<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1998
Commission File Number 333-11445
PUMA TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0349154
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
2550 North First Street, Suite 500 95131
San Jose, California (ZIP Code)
(Address of principal executive offices)
(408) 321-7650
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting common equity held by non-affiliates
of the registrant as of October 14, 1998, was approximately $17,451,619.
The number of the registrant's $0.001 par value Common Stock outstanding as of
October 14, 1998, was 12,678,401 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain sections of the Proxy Statement for registrant's 1998 PART III
Annual Meeting of Stockholders to be held on December 9, 1998
to be filed with the Commission pursuant to Registration 14A
no later than 120 days after the end of the fiscal year
covered by this Form.
Certain sections of the Annual Report to Stockholders PARTS II & IV
for fiscal year ended July 31, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PART I...................................................................................................3
ITEM 1. BUSINESS..................................................................................3
ITEM 2. PROPERTIES...............................................................................19
ITEM 3. LEGAL PROCEEDINGS........................................................................19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................20
PART II.................................................................................................22
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...................22
ITEM 6. SELECTED FINANCIAL DATA.................................................................22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...............................22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............................................22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.....23
PART III................................................................................................23
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................................23
ITEM 11. EXECUTIVE COMPENSATION...................................................................23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...........................23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........................................23
PART IV.................................................................................................23
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.........................23
SCHEDULE II..........................................................................................28
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
EXCEPT FOR THE HISTORICAL STATEMENTS CONTAINED HEREIN, THIS ANNUAL REPORT
ON FORM 10-K CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. THE ACTUAL RESULTS THAT THE
COMPANY ACHIEVES MAY DIFFER MATERIALLY FROM THOSE INDICATED IN ANY FORWARD
LOOKING STATEMENTS DUE TO THE RISKS AND UNCERTAINTIES SET FORTH UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", "CERTAIN BUSINESS RISKS" AND ELSEWHERE IN THIS FORM 10-K. THE
COMPANY UNDERTAKES NO OBLIGATION TO REVISE ANY FORWARD LOOKING STATEMENTS IN
ORDER TO REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE OF THIS
REPORT. READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE VARIOUS
DISCLOSURES MADE BY THE COMPANY IN THIS REPORT AND IN THE COMPANY'S REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION THAT ATTEMPT TO ADVISE
INTERESTED PARTIES ON THE RISKS AND FACTORS THAT MAY AFFECT THE COMPANY'S
BUSINESS.
OVERVIEW
Puma develops, markets and supports Universal Synchronization
Solutions(TM) software ("USS"), which allows users to easily access, exchange
and synchronize information stored on a variety of different computing devices
such as desktop computers and mobile computing devices, including notebook and
handheld computers, personal electronic organizers, smart phones and smart
pagers. The Company's software is designed to improve the productivity of
business professionals and corporations who are increasingly relying on mobile
computing devices to address their growing needs for accessible, up-to-date
information, whether in or out of the office. Puma's current Intellisync(R) and
recently announced Intellisync Anywhere(TM) product families allow local, LAN,
and remote "content-aware" data synchronization between a wide range of mobile
computing devices and PC and server-based applications. Puma's original
TranXit(R) product family ("TranXit") is a leading software solution
specifically designed to utilize wireless infrared ("IR") connectivity
technology for file exchange, synchronization and printing.
INDUSTRY BACKGROUND
In recent years, significant advancements in miniaturization, visual
displays, long-life batteries and portable communications have led to the
introduction of many innovative new mobile computing devices. These highly
portable devices allow users to work and communicate as they travel and have
fueled the significant growth of mobile computing. According to International
Data Corporation ("IDC"), portable computers represented 15.2% of total personal
computer ("PC") shipments of 58.2 million units in 1995. IDC estimated that this
percentage would grow to 19.6% of 117.2 million units in the year 2000. Other
electronic consumer devices, such as personal electronic organizers and smart
phones, are also being introduced to provide data storage and information
management capabilities to the mobile business professional. The 3COM PalmPilot,
Windows CE handheld PCs, Nokia 9000 Communicator, and the REX PC Companion are
examples of popular handheld mobile devices. Industry analysts, such as IDC,
project that purchases of handheld devices will grow from under 4 million units
in 1997 to 14 million by 2001, with worldwide cellular phone subscribers jumping
from 200 million to 600 million in the same time frame. With up to 25% of these
new phones and pagers potentially offering application intelligence, the overall
"smart device" market may be several times larger than that of PDAs (personal
digital assistants) alone.
As more types of new mobile computing devices become available to
business professionals, users are faced with the difficulty of exchanging
information among these various devices. This problem of interoperability is
caused by the need to exchange information among different hardware devices,
operating systems and applications. Hardware platforms range from high-speed
Pentium PCs with hundreds of megabytes of memory and gigabytes of storage, to
"shirt pocket" organizers, with specialized processors and limited memory and
storage. In addition, these devices use numerous operating systems, such as
Windows for Workgroups, Windows 3.1, Windows 95, Windows 98, Windows NT, DOS and
others, and utilize an even greater range of information management
applications, databases and data formats. Enabling these devices to
3
<PAGE>
communicate, exchange and synchronize information is a complex and
challenging task. Accomplishing this requires data-level, or content-aware,
synchronization technology to maintain complete, up-to-date and accurate
information. For example, content-aware data synchronization technology
allows users to exchange addresses from the Address Book software application
on a 3Com PalmPilot with Microsoft Outlook on a desktop PC or Lotus Notes on
corporate server, updating only the fields that have been most recently
modified, rather than copying one file over another, thereby synchronizing
both databases with the latest information.
In addition, while notebooks and a wide range of other mobile computing
devices have increased individual productivity, they have created certain
challenges in the areas of connectivity and synchronization of data and files
stored on those devices and on desktop computers. Until recently, users of
mobile computing devices were limited to cable and wired solutions as the only
effective means to connect to their desktop computers and printing devices. Most
PC notebook manufacturers, and a growing number of handheld device manufacturers
have adopted IR (infrared) as the most cost-effective, efficient medium for
wireless connectivity in the USS software market. Today, IR connectivity costs
less than other connectivity technologies, requires less space inside a device,
and is based on a single, international standard developed by the Infrared Data
Association ("IrDA") which includes approximately 150 companies including
Compaq, Ericsson, HP, IBM, Intel, Microsoft, Motorola, Nokia, Sharp and Toshiba.
The Company believes the market for IR connectivity is significant, as IDC
estimates that 1.7 million IR-enabled notebooks were shipped worldwide in 1995,
and will grow to 20 million in the year 2000. IDC also estimates that the
percentage of IR-enabled notebook computers as a percentage of all notebook
computers shipped will increase from approximately 21% in 1995 to 100% by the
year 2000.
Business professionals are continuously seeking ways to improve
productivity and, as a result, are increasingly using the growing number of new,
innovative mobile computing devices. In order to manage information effectively,
these users need convenient connectivity and synchronization solutions for the
specific combination of devices and applications that they use. USS software
solutions allow users to synchronize information maintained separately on
multiple devices (e.g., contact databases maintained by a mobile professional
using a handheld computer in the field and by a support colleague using a
desktop PC in the office). A software solution that links such different devices
must address multiple hardware architectures, operating systems, communications
architectures and application specific data formats and structures.
THE PUMA TECHNOLOGY SOLUTION
Puma's USS software products, anchored by its Intellisync family, are
designed to increase productivity for business professionals by allowing users
to easily access, exchange and synchronize information stored on a variety of
different computing devices. Puma's products allow the mobile professional to
access information at low cost with easy-to-use applications, saving time and
money. Puma's lntellisync product family allows users to synchronize data on
handheld mobile computing devices with data on PCs and groupware servers by
virtue of Puma's patented DSX Technology(TM) engine (data synchronization
extensions) content-aware data synchronization technology. The TranXit product
family is specifically designed to utilize IR connectivity technology for
reliable, cost-effective file exchange, synchronization and printing. The Puma
solution includes the following characteristics:
INTELLIGENT, CONTENT-AWARE DATA SYNCHRONIZATION. The Company's patented DSX
Technology engine provides content-aware data synchronization among a growing
number of handheld devices and industry-leading personal information management
software ("PIMs") and contact management and scheduling applications such as
Microsoft Outlook, Schedule+ and Exchange, Lotus Notes and Organizer, GoldMine,
Symantec ACT!, Novell GroupWise, ON Technology Meeting Maker, NetManage ECCO,
Starfish Sidekick and others. This technology seamlessly and transparently
translates the information from one data format to another as the information is
synchronized. Built on a powerful synchronization engine, it can expand via
device and application-specific translators to accommodate new devices and
applications. With the Intellisync Software Development Kit ("SDK"), Puma
Technology is also enabling ISVs, device OEMs and Internet-based services to
build synchronization solutions for their products on the Intellisync platform,
further entrenching the Puma standard and lowering the Company's own development
costs.
4
<PAGE>
ANYTIME, ANYWHERE HANDHELD ACCESS TO CORPORATE APPLICATION STANDARDS. With its
upcoming Intellisync Anywhere product line, the Company will provide desktop,
remote and LAN-based synchronization between both Palm Computing platform
products and Windows CE-based handheld devices and corporate groupware
applications, including Microsoft Exchange and Lotus Notes. Using wired or
wireless connections, users will be able to synchronize email, calendar, contact
and to-do list information from virtually any location, starting during the
first calendar quarter of 1999.
WIDESPREAD SOLUTIONS FOR INTEROPERABILITY. Puma's products provide connectivity
and content-aware data synchronization among industry-leading PCs and mobile
computing devices, operating systems and applications. Puma products operate
with major PC operating systems for Windows 95, Windows 98 and Windows NT, as
well as several proprietary operating systems. Puma also provides
interoperability across a wide range of industry-standard and vendor-specific
applications by supporting multiple data formats. Puma's IR communications
architecture enables robust operation across IR-enabled platforms. Intellisync
for Notebooks, the successor to TranXit, is backwards compatible with previous
versions of TranXit, allowing users to connect and exchange information with all
previous versions across different operating systems.
LEADING IR CONNECTIVITY SOFTWARE. Both Intellisync for Notebooks and the TranXit
product family are specifically designed for file exchange and synchronization
over convenient wireless IR connections. They fully support the IrDA standards,
with TranXit being the first file exchange software to incorporate the new Fast
IR standard (IrDA-2) for 4.0 Mbps connectivity. They provide a rich set of
wireless file transfer, synchronization and wireless printing features that are
both easy to use and cost-effective. Puma has bundled either TranXit or
Intellisync for Notebooks with the vast majority of IR-enabled notebooks
shipping worldwide.
STRATEGY
Puma's objective is to maintain its leadership position as a
worldwide provider of USS software, including advanced data synchronization
and wireless IR connectivity software, for business professionals. To achieve
this objective, Puma has adopted the following key strategies:
PROVIDE AN EXTENSIBLE, CROSS-PLATFORM INDUSTRY STANDARD. The Company's strategy
is to provide innovative software solutions that allow a growing number of
mobile computing devices to communicate and exchange data. While the Company's
own products target the leading high-volume, open platforms (such as the Palm
Computing and Windows CE platforms), its Intellisync technology can be used to
support mobile devices based on different operating systems, processor
architectures, communications architectures and applications. Beyond its own
products, the Company is increasingly enabling third party application
providers, mobile devices vendors and Internet-based service firms to
synchronize their products with other handheld devices and PC applications by
licensing to them the Intellisync Software Development Kit ("SDK"). The SDK will
help the Company to entrench the Intellisync platform as the de facto USS
industry standard.
DEVELOP MULTIPLE PRODUCTS FROM CORE TECHNOLOGIES. The Company intends to
leverage its core technologies and engineering experience to expand the breadth
of its software product offerings. By leveraging its advanced content-aware DSX
Technology engine data synchronization and IR connectivity technologies, Puma
plans to continually extend its Intellisync and recently announced Intellisync
Anywhere product families. In addition, as innovative new mobile computing
devices are introduced into the market, Puma can leverage its engineering
expertise, core technologies and relationships with market-leading OEMs to
develop new advanced USS software products that support these devices.
EXPAND DISTRIBUTION CHANNELS. The Company has developed significant brand-name
recognition with its customers by licensing its products to many of the world's
leading computer and mobile computing device manufacturers. Puma seeks to
leverage this brand name recognition in order to license its products to
additional OEMs and to increase sales through major distributors, resellers,
computer dealers, retailers and mail-order companies. In addition, Puma plans to
continue to expand its co- and joint-marketing programs, channel promotions and
bundling arrangements. In fiscal year 1998, this expansion led to the growth of
the Company's end-user (as opposed to OEM) software business to nearly 30% of
revenue. In addition, the Company also
5
<PAGE>
introduced its corporate site licensing program, Intellisync Gold, allowing
corporate volume purchasers to use any of the Intellisync products for PDA
for a single per seat cost.
INCREASE PENETRATION OF KEY INTERNATIONAL MARKETS. The Company has established
an international distribution network by forming overseas relationships in South
Africa, Asia, Australia, Europe and Canada. Puma intends to further develop its
international distribution network by forming additional distribution
partnerships and offering translations of its product family in key languages.
The Company believes its growing international distribution network will further
its competitive advantage over potential entrants into a market.
LEVERAGE STRATEGIC RELATIONSHIPS. Puma currently has OEM, marketing or
technology relationships with more than 70 hardware and software vendors
worldwide including 3COM/U.S. Robotics, Acer, AST, AT&T Wireless, Canon, Casio,
Corex, DEC, Ericsson, Fujitsu, Geoworks, HP, IBM, Intel, Lotus, Motorola, NEC,
Novell, Oracle, QUALCOMM, Research in Motion, SalesLogix, Seiko Epson, Sharp,
Texas Instruments, Toshiba and Unwired Planet, and many others. These
relationships generally enable Puma to receive product prototypes from hardware
manufacturers and software vendors prior to their market introduction. The
Company believes it is thereby in a strong position to potentially offer as
appropriate complementary product offerings shortly after the commercial release
of these companies' new hardware and software products.
CUSTOMERS. Puma's current customer base consists principally of large OEMs in
the PC market. In fiscal 1998 and 1997, Toshiba accounted for approximately 18%
and 21% of the Company's revenue, respectively. In fiscal 1996, Toshiba and NEC
accounted for approximately 18% and 13% of the Company's revenue, respectively.
No other customer accounted for greater than 10% of the Company's revenue in
fiscal 1998, fiscal 1997 or fiscal 1996.
PRODUCTS
Puma offers a wide range of software products to both the OEM and
retail markets. These products allow users to wirelessly connect computing
devices as well as exchange and synchronize information across a diverse set of
hardware platforms, operating systems and applications. By combining its
advanced data synchronization and IR connectivity technologies, the Company is
able to develop a number of products designed for a specific application,
operating system or hardware platform.
<TABLE>
<CAPTION>
PRODUCT NAME DESCRIPTION INTRODUCTION DATE
<S> <C> <C>
Satellite Forms(TM) A rapid application development (RAD) July, 1998
tool, this products lets developers (acquire)
quickly create and deploy custom
handheld applications for Palm
Computing platform devices which can
be tightly integrated with
corporate databases
Intellisync for Notebooks Sold through both OEM and retail channels, September 1997
this product provides PC-to-PC file
transfer and synchronization including
PIM-to-PIM synchronization over
wireless IR, wired connection, and network
connections.
Intellisync for PDA product family Content-aware data synchronization among PC-based August 1996
applications and mobile computing devices. The
Intellisync for PDA family include support for the
PalmPilot, Windows CE, REX PC Companion, Sharp
Organizers, TI Organizers, Nokia 9000 Communicator,
and AT&T PocketNet Service.
Intellisync Gold Designed for the corporate market, Intellisync Gold October 1997
includes several Intellisync-supported products in
a single package.
TranXit OEM product for file transfer, synchronization and October 1994
wireless printing over IR connections
TranXit Pro Retail version, including SyncPro automatic May 1996
synchronization, delta file transfer and long file
name support for Windows 95
TranXit Pro Connectivity Kit TranXit Pro plus IR-adapter hardware for the desktop PC May 1996
TranXit for DOS File transfer and synchronization over IR connections December 1996
for DOS
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
IntelliLink(R) Data "import" and "export" among PC-based applications September 1993
and mobile computing devices
</TABLE>
SATELLITE FORMS. Added to the Puma Technology product line with the acquisition
of SoftMagic Corporation, Satellite Forms allows corporations and developers to
quickly create and deploy sophisticated custom applications for Palm Computing
platform devices that can be tightly integrated with information stored in
corporate databases, including Oracle, DB2, Microsoft Access and Lotus Notes.
INTELLISYNC FOR NOTEBOOKS (INITIALLY INTELLISYNC 97 FOR WINDOWS). Intellisync
for Notebooks, the successor to the TranXit product family, is a native 32-bit
Windows 95/Windows NT PC-to-PC synchronization product that provides file
transfer and synchronization as well as direct PIM-to-PIM synchronization
(incorporating Puma's DSX Technology engine) between two PCs, or between a PC
and a network server. It supports IR, cable, and network connections.
Intellisync for Notebooks will replace TranXit in the OEM channel, and will also
be sold in the retail channel.
INTELLISYNC FOR PDA PRODUCT FAMILY. The Intellisync for PDA product family
provides content-aware data synchronization, including complete conflict
resolution, between a broad range of PC-based PIMs, contact management and
scheduling applications, as well as a number of mobile computing devices
including the PalmPilot, Windows CE, REX PC Companion, Sharp Organizers, TI
Organizers, Nokia 9000 Communicator, AT&T PocketNet Service, and many others.
Based upon the Company's patented DSX Technology engine technology, Intellisync
allows users to automatically synchronize their mobile computing devices
directly with various PC applications in a single step, eliminating the need for
intermediate conversions or translations.
INTELLISYNC GOLD. Intellisync Gold is designed for the corporate market, and
combines many of the individual Intellisync products in a single package.
Intellisync Gold is sold primarily as a volume purchase product to the corporate
market, and provides increased flexibility to corporate users by including
support for a wide variety of mobile devices in a single product.
TRANXIT. Puma's original product line (later succeeded by Intellisync for
Notebooks), TranXit is the leading software solution for wireless file transfer,
synchronization and printing, specifically designed to operate over convenient
IR connections. Directed at the OEM market, TranXit is currently shipped on the
vast majority of all IR-enabled notebook PCs shipped worldwide. TranXit operates
under Windows for Workgroups, Windows 3.1 and Windows 95, offering users broad
operating system interoperability. TranXit has been significantly enhanced since
its original release and each new version of TranXit is backward compatible with
all previous versions.
TRANXIT PRO. TranXit Pro is the retail version of the OEM TranXit software
product. Sold as both an upgrade for TranXit to existing users and as a separate
solution to new users, TranXit Pro adds additional features such as SyncPro for
enhanced and automatic data synchronization, a virtual Windows clipboard for
collaborative processing between two PCs, delta file transfer for enhanced
performance and long file-name support for Windows 95.
TRANXIT PRO CONNECTIVITY KIT. The TranXit Pro Connectivity Kit combines TranXit
Pro with an IrDA compliant serial IR adapter for a desktop PC. A complete
solution for an IR notebook user, the TranXit Pro Connectivity Kit provides
convenient notebook-to-desktop wireless IR connectivity.
TRANXIT FOR DOS. Much of the horizontal computing market has migrated to
graphical user interface operating systems, such as Windows for Workgroups,
Windows 3.1 and Windows 95. There are, however, a large number of vertical
market hardware devices, such as those used for data collection or factory
automation, that remain based upon the DOS operating system. TranXit for DOS
provides the necessary connectivity and file transfer capabilities that allows
these devices to interoperate with PCs. TranXit for DOS is interoperable with
all other versions of the TranXit family.
INTELLILINK. IntelliLink provides data "import" and "export" between a broad
range of PC-based contact management and scheduling applications, and a number
of mobile computing devices.
7
<PAGE>
FUTURE PRODUCTS
INTELLISYNC ANYWHERE. A key component of Puma's strategy is to bring
synchronization solutions to the server level with its new Intellisync Anywhere
product line, announced in the fall of 1998 and expected to ship in the first
calendar quarter of 1999. An important extension to the Intellisync family of
synchronization software, Intellisync Anywhere empowers corporations worldwide
to adopt handheld computers such as the PalmPilot(TM) Connected Organizer and
Microsoft Windows CE-based Handheld PCs and palm-size PCs devices. Intellisync
Anywhere provides remote (dial-up, Internet) and LAN-based synchronization of
leading handheld devices with mission-critical enterprise groupware
applications, including Microsoft Exchange and Lotus Notes. By addressing this
pivotal requirement of mobile corporate users, Intellisync Anywhere lets
organizations give handheld users untethered, up-to-date information while at
their desks, on the road or just in the office down the hall.
SATELLITE FORMS PRODUCT LINE. Puma will continue the integration its new
Satellite Forms product line, providing desktop and remote integration of
handheld applications with back-end corporate database.
INTELLISYNC FOR PDA PRODUCT FAMILY. Puma will continue to enhance the
Intellisync for PDA product family by providing support for new mobile devices,
including smart phones and smart pagers as they reach the market. In addition,
Puma will expand the application support provided with this family of products
to include additional applications, particularly groupware applications, such as
new versions of Lotus Notes and Microsoft Exchange.
TECHNOLOGY
Puma's software products allow the exchange and synchronization of data
across diverse platforms, operating systems and applications. The Company has
developed three complementary proprietary technologies for USS: The DSX
Technology engine for content-aware data synchronization, Notification Transport
Processing Technology (NXP Technology) and IR connectivity. These complementary
technologies, taken individually and together, enable Puma to provide
comprehensive solutions that meet the market's growing needs for convenient,
accurate, easy to use data exchange, synchronization and connectivity.
CONTENT-AWARE DATA SYNCHRONIZATION. The Company's content-aware DSX Technology
engine operates at both the file and record level to synchronize data among
different software applications and hardware platforms during data transfer.
With the DSX Technology engine, Puma's products allow users to synchronize not
only files, but also the data within those files, and to synchronize databases
by field or record, not just copy one database file from one to another. This
advanced data synchronization technology is composed of three main components
that collectively work to enable the effective transfer of data across supported
applications and platforms:
SYNCHRONIZATION ENGINE. Puma's proprietary synchronization engine is
the central component responsible for controlling the flow of data
throughout the entire synchronization process. It directs translator
modules to retrieve, add, delete, change and distribute data records or
fields on demand.
INTERMEDIATE DATA REPRESENTATION. Puma's synchronization technology
makes extensive use of modularity to maximize reusability for the
translator modules. The synchronization engine communicates with all
translator modules using a common "dialect," referred to as
intermediate data representation. Intermediate data representation
stipulates rules for exchanging common types of data imposing
restrictions on data content (i.e., the number and type of fields in
each application). The existence of a common data representation makes
it possible for a new translator to immediately synchronize with any
supported application or mobile computing device.
TRANSLATORS. Each translator module is responsible for interfacing with
one application or mobile computing device. When operating under
Windows, a translator is packaged as a separate Dynamic Link Library
("DLL") for maximum reusability. The development of new translators (as
well as the
8
<PAGE>
maintenance of existing modules) is greatly eased by the
existence of the translator framework, a collection of powerful C++
classes which supply software engineers with the necessary abstractions
to quickly and easily develop translator modules to meet expanding
market needs.
NXP TECHNOLOGY(TM). A core technology underpinning the Intellisync Anywhere
product family of remote synchronization server solutions is NXP Technology. NXP
Technology optimizes performance for the increasingly common wireless
connections by automatically checking for and preparing for synchronization all
new information for each user, such as email and appointments, stored on
corporate servers. This process minimizes both end user remote synchronization
time and reduces the overhead on the corporate messaging server itself.
IR CONNECTIVITY. Puma's IR connectivity software enables the wireless transfer
of data among notebook and desktop PCs, printers and mobile computing devices.
Intellisync for Notebooks and the TranXit family are designed to support IrDA
standards, with TranXit being the first file exchange and synchronization
software to incorporate the new Fast IR standard (IrDA-2) for 4.0 Mbps
connectivity.
COMMUNICATIONS ARCHITECTURE. The Company's software is based upon an
extensive, proprietary, network and device independent communications
architecture, enabling access to a variety of mobile computing devices
through a flexible and simple application program interface ("API")
that speeds the development of new features. A layered, modular design
allows the architecture to leverage existing published data transfer
protocols (IrDA, Windows Sockets), when available, and to create
proprietary data transfer protocols to provide connectivity to a broad
range of devices without extensive modification of the software.
The Company's IR communications architecture isolates hardware
implementation details from the rest of the protocol stack, enabling quick
support of new IR hardware implementations and fast adoption of new IR standards
and extensions. The architecture supports multiple vendors' implementation of
IrDA protocol stacks for migration to new operating systems and platforms.
Puma's communication protocols are designed to operate across a variety
of network and operating system environments, enabling mobile data exchange
among them. Puma software currently supports data transfer among Windows for
Workgroups, Windows 3.1 and Windows 95. Puma has also worked with Microsoft to
ensure that the Microsoft IR driver supports Mobile Data Exchange among
operating systems and IR devices.
SALES AND MARKETING
Puma strives to be both a marketing and a technology partner with its
OEM customers and its strategic partners. Puma's sales and marketing
organization sells the Company's products directly to its OEM partners, and then
works with them on joint marketing and channel programs. Puma works closely with
OEM partners on their new hardware products by providing technical input to the
OEM, thereby helping to ensure that Puma's software products will work
successfully with the OEM's hardware products. Puma also trains and educates the
OEM's sales and marketing organizations on Puma's products, allowing them to act
as Puma's "virtual" sales force to their channels and direct customers. In
addition, Puma works closely with its hardware and software strategic partners
to develop effective marketing programs designed to increase sales.
Puma distributes its retail products through several distribution
channels both domestically and internationally. In the United States, Puma's
sales organization works directly with major distributors, resellers, computer
dealers, retailers and mail order companies to distribute its retail packaged
products. Increasingly, the Company is also distributing its software products
directly to corporate customers through the Intellisync Gold enterprise site
license program. In order to further develop its brand name recognition, Puma
plans to continue to expand its joint marketing programs, marketing channel
promotions and bundling arrangements with its strategic partners. See "Business
Risks--Risks Associated with Development of Retail Distribution Channel."
9
<PAGE>
Revenue from OEMs was approximately 68%, 74% and 89% of revenue in
fiscal 1998, fiscal 1997 and fiscal 1996, respectively. Although several OEMs
are subject to certain contractual minimum purchase obligations, there can be no
assurance that any particular OEM will satisfy the minimum obligations.
Weakening demand from any key OEM and the inability of the Company to replace
revenue provided by such OEM could have a material adverse effect on the
Company's business, operating results and financial condition. The Company
maintains individually significant receivable balances from major OEMs. If these
OEMs fail to meet their payment obligations, the Company's operating results
could be materially adversely affected. See "Business Risks--Dependence on
OEMs."
Puma markets and sells through selected distributors and republishers
that focus on specific geographic and market segment areas. These international
partners operate as an extension of Puma's marketing and sales organizations,
developing the appropriate sales channels in their regions. They also work with
local resellers as well as local offices of Puma's OEM customers to develop
specific marketing and channel promotions for their regions. As of July 31,
1998, the Company was represented by over 20 distributors and resellers in
Africa, Asia, Australia, Canada and Europe and is continuing to expand its
international reach as appropriate distributors or republishers are found. See
"Business Risks--Risks Associated with International Operations."
COMPETITION
The Company expects the market for USS software, including data
synchronization and IR connectivity software to the extent it develops, to
become intensely competitive. The Company currently faces direct competition
with respect to a number of its individual products from several private
companies, including Traveling Software, Chapura, DataViz, River Run, Randsoft,
and Starfish (recently acquired by Motorola). In the future, the Company will
also face competition relative to its upcoming products from vendors offering
server-based mobile device data exchange products and services, including
Advanced Systems, Riverbed, and Avant GO. In addition to direct competition, the
Company faces indirect competition from existing and potential customers that
provide internally developed solutions. As a result, the Company must educate
prospective customers as to the advantage of the Company's products versus
internally developed solutions. The Company currently faces limited direct
competition from major applications and operating systems software vendors who
may choose to incorporate data synchronization and IR connectivity functionality
into their operating systems software, thereby potentially reducing the need for
OEMs to include Puma's products in their notebook and desktop PCs. For example,
Microsoft's inclusion of certain features permitting data synchronization and IR
connectivity between computers utilizing the Windows 98 operating system may
have the effect of reducing revenue from the Company's software if users of
Windows 98 perceive that their data synchronization and IR connectivity needs
are adequately met by Microsoft. Certain of the companies with which the Company
competes or may in the future compete, including internal software development
groups of its current and potential customers, have substantially greater
financial, marketing, sales and support resources and may have more "brand-name"
recognition than the Company. There can be no assurance that the Company will be
able either to develop software comparable or superior to software offered by
its current or future competitors or to adapt to new technologies, evolving
industry standards and changes in customer requirements. In addition, the PC and
mobile computing device markets experience intense price competition, and the
Company expects that, in order to remain competitive, it may have to decrease
its unit royalties on certain products. See "Risk Factors--Competition."
The principal competitive factors affecting the market for the
Company's software are compatibility, functionality, reliability, OEM
relationships and price. The Company believes it competes favorably overall with
respect to these factors.
The Company believes that users will want to be able to utilize IR
connectivity and data synchronization functionality with a wide variety of
mobile computing devices and software applications, and that its standards-based
approach will continue to allow it to compete favorably with larger companies
whose products may not be able to support such a degree of interoperability.
Puma's strategic relationships with hardware and software vendors enable it to
provide interoperability among a broader range of applications than many of its
current and potential competitors.
10
<PAGE>
CUSTOMER SUPPORT
The Company's service and support organization provides secondary
technical support to OEMs, primary technical support to retailers and end users
and education and training services to OEMs and retailers. The Company's current
OEMs typically have software maintenance agreements with the Company that
provide for one or more of the following services:
TECHNICAL SUPPORT. The Company offers technical support to OEM customers who
have entered into agreements to license the Company's products. The Company
provides service and support through its internal technical support
organization. Technical support includes the maintenance of the Company's
products in accordance with specifications contained in the Company's guide for
such products, as well as access to technical support personnel by telephone,
fax and e-mail. Customers under license agreements are typically entitled to
certain minor product updates and modifications, primarily bug fixes. The
Company's OEMs and some of its retail channel partners provide telephone and
initial support to end users.
RESEARCH AND DEVELOPMENT
The Company seeks to capitalize on its expertise in data
synchronization and IR connectivity technology by developing products for new
applications and increasing the functionality of existing products. The Company
believes its core DSX Technology engine and IR technologies are widely
applicable, and it plans to continue to develop new products based on its core
technologies.
As of July 31, 1998, the Company's engineering group consisted of 107
full-time employees and full-time equivalent consultants who were engaged in
product development and localization efforts for existing products. Product
maintenance and customer support responsibilities are shared by engineering
group employees on an as-needed basis. In fiscal 1998, fiscal 1997 and fiscal
1996 research and development expenses were $9.9 million, $6.2 million and $3.0
million, respectively.
The markets for Puma's products are characterized by rapidly changing
technologies, evolving industry standards, frequent new product introductions
and short product life cycles. The Company first introduced its TranXit products
in October 1994. As its product families mature, the Company expects that their
gross margins may decline. The Company's future success will depend to a
substantial degree upon its ability to enhance its existing products and to
develop and introduce, on a timely and cost-effective basis, new products and
features that meet changing customer requirements and emerging and evolving
industry standards. The Company budgets for research and development based on
planned product introductions and enhancements; however, actual expenditures may
significantly differ from budgeted expenditures. Inherent in the product
development process are a number of risks. The development of new,
technologically advanced software products is a complex and uncertain process
requiring high levels of innovation, as well as the accurate anticipation of
technological and market trends. The introduction of new or enhanced products
also requires the Company to manage the transition from older products in order
to minimize disruption in customer ordering patterns, avoid excessive levels of
older product inventories and ensure that adequate supplies of new products can
be delivered to meet customer demand. There can be no assurance that the Company
will successfully develop, introduce or manage the transition to new products.
The Company has in the past, and may in the future, experienced delays in the
introduction of its products, due to factors internal and external to the
Company. Any future delays in the introduction or shipment of new or enhanced
products, the inability of such products to gain market acceptance or problems
associated with new product transitions could adversely affect the Company's
operating results, particularly on a quarterly basis. See "Risk Factors--Risks
Associated with Product Development and Timely Introduction of New and Enhanced
Products."
PROPRIETARY RIGHTS
Puma relies on a combination of patent, copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to protect
its proprietary rights. The Company also believes that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product
11
<PAGE>
enhancements and name recognition are essential to establishing and
maintaining a technology leadership position. The Company seeks to protect
its software, documentation and other written materials under trade secret
and copyright laws, which afford only limited protection. The Company
currently has five issued United States patents that expire in 2012, 2014 and
2015, respectively, and has ten patent applications pending. In addition, the
Company has certain corresponding international patent applications pending
under the Patent Cooperation Treaty in countries to be designated at a later
date. There can be no assurance that the Company's patents will not be
invalidated, circumvented or challenged, that the rights granted thereunder
will provide competitive advantages to the Company or that any of the
Company's pending or future patent applications, whether or not being
currently challenged by applicable governmental patent examiners, will be
issued with the scope of the claims sought by the Company, if at all.
Furthermore, there can be no assurance that others will not develop
technologies that are similar or superior to the Company's technology or
design around the patents owned by the Company. Despite the Company's efforts
to protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. Policing unauthorized use of the Company's
products is difficult, and while the Company is unable to determine the
extent to which piracy of its software products exists, software piracy can
be expected to be a persistent problem. In addition, the laws of some foreign
countries do not ensure that the Company's means of protecting its
proprietary rights in the United States or abroad will be adequate or that
competition will not independently develop similar technology. The Company
has entered into source code escrow agreements with a limited number of its
customers and resellers requiring release of source code in certain
circumstances. Such agreements generally provide that such parties will have
a limited, non-exclusive right to use such code in the event that there is a
bankruptcy proceeding by or against the Company, if the Company ceases to do
business or if the Company fails to meet its support obligations. The Company
also provides its source code to foreign language translation service
providers and consultants to the Company in limited circumstances. The
provision of source code may increase the likelihood of misappropriation by
third parties.
The Company is not aware that it is infringing any proprietary rights
of third parties. There can be no assurance, however, that third parties will
not claim infringement by the Company of their intellectual property rights. The
Company expects that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps and as patent protection for software becomes increasingly
popular. Any such claims, with or without merit, could be time consuming to
defend, result in costly litigation, divert management's attention and resources
or cause product shipment delays. In addition, such claims could require the
Company to discontinue the use of certain software codes or processes, to cease
the manufacture, use and sale of infringing products, to incur significant
litigation costs and expenses and to develop non-infringing technology or to
obtain licenses to the alleged infringing technology. There can be no assurance
that the Company would be able to develop alternative technologies or to obtain
such licenses or, if a license were obtainable, that the terms would be
commercially acceptable to the Company. In the event of a successful claim of
product infringement against the Company and failure or inability of the Company
to license the infringed or similar technology, the Company's business,
operating results and financial condition would be materially adversely
affected. See "Risk Factors--Proprietary Rights, Risks of Infringement and
Source Code Release."
EMPLOYEES
As of July 31, 1998, the Company had 176 employees and full-time
equivalent consultants, including 45 in sales and marketing, 107 in engineering
and 24 in operations, finance and administration. All of the Company's employees
are located in the United States with the exception of one which is located in
Japan. None are represented by a labor union. The Company has experienced no
work stoppages and believes its relationship with its employees is good.
Competition for qualified personnel in the Company's industry is
intense. The Company believes that its future success will depend in part on its
continued ability to hire, train and retain qualified personnel.
12
<PAGE>
BUSINESS RISKS
LIMITED HISTORY OF OPERATIONS AND PROFITABILITY. The Company was organized in
August 1993 and began shipping products in October 1994. Accordingly, the
Company has a limited operating history upon which an evaluation of the Company
can be based. The Company has only been profitable in eight quarters since
inception and incurred a loss in the quarter ended July, 31 1998. The Company's
results must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in a new and evolving market such as the mobile data
exchange software market. Although the Company has experienced increased
quarterly revenue over ten of the twelve past fiscal quarters, such growth rates
have not been sustained in the past, were not sustained in the quarter ended
July 31, 1998 and may not be sustainable in the future and are not indicative of
future operating results. There can be no assurance that any of the Company's
business strategies will be successful or that the Company's revenue growth or
profitability will continue on a quarterly or annual basis.
RISKS ASSOCIATED WITH NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW AND
ENHANCED PRODUCTS. The markets for the Company's products are characterized by
rapidly changing technologies, evolving industry standards, frequent new product
introductions and short product life cycles. The Company first introduced its
TranXit products in October 1994, Intellisync for handheld devices in the first
quarter of fiscal 1997, and Intellisync for Notebooks in the first quarter of
fiscal 1998. As its product families mature, the Company expects that their
gross margins may decline. The Company's future success will depend to a
substantial degree upon its ability to enhance its existing products and to
develop and introduce, on a timely and cost-effective basis, new products and
features that meet changing customer requirements and emerging and evolving
industry standards. The Company budgets amounts to expend for research and
development based on planned product introductions and enhancements; however,
actual expenditures may significantly differ from budgeted expenditures.
Inherent in the product development process is a number of risks. The
development of new, technologically advanced software products is a complex and
uncertain process requiring high levels of innovation, as well as the accurate
anticipation of technological and market trends. The introduction of new or
enhanced products also requires the Company to manage the transition from older
products in order to minimize disruption in customer ordering patterns, avoid
excessive levels of older product inventories and ensure that adequate supplies
of new products can be delivered to meet customer demand. The Company is
continually required to recruit new engineering personnel to meet increased
engineering and testing requirements associated with patent development and
enhancement. There can be no assurance that the Company will successfully
develop, introduce or manage the transition to new products. Nor can there be
any assurance that the Company will be able to hire and retain sufficient
engineering personnel to meet the requirements inherent in this transition. The
Company has in the past, and may in the future, experience delays in the
introduction of its products, due to factors internal and external to the
Company. Any future delays in the introduction or shipment of new or enhanced
products, including particularly the development of server-based synchronization
and data-delivery solutions directly targeted at corporate enterprises, the
inability of such products to gain market acceptance or problems associated with
new product transitions could adversely affect the Company's operating results,
particularly on a quarterly basis.
BUSINESS STRATEGY. The Company's current business strategy with respect to the
market for synchronization software for handheld devices has been to identify
multiple handheld solutions and software applications, and offer an array of
solutions in its Intellisync product family. In contrast, some of the Company's
direct competitors in this market focus its efforts on fewer devices and fewer
applications. The Company's success is highly dependent upon the market
acceptance of both the handheld devices and software applications supported by
its Intellisync products. Typically the Company must develop the software
supporting a particular device or application before it has been determined
whether that third-party product will gain market acceptance. Lack of market
acceptance of hardware or software products supported by the Company's
Intellisync product is largely outside of the Company's control and may have an
adverse effect on the results. Such lack of market acceptance for several
products being supported by the Company did in fact affect the Company's results
in the second half of fiscal 1998. And, because the
13
<PAGE>
Company is focusing on a variety of products, the Company may be slower to
offer features that are specific to each individual handheld-to-PC solution.
The Company's failure to identify in advance the devices and applications
that may gain market dominance and to sufficiently focus on the most popular
solutions may adversely affect its results of operations.
The Company is currently in the process of shifting its business strategy to
focus its internal efforts on more widely adopted handheld platforms and
groupware and PIM applications with a large installed base. Lower volume device
and application vendors are encouraged to license the Company's SDK which allows
these companies to then develop synchronization capability through the Company's
synchronization engine.
COMPETITION. The Company expects the market for USS software, including data
synchronization and IR connectivity software to the extent it develops, to
become intensely competitive. The Company currently faces direct competition
with respect to a number of its individual products from several private
companies, including Traveling Software, Chapura, DataViz, River Run, Randsoft,
and Starfish (recently acquired by Motorola). In the future, the Company will
also face competition relative to its upcoming products from vendors offering
server-based mobile device data exchange products and services, including
Advanced Systems, Riverbed, and Avant Go. In addition to direct competition, the
Company faces indirect competition from existing and potential customers that
provide internally developed solutions. As a result, the Company must educate
prospective customers as to the advantage of the Company's products versus
internally developed solutions. The Company currently faces limited direct
competition from major applications and operating systems software vendors who
may choose to incorporate data synchronization and IR connectivity functionality
into their operating systems software, thereby potentially reducing the need for
OEMs to include Puma's products in their notebook and desktop PCs. For example,
Microsoft's inclusion of certain features permitting data synchronization and IR
connectivity between computers utilizing the Windows 98 operating system may
have the effect of reducing revenue from the Company's software if users of
Windows 98 perceive that their data synchronization and IR connectivity needs
are adequately met by Microsoft. Certain of the companies with which the Company
competes or may in the future compete, including internal software development
groups of its current and potential customers, have substantially greater
financial, marketing, sales and support resources and may have more "brand-name"
recognition than the Company. There can be no assurance that the Company will be
able either to develop software comparable or superior to software offered by
its current or future competitors or to adapt to new technologies, evolving
industry standards and changes in customer requirements. In addition, the PC and
mobile computing device markets experience intense price competition, and the
Company expects that, in order to remain competitive, it may have to decrease
its unit royalties on certain products.
PRODUCT CONCENTRATION; RISKS ASSOCIATED WITH NEW AND EVOLVING MARKETS. The
market for USS software, including wireless IR connectivity and advanced data
synchronization software, is new and evolving. To date, the Company has derived
a substantial portion of its revenue from the licensing of its TranXit IR
connectivity software. Although additional products are currently being sold and
potential products are currently under development, the Company believes that
the TranXit and Intellisync for Notebooks product families, although currently
accounting for a substantial portion of the Company's revenue, will decline in
overall revenue contribution in the foreseeable future. The life cycle of
TranXit and Intellisync for Notebooks is difficult to estimate because of, among
other factors, the emerging nature of the USS software market and the
possibility of future competition. As a result, the Company's future operating
results, particularly, in the near term, are dependent upon the continued market
acceptance of TranXit and Intellisync for Notebooks. The Company anticipates
that the overall revenue contribution of the TranXit and Intellisync for
Notebooks business will decrease as a percentage of total revenue, since these
products are at a mature stage in their product life cycles. There can be no
assurance that TranXit will rebound from its decline or that the Company will be
successful in developing, introducing or marketing new or enhanced products. A
continued decline in the demand for TranXit, as a result of competition,
technological change or other factors, and the failure to successfully develop,
introduce or market new or enhanced products would have a material adverse
effect on the Company's business, financial condition and results of operations.
14
<PAGE>
The market for USS software is still emerging, and there can be no assurance
that it will continue to grow or that, even if the market does grow, TranXit or
Intellisync for Notebooks will be adopted. Moreover, although demand for TranXit
and its successor product Intellisync for Notebooks has grown in recent years
with the Company's OEM customers, TranXit sales declined in mid-1998 and the
Company has no accurate method of determining the extent that end-users utilize
TranXit or Intellisync for Notebooks. The Company's success in generating
significant revenue in these evolving markets will depend, among other things,
on its ability to educate potential OEMs, retail partners and end users about
the benefits of the Company's IR technology, to maintain and enhance its
relationships with leading OEM and to develop effective retail distribution
channels. The inability of the Company to continue to penetrate the existing
market for USS products or the failure of current markets to grow or new markets
to develop or be receptive to the Company's products would have a material
adverse effect on the Company's business, operating results and financial
condition. The emergence of markets for the Company's USS products will also be
affected by a variety of factors beyond the Company's control. In particular,
the Company's products are designed to conform to certain standard IR and data
communications specifications, many of which have not been adopted as industry
standards. There can be no assurance that these specifications will be widely
adopted or that competing specifications will not emerge which will be preferred
by OEMs. The emergence of markets for the Company's products is also critically
dependent upon continued expansion of the market for mobile computing devices
and the timely introduction and successful marketing and sale of notebook and
desktop personal computers ("PCs"), personal electronic organizers, smart phones
and smart pagers. In addition, there can be no assurance that IR technology
itself will be adopted as the standard or preferred technology for USS or that
manufacturers of personal computers will elect to bundle IR technology in their
products. There can be no assurance that these or other factors beyond the
Company's control will not adversely affect the development of markets for the
Company's products.
DEPENDENCE ON OEMS. Revenue from OEMs was a substantial portion of the Company's
revenue during fiscal 1998, fiscal 1997 and fiscal 1996. OEM revenue as a
percentage of total revenue was 68%, 74% and 89% in fiscal 1998, fiscal 1997 and
fiscal 1996, respectively. Weakening demand from any key OEM and the inability
of the Company to replace revenue provided by such OEM could have a material
adverse effect on the Company's business, operating results and financial
condition. The Company maintains individually significant receivable balances
from major OEMs. If these OEMs fail to meet their payment obligations, the
Company's operating results could be materially adversely affected.
RISKS ASSOCIATED WITH DEVELOPMENT OF RETAIL DISTRIBUTION CHANNEL. The Company
distributes its products through distributors, major computer and software
retailing organizations, consumer electronics stores, discount warehouse stores
and other specialty retailers. The Company often sells on a purchase order
basis, and there are often no minimum purchase obligations on behalf of any
principal distributor or retailer. Distribution and retailing companies in the
computer industry have from time to time experienced significant fluctuations in
their businesses, and there have been a number of business failures among these
entities. The insolvency or business failure of any significant distributor or
retailer of the Company's products could have a material adverse effect on the
Company's business, operating results and financial condition. Further, certain
mass-market retailers have established exclusive relationships under which such
retailers will buy customer software only from one or two intermediaries. In
such instances, the price or other terms on which the Company sells to such
retailers may be materially adversely affected by the terms imposed by such
intermediaries, or the Company may be unable to sell to such retailers on the
terms, which the Company deems acceptable.
Retailers of the Company's products typically have a limited amount of shelf
space and promotional resources, and there is intense competition among consumer
software producers for adequate levels of shelf space and promotional support
from retailers. The Company expects that, as the number of consumer multimedia
and software products and computer platforms increases, this competition for
shelf space will intensify. Due to increased competition for limited shelf
space, retailers and distributors are increasingly in a better position to
negotiate favorable terms of sale, including price discounts, price protection
and product return policies. Retailers often require software publishers to pay
fees or provide other accommodations in exchange for shelf space. The Company's
products constitute a relatively small percentage of each retailer's
15
<PAGE>
sales volume, and there can be no assurance that retailers will continue to
purchase the Company's products or provide the Company's products with
adequate shelf space and promotional support.
MANAGEMENT OF CHANGE. The Company is currently experiencing rapid change which
has placed, and will continue to place, a significant strain on its
administrative, operational and financial resources and increased demands on its
systems and controls. This change has resulted in a continuing increase in the
level of responsibility for both existing and new management personnel. As this
change continues, the Company may have difficulty recruiting, hiring, training
and retaining key personnel in engineering, management, sales and marketing. No
assurances can be given that the Company will be able to manage this change
successfully.
DEPENDENCE ON STRATEGIC BUSINESS RELATIONSHIPS; RISKS ASSOCIATED WITH
THIRD-PARTY SERVICES. The Company believes that its success is largely dependent
on its strategic relationships with key participants in the PC and mobile
computing device industries, including Compaq, IBM, Intel, Microsoft, NEC,
Sharp, Texas Instruments, Toshiba and 3COM. These relationships generally enable
the Company to receive prototypes from hardware manufacturers and software
vendors prior to their market introduction. The Company is thereby in a stronger
position to launch complementary product offerings shortly after the commercial
release of these companies' new hardware and software products. The loss of any
of these strategic relationships or any other significant partner could
materially adversely affect the Company's product development efforts, its
business, operating results and financial condition and its ability to realize
its strategic objective to be the technological leader in its industry. In
addition, the Company relies significantly on third-party services. In
particular, third party services translate the Company's products into over ten
different native languages. The Company has generally been able to obtain
translated, functional versions of its products in a timely manner. However, any
significant delays by such third parties could delay new or existing shipments
of products and have a material adverse effect on the Company's business,
operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
degree upon the continuing contributions of its engineering, management, sales
and marketing personnel. The Company has few employment contracts with its key
personnel and does not maintain any key person life insurance policies. The loss
of key management or technical personnel could adversely affect the Company. The
Company believes that its future success will depend in large part upon its
ability to attract and retain highly skilled engineering, management, sales and
marketing personnel. Failure to recruit, hire, train and retain key personnel
could have a material adverse effect on the Company's business, operating
results and financial condition.
PROPRIETARY RIGHTS, RISKS OF INFRINGEMENT AND SOURCE CODE RELEASE. The Company
relies on a combination of patent, copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company also believes that factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements and name recognition are essential to establishing and maintaining
a technology leadership position. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection. The Company currently has five issued
United States patents that expire in 2012, 2014, 2015 and has ten patent
applications pending. In addition, the Company has corresponding international
patent applications pending under the Patent Cooperation Treaty in countries to
be designated at a later date. There can be no assurance that the Company's
patents will not be invalidated, circumvented or challenged, that the rights
granted thereunder will provide competitive advantages to the Company or that
any of the Company's pending or future patent applications, whether or not being
currently challenged by applicable governmental patent examiners, will be issued
with the scope of the claims sought by the Company, if at all. Furthermore,
there can be no assurance that others will not develop technologies that are
similar or superior to the Company's technology or design around the patents
owned by the Company. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is difficult,
and while the Company is unable to determine the extent to which piracy of its
16
<PAGE>
software products exists, software piracy can be expected to be a persistent
problem. The Company distributes its software products in the United States,
Japan, Taiwan and member countries of the European Union. The laws and practices
of some foreign countries in which the Company does business, in particular
Taiwan, do not ensure that the Company's means of protecting its proprietary
rights in the United States or abroad will be adequate or that competition will
not independently develop similar technology. There can be no assurance that the
Company will not distribute its software products in the future to countries
where the enforcement of proprietary rights may be equally or more uncertain.
The Company has also entered into source code escrow agreements with a limited
number of its customers requiring release of source code in certain
circumstances. Such agreements generally provide that such parties will have a
limited, non-exclusive right to use such code in the event that there is a
bankruptcy proceeding by or against the Company, if the Company ceases to do
business or if the Company fails to meet its support obligations. The Company
also provides its source code to foreign language translation service providers
and consultants to the Company in limited circumstances. The provision of source
code may increase the likelihood of misappropriation by third parties.
The Company is not aware that it is infringing any proprietary rights of third
parties. There can be no assurance, however, that third parties will not claim
infringement by the Company of their intellectual property rights. In
particular, because patent applications are kept confidential by the Patent and
Trademark Office, the Company has no means by which to monitor patent
applications filed by its competitors, which could result in future infringement
claims against the Company. The Company expects that software product developers
will increasingly be subject to infringement claims as the number of products
and competitors in the Company's industry segment grows and the functionality of
products in different industry segments overlaps and as patent protection for
software becomes increasingly popular. Any such claims, with or without merit,
could be time-consuming to defend, result in costly litigation, divert
management's attention and resources or cause product shipment delays. In
addition, such claims could require the Company to discontinue the use of
certain software codes or processes, to cease the manufacture, use and sale of
infringing products, to incur significant litigation costs and expenses and to
develop non-infringing technology or to obtain licenses to the alleged
infringing technology. There can be no assurance that the Company would be able
to develop alternative technologies or obtain such licenses or, if a license
were obtainable, that the terms would be commercially acceptable to the Company.
In the event of a successful claim of product infringement against the Company
and failure or inability of the Company to license the infringed or similar
technology, the Company's business, operating results and financial condition
would be materially adversely affected.
DEPENDENCE ON LICENSED TECHNOLOGY. The Company licenses technology on a
non-exclusive basis from several companies for use with its products and
anticipates that it will continue to do so in the future. The inability of the
Company to continue to license this technology or to license other necessary
technology for use with its products or substantial increases in royalty
payments under third-party licenses could have a material adverse effect on its
business, operating results and financial condition. In addition, the effective
implementation of the Company's products depends upon the successful operation
of these licenses in conjunction with the Company's products, and therefore any
undetected errors in products resulting from such licenses may prevent the
implementation or impair the functionality of the Company's products, delay new
product introductions and injure the Company's reputation. Such problems could
have a material adverse effect on the Company's business, operating results and
financial condition.
PRODUCT ERRORS; PRODUCT LIABILITY. Software products as complex as those offered
by the Company typically contain undetected errors or failures when first
introduced or as new versions are released. Testing of the Company's products is
particularly challenging because it is difficult to simulate the wide variety of
computing environments in which the Company's customers may deploy these
products. Accordingly, there can be no assurance that, despite testing by the
Company and by current and potential customers, errors will not be found after
commencement of commercial shipments, resulting in loss of or delay in market
acceptance, any of which could have a material adverse effect upon the Company's
business, operating results and financial condition. Further, the Company's
license agreements with its customers typically contain provisions designed to
limit the Company's exposure to potential product
17
<PAGE>
liability claims. Although the Company has not experienced any product
liability claims, the sale and support of products by the Company entails the
risk of such claims. The Company does not currently maintain product
liability insurance. A successful product liability claim brought against the
Company could have a material adverse effect upon the Company's business,
operating results and financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. International revenue accounted
for a significant portion of the Company's revenue in fiscal 1998 and in fiscal
1997. The Company expects that international revenue will continue to account
for a significant portion of its future revenue. Revenue from the Company's
international operations is subject to certain inherent risks, including
unexpected changes in regulatory requirements and tariffs, difficulties in
staffing and managing foreign operations, longer payment cycles, problems in
collecting accounts receivable and potentially adverse tax consequences. In
addition, sales in Europe and certain other parts of the world typically are
adversely affected in the summer months of each year when many customers and
users reduce their business activities. These seasonal factors may have a
material adverse effect on the Company's business, operating results and
financial condition. Although the Company's revenue is currently denominated in
U.S. dollars, fluctuations in currency exchange rates could cause the Company's
products to become relatively more expensive to customers in a particular
country, leading to a reduction in sales or profitability in that country.
Furthermore, future international activity may result in foreign currency
denominated sales, particularly if international revenue from distributors
increases. Consequently, gains and losses on the conversion to U.S. dollars of
accounts receivable and accounts payable arising from international operations
may contribute to fluctuations in the Company's operating results. Royalty
income by the Company from customers in certain countries, such as Japan and
Taiwan, is subject to withholding income taxes. The amount and mix of the
Company's income derived from such customers will impact the Company's provision
for income taxes. Differences in the amount and mix of the Company's income
actually derived from customers subject to foreign withholding taxes as compared
to the amounts forecasted by the Company may adversely impact the Company's
income tax rate.
UNCERTAINTIES ASSOCIATED WITH ACQUISITIONS. The Company has been involved in
three acquisitions. These acquisitions have been motivated by many factors
including the desire to obtain new technologies, the desire to expand and
enhance the Company's product lines and the desire to attract key personnel.
In July 1998, the Company acquired SoftMagic Corp. ("SoftMagic"). As a result of
the acquisition, three new employees and three new consultants joined the
Company. SoftMagic had incurred a cumulative loss through its acquisition by
Puma on July 30, 1998 of approximately $35,000 on cumulative revenue of
$331,000.
In July 1997, the Company acquired substantially all of the assets of Real World
Solutions, Inc. ("RWS"), a developer of client/server solutions. As a result of
the acquisition, four new employees joined the Company. RWS had incurred a
cumulative loss through its acquisition by Puma on July 17, 1997 of
approximately $1.3 million on cumulative revenue of $0.5 million.
In April 1996, the Company acquired IntelliLink Corp. ("IntelliLink"). As a
result of the acquisition, the Company acquired two additional product families,
as well as other technologies. In addition, more than 20 new employees joined
the Company. IntelliLink had incurred a cumulative net loss through its
acquisition by Puma on April 30, 1996 of approximately $2.5 million on
cumulative revenue of approximately $4.2 million.
POTENTIAL VOLATILITY OF STOCK PRICE. The trading price of the Company's Common
Stock is likely to be highly volatile and may be significantly affected by
factors such as actual or anticipated fluctuations in the Company's operating
results; announcements of technological innovations; new products or new
contracts by the Company or its competitors; developments with respect to
patents; copyrights or proprietary rights; conditions and trends in the software
and other technology industries; adoption of new accounting standards affecting
the software industry; changes in financial estimates by securities analysts;
general market conditions and other factors. In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
have particularly affected the market prices for the common
18
<PAGE>
stocks of technology companies. These broad market fluctuations may
materially adversely affect the market price of the Company's Common Stock.
DEPENDENCE ON YEAR 2000 COMPLIANCE OF THIRD-PARTY PRODUCTS. Some computers,
software, and other equipment include programming code in which calendar year
data is abbreviated to only two digits. As a result of this design decision,
some of these systems could fail to operate or fail to produce correct
results if "00" is interpreted to mean 1900, rather than 2000. These problems
are widely expected to increase in frequency and severity as the year 2000
approaches, and are commonly referred to as the "Millennium Bug" or "Year
2000 Problem."
The Year 2000 Problem could affect computers, software, and other equipment
used, operated, or maintained by the Company. The Company believes that its
computer systems are Year 2000 compliant.
The Company believes that it has substantially identified and resolved all
potential Year 2000 Problems with any of the software products which it
develops and markets. However, management also believes that it is not
possible to determine with complete certainty that all Year 2000 Problems
affecting the Company's software products have been identified or corrected
due to the complexity of these products and the fact that these products
interact with other third party vendor products and operate on computer
systems which are not under the Company's control.
In addition to computers and related systems, the operation of office and
facilities equipment, such as fax machines, photocopiers, telephone switches,
security systems, elevators, and other common devices may be affected by the
Year 2000 Problem. The Company presently believes that its office and
facilities equipment are Year 2000 compliant.
The Company has limited or no control over the actions of third party
suppliers. Thus, while the Company expects that it will be able to resolve
any significant Year 2000 Problems with these systems, there can be no
assurance that these suppliers will resolve any or all Year 2000 Problems
with these systems before the occurrence of a material disruption to the
business of the Company or any of its customers. Any failure of these third
parties to resolve Year 2000 problems with these systems in a timely manner
could have a material adverse effect on the Company's business, financial
condition, and results of operation.
The Company expects to identify and resolve all Year 2000 Problems that would
materially adversely affect its business operations. However, management
believes that it is not possible to determine with complete certainty that
all Year 2000 Problems affecting the Company have been identified or
corrected. The number of devices that could be affected and the interactions
among these devices are simply too numerous. In addition, one cannot
accurately predict how many Year 2000 Problem-related failures will occur or
the severity, duration, or financial consequences of these perhaps inevitable
failures. As a result, management expects that the Company could likely
suffer the following consequences:
1. a significant number of operational inconveniences and
inefficiencies for the Company and its clients that may divert
management's time and attention and financial and human resources
from its ordinary business activities; and
2. a lesser number of serious system failures that may require
significant efforts by the Company or its clients to prevent or
alleviate material business disruptions.
The Company has not developed contingency plans.
The Company does not believe that the Year 2000 Problem will have a
material adverse effect on the Company's business or results of operations.
ITEM 2. PROPERTIES
The Company's principal administrative, engineering, manufacturing,
marketing and sales facilities total approximately 31,952 square feet and are
located in a single building in San Jose, California under a lease that expires
in June 2006. The Company also has two leases for approximately 11,980 square
feet and 9,006 square feet in two buildings in Nashua, New Hampshire under
leases that expires in May 2002 and July 2003, respectively. These facilities
primarily support the engineering, product marketing and technical support
functions for its Intellisync family of products.
In October 1998, the Company internally announced a restructure plan to
consolidate its East and West Coast facilities for its Intellisync family of
products. The company expects that the implementation of this plan, which is
intended to transition engineering resources from its West Coast to East Coast
facilities once completed, may create some excess capacity in its San Jose
location. The Company believes it may be able to sublease a portion of its San
Jose building near its current market rate of rent, but this will be dependent
on many factors including economic conditions.
Management believes that its current East Coast facilities are adequate
for its needs through the next twelve months, and that, should it be needed,
suitable additional space will be available to accommodate expansion of the
Company's operations on commercially reasonable terms. Management expects it may
need to lease additional facilities in the upcoming year to support its sales
expansion in both Japan and Europe.
ITEM 3. LEGAL PROCEEDINGS
On February 6, 1998, in response to the Company's offer of a
royalty-bearing patent license, Dataviz, Inc. filed a lawsuit against the
Company in the U.S. District Court for the District of Connecticut
19
<PAGE>
seeking a judgement that four of the Company's patents are invalid and not
infringed by Dataviz' software. The complaint seeks no monetary relief other
than an award of costs of the lawsuit and reasonable attorney's fees. The
complaint contains no allegation that the Company's software infringes any
third-party intellectual property rights. The Company has filed a response
denying all of Dataviz' allegations and asserting numerous affirmative
defenses. The Company has also filed counterclaims asserting that Dataviz'
software infringes two of the Company's patents. The parties have agreed to
narrow the case to include only those two patents and are currently engaged
in discovery.
The Company believes that Dataviz' claims have no merit and intends to
defend the action vigorously. The final resolution of the lawsuit is not
expected to have a material adverse effect on the results of operations or the
financial condition of the Company. It is too early in the litigation to
determine whether attorneys' fees and costs of the lawsuit may have an adverse
affect on the results of operations of the Company in any particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the Company's fiscal year ended July 31, 1998.
EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bradley A. Rowe 38 President, Chief Executive Officer and Director
Stephen A. Nicol 38 Senior Vice President, Sales and Director
M. Bruce Nakao 54 Senior Vice President, Finance and Administration, and Chief Financial Officer
Michael M. Clair 51 Chairman of the Board
Tyrone F. Pike 44 Director
Robert D. Rutner, DDS 40 Director
</TABLE>
MR. ROWE co-founded the Company in August 1993 and has served as President since
October 1993 and Chief Executive Officer since March 1995. He has also served as
a Director of the Company since August 1993. Prior to founding the Company, from
January 1991 to July 1993, he held various management positions at SystemSoft
Corporation, a PC system software supplier, including Vice President of
Worldwide Sales and General Manager of Desktop Computing. In June 1988, Mr. Rowe
co-founded Extar Technologies, a manufacturer's representative of PC products,
where he held a number of management positions, including Vice President of
Sales and President until December 1990. From November 1983 to June 1988, Mr.
Rowe served in various sales positions at Western Digital Corporation, a storage
management company, including Director of Western Area Sales. Mr. Rowe currently
serves as a Director of 7th Street Teleworks, Inc., a privately held company.
Mr. Rowe holds a B.S. degree in engineering and management science from
Princeton University.
MR. NICOL co-founded the Company in August 1993 and has served as Senior Vice
President, Sales since its establishment. He has also served as a Director since
August 1993. Prior to founding the Company, he served in several capacities at
SystemSoft Corporation, including Director of Sales for Japan and Asia
Pacific from July 1992 to July 1993 and Sales Manager for the Eastern United
States from November 1991 to July 1992. Mr. Nicol co-founded Extar Technologies
in June 1988 where he served until November 1991 as Vice President of Sales.
Previously, Mr. Nicol served as OEM Manager for Western Digital and Computer
Sales Representative for Hewlett-Packard. He holds an A.B. degree in political
science from Princeton University.
MR. NAKAO joined the Company in June 1996 as Chief Financial Officer and Senior
Vice President, Finance and Administration. Prior to joining the Company, from
May 1986 to June 1996, he served in
20
<PAGE>
several capacities at Adobe Systems Incorporated, a software company, most
recently as its Senior Vice President, Finance and Administration, Chief
Financial Officer and Treasurer. He holds a B.A. degree in business and
economics from the University of Washington and an M.B.A. degree from
Stanford University.
MR. CLAIR became a Director of the Company in November 1994 and has served as
Chairman of the Board since March 1995. Mr. Clair was a founder of SynOptics
Communications, a computer networking company, and from January 1987 to
November 1992, served as Vice President Sales and Marketing and then as
Senior Vice President of Sales and Customer Service of SynOptics. Mr. Clair
has more than 25 years of experience in data processing, data and voice
communications and local area networking. He spent the early part of his
career with Tymshare, a computer time-sharing company, and ROLM, a
manufacturer of digital PBX equipment, in a variety of sales and marketing
positions. He holds a B.S. degree in business and an M.B.A. degree from the
University of Buffalo. Mr. Clair currently serves as a director of several
private companies in Silicon Valley.
MR. PIKE became a Director of the Company in October 1996. Since March 1993,
Mr. Pike has served as a Director of Citrix Systems, a publicly-held
supplier of multi-user application server products. Mr. Pike also serves
as a director of Proxinet, a privately-owned company. In August 1996 Mr. Pike
founded Switchsoft Systems, a supplier of open virtual network management
software for switches and routers and has served as Chairman of the Board and
Chief Executive Officer since its inception. From January 1994 to August
1996, Mr. Pike served in various positions at UB Networks, a computer
networking company, including Senior Vice President and Chief Technical
Officer. Prior to joining UB Networks, Mr. Pike served as a partner of Pike
Associates from September 1992 to January 1994. From March 1992 to September
1992, Mr. Pike served as President and Chief Executive Officer of Global
Village Communications, a networking communications company. From May 1991
to June 1992 he served as Manager, Strategic Planning & Business Development
of Intel Corporation. From April 1983 to May 1991, Mr. Pike served as
Founder, Chairman of the Board and President of LANSystems, a computer
networking company, of which he served as a Director until February 1994. Mr.
Pike holds an A.B. degree in architecture from Princeton University.
DR. RUTNER became a Director of the Company in October 1993. He has
practiced dentistry since August 1985 as proprietor of the Serra Park
Dental Group. He holds a B.S. degree in biochemistry from the
University of California at Davis, an M.S. degree in biochemistry from
the University of California at Davis and a D.D.S. degree from Georgetown
University. Dr. Rutner is a director of several private companies in Silicon
Valley.
21
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Company began trading in the over-the-counter
market on the Nasdaq National Market on December 5, 1996, under the symbol
"PUMA." The following table sets forth the high and low closing prices for the
Company's Common Stock as reported on the Nasdaq National Market from August 1,
1997, through July 31, 1998. These prices reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
1998 HIGH LOW
---- ---- ---
<S> <C> <C>
First fiscal quarter (August 1, 1997 to October 31,1997) $8.375 $5.563
Second fiscal quarter (November 1, 1997 to January 31, 1998) $8.063 $5.563
Third fiscal quarter (February 1, 1998 to April 30, 1998) $7.313 $5.563
Fourth fiscal quarter (May1, 1998 to July 31, 1998) $8.375 $5.063
</TABLE>
As of October 14, 1998, there were approximately 120 stockholders of
record of the Company's Common Stock and 12,678,401 shares of common stock
outstanding.
The Company has never paid dividends on its capital stock. The Company
currently intends to retain any future earnings for use in its business and does
not anticipate paying any cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended July 31, 1998,
which appears on page 9 in the Registrant's Annual Report to Stockholders for
the fiscal year ended July 31, 1998 under the caption "Selected Financial Data"
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this Item is set forth on pages 10-16 of
the Registrant's Annual Report to Stockholders for the fiscal year ended July
31, 1998 under the caption "Management's Discussion and Analysis," which is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is set forth on page 16 of the
Registrant's Annual Report to Stockholders for the fiscal year ended July 31,
1998, under the caption "Management's Discussion and Analysis," which is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated August 24, 1998, appearing on pages 17-31 of
the Registrant's Annual Report to Stockholders for the fiscal year ended July
31, 1998 are incorporated by reference in this Form 10-K Annual Report.
22
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no disagreements with accountants on accounting and
financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors and executive officers of the
Company is set forth in Part I Item 4 of this report under the caption
"Executive Officers and Directors of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from
the definitive proxy statement for the Company's 1998 annual meeting of
stockholders to be filed with the Commision pursuant to Regulation 14A no later
than 120 days after the end of the fiscal year covered by this Form (the "Proxy
Statement") under the caption "Executive Compensation and Other Matters."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated from the Proxy
Statement under the captions "Stock Ownership of Certain Beneficial Owners and
Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated from the Proxy
Statement under the captions "Certain Relationships and Related Transactions"
and "Executive Compensation and Other Matters - Compensation Committee
Interlocks and Insider Participation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements.
The following consolidated financial statements of the Company included
in the Company's Annual Report to Stockholders for the fiscal year
ended July 31, 1998 are filed as part of this report:
Report of Independent Accountants.
Consolidated Balance Sheets at July 31, 1998 and 1997.
Consolidated Statements of Operations for the three fiscal
Years Ended July 31, 1998.
23
<PAGE>
Consolidated Statements of Stockholders' Equity for the three
fiscal Years Ended July 31, 1998.
Consolidated Statements of Cash Flows for the three fiscal
Years Ended July 31, 1998.
Notes to Consolidated Financial Statements.
2. Supplemental Schedules.
Report of Independent Accountants on Financial Statement
Schedule.
Schedule II - Valuation and Qualifying Accounts.
Financial Statement Schedules, other than the
schedule listed above, have been omitted because the required
information is contained in the Consolidated Financial
Statements and the Notes thereto, or because such schedules
are not required or applicable.
3. Exhibits
(b) 1. Reports on Form 8-K
On August 14, 1998, the Company filed a report on Form 8-K relating to
an Agreement and Plan of Reorganization (the "Agreement"), dated July
27, 1998, by and among the Company, PacificTech Acquisition
corporation, a Delaware corporation and wholly-owned subsidiary of the
Company ("PacificTech"), and SoftMagic Corp., a privately-held Florida
corporation ("SoftMagic"). Pursuant to the Agreement, the Company
completed an acquisition (the "Merger") of SoftMagic. Upon consummation
of the Merger, SoftMagic merged with and into PacificTech. The Company
acquired substantially all of the assets and assumed all of the
liabilities of SoftMagic pursuant to the Agreement.
(c) Exhibits. The exhibits listed on the accompanying index to exhibits
immediately preceding the financial statement schedules are filed as
part of, or incorporated by reference into, this Form 10K.
(d) Financial Statement Schedules. See Item 14 (a) above.
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT TITLE
<S> <C>
2.1 1 Agreement and Plan of Reorganization dated July 27, 1998, by and among the Company,
PacificTech Acquisition Corporation and SoftMagic Corp.
2.2 3 Asset Acquisition Agreement dated July 15, 1997, by and among the Company, Real World Solutions, Inc.
and John Stossel.
2.3 2 Agreement and Plan of Merger dated April 30, 1996, by and among the Company, IntelliLink Corp.
and certain shareholders of IntelliLink Corp.
3.1 2 Articles of Incorporation of Puma Technology, Inc., a California corporation.
3.2 2 Certificate of Incorporation of Puma Technology, Inc., a Delaware corporation.
3.3 2 Bylaws of Puma Technology, Inc., a California corporation.
3.4 2 Bylaws of Puma Technology, Inc., a Delaware corporation.
10.1 2 1993 Stock Option Plan and forms of stock option agreements used thereunder.
10.2 2 Puma Technology, Inc. 1996 Employee Stock Purchase Plan and form of notice of exercise used thereunder.
10.3 3 Office Lease dated March 20, 1997, between the Company and Catellus Development Corporation.
10.4 3 Standard Commercial Lease dated March 2, 1992, as amended, between IntelliLink, Inc. and Thomas J. Flatley
d/b/a The Flatley Company.
10.5 2 Form of Indemnity Agreement for directors and officers.
24
<PAGE>
10.6 + 2 Software License Agreement dated as of May 30, 1995, between the Company and Toshiba Corporation.
10.7 2 IntelliLink Corp. 1992 Incentive Stock Option Plan and forms of stock
agreements used thereunder.
13.1 3 Portions of the Annual Report to Stockholders for the fiscal year ended July 31, 1998 expressly
incorporated by reference herein.
21.1 2 Subsidiaries of the Company.
23.1 3 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 3 Power of Attorney (reference page 28 of this the Form-10K).
27.1 3 Financial Data Schedule (filed in EDGAR format only).
99.1 2 Agreement and Plan of Merger by and between Puma Technology, Inc. a California corporation,
and Puma Technology, Inc., a Delaware corporation.
</TABLE>
+ Confidential treatment has been granted for portions of this exhibit.
1 Incorporated by reference to the Company's Report on Form 8-K filed
on August 14, 1998.
2 Incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 333-011445) declared effective on
December 4, 1996.
3 Filed herewith.
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Puma Technology, Inc.
Our audits of the consolidated financial statements referred to in our report
dated August 24, 1998 appearing in the 1998 Annual Report to Stockholders of
Puma Technology, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
San Jose, California
August 24, 1998
26
<PAGE>
SCHEDULE II
PUMA TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD/ BALANCE AT CHARGED TO DEDUCTIONS END OF
YEAR ENDED BEGINNING OF COSTS AND PERIOD/YEAR
JULY 31 PERIOD/YEAR EXPENSES
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful 1996 $ - $184 $ - $184
Accounts and Sales
Returns
Allowance for Doubtful 1997 $184 $948 $ 455 $677
Accounts and Sales
Returns
Allowance for Doubtful 1998 $677 $733 $ 467 $943
Accounts and Sales
Returns
</TABLE>
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned thereunto duly authorized, on this 10th day of
November, 1998.
Puma Technology, Inc.
Date: November 11, 1998 By: /s/ M. Bruce Nakao
------------------
M. Bruce Nakao
Senior Vice President, Finance
and Administration and Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Bradley A. Rowe and M. Bruce
Nakao, and each of them acting individually, as his attorney-in-fact, each with
full power of substitution, for him in any and all capacities, to sign any and
all amendments to this Form 10-K, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorneys-in-fact
or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K has been signed below by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Bradley A. Rowe President, Chief Executive November 11, 1998
- ----------------------------- Officer and Director -----------------
Bradley A. Rowe (PRINCIPAL EXECUTIVE OFFICER)
/s/ Stephen A. Nicol Senior Vice President, November 11, 1998
- ----------------------------- Sales and Secretary -----------------
Stephen A. Nicol
/s/ M. Bruce Nakao Senior Vice President and November 11, 1998
- ----------------------------- Chief Financial Officer -----------------
M. Bruce Nakao
/s/ Michael M. Clair Chairman of the Board November 11, 1998
- ----------------------------- -----------------
Michael M. Clair
/s/ Tyrone F. Pike Director November 11, 1998
- ----------------------------- -----------------
Tyrone F. Pike
/s/ Dr. Robert D. Rutner, DDS Director November 11, 1998
- ----------------------------- -----------------
Dr. Robert D. Rutner, DDS
</TABLE>
28
<PAGE>
ASSET ACQUISITION AGREEMENT
This Agreement is entered into effective as of July 15, 1997 (the
"Effective Date") by and between Puma Technology, Inc., a Delaware corporation
("Purchaser"), Real World Solutions, Inc., a California corporation (the
"Company") and John Stossel ("Founder").
RECITAL
The Company desires to sell to Purchaser and Purchaser desires to
purchase various tangible and intangible assets of the Company, and Purchaser
agrees to assume certain of the liabilities and obligations of the Company,
subject to the terms of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and conditions
herein contained, it is agreed as follows:
ARTICLE I
PURCHASE OF ASSETS
1.1 PURCHASE AND SALE. Subject to and upon the terms and conditions
of this Agreement, the Company shall sell to Purchaser and Purchaser shall
purchase from the Company, free and clear of all liens, claims and encumbrances,
all of Company's right, title and interest in and to various of the assets of
the Company listed on SCHEDULE 1.1 (the "Assets"), tangible and intangible,
wherever located and whether or not reflected on the books and records of the
Company, including without limitation the contracts and contract rights listed
on SCHEDULE 1.1 (the "Assigned Contracts").
1.2 FURTHER ASSURANCES; INSTRUMENTS OF TRANSFER. The Company shall
execute and deliver such bills of sale and other recordable instruments of
assignment, transfer and conveyance as Purchaser shall reasonably request to
document the sale, assignment, transfer, conveyance and delivery of the Assets,
including without limitation execution as of the Effective Date of the Bill of
Sale and Trademark Assignment attached hereto as EXHIBIT 1.2A and EXHIBIT 1.2B,
respectively. Any and all assets transferred pursuant to this Agreement are
transferred "as is," without any implied or express warranty as to quality,
performance, merchantability or fitness for a particular purpose.
1.3 PRICE. As full consideration for the purchase by Purchaser of the
Assets, Purchaser shall (i) assume certain of the liabilities of the Company
subject further to the limitations described in Section 1.4 and 6.1 below
(ii) pay $205,000, of which $125,000 will be paid at the Closing and $80,000
shall be held in escrow pursuant to an Escrow Agreement in the form attached
hereto as EXHIBIT 1.3.
1.4 ASSUMPTION OF LIABILITIES.
(a) Subject to the limitations set forth in Section 6.1 below,
effective upon the Effective Date, Purchaser hereby assumes and agrees to
perform, pay and discharge the liabilities of the Company set forth on
SCHEDULE 1.4 (collectively, the "Listed Liabilities").
1
<PAGE>
Purchaser neither assumes nor agrees to perform, pay or discharge any
liabilities not set forth on SCHEDULE 1.4, known or unknown, contingent or
fixed or otherwise, including without limitation all liabilities related to the
employment and/or termination of personnel, all taxes due and all income,
sales, use, withholding and payroll taxes accrued through the Closing. In
addition, following the Closing, the Company shall remain responsible for
preparing and filing any state and federal income tax forms related to its
business and making any related income tax payments.
(b) Nothing herein shall be deemed to deprive Purchaser of any
defenses, set-offs or counterclaims which the Company may have had or which
Purchaser shall have with respect to any of the obligations, liabilities and
commitments reflected in the Assumed Liabilities (the "Defenses and Claims").
Effective at the Effective Date, the Company hereby transfers, conveys and
assigns to Purchaser all Defenses and Claims and agrees to cooperate with
Purchaser to maintain, secure, perfect and enforce such Defenses and Claims,
including the signing of any documents, the giving of any testimony or the
taking of any such other action as is reasonably requested by Purchaser in
connection with such Defenses and Claims.
(c) Purchaser shall pay all sales, use and transfer taxes, if
any, due upon the sale or transfer of the Assets (the "Transfer Taxes"). The
Company and Purchaser shall cooperate with each other to the extent reasonably
requested and legally permitted to minimize the Transfer Taxes.
1.5 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated
to the Assets as set forth on SCHEDULE 1.1. The Company and Purchaser each
agree to use such allocation in filing Internal Revenue Code Form 8594.
1.6 BULK SALES LAW. The Company and Purchaser hereby waive
compliance, with the provisions of Article 6 of the Uniform Commercial Code as
it is in effect in the State of California. Notwithstanding the foregoing,
nothing herein shall stop or prevent either the Company or Purchaser from
asserting, as a bar or defense to any action or proceeding brought under the
Uniform Commercial Code of California that such code or law is not applicable to
the transactions contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE FOUNDER
Except as otherwise set forth in the "Company and Founder Disclosure
Schedule" provided to Purchaser on or before July 15, 1997 and attached as
EXHIBIT 2 hereto, the Company and the Founder represent and warrant to
Purchaser as set forth below. No fact or circumstance disclosed to Purchaser
shall constitute an exception to these representations and warranties unless
such fact or circumstance is set forth in the Company and Founder Disclosure
Schedule or such supplements thereto as may mutually be agreed upon in
writing by the Company and Purchaser. The representations and warranties
made by Founder in Sections 2.7, 2.10 and 2.11 hereof are made to the best
knowledge of Founder. Whenever the term "enforceable in accordance with its
terms" or like expression is used, it is understood that excepted therefrom
are any limitations on enforceability under applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting the
2
<PAGE>
enforcement of creditor's rights. The Founder's representations and warranties
contained in this Article II shall survive until 90 days after the Effective
Date.
2.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and has all requisite corporate power and authority to own or lease and operate
its properties and to carry on its business as related to the Assets as now
conducted.
2.2 POWER, AUTHORITY AND VALIDITY. The Company has the corporate
power to enter into this Agreement and to carry out its obligations hereunder
and under (i) this Agreement and (ii) all of the documents and the agreements
referenced herein as Exhibits or documents to be signed at or prior to the
Closing that are to be executed and delivered by the Company (collectively, the
"Company Ancillary Documents"). The execution and delivery of this Agreement
and the Company Ancillary Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors and the shareholders of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement and the
transactions contemplated herein and therein. The Company is not subject to or
obligated under any charter, bylaw or contract provision or any license,
franchise or permit, or subject to any order or decree, which would be breached
or violated by or in conflict with its executing and carrying out this
Agreement. No consent of any person who is a party to a contract which is
material to the Company's business, nor consent of any governmental authority,
is required to be obtained on the part of the Company to permit the transactions
contemplated herein and continue the business activities of the Company as
previously conducted by the Company without material adverse change. This
Agreement and the Company Ancillary Documents are the valid and binding
obligation of the Company enforceable in accordance with their respective terms.
2.3 NO CONFLICTS; CONSENTS. The execution and the delivery of this
Agreement and the Company Ancillary Documents by the Company do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not conflict with, result in a breach of, constitute a
default (with or without notice or lapse of time, or both) under or violation
of, or result in the creation of any lien, charge or encumbrance pursuant to any
provision of the Articles of Incorporation or Bylaws of the Company, any order,
rule, law or regulation of any court or governmental authority, foreign or
domestic, or any provision of any material agreement, instrument, understanding,
order, judgment or decree to which the Company is a party or by which the
Company or any of its properties or assets is bound or affected, nor will such
actions give to any other person or entity any interests or rights of any kind,
including rights of termination, acceleration or cancellation, in or with
respect to any of the Assets. No consent of any third party or any governmental
authority is required to be obtained on the part of the Company to permit the
consummation of the transactions contemplated by this Agreement or the Company
Ancillary Documents.
2.4 TITLE TO ASSETS. A true, correct and complete list of all claims,
liabilities, liens, pledges, mortgages, restrictions and encumbrances of any
kind ("Encumbrances") affecting the Assets are set forth in SCHEDULE 2.4.
Except as set forth in SCHEDULE 2.4, the Company has good, valid and marketable
title to all of the Assets free and clear of any Encumbrances. Except as set
forth in SCHEDULE 2.4, at the Effective Date, the Company will sell, convey,
assign, transfer and deliver to Purchaser good, valid and marketable title and
all of the Company's right and interest in and to all of the Assets, free and
clear of any Encumbrances,
3
<PAGE>
direct or indirect, whether accrued, absolute, contingent or otherwise, except
as indicated on SCHEDULE 2.4. The Assets used in the operation of its business
are in good operating condition and repair. To the Company's and Founder's
knowledge, all real or personal property leases that relate to any Assets are
valid, binding, enforceable obligations of the Company effective in accordance
with their respective terms. There is not under any of such leases any
existing material default or event of default or event which, with notice or
lapse of time or both, would constitute a material default.
2.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not a party to,
or bound by, any written or oral contract, agreement, license, indenture,
mortgage, debenture, note or other instrument under the terms of which
performance by the Company according to the terms of this Agreement and the
Company Ancillary Documents will be a default or an event of acceleration, or
whereby timely performance by the Company according to the terms of this
Agreement and the Company Ancillary Documents may be prohibited, prevented or
delayed, or whereby the continued operation of the Company's business by
Purchaser will be materially adversely impaired.
2.6 LITIGATION. There are no suits, actions or proceedings pending
or, to the Company's and Founder's knowledge, threatened against or affecting
the Company or which questions or challenges the validity of this Agreement.
There is no judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against the Company.
2.7 COMPLIANCE WITH LAW. The Company is in compliance with all
applicable laws and regulations except where such failure would not have a
material adverse effect on its business. Neither the Company nor, to the
Company's and Founder's knowledge, any of the Company's employees has directly
or indirectly paid or delivered any fee, commission or other sum of money or
item of property, however characterized, to any finder, agent, government
official or other party in the United States or any other country, that was or
is in violation of any federal, state, or local statute or law or of any statute
or law of any other country having jurisdiction. The Company has not
participated directly or indirectly in any boycotts or other similar practices
affecting any of its customers. The Company has complied at all times with any
and all applicable federal, state and foreign laws, rules, regulations,
proclamations and orders relating to the importation or exportation of any
products of the Company ("Company Products").
2.8 GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. All licenses,
franchises, permits and other governmental authorizations held by the Company
and material to its business are valid and sufficient for the business presently
carried on by the Company. The business of the Company is not being conducted
in violation of any law, ordinance or regulation of any governmental entity,
except for violations which either singly or in the aggregate do not and will
not have a material adverse effect on the operations, assets or financial
condition of the Company.
2.9 TAXES. The Company has timely filed within the time period for
filing or any extension granted with respect thereto all federal, state, local
and other returns and reports relating to any and all taxes or any other
governmental charges, obligations or fees for taxes and any related interest or
penalties ("Tax" or "Taxes") required to be filed by it with respect to its
business and the Assets and such returns and reports are true and correct. The
Company has paid all Taxes, if any, shown to be due and payable on said returns
and
4
<PAGE>
reports and has withheld with respect to employees all federal and state income
Taxes, FICA, FUTA and other Taxes required to be withheld and has timely paid
all sales, use and similar Taxes. No income, sales, use or similar Tax return
or report of the Company has been examined or audited by the Internal Revenue
Service or any state taxing authority. There are no pending or, to the
Company's and Founder's knowledge, threatened audits, examinations,
assessments, asserted deficiencies or claims for additional Taxes. To the
Company's and Founder's knowledge, there are no liens or similar encumbrances
relating to or attributable to Taxes on the Assets.
2.10 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. With respect to the
Assets and the Assigned Contracts, the Company has obtained all material
permits, licenses and other authorizations which are required under federal,
state and local laws relating to pollution or protection of the environment,
including laws or provisions relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic
materials, substances, or wastes into air, surface water, groundwater, or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants or hazardous or toxic materials, substances, or wastes. Except as
set forth in the Company and Founder Disclosure Schedule, the Company is in
material compliance with all terms and conditions of the required permits,
licenses and authorizations. Except as set forth in the Company and Founder
Disclosure Schedule, neither the Founder of the Company is aware of, nor has
the Founder of Company received notice of, any conditions, circumstances,
activities, practices, incidents, or actions which may form the basis of any
claim, action, suit, proceeding, hearing, or investigation of, by, against or
relating to the Company or relating to the Assets or the Assigned Contracts,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic substance, material or waste.
2.11 PROPRIETARY RIGHTS.
(a) The Company owns all right, title and interest in and to,
or valid licenses for use of, all patents, copyrights, technology, software,
software tools, know-how, processes, trade secrets, trademarks, service marks,
trade names and other proprietary rights used in or necessary for the conduct
of the Company's business as conducted to the date hereof or contemplated or
the use and ownership of the Assets, free and clear of all liens, claims and
encumbrances (including, without limitation, distribution rights and the
Company has the right to transfer all such rights to Purchaser. The foregoing
representation as it relates to third party technology licensed by the Company
is limited to the Company's interest pursuant to the third party licenses
entered into by the Company, all of which are valid and enforceable and in full
force and effect and which grant the Company such rights to such third party
technology as are employed in or necessary to the business of the Company as
conducted or as previously proposed to be conducted. All of the Company's
trademark or trade name registrations are valid and in full force and effect;
and consummation of the transactions contemplated hereby will not alter or
impair any such rights. No claims have been asserted against the Company (and
the Company is not aware of any claims which are likely to be asserted against
the Company or which have been asserted against others) by any person
challenging the Company's use, possession, manufacture, sale or distribution of
Company Products under any patents, trademarks, trade names, copyrights, trade
secrets, software, technology, know-how or processes utilized by the
5
<PAGE>
Company or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto. To the Company's and Founder's
knowledge, the use or exploitation of any patents, trademarks, trade names,
copyrights, software, technology, know-how or processes by the Company in its
current business does not infringe on the rights of, constitute
misappropriation of, or in any way involve unfair competition with respect to,
any proprietary information or intangible property right of any third person or
entity, including without limitation any patent, trade secret, copyright,
trademark or trade name.
(b) To the Company's and Founder's knowledge, no employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with the Company or, to the Company's and
Founder's knowledge, any other party because of the nature of the business
conducted by the Company or proposed to be conducted by the Company.
(c) Each person presently or previously employed by the Company
(including independent contractors, if any) with access to confidential
information has executed a confidentiality and non-disclosure agreement pursuant
to the form of agreement previously provided to Purchaser or its
representatives. Such confidentiality and non-disclosure agreements constitute
valid and binding obligations of the Company and such person, enforceable in
accordance with their respective terms. To the Company's knowledge, neither the
execution or delivery of such agreements, nor the carrying on of the Company's
business as employees by such persons, nor the conduct of the Company's business
as currently anticipated, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract, covenant
or instrument under which any of such persons is obligated.
(d) The Company has not granted any third party any right to
manufacture, reproduce, distribute, market or exploit any Company Products or
any adaptations, translations, or derivative works based on the Company Products
or any portion thereof, including, without limitation, as a value added
reseller. No third party has any right to manufacture, reproduce, distribute,
market or exploit any works or materials of which any of the Company Products
are a "derivative work" as that term is defined in the United States Copyright
Act, Title 17, U.S.C. Section 101.
2.12 FINANCIAL STATEMENTS. The financial statements provided to
Purchaser are complete and in accordance with the books and records of the
Company, present fairly the financial position of the Company as of their dates
and have been prepared in conformance with GAAP applied on a consistent basis by
the Company with prior periods.
2.13 CONTRACTS.
(a) Except as set forth in the Company and Founder Disclosure
Schedule, the Company has (i) no agreements, contracts or commitments that
provide for the sale, licensing or distribution of the Company Products,
inventions, technology, know-how, trademarks or trade names except in the
ordinary course of its business, (ii) no agreements, contracts or commitments
that call for fixed and/or contingent payments or expenditures by or to the
Company and (iii) no agreements that grant to any third party (including,
without limitation, OEMs and site license customers) any rights to reproduce or
manufacture any
6
<PAGE>
Company Products, or any exclusive rights of any kind with respect to any
Company Products or any right to market any Company Products under any "private
label" or "OEM" arrangements pursuant to which the Company is not identified as
the source of such goods. True and correct copies of each document or
instrument described in the Company and Founder Disclosure Schedule pursuant to
this Section 2.13 have been made available to Purchaser or its representatives.
(b) All Assigned Contracts are valid, binding, in full force
and effect, and enforceable by the Company in accordance with their respective
terms. The Company has not received any notice from any party to any such
Assigned Contract that such party intends to cancel, withdraw, modify or amend
such Assigned Contract.
(c) The Company is not in default under or in breach or
violation of, nor, to the Company's and Founder's knowledge, is there any valid
basis for any claim of default by the Company under, or breach or violation by
the Company of, any Assigned Contract, or other agreement or arrangement,
commitment or restriction to which the Company is a party or to which it or any
of the Assets are bound, where such defaults, breaches, or violations would, in
the aggregate, have a material adverse effect on the operations, assets,
financial condition or prospects of the Company. To the Company's and Founder's
knowledge, no other party is in default under or in breach or violation of, any
Assigned Contract or other material contract, commitment, or restriction to
which the Company is bound or by which any of its properties is bound, where
such defaults, breaches, or violations would, in the aggregate, have a material
adverse effect on the operations, assets, financial condition or prospects of
the Company.
(d) Except as set forth in the Company and Founder Disclosure
Schedule, all Assigned Contracts will be the property of Purchaser upon the
closing of the transactions contemplated by this Agreement, without further
action by Purchaser. If any of the Material Contracts will not be the property
of Purchaser upon the closing of the transactions contemplated by this
Agreement, then the Company has described in the Company and Founder Disclosure
Schedule such action as is necessary for assumption of the Assigned Contract by
Purchaser.
2.14 OPERATION PRIOR TO CLOSING. Prior to Closing, the Company has
used its best efforts to preserve for its business its relationships with
employees, suppliers, distributors, customers, consultants, independent
contractors, licensors, and others having business relations with it, shall
conduct its business only in the usual and ordinary course, and shall maintain
and operate all tangible Assets in good condition and repair and in accordance
with all applicable laws, rules, and regulations, as is reasonable in the
ordinary course of business.
2.15 NO BROKERS. Neither the Company nor, to the Company's and
Founder's knowledge, any of the Company's shareholders are obligated for the
payment of fees or expenses of any broker or finder in connection with the
origin, negotiation or execution of this Agreement or in connection with any
transactions contemplated hereby.
2.16 DISCLOSURE. No statements by the Company contained in this
Agreement or any Company Ancillary Document (when read together) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
7
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as set forth below.
Whenever the term "enforceable in accordance with its terms" or like expression
is used, it is understood that excepted therefrom are any limitations on
enforceability under applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting the enforcement of
creditor's rights.
3.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3.2 AUTHORIZATION. This Agreement and the documents and the
agreements referenced herein as Exhibits or documents to be signed at or prior
to the Closing that are to be executed and delivered by the Purchaser (the
"Purchaser Ancillary Documents") have been duly and validly executed and
delivered by Purchaser and constitute valid and binding agreements of Purchaser,
enforceable against Purchaser in accordance with their terms. Purchaser has all
requisite power and authority to execute and deliver this Agreement and the
Purchaser Ancillary Documents and to enable it to carry out the transactions
contemplated by this Agreement and the Purchaser Ancillary Documents.
3.3 EFFECT OF AGREEMENT; CONSENTS. The execution and delivery of this
Agreement and the Purchaser Ancillary Documents by Purchaser do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, result in a breach of, constitute a
default (with or without notice or lapse of time, or both) under or violation
of, or result in the creation of any lien, charge or encumbrance pursuant to any
provision of the limited partnership agreement of Purchaser, any order, rule,
law or regulation of any court or governmental authority, foreign or domestic,
or any provision of any material agreement, instrument, understanding, order,
judgment or decree to which Purchaser is a party or by which Purchaser is bound.
No consent of any third party or any governmental authority is required to be
obtained on the part of Purchaser to permit the consummation of the transactions
contemplated by this Agreement or the Purchaser Ancillary Documents.
3.4 COMPLIANCE WITH OTHER INSTRUMENTS. Purchaser is not a party to,
or bound by, any written or oral contract, agreement, license, indenture,
mortgage, debenture, note or other instrument under the terms of which
performance by Purchaser according to the terms of this Agreement and the
Purchaser Ancillary Documents will be a default or an event of acceleration, or
whereby timely performance by Purchaser according to the terms of this Agreement
and the Purchaser Ancillary Documents may be prohibited, prevented or delayed.
3.5 DISCLOSURE. No representation, warranty or covenant of the
Purchaser contained in this Agreement or any Purchaser Ancillary Document (when
read together) contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances under which they were
made.
8
<PAGE>
ARTICLE IV
COVENANTS
4.1 COOPERATION. The Company will take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed
with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to Purchaser
in connection with any such requirements imposed upon Purchaser in connection
with the consummation of the transactions contemplated by this Agreement. The
Company will take all reasonable actions necessary to obtain (and will cooperate
with Purchaser in obtaining) any consent, approval, order or authorization of,
or any registration, declaration or filing with, any governmental entity,
domestic or foreign, or other person, required to be obtained or made by the
Company (or by Purchaser) in connection with the taking of any action
contemplated by this Agreement.
4.2 ACCESS TO INFORMATION. The Company shall make available to
Purchaser and Purchaser's agents and representatives all information concerning
the operation, business and prospects of the Company and related entities as may
be reasonably requested by Purchaser, including, without limitation, the
accounting and tax working papers of the Company's independent advisors.
ARTICLE V
CLOSING CONDITIONS
5.1 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The Company's
obligations to close the transactions contemplated under this Agreement are
subject to the fulfillment or satisfaction on and as of the Closing, of each of
the following conditions (any one or more of which may be waived by the Company,
but only in a writing signed by the Company):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Purchaser set forth in Article III shall be
true on and as of the Closing with the same force and effect as if they had been
made at the Closing, and the Company shall receive a certificate to such effect
from an officer of Purchaser.
(b) AUTHORIZATIONS. The Company shall have received from
Purchaser a certificate signed by an officer of Purchaser certifying that the
execution, delivery and performance of this Agreement has been duly and validly
approved and authorized by its Board of Directors.
(c) GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the date of Closing such permits or authorizations, and there shall
have been taken such other action, as may be required by any regulatory
authority having jurisdiction over the parties and the subject matter and the
actions herein proposed to be taken.
(d) DATE OF CLOSING. The Closing shall occur on or before June
25, 1997 or such later date as the parties may mutually agree.
9
<PAGE>
5.2 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of
Purchaser are subject to the fulfillment or satisfaction on, and as of the
Closing, of each of the following conditions (any one or more of which may be
waived by Purchaser, but only in a writing signed by Purchaser):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company and the Founder contained in
Article II shall be true on and as of the Closing with the same force and effect
as if they had been made at the Closing, and Purchaser shall receive a
certificate from the Company to such effect with respect to the representations
and warranties of the Company executed by Founder in his individual capacity and
as an officer of the Company.
(b) AUTHORIZATIONS. Purchaser shall have received from the
Company a certificate signed by the President and Chief Financial Officer
certifying that the execution, delivery and performance of this Agreement has
been duly and validly approved and authorized by its Board of Directors and by
its shareholders.
(c) GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the date of Closing such permits or authorizations, and there shall
have been taken such other action, as may be required by any regulatory
authority having jurisdiction over the parties and the subject matter and the
actions herein proposed to be taken.
(d) REQUIRED THIRD PARTY CONSENTS. Purchaser shall have
received all written consents, assignments, waivers, authorizations or other
certificates reasonably deemed necessary by Purchaser's legal counsel to provide
for the continuation in full force and effect or assignment or termination of
the Assets or any and all contracts and leases of the Company.
(e) EMPLOYMENT, CONSULTING AND NON-COMPETITION AGREEMENTS.
Founder and Messrs. Halim, Kim and Bui shall have executed and delivered
Employment and Non-Competition Agreements in the forms attached hereto as
EXHIBIT 5.2(e)(1), EXHIBIT 5.2(e)(2), EXHIBIT 5.2(e)(3) and EXHIBIT 5.2(e)(4),
respectively. Founder and Mr. Halim shall have executed and delivered the
Promissory Notes in the form attached hereto as EXHIBIT 5.2(e)(5) and
EXHIBIT 5.2(e)(6), respectively.
(f) ESCROW AGREEMENT. The Company and the Escrow Agent shall
have signed the Escrow Agreement in the form attached hereto as EXHIBIT 1.4.
(g) AETHER LICENSE AGREEMENT. The Company and Aeros, LLC shall
have signed the Aether License Agreement in the form attached hereto as
EXHIBIT 5.2(g).
(h) BRIDGE REPURCHASE AGREEMENT. The Company and certain of
the Company's investors shall have signed the Bridge Repurchase Agreement in the
form attached hereto as EXHIBIT 5.2(h).
/s/ MBN /s/ JWS
10
<PAGE>
(j) OPINION OF COUNSEL. Purchaser shall have received an
opinion, addressed to it and dated the Closing Date, of Jackson, Tufts, Cole &
Black, the Company's legal counsel in the form attached hereto as
EXHIBIT 5.2(j).
(k) ASSIGNMENTS OF LICENSES AND CONTRACTS. Except as agreed to
by Purchaser in writing, the Company shall have applied for and obtained in a
form reasonably satisfactory to Purchaser legal, valid, and binding assignments
to Purchaser of the Assigned Contracts and all consents and waivers in
connection therewith that Purchaser may reasonably consider to be necessary or
advisable.
ARTICLE VI
INDEMNIFICATION BY THE COMPANY
6.1 INDEMNIFICATION. The Company shall indemnify and save harmless
Purchaser, its shareholders, employees and agents from and against any and all
Losses (as defined below). "Losses" shall mean all losses, liabilities,
expenses (including, without limitation, fees and disbursements of counsel and
expenses of investigation), claims, liens or other obligations whatsoever that
Purchaser or any indemnified party is required to pay or that Purchaser
reasonably anticipates it will be required to pay, other than the Listed
Liabilities, by virtue of or resulting from (i) the breach of any
representation, warranty or covenant made by the Company in this Agreement or
otherwise made in writing and delivered by the Company to Purchaser in
connection with the transactions contemplated hereby and (ii) any failure of the
Company to perform or comply with any of its covenants and agreements set forth
herein or in any other document executed in connection with the transactions
contemplated hereby or (iii) for events that occur more than 90 days after the
Effective Date.
6.2 CONDITIONS PRECEDENT. The following are conditions precedent to
any liability of the Company under paragraph 6.1:
(a) Purchaser shall give the Company written notice of any
event or assertion of which it has knowledge concerning any Losses and as to
which it may request indemnification.
(b) Purchaser shall cooperate with the Company in defending or
settling the Losses.
(c) Purchaser shall permit the Company to control the defense
or settlement of the Losses including selection of counsel to represent
Purchaser and the Company. Purchaser may also maintain separate counsel at its
own cost and expense in connection with any Loss.
(d) In no event shall Purchaser settle a Loss without the prior
written approval of the Company, which approval shall not be unreasonably
withheld.
6.3 The indemnification obligations of the Company under this Article
VI shall continue in full force and effect as to any Loss as to which notice has
been given pursuant to subsection 6.2(a) above until such Loss has been settled
either by mutual agreement of the parties concerned, by arbitration in
accordance with the provisions of this Agreement or, in the event of a Loss
resulting from legal action by a third party, by the final order, decree or
11
<PAGE>
judgment of a court of competent jurisdiction in the United States of America
(the time for appeal having expired with no appeal having been taken). The
right of Purchaser to be indemnified under this Section 6 shall not limit,
reduce or otherwise affect any other rights and remedies it may have with
respect to the matters indemnified under this Agreement.
6.4 RESOLUTION OF DISPUTES. Purchaser and the Company agree that any
of the parties may elect to postpone the arbitration of all Contested Claims
until one year from the Effective Date in order to consolidate the arbitration
of all Contested Claims.
ARTICLE VII
GENERAL
7.1 EXPENSES. Except as described in SCHEDULE 1.4 hereto, the parties
will each pay their own legal, accounting and other professional expenses in
connection with the transactions contemplated hereby.
7.2 BROKERS. Each party represents and warrants to the other that no
person has acted as a broker, a finder or in any similar capacity in connection
with the transactions contemplated hereby. Each party shall indemnify the other
against, and agrees to hold the other harmless from, all liabilities and
expenses (including reasonable attorneys' fees and expenses) in connection with
any claim by anyone for compensation as a broker, a finder or in any similar
capacity following the Effective Date, by reason of services allegedly rendered
to the indemnifying party in connection with the transactions contemplated
hereby.
7.3 ENTIRE AGREEMENT. This document and the documents, exhibits and
schedules contemplated hereby contain the entire agreement among the parties
with respect to the matters contemplated hereby and all prior negotiations,
understandings and agreements among them.
7.4 INFORMATION. Any information disclosed by a party in this
Agreement (including Exhibits and Schedules thereto) will be treated as having
been disclosed in connection with each representation and warranty made by that
party in this Agreement.
7.5 ASSIGNMENT. Neither this Agreement nor any right of any party
under it may be assigned without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Purchaser may assign its rights under this Agreement following the Effective
Date to any party that acquires Purchaser through a merger or consolidation, or
a purchase of substantially all of Purchaser's assets.
7.6 NOTICES. Any notice or other communication required or permitted
to be given under this Agreement shall be in writing and will be deemed
effective when delivered in person, when sent by confirmed facsimile, if
promptly confirmed in writing, on the third day after the day on which mailed by
first class mail from within the United States of America, or the day following
delivery to a national overnight courier service to the following addresses or
to such other address as either party may specify in writing to the other party
in accordance with the provisions of this subsection 7.6:
12
<PAGE>
If to Purchaser: Puma Technology, Inc.
2550 North First Street
Suite 500
San Jose, CA 95131
Facsimile No.: (408) 433-2212
Attn.: Chief Executive Officer
With a copy to: Gray Cary Ware & Freidenrich, A Professional
Corporation
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Facsimile No.: (415) 327-3699
Attn.: Eric J. Lapp, Esq.
If to the Company: Real World Solutions, Inc.
700 Gale Drive, #100
Campbell, CA 95008
Facsimile No.: (408) 364-7337
With a copy to: Jackson, Tufts, Cole & Black
650 California Street
San Francisco, CA 94108
Facsimile No.: (415) 392-3494
7.7 GOVERNING LAW. This Agreement will be governed by, and construed
under, the laws of the State of California. The parties hereto agree to submit
to the personal, but not exclusive, jurisdiction of the state and federal courts
in California with respect to the enforcement or interpretation of this
Agreement or the parties' obligations hereunder.
7.8 AMENDMENT. This Agreement may be amended only by a document in
writing signed by Purchaser, the Company and the Founder.
7.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
7.10 PUBLIC DISCLOSURE. No party shall disclose the terms of this
Agreement or any related or auxiliary agreement, document, exhibit or schedule
without the written consent of Purchaser and the Company, except (i) disclosure
to such party's shareholders (provided the Company uses its best efforts to
obtain the agreement of such shareholders to the provisions of this
Section 7.10), (ii) disclosure required by law, (iii) disclosure pursuant to the
disclosure obligations of Purchaser (or an affiliate of Purchaser) under the
rules and regulations of the Securities and Exchange Commission or
(iv) disclosure after obtaining the written consent of the Company and
Purchaser.
7.11 FURTHER ASSURANCES. Each party agrees to execute such further
instruments and documents and to do such further acts as may be reasonably
requested by any other party to carry out the transactions contemplated hereby.
13
<PAGE>
7.12 NO RIGHTS CONFERRED UPON THIRD PARTIES. No provisions of this
Agreement are intended or shall be interpreted to provide or create any rights
of any kind in any third party unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof shall be personal solely to
the parties to this Agreement.
7.13 ATTORNEYS' FEES. In any litigation relating to this Agreement,
including litigation with respect to any instrument, document or agreement made
under or in connection with this Agreement, the prevailing party shall be
entitled to recover its costs and reasonable attorneys' fees and expenses.
7.14 HEADINGS. Captions and headings used herein are for convenience
only and are not a part of this Agreement and shall not be used in construing
it.
[Remainder of page intentionally left blank]
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date shown on the first page.
PUMA TECHNOLOGY, INC.
By: /s/ M. Bruce Nakao
--------------------------------
Name: M. Bruce Nakao
-------------------------
Title: Chief Financial Officer
-------------------------
REAL WORLD SOLUTIONS, INC.
By: /s/ John Stossel
--------------------------------
John Stossel, President
/s/ John Stossel
--------------------------------
John Stossel
15
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS
Schedule/Exhibit Document
---------------- --------
Schedule 1.1 Assets
Exhibit 1.2A Bill of Sale
Exhibit 1.2B Trademark Assignment
Exhibit 1.3 Escrow Agreement
Schedule 1.4 Listed Liabilities
Exhibit 2 Company and Founder Disclosure
Schedule
Exhibit 3 Purchaser Disclosure Schedule
Schedule 2.4 Encumbrances
Exhibit 5.2(e)(1) Stossel Employment and Non-Competition
Agreement
Exhibit 5.2(e)(2) Halim Employment and Non-Competition
Agreement
Exhibit 5.2(e)(3) Kim Employment and Non-Competition
Agreement
Exhibit 5.2(e)(4) Bui Employment and Non-Competition
Agreement
Exhibit 5.2(e)(5) Stossel Promissory Note
Exhibit 5.2(e)(6) Halim Promissory Note
Exhibit 5.2(g) Aether License Agreement
Exhibit 5.2(h) Bridge Repurchase Agreement
Exhibit 5.2(i) Office Lease Termination Agreement
Exhibit 5.2(j) Opinion of Counsel
<PAGE>
OFFICE LEASE - SOUTH BAY CENTER
----------------------------------
(Last Revision: November 19, 1996)
Effective Date: _____________________, 1996
(The date set forth below Landlord's signature.)
BASIC LEASE INFORMATION
-----------------------
Landlord: CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
Landlord's Address
For Notice: 2540 North First Street, Suite 307
San Jose, California 95131
Attn: Asset Management
Telephone: (408) 435-1221
Fax: (408) 435-7836
Landlord's Address
For Payment of Rent: Dept. # 1918
P.O. Box 61000
San Francisco, CA 94161-1918
Tenant: PUMA TECHNOLOGY CORPORATION,
a Delaware corporation
Tenant's Address
For Notice: 2550 North First Street
San Jose, CA 95131
Attn: Mr. M. Bruce Nakao
Telephone: 408 321-3863
Fax: 408 321-3850
Project: South Bay Center
Building: Building D
Premises: Approximately 31,952 rentable square feet on the
fourth and fifth floor(s) as shown in EXHIBIT A.
Premises Address:
Street: 2550 North First Street
City and State: San Jose, California
Company Parcel No.: CA 0850025
Cost Center: 2006231
Term: One Hundred and Eight (108) Months
Estimated Commencement
Date: May 1, 1997
Base Rent Per Month: Seventy Thousand Two Hundred Ninety-Four and
40/100 Dollars ($70,294.40)
Tenant's Building Share: 45.6742%
(i)
<PAGE>
Tenant's Site Share: 7.2685%
Base Year: The calendar year 1997
Security Deposit: Six Hundred Thousand and No/100 Dollars
($600,000.00) payable upon execution of this
Lease. All or a portion of such sum, at Tenant's
options, may be provided in the form of cash or an
unconditional, irrevocable, clean,
non-documentary, site draft letter of credit from
a bank and on terms and conditions in all respects
acceptable to Landlord to be delivered upon
execution of this Lease (the "Letter of Credit").
Prepaid Rent: Seventy Thousand Two Hundred Ninety-Four and
40/100 Dollars ($70,294.40) payable in cash upon
execution of this Lease.
Broker: Colliers Parrish International, Inc.
Lease Year: Shall refer to each three hundred sixty-five (365)
day period during the Term commencing on the
Commencement Date and on each anniversary thereof.
Parking Spaces: Four (4) non-specifically designated spaces for
each 1,000 rentable square feet.
Permitted Uses: Software engineering and design and related
office, administration and ancillary uses and no
other uses shall be permitted without the prior
written consent of Landlord.
EXHIBITS
A - Premises
B - Work Letter
C - Commencement Date Memorandum
D - Rules and Regulations
E - Tenant Estoppel
F - Signage Program
The Basic Lease Information set forth above and the Exhibits attached
hereto are incorporated into and made a part of the following Lease. Each
reference in this Lease to any of the Basic Lease Information shall mean the
respective information above and shall be construed to incorporate all of the
terms provided under the particular Lease paragraph pertaining to such
information. In the event of any conflict between the Basic Lease Information
and the provisions of the Lease, the latter shall control.
LANDLORD (_______) AND TENANT (/s/ MBN) AGREE.
initial initial
(ii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Premises . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Common Area. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Reserved Rights. . . . . . . . . . . . . . . . . . . . . . 1
1.4 Right of First Offer . . . . . . . . . . . . . . . . . . . 1
2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Commencement Date. . . . . . . . . . . . . . . . . . . . . 2
2.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . 2
3. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Pre-Determined Increases in Base Rent. . . . . . . . . . . 2
3.3 Late Charge and Interest . . . . . . . . . . . . . . . . . 2
3.4 Security Deposit . . . . . . . . . . . . . . . . . . . . . 3
3.5 Determination of Base Rent for First Offer Space . . . . . 4
4. BUILDING SERVICES AND UTILITIES . . . . . . . . . . . . . . . . . 5
5. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Increase in Real Property Taxes. . . . . . . . . . . . . . 5
5.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Personal Property Taxes. . . . . . . . . . . . . . . . . . 6
6. OPERATING EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Increase in Operating Expenses . . . . . . . . . . . . . . 6
6.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 6
7. ESTIMATED EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Adjustment . . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Tenant Review of Adjustments . . . . . . . . . . . . . . . 8
8. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 Landlord . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.3 General. . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.4 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 9
8.5 Exemption of Landlord from Liability . . . . . . . . . . . 9
9. REPAIRS AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . . 10
9.1 Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Landlord . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 Trade Fixtures; Alterations. . . . . . . . . . . . . . . . 10
10.2 Damage; Removal. . . . . . . . . . . . . . . . . . . . . . 10
10.3 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . 11
12.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 11
12.2 Environmental Compliance . . . . . . . . . . . . . . . . . 12
(iii)
<PAGE>
12.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . 12
13. DAMAGE AND DESTRUCTION. . . . . . . . . . . . . . . . . . . . . . 12
13.1 Casualty . . . . . . . . . . . . . . . . . . . . . . . . . 12
13.2 Tenant's Fault . . . . . . . . . . . . . . . . . . . . . . 13
13.3 Uninsured Casualty . . . . . . . . . . . . . . . . . . . . 13
13.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. EMINENT DOMAIN. . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.1 Total Condemnation . . . . . . . . . . . . . . . . . . . . 14
14.2 Partial Condemnation . . . . . . . . . . . . . . . . . . . 14
14.3 Award. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.4 Temporary Condemnation . . . . . . . . . . . . . . . . . . 14
15. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15.1 Events of Defaults . . . . . . . . . . . . . . . . . . . . 14
15.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.3 Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 16
16. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . 16
17. ESTOPPEL, SUBORDINATION AND ATTORNMENT. . . . . . . . . . . . . . 17
17.1 Estoppel . . . . . . . . . . . . . . . . . . . . . . . . . 17
17.2 Subordination. . . . . . . . . . . . . . . . . . . . . . . 17
17.3 Attornment . . . . . . . . . . . . . . . . . . . . . . . . 17
18. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . 17
19. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
19.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . 17
19.2 Signs. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
19.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 18
19.4 Financial Statements . . . . . . . . . . . . . . . . . . . 18
19.5 Limitation of Liability. . . . . . . . . . . . . . . . . . 19
19.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 19
19.7 Brokerage Commission . . . . . . . . . . . . . . . . . . . 19
19.8 Authorization. . . . . . . . . . . . . . . . . . . . . . . 19
19.9 Holding Over; Surrender. . . . . . . . . . . . . . . . . . 19
19.10 Joint and Several. . . . . . . . . . . . . . . . . . . . . 19
19.11 Covenants and Conditions . . . . . . . . . . . . . . . . . 19
19.12 Addenda. . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
(iv)
<PAGE>
1. PREMISES.
1.1 PREMISES. Landlord hereby leases to Tenant the Premises as shown on
EXHIBIT A attached hereto, but excluding the Common Area and any other portion
of the Project. If the actual square footage of the Premises following working
drawings is different from that stated in the Basic Lease Information, the
actual square footage of the Premises as well as the Base Rent, rental
adjustments, the Tenant's Building Share and the Tenant's Site Share, adjusted
as necessary to reflect the increase or decrease in the rentable area of the
Premises, shall be set forth in the Commencement Date Memorandum referred to in
Section 2.1 below.
1.2 COMMON AREA. Tenant may, subject to reasonable rules made by
Landlord, use the following areas ("Common Area") in common with Landlord and
other tenants of the Project: the entrances, lobbies and other public areas of
the Building, walkways, landscaped areas, driveways necessary for access to the
Premises, parking areas and other common facilities designated by Landlord from
time to time for the common use of all tenants of the Project. Neither Tenant
nor any other tenant within the Building shall have access to the telephone
closets within the Building except that Tenant shall be allowed access thereto
in the manner and under the reasonable procedures established by Landlord.
1.3 RESERVED RIGHTS. Landlord reserves the right to enter the Premises
upon reasonable advance notice to Tenant and accompanied by a representative of
Tenant (except in case of an emergency) and/or to undertake the following
inspect the Premises and/or the performance by Tenant of the terms and
conditions hereof; change boundary lines of the Common Areas (provided such
change does not unreasonably interfere with Tenant's access to or use of the
Premises); install, use, maintain, repair, alter, relocate or replace any Common
Area and any pipes, ducts, conduits, wires, equipment and other facilities in
the Building; grant easements on the Project, dedicate for public use portions
thereof and record covenants, conditions and restrictions ("CC&R's") affecting
the Project and/or amendments to existing CC&R's which do not unreasonably
interfere with Tenant's use of the Premises; change the name of the Building or
Project; affix reasonable signs and displays (provided such displays do not
unreasonably interfere with Tenant's signage rights under this Lease); and,
during the last nine (9) months of the Term, show the Premises to prospective
tenants.
1.4 RIGHT OF FIRST OFFER. Provided that (i) there exists no Event of
Default under the Lease, (ii) Tenant is in occupancy of at least ninety percent
(90%) of the Premises and Tenant intends to occupy the space referenced herein,
and (iii) Landlord has not given more than two (2) notices of default in any
twelve (12) month period for nonpayment of monetary obligations, Tenant shall
have the right of first offer ("Right of First Offer") to lease any space in the
Building that becomes available for lease on or prior to December 31, 1997 (the
"First Offer Space") under the terms and conditions outlined below. The First
Offer Space shall not be deemed "available for lease" if the tenant under an
expiring lease of all or a portion of the First Offer Space desires to renew or
extend its lease or if any existing tenant of the Project exercises an existing
option or right of first offer to lease all or a portion of the First Offer
Space. If Tenant elects to lease the First Offer Space, Tenant shall so notify
Landlord in writing (the "Election Notice") within five (5) business days after
the date of Landlord's notice that the space has or will become available for
lease. If Tenant does not deliver to Landlord the Election Notice within such
time period, then Landlord shall be relieved of its obligation to make available
for lease to Tenant the First Offer Space then "available for lease" and the
provisions of this paragraph shall be of no further force and effect with
respect thereto. Without limiting the foregoing, upon the non-delivery of the
Election Notice by Tenant, Landlord shall be entitled to grant options and
rights free and clear of Tenant's right of first offer under this paragraph to
other tenants or prospective tenants of the Project. Upon Tenant's delivery of
the Election Notice with respect to the First Offer Space, Landlord and Tenant
shall promptly enter into an amendment of this Lease adding the First Offer
Space to the Premises on all the terms and conditions set forth in this Lease as
to the Premises, except that (i) the term of the lease to Tenant of the First
Offer Space shall commence upon the actual availability date of the First Offer
Space ("Availability Date") and shall continue coterminously with the remaining
Term for the Premises, (ii) Tenant shall take the First Offer Space in its then
"as-is" condition and Landlord shall neither provide nor pay for any interior
improvement work or services related to the First Offer Space, (iii) the Base
Rent per rentable square foot payable by Tenant for the First Offer Space shall
be equal to the Market Rent (as defined below) for the First Offer Space
determined pursuant to the terms of SECTION 3.5 below, but in no event shall the
Base Rent for the First Offer Space be less than the average Base Rent paid by
Tenant under the Lease from the Commencement Date to the Availability Date, (iv)
Tenant's Share shall be increased to reflect the addition of the Right of First
Offer Space, and (v) the Base Year for the Right of First Offer Space shall be
the Base Year for the remaining Premises. The Right of First Offer set forth
herein is personal to the original Landlord and the original Tenant under this
Lease and it shall not be binding upon any lender succeeding to Landlord's
interest in this Lease (whether by foreclosure, deed in lieu of foreclosure or
otherwise) nor shall it be included in any assignment of Tenant's interest in
this Lease.
1
<PAGE>
2. TERM.
2.1 COMMENCEMENT DATE. The Term of the Lease shall commence
("Commencement Date") on the first day of the first full month following the
date on which the Premises are Substantially Complete (as hereinafter defined)
except that if Substantial Completion occurs on the first day of a month, that
date shall be the Commencement Date, and the Lease shall continue in full force
and effect for the period of time specified as the Term or until this Lease is
terminated as otherwise provided herein. The Premises shall be deemed to be
"Substantially Complete" on the earliest of the date on which: (1) Landlord
files or causes to be filed with the City in which the Premises are located (if
required) and delivers to Tenant an architect's notice of substantial
completion, or similar written notice that the Premises are substantially
complete, (2) Tenant commences business operations in the Premises, or (3) a
certificate of occupancy is issued for the Premises. Landlord shall arrange for
the construction of certain Tenant Improvements (as defined in the Work Letter),
if any, in accordance with and subject to the terms of the Work Letter attached
hereto as EXHIBIT B. Tenant shall, upon demand after delivery of the Premises to
Tenant, execute and deliver to Landlord a Commencement Date Memorandum in the
form attached hereto as EXHIBIT C acknowledging (i) the Commencement Date, (ii)
the final square footage of the Premises and any necessary adjustments to Base
Rent, rental adjustments, Tenant's Building Share or Tenant's Site Share as
provided in Section 1.1 above, and (iii) Tenant's acceptance of the Premises.
If the Premises are not Substantially Complete on the Estimated Commencement
Date, this Lease shall remain in effect, Landlord shall not be subject to any
liability, and the Commencement Date shall be delayed until the date the
Premises are Substantially Complete. Tenant acknowledges that it has had an
adequate opportunity to inspect and investigate all matters relevant to the
Premises, using experts and other qualified professionals, and that Tenant has
determined that the Premises are acceptable for Tenant's use. Tenant further
acknowledges that, except to the limited extent, if any, specifically provided
in this Lease, neither Landlord nor any broker or agent has made any
representations or warranties in connection with the physical condition of the
Premises or their fitness for Tenant's use upon which Tenant has relied directly
or indirectly for any purpose.
2.2 POSSESSION. Tenant's possession of the Premises during the period of
time, if any, from the date on which Landlord tenders possession of the Premises
to Tenant in a Substantially Completed condition (the "Possession Date") to the
Commencement Date, shall be subject to all the provisions of this Lease and
shall not advance the expiration date. Rent shall be paid for such period at
the rate stated in the Basic Lease Information, prorated on the basis of a
thirty (30) day month, and shall be due and payable to Landlord on or before the
Commencement Date. Tenant shall acknowledge in writing the Possession Date in
the form attached hereto as EXHIBIT C.
3. RENT.
3.1 RENT. Tenant shall pay to Landlord, at Landlord's Address for Payment
of Rent designated in the Basic Lease Information, or at such other address as
Landlord may from time to time designate in writing to Tenant for the payment of
Rent, the Base Rent, without notice, demand, offset or deduction, in advance, on
the first day of each calendar month. Upon the execution of this Lease, Tenant
shall pay to Landlord the first month's Base Rent. If the Term ends on a date
other than the last day of a month, Base Rent shall be prorated on a per diem
basis with respect to the portion of the last month within the Term. All sums
other than Base Rent which Tenant is obligated to pay under this Lease shall be
deemed to be additional rent due hereunder, whether or not such sums are
designated "additional rent." The term "Rent" means the Base Rent and all
additional rent payable hereunder.
3.2 PRE-DETERMINED INCREASES IN BASE RENT. Effective as of the first day
of the specified Lease Month, the Base Rent shall be increased as follows:
<TABLE>
<CAPTION>
LEASE MONTH NEW BASE RENT
----------- -------------
<S> <C>
25 $75,406.72
49 $82,116.64
73 $90,424.16
97 $99,690.24
</TABLE>
3.3 LATE CHARGE AND INTEREST. The late payment of any Rent will cause
Landlord to incur additional costs, including administration and collection
costs and processing and accounting expenses and increased debt service
("Delinquency Costs"). If Landlord has not received any installment of Rent
within five (5) days after such amount is due, Tenant shall pay a late charge of
ten percent (10%) of the delinquent amount, which is agreed to represent a
2
<PAGE>
reasonable estimate of the Delinquency Costs incurred by Landlord; provided,
however, no late charge shall be payable with respect to the first late payment
of Rent within any twelve (12) month period if such late payment of Rent is
cured within five (5) business of Landlord's written notice to Tenant of such
Rent delinquency. In addition, all such delinquent amounts shall bear interest
from the date such amount was due until paid in full at a rate per annum
("Applicable Interest Rate") equal to the lesser of (a) the maximum interest
rate permitted by law or (b) five percent (5%) above the rate publicly
announced by Bank of America, N.A. (or if Bank of America, N.A. ceases to
exist, the largest bank then headquartered in the State of California ("Bank")
as its "Reference Rate." If the use of the announced Reference Rate is
discontinued by the Bank, then the term Reference Rate shall mean the announced
rate charged by the Bank which is, from time to time, substituted for the
Reference Rate. Landlord and Tenant recognize that the damage which Landlord
shall suffer as a result of Tenant's failure to pay such amounts is difficult
to ascertain and said late charge and interest are the best estimate of the
damage which Landlord shall suffer in the event of late payment. If a late
charge becomes payable for any three (3) installments of Rent within any twelve
(12) month period, then the Rent shall automatically become due and payable
quarterly in advance.
3.4 SECURITY DEPOSIT. Upon the execution of this Lease, Tenant shall
pay to Landlord the Security Deposit. The Security Deposit shall secure the
full and faithful performance of each provision of this Lease to be performed
by Tenant. Landlord shall not be required to pay interest on the Security
Deposit or to keep the Security Deposit separate from Landlord's own funds.
If Tenant fails to perform fully and timely all or any of Tenant's covenants
and obligations hereunder, Landlord may, but without obligation, apply all or
any portion of the Security Deposit toward fulfillment of Tenant's
unperformed covenants and/or obligations. If Landlord does so apply any
portion of the Security Deposit, Tenant shall immediately pay Landlord
sufficient cash to restore the Security Deposit to the amount of the then
current Base Rent per month. Upon any Tenant's exercise of its Right of
First Offer and the addition of the First Offer Space to the Premises,
Landlord may require the Security Deposit to be increased by an amount equal
to one-twelfth (1/12th) of the aggregate total of Base Rent payable for the
First Offer Space over the then remaining Term of this Lease (at Tenant's
option, the amount of such additional Security Deposit in excess of one (1)
month's Base Rent for the First Offer Space may be provided in the form of an
additional Letter of Credit (the "Additional Letter of Credit") in which
event such Additional Letter of Credit shall also be subject to all of the
terms of this Section 3.4). After Tenant vacates the Premises, upon the
expiration or sooner termination of this Lease, if Tenant is not then in
default, Landlord shall return to Tenant any unapplied balance of the
Security Deposit.
3.4.1 LETTER OF CREDIT. As noted in the Basic Lease Provisions
and above in this Section 3.4, a portion of the Security Deposit may be
provided in the form of the Letter of Credit and the Additional Letter
of Credit (collectively, the "Letters of Credit"). The Letters of
Credit shall be held, utilized and returned, as applicable, in
accordance with the requirements of this Section 3.4.
3.4.2 TERM AND RENEWAL OF LETTERS OF CREDIT. The Letters of
Credit shall be for a term of not less than twelve (12) months, and
Tenant shall keep the Letters of Credit in effect thereafter throughout
the Term of this Lease except as otherwise provided in this Section 3.4.
Tenant shall renew, extend or replace the Letters of Credit as necessary
and deliver written evidence thereof to Landlord at least thirty (30)
days prior to the expiration date of the Letters of Credit so that valid
Letters of Credit which comply with each requirement of this Section 3.4
are in effect during the entire period required hereby. If Tenant fails
to so renew, extend or replace the Letters of Credit and deliver such
written evidence to Landlord, and such failure continues for a period of
five (5) days after the date such evidence is due to Landlord, Landlord
shall be entitled to immediately draw the entire amount of the Letters
of Credit, and hold such sums as a portion of the Security Deposit for
Tenant's faithful performance of its Lease obligations during the
remainder of the Lease Term.
3.4.3 AMOUNT OF DRAW ON LETTERS OF CREDIT. Upon the occurrence of
an Event of Default by Tenant under Section 15.1 of this Lease and a
failure by Tenant to cure such Event of Default within the time period
specified therein, Landlord shall be entitled to obtain payment under
the Letters of Credit, in such amount as may be required to satisfy
Tenant's outstanding obligations under the Lease and shall apply such
amount to said obligations. Specifically, Landlord shall be entitled to
obtain partial draws pursuant to the Letters of Credit in the amounts
that Tenant is in default and, in such event, Tenant shall replace or
reinstate the Letters of Credit to the full amount required from time to
time hereunder.
3.4.4 MANNER OF PRESENTMENT. Landlord is authorized to draw, for
the account of Tenant, the amounts allowable pursuant to this Section
3.4 by a draft, which shall be payable on sight, signed by an officer of
Landlord. Payment of the draft shall be made in the manner agreed upon
by the issuing bank, but Tenant hereby
3
<PAGE>
consents to such payment by wire transfer to the account of Landlord as
specified by Landlord in writing to the issuing bank, or in such other
manner or to such other accounts as Landlord may designate in the draft.
3.4.5 REDUCTION OF SECURITY DEPOSIT. Annually, following the
anniversary of the Commencement Date, provided that there shall not then
be continuing any Event of Default or other event or condition which
with the giving of notice or the passage of time, or both, would
constitute and Event of Default, Tenant shall be entitled to reduce the
amount of the Security Deposit in excess of final month's Base Rent for
the Premises by an amount equal to the original amount by which the
Security Deposit exceeds the final month's Base Rent for the Premises
divided by the number of years (or portions thereof) in the Term of the
Lease (or, in the case of the additional Security Deposit in excess of
the final month's Base Rent for the First Offer Space to be provided
upon exercise by Tenant of its Right of First Offer, the number of years
(or portions thereof) remaining in the Term of this Lease from and after
the Availability Date with respect to the First Offer Space). Landlord
shall reasonably cooperate with Tenant to accomplish such reduction
either by (i) acceptance of supplements to such Letters of Credit
evidencing such reductions, (ii) presentation of the original Letters of
Credit to the issuing bank for the reductions to be appropriated noted
or endorsed thereon, (iii) exchange of the original Letters of Credit
for replacement Letters of Credit in the reduced amounts, or (iv) return
to Tenant of cash in the amount of the Security Deposit reduction in the
event the additional Security Deposit was provided by Tenant in the form
of cash rather than Letters of Credit.
3.5 DETERMINATION OF BASE RENT FOR FIRST OFFER SPACE. Base Rent for the
First Offer Space shall equal the Market Rent for such space determined as
provided below. Notwithstanding anything in this Section 3.5 to the contrary,
in no event shall the Base Rent for the First Offer Space be less than the
average Base Rent paid by Tenant from the Commencement Date of the Availability
Date with respect to the original Premises.
3.5.1 AGREEMENT ON BASE RENT. Landlord and Tenant shall have
thirty (30) days after Landlord receives the Election Notice in which to
mutually agree on the Base Rent for the First Offer Space.
3.5.2 ARBITRATION. If Landlord and Tenant are unable to agree
upon the Base Rent for the First Offer Space within such thirty (30) day
period, then within fifteen (15) days after the expiration of the thirty
(30) day period, each party, by giving notice to the other party, shall
appoint a real estate appraiser who is a current member of the American
Institute of Real Estate Appraisers, with at least five (5) years of
experience appraising building space comparable to the Premises in the
city and county where the Premises is located to determine the Market
Rent. Market Rent shall mean the monthly amount per rentable square
foot in the First Offer Space that a willing, non-equity new tenant
would pay and a willing landlord would accept at arm's length for space
in a comparable building or buildings, with comparable tenant
improvements, in a comparable location, giving appropriate consideration
to monthly rental rates per rentable square foot, the presence or
absence of rent escalation clauses such as operating expense and tax
pass-throughs, length of lease term, size and location of premises being
leased and other generally applicable terms and conditions of tenancy
for a similar building or buildings. If the two (2) appraisers are
unable to agree on the Market Rent for the First Offer Space within
twenty (20) days, they shall select a third appraiser meeting the
qualifications stated in this Section within five (5) days after the
last day the two (2) appraisers are given to set the Market Rent for the
First Offer Space. The third appraiser, however selected, shall be a
person who has not previously acted in any capacity for either party.
Within twenty (20) days after the selection of the third appraiser, a
majority of the appraisers shall set the Market Rent for the First Offer
Space. If a majority of the appraisers is unable to set the Market Rent
within the twenty (20) day period, the two (2) closest appraisals shall
be added together and their total divided by two (2). The resulting
quotient shall be the Market Rent for the First Offer Space. Each party
shall be responsible for the costs, charges and fees of the appraiser
appointed by that party plus one-half of the cost of the third appraiser.
3.5.3 AMENDMENT OF LEASE. Immediately after the Base Rent is
determined pursuant to this Section 3.5, Landlord and Tenant shall
execute an amendment to this Lease adding the First Offer Space to the
Premises and adjusting the Base Rent to include the Base Rent determined
for the First Offer Space as provided in this Section 3.5.
4
<PAGE>
4. BUILDING SERVICES AND UTILITIES.
Landlord agrees to supply, subject to the other provisions of this
Lease, reasonable janitorial service and reasonable amounts of heat, water
for drinking purposes, air conditioning and electric current for office
machines and normal lighting Monday through Friday, from 8 a.m. to 6 p.m.,
and on Saturdays from 8 a.m. until noon, except for the usual holidays (the
"Usual Building Hours"); provided, however, that reasonable amounts of
electric current for office machines and normal lighting (subject to Tenant's
payment of charges therefor in the event of excess consumption as provided
below) shall be supplied by Landlord 24 hours per day, 7 days per week.
Landlord shall not be liable for any interruption of said utilities and
services when such interruption is caused by strikes, mechanical failure,
accidents or any other conditions beyond the reasonable control of Landlord,
nor shall there be any abatement of rent as a result thereof. Tenant shall
not install or use in the Premises any machines or any apparatus or device,
which individually or in the aggregate will generate excessive heat or
increase the amount of electricity, water or air conditioning usually
supplied for use of the Premises as general office space, or in any way
create a burden on or adversely affect the normal functioning of the heating,
ventilation and air conditioning ("HVAC") system of the Building. Tenant
shall use only the electrical outlets and water pipes existing in the
Premises upon completion of the initial tenant improvements. In the event
Tenant utilizes or consumes utilities or services after Usual Building Hours
or in amounts which are appreciably in excess of those utilized or consumed
by the average office tenants in the Building, Tenant shall reimburse
Landlord, as additional rent, upon receipt of demand therefor, for the cost
of such excess consumption. In addition, Landlord shall have the right at
any time to cause water meters or electric current meters to be installed in
the Premises for the purpose of measuring such excess consumption, in which
event Tenant shall pay to Landlord, as additional rent, the cost of any such
meters (which shall be the property of Landlord), as well as the cost of
installation, maintenance and repair thereof. Tenant shall comply with all
rules and regulations which Landlord may reasonably establish for the proper
functioning and protection of the HVAC, elevator, and plumbing systems.
Provided that Landlord shall not unreasonably interrupt Tenant's use of the
Premises, Landlord shall at all reasonable times have free access to all
mechanical installations in the Premises, including, but not limited to, air
conditioning, fan, ventilating and machine rooms and electrical closet.
Landlord shall have no responsibility for providing to Tenant any telephone
equipment, including wiring, within the Premises or for providing telephone
service or connections from the utility to the Premises, except as required
by law.
5. TAXES.
5.1 INCREASE IN REAL PROPERTY TAXES. Tenant shall pay to Landlord (a)
Tenant's Building Share of the Increase in Building Real Property Taxes and (b)
Tenant's Site Share of the Increase in Site Real Property Taxes. The "Increase
in Building Real Property Taxes" is the increase in Building Real Property Taxes
in any calendar year over the Building Real Property Taxes in the Base Year.
The "Increase in Site Real Property Taxes" is the increase in Site Real Property
Taxes in any calendar year over the Site Real Property Taxes in the Base Year.
5.2 DEFINITIONS.
5.2.1 BUILDING REAL PROPERTY TAXES. "Building Real Property Taxes"
shall be the sum of the following: all real property taxes, possessory-interest
taxes, business or license taxes or fees, service payments in lieu of such
taxes or fees, annual or periodic license or use fees, excises, transit and
traffic charges, housing fund assessments, open space charges, childcare fees,
school, sewer and parking fees or any other assessments, levies, fees,
exactions or charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen (including fees "in-lieu" of any such tax or
assessment) which are assessed, levied, charged, conferred or imposed by any
public authority upon the Building and the Common Areas of the Building or
their operations, together with all taxes, assessments or other fees imposed by
any public authority upon or measured by any Rent or other charges payable
hereunder, including any gross receipts tax or excise tax levied by any
governmental authority with respect to receipt of rental income, or upon, with
respect to or by reason of the development, possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion thereof, or documentary transfer taxes upon this
transaction or any document to which Tenant is a party creating or transferring
an interest in the Premises, together with any tax imposed in substitution,
partially or totally, of any tax previously included within the aforesaid
definition or any additional tax the nature of which was previously included
within the aforesaid definition, together with the costs and expenses
(including attorneys and expert witness fees and costs) of challenging any of
the foregoing or seeking the reduction in or abatement, redemption or return of
any of the foregoing, but only to the extent of any such reduction, abatement,
redemption or return. Nothing contained in this Lease shall require Tenant to
pay any franchise, corporate, estate or inheritance tax of Landlord, or any
income, profits or revenue tax or charge upon the net income of Landlord.
5
<PAGE>
5.2.2 SITE REAL PROPERTY TAXES. "Site Real Property Taxes" shall be
the sum of the following: all real property taxes, possessory-interest taxes,
business or license taxes or fees, service payments in lieu of such taxes or
fees, annual or periodic license or use fees, excises, transit and traffic
charges, housing fund assessments, open space charges, childcare fees, school,
sewer and parking fees or any other assessments, levies, fees, exactions or
charges, general and special, ordinary and extraordinary, unforeseen as well as
foreseen (including fees "in-lieu" of any such tax or assessment) which are
assessed, levied, charged, conferred or imposed by any public authority upon
the land on which the Building and other buildings comprising the Project are
located (the "Site") or its operations, together with any tax imposed in
substitution, partially or totally, of any tax previously included within the
aforesaid definition or any additional tax the nature of which was previously
included within the aforesaid definition, together with the costs and expenses
(including attorneys and expert witness fees and costs) of challenging any of
the foregoing or seeking the reduction in or abatement, redemption or return of
any of the foregoing, but only to the extent of any such reduction, abatement,
redemption or return.
5.3 PERSONAL PROPERTY TAXES. Prior to delinquency, Tenant shall pay all
taxes and assessments levied upon trade fixtures, alterations, additions,
improvements, inventories and other personal property located and/or installed
on the Premises by Tenant; and Tenant shall provide Landlord copies of receipts
for payment of all such taxes and assessments. To the extent any such taxes are
not separately assessed or billed to Tenant, Tenant shall pay the amount thereof
as invoiced by Landlord.
6. OPERATING EXPENSES.
6.1 INCREASE IN OPERATING EXPENSES. Tenant shall pay to Landlord (a)
Tenant's Building Share of the Increase in Building Operating Expenses and
(b) Tenant's Site Share of the Increase in Site Operating Expenses. The
"Increase in Building Operating Expenses" is the increase in Building
Operating Expenses in any calendar year over the Building Operating Expenses
in the Base Year. The "Increase in Site Operating Expenses" is the increase
in Site Operating Expenses in any calendar year over the Site Operating
Expenses in the Base Year.
6.2 DEFINITIONS.
6.2.1 BUILDING OPERATING EXPENSES. "Building Operating Expenses"
shall include all reasonable and necessary expenses incurred by Landlord in the
operation, maintenance, repair and management of the Building and the Common
Areas of the Building, including, but not limited to, (a) non-structural
repairs to and maintenance of the roof, skylights and or walls of the Building;
(b) repair, maintenance, utility costs and landscaping of the Building and
Common Areas of the Building; (c) insurance deductibles (not to exceed $100,000
per calendar year) and premiums relating to the insurance maintained by
Landlord with respect to the Building and the Common Areas of the Building; (d)
service contracts for security, cleaning, janitorial and landscaping services
and maintenance of HVAC systems and elevators, if any; (e) all wage and labor
costs, including fringe benefits, applicable to persons engaged in the
operation, maintenance and repair of the Building and the Common Areas of the
Building as Landlord's agents or as independent contractors; (f) capital
improvements made to or capital assets acquired for the Building and the Common
Areas of the Building after the Commencement Date that reduce Building
Operating Expenses or are reasonably necessary for the health and safety of the
occupants of the Building or are required under any present or future
governmental law or regulation, which capital costs, or an allocable portion
thereof, shall be amortized over the useful life of such items, together with
interest on the unamortized balance at an annual interest rate equal to
Landlord's good faith estimate of its cost of funds for such capital
improvements or capital assets but in all events not in excess of the
Applicable Interest Rate; and (g) installation, maintenance, repair and
replacement of telephone wiring within the Building. Building Operating
Expenses shall also include an administrative fee to Landlord for accounting
and project management services relating to the Building and the Common Areas
of the Building in an amount equal to ten percent (10%) of the sum of Building
Operating Expenses (other than the administrative fee) and Building Real
Property Taxes. Building Operating Expenses shall not include (i) replacement
of or structural repairs to the roof or the exterior walls; (ii) repairs to the
extent covered by insurance proceeds, or paid by Tenant or other third parties;
(iii) alterations solely attributable to tenants of the Building other than
Tenant; (iv) capital improvements made to correct any failure as of the
Commencement Date of the Premises, Building and/or Common Areas of the Building
to comply with governmental laws in effect and applicable to the Premises,
Building and/or Common Areas of the Building and Landlord as of the
Commencement Date (specifically omitting from such exclusion any capital
improvements arising out of any activities or operations of Tenant in, on or
about the Premises, the Building and/or the Common Areas of the Building); (v)
marketing and promotional costs, leasing commissions, brokerage commissions and
attorneys fees incurred in connection with the lease, sublease and/or
assignment of any other space in the Building with or to any existing or
potential tenant or other occupant; (vi) depreciation and amortization of the
Building; (vii) debt service payments with respect to the Building; and (viii)
reserves for repairs,
6
<PAGE>
replacements, bad debts and the like. If during any calendar year the Building
is not at least 95% occupied, Building Operating Expenses for such year shall
be calculated based on a 95% occupancy rate for the Building.
6.2.2 SITE OPERATING EXPENSES. "Site Operating Expenses" shall include
all reasonable and necessary expenses incurred by Landlord in the operation,
maintenance, repair and management of the Site and the Common Areas of the
Site, including, but not limited to, (a) repair, maintenance, utility costs and
landscaping of the Site and the Common Areas of the Site, including any and all
costs of cleaning, maintenance and repairs of common driveways, walkways,
parking areas, landscaping, and other costs which are allocable to the Site and
the Common Areas of the Sites under the terms of any CC&R's affecting the
Project; (b) insurance deductibles (not to exceed $100,000 per calendar year)
and premiums relating to the insurance maintained by Landlord with respect to
the Site and the Common Areas of the Site; (c) service contracts for security,
cleaning, janitorial and landscaping services, if any; (d) all wage and labor
costs, including fringe benefits, applicable to persons engaged in the
operation, maintenance and repair of the Site and the Common Areas of the Site
as Landlord's agents or as independent contractors; and (e) capital
improvements made to or capital assets acquired for the Site and the Common
Areas of the Site after the Commencement Date that reduce Site Operating
Expenses or are reasonably necessary for the health and safety of the occupants
of the Project or are required under any present or future governmental law or
regulation, which capital costs, or an allocable portion thereof, shall be
amortized over the useful life of such items, together with interest on the
unamortized balance at an annual interest rate equal to Landlord's good faith
estimate of its cost of funds for such capital improvements or capital assets
but in all events not in excess of the Applicable Interest Rate. Site
Operating Expenses shall also include an administrative fee to Landlord for
accounting and project management services relating to the Site and the Common
Areas of the Site in an amount equal to ten percent (10%) of the sum of Site
Operating Expenses (other than the administrative fee) and Site Real Property
Taxes. Site Operating Expenses shall not include (i) repairs to the extent
covered by insurance proceeds, or paid by Tenant or other third parties; (ii)
alterations solely attributable to tenants of the Project other than Tenant;
(iii) capital improvements made to correct any failure as of the Commencement
Date of the Site and/or Common Areas of the Site to comply with governmental
laws in effect and applicable to the Site and/or Common Areas of the Site and
Landlord as of the Commencement Date (specifically omitting from such exclusion
any capital improvements arising out of any activities or operations of Tenant
in, on or about the Site and/or the Common Areas of the Site); (iv) marketing
and promotional costs, leasing commissions, brokerage commissions and attorneys
fees incurred in connection with the lease, sublease and/or assignment of any
other space in the Building with or to any existing or potential tenant or
other occupant; (v) depreciation and amortization of the Building; (vi) debt
service payments with respect to the Building; and (vii) reserves for repairs,
replacements, bad debts and the like. If during any calendar year the Building
is not at least 95% occupied, Site Operating Expenses for such year shall be
calculated based on a 95% occupancy rate for the Site.
7. ESTIMATED EXPENSES.
7.1 PAYMENT. "Estimated Expenses" for any particular year shall mean
Landlord's estimate of Increases in Building Operating Expenses, Site Operating
Expenses, Building Real Property Taxes and Site Real Property Taxes
(collectively referred to as "Increases") for a calendar year. On or about the
last month of each calendar year, or as soon thereafter as practicable, Landlord
shall give Tenant notice of the Estimated Expenses for the ensuing calendar
year. Tenant shall pay Tenant's Building Share and Tenant's Site Share, as
applicable, of the Estimated Expenses with installments of Base Rent in monthly
installments of one-twelfth (1/12th) thereof on the first day of each calendar
month during such year. If at any time Landlord determines that Building
Operating Expenses, Site Operating Expenses, Building Real Property Taxes and
Site Real Property Taxes are projected to vary from the then Estimated Expenses
by more than ten percent (10%), Landlord may, by notice to Tenant, revise such
Estimated Expenses, and Tenant's monthly installments for the remainder of such
year shall be adjusted so that by the end of such calendar year Tenant has paid
to Landlord Tenant's Building Share and Tenant's Site Share, as applicable, of
the revised Estimated Expenses for such year.
7.2 ADJUSTMENT. "Operating Expenses and Real Property Taxes Adjustment"
(or "Adjustment") shall mean the difference between Tenant's Building Share and
Tenant's Site Share, as applicable, of Estimated Expenses and Tenant's Building
Share and Tenant's Site Share, as applicable, of Increases for any calendar
year. After the end of each calendar year, Landlord shall deliver to Tenant a
statement of Tenant's Building Share and Tenant's Site Share, as applicable, of
Increases for such calendar year, accompanied by a computation of the
Adjustment. If Tenant's payments are less than Tenant's Building Share and
Tenant's Site Share, as applicable, of Increases, then Tenant shall pay the
difference within twenty (20) days after receipt of such statement. Tenant's
obligation to pay such amount shall survive the termination of this Lease. If
Tenant's payments exceed Tenant's Building Share and Tenant's Site Share, as
applicable, of Increases, then (provided that Tenant is not in default),
Landlord shall credit such excess amount to future installments
7
<PAGE>
of Tenant's Building Share and Tenant's Site Share, as applicable, of Increases
for the next calendar year. If Tenant is in default, Landlord may, but shall
not be required to, credit such amount to Rent arrearages.
7.3 TENANT REVIEW OF ADJUSTMENTS. If Tenant shall dispute any
statement regarding any Adjustment, Tenant shall have the right, at any
reasonable time during normal business hours and after giving reasonable
notice to Landlord, not later than sixty (60) days following the receipt of
such statement (otherwise, such statement shall be final and binding for all
purposes hereof) and upon the condition that Tenant shall first deposit with
Landlord the full amount in dispute, to review at Landlord's offices
Landlord's books and records with respect to Operating Expenses and Real
Property Taxes for such calendar year. Tenant agrees that its review of such
books and records shall be conducted in a manner to minimize any interference
with Landlord's normal business operations. All information so obtained by
Tenant or otherwise obtained under the provisions of this Lease shall be
treated as confidential except in any litigation or arbitration proceedings
between the parties.
8. INSURANCE.
8.1 LANDLORD. Landlord shall maintain insurance insuring the Building
against fire and extended coverage (including, if Landlord elects, "all risk"
coverage, earthquake/volcanic action, flood and/or surface water insurance) for
the full replacement cost of the Building, with deductibles and the form and
endorsements of such coverage as selected by Landlord; provided, Landlord
reserves the right to self-insure with respect to any such coverage. Landlord
may also carry such other insurance as Landlord may deem prudent or advisable
including, without limitation, liability insurance in such amounts and on such
terms as Landlord shall determine. Such insurance is to protect, and to be for
the benefit of, Landlord.
8.2 TENANT. Tenant shall, at Tenant's expense, obtain and keep in
force at all times the following insurance:
8.2.1 COMMERCIAL GENERAL LIABILITY INSURANCE (OCCURRENCE FORM). A
policy of commercial general liability insurance (occurrence form) having a
combined single limit of not less than Two Million Dollars ($2,000,000) per
occurrence and Two Million Dollars ($2,000,000) aggregate per location if
Tenant has multiple locations, providing coverage for, among other things,
blanket contractual liability, premises, products/completed operations and
personal and advertising injury coverage, with deletion of (a) the exclusion
for operations within fifty (50) feet of a railroad property (railroad
protective liability), if applicable, and (b) the exclusion for explosion,
collapse or underground hazard, if applicable, and, if necessary, Tenant shall
provide for restoration of the aggregate limit;
8.2.2 AUTOMOBILE LIABILITY INSURANCE. Comprehensive automobile
liability insurance having a combined single limit of not less than Two Million
Dollars ($2,000,000) per occurrence and insuring Tenant against liability for
claims arising out of the ownership, maintenance, or use of any owned, hired or
non-owned automobiles;
8.2.3 WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY INSURANCE.
Workers' compensation insurance having limits not less than those required by
state statute and federal statute, if applicable, and covering all persons
employed by Tenant in the conduct of its operations on the Premises (including
the all states endorsement and, if applicable, the volunteers endorsement),
together with employer's liability insurance coverage in the amount of at least
One Million Dollars ($1,000,000); and
8.2.4 PROPERTY INSURANCE. "All risk" property insurance covering
damage to or loss of any personal property, fixtures and equipment, including
electronic data processing equipment, of Tenant (collectively "Tenant's
Property") (and coverage for the full replacement cost thereof including
business interruption of Tenant), together with, if the property of Tenant's
invitees is to be kept in the Premises, warehouser's legal liability or bailee
customers insurance for the full replacement cost of the property belonging to
invitees and located in the Premises.
8.3 GENERAL.
8.3.1 INSURANCE COMPANIES. Insurance required to be maintained by
Tenant shall be written by companies licensed to do business in the state in
which the Premises are located and having a "General Policyholders Rating" of
at least A VIII (or such higher rating as may be required by a lender having a
lien on the Premises) as set forth in the most current issue of "Best's
Insurance Guide."
8
<PAGE>
8.3.2 CERTIFICATES OF INSURANCE. Tenant shall deliver to Landlord
certificates of insurance for all insurance required to be maintained by
Tenant, in the form of the ACORD standard certificate of insurance, no
later than seven (7) days prior to the date of possession of the
Premises. Tenant shall, at least ten (10) days prior to expiration of
the policy, furnish Landlord with certificates of renewal or "binders"
thereof. Each certificate shall expressly provide that such policies
shall not be cancelable or otherwise subject to modification except
after sixty (60) days prior written notice to the parties named as
additional insureds as required in this Lease (except in the case of
cancellation for nonpayment of premium in which case cancellation shall
not take effect until at least ten (10) days' notice has been given to
the parties named as additional insureds). If Tenant fails to maintain
any insurance required in this Lease, Tenant shall be liable for all
losses and cost resulting from said failure.
8.3.3 ADDITIONAL INSUREDS. Landlord and any property management
company of Landlord for the Premises shall be named as additional
insureds on the policy as required by Section 8.2.1. The policies
required under Sections 8.2.1 and 8.3.5 shall provide for severability
of interest. An additional insureds endorsement, naming Landlord and
any property management company of Landlord, if applicable, as
additional insured(s), shall be attached to the certificate of insurance.
8.3.4 PRIMARY COVERAGE. All insurance to be maintained by Tenant
shall, except for workers' compensation and employer's liability
insurance, be primary, without right of contribution from insurance of
Landlord.
8.3.5 UMBRELLA/EXCESS INSURANCE. Any umbrella liability policy or
excess liability policy (which shall be in "following form")
shall-provide that if the underlying aggregate is exhausted, the excess
coverage will drop down as primary insurance. The limits of insurance
maintained by Tenant shall not limit Tenant's liability under this Lease.
8.3.6 WAIVER OF SUBROGATION. Tenant and Landlord each waive any
right to recover against the other for claims for damages to its
property to the extent covered by insurance. This provision is intended
to waive fully, and for the benefit of Landlord and Tenant any rights
and/or claims which might give rise to a right of subrogation in favor
of any insurance carrier with respect to property insurance carried by
Landlord and Tenant under Sections 8.1 and 8.2.4, respectively. The
coverage obtained by Landlord and Tenant pursuant to this Lease shall
include, without limitation, a waiver of subrogation endorsement
attached to the certificate of insurance.
8.3.7 NOTIFICATION OF INCIDENTS. Tenant shall notify Landlord
within twenty-four (24) hours after the occurrence of any accident or
incident in the Premises, the Building or the Common Areas which could
give rise to a claim against any of the insurance policies required
under this Section 8.
8.4 INDEMNITY. Tenant shall indemnify, protect, defend by counsel
reasonably acceptable to Landlord, and hold harmless Landlord and its partners,
directors, officers, employees, shareholders, lenders, agents, contractors and
each of their successors and assigns from and against any and all claims,
judgments, causes of action, damages, penalties, costs, liabilities, and
expenses, including all costs, attorneys' fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon, arising at any time during or after the Term as a result (directly or
indirectly) of or in connection with (i) any default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
(ii) Tenant's use of the Premises, the conduct of Tenant's business or any
activity, work or things done, permitted or suffered by Tenant in or about the
Premises, the Building, the Common Area or other portions of the Project, except
for claims caused solely by Landlord's gross negligence or wilful misconduct.
The obligations of Tenant under this Section 8.4 shall survive the termination
of this Lease with respect to any claims or liability arising prior to such
termination.
8.5 EXEMPTION OF LANDLORD FROM LIABILITY. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk of damage to property
including, but not limited to, Tenant's fixtures, equipment, furniture and
alterations or injury to persons in, upon or about the Premises, the Building,
the Common Area or other portions of the Project arising from any cause, and
Tenant hereby waives all claims in respect thereof against Landlord, except such
claims as are caused solely by Landlord's gross negligence or wilful misconduct.
Tenant hereby agrees that Landlord shall not be liable for injury to Tenant's
business or any loss of income therefrom or for damage to the property of
Tenant, or injury to or death of Tenant, Tenant's employees, invitees,
customers, agents or contractors or any other person in or about the Premises,
the Building, the Common Area or the Project, whether such damage or injury is
caused by fire, steam, electricity, gas, water or rain, or from the breakage,
leakage or other defects of sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or the interruption or failure of telephone
services to the Premises; or from any other cause, whether said damage or injury
results from conditions arising upon the Premises, upon other portions of the
Building or from other
9
<PAGE>
sources or places, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible to Tenant, except damage or
injury caused solely by Landlord's gross negligence or wilful misconduct.
Landlord shall not be liable for any damages arising from any act or neglect of
any other tenant, if any, of the Building or the Project or Landlord's failure
to enforce the terms of any agreements with parties other than Tenant.
9. REPAIRS AND MAINTENANCE.
9.1 TENANT. Tenant shall keep and maintain the Premises, including floors
and floor coverings, carpet and window coverings, interior plumbing, electrical
wiring, fixtures and equipment in good repair and in a clean and safe condition,
and repair and/or replace any and all of the foregoing in a good and workmanlike
manner.
9.2 LANDLORD. Landlord shall repair damage to (i) structural portions of
the Building, and (ii) building operating systems (e.g. electrical, plumbing,
HVAC and elevators) located outside of the Premises; provided, if such damage is
caused by an act or omission of Tenant, then such repairs shall be at Tenant's
sole expense. There shall be no abatement of Rent during the performance of
such work. Except for the initial improvements provided for in the Work Letter,
Landlord shall have no obligation during the Term of this Lease to remodel,
repair, improve, decorate or paint any part of the Premises or to clean, repair
or replace carpeting or window coverings, except for normal vacuuming of the
carpet as part of the janitorial services provided herein. Landlord shall not
be liable to Tenant for injury or damage that may result from any defect in the
construction or condition of the Premises, nor for any damage that may result
from interruption of Tenant's use of the Premises during any repairs by
Landlord. Tenant waives any right to repair the Premises, the Building and/or
the Common Area at the expense of Landlord under any applicable governmental
laws, ordinances, statutes, orders or regulations now or hereafter in effect
which might otherwise apply.
10. ALTERATIONS.
10.1 TRADE FIXTURES; ALTERATIONS. Tenant may install necessary trade
fixtures, equipment and furniture in the Premises, provided that such items are
installed and are removable without structural or material damage to the
Premises, the Building, the Common Area or the Project. Tenant shall not
construct, nor allow to be constructed, any alterations or physical additions
in, about or to the Premises, nor alter, modify, add to or disturb any telephone
wiring in the Premises or elsewhere in the Building without obtaining the prior
written consent of Landlord, which consent may be conditioned upon Tenant's
compliance with all laws, ordinances, regulations, codes and other governmental
requirements and with Landlord's reasonable requirements regarding construction
of improvements and alterations but such consent otherwise shall not be
unreasonably withheld. Tenant shall submit plans and specifications to Landlord
with Tenant's request for approval and shall reimburse Landlord for all costs
which Landlord may incur in connection with granting approval to Tenant for any
such alterations and additions, including any costs or expenses which Landlord
may incur in electing to have outside architects and engineers review said
matters. Landlord's approval of the plans, specifications and working drawings
for Tenant's alterations and additions shall create no responsibility or
liability on the part of Landlord for their completeness, design sufficiency or
compliance with all laws, rules and regulations of governmental agencies or
authorities. Tenant shall file a notice of completion after completion of such
work and provide Landlord with a copy thereof. Tenant shall provide Landlord
with a set of "as-built" drawings for any such work.
10.2 DAMAGE; REMOVAL. Tenant shall repair all damage to the Premises
and/or the Building caused by the installation or removal of Tenant's fixtures,
equipment, furniture and alterations or damage to the telephone wiring in the
Building due to the act, negligent or otherwise, of Tenant or any employee,
contractor or agent of Tenant. Upon the termination of this Lease, except as
otherwise may be approved in writing by Landlord, Tenant shall remove any or all
alterations, additions, improvements and partitions made or installed by Tenant
and restore the Premises to its condition existing prior to the construction of
any such items and perform any closure work, investigation and environmental
remedial work required by any Environmental Laws (as defined in Article 12) or
by any other applicable laws, ordinances, regulations or permits by any
governmental authority having jurisdiction; provided, however, Landlord may
permit, upon written notice to Tenant, any such items designated by Landlord to
remain on the Premises, in which event they shall be and become the property of
Landlord upon the termination of this Lease. All such removals and restoration
shall be accomplished in a good and workmanlike manner so as not to cause any
damage to the Premises, the Building, the Common Area or the Project whatsoever
and in strict accordance with all applicable laws, regulations and government
orders. In connection with Tenant's request for Landlord's approval of
alterations, additions or improvements to the Premises as provided in SECTION
10.1 above, Tenant may request that Landlord specify in writing as part of
Landlord's approval of such alterations, additions or improvements which items,
if any, Landlord will permit to remain on the Premises upon the termination of
this Lease.
10
<PAGE>
10.3 LIENS. Tenant shall promptly pay and discharge all claims for labor
performed, supplies furnished and services rendered at the request of Tenant and
shall keep the Premises free of all mechanics' and materialmen's liens in
connection therewith. Tenant shall provide at least ten (10) days prior written
notice to Landlord before any labor is performed, supplies furnished or services
rendered on or at the Premises and Landlord shall have the right to post on the
Premises notices of non-responsibility. If any lien is filed, Tenant shall
cause such lien to be released and removed within ten (10) days after the date
of filing, and if Tenant fails to do so, Landlord may take such action as may be
necessary to remove such lien and Tenant shall pay Landlord such amounts
expended by Landlord together with interest thereon at the Applicable Interest
Rate from the date of expenditure.
11. USE.
The Premises shall be used only for the Permitted Uses set forth in the
Basic Lease Information and for no other uses. Tenant, at Tenant's expense,
shall comply with any CC&R's or supplement thereto recorded in any official or
public records with respect to the Project or any portion thereof and with all
laws, rules, orders, ordinances, directions, regulations and requirements of
federal, state, county and municipal authorities now in force or which may
hereafter be in force, which shall impose any duty upon Landlord or Tenant with
respect to the use, occupation or alteration of the Premises. Tenant shall be
responsible for obtaining any permit, business license, certificate of
occupancy, or other permits or licenses required by any governmental agency
permitting Tenant's use or occupancy of the Premises. Tenant shall comply with
the rules and regulations attached hereto as EXHIBIT D, together with such
additional rules and regulations as Landlord may from time to time reasonably
prescribe. Tenant shall not commit waste, overload the floors or structure of
the Building, subject the Premises, the Building, the Common Area or the Project
to any use which would damage the same or increase the risk of loss or violate
any insurance coverage, permit any unreasonable odors, smoke, dust, gas,
substances, noise or vibrations to emanate from the Premises, take any action
which would constitute a nuisance or would disturb, obstruct or endanger any
other tenants, take any action which would abrogate any warranties, or use or
allow the Premises to be used for any unlawful purpose. Tenant shall have the
right to use for its employees and invitees, on an unreserved basis, the number
of Parking Spaces indicated in the Basic Lease Information. Tenant shall not
use more than the number of spaces allocated to Tenant. Landlord shall not be
responsible for non-compliance by any other tenant or occupant with, or
Landlord's failure to enforce, any of the rules or regulations or any other
terms or provisions of such tenant's or occupant's lease. Landlord shall
enforce such rules and regulations on a non-discriminatory basis. Tenant shall
promptly comply with the reasonable requirements of any board of fire insurance
underwriters or other similar body now or hereafter constituted. Tenant shall
not do any act which shall in any way encumber the title of Landlord in and to
the Premises, the Building or the Project.
12. ENVIRONMENTAL MATTERS.
12.1 DEFINITIONS.
12.1.1 ENVIRONMENTAL CONDITION. "Environmental Condition" means any
adverse condition relating to any Hazardous Materials or the environment,
including surface water, groundwater, drinking water supply, land, soil,
surface or subsurface strata or the ambient air and includes air, land and
water pollutants, noise, vibration, light and odors.
12.1.2 ENVIRONMENTAL LAWS. "Environmental Laws" means any and all
federal, state or local environmental, health and/or safety-related laws,
regulations, standards, decisions of courts, ordinances, rules, codes, orders,
decrees, directives, guidelines, permits or permit conditions, currently
existing and as amended, enacted, issued or adopted in the future relating to
the environment or to any Hazardous Material (including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 ET SEQ.)), which are or become applicable to
Tenant, the Premises, the Building, the Common Area or the Project.
12.1.3 HAZARDOUS MATERIALS. "Hazardous Materials" means any
chemical, substance, material, controlled substance, object, condition, waste,
living organism or combination thereof which is or may be hazardous to human
health or safety or to the environment (whether potentially injurious to
persons and property and whether potentially injurious by themselves or in
combination with other materials) due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity,
phytotoxicity, infectiousness or other harmful or potentially harmful
properties or effects, including, without limitation, petroleum and petroleum
products, asbestos, radon, polychlorinated biphenyls (PCBs) and all of those
chemicals, substances, materials, controlled substances, objects, conditions,
wastes, living organisms or combinations thereof which are now or become in the
future listed in the United States Department
11
<PAGE>
of Transportation Hazardous Materials Table [49 C.F.R. Section 172.101],
as amended from time to time, or listed, defined or regulated in any
manner by any Environmental Law.
12.2 ENVIRONMENTAL COMPLIANCE. Tenant shall not cause nor permit, nor
allow any of Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees or subtenants (collectively, "Tenant's
Parties") to cause or permit any Hazardous Materials to be brought upon, stored,
manufactured, generated, blended, handled, recycled, treated, disposed or used
on, under or about the Premises, the Building, the Common Area or the Project,
except for routine office and janitorial supplies in usual and customary
quantities stored, used and disposed of in accordance with all applicable
Environmental Laws. Tenant and Tenant's Parties shall comply with all
Environmental Laws and promptly notify Landlord in writing of (a) the presence
of any Hazardous Materials, other than office and janitorial supplies as
permitted above, on the Premises; (b) any notices of violation or potential or
alleged violation of any Environmental Law which are received by Tenant from any
governmental agency; (c) any and all inquiry, investigation, enforcement,
clean-up, removal or other governmental or regulatory actions instituted or
threatened relating to Tenant or the Premises or the Project; and (d) all claims
made or threatened by any third-party against Tenant or the Premises or Project
relating to any Hazardous Materials. Landlord shall have the right, upon not
less than forty-eight (48) hours notice to Tenant, to enter upon and inspect the
Premises and to conduct tests, monitoring and investigations. Such right of
entry shall include the right to test for soil and groundwater contamination.
If such tests indicate the presence of any Environmental Condition which
occurred during the Term of this Lease, or if Landlord has reasonable grounds to
believe that Tenant has disposed of or caused a release of Hazardous Materials
at, on or about the Premises or the Project, Tenant shall reimburse Landlord for
the cost of conducting such tests. In the event of any such Environmental
Condition, Tenant shall promptly take any and all steps necessary to rectify the
same to Landlord's reasonable satisfaction or shall, at Landlord's election,
reimburse Landlord, upon demand, for the cost to Landlord of performing
rectifying work. The reimbursement shall be paid to Landlord in advance of
Landlord's performing such work, based upon Landlord's reasonable estimate of
the cost thereof; and upon completion of such work by Landlord, Tenant shall pay
to Landlord any shortfall within thirty (30) days after Landlord bills Tenant
therefor or Landlord shall within thirty (30) days refund to Tenant any excess
deposit, as the case may be. In addition, Tenant shall comply, at its sole cost
and expense, with such recommendations contained in any environmental assessment
as Landlord may reasonably require including, without limitation, any
recommendations with respect to precautions which should be taken with respect
to activities on the Premises, and additional testing and studies to detect the
presence of Hazardous Materials.
12.3 INDEMNIFICATION. Tenant shall indemnify, protect, defend by counsel
acceptable to Landlord and hold harmless Landlord and its partners, directors,
officers, employees, shareholders, lenders, agents, contractors and each of
their respective successors and assigns (individually and collectively,
"Indemnitees") from and against any and all claims, judgments, causes of action,
damages, penalties, fines, taxes, costs, liabilities, losses and expenses
(including, without limitation, reasonable attorneys' fees and court costs) or
death or injury to any person or damage to any property whatsoever, arising from
or in connection with, or caused in whole or in part, directly or indirectly, by
(a) Tenant and/or any of Tenant's Parties' breach of any prohibition or
provision of this Section 12; (b) Tenant and/or any of Tenant's Parties breach
of any Environmental Law; or (c) the presence of Hazardous Materials on, under
or about the Premises or other properties as a result (directly or indirectly)
of Tenant's and/or any of Tenant's Parties' activities, or failure to act, in
connection with the Premises. This indemnity shall include the cost of any
required or necessary repair, response, removal, cleanup or detoxification, and
the preparation and implementation of any closure, monitoring or other required
plans, whether such action is required or necessary prior to or following the
termination of this Lease. This indemnification is intended to constitute an
indemnity agreement within the meaning of Section 9607(e)(i) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9607(e)(i)). Neither the written consent by Landlord to the
presence of Hazardous Materials on, under or about the Premises, nor the strict
compliance by Tenant with all Environmental Laws, shall excuse Tenant from
Tenant's obligation of indemnification pursuant hereto. Tenant's obligations
pursuant to the foregoing indemnity shall survive the termination of this Lease.
13. DAMAGE AND DESTRUCTION.
13.1 CASUALTY. If the Premises or Building should be damaged or destroyed
by fire or other casualty, within thirty (30) days after receipt by Landlord of
notice of such damage or destruction, Landlord shall notify Tenant whether the
necessary repairs can reasonably be made: (a) within ninety (90) days; (b) in
more than ninety (90) days but in less than one hundred eighty (180) days; or
(c) in more than one hundred eighty (180) days from the date of such damage or
destruction.
12
<PAGE>
13.1.1 LESS THAN 90 DAYS. If the Premises or Building should be
damaged only to such extent that rebuilding or repairs can reasonably be
completed within ninety (90) days, this Lease shall not terminate and, provided
that insurance proceeds are available to fully repair the damage, Landlord
shall repair the Premises, except that Landlord shall not be required to
rebuild, repair or replace any alterations, partitions, fixtures, additions and
other improvements (collectively, "Excluded Improvements") which may have been
placed in, on or about the Premises by or for the benefit of Tenant other than
the Tenant Improvements constructed pursuant to the Work Letter (which Tenant
Improvements shall be repaired by Landlord). If Tenant is required to vacate
all or a portion of the Premises during Landlord's repair thereof, the Base
Rent payable hereunder shall be abated proportionately from the date Tenant
vacates all or a portion of the Premises only during the period the Premises
are unfit for occupancy.
13.1.2 GREATER THAN 90 DAYS. If the Premises or Building should be
damaged only to such extent that rebuilding or repairs can reasonably be
completed in more than ninety (90) days but in less than one hundred eighty
(180) days, then Landlord shall have the option of: (a) terminating the Lease
effective upon the occurrence of such damage, in which event the Rent shall be
abated from the date Tenant vacates the Premises; or (b) electing to repair the
Premises, provided insurance proceeds are available to fully repair the damage
(except that Landlord shall not be required to rebuild, repair or replace any
part of the Excluded Improvements which may have been placed in, on or about
the Premises by or for the benefit of Tenant). If Tenant is required to vacate
all or a portion of the Premises during Landlord's repair thereof, the Base
Rent payable hereunder shall be abated proportionately from the date Tenant
vacates all or a portion of the Premises only during the period the Premises
are unfit for occupancy. In the event that Landlord should fail to
substantially complete such repairs within one hundred eighty days (180) days
after the date upon which Landlord is notified by Tenant of the casualty (such
period to be extended for delays caused by Tenant or because of any items of
Force Majeure, as defined in the Work Letter) and Tenant has not re-occupied
the Premises, Tenant shall have the right, as Tenant's exclusive remedy, within
ten (10) days after the expiration of such one hundred eighty (180) day period,
to terminate this Lease by delivering written notice to Landlord as Tenant's
exclusive remedy, whereupon all rights hereunder shall cease and terminate
thirty (30) days after Landlord's receipt of such notice.
13.1.3 GREATER THAN 180 DAYS. If the Premises or Building should be
so damaged that rebuilding or repairs cannot be completed within one hundred
eighty (180) days, either Landlord or Tenant may terminate this Lease by giving
written notice within ten (10) days after notice from Landlord specifying such
time period of repair; and this Lease shall terminate and the Rent shall be
abated from the date Tenant vacates the Premises. In the event that neither
party elects to terminate this Lease, Landlord shall promptly commence and
diligently prosecute to completion the repairs to the Premises, provided
insurance proceeds are available to repair the damage (except that Landlord
shall not be required to rebuild, repair or replace any Excluded Improvements
which may have been placed in, on or about the Premises by or for the benefit
of Tenant). If Tenant is required to vacate all or a portion of the Premises
during Landlord's repair thereof, the Base Rent payable hereunder shall be
abated proportionately from the date Tenant vacates all or a portion of the
Premises only during the period that the Premises are unfit for occupancy.
13.2 TENANT'S FAULT. If the Premises or any portion of the Building is
damaged resulting from the negligence or breach of this Lease by Tenant or any
of Tenant's Parties, Rent shall not be reduced during the repair of such damage
and Tenant shall be liable to Landlord for the cost of the repair caused thereby
to the extent such cost is not covered by insurance proceeds.
13.3 UNINSURED CASUALTY. In the event that the Premises or any portion of
the Building is damaged to the extent Tenant is unable to use the Premises and
such damage is not covered by insurance proceeds received by Landlord or in the
event that the holder of any indebtedness secured by the Premises requires that
the insurance proceeds be applied to such indebtedness, then Landlord shall have
the right at Landlord's option either (i) to repair such damage as soon as
reasonably possible at Landlord's expense, or (ii) to give written notice to
Tenant within thirty (30) days after the date of the occurrence of such damage
of Landlord's intention to terminate this Lease as of the date of the
occurrence of such damage. In the event Landlord elects to terminate this
Lease, Tenant shall have the right within ten (10) days after receipt of such
notice to give written notice to Landlord of Tenant's intention to pay the cost
of repair of such damage, in which event this Lease shall continue in full force
and effect, Landlord shall make such repairs as soon as reasonably possible and
Tenant shall reimburse Landlord for such repairs within fifteen (15) days after
receipt of an invoice from Landlord. If Tenant does not give such notice within
the ten (10) day period, this Lease shall terminate automatically as of the date
of the occurrence of the damage. Notwithstanding the foregoing, in the event
that the cost of repair of such uninsured damage does not exceed in the
aggregate $50,000.00, (x) neither Landlord nor Tenant shall have the right to
terminate this Lease by reason of such uninsured damage and this Lease, (y)
Tenant shall pay to Landlord one-half of the cost of
13
<PAGE>
repair of such uninsured damage, and (z) Landlord, without further cost or
expense to Tenant, shall make such repairs as soon as reasonably possible.
13.4 WAIVER. With respect to any damage or destruction which Landlord is
obligated to repair or may elect to repair, Tenant waives all rights to
terminate this Lease pursuant to rights otherwise presently or hereafter
accorded by law.
14. EMINENT DOMAIN.
14.1 TOTAL CONDEMNATION. If all of the Premises is condemned by eminent
domain, inversely condemned or sold under threat of condemnation for any public
or quasi-public use or purpose ("Condemned"), this Lease shall terminate as of
the earlier of the date the condemning authority takes title to or possession of
the Premises, and Rent shall be adjusted to the date of termination.
14.2 PARTIAL CONDEMNATION. If any portion of the Premises or the Building
is Condemned and such partial condemnation materially impairs Tenant's ability
to use the Premises for Tenant's business as reasonably determined by Landlord,
Landlord shall have the option of either (i) relocating Tenant to comparable
space within the Project or (ii) terminating this Lease as of the earlier of the
date title vests in the condemning authority or as of the date an order of
immediate possession is issued and Rent shall be adjusted to the date of
termination. If such partial condemnation does not materially impair Tenant's
ability to use the Premises for the business of Tenant, Landlord shall promptly
restore the Premises to the extent of any condemnation proceeds recovered by
Landlord, excluding the portion thereof lost in such condemnation, and this
Lease shall continue in full force and effect except that after the date of such
title vesting Rent shall be adjusted as reasonably determined by Landlord.
14.3 AWARD. If the Premises are wholly or partially Condemned, Landlord
shall be entitled to the entire award paid for such condemnation, and Tenant
waives any claim to any part of the award from Landlord or the condemning
authority; provided, however, Tenant shall have the right to recover from the
condemning authority such compensation as may be separately awarded to Tenant in
connection with costs in removing Tenant's merchandise, furniture, fixtures,
leasehold improvements and equipment to a new location. No condemnation of any
kind shall be construed to constitute an actual or constructive eviction of
Tenant or a breach of any express or implied covenant of quiet enjoyment.
14.4 TEMPORARY CONDEMNATION. In the event of a temporary condemnation not
extending beyond the Term, this Lease shall remain in effect, Tenant shall
continue to pay Rent and Tenant shall receive any award made for such
condemnation except damages to any of Landlord's property. If a temporary
condemnation is for a period which extends beyond the Term, this Lease shall
terminate as of the date of initial occupancy by the condemning authority and
any such award shall be distributed in accordance with the preceding section.
If a temporary condemnation remains in effect at the expiration or earlier
termination of this Lease, Tenant shall pay Landlord the reasonable cost of
performing any obligations required of Tenant with respect to the surrender of
the Premises.
15. DEFAULT.
15.1 EVENTS OF DEFAULTS. The occurrence of any of the following events
shall, at Landlord's option, constitute an "Event of Default":
15.1.1 Abandonment of the Premises for a period of thirty (30)
consecutive days;
15.1.2 Failure to pay Rent on the date when due and the failure
continuing for a period of three (3) calendar days after written notice from
Landlord that such payment is due; provided, however, that any such notice
shall be in lieu of, and not in addition to, any notice required to be provided
under Section 1161 ET SEQ of the California Code of Civil Procedure;
15.1.3 Failure to perform Tenant's covenants and obligations
hereunder (except default in the payment of Rent) where such failure continues
for a period of thirty (30) days after written notice from Landlord; provided,
however, if the nature of the default is such that more than thirty (30) days
are reasonably required for its cure, Tenant shall not be deemed to be in
default if Tenant commences the cure within the thirty (30) day period and
diligently prosecutes such cure to completion;
14
<PAGE>
15.1.4 The making of a general assignment by Tenant for the benefit
of creditors; the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary
action, the failure to remove or discharge the same within sixty (60) days of
such filing; the appointment of a receiver or other custodian to take
possession of substantially all of Tenant's assets or this leasehold; Tenant's
insolvency or inability to pay Tenant's debts or failure generally to pay
Tenant's debts when due; any court entering a decree or order directing the
winding up or liquidation of Tenant or of substantially all of Tenant's assets;
Tenant taking any action toward the dissolution or winding up of Tenant's
affairs; the cessation or suspension of Tenant's use of the Premises; or the
attachment, execution or other judicial seizure of substantially all of
Tenant's assets or this leasehold;
15.1.5 The making of any material misrepresentation or omission by
Tenant or any successor in interest of Tenant in any materials delivered by or
on behalf of Tenant to Landlord or Landlord's lender pursuant to this Lease;
15.1.6 The occurrence of an Event of Default set forth in Section
15.1.4 or 15.1.5 with respect to any guarantor of this Lease, if applicable; or
15.1.7 The release or discharge of Hazardous Materials into the soil
or groundwater.
15.2 REMEDIES.
15.2.1 TERMINATION. In the event of the occurrence of any Event of
Default, Landlord shall have the right to give a written termination notice to
Tenant and, on the date specified in such notice, this Lease shall terminate
unless on or before such date all arrears of Rent and all other sums payable by
Tenant under this Lease and all costs and expenses incurred by or on behalf of
Landlord hereunder shall have been paid by Tenant and all other Events of
Default at the time existing shall have been fully remedied to the satisfaction
of Landlord.
15.2.1.1 REPOSSESSION. Following termination, without prejudice to
other remedies Landlord may have, Landlord may (i) peaceably re-enter the
Premises upon voluntary surrender by Tenant or remove Tenant therefrom and any
other persons occupying the Premises, using such legal proceedings as may be
available; (ii) repossess the Premises or relet the Premises or any part
thereof for such term (which may be for a term extending beyond the Term), at
such rental and upon such other terms and conditions as Landlord in Landlord's
sole discretion shall determine, with the right to make reasonable alterations
and repairs to the Premises; and (iii) remove all personal property therefrom.
15.2.1.2 UNPAID RENT. Landlord shall have all the rights and
remedies of a landlord provided by applicable law, including the right to
recover from Tenant: (a) the worth, at the time of award, of the unpaid Rent
that had been earned at the time of termination, (b) the worth, at the time of
award, of the amount by which the unpaid Rent that would have been earned after
the date of termination until the time of award exceeds the amount of loss of
rent that Tenant proves could have been reasonably avoided, (c) the worth, at
the time of 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 loss of rent that
Tenant proves could have been reasonably avoided, and (d) any other amount, and
court costs, necessary to compensate Landlord for all detriment proximately
caused by Tenant's default. The phrase "worth, at the time of award," as used
in (a) and (b) above, shall be computed at the Applicable Interest Rate, and as
used in (c) above, shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).
15.2.2 CONTINUATION. Even though an Event of Default may have
occurred, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession; and Landlord may enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
Rent as it becomes due. Landlord, without terminating this Lease, may, during
the period Tenant is in default, enter the Premises and relet the same, or any
portion thereof, to third parties for Tenant's account and Tenant shall be
liable to Landlord for all costs Landlord incurs in reletting the Premises,
including, without limitation, brokers' commissions, expenses of remodeling the
Premises and like costs. Reletting may be for a period shorter or longer than
the remaining Term. Tenant shall continue to pay the Rent on the date the same
is due. No act by Landlord hereunder, including acts of maintenance,
preservation or efforts to lease the Premises or the appointment of a receiver
upon application of Landlord to protect Landlord's interest under this Lease,
shall terminate this Lease unless Landlord notifies Tenant that Landlord elects
to terminate this Lease. In the event that Landlord elects to relet the
Premises, the rent that Landlord receives from reletting shall be applied to
the payment of, first, any indebtedness from Tenant to Landlord other than Base
Rent and Tenant's Building Share and Tenant's Site Share,
15
<PAGE>
as applicable, of Increases; second, all costs, including maintenance, incurred
by Landlord in reletting; and, third, Base Rent and Tenant's Building Share and
Tenant's Site Share, as applicable, of Increases under this Lease. After
deducting the payments referred to above, any sum remaining from the rental
Landlord receives from reletting shall be held by Landlord and applied in
payment of future Rent as Rent becomes due under this Lease. In no event, and
notwithstanding anything in Section 16 to the contrary, shall Tenant be
entitled to any excess rent received by Landlord. If, on the date Rent is due
under this Lease, the rent received from the reletting is less than the Rent
due on that date, Tenant shall pay to Landlord, in addition to the remaining
Rent due, all costs, including maintenance, which Landlord incurred in
reletting the Premises that remain after applying the rent received from
reletting as provided hereinabove. So long as this Lease is not terminated,
Landlord shall have the right to remedy any default of Tenant, to maintain or
improve the Premises, to cause a receiver to be appointed to administer the
Premises and new or existing subleases and to add to the Rent payable hereunder
all of Landlord's reasonable costs in so doing, with interest at the Applicable
Interest Rate from the date of such expenditure.
15.2.3 ENVIRONMENTAL DEFAULTS. In the event of the occurrence of an
Event of Default under Section 15.1.7, Landlord shall have the right to (a)
terminate this Lease and collect damages, including the cost of remediation of
any Hazardous Materials released into the soil or groundwater, or (b) require
remediation of contamination while enforcing the remaining terms of this Lease.
15.3 CUMULATIVE. Each right and remedy of Landlord provided for herein or
now or hereafter existing at law, in equity, by statute or otherwise shall be
cumulative and shall not preclude Landlord from exercising any other rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity, by statute or otherwise. No payment by Tenant of a lesser amount than
the Rent nor any endorsement on any check or letter accompanying any check or
payment as Rent shall be deemed an accord and satisfaction of full payment of
Rent; and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies.
16. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign, sublet or otherwise transfer, whether voluntarily
or involuntarily or by operation of law, the Premises or any part thereof
without Landlord's prior written approval, which shall not be unreasonably
withheld. Landlord's consent to one assignment or subletting shall not be
deemed a consent to subsequent assignments and/or sublettings. The merger of
Tenant with any other entity or the transfer of any controlling or managing
ownership or beneficial interest in Tenant, or the assignment of a substantial
portion of the assets of Tenant, whether or not located at the Premises, shall
constitute an assignment hereunder. If Tenant desires to assign this Lease or
sublet any or all of the Premises, Tenant shall give Landlord written notice
thereof with copies of all related documents and agreements associated with the
assignment or sublease, including without limitation, the financial statements
of any proposed assignee or subtenant, thirty (30) days prior to the
anticipated effective date of the assignment or sublease. Tenant shall pay
Landlord's reasonable attorneys' fees incurred in the review of such
documentation plus an administrative fee of Three Hundred Fifty Dollars
($350.00) for each proposed transfer. Landlord shall have a period of twenty
(20) days following receipt of such notice and all related documents and
agreements to notify Tenant in writing of Landlord's approval or disapproval of
the proposed assignment or sublease. If Landlord fails to notify Tenant in
writing of such election, Landlord shall be deemed to have disapproved such
assignment or subletting. The parties agree that it shall be reasonable for
Landlord to withhold its consent to a proposed assignment or subletting if the
proposed assignee or sublessee or its business is subject to compliance with
additional requirements of the law (including related regulations) commonly
known as the "Americans with Disabilities Act (ADA)" beyond those requirements
which are applicable to the tenant desiring to assign or sublease or if the
proposed assignee's or subtenant's activities in, on or about the Premises or
Project involve the use, analysis, handling, storage, transport, discharge,
release, generation or disposal of any Hazardous Materials. This Lease may not
be assigned by operation of law. Any purported assignment or subletting
contrary to the provisions hereof shall be void and shall constitute an Event
of Default hereunder. If Tenant receives rent or other consideration for any
such transfer in excess of the Rent, or in case of the sublease of a portion of
the Premises, in excess of such Rent that is fairly allocable to such portion,
after appropriate adjustments to assure that all other payments required
hereunder are appropriately taken into account, Tenant shall pay Landlord fifty
percent (50%) of the difference between each such payment of rent or other
consideration (after deduction of Tenant's actual and reasonable leasing
commissions, tenant improvements and other ordinary and customary costs of such
transfer) and the Rent required hereunder ("bonus rental"). Landlord may,
without waiving any rights or remedies, collect rent from the assignee,
subtenant or occupant and apply the net amount collected to the Rent herein
reserved and apportion any excess rent so collected in accordance with the
terms of the preceding sentence. Tenant shall continue to be liable as a
principal and not as a guarantor or surety to the same extent as though no
assignment or subletting had been made. In addition, Tenant shall make all
legally required
16
<PAGE>
disclosures to the proposed assignee or subtenant. Landlord may consent to
subsequent assignments or subletting of this Lease or amendments or
modifications to the Lease by assignees of Tenant without notifying Tenant or
any successor of Tenant and without obtaining their consent. No permitted
transfer shall be effective until there has been delivered to Landlord a
counterpart of the transfer instrument in which the transferee agrees to be and
remain jointly and severally liable with Tenant for the payment of Rent
pertaining to the Premises and for the performance of all the terms and
provisions of this Lease relating thereto arising on or after the date of the
transfer.
Notwithstanding the foregoing, subject to compliance with the provisions
regarding the payment of "bonus rental", Tenant may assign this Lease or sublet
the Premises or any portion thereof, without Landlord's consent, to any
partnership, corporation or other entity which controls, is controlled by, or is
under common control with Tenant (control being defined for such purposes as the
power to direct the management of the relevant entity), or to any partnership,
corporation or other entity resulting from a merger or consolidation with Tenant
or to any person or entity which acquires at least a majority of all the assets
of Tenant as a going concern (collectively, an "Affiliate"); provided, that (i)
Landlord receives prior written notice of such assignment or subletting, (ii)
such Affiliate assumes (in the event of an assignment) in writing all of
Tenant's obligations under this Lease, and (iii) Landlord receives a fully
executed copy of such assignment or sublease agreement between Tenant and the
Affiliate.
17. ESTOPPEL, SUBORDINATION AND ATTORNMENT.
17.1 ESTOPPEL. Within ten (10) days after request by Landlord, Tenant
shall deliver an estoppel certificate duly executed (and acknowledged if
required by any lender or purchaser), in the form attached hereto as EXHIBIT E,
or in such other form as may be acceptable to the lender or purchaser, which
form may include some or all of the provisions contained in EXHIBIT E, to any
proposed mortgagee, purchaser or Landlord. Tenant's failure to deliver said
statement in such time period shall be an Event of Default hereunder and shall
be conclusive upon Tenant that (a) this Lease is in full force and effect,
without modification except as may be represented by Landlord; (b) there are no
uncured defaults in Landlord's performance and Tenant has no right of offset,
counterclaim or deduction against Rent hereunder; and (c) no more than one
month's Base Rent has been paid in advance. Landlord reserves the right to
substitute a different form of estoppel certificate upon the request of any
proposed mortgagee or purchaser. If any financier should require that this
Lease be amended (other than in the description of the Premises, the Term, the
Permitted Use, the Rent or as will adversely affect the rights, or increase the
obligations, of Tenant), Landlord shall give written notice thereof to Tenant,
which notice shall be accompanied by a Lease supplement embodying such
amendments. Tenant shall not unreasonably withhold its consent to such Lease
supplement and, within ten (10) days after the receipt of Landlord's notice,
execute and deliver to Landlord the tendered Lease supplement and any other
documents as may be reasonably and ordinarily required by such lender or
purchaser, unless Tenant shall reasonably withhold its consent thereto in which
event Tenant, within such time period, shall give written notice to Landlord of
Tenant's reasonable objections thereto.
17.2 SUBORDINATION. This Lease shall be subject and subordinate to all
ground leases and the lien of all mortgages and deeds of trust which now or
hereafter affect the Premises or the Project or Landlord's interest therein, and
all amendments thereto, all without the necessity of Tenant's executing further
instruments to effect such subordination. If requested, Tenant shall execute
and deliver to Landlord within ten (10) days after Landlord's request whatever
documentation that may reasonably be required to further effect the provisions
of this paragraph provided that such documentation provides for non-disturbance
of Tenant's occupancy on a form containing commercially reasonable terms and
conditions.
17.3 ATTORNMENT. In the event of a foreclosure proceeding, the exercise of
the power of sale under any mortgage or deed of trust or the termination of a
ground lease, Tenant shall, if requested, attorn to the purchaser thereupon and
recognize such purchaser as Landlord under this Lease; provided, however,
Tenant's obligation to attorn to such purchaser shall be conditioned upon
Tenant's receipt of a non-disturbance agreement.
18. INTENTIONALLY OMITTED.
19. MISCELLANEOUS.
19.1 GENERAL.
19.1.1 ENTIRE AGREEMENT. This Lease sets forth all the agreements
between Landlord and Tenant concerning the Premises; and there are no agreements
either oral or written other than as set forth herein.
17
<PAGE>
19.1.2 TIME OF ESSENCE. Time is of the essence of this Lease.
19.1.3 ATTORNEYS' FEES. In any action or proceeding which either
party brings against the other to enforce its rights hereunder, the
unsuccessful party shall pay all costs incurred by the prevailing party,
including reasonable attorneys' fees, which amounts shall be a part of the
judgment in said action or proceeding.
19.1.4 SEVERABILITY. If any provision of this Lease or the
application of any such provision shall be held by a court of competent
jurisdiction to be invalid, void or unenforceable to any extent, the
remaining provisions of this Lease and the application thereof shall remain
in full force and effect and shall not be affected, impaired or invalidated.
19.1.5 LAW. This Lease shall be construed and enforced in accordance
with the laws of the state in which the Premises are located.
19.1.6 NO OPTION. Submission of this Lease to Tenant for
examination or negotiation does not constitute an option to lease, offer to
lease or a reservation of, or option for, the Premises; and this document
shall become effective and binding only upon the execution and delivery
hereof by Landlord and Tenant.
19.1.7 SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and
inure to the benefit of the successors and assigns of Landlord and, subject to
compliance with the terms of Section 16, Tenant.
19.1.8 THIRD PARTY BENEFICIARIES. Nothing herein is intended to
create any third party benefit.
19.1.9 MEMORANDUM OF LEASE. Tenant shall not record this Lease or a
short form memorandum hereof without Landlord's prior written consent.
19.1.10 AGENCY, PARTNERSHIP OR JOINT VENTURE. Nothing contained
herein nor any acts of the parties hereto shall be deemed or construed by the
parties hereto, nor by any third party, as creating the relationship of
principal and agent or of partnership or of joint venture by the parties hereto
or any relationship other than the relationship of landlord and tenant.
19.1.11 MERGER. The voluntary or other surrender of this Lease by
Tenant or a mutual cancellation thereof or a termination by Landlord shall not
work a merger and shall, at the option of Landlord, terminate all or any
existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all of such subtenancies.
19.1.12 HEADINGS. Section headings have been inserted solely as a
matter of convenience and are not intended to define or limit the scope of
any of the provisions contained therein.
19.2 SIGNS. All signs and graphics of every kind visible in or from
public view or corridors, the Common Areas or the exterior of the Premises
shall be subject to Landlord's prior written approval and shall be subject to
any applicable Governmental laws, ordinances, and regulations and in
compliance with Landlord's signage program described in EXHIBIT F, attached
hereto, which signage program provides, among other things, for pro-rata
signage rights. Tenant shall remove all such signs and graphics prior to the
termination of this Lease. Such installations and removals shall be made in
such manner as to avoid injury or defacement of the Premises; and Tenant
shall repair any injury or defacement, including without limitation,
discoloration caused by such installation or removal. Such signage as shall
be installed pursuant to EXHIBIT F shall be permitted to remain in place
throughout the term of this Lease; provided, however, such signage rights
pursuant to this Lease are and shall remain personal to the original Tenant
hereunder and shall not be included in any subletting or assignment of this
Lease.
19.3 WAIVER. No waiver of any default or breach hereunder shall be
implied from any omission to take action on account thereof, notwithstanding
any custom and practice or course of dealing. No waiver by either party of
any provision under this Lease shall be effective unless in writing and
signed by such party. No waiver shall affect any default other than the
default specified in the waiver and then such waiver shall be operative only
for the time and to the extent therein stated. Waivers of any covenant shall
not be construed as a waiver of any subsequent breach of the same.
19.4 FINANCIAL STATEMENTS. As a material part of this Lease, Tenant
agrees to provide to any lender, purchaser or Landlord, within ten (10) days
after request, a current, accurate, certified financial statement for Tenant
and Tenant's
18
<PAGE>
business prepared under generally accepted accounting principles consistently
applied and such other certified financial information or tax returns as may be
reasonably required by Landlord, purchaser or any lender of either.
19.5 LIMITATION OF LIABILITY. The obligations of Landlord under this
Lease are not personal obligations of the individual partners, directors,
officers, shareholders, agents or employees of Landlord; and Tenant shall
look solely to the Building for satisfaction of any liability of Landlord and
shall not look to other assets of Landlord nor seek recourse against the
assets of the individual partners, directors, officers, shareholders, agents
or employees of Landlord. Whenever Landlord transfers its interest, Landlord
shall be released automatically from further performance under this Lease and
from all further liabilities and expenses hereunder and the transferee of
Landlord's interest shall assume all liabilities and obligations of Landlord
hereunder from the date of such transfer.
19.6 NOTICES. All notices to be given hereunder shall be in writing and
mailed postage prepaid by certified or registered mail, return receipt
requested, or delivered by personal or courier delivery, or sent by facsimile
(immediately followed by one of the preceding methods), to Landlord's Address
and Tenant's Address, or to such other place as Landlord or Tenant may designate
in a written notice given to the other party. Notices shall be deemed served
upon the earlier of receipt or three (3) days after the date of mailing.
19.7 BROKERAGE COMMISSION. Landlord shall pay a brokerage commission
to Broker in accordance with a separate agreement between Landlord and Broker.
Tenant warrants to Landlord that Tenant's sole contact with Landlord or with the
Premises in connection with this transaction has been directly with Landlord and
Broker, and that no other broker or finder can properly claim a right to a
commission or a finder's fee based upon contacts between the claimant and
Tenant. Tenant agrees to indemnify and hold Landlord harmless from any claims
or liability, including reasonable attorneys' fees, in connection with a claim
by any person for a real estate broker's commission, finder's fee or other
compensation based upon any statement, representation or agreement of Tenant,
and Landlord agrees to indemnify and hold Tenant harmless from any such claims
or liability, including reasonable attorneys' fees, based upon any statement,
representation or agreement of Landlord.
19.8 AUTHORIZATION. Each individual executing this Lease on behalf of
Tenant represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of Tenant and that such execution is binding upon
Tenant.
19.9 HOLDING OVER; SURRENDER.
19.9.1 HOLDING OVER. If Tenant holds over the Premises or any part
thereof after expiration of the Term, such holding over shall constitute a
month-to-month tenancy, at a rent equal to one hundred seventy-five percent
(175%) of the Base Rent in effect immediately prior to such holding over and
shall otherwise be on all the other terms and conditions of this Lease. This
paragraph shall not be construed as Landlord's permission for Tenant to hold
over. Acceptance of Rent by Landlord following expiration or termination shall
not constitute a renewal of this Lease or extension of the Term except as
specifically set forth above. If Tenant fails to surrender the Premises upon
expiration or earlier termination of this Lease, Tenant shall indemnify and hold
Landlord harmless from and against all loss or liability resulting from or
arising out of Tenant's failure to surrender the Premises, including, but not
limited to, any amounts required to be paid to any tenant or prospective tenant
who was to have occupied the Premises after the expiration or earlier
termination of this Lease and any related attorneys' fees and brokerage
commissions.
19.9.2 SURRENDER. Upon the termination of this Lease or Tenant's
right to possession of the Premises, Tenant will surrender the Premises,
together with all keys, in good condition and repair, reasonable wear and
tear excepted. Conditions existing because of Tenant's failure to perform
maintenance, repairs or replacements shall not be deemed "reasonable wear and
tear."
19.10 JOINT AND SEVERAL. If Tenant consists of more than one person,
the obligation of all such persons shall be joint and several.
19.11 COVENANTS AND CONDITIONS. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a condition.
19
<PAGE>
19.12 ADDENDA. The Addenda attached hereto, if any, and identified with
this Lease are incorporated herein by this reference as if fully set forth
herein.
IN WITNESS THEREOF, the parties have executed this Lease as of the date
set forth above.
"Landlord" "Tenant"
CATELLUS DEVELOPMENT CORPORATION, PUMA TECHNOLOGY CORPORATION,
a Delaware corporation a Delaware corporation
By: By: /s/ M. Bruce Nakao
-------------------------------- ---------------------------
Its: Its: Sr. VP, CFO
------------------------------- --------------------------
Date: Date: March 20, 1997
------------------------------ -------------------------
20
<PAGE>
EXHIBIT A
PREMISES
(PAGE 1 OF 2)
FLOOR PLAN
For the premises located at 2550 North First Street, Fourth Floor, in San Jose,
California.
[GRAPHIC OF FLOOR PLAN]
For the premises located at 2550 North First Street, Fifth Floor, in San Jose,
California
[GRAPHIC OF FLOOR PLAN]
<PAGE>
EXHIBIT A
PREMISES
(PAGE 2 OF 2)
DESCRIPTION OF THE SITE:
All that certain real property situated in the County of Santa Clara, State of
California, described as follows:
"Map of Tract No. 7892, South Bay Center, San Jose, California," a recorded
resubdivision on November 6, 1996, in Book 566 of Maps at Pages 45 and 48,
Lot 6, Santa Clara County Official Records.
SOUTH BAY CENTER
[GRAPHIC OF PREMISES MAP]
<PAGE>
EXHIBIT B
WORK LETTER
1. WORK LETTER DEFINED TERMS.
<TABLE>
<CAPTION>
Critical Dates Item
-------------- ----
<C> <S>
____________, 1997 Landlord to deliver to Tenant Final Working Drawings
____________, 1997 Tenant to approve Final Working Drawings
Substantial completion by Landlord of Tenant Improvements
</TABLE>
Any delay in any of the foregoing dates (including any re-do of any item
due to Tenant's disapproval thereof) shall automatically delay all
subsequent deadlines by a like amount of time. To the extent any such
delay has been caused by Tenant, the Commencement Date for all purposes
under the Lease will be the date the Premises would have been Substantially
Complete (as defined in the Lease) absent such Tenant Delays (defined
below).
Tenant's Representative: Steven Doctors
Landlord's Representative: Virginia Unruh, Catellus Development Corporation
2. PROCEDURE AND COSTS. Landlord and Tenant shall comply with the procedure
outlined below in preparing, delivering and approving matters relating to
tenant improvements to be constructed by Landlord ("Tenant Improvements") in
the Premises. The deadlines for performance by each party are specified in
the foregoing schedule of Critical Dates.
2.1 Attached hereto as SCHEDULE 1 are preliminary plans and outline
specifications ("Preliminary Plans") for Tenant Improvements, which
Preliminary Plans have previously been approved by Landlord and Tenant.
Landlord shall cause to be prepared and delivered to Tenant on or before the
Critical Date final plans and specifications based upon the Preliminary Plans
and Tenant's design input for the Tenant Improvements which shall include
structural, fire protection, life safety, mechanical and electrical working
drawings and final architectural drawings for the Premises (collectively,
"Final Working Drawings"), which Final Working Drawings shall substantially
conform to the Preliminary Plans and include modifications to the Premises,
if any, required to comply with the ADA. Landlord's obligation to deliver
the Final Working Drawings to Tenant within the time period set forth above
shall be subject to any delay encountered by Landlord as a result of a
request by Tenant for changes in accordance with the procedure set forth
below, any other Tenant Delays or any other cause beyond Landlord's control.
No later than the Critical Date, Tenant shall either approve the Final
Working Drawings or set forth in writing with particularity any changes
necessary to bring the Final Working Drawings into substantial conformity
with the Preliminary Plans; provided that Tenant shall not object to any
logical development or refinement of the Preliminary Plans or any change
necessitated by applicable law. Failure of Tenant to deliver to Landlord
written notice of such disapproval and the changes required on or before the
Critical Date shall constitute and be deemed approval of the Final Working
Drawings. Upon approval, actual or deemed, of the Final Working Drawings by
Landlord and Tenant, the Final Working Drawings shall be referred to as the
"Approved Working Drawings."
2.2 Landlord shall, at Tenant's sole expense (except as otherwise
specifically provided in SECTION 2.3 below), diligently construct and complete
the Tenant Improvements substantially in accordance with the Approved Working
Drawings. Landlord shall bid the work to at least three (3) general contractors
selected by Tenant from Landlord's list of acceptable general contractors and
subcontracts shall be bid to at least three (3) subcontractors in each subtrade
selected by Tenant from Landlord's list of acceptable subcontractors. Landlord
and Tenant shall jointly review any bids and make adjustments to the bids, as
necessary, for inconsistent assumptions in order to effect an equitable
comparison among bids. Landlord shall select the lowest price general
contractor bidding for such work deemed acceptable by Landlord and attempt to
enter into a construction contract with such general contractor on terms
consistent with the terms of the bid (the "Construction Contract").
<PAGE>
2.3 Landlord shall contribute to the costs and expenses of planning,
designing and constructing the Tenant Improvements in an amount not to exceed
$256,757.00 ("TI Allowance"); provided, however, that the TI Allowance may
only be utilized for installation of building improvements and associated
planning, design and permit costs.
2.4 Landlord, at its sole cost and without reducing the TI Allowance,
shall cause the (i) plumbing, electrical and mechanical systems within and
serving the Premises to be in good working order and condition as of the
Commencement Date, (ii) building standard men's and women's toilet rooms to
be completed in compliance with all applicable codes and legal
requirements, (iii) all existing cabling and wiring within in the Premises
from previous tenants to be removed, and (iv) the building shell and core,
to the extent necessary or desirable for the occupancy and use of the
Premises by Tenant for the purposes set forth in the Lease, shall be
completed in accordance with all applicable governmental laws applicable
thereto and to Landlord as of the Commencement Date.
3. PAYMENT. All costs and expenses of planning, designing and constructing
the Tenant Improvements in excess of the TI Allowance shall be paid by
Tenant. In the event the estimated cost of the Tenant Improvements shall
exceed the TI Allowance, Tenant shall co-fund the construction of the Tenant
Improvements by payment from time to time as reasonably requested by Landlord
of an amount equal the Cost Percentage (as defined below) multiplied by the
amount then required to be paid under the Construction Contract and/or other
contracts relating to the planning, design and/or construction of the Tenant
Improvements. As used herein, the term "Cost Percentage" shall mean a
fraction the numerator of which is an amount equal to the total costs and
expenses of planning, designing and constructing the Tenant Improvements less
the TI Allowance, and the denominator of which is an amount equal to the
total costs and expenses of planning, designing and constructing the Tenant
Improvements. All amounts payable by Tenant to Landlord pursuant to this Work
Letter shall be paid by Tenant within ten (10) calendar days after the
rendering to Tenant of a bill therefor by Landlord. Tenant's failure to pay
in the aforesaid time shall constitute an Event of Default under the Lease;
and all such amounts shall then bear interest from the date due and payable
until paid at the Applicable Interest Rate.
4. TENANT DELAYS. When Landlord's architect has furnished Landlord with
a certificate that the work to be done by Landlord has been substantially
completed (subject only to reasonable punch list items), the Premises will
be deemed ready for occupancy and possession thereof deemed delivered to
Tenant for all purposes of the Lease, including, without limitation,
regarding commencement of Rent and other obligations. Landlord shall
prepare, certify by Landlord's architect's signature and deliver in
duplicate to Tenant, a written statement certifying that (a) the Premises
are substantially complete in accordance with this Work Letter, and (b) the
date of such completion. Tenant's obligation to pay Rent shall not
commence until the Premises are Substantially Complete (as defined in the
Lease); provided, however, that if Landlord shall be delayed in
substantially completing any of the work for which it is responsible
hereunder as a result of:
4.1 Tenant's failure to timely approve any matters requiring such
approval and any delay resulting from the need to revise any drawings; or
4.2 Tenant's changes in the Approved Working Drawings or any Tenant
changes in the Final Working Drawings; or
4.3 Any delay of any other kind or nature in the completion of the
Tenant Improvements caused by Tenant (or its agents or employees) or
resulting from the performance of Tenant's Work (hereinafter defined), if
any;
(all of the foregoing being hereinafter collectively referred to as "Tenant
Delays") then, notwithstanding anything to the contrary set forth herein or
in the Lease, the Term and Tenant's obligation to pay Rent shall be
accelerated by the number of days of such Tenant Delays, and Tenant shall
reimburse Landlord for any and all reasonable additional actual costs and
expenses incurred by Landlord as a result of such Tenant Delays. Landlord
shall diligently complete any items of work not completed when the Premises
are Substantially Complete. Substantial Completion shall have occurred
notwithstanding Tenant's submission of a punchlist to Landlord, which Tenant
must submit, if at all, within thirty (30) days after the Commencement Date.
5. TENANT'S REPRESENTATIVE. Tenant has designated the Tenant's
Representative as its sole representative with respect to the matters set
forth in this Work Letter, who shall have full authority and responsibility
to act on behalf of the Tenant as required in this Work Letter.
<PAGE>
6. LANDLORD'S REPRESENTATIVE. Landlord has designated the Landlord's
Representative as its sole representative with respect to the matters set forth
in this Work Letter, who shall have full authority and responsibility to act on
behalf of the Landlord as required in this Work Letter.
7. CHANGES. Tenant may request reasonable changes in the Approved Working
Drawings; provided, however, that (a) no such request shall affect any
structural change in the Building or otherwise render the Premises or
Building in violation of applicable laws; (b) Tenant shall pay any additional
costs required to implement such change in excess of the TI Allowance,
including, without limitation, loss of rents, architecture fees, increases in
construction costs and other charges payable hereunder caused by delay, and
Tenant shall pay Landlord for said excess costs in accordance with Paragraph
3 above; and (c) such requests shall constitute an agreement by Tenant to any
reasonable delay in completion caused by reviewing, processing and
implementing such change.
8. MISCELLANEOUS. All references herein to a "number of days" shall mean and
refer to calendar days. In all instances where Tenant's approval is required,
if no written notice of disapproval is given within the applicable time period,
at the end of such period Tenant shall be deemed to have given its approval and
the next succeeding time period shall commence. If any item requiring approval
is timely disapproved by Tenant the procedure for preparation of such item and
approval thereof shall be repeated and all reasonable delays in completion of
the Premises associated therewith shall be the responsibility of Tenant.
LANDLORD ( ) AND TENANT (MBN) AGREE.
Initials Initials
<PAGE>
[GRAPHIC OF FLOOR PLAN]
SCHEDULE 1
<PAGE>
[GRAPHIC OF FLOOR PLAN]
SCHEDULE 1A
<PAGE>
EXHIBIT C
COMMENCEMENT DATE MEMORANDUM
With respect to that certain lease ("Lease") dated _________________,
19__, between ________________, a _________________ ("Tenant"), and
_______________, a _____________________ ("Landlord"), whereby Landlord
leased to Tenant and Tenant leased from Landlord approximately _______
rentable square feet of the building located at _____________________
("Premises"), Tenant hereby acknowledges and certifies to Landlord as follows:
(1) Landlord delivered possession of the Premises to Tenant in a
Substantially Completed condition on ____________________ ("Possession
Date");
(2) The Lease commenced on ________________________ ("Commencement Date");
(3) The Premises contain ________ square feet of space; and
(4) Tenant has accepted and is currently in possession of the Premises and
the Premises are acceptable for Tenant's use.
IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this
___________ day of __________________________.
"Tenant"
--------------------------------------
a
-------------------------------------
By:
-----------------------------------
Its:
-------------------------------
By:
-----------------------------------
Its:
-------------------------------
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
WHICH CONSTITUTE A PART OF THE OFFICE LEASE
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress.
2. No awning or other projection shall be displayed or attached to the
outside walls of the Building without the prior written consent of Landlord.
The standard drapes provided by Landlord shall not be removed from the windows,
and no other curtains, blinds, shades or screens shall be attached to or hung
in, or used in connection with, any window or door of the Premises, without the
prior written consent of Landlord. Such awnings, projections, curtains, blinds,
shades, screens or other fixtures must be of a quality, type, design and color,
and attached in the manner approved by Landlord.
3. No sign, advertisement, or notice shall be exhibited, painted,
inscribed or affixed by any tenant on any part of, or so as to be seen from the
outside of, the Premises or the Building without the prior written consent of
Landlord. In the event of the violation of the foregoing by any tenant,
Landlord may remove same without any liability, and may charge the expense
incurred in such removal to the tenant violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
tenant by Landlord at the expense of such tenant, and shall be of a size, color,
and style acceptable to Landlord.
4. Electric wiring of every kind and telephone outlets shall be installed
in a manner as will be prescribed by Landlord. The location of convenience
outlets, electric light outlets, power outlets and telephone outlets shall be
approved by Landlord, prior to installation, but the cost paid by tenant. No
electrical wall or ceiling fixture shall be installed unless first approved by
Landlord. All electric work must be done by electricians so licensed by the
State in which the Premises are located pursuant to proper governmental permits.
5. The sashes, sash doors, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by any tenant, nor shall any
bottles, parcels or other articles be placed on the windowsills, except
Landlord shall have the right to require Tenant to keep the drapes closed at
all times or some of the time.
6. The toilets, wash bowls and other plumbing fixtures shall not be
used for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees shall have
caused the same.
7. No tenant shall mark, paint, drill into, or in any way deface any part
of the Premises or the Building. No boring, cutting or stringing of wires or
laying of carpeting, linoleum or other similar floor coverings shall be
permitted, except with the prior written consent of the Landlord and as Landlord
may direct.
8. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises, and no cooking shall be done or permitted by any
tenant on the Premises, except the preparation of coffee, tea, hot chocolate and
similar items for tenants and their employees shall be permitted. No tenant
shall cause or permit any unusual or objectionable odors to be produced upon or
permeate the Premises.
9. The Premises shall not be used for manufacturing or for the storage
of merchandise except as such storage may be incidental to the use of the
Premises for general office purposes. No tenant shall occupy or permit any
portion of his Premises to be occupied for the manufacture or sale of liquor,
narcotics, or tobacco in any form. No tenant shall engage or pay any employees
on the Premises except those actually working for such tenant on the Premises
nor advertise for laborers giving an address at the Premises. The Premises
shall not be used for lodging or sleeping or for any immoral or illegal
purposes.
10. No tenant shall use, keep or permit to be used or kept any foul or
noxious gas or substances in the Premises or the Building or permit or suffer
the Premises to be occupied or used in a manner offensive or objectionable
1
<PAGE>
to Landlord or other tenants of the Building of neighboring buildings by reason
of noise, odors and/or vibrations, including, without limitation, by the use of
any musical instrument, radio, phonograph, sound-producing instrument or device
that can be heard outside the Premises.
11. No tenant shall place any radio or television antenna on the roof
or on any part of the inside or outside of the Building other than inside the
Premises. No tenant shall operate any electrical device from which may
emanate electrical waves which may interfere with or impair radio or
television broadcasting or reception from or in the Building or any part of
the Facilities. No tenant shall throw anything out of the doors, windows or
down the passageways. Landlord reserves the right to exclude or expel from
the Building or any part of the Facilities any person who, in the judgment of
Landlord, is intoxicated or under the influence of liquor or drugs or who
shall in any manner do any act in violation of these Rules and Regulations.
12. No tenant, nor any of tenant's servants, employees, agents, visitors
or licensees, shall at any time keep or permit to be kept upon the Premises any
inflammable, combustible or explosive fluid, chemical or substance.
13. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanism thereof. All keys to the Premises, and any other parts
of the Building, shall be obtained by the Tenant only from Landlord. Landlord
shall furnish Tenant, without charge, two keys to each entrance door to the
Premises. The Tenant shall obtain any additional keys only from Landlord and
shall not make or otherwise procure any additional sets of keys. Each tenant
must, upon the termination of his tenancy, return to the Landlord all such keys
and in the event of the loss of any keys so furnished, such tenant shall pay to
the Landlord the cost of replacing the same or of changing the lock or locks
opened by such lost key if Landlord shall deem it necessary to make such change.
14. The weight, size and position of all safes and other unusually heavy
objects used or placed in the Building shall be prescribed by Landlord. The
repair of any damage done to the Building or property therein by putting in or
taking out or maintaining such safes or other unusually heavy objects shall be
made and paid for by Tenant. All removals, or the carrying in or out of the
Building or moving within the Building of any safes, freight, furniture,
fixtures or bulky matter of any description must take place during the hours
which the Landlord may determine from time to time. The moving of safes,
furniture or other fixtures or bulky matter of any kind must be made upon
previous notice to the superintendent of the Building and under his supervision,
and the persons employed by any tenant for such work must be acceptable to
Landlord. Landlord reserves the right to inspect all safes, furniture,
fixtures, freight or other bulky articles to be brought into the Building and to
exclude from the Building all safes, freight or other bulky articles which
violate any of these Rules and Regulations or the Lease of which these Rules and
Regulations are a part. Landlord reserves the right to prescribe the weight and
position of all safes, which must be placed upon supports approved by Landlord
to distribute the weight.
15. No tenant shall purchase janitorial or maintenance or other like
service, from any company or persons unless the written consent of Landlord is
first obtained.
16. Tenant shall not use the name of the Building or Landlord in its
advertising.
17. Access to the Building between the hours of 6 P.M. in the evening
and 7 A.M. in the morning on weekdays and at all hours on Saturdays and
Sundays and usual holidays is controlled by a card key system. Landlord will
furnish card keys to tenant employees for whom any tenant requests the same
in writing. Each tenant shall be responsible for all persons for whom he
requests card keys and shall be liable to Landlord for all acts of such
persons. In the case of mob, riot, public disorder or other commotion or
invasion, Landlord reserves the right to prevent access to the Building or to
any other part of the Facilities during the continuance of the same by
closing the entrances to the Building or any other part of the Facilities,
blocking ingress or egress to the Building or any other part of the
Facilities or by closing the doors, or otherwise, for the safety of the
tenants of the Building or protection of the Building and property in the
Building.
18. Any persons employed by any tenant to do janitorial work shall, while
in the Building and outside of the Premises, be subject to and under the control
and direction of the superintendent of the Building (but not as an agent or
servant of said superintendent or of Landlord, and the tenant shall be
responsible for all acts of such persons).
19. All doors opening onto public corridors shall be kept closed, except
when in use for ingress or egress.
2
<PAGE>
20. The requirements of tenants will be attended to only upon application
to the Office of the Building.
21. Canvassing, soliciting, and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
22. All office equipment of any electrical or mechanical nature shall
be placed by tenants in the Premises in settings approved by Landlord, to
absorb or prevent any vibration, noise or annoyance.
23. No air conditioning unit or other similar apparatus shall be installed
or used by any tenant without the written consent of Landlord.
24. There shall not be used in any space, or in the public halls of the
Building either by any tenants or others, any hand trucks except those equipped
with rubber tires and side guards.
25. The expense of repairing any damage resulting from a violation of any
Rule or Regulation herein shall be done by the tenant by whom, or by whose
contractors, employees or invitees, the damage shall have been caused.
LANDLORD'S INITIALS TENANT'S INITIALS MBN
------- -------
3
<PAGE>
EXHIBIT E
TENANT ESTOPPEL
This Agreement ("Agreement"), dated as of ________________, 199_, executed
by ___________________ ("Tenant"), in favor of __________________________, a
______________________ ("Lender"), is entered into with reference to the
following facts:
A. Tenant is presently leasing certain premises (the "Premises")
comprising a portion of the real property (the "Property") described in
EXHIBIT A, attached hereto and incorporated herein by this reference, pursuant
to that certain lease (as modified from time to time, the "Lease") dated as of
________________, 199_, between Tenant and ______________________________, a
____________________ ("Landlord").
B. Lender has made or agreed to make a loan or loans to Landlord (the
"Loan") and, in connection therewith, Landlord has executed or will execute a
deed of trust (as modified from time to time, the "Deed of Trust") assigning to
Lender Landlord's interest in the Property, including Landlord's interests as
landlord under the Lease.
In consideration of the forecoing, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Tenant hereby
agrees as follows:
1. CERTIFICATION BY TENANT. Tenant hereby certifies to Lender as follows:
1.1 The Lease is in full force and effect, and Tenant has not
transferred its interests in the Lease or agreed to do so.
1.2 A true and complete copy of the Lease, together with all
amendments, supplements and other modifications thereto (oral or written), is
attached hereto as EXHIBIT B.
1.3 No rent or other amount has been prepaid under the Lease,
except as follows (if none, state "None"):
1.4 No deposit of any nature has been made in connection with the
Lease (other than deposits the nature and amount of which are expressly
described in the Lease), except as follows (if none, state "None"):
1.5 Tenant shall pay base rent under the Lease, upon the execution
of the Lease, in the amount of $___________ per month.
1.6 The Lease is the only agreement between Landlord and Tenant
with respect to the Premises, and Tenant claims no rights with respect to
the Premises or the Property other than those set forth in the Lease, except
as follows (if none, state "None"):
1.7 To the best of Tenant's knowledge, there are no existing
defenses or offsets against amounts due or to become due to Landlord under
the Lease, and there are no existing uncured defaults by Landlord under the
Lease, nor has any event occurred which, with the passage of time or the
giving of notice or both, would constitute such a default, except as follows
(if none, state "None"):
1.8 Landlord has offered no free rent period, building allowance or
similar concession(s) to induce Tenant to enter into the Lease, except as set
forth in the Lease, and Landlord has no other obligations to Tenant in
connection with the Lease, matured or not yet matured, except as set forth in
the Lease.
1.9 To the best of Tenant's knowledge, no circumstance presently
exists, and no event has occurred, that would prevent the Lease from becoming
effective or would entitle Tenant to terminate the Lease.
1
<PAGE>
2. CONSENT TO ASSIGNMENT. Tenant understands that Landlord has
assigned or will assign the Lease to Lender in connection with the Loan, and
Tenant hereby consents to such assignment. Tenant is not aware of any prior
assignment of the Lease by Landlord, except as follows (if none, state
"None"):
3. NO MODIFICATION OF LEASE; LENDER CONSENTS. Tenant shall not,
without Lender's prior written consent, (a) amend, supplement, terminate or
otherwise modify the Lease; or (b) accept (and/or act in reliance on) the
release, relinquishment or waiver by Landlord of any right with respect to
the Lease. Any such termination, modification, acceptance or other action
taken without such prior consent shall, at Lender's option, be void. Without
limiting the generality of the foregoing, (i) any assignment or subletting by
Tenant (or by any assignee or subtenant) which requires Landlord's consent
shall also require Lender's consent, which consent shall not be unreasonably
withheld, and shall, at Lender's option, be void if such consent is not
obtained, and (ii) any alteration to the Premises which requires Landlord's
consent shall also require Lender's consent which consent shall not be
unreasonably withheld. Tenant shall not pay any rent or other amount due to
Landlord under the Lease more than 10 days in advance of the due date.
4. LENDER CURE RIGHTS. Tenant shall not exercise any termination remedy
upon a default by Landlord with respect to the Lease unless Tenant has first
given Lender written notice of such default (at the address shown below or any
other address hereafter supplied to Tenant by Lender) and such default is not
cured within 30 days thereafter; provided that, if such default is nonmonetary,
is curable by Lender, and (a) is of such a nature that it cannot reasonably be
cured within 30 days or (b) the cure thereof by Lender requires Lender to have
possession of the Property, then in either such event Tenant shall not exercise
any termination remedy so long as Lender is diligently taking all steps required
for Lender to cure the default (including pursuit of possession of the
Property, to the extent required).
ADDRESS FOR NOTICES TO LENDER:
5. TRANSFEREE OF LANDLORD'S INTERESTS. Notwithstanding any provision to
the contrary in the Lease, a transferee of the Landlord's interest under the
Lease shall not be (i) liable for any act or omission of anv prior landlord
under the Lease (including without limitation the breach of any representation
or warranty made by any prior landlord unless such breach is caused by such
transferee), (ii) obligated to cure any default of any prior landlord under the
Lease (other than non-monetary defaults that remain uncured at the time of
foreclosure), (iii) subject to any offsets or defenses which Tenant is entitled
to assert against any prior landlord under the Lease, (iv) bound by any payment
of any amount owing under the Lease to any prior landlord which was made more
than 10 days prior to the date due, (v) bound by any amendment or other
modification to the Lease which has made subsequent to the date of this
Agreement without the prior written consent of Lender (which shall not be
unreasonably withheld) and which could adversely affect the landlord's
interests, or (vi) liable for the return to Tenant of any security or other
deposit paid by Tenant to any prior landlord under the Lease except to the
extent that such transferee actually receives such deposit.
6. FURTHER ASSURANCES. Tenant shall execute, acknowledge and deliver to
Landlord or Lender all documents, and shall take all actions, reasonably
required by Landlord or Lender from time to time to confirm or effect the
matters set forth herein, or otherwise to carry out the purposes of this
Agreement.
7. PAYMENTS TO LENDER. Tenant shall make all payments under the Lease to
Lender upon receiving a direction to pay from Lender, and shall comply with any
such direction to pay without determining whether any default exists with
respect to the Loan.
8. AGREEMENTS BY LANDLORD. Landlord hereby agrees as follows:
8.1 Tenant shall have no liability to Landlord for any amount
otherwise owing to Landlord under the Lease in the event that (a) Tenant
receives a written demand from Lender to pay such amount to Lender, and (b)
Tenant thereafter pays such amount to Lender.
8.2 Tenant shall be entitled to assume that any such demand by
Lender is valid and shall be under no obligation and shall have no right, to
inquire as to its validity, nor shall any claim by Landlord that such demand
is
2
<PAGE>
invalid affect Tenant's right and obligation to pay all amounts demanded to
Lender and thereupon be discharged of Tenant's obligation to pay such amounts to
Landlord.
9. ATTONEYS' FEES. In the event that any litigation shall be commenced
concerning this Agreement, the party prevailing in such litigation shall be
entitled to recover, in addition to such other relief as may be granted, its
reasonable costs and expenses, including without limitation reasonable
attorneys' fees and court costs, whether or not taxable, as awarded by a court
of competent jurisdiction.
10. RELIANCE BY LENDER. Tenant understands that Lender will rely upon
this Agreement in making the Loan and/or in entering into certain agreements
and/or granting certain consents in connection therewith. Notice of
acceptance of this Agreement by Lender is waived.
11. MISCELLANEOUS. This Agreement shall bind, and shall inure to the
benefit of, the successors and assigns of the parties. This Agreement shall be
governed by the laws of the State of California.
IN WITNESS WHEREOF, Tenant has caused this Agreement to be duty executed as
of the date first written above.
"Tenant"
Puma Technology Inc.
--------------------------------------
By:
/s/M. Bruce Nakao
-----------------------------------
Title:
Sr. VP, CFO
--------------------------------
Landlord consents to and agrees with the
terms of Paragraphs 0.7 and 0.8 herein:
- --------------------------------------,
a
-------------------------------------
By:
-----------------------------------
Title:
--------------------------------
3
<PAGE>
STANDARD COMMERCIAL LEASE
SECTION 1 - PARTIES
Thomas J. Flatley d/b/a The Flatley Company, LESSOR, which expression shall
include their heirs, successors and assigns where the context so admits, does
hereby lease to IntelliLink, Inc., LESSEE.
SECTION 2 - PREMISES
LESSEE, which expression shall include its successors, executors,
administrators and assigns where the context so admits, does hereby lease the
following described Premises: Suite Number 0006 on the lower level of Nashua
Office Park, One Tara Boulevard, Nashua, NH 03062, consisting of
approximately 717 square feet of space as outlined on Exhibit "A" of this
Lease, which also includes a 15% common area factor, together with the right
to use in common, with others entitled thereto, the hallways, stairways and
elevators, necessary for access to said Premises and lavatories nearest
thereto.
SECTION 3 - TERM
The term of this Lease shall be for two (2) years, commencing on March 15,
1992, or the Commencement Date (defined below), whichever is later, and
terminating two (2) years immediately thereafter, unless sooner terminated as
herein provided.
SECTION 4 - COMMENCEMENT DATE
The Commencement Date of the term of this Lease shall be the earlier of (a)
the day following the date on which the Premises are ready for occupancy, or
(b) the day LESSEE takes occupancy of the Premises. The Premises shall be
deemed ready for occupancy on the first day as of which LESSOR'S work has been
completed except for items of work (and, if applicable, adjustment and fixtures)
which can be completed after occupancy has been taken, without causing undue
interference with LESSEE'S use of the Premises (i.e., so-called "punch list"
items) and LESSEE has been given notice thereof. LESSOR shall complete as soon
as conditions permit, all "punch list" items and LESSEE shall afford LESSOR
access to the Premises for such purposes.
Notwithstanding the foregoing, if LESSEE'S personnel shall occupy all or any
part of the Premises for the conduct of its business prior to the
Commencement Date as determined pursuant to the preceding paragraph, such
date of occupancy shall, for all intents and purposes of this Lease, be the
Commencement Date.
LESSOR and LESSEE agree to execute a Supplemental Agreement setting forth the
actual Occupancy and Term Dates, once the same have been established.
SECTION 5 - RENT
The LESSEE agrees to pay to LESSOR, without deduction or offset, rent at the
rate of SIX THOUSAND FOUR HUNDRED FIFTY-THREE AND 00/100 ($6,453.00) Dollars
annually, payable in advance on the first day of each month, in equal monthly
installments of FIVE HUNDRED THIRTY-SEVEN AND 75/100 ($537.75) Dollars, and
at that rate for any fraction of a month at the beginning of the term.
SECTION 5A - RENT COMMENCEMENT DATE
The payment of rental shall commence on the Commencement Date.
<PAGE>
Page 2
SECTION 6 - ABATEMENT OF RENT
It is understood and agreed that if for any reason whatsoever, the LESSOR
does not deliver possession of the Premises according to the terms of this
Lease, the rent shall be abated until such date as possession of the Premises
is rendered by the LESSOR. In no event shall the LESSOR, its agents or
employees be liable in damages for failure to deliver possession under the
terms of this Lease, except for willful failure to do so.
SECTION 7 - SECURITY DEPOSIT
Upon the execution of this Lease by LESSEE, LESSEE shall pay to LESSOR, the
amount of FIVE HUNDRED THIRTY-SEVEN AND 75/100 ($537.75) Dollars, which shall
be held as security for LESSEE'S performance as herein provided. Said
Security Deposit shall be refunded to LESSEE at the end of this Lease,
subject to LESSEE'S satisfactory compliance with the conditions herein
contained and set forth.
SECTION B - ADDITIONAL RENT
In accordance with the following, LESSEE shall under the terms, conditions
and provisions hereinafter provided, pay to LESSOR as additional rent, the
following:
REAL ESTATE TAXES
1. If real estate taxes upon the land and buildings (the "Property"), of
which the Premises are a part, for any tax year exceed the real estate base
tax amount, whether by reason of an increase in either the tax rate or the
assessed valuation or both, LESSEE shall pay to LESSOR as additional rent
within ten (10) days after billing therefor, an amount equal to the product
of (a) such excess over the base taxes and (b) the following fraction:
Square Footage of Lessee's Premises
--------------------------------------------
Aggregate of All the Rentable Square Footage
(whether or not rented or improved within the entire building)
Effective April 1, 1993, LESSEE shall pay monthly, at the time when Rent
payments are due hereunder, an amount equal to one-twelfth (1/12th) of the
total of annual real estate taxes (as estimated by LESSOR) due from LESSEE
to LESSOR pursuant to this Subsection 8.1. Promptly after the determination
by any taxing authority of real estate taxes upon the Building for each tax
year, LESSOR shall make a determination of the real estate taxes allocated
to the Premises, and if the aforesaid payments theretofore made for such
tax year by LESSEE exceed the real estate taxes allocated to the Premises,
such overpayment shall be credited against the payments thereafter to be
made by LESSEE pursuant to this paragraph; and if the real estate taxes
allocated to the Premises for such tax year are greater than such payments
theretofore made on account for such tax year, LESSEE shall within ten (10)
days of written notice from the LESSOR make a suitable payment to LESSOR.
Xerox copies of tax bills submitted by LESSOR with any such statement shall
be conclusive evidence of the amount of real estate taxes charged, assessed
or imposed. After the full assessment year, the initial monthly payment on
account of the real estate taxes allocated to the Premises shall
be replaced each year by a payment which is one-twelfth (1/12th) of
the real estate taxes allocated to the Premises for the immediately
preceding tax year.
2. For the purposes of this clause, the term "Tax Year" shall mean
the twelve month period commencing on April 1st (or any month as it
may apply and/or change for the city, town or municipality tax period)
immediately preceding the Commencement Date and each twelve month
period thereafter during the term of this Lease.
<PAGE>
Page 3
3. It is agreed by both parties that the Base Year as it applies to taxes
for this Lease shall be April 1, 1992 - March 31, 1993.
4. If any abatement, refund or rebate shall be subsequently made for any
tax year, an appropriate adjustment shall be made in the amount payable
from, or paid by LESSEE to LESSOR on account of said real estate taxes,
after deducting the LESSOR'S expenses reasonably incurred in obtaining such
abatement, refund or rebate and provided there is no existing default of
LESSEE. The provisions of this subsection shall not, however, be
applicable to the base tax assessment as originally levied.
5. If some method or type of taxation replaces the current method of
assessment of real estate taxes, or the type thereof, LESSEE agrees that it
shall pay an equitable share of the same computation herein provided, to
the end that LESSEE'S share thereof shall be to the maximum extent
practicable, comparable to that which LESSEE would bear under the foregoing
provisions.
6. If a tax (other than a Federal or State net income tax) is assessed on
account of the rents or other charges payable by LESSEE to the LESSOR under
this Lease, LESSEE agrees to pay the same within ten (10) days after
billing therefor, unless applicable law prohibits the payment of such tax
by LESSEE. LESSOR shall have the same rights and remedies for non-payment
by LESSEE of any such amounts due on account of such taxes as LESSOR has
hereunder, for the failure of LESSEE to pay rent as provided for in Section
23 of this Lease.
OPERATING EXPENSES
7. The following is a list of all such items of operating expenditures as
are within the meaning of "Operating Expenses" hereinafter set forth. If,
in any calendar year of the term of this Lease, LESSOR'S Operating Expenses
exceed Operating Expenses for the calendar year 1992, LESSEE shall after
notice as hereinafter provided, pay to LESSOR as additional rent, an amount
equal to (a) the product of such excess and (b) a fraction involving the
same numerator and denominator as is provided for in Sub-section 8.1 of
this Lease.
8. The expression "Operating Expenses" as used herein, shall mean the
aggregate cost or expenses reasonably incurred by LESSOR with respect to
the operation, administration, cleaning, repair, maintenance and management
of the Property, including without limitation, those items enumerated
hereinafter. If during any portion of the calendar year for which
Operating Expenses are being computed, less than 93% of the building's
rentable area was occupied by tenants, actual Operating Expenses incurred
shall be reasonably extrapolated by LESSOR on an item by item basis to the
estimated operating expenses that would have been incurred if the building
were at least 93% occupied for such year, and such extrapolated amounts
shall for the purposes hereof, be deemed to be the Operating Expenses for
such year.
9. Effective January 1, 1993, LESSEE shall pay monthly, at the time when
Rent payments are due hereunder, an amount equal to one-twelfth (1/12th) of
the total annual Operating Expenses (as estimated by LESSOR) due from
LESSEE to LESSOR pursuant to Subsection 8.7 of this Lease.
Promptly after the end of each calendar year thereafter, LESSOR shall
make a determination of LESSEE'S share of such Operating Expenses; and
if the aforesaid payments theretofore made for such period by LESSEE
exceed LESSEE'S share, such overpayment shall be credited against the
payments thereafter to be made by LESSEE pursuant to this Paragraph;
and if LESSEE'S share is greater than such payments theretofore made
on account for such period, LESSEE shall within thirty (30) days of
written notice from the LESSOR make a suitable payment to LESSOR.
<PAGE>
Page 4
The initial monthly payment on account of the Operating Expense Charge
shall be replaced after LESSOR'S determination of LESSEE'S share thereof
for the preceding accounting period by a payment which is one-twelfth
(1/12th) of LESSEE'S actual share thereof for the immediately preceding
period, with adjustments as appropriate where such preceding period is less
than a full twelve-month period. LESSOR shall have the same rights and
remedies for non-payment by LESSEE of any such amounts due on account of
such Operating Expenses as LESSOR has hereunder, for the failure of LESSEE
to pay rent as provided for in Section 23 of this Lease.
10. Without limitation, Operating Expenses shall include:
a. All expenses incurred by LESSOR or LESSOR'S agents which shall be
directly related to employment of personnel, including amounts incurred for
wages, salaries and other compensation for services, payroll, social
security, unemployment and similar taxes, worker's compensation insurance,
disability benefits, pensions, hospitalization, retirement plans and group
insurance, uniforms and working clothes and the cleaning thereof, and
expenses imposed on LESSOR or LESSOR'S agents pursuant to any collective
bargaining agreement for the services of employees of LESSOR or LESSOR'S
agents in connection with the operation, repair, maintenance, cleaning,
management and protection of the Property, and its mechanical systems
including, without limitation, day and night supervisors, property manager,
accountants, bookkeepers, janitors, carpenters, engineers, mechanics,
electricians and plumbers and personnel engaged in supervision of any of
the persons mentioned above; provided that, if any such employee is also
employed on other properties of LESSOR, such compensation shall be suitably
prorated among the Property and such other properties.
b. The cost of services, utilities, materials and supplies furnished or
used in the operation, repair, maintenance, cleaning, management and
protection of the Property.
c. The cost of replacements for tools and other similar equipment used in
the repair, maintenance, cleaning and protection of the Property; provided
that, in the case of any such equipment used jointly on other properties of
LESSOR, such costs shall be suitably prorated among the Property and such
other properties.
d. Where the Property is managed by LESSOR or an affiliate of LESSOR, a
sum equal to the amounts customarily charged by management firms in the
Nashua area for similar properties whether or not actually paid, or where
otherwise managed, the amounts accrued for management, together with
amounts accrued for legal and other professional fees relating to the
Property, but excluding such fees and commissions paid in connection with
services rendered for securing or renewing leases and for matters not
related to the normal administration and operation of the building.
e. Premiums for insurance against damage or loss to the building from
such hazards as shall from time to time be generally required by
institutional mortgagors in the Nashua area for similar
properties, including, but not by way of limitation, insurance
covering loss of rent attributable to any such hazards, and public
liability insurance.
f. Cost for electricity, water and sewer use charges, and other
utilities supplied to the Property and not paid for directly by LESSEE.
<PAGE>
Page 5
g. Betterment assessments, provided the same are apportioned equally over
the longest period permitted by law.
h. Amounts paid to independent contractors for services, materials and
supplies furnished for the operation, repair, maintenance, cleaning and
protection of the Property.
i. Any capital expenditure made by LESSOR during the term of this
Lease, the total cost of which is not properly includable in Operating
Expenses for the operating year in which it was made, shall nevertheless be
included in such Operating Expenses for the operating year in which it was
made, and Operating Expenses for each succeeding operating year shall
include the annual charge-off of such capital expenditure. Annual
charge-off shall be determined by dividing the original capital expenditure
plus an interest factor, reasonably determined by LESSOR, as being the
interest rate then being charged for long-term mortgages by institutional
lenders on "like" properties within the locality in which the building is
located, by the number of years of useful life of the capital expenditure,
and the useful life shall be determined reasonably by LESSOR in accordance
with generally accepted accounting principles and practices in effect at
the time of making such expenditure.
SECTION 9 - USE
The LESSEE shall use the Premises only for the purpose of general offices.
SECTION 10 - COMPLIANCE WITH LAWS
The LESSEE acknowledges that no trade or occupation shall be conducted in the
Premises or use made thereof which will be unlawful, improper, noisy or
offensive, or contrary to any law or any municipal by-law or ordinance in force
in the city or town in which the Premises is situated.
SECTION 11 - FIRE INSURANCE
The LESSEE shall not permit any use of the Premises which will make voidable
any insurance on the Property of which the Premises are a part, or on the
contents of said Property, which shall be contrary to any law or regulation
from time to time established by the New England Fire Insurance Rating
Association, or any similar body succeeding to its powers. The LESSEE shall,
on demand, reimburse the LESSOR and all other tenants, all extra insurance
premiums caused by LESSEE'S misuse of the Premises.
SECTION 12 - UTILITIES
The LESSOR shall provide and shall pay for all LESSEE'S water and sewer use
charges and reasonable heating and air-conditioning during the normal heating
and cooling season between the hours of 8:00 A.M. and 6:00 P.M., during normal
business days. The normal cooling season shall be from April 15th to October
1st of any given year. Normal business days are all days except Saturday,
Sunday, New Year's Day, Memorial Day, July 4th, Labor Day, Thanksgiving Day,
Christmas Day (and the following day when any such day occurs on Sunday) and
such other days as LESSOR presently or in the future recognizes as holidays
for LESSOR'S general office staff. In addition, LESSOR agrees to furnish
elevator service and to light passageways and stairways during business
hours, and to furnish such cleaning service as is customary in similar
buildings in said city or town, all subject to interruption due to any
accident, to the making of repairs, alterations or improvements, to labor
difficulties, to trouble in obtaining fuel, electricity, service or supplies
from the sources from which they are usually obtained for said building, or
to causes beyond
<PAGE>
Page 6
LESSOR'S control. If LESSEE shall require air-conditioning, heating or
ventilation outside the hours and days above specified, LESSOR shall furnish
such service and LESSEE shall pay therefor such charges as may from time to time
be in effect. In the event LESSEE introduces into the Premises personnel or
equipment which overloads the capacity of the building system or in any other
way interferes with the system's ability to perform adequately its proper
functions, supplementary systems may if and as needed at LESSOR'S option, be
provided by LESSOR, at LESSEE'S expense.
SECTION 13 - ELECTRICAL
LESSOR shall purchase and receive electric current for the Premises directly
from the public utility company serving the building and LESSEE shall permit
LESSOR'S existing wires, risers, conduits and other electrical equipment of
LESSOR to be used for such purposes. LESSOR shall not in any way be liable or
responsible to LESSEE for any loss or damage or expense which LESSEE may sustain
or incur if, during the term of this Lease, either the quantity or character of
electric current is changed or electric current is no longer available or
suitable for LESSEE'S requirements due to a factor or cause beyond LESSOR'S
control. LESSOR at LESSEE'S expense, shall purchase and install all lamps,
tubes, bulbs, starters and ballasts.
Section 13 of this Lease shall apply until such time as LESSOR separately meters
LESSEE'S suite. Thereupon, LESSEE shall be responsible to purchase its own
light and plug electric.
SECTION 14 - ADDITIONAL CHARGES
Should LESSEE fail to pay when due, any sums under this Lease designated as an
additional charge, LESSOR shall have the same rights and remedies as LESSOR has
hereunder, for failure to pay rent as provided for in Section 23 of this Lease.
SECTION 15 - MAINTENANCE OF PREMISES
The LESSEE agrees to maintain the Premises in the same condition as existed at
the commencement of the term or as they may be improved during the term of this
Lease, reasonable wear and tear, damage by fire and other casualty only
excepted, and whenever necessary, to replace plate glass and other glass
therein, acknowledging that the Premises are now in good order and the glass
whole. The LESSEE shall not permit the Premises to be overloaded, damaged,
stripped, or defaced, nor suffer any waste. LESSEE shall obtain written consent
of LESSOR before erecting any sign on the Premises. LESSEE shall be responsible
for the cost of repairs which may be made necessary by reason of damage to
common areas in the building by LESSEE, LESSEE'S independent contractors, or
LESSEE'S invitees. If repairs are required to be made by LESSEE pursuant to the
terms hereof, LESSOR may demand that LESSEE make the same forthwith, and if
LESSEE refuses or neglects to commence such repairs and complete the same with
reasonable dispatch after such demand, LESSOR may (but shall not be required to)
make or cause such repairs to be made and shall not be responsible to LESSEE
for any loss or damage that may occur to LESSEE'S stock or business by reason
thereof. If LESSOR makes or causes such repairs to be made, LESSEE agrees that
LESSEE shall forthwith on demand, pay to LESSOR the cost thereof as an
additional charge.
SECTION 16 - ALTERATIONS
The LESSEE shall not make any structural alterations or additions to the
Premises, but may make non-structural alterations provided the LESSOR
consents thereto in writing, which consent shall not be unreasonably withheld
or delayed. All such allowed alterations shall be at LESSEE'S
<PAGE>
Page 7
sole cost and expense and shall be of such quality at least equal to the present
construction. LESSEE shall not permit any mechanics' liens, or similar liens,
to remain upon the Premises for labor and material furnished to LESSEE or
claimed to have been furnished to LESSEE in connection with work or any
character performed or claimed to have been performed at the direction of LESSEE
and shall cause any such lien to be released of record forthwith without cost to
LESSOR. Any alterations or improvements made by the LESSEE shall become the
property of the LESSOR at the termination of occupancy as provided herein.
SECTION 17 - LESSOR'S LIABILITY
LESSEE specifically agrees to look solely to LESSOR'S then equity interest in
the Property at the time owned, for recovery of any judgment from LESSOR; it
being specifically agreed that neither LESSOR (original or successor) nor anyone
claiming under the LESSOR, shall ever be personally liable for any such
judgment, or for the payment of any monetary obligation to LESSEE.
LESSOR being self-insured for Comprehensive General Liability, LESSEE would look
to LESSOR to maintain sufficient equity to satisfy its obligations not to exceed
amounts equal to those required of LESSEE for such coverage and evidence of
same.
SECTION 18 - LESSOR'S SERVICES
With respect to any services to be furnished by LESSOR to LESSEE, LESSOR shall
in no event be liable for failure to furnish the same when prevented from doing
so by strike, lockout, breakdown, accident, order or regulation of or by any
governmental authority, or failure of supply, or inability by the exercise of
reasonable diligence to obtain supplies, parts or employees necessary to furnish
such services, or because of war or other emergency, or for any cause due to any
act or neglect of LESSEE or LESSEE'S servants, agents, employees, licensees or
any person claiming by, through or under LESSEE.
SECTION 19 - DAMAGES
In no event shall LESSOR ever be liable to LESSEE for any indirect or
consequential damages suffered by LESSEE from whatever cause.
SECTION 20 - LESSEE'S LIABILITY INSURANCE
The LESSEE shall maintain with respect to the Premises and the Property of which
the Premises are a part, comprehensive public liability insurance in the amounts
of $1,000,000.00/$1,000,000.00, with property damage insurance in limits of
$1,000,000.00, in responsible companies qualified to do business in New
Hampshire and in good standing therein, insuring the LESSOR as well as the
LESSEE against injury to persons or damage to property as provided. The LESSEE
shall deposit with the LESSOR, prior to the Commencement Date of the term of
this Lease, certificates for such insurance, and thereafter within thirty (30)
days prior to the expiration of any such policies. All such insurance
certificates shall provide that such policies shall not be cancelled without at
least ten (10) days prior written notice to each insured named therein.
SECTION 21 - INSURABLE DAMAGES
LESSOR shall not be liable for any damage insurable by LESSEE to LESSEE'S
fixtures, merchandise or property regardless of cause and LESSEE hereby
releases LESSOR from same. LESSEE shall not be liable for any damage
insurable by LESSOR to the Premises, regardless of cause and LESSOR hereby
releases LESSEE from same.
<PAGE>
Page 8
SECTION 22 - FIRE, CASUALTY, EMINENT DOMAIN
Should a substantial portion of the Premises, or of the Property of which the
Premises are a part, be damaged by fire or other casualty, or be taken by
eminent domain, the LESSOR may elect to terminate this Lease. When such fire,
casualty, or taking renders the Premises substantially unsuitable for LESSEE'S
intended use, a just and proportionate abatement of rent shall be made, and the
LESSEE may elect to terminate this Lease if: (a) the LESSOR fails to give
written notice within ninety (90) days of its intention to restore the Premises,
or (b) the LESSOR fails to restore the Premises to a condition substantially
suitable for LESSEE'S intended use within one hundred twenty (120) days of said
fire, casualty or taking. The LESSOR reserves, and the LESSEE grants to the
LESSOR, all rights which the LESSEE may have for damages or injury to the
Premises for any taking by eminent domain, except for damage to LESSEE'S
fixtures, property or equipment.
SECTION 23 - DEFAULT, BANKRUPTCY
If at any time subsequent to the date of this Lease, any one or more of the
following events (herein referred to as a default of LESSEE) shall occur: (a)
LESSEE shall fail to pay the installment of rent, escalation charge or other
charges hereunder when due, and such failure shall continue for three (3)
full business days after notice has been given to LESSEE from LESSOR; (b)
LESSEE shall default in the observance or performance of any other of the
LESSEE'S covenants, agreements, or obligations hereunder and such default
shall not be corrected within thirty (30) days after such notice thereof; (c)
LESSEE shall be declared bankrupt or insolvent according to law; or (d) if
any assignment shall be made of LESSEE'S property for the benefit of
creditors, then the LESSOR shall have the right thereafter, while such
default continues, to re-enter and take complete possession of the Premises,
to declare the term of this Lease ended, and to remove the LESSEE'S effects,
without prejudice to any remedies which might be otherwise used for arrears
of rent or other default. The LESSEE shall indemnify the LESSOR against all
loss of rent and other payments which the LESSOR may incur by reason of such
termination during the remainder of the term. If the LESSEE should default,
after reasonable notice thereof, in the observance or performance of any
conditions or covenants on LESSEE'S part to be observed or performed under or
by virtue of any of the provisions in any section of this Lease, the LESSOR,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of the
LESSEE. If the LESSOR makes any expenditures or incurs any obligations for
the payment of money in connection therewith, including but not limited to
reasonable attorney's fees in instituting, prosecuting or defending any
action or proceeding, any such sums paid or obligations incurred, shall
accrue interest at the rate of eighteen percent (18%) per annum, and all
costs shall be paid to the LESSOR by the LESSEE, as additional rent.
SECTION 24 - NOTICE
Any notice from the LESSOR to the LESSEE relating to the Premises or to the
occupancy thereof, shall be deemed duly served if addressed to the LESSEE and
left at the Premises, or if addressed to the LESSEE and mailed to the Premises
by registered or certified mail, return receipt requested, postage prepaid.
Any notice from the LESSEE to the LESSOR relating to the Premises or to the
occupancy thereof, shall be deemed duly served if mailed to the LESSOR at
Braintree Hill Office Park, 50 Braintree Hill Park, Braintree, MA 02184, or
to such other address as the LESSOR may from time to time advise in writing.
<PAGE>
Page 9
SECTION 25 - SURRENDER
The LESSEE shall at the expiration or other termination of this Lease, remove
all LESSEE'S goods and effects from the Premises (including without hereby
limiting the generality of the foregoing, all signs and lettering affixed or
painted by the LESSEE, either inside or outside of the Premises). LESSEE shall
deliver to LESSOR, the Premises and all keys, locks thereto and other fixtures
connected therewith and all alterations and additions made to or upon the
Premises, in the same condition as they were at the Commencement Date of the
term of this Lease, or as they were put in during the term hereof, reasonable
wear and tear and damage by fire or other casualty only excepted. In the event
of LESSEE'S failure to remove any of LESSEE'S property from the Premises, LESSOR
is hereby authorized without liability to LESSEE for loss or damage thereto, and
at the sole risk of LESSEE, to remove and store any of the property at LESSEE'S
expense, or to retain same under LESSOR'S control or to sell at public or
private sale, without notice, any or all of the property not so removed and to
apply the net proceeds of such sale to the payment of any sum due hereunder, or
to destroy such property.
SECTION 26 - HOLDING OVER
Any holding over by LESSEE after the expiration of the term of this Lease shall
be treated as a daily Tenancy At Sufferance, at a rate equal to two (2) times
the rent plus escalation charges and other charges herein provided (prorated on
a daily basis) and shall otherwise be on the same terms and conditions as set
forth in this Lease, where the same may be applicable.
SECTION 27 - RIGHT TO MOVE
The LESSOR reserves the right to move the LESSEE and if LESSOR so requests,
LESSEE shall vacate the Premises and relinquish its right with respect to the
same, provided that LESSOR provides to LESSEE, space within the complex commonly
known as Nashua Office Park, Nashua, NH.
Such space shall be reasonably comparable in size, layout, finish and utility to
the existing Premises, and further provided that LESSOR shall, at its sole cost
and expense, move the LESSEE and its removable property from the Premises to
such new space in such a manner as will minimize, to the greatest extent
practicable, undue interference with the business or operations of LESSEE. Any
such space shall from and after such relocation, be treated as the Premises
demised under this Lease, and shall be occupied by LESSEE under the same terms,
provisions and conditions as are set forth in this Lease.
SECTION 28 - RULES AND REGULATIONS
The LESSEE will observe and comply with the Rules and Regulations as attached
hereto and made a part hereof, including revisions and additions as the LESSOR
may from time to time institute.
SECTION 29 - NOT TO INVALIDATE
If any term or provision of this Lease, or the application thereof to
any person or circumstance shall, to the extent be invalid or unenforceable,
the remainder of this Lease, or the application of such term of provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected hereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted by law.
<PAGE>
Page 10
SECTION 30 - QUIET ENJOYMENT
LESSEE, subject to the terms and provisions of this Lease, on payment of the
rent and escalation charges and observing, keeping and performing all of the
other terms and provisions of this Lease on LESSEE'S part to be observed, kept
and performed, shall lawfully, peaceably and quietly have, hold, occupy and
enjoy the Premises during the term hereof, without hindrance or ejection by any
persons lawfully claiming under LESSOR to have title to the Premises superior to
LESSOR.
SECTION 31 - ASSIGNMENT AND SUBLETTING
The LESSEE shall not assign or sublet the whole or any portion of the Premises
without LESSOR'S prior written consent, which consent shall be at the sole
discretion of LESSOR. Any increase in the rent resulting from the permitted
subletting will be due and payable to the LESSOR. The foregoing restrictions
shall not be applicable to any assignment of this Lease or a subletting of the
Premises by LESSEE to a subsidiary wholly-owned by LESSEE, or controlling
operation, the stock in which is wholly-owned by the stockholders of LESSEE. It
shall be a condition of the validity of any assignment, whether with the consent
of LESSOR or to a subsidiary or controlling corporation, that the assignee
agrees directly with LESSOR, to be bound by all the obligations of LESSEE
hereunder including, without limitation, the covenant against further assignment
and subletting. No assignment or subletting shall relieve LESSEE from its
obligations hereunder and LESSEE shall remain fully and primarily liable
therefor. If this Lease shall be assigned, or if the Premises or any portion
thereof shall be sublet or occupied by anyone other than LESSEE, LESSOR may, at
any time and from time to time, collect rent and other charges from the
assignee, sublessee or occupant, and apply the net amount collected to the rent
and other charges herein reserved, but no such assignment, subletting, occupancy
or collection shall be deemed a waiver of this covenant, or the acceptance of
the assignee, sublessee or occupant as a lessee, or a release of LESSEE or any
successor from obtaining the express consent in writing of LESSOR, to any
further assignment or subletting. No assignment or subletting and no use of the
Premises by a subsidiary wholly-owned by LESSEE or controlling corporation of
LESSEE shall affect permitted uses.
Notwithstanding the provisions of the above, any proposed assignee or sublessee
submitted to the LESSOR for approval must have the same or greater financial
strength as LESSEE. If LESSEE shall request permission to assign this Lease or
sublet the Premises or any part thereof to any person other than a subsidiary
wholly-owned by LESSEE or controlling corporation, the stock of which is
wholly-owned by the stockholders of LESSEE, LESSEE shall, together with such
request for consent thereto, inform LESSOR of the rental and other amounts to be
paid by such assignee or sublessee, the term of any subletting and the financial
information required by LESSOR to make the determination required by the first
sentence of this paragraph.
LESSOR shall have the right to terminate this Lease, provided that LESSOR shall
exercise such right within forty-five (45) days of its receipt of LESSEE'S
request for such consent and provided further, that LESSEE shall
have the right to withdraw its request for such consent within fifteen
(15) days after its receipt of such notice from LESSOR, in which event
such notice of termination shall become null and void. If this Lease
shall be terminated pursuant to the provisions of the immediately preceding
sentence, such termination shall become effective upon the last day of the
calendar month next following LESSOR'S giving notice of termination. Upon
LESSEE'S vacating the Premises in accordance with this Lease, LESSOR shall
refund all unearned rent and other payments made by LESSEE.
<PAGE>
Page 11
SECTION 32 - SUBORDINATE
This Lease shall be subject and subordinate to any and all mortgages, deeds of
trust and other instruments in the nature of a mortgage, now or at any time
hereafter, a lien or liens on the Property of which the Premises are a part and
the LESSEE shall, when requested, promptly execute and deliver such written
instruments as shall be necessary to show the subordination of this Lease to
said mortgages, deeds of trust or other such instruments in the nature of
mortgage, and LESSEE hereby appoints such holder as LESSEE'S attorney-in-fact to
execute such subordination agreement upon default of LESSEE in complying with
such holder's request.
SECTION 33 - LESSOR'S ACCESS
The LESSOR or agents of the LESSOR may, at reasonable times, enter to view the
Premises and may remove placards and signs not approved and affixed as herein
provided, and make repairs and alterations as LESSOR should elect to do and may
show the Premises to others, and at any time within three (3) months prior to
the expiration of the term, may affix to any suitable part of the Premises a
notice for letting or selling the Premises or Property of which the Premises are
a part and keep the same so affixed without hindrance or molestation.
SECTION 34 - INDEMNIFICATION AND LIABILITY
The LESSEE shall save the LESSOR harmless from all loss and damage occasioned by
the use or escape of water or by the bursting of pipes, as well as from any
claim or damage resulting from neglect in not removing snow and ice from the
roof of the building or from the sidewalks bordering upon the Premises so
leased, or by any nuisance made or suffered on the Premises, unless such loss is
caused by the negligence of the LESSOR. The removal of snow and ice from the
sidewalks bordering upon the Premises shall be the LESSOR'S responsibility.
SECTION 35 - LESSEE'S RISK
To the maximum extent this agreement may be made effective according to law,
LESSEE agrees to use and occupy the Premises and to use such other portions of
the building as LESSEE is herein given the right to use at LESSEE'S own risk;
and LESSOR shall have no responsibility or liability for any loss of or damage
to LESSEE'S removable property. The provisions of this section shall be
applicable from and after the execution of this Lease and until the end of the
term of this Lease, and during such further period as LESSEE may use or be in
occupancy of any part of the Premises or of the building.
SECTION 36 - INJURY CAUSED BY THIRD PARTY
To the maximum extent this agreement may be made effective according to law,
LESSEE agrees that LESSOR shall not be responsible or liable to LESSEE or to
those claiming by, through or under LESSEE, for any loss or damage that may be
occasioned by or through the acts or omissions of persons occupying adjoining
premises or any part of the premises adjacent to or connecting with the Premises
or any part of the Property or otherwise.
SECTION 37 - LESSEE'S REMOVABLE PROPERTY
All articles of personal property and all business fixtures, machinery and
equipment and furniture owned or installed by LESSEE solely at its expense in
the Premises (LESSEE'S removable property) shall remain the property of the
LESSEE and may be removed by LESSEE at any time prior to the expiration of
this Lease, provided that LESSEE, at its expense, shall repair any damage to
the building caused by such removal or installation.
<PAGE>
Page 12
SECTION 38 - WAIVER
Failure on the part of LESSOR or LESSEE to complain of any action or non-action
on the part of the other, no matter how long the same may continue, shall never
be a waiver by LESSOR or LESSEE, respectively, of any of the other's rights
hereunder. Further, no waiver at any time of any of the provisions hereof by
LESSOR or LESSEE shall be construed as a waiver of any of the other provisions
hereof, and a waiver at any time of any of the provisions shall not be construed
as a waiver at any subsequent time of the same provisions. The consent or
approval of LESSOR or LESSEE to or of any action by the other requiring such
consent or approval shall not be construed to waive or render unnecessary
LESSOR'S or LESSEE'S consent or approval to or of any subsequent similar act by
the other.
No payment by LESSEE, or acceptance by LESSOR, of a lesser amount than shall be
due from LESSEE to LESSOR shall be treated otherwise than as a payment on
account. The acceptance by LESSOR of a check for a lesser amount with an
endorsement or statement thereon, or upon any letter accompanying such check,
that such lesser amount is payment in full, shall be given no effect, and LESSOR
may accept such check without prejudice to any other rights or remedies which
LESSOR may have against LESSEE.
SECTION 39 - CONTINGENCY
In addition, notwithstanding anything contained herein to the contrary, it is
hereby understood and agreed that this Lease Agreement is contingent upon the
existing tenant in the Building who has a Right of First Refusal on the Premises
demised hereunder refusing said space. In the event said existing tenant does
not refuse such space and elects to lease same, this Lease Agreement shall
become null and void and of no further force or effect.
SECTION 40 - LESSEE'S RIGHT TO EXPAND
In the event LESSEE has not been in default of any of the terms, conditions and
covenants of this Lease Agreement and any Amendments made hereto during the term
hereof, LESSEE shall have the right, to lease additional space from the LESSOR
within Nashua Office Park, Nashua, NH, subject to availability and further
subject, but not limited to, the following terms and conditions:
1. LESSEE'S additional space requirement must be a minimum of 717 square
feet (hereinafter referred to as the "Expansion Space").
2. LESSEE must notify LESSOR in writing of its additional space
requirements no less than thirty (30) days prior to the date LESSEE desires
such Expansion Space.
3. LESSEE must occupy said Expansion Space and the Premises demised
hereunder for a term of no less than two (2) years.
4. Rent for said Expansion Space shall be at the then current market rent
rate. Notwithstanding the foregoing, in the event the term of this Lease
is extended pursuant to Subsection 3 hereinabove, then rent for the
Expansion Space and the Premises demised hereunder shall be adjusted to
reflect the then current market rent rate effective on the commencement
date of such extended term.
It is hereby agreed between the parties that immediately following LESSOR'S
receipt of LESSEE'S notice indicating its desire to lease Expansion Space,
and once such Expansion Space has been located by LESSOR, LESSOR AND LESSEE
shall enter into a mutually acceptable Amendment to this Lease setting forth
the terms and provisions set forth hereinabove.
<PAGE>
Page 13
SECTION 41 - LESSEE'S RIGHT OF TERMINATION
In the event LESSEE desires to lease from LESSOR Expansion Space pursuant to the
terms and conditions described in Section 40 hereinabove, and in the event
LESSOR is unable to provide such Expansion Space due to unavailability of such
Expansion Space within Nashua Office Park, then LESSEE shall have the right to
terminate this Lease exercisable only after the first (1st) full year of the
term of this Lease, provided LESSEE gives LESSOR ninety (90) days prior written
notice.
Notwithstanding the foregoing, in the event the LESSEE exercises the
aforementioned termination right, Rent, Additional Rent, and all other charges
will be due and payable until the later of (i) the date LESSEE fully vacates the
Premises or (ii) the date which is ninety (90) days following LESSOR'S receipt
of LESSEE'S notice.
SECTION 42 - FINANCIAL INFORMATION
It is hereby agreed that prior to the execution of this document by LESSOR,
LESSEE shall furnish to LESSOR, a financial statement, credit reference or
similar documentation certifying LESSEE'S financial standing.
SECTION 43 - WHEN LEASE BECOMES BINDING
The submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of, or option for the Premises,
and this document shall become effective and binding only upon the execution and
delivery thereof by both LESSOR and LESSEE, regardless of any written or verbal
representation of any agent, manager or other employee of LESSOR to the
contrary. All negotiations, consideration, representations and understandings
between LESSOR and LESSEE are incorporated herein and this Lease expressly
supercedes any proposals or other written documents relating hereto. This Lease
may be modified or altered only by written agreement between LESSOR and LESSEE,
and no act or omission of any employee or agent of LESSOR shall alter, change or
modify any of the provisions thereof.
IN WITNESS WHEREOF, the LESSOR and LESSEE have hereunto set their hands and
common seals this 2nd day of March, 1992.
LESSOR Thomas J. Flatley d/b/a
The Flatley Company
/s/ Bonnie J. Frazier /s/ Richard P. Rourke
- ------------------------------ -------------------------------
WITNESS By Richard P. Rourke
Its Senior Vice President
Authorized Agent
LESSEE IntelliLink, Inc.
/s/ [ILLEGIBLE] /s/ A.K. Crozier
- ------------------------------ -------------------------------
WITNESS By A.K. Crozier
Its President
Duly Authorized
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF NORFOLK )
March 2, 1992.
Then personally appeared Richard P. Rourke to me known to be the individual
who acknowledged himself to be the Senior Vice President/Authorized Agent of The
Flatley Company, LESSOR, and that he, as such, being authorized to do so,
executed the foregoing instrument and acknowledged the execution thereof to be
his free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at
Norfolk County, Braintree, Massachusetts, this 2nd day of March, 1992.
/s/ [ILLEGIBLE]
-----------------------------
Notary Public
My commission expires: 7/2/93
STATE OF MASSACHUSETTS )
) SS.
COUNTY OF MIDDLESEX )
2/21/92, 1992.
Then personally appeared A.K. Crozier to me known to be the individual who
acknowledged himself to be the President of IntelliLink, Inc., LESSEE, and
that he, as such, being authorized to do so, executed the foregoing
instrument and acknowledged the execution thereof to be his free act and deed
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at
Middlesex County, Concord, Massachusetts this 21st day of February, 1992.
/s/ [ILLEGIBLE]
--------------------------------
Notary Public
My Commission expires: 4/13/95
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and halls shall not be obstructed or encumbered by any
LESSEE, nor shall they be used for any purpose other than ingress and egress to
and from the Premises. LESSOR shall keep the sidewalks and curbs directly in
front of said Premises, clean and free from ice and snow.
2. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of the LESSOR. No curtains,
blinds, shades or screens shall be attached to, hung in, or used in connection
with, any window or door of the Premises, without the prior written consent of
the LESSOR. Any such awnings, projections, curtains, blinds, shades, screens or
other fixtures used by LESSEE (if given the prior written consent of the LESSOR
for such use), shall be of a quality, type, design and color, attached in a
manner approved by the LESSOR.
3. A building directory will be maintained in the main lobby of the building
at the expense of the LESSOR and the number of such listings shall be at the
sole discretion of the LESSOR. No sign, advertisement, notice or other
lettering shall be exhibited, inscribed, painted or affixed by any LESSEE on any
part of the outside or inside of the Premises or building, without the prior
written consent of the LESSOR. In the event of violation of the foregoing by
any LESSEE, LESSOR may remove same without any liability and may charge the
expense incurred by such removal to any LESSEES violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each LESSEE, at LESSEE'S expense and shall be of a size, color and style
acceptable to the LESSOR.
4. The sashes, sash doors, skylights, windows and doors that reflect or admit
light and air into the halls, passageways or other public places in the building
shall not be covered or obstructed by any LESSEE, nor shall any bottles, parcels
or other articles be placed on the windowsills.
5. No show cases or other articles shall be put in front of, or affixed to any
part of the exterior of the building, nor placed in the halls, corridors,
vestibules or fire escapes, without the prior written consent of the LESSOR.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuses of the fixtures shall be borne by the LESSEE
who, or whose servants, employees, agents, visitors, or licensees, shall have
caused same.
7. No LESSEE shall mark, paint, drill into, or in any way deface any part of
the Premises or the building of which they form a part. No boring, cutting or
stringing of wires shall be permitted, except with the prior written consent of
LESSOR, and as the LESSOR may direct. No LESSEE shall lay linoleum, or other
similar floor covering, so that the same shall come in contact with the floor of
the Premises, and, if linoleum or other similar floor covering is desired to be
used, an interlining of builder's deadening felt shall be first affixed to the
floor by a paste or other material, soluble in water, the use of cement or other
similar adhesive material being expressly prohibited.
8. No bicycles, vehicles or animals of any kind shall be brought in or kept
about the Premises, and no cooking shall be done or permitted by LESSEE on said
Premises. No LESSEE shall cause or permit any unusual or objectionable odors
to be produced upon or permeate from the Premises.
<PAGE>
Page 2
9. No space in the building, except as provided in individual Leases, shall be
used for manufacturing, for the storage of merchandise, or for the sale of
merchandise, goods or property of any kind at auction.
10. No LESSEE shall make, or permit to be made, any unsettling or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises' or those having business with them, whether by the use of any
musical instrument, radio, talking machine, unmusical noise, whistling, singing,
or in any other way. No LESSEE shall throw anything out of doors, windows,
skylights or down the passageways.
11. No LESSEE, nor any of LESSEE'S servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the Premises any flammable,
combustible or explosive fluid, chemical and substance.
12. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any LESSEE, nor shall any changes be made in existing locks
or the mechanism thereof. Each LESSEE must, upon the termination of his
tenancy, return to the LESSOR, all keys for stores, offices and toilet rooms,
either furnished to, or otherwise procured by, such LESSEE, and in the event of
the loss of any keys so furnished, such LESSEE shall pay the LESSOR the cost
thereof.
13. All removals, or the carrying in or out of any safes, freight, furniture or
bulky matter of any description must take place during the hours which the
LESSOR or its agents may determine from time to time. The LESSOR reserves the
right to inspect all freight to be brought into the building and to exclude from
the building, all freight which violates any of these Rules and Regulations or
the Lease of which these Rules and Regulations are a part.
14. No LESSEE shall occupy or permit any portion of the Premises leased to him
to be occupied for the possession, storage, manufacture or sale of liquor,
narcotics, or dope, or as a barber or manicure shop.
15. LESSOR shall have the right to prohibit any advertising by any LESSEE
which, in LESSOR'S opinion, tends to impair the reputation of the building or
its desirability as a building for offices, and upon written notice from LESSOR,
LESSEE shall refrain from or discontinue such advertising. LESSEE shall not use
the name of the building or its owner in any advertising without the express
written consent of the LESSOR.
16. No LESSEE shall install or permit the installation or use of any machines
dispensing goods for sale, including without limitation, foods, beverages,
cigarettes or cigars. No food or beverage shall be carried in the public halls
and elevators of the buildings, except in closed containers.
17. The Premises shall not be used for lodging or sleeping or for any immoral
or illegal purpose.
18. Canvassing, soliciting and peddling in the building is prohibited and each
LESSEE shall cooperate to prevent the same by notifying the LESSOR. LESSOR
reserves the right to inspect any parcel or package being removed from the
building by LESSEE, its employees, representatives and business invitees.
19. There shall not be used in any space or in the public halls of any
building, either by a LESSEE or by jobbers or others in the delivery of or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
<PAGE>
EXHIBIT "A"
Floor Plan
[GRAPHIC OF FLOOR PLAN]
<PAGE>
EXHIBIT "B"
Description of LESSOR'S Work
LESSOR shall construct LESSEE'S Premises in accordance with a mutually agreed
upon floor plan.
<PAGE>
THE FLATLEY COMPANY
STANDARD FORM OF COMMERCIAL LEASE
SUBMISSION NOT AN OPTION
THE SUBMISSION OF THIS LEASE FOR EXAMINATION AND NEGOTIATION DOES NOT CONSTITUTE
AN OFFER TO LEASE, A RESERVATION OF, OR OPTION FOR THE PREMISES AND SHALL VEST
NO RIGHT IN ANY PARTY. TENANT OR ANYONE CLAIMING UNDER OR THROUGH TENANT SHALL
HAVE THE RIGHTS TO THE PREMISES AS SET FORTH HEREIN AND THIS LEASE BECOMES
EFFECTIVE AS A LEASE ONLY UPON EXECUTION, ACKNOWLEDGEMENT AND DELIVERY THEREOF
BY LANDLORD AND TENANT, REGARDLESS OF ANY WRITTEN OR VERBAL REPRESENTATION OF
ANY AGENT, MANAGER OR EMPLOYEE OF LANDLORD TO THE CONTRARY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
SECTION 1 - PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . -1-
SECTION 2 - PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . -1-
SECTION 3 - TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
SECTION 3A - ADJUSTMENT OF TERM. . . . . . . . . . . . . . . . . . . . -1-
SECTION 4 - COMMENCEMENT DATE. . . . . . . . . . . . . . . . . . . . . -1-
SECTION 5 - RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 5A - RENT COMMENCEMENT DATE. . . . . . . . . . . . . . . . . . -2-
SECTION 6 - ABATEMENT OF RENT. . . . . . . . . . . . . . . . . . . . . -2-
SECTION 7 - SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 8 - ADDITIONAL RENT. . . . . . . . . . . . . . . . . . . . . . -2-
Real Estate Taxes. . . . . . . . . . . . . . . . . . . . . . . -2-
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . -3-
SECTION 9 - USE . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 10 - COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . -6-
SECTION 11 - FIRE INSURANCE. . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 12 - UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 13 - ELECTRICAL. . . . . . . . . . . . . . . . . . . . . . . . -7-
SECTION 14 - ADDITIONAL CHARGES. . . . . . . . . . . . . . . . . . . . -7-
SECTION 15 - MAINTENANCE OF PREMISES . . . . . . . . . . . . . . . . . -7-
SECTION 16 - ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . -7-
SECTION 17 - LESSOR'S LIABILITY. . . . . . . . . . . . . . . . . . . . -8-
SECTION 18 - LESSOR'S SERVICES . . . . . . . . . . . . . . . . . . . . -8-
SECTION 19 - DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . -8-
SECTION 20 - LESSEE'S LIABILITY INSURANCE. . . . . . . . . . . . . . . -8-
SECTION 21 - INSURABLE DAMAGES . . . . . . . . . . . . . . . . . . . . -8-
SECTION 22 - FIRE, CASUALTY, EMINENT DOMAIN. . . . . . . . . . . . . . -8-
SECTION 23 - DEFAULT, BANKRUPTCY . . . . . . . . . . . . . . . . . . . -9-
SECTION 24 - NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . -9-
SECTION 25 - SURRENDER . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 26 - HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 27 - RIGHT TO MOVE . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 28 - RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . -10-
SECTION 29 - NOT TO INVALIDATE . . . . . . . . . . . . . . . . . . . . -10-
<PAGE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
SECTION 30 - QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 31 - ASSIGNMENT AND SUBLETTING. . . . . . . . . . . . . . . . . -11-
SECTION 32 - SUBORDINATE. . . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 33 - LESSOR'S ACCESS. . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 34 - INDEMNIFICATION AND LIABILITY. . . . . . . . . . . . . . . -12-
SECTION 35 - LESSEE'S RISK. . . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 36 - INJURY CAUSED BY THIRD PARTY . . . . . . . . . . . . . . . -12-
SECTION 37 - LESSEE'S REMOVABLE PROPERTY. . . . . . . . . . . . . . . . -13-
SECTION 38 - WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
SECTION 39 - FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . -13-
SECTION 40 - LATE PAYMENT . . . . . . . . . . . . . . . . . . . . . . . -13-
SECTION 41 - CONFERENCE ROOM. . . . . . . . . . . . . . . . . . . . . . -14-
SECTION 42 - TERMINATING EXISTING LEASE . . . . . . . . . . . . . . . . -14-
SECTION 43 - WHEN LEASE BECOMES BINDING . . . . . . . . . . . . . . . . -14-
Rules and Regulations. . . . . . . . . . . . . . . . . . . -17-
Exhibit "A". . . . . . . . . . . . . . . . . . . . . . . . -19-
Exhibit "B". . . . . . . . . . . . . . . . . . . . . . . . -20-
</TABLE>
<PAGE>
STANDARD COMMERCIAL LEASE
SECTION 1 - PARTIES
Thomas J. Flatley d/b/a The Flatley Company, LESSOR, which expression shall
include their heirs, successors and assigns where the context so admits, does
hereby lease to IntelliLink, Corp., LESSEE.
SECTION 2 - PREMISES
LESSEE, which expression shall include its successors, executors,
administrators and assigns where the context so admits, does hereby lease the
following described Premises: Suite Number 200, consisting of approximately
2,365 square feet of space, and Suite Number 210, consisting of approximately
2,275 square feet of space (hereinafter collectively referred to as the
"Premises") and Storage Space Number 203, consisting of approximately 475
square feet of space (hereinafter referred to as "Storage Space"), all
located on the second (2nd) floor of Nashua Office Park, One Tara Boulevard,
Nashua, NH 03062, as outlined on Exhibit "A" of this Lease, which also
includes a 15% common area factor, together with the right to use in common,
with others entitled thereto, the hallways, stairways and elevators,
necessary for access to said Premises and lavatories nearest thereto.
SECTION 3 - TERM
The term of this Lease shall be for three (3) years, commencing on the
Commencement Date (defined below), and terminating three (3) years immediately
thereafter, unless sooner terminated as herein provided.
SECTION 3A - ADJUSTMENT OF TERM
If the Commencement Date (defined below) is other than the first day of a
calendar month, this Lease shall continue in full force and effect for a period
of three (3) years from the first day of the calendar month next succeeding the
Commencement Date.
SECTION 4 - COMMENCEMENT DATE
The Commencement Date shall be the date the Premises are ready for occupancy.
The Premises shall be deemed ready for occupancy on the first day as of which
LESSOR'S Work, as described on Exhibit "B-2" attached hereto and made a part
hereof, has been completed except for items of work (and, if applicable,
adjustment and fixtures) which can be completed after occupancy without causing
undue interference with LESSEE'S use of the Premises (i.e., so-called "punch
list" items) and LESSEE has been given notice thereof. LESSOR shall complete as
soon as conditions permit, all "punch list" items and LESSEE shall afford LESSOR
access to the Premises for such purposes.
Notwithstanding the foregoing, if LESSEE'S personnel shall occupy all or any
part of the Premises for the conduct of its business prior to the Lease
Commencement Date as determined pursuant to the preceding paragraph, such date
of occupancy shall, for all intents and purposes of Lease Agreement, Lease
Commencement Date.
LESSOR and LESSEE agree to execute a Supplemental Agreement setting forth the
actual Occupancy and Term Dates, once the same have been established.
<PAGE>
SECTION 5 - RENT
The LESSEE agrees to pay to LESSOR, without deduction or offset, rent at the
following rate:
SIXTY-SIX THOUSAND ONE HUNDRED TWENTY AND 00/100 ($66,120.00) Dollars annually,
payable in advance on the first day of each month, in equal monthly installments
of FIVE THOUSAND FIVE HUNDRED TEN AND 00/100 ($5,510.00) Dollars, for the
Premises, and at that rate for any fraction of a month at the beginning of the
term; and
THREE THOUSAND EIGHT HUNDRED 00/100 ($3,800.00) Dollars annually, payable in
advance on the first day of each month, in equal monthly installments of THREE
HUNDRED SIXTEEN AND 67/100 ($316.67) Dollars, for Storage Space, and at that
rate for any fraction of a month at the beginning of the term..
SECTION 5A - RENT COMMENCEMENT DATE
The payment of rental shall commence upon the Commencement Date.
SECTION 6 - ABATEMENT OF RENT
It is understood and agreed that if for any reason whatsoever, the LESSOR does
not deliver possession of the Premises according to the terms of this Lease, the
rent shall be abated until such date as possession of the Premises is rendered
by the LESSOR. In no event shall the LESSOR, its agents or employees be liable
in damages for failure to deliver possession under the terms of this Lease,
except for willful failure to do so.
SECTION 7 - SECURITY DEPOSIT
LESSOR hereby acknowledges that it is currently in receipt of a Security Deposit
in the amount of FIVE HUNDRED THIRTY-SEVEN AND 75/100 ($537.75) Dollars, which
shall be held as security for LESSEE'S performance as herein provided. Said
Security Deposit shall be refunded to LESSEE at the end of this Lease, subject
to LESSEE'S satisfactory compliance with the conditions herein contained and set
forth.
SECTION 8 - ADDITIONAL RENT
In accordance with the following, LESSEE shall under the terms, conditions and
provisions hereinafter provided, pay to LESSOR as additional rent, the
following:
REAL ESTATE TAXES
1. If real estate taxes upon the land and buildings (the "Property"),
of which the Premises are a part, for any tax year exceed the real
estate base tax amount, whether by reason of an increase in either
the tax rate or the assessed valuation or both, LESSEE shall pay to
LESSOR as additional rent within ten (10) days after billing
therefor, an amount equal to the product of (a) such excess over the
base taxes and (b) the following fraction:
Square Footage of Lessee's Premises
-----------------------------------
Aggregate of All the Rentable Square Footage
(whether or not rented or improved within the entire building)
Effective April 1, 1993, LESSEE shall pay monthly, at the time when
Rent payments are due hereunder, an amount equal to one-twelfth
(1/12th) of the total of annual real estate
-2-
<PAGE>
taxes (as estimated by LESSOR) due from LESSEE to LESSOR pursuant to this
Subsection 8.1. Promptly after the determination by any taxing authority of real
estate taxes upon the Building for each tax year, LESSOR shall make a
determination of the real estate taxes allocated to the Premises, and if the
aforesaid payments theretofore made for such tax year by LESSEE exceed the real
estate taxes allocated to the Premises, such overpayment shall be credited
against the payments thereafter to be made by LESSEE pursuant to this paragraph;
and if the real estate taxes allocated to the Premises for such tax year are
greater than such payments theretofore made on account for such tax year, LESSEE
shall within ten (10) days of written notice from the LESSOR make a suitable
payment to LESSOR. Xerox copies of tax bills submitted by LESSOR with any such
statement shall be conclusive evidence of the amount of real estate taxes
charged, assessed or imposed. After the full assessment year, the initial
monthly payment on account of the real estate taxes allocated to the Premises
shall be replaced each year by a payment which is one-twelfth (1/12th) of the
real estate taxes allocated to the Premises for the immediately preceding tax
year.
2. For the purposes of this clause, the term "Tax Year" shall mean the
twelve month period commencing on April lst (or any month as it may apply
and/or change for the city, town or municipality tax period) immediately
preceding the Commencement Date and each twelve month period thereafter
during the term of this Lease.
3. It is agreed by both parties that the Base Year as it applies to taxes
for this Lease shall be April 1, 1992 - March 30, 1993.
4. If any abatement, refund or rebate shall be subsequently made for any tax
year, an appropriate adjustment shall be made in the amount payable from, or
paid by LESSEE to LESSOR on account of said real estate taxes, after
deducting the LESSOR'S expenses reasonably incurred in obtaining such
abatement, refund or rebate and provided there is no existing default of
LESSEE. An appropriate adjustment will be made to the base tax year as a
result of the foregoing.
5. It some method or type of taxation replaces the current method of
assessment of real estate taxes, or the type thereof, LESSEE agrees that it
shall pay an equitable share of the same computation herein provided, to the
end that LESSER'S share thereof shall be to the maximum extent practicable,
comparable to that which LESSEE would bear under the foregoing provisions.
6. If a tax (other than a Federal or State net income tax) is assessed on
account of the rents or other charges payable by LESSEE to the LESSOR under
this Lease, LESSEE agrees to pay the same within ten (10) days after billing
therefor, unless applicable law prohibits the payment of such tax by LESSEE.
LESSOR shall have the same rights and remedies for non-payment by LESSEE of
any such amounts due on account of such taxes as LESSOR has hereunder, for
the failure of LESSEE to pay rent as provided for in Section 23 of this Lease.
OPERATING EXPENSES
7. The following is a list of all such items of operating expenditures as
are within the meaning of "Operating Expenses" hereinafter set forth. If, in
any calendar year
-3-
<PAGE>
of the term of this Lease, LESSOR'S Operating Expenses exceed
Operating Expenses for the calendar year 1992, LESSEE shall after
notice as hereinafter provided, pay to LESSOR as additional rent, an
amount equal to the product of (a) such excess multiplied by (b) a
fraction involving the same numerator and denominator as is provided
for in Subsection 8.1 of this Lease.
8. The expression "Operating Expenses" as used herein, shall mean
the aggregate cost or expenses reasonably incurred by LESSOR with
respect to the operation, administration, cleaning, repair,
maintenance and management of the Property, including without
limitation, those items enumerated hereinafter. If during any
portion of the calendar year for which Operating Expenses are being
computed, less than 93% of the building's rentable area was
occupied by tenants, actual Operating Expenses incurred shall be
reasonably extrapolated by LESSOR on an item by item basis to the
estimated operating expenses that would have been incurred if the
building were at least 93% occupied for such year, and such
extrapolated amounts shall for the purposes hereof, be deemed to be
the Operating Expenses for such year.
9. Effective January 1, 1993, LESSEE shall pay monthly, at the
time when Rent payments are due hereunder, an amount equal to
one-twelfth (1/12th) of the total annual Operating Expenses (as
estimated by LESSOR) due from LESSEE to LESSOR pursuant to
Subsection 8.7 of this Lease. Promptly after the end of each
calendar year thereafter, LESSOR shall make a determination of
LESSEE'S share of such Operating Expenses; and if the aforesaid
payments theretofore made for such period by LESSEE exceed LESSEE'S
share, such overpayment shall be credited against the payments
thereafter to be made by LESSEE pursuant to this Paragraph; and if
LESSEE'S share is greater than such payments theretofore made an
account for such period, LESSEE shall within thirty (30) days of
written notice from the LESSOR make a suitable payment to LESSOR.
The initial monthly payment on account of the Operating Expense Charge
shall be replaced after LESSOR'S determination of LESSEE'S share
thereof for the preceding accounting period by a payment which is
one-twelfth (1/12th) of LESSEE'S actual share thereof for the
immediately preceding period, with adjustments as appropriate where
such preceding period is less than a full twelve-month period. LESSOR
shall have the same rights and remedies for non-payment by LESSEE of
any such amounts due on account of such Operating Expenses as LESSOR
has hereunder, for the failure of LESSEE to pay rent as provided for
in Section 23 of this Lease.
10. Without limitation, Operating Expenses shall include:
a. All expenses incurred by LESSOR or LESSOR'S agents which
shall be directly related to employment of personnel, including
amounts incurred for wages, salaries and other compensation for
services, payroll, social security, unemployment and similar
taxes, worker's compensation insurance, disability benefits,
pensions, hospitalization, retirement plans and group insurance,
uniforms and working clothes and the cleaning thereof, and
expenses imposed on LESSOR or LESSOR'S agents pursuant to any
collective bargaining agreement for the services of employees of
LESSOR or LESSOR'S agents in connection with the operation,
repair, maintenance, cleaning, management and protection of the
Property, and its mechanical
-4-
<PAGE>
systems including, without limitation, day and night
supervisors, property manager, accountants, bookkeepers,
janitors, carpenters, engineers, mechanics, electricians and
plumbers and personnel engaged in supervision of any of the
persons mentioned above; provided that, if any such employee
is also employed on other properties of LESSOR, such
compensation shall be suitably prorated among the Property
and such other properties.
b. The cost of services, utilities, materials and supplies
furnished or used in the operation, repair, maintenance,
cleaning, management and protection of the Property.
c. The cost of replacements for tools and other similar
equipment used in the repair, maintenance, cleaning and
protection of the Property; provided that, in the case of any
such equipment used jointly on other properties of LESSOR,
such costs shall be suitably prorated among the Property and
such other properties.
d. Where the Property is managed by LESSOR or an affiliate
of LESSOR, a sum equal to the amounts customarily charged by
management firms in the Boston area for similar properties
whether or not actually paid, or where otherwise managed, the
amounts accrued for management, together with amounts accrued
for legal and other professional fees relating to the
Property, but excluding such fees and commissions paid in
connection with services rendered for securing or renewing
leases and for matters not related to the normal
administration and operation of the building.
e. Premiums for insurance against damage or loss to the
building from such hazards as shall from time to time be
generally required by institutional mortgagors in the Boston
area for similar properties, including, but not by way of
limitation, insurance covering loss of rent attributable to
any such hazards, and public liability insurance.
f. Cost for electricity, water and sewer use charges, and
other utilities supplied to the Property and not paid for
directly by LESSEE.
g. Betterment assessments, provided the same are
apportioned equally over the longest period permitted by law.
h. Amounts paid to independent contractors for services,
materials and supplies furnished for the operation, repair,
maintenance, cleaning and protection of the Property.
i. Any capital expenditure made by LESSOR during the term
of this Lease, the total cost of which is not properly
includable in Operating Expenses for the operating year in
which it was made, shall nevertheless be included in such
Operating Expenses for the operating year in which it was
made, and Operating Expenses for each succeeding operating
year shall include the annual charge-off of such capital
expenditure. Annual charge-off shall be determined by
dividing the original capital expenditure plus an interest
factor, reasonably determined by LESSOR, as being the
interest rate then being charged for long-term mortgages by
institutional lenders on
-5-
<PAGE>
"like" properties within the locality in which the building
is located, by the number of years of useful life of the
capital expenditure, and the useful life shall be determined
reasonably by LESSOR in accordance with generally accepted
accounting principles and practices in effect at the time of
making such expenditure.
SECTION 9 - USE
The LESSEE shall use the Premises only for the purpose of general business
offices.
SECTION 10 - COMPLIANCE WITH LAWS
The LESSEE acknowledges that no trade or occupation shall be conducted in the
Premises or use made thereof which will be unlawful, improper, noisy or
offensive, or contrary to any law or any municipal by-law or ordinance in
force in the city or town in which the Premises is situated.
SECTION 11 - FIRE INSURANCE
The LESSEE shall not permit any use of the Premises which will make voidable
any insurance on the Property of which the Premises are a part, or on the
contents of said Property, which shall be contrary to any law or regulation
from time to time established by the New England Fire Insurance Rating
Association, or any similar body succeeding to its powers. The LESSEE shall,
on demand, reimburse the LESSOR and all other tenants, all extra insurance
premiums caused by LESSEE'S misuse of the Premises.
SECTION 12 - UTILITIES
The LESSOR shall provide and shall pay for all LESSEE'S water and sewer use
charges and reasonable heating and air-conditioning during the normal heating
and cooling season between the hours of 8:00 A.M. and 6:00 P.M., during
normal business days. The normal cooling season shall be from April 15th to
October lst of any given year. Normal business days are all days except
Saturday, Sunday, New Year's Day, Memorial Day, July 4th, Labor Day,
Thanksgiving Day, Christmas Day (and the following day when any such day
occurs on Sunday) and such other days as LESSOR presently or in the future
recognizes as holidays for LESSOR'S general office staff. In addition,
LESSOR agrees to furnish elevator service and to light passageways and
stairways during business hours, and to furnish such cleaning service as is
customary in similar buildings in said city or town, all subject to
interruption due to any accident, to the making of repairs, alterations or
improvements, to labor difficulties, to trouble in obtaining fuel,
electricity, service or supplies from the sources from which they are usually
obtained for said building, or to causes beyond LESSOR'S control. If LESSEE
shall require air-conditioning, heating or ventilation outside the hours and
days above specified, LESSOR shall furnish such service and LESSEE shall pay
therefor such charges as may from time to time be in effect. In the event
LESSEE introduces into the Premises personnel or equipment which overloads
the capacity of the building system or in any other way interferes with the
system's ability to perform adequately its proper functions, supplementary
systems may if and as needed at LESSOR'S option, be provided by LESSOR, at
LESSEE'S expense.
-6-
<PAGE>
SECTION 13 - ELECTRICAL
LESSEE shall purchase and receive electric current for the Premises directly
from the public utility company serving the building and LESSEE shall permit
LESSOR'S existing wires, risers, conduits and other electrical equipment of
LESSOR to be used for such purposes. LESSOR shall not in any way be liable or
responsible to LESSEE for any loss or damage or expense which LESSEE may sustain
or incur if, during the term of this Lease, either the quantity or character of
electric current is changed or electric current is no longer available or
suitable for LESSEE'S requirements due to a factor or cause beyond LESSOR'S
control. LESSOR at LESSEE'S expense, shall purchase and install all lamps,
tubes, bulbs, starters and ballasts.
SECTION 14 - ADDITIONAL CHARGES
Should LESSEE fail to pay when due, any sums under this Lease designated as an
additional charge, LESSOR shall have the same rights and remedies as LESSOR has
hereunder, for failure to pay rent as provided for in Section 23 of this Lease.
SECTION 15 - MAINTENANCE OF PREMISES
The LESSEE agrees to maintain the Premises in the same condition as existed at
the commencement of the term or as they may be improved during the term of this
Lease, reasonable wear and tear, damage by fire and other casualty only
excepted, and whenever necessary, to replace plate glass and other glass
therein, acknowledging that the Premises are now in good order and the glass
whole. The LESSEE shall not permit the Premises to be overloaded, damaged,
stripped, or defaced, nor suffer any waste. LESSEE shall obtain written consent
of LESSOR before erecting any sign on the Premises. LESSEE shall be responsible
for the cost of repairs which may be made necessary by reason of damage to
common areas in the building by LESSEE, LESSEE'S independent contractors, or
LESSEE'S invitees. If repairs are required to be made by LESSEE pursuant to the
terms hereof, LESSOR may demand that LESSEE make the same forthwith, and if
LESSEE refuses or neglects to commence such repairs and complete the same with
reasonable dispatch after such demand, LESSOR may (but shall not be required to)
make or cause such repairs to be made and shall not be responsible to LESSEE for
any loss or damage that may occur to LESSEE'S stock or business by reason
thereof. If LESSOR makes or causes such repairs to be made, LESSEE agrees that
LESSEE shall forthwith on demand, pay to LESSOR the cost thereof as an
additional charge.
SECTION 16 - ALTERATIONS
The LESSEE shall not make any structural alterations or additions to the
Premises, but may make non-structural alterations provided the LESSOR consents
thereto in writing, which consent shall not be unreasonably withheld or delayed.
All such allowed alterations shall be at LESSEE'S sole cost and expense and
shall be of such quality at least equal to the present construction. LESSEE
shall not permit any mechanics' liens, or similar liens, to remain upon the
Premises for labor and material furnished to LESSEE or claimed to have been
furnished to LESSEE in connection with work of any character performed or
claimed to have been performed at the direction of LESSEE and shall cause any
such lien to be released of record forthwith without cost to LESSOR. Any
alterations or improvements made by the LESSEE shall become the property of the
LESSOR at the termination of occupancy as provided herein.
-7-
<PAGE>
SECTION 17 - LESSOR'S LIABILITY
LESSEE specifically agrees to look solely to LESSOR'S then equity interest in
the Property at the time owned, for recovery of any judgment from LESSOR; it
being specifically agreed that neither LESSOR (original or successor) nor anyone
claiming under the LESSOR, shall ever be personally liable for any such
judgment, or for the payment of any monetary obligation to LESSEE.
LESSOR being self-insured for Comprehensive General Liability, LESSEE would look
to LESSOR to maintain sufficient equity to satisfy its obligations not to exceed
amounts equal to those required of LESSEE for such coverage and evidence of
same.
SECTION 18 - LESSOR'S SERVICES
With respect to any services to be furnished by LESSOR to LESSEE, LESSOR shall
in no event be liable for failure to furnish the same when prevented from doing
so by strike, lockout, breakdown, accident, order or regulation of or by any
governmental authority, or failure of supply, or inability by the exercise of
reasonable diligence to obtain supplies, parts or employees necessary to furnish
such services, or because of war or other emergency, or for any cause due to any
act or neglect of LESSEE or LESSEE'S servants, agents, employees, licensees or
any person claiming by, through or under LESSEE.
SECTION 19 - DAMAGES
In no event shall LESSOR ever be liable to LESSEE for any indirect or
consequential damages suffered by LESSEE from whatever cause.
SECTION 20 - LESSEE'S LIABILITY INSURANCE
The LESSEE shall maintain with respect to the Premises and the Property of which
the Premises are a part, comprehensive public liability insurance in the amounts
of $1,000,000.00/$1,000,000.00, with property damage insurance in limits of
$1,000,000.00, in responsible companies qualified to do business in
Massachusetts and in good standing therein, insuring the LESSOR as well as the
LESSEE against injury to persons or damage to property as provided. The LESSEE
shall deposit with the LESSOR, prior to the Commencement Date of the term of
this Lease, certificates for such insurance, and thereafter within thirty (30)
days prior to the expiration of any such policies. All such insurance
certificates shall provide that such policies shall not be cancelled without at
least ten (10) days prior written notice to each insured named therein.
SECTION 21 - INSURABLE DAMAGES
LESSOR shall not be liable for any damage insurable by LESSEE to LESSEE'S
fixtures, merchandise or property regardless of cause and LESSEE hereby releases
LESSOR from same. LESSEE shall not be liable for any damage insurable by LESSOR
to the Premises, regardless of cause and LESSOR hereby releases LESSEE from
same.
SECTION 22 - FIRE, CASUALTY, EMINENT DOMAIN
Should a substantial portion of the Premises, or of the Property of which the
Premises are a part, be damaged by fire or other casualty, or be taken by
eminent domain, the LESSOR
-8-
<PAGE>
may elect to terminate this Lease. When such fire, casualty, or taking renders
the Premises substantially unsuitable for LESSEE'S intended use, a just and
proportionate abatement of rent shall be made, and the LESSOR may elect to
terminate this Lease if: (a) the LESSOR fails to give written notice within
ninety (90) days of its intention to restore the Premises, or (b) the LESSOR
fails to restore the Premises to a condition substantially suitable for LESSEE'S
intended use within one hundred twenty (120) days of said fire, casualty or
taking. The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights
which the LESSEE may have for damages or injury to the Premises for any taking
by eminent domain, except for damage to LESSEE'S fixtures, property or
equipment.
SECTION 23 - DEFAULT, BANKRUPTCY
If at any time subsequent to the date of this Lease, any one or more of the
following events (herein referred to as a default of LESSEE) shall occur: (a)
LESSEE shall fail to pay the installment of rent, escalation charge or other
charges hereunder when due, and such failure shall continue for three (3) full
business days after notice has been given to LESSEE from LESSOR; (b) LESSEE
shall default in the observance or performance of any other of the LESSEE'S
covenants, agreements, or obligations hereunder and such default shall not be
corrected within thirty (30) days after such notice thereof; (c) LESSEE shall be
declared bankrupt or insolvent according to law; or (d) if any assignment shall
be made of LESSEE'S property for the benefit of creditors, then the LESSOR shall
have the right thereafter, while such default continues, to re-enter and take
complete possession of the Premises, to declare the term of this Lease ended,
and to remove the LESSEE'S effects, without prejudice to any remedies which
might be otherwise used for arrears of rent or other default. The LESSEE shall
indemnify the LESSOR against all loss of rent and other payments which the
LESSOR may incur by reason of such termination during the remainder of the term.
If the LESSEE should default, after reasonable notice thereof, in the observance
or performance of any conditions or covenants on LESSEE'S part to be observed or
performed under or by virtue of any of the provisions in any section of this
Lease, the LESSOR, without being under any obligation to do so and without
thereby waiving such default, may remedy such default for the account and at the
expense of the LESSEE. If the LESSOR makes any expenditures or incurs any
obligations for the payment of money in connection therewith, including but not
limited to reasonable attorney's fees in instituting, prosecuting or defending
any action or proceeding, any such sums paid or obligations incurred, shall
accrue interest at the rate of eighteen percent (18%) per annum, and all costs
shall be paid to the LESSOR by the LESSEE, as additional rent.
SECTION 24 - NOTICE
Any notice from the LESSOR to the LESSEE relating to the Premises or to the
occupancy thereof, shall be deemed duly served if addressed to the LESSEE and
left at the Premises, or if addressed to the LESSEE and mailed to the Premises
by registered or certified mail, return receipt requested, postage prepaid.
Any notice from the LESSEE to the LESSOR relating to the Premises or to the
occupancy thereof, shall be deemed duly served if mailed to the LESSOR at
Braintree Hill Office Park, 50 Braintree Hill Park, Braintree, MA 02184, or to
such other address as the LESSOR may from time to time advise in writing.
-9-
<PAGE>
SECTION 25 - SURRENDER
The LESSEE shall at the expiration or other termination of this Lease, remove
all LESSEE'S goods and effects from the Premises (including without hereby
limiting the generality of the foregoing, all signs and lettering affixed or
painted by the LESSEE, either inside or outside of the Premises). LESSEE shall
deliver to LESSOR, the Premises and all keys, locks thereto and other fixtures
connected therewith and all alterations and additions made to or upon the
Premises, in the same condition as they were at the Commencement Date of the
term of this Lease, or as they were put in during the term hereof, reasonable
wear and tear and damage by fire or other casualty only excepted. In the event
of LESSEE'S failure to remove any of LESSEE'S property from the Premises, LESSOR
is hereby authorized without liability to LESSEE for loss or damage thereto, and
at the sole risk of LESSEE, to remove and store any of the property at LESSEE'S
expense, or to retain same under LESSOR'S control or to sell at public or
private sale, without notice, any or all of the property not so removed and to
apply the net proceeds of such sale to the payment of any sum due hereunder, or
to destroy such property.
SECTION 26 - HOLDING OVER
Any holding over by LESSEE after the expiration of the term of this Lease shall
be treated as a daily Tenancy At Sufferance, at a rate equal to two (2) times
the rent plus escalation charges and other charges herein provided (prorated on
a daily basis) and shall otherwise be on the same terms and conditions as set
forth in this Lease, where the same may be applicable.
SECTION 27 - RIGHT TO MOVE
The LESSOR reserves the right to move the LESSEE and if LESSOR so requests,
LESSEE shall vacate the Premises and relinquish its right with respect to the
same, provided that LESSOR provides to LESSEE, space within the complex commonly
known as Nashua Office Park, Nashua, NH 03062.
Such space shall be reasonably comparable in size, layout, finish and utility to
the existing Premises, and further provided that LESSOR shall, at its sole cost
and expense, move the LESSEE and its removable property from the Premises to
such new space in such a manner as will minimize, to the greatest extent
practicable, undue interference with the business or operations of LESSEE. Any
such space shall from and after such relocation, be treated as the Premises
demised under this Lease, and shall be occupied by LESSEE under the same terms,
provisions and conditions as are set forth in this Lease.
SECTION 28 - RULES AND REGULATIONS
The LESSEE will observe and comply with the Rules and Regulations as attached
hereto and made a part hereof, including revisions and additions as the LESSOR
may from time to time institute.
SECTION 29 - NOT TO INVALIDATE
If any term or provision of this Lease, or the application thereof to any person
or circumstance shall, to the extent be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term
-10-
<PAGE>
and provision of this Lease shall be valid and enforced to the fullest extent
permitted by law.
SECTION 30 - QUIET ENJOYMENT
LESSER, subject to the terms and provisions of this Lease, on payment of the
rent and escalation charges and observing, keeping and performing all of the
other terms and provisions of this Lease on LESSEE'S part to be observed, kept
and performed, shall lawfully, peaceably and quietly have, hold, occupy and
enjoy the Premises during the term hereof, without hindrance or ejection by any
persons lawfully claiming under LESSOR to have title to the Premises superior to
LESSOR.
SECTION 31 - ASSIGNMENT AND SUBLETTING
The LESSEE shall not assign or sublet the whole or any portion of the
Premises without LESSOR'S prior written consent, which consent shall be at
the sole discretion of LESSOR. Any increase in the rent resulting from the
permitted subletting will be due and payable to the LESSOR. The foregoing
restrictions shall not be applicable to any assignment of this Lease or a
subletting of the Premises by LESSEE to a subsidiary wholly-owned by LESSEE,
or controlling operation, the stock in which is wholly-owned by the
stockholders of LESSEE. It shall be a condition of the validity of any
assignment, whether with the consent of LESSOR or to a subsidiary or
controlling corporation, that the assignee agrees directly with LESSOR, to be
bound by all the obligations of LESSEE hereunder including, without
limitation, the covenant against further assignment and subletting. No
assignment or subletting shall relieve LESSEE from its obligations hereunder
and LESSEE shall remain fully and primarily liable therefor. If this Lease
shall be assigned, or if the Premises or any portion thereof shall be sublet
or occupied by anyone other than LESSEE, LESSOR may, at any time and from
time to time, collect rent and other charges from the assignee, sublessee or
occupant, and apply the net amount collected to the rent and other charges
herein reserved, but no such assignment, subletting, occupancy or collection
shall be deemed a waiver of this covenant, or the acceptance of the assignee,
sublessee or occupant as a lessee, or a release of LESSEE or any successor
from obtaining the express consent in writing of LESSOR, to any further
assignment or subletting. No assignment or subletting and no use of the
Premises by a subsidiary wholly-owned by LESSEE or controlling corporation of
LESSEE shall affect permitted uses.
Notwithstanding the provisions of the above, any proposed assignee or sublessee
submitted to the LESSOR for approval must have the same or greater financial
strength as LESSEE. If LESSEE shall request permission to assign this Lease or
sublet the Premises or any part thereof to any person other than a subsidiary
wholly-owned by LESSEE or controlling corporation, the stock of which is
wholly-owned by the stockholders of LESSEE, LESSEE shall, together with such
request for consent thereto, inform LESSOR of the rental and other amounts to be
paid by such assignee or sublessee, the term of any subletting and the financial
information required by LESSOR to make the determination required by the first
sentence of this paragraph.
LESSOR shall have the right to terminate this Lease, provided that LESSOR shall
exercise such right within forty-five (45) days of its receipt of LESSEE'S
request for such consent and provided further, that LESSEE shall have the right
to withdraw its request for such consent within fifteen (15) days after its
receipt of such notice from LESSOR, in which event such notice of termination
shall become null and void. If this Lease shall be terminated pursuant to the
provisions of the immediately
-11-
<PAGE>
preceding sentence, such termination shall become effective upon the last day of
the calendar month next following LESSOR'S giving notice of termination. Upon
LESSEE'S vacating the Premises in accordance with this Lease, LESSOR shall
refund all unearned rent and other payments made by LESSER.
SECTION 32 - SUBORDINATE
This Lease shall be subject and subordinate to any and all mortgages, deeds of
trust and other instruments in the nature of a mortgage, now or at any time
hereafter, a lien or liens on the Property of which the Premises are a part and
the LESSEE shall, when requested, promptly execute and deliver such written
instruments as shall be necessary to show the subordination of this Lease to
said mortgages, deeds of trust or other such instruments in the nature of
mortgage, and LESSEE hereby appoints such holder as LESSEE'S attorney-in-fact to
execute such subordination agreement upon default of LESSEE in complying with
such holder's request.
SECTION 33 - LESSOR'S ACCESS
The LESSOR or agents of the LESSOR may, at reasonable times, enter to view the
Premises and may remove placards and signs not approved and affixed as herein
provided, and make repairs and alterations as LESSOR should elect to do and may
show the Premises to others, and at any time within three (3) months prior to
the expiration of the term, may affix to any suitable part of the Premises a
notice for letting or selling the Premises or Property of which the Premises are
a part and keep the same so affixed without hindrance or molestation.
SECTION 34 - INDEMNIFICATION AND LIABILITY
The LESSEE shall save the LESSOR harmless from all loss and damage occasioned by
the use or escape of water or by the bursting of pipes, as well as from any
claim or damage resulting from neglect in not removing snow and ice from the
roof of the building or from the sidewalks bordering upon the Premises so
leased, or by any nuisance made or suffered on the Premises, unless such loss is
caused by the negligence of the LESSOR. The removal of snow and ice from the
sidewalks bordering upon the Premises shall be the LESSOR'S responsibility.
SECTION 35 - LESSEE'S RISK
To the maximum extent this agreement may be made effective according to law,
LESSEE agrees to use and occupy the Premises and to use such other portions of
the building as LESSEE is herein given the right to use at LESSEE'S own risk;
and LESSOR shall have no responsibility or liability for any loss of or damage
to LESSEE'S removable property. The provisions of this section shall be
applicable from and after the execution of this Lease and until the end of the
term of this Lease, and during such further period as LESSEE may use or be in
occupancy of any part of the Premises or of the building.
SECTION 36 - INJURY CAUSED BY THIRD PARTY
To the maximum extent this agreement may be made effective according to law,
LESSEE agrees that LESSOR shall not be responsible or liable to LESSEE or to
those claiming by, through or under LESSEE, for any loss or damage that may be
-12-
<PAGE>
occasioned by or through the acts or omissions of persons occupying adjoining
premises or any part of the premises adjacent to or connecting with the Premises
or any part of the Property or otherwise.
SECTION 37 - LESSEE'S REMOVABLE PROPERTY
All articles of personal property and all business fixtures, machinery and
equipment and furniture owned or installed by LESSEE solely at its expense in
the Premises (LESSEE'S removable property) shall remain the property of the
LESSEE and may be removed by LESSEE at any time prior to the expiration of this
Lease, provided that LESSEE, at its expense, shall repair any damage to the
building caused by such removal or installation.
SECTION 38 - WAIVER
Failure on the part of LESSOR or LESSEE to complain of any action or non-action
on the part of the other, no matter how long the same may continue, shall never
be a waiver by LESSOR or LESSEE, respectively, of any of the other's rights
hereunder. Further, no waiver at any time of any of the provisions hereof by
LESSOR or LESSEE shall be construed as a waiver of any of the other provisions
hereof, and a waiver at any time of any of the provisions shall not be construed
as a waiver at any subsequent time of the same provisions. The consent or
approval of LESSOR or LESSEE to or of any action by the other requiring such
consent or approval shall not be construed to waive or render unnecessary
LESSOR'S or LESSEE'S consent or approval to or of any subsequent similar act by
the other.
No payment by LESSEE, or acceptance by LESSOR, of a lesser amount than shall be
due from LESSEE to LESSOR shall be treated otherwise than as a payment on
account. The acceptance by LESSOR of a check for a lesser amount with an
endorsement or statement thereon, or upon any letter accompanying such check,
that such lesser amount is payment in full, shall be given no effect, and LESSOR
may accept such check without prejudice to any other rights or remedies which
LESSOR may have against LESSEE.
SECTION 39 - FINANCIAL INFORMATION
It is hereby understood and agreed that LESSEE will supply to the LESSOR, an an
annual basis, a copy of LESSEE'S audited financial statement within ninety (90)
days following LESSEE'S fiscal year end. Any information obtained by LESSOR
pursuant to the provisions of this Paragraph shall be treated as confidential,
except that LESSOR may disclose such information to its lenders.
SECTION 40 - LATE PAYMENT
If Tenant fails to pay any installment of Annual Rent and/or Additional Rent on
or before the first (lst) day of the calendar month when such installment
becomes due and payable, Tenant shall pay to Landlord a late charge of five
percent (5%) of the amount of such installment, and, in addition, such unpaid
installment shall bear interest at the rate per annum which is four percent
(4%) greater than the "base lending rate" then in effect at The Wall Street
Journal, or the highest rate permitted by law, whichever may be less; with it
being the
-13-
<PAGE>
express intent of the parties that nothing herein contained shall be construed
or implemented in such manner as to allow Landlord to charge or receive interest
in excess of the maximum legal rate then allowed by law. Such late charge and
interest shall constitute Additional Rent hereunder due and payable with the
next monthly installment of Annual Rent due.
SECTION 41 - CONFERENCE ROOM
LESSEE shall have the right to use, in common with other tenants, the
conference room on the lower level of Nashua Office Park, One Tara Boulevard,
Nashua, NH 03062, on a prescheduled appointment basis.
SECTION 42 - TERMINATING EXISTING LEASE
In the event LESSEE is not then in default of any of the terms, conditions and
covenants of its existing Lease Agreement dated March 2, 1992, as amended by a
First Amendment to Lease dated May 13, 1992, as further amended by a Second
Amendment to Lease dated November 9, 1993, by and between LESSOR and LESSEE, for
the Premises described as Suite Numbers 210 and 203 on the second (2nd) floor of
Nashua Office Park, One Tara Boulevard, Nashua, NH 03062, (hereinafter referred
to as the "Existing Location"), upon the Commencement Date of the term of this
Lease, said existing Lease, as amended, shall become null and void.
Notwithstanding the foregoing, it is hereby understood and agreed that LESSEE
shall be obligated to pay all amounts owed LESSOR including but not limited to
the payment of Rent, Additional Rent, Electrical (if applicable) and any other
charges or expenses of any nature accruing on said Existing Location, prior to
the date of such relocations.
In the event LESSEE is delayed in moving from its Existing Locations to the
Premises demised hereunder by the fault or delays caused by LESSOR, LESSEE shall
be allowed to continue leasing said Existing Locations from LESSOR under the
same terms and conditions contained in the Lease and Amendments, including the
Rent and Additional Rent as presently being charged.
SECTION 43 - WHEN LEASE BECOMES BINDING
The submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of, or option for the Premises,
and this document shall become effective and binding only upon the execution and
delivery thereof by both LESSOR and LESSEE, regardless of any written or verbal
representation of any agent, manager or other employee of LESSOR to the
contrary. All negotiations, consideration, representations and understandings
between LESSOR and LESSEE are incorporated herein and this Lease expressly
supersedes any proposals or other written documents relating hereto. This Lease
may be modified or altered only by written agreement between LESSOR and LESSEE,
and no act or omission of any employee or agent of LESSOR shall alter, change or
modify any of the provisions thereof.
-14-
<PAGE>
IN WITNESS WHEREOF, the LESSOR and LESSEE have hereunto set their
hands and common seals this 20th day of November, 1995.
LESSOR Thomas J. Flatley d/b/a
The Flatley Company
/s/ [ILLEGIBLE] /s/ Thomas J. Flatley
- ----------------------- -------------------------------
WITNESS By Thomas J. Flatley
Its President
LESSEE IntelliLink, Corp.
/s/ A.K. Crozier
- ----------------------- -------------------------------
WITNESS By
Its
Duly Authorized
-15-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF NORFOLK )
November 20, 1995.
Then personally appeared Thomas J. Flatley to me known to be the
individual who acknowledged himself to be the President of The Flatley Company,
LESSOR, and that he, as such, being authorized to do so, executed the foregoing
instrument and acknowledged the execution thereof to be his free act and deed
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at
Norfolk County, Braintree, Massachusetts, this 20th day of November 1995.
/s/ Mary P. Chartrand
-------------------------------
Notary Public
My commission expires: 8/29/97
STATE OF NEW HAMPSHIRE )
) SS.
COUNTY OF HILLSBORO )
October 18, 1995.
Then personally appeared A. Keith Crozier to me known
to be the individual who acknowledged himself to be the President
of IntelliLink, Corp., LESSEE, and that he, as such, being authorized to do so,
executed the foregoing instrument and acknowledged the execution thereof to be
his free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal
at Hillsboro County, Nashua, NH, this 18th day of October, 1995.
/s/ Doreen A. Bradshaw
-------------------------------
Notary Public
My commission expires:
DOREEN A. BRADSHAW, Notary Public
My Commission Expires November 10, 1999
-16-
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and halls shall not be obstructed or encumbered by any
LESSEE, nor shall they be used for any purpose other than ingress and egress
to and from the Premises. LESSOR shall keep the sidewalks and curbs directly
in front of said Premises, clean and free from ice and snow.
2. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of the LESSOR. No curtains,
blinds, shades or screens shall be attached to, hung in, or used in
connection with, any window or door of the Premises, without the prior
written consent of the LESSOR. Any such awnings, projections, curtains,
blinds, shades, screens or other fixtures used by LESSEE (if given the prior
written consent of the LESSOR for such use), shall be of a quality, type,
design and color, attached in a manner approved by the LESSOR.
3. A building directory will be maintained in the main lobby of the building
at the expense of the LESSOR and the number of such listings shall be at the
sole discretion of the LESSOR. No sign, advertisement, notice or other
lettering shall be exhibited, inscribed, painted or affixed by any LESSEE on
any part of the outside or inside of the Premises or building, without the
prior written consent of the LESSOR. In the event of violation of the
foregoing by any LESSEE, LESSOR may remove same without any liability and may
charge the expense incurred by such removal to any LESSEES violating this
rule. Interior signs on doors and directory tablet shall be inscribed,
painted or affixed for each LESSEE, at LESSEE'S expense and shall be of a
size, color and style acceptable to the LESSOR.
4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
building shall not be covered or obstructed by any LESSEE, nor shall any
bottles, parcels or other articles be placed on the windowsills.
5. No show cases or other articles shall be put in front of, or affixed to
any part of the exterior of the building, nor placed in the halls, corridors,
vestibules or fire escapes, without the prior written consent of the LESSOR.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuses of the fixtures shall be borne by the
LESSEE who, or whose servants, employees, agents, visitors, or licensees,
shall have caused same.
7. No LESSEE shall mark, paint, drill into, or in any way deface any part of
the Premises or the building of which they form a part. No boring, cutting
or stringing of wires shall be permitted, except with the prior written
consent of LESSOR, and as the LESSOR may direct. No LESSEE shall lay
linoleum, or other similar floor covering, so that the same shall come in
contact with the floor of the Premises, and, if linoleum or other similar
floor covering is desired to be used, an interlining of builder's deadening
felt shall be first affixed to the floor by a paste or other material,
soluble in water, the use of cement or other similar adhesive material being
expressly prohibited.
8. No bicycles, vehicles or animals of any kind shall be brought in or kept
about the Premises, and no cooking shall be done or permitted by LESSEE on
said Premises. No LESSEE shall cause or permit any unusual or objectionable
odors to be produced upon or permeate from the Premises.
-17-
<PAGE>
9. No space in the building, except as provided in individual Leases, shall
be used for manufacturing, for the storage of merchandise, or for the sale of
merchandise, goods or property of any kind at auction.
10. No LESSEE shall make, or permit to be made, any unsettling or disturbing
noises or disturb or interfere with occupants of this or neighboring
buildings or premises' or those having business with them, whether by the use
of any musical instrument, radio, talking machine, unmusical noise,
whistling, singing, or in any other way. No LESSEE shall throw anything out
of doors, windows, skylights or down the passageways.
11. No LESSEE, nor any of LESSEE'S servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the Premises any flammable,
combustible or explosive fluid, chemical and substance.
12. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any LESSEE, nor shall any changes be made in existing
locks or the mechanism thereof. Each LESSEE must, upon the termination of
his tenancy, return to the LESSOR, all keys for stores, offices and toilet
rooms, either furnished to, or otherwise procured by, such LESSEE, and in the
event of the loss of any keys so furnished, such LESSEE shall pay the LESSOR
the cost thereof.
13. All removals, or the carrying in or out of any safes, freight, furniture
or bulky matter of any description must take place during the hours which the
LESSOR or its agents may determine from time to time. The LESSOR reserves
the right to inspect all freight to be brought into the building and to
exclude from the building, all freight which violates any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
14. No LESSEE shall occupy or permit any portion of the Premises leased to
him to be occupied for the possession, storage, manufacture or sale of
liquor, narcotics, or dope, or as a barber or manicure shop.
15. LESSOR shall have the right to prohibit any advertising by any LESSEE
which, in LESSOR'S opinion, tends to impair the reputation of the building or
its desirability as a building for offices, and upon written notice from
LESSOR, LESSEE shall refrain from or discontinue such advertising. LESSEE
shall not use the name of the building or its owner in any advertising
without the express written consent of the LESSOR.
16. No LESSEE shall install or permit the installation or use of any machines
dispensing goods for sale, including without limitation, foods, beverages,
cigarettes or cigars. No food or beverage shall be carried in the public
halls and elevators of the buildings, except in closed containers.
17. The Premises shall not be used for lodging or sleeping or for any immoral
or illegal purpose.
18. Canvassing, soliciting and peddling in the building is prohibited and
each LESSEE shall cooperate to prevent the same by notifying the LESSOR.
LESSOR reserves the right to inspect any parcel or package being removed from
the building by LESSEE, its employees, representatives and business invitees.
19. There shall not be used in any space or in the public halls of any
building, either by a LESSEE or by jobbers or others in the delivery of or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
-18-
<PAGE>
EXHIBIT "A"
Floor Plan
-19-
<PAGE>
EXHIBIT "B"
Description of LESSOR'S Work
LESSOR shall construct LESSEE'S Premises in accordance with a
mutually agreed upon floor plan.
-20-
<PAGE>
[LETTERHEAD]
December 18, 1995
Mr. Keith Crozier
IntelliLink, Corp.
One Tara Boulevard
Nashua, NH 03062
SUPPLEMENTAL AGREEMENT
To be attached to and made a part of that certain Lease Agreement dated
November 20, 1995, by and between Thomas J. Flatley d/b/a The Flatley
Company, as LESSOR, and IntelliLink, Corp., as LESSEE.
Relative to the Premises located at Suite Number 200 on the second (2nd)
floor of Nashua Office Park, One Tara Blvd., Nashua, NH 03062, and more
specifically referred to in the above-mentioned Lease, our records indicate
the following pertinent information with regard to same:
Occupancy Date: December 11, 1995
Term Commencement Date: December 11, 1995
Actual Term Dates: December 11, 1995 - December 31, 1998
Rent Commencement Date: December 11, 1995
If you concur with the above, please acknowledge by signature below,
retaining one (1) copy of this agreement for your files and returning the
other to my attention, at your earliest possible convenience.
Should this Supplemental Agreement not be executed and returned to LESSOR
within thirty (30) days of its receipt by LESSEE, said dates as specified
herein shall hereby be deemed assented to by the LESSOR.
Sincerely yours,
/s/ Diane Regan
Diane Regan
COMMERCIAL/INDUSTRIAL DIVISION
CC: S. Weeks
R. Gustafson
CERTIFIED MAIL - RETURN RECEIPT REQUESTED - Z 394 773 280
<PAGE>
Page Two
December 18, 1995
Mr. Keith Crozier
IntelliLink, Corp.
The foregoing is hereby acknowledged and agreed.
WITNESS LESSEE: IntelliLink, Corp.
- ----------------------------------- ---------------------------------------
By: Keith Crozier
Its:
Duly Authorized
<PAGE>
THE FLATLEY COMPANY
STANDARD FORM OF COMMERCIAL LEASE
SUBMISSION NOT AN OPTION
THE SUBMISSION OF THIS LEASE FOR EXAMINATION AND NEGOTIATION DOES NOT
CONSTITUTE AN OFFER TO LEASE, A RESERVATION OF, OR OPTION FOR THE PREMISES
AND SHALL VEST NO RIGHT IN ANY PARTY. TENANT OR ANYONE CLAIMING UNDER OR
THROUGH TENANT SHALL HAVE THE RIGHTS TO THE PREMISES AS SET FORTH HEREIN AND
THIS LEASE BECOMES EFFECTIVE AS A LEASE ONLY UPON EXECUTION, ACKNOWLEDGEMENT
THEREOF BY LANDLORD AND TENANT, REGARDLESS OF ANY WRITTEN OR VERBAL
REPRESENTATION OF ANY AGENT, MANAGER OR EMPLOYEE OF LANDLORD TO THE CONTRARY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
SECTION 1 - PARTIES . . . . . . . . . . . . . . . . . . . . . . . . -1-
SECTION 2 - PREMISES . . . . . . . . . . . . . . . . . . . . . . . . -1-
SECTION 3 - TERM . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
SECTION 3A ADJUSTMENT OF TERM . . . . . . . . . . . . . . . . . . . -1-
SECTION 4 - COMMENCEMENT DATE . . . . . . . . . . . . . . . . . . . -1-
SECTION 5 - RENT . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 5A RENT COMMENCEMENT DATE . . . . . . . . . . . . . . . . . -2-
SECTION 6 - ABATEMENT OF RENT . . . . . . . . . . . . . . . . . . . -2-
SECTION 7 - SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . -2-
SECTION 8 - ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . -2-
Real Estate Taxes . . . . . . . . . . . . . . . . . . . . -2-
Operating Expenses . . . . . . . . . . . . . . . . . . . . -3-
SECTION 9 USE . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 10 - COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . -6-
SECTION 11 - FIRE INSURANCE . . . . . . . . . . . . . . . . . . . . -6-
SECTION 12 - UTILITIES . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 13 - ELECTRICAL . . . . . . . . . . . . . . . . . . . . . . -7-
SECTION 14 - ADDITIONAL CHARGES . . . . . . . . . . . . . . . . . . -7-
SECTION 15 - MAINTENANCE OF PREMISES . . . . . . . . . . . . . . . . -7-
SECTION 16 - ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . -7-
SECTION 17 - LESSOR'S LIABILITY . . . . . . . . . . . . . . . . . . -8-
SECTION 18 - LESSOR'S SERVICES . . . . . . . . . . . . . . . . . . . -8-
SECTION 19 - DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . -8-
SECTION 20 - LESSEE'S LIABILITY INSURANCE . . . . . . . . . . . . . -8-
SECTION 21 - INSURABLE DAMAGES . . . . . . . . . . . . . . . . . . . -8-
SECTION 22 - FIRE, CASUALTY, EMINENT DOMAIN . . . . . . . . . . . . -8-
SECTION 23 - DEFAULT, BANKRUPTCY . . . . . . . . . . . . . . . . . . -9-
SECTION 24 - NOTICE . . . . . . . . . . . . . . . . . . . . . . . . -9-
SECTION 25 - SURRENDER . . . . . . . . . . . . . . . . . . . . . . . -9-
SECTION 26 - HOLDING OVER . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 27 - RIGHT TO MOVE . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 28 - RULES AND REGULATIONS . . . . . . . . . . . . . . . . . -10-
SECTION 29 - NOT TO INVALIDATE . . . . . . . . . . . . . . . . . . . -10-
<PAGE>
SECTION 30 - QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . -10-
SECTION 31 - ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . -11-
SECTION 32 - SUBORDINATE . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 33 - LESSOR'S ACCESS . . . . . . . . . . . . . . . . . . . . -12-
SECTION 34 - INDEMNIFICATION AND LIABILITY . . . . . . . . . . . . . -12-
SECTION 35 - LESSEE'S RISK . . . . . . . . . . . . . . . . . . . . . -12-
SECTION 36 - INJURY CAUSED BY THIRD PARTY . . . . . . . . . . . . . -12-
SECTION 37 - LESSEE'S REMOVABLE PROPERTY . . . . . . . . . . . . . . -12-
SECTION 38 - WAIVER . . . . . . . . . . . . . . . . . . . . . . . . -13-
SECTION 39 - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . -13-
SECTION 40 - LATE PAYMENT . . . . . . . . . . . . . . . . . . . . . -13-
SECTION 41 - GUARANTY . . . . . . . . . . . . . . . . . . . . . . . -13-
SECTION 42 - WHEN LEASE BECOMES BINDING . . . . . . . . . . . . . . -14-
Rules and Regulations . . . . . . . . . . . . . . . . . -17-
Exhibit "A" . . . . . . . . . . . . . . . . . . . . . . -19-
Exhibit "B" . . . . . . . . . . . . . . . . . . . . . . -20-
</TABLE>
<PAGE>
STANDARD COMMERCIAL LEASE
SECTION 1 - PARTIES
Thomas J. Flatley d/b/a The Flatley Company, LESSOR, which expression shall
include their heirs, successors and assigns where the context so admits, does
hereby lease to Intellilink Corp., LESSEE.
SECTION 2 - PREMISES
LESSEE, which expression shall include its successors, executors,
administrators and assigns where the context so admits, does hereby lease the
following described Premises: Suite Number 202 consisting of approximately
1,535 square feet of space (hereinafter referred to as the "Premises")
located on the second (2nd) floor of Nashua Office Park, One Tara Boulevard,
Nashua, NH 03062, as outlined on Exhibit "A" of this Lease, which also
includes a 15% common area factor, together with the right to use in common,
with others entitled thereto, the hallways, stairways and elevators,
necessary for access to said Premises and lavatories nearest thereto.
SECTION 3 - TERM
The term of this Lease shall be for two (2) years seven (7) months,
commencing on the Commencement Date (defined below), and terminating two (2)
years seven (7) months immediately thereafter, unless sooner terminated as
herein provided.
SECTION 3A - ADJUSTMENT OF TERM
If the Commencement Date (defined below) is other than the first day of a
calendar month, this Lease shall continue in full force and effect for a
period of two (2) years seven (7) months from the first day of the calendar
month next succeeding the Commencement Date.
SECTION 4 - COMMENCEMENT DATE
The Commencement Date of the term of this Lease shall be the earlier to occur
of (i) the date the Premises are ready for occupancy or (ii) the date LESSEE
takes occupancy of the Premises. The Premises shall be deemed ready for
occupancy on the first day as of which LESSOR'S work has been completed
except for items of work (and, if applicable, adjustment and fixtures) which
can be completed after occupancy has been taken, without causing undue
interference with LESSEE'S use of the Premises (i.e., so-called "punch list"
items) and LESSEE has been given notice thereof. LESSOR shall complete as
soon as conditions permit, all "punch list" items and LESSEE shall afford
LESSOR access to the Premises for such purposes.
Notwithstanding the foregoing, if LESSEE'S personnel shall occupy all or any
part of the Premises for the conduct of its business prior to the
Commencement Date as determined pursuant to the preceding paragraph, such
date of occupancy shall, for all intents and purposes of this Lease, be the
Commencement Date.
LESSOR and LESSEE agree to execute a Supplemental Agreement setting forth the
actual Occupancy and Term Dates, once the same have been established.
<PAGE>
SECTION 5 - RENT
The LESSEE agrees to pay to LESSOR, without deduction or offset, rent at the
rate of TWENTY-THREE THOUSAND FOUR HUNDRED EIGHT AND 75/100 ($23,408.75)
Dollars annually, payable in advance on the first day of each month, in equal
monthly installments of ONE THOUSAND NINE HUNDRED FIFTY AND 73/100
($1,950.73) Dollars, and at that rate for any fraction of a month at the
beginning of the term.
SECTION 5A - RENT COMMENCEMENT DATE
The payment of rental shall commence upon the Commencement Date.
SECTION 6 - ABATEMENT OF RENT
It is understood and agreed that if for any reason whatsoever, the LESSOR
does not deliver possession of the Premises according to the terms of this
Lease, the rent shall be abated until such date as possession of the Premises
is rendered by the LESSOR. In no event shall the LESSOR, its agents or
employees be liable in damages for failure to deliver possession under the
terms of this Lease, except for willful failure to do so.
SECTION 7 - SECURITY DEPOSIT
Upon the execution of this Lease by LESSEE, LESSEE shall pay to LESSOR, the
amount of ONE THOUSAND NINE HUNDRED FIFTY AND 73/100 ($1,950.73) Dollars
which shall be held as security for LESSEE'S performance as herein provided.
Said Security Deposit shall be refunded to LESSEE at the end of this Lease,
subject to LESSEE'S satisfactory compliance with the conditions herein
contained and set forth.
SECTION 8 - ADDITIONAL RENT
In accordance with the following, LESSEE shall under the terms, conditions
and provisions hereinafter provided, pay to LESSOR as additional rent, the
following:
REAL ESTATE TAXES
1. If real estate taxes upon the land and buildings (the
"Property"), of which the Premises are a part, for any tax year
exceed the real estate base tax amount, whether by reason of an
increase in either the tax rate or the assessed valuation or both,
LESSEE shall pay to LESSOR as additional rent within ten (10) days
after billing therefor, an amount equal to the product of (a) such
excess over the base taxes and (b) the following fraction:
Square Footage of Lessee's Premises
Aggregate of All the Rentable Square Footage
--------------------------------------------
(whether or not rented or improved within the entire building)
Effective April 1, 1997, LESSEE shall pay monthly, at the
----
time when Rent payments are due hereunder, an amount equal to
one-twelfth (1/12) of the total of annual real estate taxes (as
estimated by LESSOR) due from LESSEE to LESSOR pursuant to this
Subsection 8.1. Promptly after the determination by any taxing
authority of real estate taxes upon the Building for each tax year,
LESSOR shall make a determination of the real estate taxes
allocated to the Premises, and if the aforesaid payments
theretofore made for such tax year by LESSEE exceed the real estate
taxes
-2-
<PAGE>
allocated to the Premises, such overpayment shall be credited
against the payments thereafter to be made by LESSEE pursuant to
this paragraph; and if the real estate taxes allocated to the
Premises for such tax year are greater than such payments
theretofore made on account for such tax year, LESSEE shall within
ten (10) days of written notice from the LESSOR make a suitable
payment to LESSOR. Xerox copies of tax bills submitted by LESSOR
with any such statement shall be conclusive evidence of the amount
of real estate taxes charged, assessed or imposed. After the full
assessment year, the initial monthly payment on account of the real
estate taxes allocated to the Premises shall be replaced each year
by a payment which is one-twelfth (1/12th) of the real estate taxes
allocated to the Premises for the immediately preceding tax year.
2. For the purposes of this clause, the term "Tax Year" shall mean
the twelve month period commencing on July 1st (or any month as it
may apply and/or change for the city, town or municipality tax
period) immediately preceding the Commencement Date and each twelve
month period thereafter during the term of this Lease.
3. It is agreed by both parties that the Base Year as it applies to
taxes for this Lease shall be April 1, 1996 - March 31, 1997.
4. If any abatement, refund or rebate shall be subsequently made
for any tax year, an appropriate adjustment shall be made in the
amount payable from, or paid by LESSEE to LESSOR on account of said
real estate taxes, after deducting the LESSOR'S expenses reasonably
incurred in obtaining such abatement, refund or rebate and provided
there is no existing default of LESSEE. An appropriate adjustment
will be made to the base tax year as a result of the foregoing.
5. If some method or type of taxation replaces the current method
of assessment of real estate taxes, or the type thereof, LESSEE
agrees that it shall pay an equitable share of the same computation
herein provided, to the end that LESSEE'S share thereof shall be to
the maximum extent practicable, comparable to that which LESSEE
would bear under the foregoing provisions.
6. If a tax (other than a Federal or State net income tax) is
assessed on account of the rents or other charges payable by LESSEE
to the LESSOR under this Lease, LESSEE agrees to pay the same
within ten (10) days after billing therefor, unless applicable law
prohibits the payment of such tax by LESSEE. LESSOR shall have the
same rights and remedies for non-payment by LESSEE of any such
amounts due on account of such taxes as LESSOR has hereunder, for
the failure of LESSEE to pay rent as provided for in Section 23 of
this Lease.
OPERATING EXPENSES
7. The following is a list of all such items of operating
expenditures as are within the meaning of "Operating Expenses"
hereinafter set forth. If, in any calendar year of the term of this
Lease, LESSOR'S Operating Expenses exceed Operating Expenses for
the calendar year 1996, as it relates to all other changes with the
exception of snow removal, which shall be an amount representative
of LESSOR'S actual snow removal costs over the previous five (5)
year period. LESSEE shall after notice as hereinafter provided, pay
to LESSOR as additional rent, an amount
-3-
<PAGE>
equal to the product of (a) such excess multiplied by (b) a
fraction involving the same numerator and denominator as is
provided for in Subsection 8.1 of this Lease.
8. The expression "Operating Expenses" as used herein, shall mean
the aggregate cost or expenses reasonably incurred by LESSOR with
respect to the operation, administration, cleaning, repair,
maintenance and management of the Property, including without
limitation, those items enumerated hereinafter. If during any
portion of the calendar year for which Operating Expenses are being
computed, less than 93% of the building's rentable area was
occupied by tenants, actual Operating Expenses incurred shall be
reasonably extrapolated by LESSOR on an item by item basis to the
estimated operating expenses that would have been incurred if the
building were at least 93% occupied for such year, and such
extrapolated amounts shall for the purposes hereof, be deemed to be
the Operating Expenses for such year.
9. Effective January 1, 1997, LESSEE shall pay monthly, at the time
----
when Rent payments are due hereunder, an amount equal to
one-twelfth (1/12th) of the total annual Operating Expenses (as
estimated by LESSOR) due from LESSEE to LESSOR pursuant to
Subsection 8.7 of this Lease. Promptly after the end of each
calendar year thereafter, LESSOR shall make a determination of
LESSEE'S share of such Operating Expenses; and if the aforesaid
payments theretofore made for such period by LESSEE exceed LESSEE'S
share, such overpayment shall be credited against the payments
thereafter to be made by LESSEE pursuant to this Paragraph; and if
LESSEE'S share is greater than such payments theretofore made on
account for such period, LESSEE shall within thirty (30) days of
written notice from the LESSOR make a suitable payment to LESSOR.
The initial monthly payment on account of the Operating Expense
Charge shall be replaced after LESSOR'S determination of LESSEE'S
share thereof for the preceding accounting period by a payment
which is one-twelfth (1/12th) of LESSEE'S actual share thereof for
the immediately preceding period, with adjustments as appropriate
where such preceding period is less than a full twelve-month
period. LESSOR shall have the same rights and remedies for
non-payment by LESSEE of any such amounts due on account of such
Operating Expenses as LESSOR has hereunder, for the failure of
LESSEE to pay rent as provided for in Section 23 of this Lease.
10. Without limitation, Operating Expenses shall include:
a. All expenses incurred by LESSOR or LESSOR'S agents which
shall be directly related to employment of personnel, including
amounts incurred for wages, salaries and other compensation for
services, payroll, social security, unemployment and similar
taxes, worker's compensation insurance, disability benefits,
pensions, hospitalization, retirement plans and group insurance,
uniforms and working clothes and the cleaning thereof, and
expenses imposed on LESSOR or LESSOR'S agents pursuant to any
collective bargaining agreement for the services of employees of
LESSOR or LESSOR'S agents in connection with the operation,
repair, maintenance, cleaning, management and protection of the
Property, and its mechanical systems including, without
limitation, day and night supervisors, property manager,
accountants, bookkeepers, janitors, carpenters, engineers,
mechanics, electricians and plumbers and personnel engaged in
supervision of any of the persons
-4-
<PAGE>
mentioned above; provided that, if any such employee is also
employed on other properties of LESSOR, such compensation shall
be suitably prorated among the Property and such other
properties.
b. The cost of services, utilities, materials and supplies
furnished or used in the operation, repair, maintenance,
cleaning, management and protection of the Property.
c. The cost of replacements for tools and other similar
equipment used in the repair, maintenance, cleaning and
protection of the Property; provided that, in the case of any
such equipment used jointly on other properties of LESSOR,
such costs shall be suitably prorated among the Property and
such other properties.
d. Where the Property is managed by LESSOR or an affiliate of
LESSOR, a sum equal to the amounts customarily charged by
management firms in the Nashua area for similar properties
whether or not actually paid, or where otherwise managed, the
amounts accrued for management, together with amounts accrued
for legal and other professional fees relating to the
Property, but excluding such fees and commissions paid in
connection with services rendered for securing or renewing
leases and for matters not related to the normal
administration and operation of the building.
e. Premiums for insurance against damage or loss to the
building from such hazards as shall from time to time be
generally required by institutional mortgagors in the Nashua
area for similar properties, including, but not by way of
limitation, insurance covering loss of rent attributable to
any such hazards, and public liability insurance.
f. Cost for electricity, water and sewer use charges, and
other utilities supplied to the Property and not paid for
directly by LESSEE.
g. Betterment assessments, provided the same are apportioned
equally over the longest period permitted by law.
h. Amounts paid to independent contractors for services,
materials and supplies furnished for the operation, repair,
maintenance, cleaning and protection of the Property.
i. Any capital expenditure made by LESSOR during the term of
this Lease, the total cost of which is not properly includable
in Operating Expenses for the operating year in which it was
made, shall nevertheless be included in such Operating Expenses
for the operating year in which it was made, and Operating
Expenses for each succeeding operating year shall include the
annual charge-off of such capital expenditure. Annual
charge-off shall be determined by dividing the original capital
expenditure plus an interest factor, reasonably determined by
LESSOR, as being the interest rate then being charged for
long-term mortgages by institutional lenders on "like" properties
within the locality in which the building is located, by the
number of years of useful life of the capital expenditure, and
the useful life shall be determined reasonably by LESSOR in
accordance with generally accepted accounting principles and
practices in effect at the time of making such expenditure.
-5-
<PAGE>
SECTION 9 - USE
The LESSEE shall use the Premises only for the purpose of general business
offices.
SECTION 10 - COMPLIANCE WITH LAWS
The LESSEE acknowledges that no trade or occupation shall be conducted in the
Premises or use made thereof which will be unlawful, improper, noisy or
offensive, or contrary to any law or any municipal by-law or ordinance in
force in the city or town in which the Premises is situated.
SECTION 11 - FIRE INSURANCE
The LESSEE shall not permit any use of the Premises which will make voidable
any insurance on the Property of which the Premises are a part, or on the
contents of said Property, which shall be contrary to any law or regulation
from time to time established by the New England Fire Insurance Rating
Association, or any similar body succeeding to its powers. The LESSEE shall,
on demand, reimburse the LESSOR and all other tenants, all extra insurance
premiums caused by LESSEE'S misuse of the Premises.
SECTION 12 - UTILITIES
The LESSOR shall provide all LESSEE'S water and sewer use and reasonable heating
and air-conditioning during the normal heating and cooling season between the
hours of 8:00 A.M. and 6:00 P.M., during normal business days. The normal
cooling season shall be from April 15th to October 1st of any given year.
Normal business days are all days except Saturday, Sunday, New Year's Day,
Memorial Day, July 4th, Labor Day, Thanksgiving Day, Christmas Day (and the
following day when any such day occurs on Sunday) and such other days as LESSOR
presently or in the future recognizes as holidays for LESSOR'S general office
staff. In addition, LESSOR agrees to furnish elevator service and to light
passageways and stairways during business hours, and to furnish such cleaning
service as is customary in similar buildings in said city or town, all subject
to interruption due to any accident, to the making of repairs, alterations or
improvements, to labor difficulties, to trouble in obtaining fuel, electricity,
service or supplies from the sources from which they are usually obtained for
said building, or to causes beyond LESSOR'S control. If LESSEE shall require
air-conditioning, heating or ventilation outside the hours and days above
specified, LESSOR shall furnish such service and LESSEE shall pay therefor such
charges as may from time to time be in effect. In the event LESSEE introduces
into the Premises personnel or equipment which overloads the capacity of the
building system or in any other way interferes with the system's ability to
perform adequately its proper functions, supplementary systems may if and as
needed at LESSOR'S option, be provided by LESSOR, at LESSEE'S expense.
-6-
<PAGE>
SECTION 13 - ELECTRICAL
LESSOR shall purchase and receive electric current for the Premises directly
from the public utility company serving the building and LESSEE shall permit
LESSOR'S existing wires, risers, conduits and other electrical equipment of
LESSOR to be used for such purposes. LESSOR shall not in any way be liable
or responsible to LESSEE for any loss or damage or expense which LESSEE may
sustain or incur if, during the term of this Lease, either the quantity or
character of electric current is changed or electric current is no longer
available or suitable for LESSEE'S requirements due to a factor or cause
beyond LESSOR'S control. LESSOR at LESSEE'S expense, shall purchase and
install all lamps, tubes, bulbs, starters and ballasts.
SECTION 14 - ADDITIONAL CHARGES
Should LESSEE fail to pay when due, any sums under this Lease designated as
an additional charge, LESSOR shall have the same rights and remedies as
LESSOR has hereunder, for failure to pay rent as provided for in Section 23
of this Lease.
SECTION 15 - MAINTENANCE OF PREMISES
The LESSEE agrees to maintain the Premises in the same condition as existed
at the commencement of the term or as they may be improved during the term of
this Lease, reasonable wear and tear, damage by fire and other casualty only
excepted, and whenever necessary, to replace plate glass and other glass
therein, acknowledging that the Premises are now in good order and the glass
whole. The LESSEE shall not permit the Premises to be overloaded, damaged,
stripped, or defaced, nor suffer any waste. LESSEE shall obtain written
consent of LESSOR before erecting any sign on the Premises. LESSEE shall be
responsible for the cost of repairs which may be made necessary by reason of
damage to common areas in the building by LESSEE, LESSEE'S independent
contractors, or LESSEE'S invitees. If repairs are required to be made by
LESSEE pursuant to the terms hereof, LESSOR may demand that LESSEE make the
same forthwith, and if LESSEE refuses or neglects to commence such repairs
and complete the same with reasonable dispatch after such demand, LESSOR may
(but shall not be required to) make or cause such repairs to be made and
shall not be responsible to LESSEE for any loss or damage that may occur to
LESSEE'S stock or business by reason thereof. If LESSOR makes or causes such
repairs to be made, LESSEE agrees that LESSEE shall forthwith on demand, pay
to LESSOR the cost thereof as an additional charge.
SECTION 16 - ALTERATIONS
The LESSEE shall not make any structural alterations or additions to the
Premises, but may make non-structural alterations provided the LESSOR
consents thereto in writing, which consent shall not be unreasonably withheld
or delayed. All such allowed alterations shall be at LESSEE'S sole cost and
expense and shall be of such quality at least equal to the present
construction. LESSEE shall not permit any mechanics' liens, or similar
liens, to remain upon the Premises for labor and material furnished to LESSEE
or claimed to have been furnished to LESSEE in connection with work of any
character performed or claimed to have been performed at the direction of
LESSEE and shall cause any such lien to be released of record forthwith
without cost to LESSOR. Any alterations or improvements made by the LESSEE
shall become the property of the LESSOR at the termination of occupancy as
provided herein.
-7-
<PAGE>
SECTION 17 - LESSOR'S LIABILITY
LESSEE specifically agrees to look solely to LESSOR'S then equity interest in
the Property at the time owned, for recovery of any judgment from LESSOR; it
being specifically agreed that neither LESSOR (original or successor) nor
anyone claiming under the LESSOR, shall ever be personally liable for any
such judgment, or for the payment of any monetary obligation to LESSEE.
SECTION 18 - LESSOR'S SERVICES
With respect to any services to be furnished by LESSOR to LESSEE, LESSOR
shall in no event be liable for failure to furnish the same when prevented
from doing so by strike, lockout, breakdown, accident, order or regulation of
or by any governmental authority, or failure of supply, or inability by the
exercise of reasonable diligence to obtain supplies, parts or employees
necessary to furnish such services, or because of war or other emergency, or
for any cause due to any act or neglect of LESSEE or LESSEE'S servants,
agents, employees, licensees or any person claiming by, through or under
LESSEE.
SECTION 19 - DAMAGES
In no event shall LESSOR ever be liable to LESSEE for any indirect or
consequential damages suffered by LESSEE from whatever cause.
SECTION 20 - LESSEE'S LIABILITY INSURANCE
The LESSEE shall maintain with respect to the Premises and the Property of
which the Premises are a part, comprehensive public liability insurance in
the amounts of $1,000,000.00/$1,000,000.00, with property damage insurance in
limits of $1,000,000.00, in responsible companies qualified to do business in
New Hampshire and in good standing therein, insuring the LESSOR as well as
the LESSEE against injury to persons or damage to property as provided. The
LESSEE shall deposit with the LESSOR, prior to the Commencement Date of the
term of this Lease, certificates for such insurance, and thereafter within
thirty (30) days prior to the expiration of any such policies. All such
insurance certificates shall provide that such policies shall not be
cancelled without at least ten (10) days prior written notice to each insured
named therein.
SECTION 21 - INSURABLE DAMAGES
LESSOR shall not be liable for any damage insurable by LESSEE to LESSEE'S
fixtures, merchandise or property regardless of cause and LESSEE hereby
releases LESSOR from same. LESSEE shall not be liable for any damage
insurable by LESSOR to the Premises, regardless of cause and LESSOR hereby
releases LESSEE from same.
SECTION 22 - FIRE, CASUALTY, EMINENT DOMAIN
Should a substantial portion of the Premises, or of the Property of which the
Premises are a part, be damaged by fire or other casualty, or be taken by
eminent domain, the LESSOR may elect to terminate this Lease. When such fire,
casualty, or taking renders the Premises substantially unsuitable for
LESSEE'S intended use, a just and proportionate abatement of rent shall be
made, and the LESSEE may elect to terminate this Lease if: (a) the LESSOR
fails to give written notice within ninety (90) days of its intention to
restore the Premises, or (b) the LESSOR fails to restore the Premises to a
condition
-8-
<PAGE>
substantially suitable for LESSEE'S intended use within one hundred twenty
(120) days of said fire, casualty or taking. The LESSOR reserves, and the
LESSEE grants to the LESSOR, all rights which the LESSEE may have for damages
or injury to the Premises for any taking by eminent domain, except for damage
to LESSEE'S fixtures, property or equipment.
SECTION 23 - DEFAULT, BANKRUPTCY
If at any time subsequent to the date of this Lease, any one or more of the
following events (herein referred to as a default of LESSEE) shall occur: (a)
LESSEE shall fail to pay the installment of rent, escalation charge or other
charges hereunder when due, and such failure shall continue for three (3)
full business days after notice has been given to LESSEE from LESSOR; (b)
LESSEE shall default in the observance or performance of any other of the
LESSEE'S covenants, agreements, or obligations hereunder and such default
shall not be corrected within thirty (30) days after such notice thereof; (c)
LESSEE shall be declared bankrupt or insolvent according to law; or (d) if
any assignment shall be made of LESSEE'S property for the benefit of
creditors, then the LESSOR shall have the right thereafter, while such
default continues, to re-enter and take complete possession of the Premises,
to declare the term of this Lease ended, and to remove the LESSEE'S effects,
without prejudice to any remedies which might be otherwise used for arrears
of rent or other default. The LESSEE shall indemnify the LESSOR against all
loss of rent and other payments which the LESSOR may incur by reason of such
termination during the remainder of the term. If the LESSEE should default,
after reasonable notice thereof, in the observance or performance of any
conditions or covenants on LESSEE'S part to be observed or performed under or
by virtue of any of the provisions in any section of this Lease, the LESSOR,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of the
LESSEE. If the LESSOR makes any expenditures or incurs any obligations for
the payment of money in connection therewith, including but not limited to
reasonable attorney's fees in instituting, prosecuting or defending any
action or proceeding, any such sums paid or obligations incurred, shall
accrue interest at the rate of eighteen percent (18%) per annum, and all
costs shall be paid to the LESSOR by the LESSEE, as additional rent.
SECTION 24 - NOTICE
Any notice from the LESSOR to the LESSEE relating to the Premises or to the
occupancy thereof, shall be deemed duly served if addressed to the LESSEE and
left at the Premises, or if addressed to the LESSEE and mailed to the
Premises by registered or certified mail, return receipt requested, postage
prepaid.
Any notice from the LESSEE to the LESSOR relating to the Premises or to the
occupancy thereof, shall be deemed duly served if mailed to the LESSOR at
Braintree Hill Office Park, 50 Braintree Hill Park, Braintree, MA 02184, or
to such other address as the LESSOR may from time to time advise in writing.
SECTION 25 - SURRENDER
The LESSEE shall at the expiration or other termination of this Lease, remove
all LESSEE'S goods and effects from the Premises (including without hereby
limiting the generality of the foregoing, all signs and lettering affixed or
painted by the LESSEE, either inside or outside of the Premises). LESSEE
shall deliver to LESSOR, the Premises and all keys, locks thereto and other
fixtures connected therewith and all
-9-
<PAGE>
alterations and additions made to or upon the Premises, in the same condition
as they were at the Commencement Date of the term of this Lease, or as they
were put in during the term hereof, reasonable wear and tear and damage by
fire or other casualty only excepted. In the event of LESSEE'S failure to
remove any of LESSEE'S property from the Premises, LESSOR is hereby
authorized without liability to LESSEE for loss or damage thereto, and at the
sole risk of LESSEE, to remove and store any of the property at LESSEE'S
expense, or to retain same under LESSOR'S control or to sell at public or
private sale, without notice, any or all of the property not so removed and
to apply the net proceeds of such sale to the payment of any sum due
hereunder, or to destroy such property.
SECTION 26 - HOLDING OVER
Any holding over by LESSEE after the expiration of the term of this Lease
shall be treated as a daily Tenancy At Sufferance, at a rate equal to two (2)
times the rent plus escalation charges and other charges herein provided
(prorated on a daily basis) and shall otherwise be on the same terms and
conditions as set forth in this Lease, where the same may be applicable.
SECTION 27 - RIGHT TO MOVE
The LESSOR reserves the right to move the LESSEE and if LESSOR so requests,
LESSEE shall vacate the Premises and relinquish its right with respect to the
same, provided that LESSOR provides to LESSEE, space within the complex
commonly known as Nashua Office Park, Nashua, NH 03062.
Such space shall be reasonably comparable in size, layout, finish and utility
to the existing Premises, and further provided that LESSOR shall, at its sole
cost and expense, move the LESSEE and its removable property from the
Premises to such new space in such a manner as will minimize, to the greatest
extent practicable, undue interference with the business or operations of
LESSEE. Any such space shall from and after such relocation, be treated as
the Premises demised under this Lease, and shall be occupied by LESSEE under
the same terms, provisions and conditions as are set forth in this Lease.
SECTION 28 - RULES AND REGULATIONS
The LESSEE will observe and comply with the Rules and Regulations as attached
hereto and made a part hereof, including revisions and additions as the
LESSOR may from time to time institute.
SECTION 29 - NOT TO INVALIDATE
If any term or provision of this Lease, or the application thereof to any person
or circumstance shall, to the extent be invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall
be valid and enforced to the fullest extent permitted by law.
SECTION 30 - QUIET ENJOYMENT
LESSEE, subject to the terms and provisions of this Lease, on payment of the
rent and escalation charges and observing, keeping and performing all of the
other terms and provisions of this Lease on LESSEE'S part to be observed,
kept and performed, shall lawfully, peaceably and quietly have, hold, occupy
and
-10-
<PAGE>
enjoy the Premises during the term hereof, without hindrance or ejection by
any persons lawfully claiming under LESSOR to have title to the Premises
superior to LESSOR.
SECTION 31 - ASSIGNMENT AND SUBLETTING
The LESSEE shall not assign or sublet the whole or any portion of the
Premises without LESSOR'S prior written consent, which consent shall be at
the sole discretion of LESSOR. Any increase in the rent resulting from the
permitted subletting will be due and payable to the LESSOR. The foregoing
restrictions shall not be applicable to any assignment of this Lease or a
subletting of the Premises by LESSEE to a subsidiary wholly-owned by LESSEE,
or controlling operation, the stock in which is wholly-owned by the
stockholders of LESSEE. It shall be a condition of the validity of any
assignment, whether with the consent of LESSOR or to a subsidiary or
controlling corporation, that the assignee agrees directly with LESSOR, to be
bound by all the obligations of LESSEE hereunder including, without
limitation, the covenant against further assignment and subletting. No
assignment or subletting shall relieve LESSEE from its obligations hereunder
and LESSEE shall remain fully and primarily liable therefor. If this Lease
shall be assigned, or if the Premises or any portion thereof shall be sublet
or occupied by anyone other than LESSEE, LESSOR may, at any time and from
time to time, collect rent and other charges from the assignee, sublessee or
occupant, and apply the net amount collected to the rent and other charges
herein reserved, but no such assignment, subletting, occupancy or collection
shall be deemed a waiver of this covenant, or the acceptance of the assignee,
sublessee or occupant as a lessee, or a release of LESSEE or any successor
from obtaining the express consent in writing of LESSOR, to any further
assignment or subletting. No assignment or subletting and no use of the
Premises by a subsidiary wholly-owned by LESSEE or controlling corporation of
LESSEE shall affect permitted uses.
Notwithstanding the provisions of the above, any proposed assignee or
sublessee submitted to the LESSOR for approval must have the same or greater
financial strength as LESSEE. If LESSEE shall request permission to assign
this Lease or sublet the Premises or any part thereof to any person other
than a subsidiary wholly-owned by LESSEE or controlling corporation, the
stock of which is wholly-owned by the stockholders of LESSEE, LESSEE shall,
together with such request for consent thereto, inform LESSOR of the rental
and other amounts to be paid by such assignee or sublessee, the term of any
subletting and the financial information required by LESSOR to make the
determination required by the first sentence of this paragraph.
LESSOR shall have the right to terminate this Lease, provided that LESSOR shall
exercise such right within forty-five (45) days of its receipt of LESSEE'S
request for such consent and provided further, that LESSEE shall have the right
to withdraw its request for such consent within fifteen (15) days after its
receipt of such notice from LESSOR, in which event such notice of termination
shall become null and void. If this Lease shall be terminated pursuant to the
provisions of the immediately preceding sentence, such termination shall become
effective upon the last day of the calendar month next following LESSOR'S
giving notice of termination. Upon LESSEE'S vacating the Premises in
accordance with this Lease, LESSOR shall refund all unearned rent and other
payments made by LESSEE.
SECTION 32 - SUBORDINATE
This Lease shall be subject and subordinate to any and all mortgages, deeds
of trust and other instruments in the nature of a mortgage, now or at any
time hereafter, a lien or liens on the Property of which the Premises are a
part and the LESSEE
-11-
<PAGE>
shall, when requested, promptly execute and deliver such written instruments
as shall be necessary to show the subordination of this Lease to said
mortgages, deeds of trust or other such instruments in the nature of
mortgage, and LESSEE hereby appoints such holder as LESSEE'S attorney-in-fact
to execute such subordination agreement upon default of LESSEE in complying
with such holder's request.
SECTION 33 - LESSOR'S ACCESS
The LESSOR or agents of the LESSOR may, at reasonable times (except in cases
of emergency), enter to view the Premises and may remove placards and signs
not approved and affixed as herein provided, and make repairs and alterations
as LESSOR should elect to do and may show the Premises to others, and at any
time within three (3) months prior to the expiration of the term, may affix
to any suitable part of the Premises a notice for letting or selling the
Premises or Property of which the Premises are a part and keep the same so
affixed without hindrance or molestation.
SECTION 34 - INDEMNIFICATION AND LIABILITY
The LESSEE shall save the LESSOR harmless from all loss and damage occasioned
by the use or escape of water or by the bursting of pipes, as well as from
any claim or damage resulting from neglect in not removing snow and ice from
the roof of the building or from the sidewalks bordering upon the Premises so
leased, or by any nuisance made or suffered on the Premises, unless such loss
is caused by the negligence of the LESSOR. The removal of snow and ice from
the sidewalks bordering upon the Premises shall be the LESSOR'S
responsibility.
SECTION 35 - LESSEE'S RISK
To the maximum extent this agreement may be made effective according to law,
LESSEE agrees to use and occupy the Premises and to use such other portions
of the building as LESSEE is herein given the right to use at LESSEE'S own
risk; and LESSOR shall have no responsibility or liability for any loss of or
damage to LESSEE'S removable property. The provisions of this section shall
be applicable from and after the execution of this Lease and until the end of
the term of this Lease, and during such further period as LESSEE may use or
be in occupancy of any part of the Premises or of the building.
SECTION 36 - INJURY CAUSED BY THIRD PARTY
To the maximum extent this agreement may be made effective according to law,
LESSEE agrees that LESSOR shall not be responsible or liable to LESSEE or to
those claiming by, through or under LESSEE, for any loss or damage that may be
occasioned by or through the acts or omissions of persons occupying adjoining
premises or any part of the premises adjacent to or connecting with the Premises
or any part of the Property or otherwise.
SECTION 37 - LESSEE'S REMOVABLE PROPERTY
All articles of personal property and all business fixtures, machinery and
equipment and furniture owned or installed by LESSEE solely at its expense in
the Premises (LESSEE'S removable property) shall remain the property of the
LESSEE and may be removed by LESSEE at any time prior to the expiration of
this Lease, provided that LESSEE, at its expense, shall repair any damage to
the building caused by such removal or installation.
-12-
<PAGE>
SECTION 38 - WAIVER
Failure on the part of LESSOR or LESSEE to complain of any action or
non-action on the part of the other, no matter how long the same may
continue, shall never be a waiver by LESSOR or LESSEE, respectively, of any
of the other's rights hereunder. Further, no waiver at any time of any of
the provisions hereof by LESSOR or LESSEE shall be construed as a waiver of
any of the other provisions hereof, and a waiver at any time of any of the
provisions shall not be construed as a waiver at any subsequent time of the
same provisions. The consent or approval of LESSOR or LESSEE to or of any
action by the other requiring such consent or approval shall not be construed
to waive or render unnecessary LESSOR'S or LESSEE'S consent or approval to or
of any subsequent similar act by the other.
No payment by LESSEE, or acceptance by LESSOR, of a lesser amount than shall
be due from LESSEE to LESSOR shall be treated otherwise than as a payment on
account. The acceptance by LESSOR of a check for a lesser amount with an
endorsement or statement thereon, or upon any letter accompanying such check,
that such lesser amount is payment in full, shall be given no effect, and
LESSOR may accept such check without prejudice to any other rights or
remedies which LESSOR may have against LESSEE.
SECTION 39 - FINANCIAL INFORMATION
It is hereby understood and agreed that LESSEE will supply to the LESSOR, on
an annual basis, a copy of LESSEE'S audited financial statement within ninety
(90) days following LESSEE'S fiscal year end. Any information obtained by
LESSOR pursuant to the provisions of this Paragraph shall be treated as
confidential, except that LESSOR may disclose such information to its lenders.
SECTION 40 - LATE PAYMENT
If LESSEE fails to pay any installment of Annual Rent and/or Additional Rent
on or before the first (lst) day of the calendar month when such installment
becomes due and Payable, LESSEE shall pay to LESSOR a late charge of five
percent (5%) of the amount of such installment, and, in addition, such
unpaid installment shall bear interest at the rate per annum which is four
percent (4%) greater than the "base lending rate" then in effect at The
Wall Street Journal, or the highest rate permitted by law, whichever may be
less; with it being the express intent of the parties that nothing herein
contained shall be construed or implemented in such manner as to allow LESSOR
to charge or receive interest in excess of the maximum legal rate then
allowed by law. Such late charge and interest shall constitute Additional
Rent hereunder due and payable with the next monthly installment of Annual
Rent due.
SECTION 41 - GUARANTY
One (1) Guaranty is attached hereto and made a part hereof.
-13-
<PAGE>
SECTION 42 - WHEN LEASE BECOMES BINDING
The submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of, or option for the
Premises, and this document shall become effective and binding only upon the
execution thereof by both LESSOR and LESSEE, regardless of any written or
verbal representation of any agent, manager or other employee of LESSOR to
the contrary. All negotiations, consideration, representations and
understandings between LESSOR and LESSEE are incorporated herein and this
Lease expressly supersedes any proposals or other written documents relating
hereto. This Lease may be modified or altered only by written agreement
between LESSOR and LESSEE, and no act or omission of any employee or agent of
LESSOR shall alter, change or modify any of the provisions thereof.
IN WITNESS WHEREOF, the LESSOR and LESSEE have hereunto set their hands and
common seals this 13th day of June, 1996.
LESSOR Thomas J. Flatley d/b/a
The Flatley Company
/S/ Francesca M. Austin /s/ Thomas J. Flatley
- ------------------------------ ------------------------------
WITNESS By Thomas J. Flatley
Its President
LESSEE Intellilink Corp.
/S/ [Illegible] /s/ Brad Rowe
- ------------------------------ ------------------------------
WITNESS By
Its President
Duly Authorized
-14-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF NORFOLK )
June 13, 1996.
Then personally appeared Thomas J. Flatley to me known to be the individual
who acknowledged himself to be the President of The Flatley Company, LESSOR, and
that he, as such, being authorized to do so, executed the foregoing instrument
and acknowledged the execution thereof to be his free act and deed for the
purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at Norfolk
County, Braintree, Massachusetts, this 13th day of June, 1996.
/s/ Diane R. Regan
-------------------------------
Notary Public
My commission expires:
[SEAL]
STATE OF California )
--------------------
) SS.
COUNTY OF Santa Clara )
-------------------
June 5, 1996.
------
Then personally appeared Brad Rowe to me known to be the individual
who acknowledged himself to be the President of Intellilink Corp., LESSEE,
and that he, as such, being authorized to do so, executed the foregoing
instrument and acknowledged the execution thereof to be his free act and deed
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at Santa
Clara County, San Jose, California, this 5th day of June, 1996.
[SEAL] /s/ Valerie Bliesener
-------------------------------------
Notary Public
My commission expires: April 21, 2000
-15-
<PAGE>
GUARANTY
IN CONSIDERATION of the execution and delivery of the within Lease dated
the 13th day of June, 1996, by and between Thomas J. Flatley d/b/a The
---- ---- --
Flatley Company, as Lessor, and Intellilink Corp., as Lessee, the
undersigned, Puma Technology, Inc., having its place of business
at_________________________________________________________, does hereby
guarantee, jointly and severally, to the Lessor, its successors and assigns,
in the event of a default by the Lessee in the within Lease, the payment of
rental reserved in the within Lease and the performance by the Lessee of its
covenants and agreements therein contained. This Guaranty and the limits set
forth herein, shall not limit the rights of the Lessor as contained in the
Lease in the event of any defaults by Lessee.
The undersigned hereby expressly waives notice of all defaults and
agrees that the waiver of any rights by the Lessor against the Lessee,
arising out of defaults by the Lessee or otherwise, shall not in any way
modify or release the obligations of the undersigned.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
executed at San Jose, CA, this 5th day of June, 1996.
Puma Technology, Inc.
/s/ [Illegible] /s/ Brad Rowe
- ------------------------------ ------------------------------
Witness By
Its President & CEO
STATE OF California )
--------------------
) SS.
COUNTY OF Santa Clara )
-------------------
June 5, 1996.
------
Then personally appeared Brad Rowe to me known to be the individual who
acknowledged himself to be the President & CEO of Puma Technology, Inc., and
that he, as such, being authorized to do so, executed the foregoing instrument
and acknowledged the execution thereof to be his free act and deed for the
purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at Santa
Clara County, San Jose, California, this 5th day of June, 1996.
[SEAL] /s/ Valerie Bliesener
-------------------------------------
Notary Public
My commission expires: April 21, 2000
-16-
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and halls shall not be obstructed or encumbered by any
LESSEE, nor shall they be used for any purpose other than ingress and egress
to and from the Premises. LESSOR shall keep the sidewalks and curbs directly
in front of said Premises, clean and free from ice and snow.
2. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of the LESSOR. No
curtains, blinds, shades or screens shall be attached to, hung in, or used in
connection with, any window or door of the Premises, without the prior
written consent of the LESSOR. Any such awnings, projections, curtains,
blinds, shades, screens or other fixtures used by LESSEE (if given the prior
written consent of the LESSOR for such use), shall be of a quality, type,
design and color, attached in a manner approved by the LESSOR.
3. A building directory will be maintained in the main lobby of the
building at the expense of the LESSOR and the number of such listings shall
be at the sole discretion of the LESSOR. No sign, advertisement, notice or
other lettering shall be exhibited, inscribed, painted or affixed by any
LESSEE on any part of the outside or inside of the Premises or building,
without the prior written consent of the LESSOR. In the event of violation
of the foregoing by any LESSEE, LESSOR may remove same without any liability
and may charge the expense incurred by such removal to any LESSEES violating
this rule. Interior signs on doors and directory tablet shall be inscribed,
painted or affixed for each LESSEE, at LESSEE'S expense and shall be of a
size, color and style acceptable to the LESSOR.
4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
building shall not be covered or obstructed by any LESSEE, nor shall any
bottles, parcels or other articles be placed on the windowsills.
5. No show cases or other articles shall be put in front of, or affixed to
any part of the exterior of the building, nor placed in the halls, corridors,
vestibules or fire escapes, without the prior written consent of the LESSOR.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuses of the fixtures shall be borne by the
LESSEE who, or whose servants, employees, agents, visitors, or licensees,
shall have caused same.
7. No LESSEE shall mark, paint, drill into, or in any way deface any part
of the Premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior
written consent of LESSOR, and as the LESSOR may direct. No LESSEE shall lay
linoleum, or other similar floor covering, so that the same shall come in
contact with the floor of the Premises, and, if linoleum or other similar
floor covering is desired to be used, an interlining of builder's deadening
felt shall be first affixed to the floor by a paste or other material,
soluble in water, the use of cement or other similar adhesive material being
expressly prohibited.
8. No bicycles, vehicles or animals of any kind shall be brought in or kept
about the Premises, and no cooking shall be done or permitted by LESSEE on
said Premises. No LESSEE shall cause or permit any unusual or objectionable
odors to be produced upon or permeate from the Premises.
-17-
<PAGE>
9. No space in the building, except as provided in individual Leases, shall
be used for manufacturing, for the storage of merchandise, or for the sale of
merchandise, goods or property of any kind at auction.
10. No LESSEE shall make, or permit to be made, any unsettling or
disturbing noises or disturb or interfere with occupants of this or
neighboring buildings or premises' or those having business with them,
whether by the use of any musical instrument, radio, talking machine,
unmusical noise, whistling, singing, or in any other way. No LESSEE shall
throw anything out of doors, windows, skylights or down the passageways.
11. No LESSEE, nor any of LESSEE'S servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the Premises any flammable,
combustible or explosive fluid, chemical and substance.
12. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any LESSEE, nor shall any changes be made in existing
locks or the mechanism thereof. Each LESSEE must, upon the termination of
his tenancy, return to the LESSOR, all keys for stores, offices and toilet
rooms, either furnished to, or otherwise procured by, such LESSEE, and in the
event of the loss of any keys so furnished, such LESSEE shall pay the LESSOR
the cost thereof.
13. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which the LESSOR or its agents may determine from time to time. The LESSOR
reserves the right to inspect all freight to be brought into the building and
to exclude from the building, all freight which violates any of these Rules
and Regulations or the Lease of which these Rules and Regulations are a part.
14. No LESSEE shall occupy or permit any portion of the Premises leased to
him to be occupied for the possession, storage, manufacture or sale of
liquor, narcotics, or dope, or as a barber or manicure shop.
15. LESSOR shall have the right to prohibit any advertising by any LESSEE
which, in LESSOR'S opinion, tends to impair the reputation of the building or
its desirability as a building for offices, and upon written notice from
LESSOR, LESSEE shall refrain from or discontinue such advertising. LESSEE
shall not use the name of the building or its owner in any advertising
without the express written consent of the LESSOR.
16. No LESSEE shall install or permit the installation or use of any
machines dispensing goods for sale, including without limitation, foods,
beverages, cigarettes or cigars. No food or beverage shall be carried in the
public halls and elevators of the buildings, except in closed containers.
17. The Premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
18. Canvassing, soliciting and peddling in the building is prohibited and
each LESSEE shall cooperate to prevent the same by notifying the LESSOR.
LESSOR reserves the right to inspect any parcel or package being removed from
the building by LESSEE, its employees, representatives and business invitees.
19. There shall not be used in any space or in the public halls of any
building, either by a LESSEE or by jobbers or others in the delivery of or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
-18-
<PAGE>
LEASE AGREEMENT
This Lease Agreement dated this 18th day of March, 1997, by and between
Thomas J. Flatley d/b/a The Flatley Company, as LESSOR, and Intellilink
Corporation, as LESSEE.
WITNESSETH:
1. PREMISES: Located within Nashua Office Park, One Tara Boulevard, Nashua, NH
03062, LESSOR hereby leases to LESSEE, and LESSEE hires from LESSOR, the
area as indicated on Exhibit "A", as attached hereto and made a part
hereof, (the "Premises"), containing approximately 804 square feet of floor
area.
2. TERM: The term of this Lease Agreement shall be for eight
(8) months, commencing on the commencement date (defined below), and
terminating eight (8) months immediately thereafter, unless sooner
terminated as herein provided.
3. COMMENCEMENT DATE: The Commencement Date of the term of this Lease shall be
July 1, 1996.
Notwithstanding the foregoing, if LESSEE'S personnel shall occupy all or
any part of the Premises for the conduct of its business prior to the
Commencement Date as determined pursuant to the preceding paragraph, such
date of occupancy shall, for all intents and purposes of this Lease, be
the Commencement Date.
LESSOR and LESSEE agree to execute a Supplemental Agreement setting forth
the actual Occupancy and Term Dates, once the same have been established.
4. RENT: The LESSEE agrees to pay to LESSOR, without deduction or offset, rent
at the rate of FOUR THOUSAND TWO HUNDRED EIGHTY-EIGHT AND 00/100
($4,288.00) Dollars annually, payable in advance of the first day of each
month, in equal monthly installments of FIVE HUNDRED THIRTY-SIX AND 00/100
($536.00) Dollars, and at that rate for any fraction of a month at the
beginning of the term.
5. RENT COMMENCEMENT DATE: The payment of rental shall commence upon the
Commencement Date.
6. ADDTTTONAL RENT: In accordance with the following, LESSEE shall under the
terms, conditions and provisions hereinafter provided, pay to LESSOR as
additional rent, the following:
REAL ESTATE TAXES
1. If real estate taxes upon the land and buildings (the "Property"), of
which the Premises are a part, for any tax year exceed the real estate base
tax amount, whether by reason of an increase in either the tax rate or the
assessed valuation or both, LESSEE shall pay to LESSOR as additional rent
within ten (10) days after billing therefore, an amount equal to the
product of (a) such excess over the base taxes and (b) the following
fraction:
Square Footage of LESSEE'S Premises
--------------------------------------------
Aggregate of All the Rentable Square Footage
(whether or not rented or improved within the entire building)
Effective April 1, 1996, LESSEE shall pay monthly, at the time when Rent
payments are due hereunder, an amount equal to one-twelfth (1/12th) of the
total of annual real estate taxes (as estimated by LESSOR) due from LESSEE to
LESSOR pursuant to this Subsection 6.1. Promptly after the determination by
any taxing
<PAGE>
authority of real estate taxes upon the Building for each tax year, LESSOR
shall make a determination of the real estate taxes allocated to the
Premises, and if the aforesaid payments theretofore made for such tax year by
LESSEE exceed the real estate taxes allocated to the Premises, such
overpayment shall be credited against the payments thereafter to be made by
LESSEE pursuant to this paragraph; and if the real estate taxes allocated to
the Premises for such tax year are greater than such payments theretofore
made on account for such tax year, LESSEE shall within ten (10) days of
written notice from the LESSOR make a suitable payment to LESSOR. Xerox
copies of tax bills submitted by LESSOR with any such statement shall be
conclusive evidence of the amount of real estate taxes charged, assessed or
imposed. After the full assessment year, the initial monthly payment on
account of the real estate taxes allocated to the Premises shall be replaced
each year by a payment which is one-twelfth (1/12th) of the real estate taxes
allocated to the Premises for the immediately preceding tax year.
2. For the purposes of this clause, the term "Tax Year" shall mean the
twelve month period commencing on April 1st (or any month as it may apply
and/or change for the city, town or municipality tax period) immediately
preceding the Commencement Date and each twelve month period thereafter
during the term of this Lease.
3. It is agreed by both parties that the Base Year as it applies to taxes
for this Lease shall be April 1, 1996 - March 31, 1996.
4. If any abatement, refund or rebate shall be subsequently made for any
tax year, an appropriate adjustment shall be made in the amount payable from,
or paid by LESSEE to LESSOR on account of said real estate taxes, after
deducting the LESSOR'S expenses reasonably incurred in obtaining such
abatement, refund or rebate and provided there is no existing default of
LESSEE. An appropriate adjustment will be made to the base tax year as a
result of the foregoing.
5. If some method or type of taxation replaces the current method of
assessment of real estate taxes, or the type thereof, LESSEE agrees that it
shall pay an equitable share of the same computation herein provided, to the
end that LESSEE'S share thereof shall be to the maximum extent practicable,
comparable to that which LESSEE would bear under the foregoing provisions.
6. If a tax (other than a Federal or State net income tax) is assessed on
account of the rents or other charges payable by LESSEE to the LESSOR under
this Lease, LESSEE agrees to pay the same within ten (10) days after billing
therefore, unless applicable law prohibits the payment of such tax by LESSEE.
LESSOR shall have the same rights and remedies for non-payment by LESSEE of
any such amounts due on account of such taxes as LESSOR has hereunder, for
the failure of LESSEE to pay rent as provided for in Section 11 of this Lease.
OPERATING EXPENSES
7. The following is a list of all such items of operating expenditures as
are within the meaning of "Operating Expenses" hereinafter set forth. If, in
any calendar year of the term of this Lease, LESSOR'S Operating Expenses
exceed Operating Expenses for the calendar year 1996, as it related to all
other charges with the exception of snow removal, which shall be an amount
representative of LESSOR'S actual snow removal costs over the previous five
(5) year period, LESSEE shall after notice as hereinafter provided, pay to
LESSOR as additional rent, an amount equal to the product of (a) such excess
multiplied by (b) a fraction involving the same numerator and denominator as
is provided for in Subsection 6.1 of this Lease.
8. The expression "Operating Expenses" as used herein, shall mean the
aggregate cost of expenses reasonably incurred by LESSOR
<PAGE>
with respect to the operation, administration, cleaning, repair, maintenance
and management of the Property, including without limitation, those items
enumerated hereinafter. If during any portion of the calendar year for which
Operating Expenses are being computed, less than 93% of the building's
rentable area was occupied by tenants, actual Operating Expenses incurred
shall be reasonably extrapolated by LESSOR on an item by item basis to the
estimated operating expenses that would have been incurred if the building
were at least 93% occupied for such year, and such extrapolated amounts shall
for the purposes hereof, be deemed to be the Operating Expenses for such year.
9. Effective January 1, 1997, LESSEE shall pay monthly, at the time when Rent
payments are due hereunder, an amount equal to one-twelfth (1/12th) of the
total annual Operating Expenses (as estimated by LESSOR) due from LESSEE to
LESSOR pursuant to Subsection 8.7 of this Lease. Promptly after the end of
each calendar year thereafter, LESSOR shall make a determination of LESSEE'S
share of such Operating Expenses; and if the aforesaid payments theretofore
made for such period by LESSEE exceed LESSEE'S share, such overpayment shall
be credited against the payments thereafter to be made by LESSEE pursuant to
this Paragraph; and if LESSEE'S share is greater than such payments
theretofore made on account for such period, LESSEE shall within thirty (30)
days of written notice from the LESSOR make a suitable payment to LESSOR.
The initial monthly payment on account of the Operating Expense Charge shall be
replaced after LESSOR'S determination of LESSEE'S share thereof for the
preceding accounting period by a payment which is one-twelfth (1/12th) of
LESSEE'S actual share thereof for the immediately preceding period, with
adjustments as appropriate where such preceding period is less than a full
twelve-month period. LESSOR shall have the same rights and remedies for
non-payment by LESSEE of any such amounts due on account of such Operating
Expenses as LESSOR has hereunder, for the failure of LESSEE to pay rent as
provided for in Section 23 of this Lease.
10. Without limitation, Operating Expenses shall include:
a. All expenses incurred by LESSOR or LESSOR'S agents which shall be
directly related to employment of personnel, including amounts incurred for
wages, salaries and other compensation for services, payroll, social
security, unemployment and similar taxes, worker's compensation insurance,
disability benefits, pensions, hospitalization, retirement plans and group
insurance, uniforms and working clothes and the cleaning thereof, and
expenses imposed on LESSOR or LESSOR'S agents pursuant to any collective
bargaining agreement for the services of employees of LESSOR or LESSOR'S
agents in connection with the operation, repair, maintenance, cleaning,
management and protection of the Property, and its mechanical systems
including, without limitation, day and night supervisors, property manager,
accountants, bookkeepers, janitors, carpenters, engineers, mechanics,
electricians and plumbers and personnel engaged in supervision of any of
the persons mentioned above; provided that, if any such employee is also
employed on other properties of LESSOR, such compensation shall be suitably
prorated among the Property and such other properties.
b. The cost of services, utilities, materials and supplies furnished
or used in the operation, repair, maintenance, cleaning, management and
protection of the Property.
c. The cost of replacements for tools and other similar equipment used
in the repair, maintenance, cleaning and protection of the Property;
provided that, in the case of any such equipment used jointly on other
properties of LESSOR, such costs shall be suitable prorated among the
<PAGE>
Property and such other properties.
d. Where the Property is managed by LESSOR or an affiliate of LESSOR, a
sum equal to the amounts customarily charged by management firms in the
Nashua area for similar properties whether or not actually paid, or where
otherwise managed, the amounts accrued for management, together with
amounts accrued for legal and other professional fees relating to the
Property, but excluding such fees and commissions paid in connection with
services rendered for securing or renewing leases and for matters not
related to the normal administration and operation of the building.
e. Premiums for insurance against damage or loss to the building from
such hazards as shall from time to time be generally required by
institutional mortgagors in the Nashua area for similar properties,
including, but not by way of limitation, insurance covering loss of rent
attributable to any such hazards, and public liability insurance.
f. Cost for electricity, water and sewer use charges, and other utilities
supplied to the Property and not paid for directly by LESSEE.
g. Betterment assessments, provided the same are apportioned equally over
the longest period permitted by law.
h. Amounts paid to independent contractors for services, materials and
supplies furnished for the operation, repair, maintenance, cleaning and
protection of the Property.
i. Any capital expenditure made by LESSOR during the term of this Lease,
the total cost of which is not properly includable in Operating Expenses
for the operating year in which it was made, shall nevertheless be included
in such Operating Expenses for the operating year in which it was made, and
Operating Expenses for each succeeding operating year shall include the
annual charge-off of such capital expenditure. Annual charge-off shall be
determined by dividing the original capital expenditure plus an interest
factor, reasonably determined by LESSOR, as being the interest rate then
being charged for long-term mortgages by institutional lenders on "like"
properties within the locality in which the building is located, by the
number of years of useful life of the capital expenditure, and the useful
life shall be determined reasonably by LESSOR in accordance with generally
accepted accounting principles and practices in effect at the time of
making such expenditure.
7. ELECTRICAL: LESSOR shall purchase and receive electric current for the
Premises directly from the public utility company serving the building.
LESSOR at LESSEE'S expense, shall purchase and install all lamps, tubes,
bulbs, starters and ballasts.
Section 7 of this Lease Agreement shall apply until such time as LESSOR
separately meters LESSEE'S Premises. Thereupon, LESSEE shall be
responsible to purchase its own light and plug electricity.
8. UTILITIES: The LESSOR shall provide all shall pay for all LESSEE'S
water and sewer use charges and reasonable heating and air-conditioning
during the normal heating and cooling season between the hours of 8:00
a.m. and 6:00 p.m. during normal business days.
9. NOTICES: Any notice from the LESSOR to the LESSEE relating to the
Premises or to the occupancy thereof, shall be deemed duly served if
addressed to the LESSEE and sent certified or registered mail to Nashua
Office Park, One Tara Boulevard, Nashua, NH 03062.
<PAGE>
Any notice from the LESSEE to the LESSOR relating to the Premises or to
the occupancy thereof, shall be deemed duly served if addressed to the
LESSOR and sent certified or regisered mail to Braintree Hill Office Park,
50 Braintree Hill Park, Braintree, MA 02184.
10. USE: LESSEE shall use the Premises only for the purpose of storage space.
11. LATE PAYMENT: If LESSEE fails to pay any installment of Annual Rent and/or
Additional Rent on or before the first (lst) day of the calendar month when
such installment becomes due and payable, LESSEE shall pay to LESSOR a late
charge of five percent (5%) of the amount of such installment, and, in
addition, such unpaid installment shall bear interest at the rate per annum
which is four percent (4%) greater than the "base lending rate" then in
effect at The Wall Street Journal, or the highest rate permitted by law
whichever may be less; with it being the express intent of the parties that
nothing herein contained shall be construed or implemented in such manner
of the maximum legal rate then allowed by law. Such late charge and
interest shall constitute Additional Rent hereunder due and payable with
the next monthly installment of Annual Rent due.
12. FINANCIAL INFORMATION: It is hereby understood and agreed that LESSEE will
supply to the LESSOR, on an annual basis, a copy of LESSEE'S audited
financial statement within ninety (90) days following LESSEE'S fiscal year
end. Any information obtained by LESSOR pursuant to the provisions of
this Paragraph shall be treated as confidential, except that LESSOR may
disclose such information to its lenders.
13. CONDITION OF PREMISES: LESSEE acknowledges that it has examined and
inspected the Premises and is familiar with the physical condition thereof.
LESSEE further acknowledges (1) that LESSOR has not made and does not
hereby make any representations regarding the physical condition of the
Premises and (2) that there are no warranties, either expressed or implied,
regarding the condition of the Premises. Any such warranties which may
exist, are hereby expressly released and waived. Accordingly, LESSEE
hereby agrees to accept the Premises in their "as is" condition.
14. INSURANCE: LESSEE agrees to save LESSOR and indemnify LESSOR against any
and all injury, loss, damage or claims for injury, loss or damage, of
whatever nature, as a result of LESSEE'S use of said space. At the
execution of this Agreement, LESSEE must produce evidence of Liability
Insurance prior to its entering the Premises with minimum coverage of ONE
MILLION AND 00/100 ($1,000,000.00) Dollars, on account of bodily injury to
or death of one person, and ONE MILLION AND 00/100 ($1,000,000.00) Dollars,
on account of bodily injury to or death of more than one person as a result
of any one accident or disaster, and with ONE MILLION AND 00/100
($1,000,000.00) Dollars minimum coverage for property damage in any
accident and to deposit said policy or policies (or certificates thereof)
with the LESSOR within thirty (30) days of any use or occupancy of the
Premises.
15. GUARANTY: One (1) Corporate Guaranty is attached hereto and made a part
hereof.
16. RULES AND REGULATIONS: LESSEE will observe and comply with the Rules and
Regulations as attached hereto and made a part hereof, including
revisions and additions as the LESSOR may from time to time institute.
17. The submission of this document is for examination and negotiation does
not constitute an offer, and this document shall become effective and
binding only upon the execution thereof by both LESSOR and LESSEE,
regardless of any written
<PAGE>
or verbal representation of any agent, manager or other employee of LESSOR
to the contrary. All negotiations, consideration, representations and
understandings between LESSOR and LESSEE are incorporated herein and this
Lease Agreement expressly supersedes any proposals or other written
documents relating hereto. This Lease Agreement may be modified or altered
only be written agreement between LESSOR and LESSEE, and no act or omission
of any employee or agent of LESSOR shall alter, change or modify any of the
provisions thereof.
IN WITNESS WHEREOF, LESSOR and LESSEE have hereunto set their hands and
common seals this 18th day of March, 1997.
LESSOR: Thomas J. Flatley d/b/a
The Flatley Company
/s/ Jennifer Pacino /s/ Thomas J. Flatley
- ----------------------------- ------------------------------
WITNESS By Thomas J. Flatley
Its President
LESSEE: Intellink Corporation
/s/ M. Bruce Nakao
- ----------------------------- ------------------------------
WITNESS By
Its Sr. VP, CFO
Duly Authorized
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and halls shall not be obstructed or encumbered by any
LESSEE, nor shall they be used for any purpose other than ingress and egress
to and from the Premises. LESSOR shall keep the sidewalks and curbs directly
in front of said Premises, clean and free from ice and snow.
2. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of the LESSOR. No
curtains, blinds, shades or screens shall be attached to, hung in, or used in
connection with, any window or door of the Premises, without the prior
written consent of the LESSOR. Any such awnings, projections, curtains,
blinds, shades, screens or other fixtures used by LESSEE (if given the prior
written consent of the LESSOR for such use), shall be of a quality, type,
design and color, attached in a manner approved by the LESSOR.
3. A building directory will be maintained in the main lobby of the
building at the expense of the LESSOR and the number of such listings shall
be at the sole discretion of the LESSOR. No sign, advertisement, notice or
other lettering shall be exhibited, inscribed, painted or affixed by any
LESSEE on any part of the outside or inside of the Premises or building,
without the prior written consent of the LESSOR. In the event of violation of
the foregoing by any LESSEE, LESSOR may remove same without any liability and
may charge the expense incurred by such removal to any LESSEES violating this
rule. Interior signs on doors and directory tablet shall be inscribed,
painted or affixed for each LESSEE, at LESSEE'S expense and shall be of a
size, color and style acceptable to the LESSOR.
4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
building shall not be covered or obstructed by any LESSEE, nor shall any
bottles, parcels or other articles be placed on the windowsills.
5. No show cases or other articles shall be put in front of, or affixed to
any part of the exterior of the building, nor placed in the halls, corridors,
vestibules or fire escapes, without the prior written consent of the LESSOR.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuses of the fixtures shall be borne by the
LESSEE who, or whose servants, employees, agents, visitors, or licensees,
shall have caused same.
7. No LESSEE shall mark, paint, drill into, or in any way deface any part of
the Premises or the building of which they form a part. No boring, cutting or
stringing of wires shall be permitted, except with the prior written consent of
LESSOR, and as the LESSOR may direct. No LESSEE shall lay linoleum, or other
similar floor covering, so that the same shall come in contact with the floor
of the Premises, and, if linoleum or other similar floor covering is desired
to be used, an interlining of builder's deadening felt shall be first affixed
to the floor by a paste or other material, soluble in water, the use of
cement or ther similar adhesive mateial being expressly prohibited.
8. No bicycles, vehicles or animals of any kind shall be
<PAGE>
brought in or kept about the Premises, and no cooking shall be done or
permitted by LESSEE on said Premises. No LESSEE shall cause or permit any
unusual or objectionable odors to be produced upon or permeate from the
Premises.
9. No space in the building, except as provided in individual Leases, shall
be used for manufacturing, for the storage of merchandise, or for the sale of
merchandise, goods or property of any kind at auction.
10. No LESSEE shall make, or permit to be made, any unsettling or disturbing
noises or disturb or interfere with occupants of this or neighboring
buildings or premises' or those having business with them, whether by the use
of any musical instrument, radio, talking machine, unmusical noise,
whistling, singing, or in any other way. No LESSEE shall throw anything out
of doors, windows, skylights or down the passageways.
11. No LESSEE, nor any of LESSEE'S servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the Premises any flammable,
combustible or explosive fluid, chemical and substance.
12. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any LESSEE, nor shall any changes be made in existing
locks or the mechanism thereof. Each LESSEE must, upon the termination of
his tenancy, return to the LESSOR, all keys for stores, offices and toilet
rooms, either furnished to, or otherwise procured by, such LESSEE, and in the
event of the loss of any keys so furnished, such LESSEE shall pay the LESSOR
the cost thereof.
13. All removals, or the carrying in or out of any safes, freight, furniture
or bulky matter of any description must take place during the hours which the
LESSOR or its agents may determine from time to time. The LESSOR reserves
the right to inspect all freight to be brought into the building and to
exclude from the building, all freight which violates any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
14. No LESSEE shall occupy or permit any portion of the Premises leased to
him to be occupied for the possession, storage, manufacture or sale of
liquor, narcotics, or dope, or as a barber or manicure shop.
15. LESSOR shall have the right to prohibit any advertising by any LESSEE
which, in LESSOR'S opinion, tends to impair the reputation of the building or
its desirability as a building for offices, and upon written notice from
LESSOR, LESSEE shall refrain from or discontinue such advertising. LESSEE
shall not use the name of the building or its owner in any advertising
without the express written consent of the LESSOR.
16. No LESSEE shall install or permit the installation or use of any
machines dispensing goods for sale, including without limitation, foods,
beverages, cigarettes or cigars. No food or beverage shall be carried in the
public halls and elevators of the buildings, except in closed containers.
<PAGE>
17. The Premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
18. Canvassing, soliciting and peddling in the building is prohibited and
each LESSEE shall cooperate to prevent the same by notifying the LESSOR.
LESSOR reserves the right to inspect any parcel or package being removed from
the building by LESSEE, its employees, representatives and business invitees.
19. There shall not be used in any space or in the public halls of any
building, either by a LESSEE or by jobbers or others in the delivery of or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF NORFOLK )
_______________, 1997.
Then personally appeared Thomas J. Flatley to me known to be the
individual who acknowledged himself to be the President of The Flatley
Company, LESSOR, and that he, as such, being authorized to do so, executed
the foregoing instrument and acknowledged the execution thereof to be his
free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at Norfolk
County, Braintree, Massachusetts, this __ day of _______________, 1997.
--------------------------------
Notary Public
My commission expires:
STATE OF __________________ )
) SS.
COUNTY OF _________________ )
_______________, 1997.
Then personally appeared ______________________________ to me known to
be the individual who acknowledged himself to be the _______________________
of Intellilink Corporation, LESSEE, and that he, as such, being authorized to
do so, executed the foregoing instrument and acknowledged the execution
thereof to be his free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at
______________ County, ______________, __________________, this _______day of
_____________________,1997.
--------------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBIT "A"
Floor Plan
[GRAPHIC OF FLOOR PLAN]
<PAGE>
GUARANTY
IN CONSIDERATION of the execution and delivery of the within Lease dated
the ________ day of _______________, 19__, by and between Thomas J. Flatley
d/b/a The Flatley Company, as LESSOR, and Intellilink Corporation, as LESSEE,
the undersigned, Puma Technology, Inc., having its place of business at
_______________________, does hereby guarantee, jointly and severally, to the
LESSOR, its successors and assigns, in the event of a default by the LESSEE
in the within Lease, the payment of rental reserved in the within Lease and
the performance by the LESSEE of its covenants and agreements therein
contained. This Guaranty and the limits set forth herein, shall not limit
the rights of the LESSOR as contained in the Lease in the event of any
defaults by LESSEE.
The undersigned hereby expressly waives notice of all defaults and
agrees that the waiver of any rights by the LESSOR against the LESSEE,
arising out of defaults by the LESSEE or otherwise, shall not in any way
modify or release the obligations of the undersigned.
IN WITNESS WHEREOF, the undersigned has caused thIs Guaranty to be
executed at ___________________, this 18th day of March, 1997.
Puma Technology, Inc.
------------------------------------
/s/ Wendy Peter /s/ M. Bruce Nakao
- ------------------------------- ------------------------------------
Witness By:
Its: Sr. VP, CFO
STATE OF ____________________ )
) SS.
COUNTY OF ___________________ )
_______________________, 19__.
Then personally appeared ___________________________ to me known to be
the individual who acknowledged himself to be the __________________ of Puma
Technology, Inc., and that he, as such, being authorized to do so, executed
the foregoing instrument and acknowledged the execution thereof to be his
free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at _______
County,_________, _________________, this ________ day of ____________, 19__.
------------------------------------
Notary Public
My commission expires:
<PAGE>
THE FLATLEY COMPANY
STANDARD FORM OF COMMERICAL LEASE
SUBMISSION NOT AN OPTION
EMPLOYEES OR AGENTS OF LANDLORD HAVE NO AUTHORITY TO MAKE
OR AGREE TO MAKE A LEASE OR ANY OTHER AGREEMENT IN
CONNECTION HEREWITH. THE SUBMISSION OF THIS LEASE FOR
EXAMINATION AND NEGOTIATION DOES NOT CONSTITUTE AN OFFER TO
LEASE, A RESERVATION OF, OR OPTION FOR THE PREMISES AND SHALL
VEST NO RIGHT IN ANY PARTY, TENANT OR ANYONE CLAIMING UNDER
OR THROUGH TENANT SHALL HAVE THE RIGHTS TO THE PREMISES AS
SET FORTH AND THIS LEASE BECOME EFFECTIVE AS A LEASE
ONLY UPON EXECUTION, ACKNOWLEDGE AND DELIVERY
THEREOF BY LANDLORD AND TENANT, REGARDLESS OF ANY WRITTEN
OR VERBAL REPRESENTATION OF ANY AGENT, MANAGER OR EMPLOYEE
OF LANDLORD TO THE CONTRARY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ARTICLE 1 SUMMARY OF BASIC LEASE PROVISIONS. . . . . . . . . . 2
SECTION 1.1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 BASIC DATA . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 ENUMERATION OF EXHIBITS . . . . . . . . . . . . . . 4
ARTICLE II DESCRIPTION OF PREMISES AND APPURTENANT RIGHTS . . . 4
SECTION 2.1 LOCATION OF PREMISES . . . . . . . . . . . . . . . . 4
SECTION 2.2 APPURTENANT RIGHTS AND RESERVATIONS . . . . . . . . 4
ARTICLE III TERM OF LEASE: CONDITION OF PREMISES . . . . . . . . 5
SECTION 3.1 TERM OF LEASE. . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV RENT . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.1 RENT PAYMENTS. . . . . . . . . . . . . . . . . . . . 5
SECTION 4.2 REAL ESTATE TAX. . . . . . . . . . . . . . . . . . . 6
SECTION 4.3 TENANT'S SHARE OF OPERATING COSTS. . . . . . . . . . 8
ARTICLE V USE OF PREMISES. . . . . . . . . . . . . . . . . . . 10
SECTION 5.1 PERMITTED USE. . . . . . . . . . . . . . . . . . . . 10
SECTION 5.2 COMPLIAINCE WIIH LAWS. . . . . . . . . . . . . . . . 11
SECTION 5.3 INSURANCE RISKS. . . . . . . . . . . . . . . . . . . 11
SECTION 5.4 ELECTRICAL EQUIPMENT . . . . . . . . . . . . . . . . 12
SECTION 5.5 TENANT'S OPERATIONAL COVENANTS . . . . . . . . . . . 12
SECTION 5.6 SIGNS, BLINDS and DRAPES . . . . . . . . . . . . . . 13
SECTION 5.7 HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . 13
ARTICLE VI INSTALLATIONS, ALTERATIONS, AND ADDITIONS. . . . . . 14
SECTION 6.1 INSTALLATIONS, ALTERATIONS, AND ADDITIONS. . . . . . 14
ARNCLE VII ASSIGNMENT AND SUBLETTING. . . . . . . . . . . . . . 15
SECTION 7.1 PROHIBITION. . . . . . . . . . . . . . . . . . . . . 15
SECTION 7.2 ACCEPTANCE OF RENT FROM TRANSFEREE . . . . . . . . . 17
ARTICLE VIII REPAIRS MAINTENANCE. . . . . . . . . . . . . . . . . 17
SECTION 8.1 TENANT OBLIGATIONS . . . . . . . . . . . . . . . . . 17
SECTION 8.2 LANDLORD OBLIGATIONS . . . . . . . . . . . . . . . . 17
<PAGE>
ARTICLE IX SERVICES TO BE FURNISHED BY LANDLORD;
UTILITIES. . . . . . . . . . . . . . . . . . . . . . 18
SECTION 9.1 LANDLORD'S SERVICES. . . . . . . . . . . . . . . . . 18
SECTION 9.2 CAUSES BEYOND CONTROL OF THE LANDLORD. . . . . . . . 19
SECTION 9.3 SEPARATELY METERED UTILITIES . . . . . . . . . . . . 19
ARTICLE X INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 10(a) THE TENANT'S INDEMNITY . . . . . . . . . . . . . . . 19
SECTION 10(b) THE LANDLORD'S INDEMNITY . . . . . . . . . . . . . . 20
SECTION 10.2 THE TENANT'S RISK. . . . . . . . . . . . . . . . . . 20
SECTION 10.3 INJURY CAUSED BY THIRD PARTIES . . . . . . . . . . . 21
SECTION 10.4 SECURITY . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XI INSURANCE. . . . . . . . . . . . . . . . . . . . . . 21
SECTION 11.1 INSURANCE OBLIGATIONS. . . . . . . . . . . . . . . . 21
SECTION 11.2 CONSTRUCTION PERIOD INSURANCE. . . . . . . . . . . . 21
SECTION 11.3 WAIVER OF SUBROGATION. . . . . . . . . . . . . . . . 22
ARTICLE XII CASUALTY . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 12.1 DEFINITION OF "SUBSTANTLAL DAMAGE" AND
"PARTIAL DAMAGE" . . . . . . . . . . . . . . . . . . 22
SECTION 12.2 PARTIAL DAMAGE TO THE BUILDING . . . . . . . . . . . 22
SECTION 12.3 SUBSTANTIAL DAMAGE TO THE BUILDING . . . . . . . . . 23
SECTION 12.4 ABATEMENT OF RENT. . . . . . . . . . . . . . . . . . 23
SECTION 12.5 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 23
ARTICLE XIII EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . 24
SECTION 13.1 RIGHTS OF TERMINATION FOR TAKING . . . . . . . . . . 24
SECTION 13.2 PAYMENT OF AWARD . . . . . . . . . . . . . . . . . . 25
SECTION 13.3 ABATEMENT OF RENT. . . . . . . . . . . . . . . . . . 25
SECTION 13.4 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 25
ARTICLE XIV TENANT'S DEFAULT . . . . . . . . . . . . . . . . . . 25
SECTION 14.1 TENANT'S DEFAULT . . . . . . . . . . . . . . . . . . 25
ARTICLE XV THE LANDLORD'S ACCESS TO PREMISES. . . . . . . . . . 30
SECTION 15.1 THE LANDLORD'S RIGHT OF ACCESS . . . . . . . . . . . 30
ARTICLE XVI LANDLORD'S MORTGAGES . . . . . . . . . . . . . . . . 30
<PAGE>
SECTION 16.1 SUBORDINATION . . . . . . . . . . . . . . . . . . . 30
SECTION 16.2 MODIFICATIONS . . . . . . . . . . . . . . . . . . . 30
ARTICLE XVII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . 30
SECTION 17.1 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 17.2 NO ACCORD AND SATISFACTION . . . . . . . . . . . . 31
SECTION 17.3 CUMULATIVE REMEDIES . . . . . . . . . . . . . . . . 31
SECTION 17.4 LANDLORD'S RIGHT TO CURE. . . . . . . . . . . . . . 31
SECTION 17.5 BROKERAGE . . . . . . . . . . . . . . . . . . . . . 31
SECTION 17.6 HOLDOVER. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 17.7 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . 32
SECTION 17.8 CONSTRUCTION AND GRAMMATICAL USAGE. . . . . . . . . 32
SECTION 17.9 SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . 32
SECTION 17.10 LANDLORD'S ENFORCEMENT EXPENSES . . . . . . . . . . 33
SECTION 17.11 TENANT'S ENFORCEMENT EXPENSES . . . . . . . . . . . 33
SECTION 17.12 NO SURRENDER. . . . . . . . . . . . . . . . . . . . 34
SECTION 17.13 COVENANT OF QUIET ENJOYMENT . . . . . . . . . . . . 34
SECTION 17.14 NO PERSONAL LIABILITY OF THE LANDLORD . . . . . . . 34
SECTION 17.15 NOTICES . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 17.16 FINANCIAL INFORMATION . . . . . . . . . . . . . . . 34
SECTION 17.17 RULES AND REGULATIONS . . . . . . . . . . . . . . . 35
SECTION 17.18 RIGHT TO MOVE . . . . . . . . . . . . . . . . . . . 35
SECTION 17.19 TENANT'S RIGHT TO EXPAND. . . . . . . . . . . . . . 35
SECTION 17.20 TENANT'S OPTION TO EXPAND . . . . . . . . . . . . . 36
SECTION 17.21 WHEN LEASE BECOMES BINDING. . . . . . . . . . . . . 37
SECTION 17.22 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 38
SECTION 17.23 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . 38
RULES AND REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
EXHIBIT A: PLAN showing the Premises
EXHIBIT B: Description of Landlord's Work
EXHIBIT B-1: Construction
EXHIBIT C: Term Commencement Date Agreement
EXHIBIT D: Landlord's Waiver
<PAGE>
LEASE
This instrument is an indenture of lease by and between Thomas J. Flatley
d/b/a The Flatley Company ("Landlord") and Puma Technology, Inc., a Delaware
corporation ("Tenant").
The parties to this instrument hereby agree with each other as follows:
ARTICLE I
SUMMARY OF BASIC LEASE PROVISIONS
1.1 INTRODUCTION
As further supplemented in the balance of this instrument and its
Exhibits, the following sets forth the basic terms of this Lease, and, where
appropriate, constitutes definitions of certain terms used in this Lease.
1.2 BASIC DATA
Date: May 23, 1997
Landlord: Thomas J. Flatley d/b/a
The Flatley Company
Present Mailing Address
of Landlord: 50 Braintree Hill Office Park
Braintree, MA 02184
Payment Address: P.O. Box 850168
Braintree, MA 02185-0168
Tenant: Puma Technology, Inc.
Mailing Address of
Tenant: 240 North First Street
San Jose, CA 95134
Premises: Suite Nos. 1104, 2200, 2201, 2202, 2203 and
2210 located on the first (1st) and second
(2nd) floors of Nashua Office Park, One Tara
Boulevard, Nashua, NH 03062
-2-
<PAGE>
Lease Term: Five (5) years (plus the partial calendar month
immediately following the Term Commencement Date
if the Term Commencement Date does not
fall on the first day of a month).
Term Commencement Date: June 1, 1997
Base Rent: For the first lease year through the second
lease year, at the rate of $177,304.00 per annum
($14,775.33 per month);
For the third lease year through the fourth
lease year, at the rate of $189,284.00 per
annum ($15,773.67 per month); and
For the fifth lease year, at the rate of
$195,273.96 per annum ($16,272.83 per month).
Rent Commencement Date: Shall commence on the Term Commencement Date.
Security Deposit: $14,775.33 of which $2,488.88 is on account.
Permitted Use: General Business Office, and for no other
purpose or purposes.
Tenant's Proportionate
Share: shall be based on the fraction:
Square Footage of TENANT's Premises
-----------------------------------------
Aggregate of All the Rentable Square Footage
(whether or not rented or improved within the entire Building)
Additional Rent: (i) Operating Expense Base: The Operating
Costs for the Building and Lot for Fiscal Year
ending December 1997.
(ii) Real Estate Tax Base: Real Estate Taxes
for the Building and Lot for the City of
Nashua Fiscal Year ending March 31 1998.
Tenant's Insurance
Requirements: Public Liability: ONE MILLION AND 00/100
($1,000,000.00) Dollars for injury to one
person, ONE MILLION AND 00/100 ($1,000,000.00)
Dollars for injury to more than one person,
per incident.
-3-
<PAGE>
Property Damage: ONE MILLION AND 00/100
($1,000,000.00) Dollars per incident.
1.3 ENUMERATION OF EXHIBITS
Exhibit A: Plan showing the Premises.
Exhibit B: Description of Landlord's work.
Exhibit B-1: Work Letter
Exhibit C: Term Commencement Date Agreement
Exhibit D: Landlord's Waiver
ARTICLE II
DESCRIPTION OF PREMISES AND APPURTENANT
RIGHTS
2.1 LOCATION OF PREMISES
The Landlord hereby leases to Tenant, and Tenant hereby accepts from
Landlord, the premises (the "Premises") described as Suite Number 1104 on the
first (1st) floor and Suite Numbers 2200, 2201, 2202, 2203 and 2210 in
"Landlord's building (the "Building") located at Nashua Office Park, One Tara
Boulevard, Nashua, NH 03062, consisting of approximately 11,980 square feet of
space as identified on Exhibit A. Nothing, in Exhibit A shall be treated as a
representation that the Premises or the Building, shall be precisely of the
area, dimensions, or shapes as shown, it being the intention of the parties
only to show diagrammatically, rather than precisely, on Exhibit A the layout
of the Premises and the Building.
2.2 APPURTENANT RIGHTS AND RESERVATIONS
Tenant shall have, as appurtenant to the Premises, rights to use in
common with others entitled thereto the common facilities included in the
Building or the land on which the Building is located (the "Lot"), including
common walkways, driveways, lobbies, hallways, ramps, stairways and elevators,
necessary for access to said Premises and lavatories nearest thereto. Such
rights shall always be subject to reasonable rules and regulations from time
to time established by Landlord by suitable notice, and to the right of
Landlord to designate and to change from time to time the areas and facilities
so to be used, provided that such changes do not unreasonably interfere with
the use of the Premises for the Permitted Use.
-4-
<PAGE>
Not included in the Premises are the roof or ceiling, the floor and all
perimeter walls of the space identified in Exhibit A, except the inner
surfaces thereof and the perimeter doors and windows. The Landlord reserves
the right to install, use, maintain, repair and replace in the Premises (but
in such manner as not unreasonably to interfere with Tenant's use of the
Premises) utility lines, shafts, pipes, and the like, in, over and upon the
Premises, provided that the same are located above the dropped ceiling (or, if
there is no dropped ceiling, then within three (3) feet of the roof deck),
below the floor surfaces or tight against demising walls or columns. Landlord
agrees to repair any damage to the Premises caused by the installation of any
such items. Such utility lines, shafts, pipes and the like shall not be
deemed part of the Premises under this Lease. The Landlord also reserves the
right to alter or relocate any common facility and to change the lines of the
Lot.
ARITCLE III
TERM OF LEASE: CONDITION OF PREMISES
3.1 TERM OF LEASE
The term of this Lease shall be the period specified in Section 1.2
hereof as the "Lease Term" commencing upon the Term Commencement Date
specified in Section 1.2. Promptly upon the determination of the date
constituting the Term Commencement Date, the parties hereto shall enter into a
term commencement date agreement substantially in the form of Exhibit C
attached hereto and made a part hereof.
ARTICLE IV
RENT
4.1 RENT PAYMENTS
The Base Rent (at the rates specified in Section 1.2 hereof) and the
additional rent or other charges payable pursuant to this Lease (collectively
the "Rent") shall be payable by Tenant to Landlord at the Payment Address or
such other place as Landlord may from time to time designate by notice to
Tenant without any demand whatsoever except as otherwise specifically provided
in this Lease and without any counterclaim, offset or deduction whatsoever,
EXCEPT AS PROVIDED HEREIN.
(a) Commencing on the Rent Commencement Date, Base Rent and the monthly
installments of Tenant's Proportionate Share of the Taxes and Tenant's
Proportionate Share of Operating Expenses shall be payable in advance on the
first day of each and every calendar month during the term of this Lease. If
the Rent Commencement Date falls on a day other than the first day of a calendar
month, the first payment which Tenant shall make shall be made on the Rent
Commencement Date and shall be equal to a proportionate part of such monthly
Rent for the partial month from the Rent Commencement Date to the first day of
the succeeding calendar month, and the monthly Rent for such succeeding calendar
month. As used in this Lease, the term "lease year" shall mean any twelve (12)
month period commencing on the Term
-5-
<PAGE>
Commencement Date; provided, however, if the Term Commencement Date does not
fall on the first day of a month, then the term "lease year" shall mean any
twelve month period commencing on the first day of the month immediately
following the Term Commencement Date, in which event the first lease year
shall also include the partial month containing the Term Commencement Date.
(b) Base Rent and the monthly installments of Tenant's Proportionate
Share of the Taxes and Tenant's Proportionate Share of Operating Expenses for
any partial month shall be paid by Tenant to Landlord at such rate on a pro
rata basis. Any other charges payable by Tenant on a monthly basis, as
hereinafter provided, shall likewise be prorated.
(c) Rent not paid when due shall bear interest at a rate (the "Lease
Interest Rate") equal to the lesser of (I) the so-called base rate of interest
charged from time to time by The First National Bank of Boston, N.A., plus TWO
percent (2%) per annum or (ii) the maximum legally permissible rate, from the
due date until paid.
(d) Rent for the first full month of the initial Term for which rent
is due shall be paid by Tenant upon the execution of this Lease.
4.2 REAL ESTATE TAX
(a) The term "Taxes" shall mean all taxes and assessments (including
without limitation, assessments for public improvements or benefits and water
and sewer use charges), and other charges or fees in the nature of taxes for
municipal services which at any time during or in respect of the Lease Term
may be assessed, levied, confirmed or imposed on or in respect of, or be a lien
upon, the Building and the Lot, or any part thereof, or any rent therefrom or
any estate, right, or interest therein, or any occupancy, use, or possession
of such property or any part thereof, and ad valorem taxes for any personal
property used in connection with the Building or Lot. Without limiting the
foregoing, Taxes shall also include any payments made by Landlord in lieu of
taxes. The Landlord agrees that Tenant's share of any special assessment
shall be determined (whether or not Landlord avails itself of the privilege so
to do) as if Landlord had elected to pay the same in installments over the
longest period of time permitted by applicable law and Tenant shall be
responsible only for those installments (including interest accruing and
payable thereon) or parts of installment that are attributable to periods
within the Lease Term.
Should the STATE OF NEW HAMPSHIRE, or any political subdivision thereof,
or any other governmental authority having jurisdiction over the Building, (1)
impose a tax, assessment, charge or fee, which Landlord shall be required to
pay, by way of substitution for or as a supplement to such Taxes, or (2)
impose an income or franchise tax or a tax on rents in substitution for or as
a supplement to a tax levied against the Building or the Lot or any part
thereof and/or the personal property used in connection
-6-
<PAGE>
with the Building or the Lot or any part thereof, all such taxes, assessments,
fees or charges ("Substitute Taxes") shall be deemed to constitute Taxes
hereunder. Taxes shall also include, in the year paid, all fees and costs
incurred by Landlord in seeking to obtain a reduction of, or a limit on the
increase in, any Taxes, BUT ONLY TO THE EXTENT OF reduction or limitation
ACTUALLY obtained. Except as hereinabove provided with regard to Substitute
Taxes, Taxes shall not include any inheritance, estate, succession, transfer,
gift, franchise, net income or capital stock tax.
(b) The Tenant shall pay to Landlord, as additional rent, Tenant's
Proportionate Share of the Taxes assessed against the Building and Lot which
exceeds Tenant's Real Estate Tax Base during any tax year (i.e., April 1 through
March 31) during the Lease Term.
Effective April 1, 1998, Tenant shall pay monthly, at the time when Rent
payments are due hereunder, an amount equal to one-twelfth (1/12th) of the
total of annual Taxes (as estimated by Landlord) due from Tenant to Landlord
pursuant to this Article 4.2(b). Promptly after the determination by any
taxing authority of Taxes upon the Building and Lot for each tax year,
Landlord shall make a determination of the Taxes allocated to the Premises,
and if the aforesaid payments theretofore made for such tax year by Tenant
exceed the Taxes allocated to the Premises, such overpayment shall be credited
against the payments thereafter to be made by Tenant pursuant to this
paragraph; and if the Taxes allocated to the Premises for such tax year are
greater than such payments theretofore made on account for such tax year,
Tenant shall within ten (10) days of written notice from the Landlord make a
suitable payment to Landlord. Xerox copies of tax bills submitted by Landlord
with any such statement shall be conclusive evidence of the amount of Taxes
charged, assessed or imposed. After the full assessment year, the initial
monthly payment on account of the Taxes allocated to the Premises shall be
replaced each year by a payment which is one-twelfth (1/12th) of the Taxes
allocated to the Premises for the immediately preceding tax year.
(c) If any Taxes, with respect to which Tenant shall have paid
Tenant's Proportionate Share, shall be adjusted to take into account any
abatement or refund, Tenant shall be entitled to a credit against rental
obligations hereunder, in the amount of Tenant's Proportionate Share of such
abatement or refund less Landlord's costs or expenses, including without
limitation appraiser's and attorneys' fees, of securing such abatement or
refund or, if the Lease Term has expired and Tenant has no outstanding
monetary obligations to Landlord, Landlord shall promptly pay such amount to
Tenant. The Tenant shall not apply for any real estate tax abatement without
the prior written consent of Landlord.
(d) Tenant shall pay or cause to be paid, prior to delinquency, any
and all taxes and assessments levied upon all trade fixtures, inventories and
other personal property placed in and upon the Premises by Tenant.
-7-
<PAGE>
4.3 TENANT'S SHARE OF OPERATING COSTS
If, in any calendar year of the term of this Lease, Landlord's
Operating Costs exceed the Operating Expense Base, as it relates to all other
changes with the exception of snow removal, which shall be an amount
representative of Landlord's actual snow removal cost over the previous five
(5) year period. Tenant shall after notice as hereinafter provided, pay to
Landlord as additional rent, an amount equal to the product of (a) such
excess multiplied by (b) a fraction involving the same numerator and
denominator as is provided for in Article 1.2, namely Basic Data, of this
Lease.
Effective January 1, 1998, Tenant shall pay monthly, at the time
when Rent payments are due hereunder, an amount equal to one-twelfth (1/12th)
of the total annual Operating Costs (as estimated by Landlord) due from
Tenant to Landlord pursuant to Article 4.3 of this Lease. Promptly after the
end of each calendar year thereafter, Landlord shall make a determination of
Tenant's share of such Operating Costs; and if the aforesaid payments
theretofore made for such period by Tenant exceed Tenant's share, such
overpayment shall be credited against the payments thereafter to be made by
Tenant pursuant to this Paragraph; and if Tenant's share is greater than such
payments theretofore made on account for such period, Tenant shall within
thirty (30) days of written notice from the Landlord make a suitable payment
to Landlord.
The initial monthly payment on account of the Operating Costs shall be
replaced after Landlord's determination of Tenant's share thereof for the
preceding accounting period by a payment which is one-twelfth (1/12th) of
Tenant's actual share thereof for the immediately preceding period, with
adjustments as appropriate where such preceding period is less than a full
twelve-month period. Landlord shall have the same rights and remedies for
non-payment by Tenant of any such amounts due on account of such
Operating Costs as Landlord has hereunder, for the failure of Tenant
to pay rent as provided for in Article 14 of this Lease.
As used in this Lease, the term "Operating Costs" shall mean all
costs and expenses incurred by Landlord in connection with the operation,
insuring, repair, equipping, maintenance, replacement, management and
cleaning (collectively, "the Operation") of the Building, the Building
heating, ventilating, electrical, plumbing, and other systems and the Lot
(collectively, "the Property"), including, without limitation, the following:
(1) All expenses incurred by Landlord or Landlord's agents which
shall be directly related to employment of personnel, including amounts
incurred for wages, salaries and other compensation for services, payroll,
social security, unemployment and similar taxes, worker's compensation
insurance, disability benefits, pensions, hospitalization, retirement plans
and group insurance, uniforms and working clothes and the cleaning thereof,
and expenses imposed on Landlord or Landlord's agents pursuant to any
collective bargaining agreement for the services of employees of Landlord or
Landlord's agents in connection with the Operation of the Property, and its
mechanical systems including, without limitation, day and night supervisors,
property manager, accountants, bookkeepers, janitors, carpenters, engineers,
mechanics,
-8-
<PAGE>
electricians and plumbers and personnel engaged in supervision of any of the
persons mentioned above; provided that, if any such employee is also employed
on other properties of Landlord such compensation shall be suitably prorated
among the Property and such other properties;
(2) The cost of services, materials and supplies furnished or used
in the Operation of the Property, including, without limitation, the cost to
perform Landlord's obligations under Sections 8.2 and 9.1 of this Lease;
(3) The amounts paid to managing agents and for legal and other
professional fees relating to the Operation of the Property, but excluding
such fees paid in connection with (x) negotiations for or the enforcement of
leases; and (y) seeking abatements of Taxes; provided, however, that
management fees shall not exceed prevailing market rates;
(4) Insurance premiums;
(5) Costs for electricity, steam and other utilities required in
the Operation of the Property;
(6) Water and sewer use charges;
(7) The costs of snow-plowing and removal and landscaping;
(8) Amounts paid to independent contractors for services,
materials and supplies furnished for the Operation of the Property;
(9) All other expenses incurred in connection with the Operation
of the Property; and
(10) ONLY THOSE CAPITAL EXPENDITURES MADE TO REDUCE OPERATING
EXPENSES OR WHICH ARE FOR ENERGY CONSERVATION SHALL BE INCLUDED IN OPERATING
EXPENSES PURSUANT TO THIS SECTION.
NOTWITHSTANDING THE FOREGOING, OPERATING COSTS SHALL NOT, HOWEVER, INCLUDE:
(a) EXPENSES IN CONNECTION WITH THE SERVICES OR OTHER BENEFITS OF
A TYPE WHICH ARE NOT PROVIDED TO LESSEE BUT WHAT ARE PROVIDED TO ANOTHER
TENANT OR OCCUPANT.
(b) COSTS INCURRED DUE TO VIOLATION BY LESSOR OR ANY TENANT OF THE
TERMS AND CONDITIONS OF ANY LEASE.
(c) OVERHEAD AND PROFIT INCREMENT PAID TO SUBSIDIARIES OR
AFFILIATES OR LESSOR FOR SERVICES ON OR TO THE REAL PROPERTY TO THE EXTENT
ONLY THAT THE COST OF SUCH SERVICES EXCEEDS COMPETITIVE COSTS OF SUCH
SERVICES WERE THEY NOT SO RENDERED BY A SUBSIDIARY AFFILIATE.
-9-
<PAGE>
(d) LESSOR'S GENERAL OVERHEAD, IF ANY, NOT DIRECTLY CONNECTED WITH
THE OPERATION AND MANAGEMENT OF THE BUILDING.
(e) ANY COMPENSATION PAID TO CLERKS, ATTENDANTS OR OTHER PERSONS
IN COMMERCIAL CONCESSIONS OPERATED BY LESSOR.
(f) ALL ITEMS AND SERVICES FOR WHICH LESSEE IS SEPARATELY CHARGED,
REIMBURSES LESSOR OR PAYS THIRD PERSONS.
(g) ANY FINES OR PENALTIES INCURRED DUE TO VIOLATIONS BY LESSOR OF
ANY GOVERNMENTAL RULE OR AUTHORITY.
(h) ANY COSTS WHATSOEVER RELATED TO LESSOR'S EXPANSION OF THE
BUILDING OR CONSTRUCTION OF NEW IMPROVEMENTS ON THE LAND.
WITH A THIRTY (30) DAY PRIOR WRITTEN NOTICE TO LESSOR, LESSEE SHALL HAVE THE
RIGHT TO AUDIT THE LESSOR'S RECORDS, AT LESSOR'S MAIN OFFICE DURING NORMAL
BUSINESS HOURS, AS THEY RELATE TO THE CHARGES AS CONTAINED UNDER SECTION 4.2,
NAMELY REAL ESTATE TAX AND SECTION 4.3, NAMELY TENANT'S SHARE OF OPERATING
COSTS. ANY ADJUSTMENT TO THE ORIGINAL BILLING AS A RESULT OF SUCH AUDIT,
SHALL BE MADE TO THE NEXT REGULAR RENT PAYMENT HEREUNDER. THIS RIGHT TO
AUDIT DOES NOT EXTEND LESSEE THE RIGHT TO WITHHOLD PAYMENT OF SUCH REAL
ESTATE TAXES OR OPERATING EXPENSES.
LESSOR AGREES TO KEEP BOOKS AND RECORDS SHOWING OPERATING EXPENSES IN
ACCORDANCE WITH A SYSTEM OF ACCOUNTS AND ACCOUNTING PRACTICES WHICH ARE
CONSISTENTLY MAINTAINED ON A YEAR-TO-YEAR BASIS AND IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRACTICES. LESSEE AGREES THAT ALL INFORMATION
GAINED FROM INSPECTIONS OR AUDITS OF SUCH BOOKS AND RECORDS CONDUCTED BY OR
ON BEHALF OF LESSEE SHALL BE CONFIDENTIAL AND SHALL NOT BE DISCLOSED OTHER
THAN TO CARRY OUT THE PURPOSES HEREOF, PROVIDED, HOWEVER, THAT LESSEE SHALL
BE PERMITTED TO DIVULGE SUCH INFORMATION IN CONNECTION WITH ANY
ADMINISTRATIVE OR JUDICIAL PROCEEDING IN WHICH LESSOR IS INVOLVED AND WHERE
LESSEE IS REQUIRED TO DIVULGE SUCH INFORMATION.
ARTICLE V
USE OF PREMISES
5.1 PERMITTED USE
Tenant agrees that the Premises shall be used and occupied by
Tenant only for the purposes specified as the Permitted Use thereof in
Section 1.2 of this Lease, and for no other purpose or purposes.
-10-
<PAGE>
The Tenant shall comply and shall cause its employees, agents, and
invitees to comply with such reasonable rules and regulations as Landlord
shall from time to time establish for the proper regulation of the Building
and the Lot, provided that Landlord gives Tenant reasonable advance notice
thereof and that such additional rules and regulations shall be of general
application to all the tenants in the Building, except where different
circumstances justify different treatment. SUCH RULES AND REGULATIONS SHALL
NOT CONFLICT WITH THE LEASE OR IMPOSE A GREATER BURDEN ON TENANT.
5.2 COMPLIANCE WITH LAWS
Tenant agrees that no trade or occupation shall be conducted in the
Premises or use made thereof which will be unlawful, improper, or contrary to
any law, ordinance, by-law, code, rule, regulation or order applicable in the
municipality in which the Premises are located or which will disturb the
quiet enjoyment of the other tenants of the Building. Tenant shall obtain
any and all approvals, permits, licenses, variances and the like from
governmental or quasi-governmental authorities, including without limitation
any Architectural Access Board and Board of Fire Underwriters (collectively,
"Approvals") which are required for Tenant's use of the Premises, including,
without limitation, any which may be required for any construction work and
installations, alterations, or additions made by Tenant to, in, on, or about
the Premises; provided, however, that Tenant shall not seek or apply for any
Approvals without first having given Landlord a reasonable opportunity to
review any applications for Approvals and all materials and plans to be
submitted in connection therewith and obtaining Landlord's written consent.
In any event, Tenant shall be responsible for all costs, expenses, and fees
in connection with obtaining all Approvals. Tenant's inability to obtain or
delay in obtaining any such Approval shall in no event reduce, delay, or
terminate Tenant's rental, payment, and performance obligations hereunder.
Tenant shall, at its own cost and expense, (i) make all installations,
repairs, alterations, additions, or improvements to the Premises required by
any law, ordinance, by-law, code, rule, regulation or order of any
governmental or quasi-governmental authority DUE TO TENANT'S SPECIFIC USE OR
ALTERATIONS AS OPPOSED TO GENERAL OFFICE USE; (ii) keep the Premises equipped
with all required safety equipment and appliances; and (iii) comply with all
laws, ordinances, codes, rules, regulations, and orders and the requirements
of Landlord's and Tenant's insurers applicable to the Premises, Building and
Lot. Tenant shall not place a load upon any floor in the Premises exceeding
the lesser of (a) the floor load per square foot of area which such floor was
designed to carry as certified by Landlord's architect and (b) the floor load
per square foot of area which is allowed by law. Landlord reserves the right
to prescribe the weight and position of all business machines and mechanical
equipment, including safes, which shall be placed so as to distribute the
weight.
5.3 INSURANCE RISKS
Tenant shall not permit any use of the Premises which will make
voidable or, unless Tenant pays the extra insurance premium attributable
thereto as provided below,
-11-
<PAGE>
increase the premiums for any insurance on the Building or on the contents of
said property or which shall be contrary to any law or regulation from time
to time established by the New England Fire Insurance Rating Association (or
any successor organization) or which shall require any alteration or addition
to the Building. Tenant shall, within thirty (30) days after written demand
therefor, reimburse Landlord and all other tenants for the costs of all extra
insurance premiums caused by Tenant's use of the Premises. Any such amounts
shall be deemed to be additional rent hereunder.
5.4 ELECTRICAL EQUIPMENT
The Tenant shall not, without Landlord's written consent in each
instance, connect to the electrical distribution system any fixtures,
appliances, or equipment which will operate individually or collectively at a
wattage in excess of the capacity of the electrical system serving the
Premises as the same may be reasonably determined by Landlord and Landlord
may audit Tenant's use of electric power to determine Tenant's compliance
herewith. If Landlord, in its sole discretion, permits such excess usage,
Tenant will pay for the cost of such excess power as additional rent,
together with the cost of installing any additional risers, meters, or other
facilities that may be required to furnish or measure such excess power to
the Premises.
5.5 TENANT'S OPERATIONAL COVENANTS
(a) Affirmative Covenants
In regard to the use and occupancy of the Premises, Tenant will at
its expense: (1) keep the inside and outside of all glass in the doors and
windows of the Premises reasonably clean AND FREE OF ANY OBSTRUCTIONS; (2)
UNLESS COVERED BY LANDLORD'S COMPREHENSIVE PUBLIC LIABILITY INSURANCE,
replace promptly any cracked or broken glass of the Premises PROVIDED SUCH
REPLACEMENT IS NECESSARY DUE TO THE NEGLIGENCE OF THE TENANT, ITS AGENTS,
CONTRACTORS OR INVITEES, with glass of like kind and quality; (3) maintain
the Premises in a clean, orderly and sanitary condition and free of insects,
rodents, vermin and other pests; (4) keep any garbage, trash, rubbish or
other refuse in vermin-proof containers within the interior of the Premises
until removed (and Tenant shall cause the Premises to be inspected and
exterminated on a regular basis by a reputable, licensed exterminator and
shall provide Landlord, on request, with a copy of Tenant's contract for such
services); (5) keep all mechanical apparatus OWNED BY TENANT FREE of
vibration and loud noise which may be transmitted beyond the Premises; and
(6) comply with and observe all rules and regulations reasonably established
by Landlord from time to time.
(b) Negative Covenants
In regard to the use and occupancy of the Premises and common
areas, Tenant will not: (7) place or maintain any trash, refuse or other
articles in any vestibule or entry of the Premises, on the sidewalks or
corridors adjacent thereto or elsewhere on the exterior of the Premises so as
to obstruct any corridor, stairway, sidewalk or
-12-
<PAGE>
common area; (8) permit undue accumulations of or burn garbage, trash,
rubbish or other refuse within or without the Premises; (9) cause or permit
objectionable odors to emanate or to be dispelled from the Premises; or (10)
commit, or suffer to be committed, any waste upon the Premises or any public
or private nuisance or other act or thing which may disturb the quiet
enjoyment of any other tenant or occupant of the Building, or use or permit
the use of any portion of the Premises for any unlawful purpose; (11) park
trucks or other vehicles in a manner that will block access to the loading
docks serving the Building.
5.6 SIGNS, BLINDS and DRAPES
Tenant shall not place any signs on the exterior of the Building or
on or in any window, public corridor or door visible from the exterior of the
Premises. No drapes or blinds may be put on or in any window nor may any
Building drapes or blinds be removed by Tenant.
5.7 HAZARDOUS MATERIALS
WITH THE EXCEPTION OF ORDINARY OFFICE SUPPLIES, the Tenant shall not
use, handle, store or dispose of any oil, hazardous or toxic substances,
materials or wastes (collectively "Hazardous Materials") in, under, on or
about the Property except for such storage and use consented to by Landlord
in advance which consent may be withheld in Landlord's sole and absolute
discretion. Any Hazardous Materials in the Premises, and all containers
therefor, shall be used, kept, stored and disposed of in conformity with all
applicable laws, ordinances, codes, rules, regulations and orders of
governmental authorities. If the transportation, storage, use or disposal of
Hazardous Materials anywhere on the Property in connection with Tenant's use
of the Premises results in (1) contamination of the soil or surface or ground
water or (2) loss or damage to person(s) or property, then Tenant agrees (i)
to notify Landlord immediately of any contamination, claim of contamination,
loss or damage, (ii) after consultation with and approval by Landlord, to
clean up all contamination in full compliance with all applicable statutes,
regulations and standards, and (iii) to indemnify, defend and hold Landlord
harmless from and against any claims, suits, causes of action, costs and
fees, including, without limitation, attorneys' fees, arising from or
connected with any such contamination, claim of contamination, loss or
damage. This provision shall survive the termination of this Lease. No
consent or approval of Landlord shall in any way be construed as imposing
upon Landlord any liability for the means, methods, or manner of removal,
containment or other compliance with applicable law for and with respect to
the foregoing. The terms of this Section 5.7 shall apply to any
transportation, storage, use or disposal of Hazardous Materials irrespective
of whether Tenant has obtained Landlord's consent therefor but nothing in
this Lease shall limit or otherwise modify the requirement of obtaining
Landlord's prior consent as set forth in the first sentence of this Section
5.7. LANDLORD REPRESENTS AND WARRANTS TO THE BEST OF ITS KNOWLEDGE THAT AS OF
THE RENT COMMENCEMENT DATE THERE SHALL BE NO HAZARDOUS MATERIALS LOCATED ON,
AT, IN OR UNDER THE PROPERTY AND THAT LANDLORD HAS RECEIVED
-13-
<PAGE>
NO NOTICE OF ANY RELEASE OR THREAT OF RELEASE OF ANY OF ANY HAZARDOUS
MATERIALS ON, AT, IN OR UNDER THE PROPERTY OR NEAR THE PROPERTY. LANDLORD
SHALL INDEMNIFY AND HOLD TENANT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
LOSS, COST, EXPENSE OR DAMAGE RESULTING FROM ANY BREACH BY LANDLORD OF THE
FOREGOING REPRESENTATION AND WARRANTY.
ARTICLE VI
INSTALLATIONS, ALTERATIONS, AND ADDITIONS
6.1 INSTALLATIONS, ALTERNATIONS, AND ADDITIONS
Tenant shall not make structural installations, alterations, or
additions to the Premises, but may make nonstructural installations,
alterations or additions provided that Landlord consents thereto in advance
and in writing. TENANT SHALL HAVE THE RIGHT TO MAKE NONSTRUCTURAL ALTERATIONS
COSTING IN EXCESS OF $15,000.00 WITHOUT FIRST OBTAINING LANDLORD'S PRIOR
WRITTEN CONSENT. In any event, Tenant shall not demolish the existing office
space in the Premises, without the prior written approval of Landlord, which
approval may NOT BE UNREASONABLY withheld OR DELAYED PROVIDED, HOWEVER, THAT
TENANT CONFORMS TO THE STANDARD TYPICAL CONSTRUCTION CRITERIA ESTABLISHED BY
LANDLORD FOR THE BUILDING. In no event shall Landlord's approval of any
proposed installations, alterations, or additions to the Premises, whether in
connection with Tenant's initial leasehold improvements or otherwise,
constitute a representation by Landlord that such work complies with the
requirements of any applicable law or regulation, including without
limitation the requirements of the ADA. Any installations, alterations, or
additions made by Tenant shall be at Tenant's sole cost and expense and shall
be done in a good and workmanlike manner using materials of a quality at
least equivalent to that of the existing improvements and in compliance with
the requirements of Section 5.2; and prior to Tenant's use of the Premises,
after the performance of any such work, Tenant shall procure certificates of
occupancy and any other required certificates. Tenant shall not suffer or
permit any mechanics' or similar liens to be placed upon the Premises for
labor or materials furnished to Tenant or claimed to have been furnished to
Tenant in connection with work of any character performed or claimed to have
been performed at the direction of Tenant, and shall cause any such lien to
be released of record forthwith without cost to Landlord. Any and all Tenant
installations, alterations, and additions, in or to the Premises, that are
intended to become or do become part of the real estate or fixtures therein
(other than trade fixtures that are readily removable without damage to the
Premises) including but not limited to equipment, appliances, and machinery,
shall be fully paid for and free and clear of any and all chattel mortgages,
conditional bills of sale, security interests, or any liens or encumbrances
of any kind or nature. At all times when any installation, alteration, or
addition by Tenant is in progress, there shall be maintained, at Tenant's
cost and expense, insurance meeting the requirements of Section 11.3 below
and certificates of insurance evidencing such coverage shall be furnished to
Landlord prior to the commencement of any such work. Any installations,
alterations or additions made by Tenant to the Premises, including, without
limitation, all utility systems,
-14-
<PAGE>
fixtures, machinery, equipment, and appliances installed in connection
therewith, other than movable personal property, shall become the property of
Landlord at the termination or expiration of this Lease, unless Landlord
requires, at the time of Landlord's approval of such work, Tenant to remove
any of the same, IF NOT TYPICAL OFFICE ALTERATIONS, in which event Tenant
shall, at its own cost and expense, comply with such requirement and repair
any damage caused by such removal.
It is further agreed and understood that at the termination of this
Lease or any extensions thereof, Tenant shall leave the Premises broom clean
and in good repair, order and condition, ORDINARY WEAR AND TEAR EXCEPTED
ARTICLE VII
ASSIGNMENT AND SUBLETTING
7.1 PROHIBITION
Notwithstanding any other provision of this Lease, Tenant shall not,
directly or indirectly, assign, mortgage, pledge or otherwise transfer,
voluntarily or involuntarily, this Lease or any interest herein or sublet
(which term without limitation, shall include granting of concessions,
licenses, and the like) or allow any other person or entity to occupy the
whole or any part of the Premises, without, in each instance, having first
received the express consent of Landlord, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED. Any assignment of this Lease or subletting
of the whole or any part of the Premises (other than as permitted to a
subsidiary or a controlling corporation as set forth below) by Tenant without
Landlord's express consent shall be invalid, void and of no force or effect.
This prohibition includes, without limitation, any assignment, subletting, or
other transfer which would occur by operation of law, merger, consolidation,
reorganization, acquisition, transfer, or other change of Tenant's corporate
or proprietary structure, including a change in the partners of any
partnership, and the sale, pledge, or other transfer of any of the issued or
outstanding capital stock of any corporate Tenant (unless such stock is
publicly traded on a recognized security exchange or over-the-counter
market). Any request for consent under this Section 7.1 shall set forth, in
detail reasonably satisfactory to Landlord, the identification of the
proposed assignee or sublessee, its financial condition and the terms on
which the proposed assignment or subletting is to be made, including, without
limitation, the rent or any other consideration to be paid in respect thereto
and such request shall be treated as Tenant's warranty in respect of the
information submitted therewith.
In any case where Landlord shall consent to any assignment or
subletting, Tenant originally named herein shall remain fully liable for
Tenant obligations hereunder, including, without limitation, the obligation
to pay the rent and other amounts provided under this Lease and such
liability shall not be affected in any way by any future amendment,
modification, or extension of this Lease (BUT SHALL NOT BE INCREASED BY SUCH
FUTURE AMENDMENTS) or any further assignment, other transfer, or subleasing
and Tenant hereby irrevocably consents to any and all such transactions.
-15-
<PAGE>
Tenant agrees to pay to Landlord, within fifteen (15) days of billing
therefor, all reasonable legal and other out-of-pocket expenses UP TO
$1,000.00 incurred by Landlord in connection with any request to assign or
sublet. It shall be a condition of the validity of any permitted assignment
or subletting that the assignee or sublessee agree directly with Landlord, in
form REASONABLY satisfactory to Landlord, to be bound by all Tenant
obligations hereunder, including, without limitation, the obligation to pay
all Rent and other amounts provided for under this Lease and the covenant
against further assignment or other transfer or subletting.
Without limiting Landlord's discretion to grant or withhold its consent
to any proposed assignment or subletting, if Tenant requests Landlord's
consent to assign this Lease or sublet all or any portion of the Premises,
Landlord shall have the option, exercisable by notice to Tenant given within
thirty (30) days after Landlord's receipt of such request, to terminate this
Lease as of the date specified in such notice which shall be not less than
thirty (30) nor more than sixty (60) days after the date of such notice for
the entire Premises, in the case of an assignment or subletting of the whole,
and for the portion of the Premises, in the case of a subletting of a
portion. In the event of termination in respect of a portion of the
Premises, the portion so eliminated shall be delivered to Landlord on the date
specified in good order and condition in the manner provided in Section 8.1
at the end of the Lease Term and thereafter, to the extent necessary in
Landlord's judgment, Landlord, at Tenant's sole cost and expense, may have
access to and may make modification to the Premises so as to make such
portion a self-contained rental unit with access to common areas, elevators
and the like. Rent and Tenant's Proportionate Share shall be adjusted
according to the extent of the Premises for which this Lease is terminated.
Without limitation of the rights of Landlord hereunder in respect thereto, if
there is any assignment of this Lease by Tenant for consideration or a
subletting of the whole of the Premises by Tenant at a rent which exceeds the
rent payable hereunder by Tenant, or if there is a subletting of a portion of
the Premises by Tenant at a rent in excess of the subleased portion's PRO
RATA share of the Rent payable hereunder by Tenant, then Tenant shall pay to
Landlord, as additional rent, forthwith upon Tenant's receipt of the
consideration (or the cash equivalent thereof) therefor, in the case of an
assignment, and in the case of a subletting, FIFTY PERCENT (50%) of the
amount of any such excess rent. The provisions of this paragraph shall apply
to each and every assignment of this Lease and each and every subletting of
all or a portion of the Premises, whether to a subsidiary or controlling
corporation of Tenant or any other person, firm or entity, in each case on
the terms and conditions set forth herein. For the purposes of this Section
7.1, the term "rent" shall mean all rent, additional rent or other payments
and/or consideration payable by one party to another for the use and
occupancy of all or a portion of the Premises.
The requirement of Landlord's prior consent and Landlord's recapture
right shall not, however, be applicable to an assignment of this Lease by
Tenant to a subsidiary (for such period of time as at least 50% of the stock
of such subsidiary continues to be owned by Tenant, it being agreed that the
subsequent sale or transfer of the stock of such subsidiary (either
individually or in the aggregate) resulting in Tenant owning less than 50% of
the stock of such subsidiary shall be treated as if such sale or transfer
were, for all purposes, an assignment of this Lease governed by the provisions
-16-
<PAGE>
of this Section 7.1) or controlling corporation, provided (and it shall be a
condition of the validity of any such assignment) that such subsidiary or
controlling corporation agree directly with Landlord to be bound by all of
the obligations of Tenant hereunder, including, without limitation, the
obligation to pay the rent and other amounts provided for under this Lease,
the covenant to use the Premises only for the purposes specifically permitted
under this Lease and the covenant against further assignment; but such
assignment shall not relieve Tenant herein named of any of its obligations
hereunder, and Tenant shall remain fully liable therefor. Further,
Landlord's consent shall not be required for an assignment of this Lease in
connection with a transfer of substantially all operations of Tenant to
another entity by way of merger, consolidation or sale of substantially all
of the stock therein or assets thereof, provided that at the time of such
assignment such entity has a net worth at least equal to that of Tenant or
any guarantor on the date hereof or on the date of such assignment, whichever
is greater.
7.2 ACCEPTANCE OF RENT FROM TRANSFEREE
The acceptance by Landlord of the payment of Rent, additional rent,
or other charges following assignment, subletting, or other transfer
prohibited by this Article VII shall not be deemed to be a consent by
Landlord to any such assignment, subletting, or other transfer, nor shall the
same constitute a waiver of any right or remedy of Landlord.
ARTICLE VIII
REPAIRS AND MAINTENANCE
8.1 TENANT OBLIGATIONS
From and after the date that possession of the Premises is
delivered to Tenant and until the end of the Lease Term, Tenant shall keep
the Premises and every part thereof in good order, condition, and repair,
reasonable wear and tear and damage by casualty, as a result of condemnation,
or as a result of the failure of Landlord to provide services required to be
provided hereunder only excepted; and shall return the Premises to Landlord
at the expiration or earlier termination of the Lease Term in such condition.
8.2 LANDLORD OBLIGATIONS
Except as may be provided in Articles XII and XIII, Landlord agrees
to keep in good order, condition, and repair the structural components and
the roof of the Building, the common utility and Building systems, the common
hallways, entrances, restrooms and elevators, the paved surface of the
parking areas serving the Building and the sprinkler system to the extent the
same is located outside the Premises (Tenant being responsible for all
portions of the sprinkler system located within the Premises), except that
Tenant shall reimburse Landlord, as additional rent hereunder, for the costs
of maintaining, repairing, or otherwise correcting any condition caused by an
act, omission, neglect or default under this Lease of Tenant or any employee,
agent, or
-17-
<PAGE>
contractor of Tenant or any other party for whose conduct Tenant is
responsible UNLESS COVERED BY LANDLORD'S COMPREHENSIVE PUBLIC LIABILITY
INSURANCE. Without limitation, Landlord shall not be responsible to make any
improvements or repairs other than as expressly provided in this Section 8.2,
and Landlord shall not be liable for any failure to make such repairs unless
Tenant has given notice to Landlord of the need to make such repairs and
Landlord has failed to commence to make such repairs within a reasonable time
thereafter.
ARTICLE IX
SERVICES TO BE FURNISHED BY LANDLORD;
UTILITIES
9.1 LANDLORD'S SERVICES
The Landlord shall provide all Tenant's water and sewer use and
reasonable heating and air-conditioning during the normal heating and cooling
season between the hours of 8:00 A.M. and 6:00 P.M., during normal business
days. The normal cooling season shall be from April 15th to October 1st of
any given year. Normal business days are all days except Saturday, Sunday,
New Year's Day, Memorial Day, July 4th, Labor Day, Thanksgiving Day,
Christmas Day (and the following day when any such day occurs on Sunday) and
such other days as Landlord presently or in the future recognizes as holidays
for Landlord's general office staff. In addition, Landlord agrees to furnish
elevator service and to light passageways and stairways during business
hours, and to furnish such cleaning service as is customary in similar
buildings in said city or town, all subject to interruption due to any
accident, to the making of repairs, alterations or improvements, to labor
difficulties, to trouble in obtaining fuel, electricity, service or supplies
from the sources from which they are usually obtained for said building, or
to causes beyond Landlord's control. If Tenant shall require
air-conditioning, heating or ventilation outside the hours and days above
specified, Landlord shall furnish such service and Tenant shall pay therefor
such charges as may from time to time be in effect. In the event Tenant
introduces into the Premises personnel or equipment which overloads the
capacity of the building system or in any other way interferes with the
system's ability to perform adequately its proper functions, supplementary
systems may if and as needed at Landlord's option, be provided by Landlord,
at Tenant's expense.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IF
DURING THE LEASE TERM THERE IS A LOSS OR INTERFERENCE WITH A BUILDING SYSTEM
AND SUCH LOSS OR INTERFERENCE SHALL MATERIALLY INTERFERE WITH TENANT'S USE OF
THE PREMISES AS CONTEMPLATED BY THIS LEASE, LANDLORD SHALL PROMPTLY RESTORE
SAID BUILDING SYSTEM TO ENABLE TENANT'S USE OF THE PREMISES. IN THE EVENT
THE BUILDING SYSTEM IS NOT RESTORED WITHIN FIVE (5) DAYS FROM THE DATE OF
SUCH LOSS OR INTERFERENCE, A JUST PROPORTION OF THE BASE RENT AND ADDITIONAL
RENT PAYABLE BY TENANT SHALL ABATE, COMMENCING ON THE DATE OF SUCH
INTERRUPTION OR LOSS, BUT SUCH ABATEMENT OR REDUCTION SHALL END WHEN LANDLORD
SHALL HAVE SUBSTANTIALLY RESTORED THE BUILDING SYSTEM.
-18-
<PAGE>
9.2 CAUSES BEYOND CONTROL OF THE LANDLORD
The Landlord shall in no event be liable for failure to perform any
of its obligations under this Lease when prevented from doing so by causes
beyond its reasonable control, including without limitation labor dispute,
breakdown, accident, order or regulation of or by any governmental authority,
or failure of supply, or inability by the exercise of reasonable diligence to
obtain supplies, parts, or employees necessary to furnish services required
under this Lease, or because of war or other emergency, or for any cause due
to any act, neglect, or default of Tenant or Tenant's servants, contractors,
agents, employees, licensees or any person claiming by, through or under
Tenant, and in no event shall Landlord ever be liable to Tenant for any
indirect, special or consequential damages under the provisions of this
Section 9.2 or any other provision of this Lease.
9.3 SEPARATELY METERED UTILITIES
Tenant shall pay directly to the utility, as they become due, all
bills for electricity, gas, water and sewer, and other utilities (whether
they are used for furnishing heat or for other purposes) that are furnished
to the Premises and now or hereafter separately metered or billed by the
utility to the Premises. If any utilities used or consumed by Tenant are not
separately metered, Tenant shall pay its allocable share of such utilities,
based on use, as determined by Landlord. Landlord at Tenant's expense, shall
purchase and install all lamps, tubes, bulbs, starters and ballasts.
ARTICLE X
INDEMNITY
10.1 THE TENANT'S INDEMNITY. The Tenant shall indemnify and save
harmless Landlord, the directors, officers, agents, and employees of
Landlord, against and from all claims, expenses, or liabilities of whatever
nature (a) arising directly or indirectly from any default or breach by
Tenant or Tenant's contractors, licensees, agents, servants, or employees
under any of the terms or covenants of this Lease (including without
limitation any violation of Landlord's Rules and Regulations and any failure
to maintain or repair equipment or installations to be maintained or repaired
by Tenant hereunder) or the failure of Tenant or such persons to comply with
any rule, order, regulation, or lawful direction now or hereafter in force of
any public authority, in each case to the extent the same are related,
directly or indirectly, to the Premises or the Building, or Tenant's use
thereof; or (b) arising directly or indirectly from any accident, injury, or
damage, however caused, to any person or property, on or about the damages;
or (c) arising directly or indirectly from any accident, injury, or damage to
any person or property occurring outside the Premises but within the Building
or on the Lot, where such accident, injury, or damage results, or is claimed
to have resulted, from any act, omission, or negligence on the part of
Tenant, or Tenant's contractors, licensees, agents, servants, employees, or
customers, or anyone claiming by or through Tenant: provided, however, that in
no event shall Tenant be obligated under this clause (c) to indemnify
Landlord, the directors, officers, agents, employees of Landlord, to the
extent such claim, expense, or liability results from any omission, fault,
negligence,
-19-
<PAGE>
or other misconduct of Landlord or the officers, agents, or employees of
Landlord on or about the Premises or the Building.
This indemnity and hold harmless agreement shall include, without
limitation, indemnity against all expenses, attorney's fees and liabilities
incurred in connection with any such claim or proceeding brought thereon and
the defense thereof with counsel reasonably acceptable to Landlord. At the
request of Landlord, Tenant shall defend any such claim or proceeding
directly on behalf and for the benefit of Landlord.
(b) THE LANDLORD'S INDEMNITY. THE LANDLORD SHALL INDEMNIFY AND SAVE
HARMLESS TENANT, THE DIRECTORS, OFFICERS, AGENTS, AND EMPLOYEES OF TENANT,
AGAINST AND FROM ALL CLAIMS, EXPENSES, OR LIABILITIES OF WHATEVER NATURE (A)
ARISING DIRECTLY OR INDIRECTLY FROM ANY DEFAULT OR BREACH BY LANDLORD OR
LANDLORD'S CONTRACTORS, LICENSEES, AGENTS, SERVANTS, OR EMPLOYEES UNDER ANY
OF THE TERMS OR COVENANTS OF THIS LEASE (INCLUDING WITHOUT LIMITATION ANY
FAILURE TO MAINTAIN OR REPAIR EQUIPMENT OR INSTALLATIONS TO BE MAINTAINED OR
REPAIRED BY LANDLORD HEREUNDER) OR THE FAILURE OF LANDLORD OR SUCH PERSONS TO
COMPLY WITH ANY RULE, ORDER, REGULATION, OR LAWFUL DIRECTION NOW OR HEREAFTER
IN FORCE OF ANY PUBLIC AUTHORITY, IN EACH CASE TO THE EXTENT THE SAME ARE
RELATED, DIRECTLY OR INDIRECTLY, TO THE PREMISES OR THE BUILDING, OR
LANDLORD'S USE THEREOF; OR (B) ARISING DIRECTLY OR INDIRECTLY FROM ANY
ACCIDENT, INJURY, OR DAMAGE, HOWEVER CAUSED, TO ANY PERSON OR PROPERTY, ON OR
ABOUT THE PREMISES; OR (C) ARISING DIRECTLY OR INDIRECTLY FROM ANY ACCIDENT,
INJURY, OR DAMAGE TO ANY PERSON OR PROPERTY OCCURRING OUTSIDE THE PREMISES
BUT WITHIN THE BUILDING OR ON THE LOT, WHERE SUCH ACCIDENT, INJURY, OR DAMAGE
RESULTS, OR IS CLAIMED TO HAVE RESULTED, FROM ANY ACT, OMISSION, OR
NEGLIGENCE ON THE PART OF LANDLORD, OR LANDLORD'S CONTRACTORS, LICENSEES,
AGENTS, SERVANTS, EMPLOYEES, OR CUSTOMERS, OR ANYONE CLAIMING BY OR THROUGH
LANDLORD; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL LANDLORD BE OBLIGATED
UNDER THIS SECTION 10.1 (b) TO INDEMNIFY TENANT, THE DIRECTORS, OFFICERS,
AGENTS, EMPLOYEES OF TENANT, TO THE EXTENT SUCH CLAIM, EXPENSE, OR LIABILITY
RESULTS FROM ANY OMISSION, FAULT, NEGLIGENCE, OR OTHER MISCONDUCT OF TENANT OR
THE OFFICERS, AGENTS, OR EMPLOYEES OF TENANT ON OR ABOUT THE PREMISES OR THE
BUILDING.
THIS INDEMNITY AND HOLD HARMLESS AGREEMENT SHALL INCLUDE, WITHOUT
LIMITATION, INDEMNITY AGAINST ALL EXPENSES, ATTORNEY'S FEES AND LIABILITIES
INCURRED IN CONNECTION WITH ANY SUCH CLAIM OR PROCEEDING BROUGHT THEREON AND
THE DEFENSE THEREOF WITH COUNSEL REASONABLY ACCEPTABLE TO TENANT. AT THE
REQUEST OF TENANT, LANDLORD, SHALL DEFEND ANY SUCH CLAIM, OR PROCEEDING
DIRECTLY ON BEHALF AND FOR THE BENEFIT OF TENANT.
10.2 THE TENANT'S RISK
The Tenant agrees to use and occupy the Premises and to use such
other portions of the Building and the Lot as Tenant is herein given the
right to use at Tenant's sole risk; and Landlord shall have no responsibility
or liability for any loss or damage, however caused, to furnishings,
fixtures, equipment, or other personal property of Tenant or of any persons
claiming by, through, or under Tenant.
-20-
<PAGE>
10.3 INJURY CAUSED BY THIRD PARTIES
The Tenant agrees that Landlord shall not be responsible or liable
to Tenant, or to those claiming by, through, or under Tenant, for any loss or
damage resulting to Tenant or those claiming by, through, or under Tenant, or
its or their property, that may be occasioned by or through the acts or
omissions of persons occupying any part of the Building, or for any loss or
damage from the breaking, bursting, crossing, stopping, or leaking of
electric cables and wires, and water, gas, sewer, or steam pipes, or like
matters.
10.4 SECURITY
Tenant agrees that, in all events, Tenant is responsible for
providing security to the Premises and its own personnel.
ARTICLE XI
INSURANCE
11.1 TENANT'S INSURANCE OBLIGATIONS
Tenant shall carry public liability insurance in a company or
companies licensed to do business in the state in which the Premises are
located and reasonably approved by Landlord. Said insurance shall be in
minimum amounts reasonably required by Landlord from time to time by notice
to Tenant and shall name Landlord as an additional insured, as its interests
may appear, and Tenant shall provide Landlord with evidence, when requested,
that such insurance is in full force and effect. Tenant shall carry property
damage insurance for all of its equipment and for all leasehold improvements
above the building standard which are made by Landlord or Tenant in and to
the Premises, which policies shall name Landlord as an additional insured.
If required by Landlord, receipts evidencing payment for said insurance shall
be delivered to Landlord at least annually by Tenant and each policy shall
contain an endorsement that will prohibit its cancellation or amendment prior
to the expiration of thirty (30) days after notice of such proposed
cancellation or amendment to Landlord. Tenant shall carry insurance in the
initial amounts listed in the Basic Data and shall provide Landlord with
certificates of such Tenant Insurance Requirements on or prior to the
Commencement Date.
11.2 CONSTRUCTION PERIOD INSURANCE
At any time when demolition or construction work is being performed
on or about the Premises or Building by or on behalf of Tenant, the Tenant
shall keep in full force and effect the following insurance coverage in each
instance with policies reasonably acceptable to Landlord, including, without
limitation, the amount of any deductible thereunder:
-21-
<PAGE>
(1) builder's risk completed value (non-reporting form) in such
form and affording such protections as required by Landlord, naming landlord
and its mortgagees as additional insureds; and
(2) workers' compensation or similar insurance in form and amounts
required by law.
Tenant shall cause a certificate or certificates of such insurance
to be delivered to Landlord prior to the commencement of any work in or about
the Building or the Premises, in default of which Landlord shall have the
right, but not the obligation, to obtain any or all such insurance at the
expense of Tenant, in addition to any other right or remedy of Landlord. The
provisions of this Section 11.3 shall survive the expiration or earlier
termination of this Lease.
11.3 WAIVER OF SUBROGATION
Tenant and Landlord each hereby release the other to the extent of
their respective insurance coverage, from any and all liability for any loss
or damage caused by fire or any of the extended coverage casualties or any
other casualty insured against, even if such fire or other casualty shall be
brought about by the fault or negligence of Tenant, Landlord or their agents.
Tenant and Landlord agree that their respective policies covering such loss
or damage shall contain a clause to the effect that this release shall not
affect said policies or the right of Tenant or Landlord, as the case may be,
to recover thereunder and otherwise acknowledging this mutual waiver of
subrogation.
ARTICLE XII
CASUALTY
12.1 DEFINITION OF "SUBSTANTIAL DAMAGE" AND "PARTIAL DAMAGE"
The term "substantial damage," as used herein, shall refer to
damage which is of such a character that in Landlord's reasonable, good faith
estimate the same cannot, in ordinary course, be expected to be repaired
within 90 calendar days from the time that such repair work would commence.
Any damage which is not "substantial damage" is "partial damage."
12.2 PARTIAL DAMAGE TO THE BUILDING
If during the Lease Term there shall be partial damage to the
Building by fire or other casualty and if such damage shall materially
interfere with Tenant's use of the Premises as contemplated by this Lease,
Landlord shall promptly proceed to restore the Building to substantially the
condition in which it was immediately prior to the occurrence of such damage.
-22-
<PAGE>
12.3 SUBSTANTIAL DAMAGE TO THE BUILDING
If during the Lease Term there shall be substantial damage to the
Building by fire or other casualty and if such damage shall materially
interfere with Tenant's use of the Premises as contemplated by this Lease,
Landlord shall promptly restore the Building to the extent reasonably
necessary to enable Tenant's use of the Premises, unless Landlord, within
ninety (90) days after the occurrence of such damage, shall give notice to
ALL OF THE TENANTS OF THE BUILDING of Landlord's election to terminate ALL
TENANTS LEASES WITHIN THE BUILDING. The Landlord shall have the right to
make such election in the event of substantial damage to the Building whether
or not such damage materially interferes with Tenant's use of the Premises.
If Landlord shall give such notice, then this Lease shall terminate as of the
date of such notice with the same force and effect as if such date were the
date originally established as the expiration date hereof. If Landlord has
not restored the Premises to the extent required under this Section 12.3
within nine (9) months after the date of such damage or destruction, such
nine-month period to be extended to the extent of any delays of the
completion of such restoration due to matters beyond Landlord's reasonable
control, or if the Premises shall be substantially damaged during the last
nine (9) months of the Lease Term then, in either such case, Tenant may elect
to terminate this Lease by giving written notice of such election to Landlord
within thirty (30) days after the end of such nine-month period and before
the substantial completion of such restoration. If Tenant so elects to
terminate this Lease, then this Lease and the term hereof shall cease and
come to an end on the date that is thirty (30) days after the date that
Landlord receives Tenant's termination notice, unless on or before such date
Landlord has substantially completed such restoration.
12.4 ABATEMENT OF RENT
If during the Lease Term the Building shall be damaged by fire or
casualty and if such damage shall materially interfere with Tenant's use of
the Premises as contemplated by this Lease, a just proportion of the Base
Rent payable by Tenant hereunder shall abate proportionately for the period
in which, by reason of such damage, there is such interference with Tenant's
use of the Premises, having regard to the extent to which Tenant may be
required to discontinue Tenant's use of the Premises, but such abatement or
reduction shall end if and when Landlord shall have substantially restored
the Premises or so much thereof as shall have been originally constructed by
Landlord (exclusive of any of Tenant's fixtures, furnishings, equipment and
the like or work performed therein by Tenant) to substantially the condition
in which the Premises were prior to such damage.
12.5 MISCELLANEOUS
In no event shall Landlord have any obligation to make any repairs or
perform any restoration work under this Article XII if prevented from doing so
by reason of any cause beyond its reasonable control, including, without
limitation, the requirements
-23-
<PAGE>
of any applicable laws, codes, ordinances, rules, or regulations, the refusal
of the holder of a mortgage or ground lease affecting the premises to make
available to Landlord the net insurance proceeds attributable to such
restoration, or the inadequacy of such proceeds to fund the full cost of such
repairs or restoration, but reasonably promptly after Landlord ascertains the
existence of any such cause, it shall either terminate this Lease or waive such
condition to its restoration obligations and proceed to restore the Premises
as otherwise provided herein. Further, Landlord shall not be obligated in
any event to make any repairs or perform any restoration work EXCEPT FOR
DAMAGE CAUSED BY NEGLIGENCE OF LANDLORD, ITS AGENTS OR CONTRACTORS, to any
alterations, additions, or improvements to the Premises performed by or for
the benefit of Tenant or to any fixtures in or portions of the Premises or
the Building which were constructed or installed by or for some party other
than Landlord or which are not the property of Landlord.
ARTICLE XIII
EMINENT DOMAIN
13.1 RIGHTS OF TERMINATION FOR TAKING
If the Premises, or such portion thereof as to render the balance
(if reconstructed to the maximum extent practicable in the circumstances)
physically unsuitable for Tenant's purposes, shall be taken (including a
temporary taking in excess of 180 days) by condemnation or right of eminent
domain or sold in lieu of condemnation, Landlord or Tenant may elect to
terminate this Lease by giving notice to the other of such election not later
than thirty (30) days after Tenant has been deprived of possession.
Further, if so much of the Building (which may include the
Premises) or the Lot shall be so taken, condemned or sold or shall receive
any direct or consequential damage by reason of anything done pursuant to
public or quasi-public authority such that continued operation of the same
would, in Landlord's opinion, be uneconomical, Landlord may elect to
terminate this Lease by giving notice to Tenant of such election not later
than thirty (30) days after the effective date of such taking.
Should any part of the Premises be so taken or condemned or receive
such damage and should this Lease be not terminated in accordance with the
foregoing provisions, Landlord shall promptly after the determination of
Landlord's award on account thereof, expend so much as may be necessary of
the net amount which may be awarded to Landlord in such condemnation
proceedings in restoring the Premises to an architectural unit that is
reasonably suitable to the uses of Tenant permitted hereunder. Should the
net amount so awarded to Landlord be insufficient to cover the cost of so
restoring the Premises, in the reasonable estimate of Landlord, Landlord may,
but shall have no obligation to, supply the amount of such insufficiency and
restore the Premises to such an architectural unit, with all reasonable
diligence, or Landlord may terminate this Lease by giving notice to Tenant
within a reasonable time after Landlord has determined the estimated cost of
such restoration.
-24-
<PAGE>
13.2 PAYMENT OF AWARD
The Landlord shall have and hereby reserves and excepts, and Tenant
hereby grants and assigns to Landlord, all rights to recover for damages to
the Building and the Lot and the leasehold interest hereby created, and to
compensation accrued or hereafter to accrue by reason of such taking or
damage, as aforesaid. The Tenant covenants to deliver such further
assignments and assurances thereof as Landlord may from time to time request.
Nothing contained herein shall be construed to prevent Tenant from
prosecuting in any condemnation proceedings a claim for the value of any of
Tenant's trade fixtures installed in the Premises by Tenant at Tenant's
expense and for relocation expenses, provided that such action shall not
affect the amount of compensation otherwise recoverable hereunder by Landlord
from the taking authority.
13.3 ABATEMENT OF RENT
In the event of any such taking of the Premises, the Base Rent or a
fair and just proportion thereof, according to the nature and extent of the
damage sustained, shall be suspended or abated, as appropriate and equitable
in the circumstances.
13.4 MISCELLANEOUS
In no event shall Landlord have any obligation to make any repairs
under this Article XIII if prevented from doing so by reason of any cause
beyond its reasonable control, including, without limitation, requirements of
any applicable laws, codes, ordinances, rules, or regulations or requirements
of any mortgagee. Further, Landlord shall not be obligated to make any
repairs to any portions of the Premises or the Building which were
constructed or installed by or for some party other than Landlord or which
are not the property of Landlord, and Tenant shall be obligated to perform
any repairs on and restorations to any alterations, additions, or
improvements to the Premises performed by or for the benefit of Tenant.
ARTICLE XIV
14.1 TENANT'S DEFAULT
(a) EVENTS OF DEFAULT. The following shall be "Events of Default"
under this Lease:
(i) If Tenant shall fail to pay any monthly installment of Rent when
due, and such default shall continue for five (5) days after written
notice from Landlord; provided that no such notice shall be required
if Tenant has received a similar notice within three hundred
sixty-five (365) days prior to such violation or failure;
-25-
<PAGE>
(ii) If Tenant shall fail to timely make any other payment
required under this Lease and such default shall continue for five
(5) days after written note from Landlord; provided that no such
notice shall be required if Tenant has received a similar notice
within three hundred sixty-five (365) days prior to such violation
or failure;
(iii) If Tenant shall violate or fail to perform any of the
other terms, conditions, covenants or agreements herein made by
Tenant, if such violation or failure continues for a period of thirty
(30) days after Landlord's written notice thereof to Tenant; provided
that no such notice shall be required if Tenant has received a
similar notice within three hundred sixty-five (365) days prior to
such violation or failure;
(iv) Tenant's becoming insolvent, as that term is defined
in Title 11 of the United States Code, entitled Bankruptcy, 11
U.S.C. Section 101 et. seq. (the "Bankruptcy Code"), or under the
insolvency laws of any State, District, Commonwealth or Territory of
the United States (the "Insolvency Laws");
(v) the appointment of a receiver or custodian for all or
a substantial portion of Tenant's property or assets, or the
institution of a foreclosure action upon all or a substantial portion
of Tenant's real or personal property;
(vi) the filing of a voluntary petition under the
provisions of the Bankruptcy Code or Insolvency Laws;
(vii) the filing of an involuntary petition against Tenant
as the subject debtor under the Bankruptcy Code or Insolvency Laws,
which is either not dismissed within forty-five (45) days of filing,
or results in the issuance of an order for relief against the debtor,
whichever is earlier;
(viii) Tenant's making or consenting to an assignment for the
benefit of creditors or a common law composition of creditors; or
(ix) Tenant's interest in this Lease being taken on
execution in any action against the Tenant.
(b) LANDLORD'S REMEDIES. Should an Event of Default occur under
this Lease, Landlord may pursue any or all of the following remedies:
(i) TERMINATION OF LEASE. Landlord may terminate this Lease by
giving written notice of such termination to Tenant, or by
reentry, whereupon the mailing of such notice of termination
addressed to Tenant, or in the case of reentry, upon such
reentry, with or without notice or demand and with process of law
(forcibly if necessary), this Lease shall automatically cease and
terminate and Tenant shall be immediately obligated to quit the
Premises. Termination by entry or notice as provided herein shall
be effective and complete upon entry or the mailing of notice,
respectively, and shall require no further action on the
-26-
<PAGE>
part of Landlord including, without limitation, resort to legal process under
applicable law. Any other notice to quit or notice of Landlord's intention to
reenter the Premises is hereby expressly waived. If Landlord elects to
terminate this Lease, everything contained in this Lease on the part of Landlord
to be done and performed shall cease without prejudice, subject, however, to the
right of Landlord to recover from Tenant all Annual Rent and Additional Rent and
any other sums accrued up to the time of termination or recovery of possession
by Landlord, whichever is later.
(ii) SUIT FOR POSSESSION. Landlord may proceed to recover possession
of the Premises under and by virtue of the provisions of the laws of the state
in which the Premises are located or by such other proceedings, including
reentry and possession, as may be applicable.
(iii) RELETTING OF PREMISES. Should this Lease be terminated
before the expiration of the Tenn of this Lease by reason of Tenant's default
as hereinabove provided, or if Tenant shall abandon or vacate the Premises
before the expiration or termination of the Term of this Lease without having
paid the full rental for the remainder of such Term, Landlord shall have the
option, but not the obligation, to relet the Premises for such rent and upon
such terms as are not unreasonable under the circumstances, and, if the full
Annual Rent and Additional Rent reserved under this Lease, BUT IN NO EVENT
MORE THAN THE ACCELERATED REMAINING RENT AND COST TO RELET (and any of the
costs, expenses or damages indicated below) shall not be realized by
Landlord, Tenant shall be liable for all damages sustained by Landlord,
including, without limitation, deficiency in rent, reasonable attorneys'
fees, brokerage fees and expenses of placing the Premises in first-class
rentable condition including without limitation any alterations and
improvements. Landlord, in putting the Premises in good order or preparing
the same for rerental may, at Landlord's option, make such alterations,
repairs or replacements in the Premises as Landlord, in its sole judgment,
considers advisable and necessary for the purpose of reletting the Premises,
and the making of such alterations, repairs, or replacements shall not
operate or be construed to release Tenant from liability hereunder as
aforesaid. Landlord shall in no event be liable in any way whatsoever for
failure to relet the Premises, or in the event that the Premises are relet,
for failure to collect the rent under such reletting, and in no event shall
Tenant be entitled to receive the excess, if any, of such net rent collected
over the sums payable by Tenant to Landlord hereunder.
(iv) ACCELERATION OF PAYMENT. If Tenant shall fail to pay any
monthly installment of Rent pursuant to the terms of this Lease, within five
(5) days of the date when each such payment is due, for three (3) consecutive
months, or three (3) times in any period of twelve (12) consecutive months,
then Landlord may, by giving written notice to Tenant, exercise any of the
following options: (A) declare the entire rent reserved under this Lease to be
due and payable within ten (10) days of such notice; (B) declare the rent
reserved under this Lease for the next six (6) months (or at Landlord's
option for a lesser period) to
-27-
<PAGE>
be due and payable within ten (10) days of such notice; or (C)
require an additional security deposit to be paid to Landlord
within ten (10) days of such notice in an amount not to exceed six
(6) months rent. Landlord may invoke any of the options provided
for herein at any time during which an Event of Default remains
uncured.
(v) MONETARY DAMAGES. Any damage or loss of rent sustained
by Landlord may be recovered by Landlord, at Landlord's option, at
the time of the reletting, or in separate actions, from time to
time, as said damage shall have been made more easily
ascertainable by successive relettings, or at Landlord's option in
a single proceeding deferred until the expiration of the Term of
this Lease (in which event Tenant hereby agrees that the cause of
action shall not be deemed to have accrued until the date of
expiration of said Term) or in a single proceeding prior to either
the time or relenting or the expiration of the Tenn of this Lease.
In addition, should it be necessary for Landlord to employ legal
counsel to enforce any of the provisions herein contained, Tenant
agrees to pay all attorney's fees and court costs reasonably
incurred.
(vi) ANTICIPATORY BREACH; CUMULATIVE REMEDIES. Nothing
contained herein shall prevent the enforcement of any claim
Landlord may have against Tenant for anticipatory breach of the
unexpired Term of this Lease. In the event of a breach or
anticipatory breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity as
if reentry, summary proceedings and other remedies were not
provided for herein. Mention in this Lease of any particular
remedy shall not preclude Landlord from any other remedy, in law
or in equity, whether or not mentioned herein. Landlord's
election to pursue one or more remedies, whether as set forth
herein or otherwise, shall not bar Landlord from seeking any other
or additional remedies at any time and in no event shall Landlord
ever be deemed to have elected one or more remedies to the
exclusion of any other remedy or remedies. Any and all rights and
remedies that Landlord may have under this Lease, and at law and
in equity, shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such
rights and remedies may be exercised at the same time insofar as
permitted by law. Tenant hereby expressly waives any and all
rights of redemption granted by or under any present or future
laws in the event of Tenant being evicted or dispossessed for any
cause, or in the event of Landlord obtaining possession of the
Premises, by reason of the violation by Tenant of any of the
covenants and conditions of this Lease, or otherwise.
(c) WAIVER. If, under the provisions hereof, Landlord shall
institute proceedings against Tenant and a compromise or settlement thereof
shall be made, the same shall not constitute a waiver of any other covenant,
condition or agreement herein contained, nor of any of Landlord's rights
hereunder. No waiver by Landlord of any breach of any covenant, condition or
agreement herein contained shall operate as a waiver of such covenant,
condition, or agreement itself, or of any subsequent breach thereof. No
payment by Tenant or receipt by Landlord of a lesser amount than the
-28-
<PAGE>
monthly installments of rent herein stipulated shall be deemed to be other
than on account of the earliest stipulated rent, nor shall any endorsement or
statement on any check or letter accompanying a check for payment of Rent or
any other sum 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 any other sum or so pursue any other remedy provided
in this Lease. No reentry by Landlord, and no acceptance by Landlord of keys
from Tenant, shall be considered an acceptance of a surrender of the Lease or
Premises.
(d) RIGHT OF LANDLORD TO CURE TENANT'S DEFAULT. If Tenant defaults
in the making of any payment or in the doing of any act herein required to be
made or done by Tenant, then Landlord may, but shall not be required to, make
such payment or do such act, and charge the amount of the expense thereof, if
made or done by Landlord, with interest thereon at the rate per annum which
is TWO percent (2%) greater than the "base-lending rate" then in effect at
The First National Bank of Boston, Boston, Massachusetts, or the highest rate
permitted by law, whichever may be less; with it being the express intent of
the parties that nothing herein contained shall be construed or implemented
in such a manner as to allow Landlord to charge or receive interest in excess
of the maximum legal rate then allowed by law. Such payment and interest
shall constitute Additional Rent hereunder due and payable with the next
monthly installment of Rent; but the making of such payment or the taking of
such action by Landlord shall not operate to cure such default or to stop
Landlord from the pursuit of any remedy to which Landlord would otherwise be
entitled.
(e) LATE PAYMENT. If Tenant fails to pay any installment of Rent
WITHIN FIVE (5) DAYS AFTER WRITTEN NOTICE FROM LANDLORD THAT such installment
becomes due and payable, Tenant shall pay to Landlord a late charge of five
percent (5%) of the amount of such installment, and, in addition, such unpaid
installment shall bear interest at the rate per annum which is TWO percent
(2%) greater than the "base lending rate" then in effect at The First
National Bank of Boston, Boston, Massachusetts, or the highest rate permitted
by law, whichever may be less; with it being the express intent of the
parties that nothing herein contained shall be construed or implemented in
such manner as to allow Landlord to charge or receive interest in excess of
the maximum legal rate then allowed by law. Such late charge and interest
shall constitute Additional Rent hereunder due and payable with the next
monthly installment of Rent due, or if payments have been accelerated
pursuant to this Article 14, due and payable immediately.
(f) LIEN ON PERSONAL PROPERTY. LANDLORD EXPRESSLY WAIVES ITS
STATUTORY OR COMMON LAW LANDLORD'S LIEN AND ANY AND ALL RIGHTS GRANTED UNDER
ANY PRESENT OR FUTURE LAWS TO LEVY OR DISTRAIN FOR RENT (WHETHER IN ARREARS
OR IN ADVANCE) AGAINST THE AFORESAID PROPERTY OF TENANT ON THE PREMISES AND
FURTHER AGREES TO EXECUTE ANY REASONABLE INSTRUMENTS EVIDENCING SUCH WAIVER,
AT ANY TIME OR TIMES HEREAFTER UPON TENANT'S REQUEST IN THE FORM OF EXHIBIT
"D" ATTACHED HERETO.
-29-
<PAGE>
ARTICLE XV
THE LANDLORD'S ACCESS TO PREMISES
15.1 THE LANDLORD'S RIGHT OF ACCESS
The Landlord and its agents, contractors, and employees shall have
the right to enter the Premises at all reasonable hours upon reasonable
advance notice AND ACCOMPANIED BY A REPRESENTATIVE OF TENANT or any time in
case of emergency, for the purpose of inspecting or of making repairs or
alterations, to the Premises or the Building or additions to the Building,
and Landlord shall also have the right to make access available at all
reasonable hours UPON REASONABLE ADVANCE NOTICE to prospective or existing
mortgagees or purchasers of any part of the Building.
For a period commencing twelve (12) months prior to the expiration
of the Lease Term, Landlord may have reasonable access to the Premises at all
reasonable hours UPON REASONABLE ADVANCE NOTICE for the purpose of exhibiting
the same to prospective tenants.
ARTICLE XVI
16.1 SUBORDINATION
Upon the written request of Landlord, Tenant shall enter into a
recordable agreement IN A COMMERCIALLY REASONABLE FORM with the holder of any
present or future mortgage of the Premises, Building or Lot which shall
provide that (i) this Lease shall be subordinated to such mortgage, (ii) in
the event of foreclosure of said mortgage or any other action thereunder by
the mortgagee, the mortgagee (and its successors in interest) and Tenant shall
be directly bound to each other to perform the respective undischarged
obligations of Landlord and Tenant hereunder (in the case of Landlord
accruing after such foreclosure or other action and in the case of Tenant
whether accruing before or after such foreclosure or other action), (iii)
this Lease shall continue in full force and effect, and (iv) Tenant's rights
hereunder shall not be disturbed, except as in this Lease provided. The word
"mortgage" as used herein includes mortgages, deeds of trust and all similar
instruments, all modifications, extensions, renewals and replacements
thereof, and any and all assignments of the Landlord's interest in this Lease
given as collateral security for any obligation of Landlord.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 CAPTIONS
The captions throughout this Lease are for convenience or reference
only and shall in no way be held or deemed to define, limit, explain,
describe, modify, or add to the interpretation, construction, or meaning of
any provision of this Lease.
-30-
<PAGE>
17.2 NO ACCORD AND SATISFACTION
No acceptance by Landlord of a lesser sum than the minimum and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be
deemed to be an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of
such installment or pursue any other remedy in this Lease or at law or in
equity provided.
17.3 CUMULATIVE REMEDIES
The specific remedies to which Landlord may resort under the terms
of this Lease are cumulative and not intended to be exclusive of any other
remedies or means of redress to which it may be lawfully entitled in case of
any breach or threatened breach by Tenant of any provisions of this Lease.
In addition to the other remedies provided in this Lease, Landlord shall be
entitled to the restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of
this Lease or to a decree compelling specific performance of any such
covenants, conditions or provisions. Except as otherwise set forth herein,
any obligations of Tenant as set forth herein (including, without limitation,
rental and other monetary obligations, repair obligations and obligations to
indemnify Landlord) shall survive the expiration or earlier termination of
this Lease, and Tenant shall immediately reimburse Landlord for any expense
incurred by Landlord in curing Tenant's failure to satisfy any such
obligation (notwithstanding the fact that such cure might be effected by
Landlord following the expiration or earlier termination of this Lease).
17.4 LANDLORD'S RIGHT TO CURE
If Tenant shall at any time default in the performance of any
obligation under this Lease, Landlord shall have the right, but not the
obligation, to enter upon the Premises, and/or to perform such obligation,
notwithstanding the fact that no specific provision for such substituted
performance by Landlord is made in this Lease with respect to such default.
In performing any such obligations, Landlord may make any payment of money or
perform any other act. All sums so paid by Landlord (together with interest
at the Lease Interest Rate) and all necessary incidental costs and expenses
in connection with the performance of any such act by Landlord, shall be deemed
to be additional rent under this Lease and shall be payable to Landlord
immediately on demand. Landlord may exercise the foregoing rights without
waiving any other of its rights or releasing Tenant from any of its
obligations under this Lease.
17.5 BROKERAGE
Tenant warrants that there are no claims for broker's commission or
finder's fees in connection with its execution of this Lease or the tenancy
hereby created and
-31-
<PAGE>
agrees to indemnify and save Landlord harmless from any liability that may
arise from such claim, including reasonable attorneys fees.
17.6 HOLDOVER
If Tenant remains in the Premises after the termination of this
Lease, by its own terms or for any other reason, such holding over shall not
be deemed to create any tenancy, but Tenant shall be a tenant at sufferance
only, at a daily rate equal to ONE HUNDRED FIFTY PERCENT (150%) the Rent
applicable immediately prior to such termination plus the then applicable
additional rent and other charges under this Lease. Tenant shall also pay to
Landlord all damages, direct or indirect, sustained by Landlord by reason of
any such holding over. Otherwise, such holding over shall be on the terms and
conditions set forth in this Lease as far as applicable.
17.7 COUNTERPARTS
This Lease is executed in any number of counterparts, each copy of
which is identical, and any one of which shall be deemed to be complete in
itself and may be introduced in evidence or used for any purpose without the
production of the other copies.
17.8 CONSTRUCTION AND GRAMMATICAL USAGE
This Lease shall be governed, construed and interpreted in
accordance with the laws of THE STATE OF NEW HAMPSHIRE, and Tenant agrees to
submit to the personal jurisdiction of any court (federal or state) in said
STATE for any dispute, claim or proceeding arising out of or relating to this
Lease. In construing this Lease, feminine or neuter pronouns shall be
substituted for those masculine in form and vice versa, and plural terms
shall be substituted for singular and singular for plural in any place in
which the context so admits or requires. If there be more than one party
tenant, the covenants of Tenant shall be the joint and several obligations of
each such party and, if Tenant is a partnership, the covenants of Tenant
shall be the joint and several obligations of each of the partners and the
obligations of the firm.
17.9 SECURITY DEPOSIT
Tenant has deposited with Landlord the Security Deposit as security
for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this Lease. It is agreed that in the event
Tenant defaults in respect of any of the terms, provisions and conditions of
this Lease, Landlord may use, apply or retain the whole or any part of the
Security Deposit to the extent required for payment of any Rent or any other
sum as to which Tenant is in default or for any sum which Landlord may expend
or may be required to expend by reason of Tenant's default in respect of any
of the terms, covenants and conditions of this Lease, including but not
limited to any damage or deficiency accrued before or after summary
proceedings or other reentry by Landlord, including the costs of such
proceeding or reentry and further including, without limitation, reasonable
attorney's fees. It is agreed that Landlord shall always
-32-
<PAGE>
have the right to apply the Security Deposit, or any part thereof, as
aforesaid, WITH ADVANCE notice and without prejudice to any other remedy or
remedies which Landlord may have, or Landlord may pursue any other such
remedy or remedies in lieu of applying the Security Deposit or any part
thereof. No interest shall be payable on the Security Deposit. If Landlord
shall use, apply or retain the Security Deposit in whole or in part and the
Lease continues or Tenant's occupancy continues in the Premises, Tenant shall
within ten (10) days after written notice from the Landlord make such further
or other deposit of monies as may be necessary to bring the balance of the
deposit to $14,775.33. In the event that Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
Lease, the Security Deposit shall be returned to Tenant within FORTY-FIVE
(45) days after the date fixed as the end of the Lease and after delivery of
entire possession of the Premises to Landlord in accordance with the terms of
this Lease. In the event of a sale or other transfer of the Building, or
leasing of the entire Building including the Premises subject to Tenant's
tenancy hereunder, Landlord shall transfer the Security Deposit then
remaining to the vendee or lessee and Landlord shall thereupon be released
from all liability for the return of such Security Deposit to Tenant; and
Tenant agrees to look solely to the new Landlord for the return of said
Security Deposit then remaining. The holder of any mortgage upon the
Building or Lot shall never be responsible to Tenant for the Security Deposit
or its application or return unless the Security Deposit shall actually have
been received in hand by such holder. Tenant further covenants that it will
not assign or encumber or attempt to assign or encumber the Security Deposit
and that neither Landlord nor its successors or assigns shall be bound by any
such assignment, encumbrance, attempted assignment or attempted encumbrance.
17.10 LANDLORD'S ENFORCEMENT EXPENSES
Unless prohibited by applicable law, the Tenant agrees to pay to the
Landlord the amount of all fees and expenses (including, without limitation,
attorneys' fees and costs) incurred by the Landlord arising out of or resulting
from any act or omission by the Tenant with respect to this Lease or the
Premises, including without limitation, any breach by the Tenant of its
obligations hereunder, irrespective of whether Landlord resorts to litigation as
a result thereof.
17.11 TENANTS'S ENFORCEMENT EXPENSES
UNLESS PROHIBITED BY APPLICABLE LAW, THE LANDLORD AGREES TO PAY TO THE
TENANT THE AMOUNT OF ALL FEES AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES AND COSTS) INCURRED BY THE TENANT ARISING OUT OF OR RESULTING
FROM ANY ACT OR OMISSION BY THE LANDLORD WITH RESPECT TO THIS LEASE OR THE
PREMISES, INCLUDING WITHOUT LIMITATION, ANY BREACH BY THE LANDLORD OF ITS
OBLIGATIONS HEREUNDER, IRRESPECTIVE OF WHETHER TENANT RESORTS TO LITIGATION AS A
RESULT THEREOF.
-33-
<PAGE>
17.12 NO SURRENDER
The delivery of keys to any employee of Landlord or to Landlord's
agents or employees shall not operate as a termination of this Lease or a
surrender of the Premises.
17.13 COVENANT OF QUIET ENJOYMENT
Subject to the terms and provisions of this Lease and on payment of
the Rent, additional rent, and other sums due hereunder and compliance with
all of the terms and provisions of this Lease, Tenant shall lawfully,
peaceably, and quietly have, hold, occupy, and enjoy the Premises during the
term hereof, without hindrance or ejection by Landlord or by any persons
claiming under Landlord; the foregoing covenant of quiet enjoyment is in lieu
of any other covenant, express or implied.
17.14 NO PERSONAL LIABILITY OF THE LANDLORD
It is specifically agreed that the obligations of Landlord under
this Lease do not constitute personal obligations of Landlord and that Tenant
shall not seek recourse against the personal assets of Landlord for
satisfaction of any liability with respect to this Lease.
17.15 NOTICES
Any notice or consent required to be given by or on behalf of
either party to the other shall be in writing and shall be given by mailing
such notice or consent as set forth in Article 1.2 of this Lease, addressed,
if to Landlord, at the address set forth in Article 1.2 of this Lease, and,
if to Tenant, at the address as set forth in Article 1.2 of this Lease, or at
such other address as may be specified from time to time in writing sent to
the other party by like notice.
Whenever, by the terms of this Lease, notice shall or may be given
either to Landlord or to Tenant, such notice shall be in writing and shall be
delivered by hand or sent by registered or certified mail, postage prepaid or
by so-called "express" mail (such as Federal Express or U.S. Postal Service
Express Mail).
17.16 FINANCIAL INFORMATION
IT IS HEREBY UNDERSTOOD AND AGREED THAT UPON LANDLORD'S WRITTEN
REQUEST, SOLELY FOR THE REASONS SET FORTH BELOW, TENANT SHALL SUPPLY TO THE
LANDLORD, FINANCIAL INFORMATION REASONABLY ACCEPTABLE TO LANDLORD;
1. UPON WRITTEN REASONABLE REQUEST BY LANDLORD'S LENDER.
2. UPON WRITTEN REASONABLE REQUEST FOR PURPOSES OF FINANCING OR
REFINANCING THE PREMISES.
3. SHOULD TENANT BE IN DEFAULT AS DEFINED IN SECTION 14.1 HEREIN.
-34-
<PAGE>
17.17 RULES AND REGULATIONS
The Tenant will observe and comply with the Rules and Regulations as
attached hereto and made a part hereof, including revisions and additions as the
Landlord may from time to time institute.
17.18 RIGHT TO MOVE
The Landlord reserves the right to move the Tenant and if Landlord so
requests, Tenant shall vacate the Premises and relinquish its right with respect
to the same, provided that Landlord GIVES TENANT NOT LESS THAN NINETY (90) DAYS
PRIOR WRITTEN NOTICE OF SUCH A MOVE, AND FURTHER provides to Tenant, space
within the complex commonly known as Nashua Office Park, Nashua, NH 03062.
Such space shall be reasonably comparable in size, layout, finish and utility
to the existing Premises, and further provided that Landlord shall, at its sole
cost and expense, move the Tenant and its removable property from the Premises
to such new space in such a manner as will minimize, to the greatest extent
practicable, undue interference with the business or operations of Tenant.
LANDLORD FURTHER AGREES TO PAY FOR ALL VERIFIED REASONABLE DIRECT AND INDIRECT
COSTS AS A RESULT OF ANY SUCH RELOCATION, TO INCLUDE BUT NOT BE LIMITED TO COSTS
OF RELOCATING FURNITURE, FILES AND EQUIPMENT, TELEPHONE INSTALLATION, AND THE
REASONABLE COSTS OF NEW STATIONERY. Any such space shall from and after such
relocation, be treated as the Premises demised under this Lease, and shall be
occupied by Tenant under the same terms, provisions and conditions as are set
forth in this Lease.
17.19 TENANT'S RIGHT TO EXPAND
IN THE EVENT TENANT HAS NOT BEEN IN DEFAULT OF ANY OF THE TERMS,
CONDITIONS AND COVENANTS OF THIS LEASE AND ANY AMENDMENTS MADE HERETO DURING
THE TERM HEREOF, LANDLORD HEREBY AGREES TO LEASE TO TENANT AND TENANT HEREBY
AGREES TO LEASE FROM LANDLORD APPROXIMATELY 1,199 SQUARE FEET OF SPACE
ADJACENT TO TENANT'S EXISTING PREMISES ON THE SECOND (2ND) FLOOR OF NASHUA
OFFICE PARK, ONE TARA BOULEVARD, NASHUA, NH 03062 (HEREINAFTER REFERRED TO AS
THE "EXPANSION PREMISES I"). THE LANDLORD SHALL DELIVER THE EXPANSION
PREMISES I TO TENANT ON OR BEFORE OCTOBER 1, 1997, PROVIDED, HOWEVER, IF
LANDLORD IS UNABLE TO DELIVER THE EXPANSION PREMISES I ON OR BEFORE SUCH DATE
AS A RESULT OF THE EXISTING TENANT HOLDING OVER IN THE EXPANSION PREMISES I,
LANDLORD SHALL NOT BE RESPONSIBLE FOR ANY DELAY CAUSED THEREBY AND LANDLORD
SHALL DILIGENTLY PURSUE ALL ITS REMEDIES UNDER THE LAW OR ITS LEASE WITH SUCH
THIRD PARTY TO EVICT SUCH HOLDOVER TENANT FROM THE EXPANSION PREMISES I.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS LEASE TO THE CONTRARY, EFFECTIVE
ON THE COMMENCEMENT DATE WITH RESPECT TO THE EXPANSION PREMISES I, THE
FOLLOWING TERMS AND PROVISIONS OF THIS LEASE SHALL BE AMENDED ACCORDINGLY:
-35-
<PAGE>
1. THE DESCRIPTION OF TENANT'S PREMISES AS SET FORTH IN ARTICLE 2.1
HEREIN, SHALL BE AMENDED IN PART BY DELETING THE PHRASE
"CONSISTING OF APPROXIMATELY 11,980 SQUARE FEET OF SPACE" AND
REPLACING WITH "CONSISTING OF APPROXIMATELY 13,179 SQUARE FEET
OF SPACE".
2. THE TERM OF THE EXPANSION PREMISES I SHALL BE COTERMINOUS WITH
THE TERM OF THIS LEASE AS SET FORTH IN ARTICLE 3.1 HEREIN.
3. SAID EXPANSION PREMISES SHALL BE OFFERED TO TENANT AT THE SAME
PER SQUARE FOOT RENTAL RATE THEN BEING PAID BY TENANT IN
ACCORDANCE WITH ARTICLE 4.1 HEREIN.
4. TENANT HEREBY AGREES TO ACCEPT THE EXPANSION PREMISES I IN THEIR
"AS-IS" CONDITION.
EXCEPT AS PROVIDED HEREINABOVE, ALL OTHER TERMS AND PROVISIONS OF THIS LEASE
SHALL APPLY TO THE EXPANSION PREMISES I AND SHALL REMAIN THE SAME WHERE
APPLICABLE AND ARE HEREBY REAFFIRMED.
17.20 TENANT'S OPTION TO EXPAND
IN THE EVENT TENANT HAS NOT BEEN IN DEFAULT OF ANY OF THE TERMS,
CONDITIONS AND COVENANTS OF THIS LEASE AND ANY AMENDMENTS MADE HERETO DURING
THE TERM HEREOF, TENANT SHALL HAVE THE RIGHT, TO LEASE ADDITIONAL SPACE FROM
THE LANDLORD WITHIN NASHUA OFFICE PARK, ONE TARA BOULEVARD, NASHUA, NH 03062,
SUBJECT TO AVAILABILITY AND FURTHER SUBJECT, BUT NOT LIMITED TO, THE
FOLLOWING TERMS AND CONDITIONS:
1. TENANT'S ADDITIONAL SPACE REQUIREMENT MUST BE APPROXIMATELY 1,336
SQUARE FEET ON THE SECOND (2ND) FLOOR OF SAID BUILDING
(HEREINAFTER REFERRED TO AS THE `EXPANSION PREMISES II').
2. TENANT MUST NOTIFY LANDLORD IN WRITING OF ITS ADDITIONAL SPACE
REQUIREMENTS NO LESS THAN NINETY (90) DAYS PRIOR TO THE DATE
TENANT DESIRES SUCH EXPANSION PREMISES II.
3. TENANT MUST OCCUPY SAID EXPANSION PREMISES II AND THE PREMISES
DEMISED HEREUNDER FOR A TERM WHICH SHALL BE COTERMINOUS WITH THE
EXISTING LEASE, BUT IN NO EVENT LESS THAN THREE (3) YEARS.
4. RENT FOR SAID EXPANSION SPACE II SHALL BE AT THE THEN CURRENT
MARKET RENT RATE.
IT IS HEREBY AGREED BETWEEN THE PARTIES THAT IMMEDIATELY FOLLOWING LANDLORD'S
RECEIPT OF TENANT'S NOTICE INDICATING ITS DESIRE TO LEASE EXPANSION PREMISES
II LANDLORD AND LESSEE SHALL ENTER INTO A MUTUALLY ACCEPTABLE AMENDMENT TO
THE SETTINCY FORTH THE TERMS AND PROVISIONS SET FORTH HEREINABOVE.
-36-
<PAGE>
17.21 WHEN LEASE BECOMES BINDING
Employees or agents of Landlord have no authority to make or agree
to make a lease or any other agreement or undertaking in connection herewith.
The submission of this Lease for examination and negotiation does not
constitute an offer to lease, a reservation of, or option for the Premises
and shall vest no right in any party. Tenant or anyone claiming under or
through Tenant shall have the rights to the Premises as set forth herein and
this Lease becomes effective as a Lease only upon execution, acknowledgement
and delivery thereof by Landlord and Tenant, regardless of any written or
verbal representation of any agent, manager or employee of Landlord to the
contrary.
17.22 MISCELLANEOUS
Each party hereto has reviewed and revised (or requested revisions
of) this Lease, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Lease or any
Exhibits hereto.
17.23 ENTIRE AGREEMENT
This Lease and the exhibits and any rider attached hereto, set
forth all the covenants, promises, agreements conditions, representations and
understandings between Landlord and Tenant concerning the Premises and there
are no covenants, promises, agreements, conditions, representations or
understandings, either oral or written between them other than those herein
set forth and this Lease expressly supersedes any proposals or other written
documents relating hereto. Except as herein otherwise provided, no
subsequent alteration, amendment, change or addition to this Lease shall be
binding upon Landlord and Tenant unless reduced to writing and signed by
them. Tenant agrees that Landlord and its agents have made no
representations or promises with respect to the Premises, or the Building of
which the Premises are a part, or the Lot, except as herein expressly set
forth.
IN WITNESS OF, the parties hereto have executed this instrument
under s@ as of the date set forth in Section 1.2, above.
LANDLORD: Thomas J. Flatley d/b/a The Flatley Company
/s/ Thomas J. Flatley
-------------------------------------------
By: Thomas J. Flatley
Its: President
TENANT: Puma Technology, Inc
/s/ M. Bruce Nakao
-------------------------------------------
By: M. Bruce Nakao
Its: Sr VP, CFO
-37-
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and halls shall not be obstructed or encumbered by any
Tenant, nor shall they be used for any purpose other than ingress and egress to
and from the Premises. Landlord shall keep the sidewalks and curbs directly in
front of said Premises, clean and free from ice and snow.
2. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of the Landlord. No curtains,
blinds, shades or screens shall be attached to, hung in, or used in connection
with, any window or door of the Premises, without the prior written consent of
the Landlord. Any such awnings, projections, curtains, blinds, shades, screens
or other fixtures used by Tenant (if given the prior written consent of the
Landlord for such use), shall be of a quality, type, design and color, attached
in a manner approved by the Landlord.
3. A building directory will be maintained in the main lobby of the building
at the expense of the Landlord and the number of such listings shall be at the
sole discretion of the Landlord. No sign, advertisement, notice or other
lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any
part of the outside or inside of the Premises or building, without the prior
written consent of the Landlord. In the event of violation of the foregoing by
any Tenant, Landlord may remove same without any liability and may charge the
expense incurred by such removal to any Tenants violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted or affixed for
each Tenant, at Tenant's expense and shall be of a size, color and style
acceptable to the Landlord.
4. The sashes, sash doors, skylights, windows and doors that reflect or admit
light and air into the halls, passageways or other public places in the building
shall not be covered or obstructed by any Tenant, nor shall any bottles, parcels
or other articles be placed on the windowsills.
5. No show cases or other articles shall be put in front of, or affixed to any
part of the exterior of the building, nor placed in the halls, corridors,
vestibules or fire escapes, without the prior written consent of the Landlord.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuses of the fixtures shall be done by the Tenant
who, or whose servants, employees, agents, visitors, or licensees, shall have
caused same.
7. No Tenant shall mark, paint, drill into, or in any way deface any part of
the Premises or the building of which they form a part. No boring, cutting or
stringing of wires shall be permitted, except with the prior written consent of
Landlord, and as the Landlord may direct. No Tenant shall lay linoleum, or
other similar floor covering, so
-38-
<PAGE>
that the same shall come in contact with the floor of the Premises, and, if
linoleum or other similar floor covering is desired to be used, an
interlining of builder's deadening felt shall be first affixed to the floor
by a paste or other material, soluble in water, the use of cement or other
similar adhesive material being expressly prohibited.
8. No bicycles, vehicles or animals of any kind shall be brought in or kept
about the Premises, and no cooking shall be done or permitted by Tenant on said
Premises. No Tenant shall cause or permit any unusual or objectionable odors to
be produced upon or permeate from the Premises.
9. No space in the building, except as provided in individual Leases, shall be
used for manufacturing, for the storage of merchandise, or for the sale of
merchandise, goods or property of any kind at auction.
10. No Tenant shall make, or permit to be made, any unsettling or disturbing
noises or disturb or interfere with occupants of this or neighboring buildings
or premises' or those having business with them, whether by the use of any
musical instrument, radio, talking machine, unusual noise, whistling,
singing, or in any other way. No Tenant shall throw anything out of doors,
windows, skylights or down the passageways.
11. No Tenant, nor any of Tenant's servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the Premises any flammable,
combustible or explosive fluid, chemical and substance.
12. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or the mechanism thereof. Each Tenant must, upon the termination of his
tenancy, return to the Landlord, all keys for stores, offices and toilet rooms,
either furnished to, or otherwise procured by, such Tenant, and in the event of
the loss of any keys so furnished, such Tenant shall pay the Landlord the cost
thereof.
13. All removals, or the carrying in or out of any safes, freight, furniture or
bulky matter of any description must take place during the hours which the
Landlord or its agents may determine from time to time. The Landlord reserves
the right to inspect all freight to be brought into the building and to exclude
from the building, all freight which violates any of these Rules and Regulations
or the Lease of which these Rules and Regulations are a part.
14. No Tenant shall occupy or permit any portion of the Premises leased to him
to be occupied for the possession, storage, manufacture or sale of liquor,
narcotics or as a barber or manicure shop.
15. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the building or
its desirability as a building for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising. Tenant
shall not use the name of the building or its owner in any advertising without
the express written consent of the Landlord.
-39-
<PAGE>
16. No Tenant shall install or permit the installation or use of any machines
dispensing goods for sale, including without limitation, foods, beverages,
cigarettes or cigars. No food or beverage shall be carried in the public halls
and elevators of the buildings, except in closed containers.
17. The Premises shall not be used for lodging or sleeping or for any immoral
or illegal purpose.
18. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same by notifying the Landlord. Landlord
reserves the right to inspect any parcel or package being removed from the
building by Tenant, its employees, representatives and business invitees.
19. There shall not be used in any space or in the public halls of any
building, either by a Tenant or by jobbers or others in the delivery of or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
-40-
<PAGE>
EXHIBIT A
Floor Plan
-41-
<PAGE>
EXHIBIT B
LANDLORD shall construct TENANT Premises in accordance with a mutually agreed
upon floor plan.
-42-
<PAGE>
EXHIBIT B-1
CONSTRUCTION
Attached to and made part of Lease dated as of _________________, 1997.
Between
Thomas J. Flatley d/b/a The Flatley Company
and
Puma Technology, Inc.
A. SUBSTANTIAL COMPLETION. For the purposes hereof, the Landlord's Work shall
be deemed to be Substantially Complete on the date that (i) Landlord's Work, as
defined in Paragraph B hereof, has been completed in a good and workmanlike
manner except for minor items of work and adjustment of equipment and fixtures
which can be completed within thirty (30) days after Landlord's receipt of a
punch list from the Tenant, without causing unreasonable interference with
Tenant's use of the Premises (i.e., so-called "punch list" items) which "punch
list" items (a) shall be designated by Tenant and/or Tenant's Representative, in
conjunction with Landlord's architect and/or Landlord's Representative, and (b)
Landlord shall complete within thirty (30) days (except for any "Long Lead Time
Items" as developed between Landlord's Representative and Tenant's
Representative as attached hereto); and (ii) Tenant has received a Certificate
of Occupancy (permanent or temporary) from the City of Nashua in connection with
Landlord's Work. In the event a temporary Certificate of Occupancy is issued,
Landlord agrees to diligently proceed to obtain a permanent Certificate of
Occupancy. If Landlord fails to (i) complete the punch list items within thirty
(30) days following receipt of the punch list from the Tenant or (ii) obtain a
permanent Certificate of Occupancy within ninety (90) days, Tenant shall have
the right, but not the obligation, to complete such work at Landlord's cost and
expense, and Tenant may deduct from Base Rent the cost thereof if Landlord does
not reimburse Tenant on demand therefor.
B. LANDLORD'S WORK. Notwithstanding the foregoing, for the purposes of
determining Substantial Completion, "Landlord's Work" shall be defined as all
work shown on the Final Plans, as defined in Paragraph D hereof, but shall not
include telephone data, furniture, fixtures, and equipment ("FF &E"), special
work (i.e., Long Lead Time Items) and any items of work which are delayed by
changes made by Tenant to the Final Plans, or Tenant's physical move.
Landlord's Work shall be performed in a good and workmanlike manner, in
compliance with all applicable laws and regulations and in accordance with the
Final Plans.
C. PAYMENT FOR WORK. Tenant shall pay for the cost of Landlord's Work (as
set forth below) and shall contribute to the cost of the Landlord's Work,
including, the construction work and materials, all permit fees, all
architectural, engineering, and Landlord's general contractor's fees and
general conditions which shall be 10% of the
-43-
<PAGE>
total construction costs; Tenant shall pay 50% of the estimated construction
costs upon Lease execution and the balance upon substantial completion of
Landlord's Work.
If (A) Tenant makes any changes after the Tenant's Plans have been approved by
Landlord and Tenant, and (B) the net cost of Landlord's Work will be increased
thereby, then Tenant shall pay to Landlord within ten (10) days of Substantial
Completion the amount by which the net increase in the cost of Landlord's Work
resulting from all of the applicable changes. All change orders (which shall
include Landlord's general contractor's fee of 10% of the total construction
costs (unless such change order extends the time for substantial completion of
Landlord's Work in which event the fee shall be 10% of the work so extending the
substantial completion date) shall be agreed upon in writing by Landlord and
Tenant's Representative prior to the commencement of any work in accordance with
standard Bulletin Proposal format, a copy of the form of which is attached
hereto as Exhibit B-2.
All payments to Landlord's contractor shall be made via AIA Requisition form
which shall be executed by the Landlord's Representative prior to payment to
such contractors. All subcontractors shall provide releases of liens as
condition to payment of monthly requisitions. Each requisition shall contain
customary trade payment breakdown and backup for each trade for the prior
month's work.
D. PLAN PREPARATION AND APPROVAL. Landlord shall prepare a full and complete
set of biddable working plans and specifications ("Tenant's Plans") in
accordance with the following schedule:.
1. Submission of all plans for construction shall satisfy the permitting
process with the City of Nashua Building Department and shall be available on or
before May 15, 1997. Landlord shall be responsible for obtaining all
construction permits and approvals in connection with Landlord's Work.
2. In or within ten (10) days of completion of the design development
drawings, but in no event later than May 15, 1997, Landlord shall provide
Tenant with a detailed cost estimate by trade breaking out all costs and
expenses associated with Landlord's Work.
3. Response (i.e. approval or disapproval of Tenant's Plans) by Tenant to the
Tenant's Plans shall be on or before the fifth (5th) business day after Landlord
submits to Tenant all of Tenant's Plans (or revised plans). Landlord agrees to
promptly commence, and thereafter diligently and continuously proceed, to
complete and deliver to Tenant, Tenant's Plans, and Landlord and Tenant agree
that upon delivery of Tenant's Plans to Tenant, each shall proceed with
reasonable diligence and continuity to complete the process of finalizing and
approving Tenant's Plans with the intent of the parties completing the process
by May 15, 1997 or earlier. Landlord shall use best efforts to supply progress
prints of the Tenant's Plans to Tenant from time to time during plan
preparation.
-44-
<PAGE>
4. Upon approval of Tenant's Plans by Landlord and Tenant, such plans are
referred to herein as the "Final Plans". Landlord shall submit the Final Plans
to at least three (3) qualified subcontractors.
Landlord and Tenant shall jointly review and evaluate the bids to determine
which bids, if any, conform to the requirements of this Section, and which
appear to be bona fide, responsible and free of apparent error. In the event
that both Landlord and Tenant approve any such bids, Landlord shall enter into a
contract or contracts with the lowest qualified bidder(s) promptly thereafter.
Landlord agrees to consult with and make a diligent, good faith effort to
include Tenant in all aspects of the bidding process. Tenant and Tenant's
Representative shall be notified of and entitled to attend all progress and
status meetings relating to Landlord's Work. Tenant shall also have the right
to inspect and review the plans and specifications of the base building and
systems relating thereto to ensure the capacity and quality thereof.
5. Landlord shall submit to Tenant a detailed budget by trade breaking out all
costs associated with Landlord's Work. On or before the fifth (5th) business
day after Landlord's submission to Tenant of the cost of Landlord's Work
(including appropriate back-up by trade), Tenant shall either (i) agree upon the
price for Landlord's Work and the estimated amount to be paid by Tenant to
Landlord, if any, for the cost of Landlord's Work in excess of the Construction
Allowance (subject to adjustment based on change orders), and authorize Landlord
to commence Landlord's Work, or (ii) Tenant shall have the right to revise the
Tenant's Plans and have Landlord work in conjunction with Tenant towards value
engineering. Time is of the essence in connection with the authorization to
Landlord to proceed with construction.
E. PERFORMANCE OF WORK. Landlord agrees to use best efforts to complete
Landlord's Work in accordance with the schedule of certain dates attached hereto
as Exhibit B-3, including, without limitation, the dates of (i) delivery to
Tenant of Tenant's Plans and portions thereof, (ii) approval by Tenant of
Tenant's Plans and portions thereof, (iii) commencement of construction, (iv)
anticipated date of Substantial Completion of Landlord's Work and delivery to
Tenant. The actual date of Substantial Completion of the Premises is defined as
a "Rent Commencement Date".
If Tenant (i) fails or omits to supply additional information relating
to Landlord's Work which may be requested after Tenant's authorization to
Landlord to proceed with construction, or materially interferes with the
performance of Landlord's Work in the exercise of its rights pursuant to
Paragraph F hereof, and any of the foregoing failures continues for three (3)
business days after written notice from Landlord to Tenant, or (E) changes
the scope of Landlord's Work or requests change orders which because of the
process for approval therefor or the additional time to perform the work or
obtain the materials delay the performance of Landlord's Work and Landlord
gives Tenant written notice of such delay ( (i) and (ii) collectively,
"Tenant Delays"), then the Rent Commencement Date shall be deemed to have
occurred as of the date the Premises would
-45-
<PAGE>
have been Substantially Completed in accordance with Paragraphs A & B hereof,
but for such Tenant Delays the Premises are not, in fact, ready for Tenant's
occupancy. Landlord agrees to use reasonable efforts to accelerate construction
or reschedule certain portions of the Landlord's Work to make up for lost time
due to any delays, provided that Landlord shall not be required to incur
additional costs as a result thereof and any overtime costs incurred by Landlord
as a result of accelerating construction due to Tenant Delays shall be Tenant
change orders.
If Landlord does not Substantially Complete Landlord's Work to the Premises in
accordance with Paragraphs A and B hereof by the Required Delivery Date (as same
may have been adjusted as a result of Tenant Delays) then from the Required
Delivery Date (as same may have been adjusted as a result of Tenant Delays)
until the date of which Landlord's Work is Substantially Complete, Tenant shall
not be obligated to pay Base Rent, but such obligation shall commence on the
date of which Landlord's Work is Substantially Complete. If Landlord does not
Substantially Complete the Premises in accordance with Paragraphs A and B
hereof on or before the Required Delivery Date (as same may have been adjusted
as a result of Tenant Delays) (the "Penalty Date"), then from the Penalty Date
until the date on which Landlord's Work is Substantially Complete, Tenant shall
be entitled to a credit towards the Base Rent under this Lease in the amount of
two days of Base Rent for each day from the Penalty Date until the date on which
Landlord's Work is Substantially Complete.
F. TENANT'S WORK. Tenant shall have the right to contract with cabling and
wiring contractors to install cable and wiring, furniture contractor and other
specialty trades, provided Tenant's contractors shall cooperate and coordinate
their work with the general contractor for Landlord's Work (which schedule shall
be as set by said general contractor), and shall comply with reasonable,
non-discriminatory rules and regulations, in an "open-shop" capacity. All
Tenant contractors shall be subject to the supervision and authority of
Landlord's job superintendent.
G. TENANT'S CONTRACTORS. In the event that Tenant engages any separate
contractors in the performance of Tenant's Work, Tenant and Tenant's
contractors and Landlord and Landlord's contractors shall cooperate in all
ways with each other to avoid any delay to the work being performed by each
party or any damages which might occur to any work or materials to be
installed in the Premises or conflict in any other way with the performance
of such work. Tenant and its agents, contractors, and employees shall have
the right to enter the Premises at all reasonable hours for the purpose of
performing Tenant's Work.
H. ACCEPTANCE OF WORK. Tenant shall be conclusively deemed to have agreed
that Landlord has performed all of its obligations under this Exhibit B-1
unless not later than sixty (60) days after the Rent Commencement Date,
Tenant shall give Landlord written notice specifying the respects in which
Landlord has not performed any such obligation. Notwithstanding the
foregoing, Landlord guarantees that Landlord's Work shall be free from
defects for a period of twelve (12) months from the Rent Commencement Date.
-46-
<PAGE>
I. RIGHTS AND REMEDIES. Landlord shall have the same rights and remedies
which Landlord has upon the nonpayment of Base Rent and Additional Rent for
nonpayment of the cost of Landlord's Work in excess of the Construction
Allowance pursuant to the provisions herein.
-47-
<PAGE>
EXHIBIT C
TERM COMMENCEMENT DATE AGREEMENT
To be attached to and made a part of that certain Lease Agreement dated April
___________, 1997 by and between Thomas J. Flatley d/b/a The Flatley Company as
LANDLORD, and Puma Technology, Inc., as TENANT.
Relative to the Premises located on the second floor first (1st) and second
(2nd) floors of Nashua Office Park and more specifically referred to in the
above-mentioned Lease, our records indicate the following pertinent information
with regard to same:
Occupancy Date:
Term Commencement Date:
Actual Term Dates:
Rent Commencement Date:
If you concur with the above, please acknowledge by signature below, retaining
one (1) copy of this Agreement for your files and returning the other to my
attention, at your earliest possible convenience.
-48-
<PAGE>
PAGE TWO
TERM COMMENCEMENT DATE AGREEMENT
Should this Term Commencement Date Agreement not be executed and returned
to LANDLORD within thirty (30) days of its receipt by TENANT, said dates as
specified herein shall hereby be deemed assented to by the TENANT.
Sincerely yours,
Lease Administration
COMMERCIAL/INDUSTRIAL DIVISIONS
cc:
CERTIFIED MAIL - RETURN RECEIPT REQUESTED
P
The foregoing is hereby acknowledged and agreed.
WITNESS TENANT: Puma Technology, Inc.
/s/ M. Bruce Nakao
- ------------------------------ -------------------------------
By: M. Bruce Nakao
Sr. VP, CFO
Duly Authorized
-49-
<PAGE>
EXHIBIT D
LANDLORD'S WAIVER
To induce ______________________, a lender having its principal place of
business at ______________________ (the "Lender"), to enter into certain
financial transactions with ____________, a corporation having its
principal place of business at _________________ ("Borrower"), including but
not limited to a certain transaction dated __________________, and in
consideration thereof, Thomas J. Flatley d/b/a The Flatley Company
("Landlord"), who by indenture dated ________________ has leased to Borrower
a portion of the premises known as _____________________, consisting of
approximately ________ square feet (the "Premises") hereby represents,
warrants, covenants and agrees to and with the Borrower, the Bank and each of
them, as follows:
The Landlord hereby subordinates, waives, releases and relinquishes to said
Lender, its successors or assigns, all right, title and interest, if any,
which the Landlord may otherwise claim in and to all property (collateral)
which is the subject of the Security Agreement dated _____________________,
between the Borrower and the Lender, including substitutions, accessions,
replacements and after-acquired collateral. A description of the collateral
secured by the Security Agreement is attached hereto as Exhibit "A".
The Landlord consents to the continued location of all collateral on the
Premises and hereby authorizes and empowers the Bank, its agents, attorneys,
employees, successors and assigns, to enter upon the Premises and to remove the
collateral provided that (1) the Lender gives Landlord prior written notice of
Borrower's default; (2) the Lender gives Landlord a ten (10) day prior written
notice before entering the Premises to recover the collateral and (3) the Lender
agrees to restore the demised Premises to their original condition, reasonable
wear and tear excepted.
Landlord further agrees that the Lender may, by giving simultaneous written
notice to the Landlord of the Lender's intention to take occupancy, maintain
sole, exclusive use and occupation of the Premises for such reasonable time as
may be necessary to remove the collateral from the Premises, provided that such
reasonable period of time shall not exceed thirty (30) days; and the Lender
shall pay to Landlord that Rent then being paid by Borrower for its use and
occupancy of the Premises. It is clearly understood and agreed that in no event
will a foreclosure sale take place within the Premises.
-50-
<PAGE>
THAT CERTAIN LEASE BY AND BETWEEN THOMAS J. FLATLEY d/b/a THE FLATLEY COMPANY
AND , A CORPORATION, DOES NOT CONSTITUTE
COLLATERAL OF SECURED PARTIES.
This Waiver and Assent shall be binding upon Landlord and Landlord's successors
and assigns and shall inure to the benefit of the Lender and its successors and
assigns.
IN WITNESS WHEREOF, Landlord and the Lender have executed this Waiver and
Assent this day of , 1997.
WITNESSETH: THOMAS J. FLATLEY
d/b/a THE FLATLEY CONTANY
- --------------------------------- --------------------------------------
By: Thomas J. Flatley
Its: President
WITNESSETH:
- --------------------------------- --------------------------------------
By:
Its:
-51-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Norfolk, ss.
Then personally appeared before me the above named Thomas J. Flatley, as
President, and acknowledged the foregoing to be his free act and deed, on behalf
of THOMAS J. FLATLEY d/b/a THE FLATLEY COMPANY before me, this day
of , 1997.
------------------------
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
, ss.
Then personally appeared before me the above named , as
and
acknowledged the foregoing to be free act and deed, on behalf of __________
____, before me, this day of , 1997.
------------------------
Notary Public
My Commission Expires:
-52-
<PAGE>
EXHIBIT "A"
TO LANDLORD'S WAIVER
Notwithstanding anything contained herein to the contrary, it is hereby
understood and agreed, that certain Lease by and between Thomas J. Flatley
d/b/a The Flatley Company and _______________________________, a
_________________________________Corporation, does not constitute Collateral
of secured parties.
-53-
<PAGE>
CALIFORNIA
ALL-PURPOSE
ACKNOWLEDGEMENT
STATE OF CALIFORNIA )
COUNTY OF Santa Clara )
-----------------
On May 14, 1997 before me, Valerie Bliesener
------------ -----------------------------------------------------,
DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC"
personally appeared, Masami Bruce Nakao
----------------------------------------------------------
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
[STAMP]
Valerie Bliesener
- ---------------------------------- (SEAL)
NOTARY PUBLIC SIGNATURE
OPTIONAL INFORMATION
TITLE OR TYPE OF DOCUMENT Standard form of Commercial Lease
-----------------------------------------------------
DATE OF DOCUMENT 05-08-97 NUMBER OF PAGES
--------------------------- -------------------
SIGNER(S) OTHER THAN NAMED ABOVE
----------------------------------------------
<PAGE>
FIRST AMENDMENT TO LEASE
This Agreement made this 7th day of May, 1998, by and between Thomas J.
Flatley d/b/a The Flatley Company (hereinafter referred to as LANDLORD), and
Puma Technology, Inc. (hereinafter referred to as TENANT),
WITNESSETH:
WHEREAS, by a certain Lease Agreement dated May 23, 1997, as amended by
a Supplemental Agreement dated November 19, 1997 (hereinafter referred to as
the "Lease"), LANDLORD leased to TENANT certain premises located at Nashua
Office Park, One Tara Boulevard, Nashua, NH 03062, consisting of
approximately 13,179 square feet of space, more particularly described
therein as ("Premises"), and,
TENANT wishes to lease from LANDLORD, and LANDLORD wishes to lease to
TENANT an additional 1,336 square feet of space (hereinafter referred to as
"Expansion Premises II") located on the second (2nd) floor of Nashua Office
Park, One Tara Boulevard, Nashua, NH 03062, as outlined on Exhibit "A-1"
attached hereto and made a part hereof;
LANDLORD and TENANT desire to amend the Lease to reflect this and
certain additional changes which have been agreed to by the parties and all
changes as set forth below shall become effective on the First Amendment to
Lease Commencement Date (as hereinafter defined).
NOW, THEREFORE, for more valuable consideration, the receipt of which is
hereby acknowledged each to the other, the above-named parties do hereby
agree to amend said Lease as follows:
1. Effective upon the First Amendment to Lease Commencement Date, the
description of TENANT'S Premises as set forth in Section 2.1 of the Lease,
namely Location of Premises, shall be amended, in part, as follows:
... Suite Number 1104 on the first (lst) floor and Suite No. 2200 on
the second (2nd) floor of Nashua Office Park, One Tara Boulevard,
Nashua, NH 03062, consisting of approximately 14,515 square feet of
space ...
2. The term of this First Amendment to Lease shall commence on the First
Amendment to Lease Commencement Date (defined below), and shall be
coterminous with the existing Lease Agreement, and therefore shall
terminate June 30, 2002.
The First Amendment to Lease Commencement Date shall be February 15,
1998.
Notwithstanding the foregoing, if TENANT'S personnel shall occupy all
or any part of the Expansion Premises II for the conduct of its
business prior to the First Amendment to Lease Commencement Date as
determined pursuant to the preceding paragraph, such date of occupancy
shall, for all intents and purposes of this First Amendment to Lease,
be the First Amendment to Lease Commencement Date.
LANDLORD and TENANT agree to execute a Supplemental Agreement setting
forth the actual Occupancy and Term Dates, once the same have been
established.
1
<PAGE>
3. Effective upon the First Amendment to Lease Commencement Date, the
TENANT agrees to pay to LANDLORD, without deduction or offset, rent FOR
THE EXPANSION PREMISES II ONLY, at the rate of NINETEEN THOUSAND SEVEN
HUNDRED SEVENTY-TWO AND 80/100 ($19,772.80) DOLLARS annually, payable in
advance, on the first day of each month, in equal monthly installments
of ONE THOUSAND SIX HUNDRED FORTY-SEVEN AND 73/100 ($1,647.73) DOLLARS
for the period commencing on the First Amendment to Lease Commencement
Date and continuing through and including June 30, 1999, and at that rate
for any fraction of a month; and
TWENTY-ONE THOUSAND ONE HUNDRED EIGHT AND 80/100 ($21,108.80) DOLLARS
annually, payable in advance, on the first day of each month, in equal
monthly installments of ONE THOUSAND SEVEN HUNDRED FIFTY-NINE AND 07/100
($1,759.07) DOLLARS for the period commencing July 1, 1999 and continuing
through and including June 30, 2001, and at that rate for any fraction of
a month; and
TWENTY-ONE THOUSAND SEVEN HUNDRED SEVENTY-SIX AND 80/100 ($21,776.80)
DOLLARS annually, payable in advance, on the first day of each month, in
equal monthly installments of ONE THOUSAND EIGHT HUNDRED FOURTEEN AND
73/100 ($1,814.73) DOLLARS for the period commencing July 1, 2001 and
continuing through and including June 30, 2002, and at that rate for any
fraction of a month of the term.
4. CONSTRUCTION COST. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE
CONTRARY, IT IS HEREBY UNDERSTOOD AND AGREED THAT LANDLORD HEREBY AGREES
TO PERFORM THE CONSTRUCTION AS DESCRIBED ON EXHIBIT "B-1", ATTACHED
HERETO AND MADE A PART HEREOF. TENANT HEREBY AGREES TO REIMBURSE
LANDLORD FOR THE TOTAL CONSTRUCTION COST, NAMELY TWENTY-TWO THOUSAND
THREE HUNDRED SEVENTY NINE AND 23/100 ($22,379.23) DOLLARS, (HEREINAFTER
REFERRED TO AS THE "TOTAL CONTRIBUTION") . LANDLORD IS IN RECEIPT OF
ONE-HALF (1/2) OF THE TOTAL CONTRIBUTION, NAMELY ELEVEN THOUSAND ONE
HUNDRED EIGHTY-NINE AND 62/100 ($11,189.62) DOLLARS. THE BALANCE OF THE
TOTAL CONTRIBUTION, NAMELY ELEVEN THOUSAND ONE HUNDRED EIGHTY-NINE AND
61/100 ($11,189.61) DOLLARS SHALL BE REMITTED BY TENANT TO LANDLORD UPON
SUBSTANTIAL COMPLETION OF LANDLORD IS WORK TO THE PREMISES. LANDLORD'S
WORK SHALL BE DEEMED SUBSTANTIALLY COMPLETED WHEN THE EXPANSION PREMISES
II IS READY FOR OCCUPANCY EXCEPT FOR ITEMS OF WORK (AND, IF APPLICABLE,
ADJUSTMENTS AND FIXTURES) WHICH CAN BE COMPLETED AFTER OCCUPANCY HAS
BEEN TAKEN, WITHOUT CAUSING UNDUE INTERFERENCE WITH TENANT'S USE OF THE
EXPANSION PREMISES II (I.E., SO-CALLED "PUNCH LIST" ITEMS) AND TENANT
HAS GIVEN NOTICE THEREOF. LANDLORD SHALL COMPLETE AS SOON AS CONDITIONS
PERMIT, ALL "PUNCH LIST" ITEMS AND TENANT SHALL AFFORD LANDLORD ACCESS
TO THE EXPANSION PREMISES II FOR SUCH PURPOSES.
5. Except where this First Amendment to Lease specifically changes same, all
other terms, conditions and covenants of the Lease shall apply to the
Expansion Premises II and shall remain the same, where applicable, and are
hereby reaffirmed.
6. The submission of this document for examination and negotiation does
not constitute an offer, and this document shall become effective and
binding only upon the execution and delivery thereof by both
LANDLORD and TENANT, regardless of any written or verbal representation
of any agent, manager or other employee of LANDLORD to the contrary. All
negotiations, consideration, representations and understandings between
LANDLORD and TENANT are incorporated herein and the Lease and this First
Amendment to Lease expressly supersede any proposals or other written
documents
2
<PAGE>
relating hereto. The Lease and this First Amendment to Lease may be
modified or altered only by written agreement between LANDLORD and TENANT,
and no act or omission of any employee or agent of LANDLORD shall alter,
change or modify any of the provisions thereof.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
instrument on the day and year first above written.
LANDLORD Thomas J. Flatley d/b/a
The Flatley Company
/s/ Sara Capaccioli /s/ Thomas J. Flatley
- --------------------------- ----------------------------
WITNESS By Thomas J. Flatley
Its President
TENANT Puma Technology, Inc.
/s/ Wendy Peter /s/ M. Bruce Nakao
- --------------------------- ----------------------------
WITNESS By
Its
Duly Authorized
3
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF NORFOLK )
May 7, 1998.
Then personally appeared Thomas J. Flatley to me known to be the
individual who acknowledged himself to be the President of The Flatley
Company, LANDLORD, and that he, as such, being authorized to do so, executed
the foregoing instrument and acknowledged the execution thereof to be his
free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at Norfolk
County, Braintree, Massachusetts, this 7th day of May, 1998.
/s/ Jennifer Pacino
---------------------------
Notary Public
My commission expires:
STATE OF
--------------------- ) [SEAL]
COUNTY OF ) SS.
-------------------- )
, 19 .
-------------- ---
Then personally appeared to me
known to be the individual who acknowledged himself to be the
of Puma Technology, Inc., TENANT, and that he, as such, being authorized to
do so, executed the foregoing instrument and acknowledged the execution
thereof to be his free act and deed for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal at _________
County, __________, _____________, this ____ day of _________________, 19__.
-------------------------------
Notary Public
my commission expires:
4
<PAGE>
EXHIBIT "A-1"
Floor Plan - Expansion Premises II
5
<PAGE>
EXHIBIT "B-1"
LANDLORD'S Work - Expansion Premises II
LANDLORD shall construct TENANT'S Expansion Premises II in accordance with a
mutually agreed upon floor plan.
6
<PAGE>
SELECTED FINANCIAL DATA
PUMA TECHNOLOGY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA 1998 1997 1996 1995 1994(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEARS ENDED JULY 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue $22,308 $15,629 $7,716 $ 860 $ 70
Cost of revenue 3,077 1,738 777 77 --
Gross profit 19,231 13,891 6,939 783 70
Operating expenses 21,880 13,222 8,916 2,920 1,030
Operating income (loss) (2,649) 669 (1,977) (2,137) (960)
Other income, net 1,114 822 85 71 6
Income (loss) before income taxes (1,535) 1,491 (1,892) (2,066) (954)
Provision for income taxes (1,164) (831) (509) (80) --
Net income (loss) $ (2,699) $ 660 $(2,401) $(2,146) $(954)
-------------------------------------------------------------------------
Basic net income (loss) per share $ (0.22) $ 0.07 $ (0.82) $ (0.75) $(0.31)
Diluted net income (loss) per share $ (0.22) $ 0.06 $ (0.82) $ (0.75) $(0.31)
(1) Period from August 27, 1993 (inception)
to July 31, 1994.
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET DATA 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JULY 31, (IN THOUSANDS)
Cash, cash equivalents and
short-term investments $21,083 $21,171 $ 982 $ 2,500 $ 406
Total assets 30,439 29,413 4,004 2,948 561
Long-term obligations 41 66 961 16 --
Total stockholders' equity 26,224 26,423 653 1,886 287
</TABLE>
<TABLE>
<CAPTION>
SUMMARY QUARTERLY DATA UNAUDITED
- ---------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED, JULY 31, APRIL 30, JAN 31, OCT 31, July 31, April 30, Jan 31, Oct 31,
(IN THOUSANDS, 1998 1998 1998 1997 1997 1997 1997 1996
EXCEPT PER SHARE DATA) ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $4,602 $6,742 $5,727 $5,237 $4,478 $4,325 $3,624 $3,202
Gross profit 3,751 5,770 5,098 4,612 3,926 3,791 3,329 2,845
Operating income (loss) (3,943) 900 312 82 (860) 675 515 339
Net income (loss) (4,029) 726 376 228 (649) 628 454 227
Basic net income (loss)
per share $(0.33) $ 0.06 $ 0.03 $ 0.02 $ (0.05) $ 0.05 $ 0.05 $ 0.05
Diluted net income (loss)
per share $(0.33) $ 0.06 $ 0.03 $ 0.02 $ (0.05) $ 0.05 $ 0.04 $ 0.02
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PUMA TECHNOLOGY
OVERVIEW Puma Technology, Inc. (Puma or the Company) develops, markets and
supports Mobile Data Exchange-TM- (MDE) software, including wireless infrared
connectivity and advanced data synchronization software. The Company currently
has three primary families of products -- its TranXit-R- family of products that
supports infrared connectivity, its Intellisync-R- family of products that
performs advanced data synchronization, and its Intellisync for Notebooks family
of products which combines infrared connectivity with advanced data
synchronization. Additionally, the Company began licensing and earning revenue
from its Software Developers Kit ("SDK") in the third fiscal quarter of 1998.
The SDK provides Puma's customers with a suite of developer tools, which enable
them to develop translators for both applications, and devices, which can then
be incorporated into the Company's products.
TranXit and Intellisync for Notebooks software is licensed primarily to original
equipment manufacturer (OEM) customers, which are primarily makers of laptop
computers. These OEM customers license the Company's software for inclusion in
their laptop computers to enable infrared connectivity (IR) from the laptop back
to desktop computers. These OEM customers include the Company's software into
their products at the time of manufacture and for each device shipped, the
Company collects a royalty. Royalties are typically paid to the Company based on
actual usage or forecasted volume, although certain contracts contain fixed
royalties regardless of volume, for a given time period.
Intellisync software is used for advanced data synchronization of data base
information that resides on a computer such as a desktop machine and
increasingly popular handheld devices such as electronic organizers, handheld
computers, smart phones and smart pagers. The Company's software actually runs
on the desktop computer and keeps information in the desktop and the handheld
device synchronized. Intellisync software is currently distributed directly to
the end user and through the Company's retail distribution channel, and is
bundled with their products by some of the handheld device manufacturers.
Software Developers Kits are primarily licensed directly to hardware and
software manufacturers to enable their products to operate with Intellisync
software.
The Company currently is developing new products that will extend its
Intellisync line to include server-based synchronization and data-delivery
solutions directly targeted at corporate enterprises.
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO AND IN CONJUNCTION WITH THE COMPANY'S
FORM 10-K. THIS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTAINS FORWARD-LOOKING STATEMENTS REGARDING FUTURE EVENTS OR THE
FUTURE PERFORMANCE OF THE COMPANY THAT INVOLVE CERTAIN RISKS AND UNCERTAINTIES.
IN THIS REPORT, THE WORDS "ANTICIPATE(S)," "BELIEVE(S)", "EXPECT(S)",
"INTEND(S)", "FUTURE" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING
STATEMENTS. ACTUAL EVENTS OR THE ACTUAL FUTURE RESULTS OF THE COMPANY MAY DIFFER
MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS DUE TO SUCH RISKS AND
UNCERTAINTIES. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING
STATEMENTS TO REFLECT ACTUAL RESULTS OR CHANGES IN FACTORS OR ASSUMPTIONS
AFFECTING SUCH FORWARD-LOOKING ASSUMPTIONS. READERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT MANAGEMENT'S
ANALYSIS ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY RELEASE THE RESULTS OF ANY REVISION TO THESE FORWARD-LOOKING
STATEMENTS, WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
RESULTS OF OPERATIONS - REVENUE - The Company's revenue is earned from two
primary sources; software licenses and fees for service, which include customer
funded engineering services and amortization of maintenance contract programs.
Revenue was $22,308,000 in fiscal 1998 as compared to $15,629,000 in fiscal 1996
and $7,716,000 in fiscal 1995, representing increases of 43% and 103% from
fiscal 1997 to fiscal 1998 and from fiscal 1996 to fiscal 1997, respectively.
Revenue in the first nine months of fiscal 1996 did not include revenue derived
from Intellisync or IntelliLink
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PUMA TECHNOLOGY
products, which resulted from the IntelliLink-R- acquisition, since the
acquisition was not completed until April 30, 1996.
OEM revenue continues to represent a significant portion of the Company's
revenue. OEM revenue represented 68%, 74%, and 89%, of the Company's revenue in
fiscal 1998, fiscal 1997, and fiscal 1996, respectively. In fiscal 1998 and
1997, Toshiba accounted for approximately 18% and 21% of the Company's revenue,
respectively, and no other customer accounted for more than 10% of the Company's
revenue. In fiscal 1996, Toshiba and NEC accounted for approximately 18% and 13%
of the Company's revenue, respectively. Although several OEMs are subject to
certain contractual minimum purchase obligations, there can be no assurance that
any particular OEM will satisfy the obligation. In addition, the Company
believes that the percentage of revenue derived from OEMs may fluctuate in
future periods since the distribution channels used by the Company for its
existing and future products are subject to change.
International revenue continues to represent a significant portion of the
Company's revenue. International revenue represented approximately 48%, 54%, and
67% of the Company's revenue in fiscal 1998, fiscal 1997, and fiscal 1996,
respectively. The Company expects that international revenue will continue to
represent a significant portion of the Company's revenue for the foreseeable
future.
- - LICENSE REVENUE - License revenue is earned from the sale of software products
and royalty agreements with OEMs. License revenue was $18,469,000 in fiscal 1998
as compared to $13,710,000 in fiscal 1997 and $7,418,000 in fiscal 1996,
representing increases of 35% and 85% from fiscal 1997 to fiscal 1998 and from
fiscal 1996 to fiscal 1997, respectively. The increase in license revenue from
fiscal 1998 as compared to fiscal 1997 was primarily due to increased
revenue earned from the Company's Intellisync for handheld devices, and to a
lesser extent, increased license revenue earned from Intellisync for Notebook
products and Software Development Kits. The increase in license revenue in
fiscal 1997 as compared to fiscal 1996 was primarily due to both increased unit
shipments from the continuing acceptance of the Company's TranXit products and
increased unit shipments of the Company's Intellisync products which were
introduced in fiscal 1996.
- - SERVICE REVENUE - Service revenue is earned from fees for services including
customer funded engineering services and amortization of maintenance contract
programs. Service revenue was $3,839,000 in fiscal 1998 as compared to
$1,919,000 in fiscal 1997 and $298,000 in fiscal 1996 representing 100% and 544%
increases, respectively. The increases in service revenue for fiscal 1998 as
compared to fiscal 1997 and fiscal 1997 as compared to fiscal 1996 was primarily
due to increased customer funded engineering services for software development
required to support new mobile computing devices.
- - COST OF REVENUE - Cost of revenue consists primarily of product media and
duplication, manuals, packing supplies, shipping expenses and personnel related
costs incurred under customer funded software development agreements. The
Company's cost of revenue is affected by the mix between its various
distribution channels and is affected by the mix between its geographies such as
the United States, Japan and Europe. Additionally, the Company's cost of revenue
is affected by the mix between its sources such as royalties, packaged product,
customer funded engineering contracts and sales and fulfillment via its Web
site. A majority of Intellisync revenue is derived by direct sales to
distributors and retailers as well as end-users. The Company anticipates that
gross profit as a percentage of total revenue will decrease, to the extent sales
service revenue as a percentage of total revenue increases in proportion to the
Company's total revenue. This decline in gross profit percentage is anticipated
since the gross profit associated with revenue earned from customer funded
engineering services tend to be lower than the margins associated with revenue
earned from royalties or packaged product. Additionally, the Company anticipates
that gross profit as a percentage of total revenue will decrease, to the extent
sales to distributors and retailers increase in proportion to the Company's
total revenue. This decline in gross profit percentage is anticipated since the
average selling price to distributors and retailers is lower due to distributor
discounts and the cost of revenue is higher due to product
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PUMA TECHNOLOGY
costs. Royalty revenue is derived largely from licensing TranXit to OEM
customers and cost of sales attributable to TranXit royalties have not been
significant.
- - COST OF LICENSE REVENUE - Cost of license revenue includes product media and
duplication, manuals, packing supplies, shipping expenses and, in certain
transactions, royalties paid to certain vendors. Cost of license revenue as a
percentage of license revenue was 8% for fiscal 1998 and 1997 and 9% for 1996.
The fiscal 1997 decrease in cost of license revenue as percentage of license
revenue as compared to fiscal 1996 was primarily due to reduced product costs
associated with OEM's partially offset by increased costs associated with
increased volumes of packaged product shipments.
- - COST OF SERVICE REVENUE - Cost of service revenue primarily represents
personnel related costs incurred for development work under customer funded
software development agreements. Cost of service revenue as a percentage of
service revenue represented 40% in fiscal 1998, 37% in fiscal 1997 and 35% in
fiscal 1996.
- - RESEARCH AND DEVELOPMENT - Research and development expenses consist primarily
of salaries and other related expenses for research and development personnel,
quality assurance personnel, product localization, fees to outside contractors
and the cost of facilities and depreciation of capital equipment. The Company
invests in research and development both for new products and to provide
continuing enhancements to existing products. Research and development expenses
increased by 58% to $9,876,000 in fiscal 1998 from $6,236,000 in fiscal 1997. In
fiscal 1997, research and development expenses increased 108% to $6,236,000 from
$3,003,000 in fiscal 1996. Research and development represented approximately
44% of total revenue in fiscal 1998 and represented approximately 40% of total
revenue in both fiscal 1997 and fiscal 1996. The absolute dollar year over year
increase in research and development expenses in fiscal 1998 was primarily due
to increased personnel related costs and spending. This increased spending was
required to develop and support a wider breadth of the Company's existing
Intellisync and TranXit product offerings and, to a lesser extent, increased
personnel related costs and spending required to develop the Company's next
generation of products which will be server based. The absolute dollar year over
year increase in research and development expenses in fiscal 1997 was primarily
due to increased personnel related costs and spending required to develop the
Company's Intellisync product offerings and, to a lesser extent, increased
personnel related costs and spending required to develop enhanced versions of
TranXit and other new products. A significant portion of the Company's research
and development expenses are comprised of fees paid to outside contractors which
are engaged by the Company on a project-by-project basis. The Company believes
research and development expenses may fluctuate from quarter to quarter in
absolute dollars and as a percentage of revenue, depending upon the status of
various development projects.
Research and development expenses have been expensed as incurred. Statement of
Financial Accounting Standards No. 86 requires capitalization of certain
software development costs once technological feasibility is established. The
Company defines establishment of technological feasibility at the point which
product reaches beta. Software development costs incurred subsequent to the
establishment of technological feasibility through the period of general market
availability of the product are capitalized, if material. To date, all of these
software development costs have been insignificant and expensed as incurred.
- - SALES AND MARKETING - Sales and marketing expenses consist primarily of
salaries, commissions, promotional expenses and other related expenses of sales
and marketing personnel. Sales and marketing expenses increased by 72% to
$6,855,000 in fiscal 1998 from $3,983,000 in fiscal 1997. In fiscal 1997, sales
and marketing expenses increased 84% to $3,983,000 from $2,169,000 in fiscal
1996. Sales and marketing expenses represented approximately 31%, 25% and 28% of
total revenues in fiscal 1998, fiscal 1997, and fiscal 1996, respectively. Sales
and marketing expenses increased in absolute dollars in both fiscal 1998 and
fiscal 1997 primarily due to the expansion of the Company's sales and marketing
force, related travel and entertainment expenses and increased marketing
activities in an effort to expand its customer base and channel presence. The
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PUMA TECHNOLOGY
Company intends to continue expanding its sales organization to promote new
products and geographies in the upcoming fiscal year.
- - GENERAL AND ADMINISTRATIVE - General and administrative expenses consist
primarily of salaries and other related expenses of administrative, executive
and financial personnel and other outside professional fees. General and
administrative expenses increased by 41% to $2,994,000 in fiscal 1998 from
$2,123,000 in fiscal 1997. In fiscal 1997, general and administrative expenses
increased 100% to $2,123,000 in fiscal 1997 from $1,064,000 in fiscal 1996.
General and administrative expenses represented approximately 13% of total
revenues in fiscal 1998, represented 14% of total revenues in both fiscal 1997
and fiscal 1996. The year over year increases in absolute general and
administrative spending in fiscal 1998 was primarily due to increased personnel
and facility related costs, increased legal and accounting fees, increased
provision for doubtful accounts, and increased amortization of intangible assets
related to the acquisition of Real World Solutions. The year over year increases
in absolute general and administrative spending in fiscal 1997 was primarily due
to increased headcount and related spending to support the need for a growing
infrastructure, and to a lesser extent, amortization of intangible assets
related to the acquisition of IntelliLink.
- - IN-PROCESS RESEARCH AND DEVELOPMENT - In the fourth quarter of fiscal 1998,
the Company recorded a charge of $2,155,000 for in-process research and
development associated with the purchase of SoftMagic Corp. ("SoftMagic"). In
the fourth quarter of fiscal 1997, the Company recorded a charge of $880,000 for
in-process research and development associated with the asset purchase of Real
World Solutions. In the third quarter of 1996, the Company recorded a charge of
$2,680,000 for in-process research and development associated with the purchase
of IntelliLink Corporation. See Note 2 of Notes to Consolidated Financial
Statements.
- - INTEREST AND OTHER INCOME, NET - Interest and other income, net, represents
interest earned by the Company on its cash and short-term investments, offset by
interest expense on long-term debt and capitalized leases and miscellaneous fees
and charges. Interest and other income, net, increased to $1,114,000 in fiscal
1998 from $822,000 in fiscal 1997 and from $85,000 in fiscal 1996. The increase
in interest and other income, net, in fiscal 1998 as compared to fiscal 1997 was
due to increased interest income on increased cash, cash equivalents and
short-term investment base held throughout the year. The increase in interest
and other income, net, in fiscal 1997 as compared to fiscal 1996 was due to
increased interest income on increased average cash, cash equivalents and
short-term investment base, primarily as a result of proceeds generated from the
Company's initial public offering in December 1996.
- - PROVISION FOR INCOME TAXES - Provision for income taxes increased to
$1,164,000 in fiscal 1998 from $831,000 in fiscal 1997 and $509,000 in fiscal
1996. The provision for income taxes primarily represents foreign withholding
taxes. The foreign withholding taxes are primarily a function of royalties
earned by the Company from certain foreign customers.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS The Company expects that its
future operating results could fluctuate significantly as a result of numerous
factors including, but not limited to, the demand for the Company's products,
the Company's success in developing new products, the timing of new product
introductions by the Company and its competitors, market acceptance of the
Company's new and enhanced products, the emergence of new industry standards,
the timing of customer orders, the mix of products sold, competition, the mix of
distribution channels employed, the evolving and unpredictable nature of the
markets for the Company's products and mobile computing devices generally,
the rate of growth of the personal computer market in general and general
economic conditions.
The Company's revenue is difficult to forecast in part because the market for
wireless IR connectivity and data synchronization software is rapidly evolving.
In addition, the Company typically operates with a relatively small order
backlog. As a result, quarterly sales and operating results depend in part on
the volume and timing of orders received within the quarter, which are difficult
to forecast. In addition, a significant portion of the Company's expense levels
is fixed in advance based in large part on the Company's forecasts of future
revenue.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PUMA TECHNOLOGY
If revenue is below expectations in any given quarter, the adverse impact of the
shortfall on the Company's operating results may be magnified by the Company's
inability to adjust spending to compensate for the shortfall. Therefore, a
shortfall in actual revenue as compared to estimated revenue would have an
immediate adverse effect on the Company's business, financial condition
and operating results that could be material.
The Company historically has derived a substantial portion of its revenue from
OEMs. Due to the Company's ongoing effort to expand into retail and reseller
distribution channels, an increasing percentage of the Company's licensing
activity is expected to result from the sale of products through distributors
and other resellers, which sales are harder to predict and may have lower
margins than other channels. Sales through such channels may contribute to
increased fluctuation of operating results. A significant portion of the
Company's revenue in any quarter is typically derived from sales to a limited
number of customers. The Company has generally recognized a substantial portion
of its revenue in the last month of each quarter, when it typically receives
royalty reports from its OEM customers. Any significant deferral of purchases of
the Company's products by its customers could have a material adverse effect on
the Company's business, operating results and financial condition in any
particular quarter. To the extent that significant sales occur earlier than
expected, operating results for subsequent quarters may be adversely affected.
The Company has expanded its sales channel by fulfilling orders via the World
Wide Web. Given its limited history, there can be no assurance of continued
acceptance or demand for orders placed via the Web. Additionally, there can be
no assurance that Web sales may not adversely affect sales in the Company's
retail and reseller sales channels.
The Company's gross margin on its service revenue is substantially lower than
its gross margin on license revenue. Any increase in service revenue would have
a corresponding increase in cost of revenue and may have an adverse effect on
the Company's gross margins. The Company may also reduce prices or increase
spending in response to competition or to pursue new market opportunities.
The operating results of many software companies reflect seasonal fluctuation.
For example, sales in Europe and certain other countries typically are adversely
affected in the summer months when business activity is reduced. The Company's
revenues and operating results may be adversely affected by diminished demand
for the Company's products on a seasonal basis.
Because of these factors, the Company believes that period-to-period comparisons
of its operating results are not necessarily meaningful and that such
comparisons should not be relied upon as indications of future performance. As a
result of the foregoing and other factors, the Company's operating results and
stock price may be subject to significant volatility, particularly on a
quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES Up until the Company's initial public offering
in December 1996, the Company financed its operations and met its capital
expenditure requirements primarily from proceeds from the private sale of
Preferred Stock and Common Stock. Through October 31, 1996, the Company had
raised approximately $6,800,000 from the sale of Preferred and Common Stock. In
December 1996, the Company generated net proceeds of approximately $21,165,000
from its initial public offering of common stock.
The Company's operating activities provided cash of $2,128,000, provided cash of
$392,000, and used cash of $896,000 in fiscal 1998, fiscal 1997 and fiscal
1996, respectively. Net cash provided in fiscal 1998 was primarily due to net
loss adjusted for non-cash depreciation and amortization, in-process research
and development related to the asset acquisition of SoftMagic and increased
deferred revenue and accrued expenses and decreased accounts receivable and
prepaid expenses. These sources were partially offset by increases in inventory
and decreases in accounts payable. Net cash provided in fiscal 1997 was
primarily due to net income adjusted for non-cash depreciation and amortization,
in-process research and development related to the asset acquisition of Real
World Solutions and increased accounts payable and accrued
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PUMA TECHNOLOGY
expenses. These sources were partially offset by increases in accounts
receivable, inventory, prepaids and other assets and decreases in deferred
revenue.
Cash used in investing activities was $1,046,000, used in investing activities
was $19,444,000, and provided from investing activities $132,000 in fiscal 1998,
fiscal 1997 and fiscal 1996, respectively. Cash used in fiscal 1998 was
primarily due to purchases of short-term investments, and to a lesser extent,
purchases of property and equipment and cash used in the asset purchase of
SoftMagic. Cash used in fiscal 1997 was primarily due to purchases of short-term
investments, and to a lesser extent, purchases of property and equipment and
cash used in the asset purchase of Real World Solutions. Cash provided by
investing activities in fiscal 1996 was primarily related to proceeds from
maturities of short-term investments offset by purchases of property and
equipment. Cash used in fiscal 1995 was primarily related to purchases of
short-term investments, and to a lesser extent, purchases of property and
equipment.
Cash provided by financing activities was $512,000, provided by financing
activities was $23,894,000, and used in financing activities $254,000, in fiscal
1998, fiscal 1997 and fiscal 1996, respectively. Cash provided from financing
activities provided in fiscal 1998 was primarily due to the issuance of Common
Stock and repayments of notes to stockholders. Cash provided from financing
activities provided in fiscal 1997 was primarily due to the issuance of Common
Stock and, to a much lesser extent, the preferred stock and proceeds from
conversion of warrants and exercise of stock options.
At July 31, 1998 the Company's principal source of liquidity represented by
cash, cash equivalents and short-term investments totaled $21,083,000. The
Company currently has no significant capital commitments. The Company currently
has no bank financing arrangements. The Company believes that its current cash,
cash equivalents and short-term investment balances and cash generated from
operations, if any, will be sufficient to meet its working capital and other
cash requirements for at least the next twelve months.
OTHER FACTORS - YEAR 2000 ISSUES - BACKGROUND - Some computers, software, and
other equipment include programming code in which calendar year data is
abbreviated to only two digits. As a result of this design decision, some of
these systems could fail to operate or fail to produce correct results if "00"
is interpreted to mean 1900, rather than 2000. These problems are widely
expected to increase in frequency and severity as the year 2000 approaches, and
are commonly referred to as the "Millennium Bug" or "Year 2000 Problem."
ASSESSMENT - The Year 2000 Problem could affect computers, software, and other
equipment used, operated, or maintained by the Company. The Company believes
that its computer systems are Year 2000 compliant.
SOFTWARE SOLD TO CONSUMERS - The Company believes that it has substantially
identified and resolved all potential Year 2000 Problems with any of the
software products, which it develops and markets. However, management also
believes that it is not possible to determine with complete certainty that all
Year 2000 Problems affecting the Company's software products have been
identified or corrected due to complexity of these products and the fact that
these products interact with other third party vendor products and operate on
computer systems which are not under the Company's control.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS - In addition to computers and
related systems, the operation of office and facilities equipment, such as fax
machines, photocopiers, telephone switches, security systems, elevators, and
other common devices may be affected by the Year 2000 Problem. The Company
presently believes that its office and facilities equipment are Year 2000
compliant.
SUPPLIERS - The Company has limited or no control over the actions of third
party suppliers. Thus, while the Company expects that it will be able to resolve
any significant Year 2000 Problems with these systems, there can be no assurance
that these suppliers will resolve any or all Year 2000 Problems with these
systems before the occurrence of a material disruption to the business of the
Company
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
PUMA TECHNOLOGY
or any of its customers. Any failure of these third parties to resolve
Year 2000 problems with these systems in a timely manner could have a material
adverse effect on the Company's business, financial condition, and results of
operation.
MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS - The Company expects to identify
and resolve all Year 2000 Problems that would materially adversely affect its
business operations. However, management believes that it is not possible to
determine with complete certainty that all Year 2000 Problems affecting the
Company have been identified or corrected. The number of devices that could be
affected and the interactions among these devices are simply too numerous. In
addition, one cannot accurately predict how many Year 2000 Problem-related
failures will occur or the severity, duration, or financial consequences of
these perhaps inevitable failures. As a result, management expects that the
Company could likely suffer the following consequences:
1. a significant number of operational inconveniences and inefficiencies
for the Company and its clients that may divert management's time and
attention and financial and human resources from its ordinary business
activities; and
2. a lesser number of serious system failures that may require
significant efforts by the Company or its clients to prevent or
alleviate material business disruptions.
CONTINGENCY PLANS - The Company has not developed contingency plans.
The Company does not believe that the Year 2000 Problem will have a material
adverse effect on the Company's business or results of operations.
DISCLAIMER - The discussion of the Company's efforts, and management's
expectations, relating to Year 2000 compliance are forward-looking statements.
The Company's ability to achieve Year 2000 compliance and the level of
incremental costs associated therewith, could be adversely impacted by, among
other things, the availability and cost of programming and testing resources,
vendors' ability to modify proprietary software, and unanticipated problems
identified in the ongoing compliance review.
- - MARKET RISK DISCLOSURE - At the end of fiscal year 1998, the Company had an
investment portfolio of fixed income securities excluding those classified as
cash and cash equivalents, of $13,665,000 (see Note 3 of Notes to Consolidated
Financial Statements). These securities, like all fixed income instruments, are
subject to interest rate risk and will fall in values if market interest rates
increase. If market interest rates were to increase immediately and uniformly by
10% from levels as of July 31, 1998, the decline of the fair value of the
portfolio (approximately $24,000) would not be material. However, the Company
has the ability to hold its fixed income investments until maturity, and
therefore the Company would not expect to recognize an adverse impact in income
or cash flows.
- - SUBSEQUENT EVENT - RESTRUCTURE - In October 1998 the Company internally
announced a plan to consolidate its East and West coast engineering
organizations for its Intellisync family of products. Once completed, the
restructuring plan is expected to create efficiencies by reducing overall
engineering headcount and eliminating redundancies associated with maintaining
two separate product development organizations. The Company currently plans to
complete the restructuring activities by the end of its third fiscal quarter.
As a result of the restructuring plan, the Company expects to incur a one-time
charge in its first fiscal quarter of 1999 for severance and facility related
costs associated with implementing its plan. Additionally, the Company also
expects the restructuring plan to have an adverse impact on its statements of
operations in the second and third fiscal quarters of fiscal 1999.
16
<PAGE>
CONSOLIDATED BALANCE SHEETS
PUMA TECHNOLOGY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
JULY 31, (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,418 $ 5,824
Short-term investments 13,665 15,347
Accounts receivable, net 3,431 3,615
Inventories 244 224
Prepaid expenses and other current assets 392 443
----------------------------------------
Total current assets 25,150 25,453
Property and equipment, net 3,254 2,844
Other assets 2,035 1,116
----------------------------------------
Total assets $30,439 $29,413
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,140 $ 1,215
Accrued expenses and other current liabilities 1,517 1,001
Deferred revenue 1,489 683
Current portion of capital lease obligations 28 25
----------------------------------------
Total current liabilities 4,174 2,924
----------------------------------------
Capital lease obligations, net of current portion 41 66
----------------------------------------
Total liabilities 4,215 2,990
----------------------------------------
Commitments and contingencies (Note 5)
Common stock, $0.001 par value; 40,000 shares authorized
12,473, and 12,032 shares issued and outstanding at
July 31, 1998 and 1997 respectively 12 12
Additional paid-in capital 33,871 31,525
Receivable from stockholders (66) (192)
Deferred stock compensation (53) (81)
Accumulated deficit (7,540) (4,841)
----------------------------------------
Total stockholders' equity 26,224 26,423
----------------------------------------
Total liabilities and stockholders' equity $30,439 $29,413
----------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
PUMA TECHNOLOGY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
YEARS ENDED JULY 31, (IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
Revenue
License $18,469 $13,710 $ 7,418
Services 3,839 1,919 298
------------------------------------------------
Total revenue 22,308 15,629 7,716
------------------------------------------------
Cost of revenue
License 1,541 1,032 673
Services 1,536 706 104
------------------------------------------------
Total cost of revenue 3,077 1,738 777
------------------------------------------------
Gross profit 19,231 13,891 6,939
Operating expenses:
Research and development 9,876 6,236 3,003
Sales and marketing 6,855 3,983 2,169
General and administrative 2,994 2,123 1,064
In-process research and development 2,155 880 2,680
------------------------------------------------
Total operating expenses 21,880 13,222 8,916
------------------------------------------------
Operating income (loss) (2,649) 669 (1,977)
Other income, net 1,114 822 85
------------------------------------------------
Income (loss) before income taxes (1,535) 1,491 (1,892)
Provision for income taxes (1,164) (831) (509)
------------------------------------------------
Net income (loss) $(2,699) $ 660 $(2,401)
------------------------------------------------
------------------------------------------------
Basic net income (loss) per share $ (0.22) $ 0.07 $ (0.82)
Diluted net income (loss) per share $ (0.22) $ 0.06 $ (0.82)
Shares used in computing basic net income (loss)
per common share 12,118 9,326 2,926
Shares used in computing diluted net income (loss)
per common share 12,118 11,442 2,926
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PUMA TECHNOLOGY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Convertible Receivable Deferred
Preferred Stock Common Stock Additional from Stock Accu-
Stock Sub- --------------- -------------- Paid-in Stock- Compen- mulated
(IN THOUSANDS) scription Shares Amount Shares Amount Capital holders sation Deficit Total
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1995 $ -- 2,620 $ 3 2,722 $ 3 $ 4,982 $ (2) $ -- $(3,100) $ 1,886
Issuance of Common Stock
upon exercise of options -- -- -- 580 -- 321 (53) -- -- 268
Issuance of Common Stock
in connection with
acquisition of IntelliLink -- -- -- 1,019 1 1,273 (194) -- -- 1,080
Loan to former officer of
IntelliLink Corp. -- -- -- -- -- -- (184) -- -- (184)
Repurchase of unvested
Common Stock -- -- -- (24) -- (5) 2 -- -- (3)
Deferred compensation
related to stock options -- -- -- -- -- 115 -- (108) -- 7
Subscription for Series C
convertible preferred stock 1,582 -- -- -- -- -- (1,582) -- -- --
Net loss -- -- -- -- -- -- -- -- (2,401) (2,401)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Balance at July 31, 1996 1,582 2,620 3 4,297 4 6,686 (2,013) (108) (5,501) 653
Issuance of Series C
convertible preferred stock,
net of issuance costs (1,582) 286 -- -- -- 1,582 1,582 -- -- 1,582
Issuance of Common Stock
upon exercise of options -- -- -- 189 -- 564 -- -- -- 564
Issuance of warrants -- -- -- -- -- 175 -- -- -- 175
Exercise of warrants for
Common Stock -- -- -- 330 -- 405 -- -- -- 405
Conversion of debenture to
Common Stock -- -- -- 344 -- 953 -- -- -- 953
Repurchase of unvested
Common Stock -- -- -- (3) -- -- -- -- -- --
Loan to stockholder -- -- -- -- -- -- (71) -- -- (71)
Repayments by stockholder -- -- -- -- -- -- 310 -- -- 310
Amortization of deferred
compensation -- -- -- -- -- -- -- 27 -- 27
Shares issued in initial
offering, net of expenses -- -- -- 2,500 4 21,161 -- -- -- 21,165
Conversion of preferred stock
to Common Stock -- (2,906) (3) 4,375 4 (1) -- -- -- --
Net income -- -- -- -- -- -- -- -- 660 660
------------------------------------------------------------------------------------------------
Balance at July 31, 1997 -- -- -- 12,032 12 31,525 (192) (81) (4,841) 26,423
Issuance of Common Stock
upon exercise of options -- -- -- 91 -- 107 -- -- -- 107
Issuance of Common Stock
under Employee Stock
Purchase Plan -- -- -- 62 -- 273 -- -- -- 273
Repurchase of unvested
Common Stock -- -- -- (54) -- (10) -- -- -- (10)
Issuance of options and
warrants -- -- -- -- -- 38 -- -- -- 38
Issuance of Common Stock
in connection with
SoftMagic Acquisition -- -- -- 342 -- 1,938 -- -- -- 1,938
Repayments by stockholder -- -- -- -- -- -- 126 -- -- 126
Amortization of deferred
compensation -- -- -- -- -- -- -- 28 -- 28
Net loss -- -- -- -- -- -- -- -- (2,699) . (2,699)
------------------------------------------------------------------------------------------------
Balance at July 31, 1998 $ -- -- $-- 12,473 $12 $33,871 $ (66) $ (53) $(7,540) $26,224
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
CONSOLIDATED CASH FLOWS
PUMA TECHNOLOGY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
YEARS ENDED JULY 31, 1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (2,699) $ 660 $(2,401)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,182 616 217
In-process research and development 2,155 880 2,680
Other 28 20 42
Changes in assets and liabilities:
Accounts receivable 184 (1,778) (1,637)
Inventories (20) (59) (105)
Prepaid expenses and other current assets 51 (384) (82)
Accounts payable (75) 512 17
Accrued expenses and other current liabilities 516 284 272
Deferred revenues 806 (359) 101
----------------------------------------------
Net cash provided by (used in) operating activities 2,128 392 (896)
----------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (1,332) (2,679) (317)
Purchase of short term investments (20,409) (23,960) --
Maturities of short-term investments 21,791 8,003 500
Cash used in acquisitions, net of cash acquired (1,096) (808) (51)
----------------------------------------------
Net cash (used in) provided by investing activities (1,046) (19,444) 132
----------------------------------------------
Cash flows from financing activities:
Principal payments under capital lease obligations (22) (26) (22)
Principal repayments on notes payable -- (35) (119)
Proceeds from exercise of warrants -- 405 --
Note repayments (advances) to stockholder 126 239 (184)
Net proceeds from issuance of convertible preferred stock -- 1,582 --
Net proceeds from issuance of Common Stock 408 21,729 71
----------------------------------------------
Net cash provided by (used in) financing activities 512 23,894 (254)
----------------------------------------------
Increase (decrease) in cash and cash equivalents 1,594 4,842 (1,018)
Cash and cash equivalents at beginning of period 5,824 982 2,000
----------------------------------------------
Cash and cash equivalents at end of period $ 7,418 $ 5,824 $ 982
----------------------------------------------
----------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid $ 3 $ 21 $ 7
----------------------------------------------
Income taxes paid $ 370 $ 831 $ 509
----------------------------------------------
Supplemental disclosure of noncash financing activities:
Property and equipment acquired under capital leases -- -- --
Common Stock issued in connection with the
acquisition of SoftMagic and IntelliLink Corp. 1,938 -- 1,274
Common Stock paid by cancellation of accounts payable -- -- 197
Issuance of warrants for technology -- 175 --
Conversion of debenture to Common Stock -- 953 --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
1 THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
- - THE COMPANY - Puma Technology, Inc. (the "Company") was incorporated in
California on August 27, 1993 and was subsequently reincorporated in Delaware
on November 27, 1996. The Company develops, markets and supports mobile data
exchange software which allows user to easily access, exchange and
synchronize information stored on a variety of different computing devices.
- - BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
- - USE OF ESTIMATES AND ASSUMPTIONS - The preparation of the consolidated
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
- - REVENUE RECOGNITION - The Company recognizes revenue in accordance with the
American Institute of Certified Public Accountants' Statement of Position
("SoP") 91-1 on software revenue recognition. In October 1997, the AICPA
issued SoP No. 97-2, "Software Revenue recognition," which provides guidance
on recognizing revenue for software transactions. See Note 10 for discussion
of SoP No. 97-2 and its impact on the Company's revenue recognition practice
for transactions entered into after July 31, 1998.
Revenue is comprised of license revenue and service revenue. License revenue
is derived from the sale of software products and royalty agreements with
original equipment manufacturers (OEMs). Service revenue is derived from
customer funded engineering services and maintenance contract programs.
License revenue is recognized upon shipment of the software if no significant
obligation remains and collection of the resulting receivable is deemed
probable. The Company currently sells its products primarily to OEMs and to a
lesser extent to distributors and resellers in the United States, Africa, Asia,
Australia, Canada and Europe. The Company grants distributors and resellers
certain rights of return and price protection on unsold merchandise held by
those distributors and resellers. Accordingly, reserves for estimated future
returns and credits for price protection are provided for upon revenue
recognition. Such reserves are based on historical rates of returns and
allowances, distributor inventory levels and other factors.
Revenue from OEMs under minimum guaranteed royalty arrangements, which are
not subject to significant future obligations, is recognized when such
royalties are earned and become payable. Royalty revenue that is subject to
significant future obligations is recognized when such obligations are
fulfilled. Royalty revenue that exceeds minimum guarantees is recognized in
the period earned. Payments received for maintenance contract services are
recognized pro-ratably over the term of the service agreement. Payments from
customers received in advance of revenue recognition are recorded as deferred
revenue.
The Company also provides a limited amount of telephone technical support to
customers. These activities are generally considered insignificant
postcontract customer support obligations and related costs are accrued upon
recognition of the license revenue.
- - CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments with a maturity of three months or less at the date of purchase
to be cash equivalents.
- - SHORT TERM INVESTMENTS - The Company accounts for its marketable securities
in accordance with Statement of Financial Accounting Standards No. 115 (FAS
115), "Accounting for Certain Investments in Debt and Equity Securities,"
which requires the
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
Company to classify debt and equity securities into one of three categories:
held to maturity, trading or available for sale. The Company has classified
its investments as available for sale. The cost of securities sold is based
on the specific identification method.
- - INVENTORIES - Inventories consist principally of software and related
documentation, which are stated at the lower of cost (first-in, first-out) or
market.
- - SOFTWARE DEVELOPMENT COSTS - Software development costs incurred prior to the
establishment of technological feasibility are included in research and
development and are expensed as incurred. The Company defines establishment of
technological feasibility at the point which product reaches beta. Software
development costs incurred subsequent to the establishment of technological
feasibility through the period of general market availability of the product are
capitalized, if material. To date, all software development costs have been
expensed as incurred.
- - PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation and amortization is computed using the straight-line method over
the estimated useful lives of the assets, generally three to five years, or
in the case of leased assets, the life of the lease, if shorter.
- - OTHER ASSETS - Other assets are primarily comprised of intangibles,
goodwill, and other investments. Amortization on intangibles and goodwill is
computed on the straight-line basis over the expected lives of the assets
ranging from two to five years. Accumulated amortization was $543,000 and
$282,000 at July 31, 1998 and 1997 respectively.
- - INCOME TAXES - Income taxes are computed using the asset and liability method.
Under the asset and liability method, deferred income tax assets and liabilities
are determined based on the differences between the financial reporting and tax
bases of the assets and liabilities and are measured using the currently enacted
tax rates and laws.
- - CONCENTRATION OF CREDIT RISK - Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
cash, cash equivalents, short-term investments and trade accounts receivable.
The Company places its cash, cash equivalents and short-term investments
primarily in money market accounts and commercial paper. The Company, by policy,
limits the amount of credit exposure for cash and cash equivalents to any one
issuer.
The Company performs ongoing credit evaluations of its customers and maintains
reserves for potential credit losses. At July 31, 1998, three customers
accounted for 21%, 18%, and 15% of accounts receivable, respectively. At July
31, 1997 two customers accounted for 17% and 11% of accounts receivable,
respectively.
The Company's sales are generally denominated in US dollars. The Company does
not undertake any foreign currency hedging activities.
- - NET INCOME (LOSS) PER SHARE - Net income (loss) per share is computed in
accordance with Statement of Financial Standards No. 128. Basic net income per
share is computed using the weighted average common shares outstanding during
the period. Diluted net income per share is computed using the weighted average
common shares and, if dilutive, potential common shares (convertible preferred,
stock options and warrants) outstanding during the period.
2 ACQUISITIONS
- - SOFTMAGIC CORP. - On July 30, 1998, the Company completed the acquisition of
SoftMagic Corp. ("SoftMagic"), a leader in software tools for the development of
custom applications for handheld devices. Under the terms of the agreement, Puma
paid cash of $1,000,000 and issued 341,742 shares of the Company's Common Stock
in exchange for all outstanding shares of SoftMagic.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
The SoftMagic acquisition has been accounted for as a purchase. The total
purchase price of approximately $3,076,000 was assigned, based on an independent
appraisal, to the fair value of the assets acquired, including $35,000 to
tangible assets acquired, $2,155,000 to in-process research and development and
$886,000 to identified intangible assets. The in-process research and
development was expensed at the acquisition date.
- - REAL WORLD SOLUTIONS, INC. - In July 1997, the Company acquired the assets of
Real World Solutions, Inc., (RWS), a developer of client/server software
solutions, in a transaction accounted for as a purchase. The consolidated
financial statements of the Company include the results of the operations of RWS
since the date of acquisition.
The total purchase price of approximately $1,006,000 (including $751,000 for
liabilities assumed) was assigned, based on an independent appraisal, to the
fair value of the assets acquired, including $70,000 to tangible assets
acquired, $880,000 to in-process research and development and $56,000 to
identified intangible assets. The in-process research and development
was expensed at the acquisition date.
- - INTELLILINK CORP. - In April 1996, the Company acquired IntelliLink, a
developer of advanced synchronization software, in a transaction accounted for
as a purchase. The total purchase price of approximately $3,483,000 (including
$1,207,000 for liabilities assumed) was assigned, based on an independent
appraisal, to the fair value of the assets acquired, including $327,000 to
tangible assets acquired, $2,680,000 to in-process research and development,
$120,000 to identified intangible assets and the remaining $356,000 to goodwill.
The in-process research and development was expensed at the acquisition date.
The consolidated financial statements of the Company include IntelliLink since
the date of the acquisition.
Unaudited pro forma information, which reflects the results of operations for
the years ended July 31, 1998, 1997 and 1996 as if the acquisitions of
SoftMagic, IntelliLink, and RWS had occurred as of the beginning of the periods
presented. Pro forma information presented gives effect of certain adjustments,
including amortization of goodwill and other intangibles, and excludes the
effect of in-process research and development of $2,155,000, $880,000 and
$2,680,000 directly attributable to the acquisitions of SoftMagic, IntelliLink,
and RWS, respectively.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEARS ENDED JULY 31, 1998 1997 1996
................................................
<S> <C> <C> <C>
Pro forma revenue $22,638 $15,735 $ 9,003
Pro forma net
income (loss) $ (805) $ 609 $(1,155)
Pro forma basic earnings
(loss) per share $ (.07) $ .07 $ (.39)
Pro forma diluted earnings
(loss) per share $ (.07) $ .05 $ (.39)
- -------------------------------------------------------------------------------
</TABLE>
3 BALANCE SHEET COMPONENTS
Cash equivalents and short-term investments include available-for-sale
securities as follows (in thousands):
<TABLE>
<CAPTION>
JULY 31, 1998 1997
----------------------------------------
<S> <C> <C>
Cash equivalents
Commercial paper $ 5,412 $ 4,439
Money market funds 385 665
----------------------------------------
$ 5,797 $ 5,104
----------------------------------------
----------------------------------------
Short term investments
Commercial paper $12,651 $11,284
US government agencies 1,014 4,063
----------------------------------------
$13,665 $15,347
----------------------------------------
----------------------------------------
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
Realized gains or losses on sales of available-for-sale securities were
immaterial for the years ended July 31, 1998, 1997 and 1996. There were no
unrealized holding gains or losses on such securities at July 31, 1998 and 1997.
The short-term investments have maturities of less than one year.
Accounts receivable, net consist of the following (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JULY 31, 1998 1997
----------------------------------------
<S> <C> <C>
Accounts receivable $4,374 $4,292
Less allowance for doubtful
accounts and sales returns (943) (677)
----------------------------------------
$3,431 $3,615
- --------------------------------------------------------------------------------
</TABLE>
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JULY 31, 1998 1997
----------------------------------------
<S> <C> <C>
Computer equipment and software $2,267 $1,646
Furniture and office equipment 1,657 1,252
Leasehold improvements 934 616
----------------------------------------
4,858 3,514
Less: accumulated depreciation
and amortization (1,604) (670)
----------------------------------------
$3,254 $2,844
- --------------------------------------------------------------------------------
</TABLE>
At July 31, 1998 and July 31, 1997 the Company had $126,000 of equipment under
capital leases and related accumulated amortization of $102,000 and $65,000,
respectively.
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JULY 31, 1998 1997
----------------------------------------
<S> <C> <C>
Payroll related accruals $ 741 $ 451
Other accrued liabilities 776 367
-----------------------------------------
$1,517 $1,001
- --------------------------------------------------------------------------------
</TABLE>
4 STOCKHOLDERS' EQUITY
- - CONVERTIBLE PREFERRED STOCK - The preferred stock was converted to Common
Stock on the completion of the common stock offering.
- - COMMON STOCK OFFERING - On December 10, 1996, the Company and certain
stockholders of the Company completed an initial public offering of common stock
involving the sale of 2,500,000 shares of the Company's common stock issued by
the Company and 1,985,000 shares of the Company's common stock held by the
existing stockholders. The net proceeds to the company from the sale of the
2,500,000 shares of common stock sold by the Company were approximately
$21,161,000. The Company invested the proceeds from the offering primarily in
money market funds, commercial paper and US Government agency bonds. These funds
are used for general corporate purposes, including working capital of its
operations and to fund capital expenditures and future acquisitions.
- - STOCK OPTION PLANS - In October 1993, the Board of Directors and stockholders
adopted the 1993 Stock Option Plan (the Plan) which provides for granting of
incentive stock options (ISOs) and nonqualified stock options (NSOs) to purchase
shares of Common Stock to employees, consultants and advisors of the Company. To
date, the Company has not granted any significant options to consultants or
advisors. In accordance with the Plan, the stated exercise price shall be not
less than 100% and 85% of the estimated fair market value of Common Stock on the
date of grant for ISOs and NSOs, respectively, as determined by the Board of
Directors. The Plan provides that the options shall be exercisable over a period
not to exceed ten years. Options generally vest 25% one year after date of grant
and 1/48th each month thereafter for the next 36 months. The Plan provides that
the options may be exercised prior to the options becoming vested. If the
optionee's employment is terminated for any reason, the Company has the right to
repurchase any
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
unvested shares. At July 31, 1998, the options authorized under the Plan
aggregated 4,500,000.
In September of 1997, the Board of Directors approved the repricing of certain
outstanding stock options under the Plan with an exercise price of $7.50 or
more. Each employee, officer or director who elected to participate in the
repricing program received a new option with an exercise price of $6.50 (the
fair market value on the repricing date). Each repriced option retained its
original vesting schedule except that no portion of the option could be
exercised during the six month period following the repricing date.
The Company has assumed certain options granted to former employees of acquired
companies (Acquired Options). The Acquired Options were assumed by the Company
outside the Plan, but all are administered as if assumed under the Plan. All of
the Acquired Options have been adjusted to effectuate the conversion under the
terms of the Agreements between the Company and the companies acquired. The
Acquired Options generally become exercisable over a four-year period and
generally expire ten years from the date of grant. No additional options will be
granted under any of these plans.
Stock option activity, both incentive and nonqualified, under all plans is
presented as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Range of Weighted average exercise
Option shares price per share price per share
<S> <C> <C> <C>
Outstanding at July 31,1995 555 $0.025 - $0.20 $ 0.20
Granted 1,144 $0.20 - $6.05 $ 2.64
Exercised (580) $0.025 - $1.25 $ 0.55
Canceled (80) $0.20 - $2.50 $ 0.50
--------------------------------------------------------------
Outstanding at July 31,1996 1,039 $0.20 - $6.05 $ 0.35
Granted 1,487 $7.50 - $17.25 $10.43
Exercised (188) $0.20 - $7.50 $ 3.00
Canceled (230) $0.20 - $17.25 $ 7.10
--------------------------------------------------------------
Outstanding at July 31,1997 2,108 $0.20 - $16.87 $ 7.26
Granted 1,853 $5.18 - $8.38 $ 6.50
Exercised (91) $0.20 - $7.50 $ 1.17
Canceled (1,424) $0.20 - $16.87 $ 9.72
--------------------------------------------------------------
Outstanding at July 31,1998 2,446 $0.20 - $9.75 $ 5.48
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
At July 31, 1998, a total of 58,000 shares were subject to repurchase and
options to purchase approximately 1,118,000 shares were available for future
grants.
Based on an independent appraiser's valuation report, management believes that
the exercise price for certain options granted during fiscal 1996 was below the
estimated fair value of the Company's Common Stock at the dates of grant.
Accordingly, the Company is recognizing approximately $115,000 of compensation
expense over the options' four-year vesting periods.
The following table summarizes information about stock options under the Option
Plan outstanding at July 31, 1998 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Options outstanding Options Exercisable
-------------------------------------------------------------------------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 7/31/98 Contractual Life Exercise Price at 7/31/98 Exercise Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.20 - $4.01 495 6.7 $1.83 469 $1.84
$4.02 - $6.05 557 8.8 5.83 425 5.79
$6.06 - $6.35 96 9.5 6.24 86 6.23
$6.36 - $6.50 1,056 8.7 6.50 1,056 6.50
$6.51 - $9.75 242 9.1 7.44 231 7.41
------ ------
Total 2,446 8.4 $5.48 2,267 $5.49
------ ------
------ ------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - EMPLOYEE STOCK PURCHASE PLAN - In October 1996, the board of directors adopted
the 1996 Employee Stock Purchase Plan (the "ESPP") which authorizes the issuance
of 250,000 shares of Common Stock. The purpose of the ESPP is to provide
eligible employees of the Company with a means of acquiring common stock of the
Company through payroll deductions. The plan consists of four six-month purchase
periods in each two year offering period. Shares may be purchased under the ESPP
at 85% of the lesser of the fair market value of the common stock on the grant
or purchase date. During fiscal 1998, 62,119 shares were sold through the ESPP.
At July 31, 1998,187,881 shares were available for purchase under the ESPP.
- - PRO FORMA INFORMATION - The company applies APB Opinion No. 25 "Accounting for
Stock Issued to Employees" and related interpretations in accounting for the
stock compensation plans (the Plans) described above. Accordingly, no fair value
compensation cost has been recognized for the Plans. If compensation cost for
the Plans
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
had been determined consistent with FAS No. 123 "Accounting for Stock-Based
Compensation", the Company's net income (loss) and earnings (loss) per share
would have been adjusted to the pro-forma amounts indicated below (in thousands,
except per share amounts).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEARS ENDED JULY 31, 1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Net income (loss) reported $(2,699) $660 $(2,401)
Pro forma net income (loss) $(7,404) $(870) $(2,464)
Basic Earnings (loss)
per share as reported $ (.22) $ .07 $ (0.82)
Diluted earnings (loss)
per share as reported $ (.22) $ .06 $ (0.82)
Pro forma basic earnings
(loss) per share $ (0.61) $(.09) $ (0.84)
Pro forma diluted earnings
(loss) per share $ (0.61) $(.09) $ (0.84)
- -------------------------------------------------------------------------------
</TABLE>
Because the method of accounting prescribed by FAS 123 has not been applied to
options granted prior to August 1, 1995, and because the Black-Scholes option
valuation model was developed for traded options and requires the input of
subjective assumptions, the resulting pro forma compensation cost may not be
representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for 1998, 1997 and 1996: risk-free interest rate 5.70% for
1998, 6.46% for 1997 and 5.98% for 1996, dividend yields of 0%, volatility
factors of the expected market price of the Company's Common Stock of 75% for
1998, 50% for 1997 and 0% for 1996, and a weighted average expected life of an
option of four years. The Company has also estimated the fair value for the
purchase rights issued under the Company's Employee Stock Purchase Plan, under
the Black-Scholes valuation model using the following assumptions for 1998 and
1997: risk free interest rate 5.25% and 5.9%, respectively, dividend yields of
0%, volatility factors of the expected market price of the Company's Common
Stock of 75% and 50%, respectively, and a weighted average expected life of six
months and two years, respectively.
The weighted average fair value of options granted during fiscal 1998 and 1997
was $3.51 and $4.27, respectively.
- - COMMON STOCK WARRANTS - In May 1998, the Company issued a warrant to purchase
80,000 shares of its Common Stock at $9.00 per share to Premier Technologies in
exchange for certain market development programs and recorded the warrant at
fair value on the grant date. The warrant is exercisable immediately and expires
in May of 1999. At July 31, 1998, the warrant remained outstanding and had not
been exercised.
In July 1996, the Company agreed to issue a warrant to purchase 140,000 shares
of its Common Stock at $5.50 per share to one of its Series C stockholders in
exchange for rights to certain technology. These warrants were subsequently
issued in August 1996. The aggregate value of the warrant was estimated by the
Company at $175,000 and is being accounted for as purchased technology. The
warrant is exercisable immediately and expires at the earlier of August 1999 or
the acquisition of the Company by another entity. The purchased technology will
be amortized over its estimated life.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
5 COMMITMENTS
The Company leases certain computer equipment and office equipment under
long-term lease agreements that are classified as capital leases. The leases
expire over the next four years and include options to purchase the equipment at
the end of the lease terms.
The Company leases its facilities under operating leases that expire at various
dates through April 2006. The leases provide for escalating lease payments.
Future minimum lease payments, at July 31, 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Capital Operating
Leases Leases
--------------------------------------
<S> <C> <C>
Fiscal year ending July 31,
1999 $37 $1,217
2000 28 1,285
2001 17 1,295
2002 3 1,335
2003 0 1,152
Thereafter -- 3,276
--------------------------------------
Total minimum lease payments 85 $9,560
--------------------------------------
Less amount representing interest (16)
--------------------------------------
Present value of future
minimum lease payments 69
Less current portion of
capital lease payments (28)
--------------------------------------
Long-term capital lease obligations $41
- ------------------------------------------------------------------------------
</TABLE>
Total rent expense was approximately, $1,178,000, $434,000 and $293,000 for the
years ended July 31, 1998, 1997 and 1996, respectively. The 1997 rental expense
was offset by sublease income of approximately $97,000.
6 OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS ENDED JULY 31, 1998 1997 1996
(IN THOUSANDS)
--------------------------------------
<S> <C> <C> <C>
Interest income $1,155 $882 $110
Interest expense (3) (19) (25)
Other expense, net (38) (41) --
--------------------------------------
Total other income, net $1,114 $822 $ 85
- --------------------------------------------------------------------------------
</TABLE>
7 INCOME TAXES
The income tax provision for the years ended July 31, 1998, 1997 and 1996 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS ENDED JULY 31, 1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Current
Federal $ 13 $ 27 $ --
State 26 7 --
Foreign withholding tax 1,125 797 509
--------------------------------------
$1,164 $831 $509
- --------------------------------------------------------------------------------
</TABLE>
Deferred tax assets are summarized as follows (IN THOUSANDS):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JULY 31, 1998 1997
---------------------------------
<S> <C> <C>
Net operating loss carryforwards $ 118 $ 230
Alternative minimum tax credit
carryforwards 78 65
Research and development credit
carryforwards 653 180
Foreign tax credit carryforwards 1,632 750
Reserves and allowances 406 520
Research and development 182 755
---------------------------------
Total deferred tax assets 3,069 2,500
Deferred tax asset valuation allowance (3,069) (2,500)
---------------------------------
$ -- $ --
- --------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
The Company has incurred losses from inception through fiscal 1996. Management
believes that, based on the history of such losses and other factors, the weight
of available evidence indicates that it is more likely than not that the Company
will not be able to realize its deferred tax assets and thus a full valuation
reserve has been recorded at July 31, 1998 and 1997.
A reconciliation of the income tax provision to the amount computed by applying
the statutory federal income tax rate to income (loss) before income tax
provision is summarized as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS ENDED JULY 31, 1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Amounts computed at
statutory federal rate $ (522) $507 $(644)
Foreign withholding taxes 1,125 797 509
In-process research and
development not deductible 288 247 911
Utilization of foreign tax credits (190) (633) --
Utilization of tax loss
carryforwards (359) (448) (322)
Future benefits not
currently recognized 822 361 55
--------------------------------------
$1,164 $831 $509
- --------------------------------------------------------------------------------
</TABLE>
At July 31, 1998, the Company has $653,000 of federal and state research and
development credit carryforwards, $1,632,000 of foreign tax credit carryforwards
and $77,000 of alternative minimum tax credit carryforwards.
8 NET INCOME (LOSS) PER SHARE
In accordance with disclosure requirements of SFAS128, a reconciliation of the
numerator and denominator of basic and diluted net income (loss) per share
calculations is provided as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Net income (loss)
as reported $(2,699) $ 660 $(2,401)
------------------------------------------
------------------------------------------
Weighted average
shares outstanding
(denominator) used to
compute basic earnings
per common share 12,118 9,326 2,926
Shares issuable upon
exercise of options
and warrants -- 582 --
Weighted average preferred
shares as if converted -- 1,534 --
------------------------------------------
Denominator used to
compute diluted
earnings per share 12,118 11,442 2,926
------------------------------------------
------------------------------------------
Basic earnings (loss)
per share $ (0.22) $ 0.07 $ (0.82)
Diluted earnings (loss)
per share $ (0.22) $ 0.06 $ (0.82)
- --------------------------------------------------------------------------------
</TABLE>
As a result of the net loss incurred by the Company in 1998 and 1996, potential
common share attributable to stock options, warrants and convertible preferred
stock were antidilutive and were excluded from net loss per share calculations.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUMA TECHNOLOGY
9 REVENUE BY REGION
The Company operates in a single industry segment encompassing the development,
marketing and support of mobile data exchange software. The Company markets its
products to customers in North America, Asia and Europe. The Company's customer
base consists primarily of large OEMs in the PC market and selected distributors
in North America, Asia and Europe which primarily market to the retail channel.
The Company's sales are generally denominated in U.S. dollars.
Revenue information by geographic region is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEARS ENDED JULY 31, 1998 1997 1996
<S> <C> <C> <C>
North America $11,681 $ 7,172 $2,649
Japan 9,888 7,304 4,302
Other International 739 1,153 765
------------------------------------------
$22,308 $15,629 $7,716
- --------------------------------------------------------------------------------
</TABLE>
10 RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosure about segments
of an Enterprise and Related Information." Under SFAS No. 130, companies are
required to report in the financial statements, in addition to net income,
comprehensive income including, as applicable, foreign currency items, minimum
pension liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities. Under SFAS No. 131, companies are
required to separately report certain financial and descriptive information
about operating segments. The Company will adopt the provisions of SFAS No. 130
and SFAS No. 131 in connection with its financial statements for the year ending
July 31, 1999, and does not expect the adoption to have a material impact on
such financial statements.
In October 1997, the AICPA issued SoP No. 97-2, Software Revenue recognition,"
which provides guidance on recognizing revenue for software transactions. SOP
97-2 supersedes SoP No. 91-1 and is effective for transactions entered into by
the Company after July 31, 1998. The Company expects SoP No. 97-2 to have an
insignificant impact on the Company's revenue recognition policy. In March 1998,
the AICPA issued SoP No. 98-4, which deferred for one year, certain provisions
of SoP 97-2 relating to the determination of fair value of multiple elements
included in a software arrangement. While the ultimate resolution of the
guidance deferred by SoP 98-4 cannot be determined, the Company currently does
not expect such resolution will have a significant impact on its revenue
recognition policy.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and is effective for all years beginning after June 15,
1999. The Company does not expect the adoption of SFAS 133 to have a material
impact on its financial position.
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
PUMA TECHNOLOGY
To the Board of Directors and Stockholders of
Puma Technology, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Puma
Technology, Inc. and its subsidiaries at July 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended July 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
August 24, 1998
31
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-28277 and No. 333-46691) of Puma Technology,
Inc. of our report dated August 24, 1998 appearing on page 31 of the Annual
Report to Stockholders which is incorporated in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 26 of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
San Jose, California
November 11, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 7,418
<SECURITIES> 13,665
<RECEIVABLES> 4,374
<ALLOWANCES> 943
<INVENTORY> 244
<CURRENT-ASSETS> 392
<PP&E> 4,858
<DEPRECIATION> 1,604
<TOTAL-ASSETS> 3,254
<CURRENT-LIABILITIES> 4,174
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 26,212
<TOTAL-LIABILITY-AND-EQUITY> 30,439
<SALES> 18,469
<TOTAL-REVENUES> 22,308
<CGS> 1,541
<TOTAL-COSTS> 3,077
<OTHER-EXPENSES> 21,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> (15,535)
<INCOME-TAX> 1,164
<INCOME-CONTINUING> (2,699)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,699)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
