<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 2, 1998
Commission File No. 000-23169
SEAGATE SOFTWARE, INC.
(Registrant)
-------------------
Incorporated in the State of Delaware
I.R.S. Employer Identification Number 77-0397623
915 Disc Drive, Scotts Valley, California 95066
Telephone: (831) 438-6550
-------------------
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 [ ]
The number of shares outstanding of the registrant's Common Stock as of October
2, 1998 was 1,030,362.
<PAGE> 2
INDEX
SEAGATE SOFTWARE, INC.
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of October 2, 1998
(unaudited) and July 3, 1998 2
Condensed Consolidated Statements of Operations for the three
months ended October 2, 1998 and October 3, 1997 (unaudited) 3
Condensed Consolidated Statements of Cash Flows for the three
months ended October 2, 1998 and October 3, 1997 (unaudited) 4
Notes to the Condensed Consolidated Financial Statements 5
(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risks 25
PART II OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURES 27
</TABLE>
1
<PAGE> 3
SEAGATE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 2, JULY 3,
1998 1998
------------- -------------
(UNAUDITED) (1)
<S> <C> <C>
ASSETS
Cash $ 10,418 $ 15,130
Accounts receivable, net 44,416 46,564
Inventories 776 1,117
Other current assets 4,386 2,474
------------- -------------
Total current assets 59,996 65,285
Equipment and leasehold improvements, net 15,257 16,876
Goodwill and other intangibles, net 48,019 53,879
------------- -------------
Total assets $ 123,272 $ 136,040
============= =============
LIABILITIES
Loan payable to Seagate Technology $ 3,895 $ 16,054
Accounts payable 11,795 10,994
Accrued employee compensation 14,100 14,365
Accrued expenses 17,080 15,339
Accrued income taxes 652 5,562
Deferred revenue 14,208 13,714
------------- -------------
Total current liabilities 61,730 76,028
Deferred income taxes 1,343 1,691
Other liabilities 284 255
------------- -------------
Total liabilities 63,357 77,974
Common stock subject to repurchase 3,899 3,917
STOCKHOLDERS' EQUITY
Convertible preferred stock 55 55
Common stock -- --
Additional paid-in capital 344,744 343,526
Accumulated deficit (288,323) (289,175)
Foreign currency translation adjustment (460) (257)
------------- -------------
Total stockholders' equity 56,016 54,149
------------- -------------
Total liabilities and stockholders' equity $ 123,272 $ 136,040
============= =============
</TABLE>
(1) The information in this column was derived from the Company's audited
consolidated balance sheet as of July 3, 1998.
See notes to condensed consolidated financial statements.
2
<PAGE> 4
SEAGATE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
OCTOBER 2, OCTOBER 3,
1998 1997
------------- -------------
<S> <C> <C>
Revenues:
Licensing $ 58,671 $ 51,797
Licensing from Seagate Technology 2,156 1,000
Maintenance, support and other 14,048 10,225
------------- -------------
Total revenues 74,875 63,022
Cost of revenues:
Licensing 2,935 4,969
Licensing from Seagate Technology 129 285
Maintenance, support and other 6,430 4,600
Amortization of developed technologies 2,866 3,942
------------- -------------
Total cost of revenues 12,360 13,796
------------- -------------
Gross profit 62,515 49,226
Operating expenses:
Sales and marketing 36,007 28,697
Research and development 12,787 11,393
General and administrative 8,940 9,079
Amortization of goodwill and other intangibles 3,198 3,456
------------- -------------
Total operating expenses 60,932 52,625
------------- -------------
Income (loss) from operations 1,583 (3,399)
Interest expense (156) (300)
Other, net 468 165
------------- -------------
Interest and other, net 312 (135)
------------- -------------
Income (loss) before income taxes 1,895 (3,534)
Benefit from (provision for) income taxes (1,043) 619
------------- -------------
Net income (loss) $ 852 $ (2,915)
============= =============
Net income (loss) per common share:
Basic $ 3.09 $ (28.12)
Diluted $ 0.01 $ (28.12)
Number of shares used in per share computations:
Basic 275,314 103,659
Diluted 59,984,218 103,659
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
SEAGATE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
OCTOBER 2, OCTOBER
1998 3, 1997
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 852 $ (2,915)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 8,247 10,245
Deferred income taxes (348) (1,507)
Write-offs due to restructure -- 553
Changes in operating assets and liabilities:
Accounts receivable 2,148 (2,702)
Inventories 341 831
Other current assets (1,912) 73
Accounts payable 801 (607)
Accrued employee compensation (265) 717
Accrued expenses 1,741 (4,152)
Accrued income taxes (4,810) (512)
Deferred revenue 494 443
Other liabilities 29 (24)
------------- -------------
Net cash provided by operating activities 7,318 443
INVESTING ACTIVITIES
Acquisition of equipment and leasehold improvements, net (572) (1,948)
Acquisition of intangibles (204) --
------------- -------------
Net cash used in investing activities (776) (1,948)
FINANCING ACTIVITIES
Sale of common stock 278 169
Borrowings from Seagate Technology, net (11,337) (1,536)
------------- -------------
Net cash used in financing activities (11,059) (1,367)
Effect of exchange rate changes on cash (195) (38)
------------- -------------
Decrease in cash (4,712) (2,910)
Cash at the beginning of the period 15,130 12,085
------------- -------------
Cash at the end of the period $ 10,418 $ 9,175
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $-- $ 14
Cash paid for income taxes 5,201 991
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated condensed financial statements have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes the
disclosures included in the unaudited condensed consolidated financial
statements, when read in conjunction with the consolidated financial statements
of the Company as of July 3, 1998 and notes thereto, are adequate to make the
information presented not misleading.
The condensed consolidated financial statements reflect, in the opinion of
management, all normal recurring adjustments necessary to summarize fairly the
consolidated financial position, results of operations and cash flows for such
periods.
The results of operations for the three months ended October 2, 1998 are not
necessarily indicative of the results that may be expected for the fiscal year
ending July 2, 1999.
The Company operates and reports financial results on a fiscal year of 52 or
53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1998 was
53 weeks and ended on July 3, 1998 and fiscal 1999 will be 52 weeks and will end
on July 2, 1999. All references to years in this Form 10-Q represent fiscal
years unless otherwise noted.
REVENUE RECOGNITION. The Company's revenues are primarily derived from the
sale of product licenses, software maintenance, technical support, training and
consulting. During the first quarter of 1999, the Company began recognizing
license revenues in accordance with the American Institute of Certified Public
Accountants Statement of Position 97-2, "Software Revenue Recognition". Revenues
from software license agreements are generally recognized at the time of product
delivery, provided that fees are fixed or determinable, evidence of an
arrangement exists, collectibility is probable and the Company has
vendor-specific objective evidence of fair value. Service revenues from customer
maintenance fees for ongoing customer support and product updates are recognized
ratably over the maintenance term, which is typically 12 months. Service
revenues from training and consulting are recognized when such services are
performed.
NET INCOME (LOSS) PER SHARE. Basic net income (loss) per common share is
computed using the weighted average number of shares of common stock outstanding
during the period. For periods in which the Company had losses, common
equivalent shares from stock options, shares subject to repurchase and
convertible preferred stock are excluded from the computation of diluted net
loss per share, as their effect is antidilutive. Below is a reconciliation of
the numerator and denominator used to calculate basic and diluted earnings per
share (in thousands, except share and per share data):
5
<PAGE> 7
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
OCTOBER 2, OCTOBER 3,
1998 1997
------------- -------------
<S> <C> <C>
Basic net income (loss) per share computation:
Numerator:
Net income (loss) $ 852 $ (2,915)
------------- -------------
Denominator:
Weighted average number of common shares
outstanding during the period 275,314 103,659
------------- -------------
Net income (loss) per share-- basic $ 3.09 $ (28.12)
============= =============
Diluted net income (loss) per share computation:
Numerator:
Net income (loss) $ 852 $ (2,915)
------------- -------------
Denominator:
Weighted average number of common shares
outstanding during the period 275,314 103,659
Convertible preferred stock 54,633,333 --
Incremental common shares attributable to
exercise of outstanding options and shares
subject to repurchase (assuming proceeds
would be used to purchase treasury stock) 5,075,571 --
------------- -------------
59,984,218 103,659
------------- -------------
Net income (loss) per share-- diluted $ 0.01 $ (28.12)
============= =============
</TABLE>
For the period ended October 3, 1997, 11,332 shares of common stock subject
to repurchase at an average exercise price of $6.00 per share and options to
purchase 7,789,770 shares of common stock at an average exercise price of $5.24
per share were excluded from the computation of diluted earnings per share
because the effect would have been antidilutive.
6
<PAGE> 8
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
ACCOUNTS RECEIVABLE. Accounts receivable are summarized below, in thousands:
<TABLE>
<CAPTION>
OCTOBER 2, JULY 3,
1998 1998
------------- -------------
<S> <C> <C>
Accounts receivable $ 46,126 $ 48,200
Less allowance for (1,710) (1,636)
non-collection
------------- -------------
$ 44,416 $ 46,564
============= =============
</TABLE>
EQUIPMENT AND LEASEHOLD IMPROVEMENTS. Equipment and leasehold improvements
consisted of the following, in thousands:
<TABLE>
<CAPTION>
OCTOBER 2, JULY 3,
1998 1998
------------- -------------
<S> <C> <C>
Equipment $ 32,431 $ 30,999
Leasehold improvements 8,495 9,424
------------- -------------
40,926 40,423
Less accumulated depreciation
and amortization (25,669) (23,547)
------------- -------------
$ 15,257 $ 16,876
============= =============
</TABLE>
GOODWILL AND OTHER INTANGIBLES. Goodwill and other intangibles consisted
of the following, in thousands:
<TABLE>
<CAPTION>
OCTOBER 2, JULY 3,
1998 1998
------------- -------------
<S> <C> <C>
Goodwill $ 44,968 $ 44,953
Developed technology 48,239 48,049
Trademarks 9,972 9,972
Assembled workforce 4,596 4,596
Distribution network 2,925 2,925
Other intangibles 13,813 13,813
------------- -------------
124,513 124,308
Accumulated amortization (76,494) (70,429)
------------- -------------
Goodwill and other intangibles $ 48,019 $ 53,879
============= =============
</TABLE>
COMMON STOCK SUBJECT TO REPURCHASE. Current employees and directors of the
Company and of Seagate Technology have exercised 732,042 shares of common stock
under the 1996 Stock Option Plan (the "Option Plan"). At October 2, 1998,
279,242 shares were vested and 452,800 shares were unvested. At the option of
the employee or director, within 30 days of termination such vested and unvested
shares may be sold back to the Company at the original issue price. In addition,
upon termination, unvested shares are subject to repurchase at the option of the
Company at original issue price. Because of the obligation to repurchase vested
and unvested shares of common stock, the Company has excluded the amounts
associated with the repurchase obligation from Stockholders' Equity in the
accompanying balance sheet. At October 2, 1998, the repurchase obligation
amounted to $3,899,000.
7
<PAGE> 9
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NEW ACCOUNTING PRONOUNCEMENTS
The Company intends to adopt Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131") during fiscal 1999. This standard will require additional
disclosure, but will not have a material effect on the Company's financial
position or results of operations. SFAS 131 changes the way companies report
segment information and requires segments to be determined based on how
management measures performance and makes decisions about allocating resources.
SFAS 131 will first be reflected in the Company's 1999 Annual Report on Form
10-K.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance
on capitalization of the costs incurred for computer software developed or
obtained for internal use. It also provides guidance for determining whether
computer software is internal-use software and on accounting for the proceeds of
computer software originally developed or obtained for internal use and then
subsequently sold to the public. The Company has not yet determined the impact,
if any, of adopting this statement. The disclosures prescribed by SOP 98-1 will
be effective for the Company's consolidated financial statements for the fiscal
year ending June 30, 2000.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that derivatives
be recognized in the balance sheet at fair value and specifies the accounting
for changes in fair value. SFAS 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999, and will be effective for the
Company's fiscal year 2000. The Company generally does not use derivative
financial instruments.
STOCKHOLDERS' EQUITY
Shares authorized and outstanding are as follows:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
---------------------------------
OCTOBER 2, JULY 3,
1998 1998
------------- -------------
<S> <C> <C>
Preferred stock, par value $.001 per share,
73,000,000 shares authorized 54,633,333 54,633,333
Common stock, par value $.001 per share,
95,600,000 shares authorized 298,320 235,502
</TABLE>
8
<PAGE> 10
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
INCOME TAXES
The Company expects its annual effective tax rate on anticipated
operating income for fiscal 1999 (see "Subsequent Event") to approximate 55%
absent the effects, if any, of the anticipated contribution of the Company's
Network & Storage Management Group to Veritas Holding Corporation. The projected
effective tax rate exceeds the U.S. statutory rate primarily due to the
amortization of goodwill and certain other purchased intangible assets that are
not deductible for tax purposes, expected foreign losses in certain
jurisdictions for which no tax benefit can be recognized currently, and foreign
taxes on certain earnings generated in higher tax rate jurisdictions. This
expected annual effective tax rate of 55% has been used to record the provision
for income taxes for the three month period ended October 2, 1998 compared with
a 17% effective tax rate, used to record the benefit for income taxes for the
three month period ended October 3, 1997. The effective tax rate used to record
the benefit for income taxes for the three month period ended October 3, 1997
was less than the U.S. statutory rate primarily due to increases in the
valuation allowance for deferred tax assets and the amortization of
nondeductible goodwill.
The Company is included in the consolidated federal and certain combined
and consolidated state and foreign income tax returns of Seagate Technology, the
Company's majority stockholder. Seagate Technology and the Company have entered
into a tax sharing agreement ("the Tax Allocation Agreement"). Pursuant to
certain terms of the Tax Allocation Agreement, the Company's ability to
recognize the tax benefits of certain net operating loss carryforwards and
foreign and domestic tax credits can be impacted by Seagate Technology's
anticipated operating income for fiscal 1999. Accordingly, the Company's
expected annual effective tax rate of 55% on anticipated operating income may be
subject to adjustment in future quarters.
COMPREHENSIVE INCOME
As of July 4, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income. SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of SFAS 130 had no impact on the Company's
net income or stockholders' equity. SFAS 130 requires that foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, be included in other comprehensive income. Accordingly,
the differences between the Company's comprehensive income and net income for
the periods presented are not material.
LITIGATION
See Part II, Item 1 of this Form 10-Q for a description of legal
proceedings.
SUBSEQUENT EVENT
The Company, its parent company, Seagate Technology, Inc. ("STI") and its
Seagate Software Network & Storage Management Group, Inc. ("NSMG") subsidiary
announced on October 5, 1998 that they had entered into an Agreement and Plan of
Reorganization (the "Plan") as of such date with Veritas Holding Corporation
("Newco") and Veritas Software Corporation ("VERITAS"). VERITAS provides
end-to-end storage management software solutions. The Plan provides for the
contribution by the
9
<PAGE> 11
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Company, STI and certain of their respective subsidiaries to Newco of (a) the
outstanding stock of NSMG and certain other subsidiaries of the Company, and (b)
those assets used primarily in the network storage management business of the
Company (the "NSMG Business"), in consideration for the issuance of shares of
Common Stock of Newco to the Company and the offer by Newco to grant options to
purchase Common Stock of Newco to certain of the Company's employees who become
employees of Newco or its subsidiaries. As part of the Plan, Newco will also
assume certain liabilities of the NSMG Business. The Plan is structured to
qualify as a tax-free exchange. The merger will be accounted for as a
non-monetary transaction using the fair value of the assets exchanged.
Upon consummation of the merger, Newco shall issue shares of Common
Stock to the Company equal to approximately 40% of the fully diluted Common
Stock equivalent equity interests in Newco (assuming conversion of all
convertible securities, including the VERITAS convertible debentures, and
exercise of all assumed options and warrants) less that number of shares of
Newco Common Stock issuable upon exercise of Newco options issued to the Company
employees who surrender their outstanding options to purchase shares of the
Company's Common Stock. Upon consummation of the merger, the former security
holders of VERITAS will be issued Newco securities representing approximately
60% of the fully diluted Common Stock equivalent equity interests in Newco.
The merger is subject to a number of conditions, including but not
limited to the effectiveness of a Registration Statement on Form S-4 to be filed
by Newco with the Securities and Exchange Commission, approval by the
stockholders of VERITAS and the Company, the expiration or termination of the
waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and other customary closing conditions.
The Company anticipates recording a substantial gain and certain
expenses in connection with the merger. The gain will be recorded in fiscal
1999. The expenses will include a substantial one-time write-off of in-process
research and development during fiscal 1999 as well as amortization of goodwill
and intangibles over periods up to five years following the merger. The
magnitude of the gain and expenses will depend on several factors, including the
average stock price of Veritas around the date of the merger, the number of
shares of stock exchanged and an independent valuation of Veritas' business. The
Company will account for its investment in Veritas using the equity method and
currently anticipates the merger will be consummated in the third quarter of
fiscal 1999.
NSMG comprised approximately 53% of consolidated assets, 60% of
consolidated revenues, and (43)% of consolidated net loss at and for the fiscal
year ended 1998 (60% of consolidated assets, 65% of consolidated revenues, and
493% of consolidated net income at and for the first fiscal quarter of 1999). If
the exchange with Veritas is consummated along the lines currently comtemplated,
it will result in a substantial reduction in ongoing consolidated revenues and
will result in net losses in periods subsequent to the exchange resulting from
the amortization of intangible assets and goodwill.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN FORWARD-LOOKING INFORMATION
Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") are forward-looking
statements based on current expectations, and entail various risks and
uncertainties that could cause actual results to differ from those projected in
such forward-looking statements. Certain of these risks and uncertainties are
set forth below in the sections entitled "Results of Operations," "Liquidity and
Capital Resources" and "Factors Affecting Future Operating Results. " Certain
sections in this Quarterly Report on Form 10-Q have been identified as
containing forward-looking statements. The reader is cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
OVERVIEW
The Company develops and markets software products and provides related
services enabling business users and information technology ("IT") professionals
to manage enterprise information. Headquartered in Scotts Valley, California,
the Company has over 40 offices and operations in 17 countries worldwide. The
Company is a majority-owned and consolidated subsidiary of Seagate Technology,
Inc. (the "Parent Company" or "Seagate Technology"), a data technology company
that provides products for storing, managing and accessing digital information
on computer systems. As of October 2, 1998, the Parent Company and one of its
subsidiaries held 99.6% of the Company's outstanding capital stock. On a fully
converted basis, the outstanding minority interests of the Company amounted to
approximately 18.2%, which consisted of Common Stock, options to purchase its
Common Stock issued pursuant to the 1996 Stock Option Plan (the "Option Plan")
and Common Stock subject to repurchase. Such options and stock are held by
certain current and former employees, directors and consultants of the Company
and the Parent Company.
The Company was incorporated in Delaware in November 1993 and commenced
operations in May 1994 pursuant to the Parent Company's merger with Crystal
Computer Services, Inc., a company engaged in developing and marketing report
writing software. From August 1994 to June 1996, the Parent Company acquired
eight software companies, which were engaged in developing and marketing
business intelligence ("BI") or network and/or storage management software
products. In February 1996, the Parent Company merged with Conner Peripherals,
Inc. ("Conner") in a transaction accounted for as a pooling-of-interests. In
connection with the merger, the Parent Company purchased the outstanding
minority interests in Conner's storage management software operations under
Arcada Holdings, Inc. ("Arcada"). In April 1996, the Parent Company consolidated
its software operations into Seagate Software. In June 1998, the Company
acquired Eastman Software Storage Management Group, Inc. ("Eastman"), a company
engaged in developing, producing and marketing hierarchical storage management
("HSM") products for the Windows NT platform. The purchase price of
approximately $10,000,000 was paid in cash. The Company accounted for the
acquisition using the purchase method, and the results of operations of Eastman
are only included in the Company's operations since the acquisition was
completed.
On October 5, 1998, the Company signed a definitive agreement to
contribute its Network & Storage Management Group subsidiary ("NSMG") to a new
holding company that will also acquire VERITAS Software Corporation ("Veritas").
See "Notes to Condensed Consolidated Financial Statements -- Subsequent Event."
11
<PAGE> 13
The Company expects to incur certain expenses in connection with the
contribution of NSMG to Newco. These expenses include a substantial one-time
write-off of in-process research and development during fiscal 1999 as well as
amortization of goodwill and intangibles over the next four to five years and
amortization of the Company's portion of the amortization related to its
acquisition of Newco's stock and the consolidation of Newco's amortization of
its balance sheet items on a pro rata basis in fiscal 1999 and over the next
three to five years. The Company also expects to record a substantial gain on
the sale of NSMG.* The magnitude of the expenses and the gain will depend on
several factors, including the stock price of Veritas on the date of the merger,
the number of options to purchase Seagate Software common stock that are
surrendered by employees of NSMG who receive Newco options, and an independent
valuation of Veritas' business.
NSMG comprised approximately 53% of consolidated assets, 60% of
consolidated revenues, and (43)% of consolidated net loss at and for the fiscal
year ended 1998 (60% of consolidated assets, 65% of consolidated revenues, and
493% of consolidated net income at and for the first fiscal quarter of 1999). If
the exchange with Veritas is consummated along the lines currently contemplated,
it will result in a substantial reduction in ongoing consolidated revenues and
will result in net losses in periods subsequent to the exchange resulting from
the amortization of intangible assets and goodwill.
The Company operates and reports financial results on a fiscal year of
52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1998
was 53 weeks and ended on July 3, 1998 and fiscal 1999 will be 52 weeks and will
end on July 2, 1999. All references to years in this Form 10-Q represent fiscal
years unless otherwise noted.
RESULTS OF OPERATIONS
REVENUES. Total revenues increased 19% in the three months ended October
2, 1998, to $74.9 million from $63.0 million for the three months ended October
3, 1997. Licensing revenues increased 15% to $60.8 million for the three months
ended October 2, 1998 from $52.8 million for the three months ended October 3,
1997. The increase in licensing revenues over the comparable year-ago quarter
was primarily due to a net increase in the number of NSMG product licenses sold
for sales of NSMG's Backup Exec for Windows NT and Desktop Management Suite and
IMG's Crystal Reports and Crystal Info products. Maintenance, support, and other
revenues increased 37% to $14.0 million for the three months ended October 2,
1998 from $10.2 million for the three months ended October 3, 1997. The increase
in maintenance, support and other revenues over the comparable year-ago quarter
was primarily due to increases in training and consulting revenues resulting
from a larger installed customer base. Additionally, the Company continued to
expand both its indirect and direct sales channels. Revenues from indirect sales
channels increased 25% to $53.0 million in the three months ended October 2,
1998 from $42.2 million in the three months ended October 3, 1997. Revenues from
direct sales channels increased 5% to $21.9 million in the three months ended
October 2, 1998 from $20.8 million in the three months ended October 3, 1997.
COST OF REVENUES. The cost of revenues consists of amortization of
acquired developed technology, royalties, product packaging, documentation,
duplication, production and the cost of maintenance, consulting support and
other services. Acquired developed technology is amortized based on the greater
of the straight-line method over its estimated useful life (30 to 48 months) or
the ratio of current revenues to total current and anticipated future revenues.
Cost of revenues declined 10% to $12.4 million in the
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
12
<PAGE> 14
three months ended October 2, 1998 from $13.8 million in the three months ended
October 3, 1997. The cost of license revenue as a percent of license revenue
declined to 5% in the three months ended October 2, 1998 from 10% in the
comparable year-ago quarter. This decrease over the comparable year-ago quarter
was primarily due to a nonrecurring charge of $1 million to reserve for obsolete
inventory during the three months ended October 3, 1997. Reductions in product
packaging and documentation costs, resulting from a shift in mix to CD-ROMs from
disks and increased sales of higher margin server products, also contributed to
the decrease. The increase in the cost of maintenance, support and other
revenues over the comparable year-ago quarter was primarily due to expansion of
the Company's professional services work force necessary to support the growth
in training and consulting revenues. The 27% decrease in the amortization of
developed technology over the three months ended October 3, 1997 was primarily
due to certain intangible assets that were fully amortized during or at the
start of the first quarter of fiscal 1999.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
personnel-related expenses, advertising, sales and marketing promotions and
customer technical support costs. Total sales and marketing expenses increased
25% to $36.0 million in the three months ended October 2, 1998 from $28.7
million in the three months ended October 3, 1997. The increase in sales and
marketing expenses over the comparable year-ago quarter was primarily due to
expansion of the Company's sales force and increases in advertising, promotion
and technical support costs necessary to support revenue growth, particularly
outside of North America. As a percentage of total revenues, total sales and
marketing expenses were 48% and 46% in the three months ended October 2, 1998
and October 3, 1997, respectively.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel-related expenses, depreciation of development equipment
and facilities and occupancy costs. In accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," software development costs are expensed
as incurred until technological feasibility has been established, at which time
such costs are capitalized until the product is available for general release to
customers. To date, the establishment of technological feasibility of the
Company's products and general release of such software has substantially
coincided. As a result, software development costs qualifying for capitalization
have been insignificant. Total research and development expenses increased 12%
to $12.8 million in the three months ended October 2, 1998 from $11.4 million in
the three months ended October 3, 1997. The increase in research and development
expenses over the comparable year-ago quarter was primarily due to increases in
personnel and related expenses, many specifically related to the Eastman
acquisition, necessary to support new product development and localization
costs. As a percentage of total revenues, research and development expenses were
17% and 18% in the three months ended October 2, 1998 and October 3, 1997,
respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel-related expenses for finance, legal, information
technology, human resources and general management, fixed asset provisions and
outside services. Total general and administrative expenses decreased 2% to $8.9
million in the three months ended October 2, 1998 from $9.1 million in the three
months ended October 3, 1997. The decrease over the comparable year-ago quarter
was primarily due to management's efforts to reduce general management and
administrative costs. As a percentage of total revenues, general and
administrative expenses were 12% and 14% in the three months ended October 2,
1998 and October 3, 1997, respectively.
13
<PAGE> 15
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill represents the
excess of the purchase price of acquired companies over the estimated fair
values of the tangible and intangible net assets acquired. Goodwill is amortized
on a straight-line basis over six to seven years. Other intangible assets
consist of acquired trademarks, assembled workforces, distribution networks,
developed technology, customer bases, and covenants not to compete. Amortization
of other intangibles, other than acquired developed technology, which is
included in the cost of revenues, is provided based on the straight-line method
over the respective useful lives of the assets ranging from one to five years.
Total amortization of goodwill and other intangibles decreased 7% to $3.2
million in the three months ended October 2, 1998 from $3.5 million in the three
months ended October 3, 1997. The decrease in the amortization of goodwill and
other intangibles over the comparable year-ago quarter was primarily due to
decreases in amortization expense based on certain amounts becoming fully
amortized during or as of the start of the first fiscal quarter of 1999,
partially offset by increases in amortization expense due to goodwill acquired
as part of the Eastman acquisition. As a percentage of total revenues,
amortization of goodwill and other intangibles were 4% and 6% in the three
months ended October 2, 1998 and October 3, 1997, respectively.
INTEREST EXPENSE AND OTHER, NET. Interest expense decreased 48% to
$156,000 in the three months ended October 2, 1998 from $300,000 in the three
months ended October 3, 1997. The decrease in interest expense over the
comparable year-ago quarter was primarily due to a lower level of outstanding
borrowings from Seagate Technology. Other income, net increased 184% to $468,000
in the three months ended October 3, 1998 from $165,000 in the three months
ended October 2, 1997 primarily due to foreign currency translation gains
resulting from the Company's Canadian operations.
INCOME TAXES. The Company expects its annual effective tax rate on
anticipated operating income for fiscal 1999 (see "Subsequent Event") to
approximate 55% absent the effects, if any, of the anticipated contribution of
the Company's Network & Storage Management Group to Veritas Holding Corporation.
The projected effective tax rate exceeds the U.S. statutory rate primarily due
to the amortization of goodwill and certain other purchased intangible assets
that is not deductible for tax purposes, expected foreign losses in certain
jurisdictions for which no tax benefit can be recognized currently, and foreign
taxes on certain earnings generated in higher tax rate jurisdictions. This
expected annual effective tax rate of 55% has been used to record the provision
for income taxes for the three month period ended October 2, 1998 compared with
a 17% effective tax rate, used to record the benefit for income taxes for the
three month period ended October 3, 1997. The effective tax rate used to record
the benefit for income taxes for the three month period ended October 3, 1997
was less than the U.S. statutory rate primarily due to increases in the
valuation allowance for deferred tax assets and the amortization of
nondeductible goodwill.
The Company is included in the consolidated federal and certain combined
and consolidated state and foreign income tax returns of Seagate Technology, the
Company's majority stockholder. Seagate Technology and the Company have entered
into a tax sharing agreement ("the Tax Allocation Agreement"). Pursuant to
certain terms of the Tax Allocation Agreement, the Company's ability to
recognize the tax benefits of certain net operating loss carryforwards and
foreign and domestic tax credits can be impacted by Seagate Technology's
anticipated operating income for fiscal 1999. Accordingly, the Company's
expected annual effective tax rate of 55% on anticipated operating income may be
subject to adjustment in future quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's total cash was $10,418,000 and $15,130,000 as of October
2, 1998 and July 3 1998, respectively. The decrease in cash was primarily due to
a reduction in the Company's loan payable
14
<PAGE> 16
balance to the Parent Company and purchases of equipment, leasehold improvements
and intangible assets, partially offset by cash provided by operating activities
and the sale of common stock. The Company's cash is maintained in highly liquid
operating accounts and primarily consists of bank deposits.
The Company's operations have been financed by cash flows from operating
activities and borrowings from the Parent Company. Such borrowings are available
to the Company under a Revolving Loan Agreement between the Company and Seagate
Technology. Under the Revolving Loan Agreement, Seagate Technology finances
certain of the Company's working capital requirements. The Revolving Loan
Agreement, which provides for maximum borrowings of up to $60,000,000, is
renewable every two years and expires on July 3, 2000. Interest is paid at the
LIBOR rate plus 2% per annum on such borrowings (7.375% at October 2, 1998). The
loan balance was $3,895,000 as of October 2, 1998.
In addition to the Revolving Loan Agreement with Seagate Technology,
certain foreign subsidiaries have line of credit facilities with third party
financial institutions. These line of credit facilities provide for additional
borrowings of up to an equivalent of approximately $1,139,000 at October 2,
1998. Interest rates payable on borrowings are based on local bank prime
interest rates. At October 2, 1998, there were no outstanding borrowings under
any of these lines of credit.
During the three months ended October 2, 1998, the Company made
investments totaling approximately $1,918,000 for new office facilities,
leasehold improvements, computers, furniture and office equipment. The Company
presently anticipates it will make investments in 1999 of approximately
$15,000,000 in equipment and leasehold improvements.* Additionally, product
development activities may include cash used to acquire technology.* The Company
expects that such investments will be funded from existing cash balances and
cash flows from operations.*
The Company believes its current cash balances, its available borrowings
from the Parent Company and cash flows generated from the Company's operations
will be sufficient to meet its anticipated cash needs for working capital and
capital expenditures for at least the next 12 months.* Furthermore, the Company
anticipates that future operating and investing activities may be financed by
additional borrowings from the Parent Company, equity financing or other
sources.* The Company believes that additional financing from the Parent Company
will be available at a reasonable cost.*
FACTORS AFFECTING FUTURE OPERATING RESULTS
POTENTIAL FLUCTUATIONS IN ANNUAL AND/OR QUARTERLY OPERATING RESULTS
We often experience a high volume of sales at the end of the quarter.
Therefore, it may be late in the quarter before we are able to determine that
our costs are too high in relation to our sales. If this were to happen, we
would not be able to reduce these costs and, consequently, our net income would
be reduced or our net loss increased.* In addition, our operating results have
been and may, in the future, be subject to significant quarterly fluctuations as
a result of a number of other factors including:
- the timing of orders from and shipment of products to major
customers;
- our ability to develop, introduce, and market new products and
product enhancements in a timely fashion;
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
15
<PAGE> 17
- changes in the prices of our products and our competitors'
products;
- our ability to fill orders received within a given quarter;
- our customers' preference for competing technologies in lieu of
our products;
- our inability to reduce our costs in relation to our revenues
(because we ship our products shortly after we receive orders
and operate with no backlog);
- the impact of changes in foreign currency exchange rates on the
cost of our products and the effective price of such products to
foreign consumers;
- competition and consolidation in our industry; and
- general economic conditions.
REVENUE CONCENTRATION
We currently obtain most of our revenue from a limited number of
software products and anticipate this to be the case in the foreseeable future.*
Our new products must be accepted by customers in order for us to be successful.
If our products are not purchased as a result of competition, technological
change or other factors, then our business, operating results and financial
condition would be materially adversely affected.
Our software products have a fixed life cycle that is difficult to
estimate. If we do not develop and introduce new products before our existing
products have completed their life cycles, then we will be unable to sustain or
increase our level of sales.* We cannot be sure that we will continue to be
successful in marketing our key products or any new products, applications or
product enhancements.
Sales to a small number of customers generate a disproportionate amount
of our revenues. For example, Seagate Software derived 24% of its revenues from
sales to its top customer, Ingram Micro Inc. ("Ingram"), in the three months
ended October 2, 1998. If Ingram, or any other significant customer, reduces its
purchases from us, our business, financial condition, and results of operations
would be materially adversely affected unless we substantially increased sales
to other customers. Because our contracts with Ingram (or any other customer) do
not require them to purchase any specified number of software licenses from us,
we cannot be sure that our significant customers will continue to purchase our
products at their current levels.
RELIANCE ON SALES STAFF, CHANNEL PARTNERS AND STRATEGIC RELATIONSHIPS
Wesell and support our products through:
- sales staff,
- third party distributors, and
- Original Equipment Manufacturers ("OEMs").
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
16
<PAGE> 18
We also have a strategic relationship with Microsoft that enables us to
bundle our products with Microsoft's products, and we have developed and are
developing certain utilities and products to be a part of Microsoft's products.*
If Microsoft reduces the nature and quantity of its relationship with us, our
business, operating results and financial condition would be materially
adversely affected.
We have made significant expenditures in recent years to expand our
sales and marketing force and plan to continue this expansion. Our future
success will depend in part upon the productivity of our sales and marketing
force.* We believe that our ability to continue to attract, integrate, train,
motivate and retain new sales and marketing personnel will also affect our
success.* We face intense competition for sales and marketing personnel in the
software industry, and we cannot be sure that we will be successful in hiring
and retaining such personnel in accordance with our plans. Even if we hire and
train sufficient numbers of sales and marketing personnel, we cannot be sure
that our recent and other planned expenses will generate enough additional
revenue to exceed these costs.
We generate a substantial portion of our revenue by selling our products
to distributors and OEMs. Our distributors and OEMs decide whether or not to
include our products with those they sell and generally can carry and sell
product lines that are competitive with ours. Because OEMs and distributors
carry other product lines and are not required to make a specified level of
purchases from us, we cannot be sure that they will prioritize selling our
products. These distributors and OEMs are also generally entitled to terminate
our relationship without cause. Our business, financial results and operating
condition would be materially adversely affected if some or all of our current
distributors and OEMs discontinued selling our products and we failed to find
comparable replacements.*
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
17
<PAGE> 19
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
We had research and development expenses of:
<TABLE>
<CAPTION>
FISCAL YEAR EXPENSE
----------- -------
(in millions)
<S> <C>
1996 $36.9
1997 $42.8
1998 $47.1
the three months ended October 2, $12.8
1998
</TABLE>
Our products are used in combination with other software. The markets
for our products are characterized by rapidly changing technology, changing
customer needs, evolving industry standards and frequent new product
introductions. Our future success will therefore depend on our ability to
design, develop, test and support new software products and enhancements on a
timely and cost effective basis.*
If we do not respond to changing market conditions and customer
requirements by developing and introducing new products in a timely manner, then
our business, operating results or financial condition could be materially
adversely affected.*
COMPETITION
Our industry is intensely competitive and is characterized by rapidly
changing technology and evolving standards. We expect additional competition
from other established and/or emerging companies and as a result of future
software industry consolidations.* We expect that our competitors will offer new
and existing products at lower prices, if necessary, to gain or retain market
share and customers.* We have experienced and expect to continue to experience
intense competition from a number of domestic and foreign companies. Increased
competition can be expected to cause price reductions, reduced gross margins and
loss of market share, any of which could have a material adverse effect on our
business, operating results or financial condition.* Current and potential
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion, sale and support of their products than we are able to
do.*
It is possible that new competitors or alliances among our competitors
may emerge and rapidly acquire significant market share. In addition, network
operating system vendors could introduce new or upgrade existing operating
systems or environments that could render our products obsolete and
unmarketable.
We also face indirect competition from present and potential customers,
including Microsoft or other strategic partners, that continuously evaluate
whether to develop their own software products and components internally or
obtain them from outside sources. If our strategic partners decide to develop
the utilities and other products we have in the past provided, it could have a
material adverse effect on our business, results of operations and financial
condition.*
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
18
<PAGE> 20
There can be no assurance that we will be able to compete successfully
against current or future competitors. If we fail to compete successfully, our
business, operating results and financial condition may be materially adversely
affected.*
RISKS FROM THE CONTRIBUTION OF THE NETWORK & STORAGE MANAGEMENT GROUP
Seagate Technology consolidated its software businesses into a single
entity called Seagate Software in 1996. Seagate Software's business consists of
two primary divisions, the Network & Storage Management Group and the
Information Management Group. We announced on October 5, 1998 that we will
contribute our Network & Storage Management Group business to a newly formed
company that will also acquire Veritas Software Corporation. Seagate Software
and our optionees who are employees of the Network & Storage Management Group
who go to work for the newly formed company will receive 40% of the fully
diluted equity in the new company.*
We face a number of risks prior to and after the closing of the spin-off
of the Network & Storage Management Group including:
- our management resources may be distracted from day to day
operations by the transaction;
- employees of the Information Management Group may be distracted
by concerns about whether we continue to operate that business
or spin it off;
- the Network & Storage Management Group's customers may delay or
cancel orders due to uncertainty about the transaction;
- the ongoing OEM relationship with the Network & Storage
Management Group and Seagate Technology's tape drive operations
may be disrupted;
- we have agreed not to compete in certain storage management
software businesses for a specified period of time after the
closing and may not be able to benefit from future opportunities
in that market;
- we will not have control over the management of the new company,
although initially we will have two representatives on its board
of directors; and
- we will be limited from liquidating our interest in the new
company for a certain period of time. Thereafter, if we choose
to do so, we will be required to sell our interest in the new
company in increments to comply with certain Securities and
Exchange Commission rules or to bear the expense of filing a
registration statement.
ACQUISITIONS
We intend to continue our expansion into software through internal
growth as well as acquisitions.* Acquisitions involve numerous risks including:
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
19
<PAGE> 21
- the difficulties of integrating the operations and products of
the acquired businesses,
- the potential loss of key employees or customers of the acquired
businesses.
We expect that we will continue to incur substantial expenses as we
acquire other businesses including charges for the write-off of in-process
research and development.* Our operating results have fluctuated in the past and
may fluctuate in the future because of the timing of such write-offs.* For
example, we incurred a charge to operations in the fourth quarter of fiscal 1998
of approximately $7 million for the write-off of in-process research and
development related to our acquisition of Eastman Software Storage Management
Group, Inc.
RISKS OF SYSTEMS FAILURES
Our operations are dependent on our ability to protect our computer
equipment and the information stored in our databases from damage by
catastrophic events such as fire, natural disaster, power loss,
telecommunications failures, and unauthorized intrusion. We believe that we have
taken prudent measures to reduce the risk of interruption in our operations.
However, we cannot be sure that these measures are sufficient. Any damage or
failure that causes interruptions in our operations could have a material
adverse effect on our business, results of operations and financial condition.
YEAR 2000 RISKS
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculation causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in normal business activities.*
We consider a product to be "Year 2000 Ready" if the product's performance and
functionality are unaffected by processing of dates prior to, during and after
the year 2000, but only if all products (for example hardware, firmware, and
software) used with the products properly exchange accurate date data with it.
Seagate's Products.
Our products are used in numerous operating environments. We are
assessing our products to determine whether or not they are Year 2000 Ready.
Although we believe certain of our software products are Year 2000 Ready, we
have determined that certain of our software products are not and will not be
Year 2000 Ready. The inability of one or more of our products to properly manage
and manipulate dates related to the Year 2000 could result in a material adverse
effect on our business, financial condition or results of operations, including
increased warranty costs, customer satisfaction issues and potential lawsuits.
We are taking measures to inform our customers that those products are not and
will not be Year 2000 Ready. To assist our customers in evaluating their Year
2000 issues, we have developed a list of those products that are Year 2000 Ready
as stand-alone products. The list is located on Seagate Software's World Wide
Web page and is periodically updated when we make additional product
assessments.
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
20
<PAGE> 22
We anticipate that substantial litigation may be brought against
vendors, including Seagate Software, of all software components of systems that
are unable to properly manage data related to the Year 2000. Our customer
agreements typically contain provisions designed to limit our liability for such
claims. As a result of existing or future federal, state or local laws or
ordinances or unfavorable judicial decisions, it is possible that these measures
will not provide us with protection from liability claims.* If any such claims
are brought against us, regardless of their merit, our business, financial
condition and results of operations could be materially adversely affected from
factors that include increased warranty costs, customer satisfaction issues and
the costs of potential lawsuits.
Seagate's Systems
We have also initiated a comprehensive program to address Year 2000
readiness in our internal systems and with our customers and suppliers. Our
program has been designed to address our most critical internal systems first
and to gather information regarding the Year 2000 compliance of products
supplied to Seagate Software and into which our products are integrated.
Assessment and remediation are proceeding in tandem, and we intend to have our
critical internal systems Year 2000 Ready by July 3, 1999, the first day of
Seagate Software's fiscal year 2000. These activities are intended to encompass
all major categories of systems in use by Seagate Software, including
operations, technical support, engineering, sales, finance and human resources.*
To date, we have not incurred material costs related to assessment and
remediation of Year 2000 readiness. We are still in the process of conducting
our Year 2000 audit and therefore are unable to make a reasonable estimate of
the costs associated with Year 2000 readiness. Accordingly, no assurance can be
given that the costs required to address the Year 2000 issue will not have a
material adverse effect on our business, financial condition or results of
operations. The costs incurred to date related to these programs have not been
and are not expected to be material.
We have also initiated formal communications with our significant
suppliers to determine the extent to which Seagate Software is vulnerable to
those third parties' failure to remedy their own Year 2000 issues. To date we
have contacted our significant suppliers and have received assurances of Year
2000 compliance from a number of those contacted. However, most of our suppliers
are under no contractual obligation to provide such information to us. We could
experience material adverse effects on our business if we fail to fully identify
all Year 2000 dependencies in Seagate Software's systems and in the systems of
our suppliers, customers and financial institutions.* Those material adverse
effects could include delays in the delivery or sale of our products.*
Therefore, we are developing contingency plans for continuing operations in the
event such problems arise.*
Customer Purchasing Patterns
We believe that the purchasing patterns of customer and potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct or patch their current software systems for Year 2000
readiness.* These expenditures may result in reduced funds available to purchase
products such as those offered by Seagate Software, which could have a material
adverse effect on our business, operating results or financial condition.*
RISKS FROM INTERNATIONAL OPERATIONS.
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
21
<PAGE> 23
We have significant offshore operations including development
facilities, sales personnel and customer support operations. Our offshore
operations are subject to certain inherent risks including:
- fluctuations in currency exchange rates;
- lack of acceptance of localized products;
- longer payment cycles for sales in foreign countries;
- difficulties in staffing and managing international operations;
- seasonal reductions in business activity in the summer months in
Europe and certain other countries;
- increases in tariffs, duties, price controls, other restrictions
on foreign currencies or trade barriers imposed by foreign
countries;
- management of an enterprise spread over various countries;
- the burden of complying with a wide variety of foreign laws; and
- political unrest, particularly in areas in which we have
facilities.
These factors could have a material adverse effect on our business,
operating results and financial condition in the future.
Our products are priced in U.S. dollars even when sold to customers who
are located abroad. The currency instability in the Asian and other financial
markets may make our products more expensive than products sold by other
manufacturers that are priced in one of the effected currencies. Therefore,
foreign customers may reduce purchases of our products.* We anticipate that the
recent turmoil in financial markets and the recent deterioration of the
underlying economic conditions in certain countries, including those in Asia and
the Far East, may have an impact on our sales to customers located in or whose
end-user customers are located in those countries due to:*
- the impact of currency fluctuations on the relative price of
Seagate Software's products,
- restrictions on government spending imposed by the International
Monetary Fund (the "IMF") in those countries receiving the IMF's
assistance,
- customers' reduced access to working capital to fund software
purchases, such as our products, due to:
- higher interest rates,
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
22
<PAGE> 24
- reduced bank lending due to contractions in the money
supply or the deterioration in the customer's or its
bank's financial condition, or
- the inability to access other financing
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Our success will be heavily dependent on our proprietary technology. We
rely primarily on the following to protect our proprietary rights:
- patents,
- copyrights,
- trademarks and trade secret rights,
- confidentiality procedures,
- employee and third party nondisclosure agreements, and
- licensing restrictions.
Such efforts provide only limited protection.
We also rely in part on shrink-wrap licenses that are not signed by end
users and, therefore, may be unenforceable under the laws of certain
jurisdictions.
Even though we take these steps, someone may be able to copy or
otherwise obtain and use our products and technology without authorization.
Policing unauthorized use of our products is difficult. Although we cannot
determine the extent of existing piracy of our products, we expect that software
piracy will be a persistent problem.* Third parties may also develop similar
technology independently. We believe that effective protection of intellectual
property rights is unavailable or limited in certain foreign countries.*
Our competitors may successfully challenge the validity or scope of our
patents, copyrights and trademarks.* We cannot be sure that our patents,
copyrights and trademarks will provide us with a competitive advantage or that
our competitors will not design around any patents issued to us. We are not
aware that any of our products infringe upon the proprietary rights of third
parties, but, in the future, third parties may claim that our current or future
products infringe that party's rights.* We believe that software product
developers will be increasingly subject to claims of infringement as the
functionality of products in our industry segment overlaps.* If we were subject
to a claim of infringement, regardless of its merit, such claim would have the
following impacts on us that could have a material adverse effect on our
business, operating results or financial condition:
- require costly litigation to resolve,
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
23
<PAGE> 25
- absorb significant management time, or
- require us to enter into unfavorable royalty or license
agreements.
SOFTWARE PRODUCT ERRORS OR DEFECTS
Software products as complex as those we offer frequently contain errors
or defects, especially when first introduced or when new versions or
enhancements are released. Despite product testing, our products may contain
defects or software errors.* If our products have errors, they could:
- cause a negative customer reaction that could reduce future
sales;
- generate negative publicity regarding Seagate Software and our
products;
- harm our reputation;
- reduce or limit customer's adoption of our products;
- require us to make extensive changes to the product; or
- result in customers' delaying their purchase until the errors or
defects have been remedied, which would cause our revenues to be
reduced or delayed.
Any of these occurrences could have a material adverse effect upon our business,
operating results or financial condition.
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. Existing
or future federal, state or local laws or ordinances or unfavorable judicial
decisions may make these provisions ineffective.* Because our products are used
in system management, resource optimization and business intelligence
applications, our liability could be substantial if we receive an unfavorable
judgement, which could have a material adverse effect upon our business,
operating results or financial condition.*
DEPENDENCE ON KEY PERSONNEL.
Our future performance depends to a significant degree upon the
continued service of our key members of management as well as marketing, sales,
and product development personnel.* The loss of one or more of our key personnel
would have a material adverse effect on our business, operating results and
financial condition.* We believe our future success will also depend in large
part upon our ability to attract and retain highly skilled management,
marketing, sales, and product development personnel.* We have experienced
intense competition for such personnel and there can be no assurance that we
will be able to retain our key employees or that we will be successful in
attracting, assimilating and retaining them in the future.
RISKS FROM CONVERSION TO SINGLE EUROPEAN CURRENCY.
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
24
<PAGE> 26
On January 1, 1999, certain member states of the European Economic
Community will fix their respective currencies to a new currency, the Single
European Currency ("Euro"). On that day the Euro will become a functional legal
currency within these countries. During the three years beginning on January 1,
1999, business in these countries will be conducted both in the existing
national currency, such as the French Franc or the Deutsche Mark, as well as the
Euro. Companies operating in or conducting business in these countries, will
need to ensure that their financial and other software systems are capable of
processing transactions and properly handling the existing currencies and the
Euro.
We are still assessing the impact that the introduction and use of the
Euro will have on our internal systems. We will take corrective actions based on
such assessment but do not presently expect that introduction and use of the
Euro will materially affect our foreign exchange and hedging activities or use
of derivative instruments or will result in any material increase in our costs.*
While we will continue to evaluate the impact of the Euro introduction over
time, based on currently available information, we do not believe that the
introduction of the Euro will have a material adverse impact on Seagate
Software's financial condition or overall trends in results of operations.*
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN CURRENCY RISK. The U.S. dollar is the functional currency for
most of the Company's foreign operations. Gains and losses on the remeasurement
into U.S. dollars of amounts denominated in foreign currencies are included in
net income for those operations whose functional currency is the U.S. dollar.
Gains and losses on translation into U.S. dollars of foreign operations whose
functional currency is the local currency are recorded as a separate component
of stockholders' equity. Foreign currency fluctuations have not had a
significant effect on the Company's results of operations, and the Company does
not engage in foreign currency hedging programs.
INTEREST RATE RISK. The Company's exposure to market risk for changes in
interest rates relates primarily to the Company's borrowings under a Revolving
Loan Agreement between the Company and Seagate Technology. The Company pays
interest to Seagate Technology at the LIBOR rate plus 2% per annum on such
borrowings (7.375% at October 2, 1998). The Company typically uses available
cash in excess of amounts required for operating activities to pay amounts due
under the Revolving Loan Agreement. Accordingly, the Company has not had a
significant level of funds available for investment purposes. Interest rate
fluctuations have not had a significant effect on the Company's results of
operations.
- ---------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
25
<PAGE> 27
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 10, 1997, Vedatech Corporation commenced an action in the
High Court of Justice Chancery Division in the United Kingdom against Seagate
Software Information Management Group Ltd. claiming breach of an oral agreement
and infringement of a Vedatech U.K. copyright in the Japanese translation of one
of the Company's products (the "Complaint") and seeking monetary and injunctive
relief. No specific damage amount has yet been claimed. The Company has hired
local counsel in the U.K., reviewed documents and conducted interviews. The
Company filed an initial response in the U.K. court on January 13, 1998 and is
now in the discovery process. The Company believes the Complaint has no merit
and intends to vigorously defend the action. However, if an unfavorable outcome
were to arise, there can be no assurance that such outcome would not have a
material adverse effect on the Company's liquidity, financial position or
results of operations.
In addition to the foregoing, the Company is engaged in legal actions
arising in the ordinary course of its business and believes that the ultimate
outcome of these actions will not have a material adverse effect on the
Company's financial position, liquidity, or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included herein:
<TABLE>
<S> <C>
10.12 Lease Dated April 15, 1995 between Fiero II Associates and Arcada
Software, Inc. for the premises located at Building 1, Fiero
Commerce Park II, San Luis Obispo, California, as amended to date
10.12.1 Lease dated November 20, 1995 between Fiero II Associates and
Arcada Software, Inc. for the premises located at Building 1,
Fiero Commerce Park II, San Luis Obispo, California
10.12.2 Lease dated December 17, 1993 between Morgan Investments and
Quest Development Corporation for the premises located at 708
Fiero Commerce Park, San Luis Obispo, California
10.12.3 Addendum dated March 26, 1997 to Lease dated May 14, 1995 between
Seagate Software Storage Management Group, Inc. and Jerry Michael
10.13 Lease dated April 18, 1995 between WHC-SIX Real Estate Limited
Partnership and Seagate Technology, Inc. for the premises located
at 19925 Stevens Creek Blvd., Cupertino, California, as amended
by the First Amendment to Lease dated May 1, 1995 and the Second
Amendment to Lease dated January 16, 1996
10.14 Occupational Lease dated June 24, 1998 between the Universities
Superannuation Scheme, Seagate Software Limited and Seagate
Technology, Inc. for the premises located at Acquis House,
Blagrave Street, Reading, England
27.1 Financial Data Schedule
</TABLE>
(a) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the three months ended October 2, 1998.
26
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGATE SOFTWARE, INC.
(Registrant)
DATE: November 13, 1998 BY: /s/ Terence R. Cunningham
-----------------------
TERENCE R. CUNNINGHAM
President and Chief Operating Officer
DATE: November 13, 1998 BY: /s/Ellen E. Chamberlain
-----------------------
ELLEN E. CHAMBERLAIN
Senior Vice President, Treasurer and
Chief Financial Officer
27
<PAGE> 29
SEAGATE SOFTWARE, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
10.12 Lease Dated April 15, 1995 between Fiero II Associates and Arcada
Software, Inc. for the premises located at Building 1, Fiero
Commerce Park II, San Luis Obispo, California, as amended to date
10.12.1 Lease dated November 20, 1995 between Fiero II Associates and
Arcada Software, Inc. for the premises located at Building 1,
Fiero Commerce Park II, San Luis Obispo, California
10.12.2 Lease dated December 17, 1993 between Morgan Investments and
Quest Development Corporation for the premises located at 708
Fiero Commerce Park, San Luis Obispo, California
10.12.3 Addendum dated March 26, 1997 to Lease dated May 14, 1995 between
Seagate Software Storage Management Group, Inc. and Jerry Michael
10.13 Lease dated April 18, 1995 between WHC-SIX Real Estate Limited
Partnership and Seagate Technology, Inc. for the premises located
at 19925 Stevens Creek Blvd., Cupertino, California, as amended
by the First Amendment to Lease dated May 1, 1995 and the Second
Amendment to Lease dated January 16, 1996
10.14 Occupational Lease dated June 24, 1998 between the Universities
Superannuation Scheme, Seagate Software Limited and Seagate
Technology, Inc. for the premises located at Acquis House,
Blagrave Street, Reading, England
27.1 Financial Data Schedule
</TABLE>
28
<PAGE> 1
EXHIBIT 10.12
EXERCISE OPTION TO EXTEND
Pursuant to Article 1, Section 1.01 of our Lease Agreement, between Fiero II
Associates, A Joint Venture, ("Landlord") and Arcada Software, Inc., a Delaware
Corporation ("Tenant") for property commonly known as Building 1, Fiero Commerce
Park II ("Premises"), we would like to exercise our right to extend the lease
for one (1) additional four (4) year term, commencing on the expiration of the
original term.
Date: 1/6-98 /s/ Ellen Chamberlain
Ellen Chamberlain
Senior Vice President and Chief Financial Officer
Seagate Software
<PAGE> 2
LEASE AGREEMENT
BY THIS LEASE dated April 15, 1995, FIERO II ASSOCIATES, a Joint Venture, herein
called "Lessor", leases to ARCADA SOFTWARE, INC., a Delaware Corporation, herein
called "Lessee", that certain real property, herein called "the Premises", in
the County of San Luis Obispo, State of California, which consists of a portion
of the property commonly known as Building 1, Fiero Commerce Park II, consisting
of approximately 8,875 square feet as shown on Exhibit "A" attached hereto.
Lessee shall also have the non-exclusive right to the use and enjoyment of all
non-designated Common Areas within the Project of which the Premises are a part.
Lessee agrees to be bound by the Association Rules regarding the use of the
Common Areas as adopted by the Fiero Commerce Park II Owner's Association
("Association"), a non-profit, mutual benefit corporation.
ARTICLE 1. TERM OF LEASE
Section 1.01: Original Term
This lease shall be for a term of three (3) years, commencing on April 15, 1995
and ending on April 14, 1998.
Section 1.02: Extension Term
Should Lessee perform all of the terms and condition of this lease for the full
term specified in Section 1.01 of this lease, Lessee may extend this lease for
one (1) additional four (4) year term, commencing on the expiration of the
original term, by giving Lessor written notice of Lessee's desire to extend the
term hereof not less than one hundred twenty (120) days but not more than one
hundred eighty (180) days prior to the expiration of the original term or any
extension thereof. Should Lessee fail to exercise its right to extend the lease
within the specified period, the Lessor must notify Lessee within thirty (30)
days of the expiration of the notice period, after which Lessee will have
fifteen (15) days to notify Lessor of its intent to extend the lease.
Section 1.03: Hold Over
Should Lessee hold over and continue in possession of the Premises after
expiration of the term of this lease or any extension thereof, Lessee's
continued occupancy of the Premises shall be considered a month-to-month tenancy
subject to all the terms and conditions of this Lease, except that the base
rent, which shall be payable as provided below, shall be one hundred fifty
(150%) percent of the base rent as of the date of expiration. If Lessee fails to
surrender the Premises upon the expiration of this Lease, Lessee shall indemnify
and hold Lessor harmless from all loss or liability, including without
limitation, any claims made by any succeeding tenant founded on or resulting
from such failure to surrender.
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<PAGE> 3
Section 1.04: Delivery of Possession
Lessor shall deliver possession to Lessee on or before the commencement of the
term hereof. Lessor agrees to indemnify, defend and hold Lessee, its officers,
directors, employees and agents, and any successors to Lessee, their directors,
officers, principals, employees and agents, harmless from and against any and
all liability, including without limitation (1) foreseeable and unforeseeable
consequential damages, directly or indirectly arising from the use, generation,
storage or disposal of hazardous materials by Lessor or any other occupant or
operator of the Premises prior to the term of this lease; and (2) the cost of
any required or necessary repair, cleanup, detoxification or remediation and the
preparation of any closure or other required plans, whether such action is
required or necessary before or after the termination of the term hereof, to the
full extent that such liability is attributable, directly or indirectly, to the
presence or use, generation, storage, release, threatened release or disposal of
hazardous materials by any person on the Premises prior to the term hereof. This
indemnity shall survive the termination of the term hereof.
ARTICLE 2. RENT
Section 2.01: Base Rent
For the first year of the term hereof, Lessee agrees to pay to Lessor a fixed
minimum rental for the use and occupancy of the Premises of Forty Nine ($.49)
Center per square foot per month, payable on the first (1st) day of each and
every month commencing on April 15, 1995, at the office of the Lessor at 710-21
Fiero Lane, San Luis Obispo, California 93401, or at such other place or places
as Lessor may from time to time designate by written notice delivered to Lessee.
By execution hereof, Lessor and Lessee stipulate and agree that the Premises
contain 8,875 square feet and that the initial monthly base rate is $4,348.75.
Notwithstanding the above, Lessee shall not be required to pay the base rent for
the first three (3) months of the first year of the term hereof.
Section 2.02: Rent Adjustment
The monthly rent provided for in Section 2.01 above shall be adjusted at the
beginning of each option term as follows:
The base for computing the adjustment is the Consumer Price Index for All Items
for All Urban Consumers in the Los Angeles-Anaheim-Riverside Metropolitan Area,
published by the United States Department of Labor, Bureau of Labor Statistics
("Index"), which is last published prior to the date of the commencement of term
("Beginning Index"). For the purposes of this section, the Beginning Index shall
be 153.4. If the Index published nearest (and prior to) the adjustment date
("Extension Index") has increased over the Beginning Index, the minimum monthly
rent for the following year (until the next rent adjustment) shall be set by
multiplying the base rent set forth above by a fraction, the numerator of which
is the Extension Index and the denominator of which is the Beginning Index.
Lessor shall notify Lessee in writing of the adjustment to the base rent as soon
as the index figures are available.
Page 2
<PAGE> 4
Lessee shall pay the adjusted rent to Lessor commencing with the rent payment
due for April 15 of each year of the term hereof and any extension thereof. The
adjusted rent all be subject to similar adjustment on the following adjustment
date.
If the Index is changed so that the base year differs from that used immediately
preceding month in which the term commences, the Index shall be converted in
accordance with the conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised
during the term, such other government index or computation with which it is
replaced shall be used in order to obtain substantially the same result as would
be obtained if the Index had not been discontinued or revised.
In no event shall the minimum rental be less than $4,348.75 per month. In no
event shall the rent adjustment set forth above be less than three (3%) percent
not more than five (5%) percent for any one (1) year during the term hereof.
Section 2.03: Security Deposit
A. Lessee shall deposit with Lessor, upon execution hereof, receipt of
which is hereby acknowledged subject to collection, a security deposit
in the amount of $13,046.25, as security for the full and faithful
performance by Lessee of the terms, conditions and covenants of this
lease.
B. If at any time during the term of this lease Lessee defaults in the
payment of rent, or any portion of the rent, including any additional
rent herein described, Lessor may appropriate and apply any portion of
the security deposit reasonably necessary to remedy any such default.
C. If at any time during the term of this lease Lessee, Lessee's agents,
patrons or employees damages the Premises through want of ordinary care
of any greater degree of culpability, then Lessor may appropriate and
apply any portion of the security deposit reasonably necessary to fund
the necessary repair. Lessor should give Lessee written notice and
allow Lessee a ten (10) business day cure period prior to appropriation
of any portion of the security deposit.
D. If on termination of this tenancy, Lessee fails to leave the Premises
in a condition comparable to the condition of the Premises at the time
Lessor delivered possession to Lessee at the commencement of this
lease, excepting ordinary wear and tear, Lessor may appropriate and
apply any portion of the security deposit reasonably necessary to put
the Premises in a clean and sanitary condition.
E. Lessor's obligation with regard to the security deposit are those of a
debtor and not a trustee. Lessor shall maintain the security deposit
separate and apart from Lessor's general funds. The security deposit
($13,046.25) shall be maintained in an interest bearing account with
annual interest accruing through the term of the lease.
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<PAGE> 5
F. If Lessor transfers Lessor's interest in the Premises in any manner,
Lessor or Lessor's agent shall do one of the following acts, either of
which shall relieve Lessor of further liability with respect to the
deposit:
i. Transfer the portion of the security deposit remaining after
any deduction authorized by this section or otherwise
authorized by law, if any, to Lessor's successor in interest,
and thereafter notify Lessee by certified mail, return receipt
requested, of that transfer and of the transferee's name and
mailing address. Upon receipt of the security deposit by
Lessor's successor in interest, the successor in interest
shall have all of the rights and obligations of Lessor with
respect to the security deposit.
ii. Return the remaining portion of the security deposit, if any,
after any deductions authorized by this lease or otherwise
authorized by law, to Lessee.
G. Lessor shall return to Lessee the portion of the security deposit
remaining after deductions authorized by this section or by law, if
any, in the following manner:
i. If a deduction has been made only for the nonpayment of rent,
the remaining portion, if any shall be returned not later than
two (2) weeks after the date Lessor receives possession of the
Premises.
ii. If a deduction has been made for any other reason, the
remaining portion, if any, shall be returned not later than
thirty (30) days after the date Lessee returns possession of
the Premises to Lessor, unless Lessor needs more time to
determine the cost of curing Lessee's defaults under this
lease, in which case Lessor shall return the remaining portion
of the security deposit, if any, within two (2) weeks after
completion of the work necessary to cure Lessee's defaults.
H. If during the term of this lease, Lessor applies all or any portion of
the security deposit for a purpose authorized by this section or
otherwise authorized by law, Lessee agrees to restore the amount of the
security deposit so applied, plus such additional amount requested by
Lessor (not exceeding twice the amount of the initial security
deposit), with the next payment of rent due under this lease. Lessee's
failure to restore said security deposit, plus any additional sum
required by Lessor, shall be a material breach of this lease. Lessee
shall have ten (10) business days from receipt of written notice by
Lessor to restore security deposit.
Section 2.04: Taxes, Utilities, Owner's Association Dues as Additional Rent
In addition to the rent specified in Sections 2.01 and 2.02 above, Lessee shall
pay, as additional rent, the following:
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<PAGE> 6
A. Utilities. Lessee shall pay, and hold Lessor harmless and the property
of Lessor including the Premises, free and harmless from all charges
for the furnishing of gas, water, sewer, electricity, telephone service
and other public utilities during the entire term of this lease or any
extension thereof. All such charges shall be paid by Lessee directly to
the provider of the service and shall be paid as they become due and
payable but in any event before delinquency.
B. Personal Property Taxes. Lessee shall pay before they become delinquent
all taxes, assessments and other charges levied or imposed by any
governmental entity on the furniture, trade fixtures, appliances and
other personal property placed by Lessee in, on or about the Premises.
C. Real Property Taxes.
i. Lessee shall pay all real property taxes and general and
special assessments on the Premises, including any increases
in such taxes and assessments, before they become delinquent.
ii. The real property taxes and assessments levied against the
Premises for the first and last years of the term hereof shall
be prorated between Lessor and Lessee for purposes of this
section as of 12:01 am on the date of commencement and
termination respectively for this lease.
iii. Lessee shall have the right, at Lessee's sole cost and
expense, to protest or contest in good faith the amount of any
tax or assessment. As a condition precedent to Lessee's right
to protest such taxes or assessments, Lessee shall either pay
the disputed amount and file for refund or deposit with Lessor
the disputed amount plus one (1) years interest at the rate
then charged by said county plus any estimated penalty which
Lessor may incur by non-payment. Upon such payment or deposit,
Lessor shall cooperate with Lessee in protesting such dispute.
D. Owner's Association Dues and Assessments. Lessee acknowledges that the
Premises are part of a condominium project and as such are subject to
the imposition of regular, special, infraction and reimbursement
assessments levied by the Association pursuant to the CC&Rs.
Lessee shall pay, before they become delinquent, all such assessments
levied by the Association, and shall hold Lessor and the property of
Lessor, including the Premises, harmless from any and all liability for
such assessments. Lessor shall notify Lessee of the amount of regular
monthly assessments levied against the Premises and of any special
assessments proposed or actually levied against the Premises.
E. Payment by Lessor. Should Lessee fail to pay within the time specified
in this Article any utilities, taxes, assessments, or other charges
required by this Section to be paid by Lessee, Lessor may, without
notice or demand to Lessee, pay, discharge, or adjust such tax,
assessment or other charge for the benefit of Lessee.
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<PAGE> 7
In such event, Lessee shall promptly on written demand of Lessor
reimburse Lessor for the full amount paid by Lessor in paying,
discharging or adjusting such tax, assessment or other charge, together
with interest thereon at the maximum rate allowed by law from the date
of payment by Lessor until the date of repayment by Lessee. When no
time within which any charge required by this Article to be paid by
Lessee is specified in this Article, such charge must be paid by Lessee
before it becomes delinquent.
Section 2.05: Late Charges
If any installment of rent or other payment required to be paid by Lessee to
Lessor is not paid within ten (10) days of the date on which it is due, a late
charge equal to five (5) percent of the late payment shall be due from Lessee to
Lessor to compensate Lessor for the additional administrative work caused by
such default and to compensate Lessor for the loss of use of such defaulted
payment. The late charge herein shall be in addition to any other remedy which
Lessor may have hereunder for such default.
Section 2.06: Interest on Late Payments
If any payment required to be paid by Lessee to Lessor is not paid within ten
(10) days of the date on which it is due, such payment shall bear interest at
the maximum rate permitted by law from the date it became due until it is paid
by Lessee to Lessor.
ARTICLE 3. USE OF PREMISES
Section 3.01: Permitted Use
The Premises shall, during the term of this lease and any extensions thereof, be
used for computer software research, design, development and manufacturing,
storage uses and office uses, and other uses related to the manufacturing,
marketing, and distribution of software, and for no other purposes without the
prior written consent of Lessor, which consent Lessor shall not unreasonably
withhold.
Section 3.02: Insurance Hazards
Lessee shall not commit or permit the commission of any acts on the Premises nor
use or permit the use of the Premises in any manner that will increase the
existing rates for or cause the cancellation of any fire, liability, or other
insurance policy insuring the Premises or the improvement on the Premises.
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<PAGE> 8
Section 3.03: Waste or Nuisance
Lessee shall not commit or permit the commission by others of any waste on the
Premises; Lessee shall not maintain, commit or permit the maintenance or
commission of any nuisance as defined in Section 3479 of the California Civil
Code on the Premises; and Lessee shall not use or permit the use of the Premises
for any unlawful purpose.
Section 3.04: Hazardous Materials
Lessee warrants and represents that during the term hereof, and any extensions
thereof, Lessee shall not use the Premises in any manner that would be in
violation of any federal, state or local law, ordinance or regulation relating
to environmental conditions on, under or about the property, including but not
limited to soil and groundwater conditions.
Lessee shall not use, generate, manufacture, produce, store or dispose of on,
under or about the Premises any hazardous materials, including without
limitation flammable materials, explosives, asbestos, radioactive materials,
hazardous wastes, toxic substances or related injurious materials, whether
injurious by themselves or in combination with other materials, other than such
materials as may be necessary for Lessee's normal operations on the Premises.
Lessee shall not dispose of or permit the disposal of any hazardous materials
into the sewer system serving the Premises. For the purposes of this section,
the "Premises" are defined as those areas for which Lessee has exclusive control
over ingress and egress; specifically, the interior areas of the building
properly specified in the lease. Common areas or such other areas outside of
Lessee's exclusive control are not considered part of the "Premises" for the
purposes of this section.
For purposes of this lease, hazardous materials shall include but not be limited
to substances defined as "hazardous substances", "hazardous materials", or
"toxic substances", and any substances defined as "hazardous waste" in any of
the following laws:
A. the Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended.
B. the Hazardous Materials Transportation Act, as amended.
C. the Resource Conservation and Recovery Act of 1976, as amended.
D. California Health and Safety Code Sections 25117 and 25316 and in the
regulations promulgated under such laws.
Lessee agrees to indemnify, defend and hold Lessor, its officers, directors,
employees and agents, and any successors to Lessor, their directors, officers,
principals, employees and agents, harmless from and against any and all
liability, including with limitation (1) all foreseeable and unforeseeable
consequential damages, directly or indirectly arising from the use, generation,
storage or disposal of hazardous materials by Lessee or any other occupant or
operator of the Premises; and (2) the cost of any required
Page 7
<PAGE> 9
or necessary repair, cleanup or detoxification or remediation and the
preparation of any closure or other required plans, whether such action is
required or necessary before or after the termination of the term hereof, to the
full extent that such liability is attributable, directly or indirectly, to the
presence or use, generation, storage, release, threatened release or disposal of
hazardous materials by any person on the Premises during the term hereof. This
indemnity shall survive the termination of the term hereof.
Section 3.05: Compliance with Law
Lessee shall, at Lessee's own cost and expense comply with all statutes,
ordinances, regulations and requirements of all governmental entities, both
federal and state and county or municipal, relating to Lessee's use and
occupancy of the Premises whether such statutes, ordinances, regulations and
requirements be now in force or hereinafter enacted. The judgment of any court
of competent jurisdiction, or the admission by Lessee in a proceeding brought
against Lessee by any government entity, that Lessee has violated any such
statute, ordinance, regulation or requirement shall be conclusive as between
Lessor and Lessee and shall be grounds for termination of this lease by Lessor.
Lessor agrees that any requirements of the municipal, state or federal
authorities which require alteration of Lessor's building shall not be the
responsibility of Lessee, unless required because of an act of Lessee or a use
of the Premises by Lessee.
Section 3.06: Compliance with CC&Rs
Lessee acknowledges receipt of a copy of the Declaration of Covenants,
Conditions and Restrictions (CC&R's) for Tract 712 and a copy of the the
Declaration of Covenants, Conditions and Restrictions, Bylaws and Rules and
Regulations for Fiero Commerce Park II Owner's Association applicable to the
Premises and agrees to comply with the terms thereof, including the provisions
contained in the CC&R's pertaining to the power of the Association to allocate
sewer capacity and water allocations among all of the owners of the units within
the project of which the Premises are a part and the restriction on opposing the
formation of special assessment districts. Lessee agrees to indemnify, defend
and hold Lessor harmless from any liability, cost or expense, including
reasonable attorney's fees incurred as a result of Lessee's violation of the
CC&Rs. Any provision of this agreement which conflicts with any provision of the
CC&Rs shall be subordinate to the CC&Rs.
ARTICLE 4. ALTERATIONS AND REPAIRS
Section 4.01: Condition of Premises
Lessee shall have ten (10) days after the date of delivery of possession to
notify Lessor of any defects in the Premises as if Lessee fails to so notify
Lessor of any defects, it shall be conclusively presumed that Lessee accepts
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<PAGE> 10
the Premises, as well as the improvements thereon and the facilities appurtenant
thereto, and stipulates with Lessor that the Premises as well as the
improvements thereon and the facilities appurtenant thereto are in good, clean,
safe and tenantable condition. By acceptance of possession, Lessee further
agrees with and represents to Lessor that the Premises have been
inspected by Lessee and that they have been assured by means independent of
Lessor or any agent of Lessor of the truth of all facts material to this lease
and that the Premises are being leased by Lessee as a result of their inspection
and investigation and not as a result of any representations made by Lessor or
any agent of Lessor.
Section 4.02: Maintenance
With the exception of those portions of the Premises which are the obligation of
the Association to maintain, Lessee shall at its own cost and expense keep and
maintain all portions of the Premises, as well as all improvements on the
Premises and all facilities appurtenant thereto, including but not limited to
electrical, plumbing, heating and air conditioning and sewage systems in good
order and repair and in as safe and clean a condition as they were when received
by Lessee from Lessor, reasonable wear and tear excepted. Notwithstanding the
above, Lessor shall maintain the unexposed electrical, unexposed plumbing and
sewage systems, as well as the foundations, bearing and exterior walls. Lessor
will not have the responsibility for repairing the foregoing if such damage is
caused by negligent or intentional act of Lessee, in which event Lessee will
promptly repair such damage.
Should Lessee fail to maintain the Premises as set forth above, Lessor may, at
Lessor's option, perform or contract for the performance of such maintenance for
any on behalf of Lessee. In such event, Lessee shall promptly on written demand
from Lessor reimburse Lessor for all cost and expense incurred by Lessor in
performing Lessee's obligation hereunder plus interest at the maximum rate
permitted by law from the date expended by Lessor to the date of repayment by
Lessee.
Section 4.03: Alterations and Liens
Lessee shall not make or permit any other person to make any alterations to the
Premises or to any improvement thereon or facility appurtenant thereto without
the written consent of Lessor first obtained, which consent shall not be
unreasonably withheld. Lessee shall submit detailed plans and specifications for
any proposed alteration or improvement to the Premises for Lessor's review.
Lessor shall have fifteen (15) days from the time of submission of plans to
respond in writing to Lessee if he disapproves of such plans. Lessee has the
right to terminate this lease if those plans are not approved by the Lessor. In
addition, Lessee shall have the right to terminate this lease if Lessee is
unable to acquire the necessary governmental approvals within sixty (60) days of
submission of plans to the appropriate governmental authorities. Plans shall be
submitted to the appropriate governmental agencies no later than thirty (30)
days from execution of the lease.
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Any and all approved alterations or improvements to the Premises shall be at
Lessee's sole cost and expense. Lessee shall keep the Premises free and clear
from any and all liens, claims and demands for work performed, materials
furnished or operations conducted on the Premises at the instance or request of
Lessee. Lessee shall give Lessor not less than ten (10) days prior written
notice of the commencement of construction of any alterations or improvements
exceeding $1,000.00 so that Lessor may post and maintain on the Premises, and to
record as required by law, any notice or notices of non-responsibility provided
for under the mechanics lien laws of the State of California. Lessee will be
required to obtain Lessor's written approval only on alterations exceeding
$10,000.00 in value.
Furthermore, any and all alterations, additions, improvements and fixtures,
except furniture, trade fixtures, and all security devices and measures, made or
placed in or on the Premises by Lessee or any other person shall on expiration
or sooner termination of this lease become the property of Lessor and remain on
the Premises; provided, however, that Lessor shall have the option on expiration
or sooner termination of this lease of requiring Lessee, at Lessee's sole cost
and expense, to remove any or all such alterations, additions, improvements or
fixtures from the Premises by providing Lessee written notice within ten (10)
business days following the expiration or termination of this lease.
Section 4.04: Inspection by Lessor
Lessee shall permit Lessor or his agents to enter into and upon the Premises
during business hours by Lessor giving Lessee twenty-four (24) hour notice for
the purpose of inspecting the same, or for the purpose of posting notices of
non-responsibility for alterations, additions or repairs or for the purpose of
placing upon the property in which the Premises are located any usual or
ordinary "for sale" signs, without any rebate of rent and without any liability
to Lessee for any loss of occupation or quiet enjoyment of the Premises thereby
occasioned. Lessee shall permit Lessor, at any time within one hundred twenty
(120) days prior to the expiration of this lease, to place upon the Premises any
usual or ordinary "to let" or "to lease" signs, provided that such entries made
by Lessor hereunder shall not unreasonably interfere with the conduct of
Lessee's business.
Section 4.05: Surrender of Premises
On expiration or sooner termination of this lease, or any extensions or renewals
of this lease, Lessee shall promptly surrender and deliver the Premises to
Lessor in as good condition as they are at the date of possession, reasonable
wear and tear excepted.
ARTICLE 5. INDEMNITY AND INSURANCE
Section 5.01: Hold Harmless Clause
Lessee agrees to indemnify and hold Lessor and the property of Lessor, including
the Premises, free and harmless from any and all claims, liability,
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loss, damage, or expense resulting from Lessee's occupation and use of the
Premises, specifically including, without limitation, any claim, liability, loss
or damage arising by reason of:
A. The death or injury of any person or persons, including Lessee or any
person who is any employee or agent of Lessee, or by reason of the
damage to or destruction of any property, including property owned by
Lessee or any person who is an employee or agent of Lessee, and caused
or allegedly caused by either the condition of the Premises, or some
act or omission of Lessee or of some agent, contractor, employee,
servant, sublessee, or concessionaire of Lessee on the Premises;
B. Any work performed on the Premises or materials furnished to the
Premises at the instance or request of Lessee or any agent or employee
of Lessee;
C. Lessee's failure to perform any provision of this lease or to comply
with any requirement imposed on Lessor or the leased Premises by any
duly authorized governmental agency or political subdivision.
In the event any claim, liability, loss or damage arises as a result of
the gross negligence or willful misconduct of Lessor, Lessee shall not
be responsible for any such claim, liability, loss or damage, and that
Lessor shall indemnify Lessee for any such claim, liability, loss or
damage.
Section 5.02: Liability Insurance
Lessee shall, prior to the date Lessee takes possession of the Premises and at
its own cost and expense, obtain and maintain during the entire term of this
lease and any renewals or extensions thereof, a broad form comprehensive
coverage policy of public liability insurance issued by an insurance company
acceptable to Lessor and authorized to conduct insurance business in the State
of California and insuring Lessee and Lessor against loss or liability caused by
or connected with Lessee's occupation and use of the Premises under this lease
in amounts not less than:
A. $1,000,000 for injury to or death of one person and, subject to that
limitation for the injury or death of one person, of not less than
$3,000,000 for injury to or death of two or more persons as a result of
any one accident or incident.
B. $500,000 for damage to or destruction of any property of others.
Such public liability insurance, and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Section 5.01 above. Both
parties shall be named as co-insured, and the policy shall contain cross
liability endorsements, if available. No policy shall be cancelable or subject
to reduction of coverage except after thirty (30) days prior written notice to
Lessor.
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During the term of this lease, Lessor may require an increase in the amount of
public liability and property damage insurance coverage required hereunder, if
at that time the existing coverage is not adequate in the reasonable opinion of
Lessor's insurance broker or lender(s).
Section 5.03: Lessee's Personal Property
A. Lessee shall, at all times during the term of this lease and any
extensions thereof, maintain at Lessee's sole cost and expense an
insurance policy issued by a company acceptable to Lessor and
authorized to conduct insurance business in the State of California
insuring for their full insurable value all furniture and equipment,
and tenant improvements made to the Premises by Lessee against loss or
destruction by fire and the perils commonly covered under the standard
extended coverage endorsement to the fire policies in San Luis Obispo
County. Insurance proceeds will be payable to Lessor and Lessee based
upon their respective claims for damage to personal property or tenant
improvements. The proceeds shall be used by Lessor and Lessee to repair
or replace such furniture and equipment, and tenant improvements. In no
event shall Lessor receive insurance proceeds under the insurance
required by this paragraph in excess of the amount agreed to in an
addendum to be attached to the lease as described in Section 5.03(B).
Such policies shall not be cancelable or subject to reduction of
coverage except after thirty (30) days prior to written notice by
Lessor.
B. Lessor and Lessee shall agree to execute an addendum to this agreement
listing the dollar value of the fixtures and permanent improvements
made to the Premises by Lessee which permanent improvements to the
Premises shall be deemed "tenant improvements". In the event Lessor and
Lessee fail, for any reason, to execute the addendum called for in this
subparagraph, then the value of the tenant improvements for purposes of
capping Lessor's claim to insurance proceeds under the insurance
provided for in this Section 5.03 shall be deemed to be the price
calculated by taking the average of those bids for construction of
tenant improvements received by Lessee in connection with Lessee's
construction of the tenant improvements.
Section 5.04: Deposit of Insurance with Lessor
Lessee shall, prior to taking possession of the Premises and promptly thereafter
when any such policy is replaced, rewritten or renewed, deliver to Lessor a true
and correct copy of each insurance policy required by this Article or a
certificate executed by the insurance company or companies or their authorized
agent evidencing such policy or policies.
ARTICLE 6. SIGNS AND TRADE FIXTURES
Section 6.01: Installation and Removal of Trade Fixtures
Lessee shall have the right at any time and from time to time during the term of
this lease and any renewal or extension of such term, at Lessee's sole
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cost and expense, to install and affix in, to or on the Premises, such items,
herein called "trade fixtures", for use in Lessee's trade or business as Lessee
may, in its sole discretion, deem advisable. Any and all such trade fixtures
that can be removed without structural damage to the Premises or any building or
improvement on the Premises shall remain the property of the Lessee and may be
removed by Lessee at any time or times prior to the expiration or sooner
termination of this lease.
Section 6.02: Unremoved Trade Fixtures
Any trade fixtures described in this Article that are not removed from the
Premises by Lessee within ten (10) days after the expiration or sooner
termination, regardless of cause, of this lease shall be deemed abandoned by
Lessee and shall automatically become the property of Lessor as owner of the
real property to which they are affixed, unless Lessor notifies Lessee in
writing, of Lessor's election to have Lessee remove such trade fixtures and to
repair any damages caused thereby. Upon such election by Lessor to require
Lessee to remove such trade fixtures, Lessee shall have fifteen (15) days from
the date of such notice in which to remove such trade fixtures and repair any
damage caused by such removal. If Lessee fails to remove such trade fixtures and
repair any such damage, Lessor may do so at Lessee's sole cost and expense,
including any costs of storing such property. Such costs and expenses, if
incurred by Lessor for Lessee's benefit, shall be promptly, upon written demand
therefor, reimbursed to Lessor by Lessee, together with interest at the maximum
rate permitted by law from the date expended by Lessor to the date of
reimbursement by Lessee.
Section 6.03: Signs
Lessee may place and maintain, or permit any other person to place and maintain
any sign on the Premises providing such sign is in compliance with then existing
governmental regulations and is in compliance with the restrictions on signs
contained in the CC&R's. Lessee may not place any decoration, lettering, or
advertising matter on the glass of any exterior show window of the Premises.
Lessee shall maintain such sign at all times during this lease in good
appearance and repair. On expiration or sooner termination of this lease, all
such signs not removed from the Premises by Lessee may, without liability, be
destroyed by Lessor.
ARTICLE 7. DAMAGE, DESTRUCTION OR CONDEMNATION
Section 7.01: Partial Destruction
Should the Premises or the building of which the Premises is a part be partially
destroyed by any cause not the fault of Lessee or any person in or about the
Premises with the consent, express or implied of Lessee, the provisions of the
CC&R's shall determine the responsibility for repair or restoration of the
building of which the Premises are part. If the Association is required or
elects to repair the building, this lease shall continue in full force and
effect subject to the provisions below regarding abatement of the rent.
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Section 7.02: Total Destruction
Should the Premises or the building of which the Premises is a part be so far
destroyed by any cause not the fault of Lessee or any person in or about the
Premises with the consent, express or implied, of Lessee, that the Association
is not required to repair or replace the building or if the Association elects
not to repair the building, this lease shall terminate effective the date of the
damage or destruction.
Section 7.03: Insurance Proceeds
In the event the Association is required to repair or replace the Premises or
the building of which the Premises are a part, the insurance proceeds described
in Section 5.03 above, received by Lessor for repair and/or replacement of the
tenant improvements and the insurance proceeds described in Section 5.03 above,
received by the Lessee for the repair and/or replacement of its personal
property shall be applied to the repair and replacement of the tenant
improvements and Lessee's personal property, as the case may be. Insurance
proceeds, if any, which are payable to Lessor on account of damage or
destruction to the "tenant improvements" shall not exceed the amount as
described in the addendum to this lease. Insurance proceeds for tenant
improvements shall be the sole property of Lessor, free of any claims of Lessee.
All other insurance proceeds in excess of the amount set forth in the addendum
for tenant improvements and all amounts which are attributable to Lessee's
personal property shall be the sole property of the Lessee free of all claims of
Lessor. In the event the Association is not required to repair or replace the
Premises or the building of which the Premises are a part, or elects not to so
repair or replace the Premises or the building of which the Premises are a part,
any insurance proceeds described in Section 5.03 above shall be divided in the
same manner as set forth in this provision, with the Lessor being entitled to
such proceeds attributable to tenant improvements up to the valuation as set
forth in the addendum, and the Lessee being entitled to all proceeds
attributable to Lessee's personal property and all other proceeds above the
amount set forth in the addendum, each free of the claims of the other party.
Section 7.04: Abatement of Rent
Should the Association elect to repair or replace the building or be required to
repair and replace the building of which the Premises are a part following
partial or total destruction:
A. Lessee shall not be entitled to any damages for any loss or
inconvenience sustained by Lessee by reason of the making of such
repairs and restoration;
B. The Association shall have full right to enter the Premises and take
possession of so much of the Premises, including the whole of the
Premises, as may be reasonably necessary to enable the Association to
promptly and efficiently carry out the work of such repair and
restoration; and
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C. The rent payable by Lessee to Lessor pursuant to Article 2 of this
lease shall be abated to the extent and for the time Lessee is
prevented from using the whole of the Premises.
In the event Lessee is prohibited from using a portion of the floor
space of the Premises, rent shall be abated by that proportionate
amount of space from the whole.
Section 7.05: Total Condemnation
Should, during the term of this lease or any renewal or extension thereof, title
and possession of all of the Premises be taken under the power of eminent domain
by any public or quasi-public agency or entity, this lease shall terminate as of
12:01 am on the date actual physical possession of the Premises is taken by the
agency or entity exercising the power of eminent domain and both Lessor and
Lessee shall thereafter be released from all obligations, except those specified
in Section 7.09 of this lease, under this lease.
Section 7.06: Termination Option for Partial Condemnation
Should, during the term of this lease or any renewal or extension thereof, title
and possession of only a portion of the Premises be taken under the power of
eminent domain by any public or quasi-public agency or entity, Lessee may, at
Lessee's option, terminate this lease if more than 35 percent of the floor space
or more than 55 percent in value of the Premises is taken under the power of
eminent domain, or if Lessee us unable to continue its full operation in the
portion of the Premises which remain, Lessee shall exercise its option by giving
written notice to Lessor within thirty (30) days after actual physical
possession of the portion subject to eminent domain power is taken by the agency
or entity exercising that power. This lease shall terminate as of 12:01 am on
the date the notice is deemed given to Lessor but the rent specified in Article
2 of this lease shall be reduced in the manner specified in Section 7.07 below
from the date of taking to the date of termination of the lease. Lessee shall be
able to terminate the lease if the remaining portion of the Premises is not
suitable for Lessee's continued use of the Premises.
Section 7.07: Partial Condemnation Without Termination
Should Lessee fail to exercise the option described in Section 7.06 of this
lease, or should the portion of the Premises taken under the power of eminent
domain be insufficient to give rise to the option described in Section 7.06 of
this lease, then, in that event:
A. This lease shall terminate as to the portion of the Premises taken by
eminent domain as of 12:01 am on the day, herein called the "date of
taking", actual physical possession of that portion of the Premises is
taken by the agency or entity exercising the power of eminent domain.
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B. The rent specified in Article 2 of this lease shall, after the date of
taking, be reduced by an amount that bears the same ratio to the rent
specified in Article 2 of this lease as the square footage floor space
of the prior of said premise taken under the power of eminent domain
bears to the total square footage floor space of the Premises as of the
date of this lease; and
C. Lessor, at Lessor's own cost and expense, will remodel and reconstruct
the building remaining on the portion of the Premises not taken by
eminent domain into a single efficient architectural unit as soon after
the date of taking, or before, as can be reasonable done; provided,
however, that the rent specified in this lease shall not be abated or
reduced, except as provided in subparagraph (B) of this section, during
such remodeling or reconstruction.
Section 7.08: Condemnation Award
Should, during the term of this lease or any renewal or extension thereof, title
and possession of all or any portion of the Premises be taken under the power of
eminent domain by any public or quasi-public agency or entity, the portion of
the compensation or damages for the taking awarded to each of the parties to
this lease, Lessor and Lessee, shall belong to and be the sole property of the
party to whom it is awarded. Lessee shall be entitled to that portion of the
compensation or damages awarded for the eminent domain taking that represents
(1) reasonable value of Lessee's rights under this lease for the unexpired term
of this lease and (2) the cost or loss sustained by Lessee because of the
removal of Lessee's trade fixture, equipment and furnishings from the portion of
the Premises taken by eminent domain.
Section 7.09: Arbitration of Condemnation Award
Should separate award not be made to Lessor and Lessee for the taking by eminent
domain of all or any portion of the Premises, and should Lessor and Lessee be
unable to agree on the manner the total award is to be divided between them
pursuant to Section 7.08 of this lease, the proper division of the award between
Lessor and Lessee shall be settled by arbitration. Each party shall appoint an
arbitrator and the two arbitrators so appointed shall, within a month after both
have been appointed, select a third arbitrator. The decision of any two of these
three arbitrators in writing shall be binding on both Lessor and Lessee.
Should not two arbitrators be able to agree within one month after appointment
of the third arbitrator, the report of the arbitrator most favorable to Lessor
and the report of the arbitrator most favorable to Lessee shall both be
disregarded and the report of the remaining arbitrator shall be binding upon
both Lessor and Lessee. Should either Lessor or Lessee fail to appoint an
arbitrator within 15 days after receiving written notice from the other to do
so, the arbitrator selected by the other party shall act for both and his
decision in writing shall be binding upon both Lessor and Lessee.
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ARTICLE 8. DEFAULT, ASSIGNMENT AND TERMINATION
Section 8.01: Subleasing or Assigning as Breach
Lessee shall not encumber, assign or otherwise transfer this lease, any right or
interest in this lease, or any right or interest in the Premises or any of the
improvements that may now or hereafter be constructed or installed on the
Premises without the express written consent of Lessor first obtained.
Neither shall Lessee sublet the Premises or any part thereof or allow any other
person, other than Lessee's patrons, agents, servants, and employees to occupy
the Premises or any part thereof without the prior written consent of Lessor. A
consent by Lessor to one assignment, one subletting or one occupation of the
Premises by another person shall not be deemed to be a consent to any subsequent
assignment, subletting or occupation of the Premises by another person. Any
encumbrance, assignment, transfer or subletting without the prior written
consent of Lessor, whether it be voluntary or involuntary, by operation of law
or otherwise, is void and shall, at the option of Lessor, terminate this lease.
The consent of Lessor to any assignment of Lessee's interest in this lease or
the subletting by Lessee of the Premises or parts of the Premises shall not be
unreasonably withheld. Notwithstanding the above, Lessee may assign or sublease
the Premises, or portions thereof, to a subsidiary, affiliate or parent of
Lessee. Such permitted assignment shall not relieve Lessee from any liability
under this lease.
Lessor must respond to written notices from Lessee under the terms of this
section within thirty (30) days, else consent of Lessor will conclusively deemed
to have been given. Lessor also agrees to exempt from this assignment clause the
Lessee's duty to obtain Lessor's approval for mergers, consolidations, takeovers
and sales of the business. Transfers or assignments of this lease, the Premises
of the improvements thereon rising from such mergers, consolidations, takeovers
or sales of the business will not constitute a breach under the terms of this
section.
Section 8.02: Abandonment by Lessee
Should Lessee breach this lease and abandon the Premises prior to the natural
expiration of the term of this lease, Lessor may:
A. Continue this lease in effect by not terminating Lessee's right to
possession of the Premises, in which event Lessor shall be entitled to
enforce all his rights and remedies under this lease, including the
right to recover the rent specified in this lease as it become due
under this lease; or
B. Terminate this lease and recover from Lessee:
i. The worth at the time of award of the unpaid rent which had
been earned at the time of termination of the lease;
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ii. The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination of
the lease until the time of award exceeds the amount of rental
loss that Lessee proves could have been reasonably avoided;
iii. The worth at the time of award of the amount by which the
unpaid rent for the balance of the term of this lease after
the time of award exceeds the amount of rental loss that
Lessee proves could be reasonably avoided; and
iv. Any other amount necessary to compensate Lessor for all
detriment proximately caused by Lessee's failure to perform
Lessee's obligations under this lease.
As used in this section, "Abandonment" shall be defined as Lessee's failure to
conduct business at the Premises for any period of fifteen (15) consecutive
days. Such failure to use the Premises shall conclusively be deemed abandonment
of the Premises.
The term "rent" as used in this section shall mean the base rent, as adjusted to
the date of default, additional rent as defined above, and any other sums
required to be paid by Lessee pursuant to the terms of this lease. As used in
subsection (i) and (ii) above, the "worth at the time of award" shall be
computed by allowing interest at the rate of ten (10%) percent per annum. As
used in subsection (iii) above, the "worth at the time of award" shall be
computed by discounting that amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award, plus one (1%) percent.
Section 8.03: Default by Lessee
Should Lessee default in the payment of any rent, additional rent or other sum
to be paid by Lessee hereunder, and if such default shall continue for a period
of five (5) business days after written notice thereof from Lessor to Lessee, or
if Lessee shall default in the performance or observance of any other term,
covenant, obligation or agreement to be performed or observed by Lessee, and if
such default shall continue for a period of ten (10) days after written notice
thereof from Lessor to Lessee, or if more than four (4) of any of the foregoing
defaults, or any combination thereof shall occur in any single twelve (12) month
period during the term hereof, whether or not the same shall be cured, Lessor
shall have, in addition to any other remedies provided for herein or by law, the
option to terminate this lease, reenter the Premises by process of law and shall
have the right to recover from Lessee all of the sums described in Section
8.02(B) above.
Section 8.04: Insolvency of Lessee
The insolvency of Lessee as evidences by a receiver being appointed to take
possession of all or substantially all of the property of Lessee, or the making
of a general assignment for the benefit of creditors by Lessee or the filing by
or against Lessee of a petition in bankruptcy, shall terminate this lease and
entitle the Lessor to reenter and regain possession of the Premises.
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Section 8.05: Right of Entry on Default
Without limitation of Lessor's rights contained elsewhere in this lease or at
law, in the event of Lessee's default, any and all of Lessee's fixtures then
remaining on the Premises, with the exception of personal property, Lessor shall
have the right to take exclusive possession of same and shall be entitled to
obtain a writ of attachment of same, with notice to Lessee.
Alternatively, Lessor may remove all or any portion thereof and place such
property in storage for the account of Lessee and at the expense of Lessee.
Lessor shall have no duty to pay rent or other costs of storage and shall have
no liability to Lessee if the property is sold at auction or otherwise. Upon
such entry, Lessor may, at Lessor's option, relet the Premises or any part
thereof to a third party or third parties for any term, at any rental, and on
any other terms and conditions that Lessor, in its sole discretion may deem
advisable, and shall have the right to make alterations and repairs to the
Premises.
Lessee shall be liable for all of Lessor's costs of reletting, including but not
limited to remodeling costs required for the reletting. In the event Lessor
relets the Premises, Lessee shall pay all rent due under this lease at the times
specified herein, less any amounts actually received by Lessor from the
reletting.
Section 8.06: Cumulative Remedies
The remedies given to Lessor in this Article shall not be exclusive but shall be
cumulative and in addition to all remedies no or hereafter allowed by law or
elsewhere provided in this lease.
Section 8.07: Waiver of Breach
The waiver by Lessor of any breach by Lessee of any of the provisions of this
lease shall not constitute a continuing waiver or a waiver of any subsequent
breach by Lessee whether of the same or another provision of this lease. Lessor
shall be in default of this lease if Lessor does not perform any provision of
this lease that Lessor is obligated to perform within thirty (30) days after
written notice thereof has been given by Lessee to Lessor. If the nature of
Lessor's obligation is such that more than thirty (30) days are required for
performance, Lessor shall not be in default of this lease if Lessor commences
performance within the thirty (30) day period and diligently and in good faith
continues the same until completion.
Lessee, at any time after Lessor commits the default, may cure the detail at
Lessor's expense. If Lessee, by reason of Lessor's default, at any time pays any
sum or does any act that requires the payment of any sum, this sum paid by
Lessee shall be due immediately from Lessor to Lessee at the time the sum is
paid, and if paid at a later date shall bear interest at the maximum rate
allowed by law from the date the sum was paid by Lessee until Lessee is
reimbursed by Lessor.
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ARTICLE 9. MISCELLANEOUS
Section 9.01: Force Majeure - Unavoidable Delays
Should the performance of any act required by this lease to be performed by
either Lessor or Lessee be prevented or delayed by reason of an act of God,
strike, lockout, labor troubles, inability to secure materials, restrictive
governmental laws or regulations, or any other cause except financial inability,
not the fault of the party required to perform the act, the time for performance
of the act will be extended for a period equivalent to the period of delay and
performance of the act during the period of delay will be excused; provided,
however, that nothing contained in this section 'shall excuse the prompt payment
of rent or other sums by Lessee as required by this lease or the performance of
any act rendered difficult solely because of the financial condition of the
party, Lessor or Lessee, required to perform the act.
Section 9.02: Parking Spaces
In addition to the Premises herein described, Lessor shall provide Lessee with
twenty-five (25) parking spaces designated for Lessee's use. These shall be
spaces 87-104 inclusive and 123-129 inclusive. Such parking spaces may
proportionally include handicapped parking, spaces designated for compact
vehicles and motorcycle parking and spaces reserved for carpool parking.
Section 9.03: Option to Purchase
Provided Lessee is not in default under the terms of this agreement, Lessee
shall have the option, but not the obligation, to purchase the Premises on the
following terms and conditions:
A. The purchase price shall be Five Hundred Fourteen Thousand Seven
Hundred Fifty 514,750 Dollars. Said purchase price shall be adjusted
annually in the same manner and at the same time as the base rent is
adjusted pursuant to Section 2.02 above. In the event Lessee exercises
its option to purchase the Premises, the purchase price shall be
payable in cash to Lessor at the close of escrow.
B. Lessee may exercise this option at any time during the original three
(3) year term hereof, by giving Lessor written notice of Lessee's
exercise of this option and by depositing $15,000.00 into an escrow at
First American Title Insurance Company, San Luis Obispo, California.
Said deposit shall apply to the purchase price at the close of escrow.
Said escrow shall provide for a closing within sixty (60) days after
Lessee's deposit as above provided. Lessee shall not have any option to
purchase the Premises during any extension of the original three (3)
year term.
C. At the close of escrow, Lessor shall convey good and marketable title
to the Premises, subject only to property taxes which are a lien not
yet due, CC&R's of record and other existing encumbrances of record
approved
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by Lessee. Said title shall be evidenced by a CLTA policy of title
insurance issued by the above title company, which policy shall be paid
for by Lessor.
Section 9.04: Attorney's Fees
Should any litigation, arbitration or other proceeding be commenced between the
parties to this lease concerning the Premises, this lease, or the rights and
duties of either in relation thereto, the party, Lessor or Lessee, prevailing in
such litigation shall be entitled, in addition to such other relief as may be
granted in the litigation, to a reasonable sum as and for his attorney's fees in
such litigation, together with any costs and expenses of such proceeding,
including such fees, costs and expenses on appeal and required to enforce any
final judgment.
Section 9.05: Arbitration of Disputes
If any dispute arises between Lessor and Lessee concerning the Premises, any
provision of this lease or the rights and duties of either in regard thereto,
the dispute shall be settled by arbitration as provided in this section. Each
party shall appoint an arbitrator and give the other party written notice of the
name and address of arbitrator within five (5) days after written demand to do
so has been served on the party making the appointment by the other party to
this lease. To two appointed arbitrators shall within ten (10) days after their
appointment, appoint a third arbitrator. The written decision of any two of the
three arbitrators shall be binding and conclusive on both parties to this lease.
The arbitrators may apportion the costs and expenses of the arbitration
proceeding, including attorney's fees and arbitration fees, between the parties
to this agreement in any manner deemed reasonable by two of the three
arbitrators. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
NOTICE: By initialing in the space below you are agreeing to have any dispute
arising out of the matters included in the "Arbitration of Disputes" provision
above decided by neutral arbitration as provided by California law and you are
giving up any rights you may have to have the dispute litigated in a court or
jury trial. By initialing in the space below you are giving up your judicial
rights to discovery and appeal, unless those rights are specifically included in
the "Arbitration of Disputes" provision. If you refuse to submit to arbitration
after agreeing to this provision, you may be compelled to arbitrate under the
authority of the California Code of Civil Procedure. Your agreement to this
arbitration provision is voluntary.
We have read and understand the foregoing and agree to submit disputes arising
out of the matters included in the "Arbitration of Disputes" provision to
neutral arbitration.
Lessor's Initials _________ Lessee's Initials__________
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Section 9.06: Notices
All notices to be given to Lessee shall be given in writing personally or by
depositing the same in the United States mail, postage prepaid, and addressed to
Lessee at: Arcada Software, Inc., 708 Fiero Lane, Suite 5, San Luis Obispo,
California 93401, or such other place as may be designated from time to time by
Lessee. All notices to be given to Lessor shall be given in writing personally
or by depositing the same in the United States mail, postage prepaid, and
addressed to the Lessor at: Fiero II Associates, 710-21 Fiero Lane, San Luis
Obispo, California 93401 or such other place or places as may be designated from
time to time by Lessor.
Section 9.07: No Merger
The voluntary or other surrender of this lease by Lessee, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Lessor, terminate any existing subleases or subtenancies or may, at the option
of Lessor, operate as an assignment to it of any such subleases or subtenancies.
Section 9.08: Binding on Heirs and Successors
This lease shall be binding on and shall inure to the benefit of the heirs,
executors, administrators, successors, and assigns of the parties hereto, Lessor
and Lessee, but nothing in this section contained shall be construed as a
consent by Lessor to any assignment of this lease or any interest therein by
Lessee except as provided in Article 8 of this lease.
Section 9.09: Partial Invalidity
Should any provision of this lease be held by a court of competent jurisdiction
to be either invalid, void, or unenforceable, the remaining provisions of this
lease shall remain in full force and effect unimpaired by the holding.
Section 9.10: Sole and Only Agreement
This instrument constitutes the sole and only agreement between Lessor and
Lessee respecting the Premises, the leasing of the Premises to Lessee, or the
lease term herein specified, and correctly sets for the obligations of Lessor
and Lessee to each other as of its date. Any agreements or representations
respecting the Premises or their leasing by Lessor to Lessee not expressly set
forth in this instrument are null and void.
Section 9.11: Waiver
The waiver by Lessor of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant or condition
or any subsequent breach of the same or any other term, covenant or condition
herein contained.
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Section 9.12: Subordination and Non-Disturbance
A. This lease is subject and subordinate to all mortgages and deeds of
trust which may hereafter be placed and recorded on the property of
which the Premises are a part, and to all renewal, modifications,
replacements, and extensions thereof.
B. The subordination provided for above is conditioned on the following:
i. For each mortgage or deed of trust, lessor shall obtain from
the mortgagee or beneficiary a non- disturbance agreement in
writing that, in the event of foreclosure, or any sale
thereunder, this lease shall not be terminate and lessee's
right of possession under this lease shall not be disturbed,
provided lessee is not then in default under this lease;
ii. In consideration of the mortgagee's or beneficiary's agreement
not to disturb lessee's possession as above provided, lessee
hereby agrees to attorn to the purchaser at any foreclosure,
sale or other action or proceeding.
iii. The subordination described in this section shall be effective
without necessity of having any further instruments executed
by Lessee, but Lessee agrees to execute on demand any such
further instruments evidencing subordination that lessor or
mortgagee or beneficiary may reasonably request.
Section 9.13: Time of Essence
Time is expressly declared to be of the essence of this lease.
Section 9.14: Accord and Satisfaction
No payment by Lessee or receipt by Lessor of a lesser amount than the monthly
rent stipulated herein or any other sum due hereunder from Lessee to Lessor
shall be deemed to be anything other than a payment on account of the earliest
sum then due and owing to Lessor.
No endorsement or statement on any check or any letter accompanying any check or
payment or payment of any sums due from Lessee to Lessor hereunder shall be
deemed to be an accord and satisfaction, and Lessor may accept and negotiate any
such payment without prejudice to Lessor's right to recover the balance of such
rent or other sum or to pursue any other remedy provided for in this lease or by
law.
Section 9.15: Law Governing
The laws of the state and county wherein the Premises are located shall govern
the validity, performance and enforcement of this lease.
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Executed the 15 day of April, 1995, at San Luis Obispo, California.
--
LANDLORD TENANT
FIERO II ASSOCIATES ARCADA SOFTWARE, INC.
A Joint Venture A Delaware Corporation
By /s/David Sansone By /s/ Kevin Azzouz
David Sansone Kevin Azzouz
Authorized Representative President
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EXHIBIT "A"
LEGAL DESCRIPTION
The property described as:
A portion of Parcel 1, 2, 3 and 4 of Lot 6 of Tract 712, in the County of San
Luis Obispo, State of California, according to the map recorded October 27, 1980
in Book 10, Page 49 of Maps, in the office of the County Recorder of San Luis
Obispo, and more particularly described on the site plan dated March 15, 1995
and marked as Exhibit "B"; also known as Units 1-9 and 16-24 of 705 Fiero Lane.
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AMENDED EXHIBIT "A"
LEGAL DESCRIPTION
The property described as:
A portion of Parcel 1, 2, 3 and 4 of Lot 6 of Tract 712, in the County of San
Luis Obispo, State of California, according to the map recorded October 27, 1980
in Book 10, Page 49 of Maps, in the office of the County Recorder of San Luis
Obispo, and more particularly described on the site plan dated March 15, 1995
and marked as Exhibit "B"; also known as Units 10-15 of 705 Fiero Lane.
Lessor Initials: ____________ Lessee Initials: _____________
Date: 5/12/95 Date: 5/13/95
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EXHIBIT "B"
SITE PLAN
[CHART OMITTED]
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<PAGE> 1
EXHIBIT 10.12.1
ADDENDUM #1 TO LEASE DATED NOVEMBER 20, 1995.
CHANGE #1:
In section 1.04, "Delivery of Premises", the first sentence of that section:
Lessor shall deliver possession to Lessee on or before the commencement
of the term hereof.
SHALL BE REPLACED WITH:
Lessor shall deliver possession to Lessee of the premises as set forth
in Exhibit C ("Construction of Premises), including all "Lessor's Work"
as set forth in Section 2 of Exhibit C, on or before January 1, 1996.
Should Lessor fail to deliver Premises to Lessee by January 1, 1996,
the commencement date of the original term of this lease shall be
deemed to be the date upon which Lessor successfully delivers the
Premises as set forth in Exhibit C (including all "Lessor's Work as set
forth in Section 2) to the Lessee. All terms, conditions and other
provisions of this lease which reference the original term of this
lease, including the Original Term itself, shall be changed to reflect
the later commencement date.
All other language in that section shall remain unchanged.
Executed this 8th day of December, 1995, at SAN LUIS OBISPO, CALIFORNIA.
LANDLORD (LESSOR) TENANT (LESSEE)
Fiero II Associates Arcada Software, Inc.
a Joint Venture a Delaware Corporation
by: /s/David Sansone by: /s/ Chris Gibson
David Sansone, authorized representative Chris Gibson, Vice President,
Operations
<PAGE> 2
LEASE AGREEMENT
BY THIS LEASE dated November 20, 1995, FIERO II ASSOCIATES, a Joint Venture,
herein called "Lessor", leases to ARCADA SOFTWARE, INC., a Delaware Corporation,
herein called "Lessee", that certain real property, herein called "the
Premises", in the County of San Luis Obispo, State of California, which consists
of the property commonly known as Building 2, Fiero Commerce Park II, consisting
of approximately 28,637 square feet as shown on Exhibit "A" attached hereto.
Lessee shall also have the non-exclusive right to the use and enjoyment of all
non-designated Common Areas within the Project of which the Premises are a part.
Lessee agrees to be bound by the Association Rules regarding the use of the
Common Areas as adopted by the Fiero Commerce Park II Owner's Association
("Association"), a non-profit, mutual benefit corporation.
ARTICLE 1. TERM OF LEASE
Section 1.01: Original Term
This lease shall be for a term of five (5) years, commencing on December 1, 1995
and ending on November 30, 2000.
Section 1.02: Extension Term
Should Lessee perform all of the terms and condition of this lease for the full
term specified in Section 1.01 of this lease, Lessee may extend this lease for
one (1) additional four (4) year term, commencing on the expiration of the
original term, by giving Lessor written notice of Lessee's desire to extend the
term hereof not less than one hundred twenty (120) days but not more than one
hundred eighty (180) days prior to the expiration of the original term or any
extension thereof. Should Lessee fail to exercise its right to extend the lease
within the specified period, the Lessor must notify Lessee within thirty (30)
days of the expiration of the notice period, after which Lessee will have
fifteen (15) days to notify Lessor of its intent to extend the lease.
Section 1.03: Hold Over
Should Lessee hold over and continue in possession of the Premises after
expiration of the term of this lease or any extension thereof, Lessee's
continued occupancy of the Premises shall be considered a month-to-month tenancy
subject to all the terms and conditions of this Lease, except that the base
rent, which shall be payable as provided below, shall be one hundred fifty
(150%) percent of the base rent as of the date of expiration. If Lessee fails to
surrender the Premises upon the expiration of this Lease, Lessee shall indemnify
and hold Lessor harmless from all loss or liability, including without
limitation, any claims made by any succeeding tenant founded on or resulting
from such failure to surrender.
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Section 1.04: Delivery of Possession
Lessor agrees to indemnify, defend and hold Lessee, its officers, directors,
employees and agents, and any successors to Lessee, their directors, officers,
principals, employees and agents, harmless from and against any and all
liability, including without limitation (1) foreseeable and unforeseeable
consequential damages, directly or indirectly arising from the use, generation,
storage or disposal of hazardous materials by Lessor or any other occupant or
operator of the Premises prior to the term of this lease; and (2) the cost of
any required or necessary repair, cleanup, detoxification or remediation and the
preparation of any closure or other required plans, whether such action is
required or necessary before or after the termination of the term hereof, to the
full extent that such liability is attributable, directly or indirectly, to the
presence or use, generation, storage, release, threatened release or disposal of
hazardous materials by any person on the Premises prior to the term hereof. This
indemnity shall survive the termination of the term hereof.
ARTICLE 2. RENT
Section 2.01: Base Rent
For the first year of the term hereof, Lessee agrees to pay to Lessor a fixed
minimum rental for the use and occupancy of the Premises of Forty Nine ($.49)
Center per square foot per month, payable on the first (1st) day of each and
every month commencing on December 1, 1995, at the office of the Lessor at
710-21 Fiero Lane, San Luis Obispo, California 93401, or at such other place or
places as Lessor may from time to time designate by written notice delivered to
Lessee. By execution hereof, Lessor and Lessee stipulate and agree that the
Premises contain 28,637 square feet and that the initial monthly base rate is
$14,032.13. Notwithstanding the above, Lessee shall not be required to pay the
base rent for the first three (3) months of the first year of the term hereof.
Section 2.02: Rent Adjustment
The monthly rent provided for in Section 2.01 above shall be adjusted at the
beginning of each option term as follows:
The base for computing the adjustment is the Consumer Price Index for All Items
for All Urban Consumers in the Los Angeles-Anaheim-Riverside Metropolitan Area,
published by the United States Department of Labor, Bureau of Labor Statistics
("Index"), which is last published prior to the date of the commencement of term
("Beginning Index"). For the purposes of this section, the Beginning Index shall
be 153.4. If the Index published nearest (and prior to) the adjustment date
("Extension Index") has increased over the Beginning Index, the minimum monthly
rent for the following year (until the next rent adjustment) shall be set by
multiplying the base rent set forth above by a fraction, the numerator of which
is the Extension Index and the denominator of which is the Beginning Index.
Lessor shall notify Lessee in writing of the adjustment to the base rent as soon
as the index figures are available.
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Lessee shall pay the adjusted rent to Lessor commencing with the rent payment
due for December 1 of each year of the term hereof and any extension thereof.
The adjusted rent all be subject to similar adjustment on the following
adjustment date.
If the Index is changed so that the base year differs from that used immediately
preceding month in which the term commences, the Index shall be converted in
accordance with the conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised
during the term, such other government index or computation with which it is
replaced shall be used in order to obtain substantially the same result as would
be obtained if the Index had not been discontinued or revised.
In no event shall the minimum rental be less than $14,032.13 per month. In no
event shall the rent adjustment set forth above be less than three (3%) percent
nor more than five (5%) percent for any one (1) year during the term hereof.
Section 2.03: Security Deposit
A. Lessee shall deposit with Lessor, upon execution hereof, receipt of
which is hereby acknowledged subject to collection, a security deposit
in the amount of $42,096.39, as security for the full and faithful
performance by Lessee of the terms, conditions and covenants of this
lease.
B. If at any time during the term of this lease Lessee defaults in the
payment of rent, or any portion of the rent, including any additional
rent herein described, Lessor may appropriate and apply any portion of
the security deposit reasonably necessary to remedy any such default.
C. If at any time during the term of this lease Lessee, Lessee's agents,
patrons or employees damages the Premises through want of ordinary care
of any greater degree of culpability, then Lessor may appropriate and
apply any portion of the security deposit reasonably necessary to fund
the necessary repair. Lessor should give Lessee written notice and
allow Lessee a ten (10) business day cure period prior to appropriation
of any portion of the security deposit.
D. If on termination of this tenancy, Lessee fails to leave the Premises
in a condition comparable to the condition of the Premises at the time
Lessor delivered possession to Lessee at the commencement of this
lease, excepting ordinary wear and tear, Lessor may appropriate and
apply any portion of the security deposit reasonably necessary to put
the Premises in a clean and sanitary condition.
E. Lessor's obligation with regard to the security deposit are those of a
debtor and not a trustee. Lessor shall maintain the security deposit
separate and apart from Lessor's general funds. The security deposit
($42,096.39) shall be maintained in an interest bearing account with
annual interest accruing through the term of the lease.
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F. If Lessor transfers Lessor's interest in the Premises in any manner,
Lessor or Lessor's agent shall do one of the following acts, either of
which shall relieve Lessor of further liability with respect to the
deposit:
i. Transfer the portion of the security deposit remaining after
any deduction authorized by this section or otherwise
authorized by law, if any, to Lessor's successor in interest,
and thereafter notify Lessee by certified mail, return receipt
requested, of that transfer and of the transferee's name and
mailing address. Upon receipt of the security deposit by
Lessor's successor in interest, the successor in interest
shall have all of the rights and obligations of Lessor with
respect to the security deposit.
ii. Return the remaining portion of the security deposit, if any,
after any deductions authorized by this lease or otherwise
authorized by law, to Lessee.
G. Lessor shall return to Lessee the portion of the security deposit
remaining after deductions authorized by this section or by law, if
any, in the following manner:
i. If a deduction has been made only for the nonpayment of rent,
the remaining portion, if any shall be returned not later than
two (2) weeks after the date Lessor receives possession of the
Premises.
ii. If a deduction has been made for any other reason, the
remaining portion, if any, shall be returned not later than
thirty (30) days after the date Lessee returns possession of
the Premises to Lessor, unless Lessor needs more time to
determine the cost of curing Lessee's defaults under this
lease, in which case Lessor shall return the remaining portion
of the security deposit, if any, within two (2) weeks after
completion of the work necessary to cure Lessee's defaults.
H. If during the term of this lease, Lessor applies all or any portion of
the security deposit for a purpose authorized by this section or
otherwise authorized by law, Lessee agrees to restore the amount of the
security deposit so applied, plus such additional amount requested by
Lessor (not exceeding twice the amount of the initial security
deposit), with the next payment of rent due under this lease. Lessee's
failure to restore said security deposit, plus any additional sum
required by Lessor, shall be a material breach of this lease. Lessee
shall have ten (10) business days from receipt of written notice by
Lessor to restore security deposit.
Section 2.04: Taxes, Utilities, Owner's Association Dues as Additional Rent
In addition to the rent specified in Sections 2.01 and 2.02 above, Lessee shall
pay, as additional rent, the following:
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A. Utilities. Lessee shall pay, and hold Lessor harmless and the property
of Lessor including the Premises, free and harmless from all charges
for the furnishing of gas, water, sewer, electricity, telephone service
and other public utilities during the entire term of this lease or any
extension thereof. All such charges shall be paid by Lessee directly to
the provider of the service and shall be paid as they become due and
payable but in any event before delinquency.
B. Personal Property Taxes. Lessee shall pay before they become delinquent
all taxes, assessments and other charges levied or imposed by any
governmental entity on the furniture, trade fixtures, appliances and
other personal property placed by Lessee in, on or about the Premises.
C. Real Property Taxes.
i. Lessee shall pay all real property taxes and general and
special assessments on the Premises, including any increases
in such taxes and assessments, before they become delinquent.
ii. The real property taxes and assessments levied against the
Premises for the first and last years of the term hereof shall
be prorated between Lessor and Lessee for purposes of this
section as of 12:01 am on the date of commencement and
termination respectively for this lease.
iii. Lessee shall have the right, at Lessee's sole cost and
expense, to protest or contest in good faith the amount of any
tax or assessment. As a condition precedent to Lessee's right
to protest such taxes or assessments, Lessee shall either pay
the disputed amount and file for refund or deposit with Lessor
the disputed amount plus one (1) years interest at the rate
then charged by said county plus any estimated penalty which
Lessor may incur by non-payment. Upon such payment or deposit,
Lessor shall cooperate with Lessee in protesting such dispute.
D. Owner's Association Dues and Assessments. Lessee acknowledges that the
Premises are part of a condominium project and as such are subject to
the imposition of regular, special, infraction and reimbursement
assessments levied by the Association pursuant to the CC&Rs.
Lessee shall pay, before they become delinquent, all such assessments
levied by the Association, and shall hold Lessor and the property of
Lessor, including the Premises, harmless from any and all liability for
such assessments. Lessor shall notify Lessee of the amount of regular
monthly assessments levied against the Premises and of any special
assessments proposed or actually levied against the Premises.
E. Payment by Lessor. Should Lessee fail to pay within the time specified
in this Article any utilities, taxes, assessments, or other charges
required by this Section to be paid by Lessee, Lessor may, without
notice or demand to Lessee, pay, discharge, or adjust such tax,
assessment or other charge for the benefit of Lessee.
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In such event, Lessee shall promptly on written demand of Lessor
reimburse Lessor for the full amount paid by Lessor in paying,
discharging or adjusting such tax, assessment or other charge, together
with interest thereon at the maximum rate allowed by law from the date
of payment by Lessor until the date of repayment by Lessee. When no
time within which any charge required by this Article to be paid by
Lessee is specified in this Article, such charge must be paid by Lessee
before it becomes delinquent.
Section 2.05: Late Charges
If any installment of rent or other payment required to be paid by Lessee to
Lessor is not paid within ten (10) days of the date on which it is due, a late
charge equal to five (5) percent of the late payment shall be due from Lessee to
Lessor to compensate Lessor for the additional administrative work caused by
such default and to compensate Lessor for the loss of use of such defaulted
payment. The late charge herein shall be in addition to any other remedy which
Lessor may have hereunder for such default.
Section 2.06: Interest on Late Payments
If any payment required to be paid by Lessee to Lessor is not paid within ten
(10) days of the date on which it is due, such payment shall bear interest at
the maximum rate permitted by law from the date it became due until it is paid
by Lessee to Lessor.
ARTICLE 3. USE OF PREMISES
Section 3.01: Permitted Use
The Premises shall, during the term of this lease and any extensions thereof, be
used for computer software research, design, development and manufacturing,
storage uses and office uses, and other uses related to the manufacturing,
marketing, and distribution of software, and for no other purposes without the
prior written consent of Lessor, which consent Lessor shall not unreasonably
withhold.
Section 3.02: Insurance Hazards
Lessee shall not commit or permit the commission of any acts on the Premises nor
use or permit the use of the Premises in any manner that will increase the
existing rates for or cause the cancellation of any fire, liability, or other
insurance policy insuring the Premises or the improvement on the Premises.
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Section 3.03: Waste or Nuisance
Lessee shall not commit or permit the commission by others of any waste on the
Premises; Lessee shall not maintain, commit or permit the maintenance or
commission of any nuisance as defined in Section 3479 of the California Civil
Code on the Premises; and Lessee shall not use or permit the use of the Premises
for any unlawful purpose.
Section 3.04: Hazardous Materials
Lessee warrants and represents that during the term hereof, and any extensions
thereof, Lessee shall not use the Premises in any manner that would be in
violation of any federal, state or local law, ordinance or regulation relating
to environmental conditions on, under or about the property, including but not
limited to soil and groundwater conditions.
Lessee shall not use, generate, manufacture, produce, store or dispose of on,
under or about the Premises any hazardous materials, including without
limitation flammable materials, explosives, asbestos, radioactive materials,
hazardous wastes, toxic substances or related injurious materials, whether
injurious by themselves or in combination with other materials, other than such
materials as may be necessary for Lessee's normal operations on the Premises.
Lessee shall not dispose of or permit the disposal of any hazardous materials
into the sewer system serving the Premises. For the purposes of this section,
the "Premises" are defined as those areas for which Lessee has exclusive control
over ingress and egress; specifically, the interior areas of the building
properly specified in the lease. Common areas or such other areas outside of
Lessee's exclusive control are not considered part of the "Premises" for the
purposes of this section.
For purposes of this lease, hazardous materials shall include but not be limited
to substances defined as "hazardous substances", "hazardous materials", or
"toxic substances", and any substances defined as "hazardous waste" in any of
the following laws:
A. the Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended.
B. the Hazardous Materials Transportation Act, as amended.
C. the Resource Conservation and Recovery Act of 1976, as amended.
D. California Health and Safety Code Sections 25117 and 25316 and in the
regulations promulgated under such laws.
Lessee agrees to indemnify, defend and hold Lessor, its officers, directors,
employees and agents, and any successors to Lessor, their directors, officers,
principals, employees and agents, harmless from and against any and all
liability, including with limitation (1) all foreseeable and unforeseeable
consequential damages, directly or indirectly arising from the use, generation,
storage or disposal of hazardous materials by Lessee or any other occupant or
operator of the Premises; and (2) the cost of any required
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or necessary repair, cleanup or detoxification or remediation and the
preparation of any closure or other required plans, whether such action is
required or necessary before or after the termination of the term hereof, to the
full extent that such liability is attributable, directly or indirectly, to the
presence or use, generation, storage, release, threatened release or disposal of
hazardous materials by any person on the Premises during the term hereof. This
indemnity shall survive the termination of the term hereof.
Section 3.05: Compliance with Law
Lessee shall, at Lessee's own cost and expense comply with all statutes,
ordinances, regulations and requirements of all governmental entities, both
federal and state and county or municipal, relating to Lessee's use and
occupancy of the Premises whether such statutes, ordinances, regulations and
requirements be now in force or hereinafter enacted. The judgment of any court
of competent jurisdiction, or the admission by Lessee in a proceeding brought
against Lessee by any government entity, that Lessee has violated any such
statute, ordinance, regulation or requirement shall be conclusive as between
Lessor and Lessee and shall be grounds for termination of this lease by Lessor.
Lessor agrees that any requirements of the municipal, state or federal
authorities which require alteration of Lessor's building shall not be the
responsibility of Lessee, unless required because of an act of Lessee or a use
of the Premises by Lessee.
Section 3.06: Compliance with CC&Rs
Lessee acknowledges receipt of a copy of the Declaration of Covenants,
Conditions and Restrictions (CC&R's) for Tract 712 and a copy of the the
Declaration of Covenants, Conditions and Restrictions, Bylaws and Rules and
Regulations for Fiero Commerce Park II Owner's Association applicable to the
Premises and agrees to comply with the terms thereof, including the provisions
contained in the CC&R's pertaining to the power of the Association to allocate
sewer capacity and water allocations among all of the owners of the units within
the project of which the Premises are a part and the restriction on opposing the
formation of special assessment districts. Lessee agrees to indemnify, defend
and hold Lessor harmless from any liability, cost or expense, including
reasonable attorney's fees incurred as a result of Lessee's violation of the
CC&Rs. Any provision of this agreement which conflicts with any provision of the
CC&Rs shall be subordinate to the CC&Rs.
ARTICLE 4. ALTERATIONS AND REPAIRS
Section 4.01: Condition of Premises
Lessee shall have ten (10) days after the date of delivery of possession to
notify Lessor of any defects in the Premises as if Lessee fails to so notify
Lessor of any defects, it shall be conclusively presumed that Lessee accepts
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the Premises, as well as the improvements thereon and the facilities appurtenant
thereto, and stipulates with Lessor that the Premises as well as the
improvements thereon and the facilities appurtenant thereto are in good, clean,
safe and tenantable condition. By acceptance of possession, Lessee further
agrees with and represents to Lessor that the Premises have been
inspected by Lessee and that they have been assured by means independent of
Lessor or any agent of Lessor of the truth of all facts material to this lease
and that the Premises are being leased by Lessee as a result of their inspection
and investigation and not as a result of any representations made by Lessor or
any agent of Lessor.
Section 4.02: Maintenance
With the exception of those portions of the Premises which are the obligation of
the Association to maintain, Lessee shall at its own cost and expense keep and
maintain all portions of the Premises, as well as all improvements on the
Premises and all facilities appurtenant thereto, including but not limited to
electrical, plumbing, heating and air conditioning and sewage systems in good
order and repair and in as safe and clean a condition as they were when received
by Lessee from Lessor, reasonable wear and tear excepted. Notwithstanding the
above, Lessor shall maintain the unexposed electrical, unexposed plumbing and
sewage systems, as well as the foundations, bearing and exterior walls. Lessor
will not have the responsibility for repairing the foregoing if such damage is
caused by negligent or intentional act of Lessee, in which event Lessee will
promptly repair such damage.
Should Lessee fail to maintain the Premises as set forth above, Lessor may, at
Lessor's option, perform or contract for the performance of such maintenance for
any on behalf of Lessee. In such event, Lessee shall promptly on written demand
from Lessor reimburse Lessor for all cost and expense incurred by Lessor in
performing Lessee's obligation hereunder plus interest at the maximum rate
permitted by law from the date expended by Lessor to the date of repayment by
Lessee.
Section 4.03: Alterations and Liens
Lessee shall not make or permit any other person to make any alterations to the
Premises or to any improvement thereon or facility appurtenant thereto without
the written consent of Lessor first obtained, which consent shall not be
unreasonably withheld. Lessee shall submit detailed plans and specifications for
any proposed alteration or improvement to the Premises for Lessor's review.
Lessor shall have fifteen (15) days from the time of submission of plans to
respond in writing to Lessee if he disapproves of such plans. Lessee has the
right to terminate this lease if those plans are not approved by the Lessor. In
addition, Lessee shall have the right to terminate this lease if Lessee is
unable to acquire the necessary governmental approvals within sixty (60) days of
submission of plans to the appropriate governmental authorities. Plans shall be
submitted to the appropriate governmental agencies no later than thirty (30)
days from execution of the lease.
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Landlord shall not unreasonably withhold permission to make alterations to the
exterior premises or to any improvement thereon or facility appurtenant thereto
insofar as those changes are in accordance with the CC&R's and the Association
Bylaws. Lessee shall have the right, with written approval from Lessor, to
improve the exterior premises. Lessee shall submit detailed plans and
specifications for any proposed alteration or improvement to the premises for
the Lessor's review. Lessor shall have fifteen (15) days from the time of
submission of plans to respond in writing to Lessee if he so disapproves of such
plans.
Any and all approved alterations or improvements to the Premises shall be at
Lessee's sole cost and expense. Lessee shall keep the Premises free and clear
from any and all liens, claims and demands for work performed, materials
furnished or operations conducted on the Premises at the instance or request of
Lessee. Lessee shall give Lessor not less than ten (10) days prior written
notice of the commencement of construction of any alterations or improvements
exceeding $1,000.00 so that Lessor may post and maintain on the Premises, and to
record as required by law, any notice or notices of non-responsibility provided
for under the mechanics lien laws of the State of California. Lessee will be
required to obtain Lessor's written approval only on alterations exceeding
$10,000.00 in value.
Furthermore, any and all alterations, additions, improvements and fixtures,
except furniture, trade fixtures, and all security devices and measures, made or
placed in or on the Premises by Lessee or any other person shall on expiration
or sooner termination of this lease become the property of Lessor and remain on
the Premises; provided, however, that Lessor shall have the option on expiration
or sooner termination of this lease of requiring Lessee, at Lessee's sole cost
and expense, to remove any or all such alterations, additions, improvements or
fixtures from the Premises by providing Lessee written notice within ten (10)
business days following the expiration or termination of this lease.
Section 4.04: Inspection by Lessor
Lessee shall permit Lessor or his agents to enter into and upon the Premises
during business hours by Lessor giving Lessee twenty-four (24) hour notice for
the purpose of inspecting the same, or for the purpose of posting notices of
non-responsibility for alterations, additions or repairs or for the purpose of
placing upon the property in which the Premises are located any usual or
ordinary "for sale" signs, without any rebate of rent and without any liability
to Lessee for any loss of occupation or quiet enjoyment of the Premises thereby
occasioned. Lessee shall permit Lessor, at any time within one hundred twenty
(120) days prior to the expiration of this lease, to place upon the Premises any
usual or ordinary "to let" or "to lease" signs, provided that such entries made
by Lessor hereunder shall not unreasonably interfere with the conduct of
Lessee's business.
Section 4.05: Surrender of Premises
On expiration or sooner termination of this lease, or any extensions or renewals
of this lease, Lessee shall promptly surrender and deliver the Premises to
Lessor in as good condition as they are at the date of possession, reasonable
wear and tear excepted. Refer to Exhibit "C" - Construction of Premises.
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ARTICLE 5. INDEMNITY AND INSURANCE
Section 5.01: Hold Harmless Clause
Lessee agrees to indemnify and hold Lessor and the property of Lessor, including
the Premises, free and harmless from any and all claims, liability,
loss, damage, or expense resulting from Lessee's occupation and use of the
Premises, specifically including, without limitation, any claim, liability, loss
or damage arising by reason of:
A. The death or injury of any person or persons, including Lessee or any
person who is any employee or agent of Lessee, or by reason of the
damage to or destruction of any property, including property owned by
Lessee or any person who is an employee or agent of Lessee, and caused
or allegedly caused by either the condition of the Premises, or some
act or omission of Lessee or of some agent, contractor, employee,
servant, sublessee, or concessionaire of Lessee on the Premises;
B. Any work performed on the Premises or materials furnished to the
Premises at the instance or request of Lessee or any agent or employee
of Lessee;
C. Lessee's failure to perform any provision of this lease or to comply
with any requirement imposed on Lessor or the leased Premises by any
duly authorized governmental agency or political subdivision.
In the event any claim, liability, loss or damage arises as a result of
the gross negligence or willful misconduct of Lessor, Lessee shall not
be responsible for any such claim, liability, loss or damage, and that
Lessor shall indemnify Lessee for any such claim, liability, loss or
damage.
Section 5.02: Liability Insurance
Lessee shall, prior to the date Lessee takes possession of the Premises and at
its own cost and expense, obtain and maintain during the entire term of this
lease and any renewals or extensions thereof, a broad form comprehensive
coverage policy of public liability insurance issued by an insurance company
acceptable to Lessor and authorized to conduct insurance business in the State
of California and insuring Lessee and Lessor against loss or liability caused by
or connected with Lessee's occupation and use of the Premises under this lease
in amounts not less than:
A. $1,000,000 for injury to or death of one person and, subject to that
limitation for the injury or death of one person, of not less than
$3,000,000 for injury to or death of two or more persons as a result of
any one accident or incident.
B. $500,000 for damage to or destruction of any property of others.
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Such public liability insurance, and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Section 5.01 above. Both
parties shall be named as co-insured, and the policy shall contain cross
liability endorsements, if available. No policy shall be cancelable or subject
to reduction of coverage except after thirty (30) days prior written notice to
Lessor.
During the term of this lease, Lessor may require an increase in the amount of
public liability and property damage insurance coverage required hereunder, if
at that time the existing coverage is not adequate in the reasonable opinion of
Lessor's insurance broker or lender(s).
Section 5.03: Lessee's Personal Property
A. Lessee shall, at all times during the term of this lease and any
extensions thereof, maintain at Lessee's sole cost and expense an
insurance policy issued by a company acceptable to Lessor and
authorized to conduct insurance business in the State of California
insuring for their full insurable value all furniture and equipment,
and tenant improvements made to the Premises by Lessee against loss or
destruction by fire and the perils commonly covered under the standard
extended coverage endorsement to the fire policies in San Luis Obispo
County. Insurance proceeds will be payable to Lessor and Lessee based
upon their respective claims for damage to personal property or tenant
improvements. The proceeds shall be used by Lessor and Lessee to repair
or replace such furniture and equipment, and tenant improvements. In no
event shall Lessor receive insurance proceeds under the insurance
required by this paragraph in excess of the amount agreed to in an
addendum to be attached to the lease as described in Section 5.03(B).
Such policies shall not be cancelable or subject to reduction of
coverage except after thirty (30) days prior to written notice by
Lessor.
B. Lessor and Lessee shall agree to execute an addendum to this agreement
listing the dollar value of the fixtures and permanent improvements
made to the Premises by Lessee which permanent improvements to the
Premises shall be deemed "tenant improvements". In the event Lessor and
Lessee fail, for any reason, to execute the addendum called for in this
subparagraph, then the value of the tenant improvements for purposes of
capping Lessor's claim to insurance proceeds under the insurance
provided for in this Section 5.03 shall be deemed to be the price
calculated by taking the average of those bids for construction of
tenant improvements received by Lessee in connection with Lessee's
construction of the tenant improvements.
Section 5.04: Deposit of Insurance with Lessor
Lessee shall, prior to taking possession of the Premises and promptly thereafter
when any such policy is replaced, rewritten or renewed, deliver to Lessor a true
and correct copy of each insurance policy required by this Article or a
certificate executed by the insurance company or companies or their authorized
agent evidencing such policy or policies.
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ARTICLE 6. SIGNS AND TRADE FIXTURES
Section 6.01: Installation and Removal of Trade Fixtures
Lessee shall have the right at any time and from time to time during the term of
this lease and any renewal or extension of such term, at Lessee's sole cost and
expense, to install and affix in, to or on the Premises, such items, herein
called "trade fixtures", for use in Lessee's trade or business as Lessee may, in
its sole discretion, deem advisable. Any and all such trade fixtures that can be
removed without structural damage to the Premises or any building or improvement
on the Premises shall remain the property of the Lessee and may be removed by
Lessee at any time or times prior to the expiration or sooner termination of
this lease.
Section 6.02: Unremoved Trade Fixtures
Any trade fixtures described in this Article that are not removed from the
Premises by Lessee within ten (10) days after the expiration or sooner
termination, regardless of cause, of this lease shall be deemed abandoned by
Lessee and shall automatically become the property of Lessor as owner of the
real property to which they are affixed, unless Lessor notifies Lessee in
writing, of Lessor's election to have Lessee remove such trade fixtures and to
repair any damages caused thereby. Upon such election by Lessor to require
Lessee to remove such trade fixtures, Lessee shall have fifteen (15) days from
the date of such notice in which to remove such trade fixtures and repair any
damage caused by such removal. If Lessee fails to remove such trade fixtures and
repair any such damage, Lessor may do so at Lessee's sole cost and expense,
including any costs of storing such property. Such costs and expenses, if
incurred by Lessor for Lessee's benefit, shall be promptly, upon written demand
therefor, reimbursed to Lessor by Lessee, together with interest at the maximum
rate permitted by law from the date expended by Lessor to the date of
reimbursement by Lessee.
Section 6.03: Signs
Lessee may place and maintain, or permit any other person to place and maintain
any sign on the Premises providing such sign is in compliance with then existing
governmental regulations and is in compliance with the restrictions on signs
contained in the CC&R's. Lessee may not place any decoration, lettering, or
advertising matter on the glass of any exterior show window of the Premises.
Lessee shall maintain such sign at all times during this lease in good
appearance and repair. On expiration or sooner termination of this lease, all
such signs not removed from the Premises by Lessee may, without liability, be
destroyed by Lessor.
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ARTICLE 7. DAMAGE, DESTRUCTION OR CONDEMNATION
Section 7.01: Partial Destruction
Should the Premises or the building of which the Premises is a part be partially
destroyed by any cause not the fault of Lessee or any person in or about the
Premises with the consent, express or implied of Lessee, the provisions of the
CC&R's shall determine the responsibility for repair or restoration of the
building of which the Premises are part. If the Association is required or
elects to repair the building, this lease shall continue in full force and
effect subject to the provisions below regarding abatement of the rent.
Section 7.02: Total Destruction
Should the Premises or the building of which the Premises is a part be so far
destroyed by any cause not the fault of Lessee or any person in or about the
Premises with the consent, express or implied, of Lessee, that the Association
is not required to repair or replace the building or if the Association elects
not to repair the building, this lease shall terminate effective the date of the
damage or destruction.
Section 7.03: Insurance Proceeds
In the event the Association is required to repair or replace the Premises or
the building of which the Premises are a part, the insurance proceeds described
in Section 5.03 above, received by Lessor for repair and/or replacement of the
tenant improvements and the insurance proceeds described in Section 5.03 above,
received by the Lessee for the repair and/or replacement of its personal
property shall be applied to the repair and in Section 5.03 above, received by
the Lessee for the repair and/or replacement of its personal property shall be
applied to the repair and replacement of the tenant improvements and Lessee's
personal property, as the case may be. Insurance proceeds, if any, which are
payable to Lessor on account of damage or destruction to the "tenant
improvements" shall not exceed the amount as described in the addendum to this
lease. Insurance proceeds for tenant improvements shall be the sole property of
Lessor, free of any claims of Lessee. All other insurance proceeds in excess of
the amount set forth in the addendum for tenant improvements and all amounts
which are attributable to Lessee's personal property shall be the sole property
of the Lessee free of all claims of Lessor. In the event the Association is not
required to repair or replace the Premises or the building of which the Premises
are a part, or elects not to so repair or replace the Premises or the building
of which the Premises are a part, any insurance proceeds described in Section
5.03 above shall be divided in the same manner as set forth in this provision,
with the Lessor being entitled to such proceeds attributable to tenant
improvements up to the valuation as set forth in the addendum, and the Lessee
being entitled to all proceeds attributable to Lessee's personal property and
all other proceeds above the amount set forth in the addendum, each free of the
claims of the other party.
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Section 7.04: Abatement of Rent
Should the Association elect to repair or replace the building or be required to
repair and replace the building of which the Premises are a part following
partial or total destruction:
A. Lessee shall not be entitled to any damages for any loss or
inconvenience sustained by Lessee by reason of the making of such
repairs and restoration;
B. The Association shall have full right to enter the Premises and take
possession of so much of the Premises, including the whole of the
Premises, as may be reasonably necessary to enable the Association to
promptly and efficiently carry out the work of such repair and
restoration; and
C. The rent payable by Lessee to Lessor pursuant to Article 2 of this
lease shall be abated to the extent and for the time Lessee is
prevented from using the whole of the Premises.
In the event Lessee is prohibited from using a portion of the floor
space of the Premises, rent shall be abated by that proportionate
amount of space from the whole.
Section 7.05: Total Condemnation
Should, during the term of this lease or any renewal or extension thereof, title
and possession of all of the Premises be taken under the power of eminent domain
by any public or quasi-public agency or entity, this lease shall terminate as of
12:01 am on the date actual physical possession of the Premises is taken by the
agency or entity exercising the power of eminent domain and both Lessor and
Lessee shall thereafter be released from all obligations, except those specified
in Section 7.09 of this lease, under this lease.
Section 7.06: Termination Option for Partial Condemnation
Should, during the term of this lease or any renewal or extension thereof, title
and possession of only a portion of the Premises be taken under the power of
eminent domain by any public or quasi-public agency or entity, Lessee may, at
Lessee's option, terminate this lease if more than 35 percent of the floor space
or more than 55 percent in value of the Premises is taken under the power of
eminent domain, or if Lessee us unable to continue its full operation in the
portion of the Premises which remain, Lessee shall exercise its option by giving
written notice to Lessor within thirty (30) days after actual physical
possession of the portion subject to eminent domain power is taken by the agency
or entity exercising that power. This lease shall terminate as of 12:01 am on
the date of the notice is deemed given to Lessor but the rent specified in
Article 2 of this lease shall be reduced in the manner specified in Section 7.07
below from the date of taking to the date of termination of the lease. Lessee
shall be able to terminate the lease if the remaining portion of the Premises is
not suitable for Lessee's continued use of the Premises.
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Section 7.07: Partial Condemnation Without Termination
Should Lessee fail to exercise the option described in Section 7.06 of this
lease, or should the portion of the Premises taken under the power of eminent
domain be insufficient to give rise to the option described in Section 7.06 of
this lease, then, in that event:
A. This lease shall terminate as to the portion of the Premises taken by
eminent domain as of 12:01 am on the day, herein called the "date of
taking", actual physical possession of that portion of the Premises is
taken by the agency or entity exercising the power of eminent domain.
B. The rent specified in Article 2 of this lease shall, after the date of
taking, be reduced by an amount that bears the same ratio to the rent
specified in Article 2 of this lease as the square footage floor space
of the prior of said premise taken under the power of eminent domain
bears to the total square footage floor space of the Premises as of the
date of this lease; and
C. Lessor, at Lessor's own cost and expense, will remodel and reconstruct
the building remaining on the portion of the Premises not taken by
eminent domain into a single efficient architectural unit as soon after
the date of taking, or before, as can be reasonable done; provided,
however, that the rent specified in this lease shall not be abated or
reduced, except as provided in subparagraph (B) of this section, during
such remodeling or reconstruction.
Section 7.08: Condemnation Award
Should, during the term of this lease or any renewal or extension thereof, title
and possession of all or any portion of the Premises be taken under the power of
eminent domain by any public or quasi-public agency or entity, the portion of
the compensation or damages for the taking awarded to each of the parties to
this lease, Lessor and Lessee, shall belong to and be the sole property of the
party to whom it is awarded. Lessee shall be entitled to that portion of the
compensation or damages awarded for the eminent domain taking that represents
(1) reasonable value of Lessee's rights under this lease for the unexpired term
of this lease and (2) the cost or loss sustained by Lessee because of the
removal of Lessee's trade fixture, equipment and furnishings from the portion of
the Premises taken by eminent domain.
Section 7.09: Arbitration of Condemnation Award
Should separate award not be made to Lessor and Lessee for the taking by eminent
domain of all or any portion of the Premises, and should Lessor and Lessee be
unable to agree on the manner the total award is to be divided between them
pursuant to Section 7.08 of this lease, the proper division of the award between
Lessor and Lessee shall be settled by arbitration. Each party shall appoint an
arbitrator and the two arbitrators so appointed shall, within a month after both
have been appointed, select a third arbitrator. The decision of any two of these
three arbitrators in writing shall be binding on both Lessor and Lessee.
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Should not two arbitrators be able to agree within one month after appointment
of the third arbitrator, the report of the arbitrator most favorable to Lessor
and the report of the arbitrator most favorable to Lessee shall both be
disregarded and the report of the remaining arbitrator shall be binding upon
both Lessor and Lessee. Should either Lessor or Lessee fail to appoint an
arbitrator within 15 days after receiving written notice from the other to do
so, the arbitrator selected by the other party shall act for both and his
decision in writing shall be binding upon both Lessor and Lessee.
ARTICLE 8. DEFAULT, ASSIGNMENT AND TERMINATION
Section 8.01: Subleasing or Assigning as Breach
Lessee shall not encumber, assign or otherwise transfer this lease, any right or
interest in this lease, or any right or interest in the Premises or any of the
improvements that may now or hereafter be constructed or installed on the
Premises without the express written consent of Lessor first obtained.
Neither shall Lessee sublet the Premises or any part thereof or allow any other
person, other than Lessee's patrons, agents, servants, and employees to occupy
the Premises or any part thereof without the prior written consent of Lessor. A
consent by Lessor to one assignment, one subletting or one occupation of the
Premises by another person shall not be deemed to be a consent to any subsequent
assignment, subletting or occupation of the Premises by another person. Any
encumbrance, assignment, transfer or subletting without the prior written
consent of Lessor, whether it be voluntary or involuntary, by operation of law
or otherwise, is void and shall, at the option of Lessor, terminate this lease.
The consent of Lessor to any assignment of Lessee's interest in this lease or
the subletting by Lessee of the Premises or parts of the Premises shall not be
unreasonably withheld. Notwithstanding the above, Lessee may assign or sublease
the Premises, or portions thereof, to a subsidiary, affiliate or parent of
Lessee. Such permitted assignment shall not relieve Lessee from any liability
under this lease.
Lessor must respond to written notices from Lessee under the terms of this
section within thirty (30) days, else consent of Lessor will conclusively deemed
to have been given. Lessor also agrees to exempt from this assignment clause the
Lessee's duty to obtain Lessor's approval for mergers, consolidations, takeovers
and sales of the business. Transfers or assignments of this lease, the Premises
of the improvements thereon rising from such mergers, consolidations, takeovers
or sales of the business will not constitute a breach under the terms of this
section.
Section 8.02: Abandonment by Lessee
Should Lessee breach this lease and abandon the Premises prior to the natural
expiration of the term of this lease, Lessor may:
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A. Continue this lease in effect by not terminating Lessee's right to
possession of the Premises, in which event Lessor shall be entitled to
enforce all his rights and remedies under this lease, including the
right to recover the rent specified in this lease as it become due
under this lease; or
B. Terminate this lease and recover from Lessee:
i. The worth at the time of award of the unpaid rent which had
been earned at the time of termination of the lease;
ii. The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination of
the lease until the time of award exceeds the amount of rental
loss that Lessee proves could have been reasonably avoided;
iii. The worth at the time of award of the amount by which the
unpaid rent for the balance of the term of this lease after
the time of award exceeds the amount of rental loss that
Lessee proves could be reasonably avoided; and
iv. Any other amount necessary to compensate Lessor for all
detriment proximately caused by Lessee's failure to perform
Lessee's obligations under this lease.
As used in this section, "Abandonment" shall be defined as Lessee's failure to
conduct business at the Premises for any period of fifteen (15) consecutive
days. Such failure to use the Premises shall conclusively be deemed abandonment
of the Premises.
The term "rent" as used in this section shall mean the base rent, as adjusted to
the date of default, additional rent as defined above, and any other sums
required to be paid by Lessee pursuant to the terms of this lease. As used in
subsection (1) and (ii) above, the "worth at the time of award" shall be
computed by allowing interest at the rate of ten (10%) percent per annum. As
used in subsection (iii) above, the "worth at the time of award" shall be
computed by discounting that amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award, plus one (1%) percent.
Section 8.03: Default by Lessee
Should Lessee default in the payment of any rent, additional rent or other sum
to be paid by Lessee hereunder, and if such default shall continue for a period
of five (5) business days after written notice thereof from Lessor to Lessee, or
if Lessee shall default in the performance or observance of any other term,
covenant, obligation or agreement to be performed or observed by Lessee, and if
such default shall continue for a period of ten (10) days after written notice
thereof from Lessor to Lessee, or if more than four (4) of any of the foregoing
defaults, or any combination thereof shall occur in any single twelve (12) month
period during the term hereof, whether or not the same shall be cured, Lessor
shall have, in addition to any other remedies provided for herein or by law, the
option to terminate this lease, reenter the Premises by process of law and shall
have the right to recover from Lessee all of the sums described in Section
8.02(B) above.
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Section 8.04: Insolvency of Lessee
The insolvency of Lessee as evidences by a receiver being appointed to take
possession of all or substantially all of the property of Lessee, or the making
of a general assignment for the benefit of creditors by Lessee or the filing by
or against Lessee of a petition in bankruptcy, shall terminate this lease and
entitle the Lessor to reenter and regain possession of the Premises.
Section 8.05: Right of Entry on Default
Without limitation of Lessor's rights contained elsewhere in this lease or at
law, in the event of Lessee's default, any and all of Lessee's fixtures then
remaining on the Premises, with the exception of personal property, Lessor shall
have the right to take exclusive possession of same and shall be entitled to
obtain a writ of attachment of same, with notice to Lessee.
Alternatively, Lessor may remove all or any portion thereof and place such
property in storage for the account of Lessee and at the expense of Lessee.
Lessor shall have no duty to pay rent or other costs of storage and shall have
no liability to Lessee if the property is sold at auction or otherwise. Upon
such entry, Lessor may, at Lessor's option, relet the Premises or any part
thereof to a third party or third parties for any term, at any rental, and on
any other terms and conditions that Lessor, in its sole discretion may deem
advisable, and shall have the right to make alterations and repairs to the
Premises.
Lessee shall be liable for all of Lessor's costs of reletting, including but not
limited to remodeling costs required for the reletting. In the event Lessor
relets the Premises, Lessee shall pay all rent due under this lease at the times
specified herein, less any amounts actually received by Lessor from the
reletting.
Section 8.06: Cumulative Remedies
The remedies given to Lessor in this Article shall not be exclusive but shall be
cumulative and in addition to all remedies no or hereafter allowed by law or
elsewhere provided in this lease.
Section 8.07: Waiver of Breach
The waiver by Lessor of any breach by Lessee of any of the provisions of this
lease shall not constitute a continuing waiver or a waiver of any subsequent
breach by Lessee whether of the same or another provision of this lease. Lessor
shall be in default of this lease if Lessor does not perform any provision of
this lease that Lessor is obligated to perform within thirty (30) days after
written notice thereof has been given by Lessee to Lessor. If the nature of
Lessor's obligation is such that more than thirty (30) days are required for
performance, Lessor shall not be in default of this lease if Lessor commences
performance within the thirty (30) day period and diligently and in good faith
continues the same until completion.
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Lessee, at any time after Lessor commits the default, may cure the detail at
Lessor's expense. If Lessee, by reason of Lessor's default, at any time pays any
sum or does any act that requires the payment of any sum, this sum paid by
Lessee shall be due immediately from Lessor to Lessee at the time the sum is
paid, and if paid at a later date shall bear interest at the maximum rate
allowed by law from the date the sum was paid by Lessee until Lessee is
reimbursed by Lessor.
ARTICLE 9. MISCELLANEOUS
Section 9.01: Force Majeure - Unavoidable Delays
Should the performance of any act required by this lease to be performed by
either Lessor or Lessee be prevented or delayed by reason of an act of God,
strike, lockout, labor troubles, inability to secure materials, restrictive
governmental laws or regulations, or any other cause except financial inability,
not the fault of the party required to perform the act, the time for performance
of the act will be extended for a period equivalent to the period of delay and
performance of the act during the period of delay will be excused; provided,
however, that nothing contained in this section shall excuse the prompt payment
of rent or other sums by Lessee as required by this lease or the performance of
any act rendered difficult solely because of the financial condition of the
party, Lessor or Lessee, required to perform the act.
Section 9.02: Parking Spaces
In addition to the Premises herein described, Lessor shall provide Lessee with
seventy three (73) parking spaces designated for Lessee's use. Such parking
spaces may proportionally include handicapped parking, spaces designated for
compact vehicles and motorcycle parking and spaces reserved for carpool parking.
Section 9.03: Option to Purchase
Provided Lessee is not in default under the terms of this agreement, Lessee
shall have the option, but not the obligation, to purchase the Premises on the
following terms and conditions:
A. The purchase price shall be One Million Six Hundred Sixty Thousand Nine
Hundred Forty Six ($1,660,946.00) Dollars. Said purchase price shall be
adjusted annually in the same manner and at the same time as the base
rent is adjusted pursuant to Section 2.02 above. In the event Lessee
exercises its option to purchase the Premises, the purchase price shall
be payable in cash to Lessor at the close of escrow.
B. Lessee may exercise this option at any time during the original five
(5) year term hereof, by giving Lessor written notice of Lessee's
exercise of this option and by depositing $45,000.00 into an escrow at
First American Title Insurance Company, San Luis Obispo, California.
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<PAGE> 22
Said deposit shall apply to the purchase price at the close of escrow.
Said escrow shall provide for a closing within sixty (60) days after
Lessee's deposit as above provided. Lessee shall not have any option to
purchase the Premises during any extension of the original five (5)
year term.
C. At the close of escrow, Lessor shall convey good and marketable title
to the Premises, subject only to property taxes which are a lien not
yet due, CC&R's of record and other existing encumbrances of record
approved by Lessee. Said title shall be evidenced by a CLTA policy of
title insurance issued by the above title company, which policy shall
be paid for by Lessor.
Section 9.04: Attorney's Fees
Should any litigation, arbitration or other proceeding be commenced between the
parties to this lease concerning the Premises, this lease, or the rights and
duties of either in relation thereto, the party, Lessor or Lessee, prevailing in
such litigation shall be entitled, in addition to such other relief as may be
granted in the litigation, to a reasonable sum as and for his attorney's fees in
such litigation, together with any costs and expenses of such proceeding,
including such fees, costs and expenses on appeal and required to enforce any
final judgment.
Section 9.05: Arbitration of Disputes
If any dispute arises between Lessor and Lessee concerning the Premises, any
provision of this lease or the rights and duties of either in regard thereto,
the dispute shall be settled by arbitration as provided in this section. Each
party shall appoint an arbitrator and give the other party written notice of the
name and address of arbitrator within five (5) days after written demand to do
so has been served on the party making the appointment by the other party to
this lease. To two appointed arbitrators shall within ten (10) days after their
appointment, appoint a third arbitrator. The written decision of any two of the
three arbitrators shall be binding and conclusive on both parties to this lease.
The arbitrators may apportion the costs and expenses of the arbitration
proceeding, including attorney's fees and arbitration fees, between the parties
to this agreement in any manner deemed reasonable by two of the three
arbitrators. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
NOTICE: By initialing in the space below you are agreeing to have any dispute
arising out of the matters included in the "Arbitration of Disputes" provision
above decided by neutral arbitration as provided by California law and you are
giving up any rights you may have to have the dispute litigated in a court or
jury trial. By initialing in the space below you are giving up your judicial
rights to discovery and appeal, unless those rights are specifically included in
the "Arbitration of Disputes" provision. If you refuse to submit to arbitration
after agreeing to this provision, you may be compelled to arbitrate under the
authority of the California Code of Civil Procedure. Your agreement to this
arbitration provision is voluntary.
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We have read and understand the foregoing and agree to submit disputes arising
out of the matters included in the "Arbitration of Disputes" provision to
neutral arbitration.
Lessor's Initials 12/9/95 Lessee's Initials CRG 12/8/95
Section 9.06: Notices
All notices to be given to Lessee shall be given in writing personally or by
depositing the same in the United States mail, postage prepaid, and addressed to
Lessee at: Arcada Software, Inc., 708 Fiero Lane, Suite 5, San Luis Obispo,
California 93401, or such other place as may be designated from time to time by
Lessee. All notices to be given to Lessor shall be given in writing personally
or by depositing the same in the United States mail, postage prepaid, and
addressed to the Lessor at: Fiero II Associates, 710-21 Fiero Lane, San Luis
Obispo, California 93401 or such other place or places as may be designated from
time to time by Lessor.
Section 9.07: No Merger
The voluntary or other surrender of this lease by Lessee, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Lessor, terminate any existing subleases or subtenancies or may, at the option
of Lessor, operate as an assignment to it of any such subleases or subtenancies.
Section 9.08: Binding on Heirs and Successors
This lease shall be binding on and shall inure to the benefit of the heirs,
executors, administrators, successors, and assigns of the parties hereto, Lessor
and Lessee, but nothing in this section contained shall be construed as a
consent by Lessor to any assignment of this lease or any interest therein by
Lessee except as provided in Article 8 of this lease.
Section 9.09: Partial Invalidity
Should any provision of this lease be held by a court of competent jurisdiction
to be either invalid, void, or unenforceable, the remaining provisions of this
lease shall remain in full force and effect unimpaired by the holding.
Section 9.10: Sole and Only Agreement
This instrument constitutes the sole and only agreement between Lessor and
Lessee respecting the Premises, the leasing of the Premises to Lessee, or the
lease term herein specified, and correctly sets for the obligations of Lessor
and Lessee to each other as of its date. Any agreements or representations
respecting the Premises or their leasing by Lessor to Lessee not expressly set
forth in this instrument are null and void.
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Section 9.11: Waiver
The waiver by Lessor of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant or condition
or any subsequent breach of the same or any other term, covenant or condition
herein contained.
Section 9.12: Subordination and Non-Disturbance
A. This lease is subject and subordinate to all mortgages and deeds of
trust which may hereafter be placed and recorded on the property of
which the Premises are a part, and to all renewal, modifications,
replacements, and extensions thereof.
B. The subordination provided for above is conditioned on the following:
i. For each mortgage or deed of trust, lessor shall obtain from
the mortgagee or beneficiary a non- disturbance agreement in
writing that, in the event of foreclosure, or any sale
thereunder, this lease shall not be terminate and lessee's
right of possession under this lease shall not be disturbed,
provided lessee is not then in default under this lease;
ii. In consideration of the mortgagee's or beneficiary's agreement
not to disturb lessee's possession as above provided, lessee
hereby agrees to attorn to the purchaser at any foreclosure,
sale or other action or proceeding.
iii. The subordination described in this section shall be effective
without necessity of having any further instruments executed
by Lessee, but Lessee agrees to execute on demand any such
further instruments evidencing subordination that lessor or
mortgagee or beneficiary may reasonably request.
Section 9.13: Time of Essence
Time is expressly declared to be of the essence of this lease.
Section 9.14: Accord and Satisfaction
No payment by Lessee or receipt by Lessor of a lesser amount than the monthly
rent stipulated herein or any other sum due hereunder from Lessee to Lessor
shall be deemed to be anything other than a payment on account of the earliest
sum then due and owing to Lessor.
No endorsement or statement on any check or any letter accompanying any check or
payment or payment of any sums due from Lessee to Lessor hereunder shall be
deemed to be an accord and satisfaction, and Lessor may accept and negotiate any
such payment without prejudice to Lessor's right to recover the balance of such
rent or other sum or to pursue any other remedy provided for in this lease or by
law.
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Section 9.15: Law Governing
The laws of the state and county wherein the Premises are located shall govern
the validity, performance and enforcement of this lease.
Executed the 8th day of December, 1995, at San Luis Obispo, California.
LANDLORD TENANT
FIERO II ASSOCIATES ARCADA SOFTWARE, INC.
A Joint Venture A Delaware Corporation
/s/David Sansone /s/ Chris Gibson
By By
David Sansone CHRIS GIBSON
Authorized Representative VICE PRESIDENT
OPERATIONS
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<PAGE> 26
AMENDED EXHIBIT "A"
LEGAL DESCRIPTION
The property described as:
A portion of Parcel 1, 2, 3 and 4 of Lot 6 of Tract 712, in the County of San
Luis Obispo, State of California, according to the map recorded October 27, 1980
in Book 10, Page 49 of Maps, in the office of the County Recorder of San Luis
Obispo, and more particularly described on the site plan dated March 15, 1995
and marked as Exhibit "B"; also known as Units 25-54 of 705 Fiero Lane.
Lessor Initials: Lessee Initials:
Date: 12/9/95 Date: 12/8/95
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EXHIBIT "B"
SITE PLAN
[CHART OMITTED]
SITE PLAN
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<PAGE> 28
EXHIBIT "C"
CONSTRUCTION OF PREMISES
FIERO COMMERCE PARK II
SAN LUIS OBISPO, CALIFORNIA
1. Plans. Concurrently with the execution of the lease agreement, Lessor
shall deliver a floor plan of the premises to Lessee showing the
columns and other structural work. Lessee, at its expense, shall submit
to Lessor for its approval two (2) sets of fully dimensioned scale
drawings, prepared by a licensed architect or building designer, which
drawings shall indicate the specific requirements of Lessee's space,
clearly outlining the offices in such detail as Lessor may require,
including types of materials and colors, interior partitions, reflected
ceiling plan, roof plan, if applicable, plumbing fixtures, and
electrical plans prepared by a licensed electrical engineer setting
forth all electric requirements of Lessee, all in conformity with the
description of Lessor's Work and description of Lessee's Work herein.
Lessor shall have thirty (30) days from receipt of these drawings to
approve or disapprove them. If Lessor disapproves such plans, Lessee
shall, within ten (20) days of receipt of Lessor's notice of
disapproval, revise and resubmit such plans to Lessor, correcting or
altering such disapproved items.
2. Lessor's Work. Lessor agrees to deliver possession of the premises as
designed by Lessee's architect as specified in the premises building
plans in the following manner:
A. Structure
1. Partitioning: Shear walls as currently constructed.
2. Doors: As shown on plans.
3. Storefront: In accordance with Lessor's design. Any
alteration and/or deviations to the storefront must
be requested by Lessee, in writing, and be approved
by the Lessor. All excess costs for design and
construction above the standard storefront shall be
borne by Lessee, and approved by the Association.
4. Floor: As currently exists.
5. Roof Platforms and Penetrations: None provided.
6. Ceiling: None provided.
B. Utilities
1. Heating and Air Conditioning: None provided.
2. Electrical Service: 2000 amp main service.
3. Gas Service: As currently exists.
4. Telephone Service: Telephone service shall be brought
to telephone equipment panel. Tenant shall arrange
for further interior distribution.
5. Light Fixtures: Exterior fixtures to be provided per
the plan.
6. Sprinkler System: A fire sprinkler system based on a
standard grid and store space. Changes, if required,
shall be supplied by Lessor at Lessee's expense.
7. Plumbing: Sub slab waste line and various water
services to building per the plans.
<PAGE> 1
EXHIBIT 10.12.2
LEASE AGREEMENT
THIS LEASE is made this 17th day of December, 1993, between MORGON
INVESTMENTS, with its principal place of business located at 708 Fiero Commerce
Park, 4-10, San Luis Obispo, California 93401 (hereinafter referred to as
("Lessor") and QUEST DEVELOPMENT CORPORATION, with its principal place of
business located at 708 Fiero Commerce Park 4-10, San Luis Obispo, California
93401 (hereinafter referred to as ("Lessee").
RECITALS
This lease is made with reference to the following facts and
objectives:
1. Lessor is the owner of the premises described in Exhibit "A", which
consists of an approximate 11,600 square foot building and one (16) parking
spaces.
2. Lessee is willing to lease the premises from Lessor pursuant to the
provisions stated in this lease.
3. Lessee wishes to lease the premises for the purposes of operating a
business known as "QDC, Quest Development Corporation".
4. Lessee has examined the premises and is fully informed of their
condition.
WITNESSETH
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1
Premises
Lessor hereby leases to Lessee that real property located at 708 Fiero
Commerce Park, Suites 4,5,6,7,8,9,10,11, San Luis Obispo, California, more
particularly described in Exhibit "A", and the building and the other
improvements located on that real property (hereinafter called "premises"). This
lease confers no rights either with regard to the subsurface of the land below
the ground level of the premises or with regard to airspace above the top of the
roof of the premises.
SECTION 2
Term
The term of this lease shall commence on January 1, 1994, and shall
expire on January 1, 2001.
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<PAGE> 2
SECTION 3
Option to Extend Term
1. Lessee is given the option to extend the term on all the provisions
contained in this lease, except for minimum monthly rent, for three (3) years
"extended term(s)"), by giving notice of exercise of the option ("option
notice") to Lessor at least four (4) months but not more than one (1) year
before the expiration of the term. Provided that, if Lessee is in default on the
date giving the option notice, the option notice shall be totally ineffective,
or if Lessee is in default on the date the extended term is to commence, the
extended term shall not commence and this lease shall expire at the end of the
initial term.
2. The parties shall have sixty (60) days after Lessor received the
option notice in which to agree on minimum monthly rent during the extended
term. If the parties agree on the minimum monthly rent for the extended term
during that period, they shall immediately execute an amendment to this lease
stating the minimum monthly rent.
3. If the parties are unable to agree on the minimum monthly rent for
the extended term within said period, the option notice shall be of no effect
and this lease shall expire at the end of the term. Neither party to this lease
shall have the right to have a court or third party set the minimum monthly
rent.
4. Lessee shall have no other right to extend the term beyond the
extended term(s).
SECTION 4
Acceptance of Premises
On commencement of the term, the premises shall be in good condition.
Lessee's taking possession of the premises on commencement of the term shall
constitute Lessee's acknowledgement that the premises are in good condition.
Lessor and Lessee shall complete a walk through of the premises prior to Lessee
taking possession and will list the condition of the premises. Lessor and Lessee
shall sign the premises condition statement, and the same will be made part of
this lease as Exhibit "B".
SECTION 5
Rent
1. Lessee shall pay to Lessor as minimum monthly rent, without
deduction, setoff, prior notice, or demand, for the use and occupancy of said
premises the sum of Twenty Four Thousand Dollars ($24,000) per month,
(11,600.00) square feet, to and until such time as the premises are vacated or a
new rental agreement supersedes the existing rental agreement. The minimum
monthly rent, which is subject to possible adjustment as provided in Section 6,
shall be due and payable per month in advance on the first day of each and every
month commencing on the date the term commences and continuing during the term.
Minimum monthly rent for the first month or portion of it shall be paid on the
date the term commences. Minimum monthly rent for any partial month shall be
prorated at the rate of one-thirtieth (1/30) of the minimum monthly rent per
day.
2. All rent shall be paid to Lessor at the address specified in this
lease for the service of notices on Lessor or at such other place or places as
Lessor may from time to time designate by written notice served on Lessee. Rent
may be paid by a personal or business check. In the event the Lessee's check is
returned for insufficient funds or stop-payment. Lessee shall thereafter pay
rent with cash or cashier's check only.
SECTION 6
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<PAGE> 3
Rent Adjustment
The minimum monthly rent provided for in Section 5 shall be subject to
adjustment at the commencement of the second year of the term and each year
thereafter, including the option term as stated in Section 3, ("the adjustment
date") as follows:
1. The base for computing the adjustment is the Consumer Price Index
for All Urban Consumers (base year 1967 = 100) for Los Angeles - Long Beach,
published by the United States Department of Labor, Bureau of Labor Statistics
("Index"); which is in effect on the date of the commencement of the term
("Beginning Index"). The Index published most immediately preceding the
adjustment date in question of the adjustment. If the Extension Index has
increased over the Beginning Index, the minimum monthly rent for the following
year shall be set by multiplying the minimum monthly rent set forth in Section 5
by a fraction, the numerator of which is the Extension Index and the denominator
of which is the Beginning Index. In no case shall the minimum monthly rent be
less than the minimum monthly rent set forth in Section 5. On adjustment of the
minimum monthly rent as provided in this lease, the parties shall immediately
execute an amendment to this lease stating the new minimum monthly rent.
2. If the Index is changed so that the base year differs from that in
effect when the term commences, the Index shall be converted in accordance with
the conversion factor published by the United States Department of Labor, Bureau
of Labor Statistics. If the Index is discontinued or revised during the term
such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained if
the Index had not been discontinued or revised.
SECTION 7
Prepaid Rent
On execution of this lease, Lessee shall pay zero Dollars ($0.00) to
Lessor. Zero Dollars ($0.00) of the sum shall be the minimum monthly rent due
for the first full month of the term. If Lessee is not in default of any of the
provisions of this lease, zero dollars ($0.00) of the sum shall be applied
toward the minimum monthly rent due for the last month of the term or the
extended term if Lessee is given an option to extend the initial term, and the
option is exercised. Said prepaid rent to be remitted in the following form:
SECTION 8
Personal Property Taxes
1. Lessee shall pay before delinquency all taxes, assessments, license
fees, and other charges ("taxes") that are levied and assessed against Lessee's
personal property installed or located in or on the premises, and that become
payable during the term. On demand by Lessor, Lessee shall furnish Lessor with
satisfactory evidence of these payments.
2. If any taxes on Lessee's personal property are levied against Lessor
or Lessor's property or if the assessed value of the premises is increased by
the inclusion of a value placed on Lessee's personal property, and if Lessor
pays the taxes on any of these items or the taxes based on the increased
assessment of these items, Lessee, on demand, shall immediately reimburse Lessor
for the sum of the taxes levied against Lessor, or the proportion of the taxes
resulting from the increase in Lessor's assessment. Lessor shall have the right
to pay these taxes regardless of the validity of the levy.
3. Lessee at Lessee's cost shall have the right, at any time, to seek a
reduction in or contest taxes levied or assessed against Lessee's personal
property. Lessor shall not be required to join in any proceeding or contest
brought by Lessee unless the provisions of any law require that the proceeding
or contest be brought by or in the name of Lessor or any owner of the premises.
In that case Lessor shall join in the proceeding or contest or permit
Page 3 of 20
<PAGE> 4
it to be brought in Lessor's name as long as Lessor is not required to bear any
costs. Lessee, on final determination of the proceeding or contest, shall
immediately pay or discharge any decision or judgments rendered to the other
with all costs, charges, interest, and penalties incidental to the decision or
judgment.
4. If Lessee does not pay such taxes or assessments when due, and
Lessee seeks a reduction or contest of such as provided in this Section, before
the commencement of the proceeding or contest, Lessee shall furnish to Lessor a
surety bond issued by an insurance company qualified to do business in
California. The amount of the bond shall equal one hundred twenty-five percent
(125%) of the total amount of such taxes on assessments in dispute. The bond
shall hold Lessor harmless from any damage arising out of the proceeding or
contest and shall insure the payment of any judgment that may be rendered.
SECTION 9
Real Property Taxes
1. Lessee shall pay all real property taxes and any increases which
result from increased rate and/or valuation levied and assessed against the
premises.
2. Each year lessor shall notify Lessee of the real property taxes;
and, together with such notice, shall furnish Lessee with a copy of the tax
bill. Lessee shall reimburse Lessor for the real property taxes semi-annually
not later than (ten) 10 days before the taxing authority's delinquency date or
(ten) 10 days after receipt of the tax bill, whichever is later.
SECTION 10
Use
1. Lessee shall use the premises for a business and for no other use
without Lessor's prior written consent.
2. Lessee shall conduct Lessee's business at the premises under the
trade name of QDC, Quest Development Corporation.
SECTION 11
Limitations on use
Lessee's usage of the premises as provided in this lease shall be in
accordance with the following:
1. Lessee shall not do, bring, or keep anything in or about
the premises that will cause a cancellation of any insurance covering the
premises.
2. If the rate of any insurance carried by Lessor is increased
as a result of Lessee's use, Lessee shall pay to Lessor within (ten) 10 days
before the date Lessor is obligated to pay a premium on the insurance, or within
(ten) 10 days after Lessor delivers to Lessee a certified statement from
Lessor's insurance carrier stating that the rate increased was caused solely by
an activity of Lessee on the premises as permitted in this lease, whichever date
is later, a sum equal to the difference between the original premium and the
increased premium.
3. Lessee shall comply with all laws concerning the premises
or Lessee's use of the premises; including, without limitation, the obligation
at Lessee's cost to alter, maintain, or restore the premises in compliance and
conformity with all laws relating to the condition, use, or occupancy of the
premises during the term.
Page 4 of 20
<PAGE> 5
4. Lessee shall not use the premises in any manner that will
constitute waste, nuisance, or unreasonable annoyance (including, without
limitation, the use of loudspeakers or sound or light apparatus that can be
heard or seen outside the premises) to owners or occupants of adjacent
properties.
5. Lessee shall not do anything on the premises that will
cause damage to the premises.
6. The premises shall not be overloaded. No machinery,
apparatus, or other appliance shall be used or operated in or on the premises
that will in any manner injure, vibrate, or shake the premises.
SECTION 12
Lessee's Maintenance
Lessee at Lessee's cost shall maintain, in good condition, all portions
of the premises; including, without limitation, the following:
1. The structural parts of the building and other improvements that are
a part of the premises, which structural parts include the foundations, bearing
and exterior walls, subflooring, and roof.
2. The unexposed electrical, plumbing, and sewage systems; including,
without limitation, those portions of the systems lying outside the premises.
3. Window frames, gutters, and downspouts on the building and other
improvements that are a part of the premises.
4. Lessee's proportionate share of the following areas, including
maintaining in goods condition and repair and replacing whatever necessary, all
parking areas, sidewalks, curbs, roads, driveways, lighting standards,
landscaping, sewers, water, gas and electrical distributions systems and
facilities, drainage facilities and signs, both illuminated and non-illuminated
that are now or hereafter on the premises. Lessee shall maintain the lines
designating the parking spaces in good condition and paint the same as often as
may be necessary so that they are easily definable at all times. Lessee agrees,
at Lessee's expense, to paint the exterior of all buildings on the premises at
least once every five (5) years during the term of this lease or any extension
thereof, in a first class, workman like manner with at lease one (1) coat of
paint. Lessee agrees to take all reasonable precautions to insure that the
drainage facilities of the various roofs are not clogged and are in good
operable condition at all times. All above work is to be executed to the
approval of landlord and/or as provided for herein.
5. All portions of the interior of the premises and the common areas
consisting of the hallways and lavatories used by Lessee.
6. All Lessee's personal property, signs, storefronts, plate glass, and
show windows.
7. Lessee shall be liable for any damage to the premises resulting from
the acts or omissions of Lessee, Lessee's authorized representatives or
customers.
SECTION 13
Alterations
1. Except as provided in Section 12, Lessee shall not make any
alterations to the premises without Lessor's prior written consent. Any
alterations made shall remain on and be surrendered with the premises on
expiration or termination of the term, except that Lessor can elect within ten
(10) days before expiration of the term,
Page 5 of 20
<PAGE> 6
or within ten (10) days after termination of the term, to require Lessee to
remove any alterations that Lessee has made to the premises. If Lessor so
elects, Lessee at Lessee's cost shall restore the premises to the condition
designated by Lessor in Lessor's election, before the last day of the term, or
within three (3) days after notice of election is given, whichever is later.
2. If Lessee makes any alterations to the premises as provided in this
Section, the alterations shall not be commenced until ten (10) days after Lessor
has received notice from Lessee stating the date the installation of the
alterations is to commence so that Lessor can post and record an appropriate
notice of non responsibility.
3. Except for construction to be paid by Lessor as provided, Lessee
shall pay all costs for construction done by Lessee, or caused to be done by
Lessee, on the premises as permitted by this lease. Lessee shall keep the
building, other improvements, and land, of which the premises are a part, free
and clear of all mechanics' liens resulting from construction done by or for
Lessee.
4. Lessee shall have the right to contest the correctness or the
validity of any such lien, if, immediately on demand by Lessor, Lessee procures
and records a lien released bond issued by a corporation authorized to issue
surety bonds in California in an amount equal to one and one-half times the
amount of the claim of lien. The bond shall meet the requirement of Civil Code
31343 and shall provide for the payment of any sum that the claimant may recover
on the claim (together with costs of suit, if it recovers in the action).
SECTION 14
Utilities
Lessee shall make all arrangements for and pay for all utilities and
services furnished to or used by it, including, without limitation, gas,
electricity, water, telephone service, and trash collection, and for all
connection charges.
SECTION 15
Exculpation of Lessor
Lessor shall not be liable to Lessee for any damage to Lessee or
Lessee's property from any cause. Lessee waives all claims against Lessor for
damage to person or property arising for any reason, except that Lessor shall be
liable to Lessee for damage to Lessor's authorized representatives.
SECTION 16
Indemnity
Lessee shall hold Lessor harmless from all damages arising out of any
damage to any person or property occurring in, on, or about the premises, except
that Lessor shall be liable to Lessee for damage resulting from the willful acts
or omissions of Lessor or Lessor's authorized representatives. Lessor shall hold
Lessee harmless from all damages arising out of any such damage. A party's
obligation under this section to indemnify and hold the other party harmless
shall be limited to the sum that exceeds the amount of insurance proceeds, if
any, received by the party being indemnified.
SECTION 17
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<PAGE> 7
Public Liability and Property Damage Insurance
Lessee at Lessee's cost shall maintain public liability and property
damage insurance with a single combined liability limit of One Million Dollars
($1,000,000), and property damage limits of not less than Five Hundred Thousand
Dollars ($500,000), insuring against all liability of Lessee and Lessee's
authorized representatives arising out of and in connection with Lessee's use or
occupancy of the premises, and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Section 16. Both parties
shall be named as additional insureds, and the policy shall contain
cross-liability endorsements.
SECTION 18
Lessee's Fire Insurance
1. Lessee at Lessee's cost shall maintain on all Lessee's personal
property, Lessee's improvements, and alterations, in, on, or about the premises,
a policy of standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, to the extent of at least one hundred percent
(100%) of their full replacement value. The proceeds from any such policy shall
be used by Lessee for the replacement of personal property or the restoration of
Lessee's improvement or alterations.
2. Lessee at Lessee's cost shall maintain business interruption
insurance, insuring that the minimum monthly rent will be paid to Lessor for a
period of up to one (1) year if the premises are destroyed or rendered
inaccessible by a risk insured against by a policy of standard fire and extended
coverage insurance, with vandalism and malicious mischief endorsements.
SECTION 19
Fire Insurance on Building
1. Lessee at Lessee's cost shall maintain on the building and other
improvements that are a part of the premises a policy of standard fire and
extended coverage insurance, with vandalism and malicious mischief endorsements,
to the extent of at least one hundred percent (100%) of their full replacement
value.
2. The insurance policy shall be issued in the names of Lessor, Lessee,
Lessor's lender and owner's lender (if any), as their interests appear. The
insurance policy shall provide that any proceeds shall be made payable to
Lessor. In case this lease is terminated, the insurance policy and all rights
under it or the insurance proceeds shall be assigned to Lessor at Lessor's
election.
SECTION 20
Other Insurance Matters
1. All the insurance required under this lease shall:
A. Be issued by insurance companies authorized to do business
in the State of California, with a financial rating of at least an A + 3A status
as rated in the most recent edition of Best's Insurance Reports.
B. Be issued as a primary policy.
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<PAGE> 8
C. Contain an endorsement requiring thirty (30) days written
notice from the insurance company to both parties and Lessor's lender before
cancellation or change in the coverage, scope, or amount of any policy.
2. In the event that Lessee fails to procure and/or maintain any
insurance required by this lease, or fails to carry insurance required by law or
governmental regulation, Lessor may (but without obligation to do so) at any
time or from time to time, and without notice, procure such insurance and pay
the premiums therefore, in which event Lessee shall repay the Lessor all sums so
paid by Lessor, together with interest at the highest rate then allowed under
the usury laws of the State of California from the date due until paid, unless
otherwise specifically provided herein, but the payment of such interest shall
not excuse or cure any default by Lessee under this lease.
3. Each policy, or a certificate of the policy, together with evidence
of payment of premiums, shall be deposited with the other party at the
commencement of the term, and on renewal of the policy not less than thirty (30)
days before expiration of the term of the policy.
4. The parties release each other, and their respective authorized
representatives, from any claim for damage to any person or to the premises and
the building and other improvements in which the premises are located; and, to
the fixtures, personal property, Lessee's improvements, and alterations of
either Lessor or Lessee in or on the premises and the building and other
improvements in which the premises are located that caused by or result from
risks insured against under any insurance policies carried by the parties and in
force at the time of any such damage.
5. Each party shall cause each insurance policy obtained by either
party to provide that the insurance company waives all right of recovery by way
of subrogation against either party in connection with any damage covered by any
policy. Neither party shall be liable to the other for any damage caused by fire
or any of the risks insured against under any insurance policy required by this
lease. If any insurance policy cannot be obtained with a waiver of subrogation,
or is obtainable only by the payment of an additional premium charge above that
charged by insurance companies issuing policies without waiver of subrogation,
the party undertaking to obtain the insurance shall notify the other party of
this fact. The other party shall have a period of thirty (30) days after
receiving the notice either to place the insurance with a company that is
reasonably satisfactory to the other party and that will carry the insurance
with a waiver of subrogation, or to agree to pay the additional premium if such
a policy is obtainable at additional cost. If the insurance cannot be obtained
or the party in whose favor a waiver of subrogation is desired refuses to pay
the additional premium charged, the other party is relieved of the obligation to
obtain a waiver of subrogation rights with respect to the particular insurance
involved.
SECTION 21
Destruction of Premises
If, during the term, the premises are totally or partially destroyed
from any cause, rendering the premises totally or partially inaccessible or
unusable, Lessor shall restore the premises or the building and other
improvements in which the premises are located to substantially the same
condition as they were in immediately before destruction, if the restoration can
be made under the existing laws and can be completed within one hundred twenty
(120) working days after the date of the destruction.
2. Such destruction shall not terminate this lease; however, if the
restoration cannot be made in the time stated in this Section, Lessee can
terminate this lease immediately by giving written notice to Lessor. If Lessee
fails to terminate this lease; and, if restoration is permitted under the
existing laws, Lessor, at its election, can either terminate this lease or
restore the premises or the building and other improvements in which the
premises are located within a reasonable time, and this lease shall continue in
full force and effect. If the existing laws do not permit the restoration,
either party can terminate this lease immediately by giving notice to the other
party.
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<PAGE> 9
3. In case of destruction, there shall be an abatement or reduction of
rent between the date of destruction and the date of completion of restoration,
based on the extent to which the destruction interferes with Lessee's use of the
premises.
4. If Lessor is required or elects to restore premises as provided in
this provision, Lessor shall not be required to restore alterations made by
Lessee, Lessee's improvements, Lessee's trade fixtures, and Lessee's personal
property, such excluded items being the sole responsibility of Lessee to
restore.
5. Lessee waives the provisions of Section 1932(2) and 1933(4) of the
California Civil Code with respect to any destruction of the premises.
SECTION 22
Destruction of premises Not Covered by Lessor's Insurance
1. If, during the term, the premises are totally or partially destroyed
from a risk not covered by the insurance described in Section 19, rendering the
premises totally or partially inaccessible or unusable, Lessor shall restore the
premises to substantially the same condition as they were in immediately before
destruction. Such destruction shall not terminate this lease. If the existing
laws do not permit the restoration, either party can terminate this lease
immediately by giving notice to the other party.
2. If the cost of restoration exceeds ten percent (10%) of the then
replacement value of the premises that are destroyed, Lessor can elect to
terminate this lease by giving notice to Lessee within ten (10) days after
determining the restoration cost and replacement value.
3. If Lessor is required or elects to restore the premises as provided
in this provision, Lessor shall not be required to restore alterations made by
Lessee, Lessee's improvements, Lessee's trade fixtures, and Lessee's personal
property, such excluded items being the sole responsibility of Lessee to
restore.
4. If destruction to the premises occurs during the last one (1) year
of the term, Lessor can terminate this lease by giving notice to Lessee not more
than thirty (30) days after the destruction. Except that, if the destruction
occurs during the last one (1) year of the term and if within thirty (30) days
after the destruction Lessee exercises the option to extend the term as provided
in Section 3 (if the time within which the option can be exercised has not
expired), Lessor shall restore the premises as provided in this provision.
5. Lessee waives the provisions of Civil Code Section 1932(2) and Civil
Code Section 1933(4) with respect to any destruction of the premises.
SECTION 23
Condemnation
1. "Condemnation" means (a) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a condemnor and (b) a voluntary
sale or transfer by Lessor to any condemnor, either under threat of condemnation
or while legal proceedings for condemnation are pending.
2. "Date of taking" means the date the condemnor has the right to
possession of the property being condemned.
3. "Award" means all compensation, sums, or anything of value awarded,
paid, or received on a total or partial condemnation.
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<PAGE> 10
4. "Condemnor" means any public or quasi-public authority or private
corporation or individual having the power of condemnation.
5. If, during the term or during the period of time between the
execution of this lease and the date the term commences, there is any taking of
all or any part of the premises or any interest in this lease by condemnation,
the rights and obligations of the parties shall be determined pursuant to
Sections 24, 25, 26, and 27.
SECTION 24
Total Taking
If the premises are totally taken by condemnation, this lease shall
terminate on the date of taking.
SECTION 25
Partial Taking
If any portion of the premises is taken by condemnation, this lease
shall remain in effect, except that Lessee can elect to terminate this lease if
the remaining portion of the building or other improvements or the parking area
that are a part of the premises is rendered unsuitable for Lessee's continued
use of the premises. If Lessee elects to terminate this lease, Lessee must
exercise Lessee's right to terminate pursuant to this Section by giving notice
to Lessor within thirty (30) days after the nature and the extent of the taking
have been finally determined. If Lessee elects to terminate this lease as
provided in this Section, Lessee also shall notify Lessor of the date of
termination, which date shall not be earlier than thirty (30) days nor later
than sixty (60) days after Lessee has notified Lessor of Lessee's election to
terminate; except that this lease shall terminate on the date of taking if the
date of taking falls on a date before the date of termination as designated by
Lessee. If Lessee does not terminate this lease within the sixty (60) day
period, this lease shall continue in full force and effect, except that minimum
monthly rent shall be reduced pursuant to Section 26.
SECTION 26
Effect on Rent
If any portion of the premises is taken by condemnation and this lease
remains in full force and effect, on the date of taking the minimum monthly rent
shall be reduced by an amount that is in the same ratio to minimum monthly rent
as the value of the area of the portion of the premises taken bears to the total
value of the premises immediately before the date of taking.
SECTION 27
Waiver of CCP Section 1265.130
Each party waives the provisions of Code of Civil Procedure Section
1265.130 allowing either party to petition the superior court to terminate this
lease in the event of a partial taking of the premises.
SECTION 28
Assignment
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<PAGE> 11
1. Lessee shall not voluntarily assign or encumber Lessee's interest in
this lease or in the premises, or sublease all or any part of the premises, or
allow any other person or entity (except Lessee's authorized representatives) to
occupy or use all or any part of the premises, without first obtaining Lessor's
written consent. Any assignment, encumbrance, or sublease without Lessor's
written consent shall be voidable and, at Lessor's election, shall constitute a
default. No consent to any assignment, encumbrance, or sublease shall constitute
a further waiver of the provisions of this Section.
2. Lessee immediately and irrevocably assigns to Lessor, as security
for Lessee's obligations under this lease, all rent from any subletting of all
or a part of the premises as permitted by this lease, and Lessor, as assignee
and as attorney-in-fact for Lessee, or a receiver for Lessee appointed on
Lessor's application, may collect such rent and apply it toward Lessee's
obligations under this lease; except that, until the occurrence of an act of
default by Lessee, Lessee shall have the right to collect such rent.
3. If Lessee requests Lessor to consent to a proposed assignment or
subletting, Lessee shall pay to Lessor, whether or not consent is ultimately
given, Lessor's reasonable attorneys' fees incurred in connection with each such
request.
4. If Lessee consists of more than one person, a purported assignment,
voluntary, involuntary, or by operation of law, from one person to the other,
shall be deemed a voluntary assignment.
SECTION 29
Involuntary Assignment
1. No interest of Lessee in this lease shall be assignable by operation
of law (including, without limitation, the transfer of this lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment:
A. If Lessee is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or institutes a proceeding under the
Bankruptcy Act in which Lessee is the bankrupt; or, if Lessee is a partnership
or consists of more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt or insolvent, or makes an
assignment for the benefit of creditors;
B. If a writ of attachment or execution is levied on this
lease;
C. If, in any proceeding or action to which Lessee is a party;
a receiver is appointed with authority to take possession of the premises.
2. An involuntary assignment shall constitute of default by Lessee and
Lessor shall have the right to elect to terminate this lease, in which case this
lease shall not be treated as an asset of Lessee.
SECTION 30
Default
1. The occurrence of any of the following shall constitute a
default by Lessee:
A. Failure to pay rent within ten (10) days of when due, if
the failure continues for three (3) days after notice has been given to Lessee.
B. Abandonment and vacation of the premises (failure to occupy
and operate the premises for fourteen (14) consecutive days, shall be deemed an
abandonment and vacation.
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<PAGE> 12
C. Failure to perform any other provision of this lease if the
failure to perform is not cured with in thirty (30) days after notice has been
given to Lessee. If the default cannot reasonably be cured within thirty (30)
days, Lessee shall not be in default of this lease if Lessee commences to cure
the default within the thirty (30) day period and diligently and in good faith
continues to cure the default.
2. Notices given under this Section shall specify the alleged default
and the applicable lease provisions, and shall demand that Lessee perform the
provisions of this lease or pay the rent that is in arrears, as the case may be,
within the applicable period of time, or quit the premises. No such notice shall
be deemed a forfeiture or a termination of this lease unless Lessor so elects in
the notice.
3. The purpose of the notice requirements set forth in this Section is
to extend the notice requirements of the unlawful detainer statutes of
California.
SECTION 31
Lessor's Remedies
1. Lessor can continue this lease in full force and effect, and the
lease will continue in effect as long as Lessor does not terminate Lessee's
right to possession, and Lessor shall have the right to collect rent when due.
During the period Lessee is in default, Lessor can enter the premises and relet
them, or any part of them, to third parties for Lessee's account. Lessee shall
be liable immediately to Lessor for all costs Lessor incurs in reletting the
premises; including, without limitation, brokers' commissions, expenses of
remodeling the premises required by the reletting, and like costs. Reletting can
be for a period shorter or longer than the remaining term of this lease. Lessee
shall pay to Lessor the rent due under this lease on the dates the rent is due,
less the rent Lessor receives from any reletting. No act by Lessor, allowed by
this Section, shall terminate this lease unless Lessor notifies Lessee that
Lessor elects to terminate this lease; after Lessee's default and for as long as
Lessor elects to terminate this lease. After Lessee's default and for as long as
Lessor does not terminate Lessee's right to possession of the premises, if
Lessee obtains Lessor's written consent, Lessee shall have the right to assign
or sublet Lessee's interest in this lease, but Lessee shall not be released from
liability. Lessor's consent to a proposed assignment or subletting shall not be
unreasonably withheld.
2. If Lessor elects to relet the premises as provided in this Section,
rent that Lessor receives from reletting shall be applied to the payment of:
A. The worth, at the time of award, of the unpaid minimum
monthly rent and/or percentage rent that had been earned at the time of
termination of lease.
B. The worth, at the time of the award, of the amount by which
the unpaid rent that would have been earned after the date of termination of
this lease until the time of award exceeds the amount of loss of rent that
Lessee proves could have been reasonably avoided.
C. The worth of the amounts that would have fallen due as
percentage rent based upon the monthly average of the preceding twelve (12)
months, between the time of termination of this lease and the time of the
judgment or other award, plus interest, less the amount Lessee proves could
reasonably have been avoided.
D. The worth, at the time of the award, of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the
amount of the loss of rent that Lessee proves could have been reasonably
avoided.
E. Any other amount, and court costs, necessary to compensate
Lessor for all detriment proximately caused by Lessee's default.
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<PAGE> 13
4. "The worth, at the time of the award" as used in subparagraphs 3.a.,
3.b., and 3.c. of this Section is to be computed by allowing interest at the
maximum rate an individual is permitted by law to charge. "The worth, at the
time of the award," as referred to in 3.d. of this Section, is to be computed by
discounting the amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%).
5. If Lessee is in default of this lease, Lessor shall have the right
to have a receiver appointed to collect rent and conduct Lessee's business.
Neither the filing of a petition for the appointment of a receiver nor the
appointment itself shall constitute an election by Lessor to terminate this
lease.
6. Lessor, at any time after Lessee commits a default, can cure the
default at Lessee's cost. If Lessor at any time, by reason of Lessee's default,
pays any sum or does any act that requires the payment of any sum, the sum paid
by Lessor shall be due immediately from Lessee to Lessor at the time the sum is
paid; and, if paid at a later date, shall bear interest at the maximum rate an
individual is permitted by law to charge from the date the sum is paid by Lessor
until Lessor is reimbursed by Lessee. The sum, together with interest on it,
shall be additional rent.
SECTION 32
Lessee's Remedies
Lessor shall have thirty (30) days after notice from Lessee to commence
to perform Lessor's obligations under this lease, except that Lessor shall
perform Lessor's obligations immediately if the nature of the problem presents a
hazard or emergency. If Lessor does not perform Lessor's obligations within the
time limitations in this Section, Lessee can perform the obligations and have
the right to be reimbursed for the sum Lessee actually expends in performance of
Lessor's obligations. If Lessor does not reimburse Lessee within thirty (30)
days after demand from Lessee, Lessee's sole remedy shall be to institute suit
against Lessor, and Lessee shall not have the right to withhold from future rent
the sums Lessee has expended.
SECTION 33
Interest on Unpaid Rent
Rent not paid when due shall bear interest from the date due until paid
at the maximum rate an individual is permitted by law to charge.
SECTION 34
Late Charge
Lessee acknowledges that late payment by Lessee to Lessor of rent will
cause Lessor to incur costs not contemplated by this lease, the exact amount of
such costs being extremely difficult and impracticable to fix. Such costs
include, without limitation, processing and accounting charges, and late charges
that may be imposed on Lessor by the terms of any encumbrance and note secured
by any encumbrance covering the premises. Therefore, if any installment of rent
due from Lessee is not received by Lessor within ten (10) days of when due,
Lessee shall pay to Lessor an additional sum of ten percent (10%) of rent due.
The parties agree that this late charge represents a fair and reasonable
estimate of the costs that Lessor will incur by reason of late payment by
Lessee. Acceptance of any late charge shall not constitute a waiver of Lessee's
default with respect to the overdue amount, or prevent Lessor from exercising
any of the other rights and remedies available to Lessor.
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<PAGE> 14
SECTION 35
Signs
1. Lessee at Lessee's cost shall have the right to place, construct,
and maintain on the premises one or more signs advertising Lessee's business at
the premises, and no other signs.
2. Any sign that Lessee has the right to place, construct, and maintain
shall comply with all laws, and Lessee shall obtain any approval required by
such laws. Lessor makes no representation with respect to Lessee's ability to
obtain such approval.
3. Lessee shall have the right to use, for Lessee's signs, the exterior
walls and the roof of the building and other improvements that are a part of the
premises, as allowed by local laws.
4. Lessee's signs shall conform in style and placement to existing
signs located at the premises and commercial center of which the premises is a
part. Lessor's prior written approval of Lessee's signs shall be given as to the
particular style and placement of Lessee's signs.
SECTION 36
Lessor's Entry on Premises
1. Lessor and Lessor's authorized representatives shall have the right
to enter the premises at all reasonable time for any of the following purposes:
A. To determine whether the premises are in good condition and
whether Lessee is complying with Lessee's obligations under this lease.
B. To do any necessary maintenance and to make any restoration
to the premises or the building and other improvements in which the premises are
located that Lessor has the right or obligation to perform.
C. To serve, post, or keep posted any notices required or
allowed under the provisions of this lease.
D. To post "for sale" signs at any time during the term, to
post "for rent" or "for lease" signs during the last three (3) months of the
term, or during any period while Lessee is in default.
E. To show the premises to prospective brokers, agents,
buyers, tenants, or persons interested in an exchange, at any time during the
term, Lessor shall make said showings at commercially reasonable times.
F. To shore the foundations, footings, and walls of the
building and other improvements that are a part of the premises and to erect
scaffolding and protective barricades around and about the premises, but not so
as to prevent entry to the premises, and to do any other act or thing necessary
for the safety or preservation of the premises if any excavation or other
construction is undertaken or is about to be undertaken on any adjacent property
or nearby street. Lessor's right under this provision extends to the owner of
the adjacent property on which excavation or construction is to take place and
the adjacent property owner's authorized representatives.
2. Lessor shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance, or other damage arising out of Lessor's
entry on the premises as provided in this Section, except damage resulting from
the acts or omissions of Lessor or Lessor's authorized representatives.
3. Lessee shall not be entitled to an abatement or reduction of rent if
Lessor exercises any rights reserved in this section.
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<PAGE> 15
4. Lessor shall conduct Lessor's activities on the premises as allowed
in this Section in a manner that will cause the lease possible inconvenience,
annoyance, or disturbance to Lessee.
SECTION 37
Notice
Any notice, demand, request, consent, approval, or communication that
either party desires or is required to give to the other party or any other
person shall be in writing and either served personally or sent by prepaid,
first-class mail return receipt requested. Any notice, demand, request, consent,
approval, or communication that either party desires or is required to give to
the other shall be addressed to the other party at the address set forth in the
introductory paragraph of this lease. Either party may change its address by
notifying the other party of the change of address. Notice shall be deemed
communicated within 72 hours from the time of mailing if mailed as provided in
this Section.
SECTION 38
Waiver
1. No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right or remedy or be
construed as a waiver.
2. The receipt and acceptance by Lessor of delinquent rent shall not
constitute a waiver of any other default; it shall constitute only a waiver of
timely payment for the particular rent payment involved.
3. No act or conduct of Lessor; including, without limitation, the
acceptance of the keys to the premises, shall constitute an acceptance of the
surrender of the p[remises by Lessee before the expiration of the term. Only a
notice form Lessor to Lessee shall constitute acceptance of the surrender of the
premises and accomplish a termination of the lease.
4. Lessor's consent to or approval of any act by Lessee requiring
Lessor's consent or approval shall not be deemed to waive or render unnecessary
Lessor's consent to or approval of any subsequent act by Lessee.
5. Any waiver by Lessor of any default must be in writing and shall not
be a waiver of any other default concerning the same or any other provisions of
the lease.
SECTION 39
Attorney's Fees
Should and litigation be commenced between the parties hereto
concerning the premises, this lease, or the rights and duties of either in
relation thereto, or should an attorney be retained to enforce any provision
herein, whether or not any litigation commences, the party, Lessee or Lessor,
prevailing in such litigation or other action, shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum as and for his
attorney's fees.
SECTION 40
Surrender of Premises: Holding Over
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<PAGE> 16
1. On expiration of the term, or any extended terms, Lessee shall
surrender to Lessor the premises and all Lessee's improvements and alterations
in good condition (except for ordinary wear and tear occurring after the last
necessary maintenance made by Lessee and destruction to the premises covered by
Section 21, except for alterations that Lessee has the right to remove or is
obligated to remove under the provisions of Section 13. Lessee shall remove all
Lessee's personal property within the above stated time. Lessee shall perform
all restoration made necessary by the removal of any alterations or Lessee's
personal property within the time periods stated in this Section.
2. Lessor can elect to retain or dispose of in any manner any
alterations or Lessee's personal property that Lessee does not remove from the
premises on expiration or termination of the term a allowed or required by this
lease by giving at least fifteen (15) days notice to Lessee. Title to any such
alterations or Lessee's personal property that Lessor elects to retain or
dispose of an expiration of the fifteen (15th) day period shall vest in Lessor.
Lessee waives all claims against lessor for any damage to lessee resulting from
Lessors' retention or disposition of any such alterations or lessee's personal
property. Lessee shall be liable to Lessor for Lessor's costs for storing,
removing, and disposing of any alterations or Lessee's personal property.
3. If Lessee fails to surrender the premises to Lessor an expiration of
the term, or any extended terms, as required by this Section, Lessee shall hold
Lessor harmless from all damages resulting from Lessee's failure to surrender
the premises, including, without limitation, all claims made by a succeeding
tenant resulting from Lessee's failure to surrender the premises.
4. If Lessee, with lessor's written consent, remains in possession of
the premises after expiration or termination of the term, or after the date in
any notice given by Lessor to Lessee terminating this lease, such possession by
Lessee shall be deemed to be a month-to-month tenancy terminable on thirty (30)
days notice given at any time by either party. All provisions of this lease,
except those pertaining to term, option to extend, and option to acquire the
premises, shall apply to the month-to-month tenancy.
SECTION 41
Estoppel Certificate
1. At any time during the term of this lease, within five (5) days
after the service on Lessee of a written request by Lessor, Lessee shall
execute, acknowledge, and deliver to Lessor a true statement in writing
certifying:
A. That this lease has not been modified and is in full force and
effect; or
B. The manner in which this lease has been modified and that so
modified this lease is in full force and effect;
C. The date to which rent reserved in this lease has been paid;
and
D. Such other matters pertaining to this lease and the premises
as Lessor may request.
2. Failure to deliver the certificate within the five (5) days shall be
conclusive upon the party failing to deliver the certificate for the benefit of
the party requesting the certificate and any successor to the party requesting
the certificate, that this lease is in full force and effect and has not been
modified except a may be represented by the party requesting the certificate.
3. If a party fails to deliver the certificate within the five (5)
days, the party failing to deliver the certificate irrevocably constitutes and
appoints the other party a its special attorney-in-fact to execute and deliver
the certificate to any third party.
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<PAGE> 17
SECTION 42
Subordination of Lease
This lease and Lessee's leasehold interest under this lease are and
shall be subject, subordinate, and inferior to any lien or encumbrances now or
hereafter placed on the premises by Lessor, to all advances made under and such
lien or encumbrance, and to any and all renewals and extensions of such liens or
encumbrances.
SECTION 43
Governing Law
The parties agree that the laws of the State of California will govern
all disputes under this lease and determine all rights hereunder and that the
venue for any action concerning this lease shall be San Luis Obispo County,
California. If any provision in this lease is held by any court to be invalid,
void, or unenforceable, the remaining provisions shall nevertheless continue in
full force.
SECTION 44
Entire Contract
Lessee and Lessor agree that this instrument contains the sole and only
agreement between them concerning the premises and correctly sets forth their
rights and obligations to each other concerning the premises as of its date. Any
agreement or representation respecting the premises as of its date. Any
agreement or representation respecting the premises or the duties of either
Lessor or Lessee in relation thereto not expressly set forth in this instrument
is null and void. Any amendments to this lease shall be null and void unless in
writing, attached hereto, identified as an amendment to the lease, and signed
and dated by Lessee by Lessor, or their respective agents.
SECTION 45
Miscellaneous Provisions
1. Time is of the essence of each provision of this lease.
2. Whenever consent or approval of either party is required, that party
shall not unreasonably withhold such consent or approval.
3. This lease shall be binding on and inure to the benefit of the
parties and their successors.
4. All exhibits referred to are attached to this lease and incorporated
by reference.
5. All provision, whether covenants or conditions, on the part of
Lessee shall be deemed to be both covenants and conditions.
6. The definitions contained in this lease shall be used to interpret
this lease.
7. As used in this lease, the following words and phrases shall have
the following meanings:
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<PAGE> 18
A. Alternation: Any addition or change to, or modification of,
the premises made by Lessee after the fixturing period; including, without
limitation, fixtures, including trade fixtures, as defined here, and tenant's
improvements as defined here.
B. Authorized Representative: Any officer, agent, employee, or
independent contractor retained or employed by either party, acting within
authority given him by that party.
C. Damage: Injury, deterioration, or loss to a person or property
caused by another person's acts or omissions. Damage includes death.
D. Damages: A monetary compensation or indemnity that
can be recovered in the courts by any person who has suffered damage to his
person, property, or rights through another's act or omission.
E. Destruction: Any damage, as defined here, to or disfigurement
of the premises.
F. Encumbrance: Any deed of trust, mortgage, or other written
security device or agreement affecting the premises, and the note or other
obligation secured by it, that constitutes security for the payment of a debt or
performance of an obligation.
G. Expiration: The coming to an end of the time specified in the
lease as its duration, including any extension of the term resulting from the
exercise of an option to extend.
H. Good condition: The good physical condition of the premises
and each portion of the premises; including, without limitation, signs, windows,
show windows, appurtenances, and tenant's personal property as defined here. "In
good condition" means first-class, neat, clean and broom-clean, and is
equivalent to similar phrases referring to physical adequacy in appearance and
for use.
I. Hold Harmless: To defend and indemnify from all liability,
losses, penalties, damages as defined here, costs, expenses (including, without
limitation, attorneys' fees), causes of action, claims, or judgments arising out
of or related to any damage, as defined here, to any person or property.
J. Law: Any judicial decision, statute, constitution, ordinance,
resolution, regulation, rule, administrative order, or other requirement of any
municipal, county, state, federal, or other government agency or authority
having jurisdiction, over the parties or the premises, or both, in effect either
at the time of execution of the lease or at any time during the term, including,
without limitation, any regulation or order of a quasi-official entity or body
(e.g., board of fire examiners or public utilities).
K. Lender: The beneficiary, mortgagee, secured party, or other
holder of an encumbrance, as defined here.
L. Lien: A charge imposed on the premises by someone other than
Lessor, by which the premises are made security for the performance of an act.
Most of the liens referred to in this lease are mechanics' liens.
M. Maintenance: Repairs, replacement, repainting, and cleaning.
Page 18 of 20
<PAGE> 19
N. Person: One or more human beings, or legal entities or other
artificial persons; including, with limitation, partnerships, corporations,
trusts, estates, associates, and any combination of human beings and legal
entities.
O. Provision: Any term, agreement, covenant, condition, clause,
qualification, restriction, reservation, or other stipulation in the lease that
defines or otherwise controls, establishes, or limits the performance required
or permitted by either party.
P. Rent: Minimum monthly rent, percentage rent, prepaid rent,
security deposit, real property taxes and assessments, common area charges,
operating costs, insurance, utilities, and other similar charges payable by
Lessee to Lessor, and merchants' association dues and assessments (even if
payable directly to a merchants' association).
Q. Restoration: The reconstruction, rebuilding, rehabilitation,
and repairs that are necessary to return destroyed portions of the premises and
other property to substantially the same physical condition as they were in
immediately before the destruction.
R. Substantial Completion: Completion of Lessor's construction
obligation as evidenced by Lessor's architect or by the general contractor
performing Lessor's construction obligation.
S. Successor: Assignee, transferee, personal representative,
heir, or other person or entity succeeding lawfully, and pursuant to the
provisions of this lease, to the rights or obligations of either party.
T. Lessee's Improvement: Any addition to or modification of the
premises made by Lessee before, at, or near the commencement of the term;
including, without limitation, fixtures (including Lessee's trade fixture, as
defined here).
U. Lessee's Personal Property: Lessee's equipment, furniture,
merchandise, and moveable property placed in the premises by Lessee, excluding
Lessee's trade fixtures, as defined here.
V. Lessee's Trade Fixtures: Any property installed in or on the
premises by Lessee for the purposes of trade, manufacture, omament, or related
use.
W. Term: The period of time during which Lessee has a right to
occupy the premises.
X. Termination: The ending of the term for any reason before
expiration, as defined here.
8. The captions and the table of contents of this lease shall have no
effect on its interpretation.
9. When required by the context of this lease, the singular shall
include the plural.
10. "Party" shall mean Lessor or Lessee; and, if more than one person
or entity is Lessor or Lessee, the obligations imposed on that party shall be
joint and several.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have signed this Agreement, by their
respective authorized officers or agents, on the date indicated above.
LESSOR: Morgon Investments.
BY: /s/ Lennart Mengwall
Lennart Mengwall
BY: /s/ Kevin Azzouz
Kevin Azzouz
LESSEE: Quest Development Corporation
BY: /s/ Lennart Mengwall
Lennart Mengwall
BY: /s/ Kevin Azzouz
Kevin Azzouz
Page 20 of 20
<PAGE> 1
EXHIBIT 10.12.3
March 12, 1997
Seagate Technology
Attn: Glenn L. Dyson
920 Disc Drive
Scotts Valley, CA, 95066-4544
Re: Extension of Lease @ 710 Fiero Lane, Unit 25, San Luis Obispo
Dear Glenn:
Thank you for your letter expressing interest in extending the lease on the
above referenced property. Unit (25) twenty-five consist of 1250 square feet and
is currently leased for $1000 per month plus HOA fees, utilities and taxes. This
is equivalent to 0.80 per square foot.
I am willing to extend the lease with the following terms.
Terms: Two years with the existing lease and conditions at the rental rate of
0.84 per square foot starting 5/16/97 to 5/14/99 with the option to cancel at
the end of the first twelve (12) months with three (3) months prior notice.
If you have any questions please call me at 805-543-1794. If these terms are
satisfactory, please sign below and return this document to me.
Sincerely,
/s/Jerry Michael
Jerry Michael
2219 Blvd. Del Campo
San Luis Obispo, CA, 93401
/s/Ellen Chamberlain 3/26/97
Seagate Software Network & Date
Storage Management Group, Inc.
<PAGE> 2
ADDENDUM TO LEASE BETWEEN JERRY MICHAEL AND
SEAGATE SOFTWARE STORAGE MANAGEMENT GROUP, INC.
A DELAWARE CORPORATION
Whereas, Jerry Michael ("Landlord") and Seagate Software Storage Management
Group, Inc., a Delaware Corporation ("Tenant") previously entered into a written
lease agreement on or about May 14, 1995 for the premises known as 710 Fiero
Lane, Unit #25, San Luis Obispo, California; and
WHEREAS, Tenant had an option to extend the term for an additional period and
Tenant desires to exercise said option by this Addendum.
NOW THEREFORE, the parties agree as follows:
1. The lease is hereby extended from May 15, 1996 to May 14,
1997.
2. The parties have agreed that the rent amount contained in the
lease agreement shall be continued at the current rate.
3. All other terms and provisions of the original lease shall
remain in full force and effect.
DATED: MAY 14, 1996 /s/ Jerry Michael
JERRY MICHAEL
("LANDLORD")
SEAGATE SOFTWARE, INC., A DELAWARE
CORP. BY:
/s/ Signature Illegible
("TENANT")
<PAGE> 3
LEASE AGREEMENT
BY THIS LEASE dated May 15, 1995, Jerry Michael, an Individual, herein called
"Lessor", leases to ARCADA SOFTWARE, INC., a Delaware Corporation, herein called
"Lessee", that certain real property, herein called "the Premises", in the
County of San Luis Obispo, State of California, which consists of the property
commonly known as 710 Fiero Lane, Unit #25, consisting of approximately 1,250
square feet as shown on Exhibit "A" attached hereto. Lessee shall also have the
non-exclusive right to the use and enjoyment of all non-designated Common Areas
within the Project of which the Premises are a part. Lessee agrees to be bound
by the Association Rules regarding the use of the Common Areas as adopted by the
Fiero Commerce Park Owner's Association ("Association"), a non-profit, mutual
benefit corporation.
ARTICLE 1. TERM OF LEASE
Section 1.01: Original Term
This lease shall be for a term of one (1) year, commencing on May 15, 1995 and
ending on May 14, 1996.
Section 1.02: Extension Term
Should Lessee perform all of the terms and condition of this lease for the full
term specified in Section 1.01 of this lease, Lessee may extend this lease for
one (1) additional two (2) year term, commencing on the expiration of the
original term, by giving Lessor written notice of Lessee's desire to extend the
term hereof not less than one hundred twenty (120) days but not more than one
hundred eighty (180) days prior to the expiration of the original term or any
extension thereof. Should Lessee determine that it will not extend the lease for
the additional two (2) year term set forth above, Lessee must notify Lessor
within the notice period proscribed herein of its intention to terminate the
lease at the end of the initial term. Should Lessee fail to give notice of its
intention to terminate the lease at the end of the initial term, the two year
extension set forth herein will take effect, and Lessee's consent to extend the
lease will conclusively deemed to have been given.
Section 1.03: Hold Over
Should Lessee hold over and continue in possession of the Premises after
expiration of the term of this lease or any extension thereof, Lessee's
continued occupancy of the Premises shall be considered a month-to-month tenancy
subject to all the terms and conditions of this Lease, except that the base
rent, which shall be payable as provided below, shall be one hundred fifty
(150%) percent of the base rent as of the date of expiration. If Lessee fails to
surrender the Premises upon the expiration of this Lease, Lessee shall indemnify
and hold Lessor harmless from all loss or liability, including without
limitation, any claims made by any succeeding tenant founded on or resulting
from such failure to surrender.
Section 1.04: Delivery of Possession
Lessor shall deliver possession to Lessee on or before the commencement of the
term hereof. Lessor agrees to indemnify, defend and hold Lessee, its officers,
directors, employees and agents, and any successors to Lessee,
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their directors, officers, principals, employees and agents, harmless from and
against any and all liability, including without limitation (1) foreseeable and
unforeseeable consequential damages, directly or indirectly arising from the
use, generation, storage or disposal of hazardous materials by Lessor or any
other occupant or operator of the Premises prior to the term of this lease; and
(2) the cost of any required or necessary repair, cleanup, detoxification or
remediation and the preparation of any closure or other required plans, whether
such action is required or necessary before or after the termination of the term
hereof, to the full extent that such liability is attributable, directly or
indirectly, to the presence or use, generation, storage, release, threatened
release or disposal of hazardous materials by any person on the Premises prior
to the term hereof. This indemnity shall survive the termination of the term
hereof.
ARTICLE 2. RENT
Section 2.01: Base Rent
For the first year of the term hereof, Lessee agrees to pay to Lessor a fixed
minimum rental for the use and occupancy of the Premises of Eighty ($.80) Cents
per square foot per month, payable on the fifteenth (15th) day of each and every
month commencing on May 15, 1995, at the home of the Lessor at 2219 Boulevard
Del Campo, San Luis Obispo, CA 93401, or at such other place or places as Lessor
may from time to time designate by written notice delivered to Lessee. By
execution hereof, Lessor and Lessee stipulate and agree that the Premises
contain 1,250 square feet and that the initial monthly base rate is $1,000.00.
Section 2.02: Rent Adjustment
The monthly rent provided for in Section 2.01 above shall be adjusted at the
beginning of each option term as follows:
The base for computing the adjustment is the Consumer Price Index for All Items
for All Urban Consumers in the Los Angeles-Anaheim-Riverside Metropolitan Area,
published by the United States Department of Labor, Bureau of Labor Statistics
("Index"), which is last published prior to the date of the commencement of term
("Beginning Index"). For the purposes of this section, the Beginning Index shall
be 153.4. If the Index published nearest (and prior to) the adjustment date
("Extension Index") has increased over the Beginning Index, the minimum monthly
rent for the following year (until the next rent adjustment) shall be set by
multiplying the base rent set forth above by a fraction, the numerator of which
is the Extension Index and the denominator of which is the Beginning Index.
Lessor shall notify Lessee in writing of the adjustment to the base rent as soon
as the index figures are available.
Lessee shall pay the adjusted rent to Lessor commencing with the rent payment
due for May 15 of each year of the term hereof and any extension thereof. The
adjusted rent all be subject to similar adjustment on the following adjustment
date.
If the Index is changed so that the base year differs from that used immediately
preceding month in which the term commences, the Index shall be converted in
accordance with the conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised
during the term, such other government index or computation with which it is
replaced shall be used in order to obtain substantially the same result as would
be obtained if the Index had not been discontinued or revised.
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In no event shall the minimum rental be less than $1,000.00 per month. In no
event shall the rent adjustment set forth above be less than three (3%) percent
nor more than five (5%) percent for any one (1) year during the term hereof.
Section 2.03: Security Deposit
A. Lessee shall deposit with Lessor, upon execution hereof, receipt of which is
hereby acknowledged subject to collection, a security deposit in the amount of
$3,000.00, as security for the full and faithful performance by Lessee of the
terms, conditions and covenants of this lease.
B. If at any time during the term of this lease Lessee defaults in the payment
of rent, or any portion of the rent, including any additional rent herein
described, Lessor may appropriate and apply any portion of the security deposit
reasonably necessary to remedy any such default.
C. If at any time during the term of this lease Lessee, Lessee's agents, patrons
or employees damages the Premises through want of ordinary care of any greater
degree of culpability, then Lessor may appropriate and apply any portion of the
security deposit reasonably necessary to fund the necessary repair. Lessor
should give Lessee written notice and allow Lessee a ten (10) business day cure
period prior to appropriation of any portion of the security deposit.
D. If on termination of this tenancy, Lessee fails to leave the Premises in a
condition comparable to the condition of the Premises at the time Lessor
delivered possession to Lessee at the commencement of this lease, excepting
ordinary wear and tear, Lessor may appropriate and apply any portion of the
security deposit reasonably necessary to put the Premises in a clean and
sanitary condition.
E. Lessor's obligation with regard to the security deposit are those of a debtor
and not a trustee. Lessor shall maintain the security deposit separate and apart
from Lessor's general funds. The security deposit ($3,000.00) shall be
maintained in an interest bearing account with annual interest accruing through
the term of the lease.
F. If Lessor transfers Lessor's interest in the Premises in any manner, Lessor
or Lessor's agent shall do one of the following acts, either of which shall
relieve Lessor of further liability with respect to the deposit:
i. Transfer the portion of the security deposit remaining after any
deduction authorized by this section or otherwise authorized by law, if any, to
Lessor's successor in interest, and thereafter notify Lessee by certified mail,
return receipt requested, of that transfer and of the transferee's name and
mailing address. Upon receipt of the security deposit by Lessor's successor in
interest, the successor in interest shall have all of the rights and obligations
of Lessor with respect to the security deposit.
ii. Return the remaining portion of the security deposit, if any, after
any deductions authorized by this lease or otherwise authorized by law, to
Lessee.
G. Lessor shall return to Lessee the portion of the security deposit remaining
after deductions authorized by this section or by law, if any, in the following
manner:
i. If a deduction has been made only for the nonpayment of rent, the
remaining portion, if any shall be returned not later than two (2) weeks after
the date Lessor receives possession of the Premises.
ii. If a deduction has been made for any other reason, the remaining
portion, if any, shall be returned not later than thirty (30) days after the
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<PAGE> 6
date Lessee returns possession of the Premises to Lessor, unless Lessor needs
more time to determine the cost of curing Lessee's defaults under this lease, in
which case Lessor shall return the remaining portion of the security deposit, if
any, within two (2) weeks after completion of the work necessary to cure
Lessee's defaults.
H. If during the term of this lease, Lessor applies all or any portion of the
security deposit for a purpose authorized by this section or otherwise
authorized by law, Lessee agrees to restore the amount of the security deposit
so applied, plus such additional amount requested by Lessor (not exceeding twice
the amount of the initial security deposit), with the next payment of rent due
under this lease. Lessee's failure to restore said security deposit, plus any
additional sum required by Lessor, shall be a material breach of this lease.
Lessee shall have ten (10) business days from receipt of written notice by
Lessor to restore security deposit.
Section 2.04: Taxes, Utilities, Owner's Association Dues as Additional Rent
In addition to the rent specified in Sections 2.01 and 2.02 above, Lessee shall
pay, as additional rent, the following:
A. Utilities. Lessee shall pay, and hold Lessor harmless and the property of
Lessor including the Premises, free and harmless from all charges for the
furnishing of gas, water, sewer, electricity, telephone service and other public
utilities during the entire term of this lease or any extension thereof. All
such charges shall be paid by Lessee directly to the provider of the service and
shall be paid as they become due and payable but in any event before
delinquency.
B. Personal Property Taxes. Lessee shall pay before they become delinquent all
taxes, assessments and other charges levied or imposed by any governmental
entity on the furniture, trade fixtures, appliances and other personal property
placed by Lessee in, on or about the Premises.
C. Real Property Taxes.
i. Lessee shall pay all real property taxes and general and special
assessments on the Premises, including any increases in such taxes and
assessments, before they become delinquent.
ii. The real property taxes and assessments levied against the Premises
for the first and last years of the term hereof shall be prorated between Lessor
and Lessee for purposes of this section as of 12:01 am on the date of
commencement and termination respectively for this lease.
iii. Lessee shall have the right, at Lessee's sole cost and expense, to
protest or contest in good faith the amount of any tax or assessment. As a
condition precedent to Lessee's right to protest such taxes or assessments,
Lessee shall either pay the disputed amount and file for refund or deposit with
Lessor the disputed amount plus one (1) years interest at the rate then charged
by said county plus any estimated penalty which Lessor may incur by non-payment.
Upon such payment or deposit, Lessor shall cooperate with Lessee in protesting
such dispute.
D. Owner's Association Dues and Assessments. Lessee acknowledges that the
Premises are part of a condominium project and as such are subject to the
imposition of regular, special, infraction and reimbursement assessments levied
by the Association pursuant to the CC&Rs.
Lessee shall pay, before they become delinquent, all such assessments
levied by the Association, and shall hold Lessor and the property of Lessor,
including the Premises, harmless from any and all liability for such
assessments. Lessor shall notify Lessee of the amount of regular monthly
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assessments levied against the Premises and of any special assessments proposed
or actually levied against the Premises.
E. Payment by Lessor. Should Lessee fail to pay within the time specified in
this Article any utilities, taxes, assessments, or other charges required by
this Section to be paid by Lessee, Lessor may, without notice or demand to
Lessee, pay, discharge, or adjust such tax, assessment or other charge for the
benefit of Lessee.
In such event, Lessee shall promptly on written demand of Lessor
reimburse Lessor for the full amount paid by Lessor in paying, discharging or
adjusting such tax, assessment or other charge, together with interest thereon
at the maximum rate allowed by law from the date of payment by Lessor until the
date of repayment by Lessee. When no time within which any charge required by
this Article to be paid by Lessee is specified in this Article, such charge must
be paid by Lessee before it becomes delinquent.
Section 2.05: Late Charges
If any installment of rent or other payment required to be paid by Lessee to
Lessor is not paid within ten (10) days of the date on which it is due, a late
charge equal to five (5) percent of the late payment shall be due from Lessee to
Lessor to compensate Lessor for the additional administrative work caused by
such default and to compensate Lessor for the loss of use of such defaulted
payment. The late charge herein shall be in addition to any other remedy which
Lessor may have tenant for such default.
Section 2.06: Interest on Late Payments
If any payment required to be paid by Lessee to Lessor is not paid within ten
(10) days of the date on which it is due, such payment shall bear interest at
the maximum rate permitted by law from the date it became due until it is paid
by Lessee to Lessor.
ARTICLE 3. USE OF PREMISES
Section 3.01: Permitted Use
The Premises shall, during the term of this lease and any extensions thereof, be
used for computer software research, design, development and manufacturing,
storage uses and office uses, and other uses related to the manufacturing,
marketing, and distribution of software, and for no other purposes without the
prior written consent of Lessor, which consent Lessor shall not unreasonably
withhold.
Section 3.02: Insurance Hazards
Lessee shall not commit or permit the commission of any acts on the Premises nor
use or permit the use of the Premises in any manner that will increase the
existing rates for or cause the cancellation of any fire, liability, or other
insurance policy insuring the Premises or the improvement on the Premises.
Section 3.03: Waste or Nuisance
Lessee shall not commit or permit the commission by others of any waste on the
Premises; Lessee shall not maintain, commit or permit the maintenance or
commission of any nuisance as defined in Section 3479 of the California Civil
Code on the Premises; and Lessee shall not use or permit the use of the Premises
for any unlawful purpose.
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Section 3.04: Hazardous Materials
Lessee warrants and represents that during the term hereof, and any extensions
thereof, Lessee shall not use the Premises in any manner that would be in
violation of any federal, state or local law, ordinance or regulation relating
to environmental conditions on, under or about the property, including but not
limited to soil and groundwater conditions.
Lessee shall not use, generate, manufacture, produce, store or dispose of on,
under or about the Premises any hazardous materials, including without
limitation flammable materials, explosives, asbestos, radioactive materials,
hazardous wastes, toxic substances or related injurious materials, whether
injurious by themselves or in combination with other materials, other than such
materials as may be necessary for Lessee's normal operations on the Premises.
Lessee shall not dispose of or permit the disposal of any hazardous materials
into the sewer system serving the Premises. For the purposes of this section,
the "Premises" are defined as those areas for which Lessee has exclusive control
over ingress and egress; specifically, the interior areas of the building
properly specified in the lease. Common areas or such other areas outside of
Lessee's exclusive control are not considered part of the "Premises" for the
purposes of this section.
For purposes of this lease, hazardous materials shall include but not be limited
to substances defined as "hazardous substances", "hazardous materials", or
"toxic substances", and any substances defined as "hazardous waste" in any of
the following laws:
A. the Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended.
B. the Hazardous Materials Transportation Act, as amended.
C. the Resource Conservation and Recovery Act of 1976, as amended.
D. California Health and Safety Code Sections 25117 and 25316 and in the
regulations promulgated under such laws.
Lessee agrees to indemnify, defend and hold Lessor, its officers, directors,
employees and agents, and any successors to Lessor, their directors, officers,
principals, employees and agents, harmless from and against any and all
liability, including with limitation (1) all foreseeable and unforeseeable
consequential damages, directly or indirectly arising from the use, generation,
storage or disposal of hazardous materials by Lessee or any other occupant or
operator of the Premises; and (2) the cost of any required or necessary repair,
cleanup or detoxification or remediation and the preparation of any closure or
other required plans, whether such action is required or necessary before or
after the termination of the term hereof, to the full extent that such liability
is attributable, directly or indirectly, to the presence or use, generation,
storage, release, threatened release or disposal of hazardous materials by any
person on the Premises during the term hereof. This indemnity shall survive the
termination of the term hereof.
Section 3.05: Compliance with Law
Lessee shall, at Lessee's own cost and expense comply with all statutes,
ordinances, regulations and requirements of all governmental entities, both
federal and state and county or municipal, relating to Lessee's use and
occupancy of the Premises whether such statutes, ordinances, regulations and
requirements be now in force or hereinafter enacted. The judgment of any court
of competent jurisdiction, or the admission by Lessee in a proceeding brought
against Lessee by any government entity, that Lessee has violated any such
statute, ordinance, regulation or requirement shall be conclusive as
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between Lessor and Lessee and shall be grounds for termination of this lease by
Lessor.
Lessor agrees that any requirements of the municipal, state or federal
authorities which require alteration of Lessor's building shall not be the
responsibility of Lessee, unless required because of an act of Lessee or a use
of the Premises by Lessee.
Section 3.06: Compliance with CC&Rs
Lessee acknowledges receipt of a copy of the Declaration of Covenants,
Conditions and Restrictions (CC&R's) for Tract 712 and a copy of the the
Declaration of Covenants, Conditions and Restrictions, Bylaws and Rules and
Regulations for Fiero Commerce Park Owner's Association applicable to the
Premises and agrees to comply with the terms thereof, including the provisions
contained in the CC&R's pertaining to the power of the Association to allocate
sewer capacity and water allocations among all of the owners of the units within
the project of which the Premises are a part and the restriction on opposing the
formation of special assessment districts. Lessee agrees to indemnify, defend
and hold Lessor harmless from any liability, cost or expense, including
reasonable attorney's fees incurred as a result of Lessee's violation of the
CC&Rs. Any provision of this agreement which conflicts with any provision of the
CC&Rs shall be subordinate to the CC&Rs.
ARTICLE 4. ALTERATIONS AND REPAIRS
Section 4.01: Condition of Premises
Lessee shall have ten (10) days after the date of delivery of possession to
notify Lessor of any defects in the Premises as if Lessee fails to so notify
Lessor of any defects, it shall be conclusively presumed that Lessee accepts the
Premises, as well as the improvements thereon and the facilities appurtenant
thereto, and stipulates with Lessor that the Premises as well as the
improvements thereon and the facilities appurtenant thereto are in good, clean,
safe and tenantable condition. By acceptance of possession, Lessee further
agrees with and represents to Lessor that the Premises have been inspected by
Lessee and that they have been assured by means independent of Lessor or any
agent of Lessor of the truth of all facts material to this lease and that the
Premises are being leased by Lessee as a result of their inspection and
investigation and not as a result of any representations made by Lessor or any
agent of Lessor.
Section 4.02: Maintenance
With the exception of those portions of the Premises which are the obligation of
the Association to maintain, Lessee shall at its own cost and expense keep and
maintain all portions of the Premises, as well as all improvements on the
Premises and all facilities appurtenant thereto, including but not limited to
electrical, plumbing, heating and air conditioning and sewage systems in good
order and repair and in as safe and clean a condition as they were when received
by Lessee from Lessor, reasonable wear and tear excepted. Notwithstanding the
above, Lessor shall maintain the unexposed electrical, unexposed plumbing and
sewage systems, as well as the foundations, bearing and exterior walls. Lessor
will not have the responsibility for repairing the foregoing if such damage is
caused by negligent or intentional act of Lessee, in which event Lessee will
promptly repair such damage.
Should Lessee fail to maintain the Premises as set forth above, Lessor may, at
Lessor's option, perform or contract for the performance of such maintenance for
any on behalf of Lessee. In such event, Lessee shall
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promptly on written demand from Lessor reimburse Lessor for all cost and expense
incurred by Lessor in performing Lessee's obligation hereunder plus interest at
the maximum rate permitted by law from the date expended by Lessor to the date
of repayment by Lessee.
Section 4.03: Alterations and Liens
Lessee shall not make or permit any other person to make any alterations to the
Premises or to any improvement thereon or facility appurtenant thereto without
the written consent of Lessor first obtained, which consent shall not be
unreasonably withheld. Lessee shall submit detailed plans and specifications for
any proposed alteration or improvement to the Premises for Lessor's review.
Lessor shall have fifteen (15) days from the time of submission of plans to
respond in writing to Lessee if he disapproves of such plans. Lessee has the
right to terminate this lease if those plans are not approved by the Lessor. In
addition, Lessee shall have the right to terminate this lease if Lessee is
unable to acquire the necessary governmental approvals within sixty (60) days of
submission of plans to the appropriate governmental authorities. Plans shall be
submitted to the appropriate governmental agencies no later than thirty (30)
days from execution of the lease.
Any and all approved alterations or improvements to the Premises shall be at
Lessee's sole cost and expense. Lessee shall keep the Premises free and clear
from any and all liens, claims and demands for work performed, materials
furnished or operations conducted on the Premises at the instance or request of
Lessee. Lessee shall give Lessor not less than ten (10) days prior written
notice of the commencement of construction of any alterations or improvements
exceeding $1,000.00 so that Lessor may post and maintain on the Premises, and to
record as required by law, any notice or notices of non-responsibility provided
for under the mechanics lien laws of the State of California. Lessee will be
required to obtain Lessor's written approval only on alterations exceeding
$10,000.00 in value.
Furthermore, any and all alterations, additions, improvements and fixtures,
except furniture, trade fixtures, and all security devices and measures, made or
placed in or on the Premises by Lessee or any other person shall on expiration
or sooner termination of this lease become the property of Lessor and remain on
the Premises; provided, however, that Lessor shall have the option on expiration
or sooner termination of this lease of requiring Lessee, at Lessee's sole cost
and expense, to remove any or all such alterations, additions, improvements or
fixtures from the Premises by providing Lessee written notice within ten (10)
business days following the expiration or termination of this lease.
Section 4.04: Inspection by Lessor
Lessee shall permit Lessor or his agents to enter into and upon the Premises
during business hours by Lessor giving Lessee twenty-four (24) hour notice for
the purpose of inspecting the same, or for the purpose of posting notices of
non-responsibility for alterations, additions or repairs or for the purpose of
placing upon the property in which the Premises are located any usual or
ordinary "for sale" signs, without any rebate of rent and without any liability
to Lessee for any loss of occupation or quiet enjoyment of the Premises thereby
occasioned. Lessee shall permit Lessor, at any time within one hundred twenty
(120) days prior to the expiration of this lease, to place upon the Premises any
usual or ordinary "to let" or "to lease" signs, provided that such entries made
by Lessor hereunder shall not unreasonably interfere with the conduct of
Lessee's business.
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Section 4.05: Surrender of Premises
On-expiration or sooner termination of this lease, or any extensions or renewals
of this lease, Lessee shall promptly surrender and deliver the Premises to
Lessor in as good condition as they are at the date of possession, reasonable
wear and tear excepted.
ARTICLE 5. INDEMNITY AND INSURANCE
Section 5.01: Hold Harmless Clause
Lessee agrees to indemnify and hold Lessor and the property of Lessor, including
the Premises, free and harmless from any and all claims, liability, loss,
damage, or expense resulting from Lessee's occupation and use of the Premises,
specifically including, without limitation, any claim, liability, loss or damage
arising by reason of:
A. The death or injury of any person or persons, including Lessee or any person
who is any employee or agent of Lessee, or by reason of the damage to or
destruction of any property, including property owned by Lessee or any person
who is an employee or agent of Lessee, and caused or allegedly caused by either
the condition of the Premises, or some act or omission of Lessee or of some
agent, contractor, employee, servant, sublessee, or concessionaire of Lessee on
the Premises;
B. Any work performed on the Premises or materials furnished to the Premises at
the instance or request of Lessee or any agent or employee of Lessee;
C. Lessee's failure to perform any provision of this lease or to comply with any
requirement imposed on Lessor or the leased Premises by any duly authorized
governmental agency or political subdivision.
In the event any claim, liability, loss or damage arises as a result of the
gross negligence or willful misconduct of Lessor, Lessee shall not be
responsible for any such claim, liability, loss or damage, and that Lessor shall
indemnify Lessee for any such claim, liability, loss or damage.
Section 5.02: Liability Insurance
Lessee shall, prior to the date Lessee takes possession of the Premises and at
its own cost and expense, obtain and maintain during the entire term of this
lease and any renewals or extensions thereof, a broad form comprehensive
coverage policy of public liability insurance issued by an insurance company
acceptable to Lessor and authorized to conduct insurance business in the State
of California and insuring Lessee and Lessor against loss or liability caused by
or connected with Lessee's occupation and use of the Premises under this lease
in amounts not less than:
A. $1,000,000 for injury to or death of one person and, subject to that
limitation for the injury or death of one person, of not less than $3,000,000
for injury to or death of two or more persons as a result of any one accident or
incident.
B. $500,000 for damage to or destruction of any property of others.
Such public liability insurance, and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Section 5.01 above. Both
parties shall be named as co-insured, and the policy shall contain cross
liability endorsements, if available. No policy shall be cancelable or
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subject to reduction of coverage except after thirty (30) days prior written
notice to Lessor.
During the term of this lease, Lessor may require an increase in the amount of
public liability and property damage insurance coverage required hereunder, if
at that time the existing coverage is not adequate in the reasonable opinion of
Lessor's insurance broker or lender(s).
Section 5.03: Lessee's Personal Property
A. Lessee shall, at all times during the term of this lease and any extensions
thereof, maintain at Lessee's sole cost and expense an insurance policy issued
by a company acceptable to Lessor and authorized to conduct insurance business
in the State of California insuring for their full insurable value all furniture
and equipment, and tenant improvements made to the Premises by Lessee against
loss or destruction by fire and the perils commonly covered under the standard
extended coverage endorsement to the fire policies in San Luis Obispo County.
Insurance proceeds will be payable to Lessor and Lessee based upon their
respective claims for damage to personal property or tenant improvements. The
proceeds shall be used by Lessor and Lessee to repair or replace such furniture
and equipment, and tenant improvements. In no event shall Lessor receive
insurance proceeds under the insurance required by this paragraph in excess of
the amount agreed to in an addendum to be attached to the lease as described in
Section 5.03(B). Such policies shall not be cancelable or subject to reduction
of coverage except after thirty (30) days prior to written notice by Lessor.
B. Lessor and Lessee shall agree to execute an addendum to this agreement
listing the dollar value of the fixtures and permanent improvements made to the
Premises by Lessee which permanent improvements to the Premises shall be deemed
"tenant improvements". In the event Lessor and Lessee fail, for any reason, to
execute the addendum called for in this subparagraph, then the value of the
tenant improvements for purposes of capping Lessor's claim to insurance proceeds
under the insurance provided for in this Section 5.03 shall be deemed to be the
price calculated by taking the average of those bids for construction of tenant
improvements received by Lessee in connection with Lessee's construction of the
tenant improvements.
Section 5.04: Deposit of Insurance with Lessor
Lessee shall, prior to taking possession of the Premises and promptly thereafter
when any such policy is replaced, rewritten or renewed, deliver to Lessor a true
and correct copy of each insurance policy required by this Article or a
certificate executed by the insurance company or companies or their authorized
agent evidencing such policy or policies.
ARTICLE 6. SIGNS AND TRADE FIXTURES
Section 6.01: Installation and Removal of Trade Fixtures
Lessee shall have the right at any time and from time to time during the term of
this lease and any renewal or extension of such term, at Lessee's sole cost and
expense, to install and affix in, to or on the Premises, such items, herein
called "trade fixtures", for use in Lessee's trade or business as Lessee may, in
its sole discretion, deem advisable. Any and all such trade fixtures that can be
removed without structural damage to the Premises or any building or improvement
on the Premises shall remain the property of the Lessee and may be removed by
Lessee at any time or times prior to the expiration or sooner termination of
this lease.
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Section 6.02: Unremoved Trade Fixtures
Any trade fixtures described in this Article that are not removed from the
Premises by Lessee within ten (10) days after the expiration or sooner
termination, regardless of cause, of this lease shall be deemed abandoned by
Lessee and shall automatically become the property of Lessor as owner of the
real property to which they are affixed, unless Lessor notifies Lessee in
writing, of Lessor's election to have Lessee remove such trade fixtures and to
repair any damages caused thereby. Upon such election by Lessor to require
Lessee to remove such trade fixtures, Lessee shall have fifteen (15) days from
the date of such notice in which to remove such trade fixtures and repair any
damage caused by such removal. If Lessee fails to remove such trade fixtures and
repair any such damage, Lessor may do so at Lessee's sole cost and expense,
including any costs of storing such property. Such costs and expenses, if
incurred by Lessor for Lessee's benefit, shall be promptly, upon written demand
therefor, reimbursed to Lessor by Lessee, together with interest at the maximum
rate permitted by law from the date expended by Lessor to the date of
reimbursement by Lessee.
Section 6.03: Signs
Lessee may place and maintain, or permit any other person to place and maintain
any sign on the Premises providing such sign is in compliance with then existing
governmental regulations and is in compliance with the restrictions on signs
contained in the CC&R's. Lessee may not place any decoration, lettering, or
advertising matter on the glass of any exterior show window of the Premises.
Lessee shall maintain such sign at all times during this lease in good
appearance and repair. On expiration or sooner termination of this lease, all
such signs not removed from the Premises by Lessee may, without liability, be
destroyed by Lessor.
ARTICLE 7. DAMAGE, DESTRUCTION OR CONDEMNATION
Section 7.01: Partial Destruction
Should the Premises or the building of which the Premises is a part be partially
destroyed by any cause not the fault of Lessee or any person in or about the
Premises with the consent, express or implied of Lessee, the provisions of the
CC&R's shall determine the responsibility for repair or restoration of the
building of which the Premises are part. If the Association is required or
elects to repair the building, this lease shall continue in full force and
effect subject to the provisions below regarding abatement of the rent.
Section 7.02: Total Destruction
Should the Premises or the building of which the Premises is a part be so far
destroyed by any cause not the fault of Lessee or any person in or about the
Premises with the consent, express or implied, of Lessee, that the Association
is not required to repair or replace the building or if the Association elects
not to repair the building, this lease shall terminate effective the date of the
damage or destruction.
Section 7.03: Insurance Proceeds
In the event the Association is required to repair or replace the Premises or
the building of which the Premises are a part, the insurance proceeds described
in Section 5.03 above, received by Lessor for repair and/or replacement of the
tenant improvements and the insurance proceeds described in Section 5.03 above,
received by the Lessee for the repair and/or
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replacement of its personal property shall be applied to the repair and
replacement of the tenant improvements and Lessee's personal property, as the
case may be. Insurance proceeds, if any, which are payable to Lessor on account
of damage or destruction to the "tenant improvements" shall not exceed the
amount as described in the addendum to this lease. Insurance proceeds for tenant
improvements shall be the sole property of Lessor, free of any claims of Lessee.
All other insurance proceeds in excess of the amount set forth in the addendum
for tenant improvements and all amounts which are attributable to Lessee's
personal property shall be the sole property of the Lessee free of all claims of
Lessor. In the event the Association is not required to repair or replace the
Premises or the building of which the Premises are a part, or elects not to so
repair or replace the Premises or the building of which the Premises are a part,
any insurance proceeds described in Section 5.03 above shall be divided in the
same manner as set forth in this provision, with the Lessor being entitled to
such proceeds attributable to tenant improvements up to the valuation as set
forth in the addendum, and the Lessee being entitled to all proceeds
attributable to Lessee's personal property and all other proceeds above the
amount set forth in the addendum, each free of the claims of the other party.
Section 7.04: Abatement of Rent
Should the Association elect to repair or replace the building or be required to
repair and replace the building of which the Premises are a part following
partial or total destruction:
A. Lessee shall not be entitled to any damages for any loss or inconvenience
sustained by Lessee by reason of the making of such repairs and restoration;
B. The Association shall have full right to enter the Premises and take
possession of so much of the Premises, including the whole of the Premises, as
may be reasonably necessary to enable the Association to promptly and
efficiently carry out the work of such repair and restoration; and
C. The rent payable by Lessee to Lessor pursuant to Article 2 of this lease
shall be abated to the extent and for the time Lessee is prevented from using
the whole of the Premises.
In the event Lessee is prohibited from using a portion of the floor space of the
Premises, rent shall be abated by that proportionate amount of space from the
whole.
Section 7.05: Total Condemnation
Should, during the term of this lease or any renewal or extension thereof, title
and possession of all of the Premises be taken under the power of eminent domain
by any public or quasi-public agency or entity, this lease shall terminate as of
12:01 am on the date actual physical possession of the Premises is taken by the
agency or entity exercising the power of eminent domain and both Lessor and
Lessee shall thereafter be released from all obligations, except those specified
in Section 7.09 of this lease, under this lease.
Section 7.06: Termination Option for Partial Condemnation
Should, during the term of this lease or any renewal or extension thereof, title
and possession of only a portion of the Premises be taken under the power of
eminent domain by any public or quasi-public agency or entity, Lessee may, at
Lessee's option, terminate this lease if more than 35 percent of the floor space
or more than 55 percent in value of the Premises is taken under the power of
eminent domain, or if Lessee us unable to continue its full operation in the
portion of the Premises which remain, Lessee shall
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exercise its option by giving written notice to Lessor within thirty (30) days
after actual physical possession of the portion subject to eminent domain power
is taken by the agency or entity exercising that power. This lease shall
terminate as of 12:01 am on the date the notice is deemed given to Lessor but
the rent specified in Article 2 of this lease shall be reduced in the manner
specified in Section 7.07 below from the date of taking to the date of
termination of the lease. Lessee shall be able to terminate the lease if the
remaining portion of the Premises is not suitable for Lessee's continued use of
the Premises.
Section 7.07: Partial Condemnation Without Termination
Should Lessee fail to exercise the option described in Section 7.06 of this
lease, or should the portion of the Premises taken under the power of eminent
domain be insufficient to give rise to the option described in Section 7.06 of
this lease, then, in that event:
A. This lease shall terminate as to the portion of the Premises taken by eminent
domain as of 12:01 am on the day, herein called the "date of taking", actual
physical possession of that portion of the Premises is taken by the agency or
entity exercising the power of eminent domain.
B. The rent specified in Article 2 of this lease shall, after the date of
taking, be reduced by an amount that bears the same ratio to the rent specified
in Article 2 of this lease as the square footage floor space of the prior of
said premise taken under the power of eminent domain bears to the total square
footage floor space of the Premises as of the date of this lease; and
C. Lessor, at Lessor's own cost and expense, will remodel and reconstruct the
building remaining on the portion of the Premises not taken by eminent domain
into a single efficient architectural unit as soon after the date of taking, or
before, as can be reasonable done; provided, however, that the rent specified in
this lease shall not be abated or reduced, except as provided in subparagraph
(B) of this section, during such remodeling or reconstruction.
Section 7.08: Condemnation Award
Should, during the term of this lease or any renewal or extension thereof, title
and possession of all or any portion of the Premises be taken under the power of
eminent domain by any public or quasi-public agency or entity, the portion of
the compensation or damages for the taking awarded to each of the parties to
this lease, Lessor and Lessee, shall belong to and be the sole property of the
party to whom it is awarded. Lessee shall be entitled to that portion of the
compensation or damages awarded for the eminent domain taking that represents
(1) reasonable value of Lessee's rights under this lease for the unexpired term
of this lease and (2) the cost or loss sustained by Lessee because of the
removal of Lessee's trade fixture, equipment and furnishings from the portion of
the Premises taken by eminent domain.
Section 7.09: Arbitration of Condemnation Award
Should separate award not be made to Lessor and Lessee for the taking by eminent
domain of all or any portion of the Premises, and should Lessor and Lessee be
unable to agree on the manner the total award is to be divided between them
pursuant to Section 7.08 of this lease, the proper division of the award between
Lessor and Lessee shall be settled by arbitration. Each party shall appoint an
arbitrator and the two arbitrators so appointed shall, within a month after both
have been appointed, select a third arbitrator. The decision of any two of these
three arbitrators in writing shall be binding on both Lessor and Lessee.
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Should not two arbitrators be able to agree within one month after appointment
of the third arbitrator, the report of the arbitrator most favorable to Lessor
and the report of the arbitrator most favorable to Lessee shall both be
disregarded and the report of the remaining arbitrator shall be binding upon
both Lessor and Lessee. Should either Lessor or Lessee fail to appoint an
arbitrator within 15 days after receiving written notice from the other to do
so, the arbitrator selected by the other party shall act for both and his
decision in writing shall be binding upon both Lessor and Lessee.
ARTICLE 8. DEFAULT, ASSIGNMENT AND TERMINATION
Section 8.01: Subleasing or Assigning as Breach
Lessee shall not encumber, assign or otherwise transfer this lease, any right or
interest in this lease, or any right or interest in the Premises or any of the
improvements that may now or hereafter be constructed or installed on the
Premises without the express written consent of Lessor first obtained.
Neither shall Lessee sublet the Premises or any part thereof or allow any other
person, other than Lessee's patrons, agents, servants, and employees to occupy
the Premises or any part thereof without the prior written consent of Lessor. A
consent by Lessor to one assignment, one subletting or one occupation of the
Premises by another person shall not be deemed to be a consent to any subsequent
assignment, subletting or occupation of the Premises by another person. Any
encumbrance, assignment, transfer or subletting without the prior written
consent of Lessor, whether it be voluntary or involuntary, by operation of law
or otherwise, is void and shall, at the option of Lessor, terminate this lease.
The consent of Lessor to any assignment of Lessee's interest in this lease or
the subletting by Lessee of the Premises or parts of the Premises shall not be
unreasonably withheld. Notwithstanding the above, Lessee may assign or sublease
the Premises, or portions thereof, to a subsidiary, affiliate or parent of
Lessee. Such permitted assignment shall not relieve Lessee from any liability
under this lease.
Lessor must respond to written notices from Lessee under the terms of this
section within thirty (30) days, else consent of Lessor will conclusively deemed
to have been given. Lessor also agrees to exempt from this assignment clause the
Lessee's duty to obtain Lessor's approval for mergers, consolidations, takeovers
and sales of the business. Transfers or assignments of this lease, the Premises
of the improvements thereon rising from such mergers, consolidations, takeovers
or sales of the business will not constitute a breach under the terms of this
section.
Section 8.02: Abandonment by Lessee
Should Lessee breach this lease and abandon the Premises prior to the natural
expiration of the term of this lease, Lessor may:
A. Continue this lease in effect by not terminating Lessee's right to possession
of the Premises, in which event Lessor shall be entitled to enforce all his
rights and remedies under this lease, including the right to recover the rent
specified in this lease as it become due under this lease; or
B. Terminate this lease and recover from Lessee:
i. The worth at the time of award of the unpaid rent which had
been earned at the time of termination of the lease;
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ii. The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination of the lease until the time
of award exceeds the amount of rental loss that Lessee proves could have been
reasonably avoided;
iii. The worth at the time of award of the amount by which the unpaid
rent for the balance of the term of this lease after the time of award exceeds
the amount of rental loss that Lessee proves could be reasonably avoided; and
iv. Any other amount necessary to compensate Lessor for all detriment
proximately caused by Lessee's failure to perform Lessee's obligations under
this lease.
As used in this section, "Abandonment" shall be defined as Lessee's failure to
conduct business at the Premises for any period of fifteen (15) consecutive
days. Such failure to use the Premises shall conclusively be deemed abandonment
of the Premises.
The term "rent" as used in this section shall mean the base rent, as adjusted to
the date of default, additional rent as defined above, and any other sums
required to be paid by Lessee pursuant to the terms of this lease. As used in
subsection (1) and (ii) above, the "worth at the time of award" shall be
computed by allowing interest at the rate of ten (10%) percent per annum. As
used in subsection (iii) above, the "worth at the time of award" shall be
computed by discounting that amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award, plus one (1%) percent.
Section 8.03: Default by Lessee
Should Lessee default in the payment of any rent, additional rent or other sum
to be paid by Lessee hereunder, and if such default shall continue for a period
of five (5) business days after written notice thereof from Lessor to Lessee, or
if Lessee shall default in the performance or observance of any other term,
covenant, obligation or agreement to be performed or observed by Lessee, and if
such default shall continue for a period of ten (10) days after written notice
thereof from Lessor to Lessee, or if more than four (4) of any of the foregoing
defaults, or any combination thereof shall occur in any single twelve (12) month
period during the term hereof, whether or not the same shall be cured, Lessor
shall have, in addition to any other remedies provided for herein or by law, the
option to terminate this lease, reenter the Premises by process of law and shall
have the right to recover from Lessee all of the sums described in Section
8.02(B) above.
Section 8.04: Insolvency of Lessee
The insolvency of Lessee as evidences by a receiver being appointed to take
possession of all or substantially all of the property of Lessee, or the making
of a general assignment for the benefit of creditors by Lessee or the filing by
or against Lessee of a petition in bankruptcy, shall terminate this lease and
entitle the Lessor to reenter and regain possession of the Premises.
Section 8.05: Right of Entry on Default
Without limitation of Lessor's rights contained elsewhere in this lease or at
law, in the event of Lessee's default, any and all of Lessee's fixtures then
remaining on the Premises, with the exception of personal property, Lessor shall
have the right to take exclusive possession of same and shall be entitled to
obtain a writ of attachment of same, with notice to Lessee.
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Alternatively, Lessor may remove all or any portion thereof and place such
property in storage for the account of Lessee and at the expense of Lessee.
Lessor shall have no duty to pay rent or other costs of storage and shall have
no liability to Lessee if the property is sold at auction or otherwise. Upon
such entry, Lessor may, at Lessor's option, relet the Premises or any part
thereof to a third party or third parties for any term, at any rental, and on
any other terms and conditions that Lessor, in its sole discretion may deem
advisable, and shall have the right to make alterations and repairs to the
Premises.
Lessee shall be liable for all of Lessor's costs of reletting, including but not
limited to remodeling costs required for the reletting. In the event Lessor
relets the Premises, Lessee shall pay all rent due under this lease at the times
specified herein, less any amounts actually received by Lessor from the
reletting.
Section 8.06: Cumulative Remedies
The remedies given to Lessor in this Article shall not be exclusive but shall be
cumulative and in addition to all remedies no or hereafter allowed by law or
elsewhere provided in this lease.
Section 8.07: Waiver of Breach
The waiver by Lessor of any breach by Lessee of any of the provisions of this
lease shall not constitute a continuing waiver or a waiver of any subsequent
breach by Lessee whether of the same or another provision of this lease. Lessor
shall be in default of this lease if Lessor does not perform any provision of
this lease that Lessor is obligated to perform within thirty (30) days after
written notice thereof has been given by Lessee to Lessor. If the nature of
Lessor's obligation is such that more than thirty (30) days are required for
performance, Lessor shall not be in default of this lease if Lessor commences
performance within the thirty (30) day period and diligently and in good faith
continues the same until completion.
Lessee, at any time after Lessor commits the default, may cure the detail at
Lessor's expense. If Lessee, by reason of Lessor's default, at any time pays any
sum or does any act that requires the payment of any sum, this sum paid by
Lessee shall be due immediately from Lessor to Lessee at the time the sum is
paid, and if paid at a later date shall bear interest at the maximum rate
allowed by law from the date the sum was paid by Lessee until Lessee is
reimbursed by Lessor.
ARTICLE 9. MISCELLANEOUS
Section 9.01: Force Majeure - Unavoidable Delays
Should the performance of any act required by this lease to be performed by
either Lessor or Lessee be prevented or delayed by reason of an act of God,
strike, lockout, labor troubles, inability to secure materials, restrictive
governmental laws or regulations, or any other cause except financial inability,
not the fault of the party required to perform the act, the time for performance
of the act will be extended for a period equivalent to the period of delay and
performance of the act during the period of delay will be excused; provided,
however, that nothing contained in this section shall excuse the prompt payment
of rent or other sums by Lessee as required by this lease or the performance of
any act rendered difficult solely because of the financial condition of the
party, Lessor or Lessee, required to perform the act.
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Section 9.02: Parking Spaces
In addition to the Premises herein described, Lessor shall have exclusive use of
all parking spots controlled by Lessor for the premises.
Section 9.04: Attorney's Fees
Should any litigation, arbitration or other proceeding be commenced between the
parties to this lease concerning the Premises, this lease, or the rights and
duties of either in relation thereto, the party, Lessor or Lessee, prevailing in
such litigation shall be entitled, in addition to such other relief as may be
granted in the litigation, to a reasonable sum as and for his attorney's fees in
such litigation, together with any costs and expenses of such proceeding,
including such fees, costs and expenses on appeal and required to enforce any
final judgment.
Section 9.05: Arbitration of Disputes
If any dispute arises between Lessor and Lessee concerning the Premises, any
provision of this lease or the rights and duties of either in regard thereto,
the dispute shall be settled by arbitration as provided in this section. Each
party shall appoint an arbitrator and give the other party written notice of the
name and address of arbitrator within five (5) days after written demand to do
so has been served on the party making the appointment by the other party to
this lease. To two appointed arbitrators shall within ten (10) days after their
appointment, appoint a third arbitrator. The written decision of any two of the
three arbitrators shall be binding and conclusive on both parties to this lease.
The arbitrators may apportion the costs and expenses of the arbitration
proceeding, including attorney's fees and arbitration fees, between the parties
to this agreement in any manner deemed reasonable by two of the three
arbitrators. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
NOTICE: By initialing in the space below you are agreeing to have any dispute
arising out of the matters included in the "Arbitration of Disputes" provision
above decided by neutral arbitration as provided by California law and you are
giving up any rights you may have to have the dispute litigated in a court or
jury trial. By initialing in the space below you are giving up your judicial
rights to discovery and appeal, unless those rights are specifically included in
the "Arbitration of Disputes" provision. If you refuse to submit to arbitration
after agreeing to this provision, you may be compelled to arbitrate under the
authority of the California Code of Civil Procedure. Your agreement to this
arbitration provision is voluntary.
We have read and understand the foregoing and agree to submit disputes arising
out of the matters included in the "Arbitration of Disputes" provision to
neutral arbitration.
Lessor's Initials Lessee's Initials ______________
Section 9.06: Notices
All notices to be given to Lessee shall be given in writing personally or by
depositing the same in the United States mail, postage prepaid, and addressed to
Lessee at: Arcada Software, Inc., 708 Fiero Lane, Suite 5, San Luis Obispo,
California 93401, or such other place as may be designated from time to time by
Lessee. All notices to be given to Lessor shall be given in writing personally
or by depositing the same in the United States mail, postage prepaid, and
addressed to the Lessor at: 2219 Boulevard de Campo, San
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Luis Obispo, CA 93401 or such other place or places as may be designated from
time to time by Lessor.
Section 9.07: No Merger
The voluntary or other surrender of this lease by Lessee, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Lessor, terminate any existing subleases or subtenancies or may, at the option
of Lessor, operate as an assignment to it of any such subleases or subtenancies.
Section 9.08: Binding on Heirs and Successors
This lease shall be binding on and shall inure to the benefit of the heirs,
executors, administrators, successors, and assigns of the parties hereto, Lessor
and Lessee, but nothing in this section contained shall be construed as a
consent by Lessor to any assignment of this lease or any interest therein by
Lessee except as provided in Article 8 of this lease.
Section 9.09: Partial Invalidity
Should any provision of this lease be held by a court of competent jurisdiction
to be either invalid, void, or unenforceable, the remaining provisions of this
lease shall remain in full force and effect unimpaired by the holding.
Section 9.10: Sole and Only Agreement
This instrument constitutes the sole and only agreement between Lessor and
Lessee respecting the Premises, the leasing of the Premises to Lessee, or the
lease term herein specified, and correctly sets for the obligations of Lessor
and Lessee to each other as of its date. Any agreements or representations
respecting the Premises or their leasing by Lessor to Lessee not expressly set
forth in this instrument are null and void.
Section 9.11: Waiver
The waiver by Lessor of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant or condition
or any subsequent breach of the same or any other term, covenant or condition
herein contained.
Section 9.12: Subordination and Non-Disturbance
A. This lease is subject and subordinate to all mortgages and deeds of trust
which may hereafter be placed and recorded on the property of which the Premises
are a part, and to all renewal, modifications, replacements, and extensions
thereof.
B. The subordination provided for above is conditioned on the following:
i. For each mortgage or deed of trust, lessor shall obtain from the
mortgagee or beneficiary a non- disturbance agreement in writing that, in the
event of foreclosure, or any sale thereunder, this lease shall not be terminate
and lessee's right of possession under this lease shall not be disturbed,
provided lessee is not then in default under this lease;
ii. In consideration of the mortgagee's or beneficiary's agreement not
to disturb lessee's possession as above provided, lessee hereby agrees to attorn
to the purchaser at any foreclosure, sale or other action or proceeding.
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<PAGE> 21
iii. The subordination described in this section shall be effective
without necessity of having any further instruments executed by Lessee, but
Lessee agrees to execute on demand any such further instruments evidencing
subordination that lessor or mortgagee or beneficiary may reasonably request.
Section 9.13: Time of Essence
Time is expressly declared to be of the essence of this lease.
Section 9.14: Accord and Satisfaction
No payment by Lessee or receipt by Lessor of a lesser amount than the monthly
rent stipulated herein or any other sum due hereunder from Lessee to Lessor
shall be deemed to be anything other than a payment on account of the earliest
sum then due and owing to Lessor.
No endorsement or statement on any check or any letter accompanying any check or
payment or payment of any sums due from Lessee to Lessor hereunder shall be
deemed to be an accord and satisfaction, and Lessor may accept and negotiate any
such payment without prejudice to Lessor's right to recover the balance of such
rent or other sum or to pursue any other remedy provided for in this lease or by
law.
Section 9.15: Law Governing
The laws of the state and county wherein the Premises are located shall govern
the validity, performance and enforcement of this lease.
Executed the 17 day of May, 1995, at San Luis Obispo, California.
LANDLORD TENANT
JERRY MICHAEL ARCADA SOFTWARE, INC.
A Single Person A Delaware Corporation
By: /s/ Jerry Michael By: /s/ Kevin Azzouz
Jerry Michael Kevin Azzouz
Authorized Representative President
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<PAGE> 22
EXHIBIT "A"
LEGAL DESCRIPTION
The property described as:
Unit 25 of Tract No. 1636, in the County of San Luis Obispo, State of
California, as shown on the Condominium Plan recorded November 21, 1989 in Book
3418, Page 215 of Official Records, in the office of the County Recorder of said
County.
Page 20
<PAGE> 1
EXHIBIT 10.13
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease ("Amendment"), dated for reference
purposes only as January 16, 1996, is made and entered into by and between
WHC-SIX REAL ESTATE LIMITED PARTNERSHIP ("Landlord"), and SEAGATE TECHNOLOGY,
INC., a Delaware corporation ("Tenant").
RECITALS
A. Landlord and Tenant are parties to that certain Lease dated April
18, 1995 ("Lease"), pursuant to which Landlord leased to Tenant, and Tenant
leased from Landlord, certain premises commonly known as Suite 150, 19925
Stevens Creek Boulevard, Cupertino, California. Except as otherwise provided in
this Amendment, all capitalized terms used herein shall have the same meanings
and definitions as set forth in the Lease.
B. Landlord and Tenant desire to amend the Lease on the terms and
conditions set forth below.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which is hereby acknowledged, Landlord and Tenant hereby agree to amend the
Lease as follows:
1. Expansion Space. Commencing on the Expansion Space
Commencement Date (as defined below), Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, certain additional space located on the
second floor of the Building consisting of a rentable area of approximately
4,685 square feet ("Expansion Space"), which Expansion Space is commonly known
as Suite 200, 19925 Stevens Creek Boulevard, Cupertino, California and is shown
as cross-hatched on Exhibit "A" attached to this Amendment. Except as otherwise
provided in this Amendment, commencing on the Expansion Space Commencement Date,
(i) whenever the term "Premises" is used in the Lease, such term shall include
the Expansion Space, and (ii) all terms and conditions of the Lease shall apply
to the Expansion Space as if it were part of the original Premises demised to
Tenant under the Lease.
2. Expansion Space Commencement Date.
2.1 In General. As used in this Amendment, the term
"Expansion Space Commencement Date" shall mean the earliest to occur of the
following, as reasonably determined by Landlord: (i) the date the applicable
local governmental authority (e.g., the city in which the Building is located)
approves the improvements ("Expansion Space Improvements") which Tenant is to
construct within the Expansion Space pursuant to Exhibit "B" attached to this
Amendment, as evidenced by a final signed-off building permit or certificate of
occupancy for the Expansion Space Improvements;
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(ii) the date Landlord's architect certifies that the Expansion Space
Improvements have been substantially completed (except for punch list items);
(iii) the date Tenant occupies the Expansion Space or any portion thereof for
any purpose, including the storage of Tenant's inventory (provided, however, any
entry upon the Expansion Space by Tenant pursuant to Section 2.3 below shall not
trigger the Expansion Space Commencement Date for purposes of this subsection
(iii)); or (iv) April 1, 1996.
2.2 Expansion Space Commencement Date Memorandum. When
the Expansion Space Commencement Date is determined, the parties shall execute a
Commencement Date Memorandum, in a form substantially similar to the form
attached to the Lease as Exhibit "C" (modified as necessary to relate to the
Expansion Space), setting forth the Expansion Space Commencement Date.
2.3 Early Entry. Tenant shall be permitted to enter the
Premises prior to the Expansion Space Commencement Date for the sole purposes of
constructing the Expansion Space Improvements in accordance with Exhibit "B"
attached hereto and installing Tenant's trade fixtures and equipment. Any such
entry shall be subject to and in accordance with all the terms and provisions of
this Lease (and, for purposes of such application, the term "Premises" as used
in the Lease shall be deemed to include the Expansion Space), including, without
limitation, the provisions of Section 14(a) relating to Tenant's indemnification
of Landlord.
3. Adjustments.
3.1 Square Footage. Effective as of the Expansion Space
Commencement Date, the size of the Premises shall be deemed increased by reason
of the inclusion of the Expansion Space, from approximately 39,676 rentable
square feet to approximately 44,361 rentable square feet.
3.2 Base Rent. Commencing as of the Expansion Space
Commencement Date, monthly Base Rent payable by Tenant under the Lease shall be
increased by the sum of Nine Thousand One Hundred Thirty-five Dollars and
Seventy-five Cents ($9,135.75) per month. Based upon such increase, the monthly
Base Rent payable by Tenant under the Lease commencing on the Expansion Space
Commencement Date and continuing during the balance of the initial Term shall be
increased from Seventy-three Thousand Four Hundred Dollars and Sixty Cents
($73,400.60) to Eighty-two Thousand Five Hundred Thirty-six Dollars and
Thirty-five Cents ($82,536.35). Concurrently with Tenant's execution of this
Amendment, Tenant shall pay to Landlord the sum of Nine Thousand One Hundred
Thirty-five Dollars and Seventy-five Cents ($9,135.75), which sum shall be
applied by Landlord against the monthly Base Rent payable by Tenant for the
first full calendar month following the Expansion Space Commencement Date, as
increased above. Base Rent shall
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continue to be paid subject to and in accordance with Section 4 of the Lease.
If the Expansion Space Commencement Date is a date other than
the first day of a calendar month, then the Base Rent for the calendar month
during which the Expansion Space Commencement Date occurs shall be prorated on
the basis of a thirty (30) day month, at the rate of the current monthly Base
Rent for the period (i.e., $73,400.60) during such month from the first day of
such month through and including the day immediately preceding the Expansion
Space Commencement Date, and at the rate of the increased monthly Base Rent
(i.e., $82,536.35) for the period during such month from and including the
Expansion Space Commencement Date through and including the last day of such
month.
3.3 Tenant's Percentage Share. Effective as of the
Expansion Space Commencement Date, Tenant's Percentage Share of increases in
Operating Expenses and Real Property Taxes shall be increased from 51% to 57%.
3.4 Parking Spaces. Effective as of the Expansion Space
Commencement Date, the number of non-exclusive parking spaces available to
Tenant pursuant to Section 30 of the Lease within the Building's parking
facilities shall be increased from 130 to 147.
4. Condition of the Expansion Space. Tenant agrees to accept the
Expansion Space and all areas outside of the Expansion Space in "as is"
condition as of the date that the Expansion Space is delivered by Landlord to
Tenant, and Tenant acknowledges and agrees that Landlord has made no
representation or warranty whatsoever to Tenant regarding the Expansion Space or
the suitability of the Expansion Space, Common Areas and any of the facilities
associated with the Expansion Space, for Tenant's stated or intended use. For
purposes of applying Section 19 of the Lease to the surrender of the Expansion
Space, the term "Commencement Date" as used therein shall mean the Expansion
Space Commencement Date.
5. Brokers. Each party warrants and represents to the other that
it has had no dealings with any real estate broker or agent in connection with
the negotiation of this Amendment other than Colliers Parrish International,
Inc. ("Broker") (whose commission is to be paid by Landlord pursuant to the
terms of a separate written agreement between Landlord and Broker), and that it
knows of no real estate broker or agent other than Broker who is or might be
entitled to a commission in connection with this Amendment. Each party shall
indemnify and hold harmless the other from and against any and all liabilities
or expenses arising out of claims made by any other broker or individual for
commissions or fees related to the use or alleged use of the services of any
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broker or individual by the indemnifying party. The foregoing indemnity and hold
harmless obligations shall survive the expiration or sooner termination of the
Lease.
6. General.
6.1 Effect of Amendment; Ratification. Except as
otherwise modified by this Amendment, the Lease shall remain unmodified and in
full force and effect. In the event of any conflict or inconsistency between the
terms and conditions of the Lease and the terms and conditions of this
Amendment, the terms and conditions of this Amendment shall prevail.
6.2 Attorneys' Fees. The provisions of the Lease
respecting payment of attorney's fees shall also apply to this Amendment.
6.3 Counterparts. If this Amendment is executed in
counterparts, each counterpart shall be deemed an original.
6.4 Authority to Execute Amendment. Each individual
executing this Amendment on behalf of a partnership or corporation represents
that he or she is duly authorized to execute and deliver this Amendment on
behalf of the partnership and/or corporation and that this Amendment is binding
upon the corporation or partnership in accordance with its terms.
6.5 Governing Laws. This Amendment and any enforcement of
the agreements and modifications set forth above shall be governed by and
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the date first written above.
LANDLORD: TENANT:
WHC-Six Real Estate Limited Partnership, SEAGATE TECHNOLOGY, INC., a
a Delaware limited partnership Delaware corporation
By: JER WHC-SIX Services, Inc., a /s/ Jeffrey B. Nelson
Virginia Corporation, its By:
Managing General Partner -------------------------------
Name: Jeffrey B. Nelson
-----------------------------------
/s/Derrick McGavir Title: Vice President, Corp.
Facilities
-----------------------------------
By:_________________________ and Real Estate
DERRICK MCGAVIR
Vice President
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EXHIBIT "A"
Diagram of Expansion Space
[To be attached with Expansion Space shown as cross-hatched]
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EXHIBIT "B"
WORK LETTER
(Tenant Build-Out; Tenant Improvement Allowance)
This Exhibit is attached to and made a part of that certain First
Amendment to Lease dated January 16, 1996 ("Amendment"), by and between WHC-SIX
REAL ESTATE LIMITED PARTNERSHIP, as "Landlord", and SEAGATE TECHNOLOGY, INC., as
"Tenant", for the certain Expansion Space known as Suite 200, 19925 Stevens
Creek Boulevard, Cupertino, California.
Unless otherwise defined herein, capitalized terms used in
this Work Letter shall have the same meanings as set forth in the Amendment.
(a) PLANS AND SPECIFICATIONS. Tenant shall cause the
construction of tenant improvements within the Expansion Space ("Tenant
Improvements"), all in accordance with the provisions set forth below.
Within five (5) days after its execution of the
Amendment, Tenant shall deliver to Landlord preliminary plans ("Preliminary
Plans"), to be utilized in the preparation of final working drawings and
specifications for the Tenant Improvements. Promptly (but in no event less than
five (5) business days) after its receipt of the Preliminary Plans, Landlord
shall return the same to Tenant marked and accompanied by comments and
Landlord's required revisions. Within five (5) days thereafter, Tenant shall
submit two (2) sets of revised Preliminary Plans, revised to reflect and conform
to Landlord's comments and requirements, to Landlord for its final review and
approval. Within five (5) days following Landlord's approval of the Preliminary
Plans, Tenant shall cause its architect to prepare and submit two (2) copies of
working drawings and specifications ("Working Plans") to Landlord for its review
and approval. Landlord shall advise Tenant promptly after Landlord's receipt of
the Working Plans of any required revisions. Within five (5) days thereafter,
Tenant shall submit two (2) copies of the revised Working Plans to Landlord for
its final review and approval.
Concurrently with the above review and approval
process, Tenant shall submit all plans and specifications to the City of
Cupertino ("City") and other applicable governmental agencies to obtain
governmental approvals and issuance of necessary permits and licenses to
construct the Tenant Improvements as shown on the Working Plans.
(b) CONSTRUCTION OF TENANT IMPROVEMENTS. Tenant shall
cause the construction of the Tenant Improvements to be
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carried out in compliance with the Working Plans, all applicable zoning laws and
regulations, applicable covenants, conditions and restrictions, and otherwise in
compliance with the provisions of Section 10 of the Lease. Prior to the
commencement of construction, Tenant shall obtain course of construction and
builder's "all risk" insurance in such amounts and form as Landlord requires,
liability insurance in the form and amounts required under the Lease, and such
performance bonds in form and amounts as Landlord requires.
Tenant shall cause the construction of the Tenant
Improvements to be carried out with such materials, equipment, contractors and
subcontractors as Tenant shall select, all of which shall be approved by
Landlord. Landlord hereby approves of South Bay Construction as Tenant's general
contractor for its construction of the Tenant Improvements, subject however to
such general contractor complying with all applicable requirements of this Work
Letter. Within ten (10) days after the approval of the final Working Plans in
accordance with subparagraph (a) above or as soon as is reasonably possible
thereafter, Tenant shall submit to Landlord for its review and approval (i)
copies of all proposed construction contracts between Tenant and all contractors
and between such contractors and all subcontractors for the Tenant Improvements,
together with such background information on such contractors and subcontractors
as Landlord may require; (ii) a listing of the make, model, type, grade and all
other characteristics requested by Landlord, of all materials, equipment and
fixtures which Tenant proposes to install in or use in connection with the
Tenant Improvements; and (iii) a budget setting forth in itemized fashion the
costs of all materials, equipment, fixtures, contractors, subcontractors,
laborers, permits, fees, licenses, and all other costs and expenses Tenant
proposes to incur in connection with the construction of the Tenant
Improvements, specifically also including a development review fee to be paid to
Landlord in connection with its review, oversight and related functions under
this Work Letter in an amount equal to two and one-half percent (2.5%) of the
total Allowance * (as defined below) utilized by Tenant pursuant to subparagraph
(d) below (hereafter collectively the "Tenant Improvements Costs"). All such
matters shall be subject to the approval of Landlord prior to the commencement
of construction of the Tenant Improvements, in Landlord's reasonable discretion.
Tenant shall have the responsibility to obtain all
necessary construction and building permits and licenses necessary for the
construction of the Tenant Improvements. Tenant shall cause construction of the
Tenant Improvements in a good and workmanlike manner in strict accordance with
the approved Working Plans. All Tenant Improvements Costs shall be paid for by
and shall be the sole responsibility of the Tenant (other than to the extent
reimbursed by the Allowance as set forth below), including
* PROVIDED BY LANDLORD
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without limitation all costs of utilities, services and insurance on the
Expansion Space arising out of the construction of the Tenant Improvements. All
construction of the Tenant Improvements shall be performed and completed lien
free, and Tenant hereby indemnifies and agrees to defend and hold Landlord and
the Expansion Space free and harmless from any and all claims, losses, damages,
actions and causes of action as may be incurred as a result of work performed or
materials furnished in connection with construction of the Tenant Improvements.
Landlord shall have the right to post notices of non-responsibility at such
locations as Landlord may desire prior to the commencement of construction of
the Tenant Improvements.
(c) CHANGE ORDERS. Tenant may from time to time request
and obtain change orders during the course of construction of the Tenant
Improvements, provided that:
(i) each such request shall be reasonable and in
writing signed by or on behalf of Tenant;
(ii) each such request shall not result in any
major structural change in the Building or Tenant
Improvements;
(iii) Landlord shall have the sole and absolute
right to approve or disapprove any requested change order, in
Landlord's discretion;
(iv) all costs arising out of any approved change
order, if any, shall be borne by Tenant;
(v) any resulting delay in the completion of the
Tenant Improvements arising out of such change order shall not
delay or extend the Commencement Date.
(d) ALLOWANCE. Landlord agrees to provide Tenant a tenant
improvement allowance ("Allowance") in an amount up to, but not exceeding,
Thirty-one Thousand One Hundred Two Dollars and Fifty Cents ($31,102.50) for the
construction of the Tenant Improvements; provided, however, Tenant may elect to
increase the Allowance to an amount up to, but not exceeding, Forty-one Thousand
Four Hundred Seventy Dollars ($41,470) by providing Landlord with written notice
of such election at the time Tenant submits to Landlord the budget described in
the second paragraph of subparagraph (b) above. The Allowance shall be applied
by Tenant against the Tenant Improvements Costs incurred in the construction of
the Tenant Improvements which have been approved by the Landlord in Tenant's
proposed budget pursuant to subparagraph (b) above, and the provisions for
disbursement set forth below. In no event shall any portion of the Allowance be
used for any purpose other than the approved costs in the budget
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for the Tenant Improvements Costs. Any and all costs in excess of the Allowance
required to complete the construction of the Tenant Improvements in accordance
with subparagraph (b) above shall be the sole and exclusive obligation and
responsibility of Tenant.
On or before the fifth (5th) calendar day of every
month, Tenant shall submit to Landlord for its review and approval AIA Form No.
G702 and No. G703 invoices (or comparable invoices acceptable to Landlord) for
work performed and materials furnished to the Premises in connection with the
construction of the Tenant Improvements ("Payment Request"). Each Payment
Request shall be accompanied by a certification signed by the Tenant's general
contractor and the Tenant's architect showing that the work reflected in such
Payment Request was performed in accordance with the approved Working Plans and
the terms of all approved construction contracts; and the total costs to
construct the Tenant Improvements, including change orders, and the amount
expended for such items to date and the estimated costs to complete the Tenant
Improvements. In addition, each Payment Request shall be accompanied by lien
release waivers from all contractors, subcontractors and materialmen to be paid
through such Payment Request and, with respect to completed work, final lien
release waivers, all in form and content acceptable to Landlord. Within ten (10)
business days after Landlord's approval of each such Payment Request, Landlord
shall cause to be disbursed to Tenant's general contractor an amount equal to
ninety percent (90%) of such approved Payment Request times the ratio which the
total Allowance to be utilized by Tenant bears to the total construction cost
set forth in the certifications by Tenant's general contractor and architects.
Landlord shall cause to be disbursed the ten percent (10%) retention amount, up
to the limit of the Allowance, upon the issuance of an unqualified Certificate
of Occupancy for the Expansion Space and the expiration of the period in which
liens may be filed against the Premises by any contractor, subcontractor or
materialmen furnishing goods or services thereto in connection with the Tenant
Improvements.
In the event that the Allowance (as the same may be
increased pursuant to this subparagraph (d) above) is more than Thirty-one
Thousand One Hundred Two Dollars and Fifty Cents ($31,102.50) ("Base Allowance
Amount"), then the amount by which the Allowance (as so increased) exceeds the
Base Allowance Amount shall be fully amortized over the period commencing on the
Expansion Space Commencement Date through the balance of the initial Term of the
Lease at a rate of eleven percent (11%) per annum ("Amortization Rate"), and all
such amortized amounts shall be paid by Tenant to Landlord as Rent at the time
and in the manner required for Tenant to pay monthly Base Rent as set forth in
the Lease. Upon the occurrence of any Event of Default under the Lease, Landlord
shall have the right, in addition to all other rights and remedies of Landlord,
to accelerate the remaining
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principal balance of the excess Allowance amount amortized hereunder and to
require that the entire amount thereof be immediately paid in full by Tenant.
Should Tenant fail to pay such remaining principal amount within five (5)
business days after such election by Landlord, such remaining principal amount
shall thereafter bear interest at the Amortization Rate.
(e) RIGHTS OF LANDLORD. Throughout the course of
construction of the Tenant Improvements, Landlord shall have the unconditional
right to review and inspect such construction by and through its agents and
employees, including without limitation Landlord's architect. If at any time
Landlord disapproves of the materials or workmanship of the Tenant Improvements
by Tenant, Landlord shall promptly give Tenant written notice thereof,
specifying the deficiencies or defects therein. Upon receipt of any such notice,
Tenant shall immediately commence correction of the defect or deficiency in a
manner and to a condition acceptable to Landlord. Should Tenant fail to commence
or complete any such correction as herein provided, or should Landlord deliver
to Tenant three (3) or more such notices during the course of construction of
the Tenant Improvements, Landlord shall have the immediate right to order the
discontinuance of any further construction of the Tenant Improvements by or on
behalf of Tenant, and Landlord may, but shall not be obligated to, complete the
construction of such Tenant Improvements in accordance with the Working Plans.
Should Landlord elect to complete the Tenant Improvements as herein provided,
Landlord shall be entitled to any and all funds remaining in the Allowance to
pay for the costs of completing said construction, and any additional costs
incurred in connection therewith shall be the obligation of and shall be paid by
Tenant within ten (10) days after written demand by Landlord. In addition,
Landlord shall be entitled to a construction fee for the costs of administering
and completing the Tenant Improvements in an amount equal to five percent (5%)
of all costs incurred by Landlord in completing the Tenant Improvements, which
fee shall not be part of the Allowance or the development review fee
incorporated into the Tenant Improvement Costs.
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FIRST AMENDMENT TO LEASE
I. PARTIES AND DATE.
THIS FIRST AMENDMENT TO LEASE (this "Amendment") dated as of MAY 1,
1995 is entered into by and between WHC - SIX REAL ESTATE LIMITED PARTNERSHIP
("Landlord"), and SEAGATE TECHNOLOGY, INC. A DELAWARE CORPORATION ("Tenant").
II. RECITALS.
A. Landlord and Tenant entered into that certain
Standard Form Lease dated as of APRIL 18, 1995, for the Premises known as 19925
STEVENS CREEK BOULEVARD, SUITE 150, CUPERTINO, California. The capitalized terms
used and not otherwise defined herein shall have the same definitions as set
forth in the Lease.
B. Landlord and Tenant desire to modify the Lease as set
forth in this Amendment, which modifications shall be deemed effective as of the
date of this Amendment as indicated above.
III. MODIFICATIONS.
Landlord and Tenant hereby agree that the Lease shall be modified
and/or supplemented as follows:
TERM: The Term of the lease shall be extended one month for a total of 61
months at the same base rent.
OUTSIDE COMMENCEMENT DATE: The Outside Commencement Date of the lease shall be
extended one month to August 1, 1995.
IV. GENERAL.
A. Effect of Amendment; Ratification: Except to the
extent the Lease is modified by this Amendment, the terms and provisions of the
Lease shall remain unmodified and in full force and effect. In the event of
conflict between the terms of the Lease and the terms of this Amendment, the
terms of this Amendment shall prevail.
B. Attorneys' Fees. The provisions of the Lease
respecting payment of attorney's fees shall also apply to this Amendment.
C. Counterparts. If this Amendment is executed in
counterparts, each counterpart shall be deemed an original.
D. Authority To Execute Amendment. Each individual
executing this Amendment on behalf of a partnership or corporation represents
that he or she is duly authorized to execute and deliver this Amendment on
behalf of the partnership and/or corporation and agrees to deliver evidence of
his or her authority to Landlord upon request by Landlord.
E. Governing Law. This Amendment and any enforcement of
the agreements and modifications set forth above shall be governed by and
construed in accordance with the laws of
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date and year first above written.
WHC-SIX Real Estate Limited Partnership, a Delaware limited partnership
By: JER WHC-SIX Services, Inc., a Virginia corporation, its Managing General
Partner
/s/ Signature Illegible
By:
---------------------
Name: Lawrence A. Corson
------------------
Title: Vice President
-----------------
"Tenant"
SEAGATE TECHNOLOGY, INC., a DELAWARE CORPORATION
------------------------------------------------
/s/ Signature Illegible
By:
---------------------
Name: R. A. Kundtz
------------------
Title: Sr. Vice President, Administration
----------------------------------
<PAGE> 13
BASIC LEASE INFORMATION
DATE: April 18, 1995
LANDLORD: WHC-SIX REAL ESTATE LIMITED PARTNERSHIP
TENANT: SEAGATE TECHNOLOGY, INC., a Delaware corporation
PREMISES: Suite 150, 19925 Stevens Creek Boulevard, Cupertino, CA
(approx. 39,676 rentable sq. ft.)
USE: General office use
TERM: Sixty (60) months
OUTSIDE
COMMENCEMENT DATE: July 1, 1995
BASE RENT: Months 01 - 60: $73,400.60 per month
TENANT'S PERCENTAGE
SHARE OF OPERATING
EXPENSES AND REAL
PROPERTY TAXES: Fifty-one percent (51%)
BASE YEAR: First twelve (12) months of Term
SECURITY DEPOSIT: None
ADVANCE RENT: $73,400.60
BROKER: LANDLORD: Colliers Parrish International, Inc.
TENANT: Colliers Parrish International, Inc.
CONTRACT MANAGER: O'Donnell Property Services, Inc.
ADDRESS FOR NOTICES: LANDLORD: c/o O'Donnell Property Services, Inc.
2201 Dupont Drive, Ste. 100
Irvine, CA 92715 Attn: J.R. Wetzel
CONTRACT 1737 N. First St., Ste. 580
MANAGER: San Jose, CA 95112
Attn: Mark Schmidt
TENANT: Prior to Commencement Date:
920 Disc Drive
Scotts Valley, CA 95067
Following Commencement Date:
The Premises
<PAGE> 14
TENANT IMPROVEMENTS: See Exhibit B
Exhibits A, B, C, D, E, F, G and H
/s/ Signature Illegible/s/ Signature Illegible
INITIALS: ____________________________
LANDLORD TENANT
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THIS LEASE, which is effective as of the date set forth in the Basic Lease
Information, is entered into by Landlord and Tenant, as set forth in the Basic
Lease Information. Terms which are capitalized in this Lease shall have the
meanings set forth in the Basic Lease Information.
1. Premises. Landlord leases to Tenant, and Tenant leases from
Landlord, the Premises described in the Basic Lease Information, together with
the right in common to use the Common Areas of the Building and the Property
(the term "Building" shall mean that certain building shown on Exhibit "A" and
commonly known as 19925 Stevens Creek Boulevard and "Property" shall mean all of
the real property shown on Exhibit "A"). The Common Areas shall mean the areas
and facilities within the Building and the Property provided and designated by
Landlord for the general use, convenience or benefit of Tenant and other tenants
and occupants of the Building (e.g., common entrances and hallways; restrooms;
trash disposal facilities; janitorial, telephone and electrical closets; and
unreserved parking areas).
2. Term.
(a) Lease Term. The Term of this Lease shall commence on
the Commencement Date (as defined in Subsection 2(b)) and, unless terminated on
an earlier date in accordance with the terms of this Lease, shall extend for the
period (i.e., Term) specified in the Basic Lease Information.
(b) Commencement Date. The "Commencement Date" of this
Lease shall be the earliest to occur of the following, as reasonably determined
by Landlord: (i) the date the applicable local governmental authority (e.g., the
city in which the Building is located) approves the improvements
("Improvements") which Tenant is to construct pursuant to Exhibit "B", as
evidenced by a final signed-off building permit or certificate of occupancy for
the Improvements; (ii) the date Landlord's architect certifies that the
Improvements have been substantially completed (except for punch list items); or
(iii) the date Tenant occupies the Premises. Notwithstanding the foregoing, in
no event shall the Commencement Date be later than the Outside Commencement Date
set forth in the Basic Lease Information (i.e., July 1, 1995).
(c) [Intentionally Omitted.]
(d) Commencement Date Memorandum. When the Commencement
Date is determined, the parties shall execute a Commencement Date Memorandum, in
the form attached hereto as Exhibit "C", setting forth the Commencement Date and
the expiration date ("Expiration Date") of this Lease.
(e) Early Entry. Tenant is permitted to enter the
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Premises prior to the Commencement Date for the purposes of fixturing or any
purpose other than occupancy permitted by Landlord, the entry shall be subject
to all the terms and provisions of this Lease, except that the payment of Rent
shall commence as of the Commencement Date.
3. Rent.
(a) Rent. As used in this Lease, the term "Rent" shall
include: (i) the Base Rent; (ii) Tenant's Percentage Share of the total dollar
increase, if any, in the Operating Expenses paid or incurred by Landlord during
the calendar year over the Operating Expenses paid or incurred by Landlord in
the Base Year ("Base Year") specified in the Basic Lease Information; provided,
however, that if the Building are less then ninety-five percent (95%) occupied
during the Base Year, the Base Year Operating Expenses shall be adjusted to
equal Landlord's reasonable estimate of Operating Expenses for the Base Year if
ninety-five percent (95%) of the total rentable area of the Building were
occupied; (iii) Tenant's Percentage Share of the total dollar increase, if any,
in the Real Property Taxes paid or incurred by Landlord during the calendar year
over the Real Property Taxes paid or incurred during the Base Year; and (iv) all
other amounts which Tenant is obligated to pay under the terms of this Lease.
(b) Unpaid Rent. Any amount of Rent which is not paid
within five (5) business days after the date when due shall bear interest from
the date due until the date paid at the rate ("Interest Rate") which is the
lesser of twelve percent (12%) per annum or the maximum rate permitted by law.
(c) Late Payment Charges. Tenant hereby acknowledges that
late payment by Tenant to Landlord of Rent and any other sums to be paid to
Landlord hereunder after the expiration of any applicable grace period will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which will be extremely difficult to ascertain. Such costs include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by the terms of any trust deed covering the Premises.
Accordingly, if any installment of Rent of any other sums due from Tenant shall
not be received by Landlord within five (5) business days after the date when
due, Tenant shall pay to Landlord a late charge equal to six percent (6%) of
such overdue amount. The parties hereby agree that such late charges represents
a fair and reasonable estimate of the cost Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder.
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(d) Payments. All payments due from Tenant to Landlord
shall be paid to Contract Manager (or such other entity designated by Landlord),
without prior demand or notice, deduction or offset, in lawful money of the
United States of America at Landlord's address for notices hereunder or to such
other person at such other place as Landlord may from time to time designate by
notice to Tenant.
4. Base Rent. Tenant shall pay Base Rent and all other amounts
owing under this Lease as Rent to Contract Manager (or other entity designated
by Landlord), in advance, on the first day of each calendar month of the Term,
at Contract Manager's address for notices (as set forth in the Basic Lease
Information) or at such other address as Landlord may designate. The Base Rent
shall be the amount set forth in the Basic Lease Information. Notwithstanding
the foregoing, Tenant shall pay the Base Rent for the first (1st) month of the
Term concurrently with its execution of this Lease.
5. Additional Rent - Annual Rent Adjustment/Operating Expenses.
(a) Increase in Operating Expenses. Tenant shall pay as
Rent Tenant's Percentage Share of the total dollar increase, if any, in the
Operating Expenses paid or incurred by Landlord during each twelve (12) month
period following the Base Year (each such twelve (12) month period being
hereinafter referred to as a "Lease Year") over the Operating Expenses paid or
incurred by Landlord during the Base Year.
(b) Operating Expenses. The term "Operating Expenses"
shall mean (i) all of Landlord's direct costs and expenses of operation, repair
and maintenance of the Building and the Property, including the Common Areas and
supporting facilities, as determined by Landlord in accordance with generally
accepted accounting principles or other recognized accounting principles,
consistently applied; (ii) costs, or a portion thereof, properly allocable to
the Building or Common Areas of any capital improvements made to the Building or
Common Areas by Landlord after the date of this Lease which comprise
labor-saving devises or other equipment which Landlord reasonably determines are
necessary to improve the operating efficiency of any system within the Building
or Common Areas (such as an energy management computer system); and (iii) costs
properly allocable to the Building or Common Areas of any capital improvements
made to the Building or Common Areas by Landlord after the date of this Lease
that are required under any governmental law or regulation that was not
applicable to the Building and Common Areas at the time they were constructed,
or that are reasonably required for the health and safety of tenants in the
Building. If Landlord elects to self-insure or includes the Property under
blanket insurance
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policies covering multiple properties, then the term "Operating Expenses" shall
include the portion of the cost of such self-insurance or blanket insurance
allocated by Landlord to this Property. If less than ninety-five percent (95%)
of the rentable area of the Building is occupied, Operating Expenses shall be
adjusted to equal Landlord's reasonable estimate of Operating Expenses if
ninety-five percent (95%) of the total rentable area of the Building were
occupied.
Notwithstanding the foregoing, for purposes of calculating Tenant's
Percentage Share of increases in Operating Expenses (i) in no event shall
Operating Expenses (excluding insurance costs, expenses and deductibles)
increase by more than six percent (6%) per Lease Year, and (ii) in the event the
cost of any capital improvement made by or at the direction of Landlord exceeds
the sum of Ten Thousand Dollars ($10,000), then the cost thereof in excess of
Ten Thousand Dollars ($10,000) shall be amortized over the useful life of the
improvement in question (as reasonably determined by Landlord), together with
interest upon the unamortized balance at the Interest Rate or such higher rate
as may have been paid by Landlord on funds borrowed for the purpose of
constructing the capital improvements, and the unamortized Ten Thousand Dollars
($10,000) shall be included as part of "Operating Expenses" during the year in
which the capital improvement in question was completed, and the amortized
excess amount shall be included as part of "Operating Expenses" over the useful
life of the capital improvement in question.
(c) Estimates of Increases in Operating Expenses. During
the last month of the Base Year and each Lease Year during the Term, or as soon
thereafter as practicable, Landlord shall give Tenant written notice of
Landlord's estimate of any amount of Operating Expenses in excess of the
Operating Expenses incurred in the Base Year and the amount of the increase
which will be payable for the ensuing Lease Year. On or before the first day of
each month during the ensuring Lease Year, Tenant shall pay to Landlord
one-twelfth (1/12) of the estimated amount; provided, however, that if notice is
not given in the last month described above, Tenant shall continue to pay on the
basis of the then applicable Rent until the month after the notice is given. If
at any time it appears to Landlord that the increased amount payable for the
current Lease Year will vary from Landlord's estimate by more than five percent
(5%), Landlord may give notice to Tenant of Landlord's revised estimate for the
Lease Year in question, and subsequent payments by Tenant for such Lease Year
shall be based on the revised estimate; provided, however, that Landlord shall
not give notice of a revised estimate for any Lease Year more frequently than
once a calendar quarter.
(d) Annual Adjustment. Within one hundred twenty (120)
days after the close of each Lease Year of the Term, or as soon
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after the one hundred twenty (120) day period as practicable, Landlord shall
deliver to Tenant a statement of the adjustment to the Operating Expenses for
the prior Lease Year. If, on the basis of the statement, Tenant owes an amount
that is less than the estimated payments for the Lease Year previously made by
Tenant, Landlord shall apply the excess to the next payment of increased
Operating Expenses due. If, on the basis of the statement, Tenant owes an amount
that is more than the estimated payments for the Lease Year previously made by
the Tenant, Tenant shall pay the deficiency to Landlord within thirty (30) days
after delivery of the statement. The statement of Operating Expenses shall be
presumed correct and shall be deemed final and binding upon Tenant unless (i)
Tenant in good faith objects in writing thereto within thirty (30) days after
delivery of the statement to Tenant (which writing shall state, in reasonable
detail, all of the reasons for the objection); and (ii) Tenant pays in full,
within thirty (30) days after delivery of the statement to Tenant, any amount
owed by Tenant with respect to the statement which is not in dispute. If Tenant
objects to Landlord's allocation to this Property of the cost of self-insurance
or blanket insurance, such allocation shall nonetheless be presumed correct and
shall be deemed final and binding upon Tenant unless Tenant's timely written
objection includes credible evidence that Landlord could have obtained
substantially comparable insurance coverage for this Property alone at lower
cost.
6. Additional Rent - Annual Rent Adjustments/Real Property Taxes.
(a) Increase in Real Property Taxes. Tenant shall pay as
Rent Tenant's Percentage Share of the total dollar increase, if any, in the Real
Property Taxes paid or incurred by Landlord in each Lease Year over the Real
Property Taxes paid or incurred by Landlord during the Base Year.
(b) Real Property Taxes. The term "Real Property Taxes"
shall mean any ordinary or extraordinary form of assessment or special
assessment, license fee, rent tax, levy, penalty (if a result of Tenant's
delinquency), or tax, other than net income, premium, estate, succession,
inheritance, transfer or franchise taxes, imposed by any authority having the
direct or indirect power to tax, or by any city, county, state or federal
government for any maintenance or improvement or other district or division
thereof, relating to all or any part of the property, including the Building and
Premises. The term shall include all transit charges, housing fund assessments,
real estate taxes and all other taxes relating to the Premises, Building and/or
Property, all other taxes which may be levied in lieu of real estate taxes, all
assessments, assessment bonds, levies, fees, and other governmental charges
(including, but not limited to, charges for traffic facilities, improvements,
child care, water services
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studies and improvements, and fire services studies and improvements) for
amounts necessary to be expended because of governmental orders, whether general
or special, ordinary or extraordinary, unforeseen as well as foreseen, of any
kind and nature for public improvement, services, benefits or any other purposes
which are assessed, levied, confirmed, imposed or become a lien upon the
Premises, Building or Property or become payable during the Term.
Landlord may, in its sole discretion but without obligation,
contest the amount or validity of any Real Property Taxes at any time during the
Term. In the event Tenant desires to contest the amount or validity of any Real
Property Taxes not otherwise contested by Landlord during the Term, Tenant shall
first provide Landlord with written notice of such desire. Within thirty (30)
days of such notice, Landlord shall elect to either pursue such contest itself
or permit Tenant to pursue such contest. In the event Landlord elects to permit
Tenant to pursue such contest, then, and only then, Tenant may contest the
amount or validity of the Real Property Taxes in question by appropriate
proceedings, provided that Tenant gives Landlord prior notice of any such
contest and keeps Landlord advised as to all proceedings, and provided further
that Tenant shall continue to reimburse Landlord pursuant to Section 6(d) below
for Landlord's payment of such Real Property Taxes unless such proceedings shall
operate to prevent or stay such payment and the collection of the tax so
contested. Landlord shall join in any such proceedings if any applicable laws,
statutes, ordinances or government rule, regulation or requirement shall so
require, provided that Tenant shall hold harmless, indemnify, protect and defend
Landlord from and against any liability, claim, demand, cost or expense in
connection therewith, including, but not limited to, actual attorneys' fees and
costs reasonably incurred.
(c) Acknowledgment of Parties. It is acknowledged by
Landlord and Tenant that Proposition 13 was adopted by the voters of the State
of California in the June, 1978 election, and that assessments, taxes, fees,
levies and charges may be imposed by governmental agencies for such purposes as
fire protection, street, sidewalk, road, utility construction and maintenance,
refuse removal and for other governmental services which formerly may have been
provided without charge to property owners or occupants. It is the intention of
the parties that all new and increased assessments, taxes, fees, levies and
charges due to Proposition 13 or any other cause are to be included within the
definition of Real Property Taxes for purposes of this Lease.
(d) Estimates of Increases in Real Property Taxes. During
the last month of the Base Year and each Lease Year during the Term, or as soon
thereafter as practicable, Landlord shall give Tenant written notice if Landlord
estimates that the Real
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<PAGE> 21
Property Taxes will exceed the Real Property Taxes incurred in the Base Year,
and the amount of the increase which will be payable for the ensuing Lease Year.
On or before the first day of each month during the ensuring Lease Year, Tenant
shall pay to Landlord one-twelfth (12th) of the estimated amount; provided,
however, that if notice is not given in the last month described above, Tenant
shall continue to pay on the basis of the then applicable Rent until the month
after the notice is given. If at any time it appears to Landlord that the
increased amount payable for the current Lease Year will vary from Landlord's
estimate by more than five percent (5%), Landlord may give notice to Tenant of
Landlord's revised estimate for the Lease Year in question, and subsequent
payments by Tenant for such Lease Year shall be based on the revised estimate;
provided, however, that Landlord shall not give notice of a revised estimate for
any Lease Year more frequently than once a calendar quarter.
(e) Annual Adjustment. Within one hundred twenty (120)
days after the close of each Lease Year of the Term, or as soon after the one
hundred twenty (120) day period as practicable, Landlord shall deliver to Tenant
a statement of the adjustment to the Real Property Taxes for the prior Lease
Year; the statement shall be final and binding upon Landlord and Tenant. If, on
the basis of the statement, Tenant owes an amount that is less than the
estimated payments for the Lease Year previously made by Tenant, Landlord shall
apply the excess to the next payment of increased Real Property Taxes due. If,
on the basis of the statement, Tenant owes an amount that is more than the
estimated payments for the Lease Year previously made by the Tenant, Tenant
shall pay the deficiency to Landlord within thirty (30) days after delivery of
the statement.
(f) Taxes on Tenant Improvements and Personal Property.
Notwithstanding any other provision hereof, Tenant shall pay the full amount of
any increase in Real Property Taxes during the Term resulting from any and all
alterations and tenant improvements of any kind whatsoever placed in, on or
about the Premises for the benefit of, at the request of, or by Tenant. Tenant
shall pay, prior to delinquency, all taxes assessed or levied against Tenant's
personal property in, on or about the Premises. When possible, Tenant shall
cause its personal property to be assessed and billed separately from the real
or personal property of Landlord.
7. Proration of Rent. If the Commencement Date is not the first
day of the month, or if the end of the Term is not the last day of the month,
Rent shall be prorated on a monthly basis (based upon a thirty (30) day month)
for the fractional month during the month which this Lease commences or
terminates. The termination of this Lease shall not affect the obligations of
Landlord and
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Tenant pursuant to Subsections 5(d) and 6(e) which are to be performed after the
termination.
8. Condition of Premises. Tenant agrees to accept the Premises,
the Common Areas and all of the areas outside of the Premises in "as-is"
condition as of the date that possession of the Premises are delivered by
Landlord to Tenant, and acknowledges and agrees that Landlord has made no
representation or warranty whatsoever to Tenant regarding the Premises or the
suitability of the Premises, Common Areas and any of the facilities associated
with the Premises, for Tenant's stated or intended use. Notwithstanding the
foregoing, Landlord shall be responsible for making any alterations or
improvements to the Common Areas that may be required to be made by applicable
law and regulations. The cost of any such alterations or improvements shall be
borne solely by Landlord, unless the alterations or improvements in question are
made necessary due to Tenant's particular use of the Premises, in which event
Tenant shall reimburse Landlord for such costs and expenses within fifteen (15)
days following Landlord's written demand therefor.
9. Uses of Premises.
(a) Tenant shall use the Premises solely for the use set forth
in the Basic Lease Information, and Tenant shall not use the Premises for any
other purpose without obtaining the prior written consent of Landlord, which
consent shall be given or withheld in the sole and absolute discretion of
Landlord with the requirement of reasonableness in the exercise of that
discretion. Tenant shall, at its own cost and expense, comply with all laws,
rules, regulations, orders, permits, licenses and ordinances issued by any
governmental authority which relate to the condition, use or occupancy of the
Premises during the Term of this Lease. Tenant shall not use the Premises in any
manner that will constitute waste, nuisance, or unreasonable annoyance
(including, without limitation, use of loudspeakers or sound or light apparatus
that can be heard or seen outside the Premises) to other tenants in the
Building.
(b) "Hazardous Substance" shall mean the substances included
within the definitions of the term "Hazardous Substance" under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., and the California Carpenter-Presley-Tanner
Hazardous Substance Account Act, California Health & Safety Code Section 25300
et seq., and regulations promulgated thereunder, as amended. "Hazardous Waste"
shall mean (a) any waste listed as or meeting the identified characteristics of
a "Hazardous Waste" under the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Section 6901 et seq., and regulations promulgated pursuant thereto,
collectively "RCRA", or (b) any waste meeting the identified
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characteristics of "Hazardous Waste" under California Hazardous Waste Control
Law, California Health and Safety Code Section 25100 et seq., and regulations
promulgated pursuant thereto, collectively "CHWCL". "Hazardous Waste Facility"
shall mean a hazardous waste facility as defined under CHWCL.
(c) Tenant covenants that, at its sole cost and expense, it
will comply with all applicable laws, rules, regulations, orders, permits,
licenses and operating plans of any governmental authority with respect to the
use, handling, generation, transportation, storage, treatment and/or disposal of
hazardous substances or wastes, and Tenant will provide Landlord with copies of
all permits, registrations or other similar documents that authorize Tenant to
conduct any such activities in connection with its authorized use of the
Premises. Additionally, Tenant agrees to comply with the Rules and Regulations
attached hereto as Exhibit "E" (the "Rules"), the requirements of the Board of
Fire Underwriters or Landlord's insurance carrier, and to comply with covenants,
conditions and restrictions ("CC&Rs") applicable to the Building.
(d) Tenant agrees that it shall not operate on the Premises
any facility required to be permitted or licensed as a Hazardous Waste Facility
or for which interim status as such is required. Nor shall Tenant store any
Hazardous Wastes on the Premises for ninety (90) days or more.
(e) Tenant agrees to comply with all applicable laws, rules,
regulations, orders, and permits relating to underground storage tanks
(including any installation, monitoring, maintenance, closure and/or removal of
such tanks) as such tanks are defined in California Health and Safety Code,
Section 25281(u), including, without limitation, complying with California
Health and Safety Code Section 25280-25299.6 and the regulations promulgated
thereunder. Tenant shall furnish to Landlord copies of all registrations and
permits for all underground storage tanks.
(f) If applicable, Tenant shall provide to Landlord in writing
the following information and/or documentation at the Commencement Date and
within sixty (60) days of any change in the required information and/or
documentation:
(i) A list of all hazardous substances and/or wastes
that Tenant uses, handles, generates, transports, stores, treats or disposes in
connection with its operations on the Premises.
(ii) Copies of all Material Safety Data Sheets ("MSDSs")
required to be completed with respect to operations of Tenant at the Premises in
accordance with Title 8, California Code
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of Regulations Section 5194 or 42 U.S.C. Section 11021, or any amendments
thereto. In lieu of this requirement, Tenant may provide a Hazardous Materials
Inventory Sheet that details the MSDSs.
(iii) Copies of all hazardous waste manifests, as
defined in Title 22, California Code of Regulations Section 66481, that Tenant
is required to complete in all connections with its operations at the Premises.
(iv) A copy of any Hazardous Materials Management Plans
required with respect to Tenant's operations.
(v) Copies of any Contingency Plans and Emergency
Procedures required of Tenant due to its operations in accordance with Title 22,
Chapter 30, Article 20, of the California Code of Regulations, and any
amendments thereto.
(vi) Copies of any biennial reports to be furnished to
California Department of Health Services relating to hazardous substances or
wastes.
(vii) Copies of all industrial waste water discharge
permits.
(g) Tenant shall secure Landlord's prior written approval for
any proposed receipt, storage, possession, use, transfer or disposal of
"Radioactive Materials" or "Radiation", as such materials are defined in Title
17, California Code of Regulations Section 30100(w) and (z) or possessing the
characteristics of the materials so defined, which approval Landlord may
withhold in its sole and absolute discretion. The Tenant in connection with any
authorized receipt, storage, possession, use, transfer or disposal or
radioactive materials or radiation shall:
(i) Comply with all federal, state and local laws,
rules, regulations, orders, licenses and permits;
(ii) Furnish Landlord with a list of all radioactive
materials or radiation received, stored, possessed, used, transferred or
disposed; and
(iii) Furnish Landlord with all licenses, registration
materials, inspection reports, orders and permits in connection with the
receipt, storage, possession, use, transfer or disposal or radioactive materials
or radiation.
(h) Tenant shall comply with any and all applicable laws,
rules, regulations, and orders with respect to the release into the environment
of any hazardous wastes or substances or
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radiation or radioactive materials. Tenant shall notify Landlord in writing of
any unauthorized release into the environment within twenty-four (24) hours of
the time at which Tenant becomes aware of such release.
(i) Tenant shall indemnify, defend and hold Landlord
harmless from any and all claims, losses (including, but not limited to, loss of
rental income and loss due to business interruption), damages (including
diminution in value or loss of rental value following expiration or earlier
termination of the Term), liabilities, costs, legal fees, and expenses of any
sort arising out of or relating to any unauthorized release into the environment
of Hazardous Substances or Hazardous Wastes or Radioactive Materials by Tenant
or any of Tenant's agents, contractors or invitees, or Tenant's failure to
comply with Subparagraphs (a)-(h) of this section of the Lease. Tenant shall not
be responsible for any unauthorized release into the environment of Hazardous
Substances or Hazardous Wastes or Radioactive Materials by Landlord or
Landlord's agents or contractors.
(j) Tenant agrees to cooperate with Landlord in
furnishing Landlord with complete information regarding Tenant's receipt,
handling, use, storage, transportation, generation, treatment and/or disposal of
hazardous substances or wastes or radiation or radioactive materials. Upon
request, Tenant agrees to grant Landlord reasonable access at reasonable times
to the Premises to inspect Tenant's receipt, handling, use, storage,
transportation, generation, treatment and/or disposal of hazardous substances or
wastes or radiation or radioactive materials without being deemed guilty of any
disturbance of Tenant's use or possession and without being liable to Tenant in
any manner.
(k) Notwithstanding Landlord's rights of inspection and
review under this paragraph, Landlord shall have no obligation or duty to so
inspect or review, and no third party shall be entitled to rely on Landlord to
conduct any sort of inspection or review by reason of the provisions of this
paragraph.
(l) Tenant shall fully complete, execute and,
concurrently with Tenant's execution and delivery of this Lease to Landlord,
deliver to Landlord an Environmental Questionnaire and Disclosure Statement in
the form attached to this Lease as Exhibit "F." The completed Environmental
Questionnaire and Disclosure Statement shall be deemed incorporated into this
Lease for all purposes, and Landlord shall be entitled to fully rely on the
information contained therein.
(m) This Section 9 of the Lease shall survive termination
of the Lease.
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10. Alterations.
(a) Permitted Alterations. Tenant shall give Landlord not
less than ten (10) days' notice of any alteration Tenant desires to make to the
Premises. Tenant shall not make any alteration in, or about the Premises without
the prior written consent of Landlord unless the alteration does not affect the
Building structure, the exterior appearance of the Building, the roof or the
Building systems (e.g., electrical systems) and the cost of the alterations is
not in excess of Five Thousand Dollars ($5,000). Tenant shall comply with all
rules, laws, ordinances and requirements at the time Tenant makes any alteration
and shall deliver to Landlord a complete set of "as built" plans and
specifications for each alteration. Tenant shall be solely responsible for
maintenance and repair of all alterations made by Tenant. As used in this
Section, the term "alteration" shall include any alteration, addition or
improvement.
(b) Liens. If, because of any act or omission of Tenant
or anyone claiming by, through, or under Tenant, any mechanics' lien or other
lien is filed against the Premises, the Building, the Property or against other
property of Landlord (whether or not the lien is valid or enforceable), Tenant
shall, at its own expense, cause it to be discharged of record within a
reasonable time, not to exceed thirty (30) days, after the date of the filing.
In addition, Tenant shall defend and indemnify Landlord and hold it harmless
from any and all claims, losses, damages, judgments, settlements, costs and
expenses, including attorneys' fees, resulting from the lien.
(c) Ownership of Alterations. Any alteration made by
Tenant shall immediately become Landlord's property (other than removable
fixtures). Except as provided in Subsection 10(d), Landlord may require Tenant
at Tenant's sole expense and by the end of the Term, to remove any alterations
made by Tenant and to restore the Premises to its condition prior to the
alteration; provided, however, Tenant shall have no obligation to remove the
Tenant Improvements constructed by Tenant pursuant to Exhibit "B" attached to
this Lease.
(d) Request Regarding Removal Obligation. At the time
that Tenant requests Landlord's consent to any alteration, Tenant may request
that Landlord notify Tenant if Landlord will require Tenant, at Tenant's sole
expense to remove any or all of the alteration by the end of the Term, and to
restore the premises to its condition prior to the alteration.
11. Repairs.
(a) Tenant's Obligations. Tenant, at all times during the
Term and at Tenant's sole cost and expense, shall keep the
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Premises and every part thereof in good condition and repair, ordinary wear and
tear, damage thereto not caused by Tenant, by fire, earthquake, acts of God or
the elements excepted. Tenant hereby waives all right to make repairs at the
expense of Landlord or in lieu thereof to vacate the Premises as provided in
California Civil Code Section 1942 or any other law, statute or ordinance now or
hereafter in effect.
(b) Landlord's Obligations. Landlord, at all times during
the Term and at its sole cost and expense, shall keep the structural portions of
the roof, the exterior walls and the foundation of the Building in good
condition and repair, ordinary wear and tear excepted and subject to Section 12
below. Landlord shall not be required to make any repairs under this Section
11(b) unless and until Tenant has notified Landlord in writing of the need for
such repair and Landlord shall have a reasonable period of time thereafter to
commence and complete said repair, if warranted. Landlord's repair obligations
under this Section 11(b) shall be limited to the cost of effecting the repair in
question and in no event shall Landlord be liable for any costs or expenses in
excess of said amounts, including, but not limited to, any consequential
damages, opportunity costs or lost profits incurred or suffered by Tenant.
12. Damage or Destruction.
(a) Landlord's Obligations to Rebuild. If the Premises
are damaged or destroyed, Landlord shall promptly and diligently repair the
Premises unless Landlord has the option to terminate this Lease as provided
herein, and Landlord elects to terminate.
(b) Right to Terminate. Landlord and Tenant each shall
have the option to terminate this Lease if the Premises or the Building is
destroyed or damaged by fire or other casualty, regardless of whether the
casualty is insured against under this Lease, if Landlord reasonably determines
that the repair of the Premises or the Building cannot be completed within one
hundred eighty (180) days after the casualty. If a party desires to exercise the
right to terminate this Lease as a result of a casualty, the party shall
exercise the right by giving the other party written notice of its election to
terminate within thirty (30) days after the damage or destruction, in which
event this Lease shall terminate fifteen (15) days after the date of the notice.
If neither Landlord nor Tenant exercises the right to terminate this Lease,
Landlord shall promptly commence the process of obtaining necessary permits and
approvals, and shall commence repair of the Premises or the Building as soon as
practicable and thereafter prosecute the repair diligently to completion, in
which event this Lease shall continue in full force and effect.
(c) Limited Obligation to Repair. Landlord's
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obligation,should Landlord elect or be obligated to repair or rebuild, shall be
limited to the Building shell and any tenant improvements which are constructed
and paid for by Landlord pursuant to Exhibit "B." Tenant, at its option and
expense, shall replace or fully repair all trade fixtures, equipment and other
improvements installed by Tenant and existing at the time of the damage or
destruction.
(d) Abatement of Rent. In the event of any damage or
destruction to the Premises which does not result in termination of this Lease,
the Base Rent shall be temporarily abated proportionately to the degree the
Premises are untenantable as a result of the damage or destruction, commencing
from the date of the damage or destruction and continuing during the period
required by Landlord to substantially complete its repair and restoration of the
premises; provided, however, that nothing herein shall preclude Landlord from
being entitled to collect the full amount of any rent loss insurance proceeds.
Tenant shall not be entitled to any compensation or damages from Landlord for
loss of the use of the Premises, damage to Tenant's personal property or any
inconvenience occasioned by any damage, repair or restoration. Tenant hereby
waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the California Civil Code, and the provisions of any similar
law hereafter enacted.
(e) Damage Near End of Term and Extensive Damage. In
addition to the rights to termination under Subsection 12(b), either Landlord or
Tenant shall have the right to cancel and terminate this Lease as of the date of
the occurrence of destruction or damage if the Premises or the Building is
substantially destroyed or damaged (i.e., there is damage or destruction which
Landlord determines would require more than three (3) months to repair) and made
untenantable during the last twelve (12) months of the Term. Landlord or Tenant
shall give notice of its election to terminate this Lease under this Subsection
12(e) within thirty (30) days after Landlord determines that the damage or
destruction would require more than three (3) months to repair. If neither
Landlord nor Tenant elects to terminate this Lease, the repair of the damage
shall be governed by Subsection 12(a) or 12(b) as the case may be.
(f) Insurance Proceeds. If this Lease is terminated,
Landlord may keep all the insurance proceeds resulting from the damage to the
Building, except for those proceeds which specifically insured Tenant's
interests.
13. [Intentionally Omitted.]
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14. Indemnity and Insurance.
(a) Indemnity. Except for Landlord's active negligence,
Tenant shall be responsible for, and shall indemnify Landlord and its agents,
employees, contractors, officers and directors and hold them harmless from, any
and all liability for any loss, damage or injury to person or property occurring
in, on or about the Premises, and Tenant hereby releases Landlord and its
agents, employees, contractors, officers and directors from any and all
liability for the same. Tenant's obligation to indemnify Landlord and its
agents, employees, contractors, officers and directors hereunder shall include
the duty to defend against any claims asserted by reason of any loss, damage or
injury, and to pay any judgments, settlements, costs, fees and expenses,
including attorneys' fees, incurred in connection therewith.
(b) Insurance. At all times during the term of this
Lease, Tenant shall carry, at its own expense, for the protection of Tenant,
Landlord, Landlord's constituent parts and Landlord's management agents, as
their interest may appear, one or more policies of commercial general public
liability and property damage insurance, issued by one or more insurance
companies licensed to do business in California, with minimum coverages of One
Million Dollars ($1,000,000) combined single limit for injury to persons or
property damage per accident and insuring against any and all liability for
which Tenant is responsible under this Lease. The insurance policy or policies
shall name Landlord, Landlord's constituent parts and Landlord's management
agents (including, without limitation, J.E. Robert Companies and O'Donnell
Property Services, Inc.) as additional insureds, and shall provide that the
policy or policies may not be canceled on less than thirty (30) days' prior
written notice to Landlord. Tenant shall furnish Landlord with certificates
evidencing the insurance. If Tenant fails to carry the insurance and furnish
Landlord with certificates of insurance after a request to do so, Landlord shall
have the right to obtain the insurance and collect the cost thereof from Tenant
as additional Rent.
15. Assignment and Subletting.
(a) Landlord's Consent. Tenant shall not assign, sublet
or otherwise transfer all or any portion of Tenant's interest in this Lease
(collectively "sublet") without Landlord's prior written consent, which consent
shall not be unreasonably withheld. Consent by Landlord to one sublet shall not
be deemed to be a consent to any subsequent sublet.
(b) Effect of Sublet. Each sublet to which Landlord has
consented shall be by an instrument in writing, in a form satisfactory to
Landlord as evidenced by Landlord's written
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approval. Each sublessee shall agree in writing, for the benefit of Landlord, to
assume, to be bound by and to perform the terms, conditions and covenants of
this Lease to be performed by Tenant. Tenant shall not be released from personal
liability for the performance of each term, condition and covenant of this
Lease, and Landlord shall have the right to proceed against Tenant without
proceeding against the subtenant.
(c) Information to be Furnished. If Tenant desires at any
time to sublet the Premises, Tenant shall first notify Landlord of its desire to
do so and shall submit in writing to Landlord: (i) the name of the proposed
subtenant; (ii) the nature of the proposed subtenant's business to be carried on
in the Premises; (iii) the terms and provisions of the proposed sublease and a
copy of the proposed sublease form; and (iv) such financial information,
including financial statements, as Landlord may reasonably request concerning
the proposed subtenant.
(d) Landlord's Election. At any time within five (5)
business days after Landlord's receipt of the information specified in
Subsection 15(c), Landlord may, by written notice to Tenant, elect either (i) to
consent to the sublet by Tenant; or (ii) to refuse its consent to the sublet. If
Landlord fails to elect either of the alternatives within the five (5) business
day period, it shall be deemed that Landlord has refused its consent to the
sublet. If Landlord refuses its consent, Landlord shall deliver to Tenant a
statement of the basis for its refusal. Any attempted sublet without Landlord's
consent shall not be effective.
(e) Payment Upon Sublet. If Landlord consents to the
sublet, Tenant may thereafter enter into a valid sublet of the Premises or
portion thereof, upon the terms and conditions set forth in the information
furnished by Tenant to Landlord pursuant to Subsection 15(c), subject to the
condition that fifty percent (50%) of any excess of the monies due to Tenant
under the sublet ("subrent") over the Rent required to be paid by Tenant
hereunder shall be paid to Landlord. Any subrent to be paid to Landlord pursuant
hereto shall be payable to Landlord as and with the Base Rent payable to
Landlord hereunder pursuant to the terms of Section 4. The term "subrent" as
used herein shall include any consideration of any kind received, or to be
received, by Tenant from the subtenant, if the sums are related to Tenant's
interest in this Lease or in the Premises, including, without limitation, bonus
money, and payments (in excess of fair market value thereof) for Tenant's
assets, fixtures, inventory, accounts, goodwill, equipment, furniture, general
intangibles and any capital stock or other equity ownership of Tenant.
(f) Executed Counterparts. No sublet shall be valid nor
shall any subtenant take possession of the Premises until an
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executed counterpart of the sublease has been delivered to Landlord and approved
in writing.
(g) Transfer to Purchaser. A transfer of this Lease to
one or more purchasers of a majority interest in Tenant shall be deemed a sublet
under this Lease.
(h) Transfers to Affiliates. Tenant may assign this Lease
or sublet the Premises, without Landlord's consent, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from the merger or consolidation with Tenant, or to any
person or entity which acquires all the assets of Tenant as going concern of the
business that is being conducted on the Premises, provided that the assignee
assumes, in full, the obligations of Tenant under this Lease.
16. Default.
(a) Tenant's Default. At the option of Landlord, a
material breach of this Lease by Tenant shall exist if any of the following
events (severally, "Event of Default"; collectively, "Events of Default") shall
occur: (i) if Tenant shall have failed to pay Rent, including Tenant's
Percentage Share of increased Operating Expenses, Tenant's Percentage Share of
increased Real Property Taxes, or any other sum required to be paid hereunder
within three (3) days after the date when due, together with interest at the
Interest Rate, from the date the amount became due through the date of payment,
inclusive; (ii) if Tenant shall have failed to perform any term, covenant or
condition of this Lease except those requiring the payment of money, and Tenant
shall have failed to cure the breach within fifteen (15) days after written
notice from Landlord if the breach could reasonably be cured within the fifteen
(15) day period; provided, however, if the failure could not reasonably be cured
within the fifteen (15) day period, then Tenant shall not be in default unless
it has failed to promptly commence and thereafter continue to make diligent and
reasonable efforts to cure the failure as soon as practicable as reasonably
determined by Landlord; (iii) if Tenant shall have assigned its assets for the
benefit of its creditors; (iv) if the sequestration of, attachment of, or
execution on, any material part of the property of Tenant or any property
essential to the conduct of Tenant's business shall have occurred, and Tenant
shall have failed to obtain a return or release of the property within thirty
(30) days thereafter, or prior to sale pursuant to any sequestration, attachment
or levy, whichever is earlier; (v) if Tenant shall have failed to continuously
and uninterruptedly conduct its business in the Premises, or shall have
abandoned or vacated the Premises; (vi) if a court shall have made or entered
any decree or order adjudging Tenant to be insolvent, or approving as property
filed a petition seeking reorganization of Tenant, or
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directing the winding up or liquidation of Tenant, and the decree or order shall
have continued for a period of thirty (30) days; (vii) if Tenant shall make or
suffer any transfer which constitutes a fraudulent or otherwise avoidable
transfer under any provision of the federal Bankruptcy Laws or any applicable
state law; or (viii) if Tenant shall have failed to comply with the provisions
of Section 24 or 26. An Event of Default shall constitute a default under this
Lease.
(b) Remedies Upon Tenant's Default. Upon an Event of
Default, Landlord shall have the following remedies, in addition to all other
rights and remedies provided by law, equity, statute or otherwise provided in
this Lease, to which Landlord may resort cumulatively or in the alternative:
(i) Landlord may continue this Lease in full
force and effect, and this Lease shall continue in full force and effect as long
as Landlord does not terminate Tenant's right to possession, and Landlord shall
have the right to collect Rent when due. During the period Tenant is in default,
Landlord may enter the Premises and relet it, or any part of it, to third
parties for Tenant's account, provided that any Rent in excess of the Rent due
hereunder shall be payable to Landlord. Tenant shall be liable immediately to
Landlord for all costs Landlord incurs in reletting the Premises, including,
without limitation, brokers' commissions, expenses of cleaning and redecorating
the Premises required by the reletting and like costs. Reletting may be for a
period shorter or longer than the remaining Term of this Lease. Tenant shall pay
to Landlord the Rent and other sums due under this Lease on the dates the Rent
is due, less the Rent and other sums Landlord receives from any reletting. No
act by Landlord allowed by this Subsection (i) shall terminate this Lease unless
Landlord notifies Tenant in writing that Landlord elects to terminate this
Lease.
(ii) Landlord may terminate Tenant's right to
possession of the Premises at any time by giving written notice to that effect.
No act by Landlord other than giving written notice to Tenant shall terminate
this Lease. Acts of maintenance, efforts to relet the Premises or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord shall have the right to remove all
personal property of Tenant and store it at Tenant's costs and to recover from
Tenant as damages: (a) the worth at the time of award of unpaid Rent and other
sums due and payable which had been earned at the time of termination; plus (b)
the worth at the time of award of the amount by which the unpaid Rent and other
sums due and payable which would have been payable after termination until the
time of award exceeds the amount of the Rent loss that Tenant proves could have
been reasonably avoided; plus (c) the worth at the time of award of the amount
by which the
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unpaid Rent and other sums due and payable for the balance of the Term after the
time of award exceeds the amount of the Rent loss that Tenant proves could be
reasonably avoided; plus (d) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord: (1) in retaking possession of the Premises,
including reasonable attorneys' fees and costs therefor; (2) maintaining or
preserving the Premises for reletting to a new tenant, including repairs or
alterations to the Premises for the reletting; (3) leasing commissions; (4) any
other costs necessary or appropriate to relet the Premises; and (5) at
Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by the laws of the State of
California.
The "worth at the time of award" of the amounts referred to in
Subsections (ii)(a) and (ii)(b) is computed by allowing interest at the lesser
of twelve percent (12%) per annum or the maximum rate permitted by law, on the
unpaid Rent and other sums due and payable from the termination date through the
date of award. The "worth at the time of award" of the amount referred to in
Subsection (ii)(c) is computed by discounting the amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award, plus one percent
(1%). Tenant waives redemption or relief from forfeiture under California Code
of Civil Procedure Sections 1174 and 1179, or under any other present or future
law, if Tenant is evicted or Landlord takes possession of the Premises by reason
of any default of Tenant hereunder.
(c) Landlord's Default. Landlord shall not be deemed to
be in default in the performance of any obligation required to be performed by
Landlord hereunder unless and until Landlord has failed to perform the
obligation within thirty (30) days after receipt of written notice by Tenant to
Landlord specifying wherein Landlord has failed to perform the obligation;
provided, however, that if the nature of Landlord obligation is such that more
than thirty (30) days are required for its performance, then Landlord, shall not
be deemed to be in default if Landlord shall commence the performance within the
thirty (30) day period and thereafter shall diligently prosecute the same to
completion.
17. Landlord's Right to Perform Tenant's Covenants. If Tenant
shall at any time fail to make any payment or perform any other act on its part
to be made or performed under this Lease, Landlord may, but shall not be
obligated to, make the payment or perform any other act to the extent Landlord
may deem desirable and, in connection therewith, pay expenses and employ
counsel. Any payment or performance by Landlord shall not waive or release
Tenant from any obligations of Tenant under this Lease. All sums
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so paid by Landlord, and all penalties, interest and costs in connection
therewith, shall de due and payable by Tenant on the next day after any payment
by Landlord, together with interest thereon at the Interest Rate, from that date
to the date of payment thereof by Tenant to Landlord, plus collection costs and
attorneys' fees. Landlord shall have the same rights and remedies for the
nonpayment thereof as in the case of default in the payment of Rent.
18. [Intentionally Omitted.]
19. Surrender of Premises. By taking possession of the Premises,
Tenant shall be deemed to have accepted the Premises and the Property in good,
clean and completed condition and repair, subject to all applicable laws, codes
and ordinances. On the expiration or early termination of this Lease, Tenant
shall surrender the Premises to Landlord in its condition as of the Commencement
Date, normal wear and tear excepted. Tenant shall remove from the Premises all
of Tenant's personal property, trade fixtures and any alterations required to be
removed pursuant to Section 10. Tenant shall repair damage or perform any
restoration work required by the removal. If Tenant fails to remove any personal
property, trade fixtures or alterations after the end of the Term, Landlord may
remove the property and store it at Tenant's expense, including interest at the
Interest Rate. If the Premises are not so surrendered at the termination of this
Lease, Tenant shall indemnify Landlord against all loss or liability resulting
from delay by Tenant in so surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant, losses to Landlord due to
lost opportunities to lease to succeeding tenants, and attorneys' fees and
costs.
20. Holding Over. If Tenant remains in possession of all or any
part of the Premises after the expiration of the Term or the termination of this
Lease, the tenancy shall be month-to-month only and shall not constitute a
renewal or extension for any further term. In such event, Base Rent shall be
increased in an amount equal to one hundred and twenty-five percent (125%) of
the Base Rent during the last month of the Term (including any extensions), and
any other sums due under this Lease shall be payable in the amount, and at the
times, specified in this Lease. The month-to-month tenancy shall be subject to
every other term, condition, covenant and agreement contained in this Lease and
Tenant shall vacate the Premises immediately upon Landlord's request.
21. Access to Premises. Tenant shall permit Landlord and its
agents to enter the Premises at all reasonably scheduled times upon reasonable
notice, except in the case of an emergency (in which event no notice shall be
necessary), to inspect the Premises; to post Notices of Nonresponsibility and
similar notices
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and to show the Premises to interested parties such as prospective mortgagors,
purchasers and tenant; to make necessary alterations, additions, improvements or
repairs either to the Premises, the Building, or other premises within the
Building; and to discharge Tenant's obligations hereunder when Tenant has failed
to do so within a reasonable time after written notice from Landlord. The above
rights are subject to reasonable security regulations of Tenant, and to the
requirement that Landlord shall at all times act in a manner to cause the least
possible interference with Tenant's operations.
22. Signs. The size, design, color, location and other physical
aspects of any sign in or on the Building shall be subject to the CC&Rs, Rules
and Landlord's reasonable approval prior to installation, and to any appropriate
municipal or other governmental approvals. The costs of any permitted sign, and
the costs of its installation, maintenance and removal, shall be at Tenant's
sole expense and shall be paid within ten (10) days of Tenant's receipt of a
bill from Landlord for the costs. Landlord will provide initial directory and
suite signage at Landlord's expense.
Tenant shall be permitted to install a monument sign on the
Project, subject to and in accordance with the terms and conditions of this
paragraph. Such monument sign shall be installed by Tenant at its sole cost and
expense and the size, design, color, location and other physical aspects of such
monument sign shall be subject to the CC&Rs, Rules and Landlord's reasonable
approval prior to installation, and to any appropriate municipal or other
governmental approvals (and Landlord makes no representation or warranty to
Tenant as to the availability of such approvals). In addition, the installation
of such monument sign shall be subject to the terms and conditions of Section 10
above. During the Term, Tenant shall, at its sole cost and expenses, be solely
responsible for the repair and maintenance of such monument sign and, upon the
expiration or sooner termination of this Lease, Tenant shall, at its sole cost
and expense, remove the monument sign and promptly repair any damage to the
Project caused by such removal.
23. Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each hereby waives and releases the other
of and from any and all rights of recovery, claim, action or cause of action
against the other, its subsidiaries, directors, agents, officers and employees,
for any loss or damage that may occur in the Premises, the Building or the
Property; to improvements to the Building or personal property (building
contents) within the Building; or to any furniture, equipment, machinery, goods
and supplies not covered by this Lease which Tenant may bring or obtain upon the
Premises or any additional improvements which Tenant may construct on the
Premises
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by reason of fire, the elements or any other cause which is required to be
insured against under this Lease, regardless of cause or origin, including
negligence of Landlord or Tenant and their agents, subsidiaries, directors,
officers and employees, to the extent insured against under the terms of any
insurance policies carried by Landlord or Tenant and in force at the time of any
such damage, but only if the insurance in question permits such a partial
release in connection with obtaining a waiver of subrogation from the insurer.
Because this Section will preclude the assignment of any claim mentioned in it
by way of subrogation or otherwise to an insurance company or any other person,
each party to this Lease agrees immediately to give to each insurance company
written notice of the terms of the mutual waivers contained in this Section and
to have the insurance policies properly endorsed, if necessary, to prevent the
invalidation of the insurance coverages by reason of the mutual waivers
contained in this Section.
24. Subordination.
(a) Subordinate Nature. Except as provided in Subsection
(b), this Lease is subject and subordinate to all ground and underlying leases,
mortgages and deeds of trust which now or may hereafter affect the Property, the
Building or the Premises, to the CC&Rs, and to all renewals, modifications,
consolidation, replacements and extensions thereof. Within ten (10) days after
Landlord's written request therefor, Tenant shall execute any and all documents
required by Landlord, the lessor under any ground or underlying lease
("Lessor"), or the holder or holders of any mortgage or deed of trust ("Holder")
to make this Lease subordinate to the lien of any lease, mortgage or deed of
trust, as the case may be.
(b) Possible Priority of Lease. If a Lessor or a Holder
advises Landlord that it desires or requires this Lease to be prior and superior
to a lease, mortgage or deed of trust, Landlord may notify Tenant. Within seven
(7) days of Landlord's notice, Tenant shall execute, have acknowledged and
deliver to Landlord any and all documents or instruments, in the form presented
to Tenant, which Landlord, Lessor or Holder deems necessary or desirable to make
this Lease prior and superior to the lease, mortgage or deed of trust.
(c) Recognition or Attornment Agreement. If Landlord or
Holder requests Tenant to execute a document subordinating this Lease, the
document shall provide that, so long as Tenant is not in default, Lessor or
Holder shall agree to enter into either a recognition or attornment agreement
with Tenant, or a new lease with Tenant upon the same terms and conditions as to
possession of the Premises, which shall provide that Tenant may continue to
occupy the Premises so long as Tenant shall pay the Rent and
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observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Tenant agrees that a document in the form of Exhibit "H"
attached hereto shall satisfy the requirements of this Section 24(c).
25. Transfer of the Property. Upon transfer of the Property and
assignment of this Lease, Landlord shall be entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease occurring after the consummation of the transfer and
assignment, and from all liability for the Security Deposit. Tenant shall attorn
to any entity purchasing or otherwise acquiring the Premises at any sale or
other proceeding.
26. Estoppel Certificates. Within ten (10) days following written
request by Landlord, Tenant shall execute and deliver to Landlord an estoppel
certificate, in the form prepared by Landlord. The certificate shall: (i)
certify that this Lease is unmodified and in full force and effect or, if
modified, state the nature of the modification and certify that this Lease, as
so modified, is in full force and effect, and the date to which the Rent and
other charges are paid in advance, if any; (ii) acknowledge that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or if there are uncured defaults on the part of the Landlord, state the nature
of the uncured default; and (iii) evidence the status of the Lease as may be
required either by a lender making a loan to Landlord to be secured by deed of
trust or mortgage covering the Premises or a purchaser of the Property from
Landlord.
27. Mortgagee Protection. In the event of any default on the part
of Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage covering the Property
and shall offer the beneficiary or mortgagee a reasonable opportunity to cure
the default, including time to obtain possession of the Property or the Premises
by power of sale or a judicial foreclosure, if such should provide necessary to
effect a cure.
28. Attorneys' Fees. If either party shall bring any action or
legal proceeding for damages for an alleged breach of any provision of this
Lease, to recover rent or other sums due, to terminate the tenancy of the
Premises or to enforce, protect or establish any term, condition or covenant of
this Lease or right of either party, the prevailing party shall be entitled to
recover, as a part of the action or proceedings, or in a separate action brought
for that purpose, reasonable attorneys' fees and court costs as may be fixed by
the court or jury. The prevailing party shall be the party which secures a final
judgment in its favor.
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29. Brokers. Tenant warrants and represents that it has had no
dealings with any real estate broker or agent in connection with the negotiation
of this Lease, except for any broker(s) specified in the Basic Lease
Information, and that it knows of no other real estate broker or agent who is or
might be entitled to a commission in connection with this Lease. Tenant shall
indemnify and hold harmless Landlord from and against any and all liabilities or
expenses arising out of claims made by any other broker or individual for
commissions or fees resulting from this Lease.
30. Parking. Tenant shall have the right (i) to park in one
hundred thirty (130) parking spaces located within the Building parking
facilities, exclusive of covered, visitor or reserved parking areas, in common
with other tenants of the Building, subject to the Rules, and (ii) to park in
eight (8) parking spaces reserved for the exclusive use of Tenant, subject to
the Rules, the location of which exclusive parking spaces shall be as reasonably
designated by Landlord. Tenant agrees not to use in excess of its proportionate
share of parking facilities and agrees to cooperate with Landlord and other
tenants in the use of the parking facilities. Landlord reserves the right, in
its absolute discretion, to determine whether the parking facilities are
becoming crowded and to allocate and assign parking spaces among Tenant and the
other tenants. Landlord shall not be liable to Tenant, nor shall this Lease be
affected, if any parking is impaired by moratorium, initiative, referendum, law,
ordinance, regulation or order passed, issued or made by any governmental or
quasi-governmental body.
31. Utilities and Services. Provided that there has been no Event
of Default, Landlord agrees to furnish or cause to be furnished, to the Premises
the utilities and services described in the standards for Utilities and
Services, set forth in Exhibit "D", subject to the conditions and in accordance
with the standards set forth therein. Landlord shall not be liable for, and
Tenant shall not be entitled to any abatement or deduction of Rent by reason of,
no eviction of Tenant shall result from and, further, Tenant shall not be
relieved from the performance of any covenant or agreement in this Lease
because, of Landlord's failure to furnish any of the foregoing when the failure
is caused by accident, breakage, or repairs, strikes, lockouts or other labor
disturbance or labor dispute of any character, governmental regulation,
moratorium or other governmental action, inability despite the exercise of
reasonable diligence to obtain electricity, water or fuel, or by any other cause
beyond Landlord's reasonable control. In the event of any failure, stoppage or
interruption thereof, Landlord shall diligently attempt to resume service.
32. [Intentionally Omitted.]
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33. Acceptance. Delivery of this Lease, duly executed by Tenant,
constitutes an offer to lease the Premises as set forth herein, and under no
circumstances shall such delivery be deemed to create an option or reservation
to lease the Premises for the benefit of Tenant. This Lease shall become
effective and binding only upon execution hereof by Landlord and delivery of a
signed copy to Tenant. Upon acceptance of Tenant's offer to lease under the
terms hereof and receipt by Landlord of the Rent for the first month of the Term
and the Security Deposit in connection with Tenant's submission of the offer,
Landlord shall be entitled to retain the sums and apply them to damages, costs
and expenses incurred by Landlord if Tenant fails to occupy the Premises. If
Landlord reject the offer, the sums shall be returned to Tenant.
34. Use of Building Name. Tenant shall not employ the name of the
Building nor the name of the business in which the Building is located in the
name or title of its business or occupation without Landlord's prior written
consent, which consent Landlord may withhold in its sole discretion. Landlord
reserves the right to change the name of the Building without Tenant's consent
and without any liability to Landlord; provided, however, in the event that
Tenant at any time occupies one hundred percent (100%) of the Building, Tenant,
at its sole cost and expense, shall be permitted to change the name of the
Building, which change shall be effective only during such period of one hundred
percent (100%) occupancy by Tenant. Thereafter, Landlord shall again have the
right to change the name of the Building without Tenant's consent and without
any liability to Landlord.
35. Recording. Neither Landlord nor Tenant shall record this
Lease, nor a short form memorandum of this Lease, without the prior written
consent of the other.
36. Quitclaim. Upon any termination of this Lease pursuant to its
terms, Tenant, at Landlord's request, shall execute, have acknowledged and
deliver to Landlord a quitclaim deed of all Tenant's interest in the Premises,
the Building and the Property created by this Lease, provided Landlord will
prepare said quitclaim deed at its own expense and shall bear all costs in
connection with the recording of the deed.
37. Notices. Any notice or demand required or desired to be given
under this Lease shall be in writing and shall be given by hand delivery,
electronic mail (e.g., telecopy) or the United States mail. Notices which are
sent by electronic mail shall be deemed to have been given upon receipt. Notices
which are mailed shall be deemed to have been given when seventy-two (72) hours
have elapsed after the notice was deposited in the United States mail,
registered or certified, the postage prepaid, addressed to the party to be
served. As of the date of execution of this
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Lease, the addresses of Landlord and Tenant are as specified in the Basic Lease
Information. Either party may change its address by giving notice of the change
in accordance with this Section.
38. Landlord's Exculpation. In the event of default, breach or
violation by Landlord (which term includes Landlord's partners, co-venturers and
co-tenants, and officers, directors, employees, agents and representatives of
Landlord and Landlords's partners, co-venturers and co-tenants) of any of
Landlord's obligations under this Lease, Landlord's liability to Tenant shall be
limited to its ownership interest in the Building and Property or the proceeds
of a public sale of the ownership interest pursuant to the foreclosure of a
judgment against Landlord. Landlord shall not be personally liable, or liable in
any event, for any deficiency beyond its ownership interest in the Building.
39. Additional Structures. Any diminution or interference with
light, air or view by any structure which may be erected on land adjacent to the
Building shall in no way alter this Lease or impose any liability on Landlord.
40. General.
(a) Captions. The captions and headings used in this
Lease are for the purpose of convenience only and shall not be construed to
limit or extend the meaning of any part of this Lease.
(b) Time. Time is of the essence for the performance of
each term, condition and covenant of this Lease.
(c) Severability. If any provision of this Lease is held
to be invalid, illegal or unenforceable, the invalidity, illegality or
unenforceability shall not affect any other provision of this Lease, but this
Lease shall be construed as if the invalid, illegal or unenforceable provision
had not been contained herein.
(d) Choice of Law; Construction. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning and not strictly for or against either
Landlord or Tenant.
(e) Gender; Singular, Plural. When the context of this
Lease requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural.
(f) Binding Effect. The covenants and agreements
contained in this Lease shall be binding on the parties hereto and
26
<PAGE> 41
on their respective successors and assigns (to the extent this Lease is
assignable).
(g) Waiver. The waiver of Landlord of any breach of any
term, condition or covenant of this Lease shall not be deemed to be a waiver of
the provision or any subsequent breach of the same or any other term, condition
or covenant of this Lease. The subsequent acceptance of Rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach at the time
of acceptance of the payment. No covenant, term or condition of this Lease shall
be deemed to have been waived by Landlord unless the waiver is in writing signed
by Landlord.
(h) Entire Agreement. This Lease is the entire agreement
between the parties, and there are no agreements or representations between the
parties except as expressed herein. Except as otherwise provided herein, no
subsequent change or addition to this Lease shall be binding unless in writing
and signed by the parties hereto.
(i) Quiet Enjoyment. Landlord covenants that Tenant, upon
performing the terms, conditions and covenants of this Lease, shall have quiet
possession of the Premises as against any person claiming the same by, through
or under Landlord.
(j) [Intentionally Omitted.]
(k) Counterparts. This Lease may be executed in
counterparts, each of which shall be an original, but all counterparts shall
constitute one (1) instrument.
(1) Exhibits. The Basic Lease Information and all
exhibits attached hereto are hereby incorporated herein and made
27
<PAGE> 42
an integral part hereof.
IN WITNESS WHEREOF, the parties have executed this Lease effective as
of the date first above written.
LANDLORD:
WHC-SIX REAL ESTATE LIMITED
PARTNERSHIP
By: JER WHC-SIX SERVICES, INC.,
General Partner
By: /s/ Lawrence A. Corson
Name: LAWRENCE A. CORSON
---------------------
Title: VICE PRESIDENT
--------------------
TENANT:
SEAGATE TECHNOLOGY, INC.,
a Delaware corporation
By: /s/ R.A. Kundtz
Name: R. A. KUNDTZ
---------------------
Title: Sr. Vice President, Administration
----------------------------------
28
<PAGE> 43
EXHIBIT A
Ground Floor
17,437 Square Feet
Second Floor
36,600 Square Feet
19925 STEVENS CREEK BOULEVARD
<PAGE> 44
EXHIBIT "B"
WORK LETTER
(Tenant Build-Out; Tenant Improvement Allowance)
This Exhibit is attached to and made a part of that certain Lease dated
April 18, 1995, by and between WHC-SIX REAL ESTATE LIMITED PARTNERSHIP, as
"Landlord", and SEAGATE TECHNOLOGY, INC., as "Tenant", for the Premises known as
Suite 150, 19925 Stevens Creek Boulevard, Cupertino, California.
Unless otherwise defined herein, capitalized terms used in
this Work Letter shall have the same meanings as set forth in the Lease.
(a) PLANS AND SPECIFICATIONS. Tenant shall cause the
construction of tenant improvements to the Premises ("Tenant Improvements"), all
in accordance with the provisions set forth below.
Within five (5) days after its execution of the
Lease, Tenant shall deliver to Landlord preliminary
plans ("Preliminary Plans"), to be utilized in the preparation of final working
drawings and specifications for the Tenant Improvements. Promptly (but in no
event less than five (5) business days) after its receipt of the Preliminary
Plans, Landlord shall return the same to Tenant marked and accompanied by
comments and Landlord's required revisions. Within five (5) days thereafter,
Tenant shall submit two (2) sets of revised Preliminary Plans, revised to
reflect and conform to Landlord's comments and requirements, to Landlord for its
final review and approval. Within five (5) days following Landlord's approval of
the Preliminary Plans, Tenant shall cause its architect to prepare and submit
two (2) copies of working drawings and specifications ("Working Plans") to
Landlord for its review and approval. Landlord shall advise Tenant promptly
after Landlord's receipt of the Working Plans of any required revisions. Within
five (5) days thereafter, Tenant shall submit two (2) copies of the revised
Working Plans to Landlord for its final review and approval.
Concurrently with the above review and approval
process, Tenant shall submit all plans and specifications to the City of
Cupertino ("City") and other applicable governmental agencies to obtain
governmental approvals and issuance of necessary permits and licenses to
construct the Tenant Improvements as shown on the Working Plans.
(b) CONSTRUCTION OF TENANT IMPROVEMENTS. Tenant shall
cause the construction of the Tenant Improvements to be carried out in
compliance with the Working Plans, all applicable zoning laws and regulations,
applicable covenants, conditions and restrictions, and otherwise in compliance
with the provisions of Section 10 of the Lease. Prior to the commencement of
<PAGE> 45
construction, Tenant shall obtain course of construction and builder's "all
risk" insurance in such amounts and form as Landlord requires, liability
insurance in the form and amounts required under the Lease, and such performance
bonds in form and amounts as Landlord requires.
Tenant shall cause the construction of the Tenant
Improvements to be carried out with such materials, equipment, contractors and
subcontractors as Tenant shall select, all of which shall be approved by
Landlord. Landlord hereby approves of South Bay Construction as Tenant's general
contractor for its construction of the Tenant Improvements, subject however to
such general contractor complying with all applicable requirements of this Work
Letter. Within ten (10) days after the approval of the final Working Plans in
accordance with subparagraph (a) above or as soon as is reasonably possible
thereafter, Tenant shall submit to Landlord for its review and approval (i)
copies of all proposed construction contracts between Tenant and all contractors
and between such contractors and all subcontractors for the Tenant Improvements,
together with such background information on such contractors and subcontractors
as Landlord may require; (ii) a listing of the make, model, type, grade and all
other characteristics requested by Landlord, of all materials, equipment and
fixtures which Tenant proposes to install in or use in connection with the
Tenant Improvements; and (iii) a budget setting forth in itemized fashion the
costs of all materials, equipment, fixtures, contractors, subcontractors,
laborers, permits, fees, licenses, and all other costs and expenses Tenant
proposes to incur in connection with the construction of the Tenant
Improvements, specifically also including a development review fee to be paid to
Landlord in connection with its review, oversight and related functions under
this Work Letter in the amount of Nineteen Thousand Eight Hundred Thirty-eight
Dollars ($19,838) (hereafter collectively the "Tenant Improvements Costs"). All
such matters shall be subject to the approval of Landlord prior to the
commencement of construction of the Tenant Improvements, in Landlord's
reasonable discretion.
Tenant shall have the responsibility to obtain all
necessary construction and building permits and licenses necessary for the
construction of the Tenant Improvements. Tenant shall cause construction of the
Tenant Improvements in a good and workmanlike manner in strict accordance with
the approved Working Plans. All Tenant Improvements Costs shall be paid for by
and shall be the sole responsibility of the Tenant (other than to the extent
reimbursed by the Allowance as set forth below), including without limitation
all costs of utilities, services and insurance on the Premises arising out of
the construction of the Tenant Improvements. All construction of the Tenant
Improvements shall be performed and completed lien free, and Tenant hereby
indemnifies and agrees to defend and hold Landlord and the Premises free and
harmless from any and all claims, losses, damages, actions and causes of action
as may be incurred as a result of work performed or materials furnished in
connection with
<PAGE> 46
construction of the Tenant Improvements. Landlord shall have the right to post
notices of non-responsibility at such locations as Landlord may desire prior to
the commencement of construction of the Tenant Improvements.
(c) CHANGE ORDERS. Tenant may from time to time request
and obtain change orders during the course of construction of the Tenant
Improvements, provided that:
(i) each such request shall be reasonable and in
writing signed by or on behalf of Tenant;
(ii) each such request shall not result in any
major structural change in the Building or Tenant Improvements;
(iii) Landlord shall have the sole and absolute
right to approve or disapprove any requested change order, in Landlord's
discretion;
(iv) all costs arising out of any approved change
order, if any, shall be borne by Tenant;
(v) any resulting delay in the completion of the
Tenant Improvements arising out of such change order shall not delay or extend
the Commencement Date.
(d) ALLOWANCE. Landlord agrees to provide Tenant a tenant
improvement allowance in the amount of Seven Hundred Ninety-three Thousand Five
Hundred Twenty Dollars ($793,520) (the "Allowance") for the construction of the
Tenant Improvements. The Allowance shall be applied by Tenant against the Tenant
Improvements Costs incurred in the construction of the Tenant Improvements which
have been approved by the Landlord in Tenant's proposed budget pursuant to
subparagraph (b) above, and the provisions for disbursement set forth below. In
no event shall any portion of the Allowance be used for any purpose other than
the approved costs in the budget for the Tenant Improvements Costs. Any and all
costs in excess of the Allowance required to complete the construction of the
Tenant Improvements in accordance with subparagraph (b) above shall be the sole
and exclusive obligation and responsibility of Tenant.
On or before the fifth (5th) calendar day of every
month, Tenant shall submit to Landlord for its review
and approval AIA Form No. G702 and No. G703 invoices (or comparable invoices
acceptable to Landlord) for work performed and materials furnished to the
Premises in connection with the construction of the Tenant Improvements
("Payment Request"). Each Payment Request shall be accompanied by a
certification signed by the Tenant's general contractor and the Tenant's
architect showing that the work reflected in such Payment Request was performed
in accordance with the approved Working Plans and the terms of all approved
construction contracts; and the total costs to construct the
<PAGE> 47
Tenant Improvements, including change orders, and the amount expended for such
items to date and the estimated costs to complete the Tenant Improvements. In
addition, each Payment Request shall be accompanied by lien release waivers from
all contractors, subcontractors and materialmen to be paid through such Payment
Request and, with respect to completed work, final lien release waivers, all in
form and content acceptable to Landlord. Within ten (10) business days after
Landlord's approval of each such Payment Request, Landlord shall cause to be
disbursed to Tenant's general contractor an amount equal to ninety percent (90%)
of such approved Payment Request times the ratio which the total Allowance bears
to the total construction cost set forth in the certifications by Tenant's
general contractor and architects. Landlord shall cause to be disbursed the ten
percent (10%) retention amount, up to the limit of the Allowance, upon the
issuance of an unqualified Certificate of Occupancy for the Premises and the
expiration of the period in which liens may be filed against the Premises by any
contractor, subcontractor or materialmen furnishing goods or services thereto in
connection with the Tenant Improvements.
(e) RIGHTS OF LANDLORD. Throughout the course of
construction of the Tenant Improvements, Landlord shall have the unconditional
right to review and inspect such construction by and through its agents and
employees, including without limitation Landlord's Architect. If at any time
Landlord disapproves of the materials or workmanship of the Tenant Improvements
by Tenant, Landlord shall promptly give Tenant written notice thereof,
specifying the deficiencies or defects therein. Upon receipt of any such notice,
Tenant shall immediately commence correction of the defect or deficiency in a
manner and to a condition acceptable to Landlord. Should Tenant fail to commence
or complete any such correction as herein provided, or should Landlord deliver
to Tenant three (3) or more such notices during the course of construction of
the Tenant Improvements, Landlord shall have the immediate right to order the
discontinuance of any further construction of the Tenant Improvements by or on
behalf of Tenant, and Landlord may, but shall not be obligated to, complete the
construction of such Tenant Improvements in accordance with the Working Plans.
Should Landlord elect to complete the Tenant Improvements as herein provided,
Landlord shall be entitled to any and all funds remaining in the Allowance to
pay for the costs of completing said construction, and any additional costs
incurred in connection therewith shall be the obligation of and shall be paid by
Tenant within ten (10) days after written demand by Landlord. In addition,
Landlord shall be entitled to a construction fee for the costs of administering
and completing the Tenant Improvements in an amount equal to five percent (5%)
of all costs incurred by Landlord in completing the Tenant Improvements, which
fee shall not be part of the Allowance or the development review fee
incorporated into the Tenant Improvement Costs.
(f) COST OF DEMISING WALL. The parties acknowledge that the Tenant
Improvements will include the construction of a
<PAGE> 48
demising wall separating that portion of the Premises located on the second
floor of the Building from the balance of the second floor of the Building.
Notwithstanding anything contained in this Exhibit to the contrary, Landlord
shall reimburse Tenant for one-half (1/2) of the construction cost paid by
Tenant with respect to the construction of such demising wall, which
reimbursement shall be made by Landlord to Tenant concurrently with Landlord's
disbursement to Tenant of the ten percent (10%) retention described in Section
(d) above. The term "Tenant Improvement Costs" as used in this Exhibit shall not
include the amount to be reimbursed by Landlord to Tenant pursuant to this
Section (d).
<PAGE> 49
EXHIBIT "C"
ACKNOWLEDGMENT OF COMMENCEMENT
This Acknowledgement is made as of ____________, 19___ with reference
to that certain Lease Agreement (hereinafter referred to as the "Lease") dated
_______________, 19___ by and between __________________________________ as
"Landlord" therein, and __________________________________ as "Tenant" therein,
for the demised premises situated at _________________________________________.
The undersigned hereby confirms the following:
1. That the Tenant accepted possession of the Premises (as described in
said Lease) on ________________, 19___, and acknowledges that the Premises are
as represented by the Landlord and in good order, condition and repair, and that
the Tenant Improvements (as defined in the Lease) have been substantially
completed by Tenant in accordance with the terms and conditions of the Lease.
2. That all conditions of said Lease to be performed by Landlord
prerequisite to the full effectiveness of said Lease have been satisfied and
that Landlord has fulfilled all of its duties of an inducement nature.
3. That in accordance with the provisions of said Lease the
commencement date of the term is _______________________, 19___, and that,
unless sooner terminated, the original term thereof expires on
_____________________, 19___.
4. That said Lease is in full force and effect and that the same
represents the entire agreement between Landlord and Tenant concerning said
Lease.
5. That there are no existing defenses which Tenant has against the
enforcement of said Lease by Landlord and no offsets or credits against rentals.
6. That the minimum rental obligation of said Lease is presently in
effect and that all rentals, charges and other obligations on the part of Tenant
under said Lease commenced to accrue on ___________________, 19___.
7. That the undersigned has not made any prior assignment,
hypothecation or pledge of said Lease or of the rents hereunder.
LANDLORD: TENANT:
By: _______________________ By:_________________________
By: _______________________ By: ________________________
Date: ______________________ Date: _______________________
<PAGE> 50
EXHIBIT "D"
UTILITIES AND SERVICES
The standards set forth below for Utilities and Services are in effect.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions hereto, which do not materially affect Tenant's rights. Landlord shall
give notice to Tenant, in accordance with provisions of this Lease, of material
modification and additions.
1. Provision By Landlord. As long as Tenant is not in default
under any of the terms of this Lease, Landlord shall:
(a) Ventilation. Ventilate the Premises and furnish
air-conditioning or heating Monday through Friday, except holidays, from 8:00
a.m. to 6:00 p.m. (and at other times for the additional charges described in
Paragraph 2) to the extent required for the comfortable occupancy of the
Premises, subject to governmental regulation. The air-conditioning system
achieves maximum cooling when the window coverings and sliding glass doors are
closed. Landlord shall not be responsible for room temperatures if Tenant does
not keep all sliding glass doors in the Premises closed whenever the system is
in operation. Tenant shall cooperate to the best of its ability at all times
with Landlord and shall abide by all reasonable regulations and requirements
which Landlord may prescribe for the proper functioning and protection of the
air-conditioning system. Tenant shall not connect any apparatus, device, conduit
or pipe to the Building's chilled and hot water air-conditioning supply lines.
Tenant and Tenant's servants, employees, agents, visitors, licensees or
contractors shall not enter at any time the mechanical installations or
facilities of the Building, or adjust, tamper with, touch or otherwise in any
manner affect the installations or facilities. If any installation of
partitions, equipment or fixtures by Tenant necessitates the re-balancing of the
climate control equipment in the Premises, the re-balancing shall be performed
by Landlord at Tenant's expense.
(b) Electricity. Subject to the provisions of Paragraph
2, furnish to the Premises electric current as required by the Building standard
office lighting and fractional horsepower office business machines in the amount
of approximately two and one-half (2.5) watts per square foot. If Tenant's
electrical installation or electrical consumption is in excess of the quantity
described above, or extends beyond normal business hours, Tenant shall reimburse
Landlord monthly for the measured consumption. Tenant shall not connect any
apparatus or device with wires, conduits or pipes, or other means by which the
services are supplied, for the purpose of using additional or unusual amounts of
the services without the prior written consent
1
<PAGE> 51
of Landlord. At all times Tenant's use of electric current shall not exceed the
capacity of the feeders to the Building or the risers or wiring installation,
except as provided in working drawings approved by Landlord.
(c) Water. Make water available in public areas for
drinking and lavatory purposes only.
(d) Janitorial Service. Provide building standard
janitorial service to the Premises, provided the Premises are used exclusively
as offices, and are kept reasonably in order by Tenant. Tenant shall pay to
Landlord any cost incurred by Landlord for janitorial services in excess of
those generally provided for other tenants in the Building. Tenant shall pay to
Landlord the cost of removal of any of Tenant's refuse and rubbish.
2. Additional Charges. Landlord may impose a reasonable charge
for any utilities and services including air-conditioning, electric current,
water and janitorial service, required to be provided by Landlord by reason of
(i) any use of the Premises at any time other than between the hours of 8:00
a.m. and 6:00 p.m. Monday through Friday, except holidays; (ii) any use beyond
what Landlord agrees to furnish as described above; or (iii) special electrical,
cooling and ventilating needs created in certain areas by hybrid telephone
equipment, computers and other similar equipment or uses.
3. Rules and Regulations. Tenant agrees to cooperate at all times
with Landlord and to abide by all reasonable regulations and requirements which
Landlord may prescribe for the use of the utilities and services. Any failure to
pay any excess costs as described above with the next installment of Rent due
after receipt of a statement for such services shall constitute a breach of the
obligation to pay Rent under this Lease and shall entitle Landlord to the rights
granted in this Lease for a breach.
4. Stopping of Service. Landlord reserves the right to stop
services of the elevator, plumbing, ventilation, air-conditioning and electric
systems when necessary by reason of accident or emergency, or for repairs,
alterations or improvements, in the judgment of Landlord desirable or necessary
to be made, until the repairs, alterations or improvements have been completed.
Landlord shall have no responsibility or liability for failure to supply
elevator facilities, plumbing, ventilating, air-conditioning or electric service
when prevented by strike or accident or by any cause beyond Landlord's
reasonable control, or by laws, rules, orders, ordinances, directions,
regulations or requirements of any federal, state, county or municipal authority
or failure of gas, oil or other suitable fuel supply or inability by exercise of
reasonable
2
<PAGE> 52
diligence to obtain gas, oil or other suitable fuel. It is expressly understood
and agreed that any covenants on Landlord's part to furnish any service pursuant
to any of the terms, covenants, conditions, provisions or agreements of this
Lease, or to perform any act or thing for the benefit of Tenant, shall not be
deemed breached if Landlord is unable to furnish or perform the same by virtue
of a strike or labor trouble or any other cause whatsoever beyond Landlord's
reasonable control.
5. Notice. To the extent practical, Landlord shall attempt to
give Tenant notice of proposed shutdowns of services.
3
<PAGE> 53
EXHIBIT "E"
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be
installed or displayed on any part of the outside or inside of the Building
without the prior written consent of Landlord. Landlord shall have the right to
remove, at Tenant's expense and without notice, any sign installed or displayed
in violation of this rule. All approved signs or lettering on doors and walls
shall be printed, painted, affixed or inscribed at the expense of Tenant by a
person chosen by Landlord.
2. The directory of the Building will be provided exclusively for the
display of the name and location of tenants, and Landlord reserves the right to
exclude any other names therefrom. Landlord shall pay the cost of Tenant's
initial listing in the Building Directory, and Tenant shall pay the cost of any
changes by Tenant.
3. Except as consented to in writing by Landlord or in accordance with
Building standard improvements, no draperies, curtains, blinds, shades, screens
or other devices shall be hung at or used in connection with any window or
exterior door or doors of the Premises. No awning shall be permitted on any part
of the Premises. Tenant shall not place anything against or near glass
partitions or doors or windows which may appear unsightly from outside the
Premises.
4. Tenant shall not obstruct any sidewalks, halls, lobbies, passages,
exits, entrances, elevators or stairways of the Building. No tenant and no
employee or invitee of any tenant shall go upon the roof of the Building or make
any roof or terrace penetrations. Tenant shall not allow anything to be placed
on the outside terraces or balconies without the prior written consent of
Landlord.
5. All cleaning and janitorial services for the Building shall be
provided exclusively through Landlord, and, except with the written consent of
Landlord, no person or persons other than those approved by Landlord shall be
employed by Tenant or permitted to enter the Building for the purpose of
cleaning. Tenant shall not cause any unnecessary labor by carelessness or
indifference to the good order and cleanliness of the Premises. Landlord shall
not in any way be responsible to any Tenant for any loss of property on the
Premises, however occurring, or for any damage to any Tenant's property by the
janitor or any other employee or person.
6. Landlord will furnish Tenant, free of charge, with two keys to
Tenant's suite entrance. Landlord may make a reasonable
1
<PAGE> 54
charge for any additional keys and for having any locks changed. Tenant shall
not make or have made additional keys without Landlord's prior written consent,
and Tenant shall not alter any lock or install a new additional lock or bolt on
any door of its Premises without Landlord's prior written consent. Tenant shall
deliver to Landlord, upon the termination of its tenancy, the keys to all locks
for doors on the Premises, and in the event of loss of any keys furnished by
Landlord, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions for
their installation.
8. The elevators shall be available for use by all tenants in the
Building, subject to reasonable scheduling as Landlord in its discretion shall
deem appropriate. No equipment, materials, furniture, packages, supplies,
merchandise or other property will be received in the Building or carried in the
elevators except between the hours, in the manner and in the elevators as may be
designated by Landlord.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the maximum load per square foot which the floor was designed to carry
and which is allowed by law. Tenant's business machines and mechanical equipment
which cause noise or vibration which may be transmitted to the structure of the
Building or to any space therein, and which is objectionable to Landlord or to
any tenants in the Building, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration.
10. Tenant shall not use or keep in the Premises any toxic or hazardous
materials or any kerosene, gasoline or inflammable or combustible fluid or
material other than those limited quantities necessary for the operation or
maintenance of office equipment. Tenant shall not use or permit to be used in
the Premises any foul or noxious gas or substance, or permit or allow the
Premises to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Building by reason of noise, odors or
vibrations. No animal, except seeing eye dogs when in the company of their
masters, may be brought into or kept in the Building.
11. Tenant shall not use any method of heating or air-conditioning
other than that supplied by Landlord, unless Tenant receives the prior written
consent of Landlord.
12. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Building's heating and air-conditioning and to comply
with any governmental energy-saving
2
<PAGE> 55
rules, laws or regulations of which Tenant has actual notice. Tenant shall
refrain from attempting to adjust controls other than room thermostats installed
for Tenant's use. Tenant shall keep corridor doors and sliding glass doors
closed, and shall close window coverings at the end of each business day.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.
14. Landlord reserves the right to exclude any person from the Building
between the hours of 6:00 p.m. and 8:00 a.m., the following day, or any other
hours as may be established from time to time by Landlord, and on Saturdays,
Sundays and legal holidays, unless that person is known to the person or
employee in charge of the Building and has a pass or is properly identified.
Tenant shall be responsible for all persons for whom it requests passes and
shall be liable to Landlord for all acts of those persons. Landlord shall not be
liable for damages for any error in admitting or excluding any person from the
Tenant's Building. Landlord reserves the right to prevent access to the Building
by closing the doors or by other appropriate action in case of invasion, mob,
riot, public excitement or other commotion.
15. Tenant shall close and lock the doors of its Premises, shut off all
water faucets or other water apparatus and turn off all lights and other
equipment which is not required to be continuously run. Tenant shall be
responsible for any damage or injuries sustained by other tenants or occupants
of the Building or Landlord for noncompliance with this Rule.
16. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed, and no foreign substance of any kind whatsoever shall be placed
therein. The expense of any breakage, stoppage or damage resulting from any
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused it.
17. Tenant shall not install any radio or television antenna,
loudspeaker or other device on the roof or exterior walls of the Building.
Tenant shall not interfere with radio or television broadcasting or reception
from or in the Building or elsewhere.
18. Tenant shall not cut or bore holes for wires in the partitions,
woodwork or plaster of the Premises. Tenant shall not affix any floor covering
to the floor of the Premises in any manner except as approved by Landlord.
Tenant shall repair, or be responsible for the cost of repair of, any damage
resulting from noncompliance with this Rule.
3
<PAGE> 56
19. Tenant shall not install, maintain or operate upon the Premises any
vending machine without the prior written consent of Landlord.
20. Canvassing, soliciting and distributing handbills or any other
written material and peddling in the Building are prohibited, and each tenant
shall cooperate to prevent these activities.
21. Landlord reserves the right to exclude or expel from the Building
any person who, in Landlord's judgement, is intoxicated or under the influence
of liquor or drugs, or who is in violation of any of the Rules and Regulations
of the Building.
22. Tenant shall store all its trash and garbage within its Premises.
Tenant shall not place in any trash box or receptacle any material which cannot
be disposed of in the ordinary and customary manner of trash and garbage
disposal within the Building. All garbage and refuse disposal shall be made in
accordance with directions issued from time to time by Landlord.
23. Use by Tenant of Underwriters' Laboratory approved equipment for
brewing coffee, tea, hot chocolate and similar beverages and microwaving food
shall be permitted, provided that the equipment and use is in accordance with
all applicable federal, state, county and city laws, codes, ordinances, rules
and regulations.
24. Tenant shall not use the name of the Building in connection with or
in promoting or advertising the business of Tenant, except as Tenant's address,
without the written consent of Landlord.
25. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
Tenant shall be responsible for any increased insurance premiums attributable to
Tenant's use of the Premises, Building or Property.
26. Tenant assumes any and all responsibility for protecting its
Premises from theft and robbery, which responsibility includes keeping doors
locked and other means of entry to the Premises closed.
27. Tenant shall not use the Premises, or suffer or permit anything to
be done on, in or about the Premises, which may result in an increase to
Landlord in the cost of insurance maintained by Landlord on the Building and
Common Areas.
28. Tenant's requests for assistance will be attended
4
<PAGE> 57
to only upon appropriate application to the office of the Building by an
authorized individual. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special instructions from
Landlord, and no employee of Landlord will admit any person (Tenant or
otherwise) to any office without specific instructions from Landlord.
29. Tenant shall not park its vehicles in any parking areas designated
by Landlord as areas for parking by visitors to the Building or in parking
spaces reserved for others. Tenant shall not leave vehicles in the Building
parking areas overnight, nor park any vehicles in the Building parking areas
other than automobiles, motorcycles, motor driven or non-motor driven bicycles
or four- wheeled trucks. Tenant, its agents, employees and invitees shall not
park any one (1) vehicle in more than one (1) parking space.
30. The scheduling and manner of all Tenant move-ins and move-outs
shall be subject to the discretion and approval of Landlord, and move-ins and
move-outs shall take place only after 6:00 p.m. on weekdays, on weekends, or at
other times as Landlord may designate. Landlord shall have the right to approve
or disapprove the movers or moving company employed by Tenant, and Tenant shall
cause the movers to use only the entry doors and elevators designated by
Landlord. If Tenant's movers damage the elevator or any other part of the
Property, Tenant shall pay to Landlord the amount required to repair the damage.
31. Landlord may waive any one or more of these Rules and Regulations
for the benefit of Tenant or any other tenant, but no waiver by Landlord shall
be construed as a waiver of the Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing the Rules and
Regulations against any or all of the tenants of the Building.
32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of the premises in the
Building.
33. Landlord reserves the right to make other reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety and
security, for care and cleanliness of the Building and for the preservation of
good order therein. Tenant agrees to abide by all Rules and Regulations
hereinabove stated and any additional rules and regulations which are adopted.
34. Tenant shall be responsible for the observance of all of the
foregoing rules by Tenant's employees, agents, clients, customers, invitees and
guests.
5
<PAGE> 58
EXHIBIT "F"
ENVIRONMENTAL QUESTIONNAIRE AND DISCLOSURE STATEMENT
The purpose of this form is to obtain information regarding the use of
hazardous substances on the premises. Prospective tenants should answer the
questions in light of their proposed operations on the premises. Existing
tenants should answer the questions as they relate to on-going operations on the
premises and should update any information previously submitted. If additional
space is needed to answer the questions, you may attach separate sheets of paper
to this form.
Your cooperation in this matter is appreciated. Any questions should be
directed to, and when completed, the form should be mailed to:
O'Donnell property Services, Inc.
1737 North First Street, Suite 580
San Jose, California 95112
Attn: Mark Schmidt
Phone: (408)453-9444
1. GENERAL INFORMATION
Name of Responding Company:
-------------------------------------------
Check the Applicable Status:
Prospective Tenant [ ] Existing Tenant [ ]
Mailing Address:
------------------------------------------------------
-----------------------------------------------------------------------
Contact Person and Title:
---------------------------------------------
Telephone Number: ( ) -
----- ----------
Address of Leased Premises:
-------------------------------------------
Length of Lease Term:
-------------------------------------------------
Describe the proposed operations to take place on the property,
including principal products manufactured or services to be conducted.
Existing tenants should describe any proposed changes to on-going
operations.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
2. STORAGE OF HAZARDOUS MATERIALS
2.1 Will any hazardous materials be used or stored on-site?
Wastes Yes [ ] No [ ]
<PAGE> 59
Chemical Products Yes [ ] No [ ]
2.2 Attach the list of any hazardous materials to be used or
stored, the quantities that will be on-site at any given time,
and the location and method of storage (e.g., 55 gallon drums
on concrete pad).
3. STORAGE TANKS & SUMPS
3.1 Is any above or below ground storage of gasoline, diesel, or
other hazardous substances in tanks or sumps proposed or
currently conducted on the premises?
Yes [ ] No [ ]
If yes, describe the materials to be stored, and the type,
size and construction of the sump or tank. Attach copies of
any permits obtained for the storage of such substances.
--------------------------------------------------------------
--------------------------------------------------------------
3.2 Have any of the tanks or sumps been inspected or tested for
leakage?
Yes [ ] No [ ]
If so, attach the results.
3.3 Have any spills or leaks occurred from such tanks or sumps?
Yes [ ] No [ ]
If so, describe.
--------------------------------------------------------------
--------------------------------------------------------------
3.4 Were any regulatory agencies notified of the spill or leak?
Yes [ ] No [ ]
If so, attach copies of any spill reports filed, any clearance
letters or other correspondence from regulatory agencies
relating to the spill or leak.
3.5 Have any underground storage tanks or sumps been taken out of
service or removed?
Yes [ ] No [ ]
If yes, attach copies of any closure permits and clearance
obtained from regulatory agencies relating to closure and
removal of such tanks.
<PAGE> 60
4. SPILLS
4.1 During the past year, have any spills occurred on the
premises?
Yes [ ] No [X] N/A
If so, please describe the spill and attach the results of any
testing conducted to determine the extent of such spills.
4.2 Were any agencies notified in connection with such spills?
Yes [ ] No [ ]
If so, attach copies of any spill reports or other
correspondence with regulatory agencies.
4.3 Were any clean-up actions undertaken in connection with the
spills?
Yes [ ] No [X] N/A
If so, briefly describe the actions taken. Attach copies of
any clearance letters obtained from any regulatory agencies
involved and the results of any final soil or groundwater
sampling done upon completion of the clean-up work.
--------------------------------------------------------------
--------------------------------------------------------------
5. WASTE MANAGEMENT
5.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number?
Yes [ ] No [X] N/A
5.2 Has your company filed a biennial report as a hazardous waste
generator?
Yes [ ] No [X] N/A
If so, attach a copy of the most recent report filed.
5.3 Attach the list of the hazardous waste, if any, generated or
to be generated at the premises, its hazard class and the
quantity generated on a monthly basis.
5.4 Describe the method(s) of disposal for each waste. Indicate
where and how often disposal will take place.
N/A
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
5.5 Indicate the name of the person(s) responsible for maintaining
copies of hazardous waste manifests completed for off-site
shipments of hazardous waste.
N/A
--------------------------------------------------------------
5.6 Is any treatment or processing of hazardous wastes currently
conducted or proposed to be conducted at the premises:
Yes [ ] No [X]
<PAGE> 61
If yes, please describe any existing or proposed treatment
methods. ______________________
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
5.7 Attach copies of any hazardous waste permits or licenses
issued to your company with respect to its operations on the
premises.
6. WASTEWATER TREATMENT/DISCHARGE
6.1 Do you discharge wastewater to:
_____storm drain? _____sewer?
_____surface water? _____no Industrial discharge
6.2 Is your wastewater treated before discharge?
Yes [ ] No [ ] N/A No NW dischage
If yes, describe the type of treatment conducted.
--------------------------------------------------------------
6.3 Attach copies of any wastewater discharge permits issued to
your company with respect to its operations on the premises.
7. AIR DISCHARGES
7.1 Do you have any air filtration systems or stacks that
discharge into the air?
Yes [ ] No [X]
2
<PAGE> 62
7.2 Do you operate any of the following types of equipment, or any
other equipment requiring an air emissions permit?
_____ Spray booth
_____ Dip tank
_____ Drying oven
_____ Incinerator
_____ Other (Please Describe)
_____ No Equipment Requiring Air Permits
7.3 Are air emissions from your operations monitored?
Yes [ ] No [X] Not Needed
If so, Indicate the frequency of monitoring and a description
of the monitoring results.
--------------------------------------------------------------
7.4 Attach copies of any air emissions permits pertaining to your
operations on the premises.
8. HAZARDOUS MATERIALS DISCLOSURES
8.1 Does your company handle hazardous materials in a quantity
equal to or exceeding an aggregate of 500 pounds, 55 gallons,
or 200 cubic feet?
Yes [X] No [ ]
8.2 Has your company prepared a hazardous materials management
plan ("business plan") pursuant to Orange County Fire
Department requirements?
Yes [ ] No [ ] N/A
If so, attach a copy of the business plan.
8.3 Are any of the chemicals used in your operations regulated
under Proposition 65?
Yes [ ] No [ ] N/A
If so, describe the action taken, or proposed actions to be
taken, to comply with Proposition 65 requirements.
--------------------------------------------------------------
8.4 Describe the procedures followed to comply with OSHA Hazard
Communication Standard requirements.
New employee training.
--------------------------------------------------------------
9. ENFORCEMENT ACTIONS, COMPLAINTS
9.1 Has your company ever been subject to any agency enforcement
actions, administrative orders, or consent decrees?
Yes [X] No [ ]
<PAGE> 63
If so, describe the actions and any continuing compliance
obligations imposed as a result of these actions.
RCRA Corrective Action in Omaha, NE
--------------------------------------------------------------
9.2 Has your company ever received requests for information,
notice or demand letters, or any other Inquiries regarding its
operations?
Yes [ ] No [X]
9.3 Have there ever been, or are there now pending, any lawsuits
against the company regarding any environmental or health and
safety concerns?
Yes [ ] No [X]
9.4 Has an environmental audit ever been conducted at your
company's current facility?
Yes [ ] No [X] N/A
If so, discuss the results of the audit.
--------------------------------------------------------------
9.5 Have there been any problems or complaints from neighbors at
the company's current facility?
Yes [ ] No [ ] N/A
Seagate Technology, Inc.
-----------------------------------------------------------------------
Company
By: Lawrence C. Carls
-------------------------------------------------------------------
Title: Corp. Environ. Mgr.
-----------------------------------------------
Date: 4/11/95
---------------------------------------
3
<PAGE> 64
EXHIBIT "F"
ENVIRONMENTAL QUESTIONNAIRE AND DISCLOSURE STATEMENT
The purpose of this form is to obtain information regarding the use of
hazardous substances on the premises. Prospective tenants should answer the
questions in light of their proposed operations on the premises. Existing
tenants should answer the questions as they relate to on-going operations on the
premises and should update any information previously submitted. If additional
space is needed to answer the questions, you may attach separate sheets of paper
to this form.
Your cooperation in this matter is appreciated. Any questions should be
directed to, and when completed, the form should be mailed to:
O'Donnell property Services, Inc.
1737 North First Street, Suite 580
San Jose, California 95112
Attn: Mark Schmidt
Phone:(408) 453-9444
1. GENERAL INFORMATION
Name of Responding Company: Seagate Technology, Inc.
Check the Applicable Status:
Prospective Tenant [X] Existing Tenant [ ]
Mailing Address: 920 Disc Drive, Scotts Valley
Box 66360 CA. 95067-0360
Contact Person and Title: LARRY COWLES
Telephone Number: (408) 439-7218
Address of Leased Premises: 15019925 Stevens Creek San Jose, Ca.
Length of Lease Term:
-------------------------------------------------
Describe the proposed operations to take place on the property,
including principal products manufactured or services to be conducted.
Existing tenants should describe any proposed changes to on-going
operations.
Software Design
-----------------------------------------------------------------------
<PAGE> 65
2. STORAGE OF HAZARDOUS MATERIALS
2.1 Will any hazardous materials be used or stored on-site?
Wastes Yes [ ] No [X]
Chemical Products Yes [ ] No [X]
2.2 Attach the list of any hazardous materials to be used or
stored, the quantities that will be on-site at any given time,
and the location and method of storage (e.g., 55 gallon drums
on concrete pad).
3. STORAGE TANKS & SUMPS
3.1 Is any above or below ground storage of gasoline, diesel, or
other hazardous substances in tanks or sumps proposed or
currently conducted on the premises?
Yes [ ] No [X] None Proposed; Existing unknown.
If yes, describe the materials to be stored, and the type,
size and construction of the sump or tank. Attach copies of
any permits obtained for the storage of such substances.
--------------------------------------------------------------
--------------------------------------------------------------
3.2 Have any of the tanks or sumps been inspected or tested for
leakage?
Yes [ ] No [ ] N/A
If so, attach the results.
3.3 Have any spills or leaks occurred from such tanks or sumps?
Yes [ ] No [ ] N/A
If so, describe.
--------------------------------------------------------------
--------------------------------------------------------------
3.4 Were any regulatory agencies notified of the spill or leak?
Yes [ ] No [ ] N/A
If so, attach copies of any spill reports filed, any clearance
letters or other correspondence from regulatory agencies
relating to the spill or leak.
3.5 Have any underground storage tanks or sumps been taken out of
service or removed?
Yes [ ] No [ ] Unknown
If yes, attach copies of any closure permits and clearance
obtained from regulatory agencies relating to closure and
removal of such tanks.
<PAGE> 66
4. SPILLS
4.1 During the past year, have any spills occurred on the
premises?
Yes [ ] No [X] N/A
If so, please describe the spill and attach the results of any
testing conducted to determine the extent of such spills.
4.2 Were any agencies notified in connection with such spills?
Yes [ ] No [ ] N/A
If so, attach copies of any spill reports or other
correspondence with regulatory agencies.
4.3 Were any clean-up actions undertaken in connection with the
spills?
Yes [ ] No [X] N/A
If so, briefly describe the actions taken. Attach copies of
any clearance letters obtained from any regulatory agencies
involved and the results of any final soil or groundwater
sampling done upon completion of the clean-up work.
--------------------------------------------------------------
--------------------------------------------------------------
5. WASTE MANAGEMENT
5.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number?
Yes [ ] No [X] N/A
5.2 Has your company filed a biennial report as a hazardous waste
generator?
Yes [ ] No [X] N/A
If so, attach a copy of the most recent report filed.
5.3 Attach the list of the hazardous waste, if any, generated or
to be generated at the premises, its hazard class and the
quantity generated on a monthly basis.
5.4 Describe the method(s) of disposal for each waste. Indicate
where and how often disposal will take place.
N/A
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
5.5 Indicate the name of the person(s) responsible for maintaining
copies of hazardous waste manifests completed for off-site
shipments of hazardous waste.
N/A
--------------------------------------------------------------
5.6 Is any treatment or processing of hazardous wastes currently
conducted or proposed to be conducted at the premises:
Yes [ ] No [X]
<PAGE> 67
If yes, please describe any existing or proposed treatment
methods. _____________________
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
5.7 Attach copies of any hazardous waste permits or licenses
issued to your company with respect to its operations on the
premises.
6. WASTEWATER TREATMENT/DISCHARGE
6.1 Do you discharge wastewater to:
_____ storm drain? _____ sewer?
_____ surface water? _____ no industrial discharge
6.2 Is your wastewater treated before discharge?
Yes [ ] No [ ] N/A No WW discharge
If yes, describe the type of treatment conducted.
--------------------------------------------------------------
6.3 Attach copies of any wastewater discharge permits issued to
your company with respect to its operations on the premises.
7. AIR DISCHARGES
7.1 Do you have any air filtration systems or stacks that
discharge into the air?
Yes [ ] No [X]
2
<PAGE> 68
7.2 Do you operate any of the following types of equipment, or any
other equipment requiring an air emissions permit?
_____ Spray booth
_____ Dip tank
_____ Drying oven
_____ Incinerator
_____ Other (Please Describe)
X No Equipment Requiring Air Permits
7.3 Are air emissions from your operations monitored?
Yes [ ] No [X] Not needed
If so, indicate the frequency of monitoring and a description
of the monitoring results.
--------------------------------------------------------------
7.4 Attach copies of any air emissions permits pertaining to your
operations on the premises.
8. HAZARDOUS MATERIALS DISCLOSURES
8.1 Does your company handle hazardous materials in a quantity
equal to or exceeding an aggregate of 500 pounds, 55 gallons,
or 200 cubic feet?
Yes [X] No [ ]
8.2 Has your company prepared a hazardous materials management
plan ("business plan") pursuant to Orange County Fire
Department requirements?
Yes [ ] No [ ] N/A
If so, attach a copy of the business plan.
8.3 Are any of the chemicals used in your operations regulated
under Proposition 65?
Yes [ ] No [ ] N/A
If so, describe the actions taken, or proposed actions to be
taken, to comply with Proposition 65 requirements.
--------------------------------------------------------------
8.4 Describe the procedures followed to comply with OSHA Hazard
Communication Standard requirements.
New employee training.
9. ENFORCEMENT ACTIONS, COMPLAINTS
9.1 Has your company ever been subject to any agency enforcement
actions, administrative orders, or consent decrees?
Yes [X] No [ ]
<PAGE> 69
If so, describe the actions and any continuing compliance
obligations imposed as a result of these actions.
RCRA Corrective Action in Omaha, NE
9.2 Has your company ever received requests for information,
notice or demand letters, or any other inquiries regarding its
operations?
Yes [ ] No [X]
9.3 Have there ever been, or are there now pending, any lawsuits
against the company regarding any environmental or health and
safety concerns?
Yes [ ] No [X]
9.4 Has an environmental audit ever been conducted at your
company's current facility?
Yes [ ] No [X] N/A
If so, discuss the results of the audit.
--------------------------------------------------------------
9.5 Have there been any problems or complaints from neighbors at
the company's current facility?
Yes [ ] No [ ] N/A
Seagate Technology, Inc.
Company
By: Lawrence C. Carls
Title: Corp. Environ. Mgr.
Date: 4/11/95
3
<PAGE> 70
EXHIBIT "G"
OPTIONS TO EXTEND TERM/RIGHT OF FIRST REFUSAL
This Exhibit is attached to and made a part of that certain Lease dated
April 18, 1995, by and between WHC-SIX REAL ESTATE LIMITED PARTNERSHIP, as
"Landlord", and SEAGATE TECHNOLOGY, INC., as "Tenant", for the Premises known as
19925 Stevens Creek Boulevard, Suite 150, Cupertino, California. The capitalized
terms used and not otherwise defined herein shall have the same definitions as
set forth in the Lease. The provisions of this Exhibit shall supersede any
inconsistent or conflicting provisions of the Lease.
1. Options to Extend Term.
1.1 Grant of Options. Landlord hereby grants to Tenant
two (2) options (individually referred to hereinafter as the "Option" and
collectively referred to hereinafter as the "Options") to extend the Term of the
Lease for additional consecutive terms of three (3) years each (each is called
an "Extension"), on the same terms and conditions as set forth in the Lease,
except that the Base Rent shall be the amount determined as set forth below.
Each Option shall be exercised only by written notice delivered to Landlord at
least one hundred eighty (180) days before the expiration of the initial Term of
the Lease or the immediately preceding Extension, as the case may be. If Tenant
fails to deliver to Landlord written notice of the exercise of the Option within
the time period prescribed above, such Option and any succeeding Option shall
lapse and there shall be no further right to extend the Term of the Lease. Each
Option shall be exercisable by Tenant on the express conditions that (i) at the
time of the exercise of such Option, and thereafter at all times prior to the
commencement of the Extension, an Event of Default shall not have occurred and
be continuing under the Lease, and (ii) Tenant has not been ten (10) or more
days late in the payment of Rent more than a total of three (3) times during the
Term of the Lease. If Tenant properly exercises an Option, "Term", as used
herein and in the Lease, shall be deemed to include the applicable Extension,
unless specified otherwise herein or in the Lease.
1.2 Personal Options. Each Option is personal to Seagate
Technology, Inc. and shall not be assignable or transferable to any assignee of
Tenant (other than an assignee in which Seagate Technology, Inc. holds an
ownership interest of fifty-one percent (51%) or more ("Permitted Assignee")) or
any sublessee of all or any portion of the Premises. If Tenant subleases or
assigns or otherwise transfers any interest under the
1
<PAGE> 71
Lease (other than an assignment to a Permitted Assignee) prior to the exercise
of an Option, such Option and any succeeding Option shall lapse. If Tenant
subleases or assigns or otherwise transfers any interest of Tenant under the
Lease (other than an assignment to a Permitted Assignee) after the exercise of
an Option but prior to the commencement of the applicable Extension, such Option
and any succeeding Option shall lapse and the Term of the Lease shall expire as
if such Option was not exercised.
1.3 Calculation of Base Rent. The Base Rent during each
Extension shall be increased, as of the commencement of each Extension (each is
called a "Rental Adjustment Date") to ninety-five percent (95%) of the "Fair
Market Value" of the Premises, determined in the following manner: Not later
than one hundred (100) days prior to any applicable Rental Adjustment Date,
Landlord and Tenant shall meet in an effort to negotiate, in good faith, the
Fair Market Value of the Premises as of such Rental Adjustment Date. If Landlord
and Tenant have not agreed upon the Fair Market Value of the Premises at least
ninety (90) days prior to the applicable Rental Adjustment Date, the Fair Market
Value shall be determined by the following appraisal method:
(i) If Landlord and Tenant are not able to agree upon
the Fair Market Value of the Premises within the time period described
above, then Landlord and Tenant shall attempt to agree in good faith
upon a single appraiser not later than seventy-five (75) days prior to
the applicable Rental Adjustment Date. If Landlord and Tenant are
unable to agree upon a single appraiser within such time period, then
Landlord and Tenant shall each appoint one appraiser not later than
sixty-five (65) days prior to the applicable Rental Adjustment Date,
and Landlord and Tenant shall each give written notice to the other of
such appointment at the time of such appointment. Within ten (10) days
thereafter, the two appointed appraisers shall appoint a third
appraiser. If either Landlord or Tenant fails to appoint its appraiser
and to give written notice thereof to the other party within the
prescribed time period, the single appraiser appointed shall determine
the Fair Market Value of the Premises. If both parties fail to appoint
appraisers within the prescribed time periods, then the first appraiser
thereafter selected by a party (such selection to be by written notice
thereof to such appraiser and the other party) shall determine the Fair
Market Value of the Premises. Each party shall bear the cost of its own
appraiser and the parties shall share equally the cost of the single or
third appraiser if applicable. All appraisers shall have at least five
(5) years' experience in the appraisal of commercial/industrial real
property in the area in which the Premises are located and shall be
members of professional organizations such as MAI or its equivalent.
2
<PAGE> 72
(ii) For the purposes of such appraisal, the term
"Fair Market Value" shall mean the price that a ready and willing
tenant would pay, as of the Rental Adjustment Date, as monthly rent, to
a ready and willing landlord of property comparable to the Premises if
such property were exposed for lease on the open market for a
reasonable period of time and taking into account all of the purposes
for which such property may be used. If a single appraiser is chosen,
then such appraiser shall determine the Fair Market Value of the
Premises. Otherwise, the Fair Market Value of the Premises shall be the
arithmetic average of the two (2) of the three (3) appraisals which are
closest in amount, and the third appraisal shall be disregarded.
Landlord and Tenant shall instruct the appraiser(s) to complete their
determination of the Fair Market Value not later than thirty (30) days
prior to the applicable Rental Adjustment Date. If the Fair Market
Value is not determined prior to the applicable Rental Adjustment Date,
then Tenant shall continue to pay to Landlord the Base Rent applicable
to the Premises immediately prior to such Rental Adjustment Date until
the Fair Market Value is determined. When the Fair Market Value of the
Premises is determined, Landlord shall deliver notice thereof to
Tenant, and Tenant shall pay to Landlord, within ten (10) days after
receipt of such notice, the difference between the Base Rent actually
paid by Tenant to Landlord for the period after the Rental Adjustment
Date and the new Base Rent determined hereunder effective as of the
Rental Adjustment Date. In no event shall Base Rent be reduced below
the Base Rent applicable to the Premises immediately prior to the
applicable Rental Adjustment Date.
2. Right of First Refusal. If, during the Term, Landlord receives
a bona fide offer in writing ("Offer") from a third party to lease all or part
of the balance of the second floor of the Building (which balance is referred to
herein as the "Refusal Space"), and Landlord desires to lease that portion of
the Refusal Space that is the subject of such Offer ("Offer Space") upon the
terms and conditions set forth in the Offer, then Tenant shall have a right of
first refusal to lease the applicable Offer Space ("Right of First Refusal")
upon the same terms and conditions as set forth in the Offer. Landlord shall,
promptly following Landlord's receipt of the Offer, deliver written notice to
Tenant specifying the terms and conditions of the Offer. Tenant shall exercise
its Right of First Refusal, if at all, by providing Landlord with written notice
of exercise within three (3) business days following the date of Tenant's
receipt of Landlord's notice regarding the Offer. If Tenant exercises its Right
of First Refusal within said three (3) business day period, then Landlord and
Tenant shall execute a lease for the applicable Offer Space which includes the
terms and conditions set forth in the Offer within ten (10) business days after
the date of Tenant's exercise
3
<PAGE> 73
of the Right of First Refusal with respect to the Offer Space in question. If
Tenant fails to provide Landlord with such written notice of exercise within
such three (3) business day period, then Tenant shall be deemed to have elected
to not exercise its Right of First Refusal with respect to the Offer Space in
question. If Tenant elects (or is deemed to have elected) not to exercise its
Right of First Refusal within three (3) business days after the date of Tenant's
receipt of Landlord's notice regarding the Offer, or if, after Tenant exercises
the Right of First Refusal, Landlord and Tenant do not execute a lease for the
applicable Offer Space which includes the terms and conditions set forth in the
Offer within ten (10) business days after the date of Tenant's exercise of the
Right of First Refusal, then Tenant's Right of First Refusal in the instance in
question shall be deemed to have been waived by Tenant, and Landlord shall be
free to lease the Offer Space in question, free and clear of Tenant's Right of
First Refusal, to a third party on terms and conditions no more favorable to
such third party than the terms and conditions set forth in the applicable
Offer.
The Right of First Refusal shall be exercisable by Tenant on the
express conditions that (i) at the time of the exercise of the Right of First
Refusal, an Event of Default shall not have occurred under the Lease, and (ii)
Tenant has not been ten (10) or more days late in the payment of Rent more than
a total of three (3) times during the Term.
The Right of First Refusal shall be personal to Seagate Technology,
Inc. and shall not be assignable or transferable to any assignee of Tenant or
any sublessee of all or any portion of the Premises. If Tenant subleases or
assigns or otherwise transfers any interest under the Lease prior to its
exercise of the Right of First Refusal, the Right of First Refusal shall
automatically terminate and be of no further force or effect.
4
<PAGE> 74
EXHIBIT "H"
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the ________ day of
________________. 1995, by and between GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("Mortgagee"), and SEAGATE TECHNOLOGY, INC., a Delaware
corporation ("Lessee").
RECITALS:
A. Mortgagee has provided an acquisition and development loan
("Loan") to WHC-SIX Real Estate Limited Partnership, Owner/Lessor ("Borrower"),
for the purpose of financing Borrower's acquisition and development of the
Stevens Creek in Santa Clara, California and described in Exhibit A attached
hereto and incorporated herein by reference (said real property and improvements
being herein called the "Project"), such Loan being secured by a First Deed of
Trust and Security Agreement dated August 4, 1994 and recorded in Instrument No.
12605749, Page _____, et seq., of the official Records of Santa Clara County,
California (the "Mortgage"), constituting a lien or encumbrance on the Project;
and
B. Lessee is the holder of a leasehold estate in and to Suite 150
of the Project, consisting of approximately 39,676 rentable square feet of space
(the "Demised Premises"), under that certain Lease (the "Lease") dated April 18,
1995, executed by Borrower, as Landlord (Borrower being sometimes hereinafter
called "Lessor"), and Lessee, as Tenant; and
C. Lessee and Mortgagee desire to confirm their understandings
with respect to the Lease and Mortgage.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, Lessee and Mortgagee agree and
covenant as follows:
1. Non-Disturbance. Mortgagee agrees that it will not disturb the
possession of Lessee under the Lease upon any judicial or non-judicial
foreclosure of the Mortgage or upon acquiring title to the Project by
deed-in-lieu of foreclosure, or otherwise, if the Lease is in full force and
effect and Lessee is not then in default under the Lease, and that Mortgagee
will accept the attornment of Lessee thereafter so long as Lessee is not in
default under the Lease.
2. Attornment. If the interests of Lessor in and to the Demised
Premises are owned by Mortgagee by reason of any deed-in-lieu of foreclosure,
judicial foreclosure, sale pursuant to any power of sale or other proceedings
brought by it or by any other manner, including, but not limited to, Mortgagee's
exercise of its rights under any assignment of leases and rents, and Mortgagee
succeeds to the interest of Lessor under the Lease, Lessee shall be bound to
Mortgagee under all of the terms, covenants and conditions of the Lease for the
balance of the
<PAGE> 75
term thereof remaining and any extension thereof duly exercised by Lessee with
the same force and effect as if Mortgagee were the Lessor under the Lease; and
Lessee does hereby attorn to Mortgagee, as its lessor, said attornment to be
effective and self-operative, without the execution of any further instruments
on the part of any of the parties hereto, immediately upon Mortgagee's
succeeding to the interest of Lessor under the Lease; provided, however, that
Lessee shall be under no obligation to pay rent to Mortgagee until Lessee
receives written notice from Mortgagee that Mortgagee has succeeded to the
interest of the Lessor under the Lease or otherwise has the right to receive
such rents. The respective rights and obligations of Lessee and Mortgagee upon
such attornment, to the extent of the then remaining balance of the term of the
Lease, shall be and are the same as now set forth therein, it being the
intention of the parties hereto for this purpose to incorporate the Lease in
this Agreement by reference, with the same force and effect as if set forth in
full herein.
3. Mortgagee's Obligations. If Mortgagee shall succeed
to the interest of Lessor under the Lease, Mortgagee, subject to the
last sentence of this Paragraph 3, shall be bound to Lessee under all
of the terms, covenants and conditions of the Lease; provided, however,
that Mortgagee shall not be:
(a) Liable for any act or omission of any prior lessor
(including Lessor); or
(b) Subject to the offsets or defenses which Lessee might have
against any prior lessor (including Lessor); or
(c) Bound by any rent or additional rent or advance rent which
Lessee might have paid for more than the current month to any prior
lessor (including Lessor), and all such rent shall remain due and
owing, notwithstanding such advance payment; or
(d) Bound by any security or advance rental deposit made by
Lessee which is not delivered or paid over to Mortgagee and with
respect to which Lessee shall look solely to Lessor for refund or
reimbursement; or
(e) Bound by any termination, amendment or modification of the
Lease made without its consent and written approval.
Neither General Electric Capital Corporation nor any other party who from time
to time shall be included in the definition of Mortgagee hereunder, shall have
any liability or responsibility under or pursuant to the terms of this Agreement
after it ceases to own an interest in the Project. Nothing in this Agreement
shall be construed to require Mortgagee to see to the Application of the
proceeds of the Loan, and Lessee's agreements set forth herein shall not be
impaired on account of any modification of the documents evidencing and securing
the Loan. Lessee acknowledges that Mortgagee is obligated only to Borrower to
make the Loan only upon the terms and subject to the conditions set forth in the
Loan Agreement between Mortgagee and Borrower pertaining to the Loan. Lessee
further acknowledges and agrees that neither Mortgagee nor any purchaser of the
Project at foreclosure sale or any grantee of the Project named in a
deed-in-lieu of foreclosure, nor any heir, legal representative, successor, or
assignee
<PAGE> 76
of Mortgagee or any such purchaser or grantee, has or shall have any personal
liability for the obligations of Lessor under the Lease; provided, however, that
the Lessee may exercise any other right or remedy provided thereby or by law in
the event of any failure by Lessor to perform any such material obligation.
4. Subordination. The Lease and all rights of Lessee thereunder
are subject and subordinate to the Mortgage and to any deeds of trust,
mortgages, ground leases or other instruments of security which do now or may
hereafter cover the Project or any interest of Lessor therein (collectively, the
"Prior Encumbrances") and to any and all advances made on the security thereof
and to any and all increases, renewals, modifications, consolidations,
replacements and extensions of the Mortgage or of any of the Prior Encumbrances.
This provision is acknowledged by Lessee to be self-operative and no further
instrument shall be required to effect such subordination of the Lease. Lessee
shall, however, upon demand at any time or times execute, acknowledge and
deliver to Mortgagee any and all instruments and certificates that in
Mortgagee's judgment may be necessary or proper to confirm or evidence such
subordination. If Lessee shall fail or neglect to execute, acknowledge and
deliver any such instrument or certificate, Mortgagee may, in addition to any
other remedies Mortgagee may have, as agent and attorney-in-fact of Lessee,
execute, acknowledge and deliver the same and Lessee hereby irrevocably appoints
Mortgagee as Lessee's agent and attorney-in-fact for such purpose. However,
notwithstanding the generality of the foregoing provisions of this paragraph,
Lessee agrees that Mortgagee shall have the right at any time to subordinate the
Mortgage, and any such other mortgagee or ground lessor shall have the right at
any time to subordinate any such Prior Encumbrances, to the Lease on such terms
and subject to such conditions as Mortgagee or any such other mortgagee or
ground lessor, may deem appropriate in its discretion.
5. New Lease. Upon the written request of either Mortgagee or
Lessee to the other given at the time of any foreclosure, trustee's sale or
conveyance in lieu thereof, the parties agree to execute a lease of the Demised
Premises upon the same terms and conditions as the Lease between Lessor and
Lessee, which lease shall cover any unexpired term of the Lease existing prior
to such foreclosure, trustee's sale or conveyance in lieu of foreclosure.
6. Notice. Lessee agrees to give written notice to Mortgagee of
any default by Lessor or Borrower under the Lease not less than thirty (30) days
prior to terminating the Lease or exercising any other right or remedy
thereunder or provided by law. Lessee further agrees that it shall not terminate
the Lease or exercise any such right or remedy provided such default is cured
within thirty (30) days; provided, however, that if such default cannot by its
nature be cured within thirty (30) days, then Lessee shall not terminate the
Lease or exercise any such right or remedy, provided the curing of such default
is commenced within such thirty (30) days and is diligently prosecuted
thereafter. Such notices shall be delivered by certified mail, return receipt
requested to:
General Electric Capital Corporation, Attn.: Portfolio Management
One Galleria Tower, Suite 2000
13355 Noel Road, LB 54
Dallas, Texas 75240
<PAGE> 77
7. Mortgagee. The term "Mortgagee" shall be deemed to include
General Electric Capital Corporation and any of its successors and assigns,
including anyone who shall have succeeded to Lessor's interest in and to the
Lease and the Project by, through or under judicial foreclosure or sale under
any power or other proceedings brought pursuant to the Mortgage, or deed in lieu
of such foreclosure or proceedings, or otherwise.
8. Estoppel. Lessee hereby certifies, represents and warrants to
Mortgagee that:
(a) That the Lease is a valid lease and in full force and
effect. That there is no existing default in any of the terms and
conditions thereof and no event has occurred which, with the passing of
time or giving of notice or both, would constitute an event of default;
(b) That the Lease has not been amended, modified,
supplemented, extended, renewed or assigned, and represents the entire
agreement of the parties;
(c) That, except as provided in the Lease, Lessee is entitled
to no rent concessions or abatements;
(d) That Lessee shall not pay rental under the Lease for more
than one (1) month in advance. Lessee agrees that Lessee shall, upon
written notice by Mortgagee, pay to Mortgagee, when due, all rental
under the Lease;
(e) That all obligations and conditions under the Lease to be
performed to date have been satisfied, free of defenses and set-offs;
and
(f) That Lessee has not received written notice of any claim,
litigation or proceedings, pending or threatened, against or relating
to Lessee, or with respect to the Demised Premises which would affect
its performance under the Lease. Lessee has not received written notice
of any violations of any federal, state, county or municipal statues,
laws, codes, ordinances, rules, regulations, orders, decrees or
directives relating to the use or condition of the Demised Premises or
Lessee's operations thereon.
9. Modification and Successors. This Agreement may not be
modified orally or in any manner other than by an agreement, in writing, signed
by the parties hereto and their respective successors in interest. This
Agreement shall inure to the benefit of and be binding upon the parties hereto,
their successors and assigns.
10. Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on all
parties hereto, notwithstanding that all parties are not signatories to the
original or the same counterpart.
<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MORTGAGEE: GENERAL ELECTRIC CAPITAL CORPORATION,
A NEW YORK CORPORATION
By:
----------------------------------
Its
-------------------, ------------
LESSEE: SEAGATE TECHNOLOGY, INC.
a Delaware corporation
By:
----------------------------------
---------------, -----------------
STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
This instrument was acknowledged before me on this ____________ day of
_____________, 199___ by ____________________, ____________________ of GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation, on behalf of said
corporation.
(SEAL) -------------------------------------------
Notary Public in and for the State of Texas
-------------------------------------------
Print name of notary
My Commission Expires:
--------------------
<PAGE> 79
STATE OF __________ Section
Section
COUNTY OF _______ Section
This instrument was acknowledged before me on this __________ day of
__________, 199___ by ____________________, _______________ of
_________________________, a _______________, on behalf of said
_________________________.
(SEAL)
-------------------------------------
Notary Public in and for
-------------------------------------
Print name of notary
My Commission Expires:
---------------
<PAGE> 80
EXHIBIT "A"
Legal Description
[to be attached]
<PAGE> 1
EXHIBIT 10.14
DOCUMENT NAME: GP317G7.20
DRAFT NO: 7
AUTHOR'S INITIALS: GP
SECRETARY'S INITIALS: ANITA - 21 JULY 1998
DOCUMENT COMMENT: OCCUPATIONAL LEASE
<PAGE> 2
DATED 1998
(1) Landlord:
UNIVERSITIES SUPERANNUATION
SCHEME LIMITED
(2) Tenant:
SEAGATE SOFTWARE LIMITED
(3) Guarantor:
SEAGATE TECHNOLOGY INC.
----------------------------------
OCCUPATIONAL LEASE
- of -
Aquis House
Blagrave Street
Reading
----------------------------------
CLIFFORD CHANCE
200 Aldersgate Street
London EC1A 4JJ
Tel: 0171-600 1000
Fax: 0171-600 5555
Ref: GP/U0167/10080/ICSM
<PAGE> 3
DATED 1998
(1) Landlord:
UNIVERSITIES SUPERANNUATION
SCHEME LIMITED
(2) Tenant:
SEAGATE SOFTWARE LIMITED
(3) Guarantor:
SEAGATE TECHNOLOGY INC.
----------------------------------
Counterpart/
OCCUPATIONAL LEASE
- of -
Aquis House
Blagrave Street
Reading
----------------------------------
CLIFFORD CHANCE
200 Aldersgate Street
London EC1A 4JJ
Tel: 0171-600 1000
Fax: 0171-600 5555
Ref: GP/U0167/10080/ICSM
<PAGE> 4
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C>
SECTION 1................................................................................. 1
2. INTERPRETATION.................................................................... 5
SECTION 2................................................................................. 6
3.1 DEMISE AND TERM............................................................ 6
3.2 EXCEPTIONS AND RESERVATIONS................................................ 7
3.3 THIRD PARTY RIGHTS......................................................... 7
3.4 ENCROACHMENTS AND EASEMENTS................................................ 7
3.5 LANDLORD'S COVENANTS....................................................... 7
3.6 RIGHTS OF ENTRY BY LANDLORD................................................ 7
3.7 TERMS OF ENTRY BY LANDLORD................................................. 8
SECTION 3................................................................................. 8
4.1 TENANT'S OBLIGATION TO PAY................................................. 8
4.2 DATES OF PAYMENT OF PRINCIPAL RENT......................................... 9
4.3 METHOD OF PAYMENT OF PRINCIPAL RENT........................................ 9
4.4 DATES OF PAYMENT OF INSURANCE RENT AND ADDITIONAL RENT..................... 9
4.5 NO RIGHT OF SET-OFF........................................................ 9
5. RENT REVIEW...................................................................... 10
5.1 DEFINITIONS............................................................... 10
5.1.1 "OPEN MARKET RENT\........................................................ 10
5.1.2 "ASSUMPTIONS\............................................................. 11
5.1.3 "DISREGARDED MATTERS\..................................................... 11
5.1.4 "REVIEW SURVEYOR\......................................................... 11
5.2 RENT REVIEWS.............................................................. 12
5.3 AGREEMENT OR DETERMINATION OF THE REVIEWED RENT........................... 12
5.4 APPOINTMENT OF REVIEW SURVEYOR............................................ 12
5.5 FUNCTIONS OF REVIEW SURVEYOR.............................................. 12
5.6 FEES OF REVIEW SURVEYOR................................................... 13
5.7 APPOINTMENT OF NEW REVIEW SURVEYOR........................................ 13
5.8 INTERIM PAYMENTS PENDING DETERMINATION.................................... 13
5.9 RENT RESTRICTIONS......................................................... 14
5.10 MEMORANDA OF REVIEWED RENT................................................ 15
5.11 TIME NOT OF THE ESSENCE................................................... 15
6. INTEREST......................................................................... 15
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C>
6.1 INTEREST ON LATE PAYMENTS................................................. 15
6.2 INTEREST ON REFUSED PAYMENTS.............................................. 16
7. OUTGOINGS........................................................................ 16
7.1 TENANT'S OBLIGATION TO PAY................................................ 16
7.2 INDEMNITY AGAINST VOID RATING RELIEF...................................... 16
7.3 COSTS OF UTILITIES ETC.................................................... 16
8. VALUE ADDED TAX.................................................................. 17
8.1 SUMS EXCLUSIVE OF VAT..................................................... 17
8.2 TENANT TO PAY VAT......................................................... 17
8.3 VAT INCURRED BY LANDLORD.................................................. 17
9. TAXATION......................................................................... 17
10. LANDLORD'S COSTS................................................................. 18
SECTION 4................................................................................ 18
11.1 REPAIRS................................................................... 18
11.2 DAMAGE BY THE INSURED RISKS............................................... 19
11.3 INTERNAL DECORATIONS...................................................... 19
11.4 EXTERNAL DECORATIONS...................................................... 19
11.5 PLANT AND MACHINERY....................................................... 20
11.6 CLEANING.................................................................. 20
11.7 CARPETING................................................................. 20
12. YIELD UP......................................................................... 20
12.1 REINSTATEMENT OF PREMISES................................................. 20
12.2 YIELDING UP IN GOOD REPAIR................................................ 21
13. COMPLIANCE WITH NOTICES.......................................................... 21
13.1 TENANT TO REMEDY BREACHES OF COVENANT..................................... 21
13.2 FAILURE OF TENANT TO REPAIR............................................... 21
14. ALTERATIONS...................................................................... 21
14.1 NO STRUCTURAL ALTERATIONS................................................. 21
14.2 NON-STRUCTURAL ALTERATIONS................................................ 22
14.3 DEMOUNTABLE PARTITIONING.................................................. 22
14.4 COVENANTS BY TENANT....................................................... 22
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C>
15. SIGNS AND ADVERTISEMENTS......................................................... 22
SECTION 5................................................................................ 23
16.1 PERMITTED USE............................................................. 23
16.2 TENANT NOT TO LEAVE PREMISES UNOCCUPIED................................... 23
17. USE RESTRICTIONS................................................................. 23
18. EXCLUSION OF WARRANTY AS TO USER................................................. 23
18.1 NO WARRANTY BY LANDLORD................................................... 23
18.2 TENANT'S ACKNOWLEDGEMENT.................................................. 23
SECTION 6................................................................................ 24
19.1 ALIENATION GENERALLY...................................................... 24
19.2 SHARING WITH A GROUP COMPANY.............................................. 24
20. ASSIGNMENT....................................................................... 24
20.1 NO ASSIGNMENT OF PART..................................................... 24
20.2 CIRCUMSTANCES IN WHICH CONSENT TO ASSIGNMENT MAY BE WITHHELD.............. 24
20.3 CONDITIONS FOR LANDLORD'S CONSENT......................................... 25
20.4 ASSIGNMENT OF THE WHOLE................................................... 26
20.5 S.144 LPA 1925............................................................ 26
21. ARRANGEMENTS FOR THE SUBSTITUTION OF THE GUARANTOR............................... 26
21.1 SUBSTITUTION AND RELEASE OF SEAGATE TECHNOLOGY INC........................ 26
21.2 PROVISIONS OF ACCOUNTS AND OTHER DOCUMENTARY EVIDENCE..................... 28
21.3 LANDLORD'S CONSENT TO ASSIGNMENT.......................................... 28
21.4 CONDITIONS FOR LANDLORD'S CONSENT......................................... 28
21.5 APPLICATION FOR THE RELEASE OF SEAGATE SOFTWARE INC....................... 28
21.6 PROVISION OF ACCOUNTS AND OTHER DOCUMENTARY EVIDENCE...................... 29
21.7 LANDLORD'S CONSENT TO ASSIGNMENT.......................................... 29
21.8 CONDITIONS FOR LANDLORD'S CONSENT......................................... 29
22. UNDERLETTING..................................................................... 30
22.1 SUBLETTING UNIT........................................................... 30
22.2 UNDERLETTING OF PART...................................................... 30
22.3 UNDERLETTING OF THE WHOLE................................................. 31
22.4 UNDERLETTING RENT......................................................... 31
22.5 DIRECT COVENANTS FROM UNDERTENANT......................................... 31
22.6 CONTENTS OF UNDERLEASE.................................................... 32
22.7 TENANT TO OBTAIN LANDLORD'S CONSENT....................................... 32
22.8 TENANT TO ENFORCE OBLIGATIONS............................................. 32
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C>
22.9 REVIEW OF UNDERLEASE RENT................................................. 32
22.10 NO VARIATION OF TERMS..................................................... 33
22.11 NO REDUCTION IN RENT...................................................... 33
23. REGISTRATION OF DISPOSITIONS..................................................... 33
SECTION 7................................................................................ 33
24.1 TENANT TO COMPLY WITH STATUTES............................................ 33
24.2 TENANT TO EXECUTE NECESSARY WORKS......................................... 34
24.3 TENANT TO REFRAIN FROM CERTAIN ACTS....................................... 34
25. PLANNING ACTS.................................................................... 34
25.1 TENANT'S OBLIGATION TO COMPLY............................................. 34
25.2 NO APPLICATION FOR PLANNING PERMISSION WITHOUT CONSENT.................... 34
25.3 TENANT TO OBTAIN ALL PERMISSIONS.......................................... 34
25.4 TENANT TO PAY PLANNING CHARGES............................................ 35
25.5 NO IMPLEMENTATION OF PERMISSION WITHOUT APPROVAL.......................... 35
25.6 TENANT TO CARRY OUT WORKS BEFORE END OF TERM.............................. 35
25.7 PLANS ETC. TO BE PRODUCED................................................. 35
25.8 PLANNING CONDITIONS....................................................... 35
25.9 PLANNING REFUSAL.......................................................... 36
26. STATUTORY NOTICES................................................................ 36
26.1 NOTICES GENERALLY......................................................... 36
26.2 PARTY WALL ETC. ACT 1996.................................................. 36
27. FIRE PRECAUTIONS AND EQUIPMENT................................................... 37
27.1 COMPLIANCE WITH REQUIREMENTS.............................................. 37
27.2 FIRE FIGHTING APPLIANCES TO BE SUPPLIED................................... 37
27.3 ACCESS TO BE KEPT CLEAR................................................... 37
28. DEFECTIVE PREMISES............................................................... 37
SECTION 8................................................................................ 37
29.1 LANDLORD TO INSURE........................................................ 37
29.2 WAIVER OF SUBROGATION..................................................... 38
29.3 FULL REINSTATEMENT COST................................................... 38
29.4 LANDLORD'S FIXTURES....................................................... 38
29.5 LANDLORD TO PRODUCE EVIDENCE OF INSURANCE................................. 38
29.6 INSURANCE VALUATIONS...................................................... 39
29.7 DAMAGE TO THE PREMISES.................................................... 39
29.8 WHERE REINSTATEMENT IS DELAYED OR PREVENTED............................... 40
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C>
29.9 PAYMENT OF INSURANCE MONEY REFUSED........................................ 40
29.10 SUSPENSION OF RENT PAYMENTS............................................... 41
29.11 DOUBLE INSURANCE.......................................................... 41
29.12 INSURANCE BECOMING VOID................................................... 41
29.13 REQUIREMENTS OF INSURERS.................................................. 42
29.14 NOTICE BY TENANT.......................................................... 42
SECTION 9................................................................................ 42
30.1 RE-ENTRY.................................................................. 42
30.2 EVENTS OF DEFAULT......................................................... 42
SECTION 10............................................................................... 44
32. EXCLUSION OF IMPLIED COVENANTS BY LANDLORD....................................... 44
33. RELETTING NOTICES................................................................ 44
34. DISCLOSURE OF INFORMATION........................................................ 44
35. INDEMNITY........................................................................ 44
36. REPRESENTATIONS.................................................................. 45
37. EFFECT OF WAIVER................................................................. 45
38. NOTICES.......................................................................... 45
38.1 NOTICES TO TENANT OR GUARANTOR............................................ 45
38.2 NOTICES TO LANDLORD....................................................... 45
39. EXCLUSION OF STATUTORY COMPENSATION.............................................. 46
40. GUARANTOR'S COVENANTS............................................................ 46
41. NEW TENANCY...................................................................... 46
42. INVALIDITY OF CERTAIN PROVISIONS................................................. 46
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C>
43. GOVERNING LAW AND JURISDICTION................................................... 46
43.1 GOVERNING LAW............................................................. 46
43.2 JURISDICTION.............................................................. 46
43.3 WAIVER OF OBJECTION TO LEX FORI........................................... 46
SCHEDULE 1............................................................................... 48
SCHEDULE 2............................................................................... 49
SCHEDULE 3............................................................................... 51
SCHEDULE 4............................................................................... 55
SCHEDULE 5............................................................................... 59
SCHEDULE 6............................................................................... 62
8. INVALIDITY OF CERTAIN PROVISIONS................................................. 67
</TABLE>
<PAGE> 10
THIS LEASE is made on the day of 1998
BETWEEN:-
(1) UNIVERSITIES SUPERANNUATION SCHEME LIMITED (Company registration number
1167127) whose registered office is at Royal Liver Building Liverpool L3
1PY (the "Landlord");
(2) SEAGATE SOFTWARE LIMITED (Company registration number 2575013) whose
registered office is at 100 New Bridge Street London EC4V 6JA (the
"Tenant"); and
(3) SEAGATE TECHNOLOGY INC. of 920 Disc Drive Scotts Valley California CA
95066 (Company registration number 2102401) (the "Guarantor").
NOW THIS DEED WITNESSES as follows:-
SECTION 1
DEFINITIONS AND INTERPRETATION
1. DEFINITIONS
In this Lease, unless the context requires otherwise, the following
expressions shall have the following meanings:-
1.1 "ADDITIONAL RENT" means all sums referred to in clause 6, and all sums
which are recoverable as rent in arrear or stated in this Lease to be
due to the Landlord;
1.2 "BASE RATE" means the base rate for the time being of Barclays Bank PLC
or, if Barclays Bank PLC ceases to exist or fails to publish a base
rate such other comparable rate of interest as the Landlord shall
reasonably specify;
1.3 "CONDUITS" means all drains, pipes, gullies, gutters, sewers, ducts,
mains, channels, subways, wires, cables, conduits, flues and any other
conducting media of whatsoever nature;
1.4 "DECORATION YEAR" means the fifth year after the Term Commencement Date
and every subsequent fifth year;
1.5 "DEVELOPMENT" means development as defined in section 55 of the Town
and Country Planning Act 1990;
<PAGE> 11
1.6 "GROUP COMPANY" means any company which is, for the time being (a) a
subsidiary of the relevant party or (b) the holding company of that
party or (c) another subsidiary of the holding company of that party,
in each case within the meaning of section 736 of the Companies Act
1985, as amended by the Companies Act 1989;
1.7 "GUARANTOR" means the party named as "Guarantor" in this Lease and
includes the person from time to time guaranteeing the obligations of
the Tenant under this Lease and, in the case of an individual, includes
his personal representatives;
1.8 "INITIAL RENT" means the sum of one million and fifty thousand pounds
sterling (L1,050,000) per annum;
1.9 "INSURANCE RENT" means:-
(a) the sums which the Landlord pays from time to time for
insuring the Premises against the Insured Risks pursuant to
clause 29.1.1 and the other items referred to in clause
29.1.3; and
(b) all sums which the Landlord pays from time to time for
insuring against the loss of the Principal Rent pursuant to
clause 29.1.2;
1.10 "INSURED RISKS" means to the extent that any of the same are insurable
in the London insurance market at reasonable cost fire, storm, tempest,
flood, earthquake, lightning, explosion, impact, aircraft (other than
hostile aircraft) and other aerial devices and articles dropped from
them, riot, civil commotion and malicious damage, bursting or
overflowing of water tanks, apparatus or pipes, and such other risks as
the Landlord may, in its reasonable discretion from time to time,
determine, subject to such exclusions, excesses, limitations, terms and
conditions as may be properly contained in any policy taken out by the
Landlord;
1.11 "LANDLORD" means the person for the time being entitled to the
reversion immediately expectant on the determination of the Term;
1.12 "THIS LEASE" means this Lease and any document which is supplemental to
it, whether or not it is expressly stated to be so;
1.13 "NET INTERNAL AREA" means the total floor area expressed in square feet
measured in accordance with the Code of Measuring Practice published on
behalf of the Royal Institution
<PAGE> 12
of Chartered Surveyors and the Incorporated Society of Valuers and
Auctioneers (Fourth Edition November 1993);
1.14 "NET TANGIBLE ASSETS" means the aggregate of the amounts paid up or
credited as paid up on the issued share capital of the proposed
assignee or its guarantor (other than any redeemable shares) including:
(a) any amount credited to the share premium account;
(b) any capital redemption reserve fund; and
(c) any balance standing to the credit of the profit and loss
account of the proposed assignee or its guarantor
but deducting:
(i) any debit balance on the profit and loss account of the
proposed assignee or its guarantor;
(ii) (to the extent included) any amount shown in respect of
goodwill or other intangible assets of the proposed assignee
or its guarantor
(iii) (to the extent included) any amount set aside for taxation,
deferred taxation or bad debts; and
(iv) any dividend or distribution declared, recommended or made by
the proposed assignee or its guarantor to the extent that such
distribution is not provided for in the most recent financial
statements;
and so that no amount shall be included or excluded more than once;
1.15 "PERMITTED USE" means good class offices within Class B1 (Business) of
the Town and Country Planning (Use Classes) Order 1987 and purposes
ancillary to such use;
1.16 "PLAN" means the plan annexed to this Lease;
1.17 "PLANNING ACTS" means the Town and Country Planning Act 1990, the
Planning (Listed Buildings and Conservation Areas) Act 1990,
<PAGE> 13
the Planning (Hazardous Substances) Act 1990, the Planning
(Consequential Provisions) Act 1990, and the Planning and Compensation
Act 1991 and any other town and country planning or related
legislation;
1.18 "PREMISES" means the land situated at Blagrave Road Reading together
with the building erected on it or on part of it and known as Aquis
House as the same are registered at HM Land Registry with Title
Absolute under Title Number BK321654 and shown edged red on the Plan
and each and every part of the land and building including:-
(a) any Conduits in, on, under or over and exclusively serving
them, except those of any utility company;
(b) all landlord's fixtures, fittings, plant, machinery, apparatus
and equipment at any time in or on them;
(c) any additions, alterations and improvements;
1.19 "PRESCRIBED RATE" means four per cent (4%) per annum above the Base
Rate;
1.20 "PRESENT TENANT" means (in Schedule 3) the Tenant at the time the
covenants on the part of the Guarantor are entered into and (in
Schedule 4) the Tenant at the time the covenants on the part of the
Present Tenant therein referred to are entered into;
1.21 "PRESIDENT" means the President for the time being of the Royal
Institution of Chartered Surveyors (or in the event that such
Institution ceases to exist such other independent professional body as
the Landlord may reasonably nominate) and includes the duly appointed
deputy of the President or any person authorised by the President or by
the Institution or nominated body to make appointments on his or its
behalf;
1.22 "PRE-TAX PROFITS" means annual profits before tax as evidenced by
independently audited accounts;
1.23 "PRINCIPAL RENT" means the rent payable under clause 4.1.1;
1.24 "RENT COMMENCEMENT DATE" means 1999;
1.25 "RENTS" means the sums payable by the Tenant under clause 4;
1.26 "REVIEW DATE" means 24 June 2003 and every fifth anniversary of that
date during the Term
<PAGE> 14
and the day before the expiry of the contractual term granted by this
Lease and "RELEVANT REVIEW DATE" shall be construed accordingly;
1.27 "SURVEYOR" means any person appointed by the Landlord to perform the
function of a surveyor or an accountant for any purpose of this Lease
and includes any employee of the Landlord or of a Group Company of the
Landlord appointed for that purpose and any person appointed by the
Landlord to collect the rents or to manage the Premises but does not
include the Review Surveyor as defined in clause 5;
1.28 "TENANT" means the party named as `Tenant' in this Lease and includes
the Tenant's successors in title and assigns and, in the case of an
individual, his personal representatives;
1.29 "TERM" means the term of years specified in clause 3.1 and in respect
of the obligations of the tenant for the time being under this Lease
includes the period of any holding over or any extension or
continuation, whether by statute or common law;
1.30 "TERM COMMENCEMENT DATE" means 24 June 1998;
1.31 "UTILITIES" means water, soil, steam, air, electricity, radio,
television, telegraphic, telephone, telecommunications and other
services and supplies of whatsoever nature;
1.32 "VALUE ADDED TAX" means value added tax as defined in the Value Added
Tax Act 1994 and any tax of a similar nature substituted for, or levied
in addition to, such value added tax;
1.33 "WORKING DAY" means any day, other than a Saturday or Sunday, on which
clearing banks in the United Kingdom are open to the public for the
transaction of business.
2. INTERPRETATION Unless there is something in the subject or context
inconsistent with the same:-
2.1 every covenant by a party comprising more than one person shall be
deemed to be made by such party jointly and severally;
2.2 words importing persons shall include firms, companies and corporations
and vice versa;
2.3 any covenant by the Tenant not to do any act or thing shall include an
obligation not to permit or suffer such act or thing to be done;
<PAGE> 15
2.4 any reference to the right of the Landlord to have access to, or to
enter, the Premises shall be construed as extending to any mortgagee of
the Landlord and to all persons authorised by them, including agents,
professional advisers, contractors, workmen and others;
2.5 any reference to a statute (whether specifically named or not) shall
include any amendment or re-enactment of it for the time being in
force, and all instruments, orders, notices, regulations, directions,
bye-laws, permissions and plans for the time being made, issued or
given under it, or deriving validity from it;
2.6 all agreements and obligations by any party contained in this Lease
(whether or not expressed to be covenants) shall be deemed to be, and
shall be construed as, covenants by such party;
2.7 the word "assignment" includes equitable assignment and the words
"assign" and "assignee" shall be construed accordingly
2.8 the words "including" and "include" shall be deemed to be followed by
the words "without limitation";
2.9 the titles or headings appearing in this Lease are for reference only
and shall not affect its construction;
2.10 any reference to a clause or schedule shall mean a clause or schedule
of this Lease.
SECTION 2
GRANT OF LEASE
3. GRANT, RIGHTS AND OTHER MATTERS
3.1 DEMISE AND TERM
In consideration of the rents, covenants and agreements reserved by,
and contained in, this Lease to be paid and performed by the Tenant,
the Landlord leases the Premises to the Tenant from and including the
Term Commencement Date for the term of fifteen (15) years paying the
Rents to the Landlord in accordance with clause 4.
<PAGE> 16
3.2 EXCEPTIONS AND RESERVATIONS
There are excepted and reserved out of this Lease the rights and
easements set out in SCHEDULE 1.
3.3 THIRD PARTY RIGHTS
This Lease is granted subject to any rights, easements, reservations,
privileges, covenants, restrictions, stipulations and other matters of
whatever nature affecting the Premises including any matters contained
or referred to in the deeds and documents referred to in the entries on
the Registers of Title Number BK321654 so far as any of them relate to
the Premises and are still subsisting and capable of taking effect.
3.4 ENCROACHMENTS AND EASEMENTS
The Tenant shall not stop up or obstruct any of the windows or lights
belonging to the Premises and shall not permit any new window, light,
opening, doorway, passage, Conduit or other encroachment or easement to
be made or acquired into, on or over the Premises or any part of them.
If any person shall attempt to make or acquire any encroachment or
easement whatsoever, the Tenant shall give written notice of that fact
to the Landlord immediately it shall come to the notice of the Tenant
and, at the request of the Landlord but at the cost of the Tenant,
adopt such means as may be reasonably required by the Landlord for
preventing any encroachment or the acquisition of any easement.
3.5 LANDLORD'S COVENANTS
Covenants on the part of the Landlord are covenants to do or not to do
that which is covenanted for so long only as the Landlord remains
entitled to the reversion immediately expectant on the determination of
the Term
3.6 RIGHTS OF ENTRY BY LANDLORD
The Tenant shall permit the Landlord with all necessary materials and
appliances to enter and remain on the Premises:-
3.6.1 to examine the condition of the Premises and to take details
of the landlord's fixtures in them;
3.6.2 to exercise any of the rights excepted and reserved by this
Lease;
3.6.3 for any other purpose connected with valuing the Premises or
disposing of or raising finance upon the Landlord's interest
in the Premises.
<PAGE> 17
3.7 TERMS OF ENTRY BY LANDLORD
In exercising any of the rights mentioned in clause 3.6, the Landlord
or the person exercising the right shall:-
3.7.1 give to the Tenant not less than three (3) Working Days' prior
notice in writing that the right is to be exercised and shall
only exercise it at reasonable times (except in an emergency,
when no notice need be given and when it can be exercised at
any time);
3.7.2 cause as little inconvenience as practicable to the Tenant or
any other permitted occupier of any part of the Premises; and
3.7.3 make good, as soon as practicable and to the reasonable
satisfaction of the Tenant, any damage caused to the Premises.
SECTION 3
FINANCIAL PROVISIONS
4. RENTS
4.1 TENANT'S OBLIGATION TO PAY
The Tenant covenants to pay to the Landlord at all times during the
Term:-
4.1.1 yearly, and proportionately for any fraction of a year, the
Initial Rent and from and including each Rent Review Date,
such yearly rent as shall become payable under clause 5;
4.1.2 the Insurance Rent;
4.1.3 the Additional Rent; and
4.1.4 any Value Added Tax which may be chargeable in respect of the
Principal Rent, the Insurance Rent and the Additional Rent.
<PAGE> 18
4.2 DATES OF PAYMENT OF PRINCIPAL RENT
The Principal Rent and any Value Added Tax chargeable on it shall be
paid in four (4) equal instalments in advance on each 25th March, 24th
June, 29th September and 25th December in every year, the first
payment, in respect of the period from and including the Rent
Commencement Date to the day before the quarter day following the Rent
Commencement Date, to be made on the Rent Commencement Date.
4.3 METHOD OF PAYMENT OF PRINCIPAL RENT
The Principal Rent and any Value Added Tax chargeable on it shall be
paid so that the Landlord shall receive full value in cleared funds on
the date when payment is due.
4.4 DATES OF PAYMENT OF INSURANCE RENT AND ADDITIONAL RENT
The Insurance Rent and the Additional Rent and any Value Added Tax
chargeable on either of them shall be paid on demand, the first payment
of the Insurance Rent having been made on the date of this Lease.
4.5 NO RIGHT OF SET-OFF
Subject to any contrary statutory right, the Tenant shall not exercise
any legal or equitable rights of set-off, deduction, abatement or
counterclaim which it may have to reduce its liability for Rents.
<PAGE> 19
5. RENT REVIEW
5.1 DEFINITIONS
In this clause the following expressions shall have the following
meanings:-
5.1.1 "OPEN MARKET RENT" means the full yearly rent which might
reasonably be expected to become payable in respect of the
Premises after the expiry of any rent free period,
concessionary rent and/or after the giving of any other
inducement (whether by means of a capital payment or
otherwise) given in each case only in connection with the
fitting out of the Premises by the incoming tenant of such
length or of such amount or nature as would be negotiated in
the open market between a willing landlord and a willing
tenant (to the intent that no discount, reduction or allowance
shall be made in ascertaining the Open Market Rent to reflect
such rent free period, concessionary rent or other inducement
as would be negotiated as aforesaid or to compensate the
Tenant for its absence) upon a letting of the Premises in the
open market with vacant possession at the Relevant Review Date
by a willing landlord to a willing tenant and without the
landlord receiving any premium or any other consideration for
the grant of the lease for a term of years equal to the longer
of (a) the residue of the Term remaining unexpired on the
Relevant Review Date and (b) ten (10) years and otherwise on
the terms and conditions and subject to the covenants and
provisions contained in a lease of the Premises on the terms
and conditions and subject to the covenants and provisions
contained in this Lease except for the following provisions of
this Lease:
Clause 1.14;
Clause 1.22;
Clause 20.2.1;
Clause 20.2.3;
Clause 20.3(ii);
Clause 21;
Schedule 5; and
Schedule 6
and except for the amount of the rent payable under this Lease
but including the provisions for the review of rent contained
in this clause ("THE HYPOTHETICAL LEASE") and making the
Assumptions but disregarding the Disregarded Matters;
5.1.2 "ASSUMPTIONS" means the following assumptions (if not facts)
at the Relevant
<PAGE> 20
Review Date:-
5.1.2.1 that the Premises are fit for immediate occupation
and use by the incoming tenant prior to such incoming
tenant's fit-out;
5.1.2.2 that no work has been carried out to the Premises by
the Tenant or any undertenant or their respective
predecessors in title during the Term, which has
diminished the rental value of the Premises;
5.1.2.3 that if the Premises or any part of them have been
destroyed or damaged, they have been fully rebuilt
and reinstated;
5.1.2.4 that the Premises are in a good state of repair and
decorative condition;
5.1.2.5 that all the covenants on the part of the Tenant and
the Landlord contained in this Lease have been fully
performed and observed.
5.1.3 "DISREGARDED MATTERS" means:-
5.1.3.1 any effect on rent of the fact that the Tenant or any
permitted undertenant or their respective
predecessors in title may have been in occupation of
the Premises or any part of them;
5.1.3.2 any goodwill attached to the Premises by reason of
the business then carried on at the Premises by the
Tenant or any permitted undertenant;
5.1.3.3 any increase in rental value of the Premises
attributable to the existence, at the Relevant Review
Date, of any improvement (including any fitting out
works carried out by the Tenant after the date
hereof) to the Premises or any part of them carried
out after the date of this Lease with all necessary
consents (where required) by the Tenant or any
permitted undertenant otherwise than in pursuance of
an obligation to the Landlord or its predecessors in
title.
5.1.4 "REVIEW SURVEYOR" means an independent chartered surveyor of
not less than ten (10) years' standing, who is experienced in
valuing and leasing property similar to the Premises and is
acquainted with the market in the area in which the Premises
are located appointed from time to time under this clause to
determine the Open
<PAGE> 21
Market Rent.
5.2 RENT REVIEWS
The Principal Rent shall be reviewed at each Review Date in accordance
with the provisions of this clause and from and including each Review
Date the Principal Rent shall equal the higher of:-
5.2.1 the Principal Rent contractually payable immediately before
the Relevant Review Date (or which would be payable but for
any suspension of rent (in whole or in part) under this
Lease); and
5.2.2 the Open Market Rent on the Relevant Review Date as agreed or
determined pursuant to this clause.
5.3 AGREEMENT OR DETERMINATION OF THE REVIEWED RENT
The Open Market Rent at any Review Date may be agreed in writing at any
time between the Landlord and the Tenant but if, for any reason, they
have not so agreed, either party may (whether before or after the
Relevant Review Date) by notice in writing to the other require the
Open Market Rent to be determined by the Review Surveyor.
5.4 APPOINTMENT OF REVIEW SURVEYOR
In default of agreement between the Landlord and the Tenant on the
appointment of the Review Surveyor, the Review Surveyor shall be
appointed by the President on the written application of either party,
such application to be made not earlier than three (3) months before
the Relevant Review Date and not later than the next succeeding Review
Date.
5.5 FUNCTIONS OF REVIEW SURVEYOR
The Review Surveyor shall:-
5.5.1 act as an arbitrator in accordance with the Arbitration Act
1996 unless both parties agree that he shall act as an expert;
5.5.2 if acting as an expert invite the Landlord and the Tenant to
submit to him, within such time limits (not being less than
fifteen (15) Working Days) as he shall consider appropriate, a
valuation accompanied by a statement of reasons and such
representations and cross-representations as to the amount of
the Open Market Rent with such supporting evidence as they may
respectively wish;
<PAGE> 22
5.5.2 if acting as arbitrator have power to order on a provisional
basis any relief which he would have power to grant in a final
award;
5.5.3 within sixty (60) days of the later of his appointment and the
Relevant Review Date, or within such extended period as the
Landlord and the Tenant may jointly agree in writing, give to
each of them written notice of the amount of the Open Market
Rent as determined by him.
5.6 FEES OF REVIEW SURVEYOR
5.6.1 The fees and expenses of the Review Surveyor if acting as an expert,
including the fee payable for his nomination, shall be in the award of
the Review Surveyor but, failing such award, the same shall be payable
by the Landlord and the Tenant in equal shares who shall each bear
their own costs, fees and expenses.
5.6.2 If either party fails to pay that party's share of the fees and
expenses of the Review Surveyor, including the fee payable for his
nomination, within five (5) Working Days after being required in
writing to do so, the other party may pay such fees and expenses, and
the share of the defaulting party shall become a debt payable to the
other party on written demand with interest on such share at the
Prescribed Rate from and including the date of payment by the other
party to the date of reimbursement by the defaulting party.
5.7 APPOINTMENT OF NEW REVIEW SURVEYOR
If the Review Surveyor fails to give notice of his determination within
the allotted time, or if he dies, is unwilling to act, or becomes
incapable of acting, or if, for any other reason, he is unable to act,
the Landlord or the Tenant may request the President to discharge the
Review Surveyor and appoint another surveyor in his place to act in the
same capacity, which procedure may be repeated as many times as
necessary.
5.8 INTERIM PAYMENTS PENDING DETERMINATION
If the amount of the reviewed rent has not been agreed or determined by
the Relevant Review Date (the date of agreement or determination being
called the "DETERMINATION DATE"), then:-
5.8.1 in respect of the period (the "INTERIM PERIOD") beginning with
the Relevant Review Date and ending on the day before the
quarter day following the Determination Date, the Tenant shall
pay to the Landlord the Principal Rent at the yearly rate
payable immediately before the Relevant Review Date together
with such further amounts (if any) as may be awarded by the
Review Surveyor or (if higher or no such award has been made),
such further amounts as the Tenant shall elect to pay;
<PAGE> 23
and
5.8.2 on the Determination Date, the Tenant shall pay to the
Landlord as arrears of rent the amount by which the reviewed
rent exceeds the rent actually paid during the Interim Period
(apportioned on a daily basis) together with interest on such
amount at 4% below the Prescribed Rate, such interest to be
calculated on the amount of each quarterly shortfall on a
day-to-day basis from the date on which it would have been
payable if the reviewed rent had then been agreed or
determined to the date of actual payment.
5.9 RENT RESTRICTIONS
If, at any time during the Term, restrictions are imposed by any
statute for the control of rent which prevent or prohibit wholly or
partly the operation of the rent review provisions contained in this
clause or which operate to impose any limitation, whether in time or
amount, on the collection and retention of any increase in the
Principal Rent or any part then and in each case respectively:-
5.9.1 the operation of the rent review provisions contained in this
clause shall be postponed to take effect on the first date on
which such operation (whether wholly or partially and with or
without limited effect) may occur and in the case of
restrictions which partially prevent or prohibit such
operation and/or limit its effect on each such date;
5.9.2 the collection of any increase in the rent shall be postponed
to take effect on the first date on which such increase may be
collected and/or retained in whole or in part and on as many
occasions as shall be required to ensure the collection of the
whole increase
and, until such restrictions shall be relaxed either wholly or
partially, the Principal Rent shall be the maximum sum from time to
time permitted by such restrictions.
5.10 MEMORANDA OF REVIEWED RENT
Within ten (10) Working Days after the amount of any reviewed rent has
been agreed or determined, memoranda recording that fact shall be
prepared by the Landlord or its solicitors and shall be signed by or on
behalf of the Landlord and the Tenant and any Guarantor and annexed to
this Lease and its counterpart. The parties shall each bear their own
costs in relation to the preparation and signing of such memoranda.
<PAGE> 24
5.11 TIME NOT OF THE ESSENCE
For the purpose of this clause, time shall not be of the essence.
6. INTEREST
6.1 INTEREST ON LATE PAYMENTS
Without prejudice to any other right, remedy or power contained in this
Lease or otherwise available to the Landlord, if any of the Rents
(whether formally demanded or not) or any other sum of money payable to
the Landlord by the Tenant under this Lease shall not be paid so that
the Landlord receives full value in cleared funds:-
6.1.1 in the case of the Principal Rent and any Value Added Tax
chargeable on it, within three Working Days of the day on
which payment is due; or
6.1.2 in the case of any other Rents or sums, within ten (10)
Working Days of the date when payment is due
the Tenant shall pay interest on such Rents and/or sums at the
Prescribed Rate from and including the date when payment was due to the
date of payment to the Landlord (both before and after any judgment).
<PAGE> 25
6.2 INTEREST ON REFUSED PAYMENTS
Without prejudice to any other right, remedy or power contained in this
Lease or otherwise available to the Landlord, if the Landlord acting as
a reasonable institutional Landlord shall decline to accept any of the
Rents so as not to waive any existing actual breach, the Tenant shall
pay interest on such Rent at the Prescribed Rate from and including the
date when payment was due (or, where applicable, would have been due if
demanded on the earliest date on which it could have been demanded) to
the date when payment is accepted by the Landlord.
7. OUTGOINGS
7.1 TENANT'S OBLIGATION TO PAY
The Tenant shall pay, or indemnify the Landlord against, all existing
and future rates, taxes, duties, charges, assessments, impositions and
other outgoings whatsoever (whether parliamentary, parochial, local or
of any other description and whether or not of a capital or
non-recurring nature or of a wholly novel character) which are now or
may at any time during the Term be charged, levied, assessed or imposed
upon, or payable in respect of, the Premises or upon the owner or
occupier of them (excluding any tax payable by the Landlord occasioned
by any disposition of, or dealing with, the reversion of this Lease or
receipt of the Rents) and, in the absence of a direct assessment on the
Premises, shall pay to the Landlord a fair proportion (to be reasonably
determined by the Landlord) of any such outgoings.
7.2 INDEMNITY AGAINST VOID RATING RELIEF
The Tenant shall indemnify the Landlord against any loss to the
Landlord of one half of the void rating relief which might have been
applicable to the Premises by reason of the Premises being vacant after
the end of the Term (or any earlier termination of it) on the ground
that such relief has already been allowed to the Tenant.
7.3 COSTS OF UTILITIES ETC.
The Tenant shall:-
7.3.1 pay all charges for electricity, gas and water consumed in the
Premises, including any connection and hiring charges and
meter rents; and
7.3.2 perform and observe all present and future regulations and
requirements of the electricity, gas and water supply
companies or boards in respect of the supply and consumption
of electricity, gas and water on the Premises.
<PAGE> 26
8. VALUE ADDED TAX
8.1 SUMS EXCLUSIVE OF VAT
All sums payable under this Lease by the Tenant to the Landlord (with
the exception of the rent reserved in clause 4.1.4) shall be deemed to
be exclusive of Value Added Tax.
8.2 TENANT TO PAY VAT
Where pursuant to the terms of this Lease the Landlord makes a supply
to the Tenant (other than a supply made in consideration for the
payment of the Rents) and Value Added Tax is payable in respect of such
supply, the Tenant shall pay to the Landlord on the date of such supply
a sum equal to the amount of Value Added Tax so payable and any penalty
or interest incurred by the Landlord for any late payment of such Value
Added Tax.
8.3 VAT INCURRED BY LANDLORD
Where the Tenant is required by the terms of this Lease to reimburse
the Landlord for the costs or expenses of any supplies made to the
Landlord, the Tenant shall also at the same time pay or, as the case
may be, indemnify the Landlord against all Value Added Tax input tax
incurred by the Landlord in respect of those supplies save to the
extent that the Landlord is entitled to repayment or credit in respect
of such Value Added Tax input tax.
9. TAXATION
Notwithstanding anything contained in this Lease, the Tenant shall:-
9.1 not do on, or in relation to, the Premises or any part of them, or in
relation to any interest of the Tenant in the Premises, any act or
thing (other than the payment of the Rents) which shall render the
Landlord liable for any tax, levy, charge or other fiscal imposition of
whatsoever nature;
9.2 not dispose of, or deal with, this Lease in such a way that the
Landlord shall be or become liable for any such tax, levy, charge or
fiscal imposition; and
9.3 indemnify the Landlord against any loss arising from a breach of the
terms of clause 9.1 or clause 9.2.
10. LANDLORD'S COSTS
Within ten (10) Working Days of written demand, the Tenant shall pay,
or indemnify the Landlord and any mortgagee against, all reasonable
costs, fees, charges, disbursements and expenses properly incurred by
them, including those payable to solicitors, counsel, surveyors,
architects and bailiffs:-
<PAGE> 27
10.1 in relation to the preparation and service of a notice under
section 146 of the Law of Property Act 1925 or any proceedings
under section 146 or section 147 of that Act (whether or not
any right of re-entry or forfeiture has been waived by the
Landlord or a notice served under section 146 is complied with
by the Tenant or the Tenant has been relieved under the
provisions of that Act and even though forfeiture may be
avoided otherwise than by relief granted by the court);
10.2 in relation to the preparation and service of all notices and
schedules relating to any wants of repair, whether served
during or after the expiration of the Term (but relating in
all cases only to such wants of repair which accrued not later
than the expiration or earlier determination of the Term);
10.3 in connection with the recovery or attempted recovery of
arrears of rent or other sums due from the Tenant, or in
procuring the remedying of the breach of any covenant by the
Tenant;
10.4 in relation to any application for consent required or made
necessary by this Lease whether or not it is granted (except
in cases where the Landlord is obliged not to withhold its
consent unreasonably and the withholding of its consent is
held to be unreasonable), or the application is withdrawn;
10.5 in responding to any request made by the Tenant.
SECTION 4
REPAIRS, ALTERATIONS AND SIGNS
11. REPAIRS, DECORATION ETC.
11.1 REPAIRS
Subject to clause 11.2, the Tenant shall:-
11.1.1 repair and keep in good and substantial repair and condition
the Premises;
11.1.2 as and when necessary, replace any of the landlord's fixtures
and fittings which may be or become beyond repair with new
ones which are similar in type and quality; and
11.1.3 keep all parts of the Premises which are not built on in a
good and clean condition,
<PAGE> 28
adequately surfaced and free from weeds and all landscaped
areas properly cultivated and maintained and any trees
preserved.
11.2 DAMAGE BY THE INSURED RISKS
There shall be excepted from the obligations contained in clause 11.1
any damage caused by the Insured Risks save to the extent that payment
of the insurance moneys shall be withheld by reason of any act, neglect
or default of the Tenant, any undertenant or occupier or any of their
respective agents, licensees, visitors or contractors or any person
under the control of any of them.
11.3 INTERNAL DECORATIONS
The Tenant shall:-
11.3.1 in every Decoration Year and also in the last three (3) months
of the Term (whether determined by passage of time or
otherwise), in a good and workmanlike manner prepare and
decorate with good quality paint or otherwise treat, as
appropriate, all internal parts of the Premises, such
decorations and treatment in the last three months of the Term
to be executed in such colours and materials as the Landlord
may reasonably require;
11.3.2 as often as may be reasonably necessary, wash down all tiles,
glazed bricks and similar washable surfaces.
11.4 EXTERNAL DECORATIONS
The Tenant shall:-
11.4.1 in every Decoration Year and also during the last six (6)
months of the Term (whether determined by passage of time or
otherwise) in a good and workmanlike manner prepare and
decorate with at least two coats of good quality paint and in
colours to be approved in writing by the Landlord (such
approval not to be unreasonably withheld), or otherwise treat,
as appropriate, all external parts of the Premises;
11.4.2 as often as reasonably necessary, clean, make good and restore
and, where appropriate, treat with suitable preservative any
external cladding, brickwork, concrete, stonework or other
finish of the Premises.
<PAGE> 29
11.5 PLANT AND MACHINERY
The Tenant shall keep all lifts, boilers and central heating and air
conditioning plant, and other plant, machinery, apparatus and equipment
in the Premises properly maintained and in good working order and
condition and for that purpose shall:-
11.5.1 employ reputable contractors or appropriately qualified
persons regularly to inspect, maintain and service them;
11.5.2 renew or replace all working and other parts as and when
necessary.
11.6 CLEANING
The Tenant shall:-
11.6.1 keep the Premises in a clean and tidy condition;
11.6.2 at least once in every period of six months properly clean
both sides of the windows or window frames and all other glass
in the Premises.
11.7 CARPETING
The Tenant shall maintain the carpets now, or from time to time, laid
in the Premises and, when necessary, replace them with new carpets of
equivalent quality and value.
12. YIELD UP
12.1 REINSTATEMENT OF PREMISES
Immediately prior to the expiration or earlier determination of the
Term, the Tenant shall at its cost:-
12.1.1 replace any of the landlord's fixtures and fittings which
shall be missing, damaged (to the extent that the same are
beyond repair) or destroyed, with new ones of similar kind and
quality;
12.1.2 remove from the Premises any sign, writing or painting of the
name or business of the Tenant or any occupier of them and all
tenant's fixtures, fittings, furniture and effects and make
good, to the reasonable satisfaction of the Landlord, all
damage caused by such removal;
12.1.3 unless required by the Landlord not to do so by no less than
three months' prior
<PAGE> 30
notice, to remove and make good any alterations or additions
made to the Premises during the Term, and well and
substantially reinstate the Premises to the Landlord's
reasonable satisfaction.
12.2 YIELDING UP IN GOOD REPAIR
At the expiration or earlier determination of the Term, the Tenant
shall quietly yield up the Premises to the Landlord in good and
substantial repair and condition and in accordance with the covenants
by the Tenant contained in this Lease.
13. COMPLIANCE WITH NOTICES
13.1 TENANT TO REMEDY BREACHES OF COVENANT
Whenever the Landlord shall give written notice to the Tenant of any
defects, wants of repair or breaches of covenant, the Tenant shall,
within ninety (90) days of such notice, or such other period as may be
reasonable in the circumstances, make good such defects or wants of
repair and remedy the breach of covenant to the reasonable satisfaction
of the Landlord.
13.2 FAILURE OF TENANT TO REPAIR
If the Tenant shall fail within fifteen (15) Working Days of such
notice, or as soon as reasonably possible in the case of emergency, to
commence and then diligently and expeditiously to continue to comply
with such notice, the Landlord may enter the Premises and carry out, or
cause to be carried out, any of the works properly referred to in such
notice and all costs and expenses incurred as a result shall be paid by
the Tenant to the Landlord on demand and, in default of payment, shall
be recoverable as rent in arrear.
14. ALTERATIONS
14.1 NO STRUCTURAL ALTERATIONS
14.1.1 The Tenant shall not alter, cut into or remove the structural frame or
foundations of the Premises.
14.1.2 Subject to clause 14.1.1, the Tenant shall not make any other
alterations to the structure of the Premises without the prior written
consent of the Landlord (such consent not to be unreasonably withheld).
14.2 NON-STRUCTURAL ALTERATIONS
The Tenant shall not make any alteration or addition of a
non-structural nature to the Premises nor to the Conduits or Mechanical
or Electrical installations in the Premises without the prior written
consent of the Landlord (such consent not to be unreasonably withheld).
<PAGE> 31
14.3 DEMOUNTABLE PARTITIONING
The Tenant may install, alter or remove demountable partitioning in the
Premises without the prior written consent of the Landlord provided
always that the Tenant shall remove such partitioning and reinstate the
Premises at the end or earlier determination of the Lease.
14.4 COVENANTS BY TENANT
The Tenant shall enter into:-
(a) such covenants as the Landlord may reasonably require
regarding the execution of any works to which the Landlord
consents under this clause, and
(b) such covenants as the Landlord may require regarding the
reinstatement of the Premises at the end or earlier
determination of the Term.
15. SIGNS AND ADVERTISEMENTS
15.1 For so long as the Tenant remains in actual occupation of the whole or
substantially the whole of the Premises, the Tenant shall have the
right to designate the name of the Premises and the right to erect and
display on the Premises a sign or signs indicating the name of the
Premises and the name and trade carried on by the Tenant, such rights
being subject to obtaining the prior written approval of the Landlord
(not to be unreasonably withheld) as to name of the Premises and the
size, style and position and the materials to be used for any signs.
15.2 Subject to clause 15.1, the Tenant shall not erect or display on the
exterior of the Premises or in the windows of them so as to be visible
from the exterior, any advertisement, poster, notice, pole, flag,
aerial, satellite dish or any other sign or thing without the prior
written approval of the Landlord to the size, style and position and
the materials to be used such approval not to be unreasonably withheld.
<PAGE> 32
SECTION 5
USE
16. USE OF PREMISES
16.1 PERMITTED USE
The Tenant shall not use the Premises or any part of them except for
the Permitted Use.
16.2 TENANT NOT TO LEAVE PREMISES UNOCCUPIED
The Tenant shall not leave the Premises continuously unoccupied for
more than thirty (30) days without notifying the Landlord and
providing, or paying for, such caretaking or security arrangements as
the Landlord shall reasonably require in order to protect the Premises
from vandalism, theft or unlawful occupation.
17. USE RESTRICTIONS
The Tenant shall perform and observe the obligations set out in
SCHEDULE 2.
18. EXCLUSION OF WARRANTY AS TO USER
18.1 NO WARRANTY BY LANDLORD
Nothing contained in this Lease, or in any consent or approval granted
by the Landlord under this Lease, shall imply or warrant that the
Premises may be used under the Planning Acts for the purpose permitted
by this Lease or any purpose subsequently permitted.
18.2 TENANT'S ACKNOWLEDGEMENT
The Tenant acknowledges that neither the Landlord nor any person acting
on behalf of the Landlord has at any time made any representation or
given any warranty that any use permitted by this Lease is, will be, or
will remain, a use authorised under the Planning Acts and even though
any such use may not be a use authorised under the Planning Acts, the
Tenant shall remain fully liable to the Landlord in respect of the
obligations undertaken by the Tenant in this Lease without being
entitled to any compensation, recompense or relief of any kind.
<PAGE> 33
SECTION 6
DISPOSALS
19. GENERAL RESTRICTIONS
19.1 ALIENATION GENERALLY
The Tenant shall not assign, charge, underlet or part with possession
or share the occupation of, or permit any person to occupy, or create
any trust in respect of the Tenant's interest in, the whole or any part
of the Premises, except as may be expressly permitted by this clause
and clauses 20, 21 and 22.
19.2 SHARING WITH A GROUP COMPANY
Nothing in this clause or clauses 20, 21 and 22 shall prevent the
Tenant from sharing occupation of the whole or any part of the Premises
with any company which is, for the time being, a Group Company of the
Tenant subject to (a) the Tenant giving to the Landlord written notice
of the sharing of occupation and the name of the Group Company
concerned within five (5) Working Days after the sharing begins (b) the
Tenant and that Group Company remaining in the same relationship whilst
the sharing lasts and (c) the sharing not creating the relationship of
landlord and tenant between the Tenant and that Group Company.
20. ASSIGNMENT
20.1 NO ASSIGNMENT OF PART
The Tenant shall not assign any part or parts (as distinct from the
whole) of the Premises.
20.2 CIRCUMSTANCES IN WHICH CONSENT TO ASSIGNMENT MAY BE WITHHELD
For the purposes of Section 19 (1 A) of the Landlord and Tenant Act
1927 it is agreed that the Landlord may withhold its consent to an
assignment of the whole of the Premises in the following circumstances:
20.2.1 Where the proposed assignee is resident in the United Kingdom,
or in the case of a body corporate is incorporated in the
United Kingdom, if the Pre-tax Profits of the proposed
assignee for each of the three consecutive years immediately
prior to the application to the Landlord do not exceed three
times the Principal Rent, and the Net Tangible Assets of the
proposed assignee do not exceed five times the Principal Rent
for each of the years in the same three year period;
20.2.2 Where the proposed assignee is not resident in, or in the case
of a body corporate, is not incorporated in the United
Kingdom, except where the proposed assignee is
<PAGE> 34
incorporated in a jurisdiction which recognises judgments of
the United Kingdom courts as enforceable without
reconsideration of the merits of the issues determined by the
United Kingdom courts;
20.2.3 Where the proposed assignee is not resident in, or in the case
of a body corporate, is not incorporated in the United
Kingdom, if the Pre-tax Profits of the proposed assignee for
each of the three consecutive years immediately prior to the
application to the Landlord do not exceed six times the
Principal Rent, and the Net Tangible Assets of the proposed
assignee do not exceed ten times the Principal Rent for each
of the years in the same three year period;
20.2.4 Where the proposed assignee is an associated company of the
Tenant, except where the assignment is made jointly to such
associated company and the Tenant and any Guarantor, and the
financial strength of such associated company is equal to or
greater than that of the Tenant and any Guarantor;
20.2.5 Where the proposed assignee is any person or entity who has
the right to claim sovereign or diplomatic immunity or
exemption from liability from the covenants on the part of the
Tenant contained in this Lease
20.2.6 Where the proposed assignee is any person or entity in relation
to whom any of the events mentioned in Clause 30.2 of this
Lease would have occurred if that person or entity were the
Tenant under this Lease.
20.2.7 If there are any arrears of the Rents or any material
outstanding breaches of the Tenant's obligations under this
Lease.
20.2.8 If in the Landlord's reasonable opinion the proposed assignee
is not of sufficient financial standing to comply with the
obligations of the Tenant contained in this Lease.
20.3 CONDITIONS FOR LANDLORD'S CONSENT
For the purposes of Section 19 (1 A) of the Landlord and Tenant Act
1927 it is further agreed that any consent of the Landlord to an
assignment of the whole of the Premises may be subject to the following
conditions:-
(i) that the Tenant shall, prior to the proposed assignment being
completed, execute and deliver to the Landlord a deed which
shall be prepared by the Landlord's
<PAGE> 35
solicitors containing covenants on the part of the Tenant in
the form of those contained in Schedule 4 (therein defined as
the "Present Tenant");
(ii) that if the Landlord is entitled to withhold its consent to an
assignment of this Lease to the proposed assignee pursuant to
clause 20.2.1 or clause 20.2.3 the Tenant shall procure that a
guarantor reasonably acceptable to the Landlord and which has
Net Tangible Assets at least equal to those of Seagate
Technology Inc as at the date hereof and which, in the case of
a body corporate is either incorporated in the United Kingdom,
or incorporated in a jurisdiction which recognises judgments
of the United Kingdom courts as enforceable without
reconsideration of the merits of the issues determined by the
United Kingdom courts, shall enter into covenants in the form
of the covenants contained in Schedule 3.
20.4 ASSIGNMENT OF THE WHOLE
Without prejudice to the provisions of Clauses 19 to 20.3 inclusive the
Tenant shall not assign the whole of the Premises without the prior
written consent of the Landlord and except in relation to the
circumstances mentioned in Clause 20.2 and the conditions mentioned in
Clause 20.3 such consent shall not be unreasonably withheld. The
parties agree that in considering whether or not the Landlord is
reasonably withholding such consent due and proper regard shall be had
to the provisions and effect of the Landlord and Tenant (Covenants) Act
1995.
20.5 S.144 LPA 1925
To the extent (if any) necessary to make the foregoing provisions of
this Lease effective but not further or otherwise) Section 144 of the
Law of Property Act 1925 shall not apply.
21. ARRANGEMENTS FOR THE SUBSTITUTION OF THE GUARANTOR
21.1 SUBSTITUTION AND RELEASE OF SEAGATE TECHNOLOGY INC
Seagate Technology Inc shall be entitled to be released from its
liability as guarantor under the terms of this Lease in the following
circumstances and upon the following conditions:
(a) (i) that the issued share capital of Seagate Software
Inc is successfully listed on the NASDAQ Stock Market
or another publicly traded US Stock Exchange for
which the requirements for listing are at least
equivalent to those of the NASDAQ Stock Market and
for the year immediately prior to the application to
the Landlord, its Pre-tax Profits are equivalent to
nine times the Principal Rent, and for each of the
two consecutive preceding years its Pre-tax Profits
are equivalent to six times the Principal Rent
<PAGE> 36
payable at the time of the application to the
Landlord; or
(ii) Seagate Software Inc. has for each of the three
consecutive years immediately prior to the
application to the Landlord Pre-tax Profits
equivalent to twelve times the Principal Rent payable
at the time of the application to the Landlord; and
(iii) in either of the circumstances mentioned in (i) or
(ii) above Seagate Software Inc. enters into a Deed
of Covenant with the Landlord containing covenants in
the form of those contained in Schedule 3; or
(b) Seagate Software Ltd has, for each of the three consecutive
years immediately prior to the application to the Landlord,
Pre-tax Profits equivalent to three times the Principal Rent,
and Net Tangible Assets in the UK equivalent to five times the
Principal Rent for each of the years in the same three year
period; or
(c) the Tenant proposes to assign the whole of the Premises to
Seagate Software Ltd and another company which is either:
(i) a UK company or a foreign company with UK assets,
which has for each of the three consecutive years
immediately prior to the application to the Landlord,
Pre-tax Profits equivalent to three times the
Principal Rent, or Net Tangible Assets in the UK
equivalent to five times the Principal Rent for each
of the years in the same three year period and, in
the case of a foreign company, that company is
incorporated in a jurisdiction which recognises
judgments of the United Kingdom courts as enforceable
without reconsideration of the issues determined by
the United Kingdom courts; or
(ii) a foreign company without assets in the UK which has
for each of the three consecutive years immediately
to the application to the Landlord Pre-tax Profits
equivalent to six times the Principal Rent and Net
Tangible Assets equivalent to ten times the Principal
Rent for each of the years in the same three year
period and, in the case of a foreign company, that
company is incorporated in a jurisdiction which
recognises judgments of the United Kingdom courts as
enforceable without reconsideration of the issues
determined by the United Kingdom courts.
<PAGE> 37
21.2 PROVISIONS OF ACCOUNTS AND OTHER DOCUMENTARY EVIDENCE
If the conditions referred to in clause 21.1(a), (b) or (c) are
satisfied, the Tenant shall serve written notice on the Landlord and
provide such copy accounts and other documentary evidence as is
sufficient to demonstrate that such conditions are satisfied or
otherwise as the Landlord may reasonably require and if such evidence
is provided to the Landlord as is sufficient to show that the
circumstances referred to in clause 21.1(a) or clause 21.1(b) are
satisfied the Landlord, the Tenant and Seagate Technology Inc. shall
within twenty (20) Working Days thereafter enter into a Deed of Release
in the form of the draft deed contained in Schedule 5.
21.3 LANDLORD'S CONSENT TO ASSIGNMENT
(Subject to Clause 21.4) the Landlord shall not withhold its consent to
an assignment of the whole of the Premises in the circumstances
referred to in clause 21.1(c), and within twenty (20) Working Days
after receipt by the Landlord of copies of such accounts and other
documentary evidence as is sufficient to demonstrate that such
conditions are satisfied or otherwise as the Landlord may reasonably
require, the Landlord, the Tenant, the proposed assignee and Seagate
Technology Inc shall enter into a Licence to Assign and Deed of Release
in the form of the draft deed contained in Schedule 6.
21.4 CONDITIONS FOR LANDLORD'S CONSENT
In relation to an assignment of the whole of the Premises in the
circumstances referred to in clause 21.1(c) the Landlord may withhold
its consent in the circumstances referred to in sub-clauses 20.2.2,
20.2.5 or 20.2.6 or if there are any material unremedied breaches of
the Tenant's obligations under this Lease but the other circumstances
referred to in clause 20.2 and the conditions referred to in clause
20.3 shall not apply.
21.5 APPLICATION FOR THE RELEASE OF SEAGATE SOFTWARE INC
In the event that a deed of covenant is entered into by Seagate
Software Inc. as referred to in Clause 21.1(a)(ii), Seagate Software
Inc shall be entitled to be released from its liability as guarantor
under such deed in the following circumstances and upon the following
conditions:
(a) Seagate Software Ltd has for each of the three consecutive
years immediately prior to the application to the Landlord,
Pre-tax Profits equivalent to three times the Principal Rent,
or Net Tangible Assets in the UK equivalent to five times the
Principal Rent for each of the years in the same three year
period; or
(b) the Tenant proposes to assign the whole of the Premises to
Seagate Software Ltd and another company which is either:
<PAGE> 38
(i) a UK company or a foreign company with UK assets,
which has for each of the three consecutive years
immediately prior to the application to the Landlord,
Pre-tax Profits equivalent to three times the
Principal Rent, or Net Tangible Assets in the UK
equivalent to five times the Principal Rent for each
of the years in the same three year period and, in
the case of a foreign company, that company is
incorporated in a jurisdiction which recognises
judgments of the United Kingdom courts as enforceable
without reconsideration of the issues determined by
the United Kingdom courts; or
(ii) a foreign company without assets in the UK which has
for each of the three consecutive years immediately
prior to the application to the Landlord Pre-tax
Profits equivalent to six times the Principal Rent
and Net Tangible Assets worth equivalent to ten times
the Principal Rent for each of the years in the same
three year period and, in the case of a foreign
company, that company is incorporated in a
jurisdiction which recognises judgments of the United
Kingdom courts as enforceable without reconsideration
of the issues determined by the United Kingdom
courts.
21.6 PROVISION OF ACCOUNTS AND OTHER DOCUMENTARY EVIDENCE
If the conditions referred to in clause 21.5(a) or (b) are satisfied
the Tenant shall serve written notice on the Landlord and provide such
copies of accounts and other documentary evidence as is sufficient to
demonstrate that such conditions are satisfied or otherwise as the
Landlord may reasonably require and if such evidence is provided to the
Landlord as is sufficient to show that the circumstance referred to in
clause 21.5(a) is satisfied the Landlord, the Tenant and Seagate
Software Inc. shall within twenty (20) Working Days thereafter enter
into a Deed of Release in the form of the draft deed contained in
Schedule 5.
21.7 LANDLORD'S CONSENT TO ASSIGNMENT
The Landlord shall not withhold its consent to an assignment of the
whole of the Premises in the circumstances referred to in clause
21.5(b), and within twenty (20) Working Days after receipt by the
Landlord of copies of such accounts and other documentary evidence as
the Landlord shall reasonably require, the Landlord and Seagate
Software Inc shall enter into a Licence to Assign and Deed of Release
in the form of the draft deed contained in Schedule 6.
21.8 CONDITIONS FOR LANDLORD'S CONSENT
In relation to an assignment of the whole of the Premises in the
circumstances referred to in
<PAGE> 39
clause 21.5(b) the Landlord may withhold its consent in the
circumstances referred to in sub-clauses 20.2.2, 20.2.5 or 20.2.6 or if
there are any outstanding breaches of the Tenant's obligations under
this Lease, but the other circumstances referred to in clause 20.2
referred to in clause 20.3 shall not apply.
22. UNDERLETTING
22.1 SUBLETTING UNIT
For the purposes of this clause "Subletting Unit" means each separate
unit of accommodation which comprises:-
(i) the whole of the Net Internal Area of a floor other than the
basement; or
(ii) a part of a floor of the Premises (other than the basement)
which is capable of being occupied and used as a separate and
self contained unit with all necessary and proper services;
(iii) any combination of contiguous complete floors of the Premises;
and
(iv) a complete floor or floors or a part of a floor as described
in (ii) above and the whole of the basement or a part of the
basement which is capable of being occupied and used as a
separate and self-contained unit with all necessary and proper
services.
22.2 UNDERLETTING OF PART
The Tenant shall not underlet any part of the Premises other than on
the following conditions:-
22.2.1 the Premises shall not at any time be in the occupation of
more than six (6) persons, the Tenant and any Group Company
which is permitted to share occupation under clause 19.2
counting as one; and
22.2.2 there shall not at any time be more than two persons in
occupation of any one floor of the Premises, the Tenant and
any Group Company which is permitted to share occupation under
Clause 19.2 counting as one; and
22.2.3 the part of the Premises to be underlet shall comprise a
Subletting Unit only; and
22.2.4 if the Landlord shall reasonably so require, the Tenant shall
obtain an acceptable guarantor for any proposed undertenant
and such guarantor shall execute and
<PAGE> 40
deliver to the Landlord a deed containing covenants by that
guarantor (or, if more than one, joint and several covenants)
with the Landlord, as a primary obligation, in the terms
contained in SCHEDULE 3 (with any necessary changes) or in
such other terms as the Landlord may reasonably require; and
22.2.5 the underlease shall incorporate an agreement, authorised
beforehand by the Court, excluding sections 24 to 28 of the
Landlord and Tenant Act 1954 in relation to such underlease.
22.3 UNDERLETTING OF THE WHOLE
The Tenant shall not underlet the whole of the Premises other than on
condition that the underlease incorporates an agreement, authorised
beforehand by the Court, excluding sections 24 to 28 of the Landlord
and Tenant Act 1954 in relation to such underlease.
22.4 UNDERLETTING RENT
The Tenant shall not underlet the whole of the Premises or part at a
fine or premium or at a rent less than the open market rent of the
Premises.
22.5 DIRECT COVENANTS FROM UNDERTENANT
Prior to any permitted underlease, the Tenant shall procure that the
undertenant enters into the following direct covenants with the
Landlord:-
22.5.1 an unqualified covenant by the undertenant not to assign or
charge any part of the premises to be underlet;
22.5.2 an unqualified covenant by the undertenant not to underlet the
whole or any part of the premises to be underlet nor (save by
way of an assignment of the whole or an underlease of the
whole of the premises to be underlet) part with possession or
share the occupation of the whole or any part of the premises
to be underlet or permit any person to occupy them;
22.5.3 a covenant by the undertenant not to assign, or charge or
underlet the whole of the premises to be underlet without the
prior written consent of the Landlord, such consent not to be
unreasonably withheld;
22.5.4 a covenant by the undertenant to perform and observe all the
tenant's covenants contained in (a) this Lease (other than the
payment of the Rents) so far as the same are applicable to the
premises to be underlet, and (b) the permitted underlease.
<PAGE> 41
22.6 CONTENTS OF UNDERLEASE
Every permitted underlease (a final copy of which shall be supplied to,
and approved by, the Landlord prior to its grant, such approval not to
be unreasonably withheld) shall contain:-
22.6.1 provisions for the review of the rent payable under it on an
upwards only basis corresponding both as to terms and dates
with the rent review provisions in this Lease;
22.6.2 a covenant by the undertenant (which the Tenant covenants to
enforce) prohibiting the undertenant from doing or suffering
any act or thing on, or in relation to, the premises underlet
inconsistent with, or in breach of, this Lease;
22.6.3 a condition for re-entry on breach of any covenant by the
undertenant;
22.6.4 the same restrictions as to assignment, underletting, charging
and parting with or sharing the possession or occupation of
the premises underlet, and the same provisions for direct
covenants and registration, as are in this Lease (with any
necessary changes).
22.7 TENANT TO OBTAIN LANDLORD'S CONSENT
Without prejudice to the other provisions of this clause, the Tenant
shall not underlet the whole of the Premises or underlet a Subletting
Unit without the prior written consent of the Landlord, such consent
not to be unreasonably withheld or delayed.
22.8 TENANT TO ENFORCE OBLIGATIONS
The Tenant shall enforce the performance and observance of the
covenants by the undertenant contained in any permitted underlease and
shall not, at any time, either expressly or by implication, waive any
breach of them.
22.9 REVIEW OF UNDERLEASE RENT
The Tenant shall:-
22.9.1 procure that the rent under any permitted underlease is
reviewed in accordance with its terms but shall not agree any
reviewed rent with the undertenant nor any rent payable on any
renewal of it without the prior written consent of the
Landlord (such consent not to be unreasonably withheld);
<PAGE> 42
22.9.2 procure that the Landlord's representations as to the rent
payable under that underlease are made to the independent
person appointed to determine the rent under the underlease to
the reasonable satisfaction of the Landlord; and
22.9.3 if the rent under any such underlease is to be determined by
an independent person, not determine whether such person is to
act as an expert or as an arbitrator without the Landlord's
prior written consent (such consent not to be unreasonably
withheld or delayed).
22.10 NO VARIATION OF TERMS
The Tenant shall not vary the terms, or accept any surrender, of any
permitted underlease, without the prior written consent of the
Landlord, such consent not to be unreasonably withheld.
22.11 NO REDUCTION IN RENT
The Tenant shall procure that the rent payable under any permitted
underlease is not commuted or made payable more than one quarter in
advance, and shall not permit any reduction of that rent.
23. REGISTRATION OF DISPOSITIONS
Within fifteen (15) Working Days of every assignment, transfer, assent,
underlease, assignment of underlease, mortgage, charge or any other
disposition, whether mediate or immediate, of or relating to the
Premises or any part, the Tenant shall provide the Landlord or its
solicitors with a copy (certified as true) of the deed, instrument or
other document evidencing or effecting such disposition and, on each
occasion, shall pay to the Landlord or its solicitors a fee of
Twenty-five pounds (L25.00) or such larger sum as may be reasonable.
SECTION 7
LEGAL REQUIREMENTS
24. STATUTORY REQUIREMENTS
24.1 TENANT TO COMPLY WITH STATUTES
The Tenant shall, at its expense, comply in all respects with every
statute now in force or which may, after the date of this Lease, be in
force and any other obligation imposed by law and all regulations laws
or directives made or issued by or with the authority of The European
Commission and/or The Council of Ministers relating to the Premises or
their use, including the Offices, Shops and Railway Premises Act 1963,
the Fire Precautions Act 1971, the Defective Premises Act 1972, the
Health and Safety at Work etc. Act 1974 and the
<PAGE> 43
Environmental Protection Act 1990.
24.2 TENANT TO EXECUTE NECESSARY WORKS
The Tenant shall execute all works and provide and maintain all
arrangements on or in respect of the Premises or their use which are
required by any statute now in force or which may after the date of
this Lease be in force or by any government department, local, public
or other competent authority or court of competent jurisdiction acting
under or in pursuance of any statute, whether any of the same are
required to be carried out by the landlord, tenant or occupier, and
shall indemnify the Landlord against all costs, charges, fees and
expenses of, or incidental to, the execution of any works or the
provision or maintenance of any arrangements so required.
24.3 TENANT TO REFRAIN FROM CERTAIN ACTS
The Tenant shall not do, or omit to be done, in or near the Premises,
any act or thing by reason of which the Landlord may, under any
statute, incur or have imposed upon it, or become liable to pay, any
damages, compensation, costs, charges, expenses or penalty.
25. PLANNING ACTS
25.1 TENANT'S OBLIGATION TO COMPLY
The Tenant shall comply with the Planning Acts and with any planning
permission relating to, or affecting, the Premises, and indemnify the
Landlord against all actions, proceedings, claims, demands, losses,
costs, expenses, damages and liability whatsoever in respect of any
non-compliance.
25.2 NO APPLICATION FOR PLANNING PERMISSION WITHOUT CONSENT
The Tenant shall not make any application for planning permission or
for other consents required under the Planning Acts in respect of the
Premises without the prior written consent of the Landlord, such
consent not to be unreasonably withheld.
25.3 TENANT TO OBTAIN ALL PERMISSIONS
The Tenant shall, at its expense, obtain and, if appropriate, renew any
planning permission and any other consent and serve all necessary
notices required for the carrying out by the Tenant of any operations
or the commencement or continuance of any use on the Premises.
<PAGE> 44
25.4 TENANT TO PAY PLANNING CHARGES
The Tenant shall pay and satisfy any charge or levy imposed under the
Planning Acts in respect of any Development by the Tenant on the
Premises.
25.5 NO IMPLEMENTATION OF PERMISSION WITHOUT APPROVAL
The Tenant shall not implement any planning permission or consent
required under the Planning Acts before it has been produced to, and
approved in writing by, the Landlord, such approval not to be
unreasonably withheld but the Landlord may refuse to approve such
planning permission or consent on the grounds that any condition
contained in it, or anything omitted from it, or the period referred to
in it, would, in the reasonable opinion of the Landlord, be or be
likely to be materially prejudicial to the Landlord's interest in the
Premises, whether during or following the expiration or earlier
determination of the Term.
25.6 TENANT TO CARRY OUT WORKS BEFORE END OF TERM
Unless the Landlord shall otherwise direct in writing, the Tenant shall
carry out and complete before the expiration or earlier determination
of the Term:-
25.6.1 any works required to be carried out to the Premises as a
condition of any planning permission granted during the Term
and implemented by the Tenant whether or not the date by which
the planning permission requires such works to be carried out
is within the Term; and
25.6.2 any Development begun upon the Premises in respect of which
the Landlord may be or become liable for any charge or levy
under the Planning Acts.
25.7 PLANS ETC. TO BE PRODUCED
The Tenant shall produce to the Landlord on demand all plans, documents
and other evidence as the Landlord may reasonably require in order to
satisfy itself that this clause has been complied with.
25.8 PLANNING CONDITIONS
Where a planning permission has been granted subject to conditions, the
Landlord shall be entitled, where it is reasonable to do so, to require
the Tenant to provide security for compliance with such conditions, and
the Tenant shall not implement the planning permission until security
shall have been provided to the reasonable satisfaction of the
Landlord.
<PAGE> 45
25.9 PLANNING REFUSAL
If reasonably required by the Landlord and at the cost of the Landlord,
the Tenant shall appeal against any refusal of planning permission or
the imposition of any condition in a planning permission relating to
the Premises following an application made by the Tenant.
26. STATUTORY NOTICES
26.1 NOTICES GENERALLY
The Tenant shall:-
26.1.1 within ten (10) Working Days (or sooner if necessary having
regard to the requirements of the notice or order in question
or the time limits stated in it) of receipt of any notice or
order or proposal for a notice or order given to the Tenant
and relevant to the Premises or any occupier of them by any
government department, local, public or other competent
authority or court of competent jurisdiction, provide the
Landlord with a true copy of it and any further particulars
required by the Landlord;
26.1.2 without delay, take all necessary steps to comply with the
notice or order so far as the same is the responsibility of
the Tenant; and
26.1.3 at the request of the Landlord but at the joint cost of the
Landlord and the Tenant, make or join with the Landlord in
making such objection, complaint, representation or appeal
against or in respect of any such notice, order or proposal as
the Landlord shall deem expedient.
26.2 PARTY WALL ETC. ACT 1996
The Tenant shall:-
26.2.1 Forthwith after receipt by the Tenant of any notice served on
the Tenant under the Party Wall etc. Act 1996 provide the
Landlord with a true copy of it and of any further particulars
required by the Landlord;
26.2.2 At the request of the Landlord acting reasonably but at the
joint cost of Landlord and the Tenant make or join with the
Landlord in making such objection complaint representation and
in serving such counter notice against or in respect of any
such notice as the Landlord shall deem expedient;
<PAGE> 46
26.2.3 At the request of the Landlord but at the joint cost of the
Landlord and the Tenant make or join with the Landlord in
serving any such notice on any adjoining owner under the Party
Wall etc. Act 1996 as the Landlord may from time to time
require.
27. FIRE PRECAUTIONS AND EQUIPMENT
27.1 COMPLIANCE WITH REQUIREMENTS
The Tenant shall comply with the requirements of the fire authority and
the insurers of the Premises and the reasonable requirements of the
Landlord in relation to fire precautions affecting the Premises.
27.2 FIRE FIGHTING APPLIANCES TO BE SUPPLIED
The Tenant shall keep the Premises equipped with such fire fighting
appliances as shall be required by any statute, the fire authority or
the insurers of the Premises, or as shall be reasonably required by the
Landlord and the Tenant shall keep such appliances open to inspection
and maintained to the reasonable satisfaction of the Landlord.
27.3 ACCESS TO BE KEPT CLEAR
The Tenant shall not obstruct the access to, or means of working, any
fire fighting appliances or the means of escape from the Premises in
case of fire or other emergency.
28. DEFECTIVE PREMISES
Immediately upon becoming aware of the same, the Tenant shall give
written notice to the Landlord of any defect in the Premises which
might give rise to an obligation on the Landlord to do, or refrain from
doing, any act or thing so as to comply with any duty of care imposed
on the Landlord under the Defective Premises Act 1972, and shall
display and maintain in the Premises all notices which the Landlord
may, from time to time, reasonably require to be displayed in relation
to any such matters.
SECTION 8
INSURANCE
29. INSURANCE PROVISIONS
29.1 LANDLORD TO INSURE
The Landlord shall insure and keep insured with some publicly quoted
insurance company (or a subsidiary of a publicly quoted company) or
with Lloyds' underwriters and through such agency as the Landlord may,
from time to time, determine, (at economic market rates having regard
to all the circumstances) subject to such exclusions, excesses,
limitations, terms and conditions as may properly be contained in any
policy taken out by the Landlord having
<PAGE> 47
regard to current market practice at the time and at reasonably
competitive cost having regard to the terms of the policy:-
29.1.1 the Premises (including plate glass) in their Full
Reinstatement Cost against loss or damage by the Insured
Risks;
29.1.2 the loss of the Principal Rent from time to time payable, or
reasonably estimated to be payable, under this Lease, taking
account of any review of the rent which may become due under
this Lease, for three (3) years;
29.1.3 explosion of any engineering and electrical plant and
machinery in the Premises to the extent that the same is not
covered by clause 29.1.1;
29.1.4 property owner's liability and such other insurances in
respect of the Premises as the Landlord may, from time to
time, properly deem necessary to effect.
29.2 WAIVER OF SUBROGATION
The Landlord shall use all reasonable endeavours to obtain from the
insurers of the Premises a waiver of the insurers' rights of
subrogation against the Tenant.
29.3 FULL REINSTATEMENT COST
In this clause, "FULL REINSTATEMENT COST" means the full cost of
reinstating the Premises at the time when such reinstatement is likely
to take place, having regard to any possible increases in building
costs, and including the cost of demolition, shoring up, site
clearance, ancillary expenses and architects', surveyors' and other
professional fees and any necessary Value Added Tax.
29.4 LANDLORD'S FIXTURES
The Tenant shall notify the Landlord in writing on request of the full
reinstatement cost of any fixtures and fittings installed at any time
by the Tenant and which may become landlord's fixtures and fittings for
the purpose of enabling the Landlord to effect adequate insurance cover
for them.
29.5 LANDLORD TO PRODUCE EVIDENCE OF INSURANCE
At the request of the Tenant, the Landlord shall produce to the Tenant
reasonable evidence from the insurers of the terms of the insurance
policy and the fact that the policy is subsisting and in effect.
<PAGE> 48
29.6 INSURANCE VALUATIONS
The Tenant shall pay on demand the proper costs from time to time of
any insurance valuations carried out by the Landlord in respect of the
Premises at such periods as the Landlord may reasonably consider
appropriate (but not more often than once in any period of 3 years).
29.7 DAMAGE TO THE PREMISES
If the Premises or any part of them shall be damaged or destroyed by
any of the Insured Risks so as to render the Premises unfit for use and
occupation or inaccessible then:-
29.7.1 unless payment of the insurance moneys shall be refused wholly
or partly by reason of any act or default of the Tenant, any
undertenant or occupier of any part of the Premises or any of
their respective agents, licensees, visitors or contractors or
any person under the control of any of them; and
29.7.2 subject to the Landlord being able to obtain any necessary
planning permission and all other necessary licences,
approvals and consents, which the Landlord shall use
reasonable endeavours to obtain but shall not be obliged to
institute any appeals; and
29.7.3 subject to any necessary labour and materials being and
remaining available, which the Landlord shall use reasonable
endeavours to obtain as soon as practicable
the Landlord shall reinstate and rebuild the Premises or the part of
the Premises so damaged or destroyed substantially as it was prior to
any such damage or destruction (but not so as to provide accommodation
identical in layout if it would not be reasonably practical to do so).
<PAGE> 49
29.8 WHERE REINSTATEMENT IS DELAYED OR PREVENTED
29.8.1 If the Premises or any part of them shall be damaged or destroyed by
any of the Insured Risks so as to render the Premises unfit for use and
occupation or inaccessible and the Landlord has not begun and is not
proceeding diligently to reinstate or rebuild the Premises or the part
of the Premises so damaged or destroyed two (2) years after the date of
such damage or destruction either party may at any time determine this
Lease by giving not less than one month's written notice to the other
party to expire on the expiry of the period of loss of rent insurance
whereupon the Landlord shall be released from any obligation to rebuild
or reinstate the Premises and shall be solely entitled to all the
insurance monies. Such determination shall be without prejudice to any
claim which the Landlord may have against the Tenant or any Guarantor
or which the Tenant may have against the Landlord for any previous
breach of covenant or sum previously accrued due.
29.8.2 If, for any reason whatsoever, the Landlord is prevented from
reinstating or rebuilding the Premises, having used all reasonable
endeavours to obtain all planning permissions, approvals and consents
necessary for such purpose, and the Landlord continues to be prevented
from reinstating or rebuilding for a period of three (3) years after
the date of the damage or destruction, the Landlord shall thereupon be
released from such obligation and shall be solely entitled to all the
insurance moneys. Unless this Lease has been terminated by frustration
in the meantime, either party may, at any time after the expiry of the
period of loss of rent insurance, determine this Lease by giving
written notice to the other but such determination shall be without
prejudice to any claim which the Landlord may have against the Tenant
or any Guarantor or which the Tenant may have against the Landlord for
any previous breach of covenant or sum previously accrued due.
29.9 PAYMENT OF INSURANCE MONEY REFUSED
If payment of any insurance money is properly refused as a result of
some act or default of the Tenant, any undertenant or occupier of any
part of the Premises or any of their respective agents, licensees,
visitors or contractors or any person under the control of any of them,
the Tenant shall pay to the Landlord, on written demand, the amount so
refused with interest on that amount at two per cent below the
Prescribed Rate from and including the date of such refusal to the date
of payment by the Tenant.
<PAGE> 50
29.10 SUSPENSION OF RENT PAYMENTS
If the Premises or any part of them shall be damaged or destroyed by
any of the Insured Risks so as to render the Premises unfit for use and
occupation or inaccessible, the Principal Rent or a fair proportion
thereof according to the nature and extent of the damage sustained,
shall not be payable until the Premises or the part damaged or
destroyed shall be again rendered fit for use and occupation and
accessible. Such suspension of rent shall be conditional upon the
insurance not having been vitiated or payment of the policy moneys
refused wholly or partly as a result of some act or default of the
Tenant, any undertenant or occupier of any part of the Premises or any
of their respective agents, licensees, visitors or contractors or any
person under the control of any of them. Any dispute regarding the
suspension of payment of the Principal Rent shall be referred to a
single arbitrator to be appointed, in default of agreement, upon the
application of either party, by the President in accordance with the
Arbitration Act 1996.
29.11 DOUBLE INSURANCE
If the Tenant shall become entitled to the benefit of any insurance
covering any part of the Insured Risks relating to the Premises which
is not effected or maintained in pursuance of the obligations contained
in this Lease, the Tenant shall apply any money received from such
insurance (in so far as it extends) in making good the loss or damage
in respect of which it shall have been received.
29.12 INSURANCE BECOMING VOID
The Tenant shall not do, or omit to do:-
29.12.1 anything which could cause any policy of insurance covering
the Premises to become wholly or partly void or voidable; or
29.12.2 anything whereby any abnormal or loaded premium may become
payable in respect of the policy, unless the Tenant has
previously notified the Landlord and agreed to pay the
increased premium
and, in any event, the Tenant shall pay to the Landlord on written
demand all expenses incurred by the Landlord in renewing any such
policy.
<PAGE> 51
29.13 REQUIREMENTS OF INSURERS
The Tenant shall, at all times, comply with any requirements of the
insurers of the Premises so far as the same are known by the Tenant.
29.14 NOTICE BY TENANT
The Tenant shall give notice to the Landlord immediately on the
happening of any event or thing which the Tenant reasonably believes
might affect any insurance policy relating to the Premises.
SECTION 9
DEFAULT OF TENANT AND RIGHTS OF RE-ENTRY
30. DEFAULT OF TENANT
30.1 RE-ENTRY
Without prejudice to any other right, remedy or power contained in this
Lease or otherwise available to the Landlord, on or at any time after
the happening of any of the events mentioned in clause 30.2, the
Landlord may re-enter the Premises or any part of them in the name of
the whole, and the Term shall then end, but without prejudice to any
claim which the Landlord may have against the Tenant or any Guarantor
for any previous breach of covenant or sum previously accrued due.
30.2 EVENTS OF DEFAULT
The events referred to in clause 30.1 are the following:-
30.2.1 if the Rents or any part of them shall be unpaid for ten (10)
Working Days after becoming payable (whether formally demanded
or not); or
30.2.2 if any of the covenants by the Tenant contained in this Lease
shall not be performed and observed; or
30.2.3 if the Tenant, for the time being, and/or the Guarantor (if
any) (being a body corporate):-
30.2.3.1 calls, or a nominee on its behalf calls, a meeting of
any of its creditors; or makes an application to the
Court under Section 425 of the Companies Act 1985; or
submits to any of its creditors a proposal under Part
I of the Insolvency Act 1986; or enters into any
arrangement, scheme,
<PAGE> 52
compromise, moratorium or composition with any of its
creditors (whether under Part I of the Insolvency Act
1986 or otherwise); or
30.2.3.2 has an administrative receiver or a receiver or a
receiver and manager appointed in respect of the
Tenant's or the Guarantor's property or assets or any
part; or
30.2.3.3 resolves or the directors or shareholders resolve to
present a petition for an administration order in
respect of the Tenant or the Guarantor (as the case
may be); or an administrator is appointed; or
30.2.3.4 has a winding-up order made against it or a petition
for an administration order is presented against it
which is not withdrawn within 21 days; or passes a
winding-up resolution (other than a voluntary
winding-up whilst solvent for the purposes of an
amalgamation or reconstruction which has the prior
written approval of the Landlord such approval not to
be unreasonably withheld or delayed); or calls a
meeting of its creditors for the purposes of
considering a resolution that it be wound-up
voluntarily; or resolves to present its own
winding-up petition; or is wound-up (whether in
England or elsewhere); or has a liquidator or
provisional liquidator appointed; or
30.2.3.5 shall cease for any reason to maintain its corporate
existence; or is struck off the register of
companies; or otherwise ceases to exist; or
30.2.4 if the Tenant, for the time being, and/or the Guarantor (if
any) (being an individual, or if more than one individual,
then any one of them) makes an application to the Court for an
interim order under Part VIII of the Insolvency Act 1986; or
convenes a meeting of, or enters into any arrangement, scheme,
compromise, moratorium or composition with, any of his
creditors (whether under Part VIII of the Insolvency Act 1986
or otherwise); or has a bankruptcy petition presented against
him or is adjudged bankrupt (whether in England or elsewhere);
or has a receiver appointed in respect of the Tenant's or the
Guarantor's property or assets or any part; or
30.2.5 if analogous proceedings or events to those referred to in
this clause shall be instituted or occur in relation to the
Tenant, for the time being, and/or the Guarantor (if any)
elsewhere than in the United Kingdom; or
<PAGE> 53
30.2.6 if the Tenant, for the time being, and/or the Guarantor (if
any) suffers any distress or execution to be levied on the
Premises which is not discharged in full within twenty one
(21) days after the levy has been made; or becomes unable to
pay its debts as and when they fall due.
SECTION 10
MISCELLANEOUS
31. QUIET ENJOYMENT
The Landlord covenants with the Tenant that the Tenant, paying the
Rents and performing and observing the covenants on the part of the
Tenant contained in this Lease, shall and may peaceably hold and enjoy
the Premises during the Term without any interruption by the Landlord
or any person lawfully claiming through, under, or in trust for it.
32. EXCLUSION OF IMPLIED COVENANTS BY LANDLORD
Any covenants on the part of the Landlord which would otherwise be
implied by law are hereby expressly excluded.
33. RELETTING NOTICES
The Tenant shall permit the Landlord, at all reasonable times during
the last six (6) months of the Term, to enter the Premises and affix
and retain, without interference, on any suitable parts of them (but
not so as materially to affect the access of light or air to the
Premises) notices for reletting them and the Tenant shall not remove or
obscure such notices and shall permit all persons with the written
authority of the Landlord to view the Premises at all reasonable hours
in the daytime, upon prior appointment having been made.
34. DISCLOSURE OF INFORMATION
Upon making any application or request in connection with the Premises
or this Lease, or upon written request by the Landlord from time to
time, the Tenant shall disclose to the Landlord such information as the
Landlord may reasonably require and, whenever the Landlord shall
reasonably request, the Tenant shall supply full particulars of all
occupations and derivative interests in the Premises, however remote or
inferior.
35. INDEMNITY
The Tenant shall keep the Landlord fully indemnified from and against
all actions, proceedings, claims, demands, losses, costs, expenses,
damages and liability arising in any way directly or indirectly out
of:-
<PAGE> 54
35.1 any act, omission, neglect or default of the Tenant or any
persons in the Premises expressly or impliedly with the
Tenant's authority; or
35.2 any breach of any covenant by the Tenant contained in this
Lease.
36. REPRESENTATIONS
The Tenant acknowledges that this Lease has not been entered into in
reliance, wholly or partly, on any statement or representation made by,
or on behalf of, the Landlord, except any such statement or
representation that is expressly set out in this Lease or in written
replies to enquiries sent by the Landlord's Solicitors to the Tenant's
Solicitors prior to the date of this Lease.
37. EFFECT OF WAIVER
Each covenant by the Tenant shall remain in full force even though the
Landlord may have waived or released it temporarily or waived or
released (temporarily or permanently, revocably or irrevocably) a
similar covenant affecting other property belonging to the Landlord
38. NOTICES
38.1 NOTICES TO TENANT OR GUARANTOR
Any demand or notice required to be made, given to, or served on, the
Tenant or the Guarantor (if any) under this Lease shall be duly and
validly made, given or served if addressed to the Tenant or the
Guarantor respectively (and, if there shall be more than one of them,
then any one of them) and delivered personally, or sent by pre-paid
registered or recorded delivery mail, in the case of a company to its
registered office, or (whether a company or individual) its last known
address Provided that Seagate Technology Inc. hereby irrevocably
appoints Seagate Software Limited as its agent for the purposes of
service of any notices under the terms of this Lease to the intent that
any notice to be served upon Seagate Technology Inc. shall be validly
served if served in accordance with the terms of this Lease upon
Seagate Technology Inc. care of Seagate Software Limited Provided
always that copies of all such notices in contemplation of or in
connection with any proceedings under this Lease shall also be served
by pre-paid post or by fax on Seagate Technology Inc. at its registered
office.
38.2 NOTICES TO LANDLORD
Any notice required to be given to, or served on, the Landlord shall be
duly and validly given or served if sent by pre-paid registered or
recorded delivery mail, addressed to the Landlord at its registered
office.
<PAGE> 55
39. EXCLUSION OF STATUTORY COMPENSATION
Except where any statute prohibits or modifies the right of the Tenant
to compensation being reduced or excluded by agreement, neither the
Tenant nor any undertenant (whether immediate or not) shall be
entitled, on quitting the Premises or any part of them, to claim any
compensation from the Landlord under the Landlord and Tenant Act 1954.
40. GUARANTOR'S COVENANTS
In consideration of this Lease having been granted at its request, the
Guarantor covenants in the terms contained in Schedule 3.
41. NEW TENANCY
This Lease constitutes a new tenancy for the purposes of the Landlord
and Tenant (Covenants) Act 1995.
42. INVALIDITY OF CERTAIN PROVISIONS
If any term of this Lease or the application thereof to any person or
circumstances shall to any extent be invalid or unenforceable the same
shall be severable and the remainder of this Lease or the application
of such term 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 be enforced to
the fullest extent permitted by law.
43. GOVERNING LAW AND JURISDICTION
43.1 GOVERNING LAW
This Lease is governed by and shall be construed in accordance with
English Law.
43.2 JURISDICTION
The courts of England shall have exclusive jurisdiction to hear and
determine any suit, action or proceedings, and to settle any disputes,
which may arise out of or in connection with this Lease and, for such
purposes, each party irrevocably submits to the jurisdiction of the
courts of England.
43.3 WAIVER OF OBJECTION TO LEX FORI
Each party irrevocably waives any objection which it might at any time
have to the courts of England being nominated as the forum to hear and
determine any proceedings and to settle any disputes which may arise
out of or in connection with this Lease and agrees not to claim that
the courts of England are not a convenient or appropriate forum.
<PAGE> 56
44. It is hereby certified that there is no Agreement for Lease to which
this Lease gives effect.
IN WITNESS whereof this Deed has been executed by the parties and is intended to
be and is hereby delivered on the date first written above.
<PAGE> 57
SCHEDULE 1
EXCEPTIONS AND RESERVATIONS
The exceptions and reservations referred to in the documents contained
or referred to in the entries on the Registers of Title Number
BK321654
<PAGE> 58
SCHEDULE 2
USE RESTRICTIONS
1. DANGEROUS MATERIALS AND USE OF MACHINERY
The Tenant shall not:-
1.1 keep in the Premises any article or thing which is or may
become unusually combustible, dangerous, explosive,
inflammable, offensive or radio-active, or which might increase
the risk of fire or explosion other than reasonable quantities
of oil required for the operation of any boiler, plant,
machinery, equipment and apparatus which shall be stored in
accordance with the requirements of any statute affecting the
Premises and of any insurer of them;
1.2 keep or operate in the Premises any machinery which is unduly
noisy or causes vibration, or which is likely to annoy or
disturb any other tenant or occupier of any adjoining
property.
2. OVERLOADING FLOORS AND SERVICES
The Tenant shall not:-
2.1 overload the floors of the Premises nor suspend any excessive
weight from any ceiling, roof, stanchion, structure or wall
nor overload any Utility in or serving them;
2.2 do anything which may subject the Premises to any strain
beyond that which they are designed to bear (with due margin
for safety), and shall pay to the Landlord, on written demand,
any expense reasonably incurred by the Landlord in obtaining
the opinion of a qualified structural engineer as to whether
the structure of the Premises is being, or is about to be,
overloaded;
2.3 exceed the weight limits prescribed for any lift in the
Premises.
3. DISCHARGES INTO CONDUITS
The Tenant shall not discharge into any Conduit any oil or grease or
any noxious or deleterious effluent or substance which may cause an
obstruction or might be or become a source of danger, or which might
damage any Conduit or the drainage system of the Premises.
<PAGE> 59
4. DISPOSAL OF REFUSE
The Tenant shall not deposit in any part of the Premises any refuse,
rubbish or trade empties of any kind other than in proper receptacles
and as may be designated by the Landlord, and shall not burn any refuse
or rubbish on the Premises.
5. PROHIBITED USES
The Tenant shall not use the Premises for any public or political
meeting, or public exhibition or public entertainment, show or
spectacle; or for any dangerous, noisy, noxious or offensive business,
occupation or trade; or for any illegal or immoral purpose; or for
residential or sleeping purposes; or for betting, gambling, gaming or
wagering; or as a betting office; or as a club; or for the sale of any
beer, wines or spirits; or for any auction.
6. NUISANCE
The Tenant shall not:-
6.1 do anything in the Premises which may be or become a nuisance,
or which may cause annoyance, damage, disturbance or
inconvenience to, the Landlord or any owner or occupier of any
adjoining property, or which may be injurious to the amenity,
character, tone or value of the Premises;
6.2 play any musical instrument, or use any loudspeaker, radio,
tape recorder, record or compact disc player or similar
apparatus in such a manner as to be audible outside the
Premises;
6.3 place any goods on any open area of the Premises or expose
from any window of the Premises any articles, goods or things
of any kind.
----------------------------------------------
<PAGE> 60
SCHEDULE 3
COVENANTS BY GUARANTOR
1. COVENANT AND INDEMNITY BY GUARANTOR
The Guarantor:-
1.1 covenants with the Landlord, as a primary obligation, that the
Present Tenant or the Guarantor shall, at all times during the
Term (including any continuation or renewal of this Lease),
duly perform and observe all the covenants on the part of the
Tenant contained in this Lease, including the payment of the
Rents and all other sums payable under this Lease in the
manner and at the times specified in this Lease;
1.2 indemnifies, as a primary obligation, the Landlord against all
claims, demands, losses, damages, liability, costs, fees and
expenses whatsoever sustained by the Landlord by reason of or
arising in any way directly or indirectly out of any default
by the Present Tenant in the performance and observance of any
of its obligations or the payment of any rent and other sums;
and
1.3 indemnifies, as a primary obligation, the Landlord against any
loss sustained by the Landlord as a result of any of the
obligations of the Present Tenant contained in this Lease
being or becoming void, voidable, unenforceable or ineffective
for any reason whatsoever and whether or not known to the
Landlord, the amount of such loss being the amount which the
Landlord would otherwise have been able to recover from the
Present Tenant.
2. GUARANTOR'S LIABILITY
The Guarantor further covenants with the Landlord, as a primary
obligation, that the Guarantor shall be liable (whether before or after
any disclaimer by a liquidator or trustee in bankruptcy) for the
fulfilment of all the obligations of the Present Tenant under this
Lease and agrees that the Landlord, in the enforcement of its rights
under this Lease, may proceed against the Guarantor as if the Guarantor
was named as the Tenant in this Lease.
3. WAIVER BY GUARANTOR
The Guarantor waives any right to require the Landlord to proceed
against the Present Tenant or to pursue any other remedy whatsoever
which may be available to the Landlord before proceeding against the
Guarantor.
<PAGE> 61
4. POSTPONEMENT OF CLAIMS BY GUARANTOR AGAINST TENANT
The Guarantor further covenants with the Landlord that the Guarantor
shall:-
4.1 not claim in any liquidation, bankruptcy, composition or
arrangement of the Present Tenant in competition with the
Landlord and shall remit to the Landlord the proceeds of all
judgments and all distributions it may receive from any
liquidator, trustee in bankruptcy or supervisor of the Present
Tenant;
4.2 hold for the benefit of the Landlord all security and rights
the Guarantor may have over assets of the Present Tenant
whilst any liabilities of the Present Tenant or the Guarantor
to the Landlord remain outstanding; and
4.3 not exercise any right or remedy in respect of any amount paid
or any liability incurred by the Guarantor in performing or
discharging its obligations contained in this Schedule, or
claim any contribution from any other guarantor.
5. POSTPONEMENT OF PARTICIPATION BY GUARANTOR IN SECURITY
The Guarantor shall not be entitled to participate in any security held
by the Landlord in respect of the Tenant's obligations to the Landlord
under this Lease or to stand in the place of the Landlord in respect of
any such security until all the obligations of the Present Tenant or
the Guarantor to the Landlord under this Lease have been performed or
discharged.
6. NO RELEASE OF GUARANTOR
None of the following, or any combination of them, shall release,
determine, discharge or in any way lessen or affect the liability of
the Guarantor as principal obligor under this Lease or otherwise
prejudice or affect the right of the Landlord to recover from the
Guarantor to the full extent of this guarantee:-
6.1 any neglect, delay or forbearance of the Landlord in
endeavouring to obtain payment of the Rents or the amounts
required to be paid by the Tenant or in enforcing the
performance or observance of any of the obligations of the
Tenant under this Lease;
6.2 any refusal by the Landlord to accept rent tendered by or on
behalf of the Tenant at a time when the Landlord was entitled
(or would after the service of a notice under Section 146 of
the Law of Property Act 1925 have been entitled) to re-enter
the Premises;
<PAGE> 62
6.3 any extension of time given by the Landlord to the Tenant;
6.4 any variation of the terms of this Lease (including any reviews
of the rent payable under this Lease) or the transfer of the
Landlord's reversion or the assignment of this Lease;
6.5 any change in the constitution, structure or powers of either
the Tenant, the Guarantor or the Landlord or the liquidation,
administration or bankruptcy (as the case may be) of either the
Tenant or the Guarantor;
6.6 any legal limitation, or any immunity, disability or incapacity
of the Tenant (whether or not known to the Landlord) or the
fact that any dealings with the Landlord by the Tenant may be
outside, or in excess of, the powers of the Tenant;
6.7 any other act, omission, matter or thing whatsoever as a result
of which, but for this provision, the Guarantor would be
exonerated either wholly or partly (other than a release
executed and delivered as a deed by the Landlord).
7. DISCLAIMER OR FORFEITURE OF LEASE
The Guarantor further covenants with the Landlord that:-
7.1 if a liquidator or trustee in bankruptcy shall disclaim or
surrender this Lease; or
7.2 if this Lease shall be forfeited; or
7.3 if the Present Tenant shall cease to exist
the Guarantor shall, if the Landlord by notice in writing given to the
Guarantor within six (6) months after such disclaimer or other event so
requires, join with the Landlord in applying to the Court for an order
authorising an agreement excluding the provisions of Sections 24 to 28
(inclusive) of the Landlord and Tenant Act 1954 (as amended by Section
5 of the Law of Property Act 1969) in relation to the new lease of the
Premises hereinafter mentioned and upon the making of such order accept
from, and execute and deliver to, the Landlord a counterpart of a new
lease of the Premises for a term commencing on the date of the
disclaimer or other event and continuing for the residue then remaining
unexpired of the Term, such new lease to be at the cost of the
Guarantor and to be at the same Rents and subject to the same covenants
and provisions as are contained in this Lease.
<PAGE> 63
8. GUARANTOR TO PAY SUM EQUAL TO RENTS
If the Landlord shall not require the Guarantor to take a new lease
pursuant to paragraph 7, the Guarantor shall nevertheless upon demand
pay to the Landlord a sum equal to the Rents and other sums that would
have been payable under this Lease but for the disclaimer or other
event in respect of the period from and including the date of such
disclaimer or other event until the expiration of six (6) months from
such date or until the Landlord shall have granted a lease of the
Premises to a third party (whichever shall occur first).
9. BENEFIT OF GUARANTEE
This guarantee shall enure for the benefit of the successors and
assigns of the Landlord under this Lease without the necessity for any
assignment.
10. GUARANTOR TO JOIN IN AUTHORISED GUARANTEE AGREEMENT
The Guarantor covenants with the Landlord, and as a separate covenant
with the Present Tenant, that the Guarantor will join in, and execute
and deliver to the Landlord, any deed which the Present Tenant is
required to execute and deliver to the Landlord pursuant to clause
20.3(i), so as to give the covenants on the part of the Guarantor
contained in that deed.
----------------------------------------------
<PAGE> 64
SCHEDULE 4
AUTHORISED GUARANTEE AGREEMENT TO BE GIVEN BY TENANT
PURSUANT TO CLAUSE 20.3(i)
T H I S D E E D is made the day of 19
B E T W E E N:-
(1) [ ] whose registered office is at [ ] (registered number:
) (the "PRESENT TENANT") [and]
(2) [ ] whose registered office is at [ ] (registered number:
) (the "LANDLORD") [and]
[(3) [ ] whose registered office is at [ ] (registered number:
) (the "GUARANTOR")]]
W H E R E A S:-
(A) This Agreement is made pursuant to the lease dated [ ] and made
between [ ] (the "LEASE") which expression shall include (where
the context so admits) all deeds and documents supplemental to it
(whether expressed to be so or not) relating to the premises at
[ ] (the "PREMISES").
(B) The Present Tenant holds the Premises under the Lease and wishes to
assign the Lease to [ ] (the "ASSIGNEE"), and pursuant to the
Lease the Landlord's consent is required to such assignment (the
"ASSIGNMENT") and such consent is given subject to a condition that the
Present Tenant to enter into a deed in the form of this Deed.
NOW THIS DEED WITNESSES as follows:-
1. AUTHORISED GUARANTEE
Pursuant to the condition referred to above, the Present Tenant
covenants with the Landlord, as a primary obligation, that the Assignee
or the Present Tenant shall, at all times during the period (the
"GUARANTEE PERIOD") from the completion of the Assignment until the
Assignee
<PAGE> 65
shall have ceased to be bound by the TENANT COVENANTS (which in this
Deed shall have the meaning attributed by section 28(1) of the Landlord
and Tenant (Covenants) Act 1995 (the "1995 ACT")) contained in the
Lease (including the payment of the rents and all other sums payable
under the Lease in the manner and at the times specified in the Lease),
duly perform and observe the tenant covenants.
2. PRESENT TENANT'S LIABILITY
2.1 The Present Tenant agrees that the Landlord, in the enforcement of its
rights under this Deed, may proceed against the Present Tenant as if
the Present Tenant were the sole or principal debtor in respect of the
tenant covenant in question.
2.2 For the avoidance of doubt, notwithstanding the termination of the
Guarantee Period the Present Tenant shall remain liable under this Deed
in respect of any liabilities which may have accrued prior to such
termination.
2.3 For the avoidance of doubt the Present Tenant shall be liable under
this Deed for any costs and expenses incurred by the Landlord in
enforcing the Present Tenant's obligations under this Deed.
3. DISCLAIMER OF LEASE
The Present Tenant further covenants with the Landlord that if the
Crown or a liquidator or trustee in bankruptcy shall disclaim the Lease
during the Guarantee Period the Present Tenant shall, if the Landlord
by notice in writing given to the Present Tenant within six (6) months
after such disclaimer, accept from, and execute and deliver to, the
Landlord a counterpart of a new lease of the Premises for a term
commencing on the date of the disclaimer and continuing for the residue
then remaining unexpired of the term of the Lease, such new lease to be
at the same rents and subject to the same covenants and provisions as
are contained in the Lease.
<PAGE> 66
4. SUPPLEMENTARY PROVISIONS
By way of provision incidental or supplementary to clauses 1, 2 and 3
of this Deed:-
4.1 POSTPONEMENT OF CLAIMS BY PRESENT TENANT
The Present Tenant further covenants with the Landlord that the Present
Tenant shall:-
4.1.1 not claim in any liquidation, bankruptcy, composition or
arrangement of the Assignee in competition with the Landlord
and shall remit to the Landlord the proceeds of all judgments
and all distributions it may receive from any liquidator,
trustee in bankruptcy or supervisor of the Assignee;
4.1.2 hold for the benefit of the Landlord all security and rights
the Present Tenant may have over assets of the Assignee whilst
any liabilities of the Present Tenant or the Assignee to the
Landlord remain outstanding; and
4.1.3 not exercise any right or remedy in respect of any amount paid
or any liability incurred by the Present Tenant in performing
or discharging its obligations contained in this Deed, or
claim any contribution from any other guarantor.
4.2 POSTPONEMENT OF PARTICIPATION BY PRESENT TENANT IN SECURITY
The Present Tenant shall not be entitled to participate in any security
held by the Landlord in respect of the Assignee's obligations to the
Landlord under the Lease or to stand in the place of the Landlord in
respect of any such security until all the obligations of the Present
Tenant or the Assignee to the Landlord under the Lease have been
performed or discharged.
4.3 NO RELEASE OF PRESENT TENANT
None of the following, or any combination of them, shall release,
determine, discharge or in any way lessen or affect the liability of
the Present Tenant as principal obligor under this Deed or otherwise
prejudice or affect the right of the Landlord to recover from the
Present Tenant to the full extent of this guarantee:-
4.3.1 any neglect, delay or forbearance of the Landlord in
endeavouring to obtain payment of any rents or other amounts
required to be paid by the Assignee or in enforcing the
performance or observance of any of the obligations of the
Assignee under the Lease;
4.3.2 any refusal by the Landlord to accept rent tendered by or on
behalf of the Assignee
<PAGE> 67
at a time when the Landlord was entitled (or would after the
service of a notice under Section 146 of the Law of Property
Act 1925 have been entitled) to re-enter the Premises;
4.3.3 any extension of time given by the Landlord to the Assignee;
4.3.4 any reviews of the rent payable under the Lease and (subject
to Section 18 of the 1995 Act) any variation of the terms of
the Lease or the transfer of the Landlord's reversion;
4.3.5 any change in the constitution, structure or powers of either
the Present Tenant, the Assignee or the Landlord or the
liquidation, administration or bankruptcy (as the case may be)
of either the Present Tenant or the Assignee;
4.3.6 any legal limitation, or any immunity, disability or
incapacity of the Assignee (whether or not known to the
Landlord) or the fact that any dealings with the Landlord by
the Assignee may be outside, or in excess of, the powers of
the Assignee;
4.3.7 any other deed, act, omission, failure, matter or thing
whatsoever as a result of which, but for this provision, the
Present Tenant would be exonerated either wholly or partly
(other than a release executed and delivered as a deed by the
Landlord or a release effected by virtue of the 1995 Act).
4.4 COSTS OF NEW LEASE
The Landlord's reasonable costs in connection with any new lease
granted pursuant to clause 3 of this Deed shall be borne by the Present
Tenant and paid to the Landlord (together with Value Added Tax) upon
completion of such new lease.
4.5 GUARANTOR TO JOIN IN NEW LEASE
If the Present Tenant shall be required to take up a new lease pursuant
to clause 3 of this Deed, the Guarantor shall join in, and execute and
deliver to the Landlord a counterpart of, such new lease in order to
guarantee the obligations of the Present Tenant under it in the terms
of Schedule 3 to the Lease.
I N W I T N E S S whereof this deed has been executed by the Present
Tenant and is intended to be and is hereby delivered on the date first
above written.
<PAGE> 68
SCHEDULE 5
DRAFT DEED OF RELEASE
DATED 199
(1) Landlord:
(2) Tenant:
SEAGATE SOFTWARE LIMITED
(3) Guarantor:
SEAGATE TECHNOLOGY INC
[(or in the circumstances referred to in clause 21.5
of the Lease) SEAGATE SOFTWARE INC]
-----------------------------------------
DEED OF RELEASE
relating to
Aquis House
Blagrave Street
Reading
-----------------------------------------
CLIFFORD CHANCE
200 Aldersgate Street
London EC1A 4JJ
Telephone: 0171-600 1000
Fax: 0171-600 5555
Telex: 887847 LEGIS G
Ref: GP/U167/10080/ICSM
<PAGE> 69
DEED OF RELEASE
PARTICULARS
- --------------------------------------------------------------------------------
DATE : 1998
- --------------------------------------------------------------------------------
PARTIES
(1) Landlord :
(Company Registration No. )
(2) Tenant : SEAGATE SOFTWARE LIMITED whose
registered office is at 100 New
Bridge Street, London, EC4V 6JA
(Company Registration No. 2575013)
(3) Guarantor : SEAGATE TECHNOLOGY INC of
[ ]
[(or in the circumstances referred
to in clause 21.5 of the Lease)
SEAGATE SOFTWARE INC.]
------------------------------------------------------------------
LEASE
Date : 1998
Parties : Universities Superannuation Scheme
Limited (1)
Seagate Software Limited (2)
Seagate Technology Inc (3)
Term: : 15 years from 24 June 1998
Demised Premises : Aquis House, Blagrave Street, Reading
-------------------------------------------------------------------
<PAGE> 70
1. RELEASE OF OBLIGATIONS
In accordance with [21.1(a)] [clause 21.1(b)] [clause 21.5(a)] [clause
21.5(b)] of the Lease referred to in the foregoing Particulars (the
"Lease") the Landlord and the Guarantor named in the Particulars hereby
release each other from all of the obligations on their respective parts
contained in or arising out of the Lease but without prejudice to the
rights of either the Landlord or the Guarantor in respect of any breach
of the terms of the Lease prior to the date of this Deed.
IN WITNESS of which this Deed has been executed by the parties hereto, and is
intended to be and is hereby delivered on the date first before written.
<PAGE> 71
SCHEDULE 6
DRAFT LICENCE TO ASSIGN AND DEED OF RELEASE
DATED 1998
(1) Landlord:
(2) Tenant:
SEAGATE SOFTWARE
LIMITED AND
[ ]
(3) Assignee:
SEAGATE SOFTWARE
LIMITED [AND ]
(4) Guarantor: SEAGATE TECHNOLOGY INC. [(or in
the circumstances referred to in clause 21.5
of the Lease) SEAGATE SOFTWARE INC.]
----------------------------------
LICENCE TO ASSIGN
AND
DEED OF RELEASE
relating to
Aquis House,
Blagrave Street, Reading
----------------------------------
CLIFFORD CHANCE
200 Aldersgate Street
London EC1A 4JJ
Telephone: 0171-600 1000
Fax: 0171-600 5555
Telex: 887847 LEGIS G
Ref: GP/U167/10080/ICSM
<PAGE> 72
LICENCE TO ASSIGN AND DEED OF RELEASE
PARTICULARS
- --------------------------------------------------------------------------------
DATE : 1998
- --------------------------------------------------------------------------------
PARTIES
(1) Landlord :
(Company Registration No. )
(2) Tenant : SEAGATE SOFTWARE LIMITED
whose registered office is at 100
New Bridge Street, London, EC4V 6JA
(Company Registration No. 2575013)
[and ]
(3) Assignee : SEAGATE SOFTWARE LIMITED
whose registered office is at 100
New Bridge Street, London, EC4V 6JA
(Company Registration No. 2575013)
[and
(4) Guarantor : SEAGATE TECHNOLOGY INC of
[ ]
[(or in the circumstances referred
to in clause 21.5 of the Lease)
SEAGATE SOFTWARE INC.]
-------------------------------------------------------------------
LEASE
Date : 1998
Parties : Universities Superannuation Scheme
Limited (1)
Seagate Software Limited (2)
and Seagate Technology Inc (3)
<PAGE> 73
Term: : 15 years from 24 June 1998
Demised Premises : Aquis House, Blagrave Street, Reading
--------------------------------------------------------------------
<PAGE> 74
1. DEFINITIONS
In this Licence, unless the context otherwise requires:-
"ASSIGNEE" means the party named as Assignee in the Particulars, and
includes any successor in title or assign of such party and, in the
case of an individual, any personal representative of such individual;
"DEMISED PREMISES" means the premises demised by the Lease and as
briefly described in the Particulars;
"GUARANTOR" means the party named as Guarantor in the Particulars;
"LANDLORD" means the party named as Landlord in the Particulars, and
includes any person for the time being entitled to such party's
reversionary interest in the Demised Premises;
"LEASE" means the Lease the details of which are set out in the
Particulars, and includes any instrument supplemental thereto;
"PARTICULARS" means the matters appearing on the preceding page(s)
headed "Particulars";
"TENANT" means the party named as Tenant in the Particulars;
"TERM" means the term of years created by the Lease, and includes the
period of any holding over or any continuation thereof (whether by
statute or common law).
2. INTERPRETATION
2.1 The headings used in this Licence do not affect its construction.
2.2 This Licence is supplemental to the Lease.
2.3 In this Licence, unless the context otherwise requires:-
(a) Any covenant by a party comprising more than one person is
joint and several; and
(b) Any word importing an individual includes a company and vice
versa.
<PAGE> 75
2.4 Any covenant by the Assignee shall be construed as being not only with
the Landlord but also with any superior landlord.
3. TITLE TO DEMISED PREMISES
3.1 The Landlord is entitled to the immediate reversionary interest in the
Demised Premises.
3.2 The Tenant is entitled to the Demised Premises for the residue of the
Term.
4. CONSENT TO ASSIGNMENT
The Landlord consents to the assignment by the Tenant to the Assignee
of the Demised Premises for the residue of the Term.
5. RESTRICTION ON CONSENT
The consent granted by this Licence is restricted to the particular
assignment authorised, and does not authorise any further or other
variation of the terms of the Lease, which otherwise remains in full
force and effect.
6. RELEASE OF OBLIGATIONS
Subject to Clause 7 of this Licence, and in accordance with clause 21.
[ ] of the Lease, the Landlord and [Seagate Technology Inc.] [Seagate
Software Inc.] hereby release each other as from the date on which the
Lease is assigned to the Assignee from all obligations on their
respective parts contained in or arising out of the Lease but without
prejudice to the rights of either party in respect of any breach of the
terms of the Lease prior to the date on which the Lease is assigned to
the Assignee.
7. COMPLETION OF ASSIGNMENT
If the assignment authorised by this Licence is not completed within
the period of three months commencing on the date hereof, then, unless
the Landlord (in the Landlord's absolute discretion) extends such
period, the consent given by this Licence will become void and clause 6
of this Licence shall not take effect.
8. INVALIDITY OF CERTAIN PROVISIONS
If any term of this Licence or the application thereof to any person or
circumstances shall to any extent be invalid or unenforceable the same
shall be severable and the remainder of this Licence or the application
of such term 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 Licence shall be valid and be enforced
to the fullest extent permitted by law.
<PAGE> 76
IN WITNESS of which this Licence has been executed by the Landlord, the
Assignee and the Guarantor, and is intended to be and is hereby
delivered on the date first before written.
<PAGE> 77
THE COMMON SEAL of )
UNIVERSITIES SUPERANNUATION )
SCHEME LIMITED was affixed )
in the presence of:- )
__________________________________ Signature of director
__________________________________ Name of director
__________________________________ Signature of director/secretary
__________________________________ Name of director/secretary
<PAGE> 78
THE COMMON SEAL of )
SEAGATE SOFTWARE LIMITED )
was affixed in the presence of:- )
/s/ Ellen Chamberlain Signature of director
Ellen Chamberlain Name of director
/s/ Jeffrey B. Nelson Signature of director/secretary
Jeffrey B. Nelson Name of director/secretary
THE COMMON SEAL of )
SEAGATE TECHNOLOGY INC )
was affixed in the presence of:- )
/s/ Ellen Chamberlain Signature of director
Ellen Chamberlain Name of director
/s/ Jeffrey B. Nelson Signature of director/secretary
Jeffrey B. Nelson Name of director/secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-02-1999
<PERIOD-START> JUL-04-1998
<PERIOD-END> OCT-02-1998
<CASH> 10,418
<SECURITIES> 0
<RECEIVABLES> 46,126
<ALLOWANCES> (1,710)
<INVENTORY> 776
<CURRENT-ASSETS> 59,996
<PP&E> 40,926
<DEPRECIATION> (25,669)
<TOTAL-ASSETS> 123,272
<CURRENT-LIABILITIES> 61,730
<BONDS> 0
0
55
<COMMON> 0
<OTHER-SE> 55,961
<TOTAL-LIABILITY-AND-EQUITY> 123,272
<SALES> 74,875
<TOTAL-REVENUES> 74,875
<CGS> 12,360
<TOTAL-COSTS> 12,360
<OTHER-EXPENSES> 24,925
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 1,895
<INCOME-TAX> 1,043
<INCOME-CONTINUING> 852
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<CHANGES> 0
<NET-INCOME> 852
<EPS-PRIMARY> 3.09
<EPS-DILUTED> .01
</TABLE>
