<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-Q
(mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO ____________________
COMMISSION FILE NUMBER:
000-29592
GENESIS MICROCHIP INCORPORATED
(Exact name of registrant as specified in its charter)
NOVA SCOTIA, CANADA N/A
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
165 COMMERCE VALLEY DRIVE WEST
THORNHILL, ONTARIO, CANADA L3T 7V8
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (905) 889-5400
Former name, former address and former fiscal year if
changed since last report.
Former address: N/A
Former Fiscal Year: N/A
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
There were 18,935,620 shares of the registrant's common shares issued
and outstanding as of December 31, 1999.
<PAGE>
GENESIS MICROCHIP INCORPORATED
FORM 10-Q
THREE MONTHS ENDED DECEMBER 31, 1999
Index
<TABLE>
Item Number Page
- ----------- ----
<S> <C>
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1999 and December 31, 1999 1
Condensed Consolidated Statements of Operations for the three and nine month periods ended December
31, 1999 and November 30, 1998 2
Condensed Consolidated Statements of Comprehensive Income for the three and nine month periods ended
December 31, 1999 and November 30, 1998 2
Condensed Consolidated Statements of Cash Flows for the nine month periods ended December 31, 1999
and November 30, 1998 3
Notes To Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Part II: Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information *
Item 6. Exhibit 27 Financial Data Schedule 13
Exhibits and Reports on Form 8-K 13
Signature 13
</TABLE>
* No information has been provided because this item is not applicable.
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<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GENESIS MICROCHIP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands of U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
ASSETS
December March 31,
31, 1999 1999
-------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 43,962 $ 38,479
Accounts receivable trade, net of allowance for
doubtful accounts of $228 at December 31 and $124 at
March 31 6,519 9,413
Income taxes recoverable 147 1,221
Inventory 5,775 6,963
Other 789 2,958
-------------------------
Total current assets 57,192 59,034
Capital assets 8,783 3,871
Deferred income taxes 3,690 1,830
Other 1,180 80
-------------------------
Total assets $ 70,845 $ 64,815
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ - $ 145
Accounts payable 3,789 2,428
Accrued liabilities 3,022 4,865
Current portion of loans payable 93 1,465
-------------------------
Total current liabilities 6,904 8,903
Long-term liabilities:
Loans payable 500 504
-------------------------
Total liabilities 7,404 9,407
Shareholders' equity:
Special shares:
Authorized - 1,000,000,000 shares without par value
Issued and outstanding - no shares at December 31 or
March 31
Common shares:
Authorized - 1,000,000,000 shares without par value
Issued and outstanding - 18,935,620 shares at December 31 70,950 68,447
and 18,345,093 shares at March 31
Additional paid in capital 1,293 1,293
Cumulative other comprehensive loss (94) (94)
Deferred compensation (295) (326)
Deficit (8,413) (13,912)
-------------------------
Total shareholders' equity 63,441 55,408
-------------------------
Total liabilities and shareholders' equity $ 70,845 $ 64,815
=========================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-1-
<PAGE>
GENESIS MICROCHIP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands of U.S. dollars, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December November December November
31, 1999 30, 1998 31, 1999 30, 1998
-----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 10,059 $ 10,627 $ 42,727 $ 23,069
Cost of revenues 3,263 4,315 13,529 8,418
-----------------------------------------------------
Gross profit 6,796 6,312 29,198 14,651
Operating expenses:
Research and development 4,082 2,412 11,223 6,792
Selling, general and 2,991 2,889 9,376 6,836
administrative
Merger-related costs - - 3,455 -
-----------------------------------------------------
Total operating expenses 7,073 5,301 24,054 13,628
-----------------------------------------------------
Income (loss) from operations (277) 1,011 5,144 1,023
Interest income 550 503 1,482 1,436
-----------------------------------------------------
Income before income taxes 273 1,514 6,626 2,459
Provision for income taxes 73 - 1,127 -
-----------------------------------------------------
Net income $ 200 $ 1,514 $ 5,499 $ 2,459
=====================================================
Earnings per share:
Basic $ 0.01 $ 0.09 $ 0.29 $ 0.15
Diluted $ 0.01 $ 0.08 $ 0.28 $ 0.13
Weighted average number of common
shares outstanding (in thousands):
Basic 18,923 16,390 18,669 16,135
Diluted 19,807 19,042 19,878 18,650
</TABLE>
See accompanying notes to condensed consolidated financial statements.
GENESIS MICROCHIP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands of U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December November December November
31, 1999 30, 1998 31, 1999 30, 1998
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net income $200 $1,514 $5,499 $2,459
Cumulative translation adjustment - - - 7
-----------------------------------------------------
Comprehensive income $200 $1,514 $5,499 $2,466
=====================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-2-
<PAGE>
GENESIS MICROCHIP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands of U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December November
31, 1999 30, 1998
---------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,499 $ 2,459
Adjustments to reconcile net income to cash
used in operating activities:
Amortization 1,973 854
Stock compensation expense 31 57
Inventory provision 550 -
Deferred income taxes (1,860) -
Change in operating assets and liabilities:
Accounts receivable trade 2,895 (4,440)
Income taxes receivable 1,333 74
Inventory 637 (3,385)
Other current assets 2,166 (356)
Accounts payable 1,354 1,730
Accrued liabilities (2,157) 789
--------------------------
Net cash from (used in) operating activities 12,421 (2,218)
Cash flows from investing activities:
Additions to capital assets (6,884) (1,972)
Additions to other assets (1,100) -
--------------------------
Cash used in investing activities (7,984) (1,972)
Cash flows from financing activities:
Proceeds from issue of common shares, net of
issue costs 2,507 5,250
Proceeds (repayment) of bank indebtedness - net (145) 753
Repayment of loans payable (1,371) (110)
--------------------------
Net cash from financing activities 991 5,893
Effect of currency translation on cash balances 55 75
--------------------------
Increase in cash and cash equivalents 5,483 1,778
Cash and cash equivalents, beginning of period 38,479 35,385
--------------------------
Cash and cash equivalents, end of period $43,962 $37,163
==========================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
GENESIS MICROCHIP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of presentation
We have prepared the accompanying unaudited condensed financial statements
according to the rules and regulations of the Securities and Exchange Commission
for interim financial reporting. Consequently, they do not include all of the
information and footnotes required by United States generally accepted
accounting principles for complete financial statements. These condensed
financial statements should be read in conjunction with our financial statements
and notes thereto for the ten months ended March 31, 1999 that are included in
our most recent 10-K filing with the Securities and Exchange Commission. We
believe that the accompanying financial statements reflect all adjustments,
consisting solely of normal, recurring adjustments, that are necessary for fair
presentation of the results for the interim periods presented. The results of
operations for the periods ended December 31, 1999 are not necessarily
indicative of the results to be expected for the full fiscal year.
2. Comparative figures
On May 28, 1999, we changed our fiscal year to March 31 from May 31, effective
March 31, 1999. As a result, our unaudited condensed statements of operations,
of comprehensive income and of cash flows compare the current three and nine
month periods ended December 31, 1999 with the closest corresponding periods of
the previous year, which are the three and nine month periods ended November 30,
1998.
3. Earnings per share
Basic earnings per common share are computed by dividing the net income in a
period by the weighted average number of common shares outstanding during that
period. Diluted earnings per share are calculated in order to give effect to all
potential common shares issuable during the period. The weighted average number
of diluted shares outstanding is calculated by assuming that any proceeds from
potential common shares, such as stock options, are used to repurchase common
shares at the average share price in the period.
Per share information calculated on this basis is as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December November December November
31, 1999 30, 1998 31, 1999 30, 1998
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 200 $ 1,514 $ 5,499 $ 2,459
=============================================================
Denominator for basic earnings per share-
Weighted average common shares outstanding 18,923 16,390 18,669 16,135
=============================================================
Basic earnings per share $ 0.01 $ 0.09 $ 0.29 $ 0.15
=============================================================
Denominator for diluted earnings per share-
Weighted average common shares outstanding 18,923 16,390 18,669 16,135
Stock options and warrants 884 2,652 1,209 2,515
-------------------------------------------------------------
Shares used in computing diluted earnings per share 19,807 19,042 19,878 18,650
=============================================================
Diluted earnings per share $ 0.01 $ 0.08 $ 0.28 $ 0.13
=============================================================
</TABLE>
-4-
<PAGE>
4. Segmented information
We operate and track our results in one operating segment. We design, develop
and market integrated circuits that manipulate and process digital images.
Revenues from our unaffiliated customers by geographic region were as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December November December November
31, 1999 30, 1998 31, 1999 30, 1998
--------------------------------------------------------------
<S> <C> <C> <C> <C>
United States $ 2,663 $ 1,714 $ 9,600 $ 7,447
Japan and Asia 7,001 8,470 $32,057 14,461
Canada 95 70 279 194
Rest of World 300 373 791 967
-------------------------------------------------------------
$10,059 $10,627 $42,727 $23,069
=============================================================
</TABLE>
Net long-lived assets by country of location were as follows (in thousands):
<TABLE>
<CAPTION>
December March 31,
31, 1999 1999
------------------------
<S> <C> <C>
United States $ 1,392 $1,291
Canada 7,391 2,580
------------------------
$ 8,783 $3,871
========================
</TABLE>
The following table shows the percentage of our revenue in each period that was
derived from customers who individually accounted for more than 10% of revenue
in that period:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December November December November
31, 1999 30, 1998 31, 1999 30, 1998
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Customer A 15% 22% 11% 14%
Customer B 12% 12%
</TABLE>
At December 31, 1999 one customer accounted for 20% of accounts receivable
trade. At March 31, 1999, one customer accounted for 21% of accounts receivable
trade and a second customer accounted for 11% of accounts receivable trade.
5. Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," or SFAS 133.
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS 133 requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The impact to our
financial statements of adopting SFAS 133, which is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000, has not been determined.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains numerous statements of a forward-
looking nature relating to potential future events or to our future financial
performance. Our actual future results may differ significantly from those
forward-looking statements. You should consider the various factors identified
under the caption "Factors that may affect future operating results" in
evaluating those statements.
-5-
<PAGE>
Overview
We design, develop and market integrated circuits, or chips, that process
digital video and graphic images. Our chips translate source video, graphics and
digital images in order to be able to show them on various display systems such
as flat panel computer monitors or digital televisions. We do not manufacture
our chips. We procure them from third party manufacturers, such as IBM
Corporation, Taiwan Semiconductor Manufacturing Corporation and United
Semiconductor Corporation.
Applications for our products include:
. flat panel computer monitors,
. digital CRT computer monitors,
. digital projection systems,
. advanced image processing applications such as video editing, medical and
security systems, and
. emerging consumer electronics applications, such as digital television and
DVD.
Results of operations
The following table shows unaudited statement of operations data for the three
and nine month periods ended December 31, 1999 and November 30, 1998, expressed
as a percentage of revenues:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December November December November
31, 1999 30, 1998 31, 1999 30, 1998
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 32.4 40.6 31.7 36.5
--------------------------------------------------------------
Gross profit 67.6 59.4 68.3 63.5
Operating expenses:
Research and development 40.6 22.7 26.3 29.4
Selling, general and administrative 29.7 27.2 21.9 29.6
Merger-related costs 0.0 0.0 8.1 0.0
--------------------------------------------------------------
Total operating expenses 70.3 49.9 56.3 59.0
--------------------------------------------------------------
Income (loss) from operations (2.7) 9.5 12.0 4.5
Interest income 5.5 4.7 3.5 6.2
--------------------------------------------------------------
Income before income taxes 2.8 14.2 15.5 10.7
Provision for income taxes 0.7 0.0 2.6 0.0
--------------------------------------------------------------
Net income 2.1% 14.2% 12.9% 10.7%
==============================================================
</TABLE>
Revenues: Revenues for the three months ended December 31, 1999 decreased to
$10.1 million from $10.6 million in the three months ended November 30, 1998, a
decrease of 5.3%. Revenue for the nine months ended December 31, 1999 increased
to $42.7 million from $23.1 million in the nine months ended November 30, 1998,
an increase of 85.2%. The year-over-year increase in revenue results primarily
from increased demand for our products in the flat panel computer monitor
market.
Revenue from the flat panel computer monitor market decreased to $7.0 million,
or 69.2% of our revenue, in the three months ended December 31, 1999, from $7.5
million, or 70.6% of our revenue, in the three months ended November 30, 1998.
This market represented 70.1% of our revenue, or $30.0 million, in the nine
months ended December 31, 1999, compared with 60.8% of our revenue, or $14.0
million, in the nine months ended November 30, 1998. The year-over-year
increase in revenue was primarily a result of the overall growth of this market.
-6-
<PAGE>
The overall growth of the flat panel computer monitor market was positively
impacted in calendar 1998 by significant reductions in their retail selling
prices. Retail prices declined from about $2,500 in early calendar 1998 to
about $800 in early calendar 1999. This decline was primarily as a result of
reductions in the cost of LCD panels which are the primary component in flat
panel monitors. The reduction in the cost of LCD panels was caused by improved
panel manufacturing yields and by the devaluation of currencies in the
countries, principally in Asia, where LCD panels are manufactured.
Since early calendar 1999, there has been a lack of capacity to manufacture a
sufficient number of LCD panels to satisfy the increasing demand. This lack of
panel availability resulted in an increase in the cost of LCD panels, which in
turn, resulted in an increase in the retail selling price of flat panel computer
monitors to about $1,200 by the end of the year. The increase in retail selling
prices in 1999 resulted in a reduced rate of growth for the flat panel monitor
market through reduced end consumer demand, which caused a build-up of analog
interface monitor inventories. This inventory build-up has reduced demand for
our products in the three months ended December 31, 1999 as vendors seek to
reduce their monitor inventory levels.
Several new manufacturing facilities for LCD panels are being built, principally
in Asia. Any delays in bringing these facilities into production could continue
to restrict the overall growth of the flat panel computer monitor market by
limiting the rate of decline of the cost of LCD panels.
Revenue from our next largest market, the projection systems market, decreased
to $1.5 million or 14.6% of our revenue in the three months ended December 31,
1999, from $1.8 million or 17.3% of our revenue in the three months ended
November 30, 1998. This market represented 13.7% of our revenue, or $5.8
million, for the nine months ended December 31, 1999, compared to 22.7% of our
revenue, or $5.2 million, for the nine months ended November 30, 1998. The
dollar increase in revenue was primarily a result of an increase in units sold,
partially offset by a reduction of average selling prices. The decline of
projection systems market revenue as a percentage of our total revenue was a
result of a faster rate of revenue growth from the flat panel computer monitor
market compared to the projection systems market.
As a result of the factors described above, we do not expect to sustain the past
annual rates of revenue growth in future periods.
Gross Profit. Gross profit for the three months ended December 31, 1999
increased to $6.8 million from $6.3 million in the three months ended November
30, 1998. For the nine months ended December 31, 1999, gross profit increased to
$29.2 million from $14.7 million in the nine months ended November 30, 1998. As
a percentage of revenues, gross profit represented 67.6% of revenues in the
three months ended December 31, 1999, up from 59.4% of revenues in three months
ended November 30, 1998. Gross profit increased to 68.3% in the nine months
ended December 31, 1999 from 63.5% in the nine months ended November 30, 1998.
The increase in gross profit percentage in 1999 over 1998 was primarily
attributable to a more favorable mix of products sold, including the transition
of customers to newer, cost-reduced products and products that have more
integrated functionality. We expect gross margins to decline in future periods
as a result of price competition with other chip suppliers.
Research and Development. Research and development expenses include costs
associated with research and development personnel, development tools and
prototyping costs, less investment tax credits and government assistance.
Research and development expenses for the three months ended December 31, 1999
increased to $4.1 million from $2.4 million in the comparable period in the
previous year. These expenses represented 40.6% of revenues in the 1999 period
and 22.7% of revenues in the 1998 period. Research and development expenses for
the nine months ended December 31, 1999 increased to $11.2 million from $6.8
million in the nine months ended November 30, 1998. These expenses represented
26.3% of revenues in the nine months ended December 31, 1999 and 29.4% of
revenues in the nine months ended November 30, 1998.
-7-
<PAGE>
The dollar increase in the 1999 periods over the comparative periods in 1998
reflects higher personnel costs associated with an expansion in our research and
development activities and increased prototype and pre-production expenses for
new products under development. We expect to continue to make substantial
investments in our research and development activities and anticipate that the
dollar amount of research and development expenses will continue to increase.
The decline in research and development expenses as a percentage of revenues is
a result of the rate of growth of revenues exceeding the rate of growth of
research and development expenses.
Selling, General and Administrative. Selling, general and administrative
expenses consist of personnel and related overhead costs for selling, marketing,
customer support, finance, human resources and general management functions and
of commissions paid to regional sales representatives. Selling, general and
administrative expenses were $3.0 million in the three months ended December 31,
1999 and $2.9 million in the comparable period in the previous year. These
expenses represented 29.7% of revenues in the 1999 period and 27.2 % of revenues
in the 1998 period. Selling, general and administrative expenses were $9.4
million in the nine months ended December 31, 1999 and $6.8 million in the nine
months ended November 30, 1998. These expenses represented 21.9% of revenues in
the 1999 period and 29.6% of revenues in the 1998 period.
The dollar increases in 1999 over 1998 in selling, general and administrative
expenses reflects increased personnel costs related to increased selling,
administrative and customer support activities and to increased commissions
associated with higher sales volumes. We expect the dollar amount of selling,
general and administrative expenses to increase because of additions to
administrative, marketing, selling and customer support personnel and continued
expansion of our international operations. The decline in selling, general and
administrative expenses as a percentage of revenues results from the rate of
growth in revenues exceeding the rate of growth of selling, general and
administrative expenses.
Interest Income. Interest income in the three months ended December 31, 1999 was
$550,000, compared with $503,000 in the three months ended November 30, 1998.
For the nine months ended December 31, 1999, interest income was $1.5 million
compared with $1.4 million in the nine months ended November 30, 1998. Changes
in interest income result from changes in the average amount of cash and cash
equivalents on hand, and from interest earned on income taxes and tax credits
recoverable. Future interest income will depend on the amount of funds available
to invest and on future interest rates.
Provision for Income Taxes. The provisions for income taxes for the three and
nine month periods ended December 31, 1999, are calculated based on our expected
tax rate for the entire fiscal year. There were no provisions for income taxes
in the three and six month periods ended November 30, 1998, because we had
investment tax credits, non-capital losses or unclaimed research and development
expenditures available to reduce taxes payable or taxable income. Future income
taxes will depend on our effective tax rates and the distribution of taxable
income between taxation jurisdictions.
Liquidity and capital resources
Cash and cash equivalents were $44.0 million at December 31, 1999. Net cash
provided by operations for the nine months ended December 31, 1999, was $12.4
million. This cash was generated primarily by net income, together with
reductions in accounts receivable trade, and amounts invested in other current
assets.
Net cash used in investing activities was $8.0 million in the nine months ended
December 31, 1999. Cash of $6.9 million was used for the purchase of capital
assets, including costs of leasehold improvements to our new Canadian operating
facilities and a mixed-signal chip tester. We also invested $1.1 million for a
minority interest in a private company.
Continued expansion of our business may require higher levels of capital
equipment purchases. We have no significant capital spending or purchase
commitments other than purchase commitments made in the ordinary course of
business.
-8-
<PAGE>
Net cash provided by financing activities in the nine months ended December 31,
1999 was $1.0 million. This was primarily a result of receiving $2.5 million for
the purchase of shares under the terms of our stock purchase plan and stock
option plans, offset by our net repayment of indebtedness of $1.5 million.
We believe that our existing cash balances together with any cash generated from
our operations will be sufficient to meet our capital requirements on a short-
term basis.
Longer term, we may need to raise additional capital to fund investments in
operating assets to assist in the growth of our business, such as investments in
accounts receivable or inventory, or to purchase capital assets, such as land,
buildings or equipment. Because we do not have our own semiconductor
manufacturing facility, we may be required to make deposits to secure supply in
the future. Although we currently have no plans to raise additional funds, we
could be required or could decide to try and raise additional capital in the
future.
We periodically evaluate acquisitions of businesses, products or technologies
that complement our business. If we were to enter into a transaction of this
nature, we may either have to use a portion of our cash, issue debt or issue
additional equity securities. If we were to issue additional equity securities,
there could be further dilution to our shareholders.
Year 2000 compliance
Many businesses face issues relating to the inability of some computer systems
to correctly recognize dates starting January 1, 2000. We have evaluated our
products and believe that they function in the year 2000.
We established a committee to identify any systems that are not year 2000
compliant. Our committee has reviewed our systems, as well as those of our
suppliers and major customers to determine whether or not their systems are year
2000 compliant. Our committee continues to review potential year 2000 issues and
their impact, and will investigate possible methods of remediation if needed. We
do not believe that we have any material non-compliant systems. Our costs to
date related to year 2000 compliance have not been material.
Factors that may affect future operating results
The following factors may have a harmful impact on our business:
We subcontract our manufacturing, assembly and test operations
We do not have our own chip fabrication facilities, assembly or testing
operations. Instead, we rely on others to fabricate, assemble and test all of
our chip products. We have our chip products manufactured by IBM, United
Semiconductor Corporation, Taiwan Semiconductor Manufacturing Corporation and
Samsung Semiconductor, Inc. None of our chip products are purchased from more
than one supplier. There are many risks associated with our dependence upon
outside manufacturing, including:
. reduced control over manufacturing and delivery schedules of products,
. potential political risks in the countries where the manufacturing
facilities are located,
. reduced control over quality assurance,
. difficulty of management of manufacturing costs and quantities,
. potential lack of adequate capacity during periods of excess demand,
and
. potential unauthorized use of intellectual property.
-9-
<PAGE>
We depend upon outside manufacturers to fabricate silicon wafers on which our
integrated circuits are imprinted. These wafers must be of acceptable quality
and in sufficient quantity and the manufacturers must deliver them to assembly
and testing subcontractors on time for packaging into final products. We have at
times experienced delivery delays and long manufacturing lead times. We cannot
be sure that our manufacturers will devote adequate resources to the production
of our products or deliver sufficient quantities of finished products to us on
time or at an acceptable cost. The lead-time necessary to establish a strategic
relationship with a new manufacturing partner is considerable. We would be
unable to readily obtain an alternative source of supply for any of our products
if this proves necessary. Any occurrence of these manufacturing difficulties
could harm our business.
We face intense competition and may not be able to compete effectively
We compete with both large companies and start-up companies, including Arithmos,
Inc., Macronix International Co., Ltd., Philips Semiconductors, a division of
Philips Electronics N.V., Pixelworks, Inc., Sage, Inc. and Silicon Image, Inc.
We anticipate that as the markets for our products develop, our current
customers may develop their own products and competition from diversified
electronic and semiconductor companies will intensify. Some competitors are
likely to include companies with greater financial and other resources than us.
Increased competition could harm our business, by, for example, increasing
pressure on our profit margins or causing us to lose customers.
Our success will depend on the growth of the flat panel and digital CRT computer
monitor markets and other consumer electronics video markets
Our ability to generate increased revenues will depend on the growth of the flat
panel and digital CRT computer monitor markets. These markets are at early
stages of development. Our continued growth will also depend upon emerging
markets for consumer electronics video products, such as home theater, DVD, flat
screen and digital television, and HDTV. The potential size of these markets and
the timing of their development is uncertain and will depend in particular upon:
. a significant reduction in the costs of products in the respective
markets,
. the availability of components required by such products, and
. the emergence of competing technologies.
For the three months ended December 31, 1999, 69.2% of our revenue was derived
from sales to customers in the flat panel computer monitor market. This and
other potential markets may not develop as expected, which would harm our
business.
We must develop new products and enhance our existing products to react to rapid
technological change
We must develop new products and enhance our existing products with improved
technologies to meet rapidly evolving customer requirements and industry
standards. We need to design products for customers that continually require
higher functionality at lower costs. This requires us to continue to add
features to our products and to include all of these features on a single chip.
The development process for these advances is lengthy and will require us to
accurately anticipate technological innovations and market trends. We may be
unable to successfully develop new products or product enhancements in a timely
manner, or at all. Any new products or product enhancements may not be accepted
in new or existing markets. If we fail to develop and introduce new products or
product enhancements, that failure will harm our business.
-10-
<PAGE>
Our products may not be accepted in the flat panel computer monitor market and
other emerging markets
Our success in the flat panel computer monitor market, as well as the markets
for digital CRTs, home theater, DVD, flat panel and digital television, and HDTV
will depend upon the extent to which manufacturers of those products incorporate
our integrated circuits into their products. We have only recently begun
shipping our products in quantity to manufacturers of flat panel computer
monitors, and have only recently begun shipping limited commercial quantities of
products to manufacturers in some of the other developing consumer electronics
markets. Our ability to sell products into these markets will depend upon demand
for the functionality provided by our products. For example, some computer
industry participants have proposed that the image processing functions
performed by our products should be incorporated within the computer itself
rather than in the flat panel computer monitor. If this were to occur, we would
be subject to direct competition from suppliers of graphics integrated circuits,
many of whom have more resources than we have. The failure of our products to be
accepted in the flat panel computer monitor market in particular would harm our
business.
A large percentage of our revenue comes from sales to a small number of large
customers
The markets for our products are highly concentrated. Our sales are derived from
a limited number of customers. Sales to our largest five customers accounted for
47.3% of our revenues for the three months ended December 31, 1999. We expect
that a small number of customers will continue to account for a large amount of
our revenues. Substantially all of our sales are made on the basis of purchase
orders rather than long-term agreements. Consequently, any customer could cease
purchasing products at any time without penalty. The decision by any large
customer to decrease or cease using our products would harm our business.
Our business depends on relationships with industry leaders that are non-binding
We work closely with industry leaders in the markets we serve to design products
with improved performance, cost and functionality. We typically commit
significant research and development resources to such design activities. We
often divert financial and personnel resources from other development projects
without entering into agreements obligating these industry leaders to continue
the collaborative design project or to purchase the resulting products. The
failure of an industry leader to complete development of a collaborative design
project or to purchase the products resulting from such projects would have an
immediate and serious impact on our business, financial condition and results of
operations. Our inability to establish such relationships in the future would,
similarly, harm our business.
A large percentage of our revenues will come from sales outside of North
America, which creates additional business risks
A large portion of our revenues will come from sales to customers outside of
North America, particularly to equipment manufacturers located in Japan and
other parts of Asia. For the three months ended December 31, 1999, sales to
regions outside of North America amounted to 72.6% of revenues. These sales are
subject to numerous risks, including:
. fluctuations in currency exchange rates, tariffs, import restrictions
and other trade barriers,
. unexpected changes in regulatory requirements,
. longer payment periods,
. potentially adverse tax consequences,
. export license requirements,
. political and economic instability, and
. unexpected changes in diplomatic and trade relationships.
Because our sales are denominated in United States dollars, increases in the
value of the United States dollar could increase the price of our products in
non-U.S. markets and make our products more expensive than competitors' products
denominated in local currencies.
-11-
<PAGE>
We may not be able to attract or retain the key personnel we need to succeed
Competition for qualified management, engineering and technical employees is
intense. As a result, employees could leave with little or no prior notice. We
cannot assure you that we will be able to attract and retain employees.
If we cannot attract and retain key employees, our business would be harmed.
Other factors to consider
You should also consider the following factors:
It may be difficult for our shareholders to enforce civil liabilities under the
United States federal securities laws because we are incorporated in Canada
The enforcement by our shareholders of civil liabilities under the federal
securities laws of the United States may be adversely affected because:
. we are incorporated under the laws of Nova Scotia, Canada,
. some of our directors and officers are residents of Canada, and
. substantial portions of our assets are located outside the United
States.
As a result, it may be difficult for holders of our common shares to effect
service of a legal claim within the United States upon our directors and
officers or upon other individuals who are not residents of the United States.
It may also be difficult to satisfy any judgements of courts of the United
States based upon civil liabilities under the federal securities laws of the
United States.
Our anti-takeover defense provisions may deter potential acquirers
Our authorized capital consists of 1,000,000,000 special shares issuable in one
or more series and 1,000,000,000 common shares. Our board of directors has the
authority to issue special shares and to determine the price, designation,
rights, preferences, privileges, restrictions and conditions of these shares
without any further vote or action by our shareholders, including voting and
dividend rights. The rights of holders of our common shares will be subject to,
and may be adversely affected by, rights of holders of any special shares that
we may issue in the future. The issuance of special shares could make it more
difficult for a third party to acquire a majority of our outstanding voting
shares. We have no present plans to issue any special shares. We have adopted a
shareholder rights plan with respect to our common shares. This plan is
specifically designed to make an unsolicited, non-negotiated takeover attempt
more difficult. We also have a board of directors with three-year staggered
terms, which may, in certain circumstances, make an unsolicited, non-negotiated
takeover attempt more difficult.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We carry out a significant portion of our operations in Canada. Although
virtually all our revenues and costs of revenues are denominated in U.S.
dollars, a substantial portion of our operating expenses are denominated in
Canadian dollars. Accordingly, our operating results are affected by changes in
the exchange rate between the Canadian and U.S. dollars. Any future
strengthening of the Canadian dollar against the US dollar could negatively
impact our operating results by increasing our operating expenses. We do not
presently engage in any hedging or other transactions intended to manage the
risks relating to foreign currency exchange rate fluctuations, other than
natural hedges that occur as a result of holding both Canadian dollar
denominated assets and Canadian dollar denominated liabilities. We may in the
future undertake hedging or other such transactions if management determines
that it is necessary to offset exchange rate risks. To date, net exchange gains
and losses on Canadian dollar denominated assets and liabilities has not been
material.
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<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 8, 1999, a Complaint for Damages in Northshore Laboratories Inc. v.
-------------------------------
Genesis Microchip, Inc., docket no. 99-cv-4774(MCL) was filed in Federal
- -----------------------
District Court in Trenton, New Jersey. In that Complaint, Northshore claimed an
unspecified amount of damages for breach of contract arising out of a licensing
agreement between us. On December 6, 1999, we filed an Answer to Complaint,
Counterclaim, Third Party Complaint and Demand for Jury Trial. In our response,
we denied the allegations of the Northshore Complaint and made counterclaims for
declaratory and injunctive relief as a minority shareholder in Northshore. We
believe that our defenses and counterclaims are meritorious.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At our Annual and Special General Meeting of Shareholders held on September 28,
1999, our shareholders voted on a number of proposals that are detailed on our
Quarterly Report of Form 10-Q for the Period Ended September 30, 1999. Several
of these proposals were subject to a confirmatory vote held on October 19, 1999.
The results of the September 28, 1999 vote and the October 19, 1999 confirmatory
vote are included in Item 4 of Part II of our report on Form 10-Q for the
quarterly period ended September 30, 1999, and are incorporated herein by
reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are attached:
10.1 Property Lease
27.1 Financial Data Schedule
b) Reports on Form 8-K:
We filed no reports on Form 8-K in the three months ended December 31,
1999.
SIGNATURE
Our authorized representative has signed this report on our behalf as required
by the Securities Exchange Act of 1934.
GENESIS MICROCHIP INCORPORATED
By: /s/ I. ERIC ERDMAN
---------------------------------
I. Eric Erdman
Chief Financial Officer & Secretary
(Authorized Officer &
Principal Financial Officer)
Date: February 11, 2000
<PAGE>
Lease Agreement
(NNN Tenant Improvements)
Basic Lease Information
<TABLE>
<S> <C>
Lease Date: October 18, 1999
Landlord: WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
Landlord's Address: c/o Legacy Partners Commercial, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
Tenant: Genesis Microchip Corporation,
a California corporation
Tenant's Address: 1871 Landings Drive
Mountain View, California 94043
Changing to: 2150 Gold Street, San Jose, CA effective on the Commencement Date.
Premises: Approximately 52,165 rentable square feet as shown on Exhibit A
---------
Premises Address: 2150 Gold Street
San Jose, California 95002
Building C: Approximately 52,165 rentable square feet
Lot: APN 015-34-27, 015-34-28, 015-34-77, 015-34-78
Park: Legacy TechPark @ 237: Approximately 302,186 rentable square feet
Term: March 1, 2000 ("Commencement Date"), through
February 28, 2007 ("Expiration Date")
Base Rent ((P)3): Ninety Three Thousand Eight Hundred Ninety-Seven and 00/100 Dollars ($93,897.00)
per month commencing the Commencement Date through February 28, 2001.
Adjustments to Base Rent: Effective March 1, 2001, the Base Rent shall increase to $96,505.25 per month ($1.85
NNN per rentable sf)
Effective March 1, 2002, the Base Rent shall increase to $99,113.50 per month ($1.90
NNN per rentable sf)
Effective March 1, 2003, the Base Rent shall increase to $101,721.75 per month ($1.95
NNN per rentable sf)
Effective March 1, 2004, the Base Rent shall increase to $104,330.00 per month ($2.00
NNN per rentable sf)
Effective March 1, 2005, the Base Rent shall increase to $106,938.25 per month ($2.05
NNN per rentable sf)
Effective March 1, 2006, the Base Rent shall increase to $109,546.50 per month ($2.10
NNN per rentable sf)
The foregoing schedule is subject to adjustment as provided in Section 2 herein.
Advance Rent ((P)3): One Hundred Seven Thousand Nine Hundred Eighteen and 95/100 Dollars ($107,918.95)
Security Deposit ((P)4): One Hundred Nine Thousand Five Hundred Forty-Six and 50/100 Dollars ($109,546.50)
subject to Section 4 herein.
*Tenant's Share of Operating Expenses ((P)6.1): 17.26% of the Park
*Tenant's Share of Tax Expenses ((P)6.2): 17.26% of the Park
*Tenant's Share of Common Area Utility Costs ((P)7.2): 17.26% of the Park
*Tenant's Share of Utility Expenses ((P)7.1): 100% of the Building
*The amount of Tenant's Share of the expenses as referenced above shall be subject to modification as set forth in this Lease.
Permitted Uses ((P)9): The Premises shall be used solely for the design, research and development, sales, and
light manufacturing of electronic products and services and other incidental uses and for
no other purposes without Landlord's prior written consent, but only to the extent
permitted by the City of San Jose and all agencies and governmental authorities having
jurisdiction thereof
Parking Spaces: One hundred ninety-one (191) non-exclusive and non-designated spaces
Broker ((P)33): Colliers International for Tenant BT Commercial for Landlord
Exhibits: Exhibit A - Premises, Building, Lot and/or Park
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - Covenants, Conditions and Restrictions
Exhibit E - Tenant's Initial Hazardous Materials Disclosure Certificate
Exhibit F - Change of Commencement Date - Example
Exhibit G - Sign Criteria
Exhibit H - Subordination and Non Disturbance Agreement
Exhibit J - Guaranty
Addenda: Addendum 1 Option to Extend the Lease
Addendum 2 Right of First Offer
</TABLE>
1
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section Page
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<S> <C>
1. Premises......................................................................... 1
2. Occupancy; Adjustment of Commencement Date....................................... 1
3. Rent............................................................................. 1
4. Security Deposit................................................................. 2
5. Condition of Premises; Tenant Improvements....................................... 2
6. Additional Rent.................................................................. 2
7. Utilities and Services........................................................... 4
8. Late Charges..................................................................... 5
9. Use of Premises.................................................................. 5
10. Alterations; and Surrender of Premises........................................... 6
11. Repairs and Maintenance.......................................................... 6
12. Insurance........................................................................ 7
13. Limitation of Liability and Indemnity............................................ 8
14. Assignment and Subleasing........................................................ 8
15. Subordination.................................................................... 10
16. Right of Entry................................................................... 11
17. Estoppel Certificate............................................................. 11
18. Tenant's Default................................................................. 11
19. Remedies for Tenant's Default.................................................... 11
20. Holding Over..................................................................... 12
21. Landlord's Default............................................................... 12
22. Parking.......................................................................... 12
23. Transfer of Landlord's Interest.................................................. 12
24. Waiver........................................................................... 13
25. Casualty Damage.................................................................. 13
26. Condemnation..................................................................... 14
27. Environmental Matters/Hazardous Materials........................................ 14
28. Financial Statements............................................................. 16
29. General Provisions:.............................................................. 16
30. Signs............................................................................ 17
31. Mortgagee Protection............................................................. 17
32. Warranties of Tenant............................................................. 18
33. Brokerage Commission............................................................. 18
34. Quiet Enjoyment.................................................................. 18
35. Satellite Dish................................................................... 18
</TABLE>
<PAGE>
NNN Tenant Improvements
Lease Agreement
The Basic Lease Information set forth on Page 1 and this Lease are and shall be
construed as a single instrument.
1. Premises
Landlord hereby leases the Premises to Tenant upon the terms and conditions
contained herein. Tenant shall have the right to use, on a non-exclusive basis,
parking areas and ancillary facilities located within the Common Areas of the
Park, subject to the terms of this Lease. Landlord and Tenant hereby agree that
for purposes of this Lease, as of the Lease Date, the rentable square footage
area of each of the Premises, the Building, the Phase (if any) and the Park
shall be deemed to be the number of rentable square feet as set forth in the
Basic Lease Information. Tenant further agrees that the number of rentable
square feet of any of the Building, the Phase (if any) and the Park may
subsequently change after the Lease Date commensurate with any modifications to
any of the foregoing by Landlord, and Tenant's Share shall accordingly change.
The term "Project" as used herein shall mean and collectively refer to the
Building, the Common Areas, the Lot, the Phase (if any) and the Park.
2. Occupancy; Adjustment of Commencement Date
2.1 If Landlord, for any reason whatsoever, cannot deliver possession of the
Premises to Tenant on the Commencement Date in the condition specified in
Section 5 hereof, Landlord shall not be subject to any liability nor shall the
validity of the Lease be affected; provided, the Term of this Lease and the
obligation to pay Rent shall commence on the date possession is actually
tendered to Tenant and the Expiration Date shall be extended commensurately. If
the commencement date and/or the expiration date of this Lease is other than the
Commencement Date and Expiration Date specified in the Basic Lease Information,
Landlord and Tenant shall execute a written amendment to this Lease,
substantially in the form of Exhibit F hereto, wherein the parties shall specify
---------
the actual commencement date, expiration date and the date on which Tenant is to
commence paying Rent. The word "Term" whenever used herein refers to the
initial term of this Lease and any valid extension(s) thereof.
The term of the Lease commences on the Commencement Date, which shall be
fourteen (14) days after the date the "Tenant Improvements" (as defined in
Exhibit B to the Lease) have been "Substantially Completed" (as such terms are
defined in Exhibit B to the Lease); provided, however, that Landlord shall
notify Tenant at least 10 days prior to the date the Tenant Improvements will be
Substantially Completed and Tenant shall have the right to enter the Premises
from and after the date the Tenant Improvements have been Substantially
Completed as provided in Section 2.3 of the Lease and Section 12 of Exhibit B to
the Lease. The Expiration Date shall expire seven (7) years after the
Commencement Date.
2.2 Within fifteen (15) business days after the Substantial Completion of the
Tenant Improvements, representatives of Landlord and Tenant shall make a joint
inspection of the Tenant Improvements and the results of such inspection shall
be set forth in a written list specifying the incomplete items as well as those
items for which corrections need to be made (the "Punchlist Items"). Landlord
and Tenant shall promptly (by no later than fifteen (15) business days
thereafter) and in good faith approve the written list of Punchlist Items.
Landlord shall use commercially reasonable efforts to cause the Punchlist Items
to be promptly completed and/or corrected, as applicable. The performance of
the work associated with the Punchlist Items shall be performed in such a manner
so as not to preclude or unreasonably interfere with Tenant's ability to conduct
its operations in the Premises. Upon the completion of the Punchlist Items, to
Tenant's reasonable satisfaction, Tenant shall promptly notify Landlord in
writing that such items have been completed to Tenant's reasonable satisfaction.
In addition to the Punchlist Items, Landlord shall also use commercially
reasonable efforts to cause the general contractor to correct any other patent
deficiencies or defects in the Tenant Improvements during the thirty (30) day
period following Substantial Completion of the Tenant Improvements. If Tenant
fails to timely deliver to Landlord any such written notice of the
aforementioned patent deficiencies or defects within said 30-day period,
Landlord shall have no obligation to perform any such work thereafter, subject
to the warranties outlined in Section 5 herein.
2.3 Landlord shall permit Tenant to enter the Premises prior to the actual
Commencement Date for the limited purpose of performing the Tenant's Pre-
Occupancy Work (defined in Exhibit B hereto). Landlord shall consult with its
---------
general contractor and shall notify Tenant, in writing, of the date on which
Tenant may commence such limited purpose entry. In no event may Tenant conduct
its business or operations from the Premises until after the Commencement Date.
Such entry and occupancy shall be at Tenant's sole risk and subject to all the
provisions of this Lease, including the requirement to perform all of Tenant's
obligations hereunder, including without limitation, the requirement to pay the
Advance Rent, the Rent (except as set forth in the Basic Lease Information) and
the Security Deposit, and to obtain the insurance and deliver insurance
certificates as required pursuant to Section 12 of this Lease. In addition to
the foregoing and the provisions of Exhibit B hereto regarding such early entry
---------
and occupancy, Landlord shall have the right to impose additional reasonable
conditions with respect thereto. If, at any time, Tenant is in material default
of any term, condition or provision of this Lease beyond any applicable cure
period, any such waiver by Landlord of Tenant's requirement to pay Rent shall be
null and void and Tenant shall immediately pay to Landlord all Rent so waived by
Landlord.
The March 1, 2000 date included as the Commencement Date in the Basic Lease
Provisions is the date estimated by Landlord that the Tenant Improvements will
be Substantially Completed (herein referred to as the "Estimated Commencement
Date"). If the Commencement Date does not occur within 180 days after the
Estimated Commencement Date for any reason other than a Tenant Delay (as defined
in Exhibit B), then Tenant shall have the right, but not the obligation, to
terminate the Lease by written notice to Landlord and any monies previously paid
by Tenant to Landlord shall be immediately paid by Landlord to Tenant.
3. Rent
On the date that Tenant executes this Lease, Tenant shall deliver to Landlord
the original executed Lease, the Advance Rent (which shall be applied against
the Rent payable for the first month(s) Tenant is required to pay Rent), the
Security Deposit, and all insurance certificates evidencing the insurance
required to be obtained by Tenant under Section 12 and Exhibit B of this Lease.
---------
Tenant agrees to pay Landlord the Base Rent, without prior notice or demand,
abatement, offset, deduction or claim, in advance at Landlord's Address on the
Commencement Date and thereafter on the first (1st) day of
<PAGE>
each month throughout the balance of the Term of the Lease. In addition to the
Base Rent, Tenant shall pay Landlord in advance on the Commencement Date and
thereafter on the first (1st) day of each month throughout the balance of the
Term of this Lease, as Additional Rent, Tenant's Share of Operating Expenses,
Tax Expenses, Common Area Utility Costs, and Utility Expenses. The term "Rent"
whenever used herein refers to the aggregate of all these amounts. If Landlord
permits Tenant to occupy the Premises without requiring Tenant to pay rental
payments for a period of time, the waiver of the requirement to pay rental
payments shall only apply to the waiver of the Base Rent. The Rent for any
fractional part of a calendar month at the commencement or expiration or
termination of the Lease Term shall be a prorated amount of the Rent for a full
calendar month based upon a thirty (30) day month. To the extent not already
paid as part of the Advance Rent any prorated Rent shall be paid on the
Commencement Date, and any prorated Rent for the final calendar month hereof
shall be paid on the first day of the calendar month in which the date of
expiration or termination occurs.
4. Security Deposit
Simultaneously with Tenant's execution and delivery of this Lease, Tenant shall
deliver to Landlord, as a Security Deposit for the faithful performance by
Tenant of its obligations under this Lease, the amount specified in the Basic
Lease Information. If Tenant is in default hereunder, Landlord may, but without
obligation to do so, use all or any portion of the Security Deposit to cure the
default or to compensate Landlord for all damages sustained by Landlord in
connection therewith. Tenant shall, within twenty (20) days, pay to Landlord a
sum equal to the portion of the Security Deposit so applied or used to replenish
the amount of the Security Deposit held to increase such deposit to the amount
initially deposited with Landlord. At any time after Tenant has defaulted
hereunder, Landlord may require an increase in the amount of the Security
Deposit required hereunder for the then balance of the Term and Tenant shall,
immediately on demand, pay to Landlord such additional sums. As soon as
practicable (but no later than 60 days) after the expiration or termination of
this Lease, Landlord shall return the Security Deposit to Tenant, less such
amounts as are reasonably necessary, as determined by Landlord, to remedy
Tenant's default(s) hereunder or to otherwise restore the Premises to a clean
and safe condition, reasonable wear and tear and damage by casualty excepted.
If the cost to restore the Premises exceeds the amount of the Security Deposit,
Tenant shall within twenty (20) days deliver to Landlord any and all of such
excess sums. Landlord shall not be required to keep the Security Deposit
separate from other funds, and, unless otherwise required by law, Tenant shall
not be entitled to interest on the Security Deposit. In no event or
circumstance shall Tenant have the right to any use of the Security Deposit and,
specifically, Tenant may not use the Security Deposit as a credit or to
otherwise offset any payments required hereunder.
5. Condition of Premises; Tenant Improvements
Tenant agrees to accept the Premises on the Commencement Date as then being
suitable for Tenant's intended use and in good operating order, condition and
repair in its then existing "AS IS" condition, except as otherwise set forth in
Exhibit B hereto and this Lease and subject to Sections 2.2, 11.2 and 11.3
- ---------
herein. The Tenant Improvements (defined in Exhibit B) shall be installed in
---------
accordance with the terms, conditions, criteria and provisions set forth in
Exhibit B. By taking possession of the Premises, Tenant shall be deemed to have
- ---------
accepted the Premises in good condition and state of repair. Tenant expressly
acknowledges and agrees that neither Landlord nor any of Landlord's agents,
representatives or employees has made any representations as to the suitability,
fitness or condition of the Premises for the conduct of Tenant's business or for
any other purpose, including without limitation, any storage incidental thereto.
Any Tenant Improvements to be constructed hereunder shall be in compliance with
the requirements of the ADA (defined below) and all applicable laws, and all
costs incurred for purposes of compliance therewith shall be a part of and
included in the costs of the Tenant Improvements. Landlord and General
Contractor shall provide Tenant with any applicable warranty provided to
Landlord from any contractor, subcontractor, supplier, or manufacturer or vendor
with respect to the Tenant Improvements and will reduce Tenant's maintenance
obligations under this Lease. Landlord represents that as of the date of this
Lease, the roof, foundation, footings, floor slab, exterior and load bearing
walls, all structural portions of the Building and all plumbing, electrical,
sprinklers and other Building systems for the Building (to the extent installed)
are in good working order and repair and in compliance with all applicable laws,
ordinances, codes (collectively, "Laws"), and all applicable Development
Documents and Recorded Matters (as such terms are defined in section 9.1 of the
Lease).
6. Additional Rent
It is intended by Landlord and Tenant that this Lease be a "triple net lease."
The costs and expenses described in this Section 6 and all other sums, charges,
costs and expenses specified in this Lease other than Base Rent are to be paid
by Tenant to Landlord as additional rent (collectively, "Additional Rent").
6.1 Operating Expenses:
6.1.1 Definition of Operating Expenses. Tenant shall pay to Landlord
Tenant's Share of all Operating Expenses as Additional Rent. The term
"Operating Expenses" as used herein shall mean the total amounts paid or payable
by Landlord in connection with the ownership, management, maintenance, repair
and operation of the Premises and the other exterior common areas of the
Project. These Operating Expenses may include, but are not limited to,
Landlord's cost of: (i) repairs to, and maintenance of, the roof membrane, the
non-structural portions of the roof and the non-structural elements of the
perimeter exterior walls of the Building; (ii) maintaining the outside paved
area, landscaping and other common areas of the Park. The term "Common Areas"
shall mean all areas and facilities within the Park exclusive of the Premises
and the other portions of the Park leasable exclusively to other tenants and
Common Areas located within the other buildings of the Park. The Common Areas
include, but are not limited to, interior lobbies, mezzanines, parking areas,
access and perimeter roads, sidewalks, rail spurs (if any), and landscaped
areas; (iii) annual insurance premium(s) insuring against personal injury and
property damage (including, if Landlord elects, "all risk" or "special purpose"
coverage) and all other insurance, including, but not limited to, earthquake and
flood for the Project, rental value insurance against loss of Rent for a period
of at least nine (9) months commencing on the date of loss, and subject to the
provisions of Section 25 below, any commercially reasonable deductible; (iv) (a)
modifications and/or new improvements to any portion of the Project occasioned
by any rules, laws or regulations effective subsequent to the Lease Date; (b)
reasonably necessary replacement improvements to any portion of the Project
after the Commencement Date; and (c) new improvements to the Project that reduce
operating costs or improve life/safety conditions, all of the foregoing as
reasonably determined by Landlord, in its reasonable discretion; provided, if
such costs are of a capital nature, then such costs or allocable portions
thereof shall be amortized on a straight-line basis over the estimated useful
life of the capital item, as reasonably determined by Landlord, together with
reasonable interest on the amortized balance; (v) the management and
administration of any and all portions of the Project, including, without
limitation, a
2
<PAGE>
property management fee, accounting, auditing, billing, postage, salaries and
benefits for clerical and supervisory employees, whether located on the Project
or off-site, payroll taxes and legal and accounting costs and all fees, licenses
and permits related to the ownership, operation and management of the Project;
(vi) preventative maintenance and repair contracts including, but not limited
to, contracts for elevator systems (if any) and heating, ventilation and air
conditioning systems, lifts for disabled persons, if Landlord elects to so
procure; (vii) security and fire protection services for any portion of the
Project, if and to the extent, in Landlord's reasonable discretion, such
services are provided; (viii) the creation and modification of any rail spur or
track agreements, licenses, easements or other similar undertakings with respect
to the Project; (ix) supplies, materials, equipment, rental equipment and other
similar items used in the operation and/or maintenance of the Project; (x) any
and all levies, charges, fees and/or assessments payable to any applicable
owner's association or similar body; (xi) any barrier removal work or other
required improvements, alterations or work to any portion of the Project
generally required under the ADA (defined below) (the "ADA Work") required after
the Commencement Date; provided, if such ADA Work is required under the ADA due
to Tenant's particular use of the Premises or any Alteration (defined below)
made to the Premises by or on behalf of Tenant, then the cost of such ADA Work
shall be borne solely by Tenant and shall not be included as part of the
Operating Expenses; and (xii) the repairs and maintenance items set forth in
Section 11.2 below. Notwithstanding the above, the Operating Expenses applicable
to any particular building within the Park shall be allocated and charged to the
building in question whose tenants shall be responsible for payment of their
respective proportionate shares in the pertinent building and other Operating
Expenses applicable to the Common Areas of the Project shall be allocated and
charged to each building in the Project based on the ratio that each building's
rentable area bears to the total rentable area of all buildings in the Park
notwithstanding that other buildings may not be leased and occupied. Landlord
shall reasonably allocate such Operating Expenses to the buildings (including
the Building) or Project, as the case may be.
6.1.2 Operating Expense Exclusions. Notwithstanding anything to the
contrary contained herein, for purposes of this Lease, the term "Operating
Expenses" shall not include the following: (i) costs (including permit,
license, and inspection fees) incurred in renovating, improving, decorating,
painting, or redecorating vacant space or space for other tenants within the
Project; (ii) costs incurred because Landlord or another tenant actually
violated the terms and conditions of any lease for premises within the Project;
(iii) legal and auditing fees (other than those fees reasonably incurred in
connection with the maintenance and operation of all or any portion the
Project), leasing commissions, advertising expenses, and other costs incurred in
connection with the original leasing of the Project or future re-leasing of any
portion of the Project; (iv) depreciation of the Building or any other
improvements or equipment situated within the Project; (v) any items for which
Landlord is actually reimbursed by insurance or by direct reimbursement by any
other tenant of the Project; (vi) costs of repairs or other work necessitated by
fire, windstorm or other casualty (excluding any deductibles) and/or costs of
repair or other work necessitated by the exercise of the right of eminent domain
to the extent insurance proceeds or a condemnation award, as applicable, is
actually received by Landlord for such purposes; provided, such costs of repairs
or other work shall be paid by the parties in accordance with the provisions of
Sections 25 and 26, below; (vii) other than any interest charges for capital
improvements referred to in Section 6.1.1(iv) hereinabove, any interest or
payments on any financing for the Building, the Phase or the Project, interest
and penalties incurred as a result of Landlord's late payment of any invoice
(provided that Tenant pays Tenant's Share of Operating Expenses and Tax Expenses
to Landlord when due as set forth herein), and any bad debt loss, rent loss or
reserves for same; (viii) costs associated with the investigation and/or
remediation of Hazardous Materials (hereafter defined) present in, on or about
any portion of the Project, unless such costs and expenses are the
responsibility of Tenant as provided in Section 27 hereof, in which event such
costs and expenses shall be paid solely by Tenant in accordance with the
provisions of Section 27 hereof; (ix) Landlord's cost for the repairs and
maintenance items set forth in Section 11.3, below; (x) overhead and profit
increment paid to Landlord or to subsidiaries or affiliates of Landlord for
goods and/or services in the Project to the extent the same exceeds the costs of
such by unaffiliated third parties on a competitive basis; or any costs included
in Operating Expenses representing an amount paid to a person, firm, corporation
or other entity related to Landlord which is in excess of the amount which would
have been paid in the absence of such relationship; (xi) any payments under a
ground lease or master lease; and (xii) costs for any work or materials covered
under any applicable contractor or manufacturer warranty or guaranty.
6.2 Tax Expenses: Tenant shall pay to Landlord Tenant's Share of all real
property taxes applicable to the Project. Prior to delinquency, Tenant shall
pay any and all taxes and assessments levied upon Tenant's Property (defined
below in Section 10) located or installed in or about the Premises by, or on
behalf of Tenant. To the extent any such taxes or assessments are not
separately assessed or billed to Tenant, then Tenant shall pay the amount
thereof as invoiced by Landlord. Tenant shall also reimburse and pay Landlord,
as Additional Rent, within ten (10) days after demand therefor, one hundred
percent (100%) of (i) any increase in real property taxes attributable to any
and all Alterations (defined below in Section 10), Tenant Improvements,
fixtures, equipment or other improvements of any kind whatsoever placed in, on
or about the Premises for the benefit of, at the request of, or by Tenant, and
(ii) taxes and assessments levied or assessed upon or with respect to the
possession, operation, use or occupancy by Tenant of the Premises or any other
portion of the Project. The term "Tax Expenses" shall mean and include, without
limitation, any form of tax and assessment (general, special, supplemental,
ordinary or extraordinary), commercial rental tax, payments under any
improvement bond or bonds, license fees, license tax, business license fee,
rental tax, transaction tax or levy imposed by any authority having the direct
or indirect power of tax (including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement
district thereof) as against any legal or equitable interest of Landlord in the
Premises or any other portion of the Project or any other tax, fee, or excise,
however described, including, but not limited to, any value added tax, or any
tax imposed in substitution (partially or totally) of any tax previously
included within the definition of real property taxes, or any additional tax the
nature of which was previously included within the definition of real property
taxes. The term "Tax Expenses" shall not include any franchise, estate,
inheritance, net income, or excess profits tax imposed upon Landlord, or a
penalty fee imposed as a result of Landlord's failure to pay Tax Expenses when
due.
Tax Expenses shall not include and Tenant shall not be required to pay any
tax or assessment expense or any increase therein (i) levied on Landlord's
rental income, unless such tax or assessment expense is imposed in lieu of real
property taxes; (ii) in excess of the amount which would be payable if such tax
or assessment expense were paid in installments over the longest possible term;
(iii) imposed on land and improvements other than the Park; (iv) attributable to
Landlord's net income, inheritance, gift, transfer, estate or state taxes; or
(v) resulting from the improvement of any of other building (other than the
Building) in the Park for the sole use of other occupants. In addition,
Tenant's agreement to the payment of taxes under clause (i) of Section 6.2 of
the Lease for assessments due to alterations by Tenant and clause (ii) of
Section 6.2 of the Lease for taxes and assessments levied or assessed with
respect to the possession, operation, use or occupancy by Tenant of the Premises
is conditioned upon Landlord applying and enforcing the same
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standard on all other tenants in the Park and allocating taxes in the same
manner for all other buildings in the Park notwithstanding whether such other
buildings are leased and occupied or the tenants in such other buildings are
paying or are obligated to pay such taxes.
6.3 Payment of Expenses: Landlord shall estimate Tenant's Share of the
Operating Expenses and Tax Expenses for the calendar year in which the Lease
commences. Commencing on the Commencement Date, one-twelfth (1/12th) of this
estimated amount shall be paid by Tenant to Landlord, as Additional Rent, and
thereafter on the first (1st) day of each month throughout the remaining months
of such calendar year. Thereafter, Landlord may estimate such expenses for each
calendar year during the Term of this Lease and Tenant shall pay one-twelfth
(1/12th) of such estimated amount as Additional Rent hereunder on the first
(1st) day of each month during such calendar year and for each ensuing calendar
year throughout the Term of this Lease. Tenant's obligation to pay Tenant's
Share of Operating Expenses and Tax Expenses shall survive the expiration or
earlier termination of this Lease.
6.4 Annual Reconciliation: By June 30th of each calendar year, or as soon
thereafter as reasonably possible, Landlord shall furnish Tenant with an
accounting of actual and accrued Operating Expenses and Tax Expenses. Within
thirty (30) days of Landlord's delivery of such accounting, Tenant shall pay to
Landlord the amount of any underpayment. Notwithstanding the foregoing, failure
by Landlord to give such accounting by such date shall not constitute a waiver
by Landlord of its right to collect any underpayment by Tenant at any time.
Landlord shall credit the amount of any overpayment by Tenant toward the next
estimated monthly installment(s) falling due, or where the Term of the Lease has
expired, refund the amount of overpayment to Tenant as soon as possible
thereafter. If the Term of the Lease expires prior to the annual reconciliation
of expenses Landlord shall have the right to reasonably estimate Tenant's Share
of such expenses, and if Landlord determines that there has been an
underpayment, Landlord may deduct such underpayment from Tenant's Security
Deposit. Failure by Landlord to accurately estimate Tenant's Share of such
expenses or to otherwise perform such reconciliation of expenses shall not
constitute a waiver of Landlord's right to collect any of Tenant's underpayment
at any time during the Term of the Lease or at any time after the expiration or
earlier termination of this Lease.
6.5 Audit: After delivery to Landlord of at least thirty (30) days prior
written notice, Tenant, at its sole cost and expense through any employee or
accountant designated by it, shall have the right to examine and/or audit the
books and records evidencing such costs and expenses for the previous one (1)
calendar year, during Landlord's reasonable business hours but not more
frequently than once during any calendar year. Any such accounting firm
designated by Tenant may not be compensated on a contingency fee basis. Tenant
shall use good faith efforts to keep the results of any such audit (and any
negotiations between the parties related thereto) strictly confidential by
Tenant and its accounting firm and shall not be disclose, publish or otherwise
disseminate to any other party other than to Landlord and its authorized agents.
Landlord and Tenant each shall use its good faith efforts to cooperate in such
negotiations and to promptly resolve any discrepancies between Landlord and
Tenant in the accounting of such costs and expenses.
7. Utilities and Services
Tenant shall pay to Landlord the cost of all (i) water, sewer use, sewer
discharge fees and sewer fees, gas, electricity, telephone, telecommunications,
cabling and other utilities billed or metered separately to the Premises and
(ii) refuse pickup and janitorial service to the Premises. Utility Expenses,
Common Area Utility Costs and all other sums and charges set forth in this
Section 7 are considered part of Additional Rent.
7.1 Utility Expenses: For any such utility fees, use charges, or similar
services that are not billed or metered separately to Tenant, including without
limitation, water and sewer charges, and garbage and waste disposal
(collectively, "Utility Expenses"), Tenant shall pay to Landlord Tenant's Share
of Utility Expenses. If Landlord reasonably determines that Tenant's Share of
Utility Expenses is not commensurate with Tenant's use of such services, Tenant
shall pay to Landlord the amount which is attributable to Tenant's use of the
utilities or similar services, as reasonably estimated and determined by
Landlord, based upon factors such as size of the Premises and intensity of use
of such utilities by Tenant such that Tenant shall pay the portion of such
charges reasonably consistent with Tenant's use of such utilities and similar
services. If Tenant disputes any such estimate or determination, then Tenant
shall either pay the estimated amount or cause the Premises to be separately
metered at Tenant's sole expense. Tenant shall also pay Tenant's Share of any
assessments, charges, and fees included within any tax bill for the Lot on which
the Premises are situated, including without limitation, entitlement fees,
allocation unit fees, sewer use fees, and any other similar fees or charges.
7.2 Common Area Utility Costs: Tenant shall pay to Landlord Tenant's
Share of any Common Area utility costs, fees, charges and expenses
(collectively, "Common Area Utility Costs"). Tenant shall pay to Landlord one-
twelfth (1/12th) of the estimated amount of Tenant's Share of the Common Area
Utility Costs on the Commencement Date and thereafter on the first (1st) day of
each month throughout the balance of the Term of this Lease. Any reconciliation
thereof shall be substantially in the same manner as set forth in Section 6.4
above. Tenant shall also have the right to audit the Common Area Utility Costs
pursuant to the procedures set forth in Section 6.5 above. In addition,
Landlord acknowledges and agrees that Common Area Utility Costs for which Tenant
will pay Tenant's Share shall not include Common Area Utility Costs in the
Common Areas inside any building in the Park and other Common Areas for the
exclusive use of other tenant(s) of the Park.
7.3 Miscellaneous: Tenant acknowledges that the Premises may become
subject to the rationing of utility services or restrictions on utility use as
required by a public utility company, governmental agency or other similar
entity having jurisdiction thereof. Tenant agrees that its tenancy and
occupancy hereunder shall be subject to such rationing restrictions as may be
imposed upon Landlord, Tenant, the Premises, or other portions of the Project by
the applicable utility provider, and Tenant shall in no event be excused or
relieved from any covenant or obligation to be kept or performed by Tenant by
reason of any such rationing or restrictions. If permitted by applicable Laws,
Landlord shall have the right at any time and from time to time during the Term
of this Lease to either contract for service from a different company or
companies (each such company referred to as an "Alternate Service Provider")
other than the company or companies presently providing electricity service for
the Project (the "Electric Service Provider") or continue to contract for
service from the Electric Service Provider, at Landlord's sole discretion
provided however, any change to an Alternative Service Provider for utilities in
the Common Areas may be made by Landlord only if such Alternative Service
Provider provides for the same or better quality of service and no additional
cost to Tenant. Tenant agrees to cooperate with Landlord, the Electric Service
Provider, and any Alternate Service Provider at all times and, as reasonably
necessary, shall
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allow Landlord, the Electric Service Provider, and any Alternate Service
Provider reasonable access to the Building's electric lines, feeders, risers,
wiring, and any other machinery within the Premises.
8. Late Charges
Any and all sums or charges set forth in this Section 8 are considered part of
Additional Rent. Tenant acknowledges that late payment (the fifth day of each
month or any time thereafter) by Tenant to Landlord of Rent and all other sums
due hereunder, will cause Landlord to incur costs not contemplated by this
Lease. Such costs may include, without limitation, processing and accounting
charges, and late charges that may be imposed on Landlord by the terms of any
note secured by any encumbrance against the Premises, and late charges and
penalties due to the late payment of real property taxes on the Premises.
Therefore, if any installment of Rent or any other sum payable by Tenant is not
received by Landlord within five (5) days of when due, Tenant shall promptly pay
to Landlord a late charge, as liquidated damages, in an amount equal to seven
and one-half percent (7.5%) of such delinquent amount. Notwithstanding the
foregoing, Landlord waives the late charge for the first (1st) three instances
during the Term of this Lease in which Tenant fails to timely pay Rent. If
Tenant delivers to Landlord a check for which there are not sufficient funds,
Landlord may require Tenant to replace such check with a cashier's check for the
amount of such check and all other charges payable hereunder. The parties agree
that this late charge and the other charges referenced above represent a fair
and reasonable estimate of the costs that Landlord will incur by reason of such
late payment by Tenant, excluding attorneys' fees and costs. Acceptance of any
late charge or other charges shall not constitute a waiver by Landlord of
Tenant's default with respect to the delinquent amount, nor prevent Landlord
from exercising any of the other rights and remedies available to Landlord for
any other breach of Tenant under this Lease. If a late charge becomes payable
for three (3) installments of Rent in any calendar year (inclusive of the
"grace" instances outlined above), then Landlord, at Landlord's sole option, can
either require the Rent be paid monthly in advance by cashier's check or by
electronic funds transfer.
9. Use of Premises
9.1 Compliance with Laws, Recorded Matters, and Rules and Regulations:
The Premises are to be used solely for the purposes and uses specified in the
Basic Lease Information and for no other uses or purposes without Landlord's
prior written consent. Landlord's consent shall not be unreasonably withheld or
delayed so long as the proposed use (i) does not involve the use of Hazardous
Materials other than as expressly permitted under the provisions of Section 29
below, (ii) does not require any additional parking spaces, and (iii) is
compatible and consistent with the other uses then being made in the Project and
in other similar types of buildings in the vicinity of the Project, as
reasonably determined by Landlord. The use of the Premises by Tenant and its
employees, representatives, agents, invitees, licensees, subtenants, customers
or contractors (collectively, "Tenant's Representatives") shall be subject to,
and at all times in compliance with, (a) any and all applicable laws, rules,
codes, ordinances, statutes, orders and regulations as same exist from time to
time throughout the Term of this Lease (collectively, the "Laws"), including
without limitation, the requirements of the Americans with Disabilities Act, a
federal law codified at 42 U.S.C. 12101 et seq., including, but not limited to
Title III thereof, all regulations and guidelines related thereto and all
requirements of Title 24 of the State of California (collectively, the "ADA"),
(b) any and all recorded documents, instruments, licenses, restrictions,
easements or similar instruments, conveyances or encumbrances which are at any
time, and from time to time, required to be made by or given by Landlord in any
manner relating to the initial development of the Project and/or the
construction from time to time of any additional buildings or other improvements
in the Project, including without limitation any Tenant Improvements
(collectively, the "Development Documents"), (c) any and all documents,
easements, covenants, conditions and restrictions, and similar instruments,
together with any and all amendments and supplements thereto made from time to
time each of which has been or hereafter is recorded in any official or public
records with respect to the Premises or any other portion of the Project
(collectively, the "Recorded Matters"), and (d) any and all rules and
regulations set forth in Exhibit C hereto, any other reasonable rules and
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regulations promulgated by Landlord now or hereafter enacted relating to parking
and the operation of the Premises and/or any other part of the Project and any
and all rules, restrictions and/or regulations imposed by any applicable owners
association or similar entity or body (collectively, the "Rules and
Regulations"). Landlord shall use commercially reasonable efforts to ensure
that other tenants in the project comply with the Rules and Regulations and
trust such Rules and Regulations shall apply non-discriminatorily to all
occupants in the Park. Landlord reserves to itself the right, from time to
time, to grant, without the consent of Tenant, such easements, rights and
dedications that Landlord deems reasonably necessary, and to cause the
recordation of parcel or subdivision maps and/or restrictions, so long as such
easements, rights, dedications, maps and restrictions, as applicable, do not
materially and adversely interfere with Tenant's operations in the Premises.
Tenant agrees to sign any documents reasonably requested by Landlord to
effectuate any such easements, rights, dedications, maps or restrictions.
Tenant agrees to, and does hereby, assume full and complete responsibility to
ensure that the Premises, including without limitation, the Tenant Improvements,
are in compliance with all applicable Laws throughout the Term of this Lease.
Additionally, Tenant shall be solely responsible for the payment of all costs,
fees and expenses associated with any modifications, improvements or other
Alterations to the Premises and/or any other portion of the Project occasioned
by the enactment of, or changes to, any Laws arising from Tenant's particular
use of the Premises or Alterations or other improvements made to the Premises
regardless of when such Laws became effective. Tenant shall not initiate,
submit an application for, or otherwise request, any land use approvals or
entitlements with respect to the Premises or any other portion of the Project,
including without limitation, any variance, conditional use permit or rezoning,
without first obtaining Landlord's prior written consent thereto, which consent
may be given or withheld in Landlord's reasonable discretion.
9.2 Prohibition on Use: Tenant shall not use the Premises or permit
anything to be done in or about the Premises nor keep or bring anything therein
which will in any way increase the existing rate of or affect any policy of fire
or other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy. No auctions may be held or otherwise
conducted in, on or about any portion of the Premises or the Project without
Landlord's prior written consent thereto. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way unreasonably
obstruct or interfere with the rights of Landlord or other tenants or occupants
of any portion of the Project. The Premises shall not be used for any unlawful
purpose. Tenant shall not cause, maintain or permit any private or public
nuisance in, on or about any portion of the Premises or the Project, including,
but not limited to, any offensive odors, noises, fumes or vibrations. Tenant
shall not damage or deface or otherwise commit or suffer to be committed any
waste in, upon or about the Premises or any other portion of the Project.
Tenant shall not place or store, nor permit any other person or entity to place
or store, any property, equipment, materials, supplies, personal property or any
other items or goods outside of the Premises for any period of time. Tenant
shall not permit any animals, including, but not limited to, any household pets,
to be brought or kept in or about the Premises. Tenant shall not install any
radio or television antenna, satellite dish, microwave, loudspeaker or other
device on the roof or exterior walls of the Building or any other portion of the
Project. Tenant shall not interfere with radio, telecommunication, or
television broadcasting or
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reception from or in the Building or elsewhere. Tenant shall place no loads upon
the floors, walls, or ceilings in excess of the maximum designed load permitted
by the applicable Uniform Building Code or which may damage the Building or
outside areas within the Project. Tenant shall not place any harmful liquids in
the drainage systems or dump or store waste materials, refuse or other such
materials, or allow such materials to remain outside the Building area, except
for any non-hazardous or non-harmful materials which may be stored in refuse
dumpsters.
10. Alterations; and Surrender of Premises
10.1 Alterations: Tenant shall not install any signs, fixtures,
improvements, nor make or permit any other alterations or additions
(individually, an "Alteration", and collectively, the "Alterations") to the
Premises without the prior written consent of Landlord, which consent shall not
be unreasonably withheld so long as any such Alteration does not affect the
Building systems or the structural integrity of the Premises or the Building.
Notwithstanding the foregoing, Tenant shall be permitted to install artwork,
shelving and normal office furniture, and to perform non-structural alterations
on the Premises not exceeding an aggregate of $25,000 during any calendar year
in any Building without Landlord's prior consent, provided that Tenant (i)
complies with all relevant building codes and fire, safety and other
governmental regulations and (ii) does not adversely affect the structural,
mechanical, electrical, HVAC or plumbing systems of the Premises. If any such
Alteration is expressly permitted by Landlord, Tenant shall deliver at least ten
(10) days prior notice to Landlord, from the date Tenant intends to commence
construction, sufficient to enable Landlord to post a Notice of Non-
Responsibility. In all events, Tenant shall obtain all permits or other
governmental approvals prior to commencing any of such work and deliver a copy
of same to Landlord. All Alterations shall be at Tenant's sole cost and
expense, and shall be installed by a licensed contractor (reasonably approved by
Landlord) in compliance with all applicable Laws (including, but not limited to,
the ADA), Development Documents, Recorded Matters, and Rules and Regulations.
Tenant shall keep the Premises and the property on which the Premises are
situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by or on behalf of Tenant. Tenant shall,
prior to construction of any and all Alterations, cause its contractor(s) and/or
major subcontractor(s) to provide insurance as reasonably required by Landlord,
and Tenant shall provide such assurances to Landlord, including without
limitation, waivers of lien, as Landlord shall require to assure payment of the
costs thereof to protect Landlord and the Project from and against any loss from
any mechanic's, materialmen's or other liens.
10.2 Surrender of Premises: At the expiration of the Term or earlier
termination of this Lease, Tenant shall surrender the Premises to Landlord (a)
in good condition and repair (damage by acts of God, casualty, and normal wear
and tear excepted), but with all interior walls cleaned, any carpets cleaned,
all floors cleaned and waxed, all non-working light bulbs and ballasts replaced
and all roll-up doors and plumbing fixtures in good condition and working order,
and (b) in accordance with the provisions of Section 27 hereof. Normal wear and
tear shall not include any damage or deterioration that would have been
prevented by proper maintenance by Tenant, or Tenant otherwise performing all of
its obligations under this Lease. On or before the expiration or earlier
termination of this Lease, (i) Tenant shall remove all of Tenant's Property (as
hereinafter defined) and Tenant's signage from the Premises and the other
portions of the Project, (ii) Landlord may, by notice to Tenant given not later
than ninety (90) days prior to the Expiration Date (except in the event of a
termination of this Lease prior to the scheduled Expiration Date, in which event
no advance notice shall be required), require Tenant, at Tenant's expense, to
remove any or all Alterations and Tenant shall remove such requested Alterations
from the Premises, and (iii) to the extent Landlord has advised Tenant on or
about the time that the Tenant Improvements (exclusive of the initial Tenant
Improvements outlined in Exhibit B) are to be constructed and installed in the
Premises that Tenant is to remove all or portions of the items comprising the
Tenant Improvements (the "Removable TIs"), Tenant shall remove the Removable
TIs. Tenant shall repair any damage caused by such removal of the Tenant's
Property, the requested Alterations and the Removable TIs. For purposes hereof,
the term "Tenant's Property" shall mean and refer to all equipment, trade
fixtures, computer wiring and cabling (excluding telephone lines), furnishings,
inventories, goods and personal property of Tenant. Any of Tenant's Property
not so removed by Tenant as required herein shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant's expense, and Tenant
waives all claims against Landlord for any damages resulting from Landlord's
retention and disposition of such property; provided, however, Tenant shall
remain liable to Landlord for all costs incurred in storing and disposing of
such abandoned property of Tenant. All Tenant Improvements and Alterations
except those which Landlord requires Tenant to remove shall remain in the
Premises as the property of Landlord. If the Premises are not surrendered at
the expiration of the Term or earlier termination of this Lease, and in
accordance with the provisions of this Section 10 and Section 27 below, Tenant
shall continue to be responsible for the payment of Rent (as the same may be
increased pursuant to Section 20 below) until the Premises are so surrendered in
accordance with said provisions. Tenant shall indemnify, defend and hold the
Indemnitees (hereafter defined) harmless from and against any and all damages,
expenses, costs, losses or liabilities arising from any delay by Tenant in so
surrendering the Premises including, without limitation, any damages, expenses,
costs, losses or liabilities arising from any claim against Landlord made by any
succeeding tenant or prospective tenant founded on or resulting from such delay
and losses and damages suffered by Landlord due to lost opportunities to lease
any portion of the Premises to any such succeeding tenant or prospective tenant,
together with, in each case, actual attorneys' fees and costs.
11. Repairs and Maintenance
11.1 Tenant's Repairs and Maintenance Obligations: Except for those
portions of the Building to be maintained by Landlord, as provided in Sections
11.2 and 11.3 below and this Lease, Tenant shall, at its sole cost and expense,
keep and maintain all parts of the interior of the Premises and such portions of
the Building and improvements as are within the exclusive control of Tenant in
good, clean and safe condition and repair, promptly making all necessary repairs
and replacements, whether ordinary or extraordinary, with materials and
workmanship of the same character, kind and quality as the original thereof, all
of the foregoing to the reasonable satisfaction of Landlord including, but not
limited to, repairing any damage caused by Tenant or any of Tenant's
Representatives and replacing any property so damaged by Tenant or any of
Tenant's Representatives, subject to the waiver of subrogation in Section 12.5.
Without limiting the generality of the foregoing, Tenant shall be solely
responsible for promptly maintaining, repairing and replacing (a) all mechanical
systems, heating, ventilation and air conditioning systems serving the Premises,
unless maintained by Landlord, (b) all plumbing work and fixtures, (c)
electrical wiring systems, fixtures and equipment exclusively serving the
Premises, (d) all interior lighting (including, without limitation, light bulbs
and/or ballasts) exclusively serving the Premises, (e) all glass, windows,
window frames, window casements, skylights, interior and exterior doors, door
frames and door closers, (f) all roll-up doors, ramps and dock equipment,
including without limitation, dock bumpers, dock plates, dock seals, dock
levelers and dock lights, that are for Tenant's exclusive use, (g) all tenant
signage, (h) lifts for disabled persons serving the Premises, (i) sprinkler
systems, fire protection systems and security systems, except to the extent
maintained by Landlord, and (j) all partitions, fixtures, equipment, interior
painting, interior walls and floors, and floor coverings of the Premises and
every part thereof (including, without limitation, any
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demising walls contiguous to any portion of the Premises). Additionally, Tenant
shall be solely responsible for performance of the regular removal of trash and
debris. Tenant shall have no right of access to or right to install any device
on the roof of the Building nor make any penetrations of the roof of the
Building without the express prior written consent of Landlord.
11.2 Maintenance by Landlord: Subject to the provisions of Section 11.1,
and further subject to Tenant's obligation under Section 6 to reimburse
Landlord, in the form of Additional Rent, for Tenant's Share of the cost and
expense of the following described items, Landlord agrees to repair and maintain
the following items: fire protection services; the roof and roof coverings
(provided that Tenant installs no additional air conditioning or other equipment
other than the initial equipment installed as part of the Tenant Improvements or
Alterations approved by Landlord on the roof that damages the roof coverings, in
which event Tenant shall pay all costs relating to the presence of such
additional equipment); the plumbing and mechanical systems serving the Building,
excluding the plumbing, mechanical and electrical systems exclusively serving
the Premises; any rail spur and rail crossing; exterior painting of the
Building; and the parking areas, pavement, landscaping, sprinkler systems,
sidewalks, driveways, curbs, and exterior lighting serving the Premises lighting
systems in the Common Areas. Notwithstanding anything in this Section 11 to the
contrary, Landlord shall have the right to either repair or to require Tenant to
repair any damage to any portion of the Premises and any other portion of the
Project caused by or created due to any act, omission, negligence or willful
misconduct of Tenant or any of Tenant Representatives and to restore the
Premises and the other affected portions of the Project, as applicable, to the
condition existing prior to the occurrence of such damage, subject to the waiver
of subrogation provisions in 12.5, provided however that Tenant shall pay 100%
of the deductible associated herewith. If Landlord elects to perform such
repair and restoration work, Tenant shall reimburse Landlord upon demand for all
costs and expenses incurred by Landlord in connection therewith. Tenant shall
promptly report, in writing, to Landlord any defective condition known to it
which Landlord is required to repair.
11.3 Landlord's Repairs and Maintenance Obligations: Subject to the
provisions of Sections 11.1, 25 and 26, and except for repairs rendered
necessary by the intentional or negligent acts or omissions of Tenant or any of
Tenant's Representatives, Landlord agrees, at Landlord's sole cost and expense,
to (a) keep in good repair the structural portions of the floors, foundations
and exterior perimeter walls of the Building (exclusive of glass and exterior
doors), and (b) replace the structural portions of the roof of the Building
(excluding the roof membrane).
11.4 Tenant's Failure to Perform Repairs and Maintenance Obligations: If
Tenant refuses or neglects to repair and maintain the Premises and the other
areas properly as required herein and to the reasonable satisfaction of
Landlord, Landlord may with five (5) day notice to Tenant, but without
obligation to do so, make such repairs or maintenance without Landlord having
any liability to Tenant for any loss or damage that may accrue to Tenant's
Property or to Tenant's business by reason thereof, except to the extent any
damage is caused by the willful misconduct or gross negligence of Landlord or
its authorized agents and representatives. If Landlord makes such repairs or
maintenance, upon completion thereof Tenant shall pay to Landlord, as Additional
Rent, Landlord's costs and expenses incurred therefor. The obligations of
Tenant hereunder shall survive the expiration of the Term of this Lease or the
earlier termination thereof. Tenant hereby waives any right to repair at the
expense of Landlord under any applicable Laws now or hereafter in effect with
respect to the Premises.
12. Insurance
12.1 Types of Insurance: Tenant shall maintain in full force and effect
at all times during the Term of this Lease, at Tenant's sole cost and expense,
for the protection of Tenant and Landlord, as their interests may appear,
policies of insurance issued by a licensed carrier or carriers reasonably
acceptable to Landlord and its lender (which afford the following coverages: (i)
worker's compensation and employer's liability, as required by law; (ii)
commercial general liability insurance (occurrence form) providing coverage
against any and all claims for bodily injury and property damage occurring in,
on or about the Premises arising out of Tenant's and Tenant's Representatives'
use or occupancy of the Premises. Such insurance shall include coverage for
blanket contractual liability, fire damage, premises, personal injury, completed
operations and products liability. Such insurance shall have a combined single
limit of not less than Two Million Dollars ($2,000,000) per occurrence with a
Three Million Dollar ($3,000,000) aggregate limit and excess/umbrella insurance
in the amount of Three Million Dollars ($3,000,000). If Tenant has other
locations which it owns or leases, the policy shall include an aggregate limit
per location endorsement; (iii) comprehensive automobile liability insurance
with a combined single limit of at least $1,000,000 per occurrence for claims
arising out of any company owned automobiles; (iv) "all risk" or "special
purpose" property insurance, including without limitation, sprinkler leakage,
covering damage to or loss of any of Tenant's Property located in, on or about
the Premises, and in addition, coverage for business interruption of Tenant.
Such insurance shall be written on a replacement cost basis (without deduction
for depreciation) in an amount equal to one hundred percent (100%) of the full
replacement value of the aggregate of the items referred to in this clause (iv);
and (v) higher limits of liability as is then customarily required for similar
types of buildings within the general vicinity of the Project or as may be
reasonably required by any of Landlord's lenders.
12.2 Insurance Policies: Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having a
"General Policyholders Rating" of at least A-X (or such higher rating as may be
required by a lender having a lien on the Premises) as set forth in the most
current issue of "A.M. Best's Rating Guides." Any deductible amounts under any
of the insurance policies required hereunder shall not exceed Twenty Five
Thousand Dollars ($25,000). Tenant shall deliver to Landlord certificates of
insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. Tenant shall, at least fifteen (15)
days prior to expiration of each policy, furnish Landlord with certificates of
renewal or "binders" thereof. Each certificate shall expressly provide that
such policies shall not be cancelable or the limits, insureds, additional
insureds or coverages subject to modification except after thirty (30) days
prior written notice to the parties named as additional insureds as required in
this Lease (except for cancellation for nonpayment of premium, in which event
cancellation shall not take effect until at least ten (10) days' notice has been
given to Landlord). Tenant shall have the right to provide insurance coverage
which it is obligated to carry pursuant to the terms of this Lease under a
blanket insurance policy, provided such blanket policy expressly affords
coverage for the Premises and for Landlord as required by this Lease.
12.3 Additional Insureds and Coverage: Each of Landlord, Landlord's
property management company or agent, and Landlord's lender(s) having a lien
against the Premises or any other portion of the Project shall be named as
additional insureds or loss payees (as applicable) under the policy required in
Section 12.1(ii). Additionally, all of such policies shall provide for
severability of interest. All insurance to be maintained by Tenant shall,
except for workers'
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compensation and employer's liability insurance, be primary, without right of
contribution from insurance maintained by Landlord. Any umbrella/excess
liability policy (which shall be in "following form") shall provide that if the
underlying aggregate is exhausted, the excess coverage will drop down as primary
insurance. The limits of insurance maintained by Tenant shall not limit Tenant's
liability under this Lease. It is the parties' intention that the insurance to
be procured and maintained by Tenant as required herein shall provide coverage
for any and all damage or injury arising from or related to Tenant's operations
of its business and/or Tenant's or Tenant's Representatives' use of the Premises
and any of the areas within the Project. Notwithstanding anything to the
contrary contained herein, to the extent Landlord's cost of maintaining
insurance with respect to the Building and/or any other buildings within the
Project is increased as a result of Tenant's acts, omissions, Alterations,
improvements, use or occupancy of the Premises, Tenant shall pay one hundred
percent (100%) of, and for, each such increase as Additional Rent to the extent
Landlord may reasonably attribute such increase to Tenant's acts, omissions,
Alterations, improvements, use or occupancy of the Premises.
12.4 Failure of Tenant to Purchase and Maintain Insurance: If Tenant
fails to obtain and maintain the insurance required herein throughout the Term
of this Lease, Landlord may, but without obligation to do so, purchase the
necessary insurance and pay the premiums therefor. If Landlord so elects to
purchase such insurance, Tenant shall promptly pay to Landlord as Additional
Rent, the amount so paid by Landlord, within ten (10) days after receipt of
written demand therefor. In addition, Landlord may recover from Tenant and
Tenant agrees to pay, as Additional Rent, any and all losses, damages, expenses
and costs which Landlord may sustain or incur by reason of Tenant's failure to
obtain and maintain such insurance.
12.5 Waiver of Subrogation: Landlord and Tenant hereby mutually waive
their respective rights of recovery against each other for any loss of, or
damage to, either parties' property to the extent that such loss or damage is
insured by an insurance policy required to be in effect at the time of such loss
or damage. Each party shall obtain any special endorsements, if required by its
insurer, whereby the insurer waives its rights of subrogation against the other
party. This provision is intended to waive fully, and for the benefit of the
parties hereto, any rights and/or claims which might give rise to a right of
subrogation in favor of any insurance carrier.
12.6 Landlord's Insurance: Landlord shall, during the Term of this Lease,
procure and keep in force the following insurance, the cost of which shall be
deemed an Operating Expense under Section 6.1 of this Lease: property insurance
insuring the Building and improvements within the Park and rental value
insurance for perils covered by the causes of loss - special form (all risk) and
in addition coverage for flood, earthquake and boiler and machinery (if
applicable). Such coverage (except for flood and earthquake) shall be written
on a replacement cost basis equal to at least eighty percent (80%) of the full
insurable replacement value of the foregoing (excluding costs for footings and
excavation) and shall cover the Tenant Improvements, but not any Alterations,
Tenant's equipment, trade fixtures, inventory, fixtures or personal property
located on or in the Premises. Additionally, Landlord shall, during the Term of
this Lease, procure and keep in force the following insurance, the cost of which
shall be deemed an Operating Expense under Section 6.1 of this Lease:
commercial general liability insurance (occurrence form) providing coverage
against claims for bodily injury, personal injury and property damage occurring
in, on or about the Common Areas, having a combined single limit of not less
than Two Million Dollars ($2,000,000) per occurrence and in the aggregate.
13. Limitation of Liability and Indemnity
Except to the extent of damage resulting from the gross negligence or willful
misconduct of Landlord or its authorized representatives, Tenant agrees to
protect, defend (with counsel acceptable to Landlord) and hold Landlord and
Landlord's lenders, partners, members, property management company (if other
than Landlord), agents, directors, officers, employees, representatives,
successors and assigns and each of their respective partners, members,
directors, heirs, employees, representatives, agents, contractors, heirs,
successors and assigns (collectively, the "Indemnitees") harmless and indemnify
the Indemnitees from and against all liabilities, damages, demands, penalties,
costs, claims, losses, judgments, charges and expenses (including reasonable
attorneys' fees, costs of court and expenses necessary in the prosecution or
defense of any litigation including the enforcement of this provision)
(collectively, "Claims") arising from or in any way related to, directly or
indirectly, (i) Tenant's or Tenant's Representatives' use of the Premises and
other portions of the Project, (ii) the conduct of Tenant's business, (iii) from
any activity, work or thing done, permitted or suffered by Tenant in or about
the Premises, (iv) in any way connected with the Premises, the Alterations or
with the Tenant's Property therein, including, but not limited to, any liability
for injury to person or property of Tenant, Tenant's Representatives or third
party persons, and/or (v) Tenant's failure to perform any covenant or obligation
of Tenant under this Lease. Tenant agrees that the obligations of Tenant herein
shall survive the expiration or earlier termination of this Lease.
Except to the extent of damage resulting from the gross negligence or willful
misconduct of Landlord or its authorized representatives, to the fullest extent
permitted by law, Tenant agrees that neither Landlord nor any of the Indemnitees
shall at any time or to any extent whatsoever be liable, responsible or in any
way accountable for any loss, liability, injury, death or damage to persons or
property which at any time may be suffered or sustained by Tenant or by any
person(s) whomsoever who may at any time be using, occupying or visiting the
Premises or any other portion of the Project, including, but not limited to, any
acts, errors or omissions of any other tenants or occupants of the Project.
Tenant shall not, in any event or circumstance, be permitted to offset or
otherwise credit against any payments of Rent required herein for matters for
which Landlord may be liable hereunder. Landlord and its authorized
representatives shall not be liable for any interference with light or air, or
for any latent defect in the Premises or the Building.
14. Assignment and Subleasing
14.1 Prohibition: Tenant shall not, without the prior written consent of
Landlord, assign, mortgage, hypothecate, encumber, grant any license or
concession, pledge or otherwise transfer this Lease or any interest herein,
permit any assignment or other such transfer of this Lease or any interest
hereunder by operation of law, sublet the Premises or any part thereof, or
permit the use of the Premises by any persons other than Tenant and Tenant's
Representatives (all of the foregoing are sometimes referred to collectively as
"Transfers" and any person to whom any Transfer is made or sought to be made is
sometimes referred to as a "Transferee"). No consent to any Transfer shall
constitute a waiver of the provisions of this Section 14, and all subsequent
Transfers may be made only with the prior written consent of Landlord, which
consent shall not be unreasonably withheld, but which consent shall be subject
to the provisions of this Section 14.
14.2 Request for Consent: If Tenant seeks to make a Transfer, Tenant shall
notify Landlord, in writing, and deliver to Landlord at least fifteen (15)
business days (but not more than one hundred eighty (180) days) prior to the
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proposed commencement date of the Transfer (the "Proposed Effective Date") the
following information and documents (the "Tenant's Notice"): (i) a description
of the portion of the Premises to be transferred (the "Subject Space"); (ii) all
of the terms of the proposed Transfer including without limitation, the Proposed
Effective Date, the name and address of the proposed Transferee, and a copy of
the existing or proposed assignment, sublease or other agreement governing the
proposed Transfer; (iii) current financial statements of the proposed Transferee
certified by an officer, member, partner or owner thereof, and any such other
information as Landlord may then reasonably require, including without
limitation, audited financial statements (if available); (iv) the Plans and
Specifications (defined below), if any; and (v) such other information as
Landlord may then reasonably require. Tenant shall give Landlord the Tenant's
Notice by registered or certified mail addressed to Landlord at Landlord's
Address specified in the Basic Lease Information. Within fifteen (15) days
after Landlord's receipt of the Tenant's Notice (the "Landlord Response Period")
Landlord shall notify Tenant, in writing, of its determination with respect to
such requested proposed Transfer and the election to recapture as set forth in
Section 14.5 below. If Landlord does not elect to recapture pursuant to the
provisions of Section 14.5 hereof and Landlord does consent to the requested
proposed Transfer, Tenant may thereafter assign its interests in and to this
Lease or sublease all or a portion of the Premises to the same party and on the
same terms as set forth in the Tenant's Notice. If Landlord fails to respond to
Tenant's Notice within Landlord's Response Period, then, after Tenant delivers
to Landlord ten (10) days written notice (the "Second Response Period") and
Landlord fails to respond thereto prior to the end of the Second Response
Period, the proposed Transfer shall then be deemed approved by Landlord.
14.3 Criteria for Consent: Tenant acknowledges and agrees that, among
other circumstances for which Landlord could reasonably withhold consent to a
proposed Transfer, it shall be reasonable for Landlord to withhold its consent
where (a) Tenant is in default of its obligations under this Lease beyond
applicable notice and cure periods, (b) the use to be made of the Premises by
the proposed Transferee is prohibited under this Lease or differs materially
from the uses permitted under this Lease, (c) the proposed Transferee does not
intend to occupy a substantial portion of the Premises assigned or sublet to it,
(d) Landlord reasonably disapproves of the proposed Transferee's character of
the business to be conducted by the proposed Transferee at the Premises, (e) the
proposed Transferee is an existing tenant in the Project with which Landlord is
negotiating on other space within the Park, (f) the proposed Transfer would
materially violate any "exclusive" rights of any occupants in the Project or
cause Landlord to violate another agreement or obligation to which Landlord is a
party or otherwise subject, (g) Landlord otherwise determines that the proposed
Transfer would have the effect of decreasing the value of the Building or the
Project, or increasing the expenses associated with operating, maintaining and
repairing the Project, (h) the Transfer occurs during the time period between
the Commencement Date and the date that at least ninety percent (90%) of the
rentable square feet of the Building is initially leased, (i) the rent proposed
to be charged by Tenant to the proposed Transferee during the term of such
Transfer, calculated using a present value analysis, is less than ninety percent
(90%) of the fair market rent then reasonably determined by Landlord, at the
proposed time of such Transfer, for comparable space in the Building or any
other Building in the Project for a comparable term, calculated using a present
value system, or (j) the proposed Transferee will use, store or handle Hazardous
Materials (defined below) in or about the Premises of a type, nature or quantity
not then acceptable to Landlord.
14.4 Effectiveness of Transfer and Continuing Obligations: Prior to the
date on which any permitted Transfer becomes effective, Tenant shall deliver to
Landlord (i) a counterpart of the fully executed Transfer document, (ii) an
executed Hazardous Materials Disclosure Certificate substantially in the form of
Exhibit E hereto (the "Transferee HazMat Certificate"), and (iii) Landlord's
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standard form of Consent to Assignment or Consent to Sublease, as applicable and
reasonably acceptable to all parties, executed by Tenant and the Transferee in
which each of Tenant and the Transferee confirms its obligations pursuant to
this Lease. Failure or refusal of a Transferee to execute any such consent
instrument shall not release or discharge the Transferee from its obligation to
do so or from any liability as provided herein. The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual cancellation by Landlord
and Tenant, shall not work a merger, and any such surrender or cancellation
shall, at the option of Landlord, either terminate all or any existing subleases
or operate as an assignment to Landlord of any or all of such subleases. Each
permitted Transferee shall assume and be deemed to assume this Lease and shall
be and remain liable jointly and severally with Tenant for payment of Rent
(subject to the terms of any approved sublease) and for the due performance of,
and compliance with all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed or complied with, for the Term of
this Lease. No Transfer shall affect the continuing primary liability of Tenant
(which, following assignment, shall be joint and several with the assignee), and
Tenant shall not be released from performing any of the terms, covenants and
conditions of this Lease. An assignee of Tenant shall become directly liable to
Landlord for all obligations of Tenant hereunder, but no Transfer by Tenant
shall relieve Tenant of any obligations or liability under this Lease whether
occurring before or after such consent, assignment, subletting or other
Transfer. The acceptance of any or all of the Rent by Landlord from any other
person (whether or not such person is an occupant of the Premises) shall not be
deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any Transfer. Except with respect to a Related Entity, for purposes
hereof, if Tenant is a business entity, direct or indirect transfer of fifty
percent (50%) or more of the ownership interest of the entity other than the
initial public offering of Tenant's common stock or the subsequent trading of
tenant's publicly traded common stock on a national or public stock exchange
(whether in a single transaction or in the aggregate through more than one
transaction) shall be deemed a Transfer and shall be subject to all the
provisions hereof. Any and all options, first rights of refusal, tenant
improvement allowances and other similar rights granted to Tenant in this Lease,
if any, shall not be assignable by Tenant unless expressly authorized in writing
by Landlord. Any transfer made without Landlord's prior written consent, shall,
at Landlord's option, be null, void and of no effect, and shall, at Landlord's
option, constitute a material default by Tenant of this Lease. As Additional
Rent hereunder, Tenant shall pay to Landlord, a fee in the amount of five
hundred dollars ($500) plus Tenant shall promptly reimburse Landlord for actual
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legal and other expenses incurred by Landlord in connection with any actual or
proposed Transfer.
14.5 Recapture: If the Transfer (i) by itself or taken together with then
existing or pending Transfers covers or totals, as the case may be, more than
twenty-five percent (25%) of the rentable square feet of the Premises, or (ii)
is for a term which by itself or taken together with then existing or pending
Transfers is greater than fifty percent (50%) of the period then remaining in
the Term of this Lease as of the time of the Proposed Effective Date, then
Landlord shall have the right, to be exercised by giving written notice to
Tenant, to recapture the Subject Space described in the Tenant's Notice. If
such recapture notice is given, it shall serve to terminate this Lease with
respect to the proposed Subject Space, or, if the proposed Subject Space covers
all the Premises, it shall serve to terminate the entire Term of this Lease, in
either case, as of the Proposed Effective Date. However, no termination of this
Lease with respect to part or all of the Premises shall become effective without
the prior written consent, where necessary, of the holder of each deed of trust
encumbering the Premises or any other portion of the Project. If this Lease is
terminated pursuant to the foregoing provisions with respect to less than the
entire Premises, the Rent shall be adjusted on the basis
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of the proportion of rentable square feet retained by Tenant to the rentable
square feet originally demised and this Lease as so amended shall continue
thereafter in full force and effect. Notwithstanding the above, Tenant may
sublease up to fifty percent (50%) of the Premises for the initial twenty-four
(24) months of the Lease only without Landlord having the right to recapture the
Premises, pursuant to this Section 14.5 In addition, if Landlord provides the
recapture notice as provided above, Tenant shall have the right, upon written
notice to Landlord within ten (10) days after Tenant's receipt of Landlord's
recapture notice, to rescind its request for consent to the Transfer and not
enter into the Transfer, in which case Landlord's recapture notice shall be of
void and of no force or effect.
14.6 Transfer Premium: If Landlord consents to a Transfer, as a condition
thereto which the Tenant hereby agrees is reasonable, Tenant shall pay to
Landlord, as Additional Rent any "Transfer Premium" received by Tenant from such
Transferee. The term "Transfer Premium" shall mean all rent, additional rent
and other consideration payable by such Transferee which either initially or
over the term of the Transfer exceeds the Rent or pro rata portion of the Rent,
as the case may be, for such space reserved in the Lease. Tenant shall pay the
Landlord monthly, as Additional Rent, at the same time as the monthly
installments of Rent are payable hereunder, fifty percent (50%) of the Transfer
Premium after deduction of actual reasonable brokerage commissions.
14.7 Waiver: Notwithstanding any Transfer, or any indulgences, waivers or
extensions of time granted by Landlord to any Transferee, or failure by Landlord
to take action against any Transferee, Tenant agrees that Landlord may, at its
option, proceed against Tenant without having taken action against or joined
such Transferee, except that Tenant shall have the benefit of any indulgences,
waivers and extensions of time granted to any such Transferee.
14.8 Related Entities: Notwithstanding anything to the contrary contained
in this Section 15, so long as Tenant delivers to Landlord (1) at least fifteen
(15) business days prior written notice of its intention to assign or sublease
the Premises to any Related Entity, which notice shall set forth the name of the
Related Entity, (2) a copy of the proposed agreement pursuant to which such
assignment or sublease shall be effectuated, and (3) such other information
concerning the Related Entity as Landlord may reasonably require, including
without limitation, information regarding any change in the proposed use of any
portion of the Premises and any financial information with respect to such
Related Entity, and so long as (i) any change in the proposed use of the subject
portion of the Premises is in conformance with the uses permitted to be made
under this Lease or otherwise approved by Landlord and do not involve the use or
storage of any Hazardous Materials (other than normal amounts of ordinary
household cleaners, office supplies and janitorial supplies which are not
regulated by any Environmental Laws), and (ii) at the time of the proposed
assignment or sublease, the net profits and financial condition of the Related
Entity is reasonably adequate and sufficient in relation to the then remaining
obligations of Tenant under this Lease, then Tenant may assign this Lease or
sublease any portion of the Premises (X) to any Related Entity, provided that
the Guarantor under the Guaranty of the Lease remains obligated, or (Y) in
connection with any merger, consolidation or sale of substantially all of the
assets of Tenant, without having to obtain the prior written consent of Landlord
thereto. For purposes of this Lease, the term "Related Entity" shall mean and
refer to any corporation or entity which controls, is controlled by or is under
common control with Tenant, as all of such terms are customarily used in the
industry.
15. Subordination
To the fullest extent permitted by law, this Lease, the rights of Tenant under
this Lease and Tenant's leasehold interest shall be subject and subordinate at
all times to: (i) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the Building, the Lot, or any other portion of
the Project, and (ii) the lien of any mortgage or deed of trust which may now or
hereafter exist for which the Building, the Lot, ground leases or underlying
leases, any other portion of the Project or Landlord's interest or estate in any
of said items is specified as security. Notwithstanding the foregoing, Landlord
or any such ground lessor, mortgagee, or any beneficiary shall have the right to
require this Lease be superior to any such ground leases or underlying leases or
any such liens, mortgage or deed of trust. If any ground lease or underlying
lease terminates for any reason or any mortgage or deed of trust is foreclosed
or a conveyance in lieu of foreclosure is made for any reason, Tenant shall
attorn to and become the Tenant of the successor in interest to Landlord,
provided such successor in interest will not disturb Tenant's use, occupancy or
quiet enjoyment of the Premises if Tenant is not in material default of the
terms and provisions of this Lease. The successor in interest to Landlord
following foreclosure, sale or deed in lieu thereof shall not be: (a) liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (b) subject to any offsets or defenses which
Tenant might have against any prior lessor; (c) bound by prepayment of more than
one (1) month's Rent, except in those instances when Tenant pays Rent quarterly
in advance pursuant to Section 8 hereof, then not more than three months' Rent;
or (d) liable to Tenant for any Security Deposit not actually received by such
successor in interest to the extent any portion or all of such Security Deposit
has not already been forfeited by, or refunded to, Tenant. Landlord shall be
liable to Tenant for all or any portion of the Security Deposit not forfeited
by, or refunded to Tenant, until and unless Landlord transfers such Security
Deposit to the successor in interest. Tenant covenants and agrees to execute
(and acknowledge if required by Landlord, any lender or ground lessor) and
deliver, within ten (10) days of a demand or request by Landlord and in the form
reasonably requested by Landlord, ground lessor, mortgagee or beneficiary, any
additional documents evidencing the priority or subordination of this Lease with
respect to any such ground leases or underlying leases or the lien of any such
mortgage or deed of trust provided it contains a non-disturbance agreement.
Tenant hereby acknowledges that as of the date on which Landlord and Tenant
execute this Lease there is a deed of trust encumbering, and in force against
the Premises, the Building and the Park in favor of Bank of America, N.A. (the
"Current Lender"). Within thirty (30) days of Tenant's execution of this Lease,
Tenant shall sign, notarize and deliver a subordination, non-disturbance and
attornment agreement substantially in the form of Exhibit H attached hereto,
entitled "Subordination, Non-Disturbance and Attornment Agreement." Landlord
shall (i) execute and notarize such agreement within thirty (30) days of
Landlord's execution of this Lease and (ii) cause Current Lender to execute and
notarize such agreement promptly after Landlord's and Tenant's execution and
notarization of such non-disturbance agreement. If Landlord at any time during
the Term of the Lease causes the Premises, the Building and the Park to be
encumbered by a new deed of trust or mortgage pursuant to which the beneficiary
of such deed of trust or mortgage is a party or entity other than the Current
Lender, the parties acknowledge and agree that the form of any non-disturbance
and attornment agreement that may be requested to be executed and delivered by
Tenant in connection therewith will not be the "Subordination, Non-Disturbance
and Attornment Agreement" attached to the Lease as Exhibit H. Tenant's
agreement to subordinate this Lease to any future ground or underlying lease or
any future deed of trust or mortgage pursuant to the foregoing provisions of
this Section 15 is conditioned upon Landlord delivering to Tenant from the
lessor under such future ground or underlying lease or the holder of any such
deed of trust, a non-disturbance agreement agreeing, among other things, that
Tenant's right to possession of the Premises pursuant to the terms and
conditions of this Lease shall not be disturbed provided Tenant is not in
default under this Lease beyond the applicable notice and cure periods
hereunder.
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16. Right of Entry
Landlord and its agents shall have the right to enter the Premises at all
reasonable times during normal business hours and with 24 hour prior notice,
upon reasonable prior notice, for purposes of inspection, exhibition, posting of
notices, investigation, replacements, repair, maintenance and alteration. It is
further agreed that Landlord shall have the right to use any and all means
Landlord deems necessary to enter the Premises in an emergency. Landlord shall
have the right to place during the last 180 days of the Term "for rent" or "for
lease" signs on the outside of the Premises, the Building and in the Common
Areas. Landlord shall also have the right to place "for sale" signs on the
outside of the Building and in the Common Areas. Tenant hereby waives any Claim
from damages or for any injury or inconvenience to or interference with Tenant's
business, or any other loss occasioned thereby except for any Claim for any of
the foregoing arising out of the gross negligence or willful misconduct of
Landlord or its authorized representatives. In addition, Landlord shall use
commercially reasonable efforts to comply with Tenant's security precautions
applicable at the time of such entry.
17. Estoppel Certificate
Tenant shall execute (and acknowledge if required by any lender or ground
lessor) and deliver to Landlord, within ten (10) days after Landlord provides
such to Tenant, a statement in writing certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification), the date to which the Rent and other charges are paid in advance,
if any, acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder or specifying such defaults as are
claimed, and such other matters as Landlord may reasonably require. Any such
statement may be conclusively relied upon by Landlord and any prospective
purchaser or encumbrancer of the Building or other portions of the Project.
Tenant's failure to deliver such statement within such time shall be conclusive
upon the Tenant that (a) this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord's performance; and (c) not more than one month's Rent has
been paid in advance, except in those instances when Tenant pays Rent quarterly
in advance pursuant to Section 8 hereof, then not more than three months' Rent
has been paid in advance.
18. Tenant's Default
The occurrence of any one or more of the following events shall, at Landlord's
option, constitute a material default (after any applicable notice and
expiration of the applicable cure period) by Tenant of the provisions of this
Lease:
18.1 The abandonment of the Premises by Tenant without the payment of Rent
for the statutorily described period or the vacation of the Premises by Tenant
which would cause any insurance policy to be invalidated or otherwise lapse;
18.2 The failure by Tenant to make any payment of Rent, Additional Rent or
any other payment required hereunder within three (3) days of the date said
payment is due after delivery of notice by Landlord that such payment is past
due;
18.3 The failure by Tenant to observe, perform or comply with any of the
conditions, covenants or provisions of this Lease (except failure to make any
payment of Rent and/or Additional Rent) and such failure is not cured within (i)
thirty (30) days of the date on which Landlord delivers written notice of such
failure to Tenant for all failures other than with respect to (a) Hazardous
Materials (defined in Section 27 hereof), (b) Tenant making the repairs,
maintenance and replacements required under the provisions of Section 11.1
hereof, or (c) the timely delivery by Tenant of a subordination, non-disturbance
and attornment agreement (an "SNDA"), a counterpart of a fully executed Transfer
document and a consent thereto (collectively, the "Transfer Documents"), an
estoppel certificate and insurance certificates, (ii) ten (10) days of the date
on which Landlord delivers written notice of such failure to Tenant for all
failures in any way related to Hazardous Materials or Tenant failing to timely
make the repairs, maintenance or replacements required by Section 11.1, and
(iii) the time period, if any, specified in the applicable sections of this
Lease with respect to subordination, assignment and sublease, estoppel
certificates and insurance. However, Tenant shall not be in default of its
obligations hereunder if such failure (other than any failure of Tenant to
timely and properly make the repairs, maintenance, or replacements required by
Section 11.1, or timely deliver an SNDA, the Transfer Documents, an estoppel
certificate or insurance certificates, for which no additional cure period shall
be given to Tenant) cannot reasonably be cured within such thirty (30) or ten
(10) day period, as applicable, and Tenant promptly commences, and thereafter
diligently proceeds with same to completion, all actions necessary to cure such
failure as soon as is reasonably possible, but in no event shall the completion
of such cure be later than sixty (60) days after the date on which Landlord
delivers to Tenant written notice of such failure, unless Landlord, acting
reasonably and in good faith, otherwise expressly agrees in writing to a longer
period of time based upon the circumstances relating to such failure as well as
the nature of the failure and the nature of the actions necessary to cure such
failure; or
18.4 The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within ninety (90) days of such
filing, the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold, Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets, Tenant taking
any action toward the dissolution or winding up of Tenant's affairs, the
cessation or suspension of Tenant's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold.
19. Remedies for Tenant's Default
19.1 Landlord's Rights: In the event of Tenant's material default under
this Lease, Landlord may terminate Tenant's right to possession of the Premises
by any lawful means in which case upon delivery of written notice by Landlord
this Lease shall terminate on the date specified by Landlord in such notice and
Tenant shall immediately surrender possession of the Premises to Landlord. In
addition, the Landlord shall have the immediate right of re-entry whether or not
this Lease is terminated. No re-entry or taking possession of the Premises by
Landlord pursuant to this Section 19 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant. If Landlord relets the Premises or any portion thereof, Tenant shall be
liable immediately to Landlord for all costs
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Landlord incurs in reletting the Premises or any part thereof, including,
without limitation, broker's commissions, expenses of cleaning, redecorating,
and further improving the Premises and other similar costs (collectively, the
"Reletting Costs"). Any and all of the Reletting Costs shall be fully chargeable
to Tenant and shall not be prorated or otherwise amortized in relation to any
new lease for the Premises or any portion thereof. Reletting may be for a period
shorter or longer than the remaining term of this Lease. In no event shall
Tenant be entitled to any excess rent received by Landlord. 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. So long as this Lease
is not terminated, Landlord shall have the right to remedy any default of
Tenant, to maintain or improve the Premises, to cause a receiver to be appointed
to administer the Premises and new or existing subleases and to add to the Rent
payable hereunder all of Landlord's reasonable costs in so doing, with interest
at the maximum rate permitted by law from the date of such expenditure.
19.2 Damages Recoverable: If Tenant breaches this Lease and abandons the
Premises before the end of the Term, or if Tenant's right to possession is
terminated by Landlord because of a breach or default under this Lease, then in
either such case, Landlord may recover from Tenant all damages suffered by
Landlord as a result of Tenant's failure to perform its obligations hereunder,
including without limitation, all Reletting Costs, and the worth at the time of
the award (computed in accordance with paragraph (3) of Subdivision (a) of
Section 1951.2 of the California Civil Code) of the amount by which the Rent
then unpaid hereunder for the balance of the Lease Term exceeds the amount of
such loss of Rent for the same period which Tenant proves could be reasonably
avoided by Landlord and in such case, Landlord prior to the award, may relet the
Premises for the purpose of mitigating damages suffered by Landlord because of
Tenant's failure to perform its obligations hereunder; provided, however, that
even though Tenant has abandoned the Premises following such breach, this Lease
shall nevertheless continue in full force and effect for as long as Landlord
does not terminate Tenant's right of possession, and until such termination,
Landlord shall have the remedy described in Section 1951.4 of the California
Civil Code (Landlord may continue this Lease in effect after Tenant's breach and
abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations) and may enforce all
its rights and remedies under this Lease, including the right to recover the
Rent from Tenant as it becomes due hereunder. The "worth at the time of the
award" within the meaning of Subparagraphs (a)(1) and (a)(2) of Section 1951.2
of the California Civil Code shall be computed by allowing interest at the rate
of ten percent (10%) per annum. Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179 (or
any successor or substitute statute), or under any other present or future law,
in the event Tenant is evicted or Landlord takes possession of the Premises by
reason of any default of Tenant hereunder. Tenant hereby waives for Tenant and
for all those claiming under Tenant all rights now or hereafter existing to
redeem by order or judgment of any court or by any legal process or writ,
Tenant's right of occupancy of the Premises after any termination of this Lease.
19.3 Rights and Remedies Cumulative: The foregoing rights and remedies of
Landlord are not exclusive; they are cumulative in addition to any rights and
remedies now or hereafter existing at law, in equity by statute or otherwise, or
to any equitable remedies Landlord may have, and to any remedies Landlord may
have under bankruptcy laws or laws affecting creditors' rights generally. In
addition to all remedies set forth above, if Tenant materially defaults under
this Lease, all options granted to Tenant hereunder shall automatically
terminate, unless otherwise expressly agreed to in writing by Landlord.
20. Holding Over
If Tenant holds over after the expiration of the Lease Term hereof, with or
without the express or implied consent of Landlord, such tenancy shall be from
month-to-month only, and shall not constitute a renewal hereof or an extension
for any further term, and in such case Base Rent shall be payable at a monthly
rate equal to one hundred fifty percent (150%) of the greater of (i) the Base
Rent applicable during the last rental period of the Lease Term under this Lease
or (ii) the fair market rental rate for the Premises as of the commencement of
such holdover period. Such month-to-month tenancy shall be subject to every
other term, covenant and agreement contained herein. Landlord hereby expressly
reserves the right to require Tenant to surrender possession of the Premises to
Landlord as provided in this Lease upon the expiration or other termination of
this Lease. The provisions of this Section 20 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein
or at law. If Tenant fails to surrender the Premises upon the termination or
expiration of this Lease, in addition to any other liabilities to Landlord
accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord
harmless from all Claims resulting from such failure, including but not limited
to, any Claims made by any succeeding tenant founded upon such failure to
surrender, and any lost profits to Landlord resulting therefrom.
21. Landlord's Default
Landlord shall not be considered in default of this Lease unless Landlord fails
within a reasonable time to perform an obligation required to be performed by
Landlord hereunder. For purposes hereof, a reasonable time shall not be less
than thirty (30) days after receipt by Landlord of written notice specifying the
nature of the obligation Landlord has not performed; provided, however, that if
the nature of Landlord's obligation is such that more than thirty (30) days,
after receipt of written notice, is reasonably necessary for its performance,
then Landlord shall not be in default of this Lease if performance of such
obligation is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.
22. Parking
At no charge, Tenant may use the number of non-designated and non-exclusive
parking spaces specified in the Basic Lease Information. Landlord shall
exercise reasonable efforts to ensure that such spaces are available to Tenant
for its use, but Landlord shall not be required to enforce Tenant's right to use
the same. In no event shall Tenant or any of Tenant's Representatives park or
permit any parking of vehicles overnight. Landlord agrees not to oversubscribe
parking nor designate parking in front of the Building to other tenants in the
Park and to take commercially reasonable efforts to enforce leases against any
tenant that is using more than its allocated number of spaces to the detriment
of Tenant.
23. Transfer of Landlord's Interest
If there is any sale or other transfer of the Premises or any other portion of
the Project by Landlord or any of Landlord's interest therein, Landlord shall
automatically be entirely released from all liability under this Lease
thereafter accruing and
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Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of such transfer provided such
transferee assumes all of Landlord's obligations. A ground lease or similar long
term lease by Landlord of the entire Building or Lot, of which the Premises are
a part, shall be deemed a sale within the meaning of this Section 23. Tenant
agrees to attorn to such new owner provided such new owner does not disturb
Tenant's use, occupancy or quiet enjoyment of the Premises so long as Tenant is
not in material default of any of the provisions of this Lease.
24. Waiver
No delay or omission in the exercise of any right or remedy of either party on
any default by the other party shall impair such a right or remedy or be
construed as a waiver. The subsequent acceptance of Rent by Landlord after
default by Tenant of this Lease shall not be deemed a waiver of such default,
other than a waiver of timely payment for the particular Rent payment involved,
and shall not prevent Landlord from maintaining an unlawful detainer or other
action based on such breach. No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly Rent and other sums due hereunder shall be deemed
to be other than on account of the earliest Rent or other sums due, nor shall
any endorsement or statement on any check or accompanying any check or payment
be deemed an accord and satisfaction; and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Rent or other sum or pursue any other remedy provided in this Lease. No
failure, partial exercise or delay on the part of the Landlord in exercising any
right, power or privilege hereunder shall operate as a waiver thereof.
25. Casualty Damage
25.1 Casualty. If the Premises or any part [excluding any of Tenant's
Property or any Alterations installed by or for the benefit of Tenant
(collectively, the "Tenant's FF&E")] shall be damaged or destroyed by fire or
other casualty, Tenant shall give immediate written notice thereof to Landlord.
Within sixty (60) days after receipt by Landlord of such notice, Landlord shall
notify Tenant, in writing, whether the necessary repairs can reasonably be made,
as reasonably determined by Landlord: (a) in less than one hundred eighty (180)
days; or (b) one hundred eighty (180) days or more, from the date of such
notice.
25.1.1 Insured Damage Requiring Less Than 180 Days To Repair. If the
Premises (other than the Tenant's FF&E) are damaged only to such extent that
repairs, rebuilding and/or restoration can be reasonably completed, as
reasonably determined by Landlord, in less than one hundred eighty (180) days,
this Lease shall not terminate and Landlord shall repair the Premises to
substantially the same condition that existed prior to the occurrence of such
casualty, provided insurance proceeds are available and paid to Landlord and
Tenant otherwise voluntarily contributes any shortfall thereof to Landlord to
fully repair the damage (except that Landlord shall not be required to rebuild,
repair, or replace any of Tenant's FF&E). The Rent payable hereunder shall be
abated proportionately from the date and to the extent Tenant actually vacates
the affected portions of the Premises until any and all repairs required herein
to be made by Landlord are substantially completed but such abatement shall only
be to the extent the portion of the Premises which is actually rendered unusable
and unfit for occupancy and only during the time Tenant is not actually using
same. If Landlord fails to substantially complete such repairs in less than one
hundred eighty (180) days after the date on which Landlord is notified by Tenant
of the occurrence of such casualty [such period to be extended for delays caused
by Tenant or any of Tenant's Representatives ("Tenant Delays") or any force
majeure events, which events shall include, but not be limited to, acts or
events beyond Landlord's and/or its contractors' control, acts of God,
earthquakes, strikes, lockouts, riots, boycotts, casualties not caused by
Landlord or Tenant, discontinuance of any utility or other service required for
performance of the work, moratoriums, governmental delays in issuing permits,
governmental agencies and weather, and the lack of availability or shortage of
materials ("Force Majeure Delays")], Tenant may within ten (10) business days
after expiration of such one hundred eighty (180) day period (as same may be
extended), terminate this Lease by delivering written notice to Landlord as
Tenant's exclusive remedy, whereupon all rights of Tenant hereunder shall cease
and terminate ten (10) business days after Landlord's receipt of such notice and
Tenant shall immediately vacate the Premises and surrender possession thereof to
Landlord.
25.1.2 Major Insured Damage. If the Premises (other than the
Tenant's FF&E) are damaged to such extent that repairs, rebuilding and/or
restoration cannot be reasonably completed, as reasonably determined by
Landlord, in less than one hundred eighty (180) days, then either Landlord or
Tenant may terminate this Lease by giving written notice within twenty (20) days
after notice from Landlord regarding the time period of repair. If either party
notifies the other of its intention to so terminate the Lease, then this Lease
shall terminate and the Rent shall be abated from the date of the occurrence of
such damage, provided Tenant diligently proceeds to and expeditiously vacates
the Premises (but, in all events Tenant must vacate and surrender the Premises
to Landlord by no later than ten (10) business days thereafter or there shall
not be any abatement of Rent until Tenant so vacates the Premises). If neither
party elects to terminate this Lease, Landlord shall promptly commence and
diligently prosecute to completion the repairs to the Premises, provided
insurance proceeds are available and paid to Landlord to fully repair the damage
or Tenant voluntarily contributes any shortfall thereof to Landlord (except that
Landlord shall not be required to rebuild, repair, or replace any of Tenant's
FF&E). During the time when Landlord is prosecuting such repairs to substantial
completion, the Rent payable hereunder shall be abated proportionately from the
date and to the extent Tenant actually vacates the affected portions of the
Premises until any and all repairs required herein to be made by Landlord are
substantially completed but such abatement shall only be to the extent of the
portion of the Premises which is actually rendered unusable and unfit for
occupancy and only during the time Tenant is not actually using same.
25.1.3 Damage Near End of Term. Notwithstanding anything to the
contrary contained in this Lease except for the provisions of Section 25.3
below, if the Premises are substantially damaged or destroyed (which, for
purposes of this Lease, shall mean more than twenty five percent (25%) of the
Premises shall be damaged or destroyed) during the last year of then applicable
term of this Lease, either Landlord or Tenant may, at their option, cancel and
terminate this Lease by giving written notice to the other party of its election
to do so within thirty (30) days after receipt by Landlord of notice from Tenant
of the occurrence of such casualty. If either party so elects to terminate this
Lease, all rights of Tenant hereunder shall cease and terminate ten (10) days
after Tenant's receipt or delivery of such notice, as applicable, and Tenant
shall immediately vacate the Premises and surrender possession thereof to
Landlord.
25.2 Deductible and Uninsured Casualty. Tenant shall be responsible for
and shall pay to Landlord, as Additional Rent, the deductible amounts under the
insurance policies obtained by Landlord and Tenant under this Lease if the
proceeds of which are used to repair the Premises as contemplated in this
Section 25. Notwithstanding the foregoing, if other portions of the Building
are also damaged by said casualty and insurance proceeds are payable
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therefor, then Tenant shall only pay its proportionate share of the deductible
as reasonably determined by Landlord. If any portion of the Premises is damaged
and is not fully covered by the aggregate of insurance proceeds received by
Landlord and any applicable deductible, and Tenant does not voluntarily
contribute any shortfall thereof to Landlord, or if the holder of any
indebtedness secured by the Premises requires that the insurance proceeds be
applied to such indebtedness, then Landlord or Tenant shall have the right to
terminate this Lease by delivering written notice of termination to the other
party within thirty (30) days after the date of notice to Tenant of any such
event, whereupon all rights and obligations of Tenant shall cease and terminate
hereunder, except for those obligations expressly provided for in this Lease to
survive such termination of the Lease.
25.3 Tenant's Fault and Lender's Rights. Notwithstanding anything to the
contrary contained herein, if the Premises (other than Tenant's FF&E) or any
other portion of the Building be damaged by fire or other casualty resulting
from the intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives, (i) the Rent shall not be diminished during the repair of such
damage, to the extent any portion of the Rent is not actually reimbursed to
Landlord from the proceeds of any rental loss insurance procured by Landlord
hereunder, (ii) Tenant shall not have any right to terminate this Lease due to
the occurrence of such casualty or damage. Tenant shall be liable to Landlord
for the cost and expense of the repair and restoration of all or any portion of
the Building caused thereby (including, without limitation, any deductible) to
the extent such cost and expense is not covered by insurance proceeds.
Notwithstanding anything to the contrary contained herein, if the holder of any
indebtedness secured by the Premises or any other portion of the Project
requires that the insurance proceeds be applied to such indebtedness, then
Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within thirty (30) days after the date of notice
to Tenant of any such event, whereupon all rights and obligations of Tenant
shall cease and terminate hereunder, except for those obligations expressly
provided for in this Lease to survive such termination of the Lease.
25.4 Tenant's Waiver. Landlord shall not be liable for any inconvenience
or annoyance to Tenant, injury to the business of Tenant, loss of use of any
part of the Premises by Tenant or loss of Tenant's Property, resulting in any
way from such damage, destruction or the repair thereof, except to the extent of
Landlord's gross negligence or willful misconduct and except that, Landlord
shall allow Tenant a fair diminution of Rent during the time and to the extent
the Premises are actually unusable and unfit for occupancy and Tenant is not
using or otherwise occupying same as specifically provided above in this Section
25. With respect to any damage or destruction which Landlord is obligated to
repair or may elect to repair, Tenant hereby waives all rights to terminate this
Lease or offset any amounts against Rent pursuant to rights accorded Tenant by
any law currently existing or hereafter enacted, including but not limited to,
all rights pursuant to the provisions of Sections 1932(2.), 1933(4.), 1941 and
1942 of the California Civil Code, as the same may be amended or supplemented
from time to time.
26. Condemnation
If fifteen percent (15%) or more of the Premises is condemned by eminent domain,
inversely condemned or sold in lieu of condemnation for any public or quasi-
public use or purpose ("Condemned"), then Tenant or Landlord may terminate this
Lease as of the date when physical possession of the Premises is taken and title
vests in such condemning authority, and Rent shall be adjusted to the date of
termination. Tenant shall not because of such condemnation assert any claim
against Landlord or the condemning authority for any compensation because of
such condemnation, and Landlord shall be entitled to receive the entire amount
of any award without deduction for any estate of interest or other interest of
Tenant; provided, however, the foregoing provisions shall not preclude Tenant,
at Tenant's sole cost and expense, from obtaining any separate award to Tenant
for loss of or damage to Tenant's Property or for damages for cessation or
interruption of Tenant's business provided such award is separate from
Landlord's award and provided further such separate award does not diminish nor
otherwise impair the award otherwise payable to Landlord. In addition to the
foregoing, Tenant shall be entitled to seek compensation for the relocation
costs recoverable by Tenant pursuant to the provisions of California Government
Code Section 7262. If neither party elects to terminate this Lease, Landlord
shall, if necessary, promptly proceed to restore the Premises or the Building,
as applicable, to substantially its same condition prior to such partial
condemnation, allowing for the reasonable effects of such partial condemnation,
and a proportionate allowance shall be made to Tenant, as solely determined by
Landlord, for the Rent corresponding to the time during which, and to the part
of the Premises of which, Tenant is deprived on account of such partial
condemnation and restoration. Landlord shall not be required to spend funds for
restoration in excess of the amount received by Landlord as compensation
awarded.
27. Environmental Matters/Hazardous Materials
27.1 Hazardous Materials Disclosure Certificate: Prior to executing this
Lease, Tenant has delivered to Landlord Tenant's executed initial Hazardous
Materials Disclosure Certificate (the "Initial HazMat Certificate"), a copy of
which is attached hereto as Exhibit E. Tenant covenants, represents and
---------
warrants to Landlord that the information in the Initial HazMat Certificate is
true and correct and accurately describes the use(s) of Hazardous Materials
which will be made and/or used on the Premises by Tenant. Tenant shall,
commencing with the date which is one year from the Commencement Date and
continuing every year thereafter, deliver to Landlord upon request, an executed
Hazardous Materials Disclosure Certificate ("the "HazMat Certificate")
describing Tenant's then present use of Hazardous Materials on the Premises, and
any other reasonably necessary documents as requested by Landlord. The HazMat
Certificates required hereunder shall be in substantially the form attached
hereto as Exhibit E.
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27.2 Definition of Hazardous Materials: As used in this Lease, the term
Hazardous Materials shall mean and include (a) any hazardous or toxic wastes,
materials or substances, and other pollutants or contaminants, which are or
become regulated by any Environmental Laws; (b) petroleum, petroleum by
products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and lead-
containing materials; (g) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or threatens
to cause a nuisance upon or waste to any portion of the Project or any
surrounding property; or poses or threatens to pose a hazard to the health and
safety of persons on the Premises, any other portion of the Project or any
surrounding property. For purposes of this Lease, the term "Hazardous
Materials" shall not include nominal amounts of ordinary household cleaners,
office supplies and janitorial supplies which are not actionable under any
Environmental Laws.
27.3 Prohibition; Environmental Laws: Tenant shall not be entitled to use
or store any Hazardous
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Materials on, in, or about any portion of the Premises and the Project without,
in each instance, obtaining Landlord's prior written consent thereto. If
Landlord, in its reasonable discretion, consents to any such usage or storage,
then Tenant shall be permitted to use and/or store only those Hazardous
Materials that are necessary for Tenant's business and to the extent disclosed
in the HazMat Certificate and as expressly approved by Landlord in writing. Any
such usage and storage may only be to the extent of the quantities of Hazardous
Materials as specified in the then applicable HazMat Certificate as expressly
approved by Landlord. In all events such usage and storage must at all times be
in full compliance with any and all local, state and federal environmental,
health and/or safety-related laws, statutes, orders, standards, courts'
decisions, ordinances, rules and regulations (as interpreted by judicial and
administrative decisions), decrees, directives, guidelines, permits or permit
conditions, currently existing and as amended, enacted, issued or adopted in the
future which are or become applicable to Tenant or all or any portion of the
Premises (collectively, the "Environmental Laws"). Tenant agrees that any
changes to the type and/or quantities of Hazardous Materials specified in the
most recent HazMat Certificate may be implemented only with the prior written
consent of Landlord, which consent may be given or withheld in Landlord's
reasonable discretion. Tenant shall not be entitled nor permitted to install any
tanks under, on or about the Premises for the storage of Hazardous Materials
without the express written consent of Landlord, which may be given or withheld
in Landlord's sole discretion. Landlord shall have the right at all times during
the Term of this Lease to (i) inspect the Premises, (ii) conduct tests and
investigations to determine whether Tenant is in compliance with the provisions
of this Section 27 or to determine if Hazardous Materials are present in, on or
about the Project, and (iii) request lists of all Hazardous Materials used,
stored or otherwise located on, under or about any portion of the Premises
and/or the Common Areas. The cost of all such inspections, tests and
investigations shall be borne by Landlord, unless Landlord reasonably determines
that Tenant is in default of this Section 27. The aforementioned rights granted
herein to Landlord and its representatives shall not create (a) a duty on
Landlord's part to inspect, test, investigate, monitor or otherwise observe the
Premises or the activities of Tenant and Tenant's Representatives with respect
to Hazardous Materials, including without limitation, Tenant's operation, use
and any remediation related thereto, or (b) liability on the part of Landlord
and its representatives for Tenant's use, storage, disposal or remediation of
Hazardous Materials, it being understood that Tenant shall be solely responsible
for all liability in connection therewith. In addition to any Hazardous
Materials disclosed in any HazMat Certificate (as defined in section 27.1 of the
Lease), Tenant shall be permitted to use those Hazardous Materials which are
normally and customarily used in the ordinary course of Tenant's business for
the use permitted under this Lease in the manner for which they were designed
and in such limited amounts as may be normal, customary and necessary for the
operation of Tenant's business and otherwise in compliance with all
Environmental Laws.
27.4 Tenant's Environmental Obligations: Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials on, under or about any portion of the Premises or in any
Common Areas; provided that Tenant has actual, constructive knowledge of such
event(s). Tenant, at its sole cost and expense, covenants and warrants to
promptly investigate, clean up, remove, restore and otherwise remediate
(including, without limitation, preparation of any feasibility studies or
reports and the performance of any and all closures) any spill, release,
discharge, disposal, emission, migration or transportation of Hazardous
Materials arising from or related to the intentional or negligent acts or
omissions of Tenant or Tenant's Representatives such that the affected portions
of the Project and any adjacent property are returned to the condition existing
prior to the appearance of such Hazardous Materials. Any such investigation,
clean up, removal, restoration and other remediation shall only be performed
after Tenant has obtained Landlord's prior written consent, which consent shall
not be unreasonably withheld so long as such actions would not potentially have
a material adverse long-term or short-term effect on any portion of the Project.
Notwithstanding the foregoing, Tenant shall be entitled to respond immediately
to an emergency without first obtaining Landlord's prior written consent.
Tenant, at its sole cost and expense, shall conduct and perform, or cause to be
conducted and performed, all closures as required by any Environmental Laws or
any agencies or other governmental authorities having jurisdiction thereof. If
Tenant fails to so promptly investigate, clean up, remove, restore, provide
closure or otherwise so remediate, Landlord may, but without obligation to do
so, take any and all steps necessary to rectify the same and Tenant shall
promptly reimburse Landlord, upon demand, for all costs and expenses to Landlord
of performing investigation, clean up, removal, restoration, closure and
remediation work. All such work undertaken by Tenant, as required herein, shall
be performed in such a manner so as to enable Landlord to make full economic use
of the Premises and the other portions of the Project after the satisfactory
completion of such work.
27.5 Environmental Indemnity: In addition to Tenant's obligations as set
forth hereinabove, Tenant agrees to, and shall, protect, indemnify, defend (with
counsel acceptable to Landlord) and hold Landlord and the other Indemnitees
harmless from and against any and all Claims (including, without limitation,
diminution in value of any portion of the Premises or the Project, damages for
the loss of or restriction on the use of rentable or usable space, and from any
adverse impact of Landlord's marketing of any space within the Project) arising
at any time during or after the Term of this Lease in connection with or related
to, directly or indirectly, the use, presence, transportation, storage,
disposal, migration, removal, spill, release or discharge of Hazardous Materials
on, in or about any portion of the Project as a result (directly or indirectly)
of the intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives. Neither the written consent of Landlord to the presence, use
or storage of Hazardous Materials in, on, under or about any portion of the
Project nor the strict compliance by Tenant with all Environmental Laws shall
excuse Tenant from its obligations of indemnification pursuant hereto. Tenant
shall not be relieved of its indemnification obligations under the provisions of
this Section 27.5 due to Landlord's status as either an "owner" or "operator"
under any Environmental Laws.
27.6 Survival: Tenant's obligations and liabilities pursuant to the
provisions of this Section 27 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition
of all or any portion of the Project is not in compliance with the provisions of
this Lease with respect to Hazardous Materials, including without limitation,
all Environmental Laws at the expiration or earlier termination of this Lease,
then Landlord may require Tenant to hold over possession of the Premises until
Tenant can surrender the Premises to Landlord in the condition in which the
Premises existed as of the Commencement Date and prior to the appearance of such
Hazardous Materials except for reasonable wear and tear, including without
limitation, the conduct or performance of any closures as required by any
Environmental Laws. For purposes hereof, the term "reasonable wear and tear"
shall not include any deterioration in the condition or diminution of the value
of any portion of the Project in any manner whatsoever related to directly, or
indirectly, Hazardous Materials. Any such holdover by Tenant will be with
Landlord's consent, will not be terminable by Tenant in any event or
circumstance and will otherwise be subject to the provisions of Section 20 of
this Lease.
27.7 Exculpation of Tenant: Tenant shall not be liable to Landlord for nor
otherwise obligated to Landlord
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under any provision of the Lease with respect to the following: (i) any claim,
remediation, obligation, investigation, obligation, liability, cause of action,
attorney's fees, consultants' cost, expense or damage resulting from any
Hazardous Materials present in, on or about the Premises or, the Building or
Park to the extent not caused or otherwise permitted, directly or indirectly, by
Tenant or Tenant's Representatives; or (ii) the removal, investigation,
monitoring or remediation of any Hazardous Material present in, on or about the
Premises or, the Building or Park caused by any source, including third parties,
other than Tenant or Tenant's Representatives, including but not limited to the
conditions described in the Environmental Report; provided, however, Tenant
shall be fully liable for and otherwise obligated to Landlord under the
provisions of this Lease for all liabilities, costs, damages, penalties, claims,
judgments, expenses (including without limitation, attorneys' and experts' fees
and costs) and losses to the extent (a) Tenant or any of Tenant's
Representatives contributes to the presence of such Hazardous Materials, or
Tenant and/or any of Tenant's Representatives exacerbates the conditions caused
by such Hazardous Materials, or (b) Tenant and/or Tenant's Representatives
allows or permits persons over which Tenant or any of Tenant's Representatives
has control, and/or for which Tenant or any of Tenant's Representatives are
legally responsible for, to cause such Hazardous Materials to be present in, on,
under, through or about any portion of the Premises, the Common Areas, the
Building or the Park, or (c) Tenant and/or any of Tenant's Representatives does
not take all reasonably appropriate actions to prevent such persons over which
Tenant or any of Tenant's Representatives has control and/or for which Tenant or
any of Tenant's Representatives are legally responsible from causing the
presence of Hazardous Materials in, on, under, through or about any portion of
the Premises, the Common Areas, the Building or the Park.
27.8 Disclosure: Pursuant to the provisions of California Health & Safety
Code (S)25359.7, Landlord hereby discloses to Tenant that as of the Lease Date
the Lot contains certain Hazardous Materials as such Hazardous Materials are
more particularly described and set forth in that certain report prepared by CET
Environmental Services, entitled Soil Management Plan for Development and
Ongoing Activities Route 237 Assemblage, dated August 27, 1997 (the
"Environmental Report"). Landlord acknowledges and agrees that none of the
environmental conditions or presence of Hazardous Materials on, in or under the
Lot as described in the Environmental Report have been in any way caused by
Tenant or any of Tenant's Representatives. Tenant hereby acknowledges and
agrees that Landlord has delivered to Tenant a copy of the Environmental Report
prior to Tenant entering into this Lease.
27.9 Landlord's Environmental Indemnity: Landlord agrees to, and shall
protect, indemnify, defend and hold Tenant harmless from and against any and all
claims, judgments, damages, penalties, fines, liabilities, losses, suits,
administrative proceedings, and costs arising at any time during or after the
Term of this Lease in connection with or related to the presence of the
Hazardous Materials disclosed in Section 27.8 above.
28. Financial Statements
Tenant and any permitted Transferee, for the reliance of Landlord, any lender
holding or anticipated to acquire a lien upon any portion of the Project or any
prospective purchaser of any portion of the Project within ten (10) days after
Landlord's request therefor, but not more often than once annually so long as
Tenant is not in material default of this Lease, shall deliver to Landlord the
then current financial statements of Tenant (including interim periods following
the end of the last fiscal year for which annual statements are available). If
audited financial statements have not been prepared, Tenant and any permitted
Transferee shall provide Landlord with unaudited financial statements and such
other information, the type and form of which are acceptable to Landlord in
Landlord's reasonable discretion, which reflects the financial condition of
Tenant and any permitted Transferee.
29. General Provisions:
29.1 Time. Time is of the essence in this Lease and with respect to each
and all of its provisions in which performance is a factor.
29.2 Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
29.3 Recordation. Tenant shall not record this Lease or a short form
memorandum hereof.
29.4 Landlord Exculpation. The liability of Landlord to Tenant for any
default by Landlord under the terms of this Lease shall be limited to the actual
interest of Landlord and its present or future partners or members in the
Building, and Tenant agrees to look solely to Landlord's interest in the
Building for satisfaction of any liability and shall not look to other assets of
Landlord nor seek any recourse against the assets of the individual partners,
members, directors, officers, shareholders, agents or employees of Landlord,
including without limitation, any property management company of Landlord
(collectively, the "Landlord Parties"). It is the parties' intention that
Landlord and the Landlord Parties shall not in any event or circumstance be
personally liable, in any manner whatsoever, for any judgment or deficiency
hereunder or with respect to this Lease. The liability of Landlord under this
Lease is limited to its actual period of ownership of title to the Building.
29.5 Severability and Governing Law. Any provisions of this Lease which
shall prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provisions hereof and such other provision shall remain in
full force and effect. This Lease shall be governed by, and construed in
accordance with, the laws of the State of California.
29.6 Attorneys' Fees. In the event any dispute between the parties results
in litigation or other proceeding, the prevailing party shall be reimbursed by
the party not prevailing for all reasonable costs and expenses, including,
without limitation, reasonable attorneys' and experts' fees and costs incurred
by the prevailing party in connection with such litigation or other proceeding,
and any appeal thereof. Such costs, expenses and fees shall be included in and
made a part of the judgment recovered by the prevailing party, if any.
29.7 Entire Agreement. It is understood and acknowledged that there are no
oral agreements between the parties hereto affecting this Lease and this Lease
supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. This Lease and
any side letter or separate agreement executed by Landlord and Tenant in
connection with this Lease and dated of even date herewith contain all of the
terms, covenants, conditions, warranties and agreements of the parties relating
in any manner to the rental, use and occupancy of the Premises, shall be
considered to be the only agreement
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between the parties hereto and their representatives and agents, and none of the
terms, covenants, conditions or provisions of this Lease can be modified,
deleted or added to except in writing signed by the parties hereto. All
negotiations and oral agreements acceptable to both parties have been merged
into and are included herein. There are no other representations or warranties
between the parties, and all reliance with respect to representations is based
totally upon the representations and agreements contained in this Lease. The
parties acknowledge that (i) each party and/or its counsel have reviewed and
revised this Lease, and (ii) no rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall be employed in
the interpretation or enforcement of this Lease or any amendments or exhibits to
this Lease or any document executed and delivered by either party in connection
with this Lease.
29.8 Warranty of Authority. On the date that Tenant executes this Lease,
Tenant shall deliver to Landlord an original certificate of status for Tenant
issued by the California Secretary of State. Landlord and Tenant warrant that
each person executing this Lease on behalf of a party represents and warrants
that (1) such person executing the Lease is duly and validly authorized to do so
on behalf of the entity it purports to so bind, and (2) if such party is a
partnership, corporation or trustee, that such partnership, corporation or
trustee has full right and authority to enter into this Lease and perform all of
its obligations hereunder. Each party hereby warrants that this Lease is legal,
valid and binding upon Tenant and Landlord and enforceable against the other in
accordance with its terms.
29.9 Notices. All notices, demands, statements or communications
(collectively, "Notices") given or required to be given by either party to the
other hereunder shall be in writing, shall be sent by United States certified or
registered mail, postage prepaid, return receipt requested, or delivered
personally (i) to Tenant at the Tenant's Address set forth in the Basic Lease
Information, or to such other place as Tenant may from time to time designate in
a Notice to Landlord; or (ii) to Landlord at Landlord's Address set forth in the
Basic Lease Information, or to such other firm or to such other place as
Landlord may from time to time designate in a Notice to Tenant. Any Notice will
be deemed given on the date it is mailed as provided in this Section 29.9 or
upon the date personal delivery is made.
29.10 Joint and Several; Covenants and Conditions. If Tenant consists of
more than one person or entity, the obligations of all such persons or entities
shall be joint and several. Each provision to be performed by Tenant hereunder
shall be deemed to be both a covenant and a condition.
29.11 Landlord Renovations. Tenant acknowledges that Landlord may from time
to time, at Landlord's sole option, renovate, improve, develop, alter, or modify
(collectively, the "Renovations") portions of the Building, Premises, Common
Areas and the Project, including without limitation, systems and equipment,
roof, and structural portions of the same. In connection with such Renovations,
Landlord may, among other things, erect scaffolding or other necessary
structures in the Building, limit or eliminate access to portions of the
Project, including portions of the Common Areas, or perform work in the
Building, which work may create noise, dust or leave debris in the Building.
Landlord agrees to provide Tenant with adequate advance notice of its intention
to make renovations and to use its best commercially reasonable efforts not to
interfere with Tenant's use of the Premises in connection with such Renovations.
Tenant hereby agrees that such Renovations and Landlord's actions in connection
with such Renovations shall in no way constitute a constructive eviction of
Tenant nor entitle Tenant to any abatement of Rent. Landlord shall have no
responsibility, or for any reason be liable to Tenant, for any direct or
indirect injury to or interference with Tenant's business arising from the
Renovations, nor shall Tenant be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the Premises or of
Tenant's Property, Alterations or improvements resulting from the Renovations or
Landlord's actions in connection with such Renovations, or for any inconvenience
or annoyance occasioned by such Renovations or Landlord's actions in connection
with such Renovations.
29.12 Submission of Lease. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or an option for lease,
and it is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant.
30. Signs
All signs and graphics of every kind visible in or from public view or corridors
or the exterior of the Premises shall be subject to Landlord's prior written
approval and shall be subject to and in compliance with all applicable Laws,
Development Documents, Recorded Matters, Rules and Regulations, and Landlord's
sign criteria as same may exist from time to time or as set forth in Exhibit G
---------
hereto. Tenant shall remove all such signs and graphics prior to the expiration
or earlier termination of this Lease. Such installations and removals shall be
made in a manner as to avoid damage or defacement of the Premises. Tenant shall
repair any damage or defacement, including without limitation, discoloration
caused by such installation or removal. Landlord shall have the right, at its
option, to deduct from the Security Deposit such sums as are reasonably
necessary to remove such signs and make any repairs necessitated by such
removal. Notwithstanding the foregoing, in no event shall any: (a) neon,
flashing or moving sign(s) or (b) sign(s) which are likely to interfere with the
visibility of any sign, canopy, advertising matter, or decoration of any kind of
any other business or occupant of the Building or the other portions of the
Project be permitted hereunder. Tenant further agrees to maintain each such
sign and graphics, as may be approved, in good condition and repair at all
times.
31. Mortgagee Protection
Upon any default on the part of Landlord, Tenant will give written Notice by
registered or certified mail to any beneficiary of a deed of trust or mortgagee
of a mortgage covering the Premises who has provided Tenant with notice of their
interest together with an address for receiving Notice, and shall offer such
beneficiary or mortgagee a reasonable opportunity to cure the default, including
time to obtain possession of the Premises by power of sale or a judicial
foreclosure, if such should prove necessary to effect a cure. If such default
cannot be cured within such time period, then such additional time as may be
necessary will be given to such beneficiary or mortgagee to effect such cure so
long as such beneficiary or mortgagee has commenced the cure within the original
time period and thereafter diligently pursues such cure to completion, in which
event this Lease shall not be terminated while such cure is being diligently
pursued. Tenant agrees that each lender to whom this Lease has been assigned by
Landlord is an express third party beneficiary hereof. Tenant shall not make
any prepayment of Rent more than one (1) month in advance without the prior
written consent of each such lender, except if Tenant is required to make
quarterly payments of Rent in advance pursuant to the provisions of Section 8
above. Tenant waives the collection of any deposit from such lender(s) or any
purchaser at a foreclosure sale of such lender(s)' deed of trust unless the
lender(s) or such purchaser shall have actually received and not refunded the
deposit. Tenant agrees to make all payments under this Lease to the lender with
the most senior encumbrance upon receiving a direction, in writing, to pay said
amounts to such lender. Tenant shall comply with such written direction to pay
without determining whether an event of default exists under such lender's loan
to Landlord.
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If, in connection with obtaining financing for the Premises or any other portion
of the Project, Landlord's lender shall request reasonable modification(s) to
this Lease as a condition to such financing, Tenant shall not unreasonably
withhold, delay or defer its consent thereto, provided such modifications do not
materially and adversely affect Tenant's rights hereunder or the use, occupancy
or quiet enjoyment of Tenant hereunder.
32. Warranties of Tenant
Tenant hereby warrants and represents to Landlord, for the express benefit of
Landlord, that Tenant has undertaken a complete and independent evaluation of
the risks inherent in the execution of this Lease and the operation of the
Premises for the use permitted hereby, and that, based upon said independent
evaluation, Tenant has elected to enter into this Lease. Tenant hereby further
warrants and represents to Landlord, for the express benefit of Landlord, that
in entering into this Lease, Tenant has not relied upon any statement, fact,
promise or representation (whether express or implied, written or oral) not
specifically set forth herein in writing and that any statement, fact, promise
or representation (whether express or implied, written or oral) made at any time
to Tenant, which is not expressly incorporated herein in writing, is hereby
waived by Tenant.
33. Brokerage Commission
Landlord and Tenant each represents and warrants for the benefit of the other
that it has had no dealings with any real estate broker, agent or finder in
connection with the Premises and/or the negotiation of this Lease, except for
the Broker(s) specified in the Basic Lease Information, and that it knows of no
other real estate broker, agent or finder who is or might be entitled to a real
estate brokerage commission or finder's fee in connection with this Lease or
otherwise based upon contacts between the claimant and Tenant. Each party shall
indemnify and hold harmless the other from and against any and all liabilities
or expenses arising out of claims made for a fee or commission by any real
estate broker, agent or finder in connection with the Premises and this Lease
other than Broker(s), if any, resulting from the actions of the indemnifying
party. Unless expressly agreed to in writing by Landlord and Broker(s), no real
estate brokerage commission or finder's fee shall be owed to, or otherwise
payable to, the Broker(s) for any renewals or other extensions of the initial
Term of this Lease or for any additional space leased by Tenant other than the
Premises as same exists as of the Lease Date. Tenant further represents and
warrants to Landlord that Tenant will not receive (i) any portion of any
brokerage commission or finder's fee payable to the Broker(s) in connection with
this Lease or (ii) any other form of compensation or incentive from the
Broker(s) with respect to this Lease. Landlord agrees to pay the Brokers a
commission in connection with this Lease.
34. Quiet Enjoyment
Landlord covenants with Tenant, upon the paying of Rent and observing and
keeping the covenants, agreements and conditions of this Lease on its part to be
kept, and during the periods that Tenant is not otherwise in default of any of
the terms or provisions of this Lease, and subject to the rights of any of
Landlord's lenders, (i) that Tenant shall and may peaceably and quietly have,
hold, occupy and enjoy the Premises and the Common Areas during the Term of this
Lease, and (ii) neither Landlord, nor any successor or assign of Landlord, shall
disturb Tenant's occupancy or enjoyment of the Premises and the Common Areas.
The foregoing covenant is in lieu of any other covenant express or implied.
35. Satellite Dish
Tenant shall have the right (but only to the extent permitted by the City of San
Jose and all agencies and governmental authorities having jurisdiction thereof),
at Tenant's sole cost and expense, to install and operate a satellite or
microwave dish or dishes ("Satellite Dishes") along with any necessary cables
("Cables") on a portion of the roof of the Building to be designated by Landlord
("Roof Space") for the Term of the Lease (the Satellite Dishes and Cables are
hereinafter collectively referred to as the "Equipment"). The location and size
of the Equipment shall be subject to Landlord's approval, not to unreasonably
withheld and which best promotes the safety, aesthetics and efficiency of the
Equipment; provided, all of the Equipment and any modifications thereto or
placement thereof shall be (i) at Tenant's sole cost and expense, (ii) contained
visually within the roof screen, (iii) installed and operated to Landlord's
reasonable specifications, and (iv) installed, maintained, operated and removed
in accordance with all Recorded Matters and applicable Laws. Landlord shall
cooperate reasonably with Tenant to modify the roof screen placement (subject to
all applicable Laws and Recorded Matters) if required for signal quality,
reconfiguration due to the installation of any HVAC systems and other reasonable
considerations; provided, the cost of all such modifications shall be the
responsibility of Tenant. All modifications to the Building, including the Roof
Space, if any, shall be reasonably approved by Landlord prior to commencement of
any work with respect to the Equipment. No additional rent shall be paid by
Tenant for use of the Roof Space and operation of the Equipment. The Equipment
shall remain the property of Tenant and Tenant shall remove the Equipment upon
the expiration or earlier termination of the Lease. Tenant shall restore the
Roof Space and any other portion of the Buildings affected by the Equipment to
its original condition, excepting ordinary wear and tear and/or damage or
destruction due to fire or other casualty not caused directly or indirectly by
Tenant, its agents, employees, contractors or the Equipment or any part thereof,
subject to the Waiver of Subrogation in Section 12.5 herein. Tenant may not
assign, lease, rent, sublet or otherwise transfer any of its interest in the
Roof Space or the Equipment except together with the remainder of all of the
Premises as more particularly set forth in Section 15 or to any Transferee
except that any such use by Transferee shall be at no profit to Tenant or
Transferee. Each of the other provisions of this Lease shall be applicable to
the Equipment and the use of the Roof Space by Tenant, including without
limitation, Sections 12 and 14 of this Lease. The Equipment shall comply with
all-non-interference rules of the Federal Communications Commission. If
applicable, Tenant shall provide to Landlord a copy of (i) the Federal
Communications Commission (or other agency) grant which has awarded frequencies
to Tenant and (ii) a list of Tenant's frequencies. Anything to the contrary
contained herein notwithstanding, if, during the Lease Term, as such Term may be
extended, Landlord, in its reasonable judgment, believes that the Equipment
poses a human health or environmental hazard that cannot be remediated or has
not been remediated within ten (10) days after Tenant has been notified thereof,
then Tenant shall immediately cease all operations of the Equipment and Tenant
shall remove all of the Equipment within thirty (30) days thereafter. To the
best of Tenant's knowledge, Tenant represents to Landlord that the Equipment
shall not emit or project any electro-magnetic fields which pose a human health
or environmental hazard. In addition, Tenant shall be responsible for insuring
the Equipment and Landlord shall have no responsibility therefor. Tenant shall
indemnify, defend (by counsel reasonably acceptable to Landlord) and hold
harmless Landlord from any and all claims, demands, liabilities, damages,
judgments, costs and expenses (including reasonable attorneys' fees) Landlord
may suffer or incur arising out of or related to the installation, use,
operation, maintenance, replacement and/or removal of the Equipment or any
portion thereof.
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IN WITNESS WHEREOF, this Lease is executed by the parties as of the Lease
Date referenced on Page 1 of this Lease.
Tenant:
GENESIS MICROCHIP CORPORATION,
a California corporation
By: HAMID FARZANEH
--------------
Its: Executive VP & COO
------------------
Date: 11/10/99
--------
By: /s/ HAMID FARZANEH
------------------
Its: __________________
Date: __________________
Landlord:
WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
By: LEGACY PARTNERS COMMERCIAL, INC.,
as manager and agent for WIX/NSJ Real Estate Limited Partnership
By: /s/ MACK LANEY
--------------
Senior Vice President
Date: 11/12/99
--------
If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
-----------
corporation and indicate the capacity in which they are signing. The Lease must
be executed by the president or vice-president and the secretary or assistant
---
secretary, unless the bylaws or a resolution of the board of directors shall
------
otherwise provide, in which event, the bylaws or a certified copy of the
resolution, as the case may be, must be attached to this Lease.
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Exhibit A
Premises
This exhibit, entitled "Premises", is and shall constitute EXHIBIT A to that
certain Lease Agreement dated October 18, 1999 (the "Lease"), by and between
WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership,
("Landlord") and Genesis Microchip Corporation, a California corporation
("Tenant") for the leasing of certain premises located at 2150 Gold Street, San
Jose, California, (the "Premises").
The Premises consist of the rentable square footage of space specified in the
Basic Lease Information and has the address specified in the Basic Lease
Information. The Premises are a part of and are contained in the Building
specified in the Basic Lease Information. The cross-hatched area depicts the
Premises within the Park:
[Diagram of Floor Plan of Leased Premises]
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Exhibit B to Lease Agreement
Tenant Improvements and shell improvements
This exhibit, entitled "Tenant Improvements and Shell Improvements", is and
shall constitute Exhibit B to that certain Lease Agreement, dated for reference
---------
purposes as of October 18, 1999 (the "Lease"), by and between WIX/NSJ REAL
ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord") and
Genesis Microchip Corporation, a California corporation ("Tenant") for the
leasing of certain premises located at 2150 Gold Street, San Jose, California
(the "Premises"). The terms, conditions and provisions of this Exhibit B are
---------
hereby incorporated into and are made a part of the Lease. Any capitalized
terms used herein and not otherwise defined herein shall have the meaning
ascribed to such terms as set forth in the Lease.
1. Tenant Improvements. Subject to the conditions set forth below, Landlord
-------------------
agrees to construct and install certain improvements ("Tenant Improvements") in
the Building of which the Premises are a part in accordance with the Approved
Final Drawings (defined below) and the terms of this Exhibit B.
---------
2. Definition. "Tenant Improvements" as used in this Lease shall include only
----------
those interior improvements to be made to the Premises as specified in the
Approved Final Drawings (defined below) and agreed to by Tenant and Landlord in
accordance with the provisions hereof. "Tenant Improvements" shall specifically
not include (i) any alterations, additions or improvements installed or
- ---
constructed by Tenant, (ii) any of Tenant's trade fixtures, security equipment,
equipment, furniture, furnishings, telephone and/or data equipment, telephone
and/or data lines or other personal property, and (iii) any supplemental fire
protection improvements or equipment (collectively, "Tenant's Installations").
Landlord shall construct the Tenant Improvements in a good and workmanlike
manner in substantial accordance with the Approved Final Drawings.
3. Tenant's Initial Plans; the Work. Tenant desires Landlord to perform
--------------------------------
certain Tenant Improvements in the Premises. The Tenant Improvements shall be
in substantial accordance with the plan(s) and scope of work (collectively, the
"Initial Plans"). The parties shall meet and confer to agree upon a scope of
work immediately after execution of this Lease and, within fifteen (15) business
days from the date Landlord and Tenant meet to discuss the scope of work,
Landlord's Architect shall prepare and deliver to Tenant the Initial Plans. A
copy of the Initial Plans shall be attached hereto as Schedule 1, as soon as
----------
practicable thereafter. Such work, as shown in the Initial Plans and as more
fully detailed in the Approved Final Drawings (as defined and described in
Section 4 below), shall be hereinafter referred to as the "Work". Not later
than ten (10) days after the Initial Plans are prepared and delivered to Tenant,
Tenant or Tenant's Representatives shall furnish to Landlord such additional
plans, drawings, specifications and finish details as Landlord may reasonably
request to enable Landlord's architects and engineers, as applicable, to prepare
mechanical, electrical and plumbing plans and to prepare the Final Drawings,
including, but not limited to, a final telephone layout and special electrical
connections, if any. All plans, drawings, specifications and other details
describing the Work which have been, or are hereafter, furnished by or on behalf
of Tenant shall be subject to Landlord's approval, which approval shall not be
unreasonably withheld. Landlord shall not be deemed to have acted unreasonably
if it withholds its approval of any plans, specifications, drawings or other
details or of any Change Request (hereafter defined in Section 11 below)
because, in Landlord's reasonable opinion, the work as described in any such
item or any Change Request, as the case may be: (a) is likely to adversely and
materially affect Building systems, the structure of the Building or the safety
of the Building or its occupants; (b) is likely to impair Landlord's ability to
furnish services to Tenant; (c) would increase the cost of operating the Park
unless Tenant agrees to pay; (d) would violate any applicable governmental,
administrative body's or agencies' laws, rules, regulations, ordinances, codes
or similar requirements (or interpretations thereof); (e) contains or uses
Hazardous Materials; (f) would adversely affect the appearance of the exterior
Building or the Park; (g) is likely to adversely affect another tenant's
premises or such other tenant's use and enjoyment of such premises; (h) is
prohibited by any ground lease affecting the Building, the Lot and/or the Park,
any Recorded Matters or any mortgage, trust deed or other instrument encumbering
the Building, the Lot and/or the Park; (i) is not, at a minimum, in accordance
with Landlord's Building Standards (defined below); (j) would increase the
Tenant Improvement Costs (defined in Section 9 below) by more than fifty percent
(50%) from the cost originally estimated and anticipated by the parties; or (k)
would delay completion of the Final Drawings, the Approved Final Drawings and/or
the Tenant Improvements. The foregoing reasons, however, shall not be the only
reasons for which Landlord may reasonably withhold its approval, whether or not
such other reasons are similar or dissimilar to the foregoing. Neither the
approval by Landlord of the Work, the Initial Plans or any other plans,
specifications, drawings or other items associated with the Work or any Change
Request nor Landlord's performance, supervision or monitoring of the Work shall
constitute any warranty or covenant by Landlord to Tenant of the adequacy of the
design for Tenant's intended use of the Premises. Tenant agrees to, and does
hereby, assume full and complete responsibility to ensure that the design of the
Work and the Approved Final Drawings are adequate to fully meet the needs and
requirements of Tenant's use and intended operations of its business within the
Premises.
4. Final Drawings and Approved Final Drawings. If necessary for the
------------------------------------------
performance of the Work, and to the extent not already included as part of the
Initial Plans to be attached hereto, Landlord shall prepare or cause to be
prepared final working drawings and specifications for the Work (the "Final
Drawings") based on and consistent with the Initial Plans and the other plans,
specifications, drawings, finish details or other information furnished by
Tenant or Tenant's Representatives to Landlord and approved by Landlord pursuant
to Section 3 above. Tenant shall cooperate diligently with Landlord and
Landlord's architect, engineer and other representatives and Tenant shall
furnish within ten (10) days after any request therefor, all information
required by Landlord or Landlord's architect, engineer or other representatives
for completion of the Final Drawings. So long as the Final Drawings are
substantially consistent with the Initial Plans, Tenant shall approve the Final
Drawings within ten (10) days after receipt of same from Landlord subject to
changes requested by Tenant. Tenant's failure to approve or disapprove such
Final Drawings within the foregoing ten (10) day time period, shall be
conclusively deemed to be disapproval of same by Tenant. If Tenant reasonably
disapproves of any matters included in the Final Drawings because such items are
not substantially consistent with the Initial Plans, Tenant shall, within the
aforementioned ten (10) day period, deliver to Landlord written notice of its
disapproval and Tenant shall specify in such written notice, in reasonable
detail the matters disapproved, the reasons for such disapproval, and, if
possible, the specific changes or revisions necessary to be made to the Final
Drawings to cause such drawings to substantially conform to the Initial Plans.
Any additional costs associated with such requested changes or revisions shall
be included as part of the Tenant Improvement Costs (defined below). The
foregoing procedure shall be followed by the parties until the Final Drawings
are acceptable to both Landlord and Tenant. Landlord and Tenant shall indicate
their
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approval of the Final Drawings by initialing each sheet of the Final Drawings
and delivering to one another a true and complete copy of such initialed Final
Drawings (the "Approved Final Drawings"). A true and complete copy of the
Approved Final Drawings shall be attached to the Lease as Exhibit B-1 and shall
-----------
be made a part hereof. Any changes or revisions to the Approved Final Drawings
requested by Tenant must first be approved by Landlord, which approval shall not
be unreasonably withheld, subject to the provisions of Section 3 above. If
Landlord approves such requested changes or revisions, Landlord shall cause the
Approved Final Drawings to be revised accordingly and Landlord and Tenant shall
initial each sheet of the Approved Final Drawings as revised and replace and
attach a true and complete copy thereof to the Lease as Exhibit B-1. Landlord
-----------
and Tenant hereby covenant to each other to cooperate with each other and to act
reasonably in the preparation and approval of the Final Drawings and the
Approved Final Drawings.
5. Performance of Work. As soon as practicable after Tenant and Landlord
-------------------
approve the Approved Final Drawings, Landlord shall submit the Approved Final
Drawings to the governmental authorities having rights of approval over the Work
and shall apply for the necessary approvals and building permits. Subject to
the satisfaction of all conditions precedent and subsequent to its obligations
under this Exhibit B, and further subject to the provisions of Section 10
---------
hereof, as soon as practicable after Landlord or its representatives have
received all necessary approvals and building permits, Landlord will put the
Approved Final Drawings out for bid to several licensed and insured general
contractors. The Tenant Improvements shall be constructed by a general
contractor selected by Landlord and reasonably acceptable to Tenant (the
"General Contractor"). Landlord shall commence construction, or cause the
commencement of construction by the General Contractor, of the Tenant
Improvements, as soon as practicable after selection of the General Contractor.
Except as hereinafter expressly provided to the contrary, Landlord shall cause
the performance of the Work using the standard of materials shown in the
Approved Final Drawings ("Building Standards"). Landlord shall cause three (3)
general contractors to bid for construction of the Tenant Improvements. If
Tenant so desires, Tenant may also select a general contractor, reasonably
acceptable to Landlord, to bid the work. All bids will be opened and reviewed
together with Tenant's representative. The general contractor to construct the
Tenant Improvements (the "General Contractor") shall be subject to the
reasonable approval of Tenant.
6. Substantial Completion. Landlord shall cause the General Contractor to
----------------------
Substantially Complete (defined below) the Tenant Improvements in accordance
with the Approved Final Drawings by the Commencement Date of the Lease as set
forth in Section 2 of the Lease (the "Completion Date"), subject to delays due
to (a) acts or events beyond Landlord's control including, but not limited to,
acts of God, earthquakes, strikes, lockouts, boycotts, casualties,
discontinuance of any utility or other service required for performance of the
Work, moratoriums, governmental agencies, delays on the part of governmental
agencies, delays in obtaining permits or approvals from governmental agencies
and inclement weather (including rain delays), (b) the lack of availability or
shortage of specialized materials used in the construction of the Tenant
Improvements, (c) any matters beyond the control of Landlord, the General
Contractor or any subcontractors, (d) any changes required by the fire
department, building and/or planning department, building inspectors or any
other agency having jurisdiction over the Building, the Work and/or the Tenant
Improvements (except to the extent such changes are directly attributable to
Tenant's use or Tenant's particular tenant improvements, in which event such
delays are considered Tenant Delays) (the events and matters set forth in
Subsections (a), (b), (c) and (d) are collectively referred to as "Force Majeure
Delays"), or (e) any Tenant Delays (defined in Section 7 below). The Tenant
Improvements shall be deemed substantially complete on the date that (i) the
building officials of the applicable governmental agency(s) issues its final
approval of the construction of the Tenant Improvements whether in the form of
the issuance of a final permit, certificate of occupancy or the written approval
evidencing its final inspection on the building permit(s), (ii) on which the
General Contractor delivers to both Landlord and Tenant a certificate of
substantial completion wherein the General Contractor shall certify to both
Landlord and Tenant that the Tenant Improvements have been substantially
completed in accordance with the Approved Final Drawings, or (iii) on which
Tenant first takes occupancy of the Premises and actually commences the conduct
of its operations from the Premises, whichever occurs first ("Substantial
Completion", or "Substantially Completed", or "Substantially Complete"). Tenant
hereby acknowledges and agrees that the term "Substantial Completion" of the
Tenant Improvements as used herein will not include the completion of any work
---
associated with Tenant's Installations, including without limitation, Tenant's
storage requirements, Tenant's data equipment and telecommunication systems, and
work related to any requirements of governmental and regulatory agencies with
respect to any of Tenant's Installations. If the Work is not deemed to be
Substantially Completed on or before the scheduled Completion Date, (i) Landlord
agrees to use reasonable efforts to Substantially Complete the Work as soon as
practicable thereafter, (ii) the Lease shall remain in full force and effect,
(iii) Landlord shall not be deemed to be in breach or default of the Lease or
this Exhibit B as a result thereof and Landlord shall have no liability to
---------
Tenant as a result of any delay in occupancy (whether for damages, abatement of
all or any portion of the Rent, or otherwise), and (iv) except in the event of
any Tenant Delays (which notwithstanding anything to the contrary contained in
the Lease will not affect the Commencement Date but will extend the Completion
Date without any penalty or liability to Landlord), the Commencement Date and
the Expiration Date of the Term of the Lease shall be extended commensurately by
the amount of time attributable to any Force Majeure Delays. In such event,
Landlord and Tenant shall execute a written amendment to the Lease evidencing
such extensions of time, substantially in the form of Exhibit F to the Lease.
---------
Subject to the provisions of Section 10.2 of the Lease, the Tenant Improvements
shall belong to Landlord and shall be deemed to be incorporated into the
Premises for all purposes of the Lease, unless Landlord, in writing, indicates
otherwise to Tenant.
7. Tenant Delays. There shall be no extension of the scheduled Commencement
-------------
Date or Expiration Date of the Term of the Lease (as otherwise permissibly
extended in accordance with the provisions of Section 6 above) if the Work has
not been Substantially Completed by the scheduled Commencement Date due to any
delay attributable to Tenant and/or any of Tenant's Representatives or Tenant's
acts or omissions or otherwise relating to intended use of the Premises
(collectively, "Tenant Delays"), including, but not limited to, any of the
following described events or occurrences: (a) delays related to changes made or
requested by Tenant to the Work, the Final Drawings and/or the Approved Final
Drawings; (b) the failure of Tenant to furnish timely all or any plans,
drawings, specifications, finish details or other information required under
Sections 3 and 4 above; (c) the failure of Tenant to comply with the
requirements of Section 10 below; (d) Tenant's requirements for special work or
materials, finishes, or installations other than the Building Standards or
Tenant's requirements for special construction or phasing; (e) any changes
required by the fire department, building or planning department, building
inspectors or any other agency having jurisdiction over the Building, the Work
and/or the Tenant Improvements if such changes are directly attributable to
Tenant's particular use or Tenant's particular tenant improvements; (f) the
completion of any work associated with Tenant's Installations, including without
limitation, Tenant's storage requirements, Tenant's data equipment and
telecommunication systems, and work related to any requirements of governmental
and regulatory agencies with respect to any of Tenant's Installations; (g)
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the performance of any additional work pursuant to a Change Request that is
initiated by Tenant; (h) the performance of work in or about the Premises by any
person, firm or corporation employed by or on behalf of Tenant during the period
prior to the Commencement Date, including, without limitation, any failure to
complete or any delay in the completion of such work; and/or (i) any and all
delays caused by or arising from the acts or omissions of Tenant and/or Tenant's
Representatives, in any manner whatsoever, including, but not limited to, any
and all revisions to the Approved Final Drawings and Approved Final Drawings.
Notwithstanding anything to the contrary contained in the Lease, any delays in
the construction of the Tenant Improvements due to any Tenant Delays, shall in
no way extend or affect the date on which Tenant is required to commence paying
Rent under the terms of the Lease. It is the intention of the parties that all
of such delays will be considered Tenant Delays for which Tenant shall be wholly
and completely responsible for any and all consequences related to such delays,
including, without limitation, any costs and expenses attributable to increases
in labor or materials. Notwithstanding the above, Landlord must provide written
notice to Tenant of any Tenant Delay and/or Force Majeure Delay promptly after
the event constituting a Tenant Delay or Force Majeure Delay occurs and such
notice must include a reasonable estimation of the length of the delay, all of
which shall be subject to the reasonable approval of Tenant.
8. Tenant Improvement Allowance. Subject to the provisions of this Exhibit B,
----------------------------- ---------
Landlord shall provide to Tenant an allowance for the planning and construction
of the Tenant Improvements including the Work to be performed in the Premises,
as described in the Initial Plans and the Approved Final Drawings, in the amount
of One Million Five Hundred Sixty Four Thousand Nine Hundred Fifty and 00/100
Dollars ($1,564,950.00) (the "Tenant Improvement Allowance") based upon an
allowance of Thirty and 00/100 Dollars ($30.00) per rentable square foot for
approximately 52,165 rentable square feet of the Premises to be improved, as
described in the Initial Plans and the Approved Final Drawings. Tenant shall
not be entitled to any credit, abatement or payment from Landlord in the event
that the amount of the Tenant Improvement Allowance specified above exceeds the
actual Tenant Improvement Costs. The Tenant Improvement Allowance shall only be
used for tenant improvements typically installed by Landlord in office and
research and development buildings. The Tenant Improvement Allowance shall be
the maximum contribution by Landlord for the Tenant Improvement Costs and shall
be subject to the provisions of Section 10 below.
9. Tenant Improvement Costs. The Tenant Improvements' cost (the "Tenant
------------------------
Improvement Costs") shall mean and include any and all costs and expenses of the
Work, including, without limitation, all of the following:
(a) All costs of preliminary space planning and final architectural and
engineering plans and specifications (including, without limitation, the scope
of work, all plans and specifications, the Initial Plans, the Final Drawings and
the Approved Final Drawings) for the Building lobby and Tenant Improvements, and
architectural fees, engineering costs and fees, and other costs associated with
completion of said plans;
(b) All engineering costs associated with completion of the State of
California energy utilization calculations under Title 24 legislation;
(c) All costs of obtaining building permits and other necessary
authorizations and approvals from all local governmental authorities and all
other applicable agencies and entities having jurisdiction thereof;
(d) All costs of interior design and finish schedule plans and
specifications including as-built drawings, if applicable;
(e) All direct and indirect costs of procuring, constructing and installing
the Tenant Improvements in the Premises, including, but not limited to, the
construction fee for overhead and profit to the general contractor, the cost of
all on-site supervisory and administrative staff for the general contractor,
office, equipment and temporary services rendered by Landlord's consultants and
the General Contractor in connection with construction of the Tenant
Improvements, and all labor (including overtime) and materials constituting the
Work;
(f) All fees payable to the General Contractor, architect and Landlord's
engineering firm if they are required by Tenant to redesign any portion of the
Tenant Improvements following Tenant's approval of the Approved Final Drawings;
(g) Utility connection fees;
(h) Inspection fees and filing fees payable to local governmental
authorities, if any;
(i) All costs of all permanently affixed equipment and non-trade fixtures
provided for in the Approved Final Drawings, including the cost of installation;
and,
(j) A construction management fee payable to Landlord in the amount of
three percent (3%) of all direct and indirect costs of procuring, constructing
and installing the Tenant Improvements in the Premises and the Building.
10. Change Requests. No changes or revisions to the Approved Final Drawings
---------------
shall be made by either Landlord or Tenant unless approved in writing by both
parties. Upon Tenant's request and submission by Tenant (at Tenant's sole cost
and expense) of the necessary information and/or plans and specifications for
any changes or revisions to the Approved Final Drawings and/or for any work
other than the Work described in the Approved Final Drawings ("Change Requests")
and the approval by Landlord of such Change Request(s), which approval Landlord
agrees shall not be unreasonably withheld, Landlord shall perform the additional
work associated with the approved Change Request(s), at Tenant's sole cost and
expense, subject, however, to the following provisions of this Section 11.
Prior to commencing any additional work related to the approved Change
Request(s), Landlord shall submit to Tenant a written statement of the cost of
such additional work and a proposed tenant change order therefor ("Change
Order") in the standard form then in use by Landlord. Tenant shall execute and
deliver to Landlord such Change Order and shall pay the entire cost of such
additional work in the following described manner. Any costs related to such
approved Change Request(s) and Change Order shall be added to the Tenant
Improvement Costs and shall be paid for by Tenant as and with any Excess Tenant
Improvement Costs as set forth in Section 10 above. Any delays associated with
any Change Request or Change Order shall be considered a Tenant Delay. The
billing for such additional costs to Tenant shall be accompanied by evidence of
the amounts billed as is customarily used in the business. Costs related to
approved Change Requests and
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Change Orders shall include without limitation, any architectural or design
fees, Landlord's construction fee for overhead and profit, the cost of all on-
site supervisory and administrative staff, office, equipment and temporary
services rendered by Landlord and/or Landlord's consultants, and the General
Contractor's price for effecting the change. If Tenant fails to execute or
deliver such Change Order, or to pay the costs related thereto, then Landlord
shall not be obligated to do any additional work related to such approved Change
Request(s) and/or Change Orders, and Landlord may proceed to perform only the
Work, as specified in the Approved Final Drawings. Landlord shall equitably
adjust the amount of the Tenant Improvement Costs for any deletions in the scope
of the Work.
11. Termination. If the Lease is terminated prior to the Completion Date, for
-----------
any reason due to the default of Tenant hereunder, in addition to any other
remedies available to Landlord under the Lease, Tenant shall pay to Landlord as
Additional Rent under the Lease, within ten (10) days of receipt of a statement
therefor, any and all costs incurred by Landlord and not reimbursed or otherwise
paid by Tenant through the date of termination in connection with the Tenant
Improvements to the extent planned, installed and/or constructed as of such date
of termination, including, but not limited to, any costs related to the
demolition and/or removal of all or any portion of the Tenant Improvements and
restoration costs related thereto. Subject to the provisions of Section 10.2 of
the Lease, upon the expiration or earlier termination of the Lease, Tenant shall
not be required to remove the Tenant Improvements it being the intention of the
parties that the Tenant Improvements are to be considered incorporated into the
Building. Notwithstanding anything to the contrary contained herein, Landlord
or Tenant shall have the right to terminate the Lease, upon written notice to
Tenant, if Landlord is unable to obtain a building permit for the Tenant
Improvements within one hundred eighty (180) days from the date the Lease is
signed by Tenant.
12. Tenant Access. Landlord, in Landlord's reasonable discretion and upon
-------------
receipt of a written request from Tenant and written confirmation from the
General Contractor that such limited entry will be in harmony with the General
Contractor's work schedule with respect to the Tenant Improvements, may grant
Tenant a license to have access to the Premises at least two weeks prior to the
Completion Date to allow Tenant to do other work required by Tenant to install
the Tenant Installations and to otherwise make the Premises ready for Tenant's
use and occupancy (the "Tenant's Pre-Occupancy Work"). It shall be a condition
to the grant by Landlord and continued effectiveness of such license that:
(a) Tenant shall give to Landlord a written request to have such access not
less than ten (10) business days prior to the date on which such proposed access
will commence (the "Access Notice"). The Access Notice shall contain or be
accompanied by each of the following items, all in form and substance reasonably
acceptable to Landlord: (i) a detailed description of and schedule for Tenant's
Pre-Occupancy Work; (ii) the names and addresses of all contractors,
subcontractors and material suppliers and all other representatives of Tenant
who or which will be entering the Premises on behalf of Tenant to perform
Tenant's Pre-Occupancy Work or will be supplying materials for such work, and
the approximate number of individuals, itemized by trade, who will be present in
the Premises; (iii) if requested by Landlord, copies of all contracts,
subcontracts, material purchase orders, plans and specifications pertaining to
Tenant's Pre-Occupancy Work; (iv) copies of all licenses and permits required in
connection with the performance of Tenant's Pre-Occupancy Work; and (v)
certificates of insurance (in amounts satisfactory to Landlord and with the
parties identified in, or required by, the Lease named as additional insureds).
(b) Tenant shall indemnify, defend and hold the Indemnitees harmless from
and against any and all claims, liens, actions, costs, expenses (including
without limitation, attorneys' fees and costs), penalties, fines, and damages
arising from or related to, in any manner whatsoever, the Tenant's Pre-Occupancy
Work pursuant to the terms of the Lease.
(c) Such pre-term access by Tenant and Tenant's employees, agents,
contractors, consultants, workmen, mechanics, suppliers and invitees shall be
subject to scheduling by Landlord.
(d) Tenant's employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall fully cooperate, work in harmony and
not, in any manner, interfere with Landlord or Landlord's agents or
representatives in performing the Work and any additional work pursuant to
approved Change Orders, Landlord's work in other areas of the Building or the
Park, or the general operation of the Park. If at any time any such person
representing Tenant shall not be cooperative or shall otherwise cause or
threaten to cause any such disharmony or interference, including without
limitation, labor disharmony, and Tenant fails to immediately institute and
maintain corrective actions as directed by Landlord, then Landlord may revoke
such license upon one business days' prior written notice to Tenant.
(e) Any such entry into and limited occupancy of the Premises or any
portion thereof by Tenant or any person or entity working for or on behalf of
Tenant shall be deemed to be subject to all of the terms, covenants, conditions
and provisions of the Lease, excluding only the covenant to pay Rent. Landlord
shall not be liable for any injury, loss or damage that may occur to any of
Tenant's Pre-Occupancy Work made in or about the Premises or to any property
placed therein prior to the commencement of the Term of the Lease, the same
being at Tenant's sole risk and liability. Tenant shall be liable to Landlord
for any damage to any portion of the Premises, the Work or the additional work
related to any approved Change Orders caused by Tenant or any of Tenant's
employees, agents, contractors, consultants, workmen, mechanics, suppliers and
invitees for which the waiver of subrogation is not applicable or to the extent
insurance is not available. In the event that the performance of Tenant's Pre-
Occupancy Work causes extra costs to be incurred by Landlord or requires the use
of other Building services, after delivery to Tenant of prior notice that such
extra costs are reasonably anticipated by Landlord to be incurred Tenant shall
promptly reimburse Landlord for such extra costs and/or shall pay Landlord for
such other Building services at Landlord's standard rates then in effect.
13. Lease Provisions; Conflict. The terms and provisions of the Lease, insofar
--------------------------
as they are applicable, in whole or in part, to this Exhibit B, are hereby
---------
incorporated herein by reference, and specifically including all of the
provisions of Section 31 of the Lease. In the event of any conflict between the
terms of the Lease and this Exhibit B, the terms of this Exhibit B shall
--------- ---------
prevail. Any amounts payable by Tenant to Landlord hereunder shall be deemed to
be Additional Rent under the Lease and, upon any default in the payment of same,
Landlord shall have all rights and remedies available to it as provided for in
the Lease.
14. Warranty. Effective upon the Commencement Date, Landlord warrants that (i)
--------
construction of the Tenant Improvements was performed in accordance with all
Laws and the Approved Final Plans and in a good and workmanlike manner, and (ii)
all material and equipment installed conformed to the Approved Final Plans and
was new, of good quality and in good operating condition.
4
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Exhibit C to Lease Agreement
Rules & Regulations
This exhibit, entitled "Rules & Regulations", is and shall constitute EXHIBIT C
---------
to that certain Lease Agreement dated October 18, 1999 (the "Lease"), by and
between WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership
("Landlord") and Genesis Microchip Corporation, a California corporation
("Tenant") for the leasing of certain premises located at 2150 Gold Street, San
Jose, California (the "Premises"). The terms, conditions and provisions of this
EXHIBIT C are hereby incorporated into and are made a part of the Lease. Any
- ---------
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease:
1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Premises or the Building without the prior written consent of
Landlord. Landlord shall have the right to remove any such unapproved item
without notice and at Tenant's expense.
2. Tenant shall not regularly park motor vehicles in designated parking areas
overnight.
3. Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed.
4. All window coverings installed by Tenant and visible from the outside of the
Building require the prior written approval of Landlord.
5. Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance or any flammable or combustible materials on or around the
Premises, the Building or the Park.
6. Tenant shall park motor vehicles in those general parking areas as
designated by Landlord except for loading and unloading. During those periods
of loading and unloading, Tenant shall not unreasonably interfere with traffic
flow within the Park and loading and unloading areas of other Tenants.
7. Tenant shall not disturb, solicit or canvas any occupant of the Building or
Park and shall cooperate to prevent same.
8. No person shall go on the roof without Landlord's permission, except as
permitted in the Lease.
9. Business machines and mechanical equipment belonging to Tenant which cause
noise or vibration that may be transmitted to the structure of the Building, to
such a degree as to be objectionable to Landlord or other Tenants, shall be
placed and maintained by Tenant, at Tenant's expense, on vibration eliminators
or other devices sufficient to eliminate noise or vibration.
10. All goods, including material used to store goods, delivered to the
Premises of Tenant shall be immediately moved into the Premises and shall not be
left in parking or receiving areas overnight.
11. Tractor trailers which must be unhooked or parked with dolly wheels beyond
the concrete loading areas must use steel plates or wood blocks under the dolly
wheels to prevent damage to the asphalt paving surfaces. No parking or storing
of such trailers will be permitted in the auto parking areas of the Park or on
streets adjacent thereto.
12. Forklifts which operate on asphalt paving areas shall not have solid rubber
tires and shall only use tires that do not damage the asphalt.
13. Tenant is responsible for the storage and removal of all trash and refuse.
All such trash and refuse shall be contained in suitable receptacles stored
behind screened enclosures at locations approved by Landlord.
14. Tenant shall not store or permit the storage or placement of goods, or
merchandise or pallets or equipment of any sort outside the Premises, the
Building, the Park or any of the Common Areas of the foregoing. No displays or
sales of merchandise shall be allowed in the parking lots or other Common Areas.
15. Tenant shall not permit any animals, including, but not limited to, any
household pets, to be brought or kept in or about the Premises, the Building,
the Park or any of the Common Areas of the foregoing, except as required under
applicable law.
16. Tenant shall not permit any motor vehicles to be washed on any portion of
the Premises or in the Common Areas of the Park, nor shall Tenant permit
mechanical work or maintenance of motor vehicles to be performed on any portion
of the Premises or in the Common Areas of the Park.
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Exhibit E
Hazardous Materials Disclosure Certificate
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as Tenant. After a lease agreement is signed by you and the Landlord
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Section 29 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Landlord to defend itself or its lenders, partners
or representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:
Landlord: WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
c/o Legacy Partners Commercial, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn: Portfolio Vice President
Phone: (650) 571-2200
Name of (Prospective) Tenant: Genesis Microchip Corporation
Mailing Address: _____________________________________________________________
______________________________________________________________________________
Contact Person, Title and Telephone Number(s): _______________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s): _________________________________________________________
______________________________________________________________________________
Address of (Prospective) Premises: ___________________________________________
Length of (Prospective) Initial Term: ________________________________________
______________________________________________________________________________
1. General Information:
Describe the initial proposed operations to take place in, on, or about the
Premises, including, without limitation, principal products processed,
manufactured or assembled services and activities to be provided or
otherwise conducted. Existing Tenants should describe any proposed changes
to on-going operations.
_______________________________________________________________________
_______________________________________________________________________
2. Use, Storage and Disposal of Hazardous Materials
2.1 Will any Hazardous Materials be used, generated, stored or disposed of
in, on or about the Premises? Existing Tenants should describe any
Hazardous Materials which continue to be used, generated, stored or
disposed of in, on or about the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
If Yes is marked, please explain: ____________________________________
______________________________________________________________________
______________________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, stored or disposed of in, on or about
the Premises, including the applicable hazard class and an estimate of
the quantities of such Hazardous Materials at any given time; estimated
annual throughput; the proposed location(s) and method of storage
(excluding nominal amounts of ordinary household cleaners and
janitorial supplies which are not regulated by any Environmental Laws);
and the proposed location(s) and method of disposal for each Hazardous
Material, including, the estimated frequency, and the proposed
contractors or subcontractors. Existing Tenants should attach a list
setting forth the information requested above and such list should
include actual data from on-going operations and the identification of
any variations in such information from the prior year's certificate.
3. Storage Tanks and Sumps
3.1 Is any above or below ground storage of gasoline, diesel, petroleum, or
other Hazardous Materials in tanks or sumps proposed in, on or about
the Premises? Existing Tenants should describe any such actual or
proposed activities.
Yes [ ] No [ ]
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If yes, please explain: ____________________________________________
____________________________________________________________________
____________________________________________________________________
4. Waste Management
4.1 Has your company been issued an EPA Hazardous Waste Generator I.D.
Number? Existing Tenants should describe any additional identification
numbers issued since the previous certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly reports as a hazardous
waste generator? Existing Tenants should describe any new reports
filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report filed.
5. Wastewater Treatment and Discharge
5.1 Will your company discharge wastewater or other wastes to:
_____ storm drain? _____ sewer?
_____ surface water? _____ no wastewater or other wastes discharged.
Existing Tenants should indicate any actual discharges. If so, describe
the nature of any proposed or actual discharge(s).
____________________________________________________________________
____________________________________________________________________
5.2 Will any such wastewater or waste be treated before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to be conducted.
Existing Tenants should describe the actual treatment conducted.
____________________________________________________________________
____________________________________________________________________
6. Air Discharges
6.1 Do you plan for any air filtration systems or stacks to be used in your
company's operations in, on or about the Premises that will discharge
into the air; and will such air emissions be monitored? Existing
Tenants should indicate whether or not there are any such air
filtration systems or stacks in use in, on or about the Premises which
discharge into the air and whether such air emissions are being
monitored.
Yes [ ] No [ ]
If yes, please describe: __________________________________________
____________________________________________________________________
____________________________________________________________________
6.2 Do you propose to operate any of the following types of equipment, or
any other equipment requiring an air emissions permit? Existing Tenants
should specify any such equipment being operated in, on or about the
Premises.
_____ Spray booth(s) _____ Incinerator(s)
_____ Dip tank(s) _____ Other (Please describe)
_____ Drying oven(s) _____ No Equipment Requiring Air Permits
If yes, please describe: ___________________________________________
____________________________________________________________________
____________________________________________________________________
7. Hazardous Materials Disclosures
7.1 Has your company prepared or will it be required to prepare a Hazardous
Materials management plan ("Management Plan") pursuant to Fire
Department or other governmental or regulatory agencies' requirements?
Existing Tenants should indicate whether or not a Management Plan is
required and has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan. Existing Tenants should
attach a copy of any required updates to the Management Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the Premises
regulated under Proposition 65? Existing Tenants should indicate
whether or not there are any new Hazardous Materials being so used
which are regulated under Proposition 65.
Yes [ ] No [ ]
If yes, please explain: ____________________________________________
____________________________________________________________________
____________________________________________________________________
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8. Enforcement Actions and Complaints
8.1 With respect to Hazardous Materials or Environmental Laws, has your
company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company received
requests for information, notice or demand letters, or any other
inquiries regarding its operations? Existing Tenants should indicate
whether or not any such actions, orders or decrees have been, or are in
the process of being, undertaken or if any such requests have been
received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any continuing
compliance obligations imposed as a result of these actions, orders or
decrees and also describe any requests, notices or demands, and attach
a copy of all such documents. Existing Tenants should describe and
attach a copy of any new actions, orders, decrees, requests, notices or
demands not already delivered to Landlord pursuant to the provisions of
Section 29 of the signed Lease Agreement.
____________________________________________________________________
____________________________________________________________________
8.2 Have there ever been, or are there now pending, any lawsuits against
your company regarding any environmental or health and safety concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other documents
related thereto as requested by Landlord. Existing Tenants should
describe and attach a copy of any new complaint(s), cross-complaint(s),
pleadings and other related documents not already delivered to Landlord
pursuant to the provisions of Section 29 of the signed Lease Agreement.
____________________________________________________________________
____________________________________________________________________
8.3 Have there been any problems or complaints from adjacent Tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing Tenants
should indicate whether or not there have been any such problems or
complaints from adjacent Tenants, owners or other neighbors at, about
or near the Premises.
Yes [ ] No [ ]
If yes, please describe. Existing Tenants should describe any such
problems or complaints not already disclosed to Landlord under the
provisions of the signed Lease Agreement.
____________________________________________________________________
____________________________________________________________________
9. Permits and Licenses
9.1 Attach copies of all Hazardous Materials permits and licenses including
a Transporter Permit number issued to your company with respect to its
proposed operations in, on or about the Premises, including, without
limitation, any wastewater discharge permits, air emissions permits,
and use permits or approvals. Existing Tenants should attach copies of
any new permits and licenses as well as any renewals of permits or
licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Section 29 of the Lease Agreement; and (C) that
Tenant shall have and retain full and complete responsibility and liability with
respect to any of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Indemnitees and compliance
with all Environmental Laws, or (b) imposing upon Landlord, directly or
indirectly, any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or to
ensure that Tenant is in compliance with all Environmental Laws; (i) the
delivery of such certificate to Landlord and/or Landlord's acceptance of such
certificate, (ii) Landlord's review and approval of such certificate, (iii)
Landlord's failure to obtain such certificate from Tenant at any time, or (iv)
Landlord's actual or constructive knowledge of the types and quantities of
Hazardous Materials being used, stored, generated, disposed of or transported on
or about the Premises by Tenant or Tenant's Representatives. Notwithstanding
the foregoing or anything to the contrary contained herein, the undersigned
acknowledges and agrees that Landlord and its partners, lenders and
representatives may, and will, rely upon the statements, representations,
warranties, and certifications made herein and the truthfulness thereof in
entering into the Lease Agreement and the continuance thereof throughout the
term, and any renewals thereof, of the Lease Agreement.
I (print name)________, acting with full authority to bind the (proposed) Tenant
and on behalf of the (proposed) Tenant, certify, represent and warrant that the
information contained in this certificate is true and correct.
(Prospective) Tenant:
By: ________________________
Title: ________________________
Date: ________________________
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<PAGE>
Exhibit F
First Amendment to Lease Agreement
Change of Commencement Date
This First Amendment to Lease Agreement (the "Amendment") is made and entered
into to be effective as of _______________, by and between _________________
_____________________________ ("Landlord"), and ________________________
("Tenant"), with reference to the following facts:
Recitals
A. Landlord and Tenant have entered into that certain Lease Agreement dated
___________ (the "Lease"), for the leasing of certain premises containing
approximately __________ rentable square feet of space located at
____________________________, California (the "Premises") as such Premises are
more fully described in the Lease.
B. Landlord and Tenant wish to amend the Commencement Date of the Lease.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. Recitals: Landlord and Tenant agree that the above recitals are true
and correct.
2. The Commencement Date of the Lease shall be ________________________.
3. The last day of the Term of the Lease (the "Expiration Date") shall be
______________.
4. The dates on which the Base Rent will be adjusted are:
for the period ________ to _______ the monthly Base Rent shall be
$__________;
for the period ________ to _______ the monthly Base Rent shall be
$__________; and
for the period ________ to _______ the monthly Base Rent shall be
$__________.
5. Effect of Amendment: Except as modified herein, the terms and conditions
-------------------
of the Lease shall remain unmodified and continue in full force and effect. In
the event of any conflict between the terms and conditions of the Lease and this
Amendment, the terms and conditions of this Amendment shall prevail.
6. Definitions: Unless otherwise defined in this Amendment, all terms not
-----------
defined in this Amendment shall have the meaning set forth in the Lease.
7. Authority: Subject to the provisions of the Lease, this Amendment
---------
shall be binding upon and inure to the benefit of the parties hereto, their
respective heirs, legal representatives, successors and assigns. Each party
hereto and the persons signing below warrant that the person signing below on
such party's behalf is authorized to do so and to bind such party to the terms
of this Amendment.
8. The terms and provisions of the Lease are hereby incorporated in this
Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
[PROPERTY MANAGER: Please provide Tenant information and Word Processing will
complete the signature block]
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Exhibit G
Sign Criteria
To be attached
[Diagram of side view of building]
TYPICAL FUTURE TENANT WALL SIGN - ELEVATION
TENANT ALLOWED ONE SIGN ON EXTERIOR WALL, NOT TO EXCEED ONE SIGN PER BUILDING
FRONTAGE, THREE FRONTAGES MAXIMUM
OVERALL SIGN SIZE NOT TO EXCEED 100 SQUARE FEET PER FRONTAGE
SIGN TO HAVE 6" VERTICAL CLEARANCE TOP AND BOTTOM FROM EDGES OF WALL PANEL
SECTIONS
SIGNS TO BE INDIVIDUAL CHANNEL LETTER FABRICATION, EITHER ILLUMINATED WITH
INTERNAL NEON, OR NON-ILLUMUNATED
CORPORATE NAME AND/OR LOGO ONLY, IN CORPORATE COLORS
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Exhibit H
Subordination, Non-Disturbance and Attornment Agreement
This Subordination, Non-Disturbance and Attornment Agreement (this "Agreement")
dated ________, 19__, is made among ____________________________________,
_____________________________________________, ("Tenant"), ____________________
___________________________ _____________________________________ ("Landlord"),
and _________________________________ ____________________________________
("Mortgagee").
WHEREAS, Mortgagee is the owner of a promissory note (herein, as it may have
been or may be from time to time renewed, extended, amended or supplemented,
called the "Note") dated _______________, 19__, executed by Landlord, payable to
the order of Mortgagee, in the principal face amount of $________________,
bearing interest and payable as therein provided, secured by, among other
things, a Deed of Trust (herein, as it may have been or may be from time to time
renewed, extended, amended or supplemented, called the "Deed of Trust"),
recorded in the office of the County Clerk of ______________ County, California,
covering, among other property, the land (the "Land") described in Exhibit "A"
which is attached hereto and incorporated herein by reference, and the
improvements (the "Improvements") thereon (such Land and Improvements being
herein together called the "Property");
WHEREAS, Tenant and Landlord executed a certain Lease Agreement dated
____________, 19__, (herein, as it may from time to time be renewed, extended,
amended or supplemented, called the "Lease"), covering a portion of the Property
(said portion being herein referred to as the "Premises"); and
WHEREAS, the term "Landlord" as used herein means the present landlord under
the Lease or, if the landlord's interest is transferred to any manner, the
successor(s) or assign(s) occupying the position of landlord under the Lease at
the time in question;
THEREFORE, in consideration of the mutual agreements herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Subordination. Tenant agrees and covenants that the Lease and the rights
-------------
of Tenant thereunder, all of Tenant's right, title and interest in and to the
property covered by the Lease, and any lease hereafter executed by Tenant
covering any part of the Property, are and shall be subordinate and inferior to
(a) the Deed of Trust and the rights of Mortgagee thereunder, and all right,
title and interest of Mortgagee in the Property, and (b) all other security
documents now or hereafter securing payment of any indebtedness of the Landlord
(or any prior Landlord) to Mortgagee which cover or affect the Property (the
"Security Documents"). This Agreement is not intended and shall not be construed
to subordinate the Lease to any mortgage, deed of trust or other security
document other than those referred to in the preceding sentence, securing the
indebtedness to Mortgagee. Without limitation of any other provision hereof,
Mortgagee may, at its option and without joinder or further consent of Tenant,
Landlord, or anyone else, at any time after the date hereof subordinate the lien
of the Deed of Trust (or any other lien or security interest held by Mortgagee
which covers or affects the Property) to the Lease by executing an instrument
which is intended for that purpose and which specifies such subordination; and,
in the event of any such election by Mortgagee to subordinate, Tenant will
execute any documents required to evidence such subordination; provided however,
notwithstanding that the Lease may be unilateral subordination by Mortgagee
hereafter be made superior to the lien of the Deed of Trust, the provisions of
the Deed of Trust relative to the rights of Mortgagee with respect to proceeds
arising from an eminent domain taking (including a voluntary conveyance by
Landlord) and/or insurance payable to reason of damage to or destruction of the
Premises shall be prior and superior to and shall control over any contrary
provisions in the Lease.
2. Non-Disturbance. Mortgagee agrees that so long as the Lease is in full
---------------
force and effect and Tenant is not in default in the payment of rent, additional
rent or other payments or in the performance of any of the other terms,
covenants or conditions of the Lease on Tenant's part to be performed (beyond
the period, if any, specified in the Lease within which Tenant may cure such
default),
(a) Tenant's possession of the Premises under the Lease shall not be
disturbed or interfered with by Mortgagee in the exercise of any of its rights
under the Mortgage, including any foreclosure or conveyance in lieu of
foreclosure, and
(b) Mortgagee will not join Tenant as a party defendant for the purpose
of terminating Tenant's interest and estate under the Lease in any proceeding
for foreclosure of the Mortgage.
3. Attornment.
----------
(a) Tenant covenants and agrees that in the event of foreclosure of the
Mortgage, whether by power of sale or by court action, or upon a transfer of the
Property by conveyance in lieu of foreclosure (the purchaser at foreclosure or
the transferee in lieu of foreclosure, including Mortgagee if it is such
purchaser or transferee, being herein called "New Owner"), Tenant shall attorn
to the New Owner as Tenant's new landlord, and agrees that the Lease shall
continue in full force and effect as a direct lease between Tenant and New Owner
upon all of the terms, covenants, conditions and agreements set forth in the
Lease and this Agreement, except for provisions which are impossible for
Mortgagee to perform; provided, however, that in no event shall the New Owner
be:
(i) liable for any act, omission, default, misrepresentation, or
breach of warranty, of any previous landlord (including Landlord) or obligations
accruing prior to New Owner's actual ownership of the property; (other than for
a default by Landlord arising from Landlord's failure to perform any maintenance
or repair obligation required of Landlord under the Lease if, and only if, (i)
Tenant has provided New Owner with written notice of such default and an
opportunity to cure the same in accordance with the requirements of Section 5
hereof prior to exercising any of Tenant's rights under the Lease, (ii) Tenant
duly exercises its rights under the Lease to cure such default by making such
repairs or performing such maintenance to the Premises or the Building on behalf
of Landlord (1) in compliance with all applicable laws (2) with materials of a
quality and grade at least as equal to that in place as of the date of delivery
of the Premises to Tenant, and (3) without interference with the rights of other
tenants of the Property, (iii) the total liability for such default shall not
exceed the fair and reasonable cost to Tenant to make such repairs or perform
such maintenance on Landlord's behalf);
1
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(ii) subject to any offset, defense, claim or counterclaim which
Tenant might be entitled to assert against any previous landlord (including
Landlord); except with respect to offsets arising from Tenant's repairs to or
maintenance of the Premises or the Building in accordance with subparagraph (i)
above;
(iii) bound by any payment of rent, additional rent or other
payments, made by Tenant to any previous landlord (including Landlord) for more
than one (1) month in advance;
(iv) bound by any amendment, or modification of the Lease hereafter
made, or consent by any previous landlord (including Landlord) under the Lease
to any assignment or sublease hereafter granted, without the written consent of
Mortgagee; or
(v) liable for any deposit that Tenant may have given to any
previous landlord (including Tenant) which has not, as such, been transferred to
New Owner.
(b) The provisions of this Agreement regarding attornment by Tenant shall
be self-operative and effective without the necessity of execution of any new
lease or other document on the part of any party hereto or the respective heirs,
legal representatives, successors or assigns of any such party. Tenant agrees,
however, to execute and deliver at any time and from time to time, upon the
request of Landlord or of any holder(s) of any of the indebtedness or other
obligations secured by the Mortgage, any instrument or certificate which, in the
reasonable judgement of Landlord or of such holder(s), may be necessary or
appropriate in any such foreclosure proceeding or otherwise to evidence such
attornment, including, if requested, a new lease of the Premises on the same
terms and conditions as the Lease for the then unexpired term of the Lease
including the Extended Term, if any.
4. Estoppel Certificate. Tenant agrees to execute and deliver from time to
--------------------
time, upon the request of Landlord or of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, a certificate
regarding the status of the Lease in a form reasonably acceptable to Tenant,
consisting of statements, if true (or if not, specifying why not), (a) that the
Lease is in full force and effect, (b) the date through which rentals have been
paid, (c) the date of the commencement of the term of the Lease, (d) the nature
of any amendments or modifications of the Lease, (e) that no default, or state
of facts which with the passage of time or notice (or both) would constitute a
default, exists under the Lease, and (f) such other matters as may be reasonable
requested.
5. Acknowledgement and Agreement by Tenant. Tenant acknowledges and agrees
---------------------------------------
as follows:
(a) Tenant acknowledges that Landlord will execute and deliver to
Mortgagee in connection with the financing of the Property the Deed of Trust
which assigns the rent and all other sums due under the Lease to Mortgagee.
Tenant hereby expressly consents to such [absolute assignment] [collateral
assignment] and agrees that such assignment shall, in all respects, be superior
to any interest Tenant has in the Lease of the Property, subject to the
provision of the Agreement. Tenant will not amend, alter, terminate, or waive
any provision of, or consent to the amendment, alteration, termination or waiver
of any provision of the Lease without the prior written consent of Mortgagee,
and no termination of the Lease, whether pursuant to the terms of the Lease or
otherwise, will be effective without prior written consent of Mortgagee. Tenant
shall not prepay any rents or other sums due under the lease for more than one
(1) month in advance of the due date therefor. Tenant acknowledges that
Mortgagee will rely upon this instrument in connection with such financing.
(b) Mortgagee, in making any disbursements to Landlord, is under no
obligation or duty to oversee or direct the application of the proceeds of such
disbursements, and such proceeds may be used by Landlord for purposes other than
improvement of the Property.
(c) From and after the date hereof, in the event of any act or omission
by Landlord which would give Tenant the right, either immediately or after the
lapse of time, to terminate the Lease or to claim a partial or total eviction,
Tenant will not exercise any such right (i) until it has given written notice of
such act or omission to the Mortgagee; and (ii) until the same period of time as
is given to Landlord under the Lease to cure such act or omission shall have
elapsed following such giving of notice to Mortgagee and following tile time
when Mortgagee shall have become entitled under the Mortgage to remedy the same,
but in any event 30 days after receipt of such notice or such longer period of
time as may be necessary to cure or remedy such default, act, or omission
including such period of time necessary to obtain possession of the Property and
thereafter cure such default, act, or omission, during which period of time
Mortgagee shall be permitted to cure or remedy such default; act or omission;
provided, however that Mortgagee shall have no duty or obligation to cure or
remedy any beach of default. It is specifically agreed that Tenant shall not, as
to Mortgagee, require cure of any such default which is personal to Landlord,
and therefore not susceptible to cure by Mortgagee.
(d) In the event that Mortgagee notifies Tenant of a default under the
Mortgage, Note, or Security Documents and demands that Tenant pay its rent and
all other sums due under the Lease directly to Mortgagee, Tenant shall honor
such demand and pay the full amount of its rent and all other sums due under the
Lease directly to Mortgagee or as otherwise required pursuant to such notice
beginning with the payment next due after such notice of default, without
inquiry as to whether a default actually exists under the Mortgage, Security
Documents or otherwise in connection with the Note, and notwithstanding any
contrary instructions of or demands from Landlord.
(e) Tenant shall send a copy of any notice or statement under the Lease
to Mortgagee at the same time such notice or statement is sent to Landlord.
(f) Tenant has no right or option of any nature whatsoever, whether
pursuant to the Lease or otherwise, to purchase the Premises or the Property, or
any portion thereof or any interest therein, and to the extent that Tenant has
had, or hereafter acquires, any such right or option, same is hereby
acknowledged to be subject and subordinate to the Mortgage and is hereby waived
and released as against Mortgagee.
(g) This Agreement satisfies any condition or requirement in the Lease
relating to the granting of a non-disturbance agreement and Tenant waives any
requirement to the contrary in the Lease.
(h) Mortgagee and any New Owner shall have no liability to Tenant or any
other party for any conflict between the provisions of the Lease and the
provisions of any other lease affecting the Property, including, but
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<PAGE>
not limited to, any provisions relating to exclusive or non-conforming uses or
rights, renewal options and options to expand, and in the event of such a
conflict, Tenant shall have no right to cancel the Lease or take any other
remedial action against Mortgagee or New Owner, or against any other party for
which Mortgagee or any New Owner would be liable.
(i) Mortgagee and any New Owner shall have no obligation nor incur any
liability with respect to the erection or completion of the improvements in
which the Premises are located or for completion of the Premises or any
improvements for Tenant's use and occupancy, either at the commencement of the
term of the Lease or upon any renewal or extension thereof or upon the addition
of additional space, pursuant to any expansion rights contained in the Lease.
(j) Mortgagee and any New Owner shall have no obligation nor incur any
liability with respect to any warranties of any nature whatsoever, whether
pursuant to the Lease or otherwise, including, without limitation, any
warranties respecting use, compliance with zoning, Landlord's title, Landlord's
authority, habitability, fitness for purpose or possession.
(k) In the event that Mortgagee or any New Owner shall acquire title to
the Premises or the Property, Mortgagee or such New Owner shall have no
obligation, nor incur any liability, beyond Mortgagee's or New Owner's then
equity interest, if any, in the Property or the Premises, and Tenant shall look
exclusively to such equity interest or Mortgagee or New Owner, if any, for the
payment and discharge of any obligations imposed upon Mortgagee or New Owner
hereunder or under the Lease or for recovery of any judgement from Mortgagee, or
New Owner, and in no event shall Mortgagee, New Owner, nor any of their
respective officers, directors, shareholders, agents, representatives, servants,
employees or partners ever by personally liable for such judgement.
(l) Nothing herein contained is intended, nor shall it be construed, to
abridge or adversely affect any right or remedy of Landlord under the Lease in
the event of any default by Tenant in the payment of rent and/or any other sums
due under the Lease or in the performance of any of the other terms, covenants
or conditions of the Lease on Tenant's part to be performed.
(m) Landlord has not agreed to any abatement of rent or other sums or
period of "free rent" for the Premises unless same is specifically provided in
the Lease, and Tenant agrees that in the event Mortgagee, or any New Owner
becomes the owner of the Property, no agreement for abatement of rent or any
other sum not specifically provided in the Lease will be binding on Mortgagee or
New Owner.
(n) Tenant have never permitted, and will not permit, the generation,
treatment, storage or disposal of any hazardous substance as defined under
federal, state, or local law, on the Premises or Property except for such
substances of a type and only in a quantity normally used in connection with the
occupancy or operation of buildings (such a non-flammable cleaning fluids and
supplies normally used in the day to day operation of first class [office or
retail establishments]) which substances are being held, stored, and used in
strict compliance with federal, state, and local laws. Tenant shall be solely
responsible for and shall reimburse Landlord for any loss, liability, claim or
expense, including without limitation, cleanup and all other expenses, that
Landlord may incur by reason of Tenant's violation of the requirements of this
Paragraph 5(n).
6. Acknowledgement and Agreement by Landlord. Landlord, as landlord under
-----------------------------------------
the Lease and grantor under the Mortgage, acknowledges and agrees for itself and
its heirs, representative, successors and assigns, that: (a) this Agreement does
not constitute a waiver by Mortgagee of any of its rights under the Mortgage,
Note, or Security Documents, or in any way release Landlord from its obligations
to comply with the terms, provisions, conditions, covenants, agreements and
clauses of the Mortgage, Note, or Security Documents; (b) the provisions of the
Mortgage, Note, or Security Documents remain in full force and effect and must
be complied with by Landlord; and (c) Tenant is hereby authorized to pay its
rent and all other sums due under the Lease directly to Mortgagee upon receipt
of a notice as set forth in paragraph 5(d) above from Mortgagee and that Tenant
is not obligated to inquire as to whether a default actually exists under the
Mortgage, Security Documents or otherwise is connection with the Note. Landlord
hereby releases and discharges Tenant of and from any liability to Landlord
resulting from Tenant's payment to Mortgagee in accordance with this Agreement.
Landlord represents and warrants to Mortgagee that a true and complete copy of
the Lease has been delivered by Landlord to Mortgagee.
7. Lease Status. Landlord and Tenant certify to Mortgagee that neither
------------
Landlord nor Tenant has knowledge of any default on the part of the other under
the Lease, and the Lease is bona fide and contains all of the agreements of the
parties thereto with respect to the letting of the Premises and that all of the
agreements and provisions therein contained are in full force and effect.
8. Notices. All notices, requests, consents, demands and other
-------
communications required or which any parties desires to give hereunder shall be
in writing and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by telegram, telex, or facsimile, by expedited delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, at the addresses specified at the end of this Agreement
(unless changed by similar notice in writing given by the particular party whose
address is to be changed). Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or, in the case of telegram, telex or
facsimile, upon receipt. Notwithstanding the foregoing, no notice of change of
address shall be effective except upon receipt. This Paragraph 8 shall not be
construed in any way to affect or impair any waiver of notice or demand provided
in this Agreement or in the lease or in any document evidencing, securing or
pertaining to the loan evidenced by the Note or to require giving of notice or
demand to or upon any person in any situation or for any reason.
9. Miscellaneous.
-------------
(a) This Agreement supersedes any inconsistent provision of the Lease.
(b) Nothing contained in this Agreement shall be construed to derogate
from in any way impair, or affect the lien, security interest or provisions of
the Mortgage, Note, or Security Documents.
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<PAGE>
(c) This Agreement shall inure to the benefit of the parties hereto,
their respective successors and permitted assigns, and any New Owner, and its
heirs, personal representatives, successors and assigns; provided, however, that
in the event of the assignment or transfer of the interest of Mortgagee, all
obligations and liabilities of the assigning Mortgagee under this Agreement
shall terminate, and thereupon all such obligations and liabilities shall be the
responsibility of the party to whom Mortgagee's interest is assigned or
transferred; and provided further that the interest of Tenant under this
Agreement may not be assigned or transferred without the prior written consent
of Mortgagee.
(d) THIS AGREEMENT AND, ITS VALIDITY, ENFORCEMENT AND INTERPRETATION
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, AND APPLICABLE UNITED
STATES FEDERAL LAW EXCEPT ONLY TO THE EXTENT, IF ANY, THAT THE LAWS OF THE STATE
IN WHICH THE PROPERTY IS LOCATED NECESSARILY CONTROL.
(e) The words "herein", "hereof", "hereunder" and other similar compounds
of the word "here" as used in this Agreement refer to this entire Agreement and
not to any particular section or provision.
(f) This Agreement may not be modified orally or in any manner other than
by an agreement in writing signed by the parties hereto or their respective
successors in interest.
(g) If any provision of the Agreement shall be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not apply to or affect any other provision hereof, but
this Agreement shall be construed as if such invalidity, illegibility, or
unenforceability did not exist.
(h) If any bankruptcy proceedings shall hereafter commence with respect
to Landlord, and if the Lease is rejected by the trustee pursuant to section 365
(L) of the United States Bankruptcy Code, Tenant agrees with Mortgagee (i) not
to treat such lease as terminated, and (ii) to remain in possession of the
Premises.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
Address or Mortgagee: Mortgagee:
_______________________________________ By: ______________________________
_______________________________________
_______________________________________ Its: ______________________________
Attention: ____________________________ Date: ______________________________
Address of Tenant: Tenant:
_______________________________________ By: ______________________________
_______________________________________
_______________________________________ Its: ______________________________
Attention: ____________________________ Date: ______________________________
Address of Landlord: Landlord:
c/o Legacy Partners Commercial, Inc. ____________________________________,
101 Lincoln Centre Drive, Fourth Floor ____________________________________
Foster City, California 94404
Attention: ____________________________ By: ______________________________
Its: ______________________________
Date: ______________________________
4
<PAGE>
Exhibit J
Guaranty
IN CONSIDERATION of and as an inducement for the granting, execution and
delivery by WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited
partnership, as landlord ("Landlord"), of the Lease Agreement (the "Lease")
dated October 18, 1999, with Genesis Microchip Corporation, a California
corporation, as tenant ("Tenant"), relating to the leasing and use of those
certain premises located at 2150 Gold Street, San Jose, California 95002, as
more particularly described in the Lease (the "Premises"), the undersigned,
Genesis Microchip Inc., a Canadian corporation ("Guarantor"), hereby covenants
and agrees as follows:
1. Guarantor unconditionally and irrevocably guarantees to Landlord the full
and prompt payment of Rent (as such term is defined in the Lease) and any and
all other sums and charges payable by Tenant under the Lease, and hereby
unconditionally and irrevocably guarantees the full, faithful and timely
performance and observance of all the covenants, terms, conditions and
agreements required to be performed and observed by Tenant under the Lease and
any amendment, modification or renewal thereof.
2. Guarantor hereby covenants and agrees to and with Landlord that if a default
shall at any time be made by Tenant in the payment of any such Rent or other
such sums and charges payable by Tenant under the Lease, or if Tenant should
default in the performance and observance of any of the terms, covenants,
provisions or conditions contained in the Lease or, should Rent or other sums
and charges not be paid or terms, covenants, provisions and conditions not be
performed in the event of a Financial Proceeding (as defined in Paragraph 10
below), Guarantor shall and forthwith pay such Rent and other such sums and
charges and any arrears thereof (including, without limitation, damages,
interest, costs, fees, attorneys' fees and expenses) (collectively, the "Lease
Amounts"), and shall and will forthwith pay all Lease Amounts that (a) may arise
in connection with or otherwise relate to any default by Tenant under the Lease
and/or any enforcement of this Guaranty, or (b) would have accrued under the
Lease but for the commencement of a Financial Proceeding.
3. Guarantor's obligations under this Guaranty shall be binding on Guarantor's
successors and assigns. All references in this Guaranty (a) to Landlord and
Tenant shall include their successors, assigns or subtenants, as the case may
be, (b) to Tenant, shall also include any entity created by or pursuant to any
Financial Proceeding; and (c) to Tenant, shall include any successors in
interest to Tenant (whether or not directly succeeding Tenant) by reason of an
Event of Reorganization (as defined in Paragraph 10 below).
4. The provisions of the Lease may be changed by agreement between Landlord and
Tenant without the consent of or notice to Guarantor. The provisions of the
Lease may be changed by agreement between Landlord and any permitted assignee of
Tenant or any subsequent assignee without the consent of or notice to Guarantor.
The Lease may be assigned by Landlord or Tenant, and the Premises, or a portion
thereof, may be sublet by Tenant, all in accordance with the provisions of the
Lease, without the consent of or notice to Guarantor. This Guaranty shall
guarantee the performance of the Lease so assigned. Without limiting the
generality of the foregoing, Guarantor waives the rights and benefits of
California Civil Code Sections 2819 and 2820 with respect to any change to the
Lease between Landlord and Tenant, and with respect to any change to the Lease
between Landlord and any permitted assignee of Tenant or any subsequent
assignees, and agrees that by doing so Guarantor's liability shall continue even
if (a) Landlord and Tenant alter any Lease obligations, or Landlord and any
permitted assignee of Tenant or any subsequent assignees alter the Lease
obligation, or (b) Guarantor's remedies or rights against Tenant are impaired or
suspended without Guarantor's consent by such alteration of Lease obligations.
5. This Guaranty shall not be modified or affected by Landlord's failure or
delay from time to time to enforce any of its rights under either the Lease or
this Guaranty.
6. If Tenant breaches or otherwise is in default under the Lease, Landlord may
proceed against either Guarantor or Tenant, or both, or Landlord may enforce
against Guarantor or Tenant any rights that Landlord has under the Lease, in
equity or under applicable law. If the Lease terminates and Landlord has any
rights against Tenant after termination, Landlord may enforce those rights
against Guarantor, without giving previous notice to Tenant or Guarantor.
Guarantor hereby agrees that no notice of default need be given to Guarantor, it
being specifically agreed and understood that this Guaranty of the undersigned
is a continuing guarantee under which Landlord may proceed forthwith and
immediately against Tenant or against Guarantor following any breach or default
by Tenant.
7. Guarantor hereby waives all benefits and defenses under California Civil
Code Sections 2845, 2848, 2849 and 2850, including without limitation: (a) the
right to require Landlord to proceed against Tenant, proceed against or exhaust
any security that Landlord holds from Tenant, or pursue any other remedy in
Landlord's power; (b) any defense to its obligations hereunder based on the
termination of Tenant's liability; (c) all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance of this Guaranty; and (d) all notices of the
existence, creation, or incurring of new or additional obligations. Landlord
shall have the right to enforce this Guaranty regardless of the acceptance of
additional security from Tenant and regardless of the release or discharge of
Tenant by Landlord or by others, or by operation of any law.
8. The obligations of Tenant under the Lease to execute and deliver estoppel
certificates and applicable financial statements, if any, shall be interpreted
to also require such documents from Guarantor with respect to this Guaranty
within the same time periods prescribed in the Lease, except that such
certificates and statements shall be with regard to the Guaranty, not the Lease.
9. Guarantor's liability hereunder shall continue until all sums due and owing
Landlord under the Lease have been paid and all obligations of Tenant to be
performed under the Lease have been performed, all to the satisfaction of
Landlord.
10. The obligations of Guarantor under this Guaranty shall remain in full force
and effect and Guarantor shall not be discharged by any of the following events
with respect to Tenant or Guarantor: (a) insolvency, bankruptcy, reorganization
arrangement, adjustment, composition, assignment for the benefit of creditors,
liquidation, winding up or dissolution (each, a "Financial Proceeding"); (b) any
merger, acquisition, consolidation or change in entity structure, or any sale,
lease, transfer, or other disposition of any entity's assets, or any sale or
other transfer of interests in the entity (each, an "Event of Reorganization");
or (c) any sale, exchange, assignment, hypothecation or other transfer, in whole
or in part, of Landlord's interest in the Premises or the Lease. Nothing in
this Paragraph 10 shall diminish the effect of any subsequent written agreement
between Guarantor and Landlord.
1
<PAGE>
11. Guarantor hereby represents and warrants that it has executed this Guaranty
based solely on its independent investigation of Tenant's financial condition.
Guarantor hereby assumes responsibility for keeping informed of Tenant's
financial condition and all other circumstances affecting Tenant's performance
of its obligations under the Lease. Absent a written request for such
information by Guarantor, Landlord shall have no duty to advise Guarantor of any
information known to it regarding such financial condition or circumstances.
12. Guarantor further agrees that it may be joined in any action against Tenant
in connection with the said obligations of Tenant and recovery may be had
against Guarantor in any such action. Guarantor hereby expressly waives the
benefits and defenses under California Civil Code Sections 2821, 2839, 2847,
2848, 2849 and 2855 to the fullest extent permitted by applicable law.
Guarantor agrees not to exercise any of its rights of subrogation or
reimbursement against Tenant until after all amounts due and owing under the
Lease have been paid. If the foregoing waiver is determined by a court of
competent jurisdiction to be void or voidable, Guarantor agrees to subordinate
its rights of subrogation and reimbursement against Tenant to Landlord's rights
against Tenant under the Lease.
13. Guarantor hereby represents and warrants that, as of the date of the
execution of this Guaranty by Guarantor, there is no action or proceeding
pending or, to Guarantor's knowledge after due inquiry, threatened against
Guarantor before any court or administrative agency which could adversely affect
the Guarantor's financial condition. The foregoing representation and warranty
shall survive the execution and delivery of this Guaranty and is expressly made
for the benefit of Landlord, and Landlord's partners, lenders, representatives,
successors and assigns.
14. This Guaranty shall be one of payment and performance and not of
collection. If there is more than one undersigned Guarantor, the term
Guarantor, as used herein, shall include and be binding upon each and every one
of the undersigned, and each of the undersigned shall be jointly and severally
liable hereunder. If there is more than one undersigned Guarantor, Landlord
shall have the right to join one or all of them in any proceeding or to proceed
against them in any order.
15. Guarantor shall indemnify, defend (with counsel acceptable to Landlord),
protect and hold harmless Landlord, and Landlord's partners, lenders,
representatives, successors and assigns from and against all liabilities,
losses, claims, demands, judgments, expenses and costs (including all attorneys'
fees and costs to enforce any of the terms of this Guaranty or otherwise awarded
hereunder) arising from or in any way related to any failure by Tenant or
Guarantor to pay Rent and any and all other sums and charges payable by Tenant
under the Lease, or to fully, faithfully and timely perform and observe all the
covenants, terms, conditions and agreements required to be performed and
observed by Tenant under the Lease.
16. The term "Lease" whenever used in this Guaranty shall be deemed, and
interpreted so as, to also include any renewals or extensions of the initial or
renewal term(s), as the case may be, and any holdover periods thereunder.
17. All demands, notices and other communications under or pursuant to this
Guaranty shall be in writing, and shall be deemed to have been duly given when
personally delivered, or three (3) days after the date deposited in the United
States Postal Service, first-class postage prepaid, certified with return
receipt requested, or the delivery date designated for overnight courier
services (e.g. Federal Express), addressed to the party at the address set forth
below, or at such other address as may be hereafter designated in writing by
either party to the other.
Landlord:
WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP
c/o Legacy Partners Commercial, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attention: Portfolio Vice President
Guarantor:
Genesis Microchip Corporation
165 Commerce Valley Dr. W.
Thornhill, Ontario, Canada L3T TV8
Attention: CFO
18. Guarantor hereby represents and warrants that is duly authorized to execute
and deliver this Guaranty; that this Guaranty is binding on Guarantor in
accordance with its terms; that the terms and provisions of this Guaranty are
intended to be valid and enforceable in accordance with its terms; and that the
signatory to this Guaranty is duly authorized to bind Guarantor and execute this
Guaranty on Guarantor's behalf.
19. Landlord may assign this Guaranty in conjunction with the assignment of all
or any portion of Landlord's interest in the Lease, without the necessity of
obtaining Guarantor's consent thereto, and any such assignment shall not affect,
or otherwise relieve, Guarantor from its obligations or liability hereunder.
Guarantor may not assign or otherwise delegate any of its rights or obligations
hereunder without first obtaining Landlord's written consent thereto, which
consent may be withheld in Landlord's sole discretion. The terms and provisions
of this Guaranty shall inure to the benefit of Landlord and Landlord's partners,
lenders, representatives, successors and assigns. Guarantor hereby acknowledges
that Landlord is relying upon Guarantor's covenants, representations and
warranties contained in this Guaranty in entering into the Lease with Tenant,
and Guarantor hereby undertakes to perform its obligations hereunder promptly
and in good faith.
20. If all or any portion of the obligations guaranteed hereunder are paid or
performed and all or any part of such payment or performance is avoided or
recovered, directly or indirectly, from Landlord as a preference, fraudulent
transfer or otherwise, then Guarantor's obligations hereunder shall continue and
remain in full force and effect as to any such avoided or recovered payment or
performance.
21. All representations and warranties by Guarantor contained herein or made in
writing pursuant to this Guaranty are intended to and shall remain true and
correct as of the time of execution of this Guaranty, shall be deemed to be
material, shall survive the execution and delivery of this Guaranty, and shall
be relied upon by Landlord and Landlord's partners, lenders, representatives,
successors and assigns.
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<PAGE>
22. Guarantor hereby acknowledges and agrees that (i) California is the situs
of the negotiation of the Lease and this Guaranty, (ii) the principal executive
office of Landlord is in California, (iii) the Premises is located in
California, (iv) all payments of Rent under the Lease and this Guaranty are to
be made in California, (v) Tenant is a California corporation with principal
offices in California, (vi) all negotiations with respect to this Guaranty and
the Lease have taken place in California, and (vii) the execution and delivery
of this Lease and this Guaranty. Therefore, the laws of the State of California
shall govern the validity, performance and enforcement of this Guaranty,
irrespective of California's conflict of law rules. Guarantor hereby expressly
agrees that if any legal proceeding is initiated or otherwise commenced or
brought for any matter or thing related to this Guaranty, the venue for such
legal proceeding shall be in the County in which the Premises are situated and
Guarantor hereby expressly agrees to the submission of such legal proceeding to
such County of California forum. To the fullest extent permitted by law,
Guarantor hereby expressly waives the benefits and requirements of any
applicable conflicts of laws and/or choice of laws and expressly consents to the
County of California jurisdictional requirement as set forth herein. In
addition, Guarantor consents to the jurisdiction of any state or federal court
located within the County in which the Premises are situated and irrevocably
agrees that all actions or proceedings arising out or relating to the Lease
and/or this Guaranty shall be litigated in such courts. Guarantor accepts
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and waives any defense of forum non conveniens, and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Guaranty.
This Guaranty shall be subject to all valid applicable laws and official orders,
rules and regulations, and, in the event this Guaranty or any portion thereof is
found to be inconsistent with or contrary to any such laws or official orders,
rules or regulations, the latter shall be deemed to control, and this Guaranty
shall be regarded as modified and shall continue in full force and effect,
provided, however, that nothing herein contained shall be construed as a waiver
of any right to question or contest any such law, order, rule or regulation in
any forum having jurisdiction in the Premises.
23. This Guaranty and any exhibits hereto constitute the entire agreement
between the parties with respect to the matters covered herein and supersedes
all prior agreements and understandings between the parties hereto relating to
the subject matter hereof.
24. In the event Guarantor fails to perform any of its obligations under this
Guaranty or in the event a dispute arises concerning the meaning or
interpretation of any provision of this Guaranty, the defaulting party or the
party not prevailing in such dispute, as the case may be, shall pay any and all
costs and expenses incurred by the other party in enforcing or establishing its
rights hereunder, including, without limitation, court costs, expert fees, and
reasonable attorneys' fees. Any dispute arising under or in connection with
this Guaranty shall be litigated exclusively in the Municipal or Superior Court
of the County in which the Premises is located, and no action may be brought in
any other forum.
25. Time is of the essence of this Guaranty.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be signed by its
duly authorized representative or officer as of the date set forth below.
Guarantor:
GENESIS MICROCHIP CORPORATION,
a California corporation
By: _________________
Its: _________________
Date: _________________
3
<PAGE>
Addendum 1
Option to Extend the Lease
This Addendum 1 ("Addendum") is incorporated as a part of that certain Lease
Agreement dated October 18, 1999 (the "Lease"), by and between Genesis Microchip
Corporation, a California corporation ("Tenant"), and WIX/NSJ REAL ESTATE
LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), for the
leasing of those certain premises located at 2150 Gold Street, San Jose,
California as more particularly described in Exhibit A to the Lease (the
---------
"Premises"). Any capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed to such terms as set forth in the Lease.
1. Grant of Extension Option. Subject to the provisions, limitations and
-------------------------
conditions set forth in Paragraph 5 below, Tenant shall have an Option
("Option") to extend the term of the Lease for five (5) years (the "Extended
Term").
2. Tenant's Option Notice. If Landlord does not receive written notice from
----------------------
Tenant of its exercise of this Option on a date which is not more than two
hundred seventy (270) days nor less than one hundred eighty (180) days prior to
the end of the initial term of the Lease (the "Option Notice"), all rights under
this Option shall automatically terminate and shall be of no further force or
effect.
3. Establishing the Initial Monthly Base Rent for the Extended Term. The
----------------------------------------------------------------
initial monthly Base Rent for the Extended Term shall be the then current market
rent for similar space within the competitive market area of the Premises (the
"Fair Rental Value"). "Fair Rental Value" of the Premises means the fair market
rental value of the Premises as of the commencement of the Extended Term, taking
into consideration all relevant factors, including length of term, the uses
permitted under the Lease, the quality, size, design and location of the
Premises, including the condition and value of existing tenant improvements, and
the monthly base rent paid by and market concessions (if any) available to
tenants for premises comparable to the Premises, and located within the
competitive market area of the Premises as reasonably determined by Landlord.
If Landlord and Tenant are unable to agree on the Fair Rental Value for either
the Extended Term, within ten (10) days of receipt by Landlord of the Option
Notice for the Extended Term, Landlord and Tenant each, at its cost and by
giving notice to the other party, shall appoint a competent and disinterested
commercial real estate broker (hereinafter "broker") with at least five (5)
years' full-time commercial real estate brokerage experience in the geographical
area of the Premises to set the Fair Rental Value for the Extended Term. If
either Landlord or Tenant does not appoint a broker within ten (10) days after
the other party has given notice of the name of its broker, the single broker
appointed shall be the sole broker and shall set the Fair Rental Value for the
Extended Term. If two (2) brokers are appointed by Landlord and Tenant as
stated in this paragraph, they shall meet promptly and attempt to set the Fair
Rental Value. If the two (2) brokers are unable to agree within ten (10) days
after the second broker has been appointed, they shall attempt to select a third
broker, meeting the qualifications stated in this paragraph within ten (10) days
after the last day the two (2) brokers are given to set the Fair Rental Value.
If they are unable to agree on the third broker, either Landlord or Tenant by
giving ten (10) days' notice to the other party, can apply to the Presiding
Judge of the Superior Court of the county in which the Premises is located for
the selection of a third broker who meets the qualifications stated in this
paragraph. Landlord and Tenant each shall bear one-half (1/2) of the cost of
appointing the third broker and of paying the third broker's fee. The third
broker, however selected, shall be a person who has not previously acted in any
capacity for either Landlord or Tenant. Within fifteen (15) days after the
selection of the third broker, the third broker shall select one of the two Fair
Rental Values submitted by the first two brokers as the Fair Rental Value for
the Extended Term. Such third broker determination shall be binding on Landlord
and Tenant. If either of the first two brokers fails to submit their opinion of
the Fair Rental Value, then the single Fair Rental Value submitted shall
automatically be the monthly Base Rent for the Extended Term.
Upon determination of the initial monthly Base Rent for the Extended Term in
accordance with the terms outlined above, Landlord and Tenant shall immediately
execute an amendment to this Lease. Such amendment shall set forth among other
things, the initial monthly Base Rent for the Extended Term and the actual
commencement date and expiration date of the Extended Term. Tenant shall have
no other right to extend the term of the Lease under this Addendum unless
Landlord and Tenant otherwise agree in writing.
4. Condition of Premises and Brokerage Commissions for the Extended Term. If
---------------------------------------------------------------------
Tenant timely and properly exercises this Option, in strict accordance with the
terms contained herein: (1) Tenant shall accept the Premises in its then "As-
Is" condition and, accordingly, Landlord shall not be required to perform any
additional improvements to the Premises; and (2) Tenant hereby agrees that it
will be solely responsible for any and all brokerage commissions and finder's
fees payable to any broker now or hereafter procured or hired by Tenant or who
otherwise claims a commission based on any act or statement of Tenant ("Tenant's
Broker") in connection with the Option; and Tenant hereby further agrees that
Landlord shall in no event or circumstance be responsible for the payment of any
such commissions and fees to Tenant's Broker.
5. Limitations On, and Conditions To, Extension Option. This Option is
---------------------------------------------------
personal to Tenant or a Related Entity and may not be assigned, voluntarily or
involuntarily, separate from or as part of the Lease. At Landlord's option, all
rights of Tenant under this Option shall terminate and be of no force or effect
if any of the following individual events occur or any combination thereof
occur: (1) Tenant is in material default of any provision of the Lease on the
date of the Option Notice; and/or (2) Tenant has assigned its rights and
obligations under all or part of the Lease, except to a Related Entity; and/or
(3) Between the Lease Date and the time the Option Notice is delivered there has
occurred a material and adverse change in Tenant's financial condition; and/or
(4) Tenant has failed to properly exercise this Option in a timely manner in
strict accordance with the provisions of this Addendum; and/or (5) Tenant no
longer has possession of all or any part of the Premises under the Lease (unless
a Related Entity has possession of the Premises), or if the Lease has been
terminated earlier, pursuant to the terms of the Lease.
6. Time is of the Essence. Time is of the essence with respect to each and
----------------------
every time period described in this Addendum.
1
<PAGE>
Addendum 2
Right of First Offer
This Addendum 2 is incorporated as a part of that certain Lease Agreement dated
October 18, 1999, by and between Genesis Microchip Corporation, a California
corporation ("Tenant"), and WIX/NSJ REAL ESTATE LIMITED PARTNERSHIP, a Delaware
limited partnership ("Landlord"), for the Premises located at 2150 Gold Street,
San Jose, California (the "Premises").
During the initial term of the Lease only, Tenant shall have a one time First
Offer to Lease ("Right of First Offer") to lease 2130 Gold Street, Suite 200,
consisting of 14,067 sf ("Expansion Space #1), 2130 Gold Street, Suite 100,
consisting of approximately 27,000 sf ("Expansion Space #2), and 2130 Gold
Street, Suite 300, consisting of approximately 11,098 sf ("Expansion Space #3),
adjacent to the Premises, and containing approximately 52,165 rentable square
feet, located at 2150 Gold Street, San Jose, California, as outlined on Exhibit
-------
A attached hereto and made a part hereof (the "Expansion Spaces"). Tenant's
- -
Right of First Offer, as granted herein, is subject to the following conditions:
i. Tenant's Right of First Offer shall be void if Tenant is currently in
default in the performance of any of its obligations under the Lease; and
ii. Tenant's Right of First Offer shall be subject to Landlord's
reasonable review and approval of Tenant's guarantor then current financial
condition.
iii. Tenant's Right of First Offer shall be subject to the rights of the
then existing tenants pursuant to their existing leases as such leases may be
later modified, amended or extended.
Provided the above conditions are satisfied, if any of the Expansion Spaces
become vacant, and Landlord desires to lease any of the Expansion Spaces,
Landlord shall give Tenant written notice, by facsimile and by mail, of the
estimated date upon which Landlord can deliver such space to Tenant, and the
terms and conditions upon which Landlord is willing to lease the Expansion Space
("Landlord's Availability Notice"). Tenant shall notify Landlord within five
(5) business days following receipt of Landlord's Availability Notice of
Tenant's election to lease all the Expansion Space upon those terms by written
acceptance delivered to Landlord ("Election Notice"). If Tenant fails to notify
Landlord of Tenant's election to lease the Expansion Space within the time
specified herein, it shall be deemed that (i) Tenant has elected not to lease
said Expansion Space; (ii) Landlord may thereafter enter into a Lease Agreement
with a third party; and (iii) all rights under this Right of First Offer shall
terminate and be of no further force and effect. Time is of the essence herein.
In the event Tenant exercises any of the Right of First Offers as herein
provided, Tenant shall provide Landlord a non-refundable deposit, equivalent to
the last month's rent for said Expansion Space and the parties shall have ten
(10) working days after Landlord receives the Election Notice and deposit from
Tenant in which to execute an amendment to the Lease setting forth the agreed-
upon terms. Upon full execution of an amendment for any of the Expansion
Spaces, the non-refundable deposit shall be credited toward Base Rent or the
security deposit for the Expansion Space, as agreed between the parties.
This Right of First Offer shall terminate and be of no force and effect if
Tenant is in default of the performance of any of the covenants, conditions or
agreements to be performed under this Lease at the time any Right of First Offer
is offered; or the Premises are being subleased at the time of this Right of
First Offer is offered except for any sublease entered into for the initial
twenty-four (24) months of the Lease.
This Right of First Offer is personal to Tenant and may not be assigned,
voluntarily or involuntarily, separate from or as a part of the Lease.
Should Tenant exercise any of the Right of First Offers, Landlord and Tenant
shall execute an amendment to this Lease, adding said Expansion Space to the
Premises and adjusting the Base Rent and Tenant's proportionate share of the
items set forth in Sections 6, 7, and 8 of this Lease. If Tenant does not elect
to exercise the Right of First Offer granted herein, based upon the material
terms proposed by Landlord, all rights under this Right of First Offer shall
terminate and be of no further force and effect.
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 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> MAR-31-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 43,962
<SECURITIES> 0
<RECEIVABLES> 6,519
<ALLOWANCES> 228
<INVENTORY> 5,775
<CURRENT-ASSETS> 57,192
<PP&E> 8,783
<DEPRECIATION> 4,884
<TOTAL-ASSETS> 70,845
<CURRENT-LIABILITIES> 6,904
<BONDS> 0
0
0
<COMMON> 72,243
<OTHER-SE> 8,802
<TOTAL-LIABILITY-AND-EQUITY> 63,441
<SALES> 10,059
<TOTAL-REVENUES> 10,059
<CGS> 3,263
<TOTAL-COSTS> 3,263
<OTHER-EXPENSES> 7,073
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 273
<INCOME-TAX> 73
<INCOME-CONTINUING> 200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
