<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 2000
REGISTRATION NO. 333-94271
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TELOCITY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 7370 77-0467929
(PRIOR TO REINCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
DELAWARE CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
(AFTER REINCORPORATION)
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
</TABLE>
10355 NORTH DE ANZA BOULEVARD
CUPERTINO, CALIFORNIA 95014
(408) 863-6600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SCOTT MARTIN
EXECUTIVE VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER AND CORPORATE SECRETARY
10355 NORTH DE ANZA BOULEVARD
CUPERTINO, CALIFORNIA 95014
(408) 863-6600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
MARGARET H. KAVALARIS, ESQ. MATTHEW J. STEPOVICH, ESQ. MALCOLM I. ROSS, ESQ.
JOHN M. FOGG, ESQ. SENIOR VICE PRESIDENT, LEGAL AFFAIRS BAKER & MCKENZIE
GRAY CARY WARE & FREIDENRICH LLP DAVID I. FRAZEE, ESQ. 805 THIRD AVENUE
400 HAMILTON AVENUE CORPORATE GENERAL COUNSEL NEW YORK, NEW YORK 10022
PALO ALTO, CALIFORNIA 94301 10355 NORTH DE ANZA BOULEVARD (212) 751-5700
(650) 833-2000 CUPERTINO, CALIFORNIA 95014
(408) 863-6600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par value.............................. $151,800,000 $40,076
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(o) of the Securities Act of 1933 solely for
the purpose of computing the amount of the registration fee.
(2) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
The purpose of this Amendment No. 4 to the Registration Statement is to
file certain exhibits to the Registration Statement, as set forth in Item 16(a)
of Part II.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Telocity, Inc. in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 39,600
NASD filing fee............................................. 10,500
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving costs................................ 325,000
Legal fees and expenses..................................... 365,000
Accounting fees and expenses................................ 425,000
Blue Sky fees and expenses.................................. 10,000
Transfer Agent and Registrar fees........................... 5,000
Miscellaneous expenses...................................... 24,900
----------
Total............................................. $1,300,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
The Eighth Article of the Registrant's Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article VIII of the Registrant's Amended and Restated Bylaws provides for
the indemnification of officers, directors and third parties acting on behalf of
the Registrant if such person acted in good faith and in a manner reasonably
believed to be in and not opposed to the best interest of the Registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Amended and Restated Bylaws, and intends to enter into
indemnification agreements with any new directors and executive officers in the
future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have issued unregistered securities to a limited
number of persons as described below. For additional information concerning
these equity investment transactions, reference is made to the information
contained under the caption "Related Party Transactions" in the form of
prospectus included herein.
The sales of the following securities were deemed to be exempt from
registration in reliance on Rule 701 promulgated under Section 3(b) under the
Securities Act as transactions pursuant to a compensatory benefit plan or a
written contract relating to compensation.
(1) From July 1998 through February 29, 2000, the Registrant granted
stock options to purchase an aggregate of 15,243,878 shares of common
stock to employees and consultants with aggregate exercise prices
ranging from $0.05 to $12.00 per share pursuant to the Registrant's
stock option plan. As of February 29, 2000, 13,981,226 shares of
common stock have been issued upon exercise of options.
II-1
<PAGE> 4
(2) An aggregate of 7,100,000 shares of our common stock in December 1997
and June 1998 to Messrs. Olson, Solomon, Obenhuber, Grundy and
Stepovich in connection with Founder Stock Purchase Agreements. The
consideration received for such shares was $17,392.
The sales of the following securities were deemed to be exempt from
registration in reliance on Section 4(2) of the Securities Act as transactions
by an issuer not involving any public offering. The Registrant believes that the
transactions were exempt because the recipients of securities in each such
transaction represented their intention to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates and other
instruments issued in such transactions. All recipients either received adequate
information about Telocity or had access, through employment or other
relationships, to such information.
(1) An aggregate of 2,560,000 shares of common stock was issued in a
private placement in October 1997 to August Capital Associates L.P.
and August Capital Strategic Partners, L.P. in connection with the
Registrant's initial funding. The consideration received for such
shares was $1,280.
(2) An aggregate of 504,000 shares of our common stock in October 1997 to
Aspen Internet Systems, Inc. in exchange for the execution of a
patent license agreement. The consideration received for such shares
was $252.
(3) An aggregate of 13,150,000 shares of Series A preferred stock in a
private placement in July 1999 to entities affiliated with August
Capital L.P. and Bessemer Venture Partners, as well as other
qualified purchasers pursuant to a Series A preferred stock Purchase
Agreement. The consideration received for such shares was $6,575,000.
(4) An aggregate of 13,181,818 shares of Series B preferred stock in a
private placement in February and March 1999 to entities affiliated
with August Capital L.P., Bessemer Venture Partners, Mohr, Davidow
Ventures and RRE Investors, LLC, as well as other qualified
purchasers pursuant to Series B preferred stock Purchase Agreement.
The consideration received for such shares was $14,500,000.
(5) An aggregate of 24,332,061 shares of Series C preferred stock in a
private placement in December 1999 to entities affiliated with NBC
Internet, Inc., August Capital L.P., Bessemer Venture Partners, Mohr,
Davidow Ventures and RRE Investors, LLC, as well as other qualified
purchasers pursuant to a Series C preferred stock Purchase Agreement.
The consideration for such shares was $127,500,000.
(6) From March 1998 through December 1999 the Registrant issued to
Comdisco, Inc. warrants to purchase an aggregate of 1,054,506 shares
of preferred stock with an average exercise price of $1.23 per share
in connection with an equipment lease financing.
(7) In September 1998, the Registrant issued to Citizen's Telecom
Services Company LLC a warrant to purchase 765,018 shares of common
stock at an exercise price of $0.05 per share in connection with a
letter of intent to engage in a joint development effort.
(8) In March 1999, the Registrant issued to Vidovich-Cupertino Limited
Partnership a warrant to purchase 50,000 shares of common stock at an
exercise price of $0.11 per share in connection with a real property
lease.
(9) In May 1999 the Registrant issued to Meier Mitchell & Company a
warrant to purchase 252,272 shares of preferred stock at an exercise
price of $1.10 per share in connection with an equipment lease
financing.
(10) In June 1999, the Registrant issued to Heidrick & Struggles, Inc. a
warrant to purchase 268,856 shares of common stock at an exercise
price of $0.35 per share in connection with an executive search.
II-2
<PAGE> 5
(11) In November 1999, the Registrant issued to Ranbach Music, Ltd. a
warrant to purchase 20,000 shares of common stock at a price of $1.50
per share in connection with a license for the Registrant to use
certain music in connection with its marketing and other efforts.
(12) In November 1999, the Registrant issued to The Sobrato Group a
warrant to purchase 15,000 shares of common stock at an exercise
price of $1.50 per share in connection with a real property lease.
(13) In November 1999, in connection with bridge loans in advance of the
close of the Registrant's Series C preferred stock financing, the
Registrant issued to Ms. Hart and Mr. Olson warrants for 19,084
shares and 28,626 shares of preferred stock, respectively, with an
exercise price of $5.24 per share.
(14) In November 1999 the Registrant issued to Point Financial, Inc. a
warrant to purchase 32,599 shares of preferred stock at an exercise
price of $4.91 per share in connection with an equipment lease
financing.
(15) In December 1999 the Registrant issued to the National Broadcasting
Company, Inc. and NBC Internet, Inc. warrants for 850,191 shares and
1,039,122 shares of preferred stock, respectively, with an exercise
price of $5.24 per share.
(16) In February 2000, the Registrant issued to Comdisco, Inc. a warrant
to purchase 11,667 shares of common stock at an exercise price of
$9.00 per share in connection with a letter of credit.
(17) In February 2000, the Registrant issued to General Electric Company
warrants to purchase an aggregate of 200,000 shares of common stock
at an exercise price of $12.00 per share in connection with a Master
Broadband Services Agreement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
1.1** Form of Underwriting Agreement
3.1** Restated Certificate of Incorporation of Registrant, as
amended, to be in effect after the offering
3.2** Bylaws of Registrant
4.1* Specimen of stock certificates
5.1** Opinion of Gray Cary Ware & Freidenrich LLP
5.2* Opinion of Patton Boggs, LLP
10.1** Form of Indemnification Agreement between Registrant and
each of its directors and officers
10.2** 2000 Equity Incentive Plan and form of agreements thereunder
10.3** 2000 Employee Stock Purchase Plan
10.4** 2000 Outside Directors Stock Plan and form of agreements
thereunder
10.5 Lease between Registrant and Vidovich-Cupertino Limited
Partnership
10.6 Lease between Registrant and Lee Li Chun Koo
10.7 Lease between Registrant and The Sobrato Group
10.8** Second Amended and Restated Investors' Rights Agreement
10.9+** Product Manufacturing Agreement between Registrant and
Wellex Corporation
10.10+ Agreement for Services between Registrant and Telamon-IMS,
Inc.
</TABLE>
II-3
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
10.11+ Agreement for Services between Registrant and the Sutherland
Group, Ltd.
10.12** Employment Agreement between Registrant and Patti Hart
10.13** Employment Agreement between Registrant and Peter Olson
10.14** Employment Agreement between Registrant and Jim Morrissey
10.15** Employment Agreement between Registrant and Thomas Obenhuber
10.16** Employment Agreement between Registrant and James Rohrer
10.17** Employment Agreement between Registrant and Matthew
Stepovich
10.18** Employment Agreement between Registrant and Regina Wiedemann
10.19** Employment Agreement between Registrant and Kevin Grundy
10.20** Employment Agreement between Registrant and Jef Raskin
10.21** Employment Agreement between Registrant and Andrew Robinson
10.22** Employment Agreement between Registrant and Edward Hayes
10.23** Employment Agreement between Registrant and Scott Martin
10.24** Consultants Stock Option Plan and form of agreements
thereunder
10.25+** Market Development Agreement between Registrant and
BellSouth Business Systems, Inc.
10.26+** Private Line Service Level Agreement between Registrant and
Level 3 Communications, LLC
10.27+** Private Line Service Agreement between Registrant and MCI
WorldCom Communications, Inc.
10.28 Operating Agreement between Registrant and NBC Internet,
Inc.
10.29 Advertising Agreement between Registrant and the National
Broadcasting Company, Inc.
10.30 Advertising Agreement between Registrant and NBC Internet,
Inc.
10.31** Founder Stock Purchase Agreement between Registrant and
Peter Olson dated December 23, 1997
10.32** Founder Stock Purchase Agreement between Registrant and
Michael Solomon dated December 23, 1997
10.33** Founder Stock Purchase Agreement between Registrant and
Thomas Obenhuber dated December 23, 1997
10.34** Founder Stock Purchase Agreement between Registrant and
Matthew Stepovich dated December 23, 1997
10.35** Founder Stock Repurchase Agreement between Registrant and
Peter Olson dated June 1, 1998
10.36** Founder Stock Repurchase Agreement between Registrant and
Michael Solomon dated June 1, 1998
10.37** Founder Stock Purchase Agreement between Registrant and
Kevin Grundy dated June 10, 1998
10.38** Founder Stock Purchase Agreement between Registrant and
Thomas Obenhuber dated June 10, 1998
10.39** Founder Stock Purchase Agreement between Registrant and
Matthew Stepovich dated June 10, 1998
10.40** Secured Promissory Note between Registrant and Comdisco,
Inc. dated March 27, 1998
10.41** Secured Promissory Note between Registrant and Comdisco,
Inc. dated November 10, 1998
10.42** Secured Promissory Note between Registrant and Comdisco,
Inc. dated December 24, 1998
10.43** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 3, 1999
</TABLE>
II-4
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
10.44** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 9, 1999
10.45** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 24, 1999
10.46** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 24, 1999
10.47** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated October 19, 1999
10.48** Subordinated Promissory Note between Registrant and MMC/GATX
Partnership No. 1 dated September 30, 1999
10.49** Master Broadband Network Services Agreement and Form of
Warrant Agreement between Registrant and General Electric
Company
10.50** Consent of Jupiter Communications
10.51** Consent of Forrester Research
10.52** Consent of International Data Corporation
21.1** Subsidiaries of the Registrant
23.1** Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2** Consent of Counsel (see Exhibit 5.1)
24.1** Power of Attorney
27.1** Financial Information Schedules
</TABLE>
- ---------------
+ Confidential treatment has been requested for certain portions of this
exhibit. The omitted portions have been separately filed with the Commission.
* To be filed by amendment.
** Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
None.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such
II-5
<PAGE> 8
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cupertino,
State of California, on the 23rd day of March 2000.
Telocity, Inc.
By: /s/ EDWARD HAYES
------------------------------------
Edward Hayes, Executive Vice President
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PATTI HART* President, Chief Executive Officer March 23, 2000
- --------------------------------------------- and Director (Principal
Patti Hart Executive Officer)
/s/ EDWARD HAYES Executive Vice President and Chief March 23, 2000
- --------------------------------------------- Financial Officer (Principal
Edward Hayes Financial and Accounting
Officer)
/s/ DAVID COWAN* Director March 23, 2000
- ---------------------------------------------
David Cowan
/s/ PETER OLSON* Executive Vice President, Chief March 23, 2000
- --------------------------------------------- Technical Officer and Director
Peter Olson
/s/ ANDREW RAPPAPORT* Director March 23, 2000
- ---------------------------------------------
Andrew Rappaport
/s/ EDMOND SANCTIS* Director March 23, 2000
- ---------------------------------------------
Edmond Sanctis
/s/ MICHAEL SOLOMON* Director March 23, 2000
- ---------------------------------------------
Michael Solomon
/s/ RANDALL STRAHAN* Director March 23, 2000
- ---------------------------------------------
Randall Strahan
*By: /s/ EDWARD HAYES
---------------------------------------
Edward Hayes
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
1.1** Form of Underwriting Agreement
3.1** Restated Certificate of Incorporation of Registrant, as
amended, to be in effect after the offering
3.2** Bylaws of Registrant
4.1* Specimen of stock certificates
5.1** Opinion of Gray Cary Ware & Freidenrich LLP
5.2* Opinion of Patton Boggs, LLP
10.1** Form of Indemnification Agreement between Registrant and
each of its directors and officers
10.2** 2000 Equity Incentive Plan and form of agreements thereunder
10.3** 2000 Employee Stock Purchase Plan
10.4** 2000 Outside Directors Stock Plan and form of agreements
thereunder
10.5 Lease between Registrant and Vidovich-Cupertino Limited
Partnership
10.6 Lease between Registrant and Lee Li Chun Koo
10.7 Lease between Registrant and The Sobrato Group
10.8** Second Amended and Restated Investors' Rights Agreement
10.9+** Product Manufacturing Agreement between Registrant and
Wellex Corporation
10.10+ Agreement for Services between Registrant and Telamon-IMS,
Inc.
10.11+ Agreement for Services between Registrant and the Sutherland
Group, Ltd.
10.12** Employment Agreement between Registrant and Patti Hart
10.13** Employment Agreement between Registrant and Peter Olson
10.14** Employment Agreement between Registrant and Jim Morrissey
10.15** Employment Agreement between Registrant and Thomas Obenhuber
10.16** Employment Agreement between Registrant and James Rohrer
10.17** Employment Agreement between Registrant and Matthew
Stepovich
10.18** Employment Agreement between Registrant and Regina Wiedemann
10.19** Employment Agreement between Registrant and Kevin Grundy
10.20** Employment Agreement between Registrant and Jef Raskin
10.21** Employment Agreement between Registrant and Andrew Robinson
10.22** Employment Agreement between Registrant and Edward Hayes
10.23** Employment Agreement between Registrant and Scott Martin
10.24** Consultants Stock Option Plan and form of agreements
thereunder
10.25+** Market Development Agreement between Registrant and
BellSouth Business Systems, Inc.
10.26+** Private Line Service Level Agreement between Registrant and
Level 3 Communications, LLC
10.27+** Private Line Service Agreement between Registrant and MCI
WorldCom Communications, Inc.
10.28 Operating Agreement between Registrant and NBC Internet,
Inc.
10.29 Advertising Agreement between Registrant and the National
Broadcasting Company, Inc.
10.30 Advertising Agreement between Registrant and NBC Internet,
Inc.
10.31** Founder Stock Purchase Agreement between Registrant and
Peter Olson dated December 23, 1997
10.32** Founder Stock Purchase Agreement between Registrant and
Michael Solomon dated December 23, 1997
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
10.33** Founder Stock Purchase Agreement between Registrant and
Thomas Obenhuber dated December 23, 1997
10.34** Founder Stock Purchase Agreement between Registrant and
Matthew Stepovich dated December 23, 1997
10.35** Founder Stock Repurchase Agreement between Registrant and
Peter Olson dated June 1, 1998
10.36** Founder Stock Repurchase Agreement between Registrant and
Michael Solomon dated June 1, 1998
10.37** Founder Stock Purchase Agreement between Registrant and
Kevin Grundy dated June 10, 1998
10.38** Founder Stock Purchase Agreement between Registrant and
Thomas Obenhuber dated June 10, 1998
10.39** Founder Stock Purchase Agreement between Registrant and
Matthew Stepovich dated June 10, 1998
10.40** Secured Promissory Note between Registrant and Comdisco,
Inc. dated March 27, 1998
10.41** Secured Promissory Note between Registrant and Comdisco,
Inc. dated November 10, 1998
10.42** Secured Promissory Note between Registrant and Comdisco,
Inc. dated December 24, 1998
10.43** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 3, 1999
10.44** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 9, 1999
10.45** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 24, 1999
10.46** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated September 24, 1999
10.47** Subordinated Promissory Note between Registrant and
Comdisco, Inc. dated October 19, 1999
10.48** Subordinated Promissory Note between Registrant and MMC/GATX
Partnership No. 1 dated September 30, 1999
10.49** Master Broadband Network Services Agreement and Form of
Warrant Agreement between Registrant and General Electric
Company
10.50** Consent of Jupiter Communications
10.51** Consent of Forrester Research
10.52** Consent of International Data Corporation
21.1** Subsidiaries of the Registrant
23.1** Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2** Consent of Counsel (see Exhibit 5.1)
24.1** Power of Attorney
27.1** Financial Information Schedules
</TABLE>
- ---------------
+ Confidential treatment has been requested for certain portions of this
exhibit. The omitted portions have been separately filed with the Commission.
* To be filed by amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 10.5
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes
only, February 27, 1999, is made by and between Vidovich-Cupertino Limited
Partnership, a California Limited Partnership ("LESSOR") and MachOne
Communications, a California Corporation ("LESSEE"), (collectively the
"PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 10355 North De Anza Boulevard, Cupertino located in the County of
Santa Clara, State of California, and generally described as (describe briefly
the nature of the property and, if applicable, the "PROJECT", if the property
is located within a Project) a three-story office building with parking lot
(See also paragraph 59) ("PREMISES"). (See also Paragraph 2)
1.3 TERM: Six (6) years and no months ("ORIGINAL TERM") commencing
July 1, 1999 ("COMMENCEMENT DATE") and ending June 30, 2005 ("EXPIRATION DATE").
(See also Paragraph 3)
1.4 EARLY POSSESSION: ______________________________________________
("EARLY POSSESSION DATE"). (See also Paragraphs 3.2 and 3.3)
1.5 BASE RENT: $91,124.00 per month ("BASE RENT"), payable on the
first day of each month commencing July 1, 1999 (See also Paragraph 4)
[X] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: $91,124.00 as Base Rent for the
period July 1999.
1.7 SECURITY DEPOSIT: $150,218 (See also paragraph 52) ("SECURITY
DEPOSIT"). (See also Paragraph 5)
1.8 AGREED USE: Office and Research and Development. (See also
Paragraph 6)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See also Paragraph 8)
1.10 REAL ESTATE BROKERS: (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction (check applicable boxes):
[X] Cornish & Carey represents Lessor exclusively ("LESSOR'S BROKER");
[X] CPS represents Lessee exclusively ("LESSEE'S BROKER"); or
[ ] _________________________ represents both Lessor and Lessee ("DUAL AGENCY").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this
Lease by both Parties, Lessor shall pay to the Broker the fee agreed to in their
separate written agreement (or if there is no such agreement, the sum of ______%
of the total Base Rent for the brokerage services rendered by said Broker).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by N/A ("GUARANTOR"). (See also Paragraph 37)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 61 and Exhibits ____________________________
_________________________________, all of which constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee broom
clean and free of debris on the Commencement Date or the Early Possession Date,
whichever first occurs ("START DATE"), and, so long as the required service
contracts described in Paragraph 7.1(b) below are obtained by Lessee within
thirty (30) days following the Start Date, warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems ("HVAC"), loading doors, if any, and all other such
elements in the Premises, other than those constructed by Lessee, shall be in
good operating condition on said date and that the structural elements of the
roof, bearing walls and foundation of any buildings on the Premises (the
"BUILDING") shall be free of material defects. If a non-compliance with said
warranty exists as of the Start Date, Lessor shall, as Lessor's sole obligation
with respect to such matter, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If, after the Start Date, Lessee does not give Lessor written
notice of any non-compliance with this warranty within: (i) one year as to the
surface of the roof and the (ii) six (6) months as to the HVAC systems, (iii)
thirty (30) days as to the remaining systems and other elements of the Building,
correction of such non-compliance shall be the obligation of Lessee at Lessee's
sole cost and expense.
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termination, Lessee shall immediately cease the use of the Premises which
requires such Capital Expenditure and deliver to Lessor written notice
specifying a termination date at least ninety (90) days thereafter. Such
termination date shall, however, in no event be earlier than the last day that
Lessee could legally utilize the Premises without commencing such Capital
Expenditure.
(b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation to
pay for such costs pursuant to the provisions of Paragraph 7.1(c); provided,
however, that if such Capital Expenditure is required during the last two years
of this Lease or if Lessor reasonably determines that it is not economically
feasible to pay its share thereof, Lessor shall have the option to terminate
this Lease upon ninety (90) days prior written notice to Lessee unless Lessee
notifies Lessor, in writing, within ten (10) days after receipt of Lessor's
termination notice that Lessee will pay for such Capital Expenditure. If Lessor
does not elect to terminate, and fails to tender its share of any such Capital
Expenditure, Lessee may advance such funds and deduct same, with Interest, from
Rent until Lessor's share of such costs have been fully paid. If Lessee is
unable to finance Lessor's share, or if the balance of the Rent due and payable
for the remainder of this Lease is not sufficient to fully reimburse Lessee on
an offset basis, Lessee shall have the right to terminate this Lease upon thirty
(30) days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.
2.4 ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee's intended use; (b)
(c) neither Lessor, Lessor's agents, nor any
Broker has made any oral or written representations or warranties with respect
to said matters other than as set forth in this Lease. In addition, Lessor
acknowledges that: (a) Broker has made no representations, promises or
warranties concerning Lessee's ability to honor the Lease or suitability to
occupy the Premises; and (b) it is Lessor's sole responsibility to investigate
the financial capability and/or suitability of all proposed tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
(including, but not limited to, the obligations to pay Real Property Taxes and
insurance premiums and to maintain the Premises) shall, however, be in effect
during such period. Any such early possession shall not affect the Expiration
Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee when required and Lessee does
not terminate this Lease, as aforesaid, any period of rent abatement that Lessee
would otherwise have enjoyed shall run from the date of delivery of possession
and continue for a period equal to what Lessee would otherwise have enjoyed
under the terms hereof, but minus any days of delay caused by the acts or
omissions of Lessee. If possession of the Premises is not delivered within four
(4) months after the Commencement Date, this Lease shall terminate unless other
agreements are reached between Lessor and Lessee, in writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.
4. RENT.
4.1. RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("RENT").
4.2 PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction, on or
before the day on which it is due. Rent for any period during the term hereof
which is for less than one (1) full calendar month shall be prorated based upon
the actual number of days of said month. Payment of Rent shall be made to Lessor
at its address stated herein or to such other persons or place as Lessor may
from time to time designate in writing. Acceptance of a payment which is less
than the amount then due shall not be a waiver of Lessor's rights to the balance
of such Rent, regardless of Lessor's endorsement of any check so stating.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. Should the Agreed Use be
amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor's reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on said change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within fourteen (14) days after the expiration or termination
of this Lease, if Lessor elects to apply the Security Deposit only to unpaid
Rent, and otherwise within thirty (30) days after the Premises have been vacated
pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the
Security Deposit not used or applied by Lessor. No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment
for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold
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or delay its consent to any written request for a modification of the Agreed
Use, so long as the same will not impair the structural integrity of the
improvements on the Premises or the mechanical or electrical systems therein, is
not significantly more burdensome to the Premises. If Lessor elects to withhold
consent, Lessor shall within five (5) business days after such request give
written notification of same, which notice shall include an explanation of
Lessor's objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, or waste
whose presence, use, manufacture, disposal, transportation, or release, either
by itself or in combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "REPORTABLE USE" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises, other than as previously consented to by Lessor,
Lessee shall immediately give written notice of such fact to Lessor, and provide
Lessor with a copy of any report, notice, claim or other documentation which it
has concerning the presence of such Hazardous Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, or any third party (provided, however, that Lessee shall have no
liability under this Lease with respect to underground migration of any
Hazardous Substance under the Premises from adjacent properties). Lessee's
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. NO TERMINATION, CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY
LESSOR AND LESSEE SHALL RELEASE LESSEE FROM ITS OBLIGATIONS UNDER THIS LEASE
WITH RESPECT TO HAZARDOUS SUBSTANCES, UNLESS SPECIFICALLY SO AGREED BY LESSOR IN
WRITING AT THE TIME OF SUCH AGREEMENT.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages which existed as a
result of Hazardous Substances on the Premises prior to the Start Date or which
are caused by the gross negligence, or intentional acts of Lessor, its agents or
employees. Lessor's obligations, as and when required by the Applicable
Requirements, shall include, but not be limited to, the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the
expiration or termination of this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date. Lessee shall
cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor's investigative and remedial
responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
occurs during the term of this Lease, unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and remediation
thereof required by the Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and
Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) if the estimated cost to remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give a termination
notice, Lessee may, within ten (10) days thereafter, give written notice to
Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within thirty (30) days following such commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender and
consultants shall have the right to enter into Premises at any time, in the case
of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease. The cost of any such inspections shall be paid by Lessor,
unless a violation of Applicable Requirements, or a contamination is found to
exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the cost of such inspections, so long as such inspection is reasonably
related to the violation or contamination.
7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep
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the Premises, Utility Installations, and Alterations in good order, condition
and repair (whether or not the portion of the Premises requiring repairs, or the
means of repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of such portion of the Premises), including,
but not limited to, all equipment or facilities, such as plumbing, heating,
ventilating, air-conditioning, electrical, lighting facilities, boilers,
pressure vessels, fire protection system, fixtures, walls (interior and
exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee's obligations shall include restorations, replacements or renewals when
necessary to keep the Premises and all improvements thereon or a part thereof in
good order, condition and state of repair. Lessee shall, during the term of this
Lease, keep the exterior appearance of the Building in a first-class condition
consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Building.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements ("BASIC ELEMENTS"), if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and
pressure vessels, (iii) fire protection systems, (iv) landscaping and irrigation
systems, (v) roof covering and drains, and (vi) asphalt and parking lots, (vii)
clarifiers and (viii) any other equipment, if reasonably required by Lessor.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing
such Basic Elements, then such Basic Elements shall be replaced by Lessor, and
the cost thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is one, and the denominator of which is the number of months of the useful life
of such replacement as such useful life is specified pursuant to Federal income
tax regulations or guidelines for depreciation thereof (including interest on
the unamortized balance as is then commercially reasonable in the judgment of
Lessor's accountants), with Lessee reserving the right to prepay its obligation
at any time.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14
(Condemnation), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, or
the equipment therein, all of which obligations are intended to be that of the
Lessee. It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the
Premises, and they expressly waive the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" refers to all floor and window coverings, air lines, power
panels, electrical distribution, security and fire protection systems,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing
in or on the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the Premises.
The term "ALTERATIONS" shall mean any modification of the improvements, other
than Utility Installations or Trade Fixtures, whether by addition or deletion.
"LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed $50,000 in
the aggregate or $10,000 in any one year.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. If Lessor elects to participate in any such action, Lessee shall pay
Lessor's attorneys' fees and costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or
elect ownership as hereinafter provided, all Alterations and Utility
Installations made by Lessee shall be the property of Lessee, but considered a
part of the Premises. Lessor may, at any time, elect in writing to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor
not later than ninety (90) days prior to the end of the term of this Lease,
Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease. Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Lessee shall repair
any damage occasioned by the installation, maintenance or removal of Trade
Fixtures, furnishings, and equipment as well as the removal of any storage tank
installed by or for Lessee, and the removal, replacement, or remediation of any
soil, material or groundwater contaminated by Lessee. Trade Fixtures shall
remain the property of Lessee and shall be removed by Lessee. The failure by
Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without
the express written consent of Lessor shall constitute a holdover under the
provisions of Paragraph 26 below.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Lessee shall pay for all insurance
required under Paragraph 8 except to the extent of the cost attributable to
liability insurance carried by Lessor under Paragraph 8.2(b) in excess of
$2,000,000 per occurrence. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease
term. Payment shall be made by Lessee to Lessor within ten (10) days following
receipt of an invoice.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee
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and Lessor against claims for bodily injury, personal injury and property damage
based upon or arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than
$2,000,000 per occurrence with an "ADDITIONAL INSURED -- MANAGERS OR LESSORS OF
PREMISES ENDORSEMENT" and contain the "AMENDMENT OF THE POLLUTION EXCLUSION
ENDORSEMENT" for damage caused by heat, smoke or fumes from a hostile fire. The
Policy shall not contain any intra-insured exclusions as between insured persons
or organizations, but shall include coverage for liability assumed under this
Lease as an "insured contract" for the performance of Lessee's indemnity
obligations under this Lease. The limits of said insurance shall not, however,
limit the liability of Lessee nor relieve Lessee of any obligation hereunder.
All insurance carried by Lessee shall be primary to and not contributory with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance
as described in Paragraph 8.2(a), in addition to, and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 PROPERTY INSURANCE -- BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force a policy or policies in the name of Lessor, with loss payable
to Lessor and to any Lender insuring loss or damage to the Premises. The amount
of such insurance shall be equal to the full replacement cost of the Premises,
as the same shall exist from time to time, or the amount required by any
Lenders, but in no event more than the commercially reasonable and available
insurable value thereof. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations, Trade Fixtures, and Lessee's personal
property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor.
If the coverage is available and commercially appropriate, such policy or
policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement
of any portion of the Premises as the result of a covered loss. Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located. If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss.
(b) RENTAL VALUE. The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor with loss payable to Lessor and
any Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee
shall be liable for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned by Lessor which are adjacent to the
Premises, the Lessee shall pay for any increase in the premiums for the property
insurance of such building or buildings if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(b) BUSINESS INTERRUPTION. If reasonably available, and if
Lessor requests Lessee to do so in writing, Lessee shall obtain and maintain
loss of income and extra expense insurance in amounts as will reimburse Lessee
for direct or indirect loss of earnings attributable to all perils commonly
insured against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 INSURANCE POLICIES. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current issue
of "Best's Insurance Guide", or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certified copies of policies of such insurance or certificates evidencing
the existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is not limited by the
amount of insurance carried or required, or by any deductibles applicable
hereto. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation that such companies may have against
Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.
8.7 INDEMNITY. Except for Lessor's sole negligence, Lessee shall
indemnify, protect, defend and hold harmless the Premises, Lessor and its
agents, Lessor's master or ground lessor, partners and Lenders, from and against
any and all claims, loss of rents and/or damages, liens, judgments, penalties,
attorneys' and consultants' fees, expenses and/or liabilities arising out of,
involving, or in connection with, the use and/or occupancy of the Premises by
Lessee. If any action or proceeding is brought against Lessor by reason of any
of the foregoing matters, Lessee shall upon notice defend the same at Lessee's
expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate
with Lessee in such defense. Lessor need not have first paid any such claim in
order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in six (6) months or
less from the date of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in six (6)
months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.
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(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required to be
covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of Applicable Requirements, and
without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE -- INSURED LOSS. If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at
Lessor's election, make the repair of any damage or destruction the total cost
to repair of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to: (i) make
such restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or have this Lease terminate thirty (30) days thereafter. Lessee shall
not be entitled to reimbursement of any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE -- UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs, this Lease shall terminate sixty (60)
days following such Destruction. If the damage or destruction was caused by the
gross negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds one
(1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shall be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore
the Premises and does not commence, in a substantial and meaningful way, such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice, of Lessee's election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice. If Lessee gives
such notice and such repair or restoration is not commenced within thirty (30)
days thereafter, this Lease shall terminate as of the date specified in said
notice. If the repair or restoration is commenced within said thirty (30) days,
this Lease shall continue in full force and effect. "COMMENCE" shall mean either
the unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located. The
term "REAL PROPERTY TAXES" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during
the term of this Lease, including but not limited to, a change in the ownership
of the Premises.
10.2
(a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease. Subject to Paragraph
10.2(b), all such payments shall be made at least ten (10) days prior to any
delinquency date. Lessee shall promptly furnish Lessor with satisfactory
evidence that such taxes have been paid. If any such taxes shall cover any
period of time prior to or after the expiration or
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termination of this Lease, Lessee's share of such taxes shall be prorated to
cover only that portion of the tax bill applicable to the period that this Lease
is in effect, and Lessor shall reimburse Lessee for any overpayment. If Lessee
shall fail to pay any required Real Property Taxes, Lessor shall have the right
to pay the same, and Lessee shall reimburse Lessor therefor upon demand.
(b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on
any Rent payment, Lessor may, at Lessor's option, estimate the current Real
Property Taxes, and require that such taxes be paid in advance to Lessor by
Lessee, either: (i) in a lump sum amount equal to the installment due, at least
twenty (20) days prior to the applicable delinquency date, or (ii) monthly in
advance with the payment of the Base Rent. If Lessor elects to require payment
monthly in advance, the monthly payment shall be an amount equal to the amount
of the estimated installment of taxes divided by the number of months remaining
before the month in which said installment becomes delinquent. When the actual
amount of the applicable tax bill is known, the amount of such equal monthly
advance payments shall be adjusted as required to provide the funds needed to
pay the applicable taxes. If the amount collected by Lessor is insufficient to
pay such Real Property Taxes when due, Lessee shall pay Lessor, upon demand,
such additional sums as are necessary to pay such obligations. All monies paid
to Lessor under this Paragraph may be intermingled with other monies of Lessor
and shall not bear interest. In the event of a Breach by Lessee in the
performance of its obligations under this Lease, then any balance of funds paid
to Lessor under the provisions of this Paragraph may at the option of Lessor, be
treated as an additional Security Deposit.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent which consent shall not be unreasonably withheld
or delayed.
(b) A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction,
or series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than
twenty-five percent (25%) of such Net Worth as it was represented at the time of
the execution of this Lease or at the time of the most recent assignment to
which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, whichever was or is
greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "NET WORTH OF LESSEE" shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.
(d) An assignment or subletting without consent shall, at
Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a
noncurable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice, increase the monthly Base Rent to one hundred ten percent
(110%) of the Base Rent then in effect. Further, in the event of such Breach and
rental adjustment, (i) the purchase price of any option to purchase the Premises
held by Lessee shall be subject to similar adjustment to one hundred ten percent
(110%) of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease; (ii)
release Lessee of any obligations hereunder; or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assignee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefore to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a fee of $1,000 or ten percent (10%) of the current monthly Base
Rent applicable to the portion of the Premises which is the subject of the
proposed assignment or sublease, whichever is greater, as consideration for
Lessor's considering and processing said request. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed to
have assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented to in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all Rent payable on any sublease, and Lessor may collect
such Rent and apply same toward Lessee's obligations under this Lease; provided,
however, that until a Breach shall occur in the performance of Lessee's
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time of
the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior Defaults or Breaches
of such sublessor.
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(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
rules under this Lease. A "BREACH" is defined as the occurrence of one or more
of the following Defaults, and the failure of Lessee to cure such Default within
any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the
Premises without providing a commercially reasonable level of security, or where
the coverage of the property insurance described in Paragraph 8.3 is jeopardized
as a result thereof, or without providing reasonable assurances to minimize
potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any
other monetary payment required to be made by Lessee hereunder, whether to
Lessor or to a third party, when due, to provide reasonable evidence of
insurance or surety bond, or to fulfill any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a
period of three (3) business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written
evidence of compliance with Applicable Requirements, (ii) the service contracts,
(iii) the rescission of an unauthorized assignment or subletting, (iv) a Tenancy
Statement, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42 (easements),
or (viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the
making of any general arrangement or assignment for the benefit of creditors;
(ii) becoming a "DEBTOR" as defined in 11 U.S.C. Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days; provided, however, in the event that any
provision of this subparagraph 13.1 (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery that any financial statement of Lessee or of
any Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a Guarantor; (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty; (iii) a Guarantor's becoming insolvent or the
subject of a bankruptcy filing; (iv) a Guarantor's refusal to honor the
guaranty; or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory basis, and Lessee's failure, within sixty (60) days following
written notice of any such event, to provide written alternative assurance or
security, which, when coupled with the then existing resources of Lessee, equals
or exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative
duties or obligations, within ten (10) days after written notice (or in case of
an emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue the Lease and Lessee's right to possession and
recover the Rent as it becomes due, in which event Lessee may sublet or assign,
subject only to reasonable limitations. Acts of maintenance, efforts to relet,
and/or the appointment of a receiver to protect the Lessor's interests, shall
not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into this
Lease, all of which concessions are hereinafter referred to as "INDUCEMENT
PROVISIONS," shall be deemed conditioned upon Lessee's full and faithful
performance of all of the terms, covenants and conditions of this Lease. Upon
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of Rent or
the cure of the Breach which initiated the operation of this paragraph shall not
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be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to ten percent (10%) of each such overdue
amount. The Parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor within thirty (30) days following the date
on which it was due, shall bear interest from the thirty-first (31st) day after
it was due. The interest ("INTEREST") charged shall be equal to the prime rate
charged by the largest state chartered bank in the state in which the Premises
are located plus four percent (4%), but shall not exceed the maximum rate
allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "CONDEMNATION"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than ten percent (10%) of any building, or more than
twenty-five percent (25%) of the land area not occupied by any building, is
taken by Condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of the
date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the Base Rent shall be reduced in proportion to the reduction in utility of
the Premises caused by such Condemnation. Condemnation awards and/or payments
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold, the value of the part
taken, or for severance damages; provided, however, that Lessee shall be
entitled to any compensation for Lessee's relocation expenses, loss of business
goodwill and/or Trade Fixtures, without regard to whether or not this Lease is
terminated pursuant to the provisions of this Paragraph. All Alterations and
Utility Installations made to the Premises by Lessee, for purposes of
Condemnation only, shall be considered the property of the Lessee and Lessee
shall be entitled to any and all compensation which is payable therefor. In the
event that this Lease is not terminated by reason of the Condemnation, Lessor
shall repair any damage to the Premises caused by such Condemnation.
15. BROKERS' FEE.
15.1 ADDITIONAL COMMISSION. In addition to the payments owed pursuant
to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee
acquires any rights to the Premises or other premises owned by Lessor and
located within the same Project, if any, within which the Premises is located,
(c) if Lessee remains in possession of the Premises, with the consent of Lessor,
after the expiration of this Lease, or (d) if Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then, Lessor shall pay
Brokers a fee in accordance with the schedule of said Brokers in effect at the
time of the execution of this Lease.
15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue Interest. In addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts within ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.
16. TENANCY STATEMENT/ESTOPPEL CERTIFICATE.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days
after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party an estoppel certificate in
writing, in form similar to the then most current "TENANCY STATEMENT" form
published by the American Industrial Real Estate Association, plus such
additional information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, the original Lessor under this Lease, and
all subsequent holders of the Lessor's interest in this Lease shall remain
liable and responsible with regard to the potential duties and liabilities of
Lessor pertaining to Hazardous Substances as outlined in Paragraph 6 above.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
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19. DAYS. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted
by this Lease shall be in writing and may be delivered in person (by hand or by
courier) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notices. Either Party
may by written notice to the other specify a different address for notice,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 DATE OF NOTICE. Any notice sent by registered or
certified mail, return receipt requested, shall be deemed given on the date of
delivery shown on the receipt card, or if no delivery date is shown, the
postmark thereon. If sent by regular mail the notice shall be deemed given
forty-eight (48) hours after the same is addressed as required herein and mailed
with postage prepaid. Notices delivered by United States Express Mail or
overnight courier that guarantee next day delivery shall be deemed given
twenty-four (24) hours after delivery of the same to the Postal Service or
courier. Notices transmitted by facsimile transmission or similar means shall be
deemed delivered upon telephone confirmation of receipt, provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. The acceptance of
Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any
payment by Lessee may be accepted by Lessor on account of monies or damages due
Lessor, notwithstanding any qualifying statements or conditions made by Lessee
in connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and titles are for the
convenience of the Parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
Parties, but rather according to its fair meaning as a whole, as if both Parties
had prepared it.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices shall have no liability or
obligation to perform any of the obligations of Lessor under this Lease. Any
Lender may elect to have this Lease and/or any Option granted hereby superior to
the lien of its Security Device by giving written notice thereof to Lessee, this
Lease and such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (i)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership; (ii) be subject to any offsets or
defenses which Lessee might have against any prior lessor; or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or to declare rights hereunder, the Prevailing Party
(as hereafter defined) in any such proceeding, action, or appeal thereon, shall
be entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or
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judgment. The term, "PREVAILING PARTY" shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorneys' fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "FOR SALE" signs and
Lessor may during the last six (6) months of the term hereof place on the
Premises any ordinary "FOR LEASE" signs. Lessee may at any time place on or
about the Premises any ordinary "For Sublease" sign.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction.
34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not place
any sign upon the Premises without Lessor's prior written consent. All signs
must comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including, but not limited to, architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including, but not limited to, consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given. In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within ten (10) business days following such
request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty
in the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any
Guarantor fails or refuses, upon request to provide: (a) evidence of the
execution of the guaranty, including the authority of the party signing on
Guarantor's behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.
39. OPTIONS.
39.1 DEFINITION. "OPTION" shall mean: (a) the right to extend the
term of or renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee, and cannot be assigned
or exercised by anyone other than said original Lessee and only while the
original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee has no intention of thereafter
assigning or subletting.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during
the period commencing with the giving of any notice of Default and continuing
until said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given three (3) or more notices of separate Default, whether or not the
Defaults are cured, during the twelve (12) month period immediately preceding
the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or
effect, notwithstanding Lessee's due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended term, (i)
Lessee fails to pay Rent for a period of thirty (30) days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), (ii)
Lessor gives to Lessee three (3) or more notices of separate Default during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Lessee commits a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will observe all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including
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the care and cleanliness of the grounds and including the parking, loading and
unloading of vehicles, and that Lessee will pay its fair share of common
expenses incurred in connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay.
44. AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each Party
shall, within thirty (30) days after request, deliver to the other Party
satisfactory evidence of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
48. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the
Mediation and/or the Arbitration of all disputes between the Parties and/or
Brokers arising out of this Lease [ ] IS [X] IS NOT attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
________________________________________________________________________________
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
________________________________________________________________________________
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Executed at:
------------------------- ---------------------------
on: 1 March '99 on:
---------------------------------- ------------------------------------
By LESSOR: By LESSEE:
/s/ JOHN VIDOVICH
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
By: By: /s/ ROBERT H. SEBELLMAN JR.
---------------------------------- ------------------------------------
Name Printed: John Vidovich Name Printed: Robert H. Sebellman Jr.
------------------------ --------------------------
Title: General Partner Title: VP Operations
------------------------------- ---------------------------------
By: De Anza Properties By:
----------------------------------- ------------------------------------
Name Printed: Name Printed:
------------------------ --------------------------
Title: Title:
------------------------------- ---------------------------------
Address: 920 Fremont Address: 992 So. De Anza Blvd.
----------------------------- -------------------------------
Sunnyvale, Calif. 94087 San Jose, CA 95129
----------------------------- -------------------------------
Telephone: (408) 738-4444 Sunnyvale Telephone: (408) 863-6600
--------------------- -----------------------
Facsimile: (408) 738-0231 Facsimile: (408) 777-1451
---------------------- -----------------------
Federal ID No. Federal ID No.
----------------------- -------------------------
BROKER: BROKER:
_____________________________________ _______________________________________
Executed at:_________________________ Executed at:___________________________
on:__________________________________ on:____________________________________
By:__________________________________ By:____________________________________
Name Printed:________________________ Name Printed:__________________________
Title:_______________________________ Title:_________________________________
Address:_____________________________ Address:_______________________________
_____________________________ _______________________________
Telephone: ( )_____________________ Telephone: ( )_______________________
Facsimile: ( )_____________________ Facsimile: ( )_______________________
Federal ID No._______________________ Federal ID No._________________________
NOTE: These forms are often modified to meet the changing requirements of law
and industry needs. Always write or call to make sure you are utilizing
the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700
So. Flower Street, Suite 600, Los Angeles, California 90017. (213)
687-8777. Fax No. (213) 687-8616
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EXHIBIT 10.6
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes
only, SEPTEMBER 18, 1997, is made by and between LEE LI CHUN KOO ("LESSOR") and
MACHONE COMMUNICATIONS, INC., a California Corporation ("LESSEE"), (collectively
the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 922 South De Anza Boulevard, San Jose, located in the County of Santa
Clara, State of California, and generally described as (describe briefly the
nature of the property and, if applicable, the "PROJECT", if the property is
located within a Project) a free standing office building measuring
approximately 13,223 square feet and all associated parking as set forth on
Exhibit "B" ("PREMISES"). (See also Paragraph 2)
1.3 TERM: Five (5) years and 0 months ("ORIGINAL TERM") commencing
November 1, 1997 ("COMMENCEMENT DATE") and ending October 30, 2002 ("EXPIRATION
DATE"). (See also Paragraph 3)
1.4 EARLY POSSESSION: Upon lease execution ("EARLY POSSESSION
DATE"). (See also Paragraphs 3.2 and 3.3)
1.5 BASE RENT: $21,156.80 per month ("BASE RENT"), payable on the
first (1st) day of each month commencing November 1997 (See also Paragraph 4)
[X] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted. See Addendum - Paragraph 50
1.6 BASE RENT PAID UPON EXECUTION: $21,156.80 as Base Rent for the
period November 1997.
1.7 SECURITY DEPOSIT: $21,156.80 ("SECURITY DEPOSIT"). (See also
Paragraph 5)
1.8 AGREED USE: R&D, sales, marketing, clerical, administrative and
other legal related uses. (See also Paragraph 6)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See also Paragraph 8)
1.10 REAL ESTATE BROKERS: (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction (check applicable boxes):
[X] BT Commercial - Guterman/Turkus represents Lessor exclusively ("LESSOR'S
BROKER");
[X] CPS - Kristen Felder represents Lessee exclusively ("LESSEE'S BROKER"); or
[ ] _________________________ represents both Lessor and Lessee ("DUAL AGENCY").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this
Lease by both Parties, Lessor shall pay to the Broker the fee agreed to in their
separate written agreement (or if there is no such agreement, the sum of ______%
of the total Base Rent for the brokerage services rendered by said Broker).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by Peter Olson ("GUARANTOR"). (See also Paragraph 37)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 58 and Exhibits "A" Floor Plan, "B"
Parking, "C" Initial Alterations and Utility Installations, all of which
constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee broom
clean and free of debris on the Commencement Date ("START DATE"), and, so long
as the required service contracts described in Paragraph 7.1(b) below are
obtained by Lessee within thirty (30) days following the Start Date, warrants
that the existing electrical, plumbing, landscape irrigation, fire sprinkler,
lighting, heating, ventilating and air conditioning systems ("HVAC"), in the
Premises, other than those constructed by Lessee, shall be in good operating
condition on said date and that the structural elements of the roof, bearing
walls and foundation of any buildings on the Premises (the "BUILDING") shall be
free of material defects. If a non-compliance with said warranty exists as of
the Start Date, Lessor shall, as Lessor's sole obligation with respect to such
matter, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If, after the Start
Date, Lessee does not give Lessor written notice of any non-compliance with this
warranty within: (i) one year as to the surface of the roof and the structural
portions of the roof, foundations and bearing walls, (ii) six (6) months as to
the HVAC systems, (iii) thirty (30) days as to the remaining systems and other
elements of the Building, correction of such non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE. Lessor warrants that the improvements on the
Premises comply with all applicable laws, covenants or restrictions of record,
building codes, regulations and ordinances ("APPLICABLE REQUIREMENTS") in effect
on the Start Date. Said warranty does not apply to the use to which Lessee will
put the Premises or to any Alterations or Utility Installations (as defined in
Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's intended use,
and acknowledges that past uses of the Premises may no longer be allowed. If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within six (6) months following the Start
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. If the Applicable Requirements are hereafter
changed (as opposed to being in existence at the Start Date, which is addressed
in Paragraph 6.2(e) below) so as to require during the term of this Lease the
construction of an addition to or an alteration of the Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("CAPITAL EXPENDITURE"), Lessor and Lessee shall allocate the
cost of such work as follows:
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(a) Subject to Paragraph 2.3(c) below, if such Capital
Expenditures are required as a result of the specific and unique use of the
Premises by Lessee as compared with uses by tenants in general, Lessee shall be
fully responsible for the cost thereof, provided, however that if such Capital
Expenditure is required during the last two (2) years of this Lease and the cost
thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' Base Rent. If Lessee elects termination, Lessee shall immediately cease
the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the Premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation to
pay for such costs pursuant to the provisions of Paragraph 7.1(c); provided,
however, that if such Capital Expenditure is required during the last two years
of this Lease or if Lessor reasonably determines that it is not economically
feasible to pay its share thereof, Lessor shall have the option to terminate
this Lease upon ninety (90) days prior written notice to Lessee unless Lessee
notifies Lessor, in writing, within ten (10) days after receipt of Lessor's
termination notice that Lessee will pay for such Capital Expenditure. If Lessor
does not elect to terminate, and fails to tender its share of any such Capital
Expenditure, Lessee may advance such funds and deduct same, with Interest, from
Rent until Lessor's share of such costs have been fully paid. If Lessee is
unable to finance Lessor's share, or if the balance of the Rent due and payable
for the remainder of this Lease is not sufficient to fully reimburse Lessee on
an offset basis, Lessee shall have the right to terminate this Lease upon thirty
(30) days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.
2.4 ACKNOWLEDGEMENTS OTHER THAN AS PROVIDED IN PARAGRAPH 2.2. Lessee
acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy
itself with respect to the condition of the Premises (including but not limited
to the electrical, HVAC and fire sprinkler systems, security, environmental
aspects, and compliance with Applicable Requirements), and their suitability for
Lessee's intended use, (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to its occupancy of the Premises, and (c) neither Lessor,
Lessor's agents, nor any Broker has made any oral or written representations or
warranties with respect to said matters other than as set forth in this Lease.
In addition, Lessor acknowledges that: (a) Broker has made no representations,
promises or warranties concerning Lessee's ability to honor the Lease or
suitability to occupy the Premises, and (b) it is Lessor's sole responsibility
to investigate the financial capability and/or suitability of all proposed
tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Real Property Taxes and
insurance premiums and to maintain the Premises) shall, however, be in effect
during such period. Any such early possession shall not affect the Expiration
Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the Premises is not delivered within
four (4) months after the Commencement Date, this Lease shall terminate unless
other agreements are reached between Lessor and Lessee, in writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.
4. RENT.
4.1. RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("RENT").
4.2 PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. Rent for any period during the term hereof which is for less than one (1)
full calendar month shall be prorated based upon the actual number of days of
said month. Payment of Rent shall be made to Lessor at its address stated herein
or to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional monies with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent. Should the Agreed
Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor's reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on said change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within fourteen (14) days after the expiration or termination
of this Lease, if Lessor elects to apply the Security Deposit only to unpaid
Rent, and otherwise within thirty (30) days after the Premises have been vacated
pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the
Security Deposit not used or applied by Lessor. No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment
for any monies to be paid by Lessee under this Lease.
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6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, or waste
whose presence, use, manufacture, disposal, transportation, or release, either
by itself or in combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises, other than as previously consented to by Lessor,
Lessee shall immediately give written notice of such fact to Lessor, and provide
Lessor with a copy of any report, notice, claim or other documentation which it
has concerning the presence of such Hazardous Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, or any third party (provided, however, that Lessee shall have no
liability under this Lease with respect to underground migration of any
Hazardous Substance under the Premises from adjacent properties). Lessee's
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. NO TERMINATION, CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY
LESSOR AND LESSEE SHALL RELEASE LESSEE FROM ITS OBLIGATIONS UNDER THIS LEASE
WITH RESPECT TO HAZARDOUS SUBSTANCES, UNLESS SPECIFICALLY SO AGREED BY LESSOR IN
WRITING AT THE TIME OF SUCH AGREEMENT.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees. Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
"Alterations", as defined in Paragraph 7.3(a) below) of the Premises, in which
event Lessee shall be responsible for such payment. Lessee shall cooperate fully
in any such activities at the request of Lessor, including allowing Lessor and
Lessor's agents to have reasonable access to the Premises at reasonable times in
order to carry out Lessor's investigative and remedial responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
occurs during the term of this Lease, unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and remediation
thereof required by the Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and
Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) if the estimated cost to remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give a termination
notice, Lessee may, within ten (10) days thereafter, give written notice to
Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within thirty (30) days following such commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined
in Paragraph 30 below) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease. The cost of any such inspections
shall be paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination.
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7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises,
Utility Installations, and Alterations in good order, condition and repair
(whether or not the portion of the Premises requiring repairs, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises), including, but
not limited to, all equipment or facilities, such as plumbing, heating,
ventilating, air-conditioning, electrical, lighting facilities, boilers,
pressure vessels, fire protection system, fixtures, walls (interior and
exterior), ceilings, roof membrane, floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee's obligations shall include commercially reasonable restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in the condition as delivered consistent with the
exterior appearance of other similar facilities of comparable age and size in
the vicinity, including, when necessary, the exterior repainting of the
Building. This paragraph is subject to the modifications in Paragraph 51 of the
Addendum.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure
vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke
detection, (iv) landscaping and irrigation systems, (v) roof covering and
drains, (vi) driveways and parking lots, (vii) clarifiers (viii) basic utility
feed to the perimeter of the Building, and (ix) any other equipment, if
reasonably required by Lessor.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing
such Basic Elements, then such Basic Elements shall be replaced by Lessor, and
the cost thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is one, and the denominator of which is the number of months of the useful life
of such replacement as such useful life is specified pursuant to Federal income
tax regulations or guidelines for depreciation thereof (including interest on
the unamortized balance as is then commercially reasonable in the judgment of
Lessor's accountants), with Lessee reserving the right to prepay its obligation
at any time.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14
(Condemnation), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, or
the equipment therein, all of which obligations are intended to be that of the
Lessee. It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the
Premises, and they expressly waive the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease. This
paragraph is subject to the modifications in Paragraph 51 of the Addendum.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" refers to all floor and window coverings, air lines, power
panels, electrical distribution, security and fire protection systems,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing
in or on the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the Premises.
The term "ALTERATIONS" shall mean any modification of the improvements, other
than Utility Installations or Trade Fixtures, whether by addition or deletion.
"LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed $50,000 in
the aggregate or $10,000 in any one year.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. If Lessor elects to participate in any such action, Lessee shall pay
Lessor's attorneys' fees and costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or
elect ownership as hereinafter provided, all Alterations and Utility
Installations made by Lessee shall be the property of Lessee, but considered a
part of the Premises. Lessor may, at any time, elect in writing to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor
not earlier than ninety (90) and not later than thirty (30) days prior to the
end of the term of this Lease, Lessor may require that any or all Lessee Owned
Alterations or Utility Installations be removed by the expiration or termination
of this Lease. Lessor may require the removal at any time of all or any part of
any Lessee Owned Alterations or Utility Installations made without the required
consent.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Lessee shall repair
any damage occasioned by the installation, maintenance or removal of Trade
Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings,
and equipment as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate
the Premises pursuant to this Paragraph 7.4(c) without the express written
consent of Lessor shall constitute a holdover under the provisions of Paragraph
26 below.
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8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Lessee shall pay for all insurance
required under Paragraph 8 except to the extent of the cost attributable to
liability insurance carried by Lessor under Paragraph 8.2(b) in excess of
$2,000,000 per occurrence. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease
term. Payment shall be made by Lessee to Lessor within ten (10) days following
receipt of an invoice.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an "ADDITIONAL INSURED -- MANAGERS OR LESSORS OF PREMISES
ENDORSEMENT" and contain the "AMENDMENT OF THE POLLUTION EXCLUSION ENDORSEMENT"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance
as described in Paragraph 8.2(a), in addition to, and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 PROPERTY INSURANCE -- BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force a policy or policies in the name of Lessor, with loss payable
to Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lenders, but in no event more than the commercially reasonable
and available insurable value thereof. If Lessor is the Insuring Party, however,
Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's
personal property shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such policy
or policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement
of any portion of the Premises as the result of a covered loss. Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located. If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss.
(b) RENTAL VALUE. The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor with loss payable to Lessor and
any Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee
shall be liable for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned by Lessor which are adjacent to the
Premises, the Lessee shall pay for any increase in the premiums for the property
insurance of such building or buildings if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss
of income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 INSURANCE POLICIES. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current issue
of "Best's Insurance Guide", or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certified copies of policies of such insurance or certificates evidencing
the existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is not limited by the
amount of insurance carried or required, or by any deductibles applicable
hereto. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation that such companies may have against
Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in six (6) months or
less from the date of the damage or destruction.
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Lessor shall notify Lessee in writing within thirty (30) days from the date of
the damage or destruction as to whether or not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in six (6)
months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required to be
covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of Applicable Requirements, and
without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE -- INSURED LOSS. If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at
Lessor's election, make the repair of any damage or destruction the total cost
to repair of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to: (i) make
such restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or have this Lease terminate thirty (30) days thereafter. Lessee shall
not be entitled to reimbursement of any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE -- UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs, this Lease shall terminate sixty (60)
days following such Destruction. If the damage or destruction was caused by the
gross negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds one
(1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shall be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore
the Premises and does not commence, in a substantial and meaningful way, such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice, of Lessee's election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice. If Lessee gives
such notice and such repair or restoration is not commenced within thirty (30)
days thereafter, this Lease shall terminate as of the date specified in said
notice. If the repair or restoration is commenced within said thirty (30) days,
this Lease shall continue in full force and effect. "COMMENCE" shall mean either
the unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated
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with reference to the Building address and where the proceeds so generated are
to be applied by the city, county or other local taxing authority of a
jurisdiction within which the Premises are located. The term "REAL PROPERTY
TAXES" shall also include any tax, fee, levy, assessment or charge, or any
increase therein, imposed by reason of events occurring during the term of this
Lease, including but not limited to, a change in the ownership of the Premises.
10.2
(a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease. Subject to Paragraph
10.2(b), all such payments shall be made at least ten (10) days prior to any
delinquency date. Lessee shall promptly furnish Lessor with satisfactory
evidence that such taxes have been paid. If any such taxes shall cover any
period of time prior to or after the expiration or termination of this Lease,
Lessee's share of such taxes shall be prorated to cover only that portion of the
tax bill applicable to the period that this Lease is in effect, and Lessor shall
reimburse Lessee for any overpayment. If Lessee shall fail to pay any required
Real Property Taxes, Lessor shall have the right to pay the same, and Lessee
shall reimburse Lessor therefor upon demand.
(b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on
any Rent payment, Lessor may, at Lessor's option, estimate the current Real
Property Taxes, and require that such taxes be paid in advance to Lessor by
Lessee, either: (i) in a lump sum amount equal to the installment due, at least
twenty (20) days prior to the applicable delinquency date, or (ii) monthly in
advance with the payment of the Base Rent. If Lessor elects to require payment
monthly in advance, the monthly payment shall be an amount equal to the amount
of the estimated installment of taxes divided by the number of months remaining
before the month in which said installment becomes delinquent. When the actual
amount of the applicable tax bill is known, the amount of such equal monthly
advance payments shall be adjusted as required to provide the funds needed to
pay the applicable taxes. If the amount collected by Lessor is insufficient to
pay such Real Property Taxes when due, Lessee shall pay Lessor, upon demand,
such additional sums as are necessary to pay such obligations. All monies paid
to Lessor under this Paragraph may be intermingled with other monies of Lessor
and shall not bear interest. In the event of a Breach by Lessee in the
performance of its obligations under this Lease, then any balance of funds paid
to Lessor under the provisions of this Paragraph may, at the option of Lessor,
be treated as an additional Security Deposit.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.
(b) A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction,
or series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than
twenty-five percent (25%) of such Net Worth as it was represented at the time of
the execution of this Lease or at the time of the most recent assignment to
which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, whichever was or is
greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "NET WORTH OF LESSEE" shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.
(d) An assignment or subletting without consent shall, at
Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a
noncurable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice, increase the monthly Base Rent to one hundred ten percent
(110%) of the Base Rent then in effect. Further, in the event of such Breach and
rental adjustment, (i) the purchase price of any option to purchase the Premises
held by Lessee shall be subject to similar adjustment to one hundred ten percent
(110%) of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease; (ii)
release Lessee of any obligations hereunder; or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assignee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefore to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a fee of $1,000 or ten percent (10%) of the current monthly Base
Rent applicable to the portion of the Premises which is the subject of the
proposed assignment or sublease, whichever is greater, as consideration for
Lessor's considering and processing said request. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed to
have assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented to in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Subject to Paragraph 58 of the Addendum, regarding "Bonus
Rent" Lessee hereby assigns and transfers to Lessor all of Lessee's interest in
all Rent payable on any sublease, and Lessor may collect such Rent and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a Breach shall occur in the performance of Lessee's obligations, Lessee may
collect said Rent. Lessor shall not, by reason of the foregoing or any
assignment of such sublease, nor by reason of the collection of Rent, be deemed
liable to the sublessee for any failure of Lessee to perform and comply with any
of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes
and directs any such sublessee, upon receipt of a written notice
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from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time of
the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior Defaults or Breaches
of such sublessor.
(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in this Lease. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
rules under this Lease. A "BREACH" is defined as the occurrence of one or more
of the following Defaults, and the failure of Lessee to cure such Default within
any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the
Premises without providing a commercially reasonable level of security, or where
the coverage of the property insurance described in Paragraph 8.3 is jeopardized
as a result thereof, or without providing reasonable assurances to minimize
potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written
evidence of compliance with Applicable Requirements, (ii) the service contracts,
(iii) the rescission of an unauthorized assignment or subletting, (iv) a Tenancy
Statement, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42 (easements),
or (viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the
making of any general arrangement or assignment for the benefit of creditors;
(ii) becoming a "DEBTOR" as defined in 11 U.S.C. Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days; provided, however, in the event that any
provision of this subparagraph (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery that any financial statement of Lessee or of
any Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the
subject of a bankruptcy filing; (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory basis, unless within sixty (60) days following written notice of
any such event, Lessee provide written alternative assurance or security, which,
when coupled with the then existing resources of Lessee, equals or exceeds the
combined financial resources of Lessee and the Guarantors that existed at the
time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative
duties or obligations, or cure any default within the time provided in the
Lease, then within ten (10) days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue the Lease and Lessee's right to possession and
recover the Rent as it becomes due, in which event Lessee may sublet or assign,
subject only to reasonable limitations. Acts of maintenance, efforts to relet,
and/or the appointment of a receiver to protect the Lessor's interests, shall
not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability
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under any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into this
Lease, all of which concessions are hereinafter referred to as "INDUCEMENT
PROVISIONS," shall be deemed conditioned upon Lessee's full and faithful
performance of all of the terms, covenants and conditions of this Lease. Upon
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of Rent or
the cure of the Breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within ten (10) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to ten percent (10%) of each such overdue
amount. The Parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments (such as
Base Rent) or within thirty (30) days following the date on which it was due for
non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments, or the thirty-first (31st) day after it was due as to
non-scheduled payments. The interest ("INTEREST") charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to the
date when due plus four percent (4%), but shall not exceed the maximum rate
allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "CONDEMNATION"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than ten percent (10%) of any building portion of the
premises, or more than twenty-five percent (25%) of the land area portion of the
premises not occupied by any building, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee's
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises
by Lessee, for purposes of Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.
15. BROKERS' FEE.
15.1 ADDITIONAL COMMISSION. In addition to the payments owed pursuant
to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee
acquires any rights to the Premises or other premises owned by Lessor and
located within the same Project, if any, within which the Premises is located,
(c) if Lessee remains in possession of the Premises, with the consent of Lessor,
after the expiration of this Lease, or (d) if Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then, Lessor shall pay
Brokers a fee in accordance with the schedule of said Brokers in effect at the
time of the execution of this Lease.
15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue Interest. In addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts within ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.
16. ESTOPPEL CERTIFICATES.
(a) Each Party (as "RESPONDING PARTY") shall within ten (10)
days after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "ESTOPPEL CERTIFICATE" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such ten day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force and
effect without modification except as may be represented by the Requesting
Party, (ii) there are no uncured defaults in the Requesting Party's performance,
and (iii) if Lessor is the Requesting Party, not more than one month's Rent has
been paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.
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(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including, but not limited to,
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, and subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted
by this Lease shall be in writing and may be delivered in person (by hand or by
courier) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notices. Either Party
may by written notice to the other specify a different address for notice,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 DATE OF NOTICE. Any notice sent by registered or
certified mail, return receipt requested, shall be deemed given on the date of
delivery shown on the receipt card, or if no delivery date is shown, the
postmark thereon. If sent by regular mail the notice shall be deemed given
forty-eight (48) hours after the same is addressed as required herein and mailed
with postage prepaid. Notices delivered by United States Express Mail or
overnight courier that guarantee next day delivery shall be deemed given
twenty-four (24) hours after delivery of the same to the Postal Service or
courier. Notices transmitted by facsimile transmission or similar means shall be
deemed delivered upon telephone confirmation of receipt, provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by either party of the Default or Breach of any term,
covenant or condition hereof, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach of the same
or of any other term, covenant or condition hereof. Lessor's consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or
be construed as the basis of an estoppel to enforce the provision or provisions
of this Lease requiring such consent. The acceptance of Rent by Lessor shall not
be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be
accepted by Lessor on account of monies or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and titles are for the
convenience of the Parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lessor's Lender") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease. Any Lender may elect
to have this Lease and/or any Option granted hereby superior to the lien of its
Security Device by giving written notice thereof to Lessee, whereupon this Lease
and such Options shall be deemed prior to such Security Device, notwithstanding
the relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new
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owner shall not: (i) be liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (ii) be
subject to any offsets or defenses which Lessee might have against any prior
lessor; or (iii) be bound by prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term,
"PREVAILING PARTY" shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be, whether
by compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fees award shall not be computed
in accordance with any court fee schedule, but shall be such as to fully
reimburse all attorneys' fees reasonably incurred. In addition, the parties
shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "FOR SALE" signs and
Lessor may during the last six (6) months of the term hereof place on the
Premises any ordinary "FOR LEASE" signs. Lessee may at any time place on or
about the Premises any ordinary "For Sublease" sign.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction.
34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not place
any sign upon the Premises without Lessor's prior written consent. All signs
must comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including, but not limited to, architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including, but not limited to, consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given. In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within ten (10) business days following such
request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty
in the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any
Guarantor fails or refuses, upon request to provide: (a) evidence of the
execution of the guaranty, including the authority of the party signing on
Guarantor's behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.
39. OPTIONS.
39.1 DEFINITION. "OPTION" shall mean: (a) the right to extend the
term of or renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee, and cannot be assigned
or exercised by anyone other than said original Lessee and only while the
original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee has no intention of thereafter
assigning or subletting.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during
the period commencing with the giving of any notice of Default and continuing
until said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given three (3) or more notices of separate Default, whether or not the
Defaults are cured, during the twelve (12) month period immediately preceding
the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or
effect, notwithstanding Lessee's due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended term, (i)
Lessee fails to pay Rent for a period of thirty (30) days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), (ii)
Lessor gives to Lessee three (3) or more notices of separate Default during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Lessee commits a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will observe all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including
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the care and cleanliness of the grounds and including the parking, loading and
unloading of vehicles, and that Lessee will pay its fair share of common
expenses incurred in connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay.
44. AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each Party
shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
48. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the
Mediation and/or the Arbitration of all disputes between the Parties and/or
Brokers arising out of this Lease [X] is [ ] is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
________________________________________________________________________________
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
________________________________________________________________________________
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at:_________________________ Executed at:___________________________
on:__________________________________ on:____________________________________
By LESSOR: LEE LI CHUN KOO By LESSEE: MACHONE COMMUNICATIONS, INC.
a California Corporation
_____________________________________ _______________________________________
_____________________________________ _______________________________________
By: /s/ LEE LI CHUN KOO By: /s/ PETER D. OLSON
----------------------------------- ------------------------------------
Name Printed:________________________ Name Printed:__________________________
Title:_______________________________ Title:_________________________________
By:__________________________________ By:____________________________________
Name Printed:________________________ Name Printed:__________________________
Title:_______________________________ Title:_________________________________
Address:_____________________________ Address:_______________________________
_____________________________ _______________________________
Telephone: ( )_____________________ Telephone: ( )_______________________
Facsimile: ( )_____________________ Facsimile: ( )_______________________
Federal ID No._______________________ Federal ID No._________________________
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So.
Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777.
Fax No. (213) 687-8616
PAGE 12
<PAGE> 13
THIS LEASE ADDENDUM IS MADE PURSUANT TO AND IN CONNECTION WITH THAT CERTAIN
LEASE AGREEMENT ("LEASE") DATED SEPTEMBER 18, 1997 BY AND BETWEEN LEE LI CHUN
KOO ("LESSOR") AND MACHONE COMMUNICATIONS ("LESSEE") FOR THE PREMISES COMMONLY
KNOWN AS 992 SOUTH ANZA BOULEVARD, SAN JOSE, CALIFORNIA.
PAGE 1 OF 1
If there are inconsistencies between the body of the Lease and this
Addendum, this Addendum will prevail.
50) MONTHLY BASE RENT:
The monthly base rent shall be as follows:
<TABLE>
<CAPTION>
Term Rent/SF Rent/Month
---- ------- ----------
<S> <C> <C>
November 1, 1997 -- October 30, 1998 $1.60 NNN $21,156.80
November 1, 1998 -- October 30, 1999 $1.65 NNN $21,817.95
November 1, 1999 -- October 30, 2000 $1.70 NNN $22,479.10
November 1, 2000 -- October 30, 2001 $1.75 NNN $23,140.25
November 1, 2001 -- October 30, 2002 $1.80 NNN $23,801.40
</TABLE>
51) PAYMENT OBLIGATIONS OF TENANT AND LANDLORD:
Notwithstanding anything in the Lease to the contrary, maintenance of the
building foundations, roof structure and exterior walls, except for
damage caused by Tenant, shall be the responsibility of Landlord. All
other costs associated with Landlord's ownership of the property,
including but not limited to, taxes, insurance repairs, maintenance
(including roof repairs and HVAC maintenance), property management,
janitorial and utilities, shall be the responsibility of Tenant. Tenant
will be responsible for exterior painting only after Landlord has
repainted the building.
52) TENANT IMPROVEMENTS, CONDITION AT COMMENCEMENT, and ENVIRONMENTAL
LIABILITY:
Lessee agrees to take possession of the Premises in its present "AS IS"
condition, (including ceiling tiles and lighting systems) except as
provided in Paragraph 2.2. Lessor shall not be required to make any
improvements to the existing space. Lessee acknowledges that Except as
provided in paragraph 2.2 Lessor, including Lessor's Agent, has made no
representations or warranty regarding the condition of the Premises or the
Building, and that in entering into this lease Lessee is not relying on any
statements by Lessor or by Agent. Except as provided in paragraph 2.2
Lessor does represent that, to the best of its current actual knowledge, it
is not aware of any current environmental hazards or deficiencies in the
building operating systems. In consideration of Lessee paying for all
Tenant Improvements and accepting the Premises as indicated above, Lessee
shall receive a rent credit of up to $35,000.00. However the amount of the
rent credit shall be limited to the amount of money spent by Lessee for
Tenant Improvements, and Lessee shall provide an accounting of the Tenant
Improvement expenses to Lessor in order to receive the credit. The credit
shall be applied to offset the rental obligations due as follows:
November 1997 $12,000.00 Credit
December 1997 $12,000.00 Credit
January 1998 $11,000.00 Credit
----------
$35,000.00 Total Credit
53) SIGNAGE:
Building signage will be allowed subject to approval of Landlord, which
shall not be unreasonably withheld, and approval of the City of San Jose.
54) CAPITAL IMPROVEMENT:
Any capital improvements required during the term of the lease or any
extensions thereof that are considered common area maintenance expenses
shall be paid for by Landlord. The cost shall be amortized into the common
area maintenance expense in accordance with GAAP standards or the useful
life, whichever is greater.
<PAGE> 14
THIS LEASE ADDENDUM IS MADE PURSUANT TO AND IN CONNECTION WITH THAT CERTAIN
LEASE AGREEMENT ("LEASE") DATED SEPTEMBER 18, 1997 BY AND BETWEEN LEE LI CHUN
KOO ("LESSOR") AND MACHONE COMMUNICATIONS ("LESSEE") FOR THE PREMISES COMMONLY
KNOWN AS 992 SOUTH DE ANZA BOULEVARD, SAN JOSE, CALIFORNIA.
Page 2 of 2
55) OPTION TO EXTEND:
Lessor grants Lessee an Option to Extend the term of this Lease for an
additional period of five (5) years, provided that Lessee is not then in
default in any of the terms, conditions and covenants herein contained at
the time of the exercise of said option. Such extension shall be upon all
the terms, conditions, and covenants as contained in said Lease except
rent which shall be set at the then current market rent. To exercise the
option, Lessee must deliver written notice to Lessor at least six (6)
months prior to the expiration of the initial term. Said notice shall be by
physical delivery or U.S. Mail.
Lessor and Lessee shall in good faith make all possible efforts to reach
an agreement as to the current market rent for the first year of the
option term and yearly increased thereto. If Lessor and Lessee are unable
to agree upon the Option Rent within sixty (60) days from the written
exercise of the option, then each party shall select a commercial real
estate broker to determine the fair market rent based on similar property
in the immediate area.
Within thirty (30) days of his or her appointment, each broker shall
simultaneously deliver his or her opinion to Lessor and Lessee. If the
higher recommendation is no more than ten percent (10%) in excess of the
lower appraisal, the mean of the two shall be the fair rental value. If
the higher recommendation is more than ten percent (10%) in excess of the
lower recommendation the two brokers together shall appoint a third broker
within fifteen (15) days thereafter who shall determine which fair market
rental value between the two most nearly approximates his or her opinion of
the fair rental value. The recommendation shall be binding on the Lessor
and Lessee and shall set the base rent for the first twelve (12) months of
the option period.
In no event shall the rental paid for the first twelve (12) months of the
option period be less than the rental paid for the last twelve (12) months
of the initial term ($1.80 per square foot).
56) TENANT'S COVENANTS:
Tenant represents that it shall, in an timely manner, use due diligence to
obtain Corporate and any other necessary approvals so that a lease may be
executed by Tenant no later than September 30, 1997.
57) INITIAL OCCUPANCY:
MachOne and H3D Entertainment, Inc. (another Peter Olson backed company)
will initially jointly occupy the Premises. However, MachOne shall be the
responsible party under this Lease.
58) BONUS RENT:
Regarding Paragraph 12.3, in the event that the rent payable per square
foot per month for any portion of the property subleased is in excess of
the rent per square foot indicated in Paragraph 50 above, the excess rent
("Bonus Rent") shall be split 50/50 between Lessor and Lessee. Lessee
shall pay all expenses associated with any proposed Sublease, including
but not limited to, Tenant Improvements and Commissions. Lessee shall not
receive any credit for said expenses, nor will said expenses have any
effect on the "Bonus Rent" sharing indicated above.
READ AND APPROVED:
LANDLORD: TENANT:
LEE LI CHUN KOO MACHONE COMMUNICATIONS, INC.
A California Corporation
By: /s/ LEE LI CHUN KOO By: /s/ PETER D. OLSON
------------------------ -------------------------
Title: Title:
--------------------- ----------------------
Date: Date:
---------------------- -----------------------
<PAGE> 15
ARBITRATION OF DISPUTES: Any dispute or claim, either in law or in equity,
arising out of this contract or any resulting transaction shall be decided by
neutral binding arbitration in accordance with the rules of the American
Arbitration Association, and not by court action except as provided by
California law for judicial review of arbitration proceedings. Judgement upon
the award rendered in such arbitration proceedings may be entered in any court
having jurisdiction thereof. In the arbitration proceeding, the parties shall
have the right to discovery in accordance with California Code of Civil
Procedure Section 1283.05. Notwithstanding the foregoing, the following matters
are excluded from arbitration hereunder: (i) a judicial or non-judicial
foreclosure other action or proceeding to enforce a deed of trust, mortgage or
real property sales contract as defined in California Civil Code Section 2985;
(ii) an unlawful detainer action; (iii) the filing or enforcement of a
mechanics lien; (iv) any matter which is within the jurisdiction of a probate
court; or (v) an action for bodily injury or wrongful death, or for latent or
patent defects to which California Code of Civil Procedure Section 337.1 or
Section 337.15 applies. The filing of a judicial action to enable the recording
of a notice of pending action, or to request an order of attachment,
receivership, preliminary injunction or other provisional remedy, shall not
constitute a waiver of the right to arbitrate under this provision.
Any dispute or claim by or against any broker or associate licensee
participating in this transaction shall be submitted to arbitration pursuant to
the above only if the broker and/or associate licensee making the claim or
against whom the claim is made, shall have agreed so to submit such matter to
arbitration.
NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED IN CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR
JURY TRIAL. BY INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL
RIGHTS TO DISCOVERY AND APPEAL, THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATE AFTER
AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OR CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISIONS IS VOLUNTARY.
BY INITIALING BELOW, WE ACKNOWLEDGE THAT WE HAVE READ AND UNDERSTAND THE
FOREGOING, AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
- ----------------- -----------------
LESSOR'S INITIALS LESSEE'S INITIALS
<PAGE> 16
EXHIBIT A
FLOOR PLAN
<PAGE> 17
OFFICE OF COUNTY ASSESSOR SA
EXHIBIT B1
SITE LOCATION
<PAGE> 18
EXHIBIT B2
[SITE MAP]
<PAGE> 1
EXHIBIT 10.7
[SOBRATO DEVELOPMENT COMPANIES LOGO]
LEASE BETWEEN
THE SOBRATO GROUP AND TELOCITY, INC.
<TABLE>
<S> <C>
SECTION ............................................................... PAGE #
Parties ............................................................... 1
Premises .............................................................. 1
Use ................................................................... 1
Permitted Uses ..................................................... 1
Uses Prohibited .................................................... 1
Advertisements and Signs ........................................... 1
Covenants, Conditions and Restrictions ............................. 2
Term and Rental ....................................................... 2
Base Monthly Rent .................................................. 2
Late Charges ....................................................... 2
Security Deposit ................................................... 2
This section intentionally left blank ................................. 3
Acceptance of Possession and Covenants to Surrender ................... 3
Delivery and Acceptance ............................................ 3
Condition Upon Surrender ........................................... 3
Failure to Surrender ............................................... 4
Alterations and Additions ............................................. 4
Tenant's Alterations ............................................... 4
Free From Liens .................................................... 5
Compliance With Governmental Regulations ........................... 5
Maintenance of Premises ............................................... 5
Landlord's Obligations ............................................. 5
Tenant's Obligations ............................................... 5
Landlord and Tenant's Obligations Regarding Reimbursable
Operating Costs .................................................. 5
Reimbursable Operating Costs ....................................... 6
Tenant's Allocable Share ........................................... 6
Waiver of Liability ................................................ 6
Hazard Insurance ...................................................... 7
Tenant's Use ....................................................... 7
Landlord's Insurance ............................................... 7
Tenant's Insurance ................................................. 7
Waiver ............................................................. 7
Taxes ................................................................. 8
Utilities ............................................................. 8
Toxic Waste and Environmental Damage .................................. 8
Tenant's Responsibility ............................................ 8
Tenant's Indemnity Regarding Hazardous Materials ................... 9
</TABLE>
page i
<PAGE> 2
<TABLE>
<S> <C>
Actual Release by Tenant ........................................... 9
Environmental Monitoring ........................................... 10
Tenant's Default ...................................................... 10
Remedies ........................................................... 10
Right to Re-enter .................................................. 11
Abandonment ........................................................ 11
No Termination ..................................................... 11
Non-Waiver ......................................................... 11
Performance by Landlord ............................................ 12
Habitual Default ................................................... 12
Landlord's Liability .................................................. 12
Limitation on Landlord's Liability ................................. 12
Limitation on Tenant's Recourse .................................... 12
Indemnification of Landlord ........................................ 12
Destruction of Premises ............................................... 13
Landlord's Obligation to Restore ................................... 13
Limitations on Landlord's Restoration Obligation ................... 13
Condemnation .......................................................... 13
Assignment or Sublease ................................................ 14
Consent by Landlord ................................................ 14
Assignment or Subletting Consideration ............................. 14
No Release ......................................................... 14
Reorganization of Tenant ........................................... 15
Permitted Transfers ................................................ 15
Effect of Default .................................................. 15
Effects of Conveyance .............................................. 15
Successors and Assigns ............................................. 16
This Section intentionally left blank ................................. 16
General Provisions .................................................... 16
Attorney's Fees .................................................... 16
Authority of Parties ............................................... 16
Brokers ............................................................ 16
Choice of Law ...................................................... 16
Dispute Resolution ................................................. 16
Entire Agreement ................................................... 17
Entry by Landlord .................................................. 17
Estoppel Certificates .............................................. 18
Exhibits ........................................................... 18
Interest ........................................................... 18
Modifications Required by Lender ................................... 18
No Presumption Against Drafter ..................................... 18
Notices ............................................................ 18
Property Management ................................................ 19
Rent ............................................................... 19
Representations .................................................... 19
Rights and Remedies ................................................ 19
Severability ....................................................... 19
Submission of Lease ................................................ 19
Subordination ...................................................... 19
</TABLE>
Page ii
<PAGE> 3
<TABLE>
<S> <C>
Survival of Indemnities ............................................ 19
Time ............................................................... 19
Transportation Demand Management Programs .......................... 20
Waiver of Right to Jury Trial ...................................... 20
EXHIBIT A -- Building & Project ....................................... 22
</TABLE>
Page iii
<PAGE> 4
1. PARTIES: THIS LEASE, is entered into on this 17th day of December, 1999
("Effective Date") between The Sobrato Group, a California Limited Partnership,
whose address is 10600 North De Anza Boulevard, Suite 200, Cupertino,
California, 95014, and Telocity, Inc., a California Corporation, whose address
is 10355 North De Anza Boulevard, Cupertino, California, 95014, hereinafter
called respectively Landlord and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from Landlord
those certain Premises with the appurtenances, situated in the City of San
Jose, County of Santa Clara, State of California, commonly known and designated
as 490 Race Street consisting of 66,250 rentable square feet ("Building") as
outlined in red on Exhibit "A" and all improvements located therein including
but not limited to buildings, parking areas and structures, landscaping,
loading docks, sidewalks, service areas and other facilities. The Building is
situated within a project site shared with five (5) additional buildings owned
by Landlord as outlined in Exhibit "A" attached hereto ("Project"). Tenant
shall have the exclusive use of 225 parking spaces on the parcel on which the
Building is located. Unless expressly provided otherwise, the term Premises as
used herein shall include the Tenant Improvements (defined in Section 5.B)
constructed by Tenant pursuant to Section 5.B.
3. USE:
A. PERMITTED USES: Tenant shall use the Premises only for the following
purposes and shall not change the use of the Premises without the prior written
consent of Landlord: Office, research and development, marketing, light
manufacturing, ancillary storage and other incidental uses. Tenant shall use
only the number of parking spaces allocated to Tenant under this Lease. All
commercial trucks and delivery vehicles shall (i) be parked at the rear of the
Building, (ii) loaded and unloaded in a manner which does not interfere with
the businesses of other occupants of the Project, and (iii) permitted to remain
within the Project only so long as is reasonably necessary to complete the
loading and unloading. Landlord makes no representation or warranty that any
specific use of the Premises desired by Tenant is permitted pursuant to any
Laws.
B. USES PROHIBITED: Tenant shall not commit or suffer to be committed on
the Premises any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant in or around the Premises, nor allow any
sale by auction or any other use of the Premises for an unlawful purpose.
Tenant shall not (i) damage or overload the electrical, mechanical or plumbing
systems of the Premises, (ii) attach, hang or suspend anything from the
ceiling, walls or columns of the building or set any load on the floor in
excess of the load limits for which such items are designed, or (iii) generate
dust, fumes or waste products which create a fire or health hazard or damage
the Premises or any portion of the Project, including without limitation the
soils or ground water in or around the Project. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature, or any waste materials, refuse, scrap or debris, shall
be stored upon or permitted to remain on any portion of the Premises outside of
the Building without Landlord's prior approval, which approval may be withheld
in its sole discretion.
C. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the Premises any signs not approved by the city and
other governing authority having jurisdiction. Tenant will not place or permit
to be placed upon the Premises any signs, advertisements or notices without the
written consent of Landlord as to type, size, design, lettering, coloring and
location, which consent will not be unreasonably withheld. Any sign placed on
the Premises shall be removed by Tenant, at its sole cost, prior to the
Expiration Date or promptly following the earlier
Page 1
<PAGE> 5
termination of the Lease, and Tenant shall repair, at its sole cost, any damage
or injury to the Premises caused thereby, and if not so removed, then Landlord
may have same so removed at Tenant's expense.
D. Covenants, Conditions and Restrictions: This Lease is subject to the
effect of (i) any covenants, conditions, restrictions, easements, mortgages or
deeds of trust, ground leases, rights of way of record and any other matters or
documents of record; and (ii) any zoning laws of the city, county and state
where the Building is situated (collectively referred to herein as
"Restrictions") and Tenant will conform to and will not violate the terms of
any such Restrictions.
4. TERM AND RENTAL:
A. Base Monthly Rent: The term ("Lease Term") shall be for approximately
sixty (60) months, commencing on December 6, 1999 (the "Commencement Date") and
ending on November 30, 2004 ("Expiration Date"). Notwithstanding the Parties
agreement that the Lease Term begins on the Commencement Date, this Lease and
all of the obligations of Landlord and Tenant shall be binding and in full
force and effect from and after the Effective Date. In addition to all other
sums payable by Tenant under this Lease, Tenant shall pay base monthly rent
("Base Monthly Rent") for the Premises in accordance with the following
schedule:
12/06/99 - 12/31/99 $99,375.00
01/01/00 - 11/30/00: $119,250.00 per month
12/01/00 - 11/30/01: $122,563.00 per month
12/01/01 - 11/30/02: $125,875.00 per month
12/01/02 - 11/30/03: $129,188.00 per month
12/01/03 - 11/30/04: $132,500.00 per month
Base Monthly Rent shall be due in advance on or before the first day of each
calendar month during the Lease Term. All sums payable by Tenant under this
Lease shall be paid to Landlord in lawful money of the United States of
America, without offset or deduction and without prior notice or demand, at the
address specified in Section 1 of this Lease or at such place or places as may
be designated in writing by Landlord during the Lease Term. Base Monthly Rent
for any period less than a calendar month shall be a pro rata portion of the
monthly installment. Concurrently with Tenant's execution of this Lease, Tenant
shall pay to Landlord the sum of Ninety Nine Thousand Three Hundred Seventy
Five and No/100 Dollars ($99,375.00) as prepaid rent for the period from
December 6, 1999 through December 31, 1999.
B. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant to
Landlord of Base Monthly Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which is
extremely difficult to ascertain. Such costs include but are not limited to:
administrative, processing, accounting, and late charges which may be imposed
on Landlord by the terms of any contract, revolving credit, mortgage, or trust
deed covering the Premises. Accordingly, if any installment of Base Monthly
Rent or other sum due from Tenant shall not be received by Landlord or its
designee within five (5) days after the rent is due, Tenant shall pay to
Landlord a late charge equal to five (5%) percent of such overdue amount, which
late charge shall be due and payable on the same date that the overdue amount
was due. The parties agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant, excluding interest and attorneys fees and costs. If any rent or
other sum due from Tenant remains delinquent for a period in excess of thirty
(30) days then, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not paid when due at the Agreed Interest Rate
specified in Section 19.J following the date such amount became due until paid.
Acceptance by Landlord of such late charge shall not constitute a waiver of
Tenant's default with respect to such overdue amount nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder. In the event
that a late charge is payable hereunder, whether or not collected, for three
(3) consecutive installments of Base Monthly Rent, then the Base Monthly Rent
shall automatically become due and payable quarterly in advance, rather than
monthly, notwithstanding any provision of this Lease to the contrary.
D. SECURITY DEPOSIT: Concurrently with Tenant's execution of this Lease,
Tenant has deposited with Landlord the sum of Seven Hundred Thousand Dollars
($700,000.00) ("Security "Deposit"). Landlord shall not be deemed a trustee of
the Security Deposit, may use the Security Deposit in business, and shall not
be required to segregate it from its general accounts. Tenant shall not be
entitled to interest
Page 2
<PAGE> 6
on the Security Deposit. If Tenant defaults with respect to any provisions of
the Lease, including but not limited to the provisions relating to payment of
Base Monthly Rent or other charges, Landlord may, to the extent reasonably
necessary to remedy Tenant's default, use any or all of the Security Deposit
towards payment of the following: (i) Base Monthly Rent or other charges in
default; (ii) any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default including, but not limited to Tenant's
failure to restore or clean the Premises following vacation thereof. If any
portion of the Security Deposit is so used or applied, Tenant shall, within ten
(10) days after written demand from Landlord, deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its full original amount,
and shall pay to Landlord such other sums as necessary to reimburse Landlord for
any sums paid by Landlord. Tenant waives the provisions of California Civil Code
Section 1950.7, and all other provisions of Law now in force or that become in
force after the date of execution of this Lease, that provide that Landlord may
claim from a security deposit only those sums reasonably necessary to remedy
defaults in the payment of Rent, to repair damage caused by Tenant, or to clean
the Premises. Tenant may not assign or encumber the Security Deposit without the
consent of Landlord. Any attempt to do so shall be void and shall not be binding
on Landlord. The Security Deposit shall be returned to Tenant within thirty (30)
days after the Expiration Date and surrender of the Premises to Landlord, less
any amount deducted in accordance with this Section, together with Landlord's
written notice itemizing the amounts and purposes for such deduction. In the
event of termination of Landlord's interest in this Lease, Landlord may deliver
or credit the Security Deposit to Landlord's successor in interest in the
Premises and thereupon be relieved of further responsibility with respect to the
Security Deposit. Notwithstanding the foregoing, the Security Deposit shall be
reduced by: (i) $100,000.00 at the commencement of the 13th, 25th, 37th, and
48th month of the Lease Term, provided Tenant has not been in default under the
Lease beyond any applicable cure periods during the previous year; and (ii)
$100,000.00 after Tenant completes a successful public offering, provided Tenant
has not been in default under the Lease beyond any applicable cure periods prior
to such public offering.
Landlord agrees that in lieu of a cash Security Deposit, Tenant may deposit a
letter of credit ("LC") in a form acceptable to Landlord. Landlord shall be
entitled to draw against the LC at any time provided only that Landlord
certifies to the issuer of the LC that Tenant is in default under the Lease.
Tenant shall keep the LC in effect during the entire Lease Term, as the same
may be extended, plus a period of four (4) weeks after expiration of the Lease
Term. At least thirty (30) days prior to expiration of any LC, the term thereof
shall be renewed or extended for a period of at least one (1) year. Tenant's
failure to so renew or extend the LC shall be a material default of this Lease
by Tenant. In the event Landlord draws against the LC, Tenant shall replenish
the existing LC or cause a new LC to be issued such that the aggregate amount
of LCs available to Landlord at all times during the Lease Term is the amount
of the Security Deposit then required.
5. This section intentionally left blank:
6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:
A. DELIVERY AND ACCEPTANCE: On the Commencement Date, Landlord shall
deliver and Tenant shall accept possession of the Premises and enter into
occupancy of the Premises on the Commencement Date. Tenant acknowledges that it
has had an opportunity to conduct, and has conducted, such inspections of the
Premises as it deems necessary to evaluate its conduction. Tenant agrees to
accept possession of the Premises in its then existing condition, subject to
all Restrictions and without representation or warranty by Landlord.
B. CONDITION UPON SURRENDER: Tenant further agrees on the Expiration Date
or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear excepted. In this
regard, "normal wear and tear" shall be construed to mean wear and tear caused
to the Premises by the natural aging process which occurs in spite of prudent
application of the best commercially reasonable standards for
Page 3
<PAGE> 7
maintenance, repair replacement, and janitorial practices, and does not include
items of neglected or deferred maintenance. In any event, Tenant shall cause
the following to be done prior to the Expiration Date or sooner termination of
this Lease: (i) all interior walls shall be cleaned, patched, and otherwise
made paint-ready, (ii) all tiled floors shall be cleaned and waxed, (iii) all
carpets shall be cleaned and shampooed, (iv) all broker, marred, stained or
nonconforming acoustical ceiling tiles shall be replaced, (v) all cabling
placed above the ceiling by Tenant or Tenant's contractors shall be removed,
(vi) all windows shall be washed; (vii) the HVAC system shall be serviced by a
reputable and licensed service firm and left in "good operating condition and
repair" as so certified by such firm, (viii) the plumbing and electrical
systems and lighting shall be placed in good order and repair (including
replacement of any burned out, discolored or broken light bulbs, ballasts, or
lenses. On or before the Expiration Date or sooner termination of this Lease,
Tenant shall remove all its personal property and trade fixtures from the
Premises. All property and fixtures not so removed shall be deemed as abandoned
by Tenant. Tenant shall ascertain from Landlord within ninety (90) days before
the Expiration Date whether Landlord desires to have the Premises or any parts
thereof restored to their condition as of the Commencement Date, or to cause
Tenant to surrender all Alterations (as defined in Section 7) in place to
Landlord. If Landlord shall so desire, Tenant shall, at Tenant's sole cost and
expense, remove such Alterations as Landlord requires and shall repair and
restore said Premises or such parts thereof before the Expiration Date. Such
repair and restoration shall include causing the Premises to be brought into
compliance with all applicable building codes and laws in effect at the time of
the removal to the extent such compliance is necessitated by the repair and
restoration work.
C. FAILURE TO SURRENDER: If the Premises are not surrendered at the
Expiration Date (or sooner, upon rightful termination of the Lease) in the
condition required by this Section 6, Tenant shall be deemed in a holdover
tenancy pursuant to this Section 6.C and Tenant shall indemnify, defend, and
hold Landlord harmless against loss or liability resulting from delay by Tenant
in so surrendering the Premises including, without limitation, any claims made
by any succeeding tenant founded on such delay and costs incurred by Landlord
in returning the Premises to the required condition, plus interest at the
Agreed Interest Rate. Any holding over after the termination or Expiration Date
with Landlord's express written consent, shall be construed as month-to-month
tenancy, terminable on thirty (30) days written notice from either party, and
Tenant shall pay as Base Monthly Rent to Landlord a rate equal to one hundred
twenty five percent (125%) of the Base Monthly Rent due in the month preceding
the termination or Expiration Date, plus all other amounts payable by Tenant
under this Lease. Any holding over shall otherwise be on the terms and
conditions herein specified, except those provisions relating to the Lease Term
and any options to extend or renew, which provisions shall be of no further
force and effect following the expiration of the applicable exercise period. If
Tenant remains in possession of the Premises after the Expiration Date or
sooner termination of this Lease without Landlord's consent, Tenant's continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall
pay as rent during the holdover period an amount equal to one hundred fifty
percent (150%) of the Base Monthly Rent due in the month preceding the
termination or Expiration Date, plus all other amounts payable by Tenant under
this Lease. This provision shall survive the termination or expiration of the
Lease.
7. ALTERATIONS AND ADDITIONS:
A. TENANT'S ALTERATIONS: Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises ("Alterations"), or any part thereof,
without obtaining Landlord's prior written consent and delivering to Landlord
the proposed architectural and structural plans for all such Alterations at
least fifteen (15) days prior to the start of construction. If such Alterations
affect the structure of the Building, Tenant additionally agrees to reimburse
Landlord its reasonable out-of-pocket costs incurred in reviewing Tenant's
plans. After obtaining Landlord's consent, Tenant shall not proceed to make such
Alterations until Tenant has obtained all required governmental approvals and
permits, and provides Landlord reasonable security, in form reasonably approved
by Landlord, to protect Landlord against mechanics' lien claims. Tenant agrees
to provide Landlord (i) written notice of the anticipated and actual start-date
of the work, (ii) a complete set of half-size (15" X 21") vellum as-built
drawings, and (iii) a certificate of
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occupancy for the work upon completion of the Alterations. All Alterations
shall be constructed in compliance with all applicable building codes and laws
including, without limitation, the Americans and Disabilities Act of 1990
("ADA") as amended from time to time. The parties acknowledge that all ADA work
required to the Premises for Tenant's occupancy shall be performed by Tenant as
part of its Alterations. Upon the Expiration Date, all Alterations, except
movable furniture and trade fixtures, shall become a part of the realty and
belong to Landlord but shall nevertheless be subject to removal by Tenant as
provided in Section 6 above. Alterations which are not deemed as trade fixtures
include heating, lighting, electrical systems, air conditioning, walls,
carpeting, or any other installation which has become an integral part of the
Premises. All Alterations shall be maintained, replaced or repaired by Tenant
at its sole cost and expense.
B. FREE FROM LIENS: Tenant shall keep the Premises free from all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant or claimed to have been performed for Tenant. In the event Tenant fails
to discharge any such lien within ten (10) days after receiving notice of the
filing, Landlord shall be entitled to discharge the lien at Tenant's expense
and all resulting costs incurred by Landlord, including attorney's fees shall
be due from Tenant as additional rent.
C. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: The term Laws or Governmental
Regulations shall include all federal, state, county, city or governmental
agency laws, statutes, ordinances, standards, rules, requirements, or orders
now in force or hereafter enacted, promulgated, or issued. The term also
includes government measures regulating or enforcing public access, traffic
mitigation, occupational, health, or safety standards for employers, employees,
landlords, or tenants. Tenant, at Tenant's sole expense shall make all repairs,
replacements, alterations, or improvements needed to comply with all
Governmental Regulations. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action or proceeding against Tenant (whether
Landlord be a party thereto or not) that Tenant has violated any such law,
regulation or other requirement in its use of the Premises shall be conclusive
of that fact as between Landlord and Tenant.
8. MAINTENANCE OF PREMISES:
A. LANDLORD'S OBLIGATIONS: Landlord at its sole cost and expense, shall
maintain in good condition, order, and repair, and replace as and when
necessary, the foundation, exterior load bearing walls and roof structure of
the Building Shell.
B. TENANT'S OBLIGATIONS: Tenant shall clean, maintain, repair and replace
when necessary the Premises and every part thereof through regular inspections
and servicing, including but not limited to: (i) all plumbing and sewage
facilities, (ii) all heating ventilating and air conditioning facilities and
equipment, (iii) all fixtures, interior walls floors, carpets and ceilings,
(iv) all windows, door entrances, plate glass and glazing systems including
caulking, and skylights, (v) all electrical facilities and equipment, (vi) all
automatic fire extinguisher equipment, (vii) the parking lot and all
underground utility facilities servicing the Premises, (viii) all elevator
equipment, (ix) the roof membrane system, and (x) all waterscape, landscaping
and shrubbery. All wall surfaces and floor tile are to be maintained in an as
good a condition as when Tenant took possession free of holes, gouges, or
defacements. With respect to items (ii), (viii) and (ix) above, Tenant shall
provide Landlord a copy of a service contract between Tenant and a licensed
service contractor providing for periodic maintenance of all such systems or
equipment in conformance with the manufacturer's recommendations. Tenant shall
provide Landlord a copy of such preventive maintenance contracts and paid
invoices for the recommended work if requested by Landlord.
If as a part of Tenant's fulfilment of its maintenance obligations under this
Section 8.B., a roof replacement to the Premises is paid for by Tenant during
the last three (3) years of the Lease Term, Landlord shall reimburse Tenant for
the cost of the replacement less the sum of (i) Twenty Thousand Dollars
($20,000.00) plus (ii) that portion of the cost over $20,000.00 equal to the
product of such cost multiplied by a fraction, the numerator of which is the
number of years remaining in the Lease Term, the denominator of which is the
useful life (in years) of the roof replacement.
C. LANDLORD AND TENANT'S OBLIGATIONS REGARDING REIMBURSABLE OPERATING
COSTS: In addition to the direct payment by Tenant of
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expenses as provided in Sections 8.B, 9, 10 and 11 of this Lease, Tenant agrees
to reimburse Landlord for Tenant's Allocable Share (as defined in Section 8.E
below) of Reimbursable Operating Costs (as defined in Section 8.D below)
resulting from Landlord payment of reasonable expenses related to the Building
or Project which are not otherwise paid by Tenant directly. Tenant agrees to
pay its Allocable Share of the Reimbursable Operating Costs as additional
rental within ten (10) days of written invoice from Landlord.
D. REIMBURSABLE OPERATING COSTS: For purposes of calculating Tenant's
Allocable Share of Building and Project Costs, the term "Reimbursable Operating
Costs" is defined as all costs and expenses of the nature hereinafter
described which are incurred by Landlord in connection with ownership and
operation of the Building or the Project in which the Premises are located,
together with such additional facilities as may be determined by Landlord to be
reasonably desirable or necessary to the ownership and operation of the
Building and/or Project. All costs and expenses shall be determined in
accordance with generally accepted accounting principles which shall be
consistently applied (with accruals appropriate to Landlord's business),
including but not limited to the following: (i) common area utilities,
including water, power, telephone, heating, lighting, air conditioning,
ventilating, and Building utilities to the extent not separately metered; (ii)
common area maintenance and service agreements for the Building and/or Project
and the equipment therein, including without limitation, common area janitorial
services, alarm and security services, exterior window cleaning, and maintenance
of the sidewalks, landscaping, waterscape, roof membrane, parking areas,
driveways, service areas, mechanical rooms, elevators, and the building
exterior; (iii) insurance premiums and costs, including without limitation, the
premiums and cost of fire, casualty and liability coverage and rental abatement
and earthquake (if commercially available) insurance applicable to the Building
or Project; (iv) repairs, replacements and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by Tenant or
other third parties, and repairs or alterations attributable solely to tenants
of the Building or Project other than Tenant); and (v) all real estate taxes
and assessment installments or other impositions or charges which may be levied
on the Building or Project, upon the occupancy of the Building or Project and
including any substitute or additional charges which may be imposed during, or
applicable to the Lease Term including real estate tax increases due to a sale,
transfer or other change of ownership of the Building or Project, as such taxes
are levied or appear on the City and County tax bills and assessment rolls.
Landlord shall have no obligation to provide guard services or other security
measures for the benefit of the Project. Tenant assumes all responsibility for
the protection of Tenant and Tenant's Agents from acts of third parties;
provided, however, that nothing contained herein shall prevent Landlord, at its
sole option, from providing security measures for the Project. This is a "Net"
Lease, meaning that Base Monthly Rent is paid to Landlord absolutely net of all
costs and expenses. The provision for payment of Reimbursable Operating Costs
by means of periodic payment of Tenant's Allocable Share of Building and/or
Project Costs is intended to pass on to Tenant and reimburse Landlord for all
costs of operating and managing the Building and/or Project.
E. TENANT'S ALLOCABLE SHARE: For purposes of prorating Reimbursable
Operating Costs which Tenant shall pay, Tenant's Allocable Share of
Reimbursable Operating Costs shall be computed by multiplying the Reimbursable
Operating Costs by a fraction, the numerator of which is the rentable square
footage of the Premises and the denominator of which is either the total
rentable square footage of the Building if the service or cost is allocable
only to the Building, or the total square footage of the Project if the service
or cost is allocable to the entire Project. Tenant's obligation to share in
Reimbursable Operating Costs shall be adjusted to reflect the Lease
Commencement and Expiration dates and is subject to recalculation in the event
of expansion of the Building or Project.
F. WAIVER OF LIABILITY: Failure by Landlord to perform any defined
services, or any cessation thereof, when such failure is caused by accident,
breakage, repairs, strikes, lockout or other labor disturbances or labor
disputes of any character or by any other cause, similar or dissimilar, unless
due to the gross negligence or willful misconduct of Landlord, shall not render
Landlord liable to Tenant in any respect, including damages to either person or
property, nor be construed as an eviction of
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Tenant, nor cause an abatement of rent, nor relieve Tenant from fulfillment of
any covenant or agreement hereof. Should any equipment or machinery utilized in
supplying the services listed herein break down or for any cause cease to
function properly, upon receipt of written notice from Tenant of any
deficiency or failure of any services, Landlord shall use reasonable diligence
to repair the same promptly, but Tenant shall have no right to terminate this
Lease and shall have no claim for rebate of rent or damages on account of any
interruptions in service occasioned thereby or resulting therefrom. Tenant
waives the provisions of California Civil Code Sections 1941 and 1942
concerning the Landlord's obligation of tenantability and Tenant's right to
make repairs and deduct the cost of such repairs from the rent. Landlord shall
not be liable for a loss of or injury to person or property, however occurring,
through or in connection with or incidental to furnishing, or its failure to
furnish, any of the foregoing, unless due to the gross negligence or willful
misconduct of Landlord.
9. HAZARD INSURANCE:
A. TENANT'S USE: Tenant shall not use or permit the Premises, or any
part thereof, to be used for any purpose other than that for which the Premises
are hereby leased; and no use of the Premises shall be made or permitted, nor
acts done, which will cause an increase in premiums or a cancellation of any
insurance policy covering the Premises or any part thereof, nor shall Tenant
sell or permit to be sold, kept, or used in or about the Premises, any article
prohibited by the standard form of fire insurance policies. Tenant shall, at
its sole cost, comply with all requirements of any insurance company or
organization necessary for the maintenance of reasonable fire and public
liability insurance covering the Premises and appurtenances.
B. LANDLORD'S INSURANCE: Landlord agrees to purchase and keep in force
fire, extended coverage insurance in an amount equal to the replacement cost of
the Building (not including any Tenant Improvements or Alterations paid for by
Tenant from sources other than the Work Allowance) as determined by Landlord's
insurance company's appraisers. If available at commercially reasonable rates
and carried by other owners of commercial properties in the area, such fire and
property damage insurance may be endorsed to cover loss caused by such
additional perils against which Landlord may elect to insure, including
earthquake and/or flood, and shall contain reasonable deductibles which, in the
case of earthquake and flood insurance may be up to fifteen percent (15%) of
the replacement value of the property. Additionally Landlord may maintain a
policy of (i) commercial general liability insurance insuring Landlord (and
such others designated by Landlord) against liability for personal injury,
bodily injury, death and damage to property occurring or resulting from an
occurrence in, on or about the Premises or Project in an amount as Landlord
determines is reasonably necessary for its protection, and (ii) rental lost
insurance covering a twelve (12) month period. Tenant agrees to pay Landlord as
additional rent, on demand, the full cost of said insurance as evidenced by
insurance billings to Landlord, and in the event of damage covered by said
insurance, the amount of any deductible under such policy. Payment shall be due
to Landlord within ten (10) days after written invoice to Tenant. It is
understood and agreed that Tenant's obligation under this Section will be
prorated to reflect the Lease Commencement and Expiration Dates.
C. TENANT'S INSURANCE: Tenant agrees, at its sole cost, to insure its
personal property, Tenant Improvements (for which it has paid from sources
other than the Work Allowance), and Alterations for their full replacement
value (without depreciation) and to obtain worker's compensation and public
liability and property damage insurance for occurrences within the Premises
with a combined single limit of not less than Five Million Dollars
($5,000,000.00). Tenant's liability insurance shall be primary insurance
containing a cross-liability endorsement, and shall provide coverage on an
"occurrence" rather than a "claims made" basis. Tenant shall name Landlord and
Landlord's lender as an additional insured and shall deliver a copy of the
policies and renewal certificates to Landlord. All such policies shall provide
for thirty (30) days' prior written notice to Landlord of any cancellation,
termination, or reduction in coverage. Notwithstanding the above, Landlord
retains the right to have Tenant provide other forms of insurance which may be
reasonably required to cover future risks.
D. WAIVER: Landlord and Tenant hereby waive all rights each may have
against the other on account of any loss or damage sustained by Landlord or
Tenant, as the case may be, or to the
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Premises or its contents, which may arise from any risk covered by their
respective insurance policies (or which would have been covered had such
insurance policies been maintained in accordance with this Lease) as set forth
above. The Parties shall use their reasonable efforts to obtain from their
respective insurance companies a waiver of any right of subrogation which said
insurance company may have against Landlord or Tenant, as the case may be.
10. TAXES: Tenant shall be liable for and shall pay as additional rental, prior
to delinquency, the following: (i) all taxes and assessments levied against
Tenant's personal property and trade or business fixtures; (ii) all real estate
taxes and assessment installments or other impositions or charges which may be
levied on the Premises or upon the occupancy of the Premises, including any
substitute or additional charges which may be imposed applicable to the Lease
Term; and (iii) real estate tax increase due to an increase in assessed value
resulting from a sale, transfer or other change of ownership of the Premises as
it appears on the City and County tax bills during the Lease Term. Tenant's
obligation under this Section shall be prorated to reflect the Lease
Commencement and Expiration Dates. If, at any time during the Lease Term a tax,
excise on rents, business license tax or any other tax, however described, is
levied or assessed against Landlord as a substitute or addition, in whole or in
part, for taxes assessed or imposed on land or Buildings, Tenant shall pay and
discharges its pro rata share of such tax or excise on rents or other tax before
it becomes delinquent; except that this provision is not intended to cover net
income taxes, inheritance, gift or estate tax imposed upon Landlord. In the
event that a tax is placed, levied, or assessed against Landlord and the taxing
authority takes the position that Tenant cannot pay and discharge its pro rata
share of such tax on behalf of Landlord, then at Landlord's sole election,
Landlord may increase the Base Monthly Rent by the exact amount of such tax and
Tenant shall pay such increase. If by virtue of any application or proceeding
brought by Landlord, there results a reduction in the assessed value of the
Premises during the Lease Term, Tenant agrees to pay Landlord a fee consistent
with the fees charged by a third party appeal firm for such services.
11. UTILITIES: Tenant shall pay directly to the providing utility all water,
gas, electric, telephone, and other utilities supplied to the Premises.
Landlord shall not be liable for loss of or injury to person or property,
however occurring, through or in connection with or incidental to furnishing
or the utility company's failure to furnish utilities to the Premises, and in
such event Tenant shall not be entitled to abatement or reduction of any
portion of Base Monthly Rent or any other amount payable under this Lease.
12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. TENANT'S RESPONSIBILITY: Without the prior written consent of
Landlord, Tenant or Tenant's agents, employees, contractors and invitees
("Tenant's Agents") shall not bring, use, or permit upon the Premises, or
generate, create, release, emit, or dispose (nor permit any of the same) from
the Premises any chemicals, toxic or hazardous gaseous, liquid or solid
materials or waste, including without limitation, material or substance having
characteristics of ignitability, corrosivity, reactivity, or toxicity or
substances or materials which are listed on any of the Environmental Protection
Agency's lists of hazardous wastes or which are identified in Division 22 Title
26 of the California Code of Regulations as the same may be amended from time
to time or any wastes, materials or substances which are or may become
regulated by or under the authority of any applicable local, state or federal
laws, judgments, ordinances, orders, rules, regulations, codes or other
governmental restrictions, guidelines or requirements. ("Hazardous Materials")
except for those substances customary in typical office uses for which no
consent shall be required. In order to obtain consent, Tenant shall deliver to
Landlord its written proposal describing the toxic material to be brought onto
the Premises, measures to be taken for storage and disposal thereof, safety
measures to be employed to prevent pollution of the air, ground, surface and
ground water. Landlord's approval may be withheld in its reasonable judgment.
In the event Landlord consents to Tenant's use of Hazardous Materials on the
Premises or such consent is not required, Tenant represents and warrants that
it shall comply with all Governmental Regulations applicable to Hazardous
Materials including doing the following: (i) adhere to all reporting and
inspection requirements imposed by Federal, State, County or Municipal laws,
ordinances or regulations and will provide Landlord a copy of any such reports
or agency inspections; (ii)
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obtain and provide Landlord copies of all necessary permits required for the
use and handling of Hazardous Materials on the Premises; (iii) enforce
Hazardous Materials handling and disposal practices consistent with industry
standards; (iv) surrender the Premises free from any Hazardous Materials
arising from Tenant's bringing, using, permitting, generating, creating,
releasing, emitting or disposing of Hazardous Materials; and (v) properly close
the facility with regard to Hazardous Materials including the removal or
decontamination of any process piping, mechanical ducting, storage tanks
containers, or trenches which have come into contact with Hazardous Materials
and obtain a closure certificate from the local administering agency prior to
the Expiration Date.
B. TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Tenant shall, at
its sole cost and expense, comply with all laws pertaining to, and shall with
counsel reasonably acceptable to Landlord, indemnify, defend and hold harmless
Landlord and Landlord's trustees, shareholders, directors, officers, employees,
partners, affiliates, and agents from, any claims, liabilities, costs or
expenses incurred or suffered arising from the following conduct during the
Lease Term: the bringing, using, permitting, generating, emitting or disposing
of Hazardous Materials by Tenant, Tenant's Agents or a third party through the
surface soils of the Premises during the Lease Term or the violation of any
Governmental Regulation or environmental law, by Tenant or Tenant's Agents.
Tenant's indemnification, defense, and hold harmless obligations include,
without limitation, the following: (i) claims, liability, costs or expenses
resulting from or based upon administrative, judicial (civil or criminal) or
other action, legal or equitable, brought by any private or public person under
common law or under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Resource Conservation and
Recovery Act of 1980 ("RCRA") or any other Federal, State, County or Municipal
law, ordinance or regulation now or hereafter in effect; (ii) claims,
liabilities, costs or expenses pertaining to the identification, monitoring,
cleanup, containment, or removal of Hazardous Materials from soils, riverbeds or
aquifers including the provision of an alternative public drinking water source;
(iii) all costs of defending such claims; (iv) losses attributable to diminution
in the value of the Premises or the Building; (v) loss or restriction of use of
rentable space in the Building; (vi) Adverse effect on the marketing of any
space in the Building; and (vi) all other liabilities, obligations, penalties,
fines, claims, actions (including remedial or enforcement actions of any kind
and administrative or judicial proceedings, orders or judgments), damages
(including consequential and punitive damages), and costs (including attorney,
consultant, and expert fees and expenses) resulting from the release or
violation. This Section 12.B shall survive the expiration or termination of this
Lease.
C. ACTUAL RELEASE BY TENANT: Tenant agrees to notify Landlord of any
lawsuits or orders which relate to the remedying of or actual release of
Hazardous Materials on or into the soils or ground water at or under the
Premises. Tenant shall also provide Landlord all notices required by Section
25359.7(b) of the Health and Safety Code and all other notices required by law
to be given to Landlord in connection with Hazardous Materials. Without
limiting the foregoing, Tenant shall also deliver to Landlord, within twenty
(20) days after receipt thereof, any written notices from any governmental
agency alleging a material violation of, or material failure to comply with,
any federal, state or local laws, regulations, ordinances or orders, the
violation of which or failure to comply with poses a foreseeable and material
risk of contamination of the ground water or injury to humans (other than
injury solely to Tenant or Tenant's Agents.
In the event of any release on or into the Premises or into the soil or
ground water under the Premises, the Building or the Project of any Hazardous
Materials used, treated, stored or disposed of by Tenant or Tenant's Agents,
Tenant agrees to comply, at its sole cost, with all laws, regulations,
ordinances and orders of any federal, state or local agency relating to the
monitoring or remediation of such Hazardous Materials. In the event of any such
release of Hazardous Materials Tenant shall immediately give verbal and
follow-up written notice of the release to Landlord and its Lender to attempt
to eliminate and mitigate any financial exposure to such Lender and resultant
exposure to Landlord under California Code of Civil Procedure Section 736(b) as
a result of such release, and promptly to take reasonable monitoring, cleanup
and remedial steps given,
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inter alia, the historical uses to which the Property has and continues to be
used, the risks to public health posed by the release, the then available
technology and the costs of remediation, cleanup and monitoring, consistent with
acceptable customary practices for the type and severity of such contamination
and all applicable laws. Nothing in the preceding sentences shall eliminate,
modify or reduce the obligation of Tenant under 12.B of this Lease to indemnify,
defend and hold Landlord harmless from any claims liabilities, costs or expenses
incurred or suffered by Landlord. Tenant shall provide Landlord prompt written
notice of Tenant's monitoring, cleanup and remedial steps.
In the absence of an order of any federal, state or local governmental or
quasi-governmental agency relating to the cleanup, remediation or other response
action required by applicable law, any dispute arising between Landlord and
Tenant concerning Tenant's obligation to Landlord under this Section 12.C
concerning the level, method, and manner of cleanup, remediation or response
action required in connection with such a release of Hazardous Materials shall
be resolved by remediation and/or arbitration pursuant to this Lease.
D. ENVIRONMENTAL MONITORING: Landlord and its agents shall have the right
to reasonably inspect, investigate, sample and monitor the Premises including
any air, soil, water, ground water or other sampling or any other testing,
digging, drilling or analysis to determine whether Tenant is complying with the
terms of this Section 12. If Landlord discovers that Tenant is not in compliance
with the terms of this Section 12, any costs incurred by Landlord related to
such non-compliance, including attorneys' and consultants' fees, and costs
incurred by Landlord pursuant to this Section 12.D., shall be due and payable by
Tenant to Landlord within five (5) days following Landlord's written demand
therefore.
13. TENANT'S DEFAULT: The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant: (i) Tenant's failure to pay
the Base Monthly Rent including additional rent or any other payment due under
this Lease by the date such amount is due, where such failure continues for five
(5) days after written notice from Landlord, (ii) the abandonment of the
Premises by Tenant; (iii) Tenant's failure to observe and perform any other
required provision of this Lease, where such failure continues for thirty (30)
days after written notice from Landlord; provided, however that if the nature of
the default is such that it cannot reasonably be cured within the 30-day period,
Tenant shall not be deemed in default if it commences within such period to
cure, and thereafter diligently prosecutes the same to completion; (iv) Tenant's
making of any general assignment for the benefit of creditors; (v) the filing by
or against Tenant of a petition to have Tenant adjudged bankrupt or of a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
after the filing); (vi) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within thirty (30) days; or (vii) the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged within
thirty (30) days.
A. REMEDIES: In the event of any such default by Tenant, then in addition
to other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder
by giving written notice of such intention to terminate. In the event Landlord
elects to so terminate this Lease, Landlord may recover from Tenant all the
following: (i) the worth at time of award of any unpaid rent which had been
earned at the time of such termination; (ii) the worth at time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss for the same
period that Tenant proves could have been reasonably avoided; (iii) the worth at
time of award of the amount by which the unpaid rent for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided; (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease, or which in the ordinary course of
things would be likely to result therefrom; including the following: (x)
expenses for repairing, altering or remodeling the
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Premises for purposes of reletting, (y) broker's fees, advertising costs or
other expenses of reletting the Premises, and (z) costs of carrying the
Premises such as taxes, insurance premiums, utilities and security precautions;
and (v) at Landlord's election, such other amounts in addition to or in lieu of
the foregoing as may be permitted by applicable California law. The term
"rent", as used herein, is defined as the minimum monthly installments of Base
Monthly Rent and all other sums required to be paid by Tenant pursuant to this
Lease, all such other sums being deemed as additional rent due hereunder. As
used in (i) and (ii) above, "worth at the time of award" shall be computed by
allowing interest at a rate equal to the discount rate of the Federal Reserve
Bank of San Francisco plus five (5%) percent per annum. As used in (iii) above,
"worth at the time of award" shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one (1%) percent.
B. RIGHT TO RE-ENTER: In the event of any such default by Tenant, Landlord
shall have the right, after terminating this Lease, to re-enter the Premises
and remove all persons and property. Such property may be removed and stored in
a public warehouse or elsewhere at the cost of and for the account of Tenant,
and disposed of by Landlord in any manner permitted by law.
C. ABANDONMENT: If Landlord does not elect to terminate this Lease as
provided in Section 13.A or 13.B above, then the provisions of California Civil
Code Section 1951.4, (Landlord may continue the lease in effect after Tenant's
breach and abandonment and recover rent as it becomes due if Tenant has a right
to sublet and assign, subject only to reasonable limitations) as amended from
time to time, shall apply and Landlord may from time to time, without
terminating this Lease, either recover all rental as it becomes due or relet
the Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs
to the Premises. In the event that Landlord elects to so relet, rentals
received by Landlord from such reletting shall be applied in the following
order to: (i) the payment of any indebtedness other than Base Monthly Rent due
hereunder from Tenant to Landlord; (ii) the payment of any cost of such
reletting; (iii) the payment of the cost of any alterations and repairs to the
Premises; and (iv) the payment of Base Monthly Rent due and unpaid hereunder.
The residual rentals, if any, shall be held by Landlord and applied in payment
of future Base Monthly Rent as the same may become due and payable hereunder.
Landlord shall have the obligation to market the space but shall have no
obligation to relet the Premises following a default if Landlord has other
comparable available space within the Project. In the event the portion of
rentals received from such reletting which is applied to the payment of rent
hereunder during any month be less than the rent payable during that month by
Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately
upon demand. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any reasonable costs and expenses
incurred by Landlord in such reletting or in making such alterations and
repairs not covered by the rentals received from such reletting.
D. NO TERMINATION: Landlord's re-entry or taking possession of the Premises
pursuant to 13.B or 13.C shall not be construed as an election to terminate
this Lease unless written notice of such intention is given to Tenant or unless
the termination is decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.
3. NON-WAIVER: Landlord may accept Tenant's payments without waiving any
rights under this Lease, including rights under a previously served notice of
default. No payment by Tenant or receipt by Landlord of a lesser amount than
any installment of rent due shall be deemed as other than payment on account of
the amount due. If Landlord accepts payments after serving a notice of default,
Landlord may nevertheless commence and pursue an action to enforce rights and
remedies under the previously served notice of default without giving Tenant
any further notice or demand. Furthermore, the Landlord's acceptance of rent
from the Tenant when the Tenant is holding over without express written consent
does not convert Tenant's Tenancy from a tenancy at sufferance to a month to
month tenancy. No waiver of any provision of this Lease shall be implied by any
failure of the waiving party to enforce any remedy for the violation of that
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provision, even if that violation continues or is repeated. Any waiver by either
party of any provision of this Lease must be in writing. Such waiver shall
affect only the provision specified and only for the time and in the manner
stated in the writing. No delay or omission in the exercise of any right or
remedy by either party shall impair such right or remedy or be construed as a
waiver thereof by the waiving party. No act or conduct of Landlord, including,
without limitation, the acceptance of keys to the Premises, shall constitute
acceptance of the surrender of the Premises by Tenant before the Expiration
Date. Only written notice from Landlord to Tenant of acceptance shall constitute
such acceptance of surrender of the Premises. Landlord's consent to or approval
of any act by Tenant which requires Landlord's consent or approvals shall not be
deemed to waive or render unnecessary Landlord's consent to or approval of any
subsequent act by Tenant.
F. PERFORMANCE BY LANDLORD: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation, Landlord in its
sole discretion may, without notice, without waiving any rights or remedies and
without releasing Tenant from its obligations hereunder, perform such
obligation, in which event Tenant shall pay Landlord as additional rent all
sums paid by Landlord in connection with such substitute performance, including
interest at the Agreed Interest Rate (as defined in Section 19.J) within ten
(10) days of Landlord's written notice for such payment.
G. HABITUAL DEFAULT: The provisions of Section 13 notwithstanding, the
Parties agree that if Tenant shall have defaulted in the performance of any
(but not necessarily the same) term or condition of this Lease for four or more
times during any twelve (12) month period during the Lease Term, then such
conduct shall, at the election of the Landlord, represent a separate event of
default which cannot be cured by Tenant. Tenant acknowledges that the purpose
of this provision is to prevent repetitive defaults by Tenant, which work a
hardship upon Landlord and deprive Landlord of Tenant's timely performance
under this Lease.
14. LANDLORD'S LIABILITY:
A. LIMITATION ON LANDLORD'S LIABILITY: In the event of Landlord's
failure to perform any of its covenants or agreements under this Lease, Tenant
shall give Landlord written notice of such failure and shall give Landlord
thirty (30) days to cure or commence to cure such failure prior to any claim
for breach or resultant damages, provided, however, that if the nature of the
default is such that it cannot reasonably be cured within the 30-day period,
Landlord shall not be deemed in default if it commences within such period to
cure, and thereafter diligently prosecutes the same to completion. In addition,
upon any such failure by Landlord, Tenant shall give notice by registered or
certified mail to any person or entity with a security interest in the Premises
("Mortgagee") that has provided Tenant with notice of its interest in the
Premises, and shall provide Mortgagee a reasonable opportunity to cure such
failure, including such time to obtain possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effectuate a
cure. Tenant agrees that each of the Mortgagees to whom this Lease has been
assigned is an expressed third-party beneficiary hereof. Tenant waives any
right under California Civil Code Section 1950.7 or any other present or future
law to the collection of any payment or deposit from Mortgagee or any purchaser
at a foreclosure sale of Mortgagee's interest unless Mortgagee or such
purchaser shall have actually received and not refunded the applicable payment
or deposit. Tenant further waives any right to terminate this Lease and to
vacate the Premises on Landlord's default under this Lease. Tenant's sole
remedy on Landlord's default is an action for damages or injunctive or
declaratory relief.
B. LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity, then (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives except to
the extent of their interest in the Premises. Tenant shall have recourse only to
the interest of Landlord in the Premises or for the satisfaction of the
obligations of Landlord and shall not have recourse to any other assets of
Landlord for the satisfaction of such obligations.
C. INDEMNIFICATION OF LANDLORD: As a material part of the consideration
rendered to Landlord, Tenant hereby waives all claims against Landlord (unless
due to Landlord's
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gross negligence or willful misconduct) for damages to goods, wares and
merchandise, and all other personal property in, upon or about said Premises and
for injuries to persons in or about said Premises, from any cause arising at any
time to the fullest extent permitted by law, and Tenant shall indemnify, defend
with counsel reasonably acceptable to Landlord and hold Landlord, and their
shareholders, directors, officers, trustees, employees, partners, affiliates and
agents from any claims, liabilities, costs or expenses incurred or suffered
arising from the use of occupancy of the Premises or any part of the Project by
Tenant or Tenant's Agents, the acts or omissions of Tenant or Tenant's Agents,
Tenant's breach of this Lease, or any damage or injury to person or property
from any cause, except to the extent caused by the willful misconduct or active
negligence of Landlord or from the failure of Tenant to keep the Premises in
good condition and repair as herein provided, except to the extent due to the
gross negligence or willful misconduct of Landlord. Further, in the event
Landlord is made party to any litigation due to the acts or omission of Tenant
and Tenant's Agents, Tenant will indemnify, defend (with counsel reasonably
acceptable to Landlord) and hold Landlord harmless from any such claim or
liability including Landlord's costs and expenses and reasonable attorney's fees
incurred in defending such claims.
15. DESTRUCTION OF PREMISES:
A. LANDLORD'S OBLIGATION TO RESTORE: In the event of a destruction of the
Premises during the Lease Term Landlord shall repair the same to a similar
condition to that which existed prior to such destruction. Such destruction
shall not annul or void this Lease; however, Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent while repairs are being made, such
proportionate reduction to be based upon the extent to which the repairs
interfere with Tenant's business in the Premises, as reasonably determined by
Landlord. In no event shall Landlord be required to replace or restore
Alterations, Tenant Improvements paid for by Tenant from sources other than the
Work Allowance or Tenant's fixtures or personal property. With respect to a
destruction which Landlord is obligated to repair or may elect to repair under
the terms of this Section, Tenant waives the provisions of Section 1932, and
Section 1933, Subdivision 4, of the Civil Code of the State of California, and
any other similarly enacted statute, and the provisions of this Section 15
shall govern in the case of such destruction.
B. LIMITATIONS ON LANDLORD'S RESTORATION OBLIGATION: Notwithstanding
the provisions of Section 15.A, Landlord shall have no obligation to repair, or
restore the Premises if any of the following occur: (i) if the repairs cannot
be made in one hundred eighty (180) days from the date of receipt of all
governmental approvals necessary under the laws and regulations of State,
Federal, County or Municipal authorities, as reasonably determined by Landlord,
(ii) if the holder of the first deed of trust or mortgage encumbering the
Building elects not to permit the insurance proceeds payable upon damage or
destruction to be used for such repair or restoration, (iii) the damage or
destruction is not fully covered by the insurance maintained by Landlord,
(iv) the damage or destruction occurs in the last twenty-four (24) months of
the Lease Term, (v) Tenant is in default pursuant to the provisions of Section
13, or (vi) Tenant has vacated the Premises for more than ninety (90) days. In
any such event Landlord may elect either to (i) complete the repair or
restoration, or (ii) terminate this Lease by providing Tenant written notice of
its election within sixty (60) days following the damage or destruction.
16. CONDEMNATION: If any part of the Premises shall be taken for any public
or quasi-public use, under any statute or by right of eminent domain or
private purchase in lieu thereof, and only a part thereof remains which is
susceptible of occupation hereunder, this Lease shall, as to the part so taken,
terminate as of the day before title vests in the condemnor or purchaser
("Vesting Date") and Base Monthly Rent payable hereunder shall be adjusted so
that Tenant is required to pay for the remainder of the Lease Term only such
portion of Base Monthly Rent as the value of the part remaining after such
taking bears to the value of the entire Premises prior to such taking. Further,
in the event of such partial taking, Landlord shall have the option to
terminate this Lease as of the Vesting Date. If all of the Premises or such
part thereof be taken so that there does not remain a portion susceptible for
occupation hereunder, this Lease shall terminate on the Vesting Date. If part
or all of the Premises be taken, all compensation awarded upon such taking
shall go to Landlord, and Tenant shall have no claim thereto; except Landlord
shall cooperate with Tenant, without cost to Landlord, to recover compensation
for damage to or taking of any
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Alterations, Tenant Improvements paid for by Tenant from sources other than the
Work Allowance, or for Tenant's moving costs. Tenant hereby waives the
provisions of California Code of Civil Procedures Section 1265.130 and any
other similarly enacted statute, and the provisions of this Section 16 shall
govern in the case of a taking.
17. ASSIGNMENT OR SUBLEASE:
A. CONSENT BY LANDLORD: Except as specifically provided in this Section
17.E, Tenant may not assign, sublet, hypothecate, or allow a third party to use
the Premises without the express written consent of Landlord. In the event
Tenant desires to assign this Lease or any interest herein or sublet the
Premises or any part thereof, Tenant shall deliver to Landlord (i) executed
counterparts of any agreement and of all ancillary agreements with the proposed
assignee/subtenant, (ii) current financial statements of the transferee
covering the preceding three years, (iii) the nature of the proposed
transferee's business to be carried on in the Premises, (iv) a statement
outlining all consideration to be given on account of the Transfer, and (v) a
current financial statement of Tenant. Landlord may condition its approval of
any Transfer on receipt of a certification from both Tenant and the proposed
transferee of all consideration to be paid to Tenant in connection with such
Transfer. At Landlord's request, Tenant shall also provide additional
information reasonably required by Landlord to determine whether it will
consent to the proposed assignment or sublease. Landlord shall have a ten (10)
day period following receipt of all the foregoing within which to notify Tenant
in writing that Landlord elects to: (i) terminate this Lease in the event the
proposed sublease or assignment is for substantially all of space in the
Premises; (ii) permit Tenant to assign or sublet such space to the named
assignee/subtenant on the terms and conditions set forth in the notice; or
(iii) reasonably refuse consent. If Landlord should fail to notify Tenant in
writing of such election within the 10-day period, Landlord shall be deemed to
have elected option (iii) above. In the event Landlord elects option (i) above,
this Lease shall expire with respect to such part of the Premises on the date
upon which the proposed sublease or transfer was to commence, and from such
date forward, Base Monthly Rent and Tenant's Allocable Share of all other costs
and charges shall be adjusted based upon the proportion that the rentable area
of the Premises remaining bears to the total rentable area of the Building. In
the event Landlord elects option (ii) above, Landlord's written consent to the
proposed assignment or sublease shall not be unreasonably withheld, provided
and upon the condition that: (i) the proposed assignee or subtenant is engaged
in a business that is limited to the use expressly permitted under this Lease;
(ii) the proposed assignee or subtenant is a company with sufficient financial
worth and management ability to undertake the financial obligation of this
Lease and Landlord has been furnished with reasonable proof thereof; (iii) the
proposed assignment or sublease is in form reasonably satisfactory to Landlord;
(iv) Tenant reimburses Landlord on demand for any costs that may be incurred by
Landlord in connection with said assignment or sublease, including the
reasonable costs of making investigations as to the acceptability of the
proposed assignee or subtenant and legal costs incurred in connection with the
granting of any requested consent; and (v) Tenant shall not have advertised or
publicized in any way the availability of the Premises without prior notice to
Landlord. In the event all or any one of the foregoing conditions are not
satisfied, Landlord shall be considered to have acted reasonably if it
withholds its consent.
B. ASSIGNMENT OR SUBLETTING CONSIDERATION: Any rent or other economic
consideration realized by Tenant under any sublease and assignment, in excess
of the Base Monthly Rent payable hereunder and reasonable subletting and
assignment costs, shall be divided and paid fifty percent (50%) to Landlord and
fifty percent (50%) to Tenant. Tenant's obligation to pay over Landlord's
portion of the consideration constitutes an obligation for additional rent
hereunder. The above provisions relating to Landlord's right to terminate the
Lease and relating to the allocation of excess rent are independently
negotiated terms of the Lease which constitute a material inducement for the
Landlord to enter into the Lease, and are agreed by the Parties to be
commercially reasonable. No assignment or subletting by Tenant shall relieve it
of any obligation under this Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.
C. NO RELEASE: Any assignment or sublease shall be made only if and
shall not be effective until the assignee or subtenant shall
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execute, acknowledge, and deliver to Landlord an agreement, in form and
substance satisfactory to Landlord, whereby the assignee or subtenant shall
assume all the obligations of this Lease on the part of Tenant to be performed
or observed and shall be subject to all the covenants, agreements, terms,
provisions and conditions in this Lease. Notwithstanding any such sublease or
assignment and the acceptance of rent by Landlord from any subtenant or
assignee, Tenant and any guarantor shall remain fully liable for the payment of
Base Monthly Rent and additional rent due, and to become due hereunder, for the
performance of all the covenants, agreements, terms, provisions and conditions
contained in this Lease on the part of Tenant to be performed and for all acts
and omissions of any licensee, subtenant, assignee or any other person claiming
under or through any subtenant or assignee that shall be in violation of any of
the terms and conditions of this Lease, and any such violation shall be deemed
a violation by Tenant. Tenant shall indemnify, defend and hold Landlord
harmless from and against all losses, liabilities, damages, costs and expenses
(including reasonable attorney fees) resulting from any claims that may be made
against Landlord by the proposed assignee or subtenant or by any real estate
brokers or other persons claiming compensation in connection with the proposed
assignment or sublease.
D. REORGANIZATION OF TENANT: The provisions of this Section 17.D shall
apply if Tenant is a corporation and: (i) there is a dissolution, merger,
consolidation, or other reorganization of or affecting Tenant, where Tenant is
not the surviving corporation, or (ii) there is a sale or transfer to one
person or entity (or to any group of related persons or entities) of stock
possessing more than 50% of the total combined voting power of all classes of
Tenant's capital stock issued, outstanding and entitled to vote for the
election of directors, and after such sale or transfer of stock Tenant's stock
is no longer publicly traded. In a transaction under clause (i) the surviving
corporation shall promptly execute and deliver to Landlord an agreement in form
reasonably satisfactory to Landlord under which such surviving corporation
assumes the obligations of Tenant hereunder, and in a transaction under clause
(ii) the transferee or buyer shall promptly execute and deliver to Landlord an
agreement in form reasonably satisfactory to Landlord under which such
transferee or buyer assumes the obligations of Tenant under the Lease.
E. PERMITTED TRANSFERS: Notwithstanding anything contained in this
Section 17, so long as Tenant otherwise complies with the provisions of this
Article, Tenant may enter into any of the following transfers (a "Permitted
Transfer") without Landlord's prior consent, and Landlord shall not be
entitled to terminate the Lease or to receive any part of any subrent resulting
therefrom that would otherwise be due pursuant to Sections 17.A and 17.B. Tenant
may sublease all or part of the Premises or assign its interest in this Lease
to (i) any corporation which controls, is controlled by, or is under common
control with the original Tenant to this Lease by means of an ownership
interest of more than 50% of the total combined voting power of all classes of
Tenant's capital stock issued, outstanding and entitled to vote; (ii) a
corporation which results from a merger, consolidation or other reorganization
in which Tenant is not the surviving corporation, so long as the surviving
corporation has a net worth at the time of such assignment that is equal to or
greater than the net worth of Tenant immediately prior to such transaction; and
(iii) a corporation which purchases or otherwise acquires all or substantially
all of the assets of Tenant so long as such acquiring corporation has a net
worth at the time of such assignment that is equal to or greater than the net
worth of Tenant immediately prior to such transaction.
F. EFFECT OF DEFAULT: In the event of Tenant's default, Tenant hereby
assigns all rents due from any assignment or subletting to Landlord as security
for performance of its obligations under this Lease, and Landlord may collect
such rents as Tenant's Attorney-in-Fact, except that Tenant may collect such
rents unless a default occurs as described in Section 13 above. A termination
if the Lease due to Tenant's default shall not automatically terminate an
assignment or sublease then in existence; rather at Landlord's election, such
assignment or sublease shall survive the Lease termination, the assignee or
subtenant shall attorn to Landlord, and Landlord shall undertake the
obligations of Tenant under the sublease or assignment; except that Landlord
shall not be liable for prepaid rent, security deposits or other defaults of
Tenant to the subtenant or assignee, or for any acts or omissions of Tenant and
Tenant's Agents.
G. CONVEYANCE BY LANDLORD: As used in this Lease, the term "Landlord" is
defined only
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as the owner for the time being of the Premises, so that in the event of any
sale or other conveyance of the Premises or in the event of a master lease of
the Premises, Landlord shall be entirely free and relieved of all its covenants
and obligations hereunder, and it shall be deemed and construed, without
further agreement between the Parties and the purchaser at any such sale or the
master tenant of the Premises, that the purchaser or master tenant of the
Premises has assumed and agreed to carry out any and all covenants and
obligations of Landlord hereunder. Such transferor shall transfer and deliver
Tenant's security deposit to the purchaser at any such sale or the master
tenant of the Premises, and thereupon the transferor shall be discharged from
any further liability in reference thereto.
F. SUCCESSORS AND ASSIGNS: Subject to the provisions of this Section 17,
the covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all Parties hereto; and all
Parties hereto comprising Tenant shall be jointly and severally liable
hereunder.
18. This Section intentionally left blank.:
19. GENERAL PROVISIONS:
A. ATTORNEY'S FEES: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of any
other covenant hereon; then the losing party shall pay to the prevailing party
reasonable attorney's fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. The prevailing party shall
also be entitled to recover all costs and expenses including reasonable
attorney's fees incurred in enforcing any judgment or award against the other
party. The foregoing provision relating to post-judgment costs is severable
from all other provisions of this Lease.
B. AUTHORITY OF PARTIES: Tenant represents and warrants that it is duly
formed and in good standing, and is duly authorized to execute and deliver this
Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the by-laws of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms. At Landlord's request, Tenant shall
provide Landlord with corporate resolutions or other proof in a form acceptable
to Landlord, authorizing the execution of the Lease.
C. BROKERS: Tenant acknowledges that no real estate commission is due from,
or payable by Landlord with respect to this transaction, and Tenant agrees to
indemnify, defend and hold Landlord harmless against any claim, cost, liability
or cause of action asserted by any broker or finder claiming through Tenant.
D. CHOICE OF LAW: This Lease shall be governed by and construed in
accordance with California law. Except as provided in Section 19.E, venue shall
be Santa Clara County.
E. DISPUTE RESOLUTION: Landlord and Tenant and any other party that may
become a part to this Lease or be deemed a party to this Lease including any
subtenants agree that, except for any claim by Landlord for unlawful detainer
or any claim within the jurisdiction of the small claims court (which small
claims court shall be the sole court of competent jurisdiction), any
controversy, dispute, or claim of whatever nature arising out of, in connection
with or in relation to the interpretation, performance or breach of this Lease,
including any claim based on contract, tort, or statute, shall be resolved at
the request of any party to this agreement through a two-step dispute
resolution process administered by J.A.M.S. or another judicial mediation
service mutually acceptable to the parties located in Santa Clara County,
California. The dispute resolution process shall involve first, mediation,
followed, if necessary, by final and binding arbitration administered by and in
accordance with the then existing rules and practices of J.A.M.S. or other
judicial mediation service selected. In the event of any dispute subject to
this provision, either party may initiate a request for mediation and the
parties shall use reasonable efforts to promptly select a J.A.M.S. mediator and
commence the mediation. In the event the parties are not able to agree on a
mediator within thirty (30) days, J.A.M.S. or another judicial mediation
service mutually acceptable to the parties shall appoint a mediator. The
mediation shall be confidential and in accordance with California Evidence Code
Section 1119 et. seq. The mediation shall be held in Santa Clara County,
California and in accordance with the existing rules and practice
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of J. A. M. S. (or other judicial and mediation service selected). The parties
shall use reasonable efforts to conclude the mediation within sixty (60) days
of the date of either party's request for mediation. The mediation shall be
held prior to any arbitration or court action (other than a claim by Landlord
for unlawful detainer or any claim within the jurisdiction of the small claims
court which are not subject to this mediation/arbitration provision and may be
filed directly with a court of competent jurisdiction). Should the prevailing
party in any dispute subject to this Section 19.E attempt an arbitration or a
court action before attempting to mediate, the prevailing party shall not be
entitled to attorney's fees that might otherwise be available to them in a court
action or arbitration and in addition thereto, the party who is determined by
the arbitrator to have resisted mediation, shall be sanctioned by the
arbitrator or judge.
IF A MEDIATION IS CONDUCTED BUT IS UNSUCCESSFUL, IT SHALL BE FOLLOWED BY FINAL
AND BINDING ARBITRATION ADMINISTERED BY AND IN ACCORDANCE WITH THE THEN
EXISTING RULES AND PRACTICES OF J.A.M.S. OR THE OTHER JUDICIAL AND MEDIATION
SERVICE SELECTED, AND JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR(S) MAY
BE ENTERED BY ANY STATE OR FEDERAL COURT HAVING JURISDICTION THEREOF AS PROVIDED
BY CALIFORNIA CODE OF CIVIL PROCEDURES SECTION 1280 ET. SEQ, AS SAID STATUTES
THEN APPEAR, INCLUDING ANY AMENDMENTS TO SAID STATUTES OR SUCCESSORS TO SAID
STATUTES OR AMENDED STATUTES, EXCEPT THAT IN NO EVENT SHALL THE PARTIES BE
ENTITLED TO PROPOUND INTERROGATORIES OR REQUEST FOR ADMISSIONS DURING THE
ARBITRATION PROCESS. THE ARBITRATOR SHALL BE A RETIRED JUDGE OR A LICENSED
CALIFORNIA ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION OR MEDIATION SHALL BE
IN SANTA CLARA COUNTY, CALIFORNIA.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES" PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU
MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
LANDLORD: /s/ [Signature Illegible] TENANT:
-------------------------- ------------------
F. ENTIRE AGREEMENT: This Lease and the exhibits attached hereto contains
all of the agreements and conditions made between the Parties hereto and may
not be modified orally or in any other manner other than by written agreement
signed by all parties hereto or their respective successors in interest. This
Lease supersedes and revokes all previous negotiations, letters of intent,
lease proposals, brochures, warranties, and understandings, whether oral or in
writing, between the parties or their respective representatives or any other
person purporting to represent Landlord or Tenant.
G. ENTRY BY LANDLORD: Upon prior notice to Tenant and subject to Tenant's
reasonable security regulations, Tenant shall permit Landlord and his agents to
enter into and upon the Premises at all reasonable times, and without any rent
abatement or reduction or any liability to Tenant for any loss of occupation or
quiet enjoyment of the Premises thereby occasioned, for the following purposes:
(i) inspecting and maintaining the Premises; (ii) making repairs, alterations
or additions to the Premises; (iii) erecting additional building(s) and
improvements on the land where the Premises are situated or on adjacent land
owned by Landlord; (iv) performing any obligations of
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Landlord under the Lease including remediation of Hazardous Materials if
determined to be the responsibility of Landlord, (v) posting and keeping posted
thereon notices of non-responsibility for any construction, alteration or repair
thereof, as required or permitted by any law, and (vi) showing the Premises to
Landlord's or the Master Landlord's existing or potential successors, purchaser,
tenants and lenders. Tenant shall permit Landlord and his agents, at any time
within one hundred eighty (180) days prior to the Expiration Date (or at any
time during the Lease if Tenant is in default hereunder), to place upon the
Premises "For Lease" signs and exhibit the Premises to real estate brokers and
prospective tenants at reasonable hours, with reasonable notice.
H. ESTOPPEL CERTIFICATES: At any time during the Lease Term, Tenant shall,
within ten (10) business days following written notice from Landlord, execute
and deliver to Landlord a written statement certifying, if true, the following:
(i) that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification); (ii) the date to which rent and other
charges are paid in advance, if any; (iii) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on Landlord's part hereunder (or
specifying such defaults if they are claimed); and (iv) such other information
as Landlord may reasonably request. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of Landlord's interest
in the Premises. Tenant's failure to deliver such statement within such time
shall be conclusive upon the Tenant that this Lease is in full force and effect
without modification, except as may be represented by Landlord, and that there
are no uncured defaults in Landlord's performance. Tenant agrees to provide,
within five (5) days of Landlord's request, Tenant's most recent three (3) years
of unaudited financial statements for Landlord's use in financing or sale of the
Premises or Landlord's interest therein.
I. EXHIBITS: All exhibits referred to are attached to this Lease and
incorporated by reference.
J. INTEREST: All rent due hereunder, if not paid when due, shall bear
interest at the rate of the Reference Rate published by Bank of America, San
Francisco Branch, plus two percent (2%) per annum from that date until paid in
full ("Agreed Interest Rate"). This provision shall survive the expiration or
sooner termination of the Lease. Despite any other provision of this Lease, the
total liability for interest payments shall not exceed the limits, if any,
imposed by the usury laws of the State of California. Any interest paid in
excess of those limits shall be refunded to Tenant by application of the amount
of excess interest paid against any sums outstanding in any order that Landlord
requires. If the amount of excess interest paid exceeds the sums outstanding,
the portion exceeding those sums shall be refunded in cash to Tenant by
Landlord. To ascertain whether any interest payable exceeds the limits imposed,
any non-principal payment (including late charges) shall be considered to the
extent permitted by law to be an expense or a fee, premium, or penalty rather
than interest.
K. MODIFICATIONS REQUIRED BY LENDER: If any lender of Landlord or ground
lessor of the Premises requires a modification of this Lease that will not
increase Tenant's cost or expense or materially or adversely change Tenant's
rights and obligations, this Lease shall be so modified and Tenant shall execute
whatever documents are required and deliver them to Landlord within ten (10)
days after the request.
L. NO PRESUMPTION AGAINST DRAFTER: Landlord and Tenant understand, agree
and acknowledge that this Lease has been freely negotiated by both Parties; and
that in any controversy, dispute, or contest over the meaning, interpretation,
validity, or enforceability of this Lease or any of its terms or conditions,
there shall be no inference, presumption, or conclusion drawn whatsoever against
either party by virtue of that party having drafted this Lease or any portion
thereof.
M. NOTICES: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail, return
receipt requested, or by personal delivery addressed to the party to be notified
at the address for such party specified in Section 1 of this Lease, or to such
other place as the party to be notified may from time to time designate by at
least fifteen (15) days prior notice to the notifying party. When this Lease
requires service of a notice, that notice shall replace rather than supplement
any equivalent or similar statutory notice, including any notices required by
Code of Civil Procedure Section
Page 18
<PAGE> 22
1161 or any similar or successor statute. When a statute requires service of a
notice in a particular manner, service of that notice (or a similar notice
required by this Lease) shall replace and satisfy the statutory
service-of-notice procedures, including those required by Code of Civil
Procedure Section 1162 or any similar or successor statute.
N. PROPERTY MANAGEMENT: In addition, Tenant agrees to pay Landlord along
with the expenses to be reimbursed by Tenant a monthly fee for management
services rendered by either Landlord or a third party manager engaged by
Landlord (which may be a party affiliated with Landlord), in the amount of three
percent (3%) of the Base Monthly Rent.
O. RENT: All monetary sums due from Tenant to Landlord under this Lease,
including, without limitation those referred to as "additional rent", shall be
deemed as rent.
P. REPRESENTATIONS: Tenant acknowledges that neither Landlord nor any of
its employees or agents have made any agreements, representations, warranties
or promises with respect to the Premises or with respect to present or future
rents, expenses, operations, tenancies or any other matter. Except as herein
expressly set forth herein, Tenant relied on no statement of Landlord or its
employees or agents for that purpose.
Q. RIGHTS AND REMEDIES: Subject to Section 14 above, all rights and
remedies hereunder are cumulative and not alternative to the extent permitted
by law, and are in addition to all other rights and remedies in law and in
equity.
R. SEVERABILITY: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder of
the Lease shall not be invalidated thereby but shall be enforceable in
accordance with its terms, omitting the invalid or unenforceable term.
S. SUBMISSION OF LEASE: Submission of this document for examination or
signature by the parties does not constitute an option or offer to lease the
Premises on the terms in this document or a reservation of the Premises in
favor of Tenant. This document is not effective as a lease or otherwise until
executed and delivered by both Landlord and Tenant.
T. SUBORDINATION: This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "encumbrances")
which may now affect the Premises, to any covenants, conditions or restrictions
of record, and to all renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, if the holder or holders of any such
Encumbrance ("Holder") require that this Lease be prior and superior thereto,
within seven (7) days after written request of Landlord to Tenant, Tenant shall
execute, have acknowledged and deliver all documents or instruments, in the
form presented to Tenant, which Landlord or Holder deems necessary or
desirable for such purposes. Landlord shall have the right to cause this Lease
to be and become and remain subject and subordinate to any and all Encumbrances
which are now or may hereafter be executed covering the Premises or any
renewals, modifications, consolidations, replacements or extensions thereof,
for the full amount of all advances made or to be made thereunder and without
regard to the time or character of such advances, together with interest
thereon and subject to all the terms and provisions thereof; provided only,
that in the event of termination of any such lease or upon the foreclosure of
any such mortgage or deed of trust, Holder agrees to recognize Tenant's rights
under this Lease as long as Tenant is not then in default and continues to pay
Base Monthly Rent and additional rent and observes and performs all required
provisions of this Lease. Within ten (10) days after Landlord's written
request, Tenant shall execute any documents required by Landlord or the Holder
to make this Lease subordinate to any lien of the Encumbrance. If Tenant fails
to do so, then in addition to such failure constituting a default by Tenant, it
shall be deemed that this Lease is so subordinated to such Encumbrance.
Notwithstanding anything to the contrary in this Section, Tenant hereby attorns
and agrees to attorn to any entity purchasing or otherwise acquiring the
Premises at any sale or other proceeding or pursuant to the exercise of any
other rights, powers or remedies under such encumbrance.
U. SURVIVAL OF INDEMNITIES: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under this Lease shall survive the
expiration or sooner termination of the Lease.
V. TIME: Time is of the essence
Page 19
<PAGE> 23
hereunder.
W. TRANSPORTATION DEMAND MANAGEMENT PROGRAMS: Should a government
agency or municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or programs, Tenant agrees that the cost of TDM
imposed facilities and programs required on the Premises, including but not
limited to employee showers, lockers, cafeteria, or lunchroom facilities, shall
be paid by Tenant. Further, any ongoing costs or expenses associated with a TDM
program which are required for the Premises and not provided by Tenant, such as
an on-site TDM coordinator, shall be provided by Landlord with such costs being
included as additional rent and reimbursed to Landlord by Tenant within thirty
(30) days after demand. If TDM facilities and programs are instituted on a
Project wide basis, Tenant shall pay its proportionate share of such costs in
accordance with Section 8 above.
X. WAIVER OF RIGHT TO JURY TRIAL: Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in
any way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim or injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.
Page 20
<PAGE> 24
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.
LANDLORD: The Sobrato Group, TENANT: Telocity, Inc.
a California Limited Partnership a California Corporation
By: [ILLEGIBLE] *By: [ILLEGIBLE]
----------------------------- -----------------------------
Its: 12/17/99 Its: Executive Vice President
---------------------------- -----------------------------
*By: Matt Stepovich
-----------------------------
Its: Secretary, VP Legal Affairs
-----------------------------
*NOTE: This lease must be signed by two (2) officers of such corporation: one
being the chairman of the board, the president, or a vice president, and the
other being the secretary, an assistant secretary, the chief financial officer
or an assistant treasurer. If one (1) individual is signing in two (2) of the
foregoing capacities, that individual must sign twice; once as one officer and
again as the other officer and in such event, Tenant must deliver to Landlord a
certified copy of a corporate resolution authorizing the signatory to execute
this Lease.
Page 21
<PAGE> 25
EXHIBIT "A"
[MAP]
<PAGE> 26
[CISCO SYSTEMS LETTERHEAD]
December 7, 1999
Mr. Peter Olson
CTO
Telocity, Inc.
10355 N. De Anza Blvd.
Cupertino, CA 95014
RE: Repair of Heating, Ventilation and Air
Conditioning System ("HVAC System")
Servicing 490 Race Street, San Jose, California
Dear Mr. Olson:
In connection with Telocity Inc.'s agreement to lease the premises from
Sobrato Group, Cisco Systems, Inc. shall, at its sole cost and expense and
within sixty (60) days of the Effective Date of the Lease Termination Agreement
dated December __, 1999 between Cisco Systems, Inc. and Sobrato Group, make all
repairs required to put the HVAC System in good working order and repair, as
reasonably determined by Cisco.
Sincerely,
/s/ ELLEN JAMASON
- ---------------------------------
Ellen Jamason
Director of Real Estate Worldwide
Cisco Systems, Inc.
<PAGE> 27
[TELOCITY LETTERHEAD]
December 16, 1999
Mr. Phil Taylor
Sobrato Development
10600 N. De Anza Blvd.
Suite 200
Cupertino, CA 95014
RE: Security Deposit
Dear Phil:
To expedite the execution of the lease, we are going to provide a cash Security
Deposit of $700,000.00. Please be advised that we will trade out the cash
deposit for a letter of credit ("LC") in the next 60 days, as provided in the
Lease.
Please sign below, acknowledging that this arrangement is acceptable and that
upon presentation of the LC you will return the above deposit immediately,
without interest. Once this letter is signed, we will provide you with the cash
deposit.
Sincerely,
/s/ MICHAEL BUERGER
- ------------------------
Michael Buerger
Controller
Telocity, Inc
cc: Sonia Colgan
Matt Stepovich
Jeff Houston
Acknowledged:
/s/ PHIL TAYLOR
- -----------------------
Phil Taylor
Sobrato Development
<PAGE> 1
EXHIBIT 10.10
AGREEMENT FOR SERVICES
This Agreement is made this 6th day of October, 1999, by and between Telamon-IMS
Inc., a corporation duly organized and existing under the laws of the State of
Indiana and having its principal place of business at 1000 E. 116th Street,
Carmel, Indiana 46032 ("Contractor"), and Telocity Corporation (including its
affiliates and subsidiaries), a corporation duly organized and existing under
the laws of the State of California and having its principal place of business
at 10355 N. De Anza Boulevard, Cupertino, California, 95014-2027 ("Customer").
In consideration of the promises, mutual covenants and agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, Customer
and Contractor agree as follows:
1. TERM
This Agreement shall commence on October 15th, 1999, and expire on April 15th,
2000, (the "Initial Term") and shall continue in such full force and effect for
successive periods of one year thereafter unless terminated by either party by
giving notice in writing by registered mail at least 30 days prior to the
expiration of any such yearly period. The parties may extend the Initial Term by
executing a separate written agreement of extension prior to the expiration of
the Initial Term.
2. TERMINATION OF AGREEMENT FOR CONVENIENCE
2.1 Either party shall, in addition to its rights to cancel this Agreement
for default, have the right for its convenience to terminate this
agreement without cause during the Initial Term or any extension
thereof by giving the other party at least ninety (90) days written
notice of termination specifying the extent to which the Agreement is
terminated and the date upon such termination becomes effective.
2.2 Upon notice of termination:
2.2.1 Contractor shall stop work under the Agreement on the date and
to the extent specified;
2.2.2 Both parties shall place no further contracts except as may be
necessary for completing such portions of the Agreement as
have not been terminated;
2.2.3 Both parties shall take all reasonable efforts to terminate
any contracts with third parties that relate to the portions
of this Agreement that have been terminated to the extent they
can do so without breaching those third-party agreements; and
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<PAGE> 2
2.2.4 Contractor shall take such action as may be necessary to
protect and preserve the property related to the Services
which is in Contractor's possession and which was provided by
Customer.
2.3 Termination of this Agreement shall not affect either Customer's or
Contractor's pre-termination obligations hereunder and shall be without
prejudice to enforcement of any discharged obligations existing at the
time of termination.
2.4 Neither party shall be liable for damages, loss, anticipated profit, or
unabsorbed indirect costs of overheads or any other losses or claims
whatsoever on account of or arising out of termination of this
Agreement for convenience.
3. SCOPE OF SERVICES
The description of the Services, together with the location(s), time(s) of
performance, and Performance Standards are described in the attached Service
Schedule made a part hereof by this reference. Services shall be performed upon
such terms as set forth in the Service Schedule(s) and this Agreement unless
expressly modified or amended in writing by the parties.
4. SERVICE FEE
As consideration for Contractor's performance of the Services, Customer agrees
to pay Contractor the Service Fee(s) set forth in the Service Schedule(s). The
Service Fee shall constitute the total financial obligation of Customer to
Contractor.
5. INVOICES AND PAYMENTS
Contractor shall issue invoices in the format required by Customer within thirty
(30) days following the completion of the Services. Invoices for completed
Services shall be paid within thirty (30) days following receipt of an invoice.
All amounts past due over thirty (30) days shall bear interest from the due date
until paid at the rate of two (2) percent per month or such lesser rate as may
be the maximum permissible rate under applicable law.
6. CANCELLATION OF AGREEMENT FOR DEFAULT
Should either party at any time (1) become the subject of bankruptcy proceedings
not terminated within thirty (30) days of any filing, make a general assignment
for the benefit of creditors, make or permit the appointment of a receiver for
all or substantially all or its property, or (2) fail or refuse to prosecute its
obligations hereunder diligently or perform any other requirement of this
Agreement and not cure such failure within (30) days after written notice
thereof from the other party, the other party shall have the right, at its
election and without prejudice to any other remedies, to cancel this Agreement
in whole or in part.
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<PAGE> 3
7. FURNISHING OF LABOR, TOOLS, EQUIPMENT AND MATERIAL
Contractor shall furnish, at its own expense, all labor, supervision, machinery,
tools, equipment, fuel, power, materials, expandable supplies, transportation,
licenses, permits, bonds and all other items, whether of the type described or
not, that may required or appropriate in the performance of the Services covered
by this Agreement except such items which may be specifically provided to be
furnished by Customer. All materials, supplies, and other items purchased by
Contractor shall be in Contractor's own name and account. Contractor shall be
responsible for all freight and delivery, costs of materials, supplies,
equipment, and other items on the work site and shall be responsible for
intransit loss or damage.
8. PROPRIETARY INFORMATION
All marketing information designated by either party as confidential, the
Customer's list of customers, and technical information, specifications,
drawings, documentation, methods and other proprietary information of any kind
and description whatsoever disclosed by either party to the other under this
Agreement, except insofar as such information is (i) in the public domain, (ii)
established to have been independently developed and so documented by the other
party or (iii) obtained by the other party from any person not in breach of
confidentiality obligations to the disclosing party, is the exclusive property
of the disclosing party (the "Proprietary Information"). Except as specifically
authorized in writing by the disclosing party or as permitted hereunder, the
nondisclosing party shall treat and protect the Proprietary Information as
confidential, shall not reproduce the Proprietary Information except to the
extent reasonably required for the performance of this Agreement, shall not
divulge the Proprietary Information in whole or in part to any third parties,
and shall use the Proprietary Information only for purposes necessary for the
performance of this Agreement. This obligation shall survive the termination of
this Agreement. Each party shall disclose the Proprietary Information only to
those of its employees and agents who have a "need-to-know" the Proprietary
Information for the purposes described herein after first making such employees
or agents aware of the confidentiality obligation set forth above.
9. INDEPENDENT CONTRACTOR
The parties represent that they are engaged in an independent business and will
perform their obligations under this Agreement as an independent contractor and
not as the agent or employee of the other party. Each party is solely
responsible for its acts and those of its personnel. Each party has and retains
the right to exercise full control of and supervision over the employment,
direction, compensation and discharge of all personnel assisting in the
performance of its obligations. Each is solely responsible for
3
<PAGE> 4
compensation to its personnel and each party shall comply with workers'
compensation, unemployment, disability applicable federal, state and local laws,
rules and regulations.
10. INDEMNITY
10.1 Each party hereto shall indemnify and save the other harmless from any
liabilities, claims or demands (including the costs, expenses and
reasonable attorney's fees on account thereof) that may be made by
anyone for personal injuries, including death, or damage to tangible
property, including theft, resulting from the negligence and/or willful
misconduct of that party, its employees and agents. Each party shall
defend the other at the other's request against any such liability,
claim or demand. Each party shall notify the other promptly of written
claims or demands against such party of which the other party is
responsible hereunder.
10.2 Customer shall indemnify Contractor for any loss, damage, expense or
liability including, without limitation, court costs and attorney's
fees that may result by reason of any infringement or claim of
infringement of any patent, trademark, copyright, trade secret or other
property right relating to Service furnished pursuant to this
Agreement. Customer shall defend and/or settle at its own expense any
action brought against Contractor to the extent that it is based on a
claim that Service furnished by Contractor pursuant to this Agreement
infringe any patent, trademark, copyright, trade secret or other
proprietary right.
11. ADVERTISING
No identification of Contractor, references to Contractor or third parties or
references to Contractor's name, marks, codes, drawings or specifications will
be used in any of Customer's advertising or promotional efforts in reference to
providing Services hereunder without Contractor's prior written permission.
Customer shall indemnify Contractor and any third parties against any claim
arising out of Customer's failure to do so.
12. TIME OF PERFORMANCE
Contractor shall use its best effort in performing the services in accordance
with the schedule described in the scope of service.
13. FORCE MAJEURE
If the performance of any obligation under this Agreement is interfered with by
reason of any circumstances beyond the reasonable control of the party affected,
including, without limitation, fire explosion, power failure, acts of God, war,
revolution, civil commotion, delays of the other party in the performance of any
of its obligations hereunder, delays of subcontractor or suppliers,
unavailability of sources of energy, acts of the public enemy,
4
<PAGE> 5
or any law, order, regulation, ordinance or requirement of any government or
legal body, and labor difficulties, including without limitation, strikes,
slowdown ?????????? boycotts; then the party affected shall be excused from such
performance for period equal to the delay resulting from any such causes and
such additional period as may be reasonably necessary to allow the party to
resume its obligations, (and the other party shall likewise be excused from
performance of its obligations to the extent such party's obligations relate to
the performance so interfered with). The party so affected shall make reasonable
efforts to remove such causes of nonperformance; provided, however, in the
context of labor difficulties, that a party shall not be obligated to accede any
demands being made by employees or other personnel. Notwithstanding the
foregoing, if any such event occurs, either party may terminate this Agreement
immediately unless the party suffering the event provides adequate assurance to
the other that it will be able to resume performance of substantially all of its
business activities within seven days of the event.
14. GOVERNING LAW AND ARBITRATION
This Agreement shall be governed by and construed in all respects in accordance
with the laws of the State of Indiana as to both substance and procedure. Venue
shall lie in Indianapolis, Indiana, regarding the resolution of any disputes
arising hereunder. Any controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in the City of Indianapolis, Indiana,
in accordance with the then-governing rules of the American Arbitration
Association. Judgment upon the award rendered may be entered and enforced in any
court of competent jurisdiction.
15. SEVERAL LIABILITY
The term Customer as used herein may be applicable to one or more parties and
the singular shall include the plural. If there shall be more than one party
referred to as Customer herein, then their original obligations and liabilities
shall be several, not joint.
16. NONWAIVER
Except as specifically provided for in a waiver signed by duly authorized
representatives of Customer and Contractor, failure by either party at any time
to require performance by the other party or to claim a breach of any provision
of this Agreement shall not be construed as affecting any subsequent breach or
the right to require performance with respect thereto or to claim a breach with
respect thereto.
17. REMEDIES CUMULATIVE
The remedies provided herein shall be cumulative and in addition to any other
remedies provided by law or equity.
5
<PAGE> 6
18. AMENDMENTS
No change or modifications of any terms or conditions herein shall be valid or
binding on either party unless made in writing and signed by an authorized
representative of each party.
19. NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed
return-receipt-requested and delivered by the United States Postal Service or
other delivery service to the following addresses:
CONTRACTOR:
Telocity
10355 N. De Anza Boulevard
Cupertino, California
95014-2027
CUSTOMER:
Telamon Corporation
1000 East 116th Street
Carmel, IN
46032
Addresses may be changed by written notice to the parties.
6
<PAGE> 7
20. ENTIRE AGREEMENT
This Agreement, together with all referenced attachments shall constitute the
entire Agreement between the parties with respect to the subject matter of this
Agreement. This Agreement supersedes all prior oral and written communications,
agreements and understandings of the parties with respect to the subject of this
Agreement.
If any of the provisions of this Agreement shall be adjudged invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render this Agreement unenforceable, but rather this Agreement shall be
construed and enforced accordingly, provided that, in the event either party
would not have entered into this Agreement without such provision, that party
shall have the right to terminate this Agreement.
The parties intending to be legally bound have caused this Agreement to be
executed by their duly authorized representatives on the dates set forth below.
TELAMON IMS CORPORATION
/s/ JAMES H. ROHRER /s/ KEVIN MENDELL
- --------------------------------- ---------------------------------
(Authorized Signature) (Authorized Signature)
James H. Rohrer Kevin Mendel
- --------------------------------- ---------------------------------
(Print or Type Name of Signatory) (Print or Type Name of Signatory)
Customer Care Officer V.P. Marketing & Sales
- --------------------------------- ---------------------------------
(Title) (Title)
10/28/99 11/1/99
- --------------------------------- ---------------------------------
(Execution Date) (Execution Date)
7
<PAGE> 8
SERVICE SCHEDULE NO. ONE
PRE-SALES/SALES ADMINISTRATION
o Answer all inbound telephone and email inquiries
o Provide product, service, and customer care information to prospective
and signed Telocity customers
o Track all calls in a Telamon database call log
o Generate of a customer record through the Telocity web site
o Qualify the prospective customer's phone line for DSL service using a
Telocity database
o Sell Telocity products and services
o Complete all customer data fields to include but not limited to the
customer's computer equipment, other telephony based systems such as
security monitors, and the network interface device (NID)
o Triage customer to either a) modem only sale, or b) modem sale plus
installation of equipment
o Process customer's charge using the generally accepted charge cards
(conducted onsite at Telamon between November 1st and January 1, 2000
and thereafter through the Telocity web site).
o Schedule shipment of the Telocity product
o Schedule installation (if required)
o Submit line activation order
o Track submission of line activation order request
o Update database with line activation due date or rejection information
(rejection criteria established by Telocity)
o If line activation is rejected, contact customer and inform. Cancel
installation if scheduled. Process charge card credit. Cancel shipment
of modem.
o Process product warranty claims
FEES
<TABLE>
<CAPTION>
ITEM FEE
- ------------------------------- -------------------------------
<S> <C>
Sales & General Information [*]
Support Services
Dispatch
Credit Card Processing
Installation Database
Installation Database
Modifications/Technical
Assistance
Telephony Charges
</TABLE>
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
8
<PAGE> 9
NOTES:
1. [*]
2. Installer help desk functions associated with Telocity's residential
installations have been built into the "Telamon Installation Proposal".
3. Hours of operation: 7:00 am - 7:00 pm Monday thru Friday. Saturday 9:00
am 5:00 pm. The times designated will correspond to the Atlanta,
Georgia time zone.
4. Telocity will provide Telamon with projected call volumes on the 30th
of each month; these volumes will be for two months in advance. When
such a report is received, Telamon will have 30 days to recruit, hire,
and train new staff for the Telocity project.
SYSTEMS INTERFACE - TELAMON TO TELOCITY
A. The interface mechanism and processes are to be determined.
B. Telamon proposes to download customer data in batch every two hours
during normal business hours.
C. Telamon proposes to upload shipping data at most twice per day from
Telamon to the Telocity OSS system.
D. Communication costs incurred by Telamon will be reimbursed by Telocity
to Telamon upon approval by Telocity.
1. ACCOUNT MANAGEMENT
Telamon has assigned an Account Manager, Liz Holland, to act as the
Single Point of Contact (SPOC) between Telocity and Telamon.
Liz will:
A. Assist Telocity staff in developing customer service processes and
procedures;
B. Understand the objectives of the business model and work to ensure
that Telamon's resources are properly assigned to meet
expectations;
C. Communicate/meet with Telocity staff when planning new promotions
or modifications to the web site;
D. Monitor work activity and generate and provide reports to Telocity
and Telamon personnel;
E. Generate any invoicing as defined by the agreement; and
F. Field inquiries and complaints from Telocity. The AM will be
responsible for providing a response to complaints within two
business days of the complaint.
REPORTING
Telamon will provide standard reports on business activity from this
agreement to help Telocity to monitor certain business results.
A. Submitted on a scheduled time interval as mutually agreed upon by
Telocity and Telamon.
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
9
<PAGE> 10
Installation
o Services, fees and schedules have been provided under separate cover
"Wiring Installation Process and Requirements for Bell South ADSL
Deployment" dated 9/15/99.
Excerpts from Telamon's installation proposal are included in the following
paragraphs.
Installer Reporting
Telamon proposes to provide real time results reporting to support this project.
The installer will input required information at the customer's location that
will update the database essentially immediately. Telamon's program is password
protected to insure the integrity of the information being reported. The format
for this information can be tailored to the needs of Telocity. Alternatively,
should Telocity require direct input to its database, this is certainly
feasible. Telamon would only request that Telocity provide Telamon customer
information on a daily basis. Such information is critical to the installers,
our dispatch team and our installer help desk in assuring optimal service for
the customer and minimizing redundancy of activity in the event of a failed
install, repair or service call.
Recommended Installation Schedule
Telamon typically schedules installations at 8 am, 11 am, 1 p.m. and 3 p.m.
daily, with a two-hour window to accomplish the installation. The installer
arrives at the customer's location as an example, between 7 a.m. and 9 a.m. for
the 8 a.m. installation, having obtained customer permission to arrive ahead of
schedule.
Telamon's normal hours of operation for the installation team are 7 a.m. to 5
p.m. Scheduled installations, which occur after 5 p.m. and on Saturdays will be
subject to an additional installation charge (to be negotiated).
Telamon maintains the following insurance limits, and will maintain them for the
entire term of the contract:
1. Commercial General Liability Insurance in an amount not less
than two million dollars ($2,000,000) per occurrence for
bodily injury or property damage;
2. Employer's Liability Insurance in an amount not less than one
million dollars ($1,000,000) per occurrence;
3. Workers' Compensation Insurance in an amount not less than
that prescribed by statutory limits;
4. Commercial Automobile Liability Insurance applicable to bodily
injury and property damage, covering owned, non-owned, leased
and hired vehicles, in an amount not less than one million
dollars ($1,000,000) per accident;
5. Umbrella or Excess Liability Insurance with a combined single
limit of no less than one million dollars ($1,000,000) per
occurrence to apply over
10
<PAGE> 11
Commercial General Liability, Employer's Liability, Workers'
Compensation, and Commercial Automobile Liability Insurance.
11
<PAGE> 12
Installer Help Desk
Telamon has an ADSL help desk capable of providing support for the installers.
Our technicians are experienced in dealing with a range of issues including the
following:
o ADSL help desk technicians are skilled in working with local exchange
carriers to troubleshoot and resolve local loop issues, and can serve
as the single point of contact between the carrier, the installers and
end users. This allows the carrier to be certain that standardized
troubleshooting procedures are being followed prior to their
involvement and also insures that changes in troubleshooting procedures
will be implemented immediately and pervasively.
o Telamon maintains an extensive technical knowledge base on the company
intranet that provides help desk technicians with quick access to
on-line reference material. The knowledge base is updated regularly to
insure that the technicians are using the most current information in
their troubleshooting procedures.
Additional
The final step of the installation is completion of the Customer Satisfaction
survey. In Telamon's system, the installer will open the survey on the
customer's computer enter his name, city, phone number and e-mail address. The
installer will then request the customer take a few minutes to voluntarily
complete the survey and forward to Telamon electronically. The web page will be
set up to forward a record to Telamon even in the event a customer chooses not
to fill out the survey. This assures Telamon that the installer is following the
procedures outlined in the installation manual as well as providing feedback on
the installer's performance.
INSTALLATION PRICING
<TABLE>
<CAPTION>
CATEGORY TERMS PRICING($) SPECIAL CONSIDERATIONS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Successful ADSL Not Not Applicable
(splitterless install) Applicable
ADSL and home alarm 30 days net [*] This is a more labor intensive
systems installation. The installer
helpdesk labor is included in
this price. Telephony access
charges are separate pass through
costs.
- ----------------------------------------------------------------------------------------------------
ADSL splitterless install 30 days net [*] The installer helpdesk labor is
with trouble ticket included in this price. Telephony
access charges are separate pass
through costs.
- ----------------------------------------------------------------------------------------------------
</TABLE>
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
12
<PAGE> 13
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repair 30 days net $95 Under these circumstances Telamon
anticipates the customer will be up
and running for a period of time and
then has problems that could not be
resolved by the Telocity's technical
helpdesk.
- ----------------------------------------------------------------------------------------------------
</TABLE>
NOTE:
o Any equipment costs incurred by Telamon (such as splitters), which
would be required to successfully complete an installation for and on
behalf of Telocity, will be considered a reimbursable expense and
passed through to Telocity with appropriate documentation.
o The following Installation Deployment Plan is based on Telocity's
projected capacity to ramp up:
INSTALLATION DEPLOYMENT PLAN
<TABLE>
<CAPTION>
CITY INSTALL DATE CITY INSTALL DATE
- ---- ----------- ---- ------------
<S> <C> <C> <C>
Atlanta 11/12/99 Augusta 11/29/99
Miami 11/12/99 Chattanooga 11/29/99
West Palm Beach 11/12/99
Ft. Lauderdale 11/12/99 Montgomery 12/6/99
Boca Raton 11/12/99 Columbia 12/6/99
Orlando 11/12/99 Louisville 12/6/99
Baton Rouge 11/12/99 Greensboro 12/6/99
New Orleans 11/12/99
Charlotte 11/12/99 Greenville 12/13/99
Daytona Beach 11/12/99 Huntsville 12/13/99
Knoxville 11/12/99 Charleston 12/13/99
Memphis 11/12/99
Nashville 11/12/99
Athens 11/22/99
Jacksonville 11/22/99
Birmingham 11/22/99
Gainesville 11/22/99
Pensacola 11/22/99
Raleigh 11/22/99
Lafayette 11/22/99
Jackson 11/22/99
</TABLE>
o The Install Date is defined as: the date Telamon is prepared to install
ADSL in the above cities.
o The attached "Sales vs. Installers" spreadsheet is for reference. This
is Telocity's projected installation capacity.
13
<PAGE> 1
EXHIBIT 10.11
THE SUTHERLAND GROUP, LTD.
STANDARD TERMS AND CONDITIONS
AGREEMENT FOR SERVICES
This Agreement, including the attached Statement of Work (collectively
"Agreement") effective as of the date of the latest signature below, by and
between THE SUTHERLAND GROUP, LTD., a New York corporation with offices at 1160
Pittsford-Victor Road, Pittsford, New York 14534 ("SGL") and Telocity, Inc, with
offices at 10355 North De Anza Blvd., Cupertino, CA 95014 ("Client").
Client desires to obtain, and SGL desires to provide, services in relation to
the staffing and management of a program to be referred to as Technical Support
Program ("Program").
SCOPE:
SGL shall perform services at levels authorized by Client and shall manage and
supervise the Program as more specifically set forth in the attached Statement
of Work (the "Services").
SGL shall and does hereby acknowledge that SGL is an independent contractor
providing services to Client. SGL may perform its obligations through the use of
independent contractors, provided, however, SGL will not be relieved of its
obligations under this Agreement by use of any subcontractors.
OPERATIONS:
SGL shall provide the necessary personnel who shall have that level of training
and experience which is appropriate to the nature of the Services described in
the attached Statement of Work.
SGL shall comply at all times with all Federal, state and local authorities,
statutes, rules and regulations applicable to its business activities and shall
provide worker's compensation insurance in amounts required by applicable law.
SGL and its personnel shall comply at all times with all rules and regulations,
policies and practices applicable to Client's business activities which are
communicated to SGL management by Client.
FEES:
Client shall pay SGL for its services and costs as described in the attached
Statement of Work. Unless another payment schedule has been agreed upon and set
forth in the attached Statement of Work, SGL shall invoice on the first (1st)
day of the month in which services are to be rendered. Payment shall be due
within thirty (30) days of date of an invoice from SGL and, if not paid within
that time, will bear interest from that date, until paid, at the rate of one and
one-half percent (1-1/2%) per month.
<PAGE> 2
Notwithstanding anything to the contrary in this Agreement, if Client fails to
make any payment when due SGL past 60 days, SGL will have the right to
immediately suspend its performance under this Agreement. Any suspension of
performance will not limit or affect SGL's right to recover amounts owed by
Client prior to such suspension, or any other rights or remedies SGL may have.
TERM OF THE AGREEMENT:
The term of this Agreement shall be that specified in the attached Statement of
Work (the "Term"), subject to the right of the parties to terminate this
Agreement pursuant to the provisions of this Agreement.
Client may terminate for convenience all or any portion of SGL's Services
hereunder effective, upon ninety (90) days written notice to SGL; provided that
Client shall remain liable to SGL for amounts due up to the date of termination
(including, amounts due for services rendered and costs during the notice
period). As an alternative, Client may provide SGL with written demand that SGL
immediately cease performance of all services upon receipt of such demand, but
in that case, Client shall remain liable to SGL for service fees and costs for a
period of ninety (90) days from receipt of the demand at the same rates and in
the same amounts as if SGL had provided services during that period.
Client shall have the option to increase the SGL staffing from that provided in
the Statement of Work by giving thirty (30) days written notice to SGL and
paying SGL the associated personnel cost fee. SGL shall not modify its staffing
levels with respect to the Services without written concurrence from the Client.
In the event either party fails to perform any of its obligations under this
Agreement unless (i) such failure is cured within thirty (30) days after written
notice (10 days for payment default) to the defaulting party specifying the
nature of the failure or, (ii) the defaulting party is diligently proceeding
with the cure of such default, the non-defaulting party may, in addition to any
other remedies available at law or in equity, terminate the Agreement on the
date thirty (30) days after such notice to the defaulting party (10 days for
payment default). If Client terminates the Agreement, Client shall pay SGL for
all services rendered prior to the effective date of termination, including
services rendered during the relevant notice period.
UNAVOIDABLE DELAYS:
Neither party shall be responsible for delays or errors in its performance under
this agreement occurring by reasons or circumstances beyond its control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, flood or catastrophe, acts of God, insurrection, war, riots,
or failure of transportation, communication or power supply; provided, however,
that should any such delay continue for more than forty-five (45) days, the
Agreement may be terminated upon written notice by the party whose performance
is not affected by the delay.
-2-
<PAGE> 3
WARRANTY OF SGL AND LIMITATION OF LIABILITY:
SGL represents and warrants that the Services to be provided by SGL hereunder
shall be done in a workmanlike manner and conform at all times in all material
respects to the descriptions and levels of Service set forth in this Agreement.
EXCEPT AS SET FORTH IN THIS AGREEMENT, THE SERVICES TO BE PROVIDED BY SGL TO
CLIENT HEREUNDER ARE PROVIDED WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. IN NO EVENT WILL SGL HAVE ANY LIABILITY, WHETHER BASED ON
CONTRACT, TORT (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE), WARRANTY OR ANY
OTHER LEGAL OR EQUITABLE GROUNDS, FOR ANY LOSS OF INTEREST, PROFIT OR REVENUE BY
THE OTHER PARTY OR FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES SUFFERED BY THE OTHER PARTY, ARISING FROM OR
RELATED TO THIS AGREEMENT, EVEN IF SGL HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH LOSSES OR DAMAGES.
The monetary liability of SGL (including that of its agents and subcontractors)
for all claims resulting from its performance or non-performance under this
Agreement, regardless of the form of the action, and whether in contract, tort
(including, but not limited to, negligence), warranty or other legal or
equitable grounds, will be limited to a cumulative aggregate amount equal to
three (3) times the average monthly invoice for Services rendered by SGL.
WARRANTY OF CLIENT:
Client warrants and represents that at no time during the Term of this Agreement
will the use of any services, information, materials, techniques, or products
provided by Client infringe upon any third party's patent, trademark copyright,
or other intellectual property right, nor make use of any misappropriated trade
secret. No statements contained in any written information furnished to SGL by
or on behalf of Client in connection with this Agreement contain any untrue
statement of a material fact or omit any material fact necessary to make the
statement not misleading.
INDEMNIFICATION:
Client agrees to indemnify, defend and hold SGL harmless from and against any
and all losses, arising from or in connection with, (a) any claims of
infringement made against SGL of any patent, trademark, copyright, or similar
property rights (including without limitation, misappropriation of trade
secrets), alleged to have occurred because of equipment, systems, products or
other resources, information or items provided to SGL by Client hereunder, (b)
any claim made against SGL based upon either the sale or license of any product
or service of Client as a result of the Services performed by SGL, or (c) any
representation made by SGL and approved by Client, whether such claim is based
on contract, tort (including, without limitation, negligence), warranty or any
other legal or equitable grounds.
-3-
<PAGE> 4
CONFIDENTIALITY:
All confidential or proprietary information and documentation ("Confidential
Information") relating to either party shall be held in confidence by the other
party to the same extent that and in at least the same manner as such party
protects its own confidential or proprietary information. Except as is
reasonably necessary to the performance of its duties and obligations under this
Agreement, neither party shall use, disclose, publish, release, transfer or
otherwise make available Confidential Information of the other party in any form
to, or for the use or benefit of, any person or entity without the other
parties' approval. Each party shall be permitted to disclose relevant aspects of
the other parties' Confidential Information to its officers, agents and
employees to the extent that such disclosure is reasonably necessary to the
performance of its duties and its obligations under this Agreement, provided
that such parties shall take all reasonable measurers to insure that
Confidential Information of the other party is not used, disclosed or duplicated
in the contravention of the provisions of this Agreement by such officers,
agents and employees.
All Confidential or Proprietary Information made available in document or other
tangible form must bear an appropriate legend indicating its confidential or
proprietary nature, and, if initially disclosed orally or visually, must be
identified as confidential at the time of disclosure and a written summary
thereof, also marked with such a legend, must be provided reasonably promptly
following the initial disclosure.
The obligations in this "Confidentiality" section shall not restrict any
disclosure by either party pursuant to any applicable law, or by order of any
court or government agency (provided that the disclosing party shall endeavor to
give such notice to the non-disclosing party as may be reasonable under the
circumstances) and shall not apply with respect to information three (3) years
after its disclosure, or that is independently developed by the other party,
becomes part of the public domain (other than through unauthorized disclosure),
is disclosed by the owner of such information to a third party free of any
obligation of confidentiality or which either party gained knowledge or
possession of, free of any obligation of confidentiality.
TAXES:
Client shall, in addition to other payments required hereunder, pay all sales,
use, transfer or service taxes, whether federal or state or local, however
designated, that are levied or assessed on the provision of the Services by SGL
to Client or on the charges to Client under this Agreement, excluding however,
income taxes that may be levied against SGL.
NON-SOLICITATION OF EMPLOYEES:
During the term of this Agreement and for a period of one (1) year after its
termination, neither SGL nor Client shall actively or knowingly solicit any
full-time employee of the other with whom it has had direct contact as a result
of this Agreement (or any such former employee who has left the employ of the
other within the prior one (1) year period), to become its employee or
contractor or through any third party without the consent of the other party to
this Agreement.
-4-
<PAGE> 5
NON-EXCLUSIVE AGREEMENT:
Nothing in this Agreement shall be construed as prohibiting or restricting
Client from independently developing or acquiring materials or services which
are competitive with those delivered hereunder, from marketing such materials or
services or from marketing the Client products or services which are the subject
of the Statement of Work either itself or through a third party. Further,
nothing in this Agreement shall be construed as prohibiting or restricting the
right of SGL to provide similar services to any other entity.
SGL will retain all rights to the ideas, know-how, techniques, and software
related to the contact management system used by SGL in rendering, or to
facilitate the rendering of, the Services or the manner and method by which the
Services are rendered.
NOTICES:
All notices, requests, and demands hereunder will be given in writing and shall
be deemed to have been given if delivered in person, or via a reputable,
receipted overnight courier service, or by United States mail, certified or
registered, with return receipt requested, in either case addressed to the party
at the address for that party first written above (or to such other address as
either party specifies in writing to the other). Any notice, sent as provided
above, will be deemed given upon receipt at the address provided for above.
DISPUTE RESOLUTION:
If a dispute arises between the parties relating to this Agreement, the parties
agree to use the following procedure prior to either party pursuing its right to
binding arbitration:
(a) Upon written request of either party (the "Dispute Notice"), a "Senior
Representative" from each of the parties will meet for the purpose of
endeavoring to resolve the dispute. The meeting shall occur at a
mutually agreeable time and site (which meeting may be by teleconference
if mutually agreed upon).
(b) Each Senior Representative shall, in good faith, give audience to the
other's presentation of its position, and they shall jointly attempt to
reach a resolution of the dispute. Promptly following the meeting, a
memorandum will be prepared for both parties signature setting forth any
points of agreement between the parties.
(c) If the dispute is not resolved within fifteen (10) days of the Dispute
Notice, then the party sending the Dispute Notice may institute
arbitration of the dispute.
(d) For the purposes of this section, a party's "Senior Representative"
shall be a senior level employee or officer not involved with the
project who has decision making authority regarding the resolution of
the dispute.
-5-
<PAGE> 6
BINDING ARBITRATION:
The parties agree that any controversy or dispute arising out of or relating to
this Agreement that is not resolved using the Dispute Resolution procedure set
forth above, shall be settled by arbitration in Rochester, New York, in
accordance with the rules of the American Arbitration Association then in force.
The arbitration shall be governed by the United States Arbitration Act, and
judgement upon the award rendered by the arbitrator(s) may be entered by any
court having jurisdiction thereof.
GOVERNING LAW; VENUE:
This Agreement shall be governed and construed in accordance with the laws of
the State of New York without regard to conflicts of law principles. Any action
or proceeding arising out of, or related to, this Agreement may be brought only
in an appropriate state or federal court in Monroe County, New York.
ATTORNEYS' FEES:
Each party shall reimburse the other party on demand for all reasonable
out-of-pocket expenses incurred by the other party, including arbitration/court
costs and fees and reasonable expenses of counsel, as a consequence of or in
connection with, the successful enforcement by such other party of any right or
remedy hereunder.
If any audit or examination reveals that Client has underpaid SGL by more than
two percent (2%) during the period to which the audit relates, the direct and
reasonable costs of such audit shall be borne by Client.
SURVIVAL:
The provisions hereof related to Warranty, Indemnification, and Binding
Arbitration will survive any termination of this Agreement. In addition, any
other terms of this Agreement which by their terms extend beyond the termination
of this Agreement shall remain in effect until fulfilled.
NON-WAIVER:
The failure of either party to enforce at any time of the provisions of this
Agreement or to require any act of performance hereunder shall not be construed
a waiver of such provisions or right to performance nor in any way to affect the
validity of this Agreement or the right of either party to, thereafter, enforce
each and every provision or right to performance.
SAVINGS CLAUSE:
The invalidity of, or inability to enforce any particular provision of this
Agreement will not affect the other provisions of this Agreement, and this
Agreement will be construed in all respects as if any invalid or unenforceable
provision had been omitted.
-6-
<PAGE> 7
CAPTIONS:
The paragraph headings in this Agreement have been inserted for the purpose of
convenience and ready reference. They do not purport to and shall not be deemed
to define, limit or extend the scope or intent of the paragraph to which they
pertain.
ASSIGNMENT, HEIRS AND ASSIGNS:
Client may assign this Agreement and/or the rights granted under this Agreement
in connection with a sale, merger, or other disposition of its business,
provided that the successor agrees to be bound by all the terms and conditions
hereof.
ENTIRE AGREEMENT:
This Agreement, the Statement of Work, any appendices and referenced agreements,
embody the entire agreement of the parties with respect to the subject matter
contained herein. There are no promises, terms, conditions, or obligations other
than those contained herein. This Agreement supersedes all previous and
contemporaneous communications, representations or agreements, either verbal or
written, between the parties. It shall not be modified except by a written
agreement dated subsequent to the date of this Agreement and signed on behalf of
SGL and the Client by their respective duly authorized representatives.
IN WITNESS WHEREOF, the parties have executed this Agreement.
THE SUTHERLAND GROUP, LTD.
By: /s/ JAMES H. ROHRER By: /s/ THOMAS A TOPOLINSKI
------------------------------- -------------------------------
Name: James H. Rohrer Name: Thomas A Topolinski
------------------------------ ------------------------------
Title: Customer Care Officer Title: Vice President
----------------------------- -----------------------------
Date: Oct. 8, 1999 Date: 10/28/99
------------------------------- -------------------------------
-7-
<PAGE> 8
STATEMENT OF WORK
-8-
<PAGE> 9
[TELOCITY LOGO]
InterChange DSL Help Desk
- --------------------------------------------------------------------------------
STATEMENT OF WORK
FOR THE
[TELOCITY LOGO]
INTERCHANGE DSL HELP DESK
BY
THE SUTHERLAND GROUP, LTD.
[LOGO] [LOGO]
September 10, 1999
# PTMEB0786
v1.2
/s/ [SIGNATURE ILLEGIBLE] /s/ JAMES H. ROHRER 9/16/99
- ------------------------------ ----------------------------------
The Sutherland Group, Ltd Date Telocity Date
- --------------------------------------------------------------------------------
Confidential Page 1 9/16/99
[LOGO] [LOGO]
<PAGE> 10
[TELOCITY LOGO]
InterChange DSL Help Desk
- --------------------------------------------------------------------------------
INTRODUCTION
This Statement of Work (SOW) describes the work and services that The Sutherland
Group, Ltd. (Sutherland) is prepared to perform for Telocity by creating and
maintaining Telocity's InterChange DSL Technical Support Center.
EXECUTIVE SUMMARY
Telocity is in the initial stages of rolling out the InterChange DSL system to
selected markets throughout the United States. The launch will initially target
consumers in the "NFL Cities" market. InterChange DSL consists of a "smart" DSL
modem allowing the end-user to self-install the product, eliminating the need
for onsite installation by technical personnel ("truck roll"). The system is
specifically aimed at the home consumer market; therefore, many end users of
the product will require live technical support as well as associated Pre-Sales
Customer Service.
DELIVERABLES
In the spirit of partnership, Sutherland suggests the following service options
to minimize support costs while still delivering superior service to Telocity
customers:
o Pre-Sales Customer Service will be provided from 7 a.m. to 7 p.m.
Eastern Time (7x12).
o Post-Sales Technical Support will be provided from 7 a.m. to 11 p.m.
Eastern Time (7x16).
o Customers will dial a toll-free phone number dedicated to Telocity.
The call will be picked up by the IVRU (Interactive Voice Response
Unit) and directed to the dedicated TSE (Technical Support Engineer)
o Sutherland will utilize Telocity's OSS software and Remedy to track
and monitor all calls received by the Help Desk.
o Average call duration is expected to be 5 minutes for Pre-Sales
Customer Service Calls.
o Average call duration is expected to be 10 minutes for Help Desk
Technical Support Calls.
o Sutherland will provide service utilizing 15 dedicated Technical
Support Engineer's (TSE's)
- --------------------------------------------------------------------------------
Confidential Page 2 9/16/99
[LOGO]
<PAGE> 11
[TELOCITY LOGO]
InterChange DSL Help Desk
- -------------------------------------------------------------------------------
o Telocity will provide Sutherland with a working copy of the latest version
of InterChange and all associated hardware and software on an ongoing
basis. Sutherland will institute a lab environment for the use of the
InterChange DSL system TSE's in order to emulate the user's regular
environment and attempt to duplicate the problems that are the subject of
the support calls. This allows the TSE's to become proficient in the use
and support of Interchange DSL.
Sutherland has the ability to add foreign language support as the need arises..
Sutherland currently provides international Help Desk support to a variety of
clients from our San Diego, CA, Rochester, NY, and Syracuse, NY support
centers. Support is provided in a variety of languages, including English,
German, French, Spanish, Portuguese, Japanese, and Chinese, among others.
SCOPE OF SERVICES
The Sutherland/Telocity Help Desk will provide InterChange DSL customers access
to a team of qualified information technology personnel. The following
functions will be delivered through the Pre-Sales and Post-Sales Support Help
Desk:
Post-Installation Support Help Desk Services to include:
o Interchange DSL Support
o Related application support (software necessary for using Interchange DSL)
o
o Tracking of all calls to final resolution (defined as a satisfied
customer).
o Reports detailing activities and service levels
o Escalation services
HOURS OF SERVICE
The Telocity Post-Installation Support Help Desk will be accessible 7 days per
week 16 hours per day (7 am to 11 p.m. Eastern Time). Access will be primarily
provided via telephone using a dedicated toll-free number. Access will be
additionally provided through E-mail and Fax.
- -------------------------------------------------------------------------------
Confidential Page 3 9/16/99
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<PAGE> 12
[TELOCITY LOGO]
InterChange DSL Help Desk
- --------------------------------------------------------------------------------
Access to the Help Desks via IVRU (Interactive Voice Response Unit) can be
provided to implement menu choices and specialized routing based on input.
SERVICE LEVELS
Service levels will be monitored by Sutherland and are reported to Telocity for
performance evaluation. This information will be utilized to make adjustments
to the program for higher quality results. The following are representative
metrics and goals for this program, starting 90 days after program inception,
scheduled for October 15, 1999:
- - Post-Sales Installation Technical Product support 16 hours each business
day from 7:00 am to 11:00 pm Eastern time. (7X16)
- - Average Speed of Answer [*] or less after initial greeting.
- - Abandon rate less than [*]% of calls.
Service level metrics reviews and renegotiation can be requested by either
party at any time following the standard change control process.
STAFFING
All staff on the Help Desk will be highly skilled, experienced, professionals
who are career employees, not contractors, of The Sutherland Group, Ltd. The
profile of Technical Support Engineer (TSE) is:
- 2-5 years technical experience
- End-User Support experience
- Internet experience (navigation, connectivity)
- College degree or equivalent
- Customer Service experience and skills
- Professional Skills
- PC experience
- Networking and telephony experience
- Modem experience
All staff receives training on handling the various levels of support requests.
Sutherland's training program is formal and extensive and includes:
- Technical Training (InterChange DSL system, software, xDSL)
- --------------------------------------------------------------------------------
Confidential Page 4 9/16/99
[LOGO]
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
<PAGE> 13
[TELOCITY LOGO]
InterChange DSL Help Desk
- --------------------------------------------------------------------------------
o Phone Skills
o Customer Service Skills
o Problem Probing
o Ongoing InterChange DSL and Technology Updates, as dictated by
product roll-out and upgrade considerations
DEDICATED MODEL
Sutherland normally utilizes a dedicated program model for staffing technical
support projects. No customer program "sharing" is designed into our employee
model except for carefully planned overflow scenarios (controlled at the ACD).
We manage our program teams as such and locate them in common areas. It is
common that the teams stay together for long periods and become "attached" to
the customer for whom they are providing support. Sutherland's employee model
includes a guideline for one year minimum on each assignment, whenever possible.
GREETING/REPRESENTATION
The Technical Support Engineers (TSE) will represent themselves at all times
over any communication mode as Telocity personnel and will not disclose or
allude to an outsourced arrangement. The greeting will be similar to: "Thank
you for calling the Telocity InterChange Help Desk. This is FIRST NAME, how may
I help you?"
DIFFERENTIATORS
Among the differences between Sutherland and our competition is our approach to
the design and management of our programs. From inception of the program to its
execution, Sutherland excels at providing the optimal solution for our clients'
needs. We are unique in our superior human resources, where we offer
professional information technology engineers consistent training and
identified career paths. The state-of-the-art technology used for each program
is focused on multi-platform computer systems to meet specific technical
requirements and provides an integrated telecommunications structure that
allows our representatives to optimize their time on each call.
Technology is a core competency for Sutherland, and our Help Desk Engineers are
afforded excellent career paths. This practice keeps our attrition rates
- --------------------------------------------------------------------------------
Confidential Page 5 9/16/99
[LOGO]
<PAGE> 14
[TELOCITY LOGO]
InterChange DSL Help Desk
- -------------------------------------------------------------------------------
extremely low while continually enhancing our level of experience, giving
Sutherland a key edge in implementing advanced technical solutions and reducing
our operational expenses. Our membership in a number of call center and support
industry associations exposes Sutherland to the latest advances in the industry
to complement our focus on high quality and value. Every program we manage is
underscored by a constant focus on continuous improvement and customer
satisfaction.
SUTHERLAND'S TECHNICAL ENVIRONMENT
CALL PROCESSING ARCHITECTURE (TELEPHONY)
Sutherland's telecommunications environment includes a collection of hardware,
software, and firmware that enables our call centers to implement and manage
complex telephony operations efficiently and consistently. Sutherland's call
centers utilize Nortel Meridian Option 81c ACD's. These ACDs utilize Nortel's
Networked ACD product to establish virtual call centers that can exist across
physical ACDs in multiple locations. This capability allows a single queue to
balance and distribute calls to representatives in several Sutherland sites. We
currently have San Diego, CA, Rochester, NY, and Syracuse, NY integrated via
the ACD Network.
Our Customer Controlled Routing (CCR) software offers a variety of features for
programming queues and different types of treatment to incoming calls. CCR can
direct calls based on Calling Line Identification (CLID) information obtained
from the dialed number, or gather and react to input obtained through a
front-end script. For example, VIP callers can be recognized based on the
particular number dialed and therefore granted priority treatment in the queue.
Sutherland utilizes extensive computer telephony integration (CTI). CTI allows
for full communication among our network application servers and our ACD.
Sutherland has full CTI capability, including phone call integration with a
database record, screen pops, IVRU integration, and ACD data linkage into
trouble ticket report data.
NETWORK ARCHITECTURE AND MANAGEMENT
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InterChange DSL Help Desk
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Sutherland's Network Infrastructure is based on industry standard products and
tools used to establish both our corporate local and wide area networking
communications as well as our external connectivity to our clients and strategic
partners. Sutherland's corporate WAN utilizes technologies such as ATM and
Frame Relay to implement high-speed data transfer among the six Sutherland
facilities. The corporation has standardized on TCP/IP and Ethernet and uses
Windows NT as its primary Network Operating System.
Sutherland's internal applications are based on either two or three tier
client/server architecture. We have UNIX, Netware and NT Servers driving our
applications, tools, and database engines. Internet access is provided by
multiple Internet Servers (access and host) with dual dedicated T1 connections
to the Internet from each Sutherland facility. Our end-users can access various
applications and tools, on-line faxing, Internet and corporate e-mail, and
reference libraries on CD-Jukeboxes whenever appropriate. Client PC's have been
standardized on Compaq Pentium II 233 MHz, with a minimum of 32 MB RAM with 2
GB disk. Each workstation is equipped with 17 inch VGA monitor to allow for
ample viewing for our Graphical User Interfaces in each application.
To enable connectivity to our clients and business partners, Sutherland has
developed various gateways into external networks. Connectivity options vary
according to bandwidth requirements. We have fully dedicated T1 connections,
many dedicated lines (56k or greater), frame-relay, Virtual Private Networks,
and ISDN. Our network connects to external customer systems consisting of
client/server, mainframe, and mid-range architectures using SNA and TCP/IP
protocols. Specific connectivity requirements for the Telocity Help Desk will
be determined and implemented during program start up.
Sutherland's network is also carefully monitored and protected against
intrusion. In addition to utilizing the Windows NT inherent security system,
Sutherland also uses Firewalls and 128-bit public/private key encryption
methods for data transfers to and from our clients' systems.
CALL MANAGEMENT SYSTEM
Sutherland will use Telocity's OSS enrollment application and Remedy for call
management and problem resolution. All necessary hardware, software licenses,
and requisite training will be provided to Sutherland by Telocity.
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The following standard reports are available and are delivered weekly (or on an
as-needed basis) and are available via e-mail:
[*]
Other standard reports will be available depending upon the capabilities of the
OSS application and Remedy AR. These reports will be developed jointly by
Telocity and Sutherland during the detailed requirements definitions phase.
Additional reporting requirements for Telocity will be determined during
program start up. Ad-hoc reports are available at an additional charge.
IMPLEMENTATION PLAN
Sutherland's implementation approach typically spans [*] days from initiation
to transition of calls to the Help Desk at Sutherland. The following describe
the primary activities associated with program setup.
KICKOFF MEETING
As soon as possible following final contract negotiations, a kickoff meeting
will be held to ensure clear understanding of the program objectives and
methods by both parties. The implementation plan developed by the Sutherland
team will be reviewed at that time, as will timetables for subsequent meetings
between Telocity and Sutherland.
PERSONNEL HIRING AND STAFFING
By virtue of our long term growth and experience in setting up information
technology centers, Sutherland has become extremely adept at staffing the
appropriate people for the task at hand. Selection of employees for specific
programs is based on the both the technical requirements and the culture of the
client environment. Sutherland has established thorough and rigid hiring
practices to ensure the proper selection of our support engineers.
[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.
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DETAILED REQUIREMENTS DEFINITION
This effort will ensure that the program design and operations meet Telocity's
expectations and integrates seamlessly with existing operations. Tasks include
the definition of business processes, identification of escalation paths,
network connectivity requirements, data transfer requirements, and computer
resource specifications.
PHONE/ACD SETUP
The setup of the phone system and ACD is critical to the success of the program
and includes assignment of extensions for the Telocity/Sutherland team, setup
of the inbound call queue, custom call routing design and setup, call
accounting codes setup, voice-mail, and testing of all components.
CALL FLOW PROCESSES
These tasks include design of specific call flow procedures, escalation
procedures, and creation of documentation to be used by the TSEs once
operations commence. Any resulting modifications to other program components
are identified and implemented, as are the development of operating contingency
plans.
TRAINING
Training the Telocity/Sutherland team includes thorough understanding of
InterChange DSL, the environments in which it is used, applications used in
conjunction with InterChange DSL, use of the call tracking system and database,
call flow procedures, and escalation procedures. Only after a member of the
team is fully versed on these vital areas will they be ready to accept live
customer calls.
MONITORING AND REMOTE MONITORING
In accordance with our ISO 9002 certification all employees are monitored
regularly by their supervisors. Sutherland has the ability to make remote
monitoring available to Telocity through the use of a special extension on
Sutherland's phone switch. This would allow Telocity to monitor remotely at
will.
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REPRESENTATION
Sutherland has the permission to use Telocity's name when answering the phone
on their behalf. Representation does not grant Sutherland the right to
represent Telocity beyond answering the phone or responding by e-mail or
letter. Sutherland does not have the right to make arrangements, commitments,
or promises on Telocity's behalf.
TERMINATION
Either party may cancel this agreement with 90 days written notice of
termination to the other party.
PROGRAM MANAGERS
Sutherland will assign a Program Manager for this program to be the main
contact for Telocity. The Program Manager's goal is to ensure that all
deliverables are met for Telocity. Telocity will assign a Program Manager who
will be the primary contact for setup and implementation for Sutherland. All
changes to this SOW or any other agreements must be approved in writing by each
Program Manager.
CHANGE CONTROL PROCESS
The Sutherland Program Manager and Telocity Program Manager must agree upon any
changes to this Statement of Work in writing. All written requests for changes
must be responded to in writing within 5 business days.
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[THE SUTHERLAND GROUP LID. LOGO]
October 18, 1999
Mr. James Rohrer
Vice President & Customer Care Officer Telocity, Inc.
10355 N. De Anza Blvd.
Cupertino, CA 95014-2027
Dear Jim:
This letter will outline some of the changes/additions to the
Telocity/Sutherland partnership.
1.) Program Headcount Pricing:
Any additions to program headcount will be invoiced to Telocity,
effective the month in which they are added to the program, at the
effective rate of Six Thousand ($6000) dollars per support
representative. If representatives are added during the month, the
associated fee will be prorated over the remainder of that month, on a
full week basis, at the prevailing rates.
2.) Program Expansion:
Effective October 25, 1999, SGL will add, at your request, an
additional five (5) headcount to the existing Telocity inbound
technical support center. These individuals will be added at our San
Diego facility. This will bring the program headcount to twenty (20)
support representatives.
3.) Headcount Reduction:
According the Terms and Condition of the Telocity/SGL contract, we
require 30 days notice to increase the size of the program. Should it
be necessary to reduce the size of the program, outside of a formal
termination notice, SGL will require 30 days notice for this process as
well. However, in both instances, we will add/delete headcount as
quickly as possible to meet your schedules.
These changes, except for the addition of personnel, will be documented as an
addendum to the original Statement Of Work. The addition of personnel will only
require written permission to add them, as outlined in this letter.
Jim, I hope this additional information is helpful to you. SGL is very excited
about this program, and the ensuing relationship. We will do everything
necessary to ensure the success of it as well as your company.
Please indicate your acceptance of these terms below.
Sincerely,
Thomas J. McGrath
Director, Business Development
<PAGE> 20
I have read, and agree with, the terms and conditions, as outlined above
/s/ JIM ROHRER 10/19/99
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Jim Rohrer, Customer Care Officer Date
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[THE SUTHERLAND GROUP LID. LOGO]
October 18, 1999
Mr. James Rohrer
Vice President & Customer Care Officer
Telocity
10355 N. De Anza Blvd.
Cupertino, CA 95014-2027
Dear Jim:
This will outline our understanding, and the subsequent pricing, for the call
flow routing you have requested between SGL and your customer care vendor.
To review, all calls to the 1-888-SPEED49 Telocity branded toll free number will
come into an AT&T central cloud where they will be routed, based on customer
selection, to the appropriate location. The customers will hear the IVR greeting
saying "press 1 for sales.. press 2 for tech support.. etc." then make their
choice. All calls for pre-sales support, sales or customer service will be
routed through the cloud to your customer care vendor. All calls for technical
support will be routed to SGL.
The costs involved include a combination of the number of calls AND the average
amount of time they listen to this greeting before making their choice. Again,
these costs below include the switching technology only, and do not include any
of the actual usage charges on the lines themselves.
The pricing plan formula will be as follows:
(Number of Inbound calls x $0.12 per call) (+) (Number of Inbound calls
x Average Greeting Play Time (in min) x $0.10).
Jim, if you are in agreement with this, please indicate your acceptance of these
terms below.
Sincerely,
Thomas J. McGrath
Director, Business Development
I have read, and agree with, the terms and conditions, as outlined above
/s/ JIM ROHRER 10/19/99
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Jim Rohrer, Customer Care Officer Date
<PAGE> 1
EXHIBIT 10.28
NBCi/TELOCITY OPERATING AGREEMENT
This Operating Agreement (the "Agreement") is made and entered into as
of December 10, 1999 (the "Effective Date") between NBC Internet, Inc., a
Delaware corporation, with its principal place of business at 225 Bush Street,
San Francisco, California 94104 ("NBCi") and Telocity, Inc., a California
corporation, with its principal place of business at 10355 N. De Anza Boulevard,
Cupertino, California 95014-2027 ("Telocity"). Subject to the provisions of
Section 20.7, Telocity acknowledges that NBCi will fulfill its obligations under
this Agreement itself and through various of its subsidiaries, including Snap!
L.L.C. ("Snap"), a Delaware limited liability company and Xoom.com, Inc.
("Xoom"), a Delaware corporation. The parties hereby agree as follows:
1. Background.
1.1. Telocity is an emerging provider of branded, broadband services,
currently and primarily provided through DSL, targeted
specifically at the residential market space. Telocity will
provide the next-generation of broadband services to consumers
by deploying the first open, end-to-end platform for delivering
digital services to, and throughout, the home.
1.2. NBCi and/or its subsidiaries operate a search and aggregation
"portal" site on the Web and a direct marketing site on the Web.
1.3. Concurrently with this Agreement, Telocity, NBCi, NBC and others
have entered into a Series C Preferred Stock Purchase Agreement
dated December 10, 1999 ("Stock Purchase Agreement").
1.4. Concurrently with this Agreement, Telocity and NBC have entered
into a Letter Agreement dated December 10, 1999 ("Letter
Agreement") whereby NBC will provide Telocity with certain
television advertising services.
1.5. Concurrently with this Agreement, Telocity and NBCi have entered
into a Letter Agreement dated December 10, 1999 ("Letter
Agreement") whereby NBCi will provide Telocity with certain
television advertising services.
2. Certain Definitions. As used in this Agreement, the terms set forth
below shall have the following meanings:
2.1. "Above the Fold" means that a particular item on a Web page is
viewable on a computer screen at an 800 x 600 pixels resolution
when the User first accesses such Web page, without scrolling
down to view more of the Web page.
2.2. "Additional Interfaces" shall have the meaning set forth in
Section 4.4.
2.3. "Affiliate" means as to any Person, (i) any other Person that
directly or indirectly controls, owns, is controlled or owned
by, or is under common control or ownership with such first
Person, (ii) any subsidiary of such first Person, and (iii) any
subsidiary of any subsidiary of such first Person. A Person
shall be
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deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management, policies and/or decision making of
such other Person, whether through the ownership of voting
securities, by contract or otherwise.
2.4. "Co-Branded Site" means the co-branded version of the Enhanced
Site that will be created in accordance with Section 4 below.
2.5. "Content Portal(s)" means the specific aggregations of linked
content within areas of the Co-Branded Site, which are organized
around the Telocity Content.
2.6. "Enhanced Site" means the enhanced, high-speed version of the
NBCi Sites focused on rich media content, together with any
successor site(s) thereof and any co-branded editions of such
service that have been or may be developed for NBCi's third
party distribution partners and licensees.
2.7. "Impression" means the display of any Promotion on any NBCi
Site.
2.8. "Intellectual Property Right(s)" means any patent, copyright,
trademark, trade secret, trade dress, mask work, moral right,
right of attribution or integrity or other intellectual or
industrial property rights or proprietary rights arising under
the laws of any jurisdiction (including, without limitation, all
claims and causes of action for infringement, misappropriation
or violation thereof and all rights in any registrations and
renewals).
2.9. "Interfaces" means the Front Door Interfaces and the Additional
Interfaces.
2.10. "Last Mile Technologies" means all technologies used to provide
the last, short-distance link of broadband Internet
functionality to and from consumers' residences to and from the
broad telecommunications infrastructure.
2.11. "Last Mile Technologies Expenses" means the following Telocity
expenses incurred in providing Last Mile Technologies as part of
the Telocity Services through the Co-Branded Site; including,
without limitation, recurring monthly line cost (which are the
monthly fees Telocity incurs for last mile connectivity services
from carriers), nonrecurring telecommunications costs (i.e. RBOC
costs) and nonrecurring inside wiring costs.
2.12. "Launch Date" means the date on which the Co-Branded Site
functions properly and is made accessible to Users.
2.13. "Look and Feel" means the graphical user interface and flow of
User experience of an Internet site.
2.14. "Market Deployment Plan" means the introduction of the Telocity
Platform in at least thirty-two (32) markets covering
eighty-five percent (85%) of the DSL-ready homes of Telocity's
last mile providers in those markets by the end of 2000 and
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fifty-one (51) markets covering eighty-five percent (85%) of the
DSL-ready homes of Telocity's last mile providers in those
markets by the end of 2001.
2.15. "NBC" means the National Broadcasting Company, Inc., a Delaware
corporation with its principal place of business at 30
Rockefeller Plaza, New York, New York 10112.
2.16. "NBCi Competitor" means any entity or Affiliate thereof listed
in Exhibit C. NBCi may update this list of competitors
periodically with the prior written approval of Telocity.
2.17. "NBCi's Core Business" means (a) information, navigation and
content aggregation services distributed primarily through the
Internet that provide, across more than several topics of
general interest that do not relate to each other or to a common
topic, a combination of all or substantially all of the
following: Internet searching, content aggregation, topical
interest categories and web directories (a "Portal Service");
(b) community services distributed, primarily through the
Internet that offer its members, at a minimum, homepages, e-mail
and chat rooms (a "Community Service"); or (c) selling or
marketing a broad range of third party products and services
primarily through the Internet (an "e-Commerce Service").
2.18. "NBCi Aggregate User Data" means any aggregate data collected by
NBCi or any NBCi subsidiary about Users of broadband services or
promotions.
2.19. "NBCi Marks" means any trademarks, trade names, service marks
and logos that may be delivered by NBCi to Telocity hereunder.
2.20. "NBCi Member" means a User who has registered to become a member
of one of NBCi's, or one of NBCi's subsidiary's, registration
based services, including without limitation, the NBCi Sites and
the free email service available at www.email.com.
2.21. "NBCi Product Manager" means an NBCi employee or independent
contractor holding editorial authority and responsibility for a
portal, site, collection, area, center or page on the NBCi
Sites.
2.22. "NBCi Properties" means the NBCi Sites and the Co-Branded Site.
2.23. "NBCi Services" means the Web-based services offered by NBCi
through the Co-Branded Site.
2.24. "NBCi Sites" means: (i) subject to the "Distributor" (as defined
in Section 8.1) exclusion in Section 8.1, any and all search and
aggregation "portal," direct marketing, and commerce Web sites,
whether operated by NBCi, a subsidiary of NBCi, or a third party
under an "NBCi" brand, including, without limitation, the Web
sites located at http://www.snap.com, http://www.xoom.com,
http://www.nbc.com, and http://www.videoseeker.com, together
with any mirror sites, any co-branded editions of such site that
have been or may be developed for
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Distributors (other than the Co-Branded Site), and successors to
the foregoing; (ii) the Enhanced Site, and successors to the
foregoing; (iii) the International Editions if the parties
mutually agree in writing pursuant to Section 8.2; (iv) any
third party Web sites hosted by NBCi; and (v) if NBCi so elects
within its sole discretion, the Web site located at
http://www.nbci.com and successors thereto, and NBC's network of
affiliate Web stations' Web sites, as updated from time to time
by NBCi in its sole discretion.
2.25. "NBCi Wires" means NBCi's email newsletters sent by NBCi or an
subsidiary to NBCi Members.
2.26. "Network Operation Expenses" means fees and monthly depreciation
cost of network equipment related to the Telocity Services
including, cost of tail circuits, co-location fees, bandwidth
capacity costs, POP driven costs, and other network costs (which
are NOC capital costs, subscriber driven costs, transit costs,
fixed data exchange costs and monthly backbone costs).
2.27. "OSS" means Telocity's operational service and support system
described in Exhibit B plus the modifications that may be made
from time to time to such operational service and support
system.
2.28. "Overlapping Services" means those products and services
each party offers to its customers (e.g., utility and communication
products and services) that share a significant degree of commonality.
2.29. "Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof,
or any other legal entity.
2.30. "Promotions" means (i) banners, buttons, windows, portals,
front door windows, text links, and other promotions that are offered by
NBCi now or in the future and link directly to the Telocity Sites and/or
Co-Branded Site from the NBCi Sites; and/or (ii) text links within email
newsletters distributed by NBCi (including, without limitation, NBCi
Wires) and other promotions that are offered by NBCi now or in the
future and link directly to the Telocity Sites and/or Co-Branded Site.
2.31. "Shipping and Handling Expenses" means all of Telocity's
shipping and handling expenses incurred in shipping the Gateway to
Subscribers.
2.32. "Subscriber Fees" means all fees paid by Subscribers for a
Telocity Service.
2.33. "Telocity Aggregate User Data" means any aggregate data
collected by Telocity or any Telocity subsidiary about Users of
broadband services or promotions.
2.34. "Telocity Competitor" means any entity listed in Exhibit
D. Telocity may update this list of competitors periodically with the
prior written approval of NBCi.
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2.35. "Telocity Content" means Telocity's and its licensors' text
links, logos, graphic links, and other materials, tools,
content, or text that are delivered by Telocity to NBCi
hereunder.
2.36. "Telocity's Core Business" means the provision of next
generation, Subscriber-based broadband services to consumers
emphasizing convenience, utility and ease of use. Telocity is
deploying the first open, end-to-end platform for delivering
these services to its Subscribers, both to the home and
throughout the home which provides an infrastructure for
delivering value-added services to Subscribers.
2.37. "Telocity Database" means User Profile Data and any other
information relating to Users of the Telocity Sites or the
Co-Branded Site or other customers of Telocity or purchasers of
Telocity Services who have had information about them collected
or otherwise obtained by Telocity, or for Telocity's use or
benefit, for the purpose of direct marketing or other
communication activities, and all updates or additional
information that may be added to such database during the Term.
2.38. "Telocity Fraction" for a quarter means (a) the total number of
pages displayed by the Co-Branded Site for during the quarter,
divided by (b) the total number of pages displayed by the entire
NBCi Properties for such period; provided, however, that at such
time as NBCi distinguishes between broadband and narrow band
editions in its ad serving accounting, item (b) shall be limited
to the pages displayed by the broadband editions of the NBCi
Properties for such period.
2.39. The "Telocity Gateway" (or the "Gateway") means the gateway
described in Exhibit B, plus the modifications that may be made
from time to time to such gateway.
2.40. "Telocity Marks" means Telocity's and its licensors' trademarks,
trade names, service marks and logos that may be delivered by
Telocity to NBCi hereunder.
2.41. "Telocity Network" means Telocity's network described in Exhibit
B plus the modifications that may be made from time to time to
such network.
2.42. "Telocity Only Service" means a Telocity service that is not an
Overlapping Service.
2.43. "Telocity Services" means any and all services and products
offered through the Telocity Platform.
2.44. "Telocity Sites" means the Internet site operated by Telocity at
http://www.telocity.com, together with any mirror sites, which
shall not provide products or services competitive with those
offered on the Co-Branded Site.
2.45. "Telocity Users" means all Users described in the Telocity
Database.
2.46. "Telocity Window" means a window on the Front Door Interfaces as
described in Section 4.3.
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2.47. "Term" means the term of this Agreement as defined in Section
12.1.
2.48. "User" means any end-user of the Web.
2.49. "User Profile Data" means data regarding a User provided by the
User on the NBCi Sites, the Telocity Sites or the Co-Branded
Site or otherwise to NBCi or Telocity: the User's name,
password, hint question, hint answer, birthday, zip code,
country, time zone and gender.
2.50. "Web" means the World Wide Web part of the Internet.
3. Telocity Platform.
3.1. Proprietary Technology. Telocity and/or (to the best of
Telocity's knowledge) its licensors own, and over the
course of the Term shall own pursuant to Section 13.8,
various patents and other Intellectual Property Rights
in certain technology that enable Telocity to create and
operate the Telocity Platform and provide the Telocity
Services (the "Proprietary Technology"), including, but
not limited to, the following:
3.1.1 the automated personal computer/telephone-based loop
qualification for a customer's DSL line qualification,
Web-based customer sign-up, and Web-based system for
deployment, provisioning and customer support.
3.1.2 The Gateway combines a DSL modem, an analog modem, and a
microprocessor unit that automates installation,
customer support and service upgrades. The Gateway
allows a consumer who subscribes to a Telocity Service
(a "Subscriber") to split the broadband Internet
connection to multiple devices within the home. The
Gateway allows for the measuring, metering and billing
of both subscription and value added services provided
to the Subscriber.
3.2. Telocity Platform Described. Telocity has developed and is using
the Proprietary Technology to provide to consumers a broadband
Internet distribution platform consisting of the Gateway, the
Telocity Network, and OSS (collectively, the "Telocity
Platform") that will facilitate the delivery of broadband
Internet access services to, and throughout, the home. The
Telocity Platform is an "always on", automated broadband service
platform that is available to consumers utilizing the Gateway.
Telocity will use the Telocity Platform to deploy broadband
Internet service to the home initially via DSL, but also via
other means of high data rate connections to the home such as
cable, wireless local loop, satellite and any such delivery
platforms that may emerge as reasonably accepted industry
standards in the future.
3.3. Modifications. Telocity agrees to consider in good faith any
reasonable requests of NBCi to modify the Telocity Platform from
time to time to improve the Telocity Platform's ability to work
with the Co-Branded Site and the Interfaces. For purposes of
this Agreement, all modifications to the Telocity Platform,
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including those made pursuant to this Section 3.3, shall be
deemed to be included within the defined term Telocity Platform.
4. Co-Branded Site.
4.1. Co-Branded Site Described. NBCi will develop the Co-Branded Site
for use with the Telocity Platform in accordance with this
Section 4, and Telocity will provide reasonable assistance in
connection therewith. The Co-Branded Site will be a co-branded
version of the Enhanced Site focused on instant access to
information, communications, utility, and entertainment/media
content and will include, among other things, content and
services tailored to capitalize on the always on, broadband
environment. The parties will jointly develop the specifications
for the Co-Branded Site, and NBCi will create the Co-Branded
Site according to the joint specifications developed by the
parties. NBCi, however, will have ultimate decision making
authority over all aspects of the Co-Branded Site, including the
content contained therein, subject to compliance with the
mutually agreed upon specifications.
4.2. Front Door Interfaces. NBCi will develop interfaces to the
Co-Branded Site for: (i) the personal computer; (ii) the
television; and (iii) devices with flat panel displays in which
the presentation of information will be similar to that of a
personal computer (e.g. information appliances), specifically
designed for the broadband delivery of high-speed Internet
access over the Telocity Platform (collectively, the "Front Door
Interfaces"). The parties will collaborate to provide input to
the development of specifications for the Front Door Interfaces,
and the specifications will detail a User experience that is
compatible with the Co-Branded Site. NBCi will create the Front
Door Interfaces according to the joint specifications developed
by the parties. NBCi, however, will have ultimate decision
making authority over all aspects of the Front Door Interfaces
(other than the Telocity Window), subject to compliance with the
mutually agreed upon specifications.
4.3. Telocity Window. The Telocity Window will appear on the Front
Door Interfaces at any time there is Telocity Content, Telocity
Services or Telocity technologies (i.e., technologies and/or
access to technologies which may appear in an Additional
Interface) that cannot be effectively integrated into the Front
Door Interface. The Telocity Window may contain only Telocity
Content, Telocity Services and Telocity technologies (i.e.,
technologies and/or access to technologies which may appear in
an Additional Interface) that cannot be effectively integrated
into the Front Door Interface at that time. The parties will
collaborate to provide input to the development of
specifications for the Telocity Window, including which party
will host the Telocity Window, and the specifications will
detail a User experience that is compatible with the Co-Branded
Site. NBCi will create the Telocity Window according to the
joint specifications developed by the parties. Telocity,
however, will have ultimate decision making authority over all
aspects of the Telocity Window, subject to compliance with the
mutually agreed upon specifications.
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4.4. Additional Interfaces. The parties anticipate that over time
different interfaces to the Co-Branded Site or other information
in addition to the Front Door Interfaces ("Additional
Interfaces") will be created for other devices (e.g. flat-panel
displays other than those included within Front Door Interfaces,
wireless devices (WAP format and future format standards that
may emerge), personal digital assistants, cordless phones,
cellular phones, information appliances which do not present
information in a similar manner to that of a personal computer,
and other devices that may emerge in the future) (the "Other
Devices") for use in the home and "on the go" which will
necessitate that content from the Co-Branded Site or other
sources be displayed in different formats. For Additional
Interfaces designed and created by NBCi as set out in Section
4.5, the parties will jointly develop the specifications for the
Additional Interfaces with the intention of creating a
consistent and cohesive User experience across the various
features and applications offered on the Co-Branded Site. The
goal with such Additional Interfaces will be to mix the
functional requirements of the Other Device while maintaining a
consistent Look and Feel to the Co-Branded Site. However, for
such Additional Interfaces designed by a party, ultimate
decision making authority will reside with a party, subject to
compliance with the mutually agreed upon specifications.
4.5. Review and Implementation of Content for Other Devices and
Additional Interfaces. NBCi and Telocity will jointly develop
the Top Level Specifications for the design of Additional
Interfaces. Both parties agree to make good faith efforts to
analyze the cost and revenue potential for each Other Device and
share information pertaining to market research, consumer
behavior, emerging business models, and other such relevant
information. Prior to beginning the process itself or with a
third party, Telocity agrees to give NBCi at least sixty (60)
days after delivery of a written request to NBCi to determine
whether NBCi will provide content from the Co-Branded Site to an
Additional Interface for an Other Device and design and create
the Additional Interface for such Other Device. NBCi may, in its
sole discretion, determine that the aggregation, packaging, and
design of content from the Co-Branded Site for delivery to a
specific Other Devices is not commercially and/or strategically
viable to pursue.
4.5.1 Should NBCi elect to provide content designed for the
Other Device in a manner that is compatible with an
Additional Interface and implement the joint
specifications for the Additional Interface, NBCi will
make commercially reasonable efforts to deliver the
content and the Additional Interface within a mutually
agreed upon period of time.
4.5.2 Should NBCi elect to provide content designed for the
Other Device in a manner that is compatible with an
Additional Interface but not design and create such
Additional Interface, (i) NBCi will make commercially
reasonable efforts to deliver the content within a
mutually agreed upon period and (ii) Telocity may
contract with an independent third party, who is not an
NBCi Competitor, to provide such Additional Interface
design and creation services, provided that such
services are delivered to the
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Subscriber in such a manner that the Subscriber
experiences the same Look and Feel of the Co-Branded
Site across the various Interfaces.
4.5.3 Should NBCi decide to neither provide such content nor
design and create such Additional Interface, Telocity
shall ask NBCi, for a mutually agreed fee, for NBCi to
provide additional resources needed to provide content
and create and design such Additional Interface, and if
the parties are unable to reach agreement with respect
to such fee within ten (10) days, then Telocity may
contract with an independent third party, who is not an
NBCi Competitor, to provide such services, provided that
such services are delivered to the Telocity Subscriber
in such a manner that the User experiences the same Look
and Feel of the Co-Branded Site, to the extent
reasonable, across the various Interfaces.
4.6. Co-Branding Features. Each page on the Co-Branded Site will
include branding for NBCi and Telocity so that the NBCi Marks
and Telocity Marks are both Above the Fold and are of
substantially equivalent value and prominence to each other.
Telocity Services and the customer care features for such
services will also be prominently displayed on the Co-Branded
Site. The parties shall mutually agree on the branding for
content delivered from the Co-Branded Sites to Other Devices and
the Additional Interfaces.
4.7. Launch Date. NBCi and Telocity will use diligent efforts to
achieve a Launch Date for the Co-Branded Site before June 30,
2000.
4.8. Hosting. Except as expressly set forth in this Agreement, NBCi
will host the Co-Branded Site and the Front Door Interfaces on
its servers, on servers within its control, or servers of a
third party under contract with NBCi and will provide all
computer hardware, software and personnel necessary to operate
and maintain the Co-Branded Site as a functional site accessible
to Users.
4.9. Advertising. NBCi shall own and have the right to use or sell
all of the advertising inventory on the Co-Branded Site, except
that neither NBCi or any NBCi subsidiary shall display on the
Co-Branded Site any window or banner advertisements for Telocity
Competitors. Moreover, other than as expressly set forth herein,
NBCi shall have the right to display any third party links,
media, banner advertisements, other promotions, and/or paid or
unpaid editorial content anywhere on the NBCi Sites.
4.10. DNS Redirecting. Except as expressly set forth in this
Agreement, using Domain Name System redirection, the URL for the
Co-Branded Site will begin with http://telocity.snap.com.
Telocity agrees that NBCi will be entitled to count all page
views of the Co-Branded Site towards NBCi's traffic as measured
by Media Metrics and other Internet traffic-auditing firms.
4.11. Harvesting. Telocity shall provide all Telocity Content as
required herein pursuant to NBCi's harvesting technical
specifications, as updated in NBCi's sole
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discretion from time to time, including those set forth at
http://partnermarketing.snap.com/guide/htmlharvest.html
(Standard HTML Harvest Specifications),
http://partnermarketing.snap.com/guide/htmlsample.html (Sample
of HTML harvested content);
http://partnermarketing.snap.com/Thor/media_mockups.html (Rich
Media Harvesting Specifications), or any other successor URLs
designated by Snap. Harvested Telocity Content will maintain the
Enhanced Sites' Look and Feel and will include branding for
Telocity using Telocity Marks, in such form and placement as a
NBCi Product Manager shall determine in his or her sole
discretion. Telocity shall ensure that all Telocity Content
remains at all times current by continually providing NBCi with
timely updates to the Telocity Content. Furthermore, under no
circumstances shall Telocity Content include any content of a
NBCi Competitor, reference an NBCi Competitor or a service which
conflicts with an offering of NBCi.
4.12. Exclusivity. During the Term, except as expressly provided
otherwise in this section, NBCi shall be the exclusive Internet
content provider to Telocity for the Telocity Platform for
utility, communications, media and entertainment content
(collectively, the "Exclusive Content"). In addition, Telocity
may not enter into any other agreement with third parties for
provision of Portal Services, Community Service or E-Commerce
Services on the Telocity Platform during the Term. Further,
during the Term, Telocity may not own any material equity
interest in, loan any monies to, or enter into any joint venture
or partnership with any NBCi Competitor without the consent of
NBCi. If Telocity identifies a category of products or a content
area within the Exclusive Content that is then currently not
provided by NBCi ("Unavailable Content"), Telocity shall notify
NBCi in writing of such deficiency; provided, however, that
Telocity may not request a product or content specific to a
particular vendor. If NBCi does not notify Telocity in writing,
within forty-five (45) days of NBCi's receipt of Telocity's
notification, of NBCi's election to deliver, or is not able to
deliver, within a mutually agreeable time period from such
notification, the Unavailable Content, Telocity shall have the
right to contract with an independent third party for
development services to produce the Unavailable Content,
provided that (i) NBCi is not obligated to pay for such
incremental services, and (ii) no NBCi Competitors may be chosen
by Telocity unless the desired product or content is only
available from an NBCi Competitor. Telocity shall select third
party content providers that are consistent with the same level
of quality, experience, and reliability offered on the combined
Telocity Platform and Co-Branded Site.
4.13. Promotional Exclusivity. During the first three (3) years of the
Term, NBCi will not promote, through co-branded, on-air
television marketing, any Telocity Competitors offering
broadband delivery of Internet services. However, NBCi shall
have the right to terminate the promotional exclusivity set out
in this section under the following circumstances: (a) Telocity
fails to launch the Telocity Platform in more than fifty percent
(50%) of the service markets on an annual basis as designated in
the Market Deployment Plan, (b) in the event that Patti
Manuel-Hart should leave the employ of Telocity for any reason
during the first
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three (3) years of the Term, or (c) within eighteen (18) months
following the Effective Date, Telocity fails to complete a
Qualifying Offering (as defined in Telocity's Third Amended and
Restated Articles of Incorporation) or a private placement of
its debt or equity securities (not including the private
placement contemplated by the Stock Purchase Agreement) that
results in net proceeds to Telocity of an amount that will
enable the continued expansion of the Subscriber base for the
Telocity Platform at least fifty percent (50%) of the rates set
forth in the Market Deployment Plan for a period of six (6)
months following the closing of such Qualifying Offering or
private placement, as applicable.
4.14. Satellite Delivery. Telocity agrees to grant NBCi's Affiliate,
GE AmeriCom, a right of first negotiation for the delivery of
the Telocity Service via satellite. This right is strictly for
the carriage of Telocity Service via satellite. This right does
not pertain to any content distribution on the Telocity Service.
Beginning after thirty (30) days following the date that
Telocity provides GE Americom with written notice of its desire
to begin such discussions, which shall not be sent by Telocity
before Telocity is prepared to begin good faith negotiations,
Telocity shall be free to begin discussions with third parties
regarding the satellite delivery of the Telocity Services. The
parties agree that time is of the essence with respect to this
Section 4.14.
4.15. Video Programming and Channels. In the event that, during the
Term, Telocity or NBCi desires to offer any new class or type of
video programming or channels (i.e., full motion video of four
minutes or more in length) containing news, sports or
entertainment on the Telocity Platform or the Co-Branded Site,
Telocity or NBCi, as the case may be (the "Offering Party"),
shall so notify NBC in writing. NBC and the Offering Party shall
then negotiate exclusively and in good faith with one another
for a period of thirty (30) days following NBC's receipt of such
written notice concerning the inclusion of video programming or
channels of NBC and its affiliates (including, for example,
anything broadcast on the NBC Television Network, all television
stations owned and operated by NBC or any cable, digital or
Internet network owned or controlled by NBC or its affiliates).
In the event that the parties are unable to reach a final
agreement during such period, then, on the last day of such
period, the Offering Party shall submit to NBC its final offer,
in writing (the "Offer"), which offer shall be made in good
faith and shall represent the price, terms and conditions that
the Offering Party reasonably expects to receive for such
programming or channel in an arm's-length transaction with a
third party. NBC shall then have ten (10) business days to
accept or reject the Offer. If NBC rejects the Offer, the
Offering Party shall be free to negotiate with and enter into
agreements with third party(s) with respect to such video
programming or channels. NBC and Telocity acknowledge that, in
accordance with Section 4.12 hereof, NBCi shall be the exclusive
Internet content provider to Telocity for the Telocity Platform
for media and entertainment content and that this Section 4.15
does not limit such exclusivity in any manner. This Section 4.15
shall not be amended without the written consent of NBC.
5. Product Development; Overlapping Services.
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5.1. Product Development. Both parties shall mutually agree to the
top-level specifications and objectives ("Top Level
Specifications") for overall jointly developed product offerings
relating to the Telocity Network, End User Hardware and Software
Products, and associated software and utilities.
5.2. Telocity Network. The parties shall mutually develop the Top
Level Specifications and requirements of the Telocity Network,
including content distribution infrastructure, network speed,
hosting capabilities, usage monitoring and interconnect points,
for the purpose of supporting a jointly developed product
offering. Under no circumstances will such collaboration be
construed to create or grant NBCi or any NBCi Affiliate any
Intellectual Property Rights in the Telocity Platform or any
component thereof, such as the Gateway or the OSS. Telocity will
reasonably consider NBCi's comments with respect to the Telocity
Network, but Telocity will have the ultimate decision making
authority with respect to the Telocity Network, subject to
compliance with the Top Level Specifications. NBCi will
reasonably consider Telocity's comments with respect to
advertising serving and tracking, but NBCi will have the
ultimate decision making authority with respect to the with
respect to advertising serving and tracking.
5.3. End User Hardware and Software Products. The parties shall
mutually develop the Top Level Specifications and requirements
of the joint hardware and software offerings (respectively, "End
User Hardware" and "Software Products"), including Gateway
capabilities, software installer features, and integration of
software and services onto the Subscriber's operating system.
Telocity will reasonably consider in good faith NBCi's comments
with respect to End User Hardware and Software Products, but
Telocity will have the ultimate decision making authority with
respect to the End User Hardware and Software Products, subject
to compliance with the Top Level Specifications. Under no
circumstances will such collaboration be construed to create or
grant NBCi or any NBCi Affiliate any Intellectual Property
Rights in the Telocity Platform or any component thereof, such
as the Gateway or the OSS.
5.4. New Product/Service Milestones. Telocity agrees to use
commercially reasonable efforts to introduce at least one new
product or service for use on the Telocity Platform once a
quarter during the two year period following the Effective Date.
5.5. Overlapping Services. Although NBCi's Core Business and
Telocity's Core Business are distinctly different businesses,
the parties acknowledge that there is and may nevertheless be
Overlapping Services. Each party shall share in the revenue
streams created by the Overlapping Services as set forth in
Section 10.1. In order to maximize and coordinate the collective
opportunity presented by Overlapping Services, the parties agree
as follows:
5.5.1 If either party has an existing product or service, and
the other party wishes to offer an Overlapping Service,
then the other party will be free to
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set features, pricing and revenue models for such Overlapping
Service, but will confer with the party with the existing
product or service.
5.5.2 In all instances where NBCi releases a generally
commercially available full production version of an
Overlapping Service which is similar to an existing
Telocity Service, then the existing revenue share for
the applicable Telocity Services shall be adjusted as
provided in Section 10.1. For those Overlapping Services
that are non Web-based, NBCi shall design such
Overlapping Service to include materially enhanced
features and functionality to distinguish the product
from the Overlapping Service offered by Telocity.
5.5.3 In all instances where Telocity releases a generally
commercially available full production version of an
existing NBCi Service, Telocity shall design such
Overlapping Service to include materially enhanced
features and functionality to distinguish the product
from the Overlapping Service offered by NBCi.
5.5.4 If an Overlapping Service is identified by either party,
then the parties will work together to develop the
specifications for integrating the product or services
into the Telocity Platform and the Co-Branded Site, as
appropriate.
5.5.5 Any disputes concerning Overlapping Services will be
subject to the negotiation procedures described in
Section 19. If the negotiation procedures detailed in
Section 19 fail, then both parties agree that such
"Overlapping Services" will be placed within the
Telocity Window. The purpose of such placement will be
to minimize the confusion to the Subscriber caused by
the placement of two (2) similar products that do not
offer distinctly differentiated features or
functionality.
6. Account Management.
6.1. Service Quality Milestones. Both parties will mutually agree in
writing on an annual basis on appropriate performance criteria
for the Telocity Services and Co-Branded Site.
6.2. Billing. Telocity shall be solely responsible for all billing,
collection services and customer support services with respect
to all products and services delivered by the parties to
Subscribers via the Telocity Platform.
6.3. Account Management.
6.3.1. Account and Contact Managers. For the purposes of this
Agreement, Liz White shall be NBCi's account manager for
Telocity and Karen Papajohn shall be Telocity's contact
manager for NBCi (collectively, the "Managers"). Subject
to Section 20.12, the Managers shall be the primary
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points of contact for inquiries and requests and
information related to the activities conducted by
either party pursuant to this Agreement. Each Manager
shall provide the other with such information and
assistance as may be reasonably requested by the other
from time to time. Either party to this Agreement may
change its designated Manager by giving the other party
written notice of such change provided in accordance
with Section 20.12.
6.3.2. Meetings. Each party shall designate a team of
individuals for specific responsibilities of the party
under this Agreement, such as technical integration and
marketing (collectively, the "Teams"). Each party's Team
shall include the active participation of at least one
(1) officer at the vice president level. The individuals
on the initial Teams are outlined in Exhibit F. Each
team will meet on a frequency determined to be necessary
by the applicable team, but no less than once per month
during the first three (3) years of the Term and
approximately at least once per quarter during each year
thereafter; each of those Teams shall meet separately at
the offices of Telocity or NBCi (with the location to
alternate between the two) to monitor and manage the
relationship of the parties and any items under this
Agreement either party wishes to bring to the attention
of the other party.
6.3.3. Annual Review. Beginning three (3) years after the
Effective Date, the parties will meet on an annual basis
to review the business arrangement set out in this
Agreement in light of changed industry conditions and
other business considerations and mutually agree upon
certain milestones to be set forth for the remainder of
the Term with respect to both parties' continued
performance under this Agreement. Any modifications or
amendments to this Agreement relating to such milestones
will require the written consent of both Telocity and
NBCi.
6.3.4. Board Review. NBCi and Telocity agree to review the
status of the activities specified in this Agreement at
least twice a year during each party's respective board
meetings.
7. Advertising, Marketing and Promotion.
7.1. Email Solicitations. During the Term, NBCi will have the
exclusive right to transmit all direct marketing email
solicitations to Subscribers as provided in Section 9, except as
provided in Section 9.4.
7.2. Marketing by Telocity. Subject to Section 13.5, Telocity shall
use commercially reasonable efforts to market the Telocity
Services in the relevant local markets of the United States, by
direct marketing to Subscribers by means other than email
solicitations, including, without limitation, voice messaging in
the message inbox, print advertising, direct physical mail,
outdoor, radio and television, and other means of marketing that
may emerge in the future; provided, however, Telocity
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shall not use email in any such marketing activities except as
provided in Section 9.4. All third party messages included in
such marketing efforts will contain no content of or reference
to NBCi Competitors. The third party messages shall not be on
behalf of any third parties and shall be solely for the purpose
of promoting or upselling Telocity Services and the Telocity
Platform; provided, however, that such third party messages may
include third party products and services (for example, in
connection with Telocity's affinity program) without NBCi's
approval from entities that are not NBCi Competitors so long as
the third party product or service is not in a category for
which NBCi has an express contractual relationship (of which
Telocity has notice) with respect to the direct marketing of
such product or service. NBCi will provide Telocity with a list
of such relationships within thirty (30) days of the Effective
Date and will update the list from time to time. Telocity will
be responsible for all marketing expenses for the Telocity
Services with the exception of the Promotions described in
Section 7.5.
7.3. Promotional Events. Both parties shall make good faith efforts
to identify additional promotional events to support the
Telocity Services (e.g. special product and marketing
announcements ) and the Co-Branded Site through the use of the
Co-Branded Site to deliver exclusive broadband content for such
promotional events to Telocity Subscribers.
7.4. Online Promotion Design. Telocity will design and create all
Telocity Content required for the Promotions in accordance with
NBCi's technical and editorial guidelines, as updated in NBCi's
sole discretion from time to time, including those set forth at
http://www.snap.com/media/ or any successor URL designated by
NBCi.
7.5. Online Promotions. Beginning on the Effective Date, NBCi will
use commercially reasonable efforts to deliver a total value of
online promotional value in the aggregate dollar amount of Five
Million Dollars ($5,000,000) during the first three (3) years of
the Term through the delivery of Impressions on the NBCi Sites;
provided, however, that at least fifty percent (50%) of all
Impressions delivered hereunder shall be delivered to the
locations of the NBCi Sites as mutually agreed in writing by the
parties. Except as specified in the foregoing sentence, the
delivery of the Impressions hereunder and the format of the
Promotions will be based on a schedule and placement guidelines
selected by NBCi, in its sole discretion and at the rates set
forth in the applicable NBCi standard rate card. Any Impression
not listed in the applicable NBCi standard rate card shall be
assigned the value of a comparable Impression on such rate card
by NBCi. If NBCi fails to deliver the required number of
Impressions during the first three (3) years of the Term,
Telocity agrees that NBCi shall have an additional six (6)
months to deliver such Impressions.
8. Co-Branded and International Editions.
8.1 Co-Branded Editions. Telocity acknowledges that NBCi produces
co-branded editions of the NBCi Sites for various resellers,
distributors, other licensees and/or
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joint venture partners (collectively the "Distributors"). In
some cases, such Distributors are entitled to replace NBCi's
default content with other content within their own co-branded
editions of any NBCi Site. Notwithstanding any other provisions
of this Agreement, if any such Distributor has exercised its
right to replace Telocity Content with other content, then NBCi
will not be required to display the Promotions or Telocity
Content within such Distributor's co-branded edition of the NBCi
Sites. If NBCi does display the Promotions or Telocity Content
within a co-branded edition of any NBCi Site, such display will
be governed by this Agreement.
8.2 International Editions. NBCi is currently considering creating
one (1) or more international editions of the NBCi Sites to
reflect appropriate localized and local partner content
("International Editions") and may desire to include localized
Telocity Content within such International Editions. Upon NBCi's
request, Telocity agrees to negotiate in good faith regarding
the terms under which Telocity would agree to amend this
Agreement to grant NBCi the right to include Telocity Content
and Promotions on one (1) or more International Editions.
9. User Profile Data and Direct Marketing.
9.1. Data Ownership. Each Subscriber whose User Profile Data is
collected by a party or its subsidiaries through the Co-Branded
Site, the Telocity Site or the Telocity Platform, shall be asked
to consent to the provision of such User Profile Data to the
other party. Each party shall in its reasonable discretion,
place and word such consent request on the Co-Branded Site, the
Telocity Sites and the Telocity Platform, as applicable, and
shall consider comments from the other party with respect to
such consent requests. The User Profile Data for each Subscriber
who so consents shall be provided to the other party and shall
be jointly owned by NBCi and Telocity. Any data collected
through the Co-Branded Site for all other Users, except for the
Telocity Aggregate User Data, shall remain owned solely by NBCi.
At all times, NBCi will be the sole owner of all User data that
is collected from the NBCi Sites and Telocity will be the sole
owner of all User data that is collected from the Telocity
Sites. NBCi Aggregate User Data and Telocity Aggregate User Data
shall be jointly owned by NBCi and Telocity. Before a User is
permitted to become a Subscriber, the User must consent (e.g.,
in the Telocity terms of service) to the provision of the User's
User Profile Data to NBCi.
9.2. Use of Information and Confidentiality. Each party will have the
right to use any information provided by the other party subject
to the confidentiality restrictions set forth in Section 20.4.
All data collected from Users through the Co-Branded Site, the
Telocity Sites and the Telocity Platform will be kept
confidential and not disclosed to non-affiliated third parties
by each party in accordance with the privacy policy and
standards established by that party's respective privacy policy.
9.3. Direct Marketing. During the Term, NBCi, shall have the
exclusive right to use (or allow an Affiliate to use, in which
case all references to "NBCi" in this Section 9 shall refer to
such Affiliate) the information contained in Telocity
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Database for email-based direct marketing purposes as set forth
in this Section (with the exception of customer correspondence
specifically pertaining to non-commercial communications with
Subscribers, including, but not limited to, customer service,
billing and technical support). NBCi shall have a right to
execute, or cause to be executed, promotional email offers to
all or some of the Users described in the Telocity Database.
Such email offers shall be drafted by NBCi following a mutually
agreed upon template, approved by Telocity (and such approval
shall not be unreasonably withheld) and will appear to come from
"Telocity and Snap"; provided, however, each email will not be
subject to Telocity's approval. Such email messages may have
links to the NBCi Sites or the Co-Branded Site, as NBCi shall
decide in its sole discretion. Products offered in such emails
may include NBCi's products or services or third party products
and/or services that NBCi has the right to offer, and NBCi shall
select all of such products to be offered in its sole
discretion. NBCi agrees that any direct marketing solicitations
to Subscribers will not include advertisements or commercial
messages for Telocity Competitors. NBCi may choose to distribute
emails to some or all Users in Telocity Database. NBCi shall
also have the option to create and host "sell" pages for any
marketing campaign, arrange for purchase orders to be processed
and fulfilled, and for customer service and inventory matters to
be coordinated in relation to the products offered in emails
distributed pursuant to this Section, as NBCi shall determine in
its sole discretion. All direct marketing solicitations will
afford the User with an easy and accessible means to
unsubscribe. NBCi agrees that co-branded advertisements will not
include advertisements or commercial messages for Telocity
Competitors.
9.4. Telocity Promotional Offers. Notwithstanding Section 9.3,
Telocity shall have the right to send (i) emails to Users
described in Telocity Database solely with respect to the
billing and administration of the Telocity Services; and (ii)
periodic email newsletters related to the Telocity Services, but
such emails and newsletters may not promote services provided by
an NBCi Competitor. Further, Telocity may present promotional
offers to its Subscribers with their bill or newsletter (the
"Promotional Offers"). The Promotional Offers shall not be on
behalf of any third parties and shall be solely for the purpose
of promoting or upselling Telocity Services; provided that,
however, such Promotional Offers may include third party
products and services (for example, in connection with
Telocity's affinity program) without NBCi's approval from
entities that are not NBCi Competitors so long as the third
party product or service is not in a category for which NBCi has
an express contractual relationship with respect to such product
or service. NBCi will provide Telocity with a list of such
relationships and will update the list from time to time. With
the exception of the aforementioned emails and newsletters, all
other emails to Users described in Telocity Database will be
delivered by NBCi in order to ensure a consistent marketing
message.
9.5. Telocity Database Management. Subject to Telocity's agreements
with Subscribers, on or before the Launch Date, Telocity will
electronically send NBCi all User Profile Data then contained in
the Telocity Database to one (1) or more FTP addresses
designated by NBCi in a mutually agreed upon format. In the
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event that such agreements prohibit the foregoing, Telocity will
make best efforts to obtain consent of the Subscribers to the
transfer of the User Profile Data to NBCi. Beginning one (1)
month following the Launch Date, on a monthly basis, Telocity
will send NBCi updates of the User Profile Data. Such updates
will be provided in a mutually agreed-upon format. Both parties
will use commercially reasonable efforts to implement NBCi's
universal User registration process by the Launch Date so that
Users who have registered to become Subscribers do not need to
again enter their personal data to become NBCi Members. Telocity
will provide NBCi, on a monthly basis, Telocity's standard
report containing the Telocity Aggregate User Data.
9.6. NBCi Aggregate User Data Management. NBCi will provide Telocity,
on a monthly basis, NBCi's standard report containing the NBCi
Aggregate User Data.
10. Payments and Credits.
10.1. Revenue Sharing.
10.1.1 Telocity Only Services. Beginning on the Launch Date,
Telocity shall pay to NBCi, on a quarterly basis, ten
percent (10%) of the net revenues actually received by
Telocity for the basic Telocity internet access service.
For purposes of this Section 10.1.1, net revenues shall
mean gross revenues less a cost of goods sold figure
based on the following items: (i) Last Mile Technologies
Expenses, (ii) Shipping and Handling Expenses, and (iii)
Network Operations Expenses, but excluding all Gateway
rebate expenses, which shall be treated as customer
acquisition costs by Telocity.
10.1.2 Value-Added Services. Telocity will pay, on a quarterly
basis, ten percent (10%) of the net revenues actually
received by Telocity for value-added services, which are
Telocity subscriber services other than internet access.
For the first eighteen (18) months after the Effective
Date, net revenues shall mean gross revenues less a cost
of goods sold figure based on the following items: (i)
Last Mile Technologies Expenses, (ii) Shipping and
Handling Expenses, and (iii) Network Operations
Expenses, but excluding all Gateway rebate expenses,
which shall be treated as customer acquisition costs by
Telocity. After eighteen (18) months from the Effective
Date, net revenues for value-added services will be
calculated as gross revenues less a cost of goods sold
figure arrived at in accordance with generally accepted
accounting principles.
10.1.3 Overlapping Services. At such time as a value-added
service is an Overlapping Service, Telocity will pay
NBCi, on a quarterly basis, forty percent (40%) of the
net revenues referenced in Section 10.1.2 actually
received from revenues generated by the Overlapping
Service provided by Telocity.
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10.1.4 NBCi Services. NBCi shall pay Telocity, on a quarterly
basis, forty percent (40%) of the net revenues actually
received by NBCi or its subsidiaries derived from (i)
all revenue from advertising running on the Co-Branded
Site (including, but not limited to, banner ads and
windows) multiplied by the Telocity Fraction; (ii)
anchor tenancies and other tenancies that are solely on
the Co-Branded Site; (iii) e-Commerce Services
(including but not limited to, targeted e-mails and
product sales, fees for "host and sell" pages, and
transaction fees from national online merchants)
attributable to Subscribers (NBCi will make best efforts
to ensure that such revenues can be attributed to
Telocity Subscribers); and (iv) subscription and pay per
view media (including but not limited to, music, video,
gaming, and other media services) attributable to
Telocity Users. For purposes of this Section 10.1.4,
"net revenues" shall mean gross revenues actually
received by NBCi or its subsidiaries, less, as
applicable, agency fees, selling expenses, returns, bad
debt expenses, revenue sharing expenses payable to third
parties, content fees, licensing fees, fraud,
commissions and service fees. After eighteen (18) months
from the Effective Date, net revenues for NBCi Services
will be calculated as gross revenues less a cost of
goods sold figure arrived at in accordance with
generally accepted accounting principles.
10.1.5 Unavailable Content. In the event that Telocity chooses
to contract with an independent third party for
Unavailable Content, NBCi shall receive forty percent
(40%) of the gross revenues actually received from the
placements of such Unavailable Content within the
Telocity Platform, less, as applicable, agency fees,
selling expenses, returns, bad debt expenses, revenue
sharing expenses payable to third parties, content fees,
licensing fees, fraud, commissions and service fees.
10.2. Bundled Services. Telocity may offer bundled services from time
to time that will be priced less than the aggregate price for
all the component parts. In order to calculate the net revenues
due NBCi for purposes of Section 10.1 based on the sale of the
bundled Telocity Services, the parties will jointly determine
the appropriate net revenue share for each item in the bundle,
determine the ratio of the relative value of each item in the
bundle based on the price of all items when purchased
individually and apply such ratio to the revenue generated by
the bundled offering. For example, assume a bundled Telocity
Service package consisting of ten (10) discrete Telocity
Services (seven (7) of which are Telocity Only Services and
three (3) are Overlapping Services that meet the criteria of
Section 5.5.2) costs a Subscriber One Hundred Dollars ($100) a
month. Purchasing these ten (10) discrete Telocity Services
individually would cost the Subscriber Two Hundred Dollars
($200) a month. If the three (3) Overlapping Services
individually priced cost Fifty Dollars ($50) per month, the
ratio would be twenty-five percent (25%) for the Overlapping
Services. Therefore the net revenue share payable to NBCi by
Telocity for the three (3) Overlapping Services would be 40% of
25% of the net revenues for such $100 and the net revenue share
payable to NBCi by Telocity for the 7 Telocity Only Services
would be 10% of
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75% of the net revenues for such $100. NBCi shall have the
right, exercisable in its reasonable discretion, to permit
Telocity to bundle NBCi Services (such as pay-per-view movies)
with Telocity Services; provided, however, that NBCi will have
the right in its sole discretion to establish the price to
Telocity for such bundled NBCi Services, and Telocity shall have
the right in its sole discretion to price the overall bundle to
the Subscriber.
10.3. Payment. Payments under this Agreement will be made by check or
wire transfer of immediately available funds. All amounts due
from one party to another party hereunder shall be due and
payable on a quarterly basis by the forty-fifth (45th) day
following the quarter in which such amount can be reasonably
accrued in accordance with generally accepted accounting
principles.
10.4. Warrants. Upon execution of this Agreement, Telocity will issue
to NBCi a warrant to purchase 1,039,122 shares of Series C
Preferred Stock, in the form attached hereto as Exhibit G and,
to NBC, a warrant to purchase 850,191 shares of Series C
Preferred Stock, in the form attached hereto as Exhibit G.
11. Records and Audits.
11.1. Accounting Standards. It is expressly understood and agreed by
the parties that all computations relating to the determination
of the amounts due and payable pursuant to this Agreement shall
be made in accordance with nationally recognized and generally
accepted accounting principles and practices that are recognized
as such by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by
the Financial Accounting Standards Board ("F.A.S.B.") or through
other appropriate boards or committees thereof and shall be
consistently applied for all periods after the Effective Date.
The parties will recognize topline revenues related to this
Agreement based generally upon principles for revenue
recognition used by F.A.S.B. for accounting practices, and the
SEC for reporting practices.
11.2. Audit Rights. Each party agrees to keep accurate books of
account and records at its principal place of business covering
all transactions relating to this Agreement. Each party or any
duly authorized representative shall have the right, at all
reasonable hours of the day, but no more than once a year, to
audit, each of the other party's books of account and records
and all other documents and material in the possession or under
the control of such other party, whether in electronic format or
otherwise, with respect to the subject matter and the terms of
this Agreement and to make copies and extracts thereof; provided
that no such audit may include any periods more than three years
prior to the date of audit. In the event that any such audit
reveals an underpayment by the audited party, the audited party
shall immediately remit payment to appropriate party in the
amount of such underpayment plus interest calculated at a rate
of one and one-half (1 1/2%) per month, or the maximum rate
allowed by law, compounded daily, calculated from the date such
payments were actually due until the date when such payment is
in fact actually made. Further, in the event that any such
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underpayment is greater than five percent (5%) of the amount due
for the period being audited, the audited party shall reimburse
the party conducting the audit for the reasonable costs and
expenses of such audit. All books of account and records of each
party covering all transactions relating to this Agreement shall
be retained by such party for at least three (3) years after the
expiration or termination of this Agreement, as the case may be,
for possible inspection and/or audit by the other parties.
12. Term; Termination.
12.1. Term. The term of this Agreement will begin on the Effective
Date and end on the last day of the fifteenth (15TH) year after
the Effective Date, unless otherwise terminated as set forth in
this Agreement (the "Term").
12.2. Termination for Cause. Either NBCi or Telocity may terminate
this Agreement at any time by giving written notice of
termination to the other party if any other party commits a
material breach of its obligations hereunder, including a
material breach of a relevant party's privacy policy, that is
not cured within sixty (60) days after notice thereof from the
non-breaching party.
12.3. Termination for Insolvency. Either party may terminate this
Agreement upon sixty (60) days notice, and shall have no further
obligation under this Agreement, if the other party becomes
insolvent; makes an assignment for the benefit of creditors;
makes or sends notice of a bulk transfer; calls a meeting of its
creditors with respect to its inability to pay its obligations
owed to such creditors on customary terms; defaults under any
agreement, document or instrument relating to the party's
indebtedness for borrowed money; or ceases to do business as a
going concern; or if a petition is filed by or against the party
under any bankruptcy or insolvency laws which is not dismissed
within ninety (90) days of the date of filing.
12.4. Competitor Termination. NBCi may terminate this Agreement at any
time by giving written notice of termination to Telocity if
Telocity experiences a change in its ownership, such that an NBC
Competitor (as defined in the Stock Purchase Agreement) or an
NBCi Competitor, directly or indirectly, holds an equity
interest greater than thirty-three (33) percent in Telocity, or
otherwise acquires control of Telocity, or if Telocity is
acquired by or merges with an NBCi Competitor. NBCi shall have
the right to exercise the termination right set forth in this
Section 12.4 for up to three (3) months after the occurrence of
the event that triggered such a termination right.
12.5. Termination by NBCi. NBCi may terminate this Agreement at any
time by giving written notice of termination to Telocity if
within eighteen (18) months following the Effective Date,
Telocity fails to complete a Qualifying Offering (as defined in
Telocity's Third Amended and Restated Articles of Incorporation)
or a private placement of its debt or equity securities (not
including the private placement contemplated by the Stock
Purchase Agreement) that results in net proceeds to
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Telocity of an amount that will enable the continued expansion
of the Subscriber base for the Telocity Platform at least fifty
percent (50%) of the rates set forth with the Market Deployment
Plan for a period of six (6) months following the closing of
such Qualifying Offering or private placement, as applicable.
12.6. Consequences of Termination. Upon the termination or expiration
of this Agreement, all licenses granted hereunder shall
immediately terminate and each party shall return or destroy all
Confidential Information of the other party in its possession.
Neither party shall be liable to the other for damages of any
sort resulting solely from any termination of this Agreement in
accordance with its terms.
13. Intellectual Property.
13.1 Ownership.
13.1.1 Telocity Materials. NBCi acknowledges that Telocity and
its licensors own and shall own all rights, title and
interest in the Telocity Marks, Telocity Content, the
Telocity Window and its specifications, Additional
Interfaces developed by Telocity without NBCi (except as
provided in Section 13.4), Telocity Sites, Proprietary
Technology (collectively referred to as "Telocity
Materials"). NBCi acknowledges that it has no, and shall
receive under this Agreement no, ownership rights in the
Telocity Materials. In the event NBCi or any of its
subsidiaries, by operation of law or otherwise obtains
any Intellectual Property Rights in the Telocity
Materials, NBCi shall, or cause its subsidiaries to,
irrevocably assign to Telocity and its successors and
assigns any of NBCi's or its subsidiaries' right, title
and interest thereto, including without limitation, any
and all worldwide copyrights and patent rights and all
renewals and extensions and divisionals, continuations
in part and foreign applications and registrations
thereof and for all uses and purposes whatsoever.
13.1.2 NBCi Materials. Telocity acknowledges that NBCi, and its
licensors own and shall own all rights, title and
interest in the NBCi Marks, the NBCi Sites, Co-Branded
Site (except the Telocity Content contained therein),
the Front Door Interfaces, the specifications to such
Front Door Interfaces, the Additional Interfaces
developed by NBCi without Telocity (except as provided
in Section 13.4), and the specifications to such
Additional Interfaces (collectively referred to as "NBCi
Materials"). Telocity acknowledges that it has no, and
shall receive under this Agreement no, ownership rights
in the NBCi Materials. In the event Telocity by
operation of law or otherwise obtains any Intellectual
Property Rights in the NBCi Materials, Telocity shall
irrevocably assign to NBCi and its successors and
assigns of any and all of Telocity's right, title and
interest thereto, including without limitation any and
all worldwide copyrights and any and all renewals and
extensions thereof and for all uses and purposes
whatsoever.
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13.1.3 Jointly Developed Additional Interfaces. Except for (i)
Additional Interfaces developed by Telocity without
NBCi, (ii) Additional Interfaces developed by NBCi
without Telocity and (iii) Section 13.4, each party
acknowledges that the other party jointly owns all
jointly developed Additional Interfaces and all
specifications to such Additional Interfaces, and
neither party shall have an obligation of accounting to
the other with respect to such jointly developed
Additional Interfaces and specifications thereto.
13.2 Telocity Marks and Content. Telocity hereby grants to NBCi and
its subsidiaries a non-exclusive, non-transferable, royalty-free
license, effective throughout the Term, (i) to use, display and
publish the Telocity Marks and Telocity Content, and (ii)to
modify and create derivative works of the Telocity Content,
solely for purposes of rescaling. In the event the International
Editions are deemed included within this Agreement pursuant to
Section 8.2, Telocity hereby further grants to NBCi and its
subsidiaries a non-exclusive, non-transferable, royalty-free
license, effective throughout the Term, to modify and create
derivative works of the Telocity Content solely as permitted
hereunder. In the event the International Editions are deemed
included within this Agreement pursuant to Section 8.2, Telocity
shall in good faith modify the Telocity Marks to incorporate
changes reasonably suggested by NBCi for the relevant target
audience (e.g., complying with local laws or avoiding the use of
offensive terms in the local language). Any use of the Telocity
Marks by NBCi must comply with any reasonable usage guidelines
communicated by Telocity to NBCi from time to time. Nothing
contained in this Agreement will give NBCi any right, title or
interest in or to the Telocity Content, Telocity Marks or the
goodwill associated therewith, except for the limited usage
rights expressly provided above. Telocity will have the right to
approve all marketing materials used by NBCi that use the
Telocity Marks in any way. NBCi acknowledges that Telocity is
the sole and exclusive owner of the Telocity Marks. NBCi shall
use Telocity Marks so that they create a separate and distinct
impression from any other trademark that may be used on
materials bearing the Telocity Marks. NBCi agrees that all use
of the Telocity Marks by NBCi shall inure to the benefit of and
be on behalf of Telocity and its licensors.
13.3 Proprietary Technology. Telocity hereby grants NBCi and its
subsidiaries (and, to the extent necessary for NBCi to perform
hereunder, to subcontractors designated by NBCi, which are not
Telocity Competitors) a non-exclusive, non-transferable
royalty-free right and license during the Term to access and/or
use the Proprietary Technology, including related documentation,
methodology and tools, whether existing as of the Effective Date
or developed by Telocity after the Effective Date, to enable
NBCi to fulfill its obligations hereunder. Any subcontractors
who receive a license under this provision shall first have
signed a written agreement at least as protective of Telocity's
rights as the terms and conditions of Section 20.4.
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13.4 Integration Technologies. Telocity acknowledges that NBCi and
its licensors own and shall own all rights, title and interest
in the technology used to integrate the Telocity Window into the
Front Door Interfaces and that such technology shall constitute
NBCi Materials for purposes of this Agreement; provided,
however, if NBCi has to develop specific technology to integrate
the Telocity Window into the Front Door Interfaces, then the
parties shall jointly own such technology. If in designing and
creating an Additional Interface, NBCi has to develop specific
technology to design and create the Additional Interface, then
the parties shall jointly own such technology. With respect to
any such jointly owned technology neither party shall have an
obligation to accounting to the other.
13.5 NBCi's License Grants. NBCi hereby grants to Telocity a
non-exclusive, non-transferable, royalty free license, effective
throughout the Term, to use, display and publish the NBCi Marks
as permitted in Section 7.2 and to use, reproduce and display
the NBCi Marks in advertising, marketing and promotion of the
Co-Branded Site, the Telocity Platform and the Telocity
Services. Any use of the NBCi Marks by Telocity must comply with
any reasonable editorial and usage guidelines communicated to
Telocity by NBCi from time to time. Telocity shall submit for
approval to NBCi, and NBCi shall have the sole right of approval
over any uses of the NBCi Marks; provided that NBCi shall use
the same standard of approval as it applies to any proposed use
by NBCi or its subsidiaries and provided, further, that
following approval of a particular format and purpose of use,
Telocity shall be deemed to have continuing approval in the
specific manner and for the format and purpose of use approved
without the necessity of seeking specific approvals for each
additional use. Nothing contained in this Agreement will give
Telocity any right, title or interest in or to the NBCi Marks or
the goodwill associated therewith, except for the limited usage
rights expressly provided above. Telocity acknowledges and
agrees that, as between Telocity and NBCi, NBCi or its licensors
are the sole owners of all rights in and to the NBCi Marks. NBCi
will have the right to approve all marketing materials used by
Telocity that use the NBCi Marks in any way. Telocity agrees
that all use of the NBCi Marks by Telocity shall inure to the
benefit of and be on behalf of NBCi and its licensors.
13.6 General Limitation. Neither party will use the other party's
proprietary marks in a manner that disparages the other party or
its products or services, or portrays the other party or its
products or services in a false, competitively adverse or poor
light. If a party is authorized to use the other party's
proprietary marks, the party will comply with the other party's
requests as to the use of the other party's proprietary marks
and will avoid any action that diminishes the value of such
marks. Either party's unauthorized use of the other's
proprietary marks is strictly prohibited.
13.7 General Reservation. Neither party grants any license to the
other except as specifically set forth in this Section 13.
Except as is expressly set forth under this
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Section 13, both parties expressly reserve all of their right,
title and interest in their respective Intellectual Property
Rights.
13.8 Protection of Telocity Platform. Telocity agrees to use
commercially reasonable efforts to protect the Telocity Platform
through owning and/or licensing all Intellectual Property Rights
therein and to use commercially reasonable efforts to maintain
and enforce the same.
14. Responsibility for the Sites and Products. Telocity acknowledges and
agrees that, as between Telocity and NBCi, Telocity will be solely
responsible for any claims or other losses associated with or resulting
from the marketing or operation of the Telocity Platform and the
Telocity Sites and the offer or sale of any Telocity Services by
Telocity or through Telocity Sites or Co-Branded Site, or through emails
delivered for Telocity by NBCi. NBCi acknowledges and agrees that, as
between NBCi and Telocity, NBCi will be solely responsible for any
claims or other losses associated with or resulting from the marketing
or operation of the NBCi Properties and the NBCi Services and the offer
or sale of any NBCi Services by Telocity or by NBCi.
15. Telocity Representations and Warranties.
15.1 Telocity represents and warrants: (i) Telocity possesses
sufficient right, title, interest and license in or to all
Intellectual Property Rights embodied in or used in connection
with the Telocity Marks, the Telocity Content, the Telocity
Platform, and the Telocity Site to perform its obligations
hereunder; (ii) Telocity has full power and authority to grant
the licenses in Sections 13.2 and 13.3 above; (iii) Telocity's
use of the Co-Branded Site, the Telocity Platform and the
Telocity Services pursuant to the license granted it in Section
13.5 above shall in no way constitute an infringement or other
violation of an Intellectual Property Right or any other right
of any third party; and (iv) the execution of this Agreement by
Telocity, and the performance by Telocity of its obligations and
duties hereunder, do not and will not violate any agreement to
which Telocity is a party or by which it is otherwise bound.
15.2 EXCEPT AS EXPRESSLY SET FORTH IN SECTION 15.1 ABOVE, TELOCITY
MAKES NO REPRESENTATIONS OR WARRANTIES, AND HEREBY SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, REGARDING THE TELOCITY CONTENT, TELOCITY MARKS,
TELOCITY PLATFORM, TELOCITY SERVICES AND TELOCITY SITES,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS AND
IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF
PERFORMANCE, OR AS MAY BE SET FORTH IN EXHIBIT B.
16. NBCi Representations and Warranties.
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16.1 NBCi represents and warrants to Telocity: (i) NBCi possesses
sufficient right, title, interest and license in or to all
Intellectual Property Rights (excluding rights to third party
content, for example, user-generated content) embodied in or
used in connection with the Front Door Interface and the
Co-Branded Site to perform its obligations hereunder; (ii) NBCi
has full power and authority to grant the licenses in Sections
13.5 above; (iii) NBCi's use of the Telocity Marks, Telocity
Content and Proprietary Technology pursuant to the license
granted it in Sections 13.2 and 13.3 above shall in no way
constitute an infringement or other violation of an Intellectual
Property Right or any other right of any third party; and (iv)
the execution of this Agreement by NBCi, and the performance by
NBCi of its obligations and duties hereunder, do not and will
not violate any agreement to which NBCi is a party or by which
it is otherwise bound.
16.2 EXCEPT AS EXPRESSLY SET FORTH IN SECTION 16.1 ABOVE, NBCi MAKES
NO REPRESENTATIONS OR WARRANTIES, AND HEREBY SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, REGARDING THE NBCi MARKS, NBCi PROPERTIES AND NBCi
SERVICES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD
PARTY RIGHTS AND IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE.
17. LIMITATION OF DAMAGES. EXCEPT FOR SECTION 18, NO PARTY WILL BE LIABLE
FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING
OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY (INCLUDING NEGLIGENCE), AND EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
18. Mutual Indemnification.
18.1. Indemnification by NBCi. NBCi shall indemnify, defend and hold
Telocity and its officers, directors, employees and agents
harmless from and against any costs, losses, liabilities and
expenses, including all court costs, reasonable expenses and
reasonable attorney's fees (collectively, "Losses") that
Telocity may suffer, incur or be subjected to by reason of any
legal action, proceeding, arbitration or other claim by a third
party, whether commenced or threatened, arising out of or as a
result of (i) the operation of the NBCi Properties, (ii) the
transmission of emails or other solicitations by NBCi or any
NBCi subsidiary to a Subscriber in violation of any applicable
privacy policy or legislation or anti-spamming statutes, (iv)
Telocity's use of the NBCi Marks in accordance with this
Agreement, (v) any claim that the intellectual property of NBCi
or any NBCi subsidiary infringes an Intellectual Property Right
of any third party (except in cases where Telocity is required
to indemnify NBCi under Section 18.2), and (vi) the use or
disclosure of User Profile Data in violation of this Agreement
or any applicable law or regulation.
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18.2. Indemnification by Telocity. Telocity shall indemnify, defend
and hold NBCi, and its Affiliates, officers, directors,
employees and agents, harmless from and against any Losses that
NBCi or its Affiliates may suffer, incur or be subjected to by
reason of any legal action, proceeding, arbitration or other
claim by a third party, whether commenced or threatened, arising
out of or as a result of (i) the use of the Telocity Content,
Telocity Marks or Proprietary Technology by NBCi and/or its
Affiliates in accordance with this Agreement; (ii) the operation
of the Telocity Sites or Telocity Platform; (iii) the offer or
sale of Telocity Services by Telocity on or through Telocity
Sites or the Co-Branded Site or any emails sent by NBCi or a
third party pursuant to Section 9.3, (iv) any claim that the
intellectual property of Telocity or any Telocity subsidiary or
provided by Telocity hereunder (including the Proprietary
Technology), Telocity Sites or Telocity Content infringes an
Intellectual Property Right of any third party, (v) the use or
disclosure of User Profile Data in violation of this Agreement
or any applicable law or regulation, or (vi) the violation of
any telecommunications laws, rules or regulations by Telocity.
18.3. Indemnification Procedures. If any party entitled to
indemnification under this Section (an "Indemnified Party")
makes an indemnification request to the other, the Indemnified
Party shall permit the other party (the "Indemnifying Party") to
control the defense, disposition or settlement of the matter at
its own expense; provided that the Indemnifying Party shall not,
without the consent of the Indemnified Party enter into any
settlement or agree to any disposition that imposes an
obligation on the Indemnified Party that is not wholly
discharged or dischargeable by the Indemnifying Party, or
imposes any conditions or obligations on the Indemnified Party
other than the payment of monies that are readily measurable for
purposes of determining the monetary indemnification or
reimbursement obligations of Indemnifying Party. The Indemnified
Party shall notify the Indemnifying Party promptly of any claim
for which Indemnifying Party is responsible and shall cooperate
with the Indemnifying Party in every commercially reasonable way
to facilitate defense of any such claim; provided that the
Indemnified Party's failure to notify Indemnifying Party shall
not diminish Indemnifying Party's obligations under this Section
except to the extent that Indemnifying Party is materially
prejudiced as a result of such failure. An Indemnified Party
shall at all times have the option to participate in any matter
or litigation through counsel of its own selection and at its
own expense.
19. Alternative Dispute Resolution. Unless the parties otherwise agree in
writing and except as qualified in Section 5.5.5, any dispute,
controversy, disagreement or claim, regardless of the legal or equitable
theory involved, arising out of or with reference to this Agreement
(each, a "Dispute") shall be settled in accordance with the terms of
this Section 19. Other than as expressly provided otherwise in this
Agreement, the parties will act in good faith and use commercially
reasonable efforts to resolve any Dispute between the parties or any of
their respective subsidiaries under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby within ten (10) days of notice by one party to the
other of a specific dispute. Upon the expiration of such initial ten
(10) day period, if a Dispute
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has not been resolved by the parties, the parties shall submit such
Dispute to the parties' chief executive officers, who shall meet within
an additional ten (10) day period to discuss the resolution of such
Dispute in good faith. Such meeting shall continue for a minimum of two
(2) business days, unless the dispute is resolved prior to the
expiration of such two (2) day period. Except as provided in Section
5.5.5, upon the expiration of the second ten (10) day period, if such
Dispute remains unresolved, each party may seek any remedy available to
it at law or otherwise. Neither party will seek, nor will be entitled to
seek, outside resolution of the Dispute until after expiration of the
second ten (10) day period.
20. Miscellaneous.
20.1. Assignment. NBCi shall have the right to assign all of its
rights and liabilities hereunder to an Affiliate or to any
person or entity that (i) acquires all or substantially all of
NBCi's operating assets (whether by asset sale, stock sale,
merger or otherwise) or (ii) results from a merger or
reorganization of NBCi pursuant to any plan of merger or
reorganization. Telocity shall have the right to assign all of
its rights and liabilities hereunder to any person or entity
that (i) acquires all or substantially all of Telocity's
operating assets (whether by asset sale, stock sale, merger or
otherwise) or (ii) results from a merger or reorganization of
Telocity pursuant to any plan of merger or reorganization;
provided, however, that such person or entity is not an NBCi
Competitor.
20.2. Relationship of Parties. This Agreement will not be construed to
create a joint venture, partnership or the relationship of
principal and agent between any of the parties hereto, nor to
impose upon any party any obligations for any losses, debts or
other obligations incurred by another party except as expressly
set forth herein.
20.3. Applicable Law. This Agreement will be construed in accordance
with and governed by the laws of the State of California,
without regard to principles of conflicts of law. Litigation of
disputes under this Agreement shall be conducted in the state or
federal courts for the Northern District of California. The
parties hereto consent to the jurisdiction of any local, state
or federal court in which an action is commenced and located in
accordance with the terms of this Section 20.3 and that is
located in the Northern District of California. The parties
further agree not to disturb such choice of forum, and if not
residing in such state, waive the personal service of any and
all process upon them, and consent that such service of process
may be made by certified or registered mail, return receipt
requested, addressed to the parties as set forth herein.
20.4. Confidentiality. In connection with the activities contemplated
by this Agreement, each party may have access to confidential or
proprietary technical or business information of another party,
including without limitation (i) proposals, ideas or research
related to possible new products or services; (ii) financial
statements and other financial information; (iii) any reporting
information in Section 11 herein; and (iv) the terms of this
Agreement and the relationship among the parties; (collectively,
"Confidential Information"). Each party will
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take reasonable precautions to protect the confidentiality of
each of the other party's Confidential Information, which
precautions will be at least equivalent to those taken by such
party to protect its own Confidential Information. Except as
required by law or as necessary to perform under this Agreement,
no party will knowingly disclose the Confidential Information of
any other party or use such Confidential Information for its own
benefit or for the benefit of any third party. Each party's
obligations in this Section with respect to any portion of
another party's Confidential Information shall terminate when
the party seeking to avoid its obligation under such Section can
document that: (i) it was in the public domain at or subsequent
to the time it was communicated to the receiving party
("Recipient") by the disclosing party ("Discloser") through no
fault of Recipient; (ii) it was rightfully in Recipient's
possession free of any obligation of confidence at or subsequent
to the time it was communicated to Recipient by Discloser; (iii)
it was developed by employees or agents of Recipient
independently of and without reference to any information
communicated to Recipient by Discloser; (iv) it was communicated
by the Discloser to an unaffiliated third party free of any
obligation of confidence; or (v) the communication was in
response to a valid order by a court or other governmental body,
was otherwise required by law or was necessary to establish the
rights of either party under this Agreement.
20.5. Press Release. No party will make any public statement or other
announcement (including without limitation, issuing a press
release) or pre-briefing any member of the press or other third
party) relating to the terms or existence of this Agreement
without the prior written approval of the other parties.
Notwithstanding the foregoing and Section 20.4, the parties
shall issue an initial joint press release, the timing and
wording of which will be subject to each party's reasonable
approval (which shall not be unreasonably withheld or delayed),
regarding the relationship between the parties.
20.6. Injunctive Relief. Each party agrees that in the event of a
breach or alleged breach of Sections 20.4 or 20.5 above that the
other parties shall not have an adequate remedy at law,
including monetary damages, and that the other parties shall
consequently be entitled to seek a temporary restraining order,
injunction, or other form of equitable relief against the
continuance of such breach, in addition to any and all remedies
to which any other party shall be entitled.
20.7. Subsidiaries. Each party unconditionally guarantees to the other
party the performance of all obligations by any of its
subsidiaries under the Agreement (including, without limitation,
payment obligations), as amended from time to time, or any other
obligation of any subsidiary to the other party, now existing or
hereafter arising. If either party's subsidiary does not perform
such obligation, such party shall immediately perform such
obligation.
20.8. Captions and Section Headings. Captions and section headings
used in this Agreement are for convenience only and are not a
part of this Agreement and shall not be used in construing it.
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<PAGE> 30
20.9. Survival. Termination or expiration of this Agreement for any
reason shall not release any party from any liabilities or
obligations set forth in this Agreement which (i) the parties
have expressly agreed shall survive any such termination or
expiration, or (ii) remain to be performed or by their nature
would be intended to be applicable following any such
termination or expiration.
20.10. Force Majeure. If any party shall be delayed in its performance
of any obligation hereunder or be prevented entirely from
performing any such obligation due to causes or events beyond
its reasonable control, including without limitation any act of
God, fire, strike or other labor problem, such delay or
non-performance shall be excused and the time for performance
shall be extended to include the period of such delay or
non-performance.
20.11. Consents and Approvals. Except where expressly provided as being
in the sole discretion of a party, where agreement, approval,
acceptance, consent, confirmation, notice or similar action by
either party is required under this Agreement, such action shall
not be unreasonably delayed or withheld. An approval or consent
given by a party under this Agreement shall not relieve the
other party from responsibility for complying with the
requirements of this Agreement, nor shall it be construed as a
waiver of any rights under this Agreement, except as and to the
extent otherwise expressly provided in such approval or consent.
20.12. Notices. All notices or other communications that shall or may
be given pursuant to this Agreement, shall be in writing, in
English, shall be sent by certified or registered air mail with
postage prepaid, return receipt requested, by facsimile,
overnight express mail, or by hand delivery. Such communications
shall be deemed given and received upon confirmation of receipt,
if sent by facsimile; the day after delivery if by overnight
express mail; or upon delivery if hand delivered; or upon
receipt of mailing, if sent by certified or registered mail; and
shall be addressed to the parties as set forth above on the
first page of this Agreement and to the attention of the Legal
Department, with a Copy to the Office of the President, if to
Telocity; and to the attention of the Legal Department, with a
copy to the Office of the President, if to NBCi; or to such
other addresses or persons as the parties may designate in
writing from time to time.
20.13. Third Party Beneficiary. The parties hereto agree that NBC shall
be a third party beneficiary of this Agreement for purposes of
Section 4.15.
20.14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed a duplicate original
and all of which, when taken together, shall constitute one and
the same document.
20.15. Entire Agreement. This Agreement constitutes and contains the
entire agreement between the parties with respect to the subject
matter hereof and supersedes any prior or contemporaneous oral
or written agreements. This Agreement may not be amended except
in writing signed by all parties. Each party acknowledges and
30
<PAGE> 31
agrees that the other has not made any representations,
warranties or agreements of any kind, except as expressly set
forth herein. All exhibits attached to this Agreement are
incorporated hereby and shall be treated as if set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the dates indicated below.
NBC INTERNET, INC. TELOCITY, INC.
By: /s/ EDMOND SANCTIS By: /s/ PATTI HART
---------------------------------- ----------------------------------
(Signature) (Signature)
Name: Edmond Sanctis Name: Patti Hart
-------------------------------- --------------------------------
(Please print) (Please print)
Title: Title:
------------------------------- -------------------------------
Date: Date:
-------------------------------- --------------------------------
FOR PURPOSES OF SECTION 4.14 AND 10.4:
NATIONAL BROADCASTING COMPANY, INC.
By: /s AUTHORIZED SIGNATORY
----------------------------------
(Signature)
Name: Authorized Officer
--------------------------------
(Please print)
Title:
-------------------------------
Date:
--------------------------------
31
<PAGE> 32
EXHIBIT A
[INTENTIONALLY LEFT BLANK]
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<PAGE> 33
EXHIBIT B
OSS, NETWORK, GATEWAY
OSS
Telocity's back-end operational system is a customer focused web-enabled
business process that ties together all of the Company's functional departments
including sales, customer service, marketing, billing, accounting, line
qualification and order fulfillment. It is technically based on a best-of-breed
approach utilizing standard products for customer relationship management,
billing, for network monitoring and order processing. Using Telocity's automated
back office process, customers can self-subscribe for service without requiring
interaction. Once an order has been placed, the customer information is
populated in real-time to information technology systems within the Company.
After the customer completes the automated line test to determine if the phone
line qualifies for the broadband service, the Telocity back office system can
handle order provisioning for the central office cross connect. Simultaneously,
Telocity's residential gateway modem is automatically sent to the customer. With
these internal information systems, Telocity is able to retrieve real-time order
status, customer and financial information.
Telocity's OSS design is based on "best-of-breed" approach. The Company has
selected the best packages from order entry to billing and integrated them with
the customer as the focus point. Scalability is achieved through vertical
(functional) and horizontal (geographical) segmentation of the OSS.
Cross-functional interaction is ensured for consistent access to information.
through standards based interfaces using XML, DCOM and Cobra.
NETWORK
The Company is in the process of deploying a high performance network
IP-based network backbone starting at OC-3 capacity.
The Telocity network features the following:
o A nationwide, managed delivery platform for broadband content, based on
open Internet standards, with QoS between consumers and partners, including
local caching, proxy and media server support. Four levels of QoS from
Internet access to voice based quality.
o Peering and transit arrangements with major backbone partners
o Local media distribution centers with caching via satellite feed and local
media servers for high speed distribution. Extensible to support new
caching mechanism and media distribution schemas.
o IP-protocol based high-speed connectivity to the Internet and to Telocity's
nationwide backbone for partners, supporting various carrier mechanisms
from ATM, xDSL up to point-to-point high-speed circuits.
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<PAGE> 34
The Company has negotiated agreements for long-haul capacity from national
carriers to form the basis of its nationwide backbone. In addition, the Company
has executed last-mile interconnection agreements with major last mile
providers.
Telocity's network and OSS are managed and monitored on a 24x7 basis. The
Company's network operations center is located in Cupertino, California. From
this center, Telocity provides end-to-end network monitoring and management
using advanced network management tools 24 hours a day, 7 days a week. This
enhances Telocity's ability to address performance issues before they affect the
end-user experience and allows the Company to remotely install and/or upgrade a
customer's requested suite of products. During first half of 2000, Telocity
intends to establish a back-up data center in a low cost region within the
United States. The network operations center, customer service center and the
data center have a back-up generator and a battery back-up.
GATEWAY
Telocity's residential gateway, which includes the DSL modem, provides for
a simple installation. Once a phone line has been DSL activated in the home, the
residential gateway is shipped to the customer. It does not require installation
of any special cards in the computer or require a site visit by a computer
technician. To activate the DSL service, the customer simply plugs a phone line
into the modem, plugs the modem into the back of the computer and then follows
the automated instructions on the computer screen.
The simplicity behind Telocity's next-generation broadband services is
embodied in its intelligent device called the Telocity residential gateway. The
device combines a DSL modem, an analog modem and a microprocessor unit that
automates installation, customer support and service upgrades. The residential
gateway is a small standalone unit that operates independent of the user's
computer's operating system and does not require a network interface card to be
installed in the computer. As a result, the always-on Internet connection of the
DSL service remains in operation even if the computer crashes or shuts down. The
gateway and Telocity's integrated back office system combine to fully automate
installing, configuring, and upgrading service, including service level upgrades
and the addition of new features and services.
Key benefits of the residential gateway design include:
o Automated broadband residential gateway
o Advanced application and service offerings through automated software
downloading
o Interoperability with industry standard DSLAMs for ADSL, SDSL and G.Lite
o Intelligence to download the necessary software to support future advanced
applications
o Flexible PC connectivity with universal Parallel, Ethernet and USB ports
o Speeds scale from 320 Kbps to 1.1 Mbps for SDSL, and up to 8 Mbps for ADSL
The Company expects to extend services throughout the home with the following
features:
34
<PAGE> 35
o Home networking through the existing telephone wire
o Wireless home connectivity
o Automation through X10 integration
35
<PAGE> 36
EXHIBIT C
NBCI COMPETITORS
NBC INTERNET, INC. -- NBCI COMPETITORS
4anything.com
ABC
About.com
Amazon.com
AOL.com (which includes but is not limited to Mirabilis-ICQ & Netscape)
AskJeeves
Broadcast.com
CBS
Charter Communications
CMGI
Compaq (which includes but is not limited to Alta Vista)
Compuserve
Direct Hit
Disney (which includes but is not limited to Infoseek & GoNetwork)
Excite@Home
Fox
Go2net Inc.
GOD (Global Online Directory)
Google, Inc.
GoTo.com
HotBot
Hotmail
InfoSpace.com
Looksmart
Lycos (which includes but is not limited to Tripod & Angelfire)
Magellan
MediaOne (which includes but is not limited to Roadrunner)
Microsoft (which includes, but is not limited to MSN)
Mining Company
Northern Lights
Real Networks
TalkCity
TheGlobe.com
Time Warner
USA Networks (which includes but is not limited to Ticketmaster Online &
CitySearch)
WebCrawler
Yahoo/GeoCities
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EXHIBIT D
TELOCITY COMPETITORS
COMPETITOR LIST: AOL, Excite/@Home, AT&T, MCI/WorldCom, MSN, WebTV, GTE, BBN,
Mindspring Enterprises/Earthlink Networks, Concentric Network,
Netcom On-Line Communication Services, Verio, Flashcom, PSINet, Pacific Bell
Internet, Prodigy, SouthBell Internet, SBC Internet, USWest Internet, Bell
Atlantic Internet, MediaOne, DirectTV, RED, DSL.Net, Roadrunner, DSLNetworks,
Covad, CompuServe, Cincinnati Bell, RCN, Fastpoint Communications, CAIS,
Globix Corp., Zyan, UltarCom
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<PAGE> 38
EXHIBIT E
[INTENTIONALLY LEFT BLANK]
38
<PAGE> 39
EXHIBIT F
TEAMS
The parties shall mutually agree in writing on the contents of this Exhibit F
within thirty (30) days of the Effective Date of the Agreement.
39
<PAGE> 40
EXHIBIT G
FORM OF WARRANTS
40
<PAGE> 41
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
No.____________
WARRANT TO PURCHASE PREFERRED STOCK
of
TELOCITY, INC.
(void after December 13, 2004)
1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, on and after
the Commencement Date (as defined below), and subject to the terms and
conditions herein set forth, the Holder (as defined below) is entitled to
purchase from Telocity, Inc., a California corporation (the "Company"), at any
time before 5:00 p.m. California time on December 13, 2004 ("Termination Date"),
at a price per share equal to the Warrant Price (as defined below), the Warrant
Stock (as defined below and subject to adjustments as described below) upon
exercise of this Warrant pursuant to Section 6 hereof.
2. Definitions. As used in this Warrant, the following terms shall have
the definitions ascribed to them below:
a. "Commencement Date" shall mean December 13, 1999.
b. "Holder" shall mean NBC Internet, Inc.
c. "Securities" shall mean fully paid and non-assessable shares
of Series C Preferred Stock of the Company, or after an initial public offering
in which all outstanding shares of Preferred Stock convert into Common Stock,
Common Stock of the Company.
d. "Warrant Price" shall be equal to $5.24 per share.
e. "Warrant Stock" shall mean the Securities purchasable upon
exercise of this Warrant or issuable upon conversion of this Warrant. The total
number of shares to be issued upon exercise of the Warrant, subject to
adjustment as described in Section 3 below, shall equal 1,039,122 shares.
2. Adjustments and Notices. The Warrant Price shall be subject to
adjustment from time to time in accordance with the following provisions:
<PAGE> 42
a. Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of the Securities or
shall issue a stock dividend with respect to the Securities, the Warrant Price
in effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and in case the Company shall at any time
combine the outstanding shares of the Securities, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination, as the case may be.
b. Reclassification, Exchange, Substitution, In-Kind
Distribution. Upon any reclassifications, exchange, substitution, or other event
that results in a change of the number and/or class of the securities issuable
upon exercise or conversion of this Warrant or upon the payment of a dividend in
securities or property other than Securities, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that the Holder would have received for the Securities
if this Warrant had been exercised immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to the Holder a new Warrant for such new securities or other property. The
new Warrant shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The provisions
of this Section 3(b) shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events and successive dividends.
c. Reorganization, Merger etc. In case of any merger or
consolidation of the Company into or with another corporation, the Company, or
such successor or purchasing corporation, as the case may be, shall, as a
condition to closing any such reorganization, merger or sale, duly execute and
deliver to the Holder hereof a new warrant so that the Holder shall have the
right to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of the Securities theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and property receivable
upon such reorganization, merger or sale by the Holder of the number of shares
of Securities then purchasable under this Warrant. Such new warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 3. The provisions of this
subparagraph (c) shall similarly apply to successive reorganizations, mergers
and sales.
d. No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Securities other than as described above
that adversely affects the Holder's rights under this Warrant, the Warrant Price
shall be adjusted downward by an amount equal to the diminution in value of the
Warrant (including any unrealized gain) as a result of such action.
<PAGE> 43
e. Notice. Upon any adjustment of the Warrant Price and any
increase or decrease in the number of shares of the Securities purchasable upon
the exercise or conversion of this Warrant, then, and in each such case, the
Company, as promptly as practicable thereafter, shall give written notice
thereof to the Holder of this Warrant at the address of such Holder as shown on
the books of the Company which notice shall state the Warrant Price as adjusted
and the increased or decreased number of shares purchasable upon the exercise or
conversion of this Warrant, setting forth in reasonable detail the method of
calculation of each. The Company further agrees to notify the Holder of this
Warrant in writing of a reorganization, merger or sale in accordance with
Section 3(c) hereof at least forty-five (45) days prior to the effective date
thereof. The Company also agrees to notify the Holder of this Warrant in writing
of a proposed public offering at least thirty (30) days prior to the effective
date thereof.
f. Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded to the nearest whole share.
3. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
4. Reservation of Stock; Taxes.
a. On and after the Commencement Date, the Company will reserve
from its authorized and unissued Securities a sufficient number of shares to
provide for the issuance of Warrant Stock upon the exercise or conversion of
this Warrant and shall reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the
conversion of the Warrant Stock. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
b. The Company covenants that all Securities that may be issued
upon the exercise of rights represented by this Warrant will, upon exercise, be
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company shall pay any and all United
States federal, state and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of the certificates
representing Securities issued hereunder.
5. Exercise of Warrant. This Warrant may be exercised in whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided
<PAGE> 44
above, and the person entitled to receive the shares of Warrant Stock issuable
upon such exercise shall be treated for all purposes as Holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date (but no later than fifteen (15) days after such date), the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full shares of Warrant
Stock issuable upon such exercise. If the Warrant shall be exercised for less
than the total number of shares of Warrant Stock then issuable upon exercise,
promptly after surrender of the Warrant upon such exercise (but no later than
fifteen (15) days after such surrender), the Company will execute and deliver a
new Warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein.
6. Conversion.
a. In lieu of exercising this Warrant or any portion hereof, the
Holder hereof shall have the right to convert this Warrant or any portion hereof
into Warrant Stock by executing and delivering to the Company at its principal
office the written Notice of Conversion and Investment Representation Statement
in the forms attached hereto as Attachments 2 and 3, specifying the portion of
the Warrant to be converted, and accompanied by this Warrant. The number of
shares of Warrant Stock to be issued to the Holder upon such conversion shall be
computed using the following formula:
X = (P)(Y)(A-B)/A
where X = the number of shares of Securities to be issued to
the Holder for the portion of the Warrant being
converted.
P = the portion of the Warrant being converted
expressed as a decimal fraction.
Y = the total number of shares of Securities issuable
upon exercise of the Warrant in full.
A = the Fair Market Value of one share of Warrant
Stock.
B = the Warrant Price on the date of conversion.
b. For purposes of this Section 6, "Fair Market Value" shall
mean:
(i) the closing price of shares of the Company's common
stock quoted on the Nasdaq National Market or the closing price
quoted on any exchange on which such shares are listed, whichever
is applicable, on the trading day immediately preceding the date
of delivery of the notices pursuant to this Section 3 (it being
understood that the original Warrant may be surrendered on the
subsequent day if such original Warrant is provided to an
overnight courier service (eg, Federal Express) on the date of
delivery of such notices), or
(ii) if the Company's common stock is not listed on the
Nasdaq National Market or on an exchange, the fair market value
of one share of common
<PAGE> 45
stock as determined in good faith by the Company's Board of
Directors.; provided, however, that if the Holder shall dispute
the market price as determined by the Board, the Holder and the
Company may retain an independent expert mutually agreed upon in
good faith by the Holder and the Board (an "Independent Expert").
The determination of market price by the Independent Expert shall
be final, binding and conclusive on the Company and the Holder.
All costs and expenses of the Independent Expert shall be borne
by the Holder unless the determination of fair market value is
more favorable to such Holder by 5% or more, in which case, all
such costs and expenses shall be borne by the Company.
c. Any portion of this Warrant that is converted shall be
immediately canceled. This Warrant or any portion hereof shall be deemed to have
been converted immediately prior to the close of business on the date of its
surrender for conversion as provided above, and the person entitled to receive
the shares of Warrant Stock issuable upon such conversion shall be treated for
all purposes as the Holder of such shares of record as of the close of business
on such date. As promptly as practicable after such date (but no later than
fifteen (15) days after such date), the Company shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of full shares of Warrant Stock issuable upon such conversion. If the
Warrant shall be converted for less than the total number of shares of Warrant
Stock then issuable upon conversion, promptly after surrender of the Warrant
upon such conversion (but no later than fifteen (15) days after such surrender),
the Company will execute and deliver a new Warrant, dated the date hereof,
evidencing the right of the Holder to the balance of the Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
Notwithstanding anything to the contrary contained herein, the Holder may elect
to receive a net issuance of Securities pursuant to this Section 6 when
converting this Warrant in part.
7. Transfer of Warrant. This Warrant may be transferred or assigned by
the Holder hereof in whole or in part to an affiliate of the Holder if (i) the
transferee agrees in writing to be subject to the terms of this Warrant; and
(ii) the transferee delivers written notice of such transfer to the Company.
Upon any partial transfer, the Company will at its expense issue and deliver to
the Holder a new Warrant of like tenor, in the name of the Holder, which shall
be exercisable for such number of Securities that were not so transferred.
8. Representations and Warranties. The Company hereby makes all the
representations and warranties set forth in Section 3 of the Series C Preferred
Stock Purchase Agreement dated as of the date hereof among the Company, the
Holder and certain other investors (the "Series C Preferred Stock Purchase
Agreement"). The Holder hereby makes all the representations and warranties set
forth in Section 4 of the Series C Preferred Stock Purchase Agreement.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor and dated as of such cancellation or
delivery, in lieu of this Warrant.
<PAGE> 46
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday in San
Francisco, California, then such action may be taken or such right may be
exercised on the next succeeding day not a legal holiday in San Francisco,
California.
11. Termination. This Warrant shall terminate on 5:00 p.m. California
time on the Termination Date.
12. Miscellaneous. This Warrant shall be governed by the laws of the
State of California, as such laws are applied to contracts to be entered into
and performed entirely in California. The headings in this Warrant are for
purposes of convenience and reference only, and shall not be deemed to
constitute a part hereof. Neither this Warrant nor any term hereof may be
changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company, the Holder and
their respective successors and assigns. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company by the Holder in the Series C Preferred Stock Purchase Agreement, or to
such other address as the Holder or any transferee or assignee thereof shall
have furnished to the Company in writing, and if mailed shall be deemed given
three days after deposit in the United States mail.
ISSUED:December 13, 1999
TELOCITY, INC.
By:
-------------------------------------
Patti Hart, President
<PAGE> 47
Attachment 1
NOTICE OF EXERCISE
TO: TELOCITY, INC.
1. The undersigned hereby elects to purchase shares of the Warrant Stock
of Telocity, Inc. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
- ------------------------- ----------------------------------------
(Date) (Name of Warrant Holder)
By:
------------------------------------
Title:
----------------------------------
<PAGE> 48
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Securities
(as defined in the attached Warrant) of
TELOCITY, INC.
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Telocity, Inc. (the "Company") as follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this Statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.
(c) Except for a transfer by the undersigned, in the event the
undersigned is a partnership, to a limited or general partner of such
partnership, the undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition, and (ii) it
shall have furnished the Company with an opinion of counsel reasonably
satisfactory to the Company and Company's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws. Notwithstanding the foregoing, no
opinion of counsel shall be required for any transfer to an affiliate (as such
term is defined in Rule 405 of the Act) of the undersigned.
(d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the
<PAGE> 49
accuracy of or to amplify the Company's disclosures, and has had all questions
which have been asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market makers" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations.
Dated:
----------------------
----------------------------------------
(Typed or Printed Name)
By:
-------------------------------------
(Signature)
----------------------------------------
(Title)
<PAGE> 50
Attachment 3
NOTICE OF CONVERSION
TO: TELOCITY, INC.
1. The undersigned hereby elects to acquire shares of the Securities of
Telocity, Inc. pursuant to the terms of the attached Warrant, by conversion of
percent ( %) of the Warrant.
2. Please issue a certificate or certificates representing said shares
of Securities in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
- ------------------------- ----------------------------------------
(Date) (Name of Warrant Holder)
By:
------------------------------------
Title:
----------------------------------
<PAGE> 51
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
No.____________
WARRANT TO PURCHASE PREFERRED STOCK
of
TELOCITY, INC.
(void after December 13, 2004)
1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, on and after
the Commencement Date (as defined below), and subject to the terms and
conditions herein set forth, the Holder (as defined below) is entitled to
purchase from Telocity, Inc., a California corporation (the "Company"), at any
time before 5:00 p.m. California time on December 13, 2004 ("Termination Date"),
at a price per share equal to the Warrant Price (as defined below), the Warrant
Stock (as defined below and subject to adjustments as described below) upon
exercise of this Warrant pursuant to Section 6 hereof.
2. Definitions. As used in this Warrant, the following terms shall have
the definitions ascribed to them below:
a. "Commencement Date" shall mean December 13, 1999.
b. "Holder" shall mean National Broadcasting Company, Inc.
c. "Securities" shall mean fully paid and non-assessable shares
of Series C Preferred Stock of the Company, or after an initial public offering
in which all outstanding shares of Preferred Stock convert into Common Stock,
Common Stock of the Company.
d. "Warrant Price" shall be equal to $5.24 per share.
e. "Warrant Stock" shall mean the Securities purchasable upon
exercise of this Warrant or issuable upon conversion of this Warrant. The total
number of shares to be issued upon exercise of the Warrant, subject to
adjustment as described in Section 3 below, shall equal 850,191 shares.
2. Adjustments and Notices. The Warrant Price shall be subject to
adjustment from time to time in accordance with the following provisions:
<PAGE> 52
a. Subdivision, Stock Dividends or Combinations. In case the
Company shall at any time subdivide the outstanding shares of the Securities or
shall issue a stock dividend with respect to the Securities, the Warrant Price
in effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and in case the Company shall at any time
combine the outstanding shares of the Securities, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination, as the case may be.
b. Reclassification, Exchange, Substitution, In-Kind
Distribution. Upon any reclassifications, exchange, substitution, or other event
that results in a change of the number and/or class of the securities issuable
upon exercise or conversion of this Warrant or upon the payment of a dividend in
securities or property other than Securities, the Holder shall be entitled to
receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that the Holder would have received for the Securities
if this Warrant had been exercised immediately before the record date for such
reclassification, exchange, substitution, or other event or immediately prior to
the record date for such dividend. The Company or its successor shall promptly
issue to the Holder a new Warrant for such new securities or other property. The
new Warrant shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The provisions
of this Section 3(b) shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events and successive dividends.
c. Reorganization, Merger etc. In case of any merger or
consolidation of the Company into or with another corporation, the Company, or
such successor or purchasing corporation, as the case may be, shall, as a
condition to closing any such reorganization, merger or sale, duly execute and
deliver to the Holder hereof a new warrant so that the Holder shall have the
right to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of the Securities theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and property receivable
upon such reorganization, merger or sale by the Holder of the number of shares
of Securities then purchasable under this Warrant. Such new warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 3. The provisions of this
subparagraph (c) shall similarly apply to successive reorganizations, mergers
and sales.
d. No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment. If the
Company takes any action affecting the Securities other than as described above
that adversely affects the Holder's rights under this Warrant, the Warrant Price
shall be adjusted downward by an amount equal to the diminution in value of the
Warrant (including any unrealized gain) as a result of such action.
<PAGE> 53
e. Notice. Upon any adjustment of the Warrant Price and any
increase or decrease in the number of shares of the Securities purchasable upon
the exercise or conversion of this Warrant, then, and in each such case, the
Company, as promptly as practicable thereafter, shall give written notice
thereof to the Holder of this Warrant at the address of such Holder as shown on
the books of the Company which notice shall state the Warrant Price as adjusted
and the increased or decreased number of shares purchasable upon the exercise or
conversion of this Warrant, setting forth in reasonable detail the method of
calculation of each. The Company further agrees to notify the Holder of this
Warrant in writing of a reorganization, merger or sale in accordance with
Section 3(c) hereof at least forty-five (45) days prior to the effective date
thereof. The Company also agrees to notify the Holder of this Warrant in writing
of a proposed public offering at least thirty (30) days prior to the effective
date thereof.
f. Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded to the nearest whole share.
3. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
4. Reservation of Stock; Taxes.
a. On and after the Commencement Date, the Company will reserve
from its authorized and unissued Securities a sufficient number of shares to
provide for the issuance of Warrant Stock upon the exercise or conversion of
this Warrant and shall reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the
conversion of the Warrant Stock. Issuance of this Warrant shall constitute full
authority to the Company's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Warrant Stock issuable upon the exercise or conversion of this Warrant.
b. The Company covenants that all Securities that may be issued
upon the exercise of rights represented by this Warrant will, upon exercise, be
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issue (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company shall pay any and all United
States federal, state and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of the certificates
representing Securities issued hereunder.
5. Exercise of Warrant. This Warrant may be exercised in whole or part
by the Holder, at any time after the date hereof prior to the termination of
this Warrant, by the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the Warrant Price in cash or by check with
respect to the shares of Warrant Stock being purchased. This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided
<PAGE> 54
above, and the person entitled to receive the shares of Warrant Stock issuable
upon such exercise shall be treated for all purposes as Holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date (but no later than fifteen (15) days after such date), the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full shares of Warrant
Stock issuable upon such exercise. If the Warrant shall be exercised for less
than the total number of shares of Warrant Stock then issuable upon exercise,
promptly after surrender of the Warrant upon such exercise (but no later than
fifteen (15) days after such surrender), the Company will execute and deliver a
new Warrant, dated the date hereof, evidencing the right of the Holder to the
balance of the Warrant Stock purchasable hereunder upon the same terms and
conditions set forth herein.
6. Conversion.
a. In lieu of exercising this Warrant or any portion hereof, the
Holder hereof shall have the right to convert this Warrant or any portion hereof
into Warrant Stock by executing and delivering to the Company at its principal
office the written Notice of Conversion and Investment Representation Statement
in the forms attached hereto as Attachments 2 and 3, specifying the portion of
the Warrant to be converted, and accompanied by this Warrant. The number of
shares of Warrant Stock to be issued to the Holder upon such conversion shall be
computed using the following formula:
X = (P)(Y)(A-B)/A
where X = the number of shares of Securities to be issued to
the Holder for the portion of the Warrant being
converted.
P = the portion of the Warrant being converted expressed
as a decimal fraction.
Y = the total number of shares of Securities issuable
upon exercise of the Warrant in full.
A = the Fair Market Value of one share of Warrant Stock.
B = the Warrant Price on the date of conversion.
b. For purposes of this Section 6, "Fair Market Value" shall
mean:
(i) the closing price of shares of the Company's common
stock quoted on the Nasdaq National Market or the closing price
quoted on any exchange on which such shares are listed, whichever
is applicable, on the trading day immediately preceding the date
of delivery of the notices pursuant to this Section 3 (it being
understood that the original Warrant may be surrendered on the
subsequent day if such original Warrant is provided to an
overnight courier service (eg, Federal Express) on the date of
delivery of such notices), or
(ii) if the Company's common stock is not listed on the
Nasdaq National Market or on an exchange, the fair market value
of one share of common
<PAGE> 55
stock as determined in good faith by the Company's Board of
Directors.; provided, however, that if the Holder shall dispute
the market price as determined by the Board, the Holder and the
Company may retain an independent expert mutually agreed upon in
good faith by the Holder and the Board (an "Independent
Expert"). The determination of market price by the Independent
Expert shall be final, binding and conclusive on the Company and
the Holder. All costs and expenses of the Independent Expert
shall be borne by the Holder unless the determination of fair
market value is more favorable to such Holder by 5% or more, in
which case, all such costs and expenses shall be borne by the
Company.
c. Any portion of this Warrant that is converted shall be
immediately canceled. This Warrant or any portion hereof shall be deemed to have
been converted immediately prior to the close of business on the date of its
surrender for conversion as provided above, and the person entitled to receive
the shares of Warrant Stock issuable upon such conversion shall be treated for
all purposes as the Holder of such shares of record as of the close of business
on such date. As promptly as practicable after such date (but no later than
fifteen (15) days after such date), the Company shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of full shares of Warrant Stock issuable upon such conversion. If the
Warrant shall be converted for less than the total number of shares of Warrant
Stock then issuable upon conversion, promptly after surrender of the Warrant
upon such conversion (but no later than fifteen (15) days after such surrender),
the Company will execute and deliver a new Warrant, dated the date hereof,
evidencing the right of the Holder to the balance of the Warrant Stock
purchasable hereunder upon the same terms and conditions set forth herein.
Notwithstanding anything to the contrary contained herein, the Holder may elect
to receive a net issuance of Securities pursuant to this Section 6 when
converting this Warrant in part.
7. Transfer of Warrant. This Warrant may be transferred or assigned by
the Holder hereof in whole or in part to an affiliate of the Holder if (i) the
transferee agrees in writing to be subject to the terms of this Warrant; and
(ii) the transferee delivers written notice of such transfer to the Company.
Upon any partial transfer, the Company will at its expense issue and deliver to
the Holder a new Warrant of like tenor, in the name of the Holder, which shall
be exercisable for such number of Securities that were not so transferred.
8. Representations and Warranties. The Company hereby makes all the
representations and warranties set forth in Section 3 of the Series C Preferred
Stock Purchase Agreement dated as of the date hereof among the Company, the
Holder and certain other investors (the "Series C Preferred Stock Purchase
Agreement"). The Holder hereby makes all the representations and warranties set
forth in Section 4 of the Series C Preferred Stock Purchase Agreement.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor and dated as of such cancellation or
delivery, in lieu of this Warrant.
<PAGE> 56
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday in San
Francisco, California, then such action may be taken or such right may be
exercised on the next succeeding day not a legal holiday in San Francisco,
California.
11. Termination. This Warrant shall terminate on 5:00 p.m. California
time on the Termination Date.
12. Miscellaneous. This Warrant shall be governed by the laws of the
State of California, as such laws are applied to contracts to be entered into
and performed entirely in California. The headings in this Warrant are for
purposes of convenience and reference only, and shall not be deemed to
constitute a part hereof. Neither this Warrant nor any term hereof may be
changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company, the Holder and
their respective successors and assigns. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company by the Holder in the Series C Preferred Stock Purchase Agreement, or to
such other address as the Holder or any transferee or assignee thereof shall
have furnished to the Company in writing, and if mailed shall be deemed given
three days after deposit in the United States mail.
ISSUED:December 13, 1999
TELOCITY, INC.
By:
-------------------------------
Patti Hart, President
<PAGE> 57
Attachment 1
NOTICE OF EXERCISE
TO: TELOCITY, INC.
1. The undersigned hereby elects to purchase _________ shares of the
Warrant Stock of Telocity, Inc. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
(Name)
----------------------------------------
(Address)
- ------------------------------- -------------------------------
(Date) (Name of Warrant Holder)
By:
----------------------------
Title:
-------------------------
<PAGE> 58
Attachment 2
INVESTMENT REPRESENTATION STATEMENT
Shares of the Securities
(as defined in the attached Warrant) of
TELOCITY, INC.
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Telocity, Inc. (the "Company") as follows:
(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this Statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.
(c) Except for a transfer by the undersigned, in the event the
undersigned is a partnership, to a limited or general partner of such
partnership, the undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition, and (ii) it
shall have furnished the Company with an opinion of counsel reasonably
satisfactory to the Company and Company's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws. Notwithstanding the foregoing, no
opinion of counsel shall be required for any transfer to an affiliate (as such
term is defined in Rule 405 of the Act) of the undersigned.
(d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the
<PAGE> 59
accuracy of or to amplify the Company's disclosures, and has had all questions
which have been asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market makers" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations.
Dated:
-------------------------------
-------------------------------
(Typed or Printed Name)
By:
----------------------------
(Signature)
-------------------------------
(Title)
<PAGE> 60
Attachment 3
NOTICE OF CONVERSION
TO: TELOCITY, INC.
1. The undersigned hereby elects to acquire _________ shares of the
Securities of Telocity, Inc. pursuant to the terms of the attached Warrant, by
conversion of ____ percent (__%) of the Warrant.
2. Please issue a certificate or certificates representing said shares
of Securities in the name of the undersigned or in such other name as is
specified below:
------------------------------------
(Name)
------------------------------------
(Address)
Dated:
-------------------------------
-------------------------------
(Typed or Printed Name)
By:
---------------------------
(Signature)
-------------------------------
(Title)
<PAGE> 1
EXHIBIT 10.29
December 13, 1999
Ms. Patti Manuel-Hart
President and Chief Executive Officer
Telocity, Inc.
10355 North De Anza Boulevard
San Jose, CA 94014
Purchase of NBC TV Advertising Inventory
Dear Ms. Hart:
This letter sets forth the agreement between the National Broadcasting
Company, Inc. ("NBC"), and Telocity, Inc. ("Advertiser") with respect to NBC's
agreement to provide Advertiser with the right to use certain advertising
inventory on NBC Television Network and its owned and operated television
stations (collectively, "NBC TV") to promote Advertiser only, subject to the
following terms and conditions:
1. Spots. (a) NBC shall provide Advertiser with the use of fifteen (15) and
thirty (30) second advertising spots (the "Spots") to be telecast on NBC TV on
the Dates, Days and Times mutually agreed by NBC and Advertiser; provided,
however, that in the event that no such agreement is reached with regard to the
number or value of Spots to be broadcast in any calendar quarter or year, NBC
may propose and implement a reasonable schedule for the broadcast of Spots in
accordance with the terms of Section 2(a) below and based upon Advertiser's
reasonable request for such schedule. An initial schedule for the first quarter
of 2000 shall be determined as soon as practicable following the date hereof.
All such Spots run by Advertiser shall be subject to NBC TV's standard terms and
conditions for such advertising which are described in the "Participating
Sponsorship Agreement" attached hereto as Exhibit A (the "Standard Terms") and
which are made a part of this Letter Agreement in their entirety; provided,
however, that in the case of a conflict between the terms of this Letter
Agreement and the terms of the Standard Terms, the terms of this Letter
Agreement shall govern. For purposes of the Standard Terms, Advertiser shall be
both the "Advertiser" and the "Agency" as such terms are used therein.
(b) The Spots shall promote Advertiser and its high-speed Internet
services only and may not advertise, promote or mention any other product,
service, television program, web site
<PAGE> 2
2
or third party whatsoever (other than NBC Internet, Inc. and its products,
services and websites) without the prior written consent of NBC. In addition,
with respect to the placement or telecast of Advertiser's Spots in any
particular Program, NBC may reject such placement or telecast if such placement
or telecast would compete with or violate the rights of any other advertiser,
sponsor or supplier of such Program or program category, as determined by NBC in
its sole discretion and in good faith; it being understood that NBC's aggregate
commitments set forth in Section 2 below shall not be affected by any such
rejection.
(c) On or before two weeks prior to the Advertiser's first scheduled
Spot, Advertiser shall deliver to NBC commercial material for the first of
Advertiser's Spots. Advertiser acknowledges that if it fails to deliver such
commercial material by such date, or such commercial material is rejected in
accordance with this Section 1, then NBC TV shall be deemed to have telecast
Advertiser's Spots for purposes hereof even if Advertiser's Spot is not actually
shown when the Program is telecast. If, after such date, Advertiser delivers any
new commercial material to NBC in compliance with this Section 1 and Advertiser
instructs NBC to use such new commercial material in lieu of the commercial
material previously delivered to NBC, then NBC will use reasonable commercial
efforts to telecast such new commercial material in the Spots as soon as
practicable after receipt of such commercial material but not later than 72
hours after receipt.
2. Value of Spots. NBC shall telecast Spots with a total spot value of
$15,000,000 (the "Total Spot Value") during the thirty-six (36) months
commencing on January 1, 2000 (the "Effective Date"). The value of each Spot for
purpose of this Agreement shall be calculated at 85% of the scatter market rate
in effect at the time such Spot is ordered. The parties agree that no agency
fees or other expenses may be deducted by Advertiser in any way in connection
with determining the number of Shares (as defined below) to be paid to NBC
pursuant to Section 3 hereof at any time.
3. Payment for the Spots. (a) Advertiser shall deliver to NBC 2,862,595 shares
of Series C Preferred Stock of Advertiser pursuant to the terms and conditions
of that certain Series C Preferred Stock Purchase Agreement dated as of the date
hereof between Advertiser and certain investors (the "Purchase Agreement").
(b) NBC shall provide Advertiser with a written report within 10
business days after the end of each calendar month after the Effective Date
during which Advertiser's Spots have been telecast and setting forth the
aggregate value of Advertiser's Spots telecast by NBC in the preceding month.
4. Representations and Warranties. NBC and Advertiser each represent and warrant
that this Letter Agreement has been duly authorized, executed and delivered by
such party and that this Letter Agreement constitutes the legal, valid and
binding obligations of such party, enforceable
<PAGE> 3
3
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights generally
or by general principles of equity.
5. Termination. (a) Notwithstanding any other remedy available to NBC,
in the event that:
(i) NBC notifies Advertiser in writing (with
specificity) that Advertiser has materially breached this Letter
Agreement and Advertiser has not cured such alleged breach within
thirty (30) days of its receipt of such notice; or
(ii) upon the occurrence of a Change of Control (as
hereinafter defined); or
(iii) Advertiser admits in writing its inability to pay its
debts generally; makes a general assignment for the benefit of
creditors; has any proceeding instituted by or against it seeking to
adjudicate it as bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or
composition of Advertiser or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, or similar official for it or any substantial part
of its property; provided, in the case where such proceeding is
involuntarily instituted against Advertiser, such proceeding remains
undismissed after thirty (30) days,
then, in any such case, NBC shall have the right, but not the obligation, to
terminate this Letter Agreement, without prejudice to the rights of the parties
hereunder and, in the event of a termination after NBC's receipt of the Shares
pursuant to Section 3(a) hereof, NBC shall pay Advertiser a cash amount equal to
the difference, if positive, between the Total Spot Value and the value of the
Spots already telecast (or deemed telecast), as determined and calculated
pursuant to Sections 1 and 2 above. Notwithstanding the foregoing, the terms
contained in Sections 5, 6, 7 and 8 shall survive the termination hereof. Any
such termination right in connection with a Change of Control shall be
exercisable no later than the later to occur of (x) ten (10) business days prior
to the consummation of such Change of Control and (y) ten (10) business days
after receipt by NBC of notice (which notice shall identify the third party
having or acquiring Control over Advertiser, be in writing, explicitly state
that it is being delivered in accordance with this Section 5 and provide NBC
with such additional information as has been provided to the other stockholders
of Advertiser) from Advertiser of such Change of Control (which termination
shall become effective, at NBC's discretion, upon the consummation of such
Change of Control or following receipt of such notice from Advertiser). For
purposes of this Section 5, the following terms shall have the following
meanings:
"Change of Control" shall mean (A) any consolidation,
reorganization or merger of Advertiser with any third party, other than
a transaction resulting in the holders of the capital stock of
Advertiser (prior to such consolidation, reorganization or merger)
having Control over the surviving or resulting entity, (B) any third
party (other than NBC)
<PAGE> 4
4
having Control over Advertiser or (C) any sale, transfer or other
disposition by Advertiser of all or substantially all
of its assets to any third party (other than NBC); and
"Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of Advertiser, whether through ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise.
(b) Notwithstanding any other remedy available to Advertiser, in the
event that:
(i) Advertiser notifies NBC in writing (with specificity) that NBC has
materially breached this Letter Agreement and NBC has not cured such alleged
breach within thirty (30) days of its receipt of such notice; or
(ii) NBC admits in writing its inability to pay its debts generally; makes a
general assignment for the benefit of creditors; has any proceeding instituted
by or against it seeking to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of NBC or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or similar official
for it or any substantial part of its property; provided, in the case where such
proceeding is involuntarily instituted against NBC, such proceeding remains
undismissed after thirty (30) days,
then, in any such case, Advertiser shall have the right, but not the obligation,
to terminate this Letter Agreement, without prejudice to the rights of the
parties hereunder and, in the event of a termination after NBC's receipt of the
Shares pursuant to Section 3(a) hereof, require NBC to pay Advertiser a cash
amount equal to the difference, if positive, between the Total Spot Value and
the value of the Spots already telecast (or deemed telecast), as determined and
calculated pursuant to Sections 1 and 2 above. Notwithstanding the foregoing,
the terms contained in Sections 5, 6, 7 and 8 shall survive the termination
hereof.
6. Miscellaneous. This Letter Agreement, the Purchase Agreement and the exhibits
and schedules hereto and thereto constitute the entire agreement and
understanding of the parties relating to the subject matter hereof and supersede
all prior and contemporaneous agreements, negotiations, and understandings
between the parties, both oral and written relating thereto. No waiver or
modification of any provision of this Letter Agreement shall be effective unless
in writing and signed by both parties. The terms of this Letter Agreement shall
apply to parties hereto and any of their successors or assigns; provided,
however, that this Letter Agreement may not be transferred or assigned by
Advertiser, including, without limitation, the right to receive Spots to be
telecast by NBC TV, without the prior written consent of NBC. This Letter
Agreement may be executed in counterparts, each of which when executed shall be
deemed to be
<PAGE> 5
5
an original but all of which taken together shall constitute one and the same
agreement.
7. Governing Law and Jurisdiction. This Letter Agreement shall be governed by
and construed under the laws of the State of New York applicable to contracts
fully performed in New York, without regard to New York conflicts law. The
parties hereto irrevocably consent to and submit to the exclusive jurisdiction
of the federal and state courts located in the County of
<PAGE> 6
6
New York. The parties hereto irrevocably waive any and all rights to trial by
jury in any proceeding arising out of or relating to this Agreement.
8. Liability for Failure to Broadcast Spots. In the event that NBC does not
telecast Spots equal to the Total Spot Value during the thirty-six (36) months
after the Effective Date, then as liquidated damages and not a penalty, NBC
shall pay Advertiser in cash an amount equal to the difference, if positive,
between the Total Spot Value and the value of the Spots actually telecast, as
calculated pursuant to Section 2 above. Except for damages arising out of the
gross negligence of willful misconduct of either party hereto, no party shall be
liable to the other party or its affiliates, officers, directors, successors or
assigns for any incidental, consequential, special or punitive damages or lost
profits arising out of this Letter Agreement, whether liability is asserted in
contract or tort and irrespective of whether it has advised or been advised of
the possibility of any such loss or damage.
If you are in agreement with the above terms and conditions, please
indicate your acceptance by signing in the space provided below, and return one
original to me. This Letter Agreement shall be null and void if not signed
within two (2) days of the date set forth above.
Very truly yours,
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ AUTHORIZED SIGNATORY
-------------------------------
Name:
Title:
ACCEPTED AND AGREED:
TELOCITY, INC.
By: /s/ AUTHORIZED SIGNATORY
------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.30
December 13, 1999
Patti Hart
President & Chief Executive Officer
Telocity, Inc.
10355 North De Anza Boulevard
San Jose, CA 94014
Advertising Agreement
Dear Ms. Hart:
This letter sets forth the agreement between NBC Internet, Inc. ("NBCi")
and Telocity, Inc. ("Advertiser") with respect to NBCi's agreement to provide
Advertiser with the right to use certain of NBCi's advertising inventory on NBC
Television Network and its owned and operated television stations (collectively,
"NBC TV") to promote Advertiser only, subject to the following terms and
conditions:
1. Spots. (a) NBCi shall develop and produce fifteen (15) and thirty (30)
second advertising spots to promote the next generation Internet services
available on the Co-Branded site accessible through Advertiser's high-speed
Internet services (the "Spots"). Advertiser shall reimburse NBCi 25% of all
production expenses for each Spot within thirty (30) days of the completion of
such Spot. Use of each Spot will be subject to Advertiser's approval, not to be
withheld or delayed unreasonably. NBCi will instruct NBC TV to telecast the
Spots on NBC TV on the Dates, Days and Times mutually agreed by NBCi and
Advertiser (subject to NBCi's available inventory and prior sales commitments);
provided, however, that in the event that no such agreement is reached with
regard to the number or value of Spots to be broadcast in any calendar quarter
or year, NBCi may propose and implement a reasonable schedule for the broadcast
of Spots in accordance with the terms of Section 2 below and based upon
Advertiser's reasonable request for such schedule. An initial schedule for the
first quarter of 2000 shall be determined as soon as practicable following the
date hereof. All spots run by Advertiser pursuant to this Letter Agreement shall
be subject to NBC TV's standard terms and conditions for such advertising which
are described in the "Participating Sponsorship Agreement" attached hereto as
Exhibit A (the "Standard Terms") and which are made a part of this Letter
Agreement in their entirety; provided, however, that in the case of a conflict
<PAGE> 2
between the terms of this Letter Agreement and the terms of the Standard Terms,
the terms of this Letter Agreement shall govern. For purposes of the Standard
Terms, Advertiser shall be both the "Advertiser" and the "Agency" as such terms
are used therein.
(b) With respect to the placement or telecast of Advertiser's Spots in
any particular Program, Advertiser acknowledges that NBC TV may reject such
placement or telecast if such placement or telecast would compete with or
violate the rights of any other advertiser, sponsor or supplier of such Program
or program category, as determined by NBC TV in its sole discretion and in good
faith; it being understood that NBCi's aggregate commitments set forth in
Section 2 below shall not be affected by any such rejection.
(c) Advertiser may elect to substitute up to 15% of the value of Spots to be
provided by NBCi in any given financial quarter with an equivalent value of
on-line advertising at 100% of the applicable NBCi standard rate card, subject
to the restrictions set forth in Section 7.5 ("Online Promotions") of the
Operating Agreement among NBCi, NBC TV, and Advertiser dated December 13th, 1999
(the "Operating Agreement"), provided that Advertiser gives NBCi three-months
prior written notice.
2. Value of Spots. NBCi shall telecast Spots with a total spot value of
$13,000,000 (the "Total Spot Value") during the thirty-six (36) months
commencing on January 1, 2000 (the "Effective Date"). The value of each Spot for
purpose of this Letter Agreement shall be calculated at 42.5% of the scatter
market rate in effect at the time such Spot is ordered. The parties agree that
no agency fees or other expenses may be deducted by Advertiser in any way in
connection with determining the number of Shares (as defined below) to be paid
to NBCi pursuant to Section 3 hereof at any time.
3. Payment for the Spots. (a) Advertiser shall deliver to NBCi 2,480,916
shares of Series C Preferred Stock of Advertiser pursuant to the terms and
conditions of that certain Series C Preferred Stock Purchase Agreement dated as
of the date hereof between Advertiser and certain investors (the "Purchase
Agreement").
(b) NBCi shall provide Advertiser with a written report within 10
business days after the end of each calendar month after the Effective Date
during which Advertiser's Spots have been telecast and setting forth the
aggregate value of Advertiser's Spots telecast by NBCi in the preceding month.
4. Representations and Warranties. NBCi and Advertiser each represent and
warrant that this Letter Agreement has been duly authorized, executed and
delivered by such party and that this Letter Agreement constitutes the legal,
valid and binding obligations of such party, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general
<PAGE> 3
principles of equity.
5. Termination. (a) Notwithstanding any other remedy available to NBCi, in
the event that:
(i) NBCi notifies Advertiser in writing (with specificity) that
Advertiser has materially breached this Letter Agreement and Advertiser
has not cured such alleged breach within thirty (30) days of its receipt
of such notice; or
(ii) upon the occurrence of a Change of Control (as hereinafter
defined); or
(iii) Advertiser admits in writing its inability to pay its debts
generally; makes a general assignment for the benefit of creditors; has
any proceeding instituted by or against it seeking to adjudicate it as
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of Advertiser
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or similar official for
it or any substantial part of its property; provided, in the case where
such proceeding is involuntarily instituted against Advertiser, such
proceeding remains undismissed after thirty (30) days,
then, in any such case, NBCi shall have the right, but not the obligation, to
terminate this Letter Agreement, without prejudice to the rights of the parties
hereunder and, in the event of a termination after NBCi's receipt of the Shares
pursuant to Section 3(a) hereof, NBCi shall pay Advertiser a cash amount equal
to the difference, if positive, between the Total Spot Value and the value of
the Spots already telecast (or deemed telecast), as determined and calculated
pursuant to Sections 1 and 2 above. Notwithstanding the foregoing, the terms
contained in Sections 5, 6, 7 and 8 shall survive the termination hereof. Any
such termination right in connection with a Change of Control shall be
exercisable no later than the later to occur of (x) ten (10) business days prior
to the consummation of such Change of Control and (y) ten (10) business days
after receipt by NBCi of notice (which notice shall identify the third party
having or acquiring Control over Advertiser, be in writing, explicitly state
that it is being delivered in accordance with this Section 5 and provide NBCi
with such additional information as has been provided to the other stockholders
of Advertiser) from Advertiser of such Change of Control (which termination
shall become effective, at NBCi's discretion, upon the consummation of such
Change of Control or following receipt of such notice from Advertiser). For
purposes of this Section 5, the following terms shall have the following
meanings:
"Change of Control" shall mean (A) any consolidation, reorganization
or merger of Advertiser with any third party, other than a transaction
resulting in the holders of the capital stock of Advertiser (prior to such
consolidation, reorganization or merger) having Control over the surviving
or resulting entity, (B) any third party having Control over Advertiser or
(C) any sale, transfer or other disposition by Advertiser of all or
<PAGE> 4
substantially all of its assets to any third party; and
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of
Advertiser, whether through ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
(b) Notwithstanding any other remedy available to Advertiser, in the
event that:
(i) Advertiser notifies NBCi in writing (with specificity) that
NBCi has materially breached this Letter Agreement and NBCi has not cured
such alleged breach within thirty (30) days of its receipt of such notice;
or
(ii) NBCi admits in writing its inability to pay its debts
generally; makes a general assignment for the benefit of creditors; has
any proceeding instituted by or against it seeking to adjudicate it as
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of NBCi or its
debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or similar official for it or any
substantial part of its property; provided, in the case where such
proceeding is involuntarily instituted against NBCi, such proceeding
remains undismissed after thirty (30) days,
then, in any such case, Advertiser shall have the right, but not the obligation,
to terminate this Letter Agreement, without prejudice to the rights of the
parties hereunder and, in the event of a termination after NBCi's receipt of the
Shares pursuant to Section 3(a) hereof, require NBCi to pay Advertiser a cash
amount equal to the difference, if positive, between the Total Spot Value and
the value of the Spots already telecast (or deemed telecast), as determined and
calculated pursuant to Sections 1 and 2 above. Notwithstanding the foregoing,
the terms contained in Sections 5, 6, 7 and 8 shall survive the termination
hereof.
(c) In the event that the Operating Agreement is terminated pursuant to Section
12 ("Term; Termination") thereof, NBCi in its sole discretion may (i) terminate
its obligations under this Letter Agreement and provide Advertiser with cash in
lieu of the unused portion of the advertising; or (ii) telecast spots which
promote solely Advertiser and its high-speed Internet services only
("Advertiser-Branded Spot") in lieu of the unused portion of the advertising,
provided that such Advertiser-Branded Spots shall be valued at 100% of the
scatter market rate of a similar spot charged by NBC TV at the time that each
Advertiser-Branded Spot is scheduled by NBCi. In the event that NBCi terminates
the promotional exclusivity set forth in Section 4.12 ("Promotional
Exclusivity") of the Operating Agreement, NBCi will telecast Advertiser-Branded
Spots in lieu of the unused portion of the advertising, provided that such
Advertiser-Branded
<PAGE> 5
Spots shall be valued at 100% of the scatter market rate of a similar spot
charged by NBC TV at the time that each Advertiser-Branded Spot is scheduled by
NBCi. Advertiser shall bear the total cost of the production of all
Advertiser-Branded Spots. Advertiser agrees that it will comply with NBCi's
then-current policies regarding the timely delivery of commercial materials
related to the Advertiser-Branded Spots.
6. Miscellaneous. This Letter Agreement, the Purchase Agreement, the
Operating Agreement, and the exhibits and schedules hereto and thereto
constitute the entire agreement and understanding of the parties relating to the
subject matter hereof and supersede all prior and contemporaneous agreements,
negotiations, and understandings between the parties, both oral and written
relating thereto. No waiver or modification of any provision of this Letter
Agreement shall be effective unless in writing and signed by both parties. The
terms of this Letter Agreement shall apply to parties hereto and any of their
successors or assigns; provided, however, that this Letter Agreement may not be
transferred or assigned by Advertiser, including, without limitation, the right
to receive Spots to be telecast by NBC TV, without the prior written consent of
NBCi which shall not be unreasonably withheld. This Letter Agreement may be
executed in counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
7. Governing Law and Jurisdiction. This Letter Agreement shall be governed by
and construed under the laws of the State of New York applicable to contracts
fully performed in New York, without regard to New York conflicts law. The
parties hereto irrevocably consent to and submit to the exclusive jurisdiction
of the federal and state courts located in the County of New York. The parties
hereto irrevocably waive any and all rights to trial by jury in any proceeding
arising out of or relating to this Agreement.
8. Liability. In the event that NBC TV does not telecast Spots equal to the
Total Spot Value during the thirty-six (36) months after the Effective Date,
then as liquidated damages and not a penalty, NBCi shall pay Advertiser in cash
an amount equal to the difference, if positive, between the Total Spot Value and
the value of the Spots actually telecast, as calculated pursuant to Section 2
above. Except for damages arising out of the gross negligence of willful
misconduct of either party hereto, no party shall be liable to the other party
or its affiliates, officers, directors, successors or assigns for any
incidental, consequential, special or punitive damages or lost profits arising
out of this Letter Agreement, whether liability is asserted in contract or tort
and irrespective of whether it has advised or been advised of the possibility of
any such loss or damage.
If you are in agreement with the above terms and conditions, please
indicate your acceptance by signing in the space provided below, and return one
original to me. This Letter Agreement shall be null and void if not signed
within two (2) days of the date set forth above.
<PAGE> 6
Very truly yours,
NBC INTERNET, INC.
By: /s/ AUTHORIZED SIGNATORY
-------------------------
Name:
Title:
ACCEPTED AND AGREED:
TELOCITY, INC.
By: /s/ AUTHORIZED SIGNATORY
-------------------------
Name:
Title:
[SIGNATURE PAGE TO TELOCITY ADVERTISING LETTER AGREEMENT]
