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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE TRANSITION PERIOD TO .
COMMISSION FILE NUMBER 0-07428
CALIFORNIA MICROWAVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 94-1668412
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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555 TWIN DOLPHIN DRIVE, REDWOOD CITY, CALIFORNIA 94065
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 596-9000
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.10 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $226,911,000 as of September 6, 1996.
Indicate the number of shares outstanding of the issuer's common stock, as
of the latest practicable date: On September 6, 1996, there were 16,135,755
shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Stockholders for fiscal year
ended June 30, 1996. (Part II of Form 10-K)
(2) Portions of definitive proxy statement filed with Securities and Exchange
Commission relating to the registrant's 1996 Annual Meeting of Shareholders.
(Part III of Form 10-K)
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ITEM 1. BUSINESS
GENERAL
California Microwave, Inc. (the "Company") designs, manufactures and
markets sophisticated systems and products used worldwide in satellite and
wireless communications for the transmission of voice, data, facsimile and
video. The Company applies its expertise in microwave radio technologies to:
satellite earth stations and equipment, microwave radios for wireless
application, and electronic intelligence systems. California Microwave is a
leading provider of both satellite earth stations used for satellite
communications and digital and analog microwave radios for the cellular,
personal communications network and private network markets.
The Company sells its products through a variety of channels for use by
many of the world's principal providers of telecommunications services. These
include AT&T, MCI, Sprint, GTE, COMSAT Corporation, British Telecom, and
telephone companies around the world. Other users of the Company's products
include private networks, such as broadcast and cable television operators,
utilities and other major corporations, and municipal, state and national
governments. California Microwave believes that it is among the limited number
of key suppliers to these entities because of its proven track record of
technical performance and reliability, customer support and cost effectiveness.
In May 1995, California Microwave acquired Microwave Networks Incorporated
("MNI") in a merger effected by exchanging 3,342,653 shares of its common stock
and options to acquire 132,347 shares of its common stock for all the
outstanding MNI common and preferred stock and MNI then-outstanding options,
warrants or other convertible securities. MNI is a manufacturer of digital
microwave transmission products and systems for worldwide cellular operators,
private businesses and domestic common carriers. The merger was accounted for as
a pooling of interests; accordingly, all periods presented in this report
include the results of MNI.
In June 1995, the Company recorded restructuring and other charges of
approximately $36.4 million in connection with a program to reduce costs and
improve operating efficiencies. The program includes, among other things: the
integration of certain of the Company's wireless operations and the exit by
California Microwave -- TeleCom Transmission Systems, Inc. ("TTS") from the
short-haul radio market, which included certain short-haul radio contracts and
the shifting of short-haul radio sales to its Microwave Radio Communications
division ("MRC"); the recording of certain contract costs at its Satellite
Transmission Systems division ("STS"); the elimination of excess facilities; the
reduction of employees at STS; the write-off of excess inventory and capital
equipment; and the write-down of intangible assets. During 1996, the program was
expanded, without a net charge to operations, to include merging the operations
of TTS and MNI with certain operations of MRC into a new unit, Microwave
Networks Systems ("MNS"), resulting in the write-off of additional excess
inventories and other assets and reducing the number of employees at MNS.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act") provides
companies with a "safe harbor" when making forward looking statements.
Statements of the Company that are not historical facts, including statements
about management's expectations for fiscal year 1997 and beyond, are forward
looking statements and involve certain risks and uncertainties. Factors that
could cause the Company's actual results to differ materially from management's
projections, forecasts, estimates and expectations include, but are not limited
to, the following:
(a) The timing of receipt of significant orders and of deliveries of
new and existing products and systems;
(b) The time it takes to successfully integrate operations of new
businesses that are acquired;
(c) Fluctuating market demand, price competition and new product
introductions by competitors and the ability to develop and introduce
competitive products and bring them to market in a timely manner;
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(d) Cost overruns and contract terminations or adjustments;
(e) With regard to international sales, fluctuations in foreign
currency exchange rates, the availability of suitable export financing,
political and economic instability and the ability to retain stable and
experienced in-country partners to provide sales and support services;
(f) The availability of quality components and subsystems used by the
Company in its products and the dependence upon subcontractors to
manufacture and deliver certain items in a timely and satisfactory manner;
(g) The limitation on the ability to reduce inventory and expenses if
forecasts and demand are not realized;
(h) The nonpayment of accounts receivable arising out of customer
dissatisfaction or inability to pay;
(i) Inventory obsolescence;
(j) The reliance of certain of the Company's operations upon major
orders from a small number of customers;
(k) Legal and regulatory developments; and
(l) Changes in industry or general economic conditions.
TELECOMMUNICATIONS INDUSTRY OVERVIEW
Telecommunications Market. The demand for improved telecommunications is
increasing worldwide as emerging economies seek to modernize, and as
increasingly information intensive developed countries introduce new
telecommunications services. The telecommunications industry has expanded
rapidly during the last decade, principally due to technological advances and
regulatory changes in the United States and internationally. Advances in
technology have lowered per-unit communications costs, increased product
reliability, and encouraged a proliferation of new and enhanced communications
products and services. Regulatory initiatives (such as the breakup of the Bell
system and the assignment of radio frequency spectrum for cellular telephone
services) have enhanced competition, permitted the opening of new markets and
provided incentives for the development of new products.
Alternative Transmission Media. Customers for telecommunications equipment
must weigh the relative costs and advantages of the four presently available
transmission media: copper cable, fiber optic cable, satellite systems and
terrestrial microwave radio systems.
- Copper cable, the traditional transmission medium most familiar to
consumers, is being replaced and supplemented by the other media,
particularly for high-volume and long-distance transmissions where it has
substantial capacity, cost and reliability limitations.
- Fiber optic cable is best suited to high-volume, point-to-point, short-
or long-distance links where its advantages -- capacity, quality and
security -- justify the long lead time and high cost to equip and install
a network.
- Satellite systems are often a preferred medium for transmitting to a
large geographical or multipoint area. These systems, which use microwave
technology, are well suited for rapid introduction of service in remote
areas or where terrestrial alternatives are unavailable, such as mobile,
shipboard or military applications. Satellite systems require a sizeable
initial capital investment by service providers to build and launch one
or more satellites. Once the satellites are in orbit, however, there are
substantial incentives to use this capacity, which typically requires
continued investment in satellite earth stations.
- Terrestrial microwave radio systems can be quickly and easily installed,
require relatively low initial capital investment and can be upgraded and
expanded over time. There are a wide variety of microwave radios offering
different frequencies, modulation techniques (analog or digital), and
transmission capacities. However, microwave radio applications typically
require government licensing and frequency coordination in order to
prevent signal interference among various users, and require a
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line of sight between the transmitting and receiving antennas.
Unavailability of sufficient frequency spectrum has historically
inhibited sales in developed countries, although this constraint is being
alleviated by the actions of various governments and the availability of
radios that do not require governmental licensing prior to use.
Rarely is a complete communications system based solely on one of these
media. Transmission is normally routed through a combination of media, each
employed where it fits most cost-effectively within the communications network.
For example, a microwave radio studio-to-transmitter link used by a television
broadcaster may connect to a satellite system used to distribute programs
domestically and overseas. In addition, the various media provide routing
alternatives for the other media, as in the case of satellite backup facilities
for undersea fiber optic cables.
STRATEGY
California Microwave's strategy is to apply its expertise in microwave
technologies to systems and products for the satellite communications, wireless
and intelligence systems markets. The Company works closely with existing and
potential customers to specify and develop new products and product enhancements
that have long-term growth potential. The Company considers its ability to
create and maintain long-term customer relationships an important component of
its overall strategy in each of its markets.
The Company has concentrated its efforts on sales of systems and products
used for communications infrastructure rather than on consumer terminals and
equipment.
The Company's strategy includes the following key elements:
Maintenance of Strong Position in Satellite Communications and Intelligence
Systems Markets. By introducing new products and expanding its marketing
efforts and distribution capabilities worldwide, the Company intends to continue
to strengthen its position in its markets for satellite communications and
intelligence systems.
Wireless Growth. The Company believes that the wireless telecommunications
market offers numerous opportunities because of its rapid growth and relatively
fragmented nature. Emerging opportunities for the sale of microwave radios
include cellular and other portable personal communication systems, mobile data
entry, remote data collection and device monitoring and wireless local area
networks. Many of these opportunities relate to the portability and mobility
requirements of customers.
International Expansion. The Company's systems and equipment are marketed
on a worldwide basis. The Company's international sales are comprised of both
satellite communications and wireless systems and products, and represented 49%
of total sales for the fiscal year ended June 30, 1996. International sales are
expected to increase due to international infrastructure requirements in
developing countries and the emergence of wireless opportunities worldwide.
Acquisitions. The Company has enhanced its market position through
acquisitions of companies or lines of business that complement its existing
businesses. Consistent with this strategy, the Company in April 1992 acquired
MRC, in October 1993 acquired substantially all of the assets and certain of the
liabilities of TTS and in May 1995 acquired MNI. In addition, the Company
acquired Mobile Satellite Products Corporation (formerly ViaSat Technology
Corporation; "MobileSat"), Microwave Data Systems ("MDS") and EFData Corp.
("EFData") in recent years.
Core Technology Focus. Since its founding in 1968, the Company's systems
and products have been based on microwave radio technologies. The Company's
products employ both analog and digital applications of radio frequency
technology. Digital technology significantly enhances performance and capacity
and facilitates new product development. The Company has invested significant
resources in these technologies and believes its microwave communications
technologies provide a solid base for the development of future wireless
communications products and services, including new forms of mobile and portable
communications systems.
Decentralized Organizational Structure. California Microwave's
subsidiaries and divisions operate, for the most part, on a decentralized basis.
The Company believes this organizational structure has allowed the key
entrepreneurial personnel of each division to be responsive to particular
markets and customers. Each subsidiary and division typically maintains its own
sales, marketing, product development and manufacturing functions. The Company
is moving towards centralized coordination of certain common functions.
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Products and Markets. The Company's sales are summarized below:
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FISCAL YEARS ENDED JUNE 30,
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1996 1995 1994
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(DOLLARS IN MILLIONS)
Sales by Product Class:
Satellite communications....................... $216 47% $174 37% $178 44%
Wireless....................................... 166 36 228 49 176 44
Intelligence................................... 77 17 65 14 50 12
Other.......................................... 2 -- 1 -- 2 --
--- --- --- --- --- ---
Total.................................. $461 100% $468 100% $406 100%
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Sales by Market Sector:
International.................................. $224 49% $224 48% $189 46%
U.S. commercial................................ 133 29 136 29 115 28
U.S. government................................ 104 22 108 23 102 26
--- --- --- --- --- ---
Total.................................. $461 100% $468 100% $406 100%
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SATELLITE COMMUNICATIONS
California Microwave is a leader in the design, assembly, integration and
installation of satellite earth stations, from the largest international gateway
earth stations, through an extensive series of mid-size earth stations, to very
small portable and fixed VSAT network earth stations. Earth stations are
integrated systems consisting of antennas (1 to 32 meters in diameter),
transmitting and receiving equipment, and video, data and telephone system
interface equipment. The Company also manufactures many electronic products,
such as modems and frequency converters, which are incorporated into earth
stations. Large antennas and certain other equipment are obtained from third
parties. The Company's line of digital and analog earth stations provides
point-to-point and point-to-multipoint transmission of voice, data, facsimile
and video, as well as tracking and command of the satellites themselves. Many of
the earth stations and related equipment are incorporated into communications
networks designed, installed and integrated by the Company. The Company's
systems are installed and operating in more than 110 countries.
Turnkey Satellite Earth Stations and Networks. The Company, through its
STS division, is a leading supplier of turnkey satellite transmit/receive earth
stations and networks for domestic, international and government applications.
The Company is both an equipment supplier and a large-scale network integrator.
It has installed more than 1,000 major earth stations on a turnkey basis,
including more than 200 digital earth stations for use by members of the
INTELSAT network. Turnkey satellite earth stations typically are completed in
three to twelve months.
Transportable, Mobile, Portable and Other Satellite Earth Stations. The
Company, through its STS division and EFData subsidiary, manufactures a variety
of transportable, mobile, portable and other satellite earth stations. Most have
modular designs, which reduce equipment costs, installation costs and delivery
lead times, and accommodate a wide variety of capacity, frequency band or other
customer requirements. Transportable and mobile earth stations are typically
used for rapid deployment to supply broadcast and voice communications where
telephone service may be non-existent or temporarily unavailable.
Satellite Earth Station Products. Through various of its subsidiaries and
divisions, California Microwave manufactures a broad line of electronic products
used in earth stations. The products are used extensively in the Company's own
earth stations and are also sold in volume to other earth station suppliers and
to operators of communication networks to upgrade existing earth stations.
EFData is a leading producer of high speed (up to 155 million bits per second)
digital modems, RF transceivers and frequency converters used in satellite
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communications networks. Since 1988, EFData has delivered more than 30,000
satellite modems, RF transceivers and frequency converters for use in INTELSAT
systems, satellite backup facilities for undersea fiber optic cable, digital
video and for many private network applications. EFData also manufactures a
completely self-contained earth station electronics package for low-cost rural
and infrastructure networks. STS manufactures a range of frequency converters
used in satellite earth stations, and proprietary computer-based monitor and
control systems.
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The Company's principal satellite communications products are summarized in
the following table:
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SATELLITE COMMUNICATIONS
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<TABLE>
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TYPICAL SELECTED CUSTOMERS
PRODUCTS APPLICATION PRICE RANGE OR END USERS
<S> <C> <C> <C>
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TURNKEY SATELLITE EARTH STATIONS AND NETWORKS
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International Gateways Provides direct voice, data, video $1,000,000 to AT&T, British Telecom, MCI,
and facsimile services $5,000,000 Singapore Telecom, Telefonica
internationally (9-32 meter (Spain), Bulgaria
antenna) Telecommunications Company, Hong
Kong Telecom
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Networks Provides voice, data, video and $5,000,000 to AT&T, Tenneco Oil, U.S.
facsimile services for $15,000,000 Government, Acumen (Thailand),
corporations, telephone companies Telespazio (Italy), Samsung (South
and governments domestically Korea), Emetel (Ecuador), Shanghai
Stock Exchange
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Video Uplinks (analog) Transmits television signals $500,000 to Hughes Communications, Hong Kong
$2,000,000 Telecom, Singapore Telecom,
British Telecom, KDD (Japan)
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Very Small Aperture Transmits data used by retailers, $2,000 to Hughes Network Systems, AT&T-
Terminals ("VSAT") and car dealers, hotels, news $2,000,000 Tridom, PC Quote, Dow Jones,
Hubs agencies, financial quotation Telerate, NOAA, Xinhua (China),
services, and weather tracking S&P Comstock
services in VSAT networks
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Mobile Shore Stations Transmits voice and data to land, $1,000,000 to Hughes Network Systems, Satcom
mobile and shipboard terminals in $5,000,000 S.A. (Portugal), VSNL (India),
INMARSAT and other mobile satcom American Mobil Satellite Corp.
networks
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Tracking, Telemetry and Tracks, monitors and controls $1,000,000 to AT&T, GTE, INTELSAT, COMSAT
Command Earth Stations satellite during launch and in $5,000,000
orbit
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TRANSPORTABLE, MOBILE, PORTABLE AND OTHER SATELLITE EARTH STATIONS
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SCAMP 3.5-9 meter antenna earth stations $100,000 to CBS, Reuters, U.S. Government,
with electronics package on $400,000 Teleinformatica (Italy),
antenna for international data and Telefonica (Spain)
VSAT network hubs
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FAST 1.8-2.4 meter antenna "fly-away" $100,000 to U.S. Government, CBS, Midwest
earth stations for transmitting $600,000 Video (CNN)
voice and high-speed data (up to 2
megabits/second)
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PSAT 1.2-2.4 meter antenna earth $50,000 to Chevron, AMOCO, ABC, U.S.
stations for transmitting voice $150,000 Government
and low-speed data (256
kilobits/second), typically for
emergency communications
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LYNXX(R) Suitcase-size complete earth $30,000 to U.S. Government, Exxon, COMSAT,
station providing voice and data $50,000 British Telecom
using INMARSAT-B service
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SATELLITE EARTH STATION PRODUCTS
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C- and Ku-band C-and Ku-band 70/140 MHz RF $10,000 to Hughes Network Systems, MCI, IDB
Transceivers, Extended terminals in power levels from 2 $100,000 Communications, Satelnet
C-band Terminals to 400 watts for antenna-mounted (Argentina), U.S. Government,
applications Reuters, governments of India and
China
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High Speed Modems For connecting telephone lines to $5,000 to AT&T, GTE, MCI, Sprint, British
international satellite networks; $80,000 Telecom, OPTUS (Australia)
optical fiber back-up; broadband
data; digital video; and private
networks
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Frequency Converters Key component in earth stations $8,000 to AT&T, MCI, Telefonica (Spain),
for converting frequencies $70,000 U.S. Government, Communications
Authority of Thailand, Singapore
Telecommunications, Entel (Chile)
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Monitor and Control PC-based color graphics monitor $5,000 to British Telecom, COMSAT, MCI,
Systems; DAMA Network and control system for networks $95,000 Reuters, U.S. Government, AT&T,
Products and earth stations GTE, Sprint
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DIGITAL VIDEO TELEVISION PRODUCTS
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Progeny(TM) Transmits and receives digital $5,000 to New product; to be marketed to
television signals by satellite $20,000 U.S. and international broadcast
and other radio carrier media television networks
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WIRELESS
California Microwave designs, manufactures and markets digital and analog
microwave radios and other equipment used in land-based point-to-point and
point-to-multipoint communications links. The Company is a leading manufacturer
of microwave radios for cellular and other personal communications networks, and
for private voice and data communications networks and for portable electronic
news gathering and studio-to-transmitter links. The Company believes that
wireless is one of the fastest growing areas of the telecommunications industry
due to technological advances, regulatory initiatives and the expanding
requirements for connectivity between people and computers and other electronic
devices.
Cellular and Personal Communications Networks and Systems. The Company,
through its MNS Division, manufactures short- and long-distance digital
microwave radio systems for worldwide applications in cellular and portable
personal communications networks and systems. Over the past four years the
Company has delivered equipment to service providers in the U.S., the United
Kingdom, Germany, Belgium, Israel, Mexico, Brazil, Australia, the Philippines,
China and India. The microwave equipment (13, 15, 18, 23 and 38 GHz) is used to
interconnect the microcells of the cellular and personal communications systems.
In 1995, the FCC allocated to the U.S. Personal Communications Services ("PCS")
market a part of the frequency spectrum that is currently used by utilities and
municipalities for telecommunications networks. Incumbent users have to relocate
to a different frequency, which requires new microwave radios, primarily in the
6- and 10-GHZ frequency ranges, if microwave is to be used as the transmission
medium. In 1996, California Microwave began delivering microwave radios for the
emerging PCS market.
Land Mobile and Utility Communications. The Company, through its MNS
division, manufacturers and sells digital and analog microwave radio systems for
the interconnection of statewide public safety mobile networks. Most of these
sales are made through Motorola, with whom MNS has an equipment supply
agreement. MNS also sells products to large utilities to provide voice and data
communications along major rights of way.
Television Broadcast. The Company's MRC division is a leading supplier of
analog microwave radios to U.S. and international broadcast and cable television
markets for use principally in portable electronic news gathering and
studio-to-transmitter applications.
Wireless Data Networking. The Company, through its MDS division,
manufactures point-to-point and point-to-multipoint microwave data radios. MDS
point-to-point radios are used to extend the reach of a communications system in
areas where low capacity, multi-channel voice or data communications links are
required. Point-to-multipoint radio systems are used principally to connect
central computers to remote computer terminals or to physical measurement and
control devices. Typical applications include remote monitoring and automated
operation of oil and gas production and distribution, water-wastewater treatment
systems, and control of electric utility power generation facilities. Over
100,000 MDS data radios have been sold since MDS commenced the sale of radios in
1986.
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The Company's principal wireless products are summarized in the following
table:
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WIRELESS
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TYPICAL SELECTED CUSTOMERS
PRODUCTS APPLICATION PRICE RANGE OR END USERS
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CELLULAR AND PERSONAL COMMUNICATIONS NETWORKS AND SYSTEMS AND SPECIALIZED MOBILE RADIOS
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Digital microwave radios Cell-to-cell interconnections $7,000 to Mercury One-2-One (U.K.), Vodafone
(2 to 38 GHz) $50,000 (U.K.), British Telecom (U.K.),
Orange (U.K.), CellTel (Sri Lanka),
Sprint Cellular, Bell South
Cellular, OPTUS (Australia),
IUSACELL (Mexico) and Telstra
(India)
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LAND MOBILE AND UTILITY COMMUNICATIONS
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Analog radios Large statewide public safety $10,000 to Motorola, NYPD, Massachusetts State
(2-7 GHz) mobile networks $50,000 Police, Indiana State Police,
Digital radios Orange Co., Florida Police and
(2-23 GHz) Fire, City of Cleveland Public
Safety, Michigan State Public
Safety System
Analog radios Large utility right-of-way networks $10,000 to Motorola, Tenneco Gas, PT.
(2-6 GHz) $50,000 Telkomunikasi, Indonesia, Daqing
Digital radios Oil (China), Pennsylvania Game
(2-23 GHz) Commission
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TELEVISION BROADCAST
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Analog radios Electronic news gathering; $8,000 to ABC, CBS, NBC, CNN, FOX, C-SPAN
(2-40 GHz) electronic field production $20,000
(2-23 GHz) Studio-to-transmitter links, $18,000 to PBS, BBC (U.K.), Prime Television
regional networks $100,000 and Southern Cross Broadcasting
(Australia)
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WIRELESS DATA NETWORKING
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Analog and digital data Point-to-point and $1,000 to Mobil, Phillips Petroleum, Florida
radios (450 and 900 MHz) point-to-multipoint, remote $10,000 Power & Light, PG&E, Georgia Power,
monitoring, data collection El Paso Gas, Amoco, China National
Petroleum Corporation
LAN microwave radios (23 Local area network interconnection $10,000 to Pacific Communications, Watchtower
GHz) $12,000 Bible and Tract Society of NY, HSC
Corp.
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</TABLE>
INTELLIGENCE SYSTEMS
The Company participates in selected areas of the U.S. government market
which are closely related to the Company's commercial technological and product
base. In recent years, as U.S. defense spending has declined, the Company has
competed effectively by offering adaptations of its technologies and
commercially available "off-the-shelf" products to stable and growing segments
of the Department of Defense market at significantly less cost than would be the
case under military specification procurement procedures. The Company integrates
electronic and electro-optical systems for both airborne and ground-based
applications. These systems collect, process and disseminate intelligence and
reconnaissance information using advanced radio communications hardware and both
special-purpose and off-the-shelf computers and software. The Company maintains
and upgrades these systems throughout their useful lives, which can be a decade
or more. The Company has developed a series of products with secure, portable,
ruggedized suitcase-sized packaging that incorporate key intelligence
information collection, processing and analysis capabilities contained in its
larger systems.
The Company also designs and develops state-of-the-art multisensor imaging
systems and sophisticated electronic intelligence collection systems which it
integrates into inexpensive commercial aircraft. In fiscal 1991, the Company
received contracts totaling $19.6 million as a prime contractor for the U.S.
Army's Air
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Reconnaissance Low ("ARL") program. The ARL program employs both imagery and
signal intelligence sensors mounted on deHavilland-7 aircraft. These sensors
collect information which can be immediately transmitted to designated receiving
locations. The ARL aircraft can be rapidly deployed anywhere in the world. The
Company completed its initial ARL contracts and made final delivery of the first
aircraft to the Army in 1993. The Company has received significant follow-on ARL
contracts involving additional aircraft.
In early 1993, the Company introduced its new airborne intercept and
direction finding and geo-location system. The Company believes that this system
locates signals from over a wide range of frequencies more rapidly and
accurately than do other systems.
The Company's intelligence projects typically involve multi-year,
multi-million dollar contracts. In addition, the Company sells subsystems and
other equipment to U.S. government agencies on a short-term delivery basis. The
price of a project depends on a number of factors, including the amount of
development involved, quantities ordered, maintenance requirements and whether
an aircraft is to be modified and supplied by the Company in connection with the
contract.
SALES, MARKETING AND CUSTOMER SUPPORT
California Microwave directs its sales and marketing efforts toward major
users of its systems and products through a well established international
distribution network. The sales and marketing strategy of the Company varies
with the particular market served and involves direct sales by the Company's own
sales force, sales through representatives, value-added resellers, or a
combination of the foregoing. The Company also has entered into sales
distribution agreements with respect to certain of its satellite communications
and wireless products.
The Company considers its ability to create and maintain long-term customer
relationships an important component of its overall strategy in each of its
markets. Relationships with customers are established and maintained by the
Company's divisional area managers and their technical and marketing staffs. The
Company's strategy also includes its commitment to provide ongoing customer
support for its systems and products. This support involves providing direct
access to the Company's engineering staff or trained technical representatives
located throughout the world to resolve technical or operational problems. The
Company has sold products in over 110 countries. The Company intends to continue
to expand its marketing efforts and distribution channels worldwide.
MANUFACTURING
Manufacturing operations consist principally of assembly and testing of
electronic systems built from fabricated parts, printed circuits and electronic
components. Both manual and various automated methods are employed, depending
primarily upon production volume. The Company employs formal Total Quality
Management programs and other training programs, and most of its operations have
qualified for International Standards Organization ("ISO") quality procedure
registration to ISO 9001, a standard sometimes imposed by foreign buyers. Those
operations not yet certified are working toward registration to ISO 9001, and
the Company believes that lack of such registration does not currently have any
material adverse effect on its business.
Electronic components and raw materials used in the Company's products are
generally obtained from a large number of suppliers. Some components are
standard items and others are manufactured to the Company's specifications by
subcontractors. The Company obtains certain components and subsystems from
single, or a limited number of, sources. The Company operates without a
substantial inventory of components and subsystems but believes that most
components and subsystems are available from existing or alternative suppliers
and subcontractors. A significant interruption in the delivery of such items
could have a material adverse effect on the Company's results of operations.
9
<PAGE> 11
COMPETITION
California Microwave is engaged in a highly competitive business and the
number of potential customers for the Company's products is limited. Many of the
Company's competitors have significantly greater financial, marketing and
operating resources than the Company. In addition, certain of the Company's
customers have technological capabilities in the Company's product areas and
could choose to replace the Company's products with their own. The Company's
major competitors by product area include: NEC, Alcatel Telespace and
Scientific-Atlanta, Inc. -- satellite communications; NEC, Digital Microwave
Corporation, Harris Corporation, Alcatel, P-Com, Inc., and Motorola -- wireless;
ESL, Inc. (a subsidiary of TRW Inc.), Lockheed Martin Corporation and E-Systems,
Inc. -- intelligence.
The Company believes that competition in its markets is based primarily on
price, performance, reputation, on-time delivery, reliability and customer
support. The Company believes that it has the ability to develop, produce and
install turnkey satellite earth stations, and to deliver satellite and wireless
equipment, faster than many of its competitors. In the intelligence area, the
Company believes that it has the ability to solve customers' problems with
proprietary solutions and to offer cost-effective approaches using commercially
available products.
RESEARCH AND DEVELOPMENT
Research and development expenses were $30.9 million, $29.7 million and
$17.6 million in fiscal 1996, 1995 and 1994, respectively, representing 6.7%,
6.3% and 4.3% of total sales, respectively, for the same periods.
The Company obtains customer funding for research and development where
possible to adapt the Company's basic technology to specialized customer
requirements. Most research and development expenses in turnkey satellite earth
stations and intelligence systems are customer-funded and are included in cost
of products sold. Since the Company expects to emphasize equipment sales,
particularly in the wireless area, it expects research and development
expenditures, as a percent of sales, to continue to increase.
PATENTS AND LICENSES
Due to the rapidly changing nature of technology in the Company's business,
patents and licenses have been of substantially less significance in the
Company's business than have been the timely application of its technology and
the design, development and marketing capabilities of its personnel.
EMPLOYEES
At June 30, 1996, California Microwave had 2,294 employees, 1,169 of whom
were engaged in production and production support, 621 in research and
development and other engineering support, 315 in marketing and 189 in general
and administration functions. None of the employees is represented by a labor
union. The Company believes that its employee relations are good.
REGULATION
Radio communications, including satellite communications, are subject to
regulation by United States and foreign laws and international treaty. The
Company's equipment must conform to domestic and international requirements
established to avoid interference among users of microwave frequencies and to
permit interconnection of equipment.
The use of microwave signals depends upon the availability of frequencies
that permit interference-free operation. In many developed countries, the
unavailability of frequency spectrum has historically inhibited the growth of
microwave systems. However, two factors are alleviating this problem. First, the
proliferation of fiber optics for high capacity systems has reduced the demand
for microwave frequencies for such systems, thus freeing up frequency spectrum
for new types of services, particularly for portable or mobile communications.
Second, many government regulatory agencies are reallocating frequencies from
one type of use to another, thus providing incentive for new communications
services. Current regulatory efforts by international and national regulatory
authorities are directed at providing microwave frequencies for new portable
wireless
10
<PAGE> 12
personal communications services. Equipment to support these new services can be
marketed only if permitted by suitable frequency allocations and regulations,
and the process of establishing new regulations is complex and lengthy.
BACKLOG
At June 30, 1996, the Company's backlog of undelivered orders was $168.4
million (approximately 95% of which is expected to be delivered during fiscal
1997) compared with $231.5 million at June 30, 1995. In the Company's
experience, its backlog at any given time is not necessarily indicative of
prospective period revenues. The Company generally records an order in backlog
when the Company receives a firm contract or purchase order which identifies
product quantities and delivery dates, and in the case of government contracts,
when such contracts have been funded by the government. While from time to time
a substantial portion of the Company's backlog has been comprised of large
orders, the cancellation of any of which could have a material adverse effect on
the Company's operating results, the Company historically has not experienced
significant changes in its backlog from cancellations or revisions of orders.
ITEM 2. PROPERTIES
The table below describes the location and general character of the
principal plants and materially important physical properties that are owned or
leased by the Company and its subsidiaries as of June 30, 1996.
<TABLE>
<C> <S> <C> <C> <C> <C>
OCCUPANT LEASE NO. OF SQUARE
EXPIRES BUILDINGS FOOTAGE LOCATION
- ---------------------------------------------------------------------------------------------------
1. Corporate/Group Headquarters 2000 1 16,800 Redwood City, CA
2. Satellite Transmission Systems (owned) 2 90,000 Hauppauge, NY
(owned) 1 37,000 Melbourne, FL*
1997 1 35,000 Hauppauge, NY*
3. Services Division 1999 1 39,020 Mountain View, CA
2000 1 40,000 Sunnyvale, CA
4. Government Electronics Division 1998 1 22,640 Woodland Hills, CA
1999 1 29,260 Woodland Hills, CA
5. Airborne Systems Integration 1998 1 87,500 Hagerstown, MD
Division
1999 1 45,000 Belcamp, MD
6. EFData Corporation 2006 2 115,000 Tempe, AZ
7. Microwave Data Systems (owned) 1 56,060 Rochester, NY
8. Microwave Radio Communications 1997 1 71,500 Chelmsford, MA
9. Microwave Network Systems 1997 1 36,348 Fremont, CA
1998-2001 3 79,760 Houston, TX*
2000-2006 2 5,200 High Wycombe, UK
2000 1 36,704 Chelmsford, MA
2002 1 118,000 Stafford, TX
2006 1 50,000 Glendale Heights, IL
2009 1 107,048 Bloomingdale, IL*
10. Government Communications 1996 1 12,000 Annapolis Junction, MD
Systems
11. Government Group 1997 1 1,750 Arlington, VA
12. Digital Radio Technology, Inc. Monthly 1 7,400 Fishers, NY
</TABLE>
- ---------------
* The Company plans to sell or sublease this space, which totals approximately
260,000 square feet.
The Company believes that its facilities are adequate for its present
needs.
11
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS
On November 9, 1995, and December 12, 1995, putative class action lawsuits
entitled Rick Fairchild v. California Microwave, Inc. et al. and Mark E.
McKinney v. California Microwave, Inc. et al. were filed in the United States
District Court for the Northern District of California. The plaintiffs in these
two cases, which have been consolidated, purport to represent a class of all
persons who purchased common stock of California Microwave, Inc. (the "Company")
between September 6, 1994, and June 29, 1995 (the "Class Period"). Named as
defendants are the Company and certain of its current and former executive
officers. The complaints allege that defendants violated various federal
securities laws through material misrepresentations and omissions during the
Class Period. Defendants filed motions to dismiss the complaints, which the
court granted on April 19, 1996, with leave to amend. The plaintiffs filed
amended complaints and in August, 1996, defendants filed motions to dismiss
those complaints. Although the ultimate outcome of these proceedings cannot be
determined, California Microwave, Inc. believes that it has meritorious defenses
to the claims alleged in these lawsuits and intends to defend the actions
vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the Company, and all
positions with the Company held by such person, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------------------------
<S> <C> <C>
Philip F. Otto..................... 55 Chairman of the Board, President and Chief
Executive Officer
Gilbert F. Johnson................. 65 President of the Government Group
Douglas H. Morais.................. 53 Executive Vice President for Business Development
and Technology
Leon F. Blachowicz................. 56 President of the Wireless and Satellite
Communications Group
Dennis R. Raney.................... 53 Executive Vice President and Chief Financial
Officer
George L. Spillane................. 62 Vice President and Secretary
Michael L. Foster.................. 50 Vice President-Financial Planning and Treasurer
Carl Lee........................... 47 Vice President -- Controller
</TABLE>
Philip F. Otto rejoined the Company as a Director and as President of the
Wireless Products Group in January 1992, became President and Chief Executive
Officer of the Company in March 1992 and Chairman of the Board in January 1993.
He served as Executive Vice President, Chief Financial Officer and a director of
General Cellular Corporation, a cellular telecommunications company, from 1989
to 1991. Subsequent to Mr. Otto's employment by General Cellular Corporation,
that corporation negotiated a "prepackaged" plan of reorganization under Chapter
11 that involved the infusion of additional capital. He also served as President
of Netline Communications Corporation, a telecommunications software company, in
1988; as a consultant to the telecommunications industry from 1986 to 1988; and
as Chief Executive Officer and a director of Telco Systems, Inc., a fiber optics
telecommunications company, from 1981 to 1986. Mr. Otto served as Chief
Financial Officer of the Company from 1975 to 1980, was a director of the
Company from 1976 to 1985 and was an Executive Vice President of the Company
from 1979 to 1981. He holds a Bachelor of Science Degree in Engineering from
Yale University and a Master's Degree in Business Administration from the
Harvard Business School.
Gilbert F. Johnson, who joined California Microwave in 1973, became the
Company's President and Chief Operating Officer in 1985 and President of the
Government Group in 1991. Mr. Johnson, who holds a Bachelor's Degree in
Electrical Engineering from the University of Illinois and a Master's Degree in
Electrical Engineering from the University of Southern California, is a senior
member of the IEEE. Prior to joining
12
<PAGE> 14
California Microwave, Mr. Johnson held engineering management positions at
Applied Technology and Hughes Aircraft Company.
Dr. Douglas H. Morais joined California Microwave in February 1993 as
Senior Vice-President-Corporate Development, became President of the Wireless
Products Group in July 1993 and became Executive Vice President for Business
Development and Technology in March 1996. From October 1992 to February 1993,
Dr. Morais engaged in private business development and investment; from October
1990 to October 1992 he was an officer of Digital Microwave Corporation,
becoming its President and Chief Operating Officer in May 1991. Prior to joining
Digital Microwave, Dr. Morais spent 24 years at the Farinon Division of Harris
Corporation and headed the division as general manager from 1983 to 1990. Dr.
Morais received a B.Sc. in electrical engineering from the University of
Edinburgh in Scotland and an M.Sc. and Ph.D., also in electrical engineering,
from the University of California at Berkeley and the University of Ottawa,
respectively. He is a senior member of the IEEE.
Leon F. Blachowicz joined the Company in January 1995 as President of the
Satellite Communications Group and in March 1996 also became President of the
combined Wireless and Satellite Communications Group. From 1989 to January 1995
he was Vice President/General Manager of Varian's Microwave Equipment Products
division. Prior to 1989 he was Vice President of the Business Communications
System Division of Harris Corporation for the last three of his 20 years at
Harris Corporation.
Dennis R. Raney became an Executive Vice President and the Chief Financial
Officer of the Company in May 1996. He served as Senior Vice President and Chief
Financial Officer of the Pharmaceutical Products Group of Bristol Myers Squibb
Co. from October 1993 to November 1995, and as Chief Financial Officer of
General Magic, Inc., a publicly held company engaged in the development of
mobile computing agents, from December 1995 to May 1996. From 1970 to 1993, Mr.
Raney held various positions with Hewlett Packard Company, including
Administrative Manager South Asia; Director, Finance and Administration,
International Operations: Director, Finance and Administration, European
Operations; and Director of Worldwide Real Estate Operations. He holds an MBA
from the University of Chicago and a BS in chemical engineering from South
Dakota School of Mines.
George L. Spillane became Vice President-Finance and Chief Financial
Officer of the Company in November 1980 and Secretary of the Company in October
1981. When Garrett E. Pierce became Chief Financial Officer in April 1994, Mr.
Spillane's title was changed to Vice President and Secretary and when Mr. Pierce
resigned in January 1996 Mr. Spillane served as Chief Financial Officer until
Mr. Raney joined the Company in May 1996. From 1975 to March 1980, Mr. Spillane
was the treasurer of Farinon Corporation (now a part of Harris Corporation).
Prior thereto, Mr. Spillane was employed by Arthur Andersen & Co.
Michael L. Foster became a Vice President of the Company in October 1990.
Mr. Foster joined California Microwave in 1979 as Manager-Corporate Planning,
was promoted to Director-Finance and Planning in 1980 and to Staff Vice
President in 1983. Prior thereto, Mr. Foster was with Watkins Johnson, where he
held the position of financial manger for one of the systems divisions. Mr.
Foster holds an MBA from Stanford University.
Carl Lee became Vice-President-Controller of the Company in December 1995.
From 1986 to 1996, Mr. Lee was a partner in Ernst & Young LLP, holding the
position of National Director of Business Systems Consulting from October 1986
through March 1994, and the position of National Partner -- Entrepreneurial
Consulting from April 1994 until he joined the Company.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The stock and stock price information on page 32 of California Microwave's
1996 Annual Report to Stockholders is incorporated herein by reference.
13
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data on page 32 of California Microwave's 1996
Annual Report to Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The management's discussion and analysis of financial condition and results
of operations on pages 28 through 31, of California Microwave's 1996 Annual
Report to Stockholders is incorporated herein by reference. For factors
affecting any forward-looking statements contained in such discussion and
analysis, see "Business -- Information Regarding Forward Looking Statements" in
Item 1 of Part 1 of this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements on pages 16 through 26, and the
financial results by fiscal quarter information on page 32, of California
Microwave's 1996 Annual Report to Stockholders are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to directors of California Microwave required to
be furnished pursuant to this item is incorporated by reference from portions of
the Company's definitive Proxy Statement for its annual meeting of shareholders
to be filed with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days after June 30, 1996 (the "Proxy Statement") under the
caption "Election of Directors." Certain information relating to executive
officers of the Company is set forth in Item 4A of Part I of this Form 10-K
under the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from portions of the Proxy Statement under the
caption "Compensation of Directors and Executive Officers."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
CALIFORNIA MICROWAVE, INC.
Incorporated by reference from portions of the Proxy Statement under the
captions "Certain Shareholders" and "Compensation of Directors and Executive
Officers."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
Included in Part II of this report by incorporation by reference from the
California Microwave 1996 Annual Report to Stockholders
14
<PAGE> 16
Report of Ernst & Young LLP, Independent Auditors (page 27 of 1996 Annual
Report to Stockholders)
Consolidated statements of operations for each of the three years in the
period ended June 30, 1996 (page 16 of 1996 Annual Report to Stockholders)
Consolidated balance sheets as of June 30, 1996 and 1995 (page 17 of 1996
Annual Report to Stockholders)
Consolidated statements of stockholders' equity for each of the three years
in the period ended June 30, 1996 (page 18 of 1996 Annual Report to
Stockholders)
Consolidated statements of cash flows for each of the three years in the
period ended June 30, 1996 (page 19 of 1996 Annual Report to Stockholders)
Notes to consolidated financial statements (pages 20 through 26 of 1996
Annual Report to Stockholders)
With the exception of the information incorporated by reference into Items 5, 6,
7 and 8 of this Form 10-K, the California Microwave 1996 Annual Report to
Stockholders is not deemed filed as part of this report.
(A) 2. FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Schedule II -- Valuation and Qualifying Accounts for the three years ended
June 30, 1996.
All other schedules are omitted because they are not required, or are not
applicable, or the information is included in the consolidated financial
statements or notes to consolidated financial statements.
(A) 3. EXHIBITS
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation. (Exhibit to the Company's Form 8 dated
February 19, 1993, constituting Amendment No. 1 to the Company's Registration
Statement on Form 8-A for the Common Stock; incorporated herein by reference.)
3.2 Bylaws. (Exhibit to the Company's Form 10-K for its fiscal year ended June 30,
1994; incorporated herein by reference.)
4.1 Indenture of Trust, amended, as relating to 1987 Industrial Development Revenue
Refunding Bonds of Satellite Transmission Systems, Inc.*
4.2 Reimbursement Agreement between Satellite Transmission Systems, Inc. and The Bank
of Tokyo, Ltd., San Francisco Agency, relating to Satellite Transmission Systems,
Inc. Indenture.*
4.3 Guarantee of California Microwave, Inc. in favor of The Bank of Tokyo, Ltd., San
Francisco Agency, relating to Satellite Transmission Systems, Inc. Indenture.*
4.4 Rights Agreement, dated July 27, 1989. (Exhibit to the Company's Form 8-A filed
on August 2, 1989; incorporated herein by reference.)
4.5 Master Indenture of Trust (First Program), relating to County of Monroe
Industrial Development Bonds.*
4.6 Series F Supplemental Indenture, dated as of June 1, 1992, relating to $2,800,000
of County of Monroe Industrial Development Bonds.*
4.7 Guaranty of California Microwave, Inc. in favor of Security Pacific National
Trust Company (New York), as Trustee, dated as of June 1, 1992, relating to
$2,800,000 of County of Monroe Industrial Development Bonds.*
4.8 Letter of Credit Reimbursement Agreement, between California Microwave, Inc. and
Marine Midland Bank, N.A., dated as of June 1, 1992, relating to $2,800,000 of
County of Monroe Industrial Development Bonds.*
10.1 Employee Stock Purchase Plan, as amended through September 1996.**
</TABLE>
15
<PAGE> 17
<TABLE>
<C> <S>
10.2 Lease dated March 10, 1977, of the premises at 990 Almanor Avenue in Sunnyvale,
California. (Exhibit to the Company's Form 10-K for its fiscal year ended June
30, 1994; incorporated herein by reference.)
10.3 1986 Stock Option Plan, as amended.** (Exhibit to the Company's Form 10-K for its
fiscal year ended June 30, 1991; incorporated herein by reference.)
10.4 1988 Restricted Stock Plan.** (Exhibit to the Company's Form 10-K for its fiscal
year ended June 30, 1994; incorporated herein by reference.)
10.5 Lease of the property located at 2105 West Fifth, Tempe, Arizona. (Exhibit to the
Company's Form 10-K for its fiscal year ended June 30, 1991; incorporated herein
by reference.)
10.6 Lease of the premises located at 20 Alpha Road, Chelmsford, MA. (Exhibit to the
Company's Form 10-K for the fiscal year ended June 30, 1992; incorporated herein
by reference.)
10.7 Letter agreement with Philip F. Otto** dated September 22, 1992. (Exhibit to the
Company's Form 10-K for its fiscal year ended June 30, 1992; incorporated herein
by reference.)
10.8 Amendment to letter agreement with Philip F. Otto**, dated July 30, 1993.
(Exhibit to Company's Form 10-K for its fiscal year ended June 30, 1993;
incorporated herein by reference.)
10.9 Lease of the property located at 55 Commerce Drive, Hauppauge, N.Y. (Exhibit to
this Company's Form 10-K for its fiscal year ended June 30, 1993; incorporated
herein by reference).
10.10 Shareholders' Agreement among California Microwave, Inc., Cornix Systems, Harry
F. Eustace, Barbara Eustace, Garber International Associates and Dr. F.V. Garber,
dated March 8, 1994. (Exhibit to the Company's Form 10-K for its fiscal year
ended June 30, 1994; incorporated herein by reference.)
10.11 Amendment to letter agreement with Philip F. Otto**, dated August 15, 1994.
(Exhibit to the Company's Form 10-K for its fiscal year ended June 30, 1994;
incorporated herein by reference.)
10.12 Agreement and Plan of Reorganization of Merger, dated as of January 31, 1995
among California Microwave, Inc., CMI Acquisition Corporation and Microwave
Networks Incorporated ("Agreement and Plan of Reorganization"; Exhibit to the
Company's Form 8-K dated February 13, 1995; incorporated herein by reference.)
10.13 First Amendment to Agreement and Plan of Reorganization, dated April 28, 1995
(Exhibit to the Company's Registration Statement on Form S-4, Registration No.
33-57593, filed May 1, 1995; incorporated herein by reference).
10.14 Letter Agreement with Leon F. Blachowicz, dated December 2, 1994.** (Exhibit to
the Company's Form 10-K for its fiscal year ended June 30, 1995; incorporated
herein by reference).
10.15 Letter Agreement with Carl Lee, dated November 10, 1995.**
10.16 Letter Agreement with Dennis R. Raney dated April 19, 1996.**
10.17 Credit Agreement among California Microwave, Inc., Bank of America National Trust
and Savings Association, and other financial institutions, dated as of December
31, 1995.
10.18 First Amendment to Credit Agreement among California Microwave, Inc., Bank of
America National Trust and Savings Association and other financial institutions,
dated as of June 14, 1996.
10.19 Waiver and Second Amendment to Credit Agreement among California Microwave, Inc.,
Bank of America National Trust and Savings Association, and other financial
institutions, dated as of August 12, 1996.
10.20 Lease of premises located at 2114 West 7th Street, Tempe, Arizona.
</TABLE>
16
<PAGE> 18
<TABLE>
<C> <S>
10.21 Lease of premises known as Top Flight Airport on Showalter Road, Washington
County, Maryland
10.22 Lease of premises located at 4000 Greenbriar, Stafford, Texas
10.23 Lease of premises located at 175 West Wall Street, Glendale Heights, Illinois
10.24 1992 Stock Option Plan.** (Exhibit to the Company's Form 10-K for its fiscal year
ended June 30, 1995; incorporated herein by reference).
11 Computation of Per Share Earnings.
13 Annual Report to Stockholders (pages incorporated by reference).
21 List of Subsidiaries.
23 Consent of Ernst & Young LLP, Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
- ---------------
* Registrant agrees to file such exhibits upon request by the Commission.
** Compensatory plan or arrangement.
Exhibits are available from the Registrant upon request.
(B) REPORTS ON FORM 8-K
None.
17
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: September 27, 1996 CALIFORNIA MICROWAVE, INC.
By /s/ PHILIP F. OTTO
------------------------------------
Philip F. Otto
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ PHILIP F. OTTO Chairman, President and Chief September 27, 1996
- ------------------------------------------ Executive Officer (principal
PHILIP F. OTTO executive officer)
/s/ DENNIS R. RANEY Executive Vice President and September 27, 1996
- ------------------------------------------ Chief Financial Officer
DENNIS R. RANEY (principal financial and
accounting officer)
/s/ GILBERT F. JOHNSON* President -- Government Group September 27, 1996
- ------------------------------------------ and Director
GILBERT F. JOHNSON
/s/ DAVID B. LEESON* Director September 27, 1996
- ------------------------------------------
DAVID B. LEESON
/s/ ARTHUR H. HAUSMAN* Director September 27, 1996
- ------------------------------------------
ARTHUR H. HAUSMAN
/s/ EDWARD E. DAVID, JR.* Director September 27, 1996
- ------------------------------------------
EDWARD E. DAVID, JR.
/s/ ROBERT A. HELLIWELL* Director September 27, 1996
- ------------------------------------------
ROBERT A. HELLIWELL
/s/ ALFRED M. GRAY* Director September 27, 1996
- ------------------------------------------
ALFRED M. GRAY
/s/ J.J. ADORJAN* Director September 27, 1996
- ------------------------------------------
J.J. ADORJAN
*By /s/ GEORGE L. SPILLANE
--------------------------------------
Attorney-in-fact
</TABLE>
18
<PAGE> 20
CALIFORNIA MICROWAVE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
AT ADDITIONS BALANCE
BEGINNING CHARGED AT END
OF YEAR TO INCOME DEDUCTIONS OF YEAR
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
1996
Allowance for doubtful accounts................... $ 2,136 $ 595 $ 353 $ 2,378
Estimated liability for warranties................ 4,282 5,353 6,375 3,260
Estimated liability for contract costs............ 15,300 353 12,284 3,369
1995
Allowance for doubtful accounts................... $ 925 $ 1,297 $ 86 $ 2,136
Estimated liability for warranties................ 1,074 7,120 3,912 4,282
Allowance for excess facilities................... 1,969 -- 1,969 0
Estimated liability for contract costs............ 3,963 14,355 3,018 15,300
1994
Allowance for doubtful accounts................... $ 677 $ 361 $ 113 $ 925
Estimated liability for warranties................ 1,261 3,606(1) 3,793 1,074
Allowance for excess facilities................... 1,094 1,451(2) 576 1,969
Estimated liability for contract costs............ 0 9,631(3) 5,668 3,963
</TABLE>
- ---------------
Amounts from acquisition of TTS not charged to income:
(1) $360
(2) $145
(3) $5,595
19
<PAGE> 21
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.1 Employee Stock Purchase Plan as amended through September 1996.
10.15 Letter Agreement with Carl Lee, dated November 10, 1995.
10.16 Letter Agreement with Dennis R. Raney, dated April 19, 1996.
10.17 Credit Agreement among California Microwave, Inc., Bank of America National Trust
and Savings Association and other financial institutions, dated as of December 21,
1995.
10.18 First Amendment to Credit Agreement among California Microwave, Inc., Bank of
America National Trust and Savings Association and other financial institutions,
dated as of June 14, 1996.
10.19 Waiver and Second Amendment to Credit Agreement among California Microwave, Inc.,
Bank of America National Trust and Savings Association and other financial
institutions, dated as of August 12, 1996.
10.20 Lease of premises located at 2114 West 7th Street, Tempe, Arizona.
10.21 Lease of premises known as Top Flight Airport on Showalter Road, Washington County,
Maryland.
10.22 Lease of premises located at 4000 Greenbriar, Stafford, Texas.
10.23 Lease of premises located at 175 West Wall Street, Glendale Heights, Illinois.
11 Computation of Per Share Earnings.
13 Annual Report to Stockholders (pages incorporated by reference).
21 List of Subsidiaries.
23 Consent of Ernst & Young LLP, Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
20
<PAGE> 1
EXHIBIT 10.1
CALIFORNIA MICROWAVE, INC.
EMPLOYEE STOCK PURCHASE PLAN
(as amended through September 1996)*
1. PURPOSE:
The CALIFORNIA MICROWAVE, INC. EMPLOYEE STOCK PURCHASE PLAN
(hereinafter called the "Plan") is designed to foster continued cordial employee
relations, to encourage and assist its employees and the employees of any
present or future subsidiaries in acquiring a stock ownership interest in
CALIFORNIA MICROWAVE, INC. (hereinafter called the "Corporation") and to help
them provide for their future security. For this purpose the Corporation
reserved 1,652,756* shares of its capital stock, of which amount 1,220,180
shares had been sold under the Plan as of September 25, 1996.
2. BI-ANNUAL PERIODS:
Bi-annual periods shall mean the six-month periods ending June
30th and December 31st of each year. The first period under this Plan shall
commence on January 1, 1973.
3. ELIGIBILITY:
Anyone who was an employee at the inception of the Plan
(except those employees who own five percent (5%) or more of the stock of the
Corporation or any subsidiary of the Corporation at the start of any bi-annual
period and part-time employees, all as defined in Internal Revenue Code Section
423), was or is eligible to become a member of the Plan. Anyone who became or
becomes an employee of the Corporation or any of its present or future
subsidiaries thereafter (subject to the exceptions stated in the preceding
sentence), was or is eligible to become a member of the Plan, on the first day
of the bi-annual period following the completion of (30) days of continuous
service. Notwithstanding the foregoing, no employee shall be entitled to
purchase (i) shares of stock under the Plan and all other purchase plans of the
Corporation and any parent or subsidiary of the Corporation with an aggregate
fair market value (determined at date of grant) exceeding $25,000 per year for
each calendar year in which such option is outstanding at any time, or (ii) more
than 1,000 shares of stock under the Plan in any bi-annual period.
* Subject to stockholder approval at the Company's 1996 annual meeting of
stockholders.
<PAGE> 2
4. JOINING THE PLAN:
Any eligible employees' participation in the Plan shall be
effective on the seventh working day after the employee has completed, signed
and returned to the Corporation, or one of its present or future subsidiaries, a
Stock Purchase Plan Application and Payroll Deduction Authority form indicating
his acceptance and agreement to the Plan.
Membership of any employee in the Plan is entirely voluntary.
5. MEMBER'S CONTRIBUTIONS:
Each member shall elect to make contributions by monthly
payroll deduction of two percent (2%), five percent (5%), eight percent (8%) or
ten percent (10%) of such member's monthly gross pay.
Subject to the maximum described above, a member may elect in
writing to increase or decrease his rate of contribution; such change will
become effective the first day of the bi-annual period following receipt by the
Corporation or one of its present or future subsidiaries of such written
election.
The amount of each member's monthly contribution shall be held
by the Corporation in a special account and such contributions, free of any
obligation of the Corporation to pay interest thereon, shall be credited to such
member's individual account as soon as practicable after each pay day.
No member will be permitted to make contributions for any
period during which he is not receiving pay from the Corporation or one of its
present or future subsidiaries.
6. ISSUANCE OF SHARES:
On the 30th day of June, 1973, and on the last trading day of
each bi-annual period thereafter so long as the Plan shall remain in effect, and
provided the member has not before that date advised the Corporation that he
does not wish shares purchased for his account on that date, the Corporation
shall apply the funds then in the member's account to the purchase of authorized
but unissued shares of its capital stock in units of one share or multiples
thereof. Until the Corporation's shares are actively traded, the Board of
Directors shall set, on or before the first day of each bi-annual period, the
cost to each member for shares purchased for members' accounts on the last day
of such bi-annual period. The cost as determined by the Board of
-2-
<PAGE> 3
Directors shall be communicated to the members on or before the first day of
each bi-annual period. The cost shall be no less than eighty-five percent (85%)
and no more than one hundred percent (100%) of the fair market value of the
shares as determined by the Board of Directors.
When the Corporation's shares are actively traded, the cost to
each member for the shares so purchased shall be no less than eighty-five
percent (85%) and no more than one hundred percent (100%) of the lower of:
1. The mean between the average bid and ask prices of the
stock in the over-the-counter market as quoted on the National Association of
Security Dealers Automatic Quotation System (NASDAQ) or as reported by the
National Quotation Bureau, Inc., or if the stock is traded on one or more
securities exchanges, the average of the closing prices on all such exchanges,
on the first trading day of the bi-annual period;
2. The mean between the average bid and ask prices of the
stock in the over-the-counter market as quoted on the National Association of
Securities Dealers Automatic Quotation System (NASDAQ) or as reported by
National Quotation Bureau, Inc., or if the stock is traded on one or more
securities exchanges, the average of the closing prices on all such exchanges,
on the last trading day of the bi-annual period.
The Board of Directors shall set, on or before the first
trading day of each bi-annual period, the percentage factors to be used for the
bi-annual period about to commence. The percentage factors as decided upon by
the Board of Directors shall be communicated to the members on or before the
first trading day of each bi-annual period.
Any moneys remaining in such member's account equaling less
than the sum required to purchase one share, or moneys remaining in such
member's account by reason of application of the provisions of the next
paragraph hereof, shall be held in such member's account for use during the next
bi-annual period. Any moneys remaining in such member's account by reason of his
prior election not to purchase shares in a given bi-annual period as aforesaid
and any moneys remaining in such member's account upon termination of the
member's membership in the Plan shall be promptly returned to the member. The
Corporation shall, as expeditiously as possible after the last day of each
December and June issue to the member entitled thereto the certificates
evidencing the shares issuable to him as provided herein.
-3-
<PAGE> 4
If the number of shares members desire to purchase at the end
of any bi-annual period exceeds the number of shares then available under the
Plan, the shares available shall be allocated among such members in proportion
to their contributions during the bi-annual period.
7. TERMINATION OF MEMBERSHIP:
A member's membership in the Plan will be terminated when the
member (a) voluntarily elects to withdraw his entire account, (b) resigns or is
discharged from the Corporation or one of its present or future subsidiaries,
(c) dies, or (d) does not receive pay from the Corporation or one of its present
or future subsidiaries for twelve (12) consecutive months, unless this period is
due to illness, injury or for other reasons approved by the persons or person
appointed by the Corporation to administer the Plan as provided in Paragraph 10
below. Upon termination of membership, the terminated member shall not be
entitled to rejoin the Plan until the first day of the bi-annual period
immediately following the bi-annual period in which the termination occurs. Upon
termination of membership, the member shall be entitled to the amount of his
individual account within fifteen (15) days after the termination.
8. BENEFICIARY:
Each member shall designate a beneficiary or beneficiaries and
may, without their consent, change his designator. Any designation shall be
effective only after it is received by the Corporation and shall become
effective as of the date it is signed and shall be controlling over any
disposition by will or otherwise.
Upon the death of a member his account shall be paid or
distributed to the beneficiary or beneficiaries designated by him, or in the
absence of such designation, to the executor or administrator of his estate, and
in either event the Corporation shall not be under any further liability to
anyone. If more than one beneficiary is designated, then each beneficiary shall
receive an equal portion of the account unless the member indicates to the
contrary in his designation, provided that the Corporation may in its sole
discretion make distributions in such form as will avoid the creation of
fractional shares.
9. ADMINISTRATION OF THE PLAN:
The Plan shall be administered by such officers or other
employees of the Corporation as the Corporation may from time to time select,
and the persons so selected shall be responsible for the administration of the
Plan. All costs
-4-
<PAGE> 5
and expenses incurred in administering the Plan shall be paid by the
Corporation. Any taxes applicable to the member's account shall be charged or
credited to the member's account by the Corporation.
10. MODIFICATION AND TERMINATION:
The Corporation expects to continue the Plan until such time
as the shares reserved for issuance under the Plan have been sold. The
Corporation reserves, however, the right to amend, alter, or terminate the Plan
in its discretion. Upon termination, each member shall be entitled to the amount
of his individual account within fifteen (15) days after termination.
Appropriate and proportionate adjustments shall be made in the number and class
of shares of stock subject to this Plan, and to the rights granted hereunder and
the prices applicable to such rights, in the event of a stock dividend, stock
split, reverse stock split, recapitalization, reorganization, merger,
consolidation, acquisition, separation, or like change in the capital structure
of the Corporation.
11. ASSIGNABILITY OF RIGHTS:
No rights of any employee under this Plan shall be assigned by
him, by operation of law, or otherwise, except to the extent that he is
permitted to designate a beneficiary or beneficiaries as hereinabove provided,
and except to the extent permitted by the law of descent and distribution if no
such beneficiary be designated. Prior to the issuance of any shares under this
Plan, each employee member shall be required to sign a statement as set forth in
Exhibit "A" attached hereto and incorporated herein.
12. PARTICIPATION IN OTHER PLANS:
Nothing herein contained shall affect an employee's right to
participate in and receive benefits under and in accordance with the then
current provisions of any pension, insurance, or other employee welfare plan or
program of the Corporation.
13. APPLICABLE LAW:
The interpretation, performance, and enforcement of this Plan
shall be governed by the laws of the State of California.
-5-
<PAGE> 6
14. EFFECTIVE DATE AND APPROVALS:
This Plan as originally approved by the shareholders of the
Corporation on July 25, 1972 covered 16,000 shares. The Plan was increased by
the following:
<TABLE>
<CAPTION>
Number
Year Transaction of Shares
- ---- ----------- ---------
<S> <C> <C>
1972 Original Authorization 16,000
1974 Board of Directors & Stockholder Approval 25,000
1977 Board of Directors & Stockholder Approval 25,000
1978 50% stock dividend 12,658
1979 50% stock dividend 13,338
1980 Board of Directors & Stockholder Approval 50,000
1981 100% stock dividend 47,768
1982 Board of Directors & Stockholder Approval 100,000
1983 50% stock dividend 62,992
1985 Board of Directors & Stockholder Approval 200,000
1988 Board of Directors & Stockholder Approval 200,000
1991 Board of Directors & Stockholder Approval 200,000
1994 Board of Directors & Stockholder Approval 300,000
1996 Board of Directors Approval 400,000
---------
Total 1,652,756
</TABLE>
This Plan was subject to the approval of the California Commissioner of
Corporations. The California Commissioner of Corporations may, from time to
time, impose restrictions and conditions on any shares granted under the Plan.
-6-
<PAGE> 1
EXHIBIT 10.15
CALIFORNIA MICROWAVE, INC.
November 10, 1995
B. Carl Lee
954 Yarmouth Way
San Jose, CA 95120
Dear Carl:
I am pleased to confirm California Microwave, Inc.'s ("CMD")
offer to you to become Vice President and Corporate Controller and an Officer of
the Corporation. In this position you would report directly to me. Your base
salary would be at the rate of $160,000.00 per year, payable bi-weekly and would
be subject to review shortly after the end of CMI's 1996 fiscal year (at the
same time as all other executives in the Company).
For fiscal year 1996, you would be eligible to participate in
CMI's Executive Incentive Program (EIP) with a target bonus of 35% of your base
salary. A copy of the EIP for FY 1996 is enclosed. The Fiscal Year bonus will be
prorated for the year based on the actual time worked.
You would also be eligible to participate in the CMI Executive
Benefit Plan. The Plan is available for any of the uses set forth on the
attached schedule of Executive Benefit options and would provide you with an
additional 7% of your base salary, plus target bonus, for the period of your
employment in fiscal year 1996.
As an employee of California Microwave a fringe benefit
package, including medical, dental and life insurance, would be available to you
and your dependents effective on the first day of employment. Once you meet the
eligibility
<PAGE> 2
requirements, you would also be able to participate in CMI's 401(k) Tax-Deferred
Savings Plan, the Deferred Profit Sharing Plan and the Company's Employee Stock
Purchase Plan. You would be provided with term life insurance coverage valued at
two times your annual base salary.
Upon commencement of your regular full-time employment you
would be granted, subject to approval of the Compensation Committee of the CMI
Board Directors, an option to purchase, at a price equal to the fair market
value on the date of approval by the compensation committee, 30,000 shares of
California Microwave common stock in accordance with CMI's Stock Option Plan.
The option vests 25% per year over the four years on each anniversary date of
your grant.
Company policy grants employees two weeks of vacation annually
for the first five years of employment.
Carl, I look forward to discussing with you these arrangements
and to agree upon your official date as a CMI regular, full-time employee
beginning December 1, 1995.
If the terms of this offer are acceptable to you, please so
indicate by signing in the space provided below, and returning a copy of this
letter to me no later than November 17, 1995.
Sincerely,
CALIFORNIA MICROWAVE, INC.
/s/Garrett E. Pierce
Garrett E. Pierce Agreed:/s/B. Carl Lee
-----------------
Executive Vice President
and Chief Financial Officer Date: November 13, 1995
Attachments: FY 1996 EIP
Executive Benefit Options
<PAGE> 1
EXHIBIT 10.16
CALIFORNIA MICROWAVE, INC.
April 19, 1996
Dennis R. Raney
395 Ano Nuevo, Apt. 204
Sunnyvale, CA 94086
Dear Dennis:
I am pleased to confirm California Microwave, Inc.'s ("CMI") offer to you to
become Executive Vice President and Chief Financial Officer reporting directly
to me. Your base salary would be at the annual rate of $225,000 per year,
payable biweekly. Your base salary would be subject to review shortly after the
end of CMI's 1997 fiscal year (at the same time as all other executives in the
company). For fiscal year 1997 you would be eligible to participate in CMI's
Executive Incentive Program (EIP) with a target bonus of 40% of your base
salary. A copy of CMI's EIP for FY1996's attached; the FY1997 EIP is expected to
be similar.
Upon commencement of your employment, you would be granted options to purchase,
at a price equal to the then fair-market value, 75,000 shares of California
Microwave common stock in accordance with the CMI Stock Option Plan. These
options vest 25% on each anniversary date of your grant over four years. You
would be also be eligible to participate in the CMI Executive Benefit Plan. The
plan would provide you with an additional 8% of your base salary plus target
bonus and is available for any of the uses set forth on the attached schedule.
As an employee of California Microwave, Inc., CMI's fringe benefit package,
including dental and life insurance, would be available to you and your
dependents effective on your first days of employment. A package
<PAGE> 2
summarizing these plans is attached. Once you meet eligibility requirements, you
would also be able to participate in CMI's 401(k) Tax-Deferred Savings Plan and
the Company's Employee Stock Purchase Plan. You would also be provided with term
life insurance coverage valued at twice your annual base salary. The company
also offers its executives a deferred compensation plan which provides the
option to defer up to 70% of base salary and up to 80% of any bonus. Elections
to defer base salary or bonus would need to be made shortly after commencement
of employment for calendar year 1996.
You would also be eligible for reimbursement of up to $20,000 of household
moving expenses incurred over the next six months from your prior place of
residence in New Jersey to the San Francisco Bay Area. Additionally, if
California Microwave merges with, or is acquired by, another company and you
position would no longer be that of CFO of the combined entities, we are
prepared to continue your base salary and benefits for a period of one year,
should you leave the company. (The details of this latter aspect of your
employment, as we have discussed, will be documented in a separate letter.)
Our offer is subject to formal ratification by the Board of Directors and the
Compensation Committee of the Board at their meeting scheduled for April 25,
1996. If the terms of this offer are acceptable to you, please so indicate by
signing in the space provided below and returning a copy to me. This offer will
remain open until April 22, 1996.
Dennis, I look forward to finalizing these arrangements and establishing the
date you can join us. The experience and drive you would bring to our senior
management team as CFO is a logical career move for you that would also foster
the establishment of an exciting, long-term partnership. Accordingly, I am
<PAGE> 3
convinced that your contribution to the success of California Microwave would be
mutually rewarding.
Sincerely,
CALIFORNIA MICROWAVE, INC.
/s/ Philip F. Otto
Philip F. Otto
Chairman and Chief Executive Officer
PFO:ed
enclosures
AGREED:
/s/ Dennis R. Raney April 21, 1996
-------------------------------------
Signature Date
on or about May 11, 1996
------------------------------------
Start Date
<PAGE> 1
EXHIBIT 10.17
CREDIT AGREEMENT
DATED AS OF DECEMBER 21, 1995
AMONG
CALIFORNIA MICROWAVE, INC.,
BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION,
AS AGENT, SWINGLINE BANK
AND
LETTER OF CREDIT ISSUING BANK
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BA SECURITIES, INC.
<PAGE> 2
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS.......................... 1
1.01 Certain Defined Terms......................................... 1
1.02 Other Interpretive Provisions................................. 20
1.03 Accounting Principles......................................... 21
ARTICLE II
THE CREDITS.......................... 21
2.01 Amounts and Terms of Commitments.............................. 21
(a) The Revolving Credit............................. 21
(b) The Swingline Subfacility........................ 22
2.02 Loan Accounts................................................. 22
2.03 Procedure for Borrowing....................................... 23
2.04 Conversion and Continuation Elections......................... 24
2.05 Voluntary Termination or Reduction of Commitments............. 26
2.06 Optional Prepayments.......................................... 26
2.07 Cash Collateralization and Mandatory Prepayments of
Loans.................................................... 26
2.08 Repayment..................................................... 27
2.09 Interest...................................................... 27
2.10 Fees ......................................................... 28
(a) Arrangement, Agency Fees............................ 28
(b) Commitment Fees..................................... 28
2.11 Computation of Fees and Interest.............................. 29
2.12 Payments by the Company....................................... 30
2.13 Payments by the Banks to the Agent............................ 30
2.14 Sharing of Payments, Etc...................................... 31
ARTICLE III
THE LETTERS OF CREDIT..................... 32
3.01 The Letter of Credit Subfacility.............................. 32
3.02 Issuance, Amendment and Renewal of Letters of Credit.......... 33
3.03 Existing BofA Letters of Credit; Risk Participations,
Drawings and Reimbursements.............................. 35
3.04 Repayment of Participations................................... 37
3.05 Role of the Issuing Bank...................................... 38
3.06 Obligations Absolute.......................................... 39
3.07 Cash Collateral Pledge........................................ 40
3.08 Letter of Credit Fees......................................... 40
3.09 Uniform Customs and Practice.................................. 41
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY ............ 41
4.01 Taxes......................................................... 41
i
<PAGE> 3
Section Page
4.02 Illegality....................................................... 42
4.03 Increased Costs and Reduction of Return.......................... 43
4.04 Funding Losses................................................... 44
4.05 Inability to Determine Rates..................................... 44
4.06 Reserves on Offshore Rate Loans.................................. 45
4.07 Certificates of Banks............................................ 45
4.08 Survival......................................................... 45
ARTICLE V
CONDITIONS PRECEDENT........ ..................... 45
5.01 Conditions of Initial Credit Extensions.......................... 45
(a) Credit Agreement.................................... 46
(b) Resolutions; Incumbency............................. 46
(c) Organization Documents; Good Standing............... 46
(d) Legal Opinions...................................... 46
(e) Termination of Existing Credit Facility............. 46
(f) Payment of Fees..................................... 46
(g) Certificate......................................... 47
(h) Other Documents..................................... 47
5.02 Conditions to All Credit Extensions.............................. 47
(a) Notice, Application................................. 47
(b) Continuation of Representations and Warranties...... 47
(c) No Existing Default................................. 48
ARTICLE VI
REPRESENTATIONS AND WARRANTIES... ................... 48
6.01 Corporate Existence and Power.................................... 48
6.02 Corporate Authorization; No Contravention........................ 48
6.03 Governmental Authorization....................................... 49
6.04 Binding Effect................................................... 49
6.05 Litigation....................................................... 49
6.06 No Default....................................................... 49
6.07 ERISA Compliance................................................. 50
6.08 Use of Proceeds; Margin Regulations.............................. 50
6.09 Title to Properties.............................................. 50
6.10 Taxes............................................................ 51
6.11 Financial Condition.............................................. 51
6.12 Environmental Matters............................................ 51
6.13 Regulated Entities............................................... 52
6.14 No Burdensome Restrictions....................................... 52
6.15 Copyrights, Patents, Trademarks and Licenses, etc................ 52
6.16 Subsidiaries..................................................... 53
6.17 Insurance........................................................ 53
6.18 Swap Obligations................................................. 53
6.19 Solvency......................................................... 53
6.20 Labor Relations.................................................. 53
6.21 Full Disclosure.................................................. 53
ii
<PAGE> 4
Section Page
ARTICLE VII
AFFIRMATIVE COVENANTS...................... 54
7.01 Financial Statements.......................................... 54
7.02 Certificates; Other Information............................... 55
7.03 Notices....................................................... 55
7.04 Preservation of Corporate Existence, Etc...................... 56
7.05 Maintenance of Property....................................... 57
7.06 Insurance..................................................... 57
7.07 Payment of Obligations........................................ 57
7.08 Compliance with Laws.......................................... 58
7.09 Compliance with ERISA......................................... 58
7.10 Inspection of Property and Books and Records.................. 58
7.11 Environmental Laws............................................ 58
7.12 Use of Proceeds............................................... 59
7.13 Solvency...................................................... 59
7.14 Further Assurances............................................ 59
ARTICLE VIII
NEGATIVE COVENANTS.................... 59
8.01 Limitation on Liens........................................... 59
8.02 Disposition of Assets......................................... 61
8.03 Consolidations and Mergers.................................... 62
8.04 Loans and Investments......................................... 63
8.05 Transactions with Affiliates.................................. 63
8.06 Use of Proceeds............................................... 63
8.07 Contingent Obligations........................................ 64
8.08 Joint Ventures................................................ 64
8.09 Compliance with ERISA......................................... 64
8.10 Restricted Payments........................................... 65
8.11 Change in Business............................................ 65
8.12 Quick Ratio................................................... 65
8.13 Leverage Ratio................................................ 65
8.14 Adjusted Tangible Net Worth................................... 65
8.15 Funded Debt to EBITDA Ratio................................... 65
8.16 Consecutive Quarterly Losses.................................. 65
8.17 Change In Structure........................................... 65
8.18 Accounting Changes............................................ 66
8.19 Limitations on Subordinated Indebtedness...................... 66
ARTICLE IX
EVENTS OF DEFAULT...................... 66
9.01 Event of Default.............................................. 66
(a) Non-Payment...................................... 66
(b) Representation or Warranty....................... 66
(c) Specific Defaults................................ 67
(d) Other Defaults................................... 67
iii
<PAGE> 5
Section Page
(e) Cross-Default................................... 67
(f) Insolvency; Voluntary Proceedings............... 67
(g) Involuntary Proceedings......................... 67
(h) ERISA........................................... 68
(i) Monetary Judgments.............................. 68
(j) Non-Monetary Judgments.......................... 68
(k) Change of Control............................... 68
(l) Receivables Insurance Coverage.................. 68
9.02 Remedies................................................ 68
9.03 Swingline Loans......................................... 69
9.04 Rights Not Exclusive.................................... 69
ARTICLE X
THE AGENT.......................... 69
10.01 Appointment and Authorization; "Agent"...................... 69
10.02 Delegation of Duties........................................ 70
10.03 Liability of Agent.......................................... 70
10.04 Reliance by Agent........................................... 71
10.05 Notice of Default........................................... 71
10.06 Credit Decision............................................. 72
10.07 Indemnification of Agent.................................... 72
10.08 Agent in Individual Capacity................................ 73
10.09 Successor Agent............................................. 73
10.10 Withholding Tax............................................. 74
ARTICLE XI
MISCELLANEOUS....... ................. 75
11.01 Amendments and Waivers...................................... 75
11.02 Notices..................................................... 76
11.03 No Waiver; Cumulative Remedies.............................. 77
11.04 Costs and Expenses.......................................... 77
11.05 Company Indemnification..................................... 78
11.06 Payments Set Aside.......................................... 78
11.07 Successors and Assigns...................................... 79
11.08 Assignments, Participations, etc............................ 79
11.09 Confidentiality............................................. 81
11.10 Set-off..................................................... 81
11.11 Automatic Debits of Fees.................................... 82
11.12 Notification of Addresses, Lending Offices, Etc............. 82
11.13 Counterparts................................................ 82
11.14 Severability................................................ 82
11.15 No Third Parties Benefited.................................. 82
11.16 Governing Law and Jurisdiction.............................. 83
11.17 Waiver of Jury Trial........................................ 83
11.18 Entire Agreement............................................ 83
iv
<PAGE> 6
SCHEDULES
Schedule 2.01 Commitments
Schedule 3.03 Existing BofA Letters of Credit
Schedule 6.05 Litigation
Schedule 6.07 ERISA
Schedule 6.11 Material Obligations Not on Balance Sheet
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Minority Interests
Schedule 6.17 Insurance Matters
Schedule 8.01 Permitted Liens
Schedule 8.07 Contingent Obligations
Schedule 8.19 Permitted Subordinated Indebtedness
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Factoring Agreement
v
<PAGE> 7
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of December 21, 1995, among
California Microwave, Inc., a Delaware corporation (the "Company"), the several
financial institutions from time to time party to this Agreement (collectively,
the "Banks"; individually, a "Bank"), and Bank of America National Trust and
Savings Association, as letter of credit issuing bank and as agent for the
Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility with a letter of credit subfacility and a swingline
subfacility upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the
following meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Adjusted Tangible Net Worth" means Tangible Net Worth plus
the amount of all subordinated liabilities.
"Adjusted Total Liabilities" means, as of any date of
determination, all amounts which, without duplication, would, in
accordance with GAAP, be included under liabilities on a consolidated
balance sheet of the Company and its Subsidiaries, including all
Indebtedness of the Company and its Subsidiaries, less subordinated
debt plus all Contingent Obligations of the Company and its
Subsidiaries excluding obligations in an amount up to $20,000,000 in
respect of outstanding Surety Instruments issued for the account of the
Company or its Subsidiaries or
1
<PAGE> 8
as to which the Company or its Subsidiaries is liable for
reimbursement of drawings but including the Letters of
Credit.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 10.09 and any successor letter of credit issuing
bank hereunder, together with their respective Affiliates (including,
in the case of BofA, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 11.02 or such other address as the Agent may from
time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means the interest rate margin
specified in subsection 2.09(a).
"Arranger" means BA Securities, Inc., a Delaware
corporation.
"Assignee" has the meaning specified in subsection
11.08(a).
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BofA, including in its
capacity as Swingline Bank and as Issuing Bank; for purposes of
clarification only, to the extent that BofA may have any rights or
obligations in addition to those of the Banks due to its status as
Swingline Bank or Issuing Bank, its status as such will be specifically
referenced.
2
<PAGE> 9
"Bankruptcy Code" means the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.)
Any change in the reference rate announced by BofA
shall take effect at the opening of business on the day specified in
the public announcement of such change.
"Base Rate Loan" means a Revolving Loan, a Swingline Loan or
an L/C Advance, that bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans or Swingline Loans of the same Type made to the Company
on the same day by the Banks under Article II, and, other than in the
case of Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco
are authorized or required by law to close and, if the applicable
Business Day relates to any Offshore Rate Loan, means such a day on
which dealings are carried on in the applicable offshore dollar
interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Cash Collateralize" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent, the Issuing Bank
and the Banks, as collateral for the L/C Obligations, cash or deposit
account balances pursuant to
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<PAGE> 10
documentation in form and substance satisfactory to the Agent and the
Issuing Bank (which documents are hereby consented to by the Banks).
Derivatives of such term shall have corresponding meaning.
"Cash Equivalents" means:
(a) securities issued or fully guaranteed or insured by the
United States Government or any agency thereof and backed by the full
faith and credit of the United States having maturities of not more
than six months from the date of acquisition;
(b) certificates of deposit, time deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or
bankers' acceptances, having in each case a tenor of not more than six
months, issued by the Bank, or by any U.S. commercial bank or any
branch or agency of a non-U.S. bank licensed to conduct business in the
U.S. having combined capital and surplus of not less than $100,000,000
whose short term securities are rated at least A-1 by Standard & Poor's
Corporation and P-1 by Moody's Investors Service, Inc.;
(c) commercial paper of an issuer rated at least A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Service Inc.
and in either case having a tenor of not more than six months.
"Change of Control" means (a) any "person" (as such term is
used in subsections 13(d) and 14(d) of the Exchange Act) on or after
the Closing Date, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing 50% or more of the combined voting power of
the Company's then-outstanding voting securities, or (b) the existing
directors for any reason cease to constitute a majority of the
Company's board of directors. "Existing directors" means (x)
individuals constituting the Company's board of directors on the
Closing Date, and (y) any subsequent director whose election by the
board of directors or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds of the
directors then in office, which directors either were directors on the
Closing Date or whose election or nomination for election was
previously so approved.
"Closing Date" means the date on which all conditions
precedent set forth in Section 5.01 are satisfied or waived by all
Banks (or, in the case of subsection 5.01(e), waived by the Person
entitled to receive such payment).
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<PAGE> 11
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning
specified in Section 2.01.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit C.
"Consolidated Current Assets" means, as of any date of
determination, all amounts which would, in accordance with GAAP, be
included under current assets on a consolidated balance sheet of the
Company and its Subsidiaries; provided, however, that such amounts
shall not include (a) any amounts for any Indebtedness owing by an
Affiliate of the Company, unless such Indebtedness arose in connection
with the sale of goods or other property in the ordinary course of
business and would otherwise constitute current assets in conformity
with GAAP, (b) the equity value of any shares of stock issued by an
Affiliate of the Company, (c) the cash surrender value of any life
insurance policy or (d) any consolidated intangibles.
"Consolidated Current Liabilities" means, as of any date of
determination, all amounts which would, in accordance with GAAP, be
included under current liabilities on a consolidated balance sheet of
the Company and its Subsidiaries, but in any event including amounts of
(a) all Indebtedness of any such Person payable on demand or, at the
option of the Person to whom the Indebtedness is owed, not more than
twelve months after such date, (b) any payments in respect of any
Indebtedness of any such Person (whether installment, serial maturity
or sinking fund payments or otherwise) required to be made not more
than twelve months after that date, (c) all reserves in respect of
liabilities or Indebtedness payable on demand or, at the option of the
Person to whom the Indebtedness is owed, not more than twelve months
after that date, the validity of which is contested at that date, and
(d) all Revolving Loans.
"Consolidated Net Interest Expense" means, for any period,
gross consolidated interest expense for the period (including all
commissions, discounts, fees and other charges in connection with
standby letters of credit and similar instruments) for the Company and
its Subsidiaries, plus (a) the portion of the upfront costs and
expenses for Rate Contracts (to the extent not included in gross
interest expense) fairly allocated to such Rate Contracts as expenses
for such period, less (b) interest income for that period and Rate
Contracts payments received; as determined in accordance with GAAP.
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<PAGE> 12
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency
or any balance sheet item, level of income or financial condition of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument (other than any Letter of Credit) issued for the account of
that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property,
or for such services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or tendered, or
such services are ever performed or tendered, or (d) in respect of any
Rate Contract. The amount of any Contingent Obligation shall, in the
case of Guaranty Obligations, be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and in the
case of other Contingent Obligations other than in respect of Rate
Contracts, shall be equal to the maximum reasonably anticipated
liability in respect thereof and, in the case of Contingent Obligations
in respect of Rate Contracts, shall be equal to the Swap Termination
Value.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"Controlled Group" means the Company and all Persons
(whether or not incorporated) under common control or
6
<PAGE> 13
treated as a single employer with the Company pursuant to Section
414(b), (c), (m) or (o) of the Code.
"Conversion/Continuation Date" means any date on which, under
Section 2.04, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any
Revolving Loans or Swingline Loans hereunder, and (b) the Issuance of
any Letters of Credit hereunder (including the Existing BofA Letters of
Credit).
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of
the United States.
"EBITDA" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) the net income (or net loss) for such period plus
(b) all amounts treated as expenses for depreciation, and interest and
the amortization of intangibles of any kind to the extent included in
the determination of such net income (or loss), plus (c) all accrued
taxes on or measured by income to the extent included in the
determination of such net income (or loss); provided, however, that net
income (or loss) shall be computed for these purposes without giving
effect to extraordinary losses or extraordinary gains.
"Effective Amount" means (i) with respect to any Revolving
Loans or Swingline Loans on any date, the aggregate outstanding
principal amount thereof after giving effect to any Borrowings and
prepayments or repayments of Revolving Loans or Swingline Loans
occurring on such date; and (ii) with respect to any outstanding L/C
Obligations on any date, the amount of such L/C Obligations on such
date after giving effect to any Issuances of Letters of Credit
occurring on such date and any other changes in the aggregate amount of
the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing
under Letters of Credit taking effect on such date.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at
7
<PAGE> 14
least $100,000,000; (b) a commercial bank organized under the laws of
any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of
any such country, and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a branch or
agency located in the country in which it is organized or another
country which is also a member of the OECD; and (c) a Person that is
primarily engaged in the business of commercial banking and that is (i)
a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank
is a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.
"Eligible Receivables" means all receivables net of any
allowance for doubtful accounts, as determined in accordance with GAAP.
"Environmental Claims" means all written claims, however
asserted, by any Governmental Authority or other Person alleging
potential liability or responsibility for violation of any
Environmental Law or for release or injury to the environment or threat
to public health, personal injury (including sickness, disease or
death), property damage, natural resources damage, or otherwise
alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution,
civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon (a) the presence, placement,
discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden,
accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from
Property, whether or not owned by the Company, or (b) any other
circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, licenses, authorizations and
permits of, agreements with, and obligations due to, any Governmental
Authorities, in each case relating to environmental, health, safety and
land use matters; including, to the extent relating to the foregoing,
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the
Emergency Planning and Community Right-to-Know Act, the California
Hazardous Waste Control Law, the California Solid Waste Management,
Resource, Recovery and Recycling
8
<PAGE> 15
Act, the California Water Code and the California Health and
Safety Code.
"Environmental Permits" has the meaning specified in
subsection 6.12(b).
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning
specified in the definition of "Offshore Rate".
"Event of Default" means any of the events or
circumstances specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Existing BofA Letters of Credit" means the letters of credit
described in Schedule 3.03.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
9
<PAGE> 16
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published
on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal
funds transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection
2.10(a).
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Funded Debt to EBITDA Ratio" means, as of the last day of
each fiscal quarter, the ratio of (a) the total Indebtedness for
borrowed money, including the Loans, to (b) EBITDA during that and the
prior three fiscal quarters.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings or
similar charges (including, without limitation, net income taxes and
franchise taxes), and all liabilities with respect thereto, imposed by
any jurisdiction on account of amounts payable or paid pursuant to
Section 3.01.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
10
<PAGE> 17
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Hazardous Materials" means all those substances which are
regulated by, or which may form the basis of liability under, any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance, hazardous
material, or toxic substance, or petroleum or petroleum derived
substance or waste.
"Honor Date" has the meaning specified in subsection
3.03(c).
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money including any subordinated debt;
(b) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables
entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to
Surety Instruments; (d) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses; (e) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the
Person (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or
sale of such property); (f) all obligations with respect to capital
leases; (g) all net obligations with respect to Rate Contracts; (h) all
indebtedness referred to in clauses (a) through (g) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness; and (i) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in
Section 11.05.
"Indemnified Person" has the meaning specified in
Section 11.05.
"Independent Auditor" has the meaning specified in
subsection 7.01(a).
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<PAGE> 18
"Insolvency Proceeding" means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to such
Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter and each date such Base Rate Loan is converted into
another Type of Loan, provided, however, that if any Interest Period
for an Offshore Rate Loan exceeds three months, each date that falls
three months after the beginning of such Interest Period and each
Interest Payment Date that falls thereafter are also Interest Payment
Dates.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its Notice
of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period for any Loan shall
extend beyond September 30, 1998.
"Investments" has the meaning specified in Section
8.04.
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<PAGE> 19
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in subsection
3.01(a).
"Issue" means, with respect to any Letter of Credit, to
incorporate the Existing BofA Letters of Credit into this Agreement, or
to issue or to extend the expiry of, or to renew or increase the amount
of, such Letter of Credit; and the terms "Issued," "Issuing" and
"Issuance" have corresponding meanings.
"Issuing Bank" means BofA in its capacity as issuer of one or
more Letters of Credit hereunder, together with any replacement letter
of credit issuer arising under subsection 10.01(b) or Section 10.09.
"Joint Venture" means a single-purpose corporation,
partnership, limited liability company, joint venture or other similar
legal arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any of
its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for
amendment of outstanding standby letters of credit as shall at any time
be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of
standby letters of credit as shall at any time be in use at the Issuing
Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Revolving Loans
or Swingline Loans under subsection 3.03(c).
"L/C Commitment" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to participate in,
Letters of Credit (including the Existing BofA Letters of Credit) from
time to time Issued or outstanding under Article III, in an aggregate
amount not to exceed on any date the amount of $20,000,000, as the same
shall be reduced as a result of a reduction in the L/C
13
<PAGE> 20
Commitment pursuant to Section 2.05; provided that the aggregate amount
of any Letters of Credit outstanding which may be drawn in support of
the performance of financial obligations shall not at any time exceed
$5,000,000; and provided further that the L/C Commitment is a part of
the combined Commitments, rather than a separate, independent
commitment.
"L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Letters of
Credit, including all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.02, or such other office or offices as such Bank may from time to
time notify the Company and the Agent.
"Letters of Credit" means the Existing BofA Letters of Credit
and any letters of credit Issued by the Issuing Bank pursuant to
Article III.
"Leverage Ratio" means, with respect to any period, the ratio
(determined on a consolidated basis) of Adjusted Total Liabilities to
Adjusted Tangible Net Worth for that period.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as
debtor, under the Uniform Commercial Code or any comparable law) and
any contingent or other agreement to provide any of the foregoing, but
not including the interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Bank to the Company
under Article II or Article III in the form of a Revolving Loan,
Swingline Loan or L/C Advance.
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<PAGE> 21
"Loan Documents" means this Agreement, any Notes, the Fee
Letters, the L/C-Related Documents, and all other documents delivered
to the Agent or any Bank in connection herewith.
"Majority Banks" means at any time at least two Banks then
holding in excess of 55% of the then aggregate unpaid principal amount
of the Loans, or, if no such principal amount is then outstanding, at
least two Banks then having in excess of 55% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) of the Company or the
Company and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Company to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability of
any Loan Document.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"Note" means a promissory note executed by the Company in
favor of a Bank pursuant to subsection 2.02(b), in substantially the
form of Exhibit F.
"Notice of Borrowing" means a notice in substantially
the form of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Company to any Bank, the Agent, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter
arising.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Agent as follows:
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<PAGE> 22
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect
on such day (whether or not applicable to any Bank) under
regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum
determined by the Agent as the rate at which dollar deposits
in the approximate amount of BofA's Offshore Rate Loan for
such Interest Period would be offered by BofA's Grand Cayman
Branch, Grand Cayman B.W.I. (or such other office as may be
designated for such purpose by BofA), to major banks in the
offshore dollar interbank market at their request at
approximately 11:00 a.m. (New York City time) one Business Day
prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as
to all Offshore Rate Loans then outstanding as of the
effective date of any change in the Eurodollar Reserve
Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"Other Taxes" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection
11.08(d).
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<PAGE> 23
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section
8.01.
"Permitted Subordinated Indebtedness" has the meaning
specified in Section 8.19 which is listed on Schedule 8.19.
"Permitted Swap Obligations" means all obligations (contingent
or otherwise) of the Company or any Subsidiary existing or arising
under Rate Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets
held by such Person, or changes in the value of securities issued by
such Person in conjunction with a securities repurchase program not
otherwise prohibited hereunder, and not for purposes of speculation or
taking a "market view;" (b) such Rate Contracts do not contain (i) any
provision ("walk-away" provision) exonerating the non-defaulting party
from its obligation to make payments on outstanding transactions to the
defaulting party, or (ii) any provision creating or permitting the
declaration of an event of default, termination event or similar event
upon the occurrence of an Event of Default hereunder.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Property" means any estate or interest in any kind of
property or asset, whether real, personal or mixed, and whether
tangible or intangible.
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<PAGE> 24
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"Quick Ratio" means the ratio (determined on a consolidated
basis) of (a) cash plus Cash Equivalents plus the amount of Eligible
Receivables, to (b) Consolidated Current Liabilities.
"Rate Contracts" means interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance,
currency spot and forward contracts and other agreements or
arrangements designed to provide protection against fluctuations in
interest or currency exchange rates.
"Reportable Event" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of
the Company, or any other officer having substantially the same
authority and responsibility.
"Revolving Loan" has the meaning specified in
subsection 2.01(a).
"Revolving Termination Date" means the earlier to occur
of:
(a) September 30, 1998; and
(b) the date on which the Commitments terminate
in accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its
principal functions.
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<PAGE> 25
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Termination Value" means, in respect of any one or more
Rate Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Rate Contracts, (a) for
any date on or after the date such Rate Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced
in clause (a) the amount(s) determined as the mark-to-market value(s)
for such Rate Contracts, as determined based upon one or more
mid-market or other readily available quotations provided by any
recognized dealer in such Rate Contracts (which may include any Bank).
"Swingline Bank" means BofA or any successor to it in the
capacity of Swingline Bank by way of assignment in accordance with
Section 11.08.
"Swingline Commitment" has the meaning specified in
subsection 2.01(b).
"Swingline Loan" has the meaning specified in
subsection 2.01(b).
"Tangible Net Worth" means, as of the date of determination,
the gross book value of the assets of the Company and its consolidated
Subsidiaries (exclusive of goodwill, licensing agreements, patents,
trademarks, trade names, organization expenses, treasury stock,
unamortized debt discount and premium, deferred charges and other like
intangibles) less all reserves applicable to such tangible assets and
all liabilities (including accrued and deferred income taxes and all
liabilities whether or not by their terms they are subordinated
liabilities).
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with
19
<PAGE> 26
respect thereto, excluding, in the case of each Bank and the Agent,
respectively, taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the laws of
which such Bank or the Agent, as the case may be, is organized or
maintains a lending office.
"Type" means either a Base Rate Loan or an Offshore Rate Loan
and may refer to either Revolving Loans or Swingline Loans.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States
of America.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares required by law) 100% of the
capital stock of each class having ordinary voting power, and 100% of
the capital stock of every other class, in each case, at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
1.02 Other Interpretive Provisions. (a) The meanings of
defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section , Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
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<PAGE> 27
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks by way of
consent, approval or waiver shall be deemed modified by the phrase "in its/their
sole discretion."
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Company and the other parties, and are the products of all parties. Accordingly,
they shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles. (a) Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments.
(a) The Revolving Credit. Each Bank severally agrees, on the
terms and conditions set forth herein, to make loans to the Company (each such
loan, a "Revolving Loan") from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding the amount set forth on
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<PAGE> 28
Schedule 2.01 (such amount as the same may be reduced under Subsection 2.05(a)
or as a result of one or more assignments under Section 11.08, the Bank's
"Commitment", which in the case of the Swingline Bank shall also include the
Swingline Commitment); provided, however, that, after giving effect to any
Borrowing of Revolving Loans and any Borrowing of Swingline Loans, the Effective
Amount of all outstanding Revolving Loans and Swingline Loans and the Effective
Amount of all L/C Obligations, shall not at any time exceed the combined
Commitments; and provided further, that the Effective Amount of the Revolving
Loans of any Bank (and the Effective Amount of all outstanding Swingline Loans
in the case of Swingline Bank) plus the participation of such Bank in the
Effective Amount of all L/C Obligations shall not at any time exceed such Bank's
Commitment. Within the limits of each Bank's Commitment, and subject to the
other terms and conditions hereof, the Company may borrow under this subsection
2.01(a), prepay under Section 2.06 and reborrow under this subsection 2.01(a).
(b) The Swingline Subfacility. Subject to the terms and
conditions hereof, the Swingline Bank agrees (i) to make a portion of its
Commitment available to the Company by making swingline loans (each such loan, a
"Swingline Loan") to the Company on any Business Day during the period from the
Closing Date to the Revolving Termination Date in accordance with the procedures
set forth in this subsection 2.01(b), Subsection 2.03(b) and Section 3.02 in an
aggregate principal amount at any one time outstanding not to exceed Two Million
Dollars ($2,000,000), (the amount of such commitment of the Swingline Bank to
make Swingline Loans to the Company pursuant to this subsection 2.01(b), as the
same shall be reduced pursuant to subsection 2.05(b) or as a result of any
assignment pursuant to Section 11.08, the Swingline Bank's "Swingline
Commitment"); provided, that at no time shall (i) the sum of the Effective
Amount of all Swingline Loans plus the Effective Amount of all Revolving Loans
plus the Effective Amount of all L/C Obligations exceed the combined
Commitments, or (ii) the Effective Amount of all Swingline Loans exceed the
Swingline Commitment. Within the foregoing limits, and subject to the other
terms and conditions hereof, the Company may borrow under this subsection
2.01(b), prepay pursuant to Section 2.06 and reborrow pursuant to this
subsection 2.01(b).
2.02 Loan Accounts. (a) The Loans made by each Bank and the Letters of
Credit Issued by the Issuing Bank or the Swingline Bank shall be evidenced by
one or more accounts or records maintained by such Bank, Issuing Bank or the
Swingline Bank, as the case may be, in the ordinary course of business. The
accounts or records maintained by the Agent, the Issuing Bank, the Swingline
Bank and each Bank shall be conclusive absent manifest error of the amount of
the Loans made by the Banks to the Company and the Letters of Credit Issued for
the account of the Company, and the interest and payments thereon. Any failure
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<PAGE> 29
so to record or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Company hereunder to pay any amount owing with
respect to the Loans or any Letter of Credit.
(b) Upon the request of any Bank made through the Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Bank shall endorse on the schedules annexed
to its Note(s) the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with respect thereto.
Each such Bank is irrevocably authorized by the Company to endorse its Note(s)
and each Bank's record shall be conclusive absent manifest error; provided,
however, that the failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Note to such Bank.
2.03 Procedure for Borrowing. (a) Each Borrowing of Revolving Loans
shall be made upon the Company's irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing (which notice must be received by the
Agent prior to 9:00 a.m. (San Francisco time)) one Business Day prior to the
requested Borrowing Date, specifying:
(i) the amount of the Borrowing, which shall be
in an aggregate minimum amount of $1,000,000 or any multiple
of $1,000,000 in excess thereof;
(ii) the requested Borrowing Date, which shall be
a Business Day;
(iii) the Type of Loans comprising the Borrowing;
and
(iv) the duration of the Interest Period applicable to
such Loans. If the Notice of Borrowing fails to specify the duration of
the Interest Period for any Borrowing comprised of Offshore Rate Loans,
such Interest Period shall be three months.
The Agent will promptly notify each Bank of its receipt of any Notice
of Borrowing and of the amount of such Bank's Pro Rata Share of that Borrowing.
Each Bank will make the amount of its Pro Rata Share of each Borrowing available
to the Agent for the account of the Company at the Agent's Payment Office by
11:00 a.m. (San Francisco time) on the Borrowing Date requested by the Company
in funds immediately available to the Agent. The proceeds of all such Loans will
then be made available to the Company by the Agent at such office by crediting
the account of the Company on the books of BofA with the aggregate of the
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<PAGE> 30
amounts made available to the Agent by the Banks and in like funds as received
by the Agent.
(b) In the case of Swingline Loans, the Company shall provide
the Agent (with a copy to the Swingline Bank) irrevocable written notice
(including notice via facsimile confirmed immediately by a telephone call) in
the form of a Notice of Borrowing (which notice must be received by the
Swingline Bank and the Agent prior to 12:00 noon (San Francisco time) on the
requested Borrowing date) specifying (i) the amount of the Borrowing, which
shall be in a minimum amount of $100,000, and (ii) the requested Borrowing date,
which shall be a Business Day. Upon receipt of the Notice of Borrowing, the
Swingline Bank will immediately confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the Notice of Borrowing from the
Company and, if not, the Swingline Bank will provide the Agent with a copy
thereof. Unless the Swingline Bank has received notice prior to 2:00 p.m. on
such Borrowing date from the Agent (including at the request of any Bank) (A)
directing the Swingline Bank not to make the requested Swingline Loan as a
result of the limitations set forth in the proviso set forth in the first
sentence of subsection 2.01(b); or (B) that one or more conditions specified in
Article V are not then satisfied; then, subject to the terms and conditions
hereof, the Swingline Bank will, not later than 3:00 p.m. (San Francisco time)
on the Borrowing date specified in such Notice of Borrowing, make the amount of
its Swingline Loan available to the Agent for the account of the Company at the
Agent's Payment Office in funds immediately available to the Agent. The proceeds
of such Swingline Loan will then be made available to the Company by the Agent
crediting the account of the Company on the books of BofA with the aggregate of
the amounts made available to the Agent by the Swingline Bank and in like funds
as received by the Agent. The Agent will notify the Banks on a monthly basis if
any Swingline Loan Borrowings occurred during such month.
(c) After giving effect to any Borrowing, unless the Agent
shall otherwise consent, there may not be more than six different Interest
Periods in effect.
2.04 Conversion and Continuation Elections. (a) The
Company may, upon irrevocable written notice to the Agent in
accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Offshore Rate Loans, to convert any such Loans
(or any part thereof in an amount not less than $1,000,000, or that is
in an integral multiple of $1,000,000 in excess thereof) into Loans of
any other Type; or
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<PAGE> 31
(ii) elect as of the last day of the applicable
Interest Period, to continue any Offshore Rate Loans having Interest
Periods expiring on such day (or any part thereof in an amount not less
than $1,000,000, or that is in an integral multiple of $1,000,000 in
excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Company to continue such Loans as, and convert such Loans into, Offshore
Rate Loans shall terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 9:00 a.m.
(San Francisco time) at least one Business Day in advance of the Conversion/
Continuation Date, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans or if any Default or Event
of Default then exists, the Company shall be deemed to have elected to convert
such Offshore Rate Loans into Base Rate Loans effective as of the expiration
date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of
a Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued as an Offshore Rate Loan.
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<PAGE> 32
(f) After giving effect to any conversion or continuation of
Loans, unless the Agent shall otherwise consent, there may not be more than six
different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitments.
(a) The Company may, upon not less than five Business Days'
prior notice to the Agent, terminate the Commitments, or permanently reduce the
Commitments by an aggregate amount of $5,000,000 or more; unless, after giving
effect thereto and to any prepayments of Loans made on the effective date
thereof, (a) the Effective Amount of all Revolving Loans, Swingline Loans and
L/C Obligations together would exceed the amount of the combined Commitments
then in effect, or (b) the Effective Amount of all L/C Obligations then
outstanding would exceed the L/C Commitment. Once reduced in accordance with
this Section , the Commitments may not be increased. Any reduction of the
Commitments shall be applied to each Bank according to its Pro Rata Share. If
and to the extent specified by the Company in the notice to the Agent, some or
all of the reduction in the combined Commitments may be applied to reduce the
L/C Commitment. All accrued commitment fees to, but not including, the effective
date of any termination of Commitments, shall be paid on the effective date of
such termination.
(b) At no time shall the Swingline Commitment exceed BofA's
Commitment, and any reduction of BofA's Commitment (or that of any successor to
BofA as the Swingline Bank) which reduces it below the then-current amount of
the Swingline Commitment shall result in an automatic corresponding reduction of
the Swingline Commitment to the amount of BofA's Commitment (or that of any
successor to BofA as the Swingline Bank), as so reduced, without any action on
the part of the Swingline Bank.
2.06 Optional Prepayments. Subject to Section 4.04, the Company may, at
any time or from time to time, upon not less than one Business Day's irrevocable
notice to the Agent, ratably prepay Loans in whole or in part, in minimum
amounts of $1,000,000 or any multiple of $1,000,000 in excess thereof or in a
minimum amount of $100,000 in the case of Swingline Borrowings. Such notice of
prepayment shall specify the date and amount of such prepayment and the Type(s)
of Loans to be prepaid. The Agent will promptly notify each Bank of its receipt
of any such notice, and of such Bank's Pro Rata Share of such prepayment. If
such notice is given by the Company, the Company shall make such prepayment and
the payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 4.04.
2.07 Cash Collateralization and Mandatory Prepayments of
Loans. If on any date the Effective Amount of L/C Obligations
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<PAGE> 33
exceeds the L/C Commitment, the Company shall Cash Collateralize on such date
the outstanding Letters of Credit in an amount equal to the excess of the
maximum amount then available to be drawn under the Letters of Credit over the
L/C Commitment. Subject to Section 4.04, if on any date after giving effect to
any Cash Collateralization made on such date pursuant to the preceding sentence,
the Effective Amount of all Revolving Loans and Swingline Loans then outstanding
plus the Effective Amount of all L/C Obligations exceeds the combined
Commitments, the Company shall immediately, and without notice or demand, prepay
the outstanding principal amount of the Revolving Loans, Swingline Loans and L/C
Advances by an amount equal to the applicable excess.
2.08 Repayment. The Company shall repay to the Banks on the Revolving
Termination Date the aggregate principal amount of Loans outstanding on such
date.
2.09 Interest. (a) Each Revolving Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate or the Base Rate (subject to the
Company's right to convert to other Types of Loans under Section 2.04) plus the
Applicable Margin, and each Swingline Loan shall bear interest on the
outstanding principal amount at a rate per annum equal to the Base Rate plus the
Applicable Margin. Applicable Margin shall equal an interest rate per annum
specified in basis points to be added to the Offshore Rate or the Base Rate, as
applicable, which shall be determined on the basis of the Company's Leverage
Ratio in accordance with the following table:
<TABLE>
<CAPTION>
Leverage Ratio Offshore Rate Base Rate
-------------- ------------- ---------
<S> <C> <C>
Less than 0.50 62.5 0
Equal to or more than 0.50
but less than 0.75 75.0 0
Equal to or more than 0.75
but less than 0.90 87.5 0
Equal to or more than 0.90
but less than 1.00 112.5 12.5
</TABLE>
(b) The Applicable Margin shall be determined by the Agent from
time to time based on the Leverage Ratio reported on the Compliance Certificate
delivered by the Company for each fiscal quarter under Section 7.02 concurrently
with the quarterly financial statements to be delivered under subsection
7.01(b). Any change in the Applicable Margin shall take effect on the first
Business Day following receipt of the relevant Compliance Certificate by the
Agent.
(c) Interest on each Revolving Loan and Swingline Loan shall be
paid in arrears on each Interest Payment Date. Interest shall also be paid on
the date of any prepayment of
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Loans under Section 2.06 or 2.07 for the portion of the Loans so prepaid and
upon payment (including prepayment) in full thereof and, during the existence of
any Event of Default, interest shall be paid on demand of the Agent at the
request or with the consent of the Majority Banks.
(d) Notwithstanding subsection (a) of this Section , if any
amount of principal of or interest on any Loan, or any other amount payable
hereunder or under any other Loan Document is not paid in full when due (whether
at stated maturity, by acceleration, demand or otherwise), the Company agrees to
pay interest on such unpaid principal or other amount, from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon to the extent permitted by law, payable on
demand, at a fluctuating rate per annum equal to the Base Rate plus 2%.
(e) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Company shall pay such Bank interest at the highest rate
permitted by applicable law.
2.10 Fees. In addition to certain fees described in Section 3.08:
(a) Arrangement, Agency Fees. The Company shall pay an
arrangement fee to the Agent for the Arranger's own account, and shall pay an
agency fee to the Agent for the Agent's own account, as required by the letter
agreement ("Fee Letter") between the Company and the Arranger and Agent dated
November 3, 1995.
(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Bank a commitment fee on the average daily unused portion of
such Bank's Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the daily utilization for that
quarter as calculated by the Agent, equal to the rate per annum specified in the
table in subsection 2.10(c). For purposes of calculating utilization under this
subsection, the Commitments shall be deemed used only to the extent of the
Effective Amount of Revolving Loans (but not Swingline Loans) plus the Effective
Amount of L/C Obligations then outstanding. Such commitment fee shall accrue
from the Closing Date to the Revolving Termination Date and shall be due and
payable quarterly in arrears on the last Business Day of each calendar quarter
commencing on
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<PAGE> 35
December 31, 1995 through the Revolving Termination Date, with the final payment
to be made on the Revolving Termination Date; provided that, in connection with
any termination of Commitments under Section 2.05, the accrued commitment fee
calculated for the period ending on such date shall also be paid on the date of
such termination. The commitment fees provided in this subsection shall accrue
at all times after the above-mentioned commencement date, including at any time
during which one or more conditions in Article V are not met.
(c) Fee Rates. Commitment fees and letter of credit fees shall
equal a percentage rate per annum specified in basis points which shall be
determined on the basis of the Company's Leverage Ratio in accordance with the
following table:
<TABLE>
<CAPTION>
Commitment Performance Financial
Leverage Ratio Fee L/C Fees L/C Fees
-------------- ---------- ----------- ---------
<S> <C> <C> <C>
Less than 0.50 20.0 31.25 62.5
Equal to or more than
0.50 but less than 0.75 25.0 37.50 75.0
Equal to or more than
0.75 but less than 0.90 30.0 43.75 87.5
Equal to or more than
0.90 37.5 56.25 112.5
</TABLE>
(d) The rates applicable to such fees shall be determined by the
Agent from time to time based on the Leverage Ratio reported on the Compliance
Certificate delivered by the Company for each fiscal quarter under Section 7.02
concurrently with the quarterly financial statements to be delivered under
subsection 7.01(b). Any change in the rates applicable to such fees shall take
effect on the first Business Day following receipt of the relevant Compliance
Certificate by the Agent.
2.11 Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). Interest
and fees shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the
Agent shall be conclusive and binding on the Company and the
Banks in the absence of manifest error.
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<PAGE> 36
2.12 Payments by the Company. (a) All payments to be made by the Company
shall be made without set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the
Agent for the account of the Banks at the Agent's Payment Office, and shall be
made in dollars and in immediately available funds, no later than 11:00 a.m.
(San Francisco time) on the date specified herein. The Agent will promptly
distribute to each Bank its Pro Rata Share (or other applicable share as
expressly provided herein) of such payment in like funds as received. Any
payment received by the Agent later than 11:00 a.m. (San Francisco time) shall
be deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to
the date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such Bank
until the date repaid.
2.13 Payments by the Banks to the Agent. (a) Unless the Agent receives
notice from a Bank on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one Business Day prior to the date of
such Borrowing, that such Bank will not make available as and when required
hereunder to the Agent for the account of the Company the amount of that Bank's
Pro Rata Share of the Borrowing, the Agent may assume that each Bank has made
such amount available to the Agent in immediately available funds on the
Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Company on such date a corresponding
amount. If and to the extent any Bank shall not have made its full amount
available to the Agent in immediately available funds and the Agent in such
circumstances has made available to the Company such amount, that Bank shall on
the Business Day following such Borrowing Date make such amount available to the
Agent, together with interest at the Federal
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<PAGE> 37
Funds Rate for each day during such period. A notice of the Agent submitted to
any Bank with respect to amounts owing under this subsection (a) shall be
conclusive, absent manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Bank's Loan on the date of Borrowing
for all purposes of this Agreement. If such amount is not made available to the
Agent on the Business Day following the Borrowing Date, the Agent will notify
the Company of such failure to fund and, upon demand by the Agent, the Company
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing
Date shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.14 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
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<PAGE> 38
ARTICLE III
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility. (a) On the terms and conditions
set forth herein (i) the Issuing Bank agrees, (A) from time to time on any
Business Day during the period from the Closing Date to the Revolving
Termination Date to issue Letters of Credit for the account of the Company, and
to amend or renew Letters of Credit previously issued by it, in accordance with
subsections 3.02(c) and 3.02(d), and (B) to honor drafts under the Letters of
Credit; and (ii) the Banks severally agree to participate in Letters of Credit
Issued for the account of the Company; provided, that the Issuing Bank shall not
be obligated to Issue, and no Bank shall be obligated to participate in, any
Letter of Credit if as of the date of Issuance of such Letter of Credit (the
"Issuance Date") (1) the Effective Amount of all L/C Obligations plus the
Effective Amount of all Revolving Loans and the Effective Amount of all
Swingline Loans exceeds the combined Commitments, (2) the participation of any
Bank in the Effective Amount of all L/C Obligations plus the Effective Amount of
the Revolving Loans of such Bank (plus the Effective Amount of all Swingline
Loans in the case of the Swingline Bank) exceeds such Bank's Commitment, (3) the
Effective Amount of L/C Obligations exceeds the L/C Commitment, or (4) the
Effective Amount of L/C Obligations with respect to Letters of Credit which may
be drawn in support of the performance of financial obligations exceeds
$5,000,000. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Company's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the Company may, during the foregoing period,
obtain Letters of Credit to replace Letters of Credit which have expired or
which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter
of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Bank from Issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit, or request that the Issuing Bank refrain from, the Issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated hereunder) not in effect on
the Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable
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<PAGE> 39
on the Closing Date and which the Issuing Bank in good faith deems
material to it;
(ii) the Issuing Bank has received written notice from
any Bank, the Agent or the Company, on or prior to the Business Day
prior to the requested date of Issuance of such Letter of Credit, that
one or more of the applicable conditions contained in Article V is not
then satisfied;
(iii) the expiry date of any requested Letter of Credit is
more than 365 days after the Revolving Termination Date;
(iv) the expiry date of any requested Letter of Credit is
prior to the maturity date of any financial obligation to be supported
by the requested Letter of Credit;
(v) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to the
Issuing Bank, or the Issuance of a Letter of Credit shall violate any
applicable policies of the Issuing Bank; or
(vi) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person.
3.02 Issuance, Amendment and Renewal of Letters of Credit. (a) Each
Letter of Credit shall be issued upon the irrevocable written request of the
Company received by the Issuing Bank (with a copy sent by the Company to the
Agent) at least four days (or such shorter time as the Issuing Bank may agree in
a particular instance in its sole discretion) prior to the proposed date of
issuance. Each such request for issuance of a Letter of Credit shall be by
facsimile, confirmed immediately in an original writing, in the form of an L/C
Application, and shall specify in form and detail satisfactory to the Issuing
Bank: (i) the proposed date of issuance of the Letter of Credit (which shall be
a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry
date of the Letter of Credit; (iv) the name and address of the beneficiary
thereof; (v) the documents to be presented by the beneficiary of the Letter of
Credit in case of any drawing thereunder; (vi) the full text of any certificate
to be presented by the beneficiary in case of any drawing thereunder; and (vii)
such other matters as the Issuing Bank may require. In addition, if the Letter
of Credit being requested is to be issued in support of the performance of
financial obligations, the request for its Issuance must also include a
certification that the Letter of Credit is a financial Letter of Credit and that
the total of all such financial Letters of Credit outstanding plus the requested
financial Letter of Credit does not exceed $5,000,000.
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<PAGE> 40
(b) At least two Business Days prior to the Issuance of any
Letter of Credit, the Issuing Bank will confirm with the Agent (by telephone or
in writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (A) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under subsection 3.01(a) as a result of the limitations set forth
in clauses (1) through (3) thereof or subsection 3.01(b)(ii); or (B) that one or
more conditions specified in Article V are not then satisfied; then, subject to
the terms and conditions hereof, the Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Company in accordance with the
Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Issuing Bank will, upon the written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least four days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of amendment, amend any Letter of Credit issued by it. Each such
request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall be under no obligation to amend any
Letter of Credit if: (A) the Issuing Bank would have no obligation at such time
to issue such Letter of Credit in its amended form under the terms of this
Agreement; or (B) the beneficiary of any such letter of Credit does not accept
the proposed amendment to the Letter of Credit. The Agent will promptly notify
the Banks of the receipt by it of any L/C Application or L/C Amendment
Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, unless the
Company delivers to the Issuing Bank a written request not to renew a Letter of
Credit (with a copy sent by the Company to the Agent) at least five days (or
such shorter time as the Issuing Bank may agree in a particular instance in its
sole discretion) prior to the scheduled date of notification of nonrenewal, the
Issuing Bank shall be entitled to authorize the automatic renewal of any Letter
of Credit issued by it. Each such request not to renew a Letter of Credit
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<PAGE> 41
shall be made by facsimile, confirmed immediately in an original writing, in the
form of an L/C Amendment Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit not to be renewed;
(ii) the proposed date of notification of nonrenewal of the Letter of Credit
(which shall be a Business Day); (iii) the expiry date of the Letter of Credit;
and (iv) such other matters as the Issuing Bank may require. The Issuing Bank
shall be under no obligation so to renew any Letter of Credit if: (A) the
Issuing Bank would have no obligation at such time to issue or amend such Letter
of Credit in its renewed form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed renewal of
the Letter of Credit. If any outstanding Letter of Credit shall provide that it
shall be automatically renewed unless the beneficiary thereof receives notice
from the Issuing Bank that such Letter of Credit shall not be renewed, and if at
the time of renewal the Issuing Bank would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with this subsection
3.02(e) upon the request of the Company but the Issuing Bank shall not have
received any L/C Amendment Application from the Company with respect to such
renewal or other written direction by the Company with respect thereto, the
Issuing Bank shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Company and the Banks hereby authorize such renewal, and,
accordingly, the Issuing Bank shall be deemed to have received an L/C Amendment
Application from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the
Agent at the direction of the Majority Banks), deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than the Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent, concurrently
or promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment of a Letter of Credit.
3.03 Existing BofA Letters of Credit; Risk Participations, Drawings and
Reimbursements. (a) On and after the Closing Date, those letters of credit
issued by BofA for the account of the Company which are listed in Schedule 3.03
(the "Existing BofA Letters of Credit") shall be deemed for all purposes,
including
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<PAGE> 42
for purposes of the fees to be collected pursuant to subsections 3.08(a) and
3.08(c), and reimbursement of costs and expenses to the extent provided herein,
Letters of Credit outstanding under this Agreement and entitled to the benefits
of this Agreement and the other Loan Documents, and shall be governed by the
applications and agreements pertaining thereto and by this Agreement. Each Bank
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank on the Closing Date a participation in each such
Letter of Credit and each drawing thereunder in an amount equal to the product
of (i) such Bank's Pro Rata Share times (ii) the maximum amount available to be
drawn under such Letter of Credit and the amount of such drawing, respectively.
For purposes of subsection 2.01(a) and subsection 2.10(b), the Existing BofA
Letters of Credit shall be deemed to utilize pro rata the Commitment of each
Bank.
(b) Immediately upon the Issuance of each Letter of Credit in
addition to those described in subsection 3.03(a), each Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Bank a participation in such Letter of Credit and each drawing thereunder in an
amount equal to the product of (i) the Pro Rata Share of such Bank, times (ii)
the maximum amount available to be drawn under such Letter of Credit and the
amount of such drawing, respectively. For purposes of subsection 2.01(a), each
Issuance of a Letter of Credit shall be deemed to utilize the Commitment of each
Bank by an amount equal to the amount of such participation.
(c) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Bank will promptly
notify the Company. The Company shall reimburse the Issuing Bank prior to 10:00
a.m. (San Francisco time), on each date that any amount is paid by the Issuing
Bank under any Letter of Credit (each such date, an "Honor Date"), in an amount
equal to the amount so paid by the Issuing Bank. In the event the Company fails
to reimburse the Issuing Bank for the full amount of any drawing under any
Letter of Credit by 10:00 a.m. (San Francisco time) on the Honor Date, the
Issuing Bank will promptly notify the Agent and the Agent will promptly notify
each Bank thereof, and the Company shall be deemed to have requested that Base
Rate Loans be made by the Banks to be disbursed on the Honor Date under such
Letter of Credit, subject to the amount of the unutilized portion of the
Revolving Commitment and subject to the conditions set forth in Section 5.02.
Any notice given by the Issuing Bank or the Agent pursuant to this subsection
3.03(c) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
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<PAGE> 43
(d) Each Bank shall upon any notice pursuant to subsection 3.03(c)
make available to the Agent for the account of the Issuing Bank an amount in
Dollars and in immediately available funds equal to its Pro Rata Share of the
amount of the drawing, whereupon the participating Banks shall (subject to
subsection 3.03(e)) each be deemed to have made a Revolving Loan consisting of a
Base Rate Loan to the Company in that amount. If any Bank so notified fails to
make available to the Agent for the account of the Issuing Bank the amount of
such Bank's Pro Rata Share of the amount of the drawing by no later than 12:00
noon (San Francisco time) on the Honor Date, then interest shall accrue on such
Bank's obligation to make such payment, from the Honor Date to the date such
Bank makes such payment, at a rate per annum equal to the Federal Funds Rate in
effect from time to time during such period. The Agent will promptly give notice
of the occurrence of the Honor Date, but failure of the Agent to give any such
notice on the Honor Date or in sufficient time to enable any Bank to effect such
payment on such date shall not relieve such Bank from its obligations under this
Section 3.03.
(e) With respect to any unreimbursed drawing that is not converted
into Revolving Loans or Swingline Loans consisting of Base Rate Loans to the
Company in whole or in part, because of the Company's failure to satisfy the
conditions set forth in Section 5.02 or for any other reason, the Company shall
be deemed to have incurred from the Issuing Bank an L/C Borrowing in the amount
of such drawing, which L/C Borrowing shall be due and payable on demand
(together with interest) and shall bear interest at a rate per annum equal to
the Base Rate plus 2% per annum, and each Bank's payment to the Issuing Bank
pursuant to subsection 3.03(d) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Bank in satisfaction of its participation obligation under this Section
3.03.
(f) Each Bank's obligation in accordance with this Agreement to
make the Revolving Loans or L/C Advances, as contemplated by this Section 3.03,
as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be affected
by any circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Issuing Bank, the
Company or any other Person for any reason whatsoever; (ii) the occurrence or
continuance of a Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, however, that each Bank's obligation
to make Revolving Loans under this Section 3.03 is subject to the conditions set
forth in Section 5.02.
3.04 Repayment of Participations. (a) Upon (and only upon) receipt by
the Agent for the account of the Issuing Bank of
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<PAGE> 44
immediately available funds from the Company (i) in reimbursement of any payment
made by the Issuing Bank under the Letter of Credit with respect to which any
Bank has paid the Agent for the account of the Issuing Bank for such Bank's
participation in the Letter of Credit pursuant to Section 3.03 or (ii) in
payment of interest thereon, the Agent will pay to each Bank, in the same funds
as those received by the Agent for the account of the Issuing Bank, the amount
of such Bank's Pro Rata Share of such funds, and the Issuing Bank shall receive
the amount of the Pro Rata Share of such funds of any Bank that did not so pay
the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to
return to the Company, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Company to the Agent for the account of the Issuing Bank pursuant to subsection
3.04(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Bank shall, on demand of the Agent, forthwith
return to the Agent or the Issuing Bank the amount of its Pro Rata Share of any
amounts so returned by the Agent or the Issuing Bank plus interest thereon from
the date such demand is made to the date such amounts are returned by such Bank
to the Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds
Rate in effect from time to time.
3.05 Role of the Issuing Bank. (a) Each Bank and the Company agree
that, in paying any drawing under a Letter of Credit, the Issuing Bank shall not
have any responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be liable to
any Bank for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Banks (including the Majority Banks, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Company's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective
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correspondents, participants or assignees of the Issuing Bank, shall be liable
or responsible for any of the matters described in clauses (i) through (vii) of
Section 3.06; provided, however, anything in such clauses to the contrary
notwithstanding, that the Company may have a claim against the Issuing Bank, and
the Issuing Bank may be liable to the Company, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Company which the Company proves were caused by the Issuing
Bank's willful misconduct or gross negligence or the Issuing Bank's willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing: (i) the Issuing Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; and (ii) the Issuing
Bank shall not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
3.06 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the obligations of the Company
in respect of any Letter of Credit or any other amendment or waiver of
or any consent to departure from all or any of the L/C-Related
Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Company may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or
any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C-Related Documents or any
unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be
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<PAGE> 46
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any
loss or delay in the transmission or otherwise of any document required
in order to make a drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by the Issuing Bank under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of
any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of the Company in respect of any Letter of Credit; or
(vii) any circumstance that might otherwise constitute a
defense available to, or a discharge of, the Company or a guarantor.
3.07 Cash Collateral Pledge. Upon (i) the request of the Agent, (A) if
the Issuing Bank has honored any full or partial drawing request on any Letter
of Credit and such drawing has resulted in an L/C Borrowing hereunder, or (B)
if, as of the Revolving Termination Date, any Letters of Credit may for any
reason remain outstanding and partially or wholly undrawn, or (ii) the
occurrence of the circumstances described in subsection 2.07 requiring the
Company to Cash Collateralize Letters of Credit, then, the Company shall
immediately Cash Collateralize the L/C Obligations in an amount equal to such
L/C Obligations. The Company hereby grants the Agent, for the benefit of the
Agent, the Issuing Bank and the Banks, a security interest in all such cash and
deposit account balances. Cash collateral shall be maintained in blocked,
non-interest bearing deposit accounts at BofA.
3.08 Letter of Credit Fees. (a) The Company shall pay to the Agent for
the account of each of the Banks a letter of credit fee with respect to the
Letters of Credit equal to the percentage rate per annum specified in the table
in subsection 2.10(c) of the average daily maximum amount available to be drawn
of the outstanding Letters of Credit, computed on a quarterly basis in arrears
on the last Business Day of each calendar quarter based upon Letters of Credit
outstanding for that quarter as calculated by the Agent. Such letter of credit
fees shall be due and payable quarterly in arrears on the last
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Business Day of each calendar quarter during which Letters of Credit are
outstanding, commencing on the first such quarterly date to occur after the
Closing Date, through the Revolving Termination Date (or such later date upon
which the outstanding Letters of Credit shall expire), with the final payment to
be made on the Revolving Termination Date (or such later expiration date).
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank equal to that
percentage of the face amount (or increased face amount, as the case may be) of
such Letter of Credit specified in the Fee Letter. Such Letter of Credit
fronting fee shall be due and payable on each date of Issuance of a Letter of
Credit.
(c) The Company shall pay to the Issuing Bank from time to time
on demand the normal presentation, amendment and other processing fees, and
other standard costs and charges, of the Issuing Bank relating to letters of
credit as from time to time in effect.
3.09 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes. (a) Any and all payments by the Company to each Bank or the
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold
any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained
had no such deductions or withholdings been made;
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(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Company shall also pay to each Bank or the Agent
for the account of such Bank, at the time interest is paid, Further
Taxes in the amount that the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank
and the Agent for the full amount of i) Taxes, ii) Other Taxes, and iii) Further
Taxes in the amount that the respective Bank specifies as necessary to preserve
the after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the Company
of Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank
or the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank or
the Agent pursuant to subsection (b) or (c) of this Section, then such Bank
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office or take such reasonable action
consistent with applicable regulatory requirements so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the sole judgment of such Bank is not otherwise disadvantageous to such Bank.
4.02 Illegality. (a) If any Bank determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank
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notifies the Agent and the Company that the circumstances giving rise to such
determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 4.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
(c) Before giving any notice to the Agent under this Section, the
affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Bank, be
illegal or otherwise disadvantageous to the Bank.
4.03 Increased Costs and Reduction of Return. (a) If any Bank
determines that, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance by that Bank
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Bank of agreeing to make or making, funding or maintaining
any Offshore Rate Loans or CD Rate Loans or participating in Letters of Credit,
or, in the case of the Issuing Bank, any increase in the cost to the Issuing
Bank of agreeing to issue, issuing or maintaining any Letter of Credit or of
agreeing to make or making, funding or maintaining any unpaid drawing under any
Letter of Credit, then the Company shall be liable for, and shall from time to
time, upon demand (with a copy of such demand to be sent to the Agent), pay to
the Agent for the account of such Bank, additional amounts as are sufficient to
compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its Lending Office) or any corporation controlling the Bank with
any Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any corporation controlling
the Bank and (taking into consideration
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such Bank's or such corporation's policies with respect to capital adequacy and
such Bank's desired return on capital) determines that the amount of such
capital is increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of such Bank to the Company
through the Agent, the Company shall pay to the Bank, from time to time as
specified by the Bank, additional amounts sufficient to compensate the Bank for
such increase.
4.04 Funding Losses. The Company shall reimburse each Bank and hold
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
(a) the failure of the Company to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a
Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.06;
(d) the prepayment (including pursuant to Section 2.06 or Section
2.07) or other payment (including after acceleration thereof) of an Offshore
Rate Loan on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any Offshore
Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or CD Rate Loans or
from fees payable to terminate the deposits from which such funds were obtained.
For purposes of calculating amounts payable by the Company to the Banks under
this Section and under subsection 4.03(a), (i) each Offshore Rate Loan made by a
Bank (and each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the IBOR used in determining the
Offshore Rate for such Offshore Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Offshore Rate Loan is in fact so funded.
4.05 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or that the Offshore Rate applicable pursuant to subsection 2.09(a) for
any requested Interest Period with respect to a proposed
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Offshore Rate Loan does not adequately and fairly reflect the cost to the Banks
of funding such Loan, the Agent will promptly so notify the Company and each
Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate
Loans hereunder shall be suspended until the Agent revokes such notice in
writing. Upon receipt of such notice, the Company may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by the Company, in the amount specified in the applicable
notice submitted by the Company, but such Loans shall be made, converted or
continued as Base Rate Loans instead of Offshore Rate Loans.
4.06 Reserves on Offshore Rate Loans. The Company shall pay to each
Bank, as long as such Bank shall be required under regulations of the FRB to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional costs on the unpaid principal amount of each Offshore
Rate Loan equal to the actual costs of such reserves allocated to such Loan by
the Bank (as determined by the Bank in good faith, which determination shall be
conclusive), payable on each date on which interest is payable on such Loan,
provided the Company shall have received at least 15 days' prior written notice
(with a copy to the Agent) of such additional interest from the Bank. If a Bank
fails to give notice 15 days prior to the relevant Interest Payment Date, such
additional interest shall be payable 15 days from receipt of such notice.
4.07 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
4.08 Survival. The agreements and obligations of the Company in this
Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Initial Credit Extensions. The obligation of each
Bank to make its initial Credit Extension hereunder is subject to the condition
that the Agent shall have received on or before the Closing Date all of the
following, in form and substance satisfactory to the Agent and each Bank, and in
sufficient copies for each Bank:
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(a) Credit Agreement. This Agreement executed by each party
thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of
the Company authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant Secretary of
the Company; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Company certifying the names and true signatures of the officers of
the Company authorized to execute, deliver and perform, as applicable,
this Agreement, and all other Loan Documents to be delivered by it
hereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the
bylaws of the Company as in effect on the Closing Date, certified by
the Secretary or Assistant Secretary of the Company as of the Closing
Date; and
(ii) a good standing certificate for the Company from the
Secretary of State (or similar, applicable Governmental Authority) of
its state of incorporation and each state where the Company is
qualified to do business as a foreign corporation as of a recent date,
together with a bring-down certificate by facsimile, dated the Closing
Date;
(d) Legal Opinions.
An opinion of Howard Rice Nemerovski Canady Falk & Rabkin,
counsel to the Company and addressed to the Agent and the Banks,
substantially in the form of Exhibit D;
(e) Termination of Existing Credit Facility. The Company shall
have arranged by delivery of an irrevocable Notice of Borrowing to repay all
outstanding amounts under that certain Credit Agreement dated as of May 17,
1993, as amended between the Company and BofA with the proceeds of Loans
hereunder within one (1) day of the Closing Date and such agreement shall
thereafter be terminated.
(f) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of BofA to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of Attorney Costs
as shall constitute BofA's reasonable estimate of Attorney Costs incurred or to
be incurred by it through the closing
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proceedings (provided that such estimate shall not thereafter preclude final
settling of accounts between the Company and BofA); including any such costs,
fees and expenses arising under or referenced in Sections 2.10 and 10.04;
(g) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating:
(i) that the representations and warranties contained
in Article VI are true and correct on and as of such date, as though
made on and as of such date;
(ii) that no Default or Event of Default exists or would
result from the Credit Extension;
(iii) that there has occurred since June 30, 1995; no event
or circumstance that has resulted or could reasonably be expected to
result in a Material Adverse Effect; and
(iv) the Leverage Ratio as of the last day of the
immediately preceding fiscal quarter.
(h) Other Documents. Such other approvals, opinions, documents
or materials as the Agent or any Bank may request.
5.02 Conditions to All Credit Extensions. The obligation of each Bank
to make any Revolving Loan to be made by it (including its initial Revolving
Loan), the obligation of the Swingline Bank to make any Swingline Loan
(including the initial Swingline Loan), and the obligation to continue or
convert any Loan under Section 2.04, as well as the obligation of the Issuing
Bank to Issue any Letter of Credit (including the initial Letter of Credit) is
subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date, Conversion/Continuation Date or Issuance Date:
(a) Notice, Application. The Agent shall have received (with, in
the case of the initial Revolving Loan only, a copy for each Bank) a Notice of
Borrowing or a Notice of Conversion/Continuation, as applicable or in the case
of any Issuance of any Letter of Credit, the Issuing Bank and the Agent shall
have received an L/C Application or L/C Amendment Application, as required under
Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct on and as
of such Borrowing Date or Conversion/Continuation Date or Issuance Date with the
same effect as if made on and as of such Borrowing Date or
Conversion/Continuation Date or Issuance Date; and
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(c) No Existing Default. No Default or Event of Default shall
exist or shall result from such Borrowing or continuation or conversion or
Issuance.
Each Notice of Borrowing, Notice of Conversion/Continuation and L/C Application
or L/C Amendment Application submitted by the Company hereunder shall constitute
a representation and warranty by the Company hereunder, as of the date of each
such notice and as of each Borrowing Date, Conversion/Continuation Date, or
Issuance Date, as applicable, that the conditions in this Section 5.02 are
satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
6.01 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law; except, in each
case referred to in clause (c) or clause (d), to the extent that the failure to
do so could not reasonably be expected to have a Material Adverse Effect.
6.02 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company and its Subsidiaries of this Agreement and each
other Loan Document to which such Person is party, have been duly authorized by
all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's Organization
Documents;
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(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which such Person is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or its property is
subject; or
(c) violate any Requirement of Law.
6.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
6.04 Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.05 Litigation. Except as specifically disclosed in Schedule 6.05,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any other
Loan Document, or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Company or its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order or any order of any nature has been issued by
any court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Loan Document,
or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.06 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default
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had occurred after the Closing Date, create an Event of Default under subsection
9.01(e).
6.07 ERISA Compliance. Schedule 6.07 lists all Plans and except as
specifically disclosed in Schedule 6.07:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such qualification.
The Company and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 7.12
and Section 8.06. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.09 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in
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the ordinary conduct of their respective businesses, except for such defects in
title as could not, individually or in the aggregate, have a Material Adverse
Effect. As of the Closing Date, the property of the Company and its Subsidiaries
is subject to no Liens, other than Permitted Liens.
6.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
6.11 Financial Condition. (a) The audited consolidated financial
statements of the Company and its Subsidiaries dated June 30, 1995, and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein;
(ii) fairly present the financial condition of the Company
and its Subsidiaries as of the date thereof and results of operations
for the period covered thereby; and
(iii) except as specifically disclosed in Schedule 6.11, show
all material indebtedness and other liabilities, direct or contingent,
of the Company and its consolidated Subsidiaries as of the date
thereof, including liabilities for taxes, material commitments and
Contingent Obligations.
(b) Since June 30, 1995, there has been no Material Adverse
Effect.
6.12 Environmental Matters.
(a) The on-going operations of the Company and each of its
Subsidiaries comply in all respects with all Environmental Laws, except such
non-compliance which would not (if enforced in accordance with applicable law)
result in liability in excess of $1,000,000 in the aggregate.
(b) The Company and each of its Subsidiaries has obtained all
licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for its ordinary
course operations; all such
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Environmental Permits are in good standing; and the Company and each of its
Subsidiaries is in compliance with all material terms and conditions of such
Environmental Permits except such Environmental permits failure with which to
comply would not have a Material Adverse Effect.
(c) Except as specifically disclosed in Schedule 6.12, none of the
Company, any of its Subsidiaries or any of their respective present Property or
operations is subject to any outstanding written order from or agreement with
any Governmental Authority nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law, Environmental Claim
or Hazardous Material.
(d) There are no Hazardous Materials or other conditions or
circumstances existing with respect to any Property, or arising from operations
prior to the Closing Date, of the Company or any of its Subsidiaries that would
reasonably be expected to give rise to Environmental Claims with a potential
liability of the Company and its Subsidiaries in excess of $5,000,000 in the
aggregate for any such condition, circumstance or Property. In addition, (i)
neither the Company nor any of its Subsidiaries has any underground storage
tanks (x) that are not properly registered or permitted under applicable
Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials
off-site, and (ii) the Company and its Subsidiaries, to the extent required by
applicable Environmental Laws, have notified all of their employees of the
existence, if any, of any health hazard arising from the conditions of their
employment and have met all notification requirements under Title III of CERCLA
and all other Environmental Laws.
6.13 Regulated Entities. None of the Company, any Person controlling
the Company, or any Subsidiary, is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
6.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary
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for the operation of their respective businesses, without conflict with the
rights of any other Person. To the best knowledge of the Company, no slogan or
other advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 6.05, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
6.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 6.16.
6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Company or such Subsidiary operates.
6.18 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Rate Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Rate Contract.
6.19 Solvency. The Company is and each of its Subsidiaries are
solvent.
6.20 Labor Relations. There are no strikes, lockouts or other labor
disputes against the Company or any of its Subsidiaries, or, to the best of the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries, and no significant unfair labor practice complaint is pending
against the Company or any of its Subsidiaries or, to the best knowledge of the
Company, threatened against any of them before any Governmental Authority.
6.21 Full Disclosure. None of the representations or warranties made
by the Company or any Subsidiary in the Loan
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Documents as of the date such representations and warranties are made or deemed
made, and none of the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of the Company or any Subsidiary in
connection with the Loan Documents (including the offering and disclosure
materials delivered by or on behalf of the Company to the Banks prior to the
Closing Date), contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment or the Swingline Bank
shall have any Swingline Commitment hereunder, or any Loan or other Obligation
shall remain unpaid or unsatisfied, or any Letter of Credit shall remain
outstanding, unless the Majority Banks waive compliance in writing:
7.01 Financial Statements. The Company shall deliver to the Agent, in
form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 100 days after the
end of each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of a
nationally-recognized independent public accounting firm ("Independent Auditor")
which report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion shall not be
qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any Subsidiary's
records;
(b) as soon as available, but not later than 50 days after the end
of each fiscal quarter of each fiscal year, a copy of the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of such quarter
and the related consolidated statements of income, shareholders' equity and cash
flows for the period commencing on the first day and ending on the last day of
such quarter, and certified by a Responsible Officer as being complete and
correct and fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end
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audit adjustments), the financial position and the results of operations of the
Company and the Subsidiaries;
(c) as soon as available, but not later than 100 days after the
end of each fiscal year, a copy of an unaudited consolidating balance sheet of
the Company and its Subsidiaries as at the end of such year and the related
consolidating statement of income, shareholders' equity and cash flows for such
year, certified by a Responsible Officer as having been developed and used in
connection with the preparation of the financial statements referred to in
subsection 7.01(a);
(d) as soon as available, but not later than 50 days after the end
of each of the first three fiscal quarters of each fiscal year, a copy of the
unaudited consolidating balance sheets of the Company and its Subsidiaries and
the related consolidating statements of income for such quarter, all certified
by a Responsible Officer as having been developed and used in connection with
the preparation of the financial statements referred to in subsection 7.01(b).
7.02 Certificates; Other Information. The Company shall furnish to the
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.01(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(c) promptly, copies of all financial statements and reports that
the Company sends to its shareholders, and copies of all financial statements
and regular, periodical or special reports (including Forms 10K, 10Q and 8K)
that the Company or any Subsidiary may make to, or file with, the SEC; and
(d) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Bank, may from time to time request.
7.03 Notices. The Company shall promptly notify the Agent and each
Bank:
(a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
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(b) of any matter that has resulted or may result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between the Company
or any Subsidiary and any Governmental Authority; or (iii) the commencement of,
or any material development in, any litigation or proceeding affecting the
Company or any Subsidiary; including pursuant to any applicable Environmental
Laws;
(c) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Agent and each Bank a copy of any notice with respect
to such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability
of any Pension Plan;
(iii) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by the Company or any
ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability; and
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 7.03(a) shall describe with particularity any and all clauses
or provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
7.04 Preservation of Corporate Existence, Etc. Except in connection
with sales of assets permitted by Section 8.02 and transactions permitted by
Section 8.03, the Company shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
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(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.05 Maintenance of Property. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is used
or useful in its business in good working order and condition, ordinary wear and
tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, except as permitted by Section 8.02.
7.06 Insurance. The Company (a) shall maintain insurance with respect
to the payment of all receivables sold or to be sold in accordance with
subsection 8.02(d) in amounts and upon terms satisfactory to the Agent and to
all Banks; and (b) the Company shall maintain, and shall cause each Subsidiary
to maintain, with financially sound and reputable independent insurers,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the same or similar
business, of such types and in such amounts as are customarily carried under
similar circumstances by such other Persons; including workers' compensation
insurance, public liability and property and casualty insurance. Upon request of
the Agent or any Bank, the Company shall furnish the Agent and each of the Banks
at reasonable intervals (but not more than once per calendar year) a certificate
of a Responsible Officer of the Company (and, if requested, a certificate of any
insurance broker of the Company) setting forth the nature and extent of all
insurance maintained by the Company and its Subsidiaries in accordance with this
Section 6.06 (and which, in the case of a certificate of a broker, were placed
through such broker).
7.07 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate
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proceedings and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property; and
(c) all indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
7.08 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
7.09 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Agent or any Bank to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the expense of
the Company and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Agent or any
Bank may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
7.11 Environmental Laws. (a) The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
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(b) Upon the written request of the Agent or any Bank the Company
shall submit and cause each of its Subsidiaries to submit, to the Agent and each
of the Banks, at the Company's sole cost and expense, at reasonable intervals, a
report providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue, that could, individually or in the
aggregate, result in liability in excess of $5,000,000.
7.12 Use of Proceeds. The Company shall use the proceeds of the Loans
and the Letters of Credit for working capital and other general corporate
purposes not in contravention of any Requirement of Law or of any Loan Document.
7.13 Solvency. The Company shall at all times be, and shall cause each
of its Subsidiaries to be, solvent.
7.14 Further Assurances.
(a) The Company shall ensure that all written information,
exhibits and reports furnished to the Agent and the Banks do not and will not
contain any untrue statement of a material fact and do not and will not omit to
state any material fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made, and will
promptly disclose to the Agent and the Banks and correct any defect or error
that may be discovered therein or in any Loan Document or in the execution,
acknowledgment or recordation thereof.
(b) Promptly upon request by the Agent, the Company shall (and
shall cause any of its Subsidiaries to) do, execute, acknowledge, deliver, file,
any and all such further acts, notices of assignment, transfers, certificates,
assurances and other instruments as the Agent may reasonably require from time
to time in order to carry out more effectively the purposes of this Agreement or
any other Loan Document.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in writing:
8.01 Limitation on Liens. (i) The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, make, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its
property, whether
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now owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on property of the Company or any Subsidiary
on the Closing Date and set forth in Schedule 8.01 securing Indebtedness
outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 7.07, provided that no
notice of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Company or its Subsidiary
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, (ii) contingent obligations
on surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business, provided all
such Liens in the aggregate would not (even if enforced) cause a Material
Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all such
liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $5,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries
after the date of this Agreement, provided, however, that such Liens existed at
the time the respective
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corporations became Subsidiaries and were not created in anticipation thereof;
(j) purchase money security interests on any property acquired or
held by the Company or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) such Property
is not a Consolidated Current Asset, (ii) any such Lien attaches to such
property concurrently with or within 20 days after the acquisition thereof,
(iii) such Lien attaches solely to the property so acquired in such transaction,
and (iv) the principal amount of the debt secured thereby does not exceed 100%
of the cost of such property.
(k) Liens securing obligations in respect of capital leases on
assets subject to such leases, provided that such capital leases are otherwise
permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution; and
(m) a Lien or trust imposed upon the proceeds of any receivable
for the benefit a Bank purchasing that receivable in accordance with all of the
conditions for the disposition of a receivable pursuant to subsection 8.02(d).
(ii) The Company shall not, and shall not permit any Subsidiary to,
enter into any agreement which would prohibit or restrict the granting of any
Lien upon or with respect to any part of its property, whether now owned or
hereafter acquired, except where such an agreement is made between the Company
and one of the Banks hereunder and relates solely to a receivable purchase by
that Bank which meets all of the conditions for the disposition of a receivable
pursuant to subsection 8.02(d).
8.02 Disposition of Assets. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
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(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) dispositions as described in that certain Agreement for
Maturity Factoring Accounts Receivable dated July 31, 1987 between Microwave
Radio Corporation and BancBoston Financial Company as amended by that letter
agreement dated April 19, 1995, between Microwave Radio Corporation and BNY
Financial Corporation attached as Exhibit G; and
(d) dispositions of accounts receivable to a Bank upon the
following conditions: (i) the term to maturity at the time of disposition is
more than 60 days; (ii) the account debtor is located in a country other than
the United States; (iii) payment of the receivable is insured during the full
term of the receivable upon terms satisfactory to the Agent and all of the
Banks; (iv) recourse from the purchaser of any receivable to the Company shall
be in an amount and upon terms satisfactory to the Agent and all of the Banks;
(v) the documentation of each such disposition shall be satisfactory to the
Agent and all of the Banks; and (vi) the aggregate amount of all such
receivables sold and outstanding at any time will not exceed $20,000,000.
8.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to the Company or another Wholly-
Owned Subsidiary.
(c) any Subsidiary of the Company may merge or consolidate with or
into any other entity provided the resulting entity is wholly owned by the
Company, or any other entity may merge with or into the Company or any
Subsidiary, in connection with any acquisition by the Company or any Subsidiary;
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provided, however, the aggregate amount of cash invested in all transactions
under this Section 8.03 and Acquisitions under subsection 8.04(c) shall not
exceed in any fiscal year a total of $25,000,000 plus (or minus) 20% of (a) the
amount by which consolidated Tangible Net Worth as calculated at the end of the
immediately preceding fiscal quarter exceeds (or is less than) Tangible Net
Worth as of June 30, 1995, plus (b) the aggregate intangible assets related to
Acquisitions completed after October 1, 1995, and on or prior to the Revolving
Termination Date in an amount which does not exceed $20,000,000.
8.04 Loans and Investments. The Company shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company (together, "Investments"), except for:
(a) Investments held by the Company or Subsidiary in the form of
Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business; and
(c) Investments incurred in order to consummate Acquisitions
provided that the aggregate amount of cash invested in such Acquisitions
permitted under this subsection 8.04(c) and in all transactions permitted under
Section 8.03 shall not exceed in any fiscal year $25,000,000 plus (or minus) 20%
of (a) the amount by which consolidated Tangible Net Worth as calculated at the
end of the immediately preceding fiscal quarter exceeds (or is less than)
Tangible Net Worth as of June 30, 1995, plus (b) the aggregate intangible assets
related to Acquisitions completed after October 1, 1995, and on or prior to the
Revolving Termination Date in an amount which does not exceed $20,000,000.
8.05 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
8.06 Use of Proceeds. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to
repay or otherwise
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refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
8.07 Contingent Obligations. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course
of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.07;
(d) Contingent Obligations created hereunder;
(e) Contingent Obligations with respect to Surety Instruments
incurred in the ordinary course of business and not exceeding at any one time
$30,000,000 in the aggregate in respect of the Company and its subsidiaries
together.
8.08 Joint Ventures. The Company shall not, and shall not suffer or
permit any Subsidiary to enter into any Joint Venture, other than in the
ordinary course of business.
8.09 Compliance with ERISA. The Company shall not, and shall not suffer
or permit any of its Subsidiaries to, (i) terminate any Plan subject to Title IV
of ERISA so as to result in any material (in the opinion of the Agent acting
upon the instruction of the Majority Banks) liability to the Company or any
ERISA Affiliate, (ii) permit to exist any ERISA Event or any other event or
condition, which presents the risk of a material (in the opinion of the Agent
acting upon the instruction of the Majority Banks) liability to any member of
the Controlled Group, (iii) make a complete or partial withdrawal (within the
meaning of ERISA Section 4201) from any Multiemployer Plan so as to result in
any material (in the opinion of the Agent acting upon the instruction of the
Majority Banks) liability to the Company or any ERISA Affiliate, (iv) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder which could result in any material (in the opinion of the Agent
acting upon the instruction of the Majority Banks) liability to any member of
the Controlled Group, or (v) permit the present value of all nonforfeitable
accrued benefits under any Plan (using the actuarial assumptions utilized by the
PBGC upon termination of a Plan) materially (in the opinion of the Agent acting
upon the instruction of the Majority Banks) to exceed the fair market value of
Plan assets allocable to such benefits, all
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determined as of the most recent valuation date for each such Plan.
8.10 Restricted Payments. The Company shall not, and shall not suffer
or permit any Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding; except
that the Company and any Wholly- Owned Subsidiary may declare and make dividend
payments or other distributions payable solely in its common stock.
8.11 Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof.
8.12 Quick Ratio. The Company shall not suffer or permit its Quick
Ratio to be less than 1.0 to 1.0.
8.13 Leverage Ratio. The Company shall not suffer or permit its
Leverage Ratio to be greater than 1.0 to 1.0.
8.14 Adjusted Tangible Net Worth. The Company shall not permit its
Adjusted Tangible Net Worth (determined on a consolidated basis) to be less than
the sum of (a) $155,582,000, plus (b) seventy-five percent (75%) of quarterly
net income for each fiscal quarter subsequent to the quarter ended September 30,
1995, with no reduction for net losses, plus (c) the net proceeds of any equity
securities and subordinated debt issued by the Company after the fiscal quarter
ended September 30, 1995, less (d) the aggregate intangible assets related to
Acquisitions completed after October 1, 1995, and on or prior to the Revolving
Termination Date in an amount which does not exceed $20,000,000.
8.15 Funded Debt to EBITDA Ratio. The Company shall not permit its
Funded Debt to EBITDA Ratio to be greater than 2.0 to 1.0.
8.16 Consecutive Quarterly Losses. The Company, on a consolidated
basis, shall not incur or suffer or permit to be incurred (a) any quarterly
operating loss or any quarterly net loss, or any combination thereof, in two
consecutive fiscal quarters, or (b) any quarterly operating loss or any
quarterly net loss in excess of five percent (5%) of Tangible Net Worth.
8.17 Change In Structure. Except as expressly permitted under Section
8.03, the Company shall not and shall not permit any of its Subsidiaries to,
make any changes in its equity
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capital structure (including in the terms of its outstanding stock), or amend
its certificate of incorporation or by-laws in any material respect.
8.18 Accounting Changes. The Company shall not, and shall not suffer or
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any Subsidiary.
8.19 Limitations on Subordinated Indebtedness. (a) The Company shall
not, and shall not suffer or permit any Subsidiary to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness which by its terms is subordinated in right of
payment or in priority upon liquidation to the Loans or other senior debt of the
Company or any Subsidiary except that Indebtedness incurred under or evidenced
by those instruments or agreements listed on Schedule 8.19 ("Permitted
Subordinated Indebtedness".
(b) The Company shall not amend or modify any provision of any
Approved Subordinated Indebtedness and shall not directly or indirectly make any
prepayment (whether by reason of acceleration thereof or otherwise) of any
principal of or premium on, or in respect of the redemption, retirement,
purchase or other acquisition of any Approved Subordinated Indebtedness.
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan or of any L/C
Obligation, or (ii) within three days after the same becomes due, any interest,
fee or any other amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by
the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
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(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in any of Section 7.10 or in Article VIII;
or
(d) Other Defaults. The Company fails to perform or observe any
other term or covenant contained in this Agreement or any other Loan Document
and such default shall continue unremedied for a period of 10 days; or
(e) Cross-Default. The Company or any Subsidiary (A) fails to make
any payment in respect of any Indebtedness or Contingent Obligation; or (B)
fails to perform or observe any other condition or covenant, or any other event
shall occur or condition exist, under any agreement or instrument relating to
any such Indebtedness or Contingent Obligation; if the effect of such failure,
event or condition described in (A) or (B), above, is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness in an amount in excess
of $1,000,000 to be declared to be due and payable prior to its stated maturity,
or such Contingent Obligation in an amount in excess of $1,000,000 to become
payable or cash collateral in respect thereof to be demanded;
(f) Insolvency; Voluntary Proceedings. The Company or any
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non- U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
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(h) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$5,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $5,000,000; or (iii) the Company or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $5,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $5,000,000 or more, and the same shall remain
unvacated and unstayed pending appeal for a period of 30 days after the entry
thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any Change of Control; or
(l) Receivables Insurance Coverage. At a time when a receivable
which has been sold pursuant to the terms of subsection 8.02(d) and not fully
paid by the account debtor, the insurance of such receivable required by
subsection 7.06(a) shall be repudiated, invalidated or otherwise cease to be in
full force.
9.02 Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans and any
obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
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(b) declare an amount equal to the maximum aggregate amount that
is or at any time thereafter may become available for drawing under any
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 9.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60- day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Agent, the Issuing Bank or any Bank.
9.03 Swingline Loans. In the event that the Agent exercises any remedy
pursuant to subsection 9.02(b), then immediately and without notice or further
action of the Agent, all Swingline Loans then outstanding and all interest
accrued and unpaid thereon shall convert to Base Rate Loans to be held according
to each Banks' Pro Rata Share which shall be immediately due and payable.
9.04 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
10.01 Appointment and Authorization; "Agent". (a) Each Bank hereby
irrevocably (subject to Section 10.09) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such
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duties as are expressly delegated to it by the terms of this Agreement or any
other Loan Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with respect
to any Letters of Credit Issued by it and the documents associated therewith
until such time and except for so long as the Agent may agree at the request of
the Majority Lenders to act for such Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the benefits and
immunities (i) provided to the Agent in this Article X with respect to any acts
taken or omissions suffered by the Issuing Bank in connection with Letters of
Credit Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully as
if the term "Agent", as used in this Article X, included the Issuing Bank with
respect to such acts or omissions, and (ii) as additionally provided in this
Agreement with respect to the Issuing Bank.
10.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
10.03 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report,
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statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
10.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Majority Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
10.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent
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will notify the Banks of its receipt of any such notice. The Agent shall take
such action with respect to such Default or Event of Default as may be requested
by the Majority Banks in accordance with Article IX; provided, however, that
unless and until the Agent has received any such request, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable or
in the best interest of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent-Related Persons.
10.07 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable
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share of any costs or out-of-pocket expenses (including Attorney Costs) incurred
by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the Agent
is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Agent.
10.08 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent or the Issuing
Bank hereunder and without notice to or consent of the Banks. The Banks
acknowledge that, pursuant to such activities, BofA or its Affiliates may
receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, BofA
shall have the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent or the Issuing Bank.
10.09 Successor Agent. The Agent may, and at the request of the Majority
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Majority Banks shall appoint from among the
Banks a successor agent for the Banks. If no successor agent is appointed prior
to the effective date of the resignation of the Agent, the Agent may appoint,
after consulting with the Banks and the Company, a successor agent from among
the Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above.
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Notwithstanding the foregoing, however, BofA may not be removed as the Agent at
the request of the Majority Banks unless BofA shall also simultaneously be
replaced as "Issuing Bank" hereunder pursuant to documentation in form and
substance reasonably satisfactory to BofA.
10.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver to
the Agent:
(i) if such Bank claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, two properly
completed and executed copies of IRS Form 1001 before the payment of
any interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
(iii) such other form or forms as may be required under
the Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Company to such Bank, such
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Bank agrees to undertake sole responsibility for complying with the withholding
tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Bank not providing such forms or
other documentation an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered or was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Agent.
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks (or by the Agent at the written
request of the Majority Banks) and the Company and acknowledged by the Agent,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing and signed by all
the Banks and the Company and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Bank (or reinstate
any Commitment terminated pursuant to Section 8.02) or the Swingline Commitment;
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(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document, including any mandatory prepayments;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (iii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder;
(e) amend subsection 8.01(i)(m), 8.01(ii), 8.02(d) or 9.01(1); or
(f) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank in addition to the Majority Banks or all
the Banks, as the case may be, affect the rights or duties of the Issuing Bank
under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Majority Banks or
all the Banks, as the case may be, affect the rights or duties of the Agent
under this Agreement or any other Loan Document, and (iii) the Fee Letters may
be amended, or rights or privileges thereunder waived, in a writing executed by
the parties thereto.
11.02 Notices. (a) All notices, requests, consents, approvals, waivers
and other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 11.02, and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 11.02; or, as directed to the Company
or the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at such
other address as shall be designated by such party in a written notice to the
Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or
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transmitted in legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the U.S. mail, or if
delivered, upon delivery; except that notices pursuant to Article II, III or X
to the Agent shall not be effective until actually received by the Agent, and
notices pursuant to Article III to the Issuing Bank shall not be effective until
actually received by the Issuing Bank at the address specified for the "Issuing
Bank" on the applicable signature page hereof.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Agent and the Banks shall not have any liability to
the Company or other Person on account of any action taken or not taken by the
Agent or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
11.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) and each Bank within five Business Days after demand (subject to
subsection 5.01(e)) for all costs and expenses incurred by BofA (including in
its capacity as Agent and Issuing Bank) and each Bank in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including reasonable Attorney Costs incurred by
BofA (including in its capacity as Agent and Issuing Bank) and any Bank with
respect thereto; and
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(b) pay or reimburse the Agent, the Arranger and each Bank within
five Business Days after demand (subject to subsection 5.01(e)) for all costs
and expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an Event
of Default or after acceleration of the Loans (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).
11.05 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of the Agent or replacement of any Bank)
be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, or any action taken
or omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any Insolvency Proceeding or appellate proceeding) related to or arising out of
this Agreement or the Loans or Letters of Credit or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, that the
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations. At the election of any
Indemnified Person, the Company shall defend such Indemnified Person using legal
counsel satisfactory to such Indemnified Person in such Person's sole
discretion, at the sole cost and expense of the Company. All amounts owing under
this Section 11.05 shall be paid within 30 days after demand.
11.06 Payments Set Aside. To the extent that the Company makes a payment
to the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid
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to a trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
set-off had not occurred, and (b) each Bank severally agrees to pay to the Agent
upon demand its pro rata share of any amount so recovered from or repaid by the
Agent.
11.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
11.08 Assignments, Participations, etc. (a) Any Bank may, with the
written consent of the Company at all times other than during the existence of
an Event of Default, the Agent and the Issuing Bank, which consents shall not be
unreasonably withheld, at any time assign and delegate to one or more Eligible
Assignees (provided that no written consent of the Company, the Agent or the
Issuing Bank shall be required in connection with any assignment and delegation
by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an
"Assignee") all, or any ratable part of all, of the Loans, the Commitments, the
L/C Obligations and the other rights and obligations of such Bank hereunder, in
a minimum amount of $10,000,000; provided, however, that the Company and the
Agent may continue to deal solely and directly with such Bank in connection with
the interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment and Acceptance
in the form of Exhibit E ("Assignment and Acceptance") together with any Note or
Notes subject to such assignment and (iii) the assignor Bank or Assignee has
paid to the Agent a processing fee in the amount of $3,500. In connection with
any assignment of BofA, its Swingline Commitment may in whole be included as
part of the assignment transaction, and the Assignment and Acceptance may be
appropriately modified to include an assignment and delegation of its Swingline
Commitment and any outstanding Swingline Loans.
(b) From and after the date that the Agent notifies the assignor
Bank that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the
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<PAGE> 86
rights and obligations of a Bank under the Loan Documents, and (ii) the assignor
Bank shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Loan Documents.
(c) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, the Company shall execute and deliver to the Agent, new
Notes evidencing such Assignee's assigned Loans and Commitment and, if the
assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held by
such Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company, the
Issuing Bank and the Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to Section 11.01. In the case of any such
participation, the Participant shall not have any rights under this Agreement,
or any of the other Loan Documents, and all amounts payable by the Company
hereunder shall be determined as if such Bank had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to
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<PAGE> 87
the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it (other than in respect of the Swingline Loans) in favor of any Federal
Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR Section203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
11.09 Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "company private"
by the Company and provided to it by the Company or any Subsidiary, or by the
Agent on the Company's or such Subsidiary's behalf, under this Agreement or any
other Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with the Company or any Subsidiary; except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Banks hereunder; (H) as to any
Bank or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Bank or such Affiliate; and (I)
to its Affiliates.
11.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time
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<PAGE> 88
and from time to time, without prior notice to the Company, any such notice
being waived by the Company to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing by, such
Bank to or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. Each Bank agrees promptly to notify the Company and the Agent
after any such set-off and application made by such Bank; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.
11.11 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, letter of credit fee or other fee, or any other cost or expense
(including Attorney Costs) due and payable to the Agent, the Issuing Bank, BofA
or the Arranger under the Loan Documents, the Company hereby irrevocably
authorizes BofA to debit any deposit account of the Company with BofA in an
amount such that the aggregate amount debited from all such deposit accounts
does not exceed such fee or other cost or expense. If there are insufficient
funds in such deposit accounts to cover the amount of the fee or other cost or
expense then due, such debits will be reversed (in whole or in part, in BofA's
sole discretion) and such amount not debited shall be deemed to be unpaid. No
such debit under this Section shall be deemed a set-off.
11.12 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
11.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.14 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
11.15 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons,
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<PAGE> 89
and their permitted successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any of the other Loan
Documents.
11.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
11.17 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and
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<PAGE> 90
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in San Francisco by their proper and duly authorized
officers as of the day and year first above written.
CALIFORNIA MICROWAVE, INC.
By: /s/
---------------------------
Title:
------------------------
By: /s/
---------------------------
Title:
------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/
---------------------------
Title:
------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Bank
By: /s/
---------------------------
Title:
------------------------
84
<PAGE> 91
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
and as the Swingline Bank
By: /s/
---------------------------
Title:
------------------------
ABN AMRO BANK N.V.
By: /s/
---------------------------
Title:
------------------------
By: /s/
---------------------------
Title:
------------------------
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/
---------------------------
Title:
------------------------
85
<PAGE> 92
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- -----
<S> <C> <C>
Bank of America National
Trust and Savings
Association $ 25,000,000 41.666666666%
ABN Amro Bank N.V $ 17,500,000 29.166666667%
Canadian Imperial Bank
of Commerce $ 17,500,000 29.166666667%
TOTAL $ 60,000,000 100%
</TABLE>
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<PAGE> 93
SCHEDULE 11.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Wendy Young
Telephone: (415) 436-3420
Facsimile: (415) 436-2700
AGENT'S PAYMENT OFFICE:
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
ABA No. 121-000-358
For Credit to Acct. No. 12339-14874
Ref: California Microwave, Inc.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office:
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Notices (other than Borrowing notices and Notices of Conversion/Continuation):
Bank of America National Trust
and Savings Association
555 California Street, 41st Floor
San Francisco, California 94104
Attention: Corporate Banking
High Technology
Michael C. McCutchin
Telephone: (415) 622-4589
Facsimile: (415) 622-2514
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<PAGE> 94
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Issuing Bank
Address for Notices:
International Trade
Banking Division #5655
333 S. Beaudry Avenue, 19th Floor
Los Angeles, California 90017
ABN AMRO BANK N.V.
101 California Street, Suite 4550
San Francisco, California 94111-5812
Attention: Dianne Waggoner
Telephone: (415) 984-3706
Facsimile: (415) 362-3524
CANADIAN IMPERIAL BANK OF COMMERCE
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attention: Clare Coyne
Telephone: (770) 319-4836
Facsimile: (770) 319-4850
88
<PAGE> 1
EXHIBIT 10.18
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("Amendment"), dated as of
June 14, 1996, is entered into by and among CALIFORNIA MICROWAVE, INC. (the
"Company"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for
itself and the Banks (the "Agent"), the Swingline Bank and the Issuing Bank, and
the several financial institutions party to the Credit Agreement (collectively,
the "Banks").
RECITALS
A. The Company, Banks, and Agent are parties to a Credit Agreement
dated as of December 21, 1995 (the "Credit Agreement") pursuant to which the
Agent and the Banks have extended certain credit facilities to the Company.
B. It has been determined that one or more of the Existing BofA Letters
of Credit are denominated in currencies other than Dollars, and certain Letters
of Credit denominated in currencies other than Dollars have been issued with the
concurrence of the Banks under Article III of the Credit Agreement. The Company
has requested that the Banks waive any technical default resulting therefrom and
agree to certain amendments of the Credit Agreement, including an amendment to
permit the issuance of Letters of Credit in currencies other than Dollars. The
Banks are willing to do so subject to the terms and conditions of this
Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Waiver and Ratification.
(a) Subject to and upon the terms and conditions hereof, the
Banks hereby waive any breach of or default arising under the Credit Agreement
in connection with any Existing BofA Letters of Credit denominated in currencies
other than Dollars, the issuance since the Closing Date of Letters of Credit
denominated in such currencies, or any inaccuracies in Schedule 3.03 - Existing
BofA Letters of Credit. The Banks hereby ratify all acts of the Agent and the
Issuing Bank in connection with the issuance of Letters of Credit denominated in
currencies other than Dollars and agree that all such Letters of Credit shall be
governed by the Credit Agreement as amended by this Amendment as
<PAGE> 2
though this Amendment were in effect on the date of their Issuance.
(b) Nothing contained herein shall be deemed a waiver of (or
otherwise affect the Agent's or the Banks' ability to enforce) any other default
or any Event of Default whether now existing or arising in the future.
3. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be amended by
adding the following defined terms in their appropriate alphabetical places:
"Applicable Currency" means, as to any particular payment or
L/C Obligation, Dollars or the Offshore Currency in which it is
denominated or is payable.
"Computation Date" has the meaning specified in
subsection 3.10(a).
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to
any amount denominated in an Offshore Currency, the equivalent amount
in Dollars as determined by the Agent or the Issuing Bank, as the case
may be, at such time on the basis of the Spot Rate for the purchase of
Dollars with such Offshore Currency.
"FX Trading Office" means the Foreign Exchange Trading Center
#5193, San Francisco, California, of BofA, or such other of BofA's
offices as BofA may designate from time to time.
"Notice of Prepayment" means a notice in substantially
the form of Exhibit H.
"Offshore Currency" means any lawful currency constituting a
eurocurrency (other than Dollars) that in the opinion of the Issuing
Bank is at such time freely traded in the offshore interbank foreign
exchange markets and is freely transferable and freely convertible into
Dollars.
"Same Day Funds" means (i) with respect to disbursements and
payments in Dollars, immediately available funds, and (ii) with respect
to disbursements and payments in an Offshore Currency, same day or
other funds as may be determined by the Agent to be customary in the
place of disbursement or payment for the settlement of international
banking transactions in the relevant Offshore Currency.
"Spot Rate" for a currency means the rate quoted by BofA as
the spot rate for the purchase by BofA of such
- 2 -
<PAGE> 3
currency with another currency through its FX Trading Office (i) at
approximately 8:00 a.m. (San Francisco time) on the date two Banking
Days prior to the relevant Computation Date or (ii) at such time and on
such date as the Issuing Bank determines to pay a drawing in an
Offshore Currency and contracts to purchase funds for that purpose.
(b) Section 1.01 of the Credit Agreement shall be further
amended by deleting the defined terms "L/C Amendment Application", "L/C
Application", "L/C Commitment," "L/C Obligations," and "Letters of Credit" and
replacing them in their entirety with the following five definitions:
"L/C Amendment Application" means (a) a written application
form for amendment of outstanding standby letters of credit as shall at
any time be in use at the Issuing Bank, as the Issuing Bank shall
request, which may be transmitted by facsimile if immediately confirmed
in an original writing, or (b) notwithstanding the provisions of
Section 11.02, a request transmitted to the Issuing Bank by electronic
transmission in such manner and effective upon such terms as the
Company and the Issuing Bank may separately agree in writing.
"L/C Application" means (a) a written application form for
issuances of standby letters of credit as shall at any time be in use
at the Issuing Bank, as the Issuing Bank shall request, which may be
transmitted by facsimile if immediately confirmed in an original
writing, or (b) notwithstanding the provisions of Section 11.02, a
request transmitted to the Issuing Bank by electronic transmission in
such manner and effective upon such terms as the Company and the
Issuing Bank may separately agree in writing.
"L/C Commitment" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to participate in,
Letters of Credit (including the Existing BofA Letters of Credit) from
time to time Issued or outstanding under Article III, in an aggregate
amount not to exceed on any date the Dollar Equivalent amount of
$20,000,000, as the same shall be reduced as a result of a reduction in
the L/C Commitment pursuant to Section 2.05; provided that the
aggregate amount of any Letters of Credit outstanding which may be
drawn in support of the performance of financial obligations shall not
at any time exceed the Dollar Equivalent amount of $5,000,000; and
provided further that the L/C Commitment is a part of the combined
Commitments, rather than a separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the
aggregate undrawn Dollar Equivalent amount of all Letters of Credit
then outstanding, plus (b) the Dollar Equivalent
- 3 -
<PAGE> 4
amount of all unreimbursed drawings under all Letters of Credit,
including all outstanding L/C Borrowings.
"Letters of Credit" means the Existing BofA Letters of Credit
and any standby letters of credit Issued by the Issuing Bank pursuant
to Article III, which may be denominated either in Dollars or Offshore
Currencies.
(c) The Credit Agreement shall be amended by adding a
new Section 1.04 as follows:
"1.04 Currency Equivalents Generally. For all purposes of this
Agreement (but not for purposes of the preparation of any financial
statements delivered pursuant hereto), the equivalent in any Offshore
Currency or other currency of an amount in Dollars, and the equivalent
in Dollars of an amount in any Offshore Currency or other currency,
shall be determined at the Spot Rate."
(d) Subsection 2.03(a) of the Credit Agreement shall be
amended by deleting the first sentence and replacing it with the following:
"Each Borrowing of Revolving Loans shall be made upon the
Company's irrevocable written notice delivered to the Agent in
the form of a Notice of Borrowing which notice must be
received by the Agent (i) prior to 3:00 p.m. (San Francisco
time) two Business Days prior to the requested Borrowing Date
in the case of Offshore Rate Loans, or (ii) prior to 8:00 a.m.
(San Francisco time) on the requested Borrowing Date in the
case of Base Rate Loans; specifying:
(i) the amount of the Borrowing, which shall be
in an aggregate minimum amount of $1,000,000 or any multiple
of $500,000 in excess thereof;
(ii) the requested Borrowing Date, which shall be
a Business Day;
(iii) the Type of Loans comprising the Borrowing;
and
(iv) the duration of the Interest Period
applicable to such Loans. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing
comprised of Offshore Rate Loans, such Interest Period shall
be three months."
(e) Subsection 2.04(b) shall be amended by deleting it
and replacing it with the following:
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<PAGE> 5
"(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than (i)
8:00 a.m. (San Francisco time) on the Conversion/Continuation Date, if
the Loans are to be converted into Base Rate Loans; and (ii) 3:00 p.m.
(San Francisco time) two Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans; specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the requested Interest
Period."
(f) Subsection 2.06 of the Credit Agreement shall be amended
by deleting the first sentence and replacing it with the following:
"Subject to Section 4.04, the Company may, at any time or from time to
time, upon delivery of a Notice of Prepayment to the Agent (i) prior to
3:00 p.m. (San Francisco time) two Business Days prior to the date of
prepayment in the case of Offshore Rate Loans, (ii) prior to 11:00 a.m.
(San Francisco time) on the date of prepayment in the case of Base Rate
Loans, or (iii) prior to Noon (San Francisco time) on the date of
prepayment in the case of Swingline Loans, ratably prepay Loans in
whole or in part, (a) in minimum amounts of $1,000,000 or any multiple
of $500,000 in excess thereof in the case of Revolving Loans or (b) in
a minimum amount of $100,000 in the case of Swingline Loans."
(g) Subsection 3.02(a) of the Credit Agreement shall be
amended by deleting it and replacing it with the following:
"(a) Each Letter of Credit shall be issued upon the
irrevocable request of the Company received by the Issuing Bank (with a
copy sent by the Company to the Agent) at least four days (or such
shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of issuance. Each such
request for issuance of a Letter of Credit shall be in the form of an
L/C Application, and shall specify in form and detail satisfactory to
the Issuing Bank: (i) the proposed date of issuance of the Letter of
Credit (which shall be a Business
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<PAGE> 6
Day); (ii) the face amount of the Letter of Credit denominated in
Dollars or an Offshore Currency; (iii) the expiry date of the Letter of
Credit; (iv) the name and address of the beneficiary thereof; (v) the
documents to be presented by the beneficiary of the Letter of Credit in
case of any drawing thereunder; (vi) the full text of any certificate
to be presented by the beneficiary in case of any drawing thereunder;
and (vii) such other matters as the Issuing Bank may require. The
Company may delegate authority to designated officers of the Company or
of its wholly owned Subsidiaries to execute such requests for the
Issuance under this subsection or the amendment under subsection
3.02(c) of Letters of Credit to be issued in the name of the Company or
such Subsidiaries but for the account of the Company pursuant to
Article III of this Agreement. In addition, if the Letter of Credit
being requested is to be issued in support of the performance of
financial obligations, the request for its Issuance must also include a
certification that the Letter of Credit is a financial Letter of Credit
and that the total of all such financial Letters of Credit outstanding
plus the requested financial Letter of Credit does not exceed the
Dollar Equivalent amount of $5,000,000. The Agent will promptly notify
the Banks of the receipt by it of any L/C Application."
(h) Subsection 3.02(c) of the Credit Agreement shall
be amended by deleting it and replacing it with the following:
"(c) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the Issuing
Bank will, upon the request of the Company received by the Issuing Bank
(with a copy sent by the Company to the Agent) at least four days (or
such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of
amendment, amend any Letter of Credit issued by it. Each such request
for amendment of a Letter of Credit shall be in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory
to the Issuing Bank: (i) the Letter of Credit to be amended; (ii) the
proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv)
such other matters as the Issuing Bank may require. The Issuing Bank
shall be under no obligation to amend any Letter of Credit if: (A) the
Issuing Bank would have no obligation at such time to issue such Letter
of Credit in its amended form under the terms of this Agreement; or (B)
the beneficiary of any such letter of Credit does not accept the
proposed amendment to the Letter of Credit. The Agent will promptly
notify the Banks of the receipt by it of any L/C Amendment
Application."
- 6 -
<PAGE> 7
(i) Subsection 3.03(c) of the Credit Agreement shall be
amended by deleting it and replacing it with the following:
"Upon the receipt of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Issuing Bank will
promptly notify the Company. Immediately upon reaching a determination
that it will pay a drawing under a Letter of Credit and, in the case of
a Letter of Credit denominated in an Offshore Currency, upon also
determining the Dollar Equivalent amount of the drawing, the Issuing
Bank shall notify the Company and the Agent of (i) its determination to
pay the drawing, (ii) the date the drawing will be paid (the "Honor
Date"), (iii) the Dollar Equivalent amount of the drawing, and (iv) in
the case of a Letter of Credit denominated in an Offshore Currency, the
amount to be paid in the Offshore Currency. The Issuing Bank will
endeavor to provide such notice at least one Business Day prior to the
Honor Date, but the delivery of such notice shall not be a condition to
the payment of the drawing nor to the Company's obligation to reimburse
the amount paid on the Honor Date. The Company shall reimburse the
Issuing Bank in Dollars in Same Day Funds no later than 10:00 a.m. (San
Francisco time) on the Honor Date, the Dollar Equivalent amount equal
to the amount so to be paid by the Issuing Bank. In the event the
Company fails to reimburse the Issuing Bank in Same Day Funds for the
full Dollar Equivalent amount of any drawing under any Letter of Credit
by 10:00 a.m. (San Francisco time) on the Honor Date, the Issuing Bank
will promptly notify the Agent and the Agent will promptly notify each
Bank thereof, and the Company shall be deemed to have requested that
Base Rate Loans in the Dollar Equivalent amount equal to the amount to
be reimbursed on the Honor Date, which Base Rate Loans shall be made by
the Banks to be disbursed on the Honor Date under such Letter of
Credit, subject to the amount of the unutilized portion of the
Revolving Commitment and subject to the conditions set forth in Section
5.02. The Issuing Bank shall be authorized to apply the proceeds of
such Base Rate Loans to the purchase of funds in the Applicable
Currency to pay each drawing due to be paid on the Honor Date. Any
notice given by the Issuing Bank or the Agent pursuant to this
subsection 3.03(c) may be oral if immediately confirmed in writing
(including by facsimile); provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of
such notice."
(j) Subsection 3.03(e) of the Credit Agreement shall be
amended by deleting it and replacing it with the following:
"(e) With respect to any unreimbursed drawing that is not
converted into Revolving Loans or Swingline Loans consisting of Base
Rate Loans to the Company in whole or in
- 7 -
<PAGE> 8
part, because of the Company's failure to satisfy the conditions set
forth in Section 5.02 or for any other reason, the Company shall be
deemed to have incurred from the Issuing Bank an L/C Borrowing
denominated in Dollars in the Dollar Equivalent amount of such drawing
as determined by the Agent, which L/C Borrowing shall be due and
payable on demand (together with interest) and shall bear interest at a
rate per annum equal to the Base Rate plus 2% per annum, and each
Bank's payment to the Issuing Bank pursuant to subsection 3.03(d) shall
be deemed payment in respect of its participation in such L/C Borrowing
and shall constitute an L/C Advance from such Bank in satisfaction of
its participation obligation under this Section 3.03."
(k) Subsection 3.08(a) of the Credit Agreement shall be
amended by inserting into the first sentence the words "Dollar Equivalent"
immediately following the words "average daily maximum" and by adding the
following proviso to the first sentence: "provided, however, that the Dollar
Equivalent amount of any such Letters of Credit which are denominated in any
Offshore Currency shall be determined based upon the Spot Rate for the purchase
of such Offshore Currency with Dollars at Issuance and as of the last Business
Day of each month for the quarter in question."
(l) Subsection 3.08(b) of the Credit Agreement shall be
amended by inserting into the first sentence the words "Dollar Equivalent of
the" immediately following the words "that percentage of the".
(m) Article III of the Credit Agreement shall be amended by
adding a new Section 3.10 as follows:
"3.10. Letters of Credit Denominated in Offshore Currencies.
(a) The Agent will determine the Dollar Equivalent amount with respect
to any (i) Letter of Credit denominated in an Offshore Currency as of
the date of Issuance, (ii) outstanding L/C Obligations from time to
time as necessary to compute availability under the L/C Commitment, the
Commitments, or the Swingline Commitment, and (iii) other amount
necessary for the administration of this Agreement (each such date
under clauses (i) through (iii) a "Computation Date"). Each
determination of a Dollar Equivalent amount by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of
manifest error.
(b) Subject to Section 4.04, if on any Computation Date the
Agent shall have determined that, due to a change in applicable rates
of exchange between Dollars and Offshore Currencies, either (a) the
Effective Amount of all L/C Obligations exceeds the L/C Commitment or
(b) the aggregate Dollar Equivalent principal amount of all Loans
- 8 -
<PAGE> 9
and L/C Obligations then outstanding exceeds the combined Commitments
of the Banks, then the Agent shall give notice to the Company which
states the Dollar Equivalent amount of any such excess and requires the
Company to Cash Collateralize or to make such mandatory prepayments as
required by Section 2.07.
(n) Schedule 3.03 of the Credit Agreement shall be amended by
deleting it and replacing it with "Schedule 3.03-- First Amendment" which is
attached to this Amendment which shall be dated as of the Closing Date.
(o) "Exhibit H -- Notice of Prepayment" shall be added to the
Credit Agreement in the form which is attached to this Amendment.
4. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
(c) All representations and warranties of the Company
contained in the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the
Agent and the Banks or any other Person.
5. Effective Date. This Amendment will become effective on the day (the
"Effective Date") when all of the following conditions precedent are satisfied:
(a) The Agent has received from the Company and each of the
Banks a duly executed original (or, if elected by the Agent, an executed
facsimile copy) of this Amendment.
(b) The Agent has received from the Company a copy of a
resolution passed by the board of directors of such corporation, certified by
the Secretary or an Assistant Secretary of such corporation as being in full
force and effect on the date
- 9 -
<PAGE> 10
hereof, authorizing the execution, delivery and performance of this Amendment.
(c) All representations and warranties contained
herein are true and correct as of the Effective Date.
6. Reservation of Rights. The Company acknowledges and agrees that
neither the Agent's nor the Banks' forbearance in exercising their rights and
remedies in connection with any breach or default under the Credit Agreement,
nor the execution and delivery by the Agent and the Banks of this Amendment,
shall be deemed (i) to create a course of dealing or otherwise obligate the
Agent or the Banks to forbear or execute similar waivers under the same or
similar circumstances in the future, or (ii) to waive, relinquish or impair any
right of the Agent or the Banks to receive any indemnity or similar payment from
any Person or entity as a result of any matter arising from or relating to any
such breach or default under the Credit Agreement.
7. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed
in accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Company shall bind such Bank or the
Company, respectively, with the same force and effect as the delivery of a hard
copy original. Any failure by the Agent to receive the hard copy executed
original of such document shall not diminish the binding effect of receipt of
the facsimile transmitted executed original of such document of the party whose
hard copy page was not received by the Agent.
- 10 -
<PAGE> 11
(e) This Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 11.01 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent and
the Banks, upon demand, for all costs and expenses (including allocated costs of
in-house counsel) incurred in connection with the development, preparation,
negotiation, execution and delivery of this Amendment, including without
limitation appraisal, audit, search and filing fees incurred in connection
therewith.
- 11 -
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
CALIFORNIA MICROWAVE, INC.
By: /s/_________________________________
Title:__________________________________
By: /s/_________________________________
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/_________________________________
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank, the Swingline Bank and the
Issuing Bank
By: /s/_________________________________
Title: Vice President
ABN AMRO BANK N.V.
By: ABN AMRO NORTH AMERICA, INC.,
as agent for ABN AMRO BANK
N.V.
By: /s/_________________________________
Title:__________________________________
By: /s/_________________________________
Title:__________________________________
- 12 -
<PAGE> 13
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/_________________________________
Title:__________________________________
- 1 -
<PAGE> 1
EXHIBIT 10.19
WAIVER AND SECOND AMENDMENT TO CREDIT AGREEMENT
THIS WAIVER AND SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment"),
dated as of August 12, 1996, is entered into by and among CALIFORNIA MICROWAVE,
INC. (the "Company"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
agent for itself and the Banks (the "Agent"), the Swingline Bank and the Issuing
Bank, and the several financial institutions party to the Credit Agreement
(collectively, the "Banks").
RECITALS
A. The Company, Banks, and Agent are parties to a Credit Agreement
dated as of December 21, 1995, as amended by that First Amendment to Credit
Agreement dated as of June 14, 1996, (the "Credit Agreement") pursuant to which
the Agent and the Banks have extended certain credit facilities to the Company.
B. The Company has reported to the Agent and the Banks the existence of
certain events of default under the Credit Agreement. The Company has requested
that the Banks waive certain events of default and agree to certain amendments
of the Credit Agreement.
C. The Banks are willing to waive certain defaults under
the Credit Agreement, and to amend the Credit Agreement, subject
to the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings, if any,
assigned to them in the Credit Agreement.
2. Defaults and Waiver.
(a) For purposes of this Amendment, the "Existing Defaults"
shall mean the default existing on this date under Section 9.01(c) of the Credit
Agreement solely as a consequence of a breach of the negative covenant set forth
at Section 8.15 as reported by the Company on July 16, 1996, with respect to its
financial position as of June 30, 1996.
(b) Subject to and upon the terms and conditions
hereof, the Banks hereby waive the Existing Defaults.
(c) Nothing contained herein shall be deemed a waiver
of (or otherwise affect the Agent's or the Banks' ability to
<PAGE> 2
enforce) any other default or Event of Default, including without limitation (i)
any default or Event of Default as may now or hereafter exist and arise from or
otherwise be related to the Existing Defaults (including without limitation any
cross-default arising under the Credit Agreement by virtue of any matters
resulting from the Existing Defaults), and (ii) any default or Event of Default
arising at any time after the Effective Date and which is the same as any of the
Existing Defaults.
3. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be amended by
adding the following defined term in its appropriate alphabetical place:
"Permitted Equipment Sale Financing" means any transaction (a)
pursuant to that certain Financing Program Agreement dated as of May 9,
1996, by and between BA Credit Corporation by which certain equipment
provided by the Company to third party users and related contracts are
purchased or financed by BA Credit Corporation or (b) pursuant to
similar arrangements to finance the acquisition or leasing by third
parties of equipment provided by the Company without recourse to the
Company; provided, however, that the aggregate amount of such purchases
and financings shall not exceed $20,000,000 in any fiscal year."
(b) Subsection 2.04(a) shall be amended by deleting it
and replacing it with the following:
"(a) The Company may, upon irrevocable written notice
to the Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the
case of Base Rate Loans, or as of the last day of the
applicable Interest Period, in the case of Offshore
Rate Loans, to convert any such Loans (or any part
thereof in an amount not less than $1,000,000, or
that is in an integral multiple of $500,000 in excess
thereof) into Loans of any other Type; or
(ii) elect as of the last day of the applicable
Interest Period, to continue any Offshore Rate Loans
having Interest Periods expiring on such day (or any
part thereof in an amount not less than $1,000,000,
or that is in an integral multiple of $500,000 in
excess thereof);
provided, that if at any time the aggregate amount of Offshore
Rate Loans in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part
- 2 -
<PAGE> 3
thereof to be less than $1,000,000, such Offshore Rate Loans
shall automatically convert into Base Rate Loans,
and on and after such date the right of the Company to
continue such Loans as, and convert such Loans into, Offshore
Rate Loans shall terminate."
(c) Section 8.01 of the Credit Agreement shall be
amended by:
(i) deleting the word "and" at the end of subsection (1)
thereof;
(ii) deleting the period at the end of subsection (m)
thereof and inserting "; and" in its place; and
(iii) adding a new subsection (n) thereto as follows:
"(n) Liens granted as a part of any
Permitted Equipment Sales Financing."
(d) Section 8.02 of the Credit Agreement shall be
amended by:
(i) deleting the word "and" at the end of subsection (c)
thereof;
(ii) deleting the period at the end of subsection (d)
thereof and inserting "; and" in its place; and
(iii) adding a new subsection (e) thereto as follows:
"(e) sales of equipment, receivables and/or
contract rights as a part of any Permitted
Equipment Sales Financing."
(e) Section 8.07 of the Credit Agreement shall be
amended by:
(i) deleting the period at the end of subsection (e)
thereof and inserting "; and" in its place; and
(ii) adding a new subsection (f) thereto as follows:
"Contingent Obligations undertaken as a part of
any Permitted Equipment Sales Financing."
(f) Section 8.15 shall be amended to read as follows:
- 3 -
<PAGE> 4
8.15 Funded Debt to EBITDA Ratio. The Company shall not permit
its Funded Debt to EBITDA Ratio to be greater than the number set forth
below as of the last day of each fiscal quarter as follows:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Funded Debt to EBITDA Ratio
--------------------- ---------------------------
<S> <C>
September 30, 1996 2.5 to 1.0
December 31, 1996 2.5 to 1.0
March 31, 1997 2.25 to 1.0
Each quarter's end thereafter 2.0 to 1.0
</TABLE>
4. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Banks as follows:
(a) Other than the Existing Defaults, no Default or
Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
(c) Other than with respect to the Existing Defaults, all
representations and warranties of the Company contained in the Credit Agreement
are true and correct.
(d) The Company is entering into this Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the
Agent and the Banks or any other Person.
5. Effective Date. This Amendment will become effective on
the day (the "Effective Date") when all of the following
conditions precedent are satisfied:
(a) The Agent has received from the Company and each of the
Majority Banks a duly executed original (or, if elected by the Agent, an
executed facsimile copy) of this Amendment.
(b) The Agent has received from the Company a copy of a
resolution passed by the board of directors of such corporation, certified by
the Secretary or an Assistant Secretary of such corporation as being in full
force and effect on the date hereof, authorizing the execution, delivery and
performance of this Amendment.
- 4 -
<PAGE> 5
(c) All representations and warranties contained
herein are true and correct as of the Effective Date.
(d) Company has paid to the Agent for the account of each of
the Banks the amount of Fifteen Thousand Dollars ($15,000) per Bank,
representing payment in full of a non-refundable amendment fee.
6. Reservation of Rights. The Company acknowledges and agrees that
neither the Agent's nor the Banks' forbearance in exercising their rights and
remedies in connection with the Existing Defaults, nor the execution and
delivery by the Agent and the Banks of this Amendment, shall be deemed (i) to
create a course of dealing or otherwise obligate the Agent or the Banks to
forbear or execute similar waivers under the same or similar circumstances in
the future, or (ii) to waive, relinquish or impair any right of the Agent or the
Banks to receive any indemnity or similar payment from any Person or entity as a
result of any matter arising from or relating to any such breach or default
under the Credit Agreement.
7. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed
in accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Company shall bind such Bank or the
Company, respectively, with the same force and effect as the delivery of a hard
copy original. Any failure by the Agent to receive the hard copy executed
original of such document shall not diminish the binding effect of receipt of
the facsimile transmitted executed original
- 5 -
<PAGE> 6
of such document of the party whose hard copy page was not received by the
Agent.
(e) This Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 11.01 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent and
the Banks, upon demand, for all costs and expenses (including allocated costs of
in-house counsel) incurred in connection with the development, preparation,
negotiation, execution and delivery of this Amendment, including without
limitation appraisal, audit, search and filing fees incurred in connection
therewith.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
CALIFORNIA MICROWAVE, INC.
By: /s/_________________________________
Title:__________________________________
By: /s/_________________________________
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/_________________________________
Title: Vice President
- 6 -
<PAGE> 7
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank, the Swingline Bank and the
Issuing Bank
By: /s/_________________________________
Title: Vice President
ABN AMRO BANK N.V.
SAN FRANCISCO INTERNATIONAL BRANCH
By: ABN AMRO NORTH AMERICA, INC.,
as agent for ABN AMRO BANK
N.V.
By: /s/_________________________________
Title:__________________________________
By: /s/_________________________________
Title:__________________________________
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/_________________________________
Title:__________________________________
- 7 -
<PAGE> 1
EXHIBIT 10.20
SINGLE-TENANT LEASE-NET
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
June 30, 1995, is made by and between Chamberlain Development, L.L.C., an
Arizona limited liability company ("LESSOR") and EF Data Corporation, a wholly
owned subsidiary of California Microwave, Inc. ("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 by the street address of _______________________________ located in the
County of Maricopa, State of Arizona and generally described as a 74,280 square
foot two story office/manufacturing facility ("PREMISES"). (See paragraph 2 for
further provisions.)
1.3 TERM: 10 (ten) years and 0 (zero) months ("ORIGINAL TERM")
commencing January 1, 1996 ("COMMENCEMENT DATE") and ending December 31, 2006
("EXPIRATION DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION: _____________________________________________
("EARLY POSSESSION DATE"). (See Paragraphs 3.2 and 3.3 for further provisions.)
1.5 BASE RENT: Approximately $37,500.00 per month ("BASE RENT"), plus
applicable sales tax, payable on the 1st day of each month commencing January 1,
1996 determined pursuant to Exhibit "C" attached hereto. (See Paragraph 51.)
[ ] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted. (See Paragraph 51.)
1.6 BASE RENT PAID UPON EXECUTION: $38,981.25 ($37,500.00 plus
applicable sales tax (.0395) of $1,481.25) as Base Rent for the first month of
the lease term.
1.7 SECURITY DEPOSIT: None.
1.8 PERMITTED USE: Sales and manufacturing of microwave and satellite
communication equipment. (See Paragraph 6 for further provisions.)
1.9 INSURING PARTY: Lessee is the "INSURING PARTY". (See Paragraph 8
for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationship exist in this
transaction and are consented to by the Parties (check applicable boxes):
______________________________________________________________________represents
[ ] Lessor exclusively ("LESSOR'S BROKER"); [ ] both Lessor and Lessee, and
______________________________________________________________________represents
[ ] Lessee exclusively ("LESSEE'S BROKER"); [ ] both Lessee and Lessor.
(See Paragraph 15 for further provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by California Microwave ("GUARANTOR"). (See Paragraph 37 for
further provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 56 and Exhibits A, B, and C, all of which constitute a
part of this Lease.
Initials____
____
-1-
<PAGE> 2
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 square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, 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 Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of the Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement 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. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from the 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 Commencement Date, correction of that
non-compliance shall be the obligation of Lessee at Lessee's sole cost and
expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
satisfied itself with respect to the condition of the Premises (including but
not limited to the electrical and fire sprinkler systems, security,
environmental aspects, compliance with Applicable Law, as defined in Paragraph
6.3) and the present and future suitability of the Premises for Lessee's
intended use, (b) that Lessee has made such investigations it deems necessary
with reference to such matters and assumes all responsibility therefor as the
same relate to Lessee's occupancy of the Premises and/or the term of this Lease,
and (c) that neither Lessor, nor any of Lessor's agents, has made any oral or
written representations or warranties with respect to the said matters other
than as set forth in this Lease.
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 prorated 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
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Premises) shall be in effect during such period. Any such early possession shall
not affect nor advance the Expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reasons Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability thereof, nor shall such failure affect the validity of his Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as my be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does not terminate this Lease, as aforesaid, the period
free of the obligation to pay Base Rent, if any, that Lease 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, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent
or charges, as the same may be adjusted from time to time, 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 under the terms of this Lease. Base Rent and
all other rent and charges 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 the calendar month involved. Payment of Base Rent and other
charges shall be made to Lessor at its address stated herein or to such other
persons or at such other addresses as Lessor may from time to time designate in
writing to Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), 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 for any liability, cost, expense, loss or
damage (including attorneys' fees) 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 moneys
with Lessor sufficient to restore said Security Deposit to full amount required
by this Lease. Any time the Base Rent increases during the term of this lease,
Lessee shall, upon written request from Lessor, deposit additional moneys with
Lessor sufficient to maintain the same ratio between the Security Deposit and
the Base Rent as those amounts are specified in the Basic Provisions. Lessor
shall not be required to keep all or any part of the Security Deposit separate
from its general accounts. Lessor shall, at the expiration of earlier
termination of the term hereof and after Lessee has vacated the Premises, return
to Lessee (or, at
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Lessor's option, to the last assignee, if any of Lessee's interest herein), that
portion of the Security Deposit not used or applied by Lessor. Unless otherwise
expressly agreed in writing by Lessor, no part of the Security Deposit shall be
considered to be held in trust, to bear interest or other increment for its use,
or to be prepayment for any moneys to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material, or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation spill, release or effect, 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 liability of Lessor to any governmental agency
or third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products or fractions thereof. Lease
shall not engage in any activity in, on or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3). "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. Reportable Use shall
also included Lessee's being responsible for the presence in, on or about the
Premises of Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used by Lessee in the
normal course of Lessee's business permitted on the Premises, so long as such
use is not a Reportable Use and does may not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous substance,
activity or storage tank by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems, necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom to therefor including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
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(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or resulting
from same, 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. Lessee shall also immediately give Lessor a copy
of any statement, report, notice, registration, application, permit, business
plan, license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, concerning the presence, spill, release, discharge of, or exposure to,
any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 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 (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier 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 or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registration, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law 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 failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined
in paragraph 8.3(a)) 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
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor
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with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS. (See Paragraph 53 for additional requirements.)
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the Provisions of Paragraphs 2.2 (Lessor's warranty
as to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc.),
7.2 (Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair, structural and non-structural (whether or not such portion of the
Premises requiring repair, 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, without limiting the generality of the
foregoing, all equipment or facilities serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities,
boilers, fired or unfired pressure vessels, fire sprinkler and/or standpipe and
hose or other automatic fire extinguishing system, including fire alarm and/or
smoke detection systems and equipment, fire hydrants, 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, about, or adjacent to the
Premises. 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, the elements
surrounding same, or neighboring properties, that was caused or materially
contributed to by Lessee, or pertaining to or involving any Hazardous Substance
and/or storage tank brought onto the Premises by or for Lessee or under this
control. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. 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. If Lessee occupies the Premises for seven (7) years or
more, Lessor may require Lessee to repaint the exterior of the buildings on the
Premises as reasonably required, but not more frequently than once every seven
(7) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, in customary form and substance for, and with contractors
specializing and experienced in, the inspection, maintenance and service of the
following equipment and improvements, if any, located on the Premises: (i)
heating, air conditioning and ventilation equipment, (ii) boiler, fired or
unfired pressure vessels, (iii) fire sprinkler and/or standpipe and hose or
other automatic
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fire extinguishing system, including fire alarm and/or smoke detection, (iv)
landscaping and irrigation systems, (v) roof covering and drain maintenance and
(vi) asphalt and parking lot maintenance.
7.2 LESSOR'S OBLIGATIONS. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non-structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. 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. Lessee and Lessor expressly waive the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with the respect to, or which affords Lessee the right to
make repairs at the expense of Lessor or to terminate this Lease by reason of,
any needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS"
is used in this Lease to refer to all air lines, power panels, electric
distribution, security, fire protection systems, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about 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 on the Premises from that which
are provided by Lessor under the terms of this Lease, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "LESSEE OWNED
ALTERATIONS AND/OR UTILITY INSTALLATION" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor as defined
in Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations in, on, under or about 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), 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 the term of this
Lease as extended does not exceed $25,000.
(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 proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requests Alteration or Utility
Installation that costs $10,000 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-
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half times the estimated cost of such Alteration or Utility Installation and/or
upon Lessee's posting an additional Security Deposit with Lessor under Paragraph
36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished to or for Lessee at or for use on the Premises,
which claims are or may be secured by any mechanics' 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, or about
the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall, in
good faith, 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 against the Lessor or the
Premises. If Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to lessor 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, as required by law for the holding of the Premises free from the
effect of such lien or claim. In addition, Lessor may require Lessee to pay
Lessor's attorney's fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. All Alterations and Utility Additions made to the
Premises by Lessee shall be the property of and owned by Lessee, but considered
a part of the Premises. Lessor may, at any time and at its option, elect in
writing to Lessee to be the owner of all or any specified part of the Lessee
Owned Alterations and Utility Installations. All Lessee Owned Alterations and
utility Installations shall, at the expiration or earlier termination of this
Lease, become the property of Lessor and remain upon and be surrendered by
Lessee with the Premises.
(b) REMOVAL. Lessor may require the removal at any time of all or
any part of any Lessee Owned Alteration or Utility Installations made without
the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, with
all of the improvements, parts and surfaces thereof 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 or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
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 ground water contaminated by Lessee, all as
may then be required by Applicable Law and/or good practice. Lessee's Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee
subject to its obligation to repair and restore the Premises per this Lease.
8. INSURANCE INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee
is the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $5,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond
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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
for any amount due.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving 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 $5,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" 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 required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be 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. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in paragraph 8.2(a),
above, in addition to, and not 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 during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trust or ground leases on the Premises ("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 Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature of age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alternations and Utility Installations 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 a physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Premises required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
or 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
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exceed $25,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss, as defined in Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy in the name of Lessor, with
loss payable to Lessor and Lender(s), insuring the loss of the full rental and
other charges payable by Lessee to Lessor under this Lease for (1) year
(including all real estate taxes, insurance costs, and any scheduled rental
increases). Said insurance shall provide that in the event the Lease is
terminated by reason of any repairs or replacement of the Premises, to provide
for one full year's loss of rental revenues 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 rental income, property taxes, insurance premium costs and other
expenses, if any, 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 if the Premises are part 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.
(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible not to exceed $25,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by the insurance required by this Paragraph 8.4 and shall
provide Lessor with written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed 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, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. 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
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payable by Lessee to Lessor upon demand. If the Insuring Party shall fail to
procure and maintain the insurance required to be carried by the Insuring Party
under this Paragraph 8, the other Party may, but shall not be required to,
procure and maintain the same, but at Lessee's expense.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, 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,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or damages, arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessees business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default of Breach by Lessee in the performance in a timely manner
of any obligation of Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall 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 so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Except for negligence of
Lessor, its agents, contractors, employees, or invitees, 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, air conditioning 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 and regardless of whether the cause
of such damage or injury or the means of repairing the same is accessible or
not. 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, the repair cost of which damage or destruction is less
than 50% of the then replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
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(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the Premises, other than Lessee Owned Alterations and Utility Installations
the repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations,
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 building codes, ordinances or
laws, 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 the insurance
proceeds available to Lessee 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, the shortage in proceeds was due to the fact that, by reasons 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 Lessor does
not receive such funds or assurance within said period, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to 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. If in such case Lessor does not so elect then this Lease shall terminate
sixty (60) days following the occurrence of the damage or destruction. Unless
otherwise agreed, Lessee shall in no event have any right to reimbursement from
Lessor for 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 rather than Paragraph 9.2, 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.
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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 and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, 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) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date thirty (30) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said 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 and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision thereof, if
a Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate effective on the date
of such Premises Total Destruction, whether or not the damage or destruction is
an Insured Loss or was caused by a negligent or willful act of Lessee. In the
event, however, that the damage or destruction was caused by Lessee, Lessor
shall have the right to recover Lessor's damages from Lessee except as released
and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is a damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided however, 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, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("EXERCISE PERIOD"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds for adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
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 said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage-Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges,
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if any, payable by Lessee hereunder for the period during which such damage, its
repair or the restoration continues (not to exceed the period for which rental
value insurance is required under Paragraph 8.3(b)), shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired.
Except for abatement of Base Rent, Real Property Taxes, insurance premiums, and
other charges, if any, as aforesaid, all other obligations of Lessee hereunder
shall be performed by Lessee, and Lessee shall have no claim against Lessor for
any damage suffered by reason of any such repair or restoration unless such
damage occurs as a proximate result of negligence of Lessor, its agents,
contractors, employees or invitees.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises 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 actual notice of Lessee's election to
terminate this Lease on a date not less than thirty (30) days following the
giving of such notice. If Lessee gives such notice to Lessor and such lenders
and repair or restoration is not commenced within thirty (30) days after receipt
of such notice, this Lease shall terminate as of the date specified in said
notice. If Lessor or lendor commences the repair or restoration of the Premises
within thirty (30) days after receipt of such notice, this Lease shall continue
in full force and effect. "COMMENCE" as used in this Paragraph 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 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under 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 investigate
and 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 giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lease shall have the right within ten (10) days after the receipt of such notice
to give written notice to Lessor of Lessor's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance within thirty (30) days following Lessee's said
commitment. In such event this Lease shall continue in full force and effect,
and Lessor shall proceed to make such investigation and remediation as soon as
reasonably possible and the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within the
times specified above, this Lease shall terminate as of the date specified in
Lessor's notice of termination. If a Hazardous Substance Condition occurs for
which Lessee is not legally responsible, there shall be abatement of Lessee's
obligations under this Lease to the same extent as provided in Paragraph 9.6(a)
for a period of not to exceed twelve months.
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9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this 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 such much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor under the
terms of this Lease.
9.9 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 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand. See Paragraph 54 for additional requirements.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable to
the Premisses, and to require such current year's Real Property Taxes to be paid
in advance to Lessor by Lessee in a lump sum amount equal to the installment
due, not more than twenty (20) days prior to the applicable delinquency date.
All moneys paid to Lessor under this Paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a Breach by Lessee
in the performance of the obligations of Lessee under this Lease, then any
balance of funds paid to Lessor under the provisions of this Paragraph may,
subject to proration as provided in Paragraph 10.1(a), at the option of Lessor,
be treated as an additional Security Deposit under Paragraph 5.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"Real Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any commercial rental tax
(other than inheritance, personal, income or estate taxes) imposed upon the
Premises by any authority having the direct or indirect power to tax, including
any city, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, or levied against
any legal or equitable interest of Lessor or Lessee in the Premises or against
Lessee's Alterations, Utility Improvements or Trade Fixtures, and any change or
assessment of any kind whatsoever resulting from the Premises inclusions in any
property owners association.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable portion of the Real Property Taxes for
all of the land and improvements included within the tax parcel assessed, such
proportion to be determined by Lessor from the respective valuations assigned in
the assessor's work sheets or such other information as may be reasonably
available. Lessor's reasonable determination thereof, in good faith, shall be
conclusive.
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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 contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal 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 the Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property or, at Lessor's option, as provided in Paragraph
10.1(b).
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 changes jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively "ASSIGNMENT")
or sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written 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 unconsented to assignment or subletting as a noncurable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), increase the monthly Base Rent to
fair market value or one hundred ten percent (110%) of the Base Rent then in
effect, whichever is greater. Pending determination of the new fair market
value, if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's
Notice, with any overpayment credited against the next installment(s) of Base
Rent coming due, and any underpayment for the period retroactively to the
effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and market value
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lessee being considered an encumbrance or any deduction or
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever is greater, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect immediately prior to the market
value adjustment.
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
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of any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any 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 any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent subletting and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent,
and such action shall not relieve such persons from liability under this Lease
or sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including the sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
(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.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, 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 in writing.
(g) Lessor, as a condition to giving its consent to any assignment
or subletting, may require that the amount and adjustment structure of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment structure for property similar to the Premises as then constituted.
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 rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of
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Lessee's obligations to such sublessee under such sublease. 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 the rents and other charges due
and to become due under the sublease. Sublessee shall rely upon any such
statement and request from Lessor and shall pay such rents and other charges to
Lessor without any obligation or right to inquire as to whether such Breach
exists and notwithstanding any notice from or claim from Lessee to the contrary.
Lessee shall have no right or claim against said sublessee, or, until the Breach
has been cured, against Lessor, for any such rents and other charges so paid by
said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any 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 other prior Defaults
or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(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. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "DEFAULT" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "BREACH"
is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, and shall entitle Lessor to pursue the remedies set forth in Paragraphs
13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee 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 receipt of written notice thereof by or on behalf of
Lessor to Lessee.
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(c) Except as expressly otherwise provided in this Lease, the
failure to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of: (i) the inspection, maintenance and service
contracts required under Paragraph 7.1(b); (ii) the recision of an unauthorized
assignment or subletting per Paragraph 12.1(b); (iii) a Tenancy Statement per
Paragraphs 16 or 37; (iv) the subordination or non-subordination of this Lease
per Paragraph 30; (v) the guaranty of the performance of Lessee's obligations
under this Lease if required under Paragraphs 1.11 and 37; (vi) the execution of
any document requested under Paragraph 42 (easements); or (vii) 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 receipt of written notice by or on behalf of Lessor 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,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c) above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; 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 of this Lease by Lessee 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
by Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's become 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 the 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 by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder 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 breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with 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 affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of any emergency, without notice), Lessor may at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including but not limited to the
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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 to Lessor upon invoice therefore.
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 under this Lease by Lessee to be made only by cashier's check. In the event
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, 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, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of 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 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 the
leasing commission paid by Lessor 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 prior sentence shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's
Default or Breach of this Lease shall not waive Lessor's right to recover
damages under this Paragraph. If termination of this Lease is obtained through
the provisional remedy of unlawful detainer, Lessor shall have the right to
recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not previously
given, a notice to pay rent or quit, or perform or quit, as the case may be,
given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period
purposes required by subparagraphs 13.1(b), (c) or (d). In such case, the
applicable grace period under subparagraphs 13.1(c), (c) or (d) and under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, 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 in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
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(c) Pursue any other remedy now or thereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) 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 IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for
giving or paying by Lessor to or for Lessee of any case 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 to be performed and observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1 any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no future 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,
and recoverable by Lessor as additional rent due under this Lease,
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 to Lessor of rent and other sums due hereunder 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 terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee on the fifth day of
each month then, without any requirement for notice to Lessee, Lessee shall pay
to Lessor a late charge equal to one percent (1%) of 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 late payment by Lessee.
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, not prevent
Lessor from exercising any of the other rights and remedies granted hereunder.
13.5 BREACH BY LESSOR. 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 13.3, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises 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 after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
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 (all of which are herein called "CONDEMNATION"), this Lease shall
terminate
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as to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, 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 the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation, separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. BROKER'S FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessee shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessee
and said Brokers (or in the event there is no separate written agreement between
Lessee and said Brokers, the sum of $ by separate agreement) for
brokerage services rendered by said Brokers to Lessee in this transaction.
15.3 (deleted)
15.4 (deleted)
15.5 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 named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
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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 an such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days
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 "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, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of such
Guarantors as may be reasonably required by such lender or purchaser and are
reasonably available by Lessee. 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. LESSOR'S LIABILITY. 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 in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. 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 hereinafter defined.
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 another provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date of which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. 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.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
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 owner investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
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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.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) 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 21. The addressees noted adjacent to Party's signature on this Lease
shall be that Party's address for delivery or mailing of notice purposes. Either
Party may by written notice to the other specify a different address for notice
purposes, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate by
written notice to Lessee.
23.2 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 guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a 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 hereto 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. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statement 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 or taxes 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 earlier termination of
this Lease.
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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. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
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 by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice the cure of
said default before invoking any remedies Lessee may have by reason thereof. If
any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall given 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 provision 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 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 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 assurance (a "NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession 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 attorn to the record owner of the Premises.
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
such subordination or non-subordination, attornment, and/or non-disturbance
agreement as provided herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) or Broker 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,
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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' fee 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. Lessor shall be entitled to
attorneys' fees, costs and expenses incurred in the preparation and service of
notice 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
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 or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without first having obtained Lessor's prior written
consent. Notwithstanding anything to the contrary in this Lease, Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to grant such consent.
34. SIGNS. Lessee shall not place any signs upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations).
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, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election 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.
(a) Except for Paragraph 33 hereof (Auctions) or 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' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount
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of money (in addition to the Security Deposit held under Paragraph 5),
reasonably calculated by Lessor to represent the cost Lessor will incur in
considering and responding to Lessee's request. Except as otherwise provided,
any unused portion of said deposit shall be refunded to Lessee without interest.
Lessor's consent to any act, assignment of this Lease or subletting of the
Premises by Lessee 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.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. 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.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph
1.11, the form of the guaranty to be executed by each such Guarantor shall be
the form mutually agreeable to Lessor and Lessee and each said Guarantor shall
have the same obligations as Lessee under this Lease, including but not limited
to the obligation to provide the Tenancy Statement and information called for by
Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if
any such Guarantor fails or refuses, upon reasonable request by Lessor to give:
(a) evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signature of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the observance 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 of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39, the word "OPTION" has
the following meaning: (a) the right to extend the term of this Lease or to
renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal to lease the Premises or the
right of first offer to lease the Premises or the right of first refusal to
lease other property of Lessor or the right of first offer to lease other
property of Lessor; (c) the right to purchase the Premises, or the right of
first refusal to purchase the Premises, or the right of first offer to purchase
the Premises, or the right to purchase other property of Lessor, or the right of
first refusal to purchase other property of Lessor, or the right of first offer
to purchase 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 named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
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assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
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 to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary; (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of Default under Paragraph 13.1, whether or not
the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of this 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) All rights of Lessee under the provisions of 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 during the term of
this Lease (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for
a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three or more notices of Default under Paragraph 13.1 during any twelve
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 part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, 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
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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 under the provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general
or limited partnership, 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. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor 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 Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed 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. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. 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 an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
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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.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE
OF ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION
OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE
PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO
THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY
IS LOCATED IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE
WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
<TABLE>
<S> <C>
Executed at 505 S. Madison, TX Executed at Tempe, AZ
------------------------------------- -----------------------------------------
on August 2, 1995 on July 24, 1995
---------------------------------------------- --------------------------------------------------
by LESSOR: by LESSEE:
EF Data Corporation
- ------------------------------------------------- -----------------------------------------------------
- ------------------------------------------------- -----------------------------------------------------
By /s/ Jim Chamberlain By /s/ Stephen W. Atkins
---------------------------------------------- --------------------------------------------------
Name Printed: Jim Chamberlain Name Printed: Stephen W. Atkins
----------------------------------- ---------------------------------------
Title Printed: Member Title Printed: Vice President Finance and CFO
---------------------------------- --------------------------------------
By /s/ Patsy Chamberlain By
---------------------------------------------- --------------------------------------------------
Name Printed Patsy Chamberlain Name Printed:
------------------------------------ ---------------------------------------
Title Printed: Member Title Printed:
---------------------------------- --------------------------------------
Address: Address:
---------------------------------------- --------------------------------------------
- ------------------------------------------------- -----------------------------------------------------
Tel. No. ( ) Fax No. ( ) Tel. No. ( ) Fax No. ( )
--- --------- --- ---------- --- ----------- --- ------------
</TABLE>
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ADDENDUM TO STANDARD INDUSTRIAL LEASE/COMMERCIAL
SINGLE-TENANT LEASE - NET
49. PREMISES.
The Premises shall include the real property described in Exhibit "A"
attached hereto, containing approximately _________ square feet,
together with an industrial building (the "Building") to be erected
thereon by Lessor. The Building shall be erected substantially in
accordance with the plans and specifications prepared in conformity
with the site plan, floor plan, and elevations described in Exhibit "B"
attached hereto (the "Approved Plans and Specifications") (subject to
possible minor deviations therefrom), as they may be modified as
hereinafter provided.
50. TERM.
The term of this Lease (the "Term") shall be for ten (10) years (plus
the partial month at the beginning of the Term if the Term Commencement
Date is a day other than the first day of a calendar month), unless
this Lease is sooner terminated as hereinafter provided. The Term shall
commence on the date the Improvements are deemed completed in
accordance with Paragraph 52 (the "Term Commencement Date").
Notwithstanding the foregoing, if Lessee takes possession of or begins
to use the Premises or any part thereof prior to the Term Commencement
Date (as defined herein), the Term of this Lease shall commence on the
date such possession or use begins. Upon the commencement of the Term,
Lessor and Lessee shall execute an amendment to this Lease specifying
the commencement date and expiration date of the Term.
51. RENTAL ADJUSTMENTS.
Notwithstanding anything in the contrary contained in the Lease, the
Base Rent commencing with the sixty-first (61st) month of the term of
the Lease shall be the lesser of (a) $37,500.00 times a fraction the
numerator of which is the Adjustment Month Index (as hereinafter
defined) and the denominator of which is the Base Month Index (as
hereinafter defined; or (b) $37,500.00 x 1.06 x 1.06 x 1.06). The
Adjustment Month Index is defined as the Consumer Price Index as
established by the Center for Business Research, College of Business,
Arizona State University for the Phoenix metropolitan area (the
"Index") as of the last day of the sixtieth (60th) month of the term of
the Lease. The Base Month Index is defined as the Index as of the first
(1st) month of the term of the lease. Applicable sales tax will be
added to all rental amounts referred to above.
52. OPTION TO RENEW.
Lessee shall have the Option to extend the Expiration Date of this
Lease for sixty (60) months by giving notice to Lessor six (6) months
prior to the Expiration Date. Notwithstanding anything to the contrary
contained in the Lease, the Base Rent commencing with the one-hundred
twenty first (121st) month of the term of the Lease shall
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be the lesser of: (a) the Base Rent in the one-hundred twentieth
(120th) month times a fraction the numerator of which is the Adjustment
Month Index (as hereinafter defined) and the denominator of which is
the Base Month Index (as hereinafter defined); or (b) the Base Rent in
the one-hundred twentieth (120th) month x 1.06 x 1.06 x 1.06 x 1.06 x
1.06). The Adjustment Month Index is defined as the Consumer Price
Index as established by the Center for Business Research, College of
Business, Arizona State University of the Phoenix metropolitan area
(the "Index") as of the last day of the one-hundred twentieth (120th)
month of the term of the Lease. The Base Month Index is defined as the
Index as of the sixty-first (61st) month of the term of the lease.
Applicable sales tax will be added to all rental amounts referred to
above.
53. ADDITIONAL MAINTENANCE REQUIREMENTS.
Lessee shall maintain a contract with a fire sprinkler maintenance
company that provides quarterly inspections of the fire sprinklers on
the Premises. Lessee shall provide a copy of the contract and copies of
the quarterly inspection reports to Lessor.
This Building will have a limited roof warranty of ten (10) years from
the roofing material supplier. Lessee shall maintain a contract with a
roof maintenance company that provides for two (2) yearly inspections,
the sealing of all roof protrusions, and any necessary repairs,
including without limitation caulking or adhesive work. Lessee shall
provide copies of the contract and copies of all inspection reports to
Lessor.
Lessee shall keep all roof drains and scuppers free of debris and shall
promptly notify the roof warranty company and/or roof maintenance
company of all additional protrusions made by Lessee.
54. PROPERTY TAXES.
Lessee will receive a bill in October of each year for the year's
property taxes to be paid to Lessor in two installments. This bill will
include sales tax on the property taxes as required by the State and
City.
Lessor shall have the option to appeal tax valuations each year. In the
event the tax appeal service obtains a reduction in the assessor's
value as originally published for that year, Lessee shall reimburse
Lessor the fee paid to the tax service.
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EXAMPLE:
<TABLE>
<S> <C>
Property tax before appeal: $10,000.00
Property tax after appeal: $ 9,000.00
Tax savings: $ 1,000.00
Tax service fee: $ 350.00
Total tax savings for Lessee: $ 650.00
</TABLE>
55. LESSOR'S CONSENT TO INSTALLATION OF NITROGEN TANKS.
Lessor hereby consents to the installation of above ground storage
tanks for nitrogen gas as shown on the Approved Plans and
Specifications.
56. EARLY TERMINATION.
Provided Lessee is not in default hereunder, and provided Lessee has
been unable to negotiate a lease extension on its facility at 2105 W.
5th Place, Tempe, Arizona, 85281, Lessee shall have the right and
option to terminate the Lease effective August 31, 2001 upon
presentation of written notice to Lessor of its intent to terminate the
Lease prior to August 31, 2000.
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Exhibit "A"
LEGAL DESCRIPTION
PARCEL NO. 1:
Lot 25, UNIVERSITY INDUSTRIAL PARK, according to Book 177 of Maps, page 3,
records of Maricopa County, Arizona.
PARCEL NO. 2:
That part of the exception to the UNIVERSITY INDUSTRIAL PARK, a portion of the
Southwest quarter of Section 17, Township 1 North, Range 4 East of the Gila and
Salt River Base and Meridian, Maricopa County, Arizona, as recorded in Book 177
of Maps, page 3, records of Maricopa County, Arizona, described as follows:
COMMENCING at the Southeast corner of said Southwest quarter of Section 17;
thence South 88 degrees 52 minutes 43 seconds West, along the South line of said
Southwest quarter of Section 17, a distance of 33.00 feet; thence North 01
degrees 29 minutes 13 seconds West, parallel to and 33.00 feet Westerly from the
East line of the said Southwest quarter of Section 17, a distance of 455.00 feet
to the TRUE POINT OF BEGINNING; thence South 88 degrees 52 minutes 43 seconds
West, parallel to the South line of the said Southwest quarter of Section 17, a
distance of 250.00 feet; thence North 01 degree 29 minutes 13 seconds West,
430.00 feet; thence North 88 degrees 52 minutes 43 seconds East, 250.00 feet to
a point 33.00 feet Westerly from the said East line of the Southwest quarter of
Section 17; thence South 01 degree 29 minutes 13 seconds East, 430.00 feet to
the TRUE POINT OF BEGINNING;
EXCEPT the South 270.00 feet of the East 185.00 feet; and
EXCEPT the South 82.69 feet of the West 65.00 feet.
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Exhibit "B"
Attached to and made a part of that certain Single Tenant Lease - Net by and
between Chamberlain Development, L.L.C. as Lessor and EF Data Corporation as
Lessee dated June 30, 1995.
The Approved Plans and Specifications shall consist of plans and specifications
approved pursuant to that certain Standard Form of Agreement between EF Data
Corporation, as Owner, and Sun State Builders, as contractor, dated July 7,
1995.
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Exhibit "C"
CALCULATION OF BASE RENT
Attached to and made a part of that certain Single Tenant Lease - Net by and
between Chamberlain Development, L.L.C. as Lessor and EF Data Corporation as
Lessee dated June 30, 1995.
The Initial Monthly Base Rent pursuant to Paragraph 1.5 shall be equal to ten
percent (10%) of the Purchase Price determined pursuant to that certain
Agreement to Purchase and Sell Real Property dated July 7, 1995 by and between
Lessor and Lessee divided by 12. As an example, if the Purchase Price is
$4,500,000,000, the Initial Monthly Base Rent shall be $37,500.00 per month.
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<PAGE> 1
EXHIBIT 10.21
LEASE
between
FIRST FLIGHT LIMITED PARTNERSHIP
T/A TOPFLIGHT AIRPARK, Landlord
and
CALIFORNIA MICROWAVE, INC.
AIRBORNE SYSTEMS INTEGRATION DIVISION, Tenant
TABLE OF CONTENTS
INTRODUCTION
ARTICLE I - PREMISES AND TERM
1.1 Premises
1.2 Term
1.3 Commencement of Possession
ARTICLE II - RENTAL
2.1 Basic Rent
2.2 Consumer Price Index
2.3 Real Estate Tax
2.4 Payments for Utilities Usage
2.5 Gross Receipts Taxes
ARTICLE III - USE AND OCCUPANCY
3.1 Use of Premises
3.2 Tenant Requirements for Space Improvements
3.3 Alterations
3.4 Fixtures, Etc.
3.5 Signs, Weight, Moving, Etc.
3.6 Access
3.7 Rules and Regulations
3.8 Subletting and Assignment
3.9 Compliance with Laws and Regulations,
Hazardous Substances, and Environmental
Matters
ARTICLE IV - MAINTENANCE, REPAIRS, SERVICES AND UTILITIES
4.1 Services and Utilities
4.2 Maintenance and Repairs
ARTICLE V - INSURANCE, DAMAGES AND CONDEMNATION
5.1 Insurance and Indemnification
5.2 Damage by Tenant
5.3 Water Damage, Etc.
5.4 Other Damages
5.5 Damage by Fire or Casualty
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5.6 Condemnation
ARTICLE VI - SURRENDER OF PREMISES
6.1 Surrender and Restoration
6.2 Tenant Holding Over
6.3 Security Deposit
ARTICLE VII - DEFAULTS
7.1 Defaults and Remedies
7.2 Bankruptcy
7.3 Landlord's Liability
ARTICLE VIII - LANDLORD'S MORTGAGE
8.1 Subordination
8.2 Tenant's Estoppel Certificate
8.3 Notice to Mortgagee
ARTICLE IX - MISCELLANEOUS PROVISIONS
9.1 NonConstructive Waiver
9.2 Broker's Commission
9.3 Waiver of Trial by Jury
9.4 Attorney's Fees
9.5 Time of Essence
9.6 Governing Law
9.7 Force Majeure
9.8 Notices
9.9 Successors and Assigns
9.10 Corporate Tenants
9.11 Gender and Number
9.12 Section Headings
9.13 Entire Agreement
9.14 Landlord's Consent
Exhibit A
Exhibit B
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THIS LEASE made this 1st day of January, 1996, by and
between FIRST FLIGHT LIMITED PARTNERSHIP, T/A TOPFLIGHT AIRPARK, hereinafter
called "Landlord", whose principal office is located at 1376 Old Bridge Rd.,
Woodbridge, Virginia 22192 and CALIFORNIA MICROWAVE, INC. AIRBORNE SYSTEMS
INTEGRATION DIVISION, hereinafter called "Tenant", whose principal office is
located at 1362 Brass Mill Rd., Belcamp, MD 21017.
WITNESSETH:
ARTICLE I - PREMISES AND TERM
1.1 Premises.
Landlord, for and in consideration of the covenants and
agreements hereinafter set forth and the rent hereinafter reserved, has, and
does hereby lease, unto Tenant and Tenant, subject to the terms and conditions
herein contained, hereby leases from Landlord, 94,900 square feet, the space
described as follows: Executive Hangar, consisting of approximately 87,500
square feet of gross floor area including storage areas on the main floor, and
7,400 square feet of gross floor area in Building 7A (hereinafter called the
"Building") in the complex known as the TOPFLIGHT AIRPARK located on Showalter
Road at the Washington County Regional Airport in Washington County, Maryland,
as illustrated in Exhibit "A" attached hereto, such leased space being
hereinafter referred to as the "Leased Premises". For purposes of computation,
the Landlord shall define "Landlord Area" as 850,000 square feet.
1.2 Term.
Subject to the provisions hereof, the term of this Lease
shall be for a term of three (3) years, commencing on the 1st day of January,
1996 and ending on the 31st day of December, 1998, both dates inclusive. At the
expiration of the initial lease term, the tenant shall have the option of three
(3) one year extensions. If the tenant chooses to exercise any of the one year
extensions, tenant must provide landlord written notice 60 days prior to the
expiration of the then current lease term.
1.3 Commencement of Possession.
If Landlord shall be unable to give possession of the Leased
Premises on the date of the commencement of the term hereof by reason of the
fact that a certificate of occupancy has not been obtained or if Landlord is
unable to give possession of the Leased Premises on the date of commencement of
the term hereof by reason of holding over or retention of possession of any
tenant or occupant, or if repairs, improvements or decoration of the Leased
Premises, or of the Building, are not completed, or for any other
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reason, Landlord shall not be subject to any liability for failure to give
possession on said date. Under such circumstances, the rent reserved and
covenanted to be paid herein shall not commence until possession of the Leased
Premises is given or the Leased Premises are available for occupancy by Tenant,
and no such failure to give possession on the date of commencement of the term
shall in any other respect affect the validity of this Lease or the obligations
of Tenant hereunder. However, if by the scheduled commencement date the Leased
Premises are not ready for Tenant's occupancy, the expiration date of this Lease
shall be extended for the number of days that elapse between such date and the
date possession of the Leased Premises fully completed and ready for occupancy
is tendered to Tenant, or as soon thereafter as the space is ready for
occupancy. If permission is given to Tenant to enter into the possession of the
Leased Premises or to occupy premises other than the Leased Premises prior to
the date specified as the commencement of the term of this Lease, Tenant
covenants and agrees that such occupancy shall be deemed to be under all the
terms, covenants, conditions and provisions of this Lease. In any event,
Landlord shall give possession of the Leased Premises within thirty days; the
sole remedy for failure to do so is termination of the contract.
ARTICLE II - RENTAL
2.1 Basic Rent.
(a) Tenant covenants and agrees to pay to Landlord for the
first year of the term hereof, but subject to adjustments as hereinafter
provided, an annual basic rent, hereinafter called "Basic Rent", of THREE
HUNDRED NINETY FOUR THOUSAND FOUR HUNDRED DOLLARS ($394,400) per annum, payable
in equal monthly installments of THIRTY TWO THOUSAND EIGHT HUNDRED SIXTY-SIX
66/100 DOLLARS ($32,866.66) in advance of the first of each calendar month
during the term hereof. If this Lease shall commence on the date other than the
first day of the month, the rent for such month shall be pro-rated and a portion
of the first rental payment shall be credited to the second month's rent. The
balance of the second month's rent shall be paid by Tenant on the first day of
the second month. The aforementioned rent includes an apportionment for the
"Core" and "Corridor" attributable to the Leased Premises.
(b) All payments of Basic Rent, additional rent (as
hereinafter provided) and other payments to Landlord required hereunder shall be
made without demand, deduction or offset, in cash or by check payable to
Landlord and shall be delivered to 1376 Old Bridge Road, Woodbridge, Virginia
22192, or to such other party and place as may be designated
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by notice in writing from Landlord to Tenant from time to time.
(c) Any monthly installment of Basic Rent not paid within
ten (10) days of the due date shall be subject to a late charge of five percent
(5%), but this does not extend the due date of the rent from the first day of
each month. All other rent and all other payments becoming due hereunder
(including additional rent) shall bear interest at the rate of twelve percent
(12%) per annum from the date when the same shall become due and payable.
(d) No payment by Tenant or receipt and acceptance by
Landlord of a lesser amount than the Basic Rent, additional rent, or other
payments to Landlord required hereunder shall be deemed to be other than part
payment of the full amount then due and payable, nor shall any endorsement or
statement on any check or any letter accompanying any check, payment of rent or
other payment, be deemed an accord and satisfaction; and Landlord may accept
such part payment without prejudice to Landlord's right to recover the balance
due and payable or pursue any other remedy provided in this Lease.
2.2 Consumer Price Index.
Each year that this Lease remains in effect after the first
full year of the term hereof, Tenant shall pay to Landlord as Basic Rent such
sums as determined by application of the following formula:
(a) To the Basic Rent payable annually during the previous
twelve months shall be added that sum representing the full amount, if any,
after multiplying such Basic Rent payable during the previous twelve months, by
a fraction the numerator of which shall be the Consumer Price Index (CPI) for
Urban Wage Earners and Clerical Workers, All Items, Washington, D.C. as
published in the United States Department of Labor, Bureau of Labor Statistics
Consumer Price Index for the United States and Selected Areas (Base 1967 = 100)
for the month which is two months prior to the last month of the previous twelve
months, and the denominator of which shall be such CPI for the month which is
two months prior to the first month of such previous twelve months, and
subtracting from such product the Basic Rent payable during the previous twelve
months.
(b) The resulting new Basic Rent, which in each instance,
shall in no event be less than the Basic Rent payable during the preceding
twelve months, shall be payable in twelve equal monthly installments on the
first day of each month of the applicable year.
(c) In the event the CPI is discontinued, ceases to
incorporate a significant number of the items now incorporated therein, or if a
substantial change is made in such CPI, the parties hereto shall attempt to
agree on an alternative formula and if agreement cannot be reached, the
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matter shall be submitted to arbitration under the rules of the American
Arbitration Association then in effect.
2.3 Real Estate Tax.
(a) Tenant shall pay in each Tax Year during the Term, as
Additional Rental, its individually assessed share, or in absence thereof, a
proportionate share of all state and county real estate taxes, payable with
respect to or allocable to the Landlord's Area, including all Landlord's
Building and all other buildings and improvements situated thereon, together
with the reasonable cost (including fees of attorneys, consultants and
appraisers) of any negotiation, contest or appeal pursued by Landlord in an
effort to reduce any such tax, assessment or charge, all the foregoing being
collectively referred to herein as "Real Estate Taxes". Tenant's proportionate
share, to the extent not separately assessed, shall be determined by the amount
of the square feet of the leased premises divided by the total square feet of
all of the space (including the Tenant's space) in the Landlord's property.
Landlord and Tenant agree that the said proportionate share shall be eleven
percent (11%) for the Tax Year in which the Term commences or terminates, the
provisions of this Section shall apply, but Tenant's liability for its
proportionate share of any taxes for such year shall be subject to a pro rata
adjustment based upon the number of days of such Tax Year falling within the
Term. Tenant shall be entitled to the benefit of any abatement or reduction of
real estate taxes arising from the presence of the property in a State
Enterprise Zone.
(b) Real estate taxes which are being contested by Landlord
shall nevertheless be included for purposes of the computation of the liability
of Tenant under this Section, provided, however, that in the event that Tenant
shall have paid any amount of increased rent pursuant to this Section and
Landlord shall thereafter receive a refund of any portion of any real estate
taxes on which such payment shall have been based, Landlord shall pay to Tenant
the appropriate portion of such refund. Landlord shall have no obligation to
contest, object or litigate the levying or imposition of any real estate taxes
and may settle, compromise, consent to, waive or otherwise determine in its
discretion any real estate taxes without consent or approval of Tenant.
(c) If the termination date of this Lease shall not coincide
with the end of a real estate tax year, then in computing the amount payable
under this Section for the period between the commencement of the applicable
real estate tax year in question and the termination date of this Lease, the
real estate taxes for the applicable real estate tax year shall be prorated on a
monthly basis. Tenant's obligation to pay real estate taxes under this Section
for the final period of the Lease shall survive the expiration of the term of
this Lease.
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2.4 Payments for Utilities Usage.
(a) Tenant shall pay to Landlord an amount equal to the
value of Tenant's usage of electrical and gas services. If submetered, these
services will be billed by Landlord on the basis of metered usage and at the
same unit rates as Landlord is billed by Potomac Edison and Columbia Gas
Companies. It is understood that these rates may vary monthly and may depend
upon usage and peak demands of the entire facility, which may be independent of
Tenant's usage within the Leased Premises.
(b) In the event that Landlord is unable to submeter the gas
usage, Tenant shall pay a prorated heating charge representing a proportionate
share of the expense for the metered space, calculated on a square footage
basis. In the event that Landlord is unable to submeter electrical usage, the
basic rent to be paid by Tenant shall be increased by adding to the basic rent
reserved herein an amount equal to the electrical expenses estimated to be
incurred by the Landlord with respect to the leased premises. Such electrical
expenses shall be determined by estimating Tenant's installed usage capacity and
authorized rates for electricity and shall be adjusted in light of such factors.
Representatives of the Landlord and Tenant shall agree on an initial rate per
square foot to be paid by the Tenant to the Landlord based on Tenant's computed
electrical load, demand and usage factors resulting from hours of operation.
Thereafter, such initial rate shall be adjusted based on any Tenant changes in
equipment load and/or operating hours and for rate changes imposed by the
utility supplier. Tenant is hereby obligated to advise Landlord in writing of
changes in equipment load and/or operating hours within thirty (30) days of such
changes occurring and Landlord is accordingly obligated to advise Tenant of rate
changes received from the utility supplier. Adjustments to the Tenant's initial
rate per square foot shall be as of the dates of such factors being effective
even though such dates may require retroactive obligations on the part of the
Tenant to pay adjusted amounts. Adjustments to the initial rate per square foot
may be increased or decreased as initiated by the utility company.
(c) Landlord shall bill Tenant monthly at the applicable
rates, and Tenant shall make payment coincidentally with the rental payment for
the following month.
2.5 Gross Receipts Taxes.
After notification by Landlord, Tenant shall pay to
Landlord, as additional rent together with each monthly payment of Basic Rent an
amount equal to any taxes (other than income taxes) levied or imposed upon the
rentals payment under this Lease, whether described as gross receipts taxes,
excise tax, or by any other term.
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ARTICLE III - USE AND OCCUPANCY
3.1 Use of Premises.
(a) Tenant covenants to use and occupy the Leased Premises
for aircraft repair, to include the modification of planes, fitup of
communications for same and other aviation related uses.
(b) Tenant will not use or permit the Leased Premises or any
part thereof to be used for any disorderly, unlawful or extra hazardous purpose
nor for any other purpose than hereinbefore specified.
(c) Tenant will not do or permit to be done in the Leased
Premises, or the Building, or bring or keep anything therein, which shall in any
way increase the rate of fire or other insurance on the Building, or on the
property kept in the Building, or obstruct, or interfere with the rights of
other tenants, or in any way, injure or annoy them, or those having business
with them, or conflict with them, or conflict with the fire laws or regulations
or with any insurance policy upon the Building or any part thereof, or with any
statutes, rules or regulations enacted or established by the Federal Government
or by the State, City or County in which the Leased Premises is located. If any
increase in the rate of fire insurance or other insurance is stated by any
insurance company due to activity or equipment of Tenant in or about the Leased
Premises, such statement shall be conclusive evidence that the increase in such
rate is due to such activity or equipment and, as a result thereof, Tenant shall
be liable for such increase and shall reimburse Landlord therefor as additional
rental.
(d) Tenant shall have only a non-exclusive right to use the
common or public areas of the Building, and the parking area on the land and
shall not place or leave any items therein or thereon or in any other place on
the land or in the Building other than within the Leased Premises.
(e) DELETED
3.2 Tenant Requirements for Space Improvement.
Tenant is responsible for, and may make tenant
improvements, with the written permission of Landlord, whose permission cannot
be unreasonably withheld.
3.3 Alterations.
(a) Tenant will not make any alterations, installations,
changes, replacements, additions, or improvements, structural or otherwise, in
or to the Leased Premises or any part thereof, without the prior written consent
of Landlord.
(b) All alterations, installations, changes, replacements,
additions to or improvements upon the Leased Premises (whether with or without
Landlord's consent) shall, at the election of Landlord, remain upon the Leased
Premises
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and be surrendered with the Leased Premises at the expiration of this Lease
without disturbance, molestation or injury. Should Landlord elect that
alterations, installations, changes, replacements, additions to or improvements
upon the Leased Premises be removed upon termination of this Lease or upon
termination of any renewal period hereof, Tenant hereby agrees to cause them to
be removed at Tenant's sole cost and expense and to repair any damage caused by
such removal and should Tenant fail to remove them then and in such event,
Landlord shall cause them to be removed at Tenant's expense and Tenant hereby
agrees to reimburse Landlord for the cost of such removal together with any and
all damages which Landlord may suffer and sustain by reason of Tenant's failure
to remove them.
3.4 Fixtures, Etc.
Tenant covenants, at the expiration or other termination of
this Lease, to remove all goods and effects from the Leased Premises not the
property of the Landlord, and to yield to the Landlord the Leased Premises and
all keys, locks and other fixtures connected therewith (except trade fixtures
and other fixtures belonging to the Tenant), in good repair, order and condition
in all respects, reasonable wear and use thereof and damage by fire or other
casualty and damage from any risk with respect to which Tenant is not herein
expressly made liable excepted.
3.5 Signs, Weight, Moving, Etc.
(a) Tenant agrees that no sign, advertisement or notice
shall be inscribed, painted or affixed on any part of the outside or inside of
the Leased Premises of the Building, except on the directories and doors of
offices, and then only in such size, color and style as Landlord shall approve.
(b) Tenant agrees that it will not place a load upon any
floor which exceeds the floor load which the floor was designed or has been to
carry; that Landlord shall have the right to prescribe the weight, and method of
installation and position of heavy fixtures or equipment; that all damage done
to the Building by taking in or removing an article of Tenant's office
equipment, or due to its being in the Leased Premises, shall be repaired at the
expense of the Tenant. Tenant agrees promptly to remove from the public area
adjacent to the Building or common area any of Tenant's merchandise there
delivered or deposited.
(c) Tenant agrees not to strip or overload, damage or deface
the Leased Premises or hallways, stairways, elevators, parking facilities or
other approaches thereto, of the Building, or the fixtures therein or used
therewith, nor to permit any hole to be made in any of the same.
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3.6 Access.
Tenant agrees that it will allow Landlord, its agents or
employees, to enter the Leased Premises at all reasonable times to examine,
inspect or to protect the Leased Premises or prevent damage or injury to the
Leased Premises, or to make such alterations and repairs as Landlord may deem
necessary, or to exhibit the same to prospective tenants during the last three
(3) months of the term of this Lease.
3.7 Rules and Regulations.
Tenant covenants that the following rules and regulations,
and such other and further rules and regulations as Landlord may make and which
in Landlord's judgment are needful for the general well being, safety, care and
cleanliness of the Leased Premises and Building, together with their
appurtenances, shall be faithfully kept, observed and performed by Tenant, and
by its agent, servants, employees and guests unless waived in writing by
Landlord. Changes in these rules and regulations will be implemented with
reasonable notice to, and after reasonable consultation with, Tenant.
(a) Sidewalks, entries, passages, elevators and staircases
and other parts of the Building which are not part of the Leased Premises shall
not be obstructed or used for any other purposes than ingress or egress.
(b) Tenant shall not install or permit the installation of
any awnings, shades and the like other than those approved by Landlord in
writing.
(c) DELETED
(d) Tenant shall not construct, maintain, use or operate
within the Leased Premises or elsewhere in the Building or on the outside of the
Building, any electrical device, wiring or apparatus in connection with a loud
speaker system or other sound system unless Tenant shall have first obtained the
prior written consent of Landlord.
(e) DELETED
(f) No cooking shall be done or permitted by Tenant in the
Leased Premises, without the prior written consent of Landlord provided,
however, that the heating, refrigerating and preparing of beverages and light
snacks shall be permitted if there are appropriate facilities and equipment for
such purpose and subject to the prior written consent of Landlord. Tenant shall
not cause or permit any unusual or objectionable odors to be produced upon or
emanate from the Leased Premises.
(g) No animals of any kind shall be brought into or kept
about the Building by Tenant or any of its employees, agents or guests.
(h) No vending machines shall be permitted to be placed or
installed in any part of the Building by any tenant except as specifically
indicated by Landlord's written consent. Landlord reserves the right to place
or install
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vending machines in any part of the common areas of the Building.
3.8 Subletting and Assignment.
(a) Tenant will not sublet the Leased Premises or any part
thereof, including desk space, or transfer possession or occupancy thereof, to
any person, firm or corporation or transfer, assign, mortgage or encumber this
Lease or any interest in this Lease, without the prior written consent of
Landlord, nor shall any subletting, assignment or transfer hereof be effected by
operation of law or otherwise without the prior written consent of Landlord.
(b) If Tenant desires to sublet all or a substantial portion
of the Leased Premises, Tenant shall give Landlord thirty (30) days written
notice of Tenant's intention to do so. Within thirty (30) days after receipt of
said notice, Landlord shall have the right to sublet the Leased Premises from
Tenant at the same rental stipulated herein. If Tenant desires to sublet all of
the Leased Premises, Landlord shall have the right to terminate this Lease on a
date to be agreed upon by Landlord and Tenant. If Landlord has not exercised its
right to sublet the Leased Premises or terminate this Lease as heretofore
provided, Tenant may sublet the Leased Premises after first obtaining the
written consent of Landlord.
(c) If Tenant shall receive any consideration for any
assignment or the rent provided under any sublease shall be greater than the
rent provided for herein, Tenant shall pay to Landlord an additional rental
equal to one-half of all such increased amounts on the date which such rentals
are due under the assignment or sublease.
(d) If Landlord consents to the subletting or assignment of
the Leased Premises, Tenant shall remain fully liable and obligated under all
the terms, conditions and provisions of this Lease and any assignee shall assume
all of the obligations of the Tenant under this Lease. The consent by Landlord
to any assignment, transfer, or subletting to any party other than Landlord,
shall not be construed as a waiver or release of Tenant from the terms or any
covenants or obligation under this Lease, nor shall the collection or acceptance
of rent from any such assignee, transferee, subtenant or occupant constitute a
waiver of, or release of Tenant from, any covenant or obligation contained in
this Lease, nor shall any such assignment or subletting be construed to relieve
Tenant from giving Landlord said thirty (30) day notice or from obtaining the
consent in writing of Landlord to any further assignment or subletting. In the
event that Tenant defaults hereunder, Tenant hereby assigns to Landlord the rent
due from any subtenant of Tenant and hereby authorizes each such subtenant to
pay said rent directly to Landlord. A copy of the assignment or sublease will be
furnished to Landlord prior to its approval and will
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not thereafter be modified or amended without Landlord's prior consent.
3.9 Compliance with Laws and Regulations, Hazardous
Substances Environmental Matters.
Tenant, at its sole cost and expense, shall comply with and
shall, to the extent that offending conditions arise during its tenancy from
acts or omissions of Tenant, cause the Premises and its activities therein to
comply with (a) all federal, state, county, municipal and other governmental
statutes, laws, rules, orders, regulations and ordinances affecting the Premises
or any part thereof, or the use thereof, including those which require the
making of any structural, unforeseen or extraordinary changes, whether or not
any such statutes, laws, rules, orders, regulations or ordinances which may be
hereafter enacted involve a change of policy on the part of the governmental
body enacting the same, and whether or not proof of negligence is requisite to
violation; (b) all rules, orders and regulations of the National Board of Fire
Underwriters or Landlord's fire insurance rating organization or other bodies
exercising similar functions in connection with the prevention of fire or the
correction of hazardous conditions, which apply to the Premises; and (c)
specifically all laws, rules, orders and regulations of the Environmental
Protection Agency, the Department of Health and Mental Hygiene of the State of
Maryland, and the Department of Natural Resources of the State of Maryland with
regard to the handling, use, storage, generation, and disposition of hazardous
substances or of any substances and/or materials which may have an adverse
impact on or contaminate surface waters, ground waters, or soils, or which may
present a hazard to persons on or within the Premises or the Building. Tenant
specifically agrees not to bring any of those substances listed as "Prohibited
Substances" in Exhibit "B" attached hereto onto the Premises without specific
prior written authorization from the Landlord which will be granted only after
review by Landlord of Tenant's proposal detailing measures, procedures, and
policies to assure compliance with all applicable rules and regulations and
specifying insurance policies which will be placed in force to cover any
potential liabilities arising from the existence of one or more Prohibited
Substances(s) on the Leased Premises. Tenant shall indemnify and hold harmless
Landlord with respect to any expenses resulting from an act or omission of the
Tenant under (a), (b) and (c) above. Tenant will provide and maintain an
adequate number (as required by local codes) of hand fire extinguishers for the
Leased Premises.
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ARTICLE IV - MAINTENANCE, REPAIRS, SERVICES AND UTILITIES
4.1 Services and Utilities.
Landlord shall furnish normal and usual cleaning service for
the common areas, at no additional cost to Tenant. Additionally, Landlord shall
furnish water and sanitary sewer without additional cost to Tenant, provided,
however, that Landlord reserves the right to assess an additional fee for
consumption of utilities by Tenant beyond normal requirements as determined by
Landlord. Electrical and gas services shall be furnished by Landlord through
submetering systems where possible with Tenant responsible for electrical and
gas usages at the same unit rates as Landlord is billed by Potomac Edison and
Columbia Gas.
Landlord reserves the right to cut off and discontinue, upon
5 day notice to Tenant, furnishing any heating, ventilation, air-conditioning or
other utility services furnished by Landlord at any time when Tenant has failed
to pay any amount (whether as Rental or otherwise) due under this Lease.
Landlord shall not be liable for any damages resulting from or arising out of
any such discontinuance and the same shall not constitute a termination of this
Lease or any eviction of Tenant. Landlord shall not be liable to Tenant in
damages or otherwise (i) if any utility shall become unavailable from any public
utility company, public authority or any person or entity (including Landlord)
supplying or distributing such utility, or (ii) for any interruption in any
utility service (including, without limitation, any heating, ventilation or
air-conditioning) caused by the making of any necessary repairs or improvements
or by any cause beyond Landlord's reasonable control, and the same shall not
constitute a termination of this Lease or an eviction of Tenant. Landlord shall
incur no liability to Tenant for utility problems beyond its direct control.
4.2 Maintenance and Repairs.
(a) Subject to reasons beyond its control, Landlord agrees,
at its expense, to maintain and keep in repair the exterior structure and
demising walls, including the hangar doors, structural columns and structural
floor which collectively enclose the Leased Premises, plumbing, sewer, heating,
gas and fire extinguishing systems and lines (excluding, however, all doors and
door frames, storefronts, windows and glass) and the roof over the Premise
during the term of this Lease, except for damages caused by Tenant, its agents,
employees, visitors, licensees, contractors or suppliers, and except for items
installed for Tenant not of building standard materials. There shall be no
allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
arising from the making of any repairs in
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or to any portion of the Leased Premises or the Building (or in or to fixtures,
appurtenances or equipment thereof). Overhead cranes are not provided or
maintained under this Lease, and Tenant has no right to utilize same unless
specifically addressed herein or by amendment hereto.
(b) Tenant shall take care of the Leased Premises and the
fixtures, appurtenances and equipment therein including replacement of light
bulbs and/or fluorescent tubes and, at its sole cost and expense, make such
repairs thereto necessitated by the negligence of Tenant, its agents, employees,
visitors, licensees, contractors or suppliers or by the use of the Leased
Premises in a manner contrary to the purposes for which they are leased to
Tenant, as and when needed to preserve them in good order and condition,
reasonable wear and use excepted. All damage or injury to the Leased Premises
(and to the fixtures, appurtenances and equipment therein) the hangar doors or
hangar resulting from negligent operation of the doors or their operation during
high winds or other adverse conditions or to the Building caused by Tenant, its
agents, employees, visitors, licensees, contractors or suppliers, moving,
installing or removing furniture, equipment or other property in, within or out
of, the Leased Premises or Building, shall be repaired, restored or replaced
promptly by Tenant at its sole cost and expense, to the reasonable satisfaction
of Landlord. All such repairs, restorations and replacements shall conform to
the standard of the Building and all contracts and subcontracts, contractors,
subcontractors and suppliers involved in such work shall be subject to the
approval of Landlord, whose written approval shall be obtained prior to the
commencement of any such work. If Tenant shall fail to make such repairs,
restorations or replacements, then Landlord shall have the right to make such
necessary repairs, restorations and replacements, structural, non-structural, or
otherwise, and any charge or cost so incurred by Landlord shall be paid by
Tenant to Landlord as additional rent payable with the installment of rent next
becoming due under the terms of this Lease. This provision shall be construed as
an additional remedy granted to Landlord and not in limitation of any other
rights and remedies which Landlord has or may have in said circumstances.
ARTICLE V - INSURANCE, DAMAGES AND CONDEMNATION
5.1 Insurance and Indemnification.
(a) Tenant agrees to save Landlord and Agent harmless and
indemnified from all loss, damage, liability or expense incurred, suffered, or
claimed by any person whomsoever by reason of Tenant's neglect or use of the
Leased Premises or of the Building or of anything thereon, or the parking
facilities in or adjacent thereto, or of water,
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<PAGE> 15
steam, electricity, or other agency, or by reason of any injury, loss or damage
to any person or property upon the Leased Premises, the Building or parking
facilities, and to be answerable for all nuisances caused or suffered on the
Leased Premises, or caused by Tenant in the Building, or parking facilities, or
on the approaches thereto.
(b) Tenant agrees to maintain, at its own expense, for the
benefit of itself and Landlord, insurance of such type and in such amounts as
may be approved by Landlord including (a) all risk property contents coverage
for damage to or loss of personal property of Tenant in or on the Premises
(including, without limitation, equipment, trade fixtures, inventory, floor
covering, furniture and any leasehold improvements installed in the Premises by
Tenant pursuant to this Lease) at its replacement value; (b) Premises liability
coverage to afford protection of combined single limit per occurrence, of not
less than Five Million Dollars ($5,000,000.00) with respect to personal injury,
death or property damage; (c) Fire legal liability coverage to afford protection
with limits for each occurrence of not less than One Million Dollars
($1,000,000.00) per occurrence. Such policy or policies shall provide that the
Lessor must receive at least ten (10) days prior written notice of any
cancellation of Tenant's insurance coverage. Such policy or policies shall name
First Flight Limited Partnership, as additional insured, and shall provide for
waiver of subrogation in favor of First Flight Limited Partnership. Prior to
commencement of work by Tenant on the Premises or occupying the Premises under
this Lease, Tenant shall deliver to Landlord certificates or binders evidencing
the existence of the insurance coverages required herein.
5.2 Damage by Tenant.
All injury to the Leased Premises or the Building, caused by moving
property of Tenant into, in or out of, the Building and all breakage done by
Tenant, or the agents, servants, employees, and visitors of Tenant shall be
repaired by Tenant, at expense of Tenant. If Tenant shall fail to do so, then
Landlord shall have the right to make such necessary repairs, alterations and
replacements, structural, nonstructural or otherwise and any charge or cost so
incurred by Landlord shall be paid by Tenant with the right on the part of
Landlord to elect in its discretion to regard the same as additional rent, in
which event such cost or charge shall become additional rent payable with the
installment of the rent next becoming due or thereafter falling due under terms
of this Lease. This provision shall be construed as an additional remedy granted
to Landlord and not in limitation of any rights and remedies which Landlord has
or may have in these circumstances.
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5.3 Water Damage, Etc.
Landlord shall not be liable for any damage to any property, or
person, at any time in, the Leased Premises, or the Building, from fire, the
perils of the standard extended coverage endorsement, explosion, steam, gases,
or electricity, or from water, rain, or snow, whether they may leak into, issue
or flow from, any part of the Building, or from the pipes, sprinkler system or
heating or air conditioning apparatus of the Building, or from any other place
or from any other cause of any kind or nature whatsoever. Tenant shall give
Landlord prompt notice of any accident to or defect in the pipes, sprinkler
system, heating or air conditioning apparatus, or electric wires or system in
order that it may be remedied by Landlord.
5.4 Other Damages.
Landlord assumes no liability or responsibility whatever
with respect to the conduct and operation of the business to be conducted in the
Leased Premises nor for any loss (including theft) or damage of whatsoever kind
or by whomsoever caused, to personal property, documents, records, monies, or
goods of Tenant or to anyone in or about the Leased Premises, however caused or
whether due in whole or in part to acts of negligence on the part of Landlord,
its agents or servants, whether such acts be active or passive and Tenant agrees
to hold Landlord harmless against all such claims.
5.5 Damage by Fire or Casualty.
(a) If the Leased Premises shall be destroyed or damaged,
from whatsoever cause, so as to render them unfit for the purposes for which
leased, and if it is reasonably possible to repair such destruction or damage
within one hundred eighty (180) days, then Tenant shall not be entitled to
surrender possession of the Leased Premises without the prior written consent of
Landlord, but Landlord shall proceed to repair the destruction or damage with
all reasonable speed and shall complete the same within one hundred eighty (180)
days, unless there shall be less than one year remaining in the term of this
Lease, in which event Landlord may elect to terminate the Lease.
(b) If the Leased Premises shall be destroyed or damaged,
from whatever cause, so as to render them unfit for the purposes for which
leased, and if it is not reasonably possible to repair such destruction or
damage within one hundred eighty (180) days, then each party shall have the
option, by written notice given to the other within fifteen (15) days after such
destruction or damage, to terminate this Lease as of eight (8) days after the
giving of such notice, in which event Tenant shall be granted a proportionate
rebate and deduction from the rental payments made and to be made hereunder for
the period subsequent to said termination and,
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if such option is not exercised, Landlord shall proceed to repair the
destruction or damage with all reasonable speed.
(c) In the event of any damage or destruction to which the
above provisions are applicable, Tenant shall be granted a proportionate rebate
and deduction from the rental payments made and to be made hereunder, for the
period from the date of such damage or destruction until the Leased Premises are
ready for occupancy by Tenant or until the termination of this Lease,
corresponding to the portion of the Leased Premises with respect to which Tenant
is deprived of normal occupancy and use.
(d) Tenant shall give immediate notice to Landlord in case
of fire or other damage to the Premise.
5.6 Condemnation.
Tenant agrees that if the Leased Premises, or any part
thereof, of the Building and/or the land on which the Building is located shall
be taken or condemned for public or quasi-public use or purpose by any competent
authority, Tenant shall have no claim against Landlord and shall not have any
claim or rights to any portion of the amount that may be awarded as damages or
paid as a result of any such condemnation; and all rights of Tenant to damages
therefor, if any, are hereby assigned by Tenant to Landlord. Upon such
condemnation or taking, the term of this Lease shall cease and terminate from
the date of such taking or condemnation, and Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease, provided that if the
Leased Premises are not taken, but the taking involves a portion of the land
and/or Building, then the termination of this Lease shall be the election of
Landlord.
ARTICLE VI - SURRENDER OF PREMISES
6.1 Surrender and Restoration.
Tenant agrees to remove from the Leased Premises, at the
expiration or other termination of this Lease, all goods and effects not
belonging to Landlord, and to surrender possession of the Leased Premises broom
clean and all fixtures and furnishings connected therewith in good repair, order
and condition in all respects, reasonable wear and use thereof and damage by
fire or other unavoidable casualty only excepted. If Tenant shall fail to
perform any of the foregoing obligations, Landlord is authorized to do so in
Tenant's behalf and to sell such articles and effects left on the Leased
Premises as may be saleable. The proceeds of any such sale shall be applied
toward the expenses thus incurred, and Tenant agrees to pay any balance
promptly.
6.2 Tenant Holding Over.
If Tenant shall not immediately surrender possession of the
Leased Premises at the termination of this
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Lease, Tenant shall become a tenant from month-to-month, provided rent shall be
paid to and accepted by Landlord, in advance, at the rate of rent (including
Basic Rent and prorated additional rent) payable hereunder just prior to the
termination of this Lease or the then current rental rate being offered by
Landlord for other similar space in the Building, whichever is higher; but
unless and until Landlord shall accept such rental from Tenant, Landlord shall
continue to be entitled to retake or recover possession of the Leased Premises
as hereinabove provided in case of default on the part of Tenant, and Tenant
shall be liable to Landlord for any loss or damage (including both direct and
consequential damages) Landlord may sustain by reason of Tenant's failure to
surrender possession of the Leased Premises immediately upon the expiration of
term of this Lease. Landlord shall give ten days notice of quit. All rights of
Landlord applicable during the term of this Lease shall be equally applicable
during such period of subsequent occupancy by Tenant, whether or not a
month-to-month tenancy shall have been created as aforesaid.
6.3 Security Deposit.
Tenant simultaneously with the execution of this Lease shall
deposit with Landlord the sum of THIRTY TWO THOUSAND EIGHT HUNDRED SIXTY-SIX
DOLLARS AND 66/100 ($32,866.66) to be held as a security deposit to assure the
prompt, full and faithful performance by Tenant of each and every provision of
this Lease and of all obligations of Tenant hereunder. Landlord may apply the
security deposit (which shall not bear interest to Tenant) or such portion
thereof as is necessary, to the cost of repairing any damage to the Leased
Premises caused by Tenant or Tenant's customers or employees or to defray any
damage, loss or expense suffered by Landlord on account of any breach by Tenant
of any of the terms or provisions thereof, at any time, including the
non-payment of rent. In the event that Landlord applies all or any portion of
the security deposit to cure such default or to defray any damage, loss or
expense on account of any breach by Tenant, then Tenant shall be obligated to
promptly deposit with Landlord the amount necessary to restore the security
deposit to its original amount. The amount of the security deposit which is not
applied as aforesaid shall be refunded to Tenant after its surrender of
occupancy of the Leased Premises provided Tenant is not in default under any
provision hereof. The security deposit is not to be applied by the Tenant as
payment of any rent whatsoever.
ARTICLE VII - DEFAULTS
7.1 Defaults and Remedies.
It is agreed that if:
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(a) Tenant shall fail to pay the rent or any installment
thereof as aforesaid at the time and same shall become due and payable and/or
any additional rent as herein provided although no demand shall have been made
for same; or
(b) Tenant shall violate or fail or neglect to keep and
perform any of the covenants, conditions and agreements herein contained on the
part of Tenant to be kept and performed; or
(c) the Leased Premises shall become vacant or
deserted by Tenant, whether or not rent is in default; or
(d) there be any attachment, execution or other
judicial seizure of all or a substantial part of the assets
of Tenant or Tenant's leasehold;
then, and in each and every event from thenceforth, and at
all times thereafter, at the option of Landlord: (i) Landlord may sell at public
or private sale all or any part of the goods, chattels, fixtures and other
personal property belonging to Tenant, except aircraft, propellers, engines, and
spare parts, which are in the Premises, whether exempt or not from sale under
execution or attachment; and apply the proceeds of such sale, first to the
payment of all costs and expenses of conducting the sale or caring for or
storing said property; second, toward the payment of indebtedness, including
(without limitation) indebtedness for Rental, which may be or may become due
from Tenant to Landlord; and third, to pay the Tenant any surplus remaining
after all indebtedness of Tenant to Landlord has been fully paid (ii) Landlord
may terminate Tenant's right of possession of the Leased Premises and Landlord
shall be entitled to possession thereof and may forthwith proceed to recover
possession of the Leased Premises by process of law, any notice to quit or of
intention to re-enter the same being hereby expressly waived by Tenant. And, in
event of such re-entry by process of law or otherwise, Tenant nevertheless
agrees to remain answerable for any and all damage, deficiency or loss of rent
which Landlord may sustain by such re-entry whether or not Landlord re-lets the
Leased Premises; and in such case, Landlord shall have full power, which is
hereby acceded to by Tenant, to re-let the Leased Premises for and on Tenant's
behalf, and upon such re-letting Landlord shall have the right each month to sue
for and recover any loss of rents or monthly deficits, with the right reserved
by Landlord to bring any action(s) or proceeding(s) for the recovery of any
deficits remaining unpaid without being obligated to await the end of the term
of this Lease for a final determination of Tenant's account, and the
commencement or maintenance of any one or more actions shall not bar Landlord
from bringing other or subsequent actions for further accruals pursuant to
provisions of this Section.
If under the provisions of this Lease, a summons or other
applicable summary process shall be served, pursuant to the law of the State in
which the Leased Premises are
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<PAGE> 20
located, and a compromise settlement thereof shall be made, it shall not be
constituted as a waiver of any breach of any covenant, condition or agreement
herein contained and no waiver of any breach of any covenant, condition or
agreement herein contained shall operate as a waiver of the covenant, condition
or agreement itself, or of any subsequent breach thereof. No provision of this
Lease shall be deemed to have been waived by Landlord unless such waiver shall
be in writing signed by Landlord. No payment by Tenant or receipt by Landlord of
a lesser amount than the monthly installments of rent herein stipulated shall be
deemed to be other than on account of the earliest stipulated rent nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy in this lease provided.
(e) In the event of a default, Landlord will give notice of
said default to tenant, and tenant shall have ten days to cure.
7.2 Bankruptcy.
If at any time during the term of this Lease or any renewal, a
petition shall be filed, either by or against Tenant, in any court pursuant to
any Federal, State or municipal statute, whether in bankruptcy, insolvency or
for reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant's property or if Tenant makes an assignment for the benefit of
Tenant's creditors, then immediately upon the happening of any such event, and
without any entry or other act by Landlord, this Lease, at Landlord's option,
shall cease and come to an end with the same force and effect as if the date of
the happening of any such event were the date herein fixed for the expiration of
the term of this Lease.
It is stipulated and agreed that in the event of termination
of this Lease by the happening of any such event, Landlord shall forthwith, upon
such termination, and any other provisions of this Lease to the contrary
notwithstanding, be entitled to recover from Tenant as and for liquidated
damages caused by such breach of the provisions of this Lease an amount equal to
the difference between the then cash value of the rent reserved hereunder for
the unexpired portion of the term and the then cash rental value of the Leased
Premises for the unexpired portion of the term of this Lease, unless the statute
which governs or shall govern the proceeding in which the damages are to be
proved limits or shall limit the amount of the claim capable of being so proved,
in which case Landlord shall be entitled to prove as and for liquidated damages
an amount equal to that allowed by or under any such statute. The provisions of
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<PAGE> 21
this Section shall be without prejudice to Landlord's right to prove in full
damages for rent accrued prior to termination of this Lease, but not paid and
shall be without prejudice to any rights given Landlord by any pertinent statute
to prove further any amounts allowed thereby.
In making any such computation, the then cash rental value
of the Leased Premises shall be deemed prima facie to be the rental realized
upon any re-letting, if such re-letting can be accomplished by Landlord within a
reasonable time after the termination of this Lease, and the then present cash
value of the future rents hereunder reserved to Landlord for the unexpired
portion of the term hereby demised shall be deemed to be such sum, if invested
at eight percent per annum (8%) simple interest, as will produce the future rent
over the period of time in question.
7.3 Landlord's Liability.
In no event shall Landlord, including any successor assignee
of all or any portion of Landlord's interest in the Building, be personally
liable or accountable with respect to any provision of this Lease. If Landlord
shall be in breach or default with respect to any obligation hereunder or
otherwise, Tenant agrees to look for satisfaction solely to the equity of
Landlord in the Building. The liability of Landlord, or other entity comprising
Landlord, shall in no event exceed the amount of such equity and no other assets
of Landlord (or any partners, stockholders, or officers of Landlord) shall be
subject to levy, execution or other procedures for the satisfaction of Tenant's
remedies. In the event Landlord transfers this Lease, other than as security for
a mortgage or deed of trust, Landlord (and, in case of any subsequent transfers
or conveyance, the then grantor) shall, upon such transfer and acceptance by the
transferee be relieved from all liability and obligations hereunder arising
after such transfer, including any liability to Tenant for any security deposit
under this Lease.
ARTICLE VIII - LANDLORD'S MORTGAGE
8.1 Subordination.
This Lease is subject and subordinate to all mortgages
and/or deeds of trust which may now or hereafter affect the real property of
which the Leased Premises form a part, and to all renewals, modifications,
consolidations, replacements and extensions thereof. This clause shall be
self-operative. In confirmation of such subordination, Tenant shall execute
promptly any certificate that Landlord may request. Notwithstanding the
foregoing, the party secured by any such deed of trust or mortgage shall have
the right to recognize this Lease, and in event of any foreclosure sale under
such deed of trust or mortgage, this
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<PAGE> 22
Lease shall continue in full force and effect at the option of the party secured
by such deed of trust or mortgage or the purchase under any such foreclosure
sale; and Tenant covenants and agrees that it will, at the written request of
any party secured by any such deed of trust, execute, acknowledge and deliver
any instrument that has for its purpose and effect the subordination to said
deed of trust or mortgage of the lien of this Lease.
8.2 Tenant's Estoppel Certificate.
Tenant covenants and agrees to deliver to the beneficiary
under any deed of trust, or the holder of any mortgage, against the Building or
any prospective purchaser of the Building, upon the written request of Landlord
or its designee, at any time and from time to time, a certificate stating
whether (1) this Lease is still in full force and effect, (2) the Lease has been
amended or modified, (3) all rent has been paid to date and if any rent has been
unpaid, (4) Tenant or Landlord is in default under this Lease (and if any
default exists, the nature of it), (5) Tenant has any claims against Landlord
(and if any claim exists, the nature of it), (6) Tenant knows of any assignment
of this Lease by Landlord, and (7) as to any other fact or condition reasonably
requested by the Landlord or any mortgagee or beneficiary under any deed of
trust or prospective mortgagee or beneficiary under any deed of trust, or
purchaser of any or all of Landlord's interests, or any assignee or prospective
assignee of any interest of Landlord under this Lease.
8.3 Notice to Mortgagee.
Tenant agrees to give any mortgagee and/or deed of trust
holder, a copy of any notice of default served upon the Landlord, provided that
prior to such notice Tenant has been notified in writing (by way of Notice of
Assignment of Rents and Leases, or otherwise) of the addresses of such mortgagee
and/or deed of trust holder. Tenant further agrees that if Landlord shall have
failed to cure such default within the time provided for in this Lease, then the
mortgagee and/or deed of trust holder shall have an additional thirty (30) days
within which to cure such default or if such default cannot be cured within that
time, then such additional time as may be necessary if within such thirty (30)
days any mortgagee and/or deed of trust holder has commenced and is diligently
pursuing the remedies necessary to cure such default (including but not limited
to commencement of foreclosure proceedings if necessary to effect such cure), in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.
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<PAGE> 23
ARTICLE IX - MISCELLANEOUS
9.1 Non-Constructive Waiver.
The receipt of rent by Landlord, with knowledge of any
breach of this Agreement by Tenant or of any default on the part of Tenant in
the observance or performance of the provisions of this Lease, shall not be
deemed to be a waiver of any provision of this Lease. No failure on the part of
Landlord to enforce any covenant or provision herein contained, nor any waiver
of any right thereunder by Landlord, unless in writing, shall discharge or
invalidate such covenant or provision or affect the right of Landlord to enforce
the same in the event of any subsequent breach or default. Neither acceptance of
the keys nor any other act or thing done by Landlord or any agent or employee
during or after the term herein demised shall be deemed to be an acceptance or a
surrender of the Leased Premises, excepting only an agreement in writing signed
by Landlord accepting or agreeing to accept such a surrender.
9.2 Broker's Commission.
Each of the parties represents and warrants that there are
no claims for brokerage commissions or finder's fees in connection with the
execution of this Lease except as may be provided in an attachment hereto
initialed by both parties, and agrees to indemnify the other against, and hold
it harmless from, all liability arising from any such claim including, without
limitation, the cost of counsel fees in connection therewith.
9.3 Waiver of Trial by Jury.
Landlord and Tenant waive trial by jury of any or all issues
arising in any action, or proceedings between the parties hereto, or their
successors, arising out of or in any way connected with this Lease, or any of
its provisions, the relationship of Landlord and Tenant, Tenant's use or
occupancy of the Premises and/or any claim of injury or damage, and any
statutory remedy.
9.4 Attorney's Fees.
Tenant agrees to pay, as additional rental, all attorney's
fees and expenses of Landlord incurred in enforcing any of Tenant's obligations
under this Lease, or in any litigation or negotiation in which Landlord shall
become involved, through, or on account of Tenant.
9.5 Time of Essence.
Time is of the essence in the performance of all of Tenant's
and Landlord's obligations under this Lease.
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<PAGE> 24
9.6 Governing Law.
This Lease shall be construed and governed by the laws of
the State of Maryland. Should any provisions of this Lease and/or its conditions
be illegal or not enforceable under the laws of the State, it or they shall be
considered severable, and the Lease and its conditions shall remain in force and
be binding upon the parties as though the said provisions had never been
included.
9.7 Force Majeure.
The term "default" as used in this Lease means default in
the performance or observance of any of the terms, covenants, agreements, or
conditions contained herein, exclusive of any period of grace required to
constitute an event of default. However, if by any reason of force majeure the
Landlord is unable in whole or in part to carry out the agreements on its part
contained in this Lease or any of the other documents, the Landlord shall not be
deemed in default during the continuance of such inability. The term "force
majeure" as used herein shall include, without limitation, the following: acts
of God; strikes, lockouts or other industrial disturbances; acts of public
enemies; orders of any kind of the government of the United States or of the
State of Maryland or of any subdivision thereof or any local government, or any
of their departments, agencies or officials, or any civil or military authority;
insurrections, riots; epidemics; landslides; lightning; earthquakes; fire;
hurricanes; storms; floods; washouts; droughts; arrests; restraint of government
and people; civil disturbances; explosions; breakage or accident to machinery,
transmission pipes or canals; partial or entire failure of utilities; or any
other cause or event not reasonably within the control of Landlord it being
agreed that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of Landlord, and Landlord
shall not be required to make settlement of strikes, lockouts and other
industrial disturbances by acceding to the demands of the opposing party or
parties when such course is, in the judgment of the applicable party,
unfavorable to it.
9.8 Notices.
All notices required under this Lease shall be deemed to be
properly served if sent by United States registered or certified mail, postage
prepaid (a) if to Landlord, addressed to Landlord at 1376 Old Bridge Road,
Woodbridge, Virginia 22192 or at such other address as Landlord may have from
time to time designated by written notice to Tenant, (b) if to Tenant, addressed
to Tenant at 1362 Brass Mill Rd., Belcamp, MD 21017 or at such other address as
Tenant may have designated from time to time by written notice to Landlord and
(c) if to any mortgagee or holder of a deed of trust, at such address as such
mortgagee
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<PAGE> 25
or holder of deed of trust shall have designated from time to time. The date of
service of such notices shall be the date such notices are postmarked.
9.9 Successors and Assigns.
This Lease and the covenants, agreements, obligations and
restrictions herein contained, shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors, and assigns.
9.10 Corporate Tenants.
In the event Tenant is a corporation, the persons executing
this Lease on behalf of Tenant hereby covenant and warrant that: Tenant is a
duly constituted corporation qualified to do business in Maryland; all Tenant's
franchises and corporate taxes have been paid to date; all future forms,
reports, fees and other documents necessary for Tenant to comply with applicable
laws will be filed by Tenant when due; and such persons are duly authorized by
the board of directors of such corporation to execute and deliver this Lease on
behalf of the corporation.
9.11 Gender and Number.
Words of any gender used in this Lease shall be deemed to
include the plural when the sense requires.
9.12 Section Headings.
The headings as to contents of particular sections herein
are inserted only for convenience, and they are in no way to be construed as a
part of this Lease or as a limitation on the scope of the particular sections to
which they refer.
9.13 Entire Agreement.
This Lease contains all the agreements and conditions made
between the parties hereto and may not be modified orally or in any other manner
than by agreement in writing, signed by all parties hereto, or their respective
successors and interests. Any intention to create a joint venture or partnership
relation between the parties hereto is expressly disclaimed.
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<PAGE> 26
9.14 Landlord's Consent.
Where Landlord's consent is required herein, said consent shall not
be unreasonably withheld.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
duly executed, all done the day and year first hereinbefore written.
Witness: LANDLORD:
FIRST FLIGHT LIMITED PARTNERSHIP
By: UPLAND GROUP, INC.
General Partner
/s/ By: /s/ (SEAL)
- ------------------------------ --------------------------------
Witness: TENANT:
CALIFORNIA MICROWAVE, INC.
AIRBOURNE SYSTEMS INTEGRATION
DIVISION
/s/ Patricia A. Hartzell
- ------------------------------
Patricia A. Hartzell
By: /s/ Sheldon R. McWilliams (SEAL)
--------------------------------
Sheldon R. McWilliams
Vice President of Operations
Airborne Systems Integration
Division
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<PAGE> 27
EXHIBIT A
[set forth in this exhibit is
the layout of Topflight Airpark]
<PAGE> 28
EXHIBIT B
1,1 Dicholorethene (vinylidene chloride)
Used in the manufacture of 1, 1, 1 - Tirchloroethane (methyl choloroform).
However, the manufacture of polyvinylidene copolymers is the major use of VDC
saran wrap,etc.
1,1 - Dichloroethane
Solvent and cleaning degreasing agent as well as in organic synthesis as
an intermediate.
Trans 1, 2 - Dichloroethene (1,2 - Dichloroethylene)
Exists in two isomers cis 60% and trans 40%--solvent for waxes, resins,
and acetycellulose. It is used in the extraction of rubber, as a refrigerant, in
the manufacture of pharmaceuticals and artificial pearls, and in the extraction
of oils and fats from fish and meat.
Chloroform
Solvent for fats, oils, rubber, alkaloids, waxes, gutta percha, resins, as
cleansing agent, in fire extinguishers to lower the freezing temperature of
carbon tetrachloride in the rubber industry.
Banned by EPA from use in drug, cosmetic and food packaging products in 1976.
1,2 - Dichloroethane (Ethylene Dichloride)
Manufacture of ethylene glycol, diaminoethylene
Polyvinyl chloride, nylon, viscose, rayon, styrenebutadiene rubber and
various plastics. It is a solvent for resins, asphalt, bitumen, rubber,
cellulose acetate, cellulose ester, and paint; a degreaser in the engineering,
textile, and petroleum industries; and an extracting agent for soybean oil and
caffeine. It is also used as an antiknock agent in gasoline, a pickling agent, a
fumigant, and a dry cleaning agent. It has found use in photography, xerography,
water softening, and also in the production of adhesives, cosmetics,
pharmaceuticals, and varnishes.
1,1,1 - Trichloroethane
Substitute for carbon tetrachloride.
In liquid form, it is used as a degreaser and for cold cleaning, dip
cleaning, and bucket cleaning of metals. It is also used as a dry cleaning
agent, a vapor degreasing agent, and a propellant.
Carbon Tetrachloride
Solvent for oils and fats.
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<PAGE> 29
Lacquers, varnishes, rubber, waxes, and resins, fluorocarbons are
chemically synthesized from it. It is also used as an azeotropic drying agent
for spark plugs, a dry cleaning agent, a fire extinguishing agent, a fumigant
and an anthelmintic agent.
Trichloroethene (trichloroethylene)
Solvent in vapor degreasing, extracting caffeine from coffee, as a dry
cleaning agent, and as a chemical intermediate in the production of pesticides,
waxes, gums, resins, tars, paints, varnishes, and specific chemicals such as
chloroacetic acid.
1.1.2 - Trichloroethane (Vinyl Trichloride)
Is used as a chemical intermediate and as a solvent, but
is not as widely used as its isomer 1,1,1 - Trichloroethane.
Tetrachloroethene (Tetrachloroethylene)
Widely used as a solvent with particular use as a dry
cleaning agent, a degreaser, a chemical intermediate, a
fumigant, and medically as an anthelmintic.
Chromium
Used in chrome plating, copper stripping, aluminum anodizing, as a
catalyst, refactories, inorganic synthesis, and photography.
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<PAGE> 1
EXHIBIT 10.22
LEASE AGREEMENT
THE STATE OF TEXAS }
}
COUNTY OF FORT BEND }
This Lease Agreement (the "Lease") is made and entered into between
Landlord and Tenant, subject to and upon the terms, provisions and conditions
hereinafter set forth, and in consideration of the mutual duties and covenants
hereof, Landlord does hereby lease, demise and let to Tenant, and Tenant does
hereby lease and take from Landlord, those certain Premises located in the
Building located at 4000 Greenbriar, in the City of Stafford, Fort Bend County,
Texas.
W I T N E S E T H:
1. DEFINED TERMS. The following terms shall be deemed to be defined
terms of the Lease for all purposes.
(a) Date of this Lease: November 1, 1995.
(b) Landlord: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a
Massachusetts corporation, whose principal address is P. O. Box 111, 200
Berkeley Street, Boston, Massachusetts 02117.
(c) Tenant: CALIFORNIA MICROWAVE-MICROWAVE NETWORK SYSTEMS, INC., a
Texas corporation, whose principal address is prior to the Commencement Date,
10795 Rockley Road, Houston, Texas 77094 and subsequent to the Commencement Date
shall be 4000 Greenbriar, Suite 100, Stafford, Texas 77477.
(d) Premises: Initially, beginning on the Commencement Date,
approximately 118,750 square feet as reflected on a site plan attached hereto as
Exhibit "A" in the building (the "Building") generally known as 4000 Greenbriar,
in Stafford, Texas located upon that real property described in Exhibit "B"
attached hereto and made a part hereof (said real property, together with the
improvements now or hereafter located thereon, being herein called the
Property"); subsequently, beginning on June 1, 1997, the Premises shall be
expanded to include approximately 45,850 additional square feet as reflected on
the site plan (Exhibit "A"), so that beginning on June 1, 1997 and continuing
throughout the remainder of the Term the Premises shall consist of a total of
approximately 164,600 square feet.
(e) Address of Premises: 4000 Greenbriar Drive, Suite 100, Stafford,
Texas 77477.
(f) Permitted Use: Tenant's use of the Premises shall be for general
office and light manufacturing and assembly and warehouse purposes only. At all
times Tenant shall be responsible for complying with the "Declaration of
Protective Covenants and Restrictions" for
<PAGE> 2
Greenbriar Southwest, Section Three, filed of record in Volume 826, Page 580 of
the Real Property Records of Fort Bend County, Texas as they currently exist or
as they may be amended, and the Subdivision Plat for Greenbriar Southwest
Section Three recorded in Volume 22, Page 33 of the Plat Records of Fort Bend
County, Texas.
(g) Tenant's Pro Rata Share: 52% from December 1, 1995 through May 31,
1997; 72% from June 1, 1997 through November 30, 2002.
(h) Commencement Date: December 1, 1995.
(i) Term: A total of eighty-four (84) months, commencing on the
Commencement Date and ending on November 30, 2002.
(j) Base Monthly Rental:
From 12/01/95 through 05/31/97: $26,125.00 per month;
From 06/01/97 through 11/30/98: $36,212.00 per month; and
From 12/01/98 through 11/30/02: $46,088.00 per month.
(k) Total Base Rental: The sum total of all of the Base Monthly Rental
installments due for and over the entire Term.
(l) Additional Rent: Any monetary sum that Tenant owes to Landlord
other than the Base Monthly Rental and the Total Base Rental pursuant to the
terms hereof, including but not limited to all security deposit type damage and
any other sums due hereunder.
(m) Rent: The Total Base Rental and all Additional Rent.
(n) Security Deposit: $24,000.00
(o) Tenant's Insurance Requirements:
A. Comprehensive General Liability: $5,000,000 combined single
limit.
B. Fire and Extended Coverage: in the amount equal to the full
replacement cost of all personal property, fixtures and
improvements located at the Premises.
C. Worker's Compensation: in statutory required amounts on all
employees of Tenant.
2
<PAGE> 3
(p) Address for Notices:
To Landlord:
John Hancock Mutual Life Insurance Company
c/o Hancock Realty Investors
Attention: Asset Manager-4000 Greenbriar
P. O. Box 111
200 Berkeley Street
Boston, Massachusetts 02117
Telephone: (617) 572-3800 Fax: (617) 572-3860
with a copy to:
CB Commercial Real Estate Group, Inc.
Management Services
2500 West Loop South, Suite 250
Houston, Texas 77027-4502
To Tenant:
California Microwave-Microwave Network Systems, Inc.
Attention: Carl Frampton
4000 Greenbriar Drive, Suite 100
Stafford, Texas 77477
Telephone: (713) 495-7123 Fax: (713) 495-9544
with a copy to:
Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attn: Michael A. Boyd
(q) Brokers:
Brendan P. Lynch
CB Commercial Real Estate Group, Inc.
2500 West Loop South, Suite 100
Houston, Texas 77027-4502
and
3
<PAGE> 4
Rusty Tamlyn
Cushman & Wakefield of Texas, Inc.
1300 Post Oak Blvd., Suite 1600
Houston, Texas 77056
2. TERM/OCCUPANCY. The Term shall commence on the Commencement Date,
and shall continue for the period of time in the Term as specified hereinabove.
Tenant shall initially, beginning on the Commencement Date, occupy and lease the
approximately 118,750 square feet of space reflected on the floor plan attached
hereto as Exhibit "A", and Tenant shall subsequently, beginning on June 1, 1997,
occupy and lease the additional 45,850 square feet as reflected on the floor
plan attached hereto as Exhibit "A". Therefore, beginning June 1, 1997 and
continuing throughout the remainder of the Term, the Premises shall consist of a
total of approximately 164,600 square feet.
Landlord hereby grants to Tenant, its employees, agents, contractors,
invitees, licensees and other visitors nonexclusive license for the term of this
Lease and all extensions and renewals thereof to use the common areas of the
Building for the purpose of ingress and egress to the Building and the Premises
(including, without limitation, use of any private roadways and drives located
on or adjacent to the Building for vehicular ingress and egress).
3. USE. The Premises are to be used and occupied by Tenant (and Tenant
only) solely for the Permitted Use. Tenant shall at its own cost and expense
obtain any and all licenses and permits necessary for any such use. Tenant shall
comply with all governmental laws, ordinances and regulations, deed
restrictions, applicable to the use or occupancy of the Premises (including
without limitation, all provisions of the Americans with Disabilities Act
applicable to the Premises), and any conditions or matters at the Property
caused by Tenant, or Tenant's customers, agents, employees or invitees, and
Tenant shall promptly comply with all governmental orders, regulations,
restrictions, and directions for the correction, prevention and abatement of
nuisances in, upon, or conducted in connection with the Premises, all at
Tenant's sole expense. Without Landlord's prior written consent, Tenant shall
not receive, store, or otherwise handle any product, material or merchandise
which is volatile, hazardous, explosive or highly inflammable. The foregoing
restrictions shall not be deemed to prohibit Tenant from maintaining reasonable
quantities of any material that is utilized by Tenant or its employees in the
ordinary course of business,provided that such materials are stored and handled
in proper containers in accordance with applicable laws, regulations, codes and
ordinances. Without Landlord's prior written consent, Tenant shall not use or
permit the Premises to be used for any purpose which would render the insurance
thereon void, including but not limited to any operational activity of Tenant or
Tenant's vacating or abandonment of the Premises. Tenant shall not use the
Premises or the Building or permit the Premises or the Building to be used, or
allow any activity to occur at the Premises, in any way which would cause
offensive noises, odors, fumes, vibrations, noxious or dangerous gases or
chemicals, or any other nuisances to occur at the Premises or the Building.
Further, Tenant shall not cause or allow any disturbance of other tenants within
the Building or do or permit anything to occur which might decrease, diminish or
adversely affect the Premises, the Building, or any other tenant's interest
therein.
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Additionally, and regardless of whether Tenant is in default hereunder, Tenant
shall be responsible for paying to or reimbursing Landlord for, upon demand, any
increase, whether temporary or permanent, in insurance premiums that result from
any activity occurring at the Premises or items placed or situated at the
Premises. Landlord hereby covenants and agrees to use its diligent good faith
efforts to cause the other tenants of the Building to conduct their business and
to control their agents, employees, and contractors, in such manner as not to
create any nuisance, or unreasonably interfere with, annoy or disturb Tenant in
its possession and use of the Premises.
4. BASE MONTHLY RENTAL. Tenant agrees to pay to Landlord, as a separate
and independent covenant, the Total Base Rental; such Total Base Rental shall be
due and payable in monthly installments of Base Monthly Rental on the first day
of each calendar month during the Term of this Lease and any extensions or
renewals thereof. Tenant agrees to pay such rent plus any Additional Rent, to
Landlord at Landlord's address (or such other address as may be designated by
Landlord from time to time) monthly in advance without demand, deduction, offset
or credit except as expressly provided herein. If the Term of this Lease as
heretofore established commences on other than the first day of a month or
terminates on other than the last day of a month, then the installment of Base
Monthly Rental for such month shall be prorated and the installment so prorated
shall be paid in advance. Tenant shall also pay, as Additional Rent, all such
other sums of money as shall become due from and payable by Tenant to Landlord
under this Lease. Landlord shall have the same remedies for default for the
payment of Additional Rent as are available to Landlord in the case of a default
in the payment of Base Monthly Rental. All past due installments of Rent and any
and all other sums due Landlord from Tenant shall bear interest at the rate of
twelve percent (12%) per annum beginning on the 10th day after the due date
therefor and continuing until paid.
5. SECURITY DEPOSIT. Tenant shall contemporaneously herewith deliver to
Landlord the cash Security Deposit. The Security Deposit shall be held by
Landlord as security for the payment of all rent and other sums payable by
Tenant to Landlord hereunder, and for the faithful performance by Tenant of all
the terms, covenants, and conditions of this Lease during the Term hereof. If
Tenant defaults with respect to any provision of this Lease, including, but not
limited to the provisions relating to the payment of rent, whether it be Base
Monthly Rental or Additional Rent, Landlord may (but shall not be required to)
apply or retain all or any part of the Security Deposit for the payment of any
rent or any other sum due Landlord hereunder, and/or for the payment of any
amount which Landlord may spend or become obligated to spend by reason of
Tenant's default, and/or to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of Tenant's default. Any portion of the
Security Deposit which is not so utilized or spent by Landlord may continue to
be held by Landlord as security and same may be utilized upon a default by
Tenant for any of the aforesaid purposes. If any portion of the Security Deposit
is so used or applied, Tenant shall, within twenty-five (25) days after written
demand therefor, deliver cash to Landlord in an amount sufficient to restore the
Security Deposit to its original amount, and Tenant's failure to do so shall be
deemed to be a nonpayment of Additional Rent and a material breach of this
Lease. Landlord shall not be required to keep the Security Deposit separate from
its general funds, and Tenant shall not be
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entitled to interest on such Security Deposit. If Tenant shall fully and
faithfully perform every provision of this Lease to be performed by it
(including leaving Landlord a forwarding address in writing), the Security
Deposit or any balance thereof shall be returned to the Tenant within sixty (60)
days after the expiration of the Term. In the event of a termination of the
Landlord's interest in this Lease, Landlord shall transfer said Security Deposit
(or any balance thereof) to Landlord's successor in interest.
6. OPERATING EXPENSES/ADDITIONAL RENT.
(a) The term "Tenant's Pro Rata Share" shall mean the percentage of the
Building occupied by Tenant determined by dividing the total number of square
feet of the Premises by the total number of square feet of the Building, (which
is agreed and stipulated to be 229,200 square feet) which is agreed to be the
percentage specified hereinabove.
(b) "Operating Expenses" as said term is used herein shall be computed
at Landlord's option either on the accrual basis. All Operating Expenses shall
be determined in accordance with sound accounting principles consistently
applied. The term "Operating Expenses" as used herein shall mean all expenses,
costs and disbursements (but not replacement of capital investment items except
as otherwise stated hereinbelow, or specific costs billed to and paid by
specific tenants, or any cost or expense which is specifically set forth herein
as an obligation of Landlord) of every kind and nature which Landlord shall pay
or become obligated to pay because of or in connection with the ownership,
management, maintenance and operation of the Property, including those costs
related to pedestrian walkways, landscaping and all drives and parking
facilities, and such additional facilities in subsequent years as may be added
by Landlord, and including, but not limited to, the following:
(i) Costs of repairing, maintaining, and operating the Property;
(ii) Compensation, wages and salaries of all contractors or employees
directly engaged in operation, and/or maintenance of the Property;
(iii) All taxes, insurance and benefits relating to contractors or
employees providing these services;
(iv) All supplies, tools, equipment, and materials used in operation
and maintenance of the Property;
(v) Cost of all utilities for the Property and its common areas
including the cost of water, power, and lighting, for the Property
(except to the extend separately billed, assessed and paid for by
Tenant or other tenants of the Building);
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(vi) All management fees payable to the managing agent for the
Property, not to exceed a sum equal to five percent (5%) of the Rents
derived from the Property on an annual basis;
(vii) Cost of all maintenance and service agreements for the Property
and the equipment therein;
(viii) Cost of all insurance relating to the Property, including, but
not limited to, the cost of casualty and liability insurance applicable
to the Property and Landlord's personal property used in connection
therewith;
(ix) All taxes and assessments and governmental charges, whether
federal, state, county or municipal, and whether they be taxing
districts or authorities presently taxing the Property or by others,
subsequently created or otherwise, and any other taxes and assessments
attributable to the Property or its operation and any costs and
expenses of contesting the validity of same. It is agreed that Tenant
will be responsible for ad valorem taxes on its personal property.
Tenant shall also pay any ad valorem taxes on the value of leasehold
improvements at the Premises to the extent that same are separately
assessed by the applicable taxing authority(ies).
The term "actual Operating Expenses" shall mean, with respect to each calendar
year during the Term of this Lease, the actual Operating Expenses for said year
computed in accordance with the provisions of this Subsection.
Expressly excluded from Operating Expenses are the following items:
(1) Replacement of capital investment items;
(2) Repairs and restoration paid for by the proceeds of any insurance
policies or which are paid or reimbursed to Landlord by third parties;
(3) Principal, interest, and other costs directly relating to financing
the Property;
(4) Rental, leasing, and similar commissions, advertising, promotional,
and legal expenses;
(5) Specific costs billed to and paid by any tenant (including Tenant)
or by third persons;
(6) Depreciation;
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(7) Costs incurred in renovating or otherwise improving or decorating,
painting, or redecorating vacant space for tenants or other occupants;
(8) Overhead and profit increment paid to subsidiaries or affiliates of
Landlord for services on or to the Property, to the extent only that
the costs of such services exceed competitive costs of such services
where they are not rendered by a subsidiary or affiliate; and
(9) Any costs, fines, or penalties incurred due to violation by
Landlord, its employees, agents, contractors, or assigns, or any
governmental rule or authority.
(10) All costs of a capital nature, including but not limited to,
capital improvements, capital repairs, capital equipment and capital
tools, all as determined in conformity with generally accepted
accounting principles consistently applied, including without
limitation, any costs or expenses incurred to comply with the
requirements of any governmental authority, law, code, ordinance or
regulation enacted or imposed as of the date of this lease, including
without limitation, the ADA as it relates to the exterior elements of
the Building, including the exterior doors to the Premises (unless the
Tenant's use of the premises changes so as to cause ADA required
revisions to the exterior elements of the Building or exterior doors to
the Premises, in which case the Tenant will be responsible for the cost
of such revisions);
(11) Costs and expenses for services or amenities that are specifically
for the benefit of a particular tenant and that are of a nature not
generally provided to all tenants in the Building or to Tenant without
separate charge therefor;
(12) Landlord's general administrative overhead expenses and
partnership or corporate accounting fees;
(13) Wages, salaries, or other compensation of any kind or nature paid
to any executive employees above the grade of building manager;
(14) Any taxes or income, death taxes, franchise taxes and any taxes
imposed or measured on or by the income of Landlord from the operation
of the Property.
(c) Additional Rent. Tenant shall pay Tenant's Pro Rata Share of each
calendar year's (or any part thereof) Operating Expenses for such year (or any
part thereof). Any sum payable by Tenant under this provision shall be deemed
Additional Rent. For each year during the Term of this Lease, Landlord shall
provide to Tenant a statement of the projected Operating Expenses for such year
as soon as reasonably possible, and Tenant shall thereafter pay, in addition to
the Base Monthly Rental for such year, Tenant's Pro Rata Share of the projected
Operating Expenses. Such projected Operating Expenses may be adjusted from time
to time and Tenant's required payment of Additional Rent shall thus likewise be
adjusted. Landlord shall
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within the period of one hundred fifty (150) days (or as soon thereafter as
possible) after the close of each calendar year of the Term hereof provide
Tenant a statement of such year's actual Operating Expenses. If the actual
Operating Expenses are greater than the projected Operating Expenses paid by
Tenant, Tenant shall pay Landlord, within thirty (30) days of delivery of the
statement, the Tenant's Pro Rata Share of the difference. If such year's
projected Operating Expenses paid by Tenant are greater than the actual
Operating Expenses, Landlord shall either pay to Tenant within thirty (30) days
of said statement's issuance Tenant's Pro Rata Share of the difference, or, at
Landlord's option, apply Tenant's Pro Rata Share of the difference to any sums
due or to become due from Tenant to Landlord.
(d) Notwithstanding any other provision herein to the contrary, the
rent owed by Tenant shall never be less than the Base Monthly Rental. Further,
even though the Term has expired and Tenant has vacated the Premises, Tenant
shall remain fully liable to pay to Landlord Tenant's prorata portion of any
sums due as Additional Rent pursuant to this Section for the last calendar year
of the Term of this Lease.
(e) Landlord shall maintain complete and accurate records of all
Operating Expenses of the Building. Tenant and Tenant's authorized
representatives shall have the right, at Tenant's expense and after giving not
less than five (5) days' prior written notice to Landlord to inspect audit and
copy Landlord's books and records relating to Operating Expenses for any period
within the term of this Lease and not more than six (6) months after the
reconciliation for the previous year. Any such inspection and audit shall be
conducted in Landlord's office during normal business hours. Landlord shall
reimburse Tenant for the reasonable costs of any such inspection and audit if
Landlord and Tenant agree or a court of competent jurisdiction or arbitration
decision state that the operating expenses billed to Tenant for such previous
calendar year were overstated in Landlord's statement of actual operating
expenses for such calendar year by more than five percent (5%). The Landlord's
records and calculations of Operating Expenses for any year which are not
audited or contested in writing within six (6) months of Tenant's receipt of the
reconciliation for such year shall be conclusively deemed correct and accepted
by Tenant, and shall not be contestable or disputable (regardless of whether
actually accurate or correct).
7. PEACEFUL ENJOYMENT. Tenant shall, and may peacefully, have, hold and
enjoy the Premises, subject to the other terms hereof, provided that Tenant pays
the rental and other sums herein recited to be paid by Tenant and performs all
of Tenant's covenants and agreements herein contained.
8. ALTERATIONS, ADDITIONS AND LIENS.
(a) Except as hereinafter expressly provided, Tenant shall not make or
suffer to be made any alterations, additions or improvements to or of the
Premises, or any part thereof, whether they be to the interior or exterior of
the Premises or any part thereof, without first submitting detailed plans and
specifications for Landlord's approval, and receiving the written consent of
Landlord, which shall not be unreasonably denied, conditioned or delayed. Any
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alterations, additions or improvements to or of the Premises, including, but not
limited to, alterations, additions and improvements to the wall covering,
carpeting, paneling and built-in cabinet work, plumbing, air-conditioning, HVAC
and air handling systems, and the electrical systems, and component parts, but
excepting movable furniture and trade fixtures, shall upon the expiration of the
Term become a part of the realty belonging to the Landlord and shall be
surrendered with the Premises. In the event Landlord consents to the making of
any alterations, additions or improvements to the Premises by Tenant, the same
shall be made by Tenant at Tenant's sole cost and expense. Any contractor, or
person selected by Tenant to make such alterations, additions or improvements,
must first be approved in writing by the Landlord, which shall not be
unreasonably withheld, conditioned or delayed. No work shall commence until
Tenant has procured and paid for all required municipal and other governmental
permits and authorizations. Tenant shall not permit any mechanics' or
materialmen's lien to be filed against the Property or the Premises, or against
the Tenant's leasehold interest in the Premises, by reason of work, labor,
services, or materials supplied, or claimed to have been supplied, whether prior
or subsequent to the commencement of the Term hereof, to Tenant or anyone
holding the Premises through or under Tenant. If any such mechanics' or
materialmen's lien shall, at any time, be filed against the Property or the
Premises, or Tenant's leasehold interest, then Tenant shall, within ten (10)
days after notice of the filing thereof, cause such lien to be discharged of
record by payment, deposit, bond, order of Court of competent jurisdiction, or
otherwise. If Tenant shall fail to cause such lien to be discharged within such
ten (10) day period, then, in addition to any other right or remedy of Landlord,
Landlord may, but shall not be obligated to, discharge such lien, either by
paying the amount claimed to be due, or by procuring the discharge of such lien
by deposit or by bonding proceedings, and in any such event, Landlord shall be
entitled, if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such mechanics' and materialmen's lien by the lien or, and to pay
the amount of the judgment for and in favor of the lien or, with interest,
costs, and all other allowances. Any amount paid by the Landlord for any of such
purposes, including Court costs, attorneys' fees and expenses of litigation,
with interest thereon at the rate of twelve percent (12%) per annum from the
date of payment, shall be paid by Tenant to Landlord on demand, and if unpaid,
shall be treated as Additional Rent, as provided for elsewhere in this Lease.
Nothing in this Lease shall be construed in any way as constituting the consent
or request of the Landlord, expressed or implied, by inference or otherwise, to
any contractor, subcontractor, laborer, or materialmen, for the performance of
any labor, or the furnishing of any materials for any specific improvement,
alteration or repair of or to the Premises or as giving Tenant the right, power,
or authority, to contract for or permit the rendering of any service or the
furnishing of any material that would give rise to the filing of any mechanics'
lien against the Property or the Premises.
(b) Not withstanding anything to the contrary in Section 8(a) above,
after the Commencement Date, provided that an Event of Default does not exist,
and that Tenant first submits plans, specifications or drawings to Landlord,
Tenant will be permitted to make alterations, additions and/or improvements of a
nonstructural nature (other than cosmetic changes such as painting and
replacement of floor, wall and window coverings) to the interior of the Building
(that does not penetrate or affect the roof), if the aggregate cost of such
alterations,
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additions or improvements does not exceed $20,000.00, without Landlord's prior
consent. All other alterations, additions or improvements, including but not
limited to those of a nonstructural nature, which exceed a cost of Twenty
Thousand Dollars ($20,0000) shall be governed by the preceding paragraph hereof.
(c) It is understood and agreed that Tenant, at its sole cost and
expense, shall make certain improvements to the office area and warehouse area
of the Premises, which will entail, but shall not be limited to, dropping a
ceiling in the warehouse and air conditioning unit areas of the Premises,
increasing the lighting, installing a second set of restrooms, adding static
resistance flooring in the manufacturing area, and re-carpeting the office area.
Landlord's consent to the plans and specification for such work shall be
required prior to initiating such work; however, Landlord will cooperate with
the Tenant's architect, project manager, facilities department, general
contractor and subcontractors in connection with such work and the obtaining of
all permits required under applicable laws and complying with applicable laws,
codes or governmental regulations in connection with such construction work
(however Landlord shall not be required to expend any funds in connection
therewith). Additionally, the general contractor to perform such work shall be
subject to Landlord's prior approval, which will not be unreasonably withheld or
delayed. Tenant warrants that all such work will be done in a good and
workmanlike manner, and billed in accordance with all City of Stafford codes and
specifications. Tenant shall, upon completion all of such work, provide Landlord
with full and complete lien releases and waivers from the general contractor and
all subcontractors and materialmen.
9. MAINTENANCE AND REPAIRS.
(a) General. By taking possession of the Premises, Tenant shall be
deemed to have accepted the Premises as being in good and acceptable order,
condition and repair. Tenant shall upon the expiration or sooner termination of
this Lease surrender the Premises to Landlord in the same condition as received
by Tenant upon commencement of this Lease, ordinary wear and tear, casualty and
condemnation excepted. Except as specifically provided herein, Landlord shall
have no obligation to alter, remodel, improve, repair, maintain, decorate or
paint the Premises or any part thereof, and the parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the property except as specifically set forth herein. The Tenant's
obligation to pay rent is an independent covenant separate and apart from any
covenant or obligation of the Landlord relative to repairs or maintenance.
Tenant shall, at Tenant's sole cost and expense, keep the Premises and every
part thereof, except as hereinafter expressly provided, in good condition and
repair, including without limitation all windows, glass and plate glass, doors,
entrance ways, interior walls, finish work, floor covering, heating and air
conditioning systems and plumbing work and fixtures. Tenant shall take good care
of the Premises and its fixtures. Tenant will keep and maintain the Premises, as
well as the parking areas (being the seven areas outlined in Exhibit "C" hereto)
and driveways serving same, in a clean, neat and sanitary condition. Tenant
shall furnish and provide, at its expense, all janitorial services and supplies
to be used on or at the Premises. Tenant shall further maintain, repair and/or
replace the HVAC system or units serving the
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Premises. Upon request, Tenant shall furnish Landlord with copies of all of
Tenant's records relative to repair, replacement and/or maintenance of the HVAC
system. Further, and notwithstanding anything to the contrary stated herein,
Tenant shall be responsible and shall bear the cost to repair, maintain and/or
replace any portion of the Premises or any other part of the Building,
structural or non-structural, which is damaged or destroyed by or because of the
acts of Tenant or Tenant's agents, employees, or contractors. If Tenant fails to
make such repairs or replacements promptly, Landlord may, at its option, make
the repairs or replacements, and Tenant shall repay the cost thereof, as
Additional Rent, to Landlord upon demand. Tenant shall not commit or allow any
waste or damage to be committed on or to any portion of the Premises.
(b) Landlord shall, at its expense, maintain (in reasonably good
repair) only the roof, foundation, exterior walls and structural frame of the
Building, reasonable wear and tear excepted (unless any such repair or
maintenance was caused by any act or negligence of Tenant or its invitees,
licensees, agents or employees to the extent not covered by the Landlord's
insurance). The term "frame", as used in this Subsection, shall not include
windows, glass or plate glass, doors or entrance ways. Tenant shall immediately
give Landlord written notice of any need for repairs, after which Landlord shall
have the reasonable opportunity to repair same, subject to the provisions of
Section 31(h) hereof. Landlord's liability hereunder shall be limited to the
cost of such repairs.
(c) Landlord shall on or before the Commencement Date, pay to Tenant
the sum of $100,000.00 which shall be used by Tenant to defray the costs of
maintaining, repairing and/or replacing the HVAC system or units serving the
Premises. Landlord makes no representations or warranties with respect to the
HVAC system/units, and any costs incurred in connection with same in excess of
said $100,000.00 shall be borne exclusively by Tenant. Tenant shall submit to
Landlord evidence of all expenditures made to maintain, repair and/or replace
said HVAC systems/units at the time of paying for same.
(d) Notwithstanding that Tenant shall be responsible to maintain and
repair the parking areas and driveways serving the Premises, in the event that
the reasonable cost of repairing any one contiguous portion of the parking areas
exceeds $5,000.00, then the Landlord will be responsible for such repairs,
provided that Tenant is not in default under this Lease, and further provided
that the damages needing repairing are not caused by the negligence or willfully
wrongful actions of the Tenant, or the Tenant's agents, employees, contractors,
invitees or licensees.
(e) Tenant shall be responsible and obligated, at its sole cost and
expense, to comply with all provisions of the Americans with Disabilities Act
applicable to the interior of the Premises; provided, however, that Tenant shall
not be obligated to make any alterations or improvements to the exterior of or
outside of the Premises as a result of any provisions of such Act except as
hereinafter set forth. Landlord shall be responsible and obligated, at its sole
cost and expense, to comply with all provisions of the ADA applicable to the
exterior elements of the Building, including without limitation, the exterior
doors to the Premises, unless the required
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revisions are the result of a change in Tenant's usage of the Premises resulting
in such required revisions.
10. ENTRY BY LANDLORD. Landlord, or Landlord's agent, its mortgagee or
prospective mortgagee, and prospective purchasers of the Property and their
respective agents, shall have the right upon reasonable notice to tenant to
enter the Premises to inspect the same, to submit the Premises to prospective
purchasers, mortgagees or tenants, to post notices, to serve notice or process,
or to take any other action not in violation of this Lease. Landlord shall be
allowed to take all materials into the Premises that may be required for any
repairs, changes, or maintenance, provided, however, that if any such entry by
Landlord renders all or any portion of the Premises untenantable for a period of
three (3) consecutive business days, all rent with respect to the untenantable
portion of the Premises shall thereafter abate until the entire Premises are
restored to a tenantable condition. Promptly upon completion of any work
undertaken by or on behalf of Landlord, the Premises shall be restored to the
condition which existed prior to such entry. Tenant hereby waives any claim for
damages or for injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and other
loss occasioned by any such entry into the Premises, except to the extent caused
by the gross negligence or willful misconduct of Landlord. Landlord shall at all
times have the right to retain a key with which to unlock all of the doors in,
upon and about the Premises, and Landlord shall have the right to use any and
all means which Landlord may deem proper to open said doors in an emergency in
order to obtain entry to the Premises, without liability to Tenant. Any entry to
the Premises obtained by Landlord by any of said means, or otherwise, shall not
under any circumstances be construed or be deemed to be a forcible or unlawful
entry into or a detainer of the Premises, or an eviction of Tenant from the
Premises or any part thereof. Landlord shall endeavor to limit or minimize any
material interference with Tenant's business operations resulting from any entry
into the Premises, to the extent reasonable and practicable.
11. LANDLORD'S LIEN. The Landlord's statutory lien is waived.
12. ASSIGNMENT AND SUBLETTING.
(a) Neither Tenant or Tenant's legal representatives nor successors in
interest by operation of law or otherwise shall assign this Lease or sublease
the Premises or any part thereof or mortgage, pledge or hypothecate its
leasehold interest therein, and any attempt to do so without the prior express
written consent of Landlord shall be void, of no effect, and constitute an Event
of Default (as hereinafter defined). This prohibition against assigning or
subletting shall be construed to include a prohibition against any assignment or
subletting by operation of law. The voluntary or other surrender of this Lease
by Tenant or a mutual cancellation hereof shall not work a merger and shall, at
the option of Landlord, terminate all or any existing subleases or may, at the
option of Landlord, operate as an assignment to Landlord of Tenant's interest in
any or all such subleases. Notwithstanding any other provision of this Lease to
the contrary, Tenant may assign this Lease or sublet the Premises or any part
thereof to an affiliate of Tenant without the prior consent of, or notice to,
the Landlord. For purposes of this section, "affiliate" shall be defined as a
parent or subsidiary or other corporation or entity under common
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ownership with or owned by Tenant. Additionally, and notwithstanding any other
provision of this Lease to the contrary, the prohibition on assignments shall
not be applicable (and no prior consent of or notice to the Landlord shall be
required) with respect to a merger between Tenant and another entity where the
surviving entity has a net worth that is greater than or equal to the Tenant's
net worth on the Date on this Lease.
(b) If Tenant should desire to assign this Lease or sublease the
Premises or any portion thereof, Tenant shall give Landlord written notice of
such desire at least thirty (30) days in advance of the date on which Tenant
desires to make such assignment or effect such sublease. At the time of giving
such notice, Tenant shall provide Landlord with a copy of the proposed
assignment or sublease document, and such information as Landlord may reasonably
request concerning the proposed sublease or assignee to assist Landlord in
making an informed judgment regarding the financial condition, reputation,
operation and general desirability of the proposed sublessee or assignee.
Landlord shall then have a period of fifteen (15) days following receipt of such
notice within which to notify Tenant in writing of Landlord's election to:
(1) Terminate this Lease as to the space so affected as of the date
specified by Tenant in which event Tenant shall be relieved of all
further obligations hereunder as to the Premises or said portion
thereof, after paying all Rent due as of the Termination Date, or
(2) Permit Tenant to assign or sublet the Premises or said portion
thereof, or
(3) Refuse to consent to Tenant's assignment or subleasing of the
Premises or said portion thereof and to continue this Lease in full
force and effect as to the entire Premises.
If Landlord should fail to notify Tenant of its election within said fifteen
(15) day period, Landlord shall have elected Option 3 above. Landlord and Tenant
agree that, in the event of any approved assignment or subletting, the rights of
any such assignee or sublessee of Tenant herein shall be subject to all of the
terms, conditions and provisions of this Lease, including, without limitation,
restriction on use and the covenant to pay Rent. Landlord may collect Rent
directly from such assignee or sublessee and apply the amount so collected to
the Rent herein reserved. No such consent to or recognition of any such
assignment or subletting shall constitute a release of Tenant or any guarantor
of Tenant's performances hereunder from further performance by Tenant or such
guarantor of covenants undertaken to be performed by Tenant herein. Tenant
and/or such guarantor shall remain liable and responsible for all Rent and other
obligations herein imposed upon Lessee. Consent by Landlord to a particular
assignment, sublease or other transaction shall not be deemed a consent to any
other or subsequent transaction. In any case where Landlord consents to any such
assignment, sublease or other transaction, Tenant shall pay any reasonable
attorneys' fees incurred by Landlord in connection with such transaction. If
Landlord consents to an assignment or sublease by Tenant to any person or entity
other than an affiliate of Tenant, Tenant agrees that one-half of any Profit (as
hereinafter defined) of any such assignment or sublease shall be paid to
Landlord as additional
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rental hereunder immediately upon Tenant's receipt thereof. For purposes of this
Section 12(b), (i) the term "PROFIT" means (1) in the case of an assignment of
this Lease, the amount, if any, by which the consideration paid to Tenant in
respect of such assignment exceed Tenant's Transfer Costs, and (2) in the case
of a sublease of all or any portion of the Premises, the amount, if any, by
which the Excess Rents paid to Tenant in respect of such sublease exceed
Tenant's Transfer Costs, (ii) the term "TRANSFER COSTS" means as to any
assignment or sublease the reasonable out-of-pocket costs and expenses paid to
third parties and directly related to that assignment or sublease, including,
but not limited to, brokerage commissions,reasonable legal fees, and inducements
and allowances paid to or for the benefit of the transferee, and (iii) the term
"EXCESS RENTS" means the amount, if any, by which the rental amounts and other
consideration payable to Tenant in respect of a sublease exceed the rents
payable by Tenant under this Lease for the Premises or the portion thereof
subject to that sublease.
(c) If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. ("Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord, and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any such monies or other consideration not paid or
delivered to Landlord shall be held in trust for the benefit of Landlord and
shall be promptly paid or delivered to Landlord. Any person or entity to whom
this Lease is so assigned shall be deemed, without further act or deed, to have
assumed all of the obligations arising under this Lease as of the date of such
assignment. Any such assignee shall, upon demand therefor, execute and deliver
to Landlord an instrument confirming such assumption.
(d) Landlord shall not unreasonably withhold, condition or delay its
consent to any assignment or subletting for the Permitted Use, provided that:
(1) Tenant shall not then be in default hereunder beyond the expiration
of any applicable grace period; and
(2) The proposed assignee or subtenant shall:
(a) have a substantial financial standing, and;
(b) agree to use the Premises in a manner consistent with the
standards of the Building; and
(3) The character of the business to be conducted in the Premises by
the proposed assignee or subtenant shall not be likely to increase
substantially the Building Operating Expenses or costs or the burden on
parking; and
(4) In case of a subletting, the sublessee shall be expressly subject
to all of the obligations of Tenant under the Lease, excepting Rent and
Term, and the further condition and restriction that such sublease
shall not be assigned, encumbered or
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otherwise transferred or the Premises further sublet by the subtenant,
in whole or in part, or any part thereof suffered or permitted by the
subtenant to be used or occupied by others, without the prior written
consent of Landlord in each instance; and
(5) Each assignee, subtenant or successor shall assume and shall be
deemed to have assumed the performance of all covenants and obligations
of Tenant under the Lease, excepting Rent and Term, and shall be liable
with Tenant for the performance of all such covenants and obligations.
13. HOLD HARMLESS.
(a) Tenant shall indemnify and hold harmless Landlord against and from
any and all claims arising from Tenant's occupancy and use of the Premises, the
Building or the Property, or from the conduct of Tenant's business, or from any
activity, work, or other thing done, permitted or suffered by the Tenant in or
about the Premises, the Building or the Property, and Tenant shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease (including, without limitation,
Tenant's failure to comply with the provisions of the Americans with
Disabilities Act), or arising from any act or negligence of Tenant, or any
agent, employee, contractor, licensee, or invitee of Tenant, and from and
against all costs, attorney's fees, expenses and liabilities incurred in
connection with or relating to any such claim or any action or proceeding
brought thereon (other than a claim arising from the sole negligence or willful
misconduct of Landlord or its agents or employees). Further, if any case, claim,
action or proceeding is brought against Landlord by reason of any such claim,
Tenant shall, upon notice from Landlord, defend the same at Tenant's expense
utilizing counsel satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises, the Building and the
Property, from any causes other than those caused solely by Landlord's
negligence, or willful misconduct, and Tenant hereby waives all claims in
respect thereof against Landlord. Landlord shall indemnify and hold harmless
Tenant against and from any and all claims, actions, or proceedings arising from
the Landlord's (or Landlord's agents', employees', and contractors') negligence
or willful misconduct.
(b) Landlord shall not be liable for any damage to the Premises or for
loss or damage to any property of Tenant, or Tenant's agents, employees, guests
or invitees by theft or otherwise, or for any injury to or damage to persons or
property resulting from fire, wind, explosion, falling plaster or other
material, steam, gas, electricity, water, rain or hail, which may leak from any
part of the Building or from the pipes, appliances or plumbing works therein, or
from the roof, street or subsurface or from any other place resulting from
dampness or any other cause whatsoever, unless caused by or due to the gross
negligence or willful misconduct of Landlord and, its agents, or employees.
Landlord and its agents and employees shall not be liable for interference with
the light or other incorporeal hereditaments, loss of business by Tenant, or any
latent defect in the Premises or in the Property. Tenant shall give prompt
notice to Landlord in
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case of fire or accidents in the Premises or the Building or of defects therein
or in the fixtures or equipment.
14. NUISANCE. Tenant shall conduct its business and control its agents,
employees, invitees, and visitors in such manner as not to create any nuisance,
or interfere with, annoy or disturb any other tenant, Landlord, or any other
property owners in the vicinity of the Building. Tenant shall not cause or
permit any nuisance or disturbance at the Premises or the Building, including
but not limited to offensive noises, odors, fumes, vibrations, noxious or
dangerous gases or chemicals, or anything else that might decrease, diminish, or
adversely affect the Premises, or the Building or any other tenant's interest
therein. Landlord hereby covenants and agrees to use its diligent good faith
efforts to cause the other tenants of the Building to conduct their business and
to control their agents, employees, and contractors, in such manner as not to
create any nuisance, or unreasonably interfere with, annoy or disturb Tenant in
its possession and use of the Premises.
15. SUBORDINATION TO MORTGAGE. Landlord represents to Tenant that the
Property is not, as of the effective date hereof, encumbered by a mortgage or
deed of trust lien. This Lease shall be subject and subordinate to any mortgage
or deed of trust lien which may hereafter encumber the Premises, the Building or
the Property, and to all renewals, modifications, consolidations, replacements
and extensions thereof, provided that the owner of any such mortgage or deed of
trust enters into a written non-disturbance and attornment agreement with Tenant
providing that in the event of foreclosure or other rights asserted under the
applicable mortgage or deed of trust by the holder or any assignee thereof (a)
this Lease and all of the rights of Tenant hereunder shall continue in full
force and effect and effect and shall not be terminated or disturbed except in
accordance with the provisions of this Lease; (b) Tenant will automatically
become the tenant of such successor in interest without any change in the terms
or other provisions of this Lease; (c) such successor in interest shall not be
liable for any default of Landlord under this Lease occurring before such party
takes title to the Building, but shall assume and covenant to perform the
obligations, duties and liabilities of the Landlord under this Lease arising
from and after such date; and (d) such successor in interest shall not be bound
by (i) any payment of Rent for more than one month in advance, or (ii) any
amendment or modification of this Lease made without the written consent of such
successor in interest after the date of such non-disturbance and attornment
agreement. Tenant shall execute such a non-disturbance and attornment agreement
pursuant to this Section 15 within ten (10) business days following Tenant's
receipt of the proposed non-disturbance and attornment agreement.
16. ESTOPPEL CERTIFICATES. Tenant shall at any time and from time to
time upon not less than ten (10) business days prior written notice from
Landlord execute, acknowledge and deliver to Landlord a statement in writing (a)
certifying that this Lease is unmodified and in full force and effect (or if
modified, stating the nature of such modification and certifying that this Lease
as so modified, is in full force and effect), and the date to which the rental
and other charges are paid in advance, if any, (b) acknowledging that there are
not, to Tenant's knowledge, any uncured defaults on the part of the Landlord
hereunder, or specifying such defaults if any are claimed, and (c) all such
other and additional information and data relating
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to this Lease, the Landlord or the Tenant as Landlord or Landlord's mortgagee
may reasonably request. Any such statement shall be in a form reasonably
acceptable to Landlord or its mortgagee, and may be relied upon by a prospective
purchaser or mortgagee of all or any portion of the Premises or the Building.
17. EMINENT DOMAIN. The term "total taking", as used in this section,
means the taking of the entire Premises, under the power of eminent domain, or
taking of so much of said Premises, as to prevent or substantially impair the
conduct of Tenant's business thereon. The term "partial taking" means the taking
of a portion only of said Premises, which does not constitute a total taking, as
defined above. If, during the Term hereof, there shall be a total taking by
public authority, under the power of eminent domain, then the leasehold estate
of Tenant, in and to the Premises, shall cease and terminate as of the date of
the actual taking. If, during the Term, there shall be a partial taking of the
Premises, this Lease shall terminate as to the portion of said Premises taken
upon the date which the actual possession of said portion of said Premises is
taken, pursuant to said eminent domain proceedings, but said Lease shall
continue in force and effect as to the remainder of said Premises. The rental,
payable by the Tenant, for the balance of said Term, shall be reduced in the
ratio that the value of the part taken bears to the value of the total Premises
at the time of the taking. All damages allowed in any such condemnation
proceeding or taking of the Premises, as herein mentioned, shall belong to and
be the exclusive property of Landlord. Tenant shall have the right (at Tenant's
sole cost and expense) to appear and file a separate claim for damages in such
proceedings, and to participate in any and all hearings, trials and appeals
thereon. If this Lease is terminated, in whole or in part, pursuant to these
provisions, all rentals and other charges, payable by Tenant to Landlord
hereunder, and attributable to the Premises, shall be paid to the date upon
which actual physical possession shall be taken by the condemnor and the parties
shall thereupon be released from all further liability in relation thereto. A
voluntary conveyance by Landlord to a public utility, agency, or authority,
under threat of a taking under the power of eminent domain, in lieu of formal
proceedings, shall be a taking within the meaning of this Section.
18. DAMAGES AND LOSSES. Landlord shall not be liable or responsible to
Tenant for any loss or damage to any property or person occasioned by theft,
fire, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition or order of governmental body or authority, or any
other causes or for any damage or inconvenience which may arise through repair
or alteration of any part of the Premises.
19. FIRE AND CASUALTY.
(a) If the Premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give prompt written notice thereof to Landlord. If
the Premises shall be so damaged by fire or other casualty that (1) substantial
alteration or reconstruction of the Premises shall be, in Landlord's reasonable
opinion, required which Landlord's independent architect, in good faith,
estimates in writing will take longer than six (6) months to repair or restore,
and (2) eighteen (18) or fewer months remain in the original Term of this Lease
(or in the renewal term if Tenant has therefore exercised its renewal option as
hereinafter provided in Section 47(b)),
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Landlord may, at its option, terminate this Lease by notifying Tenant in writing
of such termination within thirty (30) days after the date of such damage or
casualty, in which event the Rent hereunder shall be abated as of the date of
such notice.
(b) Within thirty (30) days after such occurrence, if Landlord has not
elected to terminate this Lease as herein provided, Landlord will provide Tenant
with Landlord's architect's independent, good faith written estimate of the time
necessary to substantially complete the repair and restore the damage. If (a)
Landlord's architect estimates that it will take longer than six (6) months
after the fire or other casualty to substantially complete the repair and
restore the damage, or (b) such fire or other casualty occurs during the last
twelve (12) months of the Term, Tenant shall have the right to terminate this
Lease. Tenant shall give written notice to Landlord of such election within 30
days after the receipt of Landlord's architect's estimate.
(c) Provided neither Landlord nor Tenant have exercised its right to
terminate this Lease as set forth above, Landlord shall repair and restore the
Premises to substantially the same condition in which they were immediately
prior to the fire or other casualty, except that Landlord shall not be required
to rebuild, repair or replace any part of Tenant's furniture, moveable trade
fixtures, furnishings, or equipment. Landlord shall not be liable for any
inconvenience, annoyance, or injury done to the business of Tenant resulting in
any way from such damage or the repair thereof, except Landlord shall allow
Tenant an equitable reduction of Rent during the time and to the extent the
Premises are untenantable, save for Tenant's fault or negligence, as described
below. The Premises or any portion thereof shall be considered "untenantable" if
same are not reasonably usable for the conduct of Tenant's business as
customarily operated.
(d) If the Premises or the Premises shall be totally or partially
damaged by fire or other casualty resulting from the fault or negligence of
Tenant, or its agents, employees, licensees or invitees; such damage shall be
repaired by and at the expense of Tenant (to the extent that such destruction or
damage is not covered by the fire and extended coverage insurance carried by
Landlord as provided herein), under the direction and supervision of Landlord,
and Rent shall continue without abatement.
20. INSURANCE.
(a) Landlord shall maintain, as part of Operating Expenses, fire and
extended coverage insurance on the Premises. Such insurance shall be maintained
with an insurance company(ies), at full replacement cost and payment for losses
thereunder shall be made solely to Landlord subject to the rights of the holder
of any mortgage or deed of trust which may hereafter encumber the Premises.
Landlord shall also carry and maintain comprehensive general liability insurance
with a broad form general liability endorsement applicable to the Building and
its appurtenances, on an occurrence basis, a minimum combined single limit of
not less than Five Million Dollars ($5,000,000), and with a deductible or
self-insured retention of not greater than $100,000.
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(b) Tenant agrees that at all times during the Term, or any renewals,
it will maintain in force comprehensive general liability insurance insuring
both Landlord and Tenant against all claims or action arising out of or in
connection with Tenant's use or occupancy of the Premises. The Policy or
policies shall be in the amount specified in Tenant's Insurance Requirements.
Tenant also agrees to maintain fire and extended coverage insurance throughout
the Term as specified in Tenant's Insurance Requirements.
(c) Tenant agrees to carry statutory Worker's Compensation insurance
throughout the Term.
(d) All policies of insurance required to be maintained by Landlord and
Tenant under the provisions of this section shall be written by a solvent
insurance company, acceptable to Landlord, and which is duly licensed to issue
such policies in the State and County where the Premises are located. Said
policies shall provide for at least thirty (30) days written notice to Landlord
by the insurer or insurers prior to cancellation. Tenant shall promptly cause
true and correct copies of such insurance policies to be delivered to Landlord
upon effective date hereof, and certificates evidencing the renewals thereof
shall be delivered to Landlord at least thirty (30) days prior to the expiration
of the respective policy terms. All such policies of Tenant shall be written as
primary policies not contributing with and not in excess of coverage which
Landlord may carry. If Tenant should fail to comply with the foregoing
requirements relating to insurance, Landlord may obtain such insurance, and
Tenant shall pay to Landlord on demand, as Additional Rent hereunder, the
premium cost thereof plus interest at the legal rate of twelve percent (12%) per
annum.
21. WAIVER OF SUBROGATION RIGHTS. Anything in this Lease to the
contrary notwithstanding, Landlord and Tenant each hereby waive any and all
rights of recovery, claim, action or cause of action, against the other, its
agents, officers, or employees, for any loss or damage that may occur to the
Premises, or any improvements thereto, or any personal property of such party
therein, by reason of fire, the elements, or any other cause which is insured
against under the terms of standard fire and extended coverage insurance
policies referred to in this Lease, regardless of cause or origin, including
negligence of the other party hereto, its agents, officers or employees, and
covenants that no insurer shall hold any right of subrogation against such other
party. Such waiver of subrogation rights shall be a part of any policy required
to be obtained under this Lease. Notwithstanding the aforesaid, if Landlord and
Tenant agree that the waiver of subrogation will cause the insurance rates to be
commercially unreasonable, then said parties may agree to waive the provisions
of this Section.
22. PERSONAL PROPERTY TAXES. Tenant shall pay, or cause to be paid,
before delinquency, any and all taxes levied or assessed and which become
payable during the term hereof upon any or all of Tenant's equipment, furniture,
trade fixtures and other personal property located at the Premises. Upon written
request by Landlord, Tenant shall show evidence of such payment.
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23. REAL PROPERTY TAXES. Landlord shall be responsible for the ad
valorem taxes on the Premises and the Property (i.e. the real property) other
than on the aforesaid items of fixtures and personal property for which Tenant
is responsible; however, such taxes shall be included as part of the Operating
Expenses for which Tenant is required to pay its Prorate Share. Tenant shall
have the right, at no expense to Landlord, to protest the ad valorem taxes on
the Property with the appropriate taxing jurisdictions.
24. PARKING. The parking areas serving the Premises shall be available
only for parking of automobiles and light trucks owned by Tenant and other
tenants of the Building and/or their employees, agents, contractors, licensees,
and invitees. No abandoned vehicles or any other items of property may be stored
or brought upon such parking areas. Such areas shall not be used for the sale,
display or marketing of merchandise and Tenant shall remain in compliance with
all applicable deed restrictions at all times. Tenant shall have the exclusive
use of all of the 789 parking spaces outlined in Exhibit "C" hereto, except (i)
the 216 designated parking spaces shown on Exhibit "C" immediately to the east
of the Premises shall be utilized by Tenant on a non-exclusive basis along with
other tenants, guests, invitees, and licensees of the Property, and (ii) the 113
designated parking spaces shown on Exhibit "C", at the northwest portion of the
Premises adjacent to Bluebonnet Drive, shall be utilized on a non-exclusive
basis along with the existing tenant (Maxxim Medical) and its agents, employees,
licensees, guests and invitees, until such time as the Maxxim Medical lease has
terminated or expired, whereupon Tenant shall have the exclusive right to
utilize such spaces. Notwithstanding the foregoing, the Landlord shall not be
obligated to police, guard or supervise the use of the parking spaces. Landlord
shall be required to take reasonable action to prevent other persons from
utilizing such spaces. Additionally, Tenant shall abide by, and shall require
its agents and employees to abide by, any and all reasonable rules and
regulations relating to the parking areas as may be prescribed by Landlord from
time to time; provided, however, that Tenant and its employees and agents shall
be required to comply with the rules and regulations of the Building only to the
extent that same (a) are not inconsistent with any other provisions of this
Lease; and (b) are uniformly enforced among all tenants within the Building. Any
modification or addition to the rules of the Building shall be enforceable
against Tenant only after Tenant has received reasonable notice thereof.
25. SERVICES AND UTILITIES.
(a) Tenant shall be solely responsible for and promptly pay all
charges, including any deposits, for all utilities used or consumed in the
Premises. Landlord reserves the right to either submeter, or individually meter
the Premises, all or any part of the remainder of the Building, or all or any
part of the common facilities, including but not limited to the parking lot.
Initially, the Premises shall be separately metered for all utilities except
water and sewage usage, which shall be billed to Tenant, and Tenant shall pay
for same, based upon its Prorata Share of square footage within the Building.
Landlord reserves the right, however, to separately meter water/ sewage usage at
any later time. Tenant shall be solely responsible to arrange and pay for its
own janitorial services and trash/garbage removal services. Trash and garbage
shall only be
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placed in Landlord-approved receptacles in such area(s) as Landlord may
reasonably designate or redesignate from time to time.
(b) No interruption or malfunction of any utility services (including,
without limitation, electricity, gas, water and sanitary sewer services) for any
reason whatsoever shall render Landlord liable for damages to either persons or
property, nor shall any such failure or cessation be construed as an eviction or
constructive eviction of Landlord; provided, however, if any such interruption
or malfunction which is under Landlord's control shall render the Premises or a
portion thereof untenantable for a period in excess of two (2) business days,
rent shall abate as to such untenantable portion for the portion of such
untenantable period which exceeds two (2) business days, and such abatement of
rent shall be the sole remedy of Tenant, so long as Landlord shall use its best
efforts to restore such utility services in a diligent manner. If such
interruption or malfunction which is under Landlord's control shall continue for
a period of thirty (30) days, then Tenant shall be entitled to terminate this
Lease and all obligations of either party shall terminate effective as of such
termination. In considering whether the Premises, or a portion thereof, may be
untenantable during any period of time, it is agreed that the fact that Tenant
may of necessity, due to the nature of its business, occupy some of the Premises
with a reduced work force even though the space is untenantable shall not
preclude the space from being untenantable. It is the intention of the parties
that the term "untenantable" shall mean a condition which causes Tenant to
reduce its work force in such area of space due to such condition. For example,
complete failure of electricity would render the Premises untenantable for the
period of time in which the electricity is not available.
26. SIGNS. Tenant shall have the right to install a sign of its
standard logo, design, color and size, on the front section of the Building, and
to install a standard logo sign on the Property's pylon/monument sign of
comparable size to the largest size thereon, provided that Landlord first
approves the size, color, design, exact location and method of attachment, which
approval shall not be unreasonably withheld, conditioned or delayed. All sign
installation shall be subject to any applicable governmental laws, ordinances,
regulations, restrictive covenants and other requirements. Tenant shall remove
all such signs at the termination of this Lease. Such installation and removal
shall be made or done in such manner as to avoid injury or defacement of the
Building and other improvements at the Property.
27. SURRENDER. Upon the termination of this Lease, Tenant shall
peaceably and quietly surrender the Premises to Landlord in good and clean
order, repair and condition at least equal to the condition when delivered to
Tenant, excepting only reasonable wear and tear resulting from normal use,
casualty or condemnation. Tenant may remove its movable trade fixtures, office
supplies, movable office furniture, inventory, and property and equipment not
attached to the Premises provided: (a) such removal is made prior to the
termination of this Lease; (b) Tenant is not in default of any obligation or
covenant under this Lease at the time of such removal; and (c) Tenant promptly
repairs all damages cause by such removal. All other property at the Premises
(including wall to wall carpeting, paneling or other wall covering) and any
other surface attached or affixed to the floor, wall or ceiling of the Premises
including improvements and all alterations and additions thereto, and all of
Tenant's property not removed
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prior to the termination of this Lease, shall remain in and be surrendered with
the Premises as a part thereof at the termination of this Lease, Tenant hereby
waiving all rights to any payment, reimbursement or compensation therefore.
Notwithstanding the aforesaid however, if Landlord requests in writing, Tenant
shall remove all other alterations, additions, fixtures, equipment, property,
and inventory placed or installed by it in the Premises, other than the initial
improvements constructed by Tenant pursuant to Section 9(c) hereof and any
subsequent improvement approved by Landlord wherein Landlord's approval does not
specify that removal will be required, and any subsequent improvements where
Landlord's consent is not required pursuant to Section 8(b) hereof and Tenant
will repair any damage caused by such removal. Prior to the termination of this
Lease, Tenant shall also see that all utilities are fully paid for and turned
off, and Tenant shall return any and all keys to the Premises to Landlord.
Further, Tenant shall leave with Landlord a forwarding address. Landlord shall
have the right to bring any claims or causes of action against Tenant and to
seek damages or other relief from Tenant for violating the terms and conditions
of this Lease.
28. HOLDING OVER. In the event of holding over by Tenant after
expiration or termination of this Lease without the written consent of Landlord,
Tenant shall pay as liquidated damages for each month or part thereof during the
entire holdover period the greater of one hundred fifty percent (150%) of the
monthly rent due under this Lease for the last full calendar month of the Term
or the then current market rental quoted by Landlord for the Premises. No
holding over by Tenant after the Term of this Lease shall be construed to extend
the Lease; in the event of any holding over, Tenant shall indemnify Landlord
against all claims for damages by any other tenant to whom Landlord may have
leased all or any part of the Premises covered hereby effective upon the
termination of this Lease. Any holding over under this Lease with the consent of
Landlord in writing shall thereafter constitute a lease from month to month.
29. LIMITATION OF LANDLORD'S PERSONAL LIABILITY. Tenant specifically
agrees to look solely to Landlord's interest in the Premises for the recovery of
any judgment from Landlord, it being agreed that Landlord shall never be
personally liable for any such judgment. Tenant specifically agrees to look
solely to Landlord's interest in the Building for the recovery of any judgment
against Landlord, it being agreed that Landlord, its officers, directors and
employees shall never be personally liable for any such judgment. The provision
contained in the foregoing sentence is not intended to, and shall not, limit any
right that Tenant might otherwise have to obtain injunctive relief against
Landlord or Landlord's successors in interest or any suit or action in
connection with enforcement or collection of amounts which may become owing or
payable under or on account of insurance maintained by Landlord.
30. EVENTS OF DEFAULT. Each of the following acts or omissions of
Tenant or occurrences shall constitute an "Event of Default":
(a) Failure or refusal by Tenant to timely pay any rent, whether the
same is Base Monthly Rental, Additional Rent or other payments hereunder, and
such failure shall continue for ten (10) days after written notice of such
default has been delivered to Tenant;
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(b) Failure to perform or observe any other covenant or condition of
this Lease by Tenant to be performed or observed upon the expiration of a period
and such failure shall continue for thirty (30) days after written notice of
such default has been delivered to Tenant; provided, however, if such failure
cannot reasonably be cured within the thirty (30) day period, the Tenant shall
not be in default provided Tenant commences to cure within such thirty (30) day
period and diligently pursues such cure to completion;
(c) The filing or execution or occurrence of: a petition in bankruptcy
or other insolvency proceeding by or against Tenant; or petition or answer
seeking relief under any provision of the Bankruptcy Act; or an assignment for
the benefit of creditors or composition; or a petition or other proceeding by or
against the Tenant for the appointment of a trustee, receiver or liquidator of
Tenant or any of Tenant's property or a proceeding by any governmental authority
for the dissolution or liquidation of Tenant; provided same is not dismissed
within sixty (60) days of filing.
31. REMEDIES.
(a) Upon the occurrence and during the continuation of any Event of
Default, as enumerated above, Landlord may, at Landlord's option, in addition to
any other remedy or right given hereunder or by law or equity, do any one or
more of the following:
(1) Terminate this Lease, in which event, Tenant shall immediately
surrender possession of the Premises to Landlord;
(2) Enter upon and take possession of the Premises and expel or remove
Tenant and any other occupant therefrom, with or without having
terminated the Lease;
(3) Alter locks and other security devices at the Premises.
(b) Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. No such alteration of security devices and no removal or
other exercise of dominion by Landlord over the property of Tenant or others at
the Premises shall be deemed unauthorized or constitute a conversion, Tenant
hereby consenting, after and during the continuation of any Event of Default, to
the aforesaid exercise of dominion over Tenant's property within the Premises.
Tenant agrees that any reentry by Landlord may be pursuant to judgment obtained
in forcible detainer proceedings or other legal proceedings or without the
necessity for any legal proceedings, as Landlord may elect and Landlord shall
not be liable in trespass or otherwise.
(c) In the event Landlord elects to terminate the Lease by reason of an
Event of Default, then notwithstanding such termination, Tenant shall be liable
for and shall pay to
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Landlord, at Boston, Massachusetts, the sum of all rent and other indebtedness
accrued to the date of such termination, plus, as damages, an amount equal to
the then present value of the rent and any and all other sums reserved hereunder
for the remaining portion of the Term (had such Term not been terminated by
Landlord prior to the date of expiration stated in Section 2, less the then
present value of the then fair rental value of the Premises for such period. For
the purposes of determining present value, the interest rate of seven percent
(7%) per annum shall be the interest rate used to compute the discount to
present value computation contemplated by this Subsection.
(d) In the event that Landlord elects to repossess the Premises without
terminating the Lease, then Tenant shall be liable for and shall pay to Landlord
at Boston, Massachusetts all rent and other indebtedness accrued to the date of
such repossession, plus rent and any and all other sums required to be paid by
Tenant to Landlord during the remainder of the Term until the date of expiration
of the Term diminished by any net sums thereafter received by Landlord through
re-letting the Premises during said period (after deducting expenses incurred by
Landlord as provided herein). Should Landlord elect this remedy, Landlord will
use reasonable efforts to re-let the Premises. In no event shall Tenant be
entitled to any excess of any rent obtained by re-letting over and above the
rent herein reserved. Actions to collect amounts due by Tenant as provided in
this section may be brought from time to time, on one or more occasions, without
the necessity of Landlord's waiting until expiration of the Term.
(e) In the case of an Event of Default, Tenant shall also be liable for
and shall pay to Landlord, at Boston, Massachusetts in addition to any sum
provided to be paid above: broker's fees incurred by Landlord in connection with
re-letting the whole or any part of the Premises; the costs of removing and
storing Tenant's or other occupant's property; the costs of repairing the
Premises, and all reasonable expenses incurred by Landlord in enforcing
Landlord's remedies, including reasonable attorneys' fees. Past due rent and
other past due payments shall bear interest at the rate of twelve percent (12%)
per annum.
(f) In the case of an Event of Default, in the event Landlord chooses
to re-let the Premises Landlord may re-let the whole or any portion of the
Premises for any period, to any tenant, and for any use and purpose. Should
Landlord choose to re-let the Premises, or any portion thereof, for the
remainder of the Term provided for herein, and if the rent received through
re-letting does not at least equal the rent provided for herein, Tenant shall
pay and satisfy the deficiency between the amount of the rent so provided for
and that received through re-letting, including, but not limited to, the cost of
renovating, altering and decorating for a new occupant. Further, Tenant shall
not in any event ever be entitled to any excess rental and other sums paid by
any tenant over the rental and other sums provided for herein, the same shall
belong solely to Landlord. Nothing herein shall be construed as in any way
denying Landlord the right, in the case of an Event of Default, to treat the
same as an entire breach and at Landlord's option to terminate this Lease and/or
immediately seek recovery for the entire breach of this Lease and any and all
damages which Landlord suffers thereby.
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(g) If Tenant should fail to make any payment or cure any Event of
Default hereunder within the time herein permitted, Landlord, without being
under any obligation to do so and without thereby waiving such Event of Default,
may make such payment and/or remedy such other Event of Default for the account
of Tenant (and enter the Premises for such purpose), and thereupon Tenant shall
be obligated to, and hereby agrees, to pay Landlord, upon demand, all costs,
expenses and disbursements (including reasonable attorneys' fees) incurred by
Landlord in taking such remedial action.
(h) In the event of any default by Landlord, Tenant's exclusive
remedies shall be (i) an action for damages (Tenant hereby waiving the benefit
of any laws granting it a lien upon the rent due Landlord), (ii) an action for
specific performance, or (iii) an action for injunctive relief to the extent
Tenant is entitled to same under Texas law; but prior to any such action Tenant
will give Landlord written notice specifying such default with particularity,
and Landlord shall thereupon have thirty (30) days in which to cure any such
default, or to commence such cure and pursue same diligently until completion if
the default cannot reasonably be cured within the thirty (30) day period. Unless
and until Landlord fails to so cure any default after such notice, Tenant shall
not have any remedy or cause of action by reason thereof. Notwithstanding and in
addition to the foregoing, if any default by Landlord hereunder (1) (i)
prohibits or materially inhibits the Tenant's ability to operate its business at
the Premises, or (ii) results in a substantial likelihood that personal injury
or material damage to the Tenant's personal property situated in the Premises
will occur, and (2) Landlord has not cured such default, to the extent that the
conditions and clauses (i) and (ii) above are alleviated, within ten (10) days
after Tenant's notice to Landlord (or such additional reasonable time as may be
necessary to cure any default which cannot be reasonable cured within said ten
(10) day period, provided that Landlord is diligently pursuing same through
completion), then Tenant shall have the right to effect the cure of such default
and bill Landlord for the reasonable actual cost of same (which Landlord shall
be obligated to repay within thirty (30) days after Landlord's receipt of the
billing and all applicable back-up documentation pertaining to same), provided
that Tenant must utilize the most commercially reasonable method of cure, which
will cause to be incurred the lowest cost reasonably required to alleviate the
conditions in clauses (1) (i) and (ii) above, and Tenant shall only be entitled
to effect such cure to the extent necessary to alleviate such conditions. All
obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only during
the period of its ownership of the Premises and not thereafter. If Landlord does
not pay Tenant's billing under this Section 31(h) within the thirty (30) day
period, Tenant shall have no right to offset the amount of such billing against
Rent due and payable to Landlord hereunder unless (i) John Hancock Mutual Life
Insurance Company is no longer the Landlord and (ii) the Landlord at that time
has a net worth which is not equal to or greater than the net worth of Tenant at
that time. Should those two conditions be present, then Tenant shall have the
right to offset the Rent by the amount of the billing, but only in such event.
This limited right of offset shall not apply in any other circumstance under the
Lease.
(i) The term "Landlord" shall mean only the owner, for the time being
of the Premises, and in the event of the transfer by such owner of its interest
in the Premises, the
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transferee, from and after the date of the transfer, will assume the
transferor's obligations under this Lease, and the transferor shall thereupon be
released and discharged from all covenants and obligations of the Landlord
thereafter accruing. The covenants and obligations of the Landlord under this
Lease shall be binding during the Term upon each new owner for the duration of
such owner's ownership.
32. NON-WAIVER. Failure of Landlord or Tenant to declare any default
immediately upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord or Tenant shall have the
right to declare any such default at any time and take such action as might be
lawful or authorized hereunder, either in law or in equity.
33. ATTORNEY'S FEES. In the event either party defaults in the
performance of any of the terms, covenants, agreements or conditions contained
in this Lease and the other party places the enforcement of this Lease, or any
part thereof, or the collection of any rent due, or to become due hereunder or
recovery of the possession of the Premises in the hands of an attorney, or files
suit upon the same, the non-prevailing party agrees to pay the prevailing
party's reasonable attorney's fees and court costs.
34. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
(a) All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the Landlord's Address for
Notices or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the Tenant's Address for Notices or at such other
address as Tenant may specify from time to time by written notice delivered in
accordance herewith.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, or sent via overnight delivery addressed to the parties hereto at the
respective Addresses for Notices, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith.
(d) All parties included within the terms "Landlord" and "Tenant"
respectively, shall be bound by notices given in accordance with the provisions
of this section to the same effect as if each had received such notice.
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35. BROKERS.
(a) Upon execution of this Lease by both parties, Landlord shall pay to
the Brokers a fee as set forth in a separate agreement between Landlord and said
Brokers for brokerage services rendered by said Brokers to Landlord and Tenant
in this transaction.
(b) Landlord further agrees that if Tenant exercises any subsequently
granted option to extend, renew or lengthen the term of this Lease, or if Tenant
acquires any rights to the Premises, or if Tenant remains in possession of the
Premises after the expiration of the term of this Lease, or if said Brokers are
the procuring cause of any other lease or sale entered into between the parties
pertaining to the Premises, then as to any of said transactions, Landlord shall
not pay said Broker a fee for such transactions unless agreed upon by Landlord
and said Brokers in a separate agreement in writing.
(c) Each of the parties warrant that it has had no dealing with any
other real estate broker or agent in connection with the negotiation of this
Lease (other than the Brokers) and it knows of no other real estate broker or
agent who is or may be entitled to a commission in connection with this Lease.
Each party agrees to indemnify and save harmless the other from any claims for
commission of brokers or agents claiming by, through or under the indemnifying
party.
36. AUTHORITY OF LANDLORD AND TENANT. If either party hereto is a
corporation, then each individual executing this Lease on behalf of said
corporation represents and warrants that he 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 Bylaws of said corporation, and that this Lease is binding
upon said corporation in accordance with its terms.
37. JOINT OBLIGATION. If there is more than one Tenant the obligations
hereunder imposed upon Tenant shall be joint and several.
38. TIME. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
39. LATE CHARGES. Tenant acknowledges that late payment by Tenant to
Landlord of Rent or other sums due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include but are not limited to processing and
accounting charges, loss of interest and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.
According, upon any late payment of Rent, Additional Rent, or any other sum due
from Tenant which is not received by Landlord or Landlord's designee within five
(5) days after said sum is due, then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs that
Landlord will incur by reason of the late payment by Tenant.
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Acceptance of such late charges by Landlord shall in no event constitute a
waiver of Tenant's default with respect to such overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
40. NAME. Tenant shall not use the name of the Premises, the Building
or the Property for any purpose other than as an address of the business to be
conducted by Tenant in the Premises.
41. PRIOR AGREEMENTS. This Lease together with the Exhibits hereto and
Landlord's rules and regulations contain all of the agreements of the parties
hereto with respect to the Premises, and no prior or contemporaneous written or
oral agreements or understandings pertaining thereto shall be effected for any
purpose.
42. SEPARABILITY. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way effect, impair or invalidate any other
provision hereof and such other provisions shall remain in full force and
effect.
43. ALTERATION. This Lease may not be altered, changed or amended,
except by an instrument in writing signed by both parties hereto.
44. ASSIGNMENT BY LANDLORD. Landlord shall have the right to transfer
and assign, in whole or in part, all its rights and obligations hereunder and in
the Premises and property referred to herein, and in such event and upon such
transfer no further liability or obligation shall thereafter accrue against
Landlord hereunder. Tenant shall be given written notice of such assignment and
the name and address of the assignee.
45. HAZARDOUS MATERIALS. Tenant warrants, covenants and agrees that:
(a) No toxic or hazardous substances, including without limitation,
asbestos and the group of organic compounds known as polychlorinated biphenyls
("PCB's), will be generated, treated, stored, disposed of, or otherwise
deposited by Tenant (or any agent, invitee, licensee, employee or contractor of
Tenant) in or located on the Premises, including without limitation, the surface
and subsurface water of the Premises.
(b) No activity will be undertaken by Tenant (or any agent, invitee,
licensee, employee or contractor of Tenant) on the Premises which would cause:
(i) The Premises to become a hazardous waste treatment, storage, or
disposal facility within the meaning of the Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et. seq., or any
similar state law or local ordinance;
(ii) A release or threatened release of hazardous waste from the
Premises within the meaning of the Comprehensive Environmental
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Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act ("CERCLA"), 42 U.S.C.
Section 9601 et. seq., or any similar state law or local ordinance or
any other environmental law; or
(iii) The discharge of pollutants or effluents into any water source or
system, or the discharge into the air of any emissions, which would
require a permit under the Federal Water Pollution control Act, 33
U.S.C. Section 1251 et. seq., the Clean Air act, 42 U.S.C. Section 7401
et. seq., or any similar state law or local ordinance.
(c) Except as otherwise provided herein, Tenant, its agents, employees
and contractors shall not cause any substances or conditions to come upon, in or
on the Premises, or consent to the placing of same in or on the Premises, which
may support a claim or cause of action under RCRA, CERCLA, or any federal, state
or local environmental statutes, regulations, or ordinances.
(d) Tenant, its agents, employees and contractors shall not cause any
underground storage tanks or gas tanks to be located under the Premises, or
consent to the placing of same in or on the Premises.
Tenant agrees to immediately notify Landlord of any violations of subsection (a)
through (d) hereinabove stated, and to promptly cure, rectify, clean-up, and
remedy all such violations promptly and with due diligence, at Tenant's sole
cost, and under the direction of a contractor chosen or approved by Landlord.
Tenant covenants and agrees to hold harmless and to indemnify Landlord from and
against all losses, costs, and expenses, including reasonable attorneys, fees,
incurred by reason of any claim, action, suit, proceeding, hearing, motion, or
application before any court or administrative body, or arbitration panel to
which Landlord may become a party by reason of any violation or breach of the
provisions of subsections (a) through (d) hereinabove. All costs incurred by
Landlord in that regard shall be deemed Additional Rent and shall be immediately
and without notice due and payable by Tenant to Landlord. The representations
and warranties made in this Section shall survive the delivery hereof and the
termination of this Lease.
(e) For purposes hereof, "HAZARDOUS SUBSTANCES" shall mean any
pollutants, contaminants, hazardous or toxic substances, materials or wastes
(including petroleum, petroleum by-products, radon, asbestos and asbestos
containing materials, polychlorinated biphenylis ("PCBS"), PCB-containing
equipment, radioactive elements, infectious agents, and urea formaldehyde), as
such terms are used in any federal, state or local environmental law, rule,
statute, or regulation, including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act, as amended, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air
Act, and the Clean Water Act. If Hazardous Substances were used, stored,
generated or disposed of on or in the leased premises on or before the
Commencement Date of this Lease, or if the Premises were contaminated in
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any manner due to the actions or omissions of any party other than Tenant or its
agents, employees, contractors or invitees, on or before the Commencement Date
of this Lease, Landlord shall indemnify and hold harmless Tenant from any and
all claims, damages, fines, judgments, penalties, costs, liabilities and losses
arising during or after the term of this Lease and as a result of such use,
storage, generation, disposal or contamination which occurred prior to the
Commencement Date of this Lease, and which are caused by Landlord, or Landlord's
agents, employees, and contractors after the Commencement Date. This
indemnification includes, without limitation, any and all costs incurred because
of any investigation of the site or any cleanup, removal or restoration mandated
by a federal, state or local agency or political subdivision. The indemnity
obligations of Landlord under this Section 45 shall survive the expiration or
earlier termination of this lease.
(f) Landlord and Tenant agree that Tenant shall be responsible for
removal of the asbestos containing floor tile located in the Premises. Upon
receipt of Tenant's billing and applicable back-up pertaining to same, Landlord
shall reimburse Tenant for one-half (1/2) of the cost of such removal, however,
in no event shall Landlord be obligated to pay Tenant more than Ten Thousand and
No/100 Dollars ($10,000.00) as reimbursement under this Section , even if
Tenant's cost of such removal is in excess of Twenty Thousand and No/100 Dollars
($20,000.00).
46. CONDITION OF PREMISES. TENANT UNDERSTANDS AND AGREES THAT IT IS
ACCEPTING THE PREMISES IN THEIR "AS-IS," "WHERE-IS" CONDITION, "WITH ALL
FAULTS". ABSOLUTELY NO REPRESENTATIONS OR WARRANTIES ARE GIVEN BY LANDLORD TO
TENANT WITH RESPECT TO THE PREMISES, AND ALL OF SAME ARE EXPRESSLY WAIVED,
INCLUDING WITHOUT ANY LIMITATION ANY WARRANTY OF SUITABILITY, HABITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. TENANT ASSUMES ALL RISKS
FOR ANY DEFECTS, LATENT OR PATENT, WITH RESPECT TO THE PREMISES.
47. RENEWAL OPTION. Tenant (but not any subtenant or assignee unless
such assignee is an affiliate as previously defined) shall have a one time
option to renew this Lease for one five (5) year period upon the following terms
and conditions:
(a) An Event of Default must not be in existence;
(b) Tenant must notify Landlord of Tenant's intent to renew this Lease,
which notice must be received by Landlord at least one hundred eighty (180)
days, but not more than two hundred seventy (270) days, prior to the expiration
of the primary Term of this Lease; however in the event that a casualty occurs
which would otherwise permit Landlord to terminate this Lease pursuant to
Section 19(a); Tenant may elect to notify Landlord of its option to renew this
Lease earlier than permitted by this Section as long as such notification by
Tenant is within the thirty (30) days after the date of such damage or casualty,
so that more than eighteen (18) months then remain in the Lease and Landlord
will not be able to terminate the Lease pursuant to Section 19(a).
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(c) Tenant shall lease the Premises during the renewal term under the
same terms, covenants, conditions and provisions as set forth in this Lease,
except that the Base Monthly Rental for said renewal term shall be set at the
Prevailing Market Rate (as hereinafter defined) for space comparable to
condition of the Premises as of the date this Lease was originally executed by
both parties. The parties hereby stipulate and agree that the condition of the
Premises as of the date this Lease was originally executed by both parties is
correctly identified on Exhibit "D" attached hereto and made a part hereof for
all purposes; Landlord will notify Tenant of the proposed rental for the renewal
term within thirty (30) days after Landlord receives Tenant's notice of intent
to renew; if Tenant disagrees with the Prevailing Market Rate determined by
Landlord, Landlord and Tenant will negotiate in good faith to reach agreement as
to a mutually acceptable Base Rental rate for the renewal term. If Landlord and
Tenant are unable to reach an agreement within thirty (30) days after Tenant
receives Landlord's notice of determination, Tenant shall have the option to
either withdraw the exercise of the renewal option or to give written notice
(the "Binding Notice") to Landlord of its election to exercise the renewal
option and have the Prevailing Market Rate determined by Qualified Brokers (as
hereinafter defined) in accordance subsection (e) below. If Tenant does not so
notify Landlord within such time, Tenant shall be deemed to have elected not to
renew this Lease and all rights of Tenant under this Section 47 shall
automatically terminate; and
(d) Tenant must execute such documentation as Landlord may reasonably
request in order to evidence and confirm the exercise of Tenant's renewal
option. If Tenant elects to exercise the renewal option and have the Prevailing
Market Rate determined by Qualified Brokers, Landlord and Tenant shall each
within five (5) days after Landlord's receipt of the Binding Notice nominate and
appoint a Qualified Broker to determine the Prevailing Market Rate. Upon the
appointment of the two Qualified Brokers, they shall be instructed to fairly and
impartially determine the Prevailing Market Rate as of the commencement date of
the renewal term. The two (2) Qualified Brokers shall afford to Landlord and
Tenant the right to submit evidence with respect to such value and shall, with
all possible speed, make their respective determinations and deliver a written
report thereof to Landlord and Tenant within thirty 930) days after their
appointment. If the higher of the two Prevailing Market Rate determinations is
not more than one hundred five percent (105%) of the lower determination, the
average of the values so determined shall be binding upon Landlord and Tenant
and shall be the Prevailing Market Rate for purposes of the renewal term. If the
higher determination is more than one hundred five percent (105%) of the lower
determination, the two Qualified Brokers shall within five (5) days after both
of such Qualified Brokers have submitted their written reports to Landlord and
Tenant select by mutual agreement a third (3rd) Qualified Broker and give
written notice of such appointment to Landlord and Tenant. If the two (2)
Qualified Brokers fail to agree upon the third Qualified Broker within said five
(5) day period, a third Qualified Broker shall be selected by mutual agreement
of Landlord and Tenant within a further period of five (5) days. If Landlord and
Tenant cannot so agree on the third Qualified Broker, then either Landlord or
Tenant may elect to have such Qualified Broker appointed by the president of the
Texas Chapter of the Society of Industrial and Office Realtors or its successor
organization. The third Qualified Broker shall be instructed to fairly and
impartially determine which of the two original Qualified Broker's determination
of the Prevailing Market Rate most closely
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approximates his determination of the Prevailing Market Rate, and the
determination so selected shall be binding upon Landlord and Tenant and shall be
the prevailing Market Rate for purposes of the renewal term. Landlord and Tenant
shall pay the fees and expenses of the Qualified Broker it appoints, and the
fees and expenses of the third Qualified Broker shall be divided equally between
Landlord and Tenant. If any Qualified Broker appointed as aforesaid shall
thereafter become unable or unwilling to act, such Qualified Broker's successor
shall be appointed in the same manner as provided in this paragraph for the
appointment of the Qualified Broker so becoming unable or unwilling to act.
As used herein, the term "Prevailing Market Rate" means the annual
rental rate, expressed in dollars per rentable square foot, that a willing
landlord would accept and a willing tenant would pay, for space comparable to
condition of the Premises as of the date this Lease was originally executed by
both parties for the applicable renewal term under the provisions of this Lease,
which determination is shall be made by comparison to recently executed leases
in the other buildings of similar class, size, age and location, for space
comparable to the condition of the Premises as of the date this Lease was
originally executed by both parties, and adjusting the rates payable under such
leases to determine rental value of the Premises. In making such comparison and
adjustment, all relevant factors affecting rental value shall be considered,
including, without limitation, floor level; location on the floor; term of the
lease; age, quality and location of the applicable building; leasehold
improvements and/or the allowances provided; rent and cash concessions; the
extent of services to be provided; and the credit worthiness of the tenant.
As used herein, the term "Qualified Broker" means a real estate broker
who (i) is licensed in the State of Texas, (ii) has been actively and
continuously engaged in leasing space in industrial office/warehouse buildings
in Houston, Texas for not less than the previous five (5) year period, (iii)
during the preceding three (3) year period has individually represented a party
to an industrial office/warehouse space lease of at least 25,000 square feet;
and (iv) has not represented Landlord or Tenant during the preceding five (5)
year period.
48. RIGHT OF FIRST REFUSAL. Tenant shall have the right of first
refusal to lease any other space in the Building upon the following terms and
conditions:
(a) An Event of Default must not be in existence.
(b) Such other space in the Building must become available and be
vacated, and not subject to any other existing tenant's option, right of refusal
or preferential right;
(c) If Landlord receives an acceptable offer from a prospective tenant
to lease any such unleased available space during the Term of this Lease, then
Landlord will notify Tenant thereof in writing (the "Availability Notice"), and
will specify the salient terms thereof; Upon request of Tenant, Landlord will
provide access to the subject space to Tenant and its representatives during the
period of time Tenant has the right to exercise its right of first refusal with
respect to such space; Tenant shall have five (5) business days thereafter in
which to notify
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Landlord of Tenant's exercising its right of first refusal. If Tenant fails to
give such notice within said five (5) business day period, then Landlord shall
thereafter have the right to lease such space out to such prospective tenant. If
Tenant shall fail to exercise such right of first refusal after written notice
by Landlord as provided herein, Landlord may lease the portion of the space
described in the Availability Notice, on such terms and conditions and to such
party or parties as Landlord may determine in its sole and absolute discretion,
except that in no event shall the effective rental rate (taking into
consideration all amounts to be paid by Tenant to Landlord thereunder, such as
annual Base Rental and Additional Rental, together with all allowances and
monetary concessions (such as tenant improvement allowance and free rent) to be
provided by Landlord to Tenant) in such lease be less than ninety percent (90%)
of the effective rental rate offered to Tenant in the Availability Notice. If
Landlord does not enter into a lease of such space within six (6) months
following the Availability Notice, Tenant's right of first refusal shall apply
again to such space, and Landlord shall be required to notify Tenant when
Landlord enters or intends to enter serious negotiations with another party to
lease such space as provided above. If Tenant timely notifies Landlord within
said three (3) business day period that Tenant is exercising its right of first
refusal, then Tenant shall be obligated to lease the space covered by such offer
upon the same terms, covenants, conditions and provisions as contained in such
offer;
(d) Tenant's right of first refusal shall not apply to any offer to
extend an existing lease at the Building (of Schlumberger Technology Corporation
and Circuit City Stores, Inc.); and
(e) Tenant must execute such documentation as Landlord may reasonably
request in order to evidence and confirm the exercise of Tenant's right of first
refusal and the leasing of the additional space.
49. MISCELLANEOUS.
(a) Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
(b) The terms, provisions and covenants and conditions contained in
this Lease shall apply to, inure to the benefit of, and be binding upon, the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
(c) The captions are inserted in this Lease for convenience only and in
no way define, limit, or describe the scope or intent of this Lease, or any
provision hereof, nor in any way affect the interpretation of this Lease.
(d) This Lease shall be binding upon and inure to the benefit of the
successors and assigns of Landlord, and shall be binding upon and inure to the
benefit of Tenant, its successors, and, to the extent assignment may be approved
by Landlord hereunder, Tenant's assigns.
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(e) All rights and remedies of Landlord under this Lease shall be
cumulative and none shall exclude any other rights or remedies allowed by law.
(f) This Lease is declared to be a Texas contract, and all of the terms
thereof shall be construed according to the laws of the State of Texas.
IN WITNESS WHEREOF the parties hereto have executed this Lease as of
the date aforesaid.
"LANDLORD" "TENANT"
JOHN HANCOCK MUTUAL LIFE CALIFORNIA MICROWAVE-
INSURANCE COMPANY MICROWAVE NETWORK SYSTEMS,
INC.
By: /s/ By: /s/
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Name: Name:
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Title: Title:
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EXHIBIT "A"
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EXHIBIT "B"
A certain tract of land containing 16.0 acres out of the Thomas J.
Nichols Survey, Abstract 296 in the City of Stafford, Fort Bend County,
Texas, more particularly described as Greenbriar Southwest, Section 3,
Tract 6, by the Plat thereof recorded in Volume 22 at Page 33 of the
Plat Records of Fort Bend County, Texas.
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EXHIBIT "C"
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EXHIBIT 10.23
LEASE
175 WEST WALL STREET
GLENDALE HEIGHTS, ILLINOIS
THIS LEASE is made and entered into as of this 29th day of March,
1996, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not
personally but as trustee under Trust Agreement dated March 6, 1991, and known
as Trust No. 113515-09 (hereinafter referred to as "Landlord"), and CALIFORNIA
MICROWAVE, INC., a Delaware corporation (hereinafter referred to as "Tenant").
WITNESSETH:
For and in consideration of the rentals hereinafter reserved and the
mutual covenants and agreements hereinafter set forth, the receipt and
sufficiency of which consideration are hereby irrevocably acknowledged by the
parties hereto, the parties hereto mutually agree as follows:
ARTICLE I
GRANT AND TERM
1.1 PREMISES. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, that land located in DuPage County, Illinois, in the High
Grove - Glendale Heights West Campus Park, and commonly known as 175 West Wall
Street, Glendale Heights, Illinois, as legally described on Exhibit "A" which is
attached hereto and made a part hereof, together with all improvements located
thereon (which land and improvements are hereinafter collectively referred to as
the "Premises"). Said improvements consist of a building of approximately 50,000
rentable square feet, and a parking area accommodating approximately 44
automobiles, together with all fixtures and appurtenances thereunto belonging.
This Lease and the Premises are subject to all applicable building restrictions,
planning and zoning ordinances, governmental rules and regulations, and all
other encumbrances, easements, covenants, and restrictions of record as the same
may hereafter from time to time be amended.
1.2 TERM.
(a) The term of this Lease shall commence on the date hereof
(herein referred to as the "Effective Date"), and shall continue until March 31,
2006 (which period is hereinafter referred to as the "Term"), unless sooner
terminated in accordance with the provisions of this Lease.
(b) The term "Commencement Date" shall mean the earlier to
occur of the date upon which Tenant opens for business, or April 1, 1996. The
term "Lease Year" shall mean the period beginning on the Commencement Date and
ending on March 31, 1997, and each consecutive twelve (12) month period
thereafter.
(c) A portion of the Premises is currently by an existing
tenant under a lease agreement giving the Landlord the right to cancel same upon
thirty (30) days written notice. Landlord agrees that promptly upon the
execution of this Lease by all parties hereto, Landlord shall serve upon said
existing tenant such notices as may be necessary to terminate the tenancy of
such tenant within thirty (30) days. As of the Effective Date, Tenant may occupy
such portions of the Premises not occupied by such existing tenant, and Tenant
may undertake its initial build-out of the Premises, as more fully set forth in
the Work Letter Agreement which is attached hereto as Exhibit "B" and made a
part hereof, provided that Tenant's work does not interfere with the right of
said existing Tenant. Landlord shall be solely and fully liable for all costs
necessary to evict such existing tenant, in the event that such existing tenant
does not vacate within thirty (30) days following said notice. Also to the
extent the completion of Tenant's initial build-out pursuant to the Work Letter
is delayed directly as a result of a failure to vacate by such existing Tenant
allowing such thirty (30) day period, the commencement date shall be extended
one (1) day for each day of such delay.
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ARTICLE II
RENT
2.1 BASE RENT. Tenant hereby covenants and agrees to pay to Landlord
for and throughout the Term of this Lease, beginning on the Commencement Date,
and in addition to all other sums and payments to be made and paid by Tenant to
Landlord under this Lease, annual rent (hereinafter "Base Rent") in the
following amounts:
(a) during the first (1st) Lease Year through and
including the fifth (5th) Lease Year, THREE HUNDRED
SIXTY THOUSAND THREE HUNDRED SIXTY AND NO/100THS
DOLLARS ($360,360.00) per Lease Year, payable in
equal monthly installments of THIRTY THOUSAND THIRTY
AND NO/100THS DOLLARS ($30,030.00); and
(b) during the sixth (6th) Lease Year through and
including the tenth (10th) Lease Year, THREE HUNDRED
SEVENTEEN THOUSAND EIGHT HUNDRED SEVENTEEN AND
50/100THS ($317,817.50) per Lease Year, payable in
equal monthly installments of TWENTY SIX THOUSAND
FOUR HUNDRED EIGHTY FOUR AND 79/100THS DOLLARS
($26,484.79).
Monthly installments of Base Rent shall be paid in advance on the first day of
each month during the Term, except that in the event that the Commencement Date
occurs prior to April 1, 1996, Tenant shall pay upon the Commencement Date, Base
Rent equal to the prorated amount of monthly Base Rent from the Commencement
Date through and including March 31, 1996, and the annual Base Rent for the
first (1st) Lease Year shall be increased accordingly.
Notwithstanding the foregoing, so long as no default or event of default by
Tenant under this Lease shall have occurred and Tenant has not exercised the
"Termination Option" as provided in Article XX hereinbelow, monthly Base Rent
for the eleventh (11th), and twelfth (12th) months of the fifth (5th) Lease Year
shall be reduced by fifty percent (50%).
2.2 ADDITIONAL RENT. All other sums of money and other charges required
to be paid by Tenant under this Lease other than Base Rent shall be deemed
"Additional Rent." Except as otherwise provided therein, all Additional Rent
shall be due and payable thirty (30) days after written notice thereof is given
by Landlord to Tenant.
2.3 PAYMENTS BY TENANT. Tenant shall pay to Landlord, without demand,
deductions, set-offs or counterclaims, diminutions, abatements, or rebates of
whatsoever kind, nature or description, Base Rent, all Additional Rent, and all
other charges when and as the same shall be due and payable hereunder. All
payments and charges required to be made by Tenant hereunder shall be payable in
lawful United States funds, at the address of Landlord which is hereinafter set
forth, or to such other address or in such other manner as Landlord shall
specify from time to time by written notice to Tenant. Except as otherwise
determined by Landlord, payment to or receipt by Landlord of an amount less than
the amount then required to be paid hereunder shall be deemed to be on account
of the earliest amount of any obligations then due hereunder, notwithstanding
any notation, legend, or instructions of Tenant to the contrary, which
notations, legends or instructions shall be null and void. No endorsement or
statement on any check or other communication accompanying a check for payment
of any amounts payable hereunder shall be deemed an accord and satisfaction, and
Landlord may accept such check in payment without prejudice to Landlord's right
to recover the balance of any sums owed by Tenant hereunder or to pursue any
other remedy available in this Lease, or under law, against Tenant.
2.4 NET LEASE. It is intended that the income from Base Rent shall be
net to Landlord and shall not be subject to deduction or expense of any kind or
nature in connection with the ownership and maintenance of
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the Premises. All rent hereunder payable shall be paid by Tenant to Landlord
free from any charges, assessments, impositions, expenses, and deductions of any
and very kind or nature whatsoever.
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ARTICLE III
CONDUCT OF BUSINESS
3.1 USE. Tenant shall continuously occupy, use and operate the Premises
during the Term solely as an assembly, warehouse, manufacturing, and
distribution center with related offices in connection with its microwave
communications equipment business. Tenant agrees that it shall not use the
Premises for any purpose other than that which is set forth hereinabove, without
the express prior written consent of Landlord.
3.2 UTILITIES. Tenant, at it expense, shall arrange for and pay
directly to the public utility companies, all charges for all utilities used in
or at the Premises, from and after the Effective Date and continuing throughout
the Term. Tenant, at its expense, shall pay directly to the public utility
companies, the cost of any installation of any utility services desired by
Tenant from time to time during the Term, and shall, at its expense, pay
directly to the public utility companies, the cost of any installation of any
utility equipment as may be required by any governmental laws affecting the
Premises, and the cost of any capital improvements required to maintain all
utility services serving the Premises. Tenant agrees to indemnify and hold
Landlord harmless from and against any and all claims arising from all costs and
charges for utilities consumed on or by the Premises after the Effective Date.
Tenant shall use the plumbing and waste disposal systems and the storm water
management systems, if any, serving the Premises only for the purposes for which
they were constructed, and Tenant shall not dispose of any pollutants,
contaminants, toxic wastes, hazardous substances, or any other such substance
therein. Tenant shall not use any utility line on or facility located on the
Premises in a manner which overloads or damages any utility line or facility.
3.3 TENANT'S BUSINESS. Tenant shall, at its sole cost and expense, pay
before delinquency, any and all taxes, assessments, and public charges levied,
assessed, or imposed upon Tenant's business and/or the premises during the Term,
including, without limitation, all license fees, permit fees, and charges of a
similar nature for the conduct by Tenant or any subtenant or concessionaire of
any business or undertaking conducted in or from the Premises.
3.4 LEGAL REQUIREMENTS. Tenant shall, at its own cost and expense,
conduct and maintain its business upon the Premises, and maintain the Premises
including all improvements thereon in full compliance with all present and
future statutes, laws, ordinances, orders, rules, regulations and requirements
of all governmental authorities having jurisdiction over the Premises, and
observe all covenants and restrictions of record affecting or applicable to the
Premises, or affecting or applicable to the cleanliness, safety, occupancy and
use of the same, whether or not any such law, ordinance, order, rule,
regulation, covenant, restriction, or other requirement is substantial, foreseen
or unforeseen, ordinary or extraordinary, and any repairs or improvements
necessitated by any such applicable law, ordinance, order, rule, regulations,
covenant, restrictions, or other requirement, shall be at the sole cost and
expense of Tenant. In addition, Tenant shall, at its own expense, conduct and
maintain its business upon the Premises in compliance with all applicable Board
of Fire Insurance Underwriters regulations if any, respecting all matters of
occupancy, condition or maintenance of the Premises whether such orders or
directions shall be directed to Tenant or Landlord. Tenant shall hold Landlord
harmless from any and all costs or expenses incurred by Landlord on account
thereof. Tenant shall also procure and maintain all licenses and permits legally
necessary for the operation of Tenant's business upon the Premises, and shall
allow Landlord to inspect the same upon request.
3.5 CARE OF PREMISES. During the Term of this Lease, Tenant shall
maintain the Premises in an orderly, safe, and clean condition at Tenant's sole
cost and expense.
3.6 TENANT'S WARRANTIES. Tenant hereby warrants, represents, covenants,
and agrees to and with Landlord, that throughout the Term, Tenant shall, at its
sole cost and expense: (a) not use or allow the Premises to be used for any
unlawful or objectionable purpose, as reasonably determined by Landlord; (b) pay
before delinquency any and all taxes, assessments and public charges levied,
assessed, or imposed upon Tenant's business, Tenant's use and occupancy of the
Premises, or upon Tenant's fixtures, furnishings and equipment on or
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about the Premises, or upon any leasehold interest or personal property of any
kind, owned by or placed in or about the Premises, or upon any leasehold
interest or personal property of any kind, owned by or placed in or about the
Premises by Tenant, including, without limitation, any transfer taxes, and pay
when and as due all license fees, permit fees, and charges of a similar nature
for the conduct by Tenant or any subtenant or concessionaire of any business or
undertaking authorized hereunder to be connected in or from the Premises; (c) be
authorized to do business in the State of Illinois; (d) not do or permit to be
done any act or thing which might result in the cancellation or suspension of
any policy of insurance of any kind covering the Premises, or any liability of
Landlord in connection therewith, or any increase in the insurance risk under
any such policy.
3.7 ENVIRONMENTAL MATTERS.
(a) DEFINED TERMS.
A. "Claim" shall mean and include any demand, cause
of action, proceeding, or suit (i) for damages (actual or punitive), losses,
injuries to person or property, damages to natural resources, fines, penalties,
interest, contribution or settlement, (ii) for the costs of site investigations,
feasibility studies, information requests, health or risk assessments or
"Response" (as defined in F hereinbelow) actions, and (iii) for enforcing
insurance, contribution, and indemnification agreements.
B. "Environmental Laws" shall mean and include all
federal, state, and local statutes, ordinances, regulations, and rules relating
to environmental quality, health, safety, contamination and clean-up, including,
without limitation, the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Clean
Water Act, 33 U.S.C. Section 1251 et seq. and the Water Quality Act of 1987; the
Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. Section
136 et seq.; the Marine Protection, Research, and Sanctuaries Act, 33 U.S.C.
Section 1401 et seq.; the National Environmental Policy Act, 42 U.S.C. Section
4321 et seq.; the Noise Control Act, 42 U.S.C. Section 4901 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq. as
amended by the Hazardous and Solid Waste Amendments or 1984; the Safe Drinking
Water Act, 42 U.S.C. Section 300 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et
seq. as amended by the Superfund Amendments and Reauthorization Act, the
Emergency Planning and Community Right-to-Know Act, and the Radon Gas and Indoor
Air Quality Research Act; the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Section 2601 et seq.; the Atomic Energy Act, 42 U.S.C. Section 2011 et seq., and
the Nuclear Waste Policy Act of 1982, 42 U.S.C. Section 10101 et seq.; and state
and superlien and environmental cleanup statutes, with implementing regulations
and guidelines. "Environmental Laws" shall also include all state, regional,
county, municipal, and other local laws, regulations, and ordinances insofar as
they are equivalent or similar to the federal laws recited above or purport to
regulate "Hazardous Materials" as defined hereinbelow.
C. "Hazardous Materials" shall mean and include the
following, including mixtures thereof: any substance, pollutant, contaminant,
waste, by-product, or constituent regulated under any Environmental Law; oil and
petroleum products and natural gas, natural gas liquids, liquefied natural gas
and synthetic gas usable for fuel; pesticides regulated under the FIFRA;
asbestos and asbestos-containing materials, PCB's and other substances regulated
under the TSCA; source material, special nuclear material, by-product material
and any other radioactive materials or radioactive wastes, however produced
regulated under the Atomic Energy Act or the Nuclear Waste Policy Act; chemicals
subject to the OSHA Hazard Communication Standard, 29 C.F.R. Section 1910.1200
et seq.; and industrial process and pollution control wastes, whether or not
hazardous within the meaning of RCRA.
D. "Manage" means to generate, manufacture, process,
treat, store, use, re-use, refine, recycle, reclaim, blend or burn for energy
recovery, incinerate, accumulate speculatively, transport, transfer, dispose of
or abandon Hazardous Materials.
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E. "Release" or "Released" shall mean any actual or
threatened spilling, leaking, pumping, pouring emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing of Hazardous Materials into
the environment, as "environment" is defined in CERCLA.
F. "Response" or "Respond" shall mean action taken in
compliance with Environmental Laws to correct, remove, remediate, cleanup,
prevent, mitigate, monitor, evaluate, investigate, assess, or abate the Release
of a Hazardous Material.
(b) TENANT'S OBLIGATIONS WITH RESPECT TO ENVIRONMENTAL
MATTERS. During the Term: (a) Tenant shall at its own cost and expense comply
with all Environmental Laws; (b) Tenant shall not conduct or authorize the
Management of any Hazardous Materials on the Premises without prior written
approval by landlord; (c) Tenant shall not take any action that would subject
the Premises to permit requirements under RCRA or any other Environmental Laws
for storage, treatment or disposal of Hazardous Materials; (d) Tenant shall not
dispose of Hazardous Materials in dumpsters provided by Landlord for Tenant use
if any; (e) Tenant shall not discharge Hazardous Materials into drains or
sewers; (f) Tenant shall not cause or allow the Release of any Hazardous
Materials on, to or from the Premises; and (g) Tenant shall at its own cost
arrange for the lawful transportation and off-site disposal of all Hazardous
Materials that it generates.
(c) COPIES OF NOTICES. During the Term, Tenant shall promptly
provide Landlord copies of all summons, citations, directives, information
inquiries or requests, notices of potential responsibility, notices of violation
or deficiency, orders or decrees, Claims, complaints, investigations, judgments,
letters, notices of environmental liens or Response actions in progress, and
other communications, written or oral, actual or threatened, from the United
States Environmental Protection Agency, Occupational Safety and Health
Administration, other federal, state or local agency or authority, or any other
entity or individual, concerning (a) any Release of a Hazardous Material on, to
or from the Premises; (b) the imposition of any lien on the Premises; or (c) any
alleged violation of or responsibility under Environmental Laws. Landlord shall
have the right to enter upon the Premises and conduct appropriate inspections or
tests in order to determine Tenant's compliance with Environmental Laws.
(d) TESTS AND REPORTS. Upon written request by Landlord,
Tenant shall provide Landlord with the results of appropriate reports and tests,
with transportation and disposal contracts for Hazardous Materials, with any
permits issued under Environmental Laws, and with any other applicable documents
to demonstrate that Tenant complies with al Environmental Laws relating to the
Premises.
(e) ACCESS AND INSPECTION. Landlord and its agents and
representatives shall have access to the Premises and to the books and records
of Tenant (and any occupant of the Premises claiming by, through or under
Tenant) relating to Hazardous Materials for the purpose of ascertaining the
nature of the activities being conducted thereon and to determine the type, kind
and quantity of all products, materials, and substances brought onto the
Premises or made or produced thereon. Landlord and its agents and
representatives shall have the right to take samples in quantity sufficient for
scientific analysis of all materials and substances present on the Premises,
including, but not limited to, samples of materials or substances brought onto
or made or produced on the Premises by Tenant, or an occupant claiming by,
through, or under Tenant or otherwise present on the Premises. Landlord shall
not to take finished products from the Premises for any purpose whatsoever.
(f) TENANT'S OBLIGATION TO RESPOND If Tenant's Management of
Hazardous Materials at the Premises (i) gives rise to liability or to a Claim
under any Environmental Law, (ii) causes a significant public health effect, or
(iii) creates a nuisance, Tenant shall promptly take all applicable action in
Response.
(g) INDEMNIFICATION Tenant shall indemnify, defend, and hold
harmless Landlord, its lenders, any managing agents and leasing agents of the
Premises, and their respective agents, partners, officers, directors and
employees, from all Claims arising from or attributable to: (a) the presence of
Hazardous Materials including, without limitation, the hazardous materials
permitted under Subsection 3.7(h) herein below, in or on the Premises or the
subsurface thereof or the violation of any Environmental Laws (including,
without limiting the
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generality thereof, any cost, claim, liability or defense expended in
remediation required by a governmental authority, or by reason of any Release of
any Hazardous Material on or from the Premises of violation of any Environmental
Laws), or (b) any breach by Tenant of any of its warranties, representations, or
covenants in this Section . Without limitation, Tenant's obligations under the
Section 3.7 shall survive the termination or expiration of this Lease for any
reason, so long as the obligation relates to an occurrence after the Effective
Date. Landlord shall indemnify, defend, and hold harmless Tenant, its lenders,
and the respective agents, partners, officers, directors, and employees, from
all Claims arising from or attributable to any hazardous materials occurring or
being present on the premises prior to the Effective Date.
(h) PERMITTED HAZARDOUS MATERIALS Notwithstanding anything in
this Section 3.7 to the contrary, Tenant shall be allowed to maintain on the
premises in connection with its operations the following two (2) hazardous
materials: perchloroethylene and isopropyl alcohol, and upon reasonable to
Landlord, such other hazardous materials as are required by Tenant in the
operation of its business on the premises in accordance with industry standards
and techniques provided that manages such hazardous materials in accordance with
all environmental laws. Nothing in the permission granted hereunder to maintain
said permitted hazardous materials shall be deemed or construed as limiting
Tenant's indemnification obligation as provided in Subsection 3.7(g) hereinabove
relating to claims arising from or attributable to the presence of hazardous
materials.
ARTICLE IV
REAL ESTATE TAXES
4.1 TENANT'S OBLIGATIONS. Tenant shall bear the full expense of any and
all "Taxes" (as hereinafter defined) which are levied against the Premises, any
interest therein, and any or all of the improvements thereon, and are payable
with respect to or otherwise within any calendar or tax year or other period
falling wholly or partly within the Term. Taxes for the years in which the Term
commences and ends shall be prorated by Landlord and paid by Tenant within ten
(10) days after Landlord's invoice therefor. Upon expiration of the Term, Tenant
shall deposit with the Landlord Landlord's reasonable estimate of Tenant's
proportionate share of Taxes for the last calendar year falling within the Term.
Taxes for such last calendar year shall be reprorated between the parties upon
issuance of the actual bills therefor.
4.2 TAXES. The term "Taxes" shall mean the total of all real property,
personal property, and other property taxes and assessments, and all other
charges general and special, ordinary and extraordinary, foreseen and
unforeseen, including assessments for public improvements and betterments
assessed or levied against the Premises. If at any time during the Term, the
present method of taxation shall be changed so that in lieu of or in addition to
the whole or part of any Taxes levied, assessed, or imposed upon real estate
and/or improvements thereon, there shall be levied, assessed, or imposed on
Landlord a capital levy or other tax on the rents received therefrom and/or a
franchise tax, assessment, levy, or charge measured buy or based in whole or in
part, upon rents (excluding income taxes charged against Landlord), or with
respect too Landlord's ownership of the land comprising the Premises, or rentals
therefrom, all such taxes, assessments, levies, or charges, or the part thereof
so measured or based, shall be deemed to be included within the term "Taxes" for
the purposes hereof.
4.3 PAYMENT. Tenant shall pay to Landlord the amount of any invoice for
any Taxes as provided in Section 4.1 hereinabove no less than thirty (30) days
prior to the official due date of said Taxes. In no event shall Tenant be
excused from failure to pay any Taxes when due because of any failure on the
part of Landlord to deliver to Tenant any invoice for such taxes, provided that
if Landlord fails to deliver to Tenant any invoice for such taxes, Landlord
shall be liable for any and all resulting penalties and fees. Tenant shall also
reimburse Landlord for Tenant's prorated share of the amount of any current
Taxes previously paid by it with respect to the Premises for periods after the
Effective Date.
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ARTICLE V
MAINTENANCE OF PREMISES
(a) Tenant has examined and knows the condition of the
Premises and accepts possession of the Premises "as-is," and acknowledges that
no representations as to the condition of the Premises have been made by
Landlord or any agent of Landlord. Tenant shall, at its sole cost and expense,
be responsible for all repairs and replacements, including without limitation,
repair and replacement of the roof, the parking areas and all structural
components of all improvements now and hereafter located upon the Premises, and
perform all maintenance work in and to the Premises and all equipment and
fixtures therein or appurtenant thereto, that is necessary or desirable in order
to keep and maintain the Premises and all equipment and fixtures therein or
appurtenant thereto in good order, condition, and repair, and in safe, dry and
tenantable condition. Tenant shall also be responsible for all snow and ice
removal, and shall, without injury to the roof, remove all snow and ice from the
same when necessary.
(b) Tenant at its sole cost and expense shall keep and
maintain the Premises in a clean, sanitary and safe condition in accordance with
the laws of the State of Illinois, County of DuPage, and City of Glendale
Heights, and in accordance with all directions, rules and regulations of all
governmental agencies having jurisdiction over the Premises, and Tenant shall
comply with all requirements of law, ordinances, rules, regulations and orders
of any lawful authority having jurisdiction affecting the Premises or Tenant's
use thereof.
(c) Tenant shall exercise any rights to make repairs at the
expense of Landlord as may be provided for in any statute or law in effect
during the term, only upon prior written notice to Landlord and Landlord's
failure to make such repairs within a reasonable time following such notice.
(d) Failure of Tenant to make any repairs or replacements
required to be made by Tenant pursuant to this Article V shall give Landlord the
right (but not the obligation) to enter upon premises without notice and to
proceed forthwith to have such repairs or replacements made, and to pay the cost
thereof for Tenant's account. Tenant shall pay to Landlord, on demand, the cost
of such repairs or replacements, as additional rent.
ARTICLE VI
ALTERATIONS AND ADDITIONS
Except as provided in the Work Letter agreement, Tenant shall not make
or cause to be made any alterations or additions in or to the Premises without
the prior written consent of Landlord. Without limiting the generality of the
foregoing, Tenant shall not install any underground or above-ground storage
tanks upon the Premises. In the event Landlord grants such consent, such
alterations or additions, or improvements shall be performed in a good and
workmanlike manner, in accordance with all applicable legal and insurance
requirements and all drawings or specifications approved by Landlord, and in
accordance with the provisions of this Lease. Any work performed by Tenant shall
be subject to Landlord's inspection and approval after completion to determine
whether the same complies with the requirements of this Lease. Upon completion
of any alteration, Tenant shall promptly furnish Landlord with sworn owner's and
contractor's statements and full and final waivers of the lien covering all
labor and materials included in such alteration. Tenant shall not permit any
mechanic's lien or other lien or encumbrance to be filed against the Premises or
any portion thereof, whether pursuant to any alterations or otherwise. If any
such lien is filed, Tenant shall within ten (10) days thereafter have such lien
released of record or delivered to Landlord a bond in form, amount, and issued
by Assurety satisfactory to Landlord, indemnifying Landlord against all costs
and liabilities resulting from such lien and the foreclosure or attempted
foreclosure thereof. If Tenant fails to have such lien so released or to deliver
such bond to Landlord, Landlord, without investigating the validity of such
lien, may pay or discharge the same; and Tenant shall reimburse Landlord upon
demand for the amount so paid by Landlord, including Landlord's expenses and
attorney's fees.
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ARTICLE VII
INSURANCE AND INDEMNITY
7.1 INSURANCE COVERAGE. Tenant shall, at its sole cost and expense,
obtain and maintain, commencing with the Effective Date and continuing
throughout the Original Term, insurance policies providing the following
coverages:
(a) all-risk or fire and extended coverage insurance against
fire, vandalism, malicious mischief, sprinkler leakage and such additional
perils as now are or hereafter may be included in a standard extended coverage
endorsement from time to time in general use in the State of Illinois, insuring
the improvements and all fixtures and equipment pertaining thereto, in an amount
equal to not less than the full replacement value thereof (exclusive of the cost
of excavations, foundations and footings and, in any event, in at least such an
amount as will prevent Tenant from becoming a co-insurer under the terms of such
insurance policy, with a deductible not greater than Ten Thousand Dollars
($10,000). Any and all proceed of such insurance, so long as the Lease shall
remain in effect, shall be used only to repair or replace or pay for the items
so insured (subject, however, to the provisions of Article IX hereof);
(b) a comprehensive policy of general liability insurance,
protecting against any liability occasioned on or about any part of the Premises
or appurtenances thereto, or arising from any of the acts set forth in Section
7.5 hereof against which Tenant is required to indemnify Landlord, with such
policy to be in the minimum amount of Two Million dollars ($2,000,000.00) single
limit coverage for the first Lease Year.
(c) workmen's compensation insurance having such limits,
and under such terms and conditions, as are required by applicable law;
(d) during the period of any construction, reconstruction, or
alteration of the Improvements, builder's risk insurance in an amount equal to
the completed value of the improvements;
(e) products liability insurance for products, supplies and
other goods used and/or sold on or from the Premises in the minimum amount of
not less than One Million Dollars ($1,000,000.00) for personal injury and death
and not less than Five Hundred Thousand Dollars ($500,00.00) for property
damage; and
(f) contractual liability insurance insuring Tenant's
obligations hereunder with a minimum limit of not less than One Million Dollars
($1,000,000.00).
7.2 CONTRACTORS' INSURANCE. Tenant shall require all contractors
employed by it to maintain public liability insurance and broad form property
damage insurance, including completed operations and contractual coverage to
include the indemnity set forth in section 7.5, the limits of coverage of which
are to be not less than One Million Dollars ($1,000,000.00) for all perils.
Completed operations coverage shall be continued from not less than twelve (12)
months after the date of acceptance of and full payment for completion of the
work. Broad form property damage insurance shall specifically include demolition
and excavating. Tenant shall also require its contractors and subcontractors to
carry workmen's compensation and employer's liability insurance affording
protection under the Workman's Compensation Law of the State of Illinois and
employers liability protection subject to a limit of not less than Five Hundred
Thousand Dollars ($500,00.00) (or such higher amount as may be required by
applicable law).
7.3 INSURANCE POLICIES All insurance policies required to be procured
and maintained by Tenant under this Lease shall: (i) be issued by financially
responsible insurance companies authorized to do business in the State of
Illinois with a Best's rating of "A" or better; (ii) be written as primary
policy coverage and not contributing with or in excess of any coverage which
Landlord may carry; (iii) insure and name Landlord, Landlord's beneficiary,
Landlord's management agent, and any mortgagee of the Premises, as additional
insureds as their respective interests may appear; and (iv) contain an express
waiver of any right of subrogation by the
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insurance company against Landlord and Landlord's agents and employees. Neither
the issuance of any insurance policy required hereunder, nor the minimum limits
specified herein with respect to any insurance coverage, shall be deemed to
limit or restrict in any way the liability of Tenant (and/or it contractors)
arising under or out of this Lease. With respect to each and every one of the
insurance policies required to be procured and maintained under this Lease,
Tenant shall deliver to Landlord a duplicate original or certified copy of each
such policy or renewal thereof, as the case may be, together with evidence of
payment of all applicable premiums. Each and every insurance policy required to
be carried hereunder by or on behalf of Tenant (and/or its contractors) shall
provide (and any certificate evidencing the existence of each such insurance
policy shall certify ) that, unless Landlord shall first have been given thirty
(30) days' prior written notice thereof: (i) such insurance policy shall not be
canceled and shall continue in full force and effect; (ii) the insurance carrier
shall not, for any reason whatsoever, to fail to renew such insurance policy,
and (iii) no material changes may be made in such insurance policy (which shall
also require Landlord's approval). The term "insurance policy" as used herein
shall be deemed to include any extensions or renewals of such insurance policy.
In the event that Tenant (and/or its contractors) shall fail promptly to furnish
any insurance coverage hereunder required to be procured by Tenant (and/or its
contractors) Landlord, at its sole option, shall have the right to obtain the
same and pay the premium therefor for a period not exceeding one (1) year in
each instance, and the premium so paid by Landlord shall be payable by Tenant to
Landlord within five (5) business days following notice to Tenant, be
immediately due and payable by Tenant to Landlord as Additional Rent.
7.4 MUTUAL COVENANTS. Landlord and Tenant each hereby releases the
other, their beneficiaries, as applicable, and each of them and their
beneficiaries' respective partners, officers, directors, employees, and agents
from any and all liability or responsibility for any loss, damage or injury
caused by fire or other casualty for which insurance containing a waiver of
subrogation is carried by the injured party at the time of such loss, damage or
injury to the extent of any recovery by the injured party under such insurance.
Both partied hereby agree that any casualty insurance policies carried by them
shall contain such a waiver of subrogation. Notwithstanding the foregoing,
Landlord and Tenant acknowledge and agree that the provisions of this Section
7.4 are not intended and shall not be construed so as to either expand or limit
the rights and obligations of Landlord and Tenant as set forth in Sections 7.5
and 7.6 below.
7.5 TENANT'S INDEMNIFICATION. Tenant hereby indemnifies and agrees to
defend and save harmless Landlord, Landlord's beneficiary, Landlord's management
agent and each of their respective officers, directors, partners, employees and
agents, and any "Mortgagee" (as hereinafter defined) from and against any and
all claims, actions, damages, liabilities, costs and expenses, including
attorneys' fees and disbursements, that (i) arise from or are in connection with
the Premises (including, without limitation, those arising from the possession,
use, occupancy, operation, management, construction, repair, maintenance or
control of the Premises by Tenant and/or its agents, employees, contractors,
licensees or invitees), or (ii) arise from or are in connection with any act or
omission of Tenant or Tenant's agents, employees, contractors, licensees or
invitees, or (iii) result from any default, breach, violation or nonperformance
of this Lease or any provision hereof by Tenant, or (iv) result from injury to
person or property or loss of life sustained in or about the Premises, but only
to the extent such claims, actions, damages, liabilities, costs or expenses, or
incurred on or after the Effective Date. Tenant shall, at its own cost and
expense, defend any and all actions, suits and proceedings which may be brought
against Landlord or any mortgagee or the Premises with respect to the foregoing.
Tenant shall pay, satisfy and discharge any and all judgments, orders, and
decrees which may be received against Landlord or any such mortgagee or master
lessor in connection with the foregoing. In the event Landlord or any other
party so indemnified shall, without fault, be made a party to any litigation
commenced by or against Tenant, then Tenant shall protect and hold them harmless
and shall pay all costs, expenses, and attorneys' fees incurred by such
party(ies) in connection with such litigation. Tenant's obligations under this
Section 7.5 shall survive the termination of this Lease. If Landlord or any such
party shall, in its sole discretion, intervene in such litigation, then Landlord
or other such party will be fully responsible for its own costs, expenses, and
attorneys' fees incurred by such party in connection with such litigation.
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7.6 LIABILITY OF LANDLORD TO TENANT. Except with respect to any damages
resulting from the negligence of Landlord, its agents or employees, Landlord
shall not be liable to Tenant, its agents, employees or customers, for any
damage, loss, compensation, accident, or claims whatsoever resulting from: the
necessity of repairing any portion of the Premises; any interruption in the use
of the Premises; the use or operation (by Landlord, Tenant, or any other person
or persons whatsoever) or any portion of the Premises (or any fixtures of
equipment thereon); the termination of this Lease by reason of the destruction
of the Premises; any fire, robbery, theft, or any other casualty; any leakage in
any part or portion of the Premises; any water, wind, rain or snow that may leak
into, or flow from part of the Premises; any acts or omissions of any occupant
of any space adjacent to or adjoining all or any part of the Premises; any
explosion, casualty, utility failure or malfunction, or falling plaster; the
bursting, stoppage or leakage of any pipes, sewer pipes, drains, conduits,
appliances and plumbing works; and any other cause whatsoever.
ARTICLE VIII
DESTRUCTION OF PREMISES
8.1 CONTINUANCE OF LEASE. In the event of any damage to the Premises by
fire or other casualty, this Lease shall not be terminated or otherwise
affected; except that, if more than thirty-three percent (33%) of the gross
floor area of the Building shall be damaged by any such fire or other casualty
during the last year of the Term, then Landlord shall have the option to
terminate this Lease within thirty (30) days following the occurrence of such
fire or other casualty by giving written notice to Tenant during such period. In
the event that Landlord exercises such option to terminate, the entire proceeds
of the insurance in connection with such casualty shall be paid by the insurance
company or companies directly to Landlord, and this Lease shall thereupon
terminate, and Landlord and Tenant shall be relieved from any and all further
liability or obligation accruing under this Lease from and after the date of
such termination (except as otherwise provided herein).
8.2 RECONSTRUCTION. If all or any portion of the Premises are damaged
by fire or other casualty and this Lease is not terminated in accordance with
Section 8.1 herein above, then all fire and extended coverage insurance
proceeds, however, recovered, shall be held in escrow by Landlord as escrowee
("Escrowee") and made available for payment of the cost of repairing, replacing,
and rebuilding the Premises, and the damage to the Premises shall be promptly
repaired by Tenant. Tenant shall commence performance of such work within a
reasonable time following the date on which such fire or casualty has occurred,
and shall cause the same to be completed as soon thereafter as reasonably
possible under the attendant circumstances. In connection with any
reconstruction by Tenant, an architect duly registered in the State of Illinois
shall be selected by Tenant, subject to the approval of Landlord reasonably
exercised, and shall direct the disbursement of such insurance proceeds from
escrow. Such insurance proceeds shall be payable only upon receipt by the
Escrowee of certificates of said architect stating that the payments specified
therein are properly payable for the purpose of reimbursing Tenant in connection
with such work. At the election of Landlord or Landlord's Mortgagee, direct
payments may be made to material suppliers and laborers upon written
certification by said architect that such payments are due and payable. Any such
insurance proceeds in excess of Tenant's actual expenditures in restoring the
damage or destruction shall belong to Landlord. In making repairs, restoration
or reconstruction, Tenant, at its sole cost and expense, shall comply with all
laws, ordinances and governmental rules or regulations, and shall perform all
work or cause all such work to be performed with due diligence and in a
first-class manner, and in accordance with all of the terms and provisions of
this Lease. Tenant shall reconstruct the Premises in accordance with working
drawings approved by Landlord in its reasonably exercised discretion. All
permits required in connection with said repairs, restoration and reconstruction
shall be obtained by Tenant at Tenant's sole cost and expense. Tenant, at its
sole cost and expense, shall repair or replace its merchandise, trade fixtures,
furnishings and equipment in a manner and to at least a condition equal to that
prior to the damage or destruction thereof. Any amount expended by Tenant in
excess of such insurance proceeds deposited in escrow and made available to
Tenant shall be the sole obligation of Tenant. In the event Tenant fails to
commence and diligently pursue the completion of such work in the manner herein
provided, Landlord may (but shall not be obligated to) undertake such work and
be entitled to all insurance proceeds deposited in escrow, and any amount
expended by Landlord in performing such work in
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excess of the proceeds of insurance received by Landlord shall be repayable by
Tenant to Landlord within ten (10) days after receipt by Tenant from Landlord of
a statement setting forth the amount of such excess. Tenant's failure to
reimburse Landlord for the amount of such excess shall be deemed a failure to
pay rent entitling Landlord to the remedies set forth hereinabove and under
applicable law. In no event shall Landlord be required to repair or replace the
Premises or Tenant's merchandise, trade fixtures, furnishings or equipment.
Except as may be specifically set forth in this Article VIII, Landlord shall not
be liable or obligated to Tenant to any extent whatsoever by reason of any fire
or other casualty damage to the Premises, or any damages suffered by Tenant by
reason thereof, or any work performed by Landlord, or the deprivation of
Tenant's possession of all or any part of the Premises.
ARTICLE IX
CONDEMNATION
9.1 SUBSTANTIAL CONDEMNATION. If the Premises (or any portion thereof
which, if taken, would result in a material deprivation of Tenant's ability to
operate its business on the Premises) is taken by the exercise of the power of
eminent domain or is conveyed to or at the direction of any governmental entity
under a threat of such taking, then either party may elect to terminate this
Lease by giving notice to the other party not more than sixty (60) days after
the date on which the condemning authority takes possession of the portion of
the Premises so taken. Prior to such termination, Tenant shall, at the request
of Landlord, remove all improvements constructed or installed by or on behalf of
Tenant that Landlord desires removed in accordance with Section 16.1, and
otherwise return the Premises to the same condition as it was in immediately
prior to the Effective Date, with all of the foregoing work being done to
Landlord's satisfaction. Upon such termination, all rent and other charges
required to be paid by Tenant hereunder shall be apportioned and paid to the
date of the termination of this Lease as provided in this Subsection 9.1. In the
event of such substantial condemnation, then the entire award shall be the
property of Landlord.
9.2 NON-SUBSTANTIAL CONDEMNATION. In the event of a condemnation which
does not result in the termination of this Lease as provided under Section 9.1
above, this Lease shall continue in full force and effect. Upon such
condemnation, Tenant shall immediately commence restoring the Premises, with
reasonable diligence and at its sole cost and expense, as nearly as possible to
its value, condition and character immediately before such condemnation, all in
accordance with the plans and specifications therefor which shall have been
approved in writing by Landlord. Any condemnation award which may be available
pursuant to such a taking shall be made available to Tenant in order for it to
complete such restoration of the Premises. In the event that the condemnation
award is not sufficient to cover the cost of such restoration, then Tenant shall
be responsible for paying the difference therefor. If, however, the condemnation
award exceeds the cost of restoring the Premises, then the excess balance shall
be the property of Landlord, provided that Tenant shall have the right to retain
an amount as reasonably determined by Landlord to compensate Tenant for any
business interruption resulting from such taking, and Tenant's supervisory costs
in connection with completing such restoration.
ARTICLE X
ASSIGNMENT AND SUBLETTING
10.1 PROHIBITED ACTS. Notwithstanding any references to assignees,
subtenants, concessionaires, or other similar entities in this Lease, Tenant
shall not, without Landlord's prior written consent, (a) assign or otherwise
transfer or mortgage or otherwise encumber this Lease or any of its rights
hereunder, (b) sublet the Premises of any part hereof or permit the use of the
Premises of any part thereof by any person other than Tenant or its agents, or
(c) permit the assignment or other transfer of this Lease or any of Tenant's
rights hereunder by operation of law. Any such voluntary attempted or purported
transfer, assignment, mortgaging, or encumbering of this Lease of any of
Tenant's interest hereunder and any attempted or purported subletting or grant
of a right to
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use or occupy all or a portion of the Premises in violation of the foregoing
sentence shall be null and void and shall not confer any rights upon any
purported transferee, assignee, mortgagee, sublessee, or occupant, and shall, at
Landlord's option, result in a termination of this Lease without relieving
Tenant of any of its obligations hereunder for the balance of the stated term.
Landlord hereby acknowledges and agrees that it will not unreasonably withhold
its consent to any assignment of this Lease or any sublease, provided (i) the
assignee or subtenant is experienced in the operation of Tenant's type of
business, (ii) in the case of an assignment, Tenant shall furnish to Landlord an
assumption agreement, satisfactory in all respects to Landlord, executed by the
assignee, in which the assignee agrees to comply with and perform all of the
terms and conditions of this Lease and to assume all of the obligations and
responsibilities of Tenant hereunder, or in the case of a subletting, Tenant
shall furnish to Landlord a copy of the sublease agreement, executed by the
subtenant in which the subtenant acknowledges the terms and provisions of this
Lease, and agrees to abide by and comply with the same, (iii) the assignee or
subtenant uses and operates the Premises in accordance with the provisions of
this Lease, (iv) at the time of any such assignment or subletting, Tenant is not
in default under this Lease, and (v) notwithstanding any such assignment or
subletting, Tenant shall be and remain jointly and severally liable, for the
payment of rental and all other amounts reserved in this Lease, and for the
performance of all of the provisions, covenants and conditions set forth in this
Lease on Tenant's part to be kept and performed. Notwithstanding any such
assignment or subletting and Landlord's consent thereto, all of the terms and
conditions of this Lease shall continue unmodified, shall remain in full force
and effect, and (in the case of an assignment) shall be applicable to the
assignee to the same extent as if the assignee were the original tenant
hereunder, and no further subletting or assignment or transfer of this Lease or
any estate or interest therein, or other act prohibited by this Article X, shall
be permitted.
10.2 CORPORATIONS AND PARTNERSHIPS. If Tenant is a corporation other
than a publicly-traded corporation, then the sale, issuance, or transfer of any
voting capital stock of Tenant or of any corporate entity which directly or
indirectly controls Tenant which shall result in a change in the voting control
of Tenant or the corporate entity which controls Tenant shall be deemed to be a
prohibited assignment of this Lease within the meaning of this Article X. If
Tenant is a partnership, limited liability company, or an unincorporated
association, then the sale, issuance, or transfer of a majority interest
therein, or the transfer of a majority interest in or a change in the voting
control of any partnership, limited liability company, or unincorporated
association or corporation which directly or indirectly controls Tenant, shall
be deemed to be a prohibited assignment of this Lease within the meaning of this
Article X.
10.3 CONSENT NOT A WAIVER. The consent by Landlord to any assignment,
transfer, or subletting to any party shall not be construed as a waiver or
release of Tenant under the terms of any covenant or obligation under this Lease
(except as to the specific assignment, transfer or subletting to which
Landlord's consent is given) nor shall the collection or acceptance of rent from
any such assignee, transferee, subtenant, or occupant constitute a waiver or
release of Tenant of any covenant or obligation contained in this Lease.
10.4 ADDITIONAL RENT. In the event of an assignment, transfer, or
sublease, by Tenant, Tenant shall pay to Landlord one-half (1/2) of any monthly
rent or other payment accruing to Tenant as the result of any such assignment,
transfer, or sublease, including any lump sum or periodic payment in any manner
relating to such assignment, transfer or sublease, which is in excess of the
rent then payable by Tenant under the Lease. Any such rent or other payment
shall be paid by Tenant to Landlord monthly as Additional Rent. Landlord may
require a certificate from Tenant specifying the full amount of any such payment
of whatever nature.
10.5 INDEMNIFICATION. Any costs, and expenses, including reasonable
attorneys' fees and disbursements (which shall include the cost of any time
expended by Landlord's attorneys) incurred by Landlord in connection with any
proposed or purported assignment, transfer, or sublease shall be borne by Tenant
and shall be payable to Landlord, on demand, as Additional Rent.
ARTICLE XI
SUBORDINATION, FINANCING AND ASSIGNMENT BY LANDLORD
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11.1 SUBORDINATION. This Lease and Tenant's tenancy hereunder shall be
subject and subordinate at all times to the lien of any "Mortgage" (as
hereinafter defined) now of hereafter placed upon the Premises; provided,
however, that if a "Mortgagee" (as hereinafter defined) so desires, this Lease
may be deemed to be prior to the lien of its Mortgage, whether this Lease is
entered into prior or subsequent to the date of such Mortgage. Tenant agrees to
execute and deliver such instruments as may be desired by Landlord or by any
Mortgagee in order to carry out the intent of this Section 11.1. Tenant hereby
irrevocably appoints Landlord as its attorney-in-fact to execute and deliver any
such instrument on behalf of Tenant. The term "Mortgage" shall be deemed to mean
and include any mortgage, deed of trust or other similar instrument securing an
interest in the Demised Premises, and any modification, consolidation,
extension, renewal, replacement, or substitute therefor, and any and all
advances thereunder; and the term "Mortgagee" shall mean the holder of any such
Mortgage. Upon the written request of Tenant, Landlord agrees to use reasonable
efforts to cause any Mortgagee to enter into an agreement with Tenant providing
that the Mortgagee shall, in the event of foreclosure of the Mortgage, recognize
the interest of Tenant of this Lease so long as Tenant is not then in Default
hereunder; provided, however, that the failure of Landlord to obtain such an
agreement from any such Mortgagee shall not limit any obligations of the tenant
under this Lease.
11.2 ASSIGNMENT BY LANDLORD. It is expressly understood and agreed that
this Lease and all rights of Landlord hereunder shall be fully and freely
assignable by Landlord, without the consent of Tenant. In the event of any
transfer or transfers of Landlord's interest in the Premises, including a
so-called sale-leaseback, the transferor shall be automatically relieved of any
and all obligations on the part of Landlord.
11.3 ATTORNMENT. In the event that Landlord sells, conveys, or
otherwise transfers its interest in the Premises, whether voluntarily,
involuntarily, by foreclosure (or by deed in lieu of foreclosure) or by
operation of law or otherwise, then this Lease shall remain in full force and
effect and shall not be terminated except in accordance with the provisions of
this Lease. Tenant hereby agrees that it will attorn to and recognize any
successor to Landlord's interest in the Premises as the new Landlord under this
Lease, and Tenant hereby covenants and agrees that it will execute any
instruments required by such successor evidencing the same.
11.4 ESTOPPEL CERTIFICATE. Either party shall, without charge therefor,
at any time in connection with a proposed sale or mortgage of the Premises, with
ten (10) days after request therefor by Landlord, execute, acknowledge and
deliver to Landlord a written-estoppel certificate, in reasonable form,
certifying to Landlord, Mortgagee, or any purchaser of the Premises or any other
person designated by Landlord, as of the date of such estoppel certificate: (i)
that Tenant is in possession of the Premises, has unconditionally accepted the
same and is currently paying the rent reserved hereunder; (ii) that this Lease
is unmodified and in full force and effect (of it there has been modification,
that the same is in full force and effect as modified and setting forth such
modifications); (iii) whether or not there are then existing any set-offs or
defenses against the enforcement of any right or remedy of Landlord, or any duty
or obligation of Tenant, hereunder (and, if so, specifying the same in detail);
(iv) the dates, if any, to which any rent has been paid in advance; (v) that
Tenant has no knowledge of any uncured defaults on the part of Landlord under
this Lease (or if Tenant has knowledge of any such uncured defaults, specifying
the same in detail); (vi) that Tenant has no knowledge of any event having
occurred that authorized the termination of this Lease by Tenant (or if Tenant
has such knowledge, specifying the same in detail); and (vii) any other matters
that Landlord or the requesting party may require to be confirmed. Any such
failure of Landlord or Tenant to execute and deliver such certificate shall, at
Landlord's option, constitute a default by Tenant hereunder.
ARTICLE XII
DEFAULT AND REMEDIES
12.1 ELEMENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute a default by Tenant under this Lease:
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(a) if Tenant refuses to take possession of the Premises or to
perform an of its obligations under the Work Letter Agreement, within the time
periods and in the manner set forth therein;
(b) if Tenant vacates the Premises and permits the same to
remain unoccupied and unattended for a period in excess of thirty (30) days or
substantially ceases to carry on its normal activities on the Premises or fails
to operate its business in compliance with Article III hereof;
(c) if Tenant fails to pay any rent or other charges required
to be paid by Tenant when the same shall become due and payable hereunder, and
such failure continues for ten (10) days after such due date;
(d) if Tenant fails to perform or observe any term or
condition of this Lease (other than as set forth in sub-paragraphs (a), (b), and
(c) above), and such failure continues for thirty (30) days after written notice
is sent by Landlord to Tenant informing Tenant of such failure, provided that if
the failure is such that it requires more than ten (10) days to correct and is
not otherwise deemed an "emergency" by Landlord, Tenant shall not be deemed to
be in default hereunder if Tenant (i) commences curing the failure promptly upon
receipt of written notice by Landlord informing Tenant of such failure, and (ii)
diligently prosecutes the cure to completion within thirty (30) days following
the expiration of the original thirty (30) day period set forth in this
sub-paragraph (d);
(e) if Tenant shall be given three (3) notices of default
within either one (1) calendar year or one (1) Lease Year pursuant to
sub-paragraph (c) above, or three (3) notices of default at any time during the
term of this Lease pursuant to sub-paragraph (d) above, notwithstanding any
subsequent cure of the default as identified in such notices; or
(f) if any execution, levy, attachment or other legal process
of law shall occur upon Tenant's goods, fixtures, or interest in the Premises,
or it Tenant shall make any assignment for the benefit of creditors.
12.2 LANDLORD'S REMEDIES. In the event that Tenant is in default under
this Lease, then Landlord may pursue any or all of the following remedies:
(a) Landlord, in addition to other rights or remedies it may
have, shall have the right to declare the Lease terminated and the term ended
(in which event, this Lease and the Term hereof shall expire, cease and
terminate with the same force and effect as though the date set forth in the
notice of termination were the date originally set forth herein and fixed for
the expiration of the term, and Tenant shall vacate and surrender the Premises
but shall remain liable for all obligations arising during the balance of the
Original Term or the applicable Renewal Term, as the case may be, as if this
Lease had remained in full force and effect), or without terminating this Lease,
terminate Tenant's right to possession of the Premises and Landlord shall have
the right to bring a special proceeding to recover possession from Tenant
holding over and/or Landlord may, in any such event, without notice, re-enter
the Premises either by force or otherwise, and dispossess, by summary
proceedings or otherwise, Tenant and the legal representatives of Tenant or
other occupant(s) of the Premises and remove their effects and hold the Premises
as if this Lease had not been made.
(b) Upon termination of this Lease or Tenant's right to
possession of the Premises pursuant to sub-paragraph (a) above, Landlord may
proceed to recover possession of the Premises under and by virtue of the
provisions of the laws of the State of Illinois or by such proceedings,
including re-entry and possession, as may be applicable.
(c) Should this Lease or Tenant's right to possessions of the
Premises be terminated by reason of Tenant's default as hereinabove provided,
Landlord shall in good faith use reasonable efforts to relet the Premises or any
portion thereof for such rent and upon such terms as Landlord may determine in
its sole discretion, and, if the full rental reserved under this Lease
(including all items identified as "Base Rent" and "Additional Rent"), and any
of the costs, expenses or damages provided below, shall not be realized by
Landlord,
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Tenant shall be liable for all damages sustained by Landlord including, without
limitation, deficiency in rent, attorneys' fees and disbursements, brokerage
fees, and expenses of placing the Premises in first-class rentable condition.
Landlord, in putting the Premises in good order or preparing the same for
reletting, may make such alterations, repairs, or replacements in the Premises
as Landlord, in its sole judgment, considers advisable and necessary for the
purpose of reletting the Premises, and the making of such alterations, repairs
or replacements shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in no event be liable in any
way whatsoever for failure to relet the Premises, or in the event that the
Premises are relet, for failure to collect the rent under such reletting. In no
event shall Tenant be entitled to receive the excess (or any credit with respect
to the excess), if any, of such rent collected over the sums payable by Tenant
to Landlord hereunder, provided that Landlord shall be liable for failure to
relet the Premises if such an opportunity in good faith exists and Landlord
willfully refuses to take advantage of such opportunity.
(d) Any damage or loss of rent sustained by Landlord pursuant
to a default by Tenant may be recovered by Landlord, at its option, either: (i)
at the time of the reletting, (ii) in a single action or separate actions, from
time to time, as said loss of rents or damages shall accrue, (iii) in a single
action upon Tenant's default, in which event Landlord shall be entitled to
recover from Tenant, as and for liquidated damages, all amounts that Tenant
would continue to remain liable for pursuant to sub-paragraph (c) above (in
which event, Additional Rent representing Taxes, insurance, and maintenance for
the remainder of the Term shall be calculated on the basis of the total
Additional Rent for such items payable during the most recent Lease Year,
without prejudicing Landlord's right to collect any deficiency for the remainder
of the term), or (iv) in a single proceeding deferred until the expiration of
the Term (in which event Tenant hereby agrees that the cause of action shall not
be deemed to have accrued until the original date or expiration of said Term).
(e) In addition to the foregoing rights of Landlord, in the
event that Tenant shall be in default hereunder, Landlord shall have the option,
but not the obligation, to cure the act or failure constituting such default for
the account of and at the expense of Tenant. Except in the event of an emergency
as reasonably determined by Landlord, Landlord shall provide Tenant with thirty
(30) days written notice prior to curing any default, provided, however, that no
such notice shall be required for emergency repairs. In the event that Landlord
has already terminated this Lease pursuant to the Article XII, Landlord's cure
or attempt to cure of any act or failure constituting a default by Tenant (which
act or failure occasioned the termination of this Lease) shall not result in a
waiver of such termination by Landlord. Tenant hereby agrees to pay Landlord
interest, at a rate equal to the greater of four percent (4%) in excess of the
"Prime Rate" announced from time to time by The First National Bank of Chicago
at its principal office in Chicago, Illinois, or twelve percent (12%) per annum,
but not in excess of the maximum legal rate, for all sums paid by Landlord
pursuant to the terms of this Article XIII. Tenant hereby also agrees to pay
Landlord interest, at such rate for all sums due and owing Landlord under this
Lease which are not received by Landlord within thirty (30) days following the
date upon which sums were due. In addition, with respect to any monthly
installment of Base Rent which is not received by Landlord within five (5) days
following the date upon which such installment of Base Rent was due, Tenant
shall pay to Landlord a late charge in the amount of One Thousand Dollars
($1,000.00).
12.3 ADDITIONAL REMEDIES; WAIVERS. Nothing contained herein shall
prevent the enforcement of any claim Landlord may have against Tenant for
anticipatory breach of the unexpired Term. In the event of a breach or an
anticipatory breach by Tenant of any of the covenants or provisions hereof,
Landlord shall have the right of injunction and the right to invoke any remedy
allowed at law or in equity as if re-entry, summary proceedings and other
remedies were not provided for herein. Mention in this Lease of any particular
remedy shall not preclude Landlord from any other remedy, in law or in equity.
The rights and remedies of Landlord set forth herein shall be in addition to any
other right and remedy now or hereafter provided by law, and all such rights and
remedies shall be cumulative. No action or inaction by Landlord shall constitute
a waiver of a default by Tenant or termination of this Lease, and no waiver of a
default by Tenant or termination of this Lease shall be effective unless it is
in writing, signed by Landlord.
ARTICLE XIII
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BANKRUPTCY AND INSOLVENCY
13.1 TENANT'S INTEREST NOT TRANSFERABLE. Neither Tenant's interest in
this Lease, nor any estate hereby created in Tenant nor any interest herein or
therein, shall pass to any trustee or receiver or assignee for the benefit of
creditors or otherwise by operation of law, except as may specifically be
provided pursuant to the Bankruptcy Code (11 USC Sections 101, et. seq.),
as the same may be amended from time to time.
13.2 RIGHTS AND OBLIGATIONS.
(a) Upon the filing of a petition by or against Tenant under
the Bankruptcy Code, Tenant, as debtor and as debtor in possession, and any
trustee who may be appointed with respect to the assets of or estate in
bankruptcy of Tenant, agree to pay monthly in advance on the first day of each
month, as reasonable compensation for the use and occupancy of the Premises, an
amount equal to all Minimum Rent, Additional Rent and other charges and payment
otherwise due or payable pursuant to this Lease.
(b) Tenant, as debtor and as debtor-in-possession, and any
trustee who may be appointed with respect to the assets of or estate in
bankruptcy of Tenant, agree that they will take all steps necessary to cause the
Court of Bankruptcy to enter an order, within sixty (60) days of the date of
commencement of the bankruptcy proceeding, declaring this Lease to be either
assumed or rejected. Tenant, as debtor and as debtor-in-possession, and any such
trustee hereby agree to consent to any and all actions of Landlord taken with
regard to the procurement of such an order. In the event that such an order
shall not be entered within the time period set forth above, then Tenant, as
debtor and as debtor-in-possession, and any such trustee hereby specifically
agree to consent to the entry by such Court of an order rejecting this Lease.
(c) Included within and in addition to any other conditions or
obligations imposed upon Tenant or its successor in the event of assumption
and/or assignment of this Lease are the following: (i) the cure of any monetary
defaults and reimbursement of pecuniary loss within not more than thirty (30)
days of assumption and/or assignment; (ii) the deposit of an additional sum
equal to not less than three (3) months' Base Rent and Additional Rent, which
sum shall be determined by Landlord, in its sole discretion, to be a necessary
deposit to secure the future performance under the Lease of Tenant or it
assignee; (iii) the use of the Premises as set forth in Articled III of this
Lease and (iv) the prior written consent is obtained from any mortgagee to which
this Lease may have been assigned as collateral security.
ARTICLE XIV
RIGHT OF ACCESS
14.1 ACCESS BY LANDLORD. Tenant hereby agrees to allow Landlord (or any
agent of Landlord) to enter upon the Premises at all reasonable times, and upon
prior written notice to Tenant (except in the event of an emergency, in which
event no notice shall be required), for such purposes as Landlord may determine,
including, without limitation, showing the Premises to prospective purchasers,
lenders or lessees. In addition, Landlord shall have the right to display "For
Sale" or "For Rent" or similar signs on or about the Premises, as reasonably
determined by Landlord.
ARTICLE XV
PROPERTY RIGHTS
15.1 LANDLORD'S PROPERTY. Tenant hereby agrees that all improvements
upon the Premises, together with all fixtures and other appurtenances in or on
the Premises, shall immediately upon the expiration or
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sooner termination of this Lease, or upon any default by Tenant hereunder (which
continued beyond any cure or grace period that may be provided herein), at the
option of Landlord, become affixed to the realty, and shall thereafter be and
remain the sole property of Landlord (reversion to Tenant if the affixation
occurs as a result of a default by Tenant and Tenant cures the default as
provided hereunder). No such improvements, fixtures, or other property shall be
removed from the Premises by Tenant at any time, whether before or after the
expiration or sooner termination of this Lease, without the express written
approval of Landlord, except as otherwise specified herein. Notwithstanding
anything contained in this Lease to the contrary, Tenant hereby agrees that (i)
it will not, under any circumstances, use its ownership interest in any real or
personal property located upon the Premises, (ii) Tenant's interest in the
improvements and all fixtures and other appurtenances which it installs in or on
the Premises is subject in all respect to the terms and provisions of this
Lease, and (iii) Tenant cannot and will not transfer or assign its interest in
the improvements or in the fixtures and other appurtenances which it installs in
or on the Premises separately from its interest as Tenant under this Lease.
15.1 TENANT'S PROPERTY. As long as Tenant is not in default hereunder,
then Tenant shall maintain ownership of all personal property and trade fixtures
installed or located by Tenant on the Premises, and Tenant shall have the right
to remove the same from the Premises, provided that it repairs all damage to the
Premises which may be caused by the removal thereof. Any property of Tenant
remaining on the Premises following the expiration or sooner termination of this
Lease shall become the property of Landlord, and may be retained or disposed of
by Landlord as Landlord shall desire.
ARTICLE XVI
END OF TERM
16.1 RETURN OF THE PREMISES. Upon the expiration or sooner termination
of this Lease, Tenant shall quit and surrender to Landlord the Premises, broom
clean, in as good or better condition as on the Effective Date, ordinary wear
and tear, damage by fire or other casualty and Acts of God excepted (subject to
the provisions of Article VIII hereof), and Tenant shall further surrender to
landlord all keys to or for the Premises, and shall inform Landlord of all
combination locks, safes and vaults, if any, left by Tenant in the Premises.
Tenant shall, it its sole cost and expense, remove all of Tenant's property (as
defined in Section 15.2) and all alterations to the Premises not wanted by
Landlord (as specified in a written notice from Landlord to Tenant which shall
be given at the time Landlord approves any such alteration), and shall repair
any and all damage to the Premises caused by such removal and restore the
Premises to the condition required hereby. Tenant's obligation to observe and
perform all of the covenants contained in this Section 16.1 shall survive the
termination of this Lease.
16.2 HOLDING OVER. If Tenant shall hold possession of the Premises
after the termination of this Lease, then, at landlord's option: (a) Tenant
shall be deemed to be occupying the Premises as a tenant from month-to-month, at
double the Base Rent and other charges in effect during the last Lease Year
immediately preceding such holdover period, subject to all of the other
conditions, provisions, and obligations of this Lease (insofar as the same may
be applicable or adjusted to a month-to-month tenancy); or (b) Landlord may
exercise any other remedies that it has under this Lease or at law or in equity,
including treating Tenant as a trespasser (in which event Landlord shall be
entitled to the benefit to all laws relating to the speedy recovery of the
possession of the Premises), and the bringing of an action for wrongfully
holding over. In addition thereto, Tenant shall also pay, indemnify, and defend
Landlord from and against all claims and damages, consequential as well as
direct, sustain; by reason of Tenant's holding over.
ARTICLE XVII
COVENANT OF QUIET ENJOYMENT
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Upon payment by Tenant of the rents and all other charges provided for
under this Lease, and upon the observance and performance of all covenants,
terms and conditions on Tenant's part to be observed and performed pursuant to
this Lease, Tenant shall, at all times during the term hereof, subject to the
terms, covenants and conditions of this Lease, peaceably and quietly hold and
enjoy the Premises, without any interruption or disturbance from Landlord or any
other person or persons lawfully or equitably claiming by, through or under
Landlord, subject to the terms and conditions of this Lease, of any Mortgage to
which this Lease is Subordinate, and of those Documents and instruments to which
this Lease is subject.
ARTICLE XVIII
SECURITY DEPOSIT
Tenant hereby deposits with Landlord the sum of one month's Base Rent
(the "Security Deposit"), as security for the performance of Tenant's
obligations under this Lease. The Security Deposit may be applied, in whole, or
in part, by Landlord to cure any default or defaults of Tenant under this Lease
or to pay amounts payable by Tenant hereunder, without limiting, impairing, or
being in lieu of any other remedy or remedies which Landlord may have on account
of such default. Upon any such application, Tenant shall immediately, upon
demand by Landlord, pay to Landlord the amount so applied in order that Landlord
shall have the full amount of the Security Deposit on hand at all times during
the term, including any Renewal Terms if applicable, of this Lease. The Security
Deposit shall in no event be deemed an advance payment of rental or a limitation
upon the damages recoverable by Landlord on account of any default by Tenant
hereunder. Provided that Tenant shall not be in default in the performance of
any of its obligations under this Lease, any balance of the Security Deposit
remaining unapplied at the termination or expiration of this Lease shall be
repaid to Tenant not later than thirty (30) days after such termination or
expiration and Tenant's vacation of the Premises as provided hereunder. If the
Premises is conveyed by Landlord., Landlord shall be released from all liability
for repayment of the Security Deposit, and Tenant shall look to Landlord's
successor in interest for repayment thereof. The preceding sentence shall apply
to each subsequent conveyance of the Premises. The Security Deposit shall not be
assigned or encumbered by Tenant, and any such purported assignment or
encumbrance shall be void. Landlord shall hold the Security Deposit in an
interest bearing account and so long as no default by Tenant has occurred under
this Lease during any Lease Year, whether or not subsequently cured by Tenant,
Landlord shall pay to Tenant the amount of interest so earned on the Security
Deposit within thirty (30) days following the conclusion of each Lease Year.
ARTICLE XIX
MISCELLANEOUS
19.1 ENTIRE AGREEMENT. This Lease and the Work Letter Agreement
contains the entire agreement between the parties hereto with respect to the
Premises, and there are no promises, agreements, conditions, undertakings or
warranties or representations, oral or written, express or implies, between them
or other than as herein set forth.
19.2 SEVERABILITY. If any provision of this lease or the application
thereof to any extent shall be invalid or unenforceable, the remainder of this
lease, or the application of such provision to the parties or circumstances
other than those to which it is invalid or unenforceable, shall not be affected
thereby, and each provision of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
19.3 NOTICES. Each notice, demand, request, consent, approval,
disapproval, waiver or other communication (each of the foregoing are herein
referred to as a "notice") that is to be given or made or communicated pursuant
to this Lease shall be in writing and shall be deemed to have been received, and
shall be effective, when (i) delivered in person, or (ii) sent by facsimile
transmission with receipt acknowledged, or (iii) three (3) days after having
been mailed by certified or registered United States Mail, postage prepaid,
return receipt
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requested, or (iv) the next business day after having been sent by overnight
courier, receipt requested, and addressed:
(a) IF TO LANDLORD: PASCHEN CONTRACTORS INC.
2739 North Elston Avenue
Chicago, Illinois 60647
Attention: Robert L. O'Neil II
WITH A COPY TO: KUBASIAK, CREMIEUX, FYLSTRA,
REIZEN & ROTUNNO, P.C.
30 North LaSalle Street
Suite 2700
Chicago, Illinois 60602-2505
Attention: Richard J. Cremieux
AND A COPY TO: MURDOCH, COLL & LILLIBRIDGE
343 South Dearborn Street
Suite 200
Chicago, Illinois 60604
Attention: Gary Gries
(b) IF TO TENANT: CALIFORNIA MICROWAVE, INC.
855 Mission Court
Fremont, CA 94539
Attention: Ray Christie
Each party shall have the right at any time and from time to time to designate a
different address, or additional or other party or parties, at such additional
or other addresses for the delivery of notices, by giving notice similarly
given, such different addresses and/or parties being effective from and after
the date of receipt of such notice by the other party.
19.5 VENUE. If either Landlord or Tenant desires to bring an action
against the other in connection with this Lease, such action shall be brought in
the Federal or State courts located in the State of Illinois. Landlord and
Tenant consent to the jurisdiction of such courts.
19.5 ATTORNEY'S FEES. In connection with any dispute or litigation
between the parties arising under this Lease, the non-prevailing party shall pay
the prevailing party all costs and expenses, including reasonable attorneys'
fees, incurred by such prevailing party in successfully enforcing the
non-prevailing party's obligations, or successfully defending the prevailing
party's rights under this Lease against the non-prevailing party. Each party
hereto shall pay the costs and expenses, including reasonable attorneys' fees
incurred by the other party, as a result of any litigation in which said first
(1st) party causes said second (2nd) party, without said second (2nd) party's
fault, to become involved as a result of this Lease.
19.6 BROKERAGE FEE. Tenant warrants and certifies to Landlord that
Tenant has not dealt with any broker or finder in connection with this
transaction except Mesirow Realty Brokerage, Inc., and Frain Camins &
Swartchild, and Tenant agrees to defend, indemnify, and hold harmless Landlord
from and against any claim for broker's or finder's fees or commissions made by
any other person or entity.
19.7 GOVERNING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Lease and the rights and the
liabilities of the parties hereto shall be determined in accordance with the
laws of the State of Illinois.
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19.8 MODIFICATIONS. No change or modification of this Lease or of any
of the provisions hereof shall be valid or effective unless the same is in
writing and signed by the parties hereto. No alleged or contended waiver of any
of the provisions of this Lease shall be valid or effective unless in a writing
signed by the party against whom it is sought to be enforced.
19.9 CAPTIONS AND SECTION NUMBERS. Any article headings (or captions)
throughout this Lease are for convenience or reference only and the words
contained therein shall in no way be held or deemed to define, limit, describe,
explain, modify, amplify, or add to the interpretation, construction or meaning
of any provision of or the scope or intent of this Lease, nor in any way affect
this Lease.
19.10 SATISFACTION OF REQUIREMENTS. Wherever a requirement is imposed
on any party hereto, it shall be deemed that such party shall be required to
perform such requirement at its own sole cost and expense unless it is
specifically otherwise provided herein.
19.11 EXTENSION OF OBLIGATIONS. Any restriction on or requirement
imposed upon Tenant hereunder shall be deemed to extend to Tenant's
concessionaires, sublessees and invitees, and it shall be Tenant's obligation to
cause the foregoing persons to comply with such restriction or requirement.
19.12 PRONOUNS. Wherever appropriate herein, the singular includes the
plural and the plural includes the singular.
19.13 COUNTERPARTS. This Lease may be executed in several counterparts
and the counterparts shall constitute but one and the same instrument.
19.14 WAIVER. No failure by Landlord to insist upon the strict
performance of any term, covenant, agreement, provision, condition or limitation
of this Lease to be kept, observed or performed by Tenant and no failure by
Landlord to exercise any right or remedy consequent upon a breach of any such
term, covenant, agreement, provision, condition or limitation of this Lease,
shall constitute a waiver of any such breach or of any such term, covenant,
agreement, provision, condition or limitation.
19.15 SPECIFIC PERFORMANCE OF RIGHTS. Landlord and Tenant shall each
have the right to obtain specific performance of any and all of the covenants of
obligations of the other under this Lease, and nothing contained herein shall be
construed as or shall have the effect of abridging such right
19.16 DISCLAIMER. The terms of this Lease shall not be interpreted to
mean that Landlord and Tenant are partners or joint venturers, and the parties
hereto hereby disclaim the existence of any such relationship.
19.17 BINDING EFFECT. This Agreement and all of the terms and
provisions herein contained shall be binding upon and shall insure to the
benefit of the parties hereto and their respective heirs, representatives,
successors, and permitted assigns.
19.18 WAIVER OF REDEMPTION RIGHT. Tenant hereby expressly waives for
itself and all persons claiming by or through it, any right of redemption or for
the restoration of the operation of this Lease under any present or future law
in case Tenant shall be dispossessed for any cause.
19.19 RECORDING. Neither this Lease nor any memorandum hereof shall be
recorded without the express written consent of Landlord. Landlord will not
unreasonably withhold its consent to the recording of a memorandum of this Lease
at any time following the date on which Tenant makes its first payment of Base
Rent hereunder, provided that the memorandum is in form and substance
satisfactory to Landlord (in its sole reasonable discretion).
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19.20 LAND TRUST EXCULPATION. This Lease is executed by AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not personally, but solely as
Trustee under Trust Agreement dated March 6, 1991, and known as Trust Number
113515-19, and it is expressly understood and agreed by the parties hereto,
anything contained herein to the contrary notwithstanding, that each and all of
the covenants, undertakings, representations, and agreements made by said
trustee are made and intended, not as personal covenants, undertakings,
representations, and agreements of said trustee, individually, or for the
purpose of binding said trustee, personally, but solely in the exercise of the
powers conferred upon it as such trustee under said trust agreement, and no
personal liability or personal responsibility is assumed by, or shall at any
time be asserted or enforced against such trustee, the beneficiary of such
trust, or their agents, on account hereof, or on the account of any covenant,
undertaking, representation, warranty, or agreement herein contained, either
expressed or implied, all such personal liability, if any, being hereby
expressly waived and released by Tenant and by all persons claiming by or
through or under Tenant.
SECTION XX
TERMINATION OPTION
Tenant shall have to option (the "Termination Option") to terminate
this Lease effective as of April 30,, 2001 (the "Termination Date"), subject to
the following terms and conditions. Tenant shall give Landlord written notice of
Tenant's election to exercise the Termination Option not later than August 1,
2000, which notice shall be given as provided in Article XIX hereinabove. Such
election shall be effective, provided Tenant is not in default under this Lease
both on the date that Tenant exercises the Termination Option and at any time
thereafter, and Tenant pays to Landlord no later than April 30, 2001, by
cashier's or certified check, a termination fee in the amount of FOUR HUNDRED
FORTY THOUSAND AND NO/100THS DOLLARS ($440,000.00) (the "Termination Fee"). In
the event that either Tenant is in default under this Lease on the date the
Tenant exercises the Termination Option or at any time thereafter, or Landlord
is not in receipt of the Termination Fee no later than April 30, 2001, at
Landlord's option, Tenant's exercise of the Termination Option shall be deemed
null and void and of no force and effect and this Lease shall remain in full
force and effect for the balance of the Term, or Landlord may pursue its
remedies otherwise provided in Article XII pursuant to a default by Tenant. If
Tenant exercises the Termination Option, (a) all Base Rent and Additional Rent
owing under this Lease shall be paid through and apportioned as of the
Termination Date (in addition to payment by Tenant of the Termination Fee as
above provided); (b) neither party shall have any rights, estates, liabilities,
or obligations under this Lease for the period accruing after the Termination
Date, except those which, by the provisions of this Lease, expressly or
impliedly, survive the expiration or termination of the Term; (c) Tenant shall
surrender and vacate the Premises and deliver possession thereof to Landlord on
or before the Termination Date in the condition required hereinabove for
surrender of Premises; and (d) Landlord and Tenant shall enter into a written
agreement reflecting the termination of this Lease upon the Terms provided for
herein, which agreement shall be executed within thirty (30) days following
Landlord's receipt of the Termination Fee. The Termination Option shall
automatically terminate and become null and void upon the earlier to occur of:
(a) any default or event of default by Tenant under this Lease; (b) the
assignment of this Lease by Tenant, in whole or in part; (c) the sublease by
Tenant of the Premises or any portion thereof; or (d) the failure of Tenant to
timely or properly exercise the Termination Option.
IN WITNESS WHEREOF, the parties hereto have entered into this Lease as
of the day and year first above written.
LANDLORD:
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as trustee as aforesaid
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By: /s/
-------------------------------
-
Its:
---------------------------
ATTEST:
By: /s/
------------------------------------
Its:
------------------------------
TENANT:
CALIFORNIA MICROWAVE, INC.
By: /s/
-------------------------------
-
Its:
---------------------------
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EXHIBIT A
LOT 9 IN HIGHGROVE CENTER OF DUPAGE - WEST CAMPUS RESUBDIVISION NUMBER 1, BEING
A RESUBDIVISION OF ALL OF LOTS 3 AND 4 IN HIGHGROVE CENTER OF DUPAGE WEST CAMPUS
UNIT 1, IN THE SOUTHEAST QUARTER OF SECTION 21, TOWNSHIP 40 NORTH, RANGE 10 EAST
OF THE THIRD PRINCIPAL MERIDIAN, IN THE VILLAGE OF GLENDALE HEIGHTS, DUPAGE
COUNTY, ILLINOIS.
<PAGE> 25
EXHIBIT B
WORK LETTER AGREEMENT
March 29, 1996
TO: California Microwave, Inc.
855 Mission Court
Fremont, CA 94539
RE: 175 WEST WALL STREET, GLENDALE HEIGHTS, ILLINOIS
Simultaneously with the execution of this Work Letter Agreement, you ("Tenant")
and American National Bank and Trust Company of Chicago, not personally but as
Trustee under Trust Agreement dated March 6, 1991, and known as Trust No.
113515-09 ("Landlord"), have entered into a written lease (the "Lease")
pertaining to the premises referenced hereinabove (the "Premises").
This Work Letter Agreement shall set forth the obligations of Landlord and
Tenant with respect to the preparation of the Premises for Tenant's occupancy.
In consideration of the covenants contained in this Work Letter Agreement and in
the Lease, Landlord and Tenant hereby agree as follows:
1. APPROVAL OF DRAWINGS. Tenant's architect (the "Architect"), at Tenant's
sole cost and expense (subject to the "Site Plan Allowance" hereinafter
provided), shall prepare preliminary plans and specifications (the
"Preliminary Plans and Specifications") for such improvements as Tenant
desires to be made to the Premises prior to its occupancy thereof (the
"Work"). The Preliminary Plans and Specifications shall be subject to
Landlord's approval. Landlord shall review the Preliminary Plans and
Specifications dated 1/16/96, Drawing Nos. A1.0, A2.0, A4.0, A5.0 and
EQ1.0, are hereby approved by Landlord. Based upon the Preliminary
Plans and Specifications, Landlord shall submit proposed final plans
and specifications for the Work. Landlord shall review the proposed
final Plans and Specifications and shall notify Tenant of any necessary
revisions. If revisions are required, Tenant shall revise and resubmit
the proposed Plans and Specifications to Landlord. Such revision and
resubmittal procedure shall be followed until Landlord has finally
approved the Plans and Specifications (the "Final Plans and
Specifications"). Landlord's approval of the Preliminary and Final
Plans and Specifications shall not constitute any warranty by Landlord
of the adequacy of the design for Tenant's intended use of the
Premises, nor shall Landlord's approval of the Preliminary or Final
Plans and Specifications create any liability or responsibility on the
part of the Landlord for Compliance with applicable statutes,
ordinances, regulations, laws, codes, and industry standards,
including, without limitation, any and all statutes, ordinances,
regulations, laws, codes, and industry standards relating to compliance
with the American Disability Act.
2. CONTRACTING THE WORK. Upon the Landlord's final approval of the Plans
and Specifications resulting in the Final Plans and Specifications, the
Architect shall prepare bid packages subject to Landlord's review and
approval, and Tenant shall obtain bids from not less than three general
contractors acceptable to Landlord for the performance of the Work.
Each general contractor shall submit a sealed bid for Landlord's and
Tenant's review. The bids shall provide each contractor's proposed cost
to complete the Work in accordance with the Final Plans and
Specifications, and such reasonable requirements of Landlord governing
construction practices that Landlord may reasonably require
("Landlord's Requirements"). The sealed bids shall be opened and
reviewed by both Landlord and Tenant and the selection by Tenant of the
general contractor to perform the Work shall be subject to Landlord's
approval. Tenant shall notify the general contractor selected to
perform the Work (the "Contractor"), and Tenant shall enter into a
contract with the Contractor for the performance of the Work, such
contract subject to the reasonable approval of Landlord.
<PAGE> 26
3. DELAYS. It is expressly understood and agreed by Tenant that any delay
in completion of the work shall be the sole responsibility of Tenant,
it being understood that the Commencement Date as provided under the
Lease shall begin on May 1, 1996, notwithstanding any failure of the
contractor to complete the Work prior to said date, except in the event
of the failure of the existing tenant to vacate the Premises as
provided in Paragraph 4 hereinbelow.
4. PERFORMANCE OF THE WORK. The entry upon and occupation of the Premises
by Tenant and Tenant's Contractor shall be otherwise deemed to be under
all of the terms, covenants, conditions, and provisions of the Lease,
and Landlord shall not be liable for any injury, loss, or damage which
may occur to any of the Work or installations made upon the Premises or
property placed upon the Premises, the same being at Tenant's sole risk
and liability. Tenant shall be liable to landlord for any damage to the
Premises, any improvements thereon, and any portion of the Work whether
caused by Tenant, the Contractor, or any of Tenant's employees, agents,
contractors, workmen, or suppliers. Landlord shall have the right
generally to monitor the performance of the Work and shall be granted
access to the Premises at all times for such purpose. In connection
with the performance of the Work, Tenant shall deliver to Landlord
copies of all licenses and permits required in connection with the Work
and certificates of insurance and instruments of indemnification as
required under the Lease or as otherwise reasonably required by
Landlord. Tenant shall ensure that the Work shall be done in a
first-class workmanlike manner in accordance with all applicable laws,
construction codes, requirements of local government entities, the
Final Plans and Specifications, and such changes thereto which have
been approved in writing by Landlord. Tenant shall indemnify, defend,
and hold harmless Landlord, and the Premises from all costs, damages,
charges, liens, fees and expenses (including attorneys' fees and
expenses) relating to the performance of the Work. Landlord, Landlord's
beneficiary, and Landlord's management agent, shall be named as
additional insureds on all insurance relating to the Work. The
Contractor shall abide by Landlord's Requirements, including, without
limitation, not interfering with the existing tenant on the Premises
until such tenant has vacated the Premises provided that Landlord
promptly serves upon the existing Tenant notice of cancellation as
provided under the Lease with the existing Tenant, and in the event
such Tenant fails to vacate the premises in accordance with such
notice, Landlord at its cost promptly pursues all remedies available to
evict such Tenant from the Premises. To the extent that such failure to
vacate causes delay in the completion of Tenant's Work, the
Commencement Date shall be extended one (1) day for each such day of
delay.
5. LANDLORD'S WORK. Landlord, at its sole cost and expense, shall remove
the cooler and restore the Premises as reasonably required to restore
the cooler area of the Premises to normal warehouse use ("Landlord's
Work"). Landlord shall have full access to the Premises in order to
complete Landlord's Work. The Contractor shall not interfere with
Landlord's completion of Landlord's Work. Landlord shall use reasonable
efforts to complete removal of the cooler and restoration of the
Premises as it relates to the cooler removal prior to the Commencement
Date. In the event that the Landlord's Work is not completed as of the
Commencement Date, to the extent that such failure to complete
Landlord's Work by the Commencement Date causes delay to the completion
of Tenant's Work, and such delay is in addition to the delay caused by
the existing tenant's failure to vacate as provided in Paragraph 4
hereinabove, the commencement Date shall be extended one (1) day for
each such day of delay.
6. LANDLORD'S CONSTRUCTION ALLOWANCE. Landlord agrees to contribute an
amount not to exceed Five Hundred Fifty Thousand Dollars ($550,000.00)
("Landlord's Work Allowance") toward the cost of the Work, and
architectural and engineering fees that are directly related thereto.
If Landlord cannot obtain financing for the Landlord's Work Allowance,
Tenant may elect to cancel the Lease. Landlord's Work Allowance shall
be paid as follows: not more often than monthly during the performance
of Work, upon receipt by Landlord of waivers of mechanics liens from
the Contractor and all subcontractors and materialmen, percentage
completion certificates from Tenant, the Contractor, and the Architect,
a sworn contractor's affidavit from the Contractor, and a request for
disbursement from Tenant containing an approval by Tenant of the work
done. Landlord shall disburse such sums as shall be
27
<PAGE> 27
appropriate from Landlord's Work Allowance, subject to the amount
provided for retention in Tenant's contract with the Contractor (which
shall be no less than 5%, within fourteen (14) days of receipt of all
documentation provided for hereinabove or otherwise required by
Landlord's mortgagee (if any) and by the escrowee under any
construction escrow established by Landlord to effect funding
Landlord's Construction Allowance (the cost of which escrow shall be
paid from Landlord's Work Allowance). Upon completion of the Work and
prior to final disbursement of Landlord's Work Allowance, Tenant shall
furnish the Landlord with the following: final completion certificates
from Tenant, the Contractor, and the Architect, full and final waivers
of lien, as built-plans as reasonably required by Landlord, and the
certification of Tenant and the Architect that the Work has been
installed in a good workmanlike manner in accordance with the Final
Plans and Specifications, and in accordance with all applicable
statutes , ordinances, codes and regulations. If the cost of the Work
at any time, in the reasonable estimate of Landlord, will exceed
Landlord's Work Allowance, then Landlord shall not be obligated to fund
any portion of the Landlord's Work Allowance unless and until Tenant
has provided evidence reasonably satisfactory to Landlord of Tenant's
ability pay for the balance of the Work. Notwithstanding in this Work
Letter Agreement to the contrary, Landlord shall not be obligated to
disburse any portion of Landlord's Work Allowance if Tenant is in
default under any provision of this Work Letter Agreement or any
provision of the Lease. Landlord's Work Allowance shall be applied to
the cost of labor, material, and contractor's fees incurred directly in
the performance of the Work, and the cost of architectural and
engineering services directly related to the Work. In no event shall
Landlord's Work Allowance be used for the purchase of equipment,
furniture, or other items of personal property, or for any other costs
and expenses incurred by Tenant in connection with the Work or the
Lease, including, without limitation, attorneys' fees, consulting fees,
Tenant's supervisory costs, and any other costs not directly related to
the improvement of the building occupying the Premises. Upon completion
of the Work, any portion of Landlord's Work Allowance remaining unused,
such amount not to exceed the sum of One Hundred Thousand Dollars
($100,000.00), shall be credited against Base Rent first payable by
Tenant under the Lease during the fifth Lease Year of the Term.
7. LANDLORD'S SITE PLAN ALLOWANCE. Upon full execution of the Lease and
this Work Letter Agreement, Landlord shall mane available to Tenant the
sum of Two Thousand Five Hundred Two and 50/100th Dollars ($2,502.50)
to be to the cost of Tenant's initial space planning. Such sum shall be
in addition to Landlord's Work Allowance as provided hereinabove.
8. MISCELLANEOUS. The terms and provisions of the Lease insofar as they
are applicable to this Work Letter Agreement are hereby incorporated
herein by reference thereto. Any defined terms used herein, and not
otherwise defined herein, shall have the same meaning as provided in
the Lease. All amounts payable by Tenant to Landlord hereunder shall be
deemed Additional Rent under the Lease, and any default by Tenant of
any of its obligations under this Work Letter Agreement shall
constitute a default by Tenant under the Lease, and Landlord shall have
all rights and remedies provided for under the Lease in the event of
any such default by Tenant. Whenever under this Work Letter Agreement,
Landlord's consent or approval is required, such consent or approval
shall not be unreasonably withheld or delayed.
9. LAND TRUST EXCULPATION. This Work Letter Agreement is executed by
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not personally,
but solely as Trustee under Trust Agreement dated March 6, 1991, and
known as Trust Number 113515-09, and it is expressly understood and
agreed by the parties hereto, anything contained herein to the contrary
notwithstanding, that each and all of the covenants, undertakings,
representations, and agreements herein made by said trustee are made
and intended, not as personal covenants undertakings, representations,
and agreements of said trustee, individually, or for the purpose of
binding said trustee, personally, but solely in the exercise of the
powers conferred upon it as such trustee under said trust agreement,
and no personal liability or personal responsibility is assumed by, or
shall at any time be asserted or enforced against such trustee, the
beneficiary of such trust, or their agents, on account hereof, or on
the account of any covenant, undertaking, representation, warranty, or
agreement herein contained either expressed or implied, all such
28
<PAGE> 28
personal liability, if any, being hereby expressly waived and released
by Tenant and by all persons claiming by or through or under Tenant.
AMERICAN NATIONAL BANK & TRUST COMPANY,
OF CHICAGO
not personally but as Trustee as aforesaid
By:
-----------------------------------------
Its:
-------------------------------------
ACCEPTED AND APPROVED:
CALIFORNIA MICROWAVE, INC.
a Delaware corporation
By:
-----------------------------------------
Its:
-------------------------------------
29
<PAGE> 1
EXHIBIT 11
California Microwave, Inc.
Computation of Per Share Earnings
Exhibit 11
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended
June 30
-----------------------
1996 1995
-------- --------
<S> <C> <C>
PRIMARY - EPS:
Net income (loss), as reported $11,623 $(7,895)
======= =======
Average shares outstanding 15,912 15,533
Add - Common stock equivalents of Company's
stock option using the treasury stock method 288 --
------- -------
Average shares and equivalents - Primary 16,200 15,533
======= =======
Net income (loss) per share - Primary $ 0.72 $ (0.51)
======= =======
FULLY DILUTED - EPS:
Net income (loss), as reported $11,623 $(7,895)
Add back interest, net of taxes 2,248 2,248
------- -------
Net income (loss) for fully diluted $13,871 $(5,647)
======= =======
Average shares and equivalents - primary 16,200 15,533
Add - additional common stock equivalents of
the Company's stock options 7 --
Add - Shares to be issued at conversion of
Convertible Debentures 2,222 --
------- -------
Average shares and equivalents - Fully Diluted 18,429 15,533
======= =======
Net income (loss) per share - Fully Diluted $ 0.72 $ (0.51)
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 13
CONSOLIDATED STATEMENTS OF OPERATIONS CALIFORNIA MICROWAVE, INC.
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
Years ended June 30, 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 460,653 $ 467,928 $ 405,832
Costs of products sold 329,388 344,806 294,803
--------- --------- ---------
Gross margin 131,265 123,122 111,029
--------- --------- ---------
Expenses:
Research and development 30,871 29,707 17,627
Marketing and administration 75,870 73,236 62,875
Amortization of intangible assets 2,186 2,452 2,068
Other charges:
Restructuring 20,946
Merger-related 3,762
--------- --------- ---------
Total expenses 108,927 130,103 82,570
--------- --------- ---------
Operating income (loss) 22,338 (6,981) 28,459
Interest expense (4,279) (4,813) (3,045)
Interest income 102 452 521
--------- --------- ---------
Income (loss) before income taxes 18,161 (11,342) 25,935
Provision for (benefit from) income taxes 6,538 (3,447) 9,337
--------- --------- ---------
Net income (loss) $ 11,623 $ (7,895) $ 16,598
========= ========= =========
Net income (loss) per share $ 0.72 $ (0.51) $ 1.04
========= ========= =========
Average shares and equivalents 16,200 15,533 15,890
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
16
<PAGE> 2
CONSOLIDATED BALANCE SHEETS CALIFORNIA MICROWAVE, INC.
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30, 1996 1995
- -------- --------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,560 $ 1,983
Short-term investments 1,504 613
Accounts receivable, less $2,378 allowance for doubtful
accounts ($2,136 in 1995) 108,278 106,635
Inventories 103,456 100,431
Deferred tax assets 10,387 11,494
Prepaid expenses 2,314 1,898
--------- ---------
Total current assets 230,499 223,054
--------- ---------
Property, plant and equipment, at cost 106,443 86,633
Less accumulated depreciation and amortization (57,681) (46,365)
--------- ---------
Net property, plant and equipment 48,762 40,268
--------- ---------
Intangible assets of businesses acquired, less
accumulated amortization of $21,534 ($19,348 in 1995) 49,821 52,007
Deferred tax assets 1,973 5,467
Other assets 7,285 5,816
--------- ---------
$ 338,340 $ 326,612
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 525 $ 301
Accounts payable 46,566 38,637
Accrued income taxes 3,406 2,892
Other accrued liabilities 38,750 55,403
--------- ---------
Total current liabilities 89,247 97,233
--------- ---------
LONG-TERM LIABILITIES:
Long-term debt 15,563 4,591
Other long-term liabilities 470 7,876
Convertible subordinated notes 63,200 63,200
--------- ---------
Total long-term liabilities 79,233 75,667
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value, 29,200,000 shares
authorized: 16,031,048 shares issued and outstanding
(15,718,872 shares in 1995) 1,603 1,572
Capital in excess of par value 88,788 84,034
Retained earnings 80,343 68,720
Unamortized restricted stock plan expense (722) (462)
Cumulative translation adjustment (152) (152)
--------- ---------
Total stockholders' equity 169,860 153,712
--------- ---------
$ 338,340 $ 326,612
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE> 3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CALIFORNIA MICROWAVE, INC.
<TABLE>
<CAPTION>
Three years ended June 30, 1996 (In thousands, except for shares)
Unamortized
Capital restricted Cumulative Total stock-
Common Stock in excess of Retained stock plan translation holders'
Shares Amount par value earnings expense adjustment equity
---------- ------ ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1993 14,838,379 $1,484 $71,145 $60,017 $(1,239) $ 3 $131,410
---------- ------ ------- ------- ------- ------- --------
Common stock issued under:
Stock option, restricted stock
and stock purchase plans 407,235 41 5,916 464 6,421
Other 11,480 1 104 105
Currency translation adjustment (24) (24)
Net income 16,598 16,598
---------- ------ ------- ------- ------- ------- --------
BALANCE AT JUNE 30, 1994 15,257,094 1,526 77,165 76,615 (775) (21) 154,510
---------- ------ ------- ------- ------- ------- --------
Common stock issued under:
Stock option, restricted stock
and stock purchase plans 465,028 47 6,941 313 7,301
Other (3,250) (1) (72) (73)
Currency translation adjustment (131) (131)
Net loss (7,895) (7,895)
---------- ------ ------- ------- ------- ------- --------
BALANCE AT JUNE 30, 1995 15,718,872 1,572 84,034 68,720 (462) (152) 153,712
---------- ------ ------- ------- ------- ------- --------
Common stock issued under:
Stock option, restricted stock
and stock purchase plans 312,176 31 4,754 (260) 4,525
Net income 11,623 11,623
---------- ------ ------- ------- ------- ------- --------
BALANCE AT JUNE 30, 1996 16,031,048 $1,603 $88,788 $80,343 $(722) $(152) $169,860
========== ====== ======= ======= ======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
18
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASH FLOWS CALIFORNIA MICROWAVE, INC.
<TABLE>
<CAPTION>
(In thousands)
Years ended June 30, 1996 1995 1994
- -------------------- -------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 11,623 $ (7,895) $ 16,598
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 13,525 11,762 8,567
Amortization of intangible assets 2,186 2,452 2,068
Non-cash portion of restructuring charge 12,345
Other adjustments (155) 449
Deferred taxes 4,601 (11,557) (120)
Debt issuance costs 210 210 (1,936)
Net effect of changes in:
Accounts receivable, less amounts transferred
to long-term (3,920) 9,308 (34,284)
Inventories (3,025) (23,009) (10,967)
Prepaid expenses (416) 282 429
Accounts payable 7,929 (1,051) 1,493
Accrued income taxes 1,201 (1,910) 2,664
Other accrued liabilities and other
long-term liabilities (21,778) 24,409 (8,255)
-------- -------- --------
Net cash provided by (used in) operating activities 12,136 15,191 (23,294)
-------- -------- --------
INVESTING ACTIVITIES
Capital expenditures (27,701) (17,259) (12,266)
Acquisition of Microwave Radio Corporation (9,600) (1,550)
Acquisition of TeleSciences Transmission Systems, Inc. (24,196)
Proceeds from sale of assets 4,833 123 142
Other (1,476) (902) 39
-------- -------- --------
Net cash provided by (used in) investing activities (24,344) (27,638) (37,831)
-------- -------- --------
FINANCING ACTIVITIES
Issuance of convertible subordinated notes 63,200
Payments on long-term debt (428) (1,356) (503)
Net borrowings (repayments) under bank credit facilities 10,500 (3,400) 1,900
Borrowings of long-term debt 1,124 267
Issuance of common stock 3,589 5,237 4,657
-------- -------- --------
Net cash provided by (used in) financing activities 14,785 481 69,521
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 2,577 (11,966) 8,396
Cash and cash equivalents at beginning of year 1,983 13,949 5,553
Cash and cash equivalents at end of year $ 4,560 $ 1,983 $ 13,949
-------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 4,347 $ 4,746 $ 2,771
Income taxes 2,353 9,808 6,884
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of Microwave Radio Corporation 9,600
Tax benefit of stock options exercised 687 1,772 1,448
Note issued (canceled) in connection with the purchase
of TeleSciences Transmission Systems, Inc.'s assets (2,000) 2,000
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
19
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CALIFORNIA MICROWAVE, INC.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
California Microwave, Inc. and all subsidiaries (the Company). All significant
intercompany balances and transactions have been eliminated.
USE OF ESTIMATES; RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Significant estimates are used in determining the collectibility of accounts
receivable, warranty costs, inventory realization, profitability on long-term
contracts, accounting for income taxes, restructuring reserves, recoverability
of property, plant, and equipment, and contingencies. Further, in connection
with the Company's restructuring of its wireless operations, certain product
lines are being consolidated. Product transition plans have been implemented to
utilize existing inventories and purchase commitments. Reserves have been
established for inventories considered to be excess at June 30, 1996. Actual
results could differ from estimates.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to June 30, and includes
53 weeks in fiscal 1996 and 52 weeks in fiscal 1994 and 1995. For clarity of
presentation, all fiscal periods are reported as ending on a calendar month end.
REVENUE RECOGNITION, RECEIVABLES AND CREDIT RISK
Generally, sales are recorded at the time individual items are shipped. Sales on
certain long-term, small quantity, high unit value contracts are recognized at
the completion of significant project milestones, which are generally contract
line items. Scheduled billings and retainages under certain contracts
(principally export contracts) have deferred billing provisions resulting in
unbilled accounts receivables at June 30, 1996, and 1995, of $7.5 million and
$12.7 million, respectively. The unbilled receivable at June 30, 1996, is
expected to be collected within one year.
The Company manufactures and sells satellite and wireless communications
products, systems and turnkey telecommunications networks to large commercial
customers, principally domestic and foreign telephone companies and major common
carriers, and to the U.S. government. The Company generally requires no
collateral, but generally requires letters of credit, denominated in U.S.
dollars, from its foreign customers. Further, beginning in fiscal 1996, the
Company entered a credit insurance program to insure certain receivables from
foreign customers where a confirmed letter of credit was not cost effective or
available. Additionally, from time to time, the Company sells certain insured
receivables, without recourse, at prevailing discount rates.
In fiscal 1996, 1995 and 1994, the Company charged to operations $595,000,
$1,297,000 and $361,000, respectively, for its provision for doubtful accounts.
INVENTORIES AND COST OF PRODUCTS SOLD
Inventories are recorded at the lower of cost or market. Project inventories are
transferred to cost of products sold at the time revenue is recognized based on
the estimated total manufacturing costs and total contract prices under each
contract. Losses on contracts are recognized in full when the losses become
determinable. The cost of other inventories is generally based on standard costs
which approximate actual costs determined by the first-in, first-out method.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents are carried at cost which approximates market and consist of
highly liquid investments with maturities when purchased of 90 days or less.
Short-term investments consist of money market instruments, investments in
municipal bonds and mutual funds. The Company has not experienced losses from
these investments.
FOREIGN CURRENCY EXCHANGE CONTRACTS
The Company enters into forward currency exchange contracts to hedge foreign
currency transactions on a continuing basis for periods consistent with its
committed exposures. This hedging minimizes the impact of foreign currency
exchange rate movements on the Company's operating results. The Company's
foreign exchange contracts do not subject the Company's results of operations to
risk due to exchange movements because gains and losses on these contracts
generally offset losses and gains on the assets being hedged. Gains and losses
on hedges of firm commitments are deferred and included in the basis of the
hedged transaction when it is completed. Contracts to sell 3.0 million German
marks (total U.S. dollar equivalent of approximately $2.0 million) were
outstanding at June 30, 1996, and mature in August 1996. The net gains and
losses resulting from these and other foreign currency transactions have not
been material.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization charges are computed under the
straight-line method based on the estimated useful lives of the related assets.
20
<PAGE> 6
CALIFORNIA MICROWAVE, INC.
The Company adopted Statement of Financial Accounting Standard (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" during fiscal 1996. This standard prescribes the method for
asset impairment evaluation for long-lived assets and certain identified
intangibles that are either held and used or to be disposed of. The adoption of
this standard had no material effect on the consolidated financial statements.
NET INCOME (LOSS) PER SHARE
Net income per share is based on the weighted average number of common shares
outstanding plus the effect of the assumed exercise of stock options which are
dilutive common stock equivalents. Net loss per share is computed using the
weighted average number of common shares outstanding. Fully diluted net income
per share has not been presented because there is no material additional
dilution.
INTANGIBLE ASSETS OF BUSINESSES ACQUIRED
The excess of purchase price over the fair value of net assets acquired
generally is amortized on a straight line basis over periods of 5 to 30 years.
The carrying value of this excess purchase price is reviewed if the facts and
circumstances suggest that the asset may be impaired. If this review indicates
that the excess purchase price is not recoverable, the Company's carrying value
is reduced appropriately.
FOREIGN CURRENCY TRANSLATION
The Company translates the assets and liabilities of its foreign subsidiaries
into U.S. dollars at the rates of exchange in effect at the end of the period.
Gains and losses from this translation are credited or charged to stockholders'
equity as cumulative translation adjustments. Revenue and expenses are
translated using the average rates in effect during the period.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. SALES
The Company operates in one industry -- the manufacture of electronics equipment
for wireless communications, including telephone, data, control, detection,
ranging and surveillance. A breakdown of sales by product class and by market
sector for the last three years were as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Satellite com-
munications $215,887 $174,034 $178,119
47% 37% 44%
Wireless 166,131 228,069 176,239
36% 49% 44%
Intelligence 77,036 64,625 49,796
17% 14% 12%
Other 1,599 1,200 1,678
-------- -------- --------
$460,653 $467,928 $405,832
======== ======== ========
International $223,995 $223,976 $188,473
49% 48% 46%
U.S. commercial 132,680 136,284 115,479
29% 29% 28%
U.S. government 103,978 107,668 101,880
22% 23% 26%
-------- -------- --------
$460,653 $467,928 $405,832
======== ======== ========
</TABLE>
International sales by geographic area were as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Asia-Pacific $ 68,706 $ 66,598 $ 64,570
Latin America 50,070 62,623 45,368
Europe 42,256 58,744 49,795
Africa and
Middle East 51,150 23,334 17,765
Other -- principally
Canada 11,813 12,677 10,975
-------- -------- --------
$223,995 $223,976 $188,473
======== ======== ========
</TABLE>
3. ACQUISITIONS
MICROWAVE NETWORKS INCORPORATED
On May 31, 1995, California Microwave, Inc. acquired Microwave Networks
Incorporated (MNI) in a merger effected by exchanging 3,342,653 shares of the
Company's common stock and options to acquire 132,347 shares of the Company's
common stock for all of the outstanding MNI capital stock (defined as the
then-outstanding MNI common and preferred stock and MNI common stock issuable
under then-outstanding options, warrants, or other convertible securities). MNI
is engaged in the design, manufacture, sale and installation of high performance
microwave radios and transmission products. The merger was accounted for as a
pooling of interests, and accordingly, the Company's consolidated financial
statements include the results of MNI for all periods presented. The merger
related expenses of $3.8 million reflect costs associated with the merger
transaction, such as legal, investment banking, and accounting fees.
21
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CALIFORNIA MICROWAVE, INC.
TELESCIENCES TRANSMISSION SYSTEMS, INC.
On October 26, 1993, the Company acquired substantially all of the assets and
certain of the liabilities of TeleSciences Transmission Systems, Inc. (TTS), a
wholly-owned subsidiary of TeleSciences, Inc. TTS' product line consists of
digital and analog microwave radios for cellular, personal communications
network and private network markets. The Company paid $23.7 million for those
net assets.
The acquisition of TTS was accounted for as a purchase transaction and
accordingly, the acquired assets and liabilities of TTS were recorded at their
estimated fair value at the date of acquisition. The excess of the purchase
price over the valuation of the net assets acquired is being amortized on a
straight line basis over thirty years. During fiscal 1995, the excess of
purchase price over the valuation of the net assets acquired for TTS of $22.1
million was reduced by $10.0 million as a result of the restructuring described
in Note 12. The operating results of TTS have been included in the Consolidated
Financial Statements from the acquisition date.
4. INVENTORIES
The components of inventories were as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
-------- --------
<S> <C> <C>
Projects in process $ 23,948 $ 35,062
Less: progress billings 11,750 13,358
-------- --------
12,198 21,704
Work-in-process and finished
goods 43,161 38,179
Raw materials and parts 48,097 40,548
-------- --------
$103,456 $100,431
======== ========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
Life
(in years) 1996 1995
---------- -------- -------
<S> <C> <C> <C>
Land $ 1,399 $ 2,220
Buildings 30-40 6,694 6,072
Machinery and equipment 3-10 59,154 49,255
Office and computer
equipment 5-10 26,867 22,076
Leasehold
improvements Lease term 11,335 5,673
Vehicles 3-5 994 1,337
-------- -------
$106,443 $86,633
======== =======
</TABLE>
Included in other assets at June 30, 1996, is approximately $1.4 million of land
and buildings held for sale in connection with the restructuring described in
Note 12.
Depreciation and amortization expense on property, plant and equipment was $13.3
million, $11.5 million, and $8.7 million for the years ended June 30, 1996, 1995
and 1994, respectively.
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
------- -------
<S> <C> <C>
Salaries, bonuses,
and commissions $ 8,430 $12,563
Vacation 4,932 5,732
Other payroll related 5,964 3,670
Warranties 3,260 4,282
Contract costs 3,369 15,300
Advance payments 2,281 3,131
Accrued restructuring expenses 3,568 2,954
Other 6,946 7,771
------- -------
$38,750 $55,403
======= =======
</TABLE>
At June 30, 1995, approximately $7.0 million of other long-term liabilities
represented accrued restructuring expenses.
7. CREDIT LINES, NOTES PAYABLE, AND LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
------- -------
<S> <C> <C>
Bank credit facilities $10,500 $
Industrial development bonds 4,020 4,300
Other 1,568 592
------- -------
$16,088 $ 4,892
======= =======
Convertible subordinated notes:
5 1/4% notes due 2003 $57,500 $57,500
5% notes due 1998 5,700 5,700
------- -------
$63,200 $63,200
======= =======
</TABLE>
Debt maturing in each of the next five years and thereafter is as follows: 1997
- - $525,000; 1998 - $434,000; 1999 - $16,754,000; 2000 - $414,000; 2001 -
$459,000; 2002 and thereafter - $60,702,000.
22
<PAGE> 8
CALIFORNIA MICROWAVE, INC.
The Company has available two unsecured committed bank credit facilities
totaling $65.0 million, of which $60.0 million expires in September 1998, and
$5.0 million expires in October 1996. In December 1995, the Company amended its
credit facilities to increase the amount available from the previous amount of
$33.5 million. As of June 30, 1996, there were $10.5 million of borrowings and
$15.0 million of standby letters of credit outstanding under these credit lines.
The standby letters of credit support certain export contracts. These facilities
require .25% annual commitment fees and interest rates for borrowings will not
exceed the banks' reference rates (7.6% at June 30, 1996). Because of the
Company's ability to defer payment of the borrowings until September 1998, the
amount outstanding at June 30, 1996, has been classified as a long-term
liability. The carrying value of the amount borrowed at June 30, 1996,
approximated fair value based on prevailing interest rates.
The industrial development bonds are payable in annual installments through June
2013, may be prepaid at any time without penalty and bear interest at a floating
rate (3.7% at June 30, 1996), based upon prevailing market conditions, which is
redetermined every seven days. The other long-term debt represents notes which
are payable through 2005. The industrial development bonds and the other
long-term debt are secured by mortgages on the equipment and properties
involved.
At June 30, 1996, the Company was not in compliance with a certain covenant of
its debt agreements. The lenders have waived such non-compliance and amended
such covenant under the credit facilities and debt agreements as necessary to
bring the Company into compliance at June 30, 1996.
On December 15, 1993, the Company issued $57.5 million of 5 1/4%, convertible
subordinated notes due December 15, 2003. These notes are convertible at any
time prior to maturity, at the option of the holder, into shares of the
Company's common stock at a price of $28.4375 per share. These notes are
redeemable at any time on or after January 1, 1997, at the option of the
Company. Interest is payable semi-annually. The notes are subordinated to all
existing and future senior indebtedness of the Company. These notes are quoted
on the Nasdaq National Market. At June 30, 1996, the fair value of the
outstanding notes was $48.3 million, based on the quoted market prices (which
reflect the market value of the underlying securities into which the notes are
convertible, as well as current prevailing interest rates).
Concurrent with the closing of the acquisition of TTS in October 1993, the
Company issued for cash to Motorola, Inc., an investor in TeleSciences, Inc., a
$5.7 million, five year, 5% convertible subordinated note, convertible at
Motorola's option into the Company's common stock at a price of $28.50 per
share. At its option the Company may redeem the note without penalty. The note
is subordinated to all existing and future senior indebtedness of the Company.
8. COMMON STOCK
STOCKHOLDER RIGHTS
In October 1989, the stockholders of the Company approved a rights agreement
under which there was distributed to the Company's stockholders the right to
buy, for $35, one share of common stock for each share of common stock held by
such stockholders. The rights will become exercisable only if a person or group
acquires 20% or more of the Company's common stock or announces an offer to
acquire 30% or more of the Company's common stock. In the event the Company is
acquired, or upon the occurrence of certain other events, each right may under
certain circumstances entitle the holder to purchase, for $35, $70 worth of
common stock. Until such events occur, the rights are redeemable at any time by
the Company for $0.01 per right.
OPTIONS AND OTHER STOCK PLANS
Stock options have been granted to officers, directors, key employees and
consultants under the Company's stock option plans with exercise prices equal to
the fair market value of the Company's common stock on the date of grant. Most
options currently outstanding become exercisable in annual installments of 25%
beginning one year after the date of grant. Options granted to the Company's
directors become 100% exercisable upon grant. Options granted under the 1986 and
1992 stock option plans expire after ten years. Options assumed by the Company
that were granted under MNI's stock option plans (the MNI plans) generally
become exercisable in annual installments of 25% beginning on the date of grant.
In April 1996, the Board of Directors offered non-officer employees holding
stock options with exercise prices over $21 per share (the current option) the
opportunity of canceling those stock options in exchange for new options (the
replacement options) issued with exercise prices of $21 per share, which
exercise price was approximately 120% of the then current fair market value of
the Company's common stock. The number of shares covered by the replacement
option was equal to the number of outstanding shares covered by the current
option reduced in the same proportion as the reduction in the exercise price.
Included in the table below are options for 425,672 shares that were granted and
options for 513,707 shares that were canceled under this program.
23
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CALIFORNIA MICROWAVE, INC.
A summary of activity for 1996, 1995 and 1994, under the 1986 and 1992 Stock
Option Plans and the MNI plans is presented below:
<TABLE>
<CAPTION>
Outstanding shares under option
Years ended June 30,
------------------------------------------------------------
1996 1995 1994 1996 Option
price per share
---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Beginning
of year 1,716,824 1,663,947 1,517,724 $ 1.49 - $34.25
Granted 1,170,986 628,695 598,945 $17.00 - $26.00
Exercised (128,214) (376,712) (327,087) $ 0.81 - $27.25
Canceled (857,473) (199,106) (125,635) $ 1.49 - $34.00
---------- ---------- ---------- ---------------
End of year 1,902,123 1,716,824 1,663,947 $ 1.50 - $34.25
========== ========== ========== ===============
Exercisable 769,496 517,306 484,213
Available
for grant 237,573 581,388 743,588
Additional
authorized 500,000 500,000
</TABLE>
In October 1995, SFAS No. 123, "Accounting for Stock Issued to Employees," which
is effective for fiscal 1997, was issued. Under SFAS No. 123, companies can
elect, but are not required, to recognize compensation expense for all
stock-based awards, using a fair value methodology. The Company will implement
in fiscal 1997 the disclosure only provisions, as permitted by SFAS No. 123.
Stock grants have been made to officers and other key employees under the 1988
restricted stock plan at no charge to the employees. These grants generally vest
20% per year, beginning one year after the date of issue. The fair market value
of the shares, at the date of grant, is charged to compensation expense over the
five year period. Compensation expense relating to this plan was: 1996 -
$250,000; 1995 - $298,000; 1994 - $404,000. In fiscal 1994, the Company's 1992
Restricted Stock Plan covering 250,000 shares was terminated.
A summary of activity in the restricted stock plans was as follows:
<TABLE>
<CAPTION>
Outstanding restricted shares
----------------------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Beginning of year 44,330 83,300 129,200
Granted 34,250 3,450 600
Canceled (5,150) (10,600) (6,300)
Vested (21,110) (31,820) (40,200)
------- ------- --------
End of year 52,320 44,330 83,300
------- ------- --------
Available for grant 2,950 32,050 24,900
======= ======= ========
</TABLE>
The company has an employee stock purchase plan under which employees may
purchase shares, subject to certain limitations, at no less than 85% of the
lower of the fair market value of the shares at the beginning or end of a
six-month purchase period. During 1996, 154,862 shares were issued for
$2,555,000 (95,466 shares for $1,880,000 during 1995 and 85,848 shares for
$1,271,000 during 1994), leaving 132,595 shares available for future issuances.
9. RETIREMENT PLANS
The Company has a defined contribution retirement plan covering substantially
all employees. One part of the plan is a 401(K) savings plan which allows
employees to contribute pre-tax compensation up to the lesser of 20% of total
annual compensation or the statutory limit (currently $9,500). The Company
matched 66 2/3 % of the first $1,500 of each employee's contribution in fiscal
1996. The second part of the plan arises out of the conversion by the Company of
its previous cash profit sharing plan to a defined contribution plan.
Contributions are allocated based on each employee's salary and length of
employment. All of the above employer contributions are determined by and
subject to the approval of the Company's Board of Directors.
Contributions to these plans were $2,355,000 in 1996, $1,730,000 in 1995, and
$2,157,000 in 1994. Included in these amounts are amounts expensed under the
Company's previous cash profit sharing plan and Microwave Radio Corporation
(MRC)'s and MNI's separate 401(K) plans. MRC's employees began participation in
the Company's plan beginning on July 1, 1994, and MNI's employees began
participation on January 1, 1996.
10. INCOME TAXES
The provision for (benefit from) income taxes consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 1,739 $ 6,862 $ 9,791
State 198 1,248 2,282
-------- -------- --------
1,937 8,110 12,073
-------- -------- --------
Deferred:
Federal 4,074 (9,779) (2,312)
State 527 (1,778) (424)
-------- -------- --------
4,601 (11,557) (2,736)
-------- -------- --------
$ 6,538 $ (3,447) $ 9,337
======== ======== ========
</TABLE>
24
<PAGE> 10
CALIFORNIA MICROWAVE, INC.
Deferred taxes reflect the net effects of temporary differences between the
carrying amounts of assets and liabilities used for financial reporting purposes
and the amounts used for income tax purposes. The components of net deferred tax
assets are as follows:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Restructuring
charges $ 1,439 $ 8,169
Inventory 5,572 4,231
Warranty 1,584 1,771
Contracts in progress 1,738 1,458
Allowance for bad debts 993 932
Compensation related 1,634 714
Other 1,128 1,230
------- -------
14,088 18,505
------- -------
Deferred tax liabilities:
Depreciation 1,444 1,163
Other 284 381
------- -------
1,728 1,544
------- -------
Net deferred tax assets $12,360 $16,961
======= =======
</TABLE>
The differences between the U.S. federal statutory income tax rate and the
Company's effective rate were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ----- ----
<S> <C> <C> <C>
U.S. federal
statutory income
tax rate 35.0% (35.0%) 35.0%
Merger expenses 11.6
State income taxes,
net of federal benefit 2.6 (3.0) 4.7
Intangible assets 3.4 5.5 2.1
Foreign Sales Corporation
tax benefits (5.6) (8.0) (5.0)
Research and
development tax credits (2.6) (2.2)
Other 0.6 1.1 1.4
---- ----- ----
36.0% (30.4%) 36.0%
==== ===== ====
</TABLE>
At June 30, 1996, the Company had available to provide future tax benefits net
operating loss carryfowards of approximately $416,000, which will expire in
2002, and unused foreign tax credits of approximately $224,000, which will
expire in 1997 and 1998.
11. COMMITMENTS AND CONTINGENCIES
All of the buildings occupied by the Company, except for Company-owned
facilities, are occupied under operating leases which expire in one to twelve
years. Certain of these leases contain escalation clauses. Total lease expense
for the three years ended June 30, 1996 was $5,197,000, $5,270,000, and
$4,098,000, respectively. Lease commitments which are payable by the Company,
exclusive of property taxes, will be due as follows: 1997 - $6,710,000; 1998 -
$5,970,000; 1999 - $5,329,000; 2000 - $4,447,000; 2001 - $3,146,000; 2002 and
thereafter - $6,656,000.
On November 9, 1995, and December 12, 1995, two putative class action lawsuits
were filed in the United States District Court for the Northern District of
California. The plaintiffs in these two cases, which have been consolidated,
purport to represent a class of all persons who purchased common stock of the
Company between September 6, 1994 and June 29, 1995 (the class period). Named as
defendants are the Company and certain of its present and former executive
officers. The complaints allege that defendants violated various federal
securities laws through material misrepresentations and omissions during the
class period. Defendants filed motions to dismiss the complaints, which the
court granted on April 19, 1996, with leave to amend. Plaintiffs filed amended
complaints and in August 1996 defendants filed motions to dismiss those
complaints. Although the ultimate outcome of these proceedings can not be
determined, the Company believes that it has meritorious defenses to the claims
alleged in these lawsuits and intends to defend the actions vigorously.
The Company is subject to other legal proceedings and claims that arise in the
normal course of its business. The Company believes these proceedings will not
have a material adverse effect on the financial position or results of
operations of the Company.
12. RESTRUCTURING AND OTHER CHARGES
In June 1995, the Company recorded restructuring charges of approximately $20.9
million and other charges of approximately $15.5 million, for a total of
approximately $36.4 million in connection with a program to reduce costs and
improve operating efficiencies. Substantially all of the other charges were
reflected in costs of products sold. The program included, among other things:
the integration of certain of the Company's wireless operations and the exit by
TTS from the short-haul radio market, which included certain short-haul radio
contracts and the shifting of short-haul radio sales to MRC; the recording of
certain contract costs at Satellite Transmission Systems (STS) division; the
elimination of excess facilities; the reduction of employees at STS; the
write-off of excess
25
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CALIFORNIA MICROWAVE, INC.
inventory and capital equipment; and the write-down of intangible assets. During
1996, the program was expanded, without a net charge to operations, to include
merging the operations of TTS and MNI with certain operations of MRC into a new
unit, Microwave Network Systems (MNS), resulting in the write-off of additional
excess inventories and other assets and reducing the number of employees at MNS.
The following table summarizes these charges:
<TABLE>
<CAPTION>
(In thousands):
Asset write-
offs and
1995 payments Future
provision, through June cash
as adjusted 30, 1996 outlays
----------- ------------ -------
<S> <C> <C> <C>
Restructuring:
Excess facilities $ 3,930 $ 1,054 $2,876
Severance costs 4,026 4,026
Capital equipment
write-offs 1,063 1,063
Intangible assets
write-down 10,000 10,000
Other 1,927 1,235 692
------- ------- ------
20,946 17,378 3,568
------- ------- ------
Other charges:
Contract termination
and related costs
and inventories 13,450 11,758 1,692
Other 2,000 1,000 1,000
------- ------- ------
15,450 12,758 2,692
------- ------- ------
$36,396 $30,136 $6,260
======= ======= ======
</TABLE>
STS terminated approximately 75 employees in connection with the restructuring.
MNS terminated approximately 200 employees in connection with the merging of
operations of TTS and MNI with certain operations of MRC. The cost of MNS's
terminations of approximately $2.8 million was offset by reduced amounts
originally provided for excess facilities as these amounts were determined not
to be needed. Accordingly, there was no additional restructuring charge in 1996,
and the 1995 provision, as adjusted, reflects this $2.8 million adjustment.
Through June 30, 1996, assets written down and payments made totaled
approximately $30.1 million, leaving a reserve balance of $6.3 million which is
necessary for actions contemplated in fiscal 1997. The majority of remaining
future cash outlays are associated with payments for excess or unused facilities
which are expected to total approximately $2.9 million, substantially all of
which will be made during fiscal 1997.
26
<PAGE> 12
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS CALIFORNIA MICROWAVE, INC.
The Board of Directors and Stockholders
California Microwave, Inc.
We have audited the accompanying consolidated balance sheets of California
Microwave, Inc. at June 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of California
Microwave, Inc. at June 30, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
August 5, 1996
27
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS CALIFORNIA MICROWAVE, INC.
Statements made below and elsewhere in this Annual Report that are not
historical facts, including any statements about expectations for fiscal year
1997 and beyond, involve certain risks and uncertainties. Factors that could
cause the Company's actual results to differ materially from management's
projections, estimates and expectations include, but are not limited to, delays
in the receipt of orders or in the shipment of products, delays in the
integration of operations of acquired businesses and other factors referred to
under "Information Regarding Forward Looking Statements" in the Company's Form
10-K Annual Report for its fiscal year ended June 30, 1996, and in the Company's
Consolidated Financial Statements and Notes to Consolidated Financial
Statements. The Consolidated Financial Statements and Notes to Consolidated
Financial Statements should be read in conjunction with this Managements'
Discussion and Analysis of Financial Conditions and Results of Operations.
OVERVIEW
California Microwave, Inc.'s (the Company's) strategy over the last several
years has focused on increasing sales through penetration of international
markets and on increased internal and external investment in new wireless and
satellite communications products. Consistent with this strategy, the Company
has targeted the wireless products area, acquiring three companies in recent
years: Microwave Networks Incorporated (MNI), a manufacturer of digital
microwave transmission products and systems; TeleSciences Transmission Systems,
Inc. (TTS), a manufacturer of digital and analog microwave radios; and Microwave
Radio Corporation (MRC), a manufacturer of digital and analog fixed-link and
portable microwave radios. These companies are focused on the cellular, personal
communications services, private networks, and broadcast markets. The MNI
acquisition was accounted for as a pooling of interests; accordingly, the
Company's financial statements include the results of MNI for all periods
presented.
As a result of these acquisitions and the Company's focus on international
markets, wireless products and international sales have both increased
significantly since 1992. Wireless products sales have increased over 250%
during the period, although they decreased 27% in 1996 compared to 1995.
International sales have increased nearly 150% during the period 1992 to 1996.
The Company's strategy is also to improve profit margins through operational
integration and coordinated product development and marketing strategies and
activities among the business units. To this end, the Company recorded, in June
1995, restructuring charges of approximately $20.9 million in connection with a
program to reduce costs and improve operating efficiencies. This included, among
other things: the integration of certain of the Company's wireless operations;
the elimination of excess facilities; the reduction of employees at Satellite
Transmission Systems (STS) division; the write-off of capital equipment; and the
write-down of intangible assets. In June 1995, the Company also recorded other
charges of approximately $15.5 million relating principally to the phase-out of
the short-haul radio market and associated contracts by TTS, costs to complete
certain long-term contracts at STS and the write-off of certain excess
inventories. During 1996, the program was expanded, without a net charge to
operations, to include merging the operations of TTS and MNI with certain
operations of MRC into a new unit, Microwave Network Systems (MNS), resulting in
the reduction of employees at MNS and the writing-off of certain excess
inventories and other assets.
The Company's fiscal year ends on the Saturday closest to June 30, and includes
53 weeks in fiscal 1996 and 52 weeks in fiscal 1994 and 1995. For clarity of
presentation, all fiscal periods are reported as ending on a calendar month end.
The effect on the consolidated financial statements of this method of reporting
has not been material.
The following table sets forth, for the periods indicated, certain income and
expense items expressed as a percentage of total sales:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross margin 28.5% 26.3% 27.4%
Research and
development 6.7% 6.3% 4.3%
Marketing and
administration 16.5% 15.7% 15.5%
Amortization of
intangible assets 0.5% 0.5% 0.5%
Restructuring charges 4.8% 4.5%
Merger-related charges 0.9% 0.8%
Operating income (loss) (1.5%) 7.0%
Interest expense, net 0.9% 0.6%
Income (loss) before
income taxes 3.9% (2.4%) 6.4%
Net income (loss) 2.5% (1.7%) 4.1%
</TABLE>
COMPARISON OF FISCAL YEARS 1996, 1995, AND 1994
BOOKINGS AND BACKLOG. Bookings were $397.6 million, $462.7 million and $441.0
million in fiscal 1996, 1995 and 1994, respectively, representing a year-to-year
decrease of 14% in 1996 and a year-to-year increase of 5% in 1995.
Bookings decreased in 1996 compared to 1995 in each of the Company's three
principal product areas (wireless products, satellite communications products
and systems and intelligence systems) and in two of its three principal market
sectors (international and U.S. government). Bookings in 1996 compared to 1995
for the wireless products, satellite communications and intelligence systems
areas decreased 12%,18% and 11%, respectively, to 43%,
28
<PAGE> 14
CALIFORNIA MICROWAVE, INC.
40% and 17%, respectively, of total bookings. International bookings and
bookings from the U.S. government in 1996 compared to 1995 decreased 28% and
12%, respectively, while U.S. commercial bookings increased 14%.
The significant decrease in bookings for wireless products was due to several
factors including the effects of the economic downturn in Mexico and other Latin
America countries in late 1995, the late introduction of new wireless products
for the European market and the reorganization of the MNS international sales
force after the restructuring of the wireless operations. The decrease in
bookings for satellite systems and products is largely due to delays in
completing the financing of several large earth station projects in Asia-Pacific
and Africa. The financing associated with these projects is expected to be
completed in fiscal 1997. The increase in U.S. commercial bookings was generally
due to the development of the relocation segment of the U.S. personal
communications services (PCS) market, particularly in the second half of the
fiscal year.
Backlog was $168.4 million, $231.5 million and $232.7 million at June 30, 1996,
1995 and 1994, respectively, representing decreases of 27% for 1996 and 1% for
1995. The proportion of such backlog that was expected to be delivered within 12
months was 95%, 80% and 80% as of the end of 1996, 1995 and 1994, respectively.
NET SALES. Net sales were $460.7 million, $467.9 million and $405.8 million in
fiscal 1996, 1995, and 1994, respectively, representing a year-to-year decrease
of 2% in 1996 and a year-to-year increase of 15% in 1995.
The Company operates in one industry -- the manufacture of electronics equipment
for wireless communications, including telephone, data, control, detection,
ranging and surveillance. A breakdown of sales by product class and by market
sector for the last three years is shown below.
<TABLE>
<CAPTION>
(In thousands)
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Satellite com-
munications $215,887 $174,034 $178,119
Wireless 166,131 228,069 176,239
Intelligence 77,036 64,625 49,796
Other 1,599 1,200 1,678
-------- -------- --------
$460,653 $467,928 $405,832
======== ======== ========
International $223,995 $223,976 $188,473
U.S. commercial 132,680 136,284 115,479
U.S. government 103,978 107,668 101,880
-------- -------- --------
$460,653 $467,928 $405,832
======== ======== ========
</TABLE>
In 1996, sales increased 24% and 19% in the satellite communications and
intelligence areas, respectively, reflecting, principally, for the satellite
market, the effect of a single order booked of $40 million for AT&T's
telecommunications project in Saudi Arabia during fiscal 1995 and, for the
intelligence market, the continued growth in intelligence programs in which the
Company participates. Wireless products sales decreased 27% representing
decreased sales in certain international cellular and personal communication
network markets. Additionally, regulatory and other issues delayed the
development of the PCS infrastructure market in the United States.
U.S. commercial sales and sales to the U.S. government decreased 3% each.
International sales were comparable in 1996 compared to 1995. Declining sales in
Latin America and Europe were offset by increased sales in Africa and the Middle
East. The Company's international sales are generally denominated in U.S.
dollars. During the three years ended June 30, 1996, fluctuations of currency
exchange rates did not have a material effect on the Company's results of
operations.
Wireless and international sales increased 29% and 19%, respectively, in 1995
compared to 1994, principally due to increased sales in Latin America and
Europe, which included a full year of operating results of TTS in 1995, compared
to eight months in 1994. Further, MNI sales increased significantly during this
period due to several large, international projects. Intelligence sales
increased 30% in 1995 compared to 1994 principally due to the expansion of the
Airborne Reconnaissance Low program.
Sales of wireless and satellite products, as compared to satellite and
intelligence systems, declined to 61% of total sales in 1996 from 70% of total
sales in 1995, principally due to the decline in wireless sales. Product sales
for the Company increased to 70% in 1995 from 61% in 1994.
No single customer accounted for more than 10% of sales in 1996, 1995 or 1994.
However, the Company's sales to all departments and agencies of the U.S.
government represented 22%, 23% and 26% of total sales in 1996, 1995 and 1994,
respectively. Because the Company is concentrating its investments in commercial
areas, this trend is expected to continue.
GROSS MARGIN. Gross margin was $131.3 million, $123.1 million and $111.0 million
in fiscal 1996, 1995 and 1994, respectively, representing year-to-year increases
of 7% in 1996 and 11% in 1995. Gross margins as a percentage of sales for
products are generally in the 30% to 45% range, while turnkey satellite earth
stations and intelligence systems typically yield gross margins in the 15% to
20% range. System sales, compared to product sales, include a relatively high
percentage of large subcontracted items to which the Company adds less value and
upon which customers allow less markup. In addition, engineering costs in
turnkey satellite earth stations and intelligence systems are generally customer
funded and are included in cost of products sold.
29
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS CALIFORNIA MICROWAVE, INC.
Gross margin as a percentage of sales increased from 26.3% in 1995 and 27.4% in
1994 to 28.5% in 1996. The Company recorded charges of $14.9 million to costs of
products sold during the fourth quarter of 1995. These charges reflected
principally the Company's estimate of additional costs required to complete
certain contracts at STS and costs to phase-out of the short-haul market and
associated contracts at TTS as well as the write-off of certain excess
inventories. Excluding these charges, the gross margin for 1995 would have been
29.5%. The decrease of gross margin as a percentage of sales to 28.5% in 1996
compared to the adjusted amount of 29.5% in 1995 is the result of lower overhead
absorption in the wireless area due to lower sales and a higher percentage of
total sales in 1996 represented by systems, which have relatively lower margins
than products. The higher adjusted gross margin in 1995 compared to 1994
reflects a higher proportion of wireless and satellite communications products
sales in 1995 compared to 1994, offset in part by depressed margins on satellite
communications earth stations sales, and to a lesser extent by the impact of a
full year of TTS sales, which were at relatively low margins. Gross margins on
satellite systems sales improved significantly in 1996 compared to 1995.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were $30.9
million, $29.7 million and $17.6 million in fiscal 1996, 1995 and 1994,
respectively, representing year-to-year increases of 4% in 1996 and 69% in 1995.
Research and development expenses as a percentage of sales were 6.7%, 6.3% and
4.3% in 1996, 1995 and 1994, respectively. Research and development expenses
increased significantly in 1995, both in dollar terms and as a percentage of
sales as the Company accelerated the development of new wireless and satellite
networking products and software. The Company expects that research and
development expenses as a percentage of sales will remain in the 6% to 7% of
sales range. In general, engineering expenditures in turnkey satellite earth
stations and intelligence systems are customer funded and are included in cost
of products sold.
MARKETING AND ADMINISTRATION EXPENSES. Marketing and administration expenses
were $75.9 million, $73.2 million and $62.9 million in fiscal 1996, 1995 and
1994, respectively, representing year-to-year increases of 4% in 1996 and 16% in
1995. Marketing and administration expenses as a percentage of sales were 16.5%,
15.7% and 15.5% in 1996, 1995 and 1994, respectively. In general, the dollar
increases in marketing and administration expenses relate to increased expenses
associated with the development of the domestic PCS and certain international
markets. The increase in marketing and administration expenses in dollar terms
in 1995 also reflects a full year of expenses for TTS, compared to eight months
in 1994.
AMORTIZATION OF INTANGIBLE ASSETS EXPENSE. Amortization expense associated with
intangible assets was $2.2 million, $2.5 million and $2.1 million in fiscal
1996, 1995 and 1994, respectively, representing a year-to-year decrease of 12%
in 1996 and a year-to-year increase of 19% in 1995. The decrease in 1996
reflects the write-down of intangible assets of $10 million in connection with
the restructuring in 1995. The increase in 1995 reflects increased intangible
assets associated with the acquisitions of MRC and TTS.
RESTRUCTURING CHARGES. In June 1995, the Company recorded restructuring charges
of approximately $20.9 million in connection with a program to reduce costs and
improve operating efficiencies. The program included, among other things: the
integration of certain of the Company's wireless operations, the elimination of
excess facilities; the reduction of employees at STS; the write-off of capital
equipment; and the write-down of intangible assets. During 1996, the program was
expanded, without a net charge to operations, to include merging the operations
of TTS and MNI with certain operations of MRC into a new unit, Microwave Network
Systems (MNS), resulting in the reduction of employees at MNS.
The following table summarizes these charges (In thousands):
<TABLE>
<CAPTION>
Asset write-
offs and
1995 payments Future
provision, through June cash
as adjusted 30, 1996 outlays
----------- ------------ -------
<S> <C> <C> <C>
Excess facilities $ 3,930 $ 1,054 $2,876
Severance costs 4,026 4,026
Capital equipment
write-offs 1,063 1,063
Intangible assets
write-down 10,000 10,000
Other 1,927 1,235 692
------- ------- ------
$20,946 $17,378 $3,568
======= ======= ======
</TABLE>
STS terminated approximately 75 employees in connection with the restructuring.
MNS terminated approximately 200 employees in connection with the merging of
operations of TTS and MNI with certain operations of MRC. The cost of MNS's
terminations of approximately $2.8 million was offset by reduced amounts
originally provided for excess facilities as these amounts were determined not
to be needed. Accordingly, there was no additional restructuring charge in 1996,
and the 1995 provision, as adjusted, reflects this $2.8 million adjustment.
Through June 30, 1996, assets written down and payments made in connection with
the restructuring totaled $17.4 million, leaving a reserve balance of $3.6
million which is necessary for actions contemplated in fiscal 1997. The majority
of remaining future cash outlays are for payments for excess or unused
facilities which are expected to
30
<PAGE> 16
CALIFORNIA MICROWAVE, INC.
total approximately $2.9 million, substantially all of which will be made during
fiscal 1997.
MERGER-RELATED CHARGES. Merger-related charges of $3.8 million reflect costs
associated with the merger of California Microwave, Inc. and MNI during 1995,
including legal, investment banking and accounting fees.
INTEREST EXPENSE. Net interest expense was $4.2 million, $4.4 million and $2.5
million in fiscal 1996, 1995 and 1994, respectively. The increase during 1996
and 1995 compared to 1994 reflects a full year of interest expense for the $63.2
million of subordinated convertible notes issued during the second quarter of
1994 principally to fund the acquisition and working capital needs of TTS.
Interest expense also increased during 1995 due to the impact of the final $9.6
million payment to the former shareholders of MRC and during 1995 and 1996 due
to extended payment terms on certain international systems contracts.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The provision for (benefit from)
income taxes was $6.5 million, ($3.4) million and $9.3 million in fiscal 1996,
1995 and 1994, respectively. The effective tax rate was 36%, (30%) and 36% for
such years. Due to non-deductible expenses in 1995, the tax benefit rate in that
year is not comparable to the tax rate in 1996 or 1994. The Company expects its
1997 effective tax rate to be 36%.
At June 30, 1996, the Company had a cumulative net deferred tax asset of $12.4
million that will be available to reduce payments on future federal and state
tax liabilities. Management believes it is more likely than not that the asset
will be realized based on the Company's operating history and future results.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $141.3 million, including
cash and cash equivalents of $4.6 million, compared to working capital at June
30, 1995 of $125.8 million, including cash and cash equivalents of $2.0 million.
Net cash and cash equivalents provided by operating activities was $12.1 million
in 1996 compared to net cash and cash equivalents provided by operating
activities of $15.2 million in 1995 and net cash and cash equivalents used in
operating activities of $23.3 million in 1994. Cash flow from operations was
negative in 1994 principally due to the need to infuse approximately $25 million
of working capital into TTS and to extended payment terms on certain
international contracts. The latter continued to impact cash flow in 1995 and
1996. Average receivables were 85 days in 1996 compared to 87 days in 1995 and
81 days in 1994. The decrease in cash flow from operations in 1996 compared to
1995 is due principally to payments made during 1996 of approximately $6.9
million associated with the Company's restructuring and other charges recorded
in 1995.
The Company's principal investing activities in 1996 were payments for capital
additions of $27.7 million and the receipt of $4.8 million for the sale and
resulting lease-back of the Company's Tempe, Arizona facility. The Company's
principal investing activities during 1995 and 1994 consisted of capital
additions of $17.3 million and $12.3 million, respectively, and payments for the
acquisitions of MRC and TTS of $ 9.6 million and $25.7 million, respectively.
Total cash and cash equivalents used in investing activities was $24.3 million,
$27.6 million and $37.8 million in fiscal 1996, 1995 and 1994, respectively.
The Company's principal financing activities in 1996 were receipts of $3.6
million from the sale of the Company's common stock under on-going stock plans
and $10.5 million under the Company's credit facilities. Sales of the Company's
common stock were $5.2 million in 1995 and $4.7 million in 1994. During 1995,
the Company repaid MNI's notes payable of $3.4 million upon its acquisition in
May 1995. During 1994, cash was generated from the sale of $57.5 million of
ten-year, 5 1/4%, convertible subordinated notes due 2003 and a $5.7 million,
five-year, 5% convertible subordinated note due 1998. The notes are convertible
at the option of the holder into the Company's common stock at a conversion
price of $28.4375 per share for the ten-year notes and $28.50 per share for the
five-year notes. The proceeds of $63.2 million were used to retire a bank loan
incurred to fund the acquisition and working capital needs of TTS. The Company
paid $23.7 million in cash for the net assets of TTS.
The above activities resulted in a net increase in cash and cash equivalents of
$2.6 million in 1996, compared to a net decrease of cash and cash equivalents of
$12.0 million in 1995 and a net increase in cash and cash equivalents of $8.4
million in 1994.
The Company has available two unsecured committed bank credit facilities
totaling $65.0 million, of which $60.0 million expires in September 1998 and
$5.0 million expires in October 1996. In December 1995, the Company amended its
credit facilities to increase the amount available from the previous amount of
$33.5 million. As of June 30, 1996, there were $10.5 million of borrowings and
$15.0 million of standby letters of credit outstanding under these credit lines,
leaving $39.5 million of available credit lines. At June 30, 1996, the Company
was not in compliance with a certain covenant of its debt agreements. The
lenders have waived such non-compliance and amended such covenant under the
credit facilities and debt agreements as necessary to bring the Company into
compliance at June 30, 1996.
The Company believes that its current cash position, funds generated from
operations and funds available from its credit facilities will be adequate to
meet its requirements for working capital, capital additions, debt service and
external investments for the foreseeable future.
31
<PAGE> 17
SELECTED FINANCIAL DATA (UNAUDITED) CALIFORNIA MICROWAVE, INC.
Five years ended June 30, 1996 (A)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 (B) 1994 (C) 1993 1992 (D)
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales $ 460,653 $ 467,928 $ 405,832 $ 306,564 $ 221,506
Operating income (loss) 22,338 (6,981) 28,459 22,776 8,068
Income (loss) before income taxes 18,161 (11,342) 25,935 20,416 7,198
Net income (loss) 11,623 (7,895) 16,598 13,705 5,294
Net income (loss) per share $ 0.72 $ (0.51) $ 1.04 $ 1.02 $ 0.44
Average shares and equivalents (in thousands) 16,200 15,533 15,890 13,380 12,138
PERCENT OF SALES:
Gross margin 28.5% 26.3% 27.4% 27.9% 24.1%
Operating income (loss) 4.8% (1.5%) 7.0% 7.4% 3.6%
Income (loss) before income taxes 3.9% (2.4%) 6.4% 6.7% 3.2%
Net income (loss) 2.5% (1.7%) 4.1% 4.5% 2.4%
Return on average assets 3.5% N/M 6.5% 7.8% 3.9%
Return on average stockholders' equity 7.2% N/M 11.6% 12.8% 6.8%
FINANCIAL POSITION:
Total assets $ 338,340 $ 326,612 $ 321,450 $ 188,894 $ 162,016
Long-term debt (excluding current portion) 78,763 67,791 70,403 5,955 40,726
Current ratio 2.6:1 2.3:1 2.3:1 2.4:1 2.6:1
Debt to capitalization (E) 0.32 0.31 0.33 0.05 0.35
Stockholders' equity per share $ 10.60 $ 9.78 $ 10.13 $ 8.86 $ 6.96
Ratio of earnings to fixed charges (F) 4.02 N/M 6.88 6.78 4.62
OTHER:
Year-end backlog $ 168,449 $ 231,546 $ 232,680 $ 164,752 $ 144,291
Year-end employees 2,294 2,382 2,136 1,595 1,480
Year-end facilities (thousands of square feet) 879(G) 807 795 616 551
</TABLE>
(A) In May 1995, the Company acquired Microwave Networks Incorporated (MNI)
for 3,475,000 shares of the the Company's common stock and options to
acquire common stock. The acquisition was accounted for as a pooling of
interests. All periods include MNI.
(B) In fiscal 1995, the Company recorded approximately $40.2 million of
restructuring, merger-related and other charges.
(C) In October 1993, the Company acquired substantially all the assets and
certain of the liabilities of TeleSciences Transmission Systems (TTS) for
$23.7 million in cash. The acquisition was accounted for as a purchase
transaction. The operating results of TTS have been included from the
acquisition date.
(D) In April 1992, the Company acquired Microwave Radio Corporation (MRC) for
$33 million in cash. An additional $11 million in contingent payments
based on the income of MRC was subsequently paid. The acquisition was
accounted for as a purchase transaction. The operating results of MRC have
been included from the acquisition date.
(E) Debt to capitalization is year-end debt divided by year-end debt plus
stockholders' equity.
(F) The ratio of earnings to fixed charges is income before income taxes plus
fixed charges divided by fixed charges.
(G) Excludes approximately 260,000 square feet, which the Company intends to
sell or sub-lease.
N/M Not meaningful
STOCK AND QUARTERLY DATA (UNAUDITED)
California Microwave, Inc. has one series of common stock, $0.10 par value
common stock. Holders of common stock have full voting rights and have the right
to cumulate votes for the election of directors. California Microwave follows
the policy of reinvesting all earnings to finance expansion of its business and
has paid no cash dividends. No change in this policy is contemplated in the
foreseeable future. At June 30, 1996, the number of California Microwave
shareholders totaled approximately 13,000, of which approximately 2,200 were
holders of record. California Microwave stock is traded in the Nasdaq Stock
Market, is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation System (Nasdaq National Market) under the trading symbol
CMIC, and is listed in the Wall Street Journal and in other newspapers. The
following table sets forth for the fiscal periods indicated the high and low
stock prices.
STOCK PRICES BY QUARTER FISCAL YEARS 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High 26 38 1/4 39 3/4 35 32 1/2 25 1/4 20 3/4 20 1/4
Low 20 3/4 24 1/4 24 1/2 23 1/2 23 1/2 16 1/4 13 1/2 14 7/8
</TABLE>
FINANCIAL RESULTS BY FISCAL QUARTER
<TABLE>
<CAPTION>
Fiscal Gross Net income Earnings per share
Quarter Sales margin (loss) Primary Fully diluted
- ------- -------- -------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
1996
1 $115,763 $ 34,773 $ 5,107 $ 0.31 $ 0.31
2 116,289 34,130 3,648 0.23 0.23
3 100,073 29,696 1,325 0.08 0.08
4 128,528 32,666 1,543 0.10 0.10
-------- -------- -------- ------ ------
$460,653 $131,265 $ 11,623 $ 0.72 $ 0.72
======== ======== ======== ====== ======
1995
1 $115,139 $ 32,748 $ 5,177 $ 0.32 $ 0.31
2 119,063 35,951 5,943 0.37 0.35
3 121,893 37,394 6,035 0.37 0.36
4 111,833 17,029 (25,050) (1.60) (1.60)
-------- -------- -------- ------ ------
$467,928 $123,122 $ (7,895) $(0.51) $(0.51)
======== ======== ======== ====== ======
</TABLE>
32
<PAGE> 1
Exhibit 21
List of Subsidiaries
<TABLE>
<CAPTION>
Name Place of Incorporation
- ---- ----------------------
<S> <C>
EFData Corp. California
California Microwave Foreign Barbados,
Sales Corporation West Indies
California Microwave Navigation
Systems, Inc. Delaware
Digital Radio Technology, Inc. New York
</TABLE>
-1-
<PAGE> 1
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Annual Report (Form 10-K)
of California Microwave, Inc. of our report dated August 5, 1996 included in
the 1996 Annual Report to Shareholders of California Microwave, Inc.
Our audits also included the financial statement schedule of California
Microwave, Inc. listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No.'s 33-09117, 33-24517, 33-44397, 33-58108, 33-73584 and
33-86968) pertaining to the 1992 Stock Option, 1992 Restricted Stock, Employee
Stock Purchase and 1986 Stock Option Plans of California Microwave, Inc. and
the Registration Statement (Form S-8 No. 33-60957) pertaining to Microwave
Networks Incorporated 1990 Non-Qualified Stock Option Plan for Employees and
1990 Non-Qualified Stock Option Plan for Non-Employed Directors and Consultants
of our report dated August 5, 1996, with respect to the financial statements
incorporated herein by reference.
ERNST & YOUNG LLP
Palo Alto, California
September 27, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose
signature appears below, being a member of the Board of Directors of California
Microwave, Inc. (the "Company"), hereby constitutes and appoints Philip F. Otto
and George L. Spillane, and each of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for and in his name, place and stead, in any and all capacities, to sign on his
behalf the Company's Annual Report on Form 10-K for its fiscal year ended June
30, 1996, and to execute any amendments thereto, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, with the full power and authority to do and
perform each and every act and thing necessary or advisable to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
DATED: July 25, 1996
/s/ EDWARD E. DAVID, JR. /s/ GILBERT F. JOHNSON
- ------------------------------ ----------------------------------
EDWARD E. DAVID, JR. GILBERT F. JOHNSON
/s/ ALFRED M. GRAY /s/ DAVID B. LEESON
- ------------------------------ ----------------------------------
ALFRED M. GRAY DAVID B. LEESON
/s/ ARTHUR H. HAUSMAN /s/ ROBERT A. HELLIWELL
- ------------------------------ ----------------------------------
ARTHUR H. HAUSMAN ROBERT A. HELLIWELL
/s/ J. J. ADORJAN
----------------------------------
J. J. ADORJAN
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 4,560
<SECURITIES> 1,504
<RECEIVABLES> 108,278
<ALLOWANCES> 2,378
<INVENTORY> 103,456
<CURRENT-ASSETS> 230,499
<PP&E> 106,443
<DEPRECIATION> 57,681
<TOTAL-ASSETS> 338,340
<CURRENT-LIABILITIES> 89,247
<BONDS> 78,763
0
0
<COMMON> 1,603
<OTHER-SE> 168,257
<TOTAL-LIABILITY-AND-EQUITY> 338,340
<SALES> 460,653
<TOTAL-REVENUES> 460,653
<CGS> 329,388
<TOTAL-COSTS> 329,388
<OTHER-EXPENSES> 108,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,279
<INCOME-PRETAX> 18,161
<INCOME-TAX> 6,538
<INCOME-CONTINUING> 11,623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,623
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
