SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to________________
Commission file number 0-11691
ELEXSYS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3534864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1188 Bordeaux Drive, Sunnyvale, California 94089
(Address of principal executive offices) (Zip Code)
(408) 743-5400
(Registrant's telephone number, including area code)
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__
At April 10, 1996, there were 9,152,800 outstanding shares of
common stock.
This report consists of 11 pages
<PAGE>
<TABLE>
ELEXSYS INTERNATIONAL, INC.
FORM 10-Q
INDEX
<CAPTION>
Page
Part I. Financial Information:
<S> <C>
Item 1.
Consolidated Balance Sheets as of March 30, 1996 and September 30, 1995.......... 2
Consolidated Statements of Operations for the Three and Six Months
Ended March 30, 1996 and April 1, 1995........................................... 3
Consolidated Statements of Cash Flows for the Three and Six Months
Ended March 30, 1996 and April 1, 1995........................................... 4
Notes to the Consolidated Financial Statements................................... 5
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 7
Part II. Other Information:
Item 4.
Submission of Matters to Vote of Security Holders............................... 9
Item 6.
Exhibits........................................................................ 10
</TABLE>
<PAGE>
<TABLE>
ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
March 30, September 30,
1996 1995
---------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $285 $903
Accounts receivable, net 16,800 15,653
Inventories 8,648 7,860
Prepaid expenses and other current assets 1,025 709
------- -------
Total current assets 26,758 25,125
------- -------
Property, plant and equipment, net 21,096 18,980
Other assets 988 1,034
------- -------
Total assets $48,842 $45,139
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,785 $9,854
Accrued payroll and related costs 2,409 2,521
Other current liabilities 1,205 1,965
Short-term borrowings 1,178 3,248
Current portion of long-term debt 220 363
------- -------
Total current liabilities 16,797 17,951
------- -------
Long-term debt 1,468 1,280
Convertible subordinated debentures 12,000 12,000
Stockholders' equity:
Common stock, $1.00 par value, 20,000,000 shares authorized, 9,148,460 shares
issued and outstanding at March 30, 1996 and 8,960,560 shares issued and
outstanding at September 30, 1995 9,149 8,961
Additional paid-in capital 5,743 5,460
Retained earnings (deficit) 3,748 (491)
Cumulative foreign currency translation adjustment (63) (22)
------- -------
Net stockholders' equity 18,577 13,908
------- -------
Total liabilities and stockholders' equity $48,842 $45,139
======= =======
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $30,388 $23,407 $59,299 $46,160
Cost of sales 24,682 21,541 48,215 41,424
------------- ------------- ------------- -------------
Gross profit 5,706 1,866 11,084 4,736
Operating expenses:
Selling, general and administrative 3,133 2,200 6,074 4,266
Research and development 97 126 140 249
------------- ------------- ------------- -------------
Total operating expenses 3,230 2,326 6,214 4,515
------------- ------------- ------------- -------------
Income (loss) from operations 2,476 (460) 4,870 221
Interest expense, net 263 410 628 841
------------- ------------- ------------- -------------
Income (loss) before income taxes 2,213 (870) 4,242 (620)
Provision for (benefit from) income taxes (16) - 3 -
------------- ------------- ------------- -------------
Income (loss) before extraordinary item 2,229 (870) 4,239 (620)
Extraordinary item:
Gain from exchange of 5 1/2 percent Convertible
Subordinated Debentures due 2012 for common
stock, net of expenses - 1,833 - 1,833
------------- ------------- ------------- -------------
Net income $ 2,229 $ 963 $ 4,239 $ 1,213
============= ============= ============= =============
Earnings per share:
Primary $0.23 $0.11 $0.44 $0.14
Fully diluted $0.23 $0.10 $0.44 $0.13
------------- ------------- ------------- -------------
Weighted average common shares and common equivalent shares outstanding:
Primary 9,552 8,751 9,513 8,751
Fully diluted 9,552 9,278 9,513 9,278
============= ============= ============= =============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six months ended
March 30, April 1,
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $4,239 $1,213
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary gain - (1,833)
Depreciation and amortization 2,374 2,780
Increase in accounts receivable (1,144) (2,494)
(Increase) decrease in inventories (843) 556
Increase in prepaid expenses and other current assets (405) (321)
Increase in accounts payable 2,020 722
Increase (decrease) in accrued payroll and related taxes (112) 180
Decrease in restructuring reserve (79) -
Increase (decrease) in other current liabilities (702) (543)
Other (54) (207)
---------------- ----------------
Net cash provided by operating activities 5,294 53
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,358) (1,666)
---------------- ----------------
Net cash used by investing activities (4,358) (1,666)
---------------- ----------------
CASH FLOWS USED BY FINANCING ACTIVITIES
Net change in short-term borrowings (2,129) 180
Payments on long-term debt (184) (25)
Increase of long-term debt 288 -
Proceeds from exercise of stock options 471 221
---------------- ----------------
Net cash provided (used) by financing activities (1,554) 376
---------------- ----------------
Net decrease in cash and cash equivalents (618) (1,237)
Cash and cash equivalents, beginning of period 903 1,562
================ ================
Cash and cash equivalents, end of period $285 $325
================ ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest payments $421 $471
================ ================
Income tax payments $206 $24
================ ================
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Elexsys
International, Inc. and its subsidiaries (the "Company") contain all
adjustments, consisting of only normal recurring adjustments, which, in
the opinion of management, are necessary to present fairly the
financial position of the Company as of March 30, 1996 and September
30, 1995, the results of its operations for the three and six months
ended March 30, 1996 and April 1, 1995 and its cash flows for the six
months ended March 30, 1996 and April 1, 1995. Certain information and
footnote disclosures normally included in the financial statements have
been condensed or omitted pursuant to rules and regulations of the
Securities and Exchange Commission, although the Company believes that
the disclosures in the consolidated financial statements are adequate
to make the information presented not misleading.
The consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements of the Company
for the year ended September 30, 1995, included in the Company's Annual
Report on Form 10-K for that fiscal year.
Note 2 - Inventories
Inventories consist of the following (in thousands):
March 30, September 30,
1996 1995
-------------- --------------
(Unaudited)
Raw materials $3,474 $2,843
Work in progress 5,174 5,017
-------------- --------------
Totals $8,648 $7,860
============== ==============
Note 3 - Earnings Per Share
Primary and fully diluted earnings per common share for the three and
six months ended March 30, 1996 and April 1, 1995 have been computed
based on weighted average common shares outstanding and common stock
equivalents (stock options) as of the above dates and do not include
the assumed conversion of the 5 1/2 percent Convertible Subordinated
Debentures due 2012 into common stock as such effect would have been
antidilutive.
Note 4 - Income Taxes
In the first six months of 1996, the Company recorded a provision of
$3,000 for income taxes. This related to a provision for federal
alternative minimum taxes of $139,000 partially offset by a foreign
income tax benefit of $136,000 based on the Company's United Kingdom
subsidiary net operating loss for the first six months of 1996. The
remaining carryforwards, for which future benefit is not assured,
expire in various amounts through 2008.
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Translation of Foreign Currencies
Assets and liabilities of the Company's United Kingdom subsidiary are
translated into US dollars at the exchange rates in effect at the end
of the period. Revenue and expense accounts are translated at a
weighted average of exchange rates which were in effect during the
year. Translation adjustments that arise from translating the Company's
United Kingdom subsidiary's financial statements from pound sterling to
US dollars are accumulated in a separate component of stockholders'
equity. Transaction gains and losses that arise from exchange rate
changes on transactions denominated in a currency other than the local
currency are included in results of operations as incurred. For the six
months ended March 30, 1996, there were no material transaction gains
or losses.
Note 6 - Purchase of the assets of Anetec Technologies, Inc.
The Company entered into an Asset Purchase Agreement dated as of May 3,
1996 to acquire the assets on Anetec Technologies, Inc., a company
serving the small prototype and engineering marketplace located in
Fremont, California for $1 million in cash, a promissory note in the
principal amount of $1 million and 100,000 shares of the Company's
common stock. As of May 14, 1996, the transaction had not closed.
<PAGE>
ELEXSYS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto contained elsewhere within this Report on
Form 10-Q. Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The actual future results of the Company could differ materially
from those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section and
those discussed in the Company's Form 10-K for the year ended September 30,
1995.
Results of Operations
Net sales
Net sales increased 30 percent for the three months ended March 30, 1996
compared to the second quarter of fiscal 1995. For the six months ended March
30, 1996, net sales increased 29 percent over net sales for the comparable
period in fiscal 1995. The increase in net sales resulted from an increased
demand for printed circuit boards from the Company's existing customer base, new
customers, and the April 1995 acquisition in the United Kingdom.
Cost of sales
Cost of sales as a percentage of net sales improved from 92 percent in the
second quarter of fiscal 1995 to 81 percent for the second quarter of fiscal
1996. For the six months ended March 30, 1996, cost of sales as a percentage of
net sales improved from 90 percent for the first six months of fiscal 1995 to 81
percent for the six month period ended March 30, 1996. The improvement in cost
of sales for the three and six months ended March 30, 1996 was attributable to
improved operating efficiencies, cost reductions and a one-time worker's
compensation dividend payment of approximately $560,000 partially offset by
start-up costs associated with the Company's new plants in the United Kingdom
and Plano, Texas.
Selling, General and Administrative
Selling, general and administrative (SG&A) expense for the three and six months
ended March 30, 1996 increased 42 percent as compared to the similar fiscal 1995
periods. As a percentage of net sales, SG&A increased from 9.4 percent for the
second quarter of fiscal 1995 to 10.3 percent for the second quarter of fiscal
1996. SG&A as a percentage of net sales increased from 9.2 percent for the first
six months of fiscal 1995 to 10.2 percent for the six months ended March 30,
1996. The increase in SG&A was due to the inclusion of the SG&A expense of the
Company's new United Kingdom subsidiary, and an increase in employee costs,
resulting primarily from the replacement of manufacturing representatives with
direct sales employees.
Research and development
Research and development expenditures for the three months ended March 30, 1996
decreased 23 percent compared to the second quarter of fiscal 1995. For the six
months ended March 30, 1996, research and development expenditures decreased 44
percent from the comparable six month period of fiscal 1995. The decrease was
due to reduced engineering labor and benefit costs as a consequence of past
restructurings by the Company.
Interest expense, net
Interest expense, net of interest income, decreased 35 percent for the three
months ended March 30, 1996 from the comparable quarter in fiscal 1995. For the
six months ended March 30, 1996, interest expense, net of interest income,
decreased 25 percent from the comparable six month period of fiscal 1995. The
decrease is mainly attributable to a decrease in borrowings from an asset-based
lender in the second quarter of 1996 and a reduction in the number of
outstanding convertible subordinated debentures due to the March 1995 exchange
of debentures for the Company's common stock, partially offset by an increase in
interest expense incurred by the Company's subsidiary in the United Kingdom.
Factors that may affect future results
The Company's future operating results may be adversely affected by a number of
factors, including general economic conditions, foreign competition, industry
consolidation, the Company's ability to develop, manufacture, and sell its
products profitably, and the cyclical nature of the business of some of the
Company's customers.
The Company participates in a highly competitive industry. The printed circuit
board industry has been characterized by stringent customer demands for timely
deliveries, service and quality of products and by aggressive pricing practices.
The Company's operating results could be materially adversely affected should
the Company be unable to meet any one of these customer demands.
Liquidity and Capital Resources
The Company recorded cash flows from operating activities of $5.3 million during
the first six months of fiscal 1996 compared to $53,000 during the same period
of the previous year. Higher positive cash flow provided by operating activities
during the first six months of fiscal 1996 was primarily due to improved
profitability, partially offset by an increase in the use of working capital.
The cash provided by operating activities was offset by cash used by investing
activities of $4,358,000 (used for the purchase of capital equipment) and cash
used by financing activities of $1,554,000 (used primarily for the repayment of
short-term borrowings and long-term debt, less amounts received from the
exercise of stock options by certain employees and additions to long-term debt).
Capital equipment was purchased for normal replacement, for processes that the
Company had previously outsourced, and for the enhancement of manufacturing
capabilities.
As of March 30, 1996, the Company had short-term borrowings with an asset-based
lender, net of cash collections held by the lender, of $1,178,000 under a $15
million line of credit agreement that was established on December 17, 1993 and
amended on January 30, 1996. Under the terms of the agreement, the Company's
cash collections are applied to any outstanding borrowings upon the receipts
clearing the bank. At March 30, 1996, the asset-based lender was in possession
of $436,000 of the Company's cash collections. Accordingly, such funds are owed
to the Company upon clearing the bank. The line of credit is collateralized by
substantially all of the Company's assets and its will remain in effect until
December 17, 1997. The Company was in compliance with all of the covenants as
defined within the agreement.
At March 30, 1996 the Company had outstanding commitments to purchase the
remaining $1.3 million balance of a $1.6 million order for electrical test
equipment to support expanded capacity. On April 11, 1996, the Company entered
into an equipment lease agreement for approximately $1.5 million to finance such
equipment.
During the six month period, the Company's ratio of current assets to current
liabilities improved from 1.4 to 1 to 1.6 to 1. Management believes that the
Company's existing working capital, its remaining borrowing capacity and funds
generated from operations will be sufficient to meet projected working capital
requirements and other cash requirements through fiscal 1996.
<PAGE>
Part II. OTHER INFORMATION
Item 4 Submission of Matters to Vote of Security Holders
The Company held an Annual Meeting of Stockholders on January 30, 1996.
The Stockholders elected the Board's nominees as directors by the votes
indicated:
<TABLE>
<CAPTION>
Nominee Votes in Favor Votes Against Abstentions Non-votes
<S> <C> <C> <C> <C>
Roland G. Matthews 5,713,422 0 32,704 0
Peter S. Jonas 5,713,322 0 32,804 0
C. Bradford Jeffries 5,716,072 0 30,054 0
</TABLE>
The terms of two directors, Milan Mandaric and Alan C. Mendelson, continued
after the Annual Meeting.
Adoption of the Company's 1996 Employee Stock Purchase Plan, under which 250,000
shares of common stock are reserved for issuance, was approved with 5,736,326
votes in favor, 3,700 against 3,600 abstentions, and 2,500 non-votes.
Adoption of the Company's 1995 Stock Option Plan, as amended and restated, under
which 1,000,000 shares of common stock are reserved for issuance, was approved
with 5,555,984 votes in favor, 183,038 against 4,604 abstentions, and 2,500
non-votes.
Adoption of the Company's 1996 Non-Employee Directors' Stock Option Plan, under
which 200,000 shares of common stock are reserved for issuance, was approved
with 5,488,249 votes in favor, 229,838 against 25,539 abstentions, and 2,500
non-votes.
<PAGE>
Item 6 a. Exhibits
10.1 Equipment Lease Agreement dated April 11, 1996 between Elexsys
International, Inc. and Matrix Funding Corporation.
10.2 Lease for 4405 Fortran Drive, San Jose, California dated March 11,
1996 between Elexsys International, Inc. and South Bay/Fortran.
10.3 Asset Purchase Agreement dated as of May 3, 1996 among Anetec
Technologies, Inc., Helen Kwong, Elxi Acquisition, Inc., and Elexsys
International, Inc. to purchase the assets of Anetec Technologies, Inc.
(with certain schedules and attachments omitted pursuant to Item
601(b)(2) of Regulation S-K). The Company undertakes to furnish
supplemental copies of any of the omitted schedules and other
attachments upon request by the Securities and Exchange Commission.
b. Current reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELEXSYS INTERNATIONAL, INC.
---------------------------
(Registrant)
Date: May 14, 1996 By: /s/ Michael S. Shimada
- - ------------------- ---------------------------
Michael S. Shimada
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
M A T R I X
F U N D I N G C O R P O R A T I O N
6925 Union Park Center, Suite 250
Midvale, Utah 84047
LEASE NO. R0546
MASTER LEASE AGREEMENT
This agreement (the "Agreement") is made this 11th day of April, 1996 between
MATRIX FUNDING CORPORATION, with its principal office at 6925 Union Park
Center, Suite 250, Midvale, Utah 84047, (the "Lessor"), and ELEXSYS
INTERNATIONAL, INC., with its principal office at 1188 Bordeaux Drive,
Sunnyvale, California 94089, (the "Lessee").
1. LEASE:
Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the equipment and property (collectively, "Equipment") described in
any Equipment Schedule executed and delivered by Lessor and Lessee in
connection with this Agreement. Each Equipment Schedule shall incorporate
the terms and conditions of this Agreement and constitute a separate lease.
In the event of conflict between the provisions of this Agreement and any
Equipment Schedule, the provisions of the Equipment Schedule shall govern.
Each Equipment Schedule shall constitute a separate lease.
2. ADDITIONAL DEFINITIONS:
(a) "Acceptance Date" means, as to the Equipment designated on
any Equipment Schedule, the earliest to occur of (i) the date Lessee accepts
the Equipment as set forth in any certificate of acceptance or delivery
signed by the Lessee (the "Acceptance Certificate"), or (ii) the date which
is determined by the manufacturer or vendor of the Equipment to be the date
of installation of such Equipment.
(b) "Commencement Date" means, as to the Equipment designated
on any Equipment Schedule, where the Acceptance Date for such Equipment
Schedule falls on the first day of a calendar quarter, that date, and, in any
other case, the first day of the calendar quarter following the calendar
quarter in which such Acceptance Date falls.
3. TERM OF LEASE:
The term of this Agreement, as to all Equipment designated on any
Equipment Schedule, shall commence on the Acceptance Date for such Equipment,
and shall continue for an "Initial Period" ending that number of months from
the applicable Commencement Date as specified in such Equipment Schedule.
Thereafter, Lessee shall have options to purchase or return the Equipment or
to extend the Lease as provided in Section 19.(k) of this Agreement.
4. RENT AND PAYMENT:
As to any Equipment leased hereunder, the "Monthly Rental" payable by
Lessee to Lessor shall be as set forth in the applicable Equipment
Schedule. The Monthly Rental shall begin on the Commencement Date and shall
be due and payable by Lessee in advance on the first day of each month
throughout the Initial Period. If the Acceptance Date does not fall on the
first day of a calendar quarter, then the first rental payment shall be
calculated by multiplying the number of days from and including the
Acceptance Date to the Commencement Date by a daily rental equal to one
thirtieth (1/30) of the Monthly Rental, and shall be due and payable on the
Acceptance Date. Lessee shall pay all rentals hereunder to Lessor, its
successors or assigns, at Lessor's address set forth above (or as otherwise
directed in writing by Lessor, its successors or assigns), whether or not
Lessee has received any notice that such payment is due. LESSEE SHALL NOT
ABATE, SET OFF, OR DEDUCT ANY AMOUNT OR DAMAGES FROM OR REDUCE ANY RENTAL FOR
ANY REASON WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, ITS SUCCESSORS OR
ASSIGNS.
Late charges on any past due payments, taxes or other charges hereunder
shall accrue at the rate of 1 1/2% per month (or if such rate shall exceed
the maximum rate allowed by law, then at the highest rate that is permitted
to be charged on liquidated amounts after judgment) beginning with the date
that such amount was due and continuing until the amount is paid. If late
charges are assessed by a lending institution due to any late payment, Lessee
agrees to pay such late charges or to reimburse Lessor for their payment.
Lessee agrees to make payment for any late charges promptly upon demand by
Lessor.
5. TAXES:
Lessee shall pay to Lessor an amount equal to all taxes paid, payable
or required to be collected by Lessor, however designated, which are levied
or based on the Monthly Rental or on the possession, use, operation, lease,
rental, sale, purchase, control or value of the Equipment, including, without
limitation, registration and license fees and assessments, state and local
privilege or excise taxes, sales and use taxes, personal and other property
taxes, and taxes or charges based on gross revenue, but excluding taxes based
on Lessor's net income. Lessor shall invoice Lessee for all such taxes in
advance of their payment due date, and Lessee shall promptly remit to Lessor
all such taxes and charges upon receipt of such invoice from Lessor. Lessee
shall pay all penalties and interest resulting from its failure to timely
remit such taxes to Lessor when invoiced by Lessor. Lessor shall file all
required sales and use tax and personal property tax returns and reports
concerning the Equipment with all applicable governmental agencies.
6. USE; ALTERATIONS AND ATTACHMENTS:
(a) After Lessee receives and inspects any Equipment and is
satisfied that the Equipment is satisfactory, Lessee shall execute and
deliver to Lessor an Acceptance Certificate in a form provided by Lessor;
provided, however, that Lessee's failure to execute and deliver an Acceptance
Certificate for any Equipment shall not affect the validity of this Agreement
with respect to the Equipment.
(b) Lessee shall be entitled to unlimited usage of the
Equipment during the Initial Period or any renewal periods approved by Lessor
in writing.
(c) Lessee shall at all times keep the Equipment in its sole
possession and control. The Equipment shall not be moved from the location
stated in the Equipment Schedule without the prior written consent of Lessor.
(d) Lessee shall cause the Equipment to be installed, used,
operated and, at the termination of this Agreement as to each Equipment
Schedule, removed (i) in accordance with any applicable manufacturer's
manuals or instructions; (ii) by competent and duly qualified personnel only;
and (iii) in accordance with applicable governmental regulations, if any.
(e) Lessee may not make alterations in or add attachments to
the Equipment without first obtaining the written consent of Lessor. Any
such alterations or attachments shall be made at Lessee's expense and shall
not interfere with the normal and satisfactory operation or maintenance of
the Equipment. The manufacturer may incorporate engineering changes or make
temporary alterations to the Equipment upon request of Lessee. Unless Lessor
shall otherwise agree in writing, all such alterations and attachments shall
be and become the property of Lessor or, at the option of Lessor, shall be
removed by Lessee at the termination of this Agreement as to such Equipment
and the Equipment restored at Lessee's expense to its original condition,
reasonable wear and tear only excepted.
(f) Lessee acknowledges that the Equipment is and shall remain
personal property during the term of this Agreement. Lessee shall not permit
the Equipment to become an accession to other goods or a fixture to, or part
of, any real property. If the Equipment becomes an accession to other goods,
Lessee shall provide to Lessor signed waivers in form acceptable to Lessor.
(g) In the event the Equipment includes software (including
all documentation, later versions, updates, modifications; herein
"Software"), the following shall apply: (i) Lessee shall possess and use the
Software in accordance with the terms and conditions of any license agreement
("License") entered into with the owner/vendor of such Software (at Lessor's
request, Lessee shall provide a complete copy of the License to Lessor); (ii)
as due consideration for Lessor's payment of the Software price and for
providing the Software to Lessee at a lease rate (as opposed to a debt rate),
Lessee agrees that Lessor is leasing (and not financing) the Software to
Lessee; (iii) except as otherwise specifically provided herein, the Software
shall be deemed Equipment for all purposes under this Agreement.
(h) Lessee shall comply with all applicable laws, regulations
and orders relating to the Equipment and this Agreement.
(i) The Equipment is leased solely for commercial or business
purposes.
7. MAINTENANCE AND REPAIRS; RETURN OF EQUIPMENT:
(a) During the continuance of this Agreement, at its expense,
and in accordance with all manufacturer maintenance specifications, Lessee
(i) shall keep the Equipment in good repair, working order and condition;
(ii) shall make all necessary adjustments, repairs and replacements; (iii)
shall furnish all required parts, mechanisms, devices and servicing; and (iv)
shall not use or permit the Equipment to be used for any purpose for which,
in the opinion of the manufacturer, the Equipment is not designed or
reasonably suitable. Such parts, mechanisms and devices shall immediately
become a part of the Equipment for all purposes hereunder. If the
manufacturer does not provide maintenance specifications, Lessee shall
perform all maintenance in accordance with industry standards for like
equipment.
(b) During the continuance of this Agreement and at its own
expense, Lessee shall enter into and maintain in force a contract with the
manufacturer or other qualified maintenance organization for maintenance of
each item of Equipment. Such contract as to each item shall commence upon
the Acceptance Date. Lessee shall furnish Lessor with a copy of such
contract upon demand.
(c) At the termination of this Agreement and at its expense,
Lessee shall return the Equipment to Lessor at the location within the
Continental United States designated by Lessor. Upon such return, the
Equipment shall be in the same operating order, repair, condition and
appearance as on the Acceptance Date, excepting reasonable wear and tear from
proper use thereof including all engineering changes theretofore prescribed
by the manufacturer. Lessee shall provide maintenance qualification letters
and/or arrange for and pay all costs which are necessary for the manufacturer
to accept the Equipment under contract maintenance at its then standard rates.
(d) At the termination of any Schedule, Lessee shall, at its
expense, return the Software to Lessor at the location within the Continental
United States designated by the Lessor. Upon such return, Lessee shall also
(i) delete from its systems all Software then installed, (ii) destroy all
copies or duplicates of the Software which were not returned to Lessor, and
(iii) cease using the Software altogether. Upon its receipt from Lessee,
Lessor shall be responsible to return the Software to the owner/vendor or
destroy the Software so that Lessee shall not be in breach of any software
license.
8. OWNERSHIP AND INSPECTION:
(a) The Equipment shall at all times remain the property of
Lessor or its assigns. By this Agreement, Lessee acquires no ownership
rights in the Equipment. Lessor may affix (or require Lessee to affix) tags,
decals or plates to the Equipment indicating Lessor's ownership, and Lessee
shall not permit their removal or concealment.
(b) LESSEE SHALL KEEP THE EQUIPMENT AND LESSEE'S INTEREST
UNDER THIS AGREEMENT FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES, EXCEPT
THOSE PERMITTED IN WRITING BY LESSOR OR ITS ASSIGNS.
(c) Lessor, its assigns and their agents shall have free
access to the Equipment at all reasonable times during normal business hours
for the purpose of inspecting the Equipment and for any other purpose
contemplated in this Agreement.
(d) Lessee shall immediately notify Lessor in writing of all
details concerning any damage or loss to the Equipment arising from the
alleged or apparent improper manufacture, functioning or operation of the
Equipment.
9. WARRANTIES:
(a) LESSEE ACKNOWLEDGES THAT LESSOR HAS NOT MADE ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT
TO THE EQUIPMENT, INCLUDING, WITHOUT LIMITATION, WARRANTIES RELATING TO ANY
OF THE FOLLOWING: (i) THE DESCRIPTION, CONDITION, DESIGN, QUALITY OR
PERFORMANCE OF THE EQUIPMENT; (ii) ITS MERCHANTABILITY OR FITNESS OR
SUITABILITY FOR A PARTICULAR PURPOSE WHETHER OR NOT DISCLOSED TO LESSOR; AND
(iii) DELIVERY OF THE EQUIPMENT FREE OF THE RIGHTFUL CLAIM OF ANY PERSON BY
WAY OF INFRINGEMENT OR THE LIKE. LESSOR EXPRESSLY DISCLAIMS ALL SUCH
WARRANTIES. LESSOR SHALL HAVE NO LIABILITY TO LESSEE FOR ANY CLAIM, LOSS OR
DAMAGE OF ANY KIND OR NATURE WHATSOEVER, INCLUDING SPECIAL OR CONSEQUENTIAL
DAMAGES.
(b) Lessor assigns to Lessee all assignable warranties on the
Equipment, as described in Lessor's purchase contract, which assignment shall
be effective only (i) during the Initial Period and any renewal periods
approved by Lessor in writing, and (ii) so long as no uncured Event of
Default exists.
10. NET LEASE; LESSEE'S OBLIGATIONS ABSOLUTE AND UNCONDITIONAL:
This Agreement is a "net lease" and, as between Lessor and Lessee,
Lessee shall be responsible for all costs, expenses and claims of every
nature whatsoever arising out of or in connection with or related to this
Agreement or the Equipment (such as, but not limited to, transportation in
and out, packing, installation and deinstallation, shipping and other such
charges).
Lessee agrees that its Monthly Rental and other obligations hereunder
shall be irrevocable, independent, absolute and unconditional and shall not
be subject to any abatement, reduction, recoupment, defense, offset or
counterclaim otherwise available to Lessee against Lessor; nor, except as
otherwise expressly provided herein or as agreed to by Lessor in writing,
shall this Agreement terminate for any reason whatsoever prior to the end of
the Initial Period.
11. ASSIGNMENT:
(a) LESSEE MAY NOT ASSIGN THIS AGREEMENT OR ANY OF ITS RIGHTS
HEREUNDER OR SUBLEASE THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR, except that Lessee may assign this Agreement or sublease the
Equipment to any parent or subsidiary corporation, or to a corporation which
shall have acquired all or substantially all of the property of Lessee by
merger, consolidation or purchase. NO PERMITTED ASSIGNMENT OR SUBLEASE SHALL
RELIEVE LESSEE OF ANY OF ITS OBLIGATIONS HEREUNDER.
(b) Lessor may sell and assign its rights and interests in any
Equipment and in any Equipment Schedule hereunder, to another party
("Lessor's Assignee") either outright or as collateral security for loans.
Upon notice of any such assignment and instructions from Lessor, Lessee shall
pay its Monthly Rental and perform its other obligations hereunder to the
Lessor's Assignee (or to another party designated by Lessor's Assignee).
Upon any such sale or assignment, LESSEE'S OBLIGATIONS TO LESSOR'S ASSIGNEE
UNDER THE ASSIGNED EQUIPMENT SCHEDULE SHALL BE ABSOLUTE AND UNCONDITIONAL AND
LESSEE WILL NOT ASSERT AGAINST LESSOR'S ASSIGNEE ANY CLAIM, DEFENSE OR
COUNTERCLAIMS WHICH LESSEE MIGHT HAVE AGAINST LESSOR. Lessor's Assignee
shall have all of the rights but none of the obligations of Lessor under this
Agreement. Notwithstanding any assignment by Lessor, Lessor's Assignee shall
not be deemed to have assumed or to be obligated to perform any of the
obligations of Lessor.
In connection with any assignment by Lessor of its interest in the
Equipment or this Agreement, Lessee acknowledges that the assignment will not
materially change the duty of or materially increase the burden or risk
imposed on Lessee; and Lessee waives its right, if any, to demand Lessor's
Assignee to comply with the provisions of Utah Uniform Commercial code -
Leases, Section 70A-2a-303 (2) (as it now exists or hereafter modified)
dealing with adequate assurance and assumption requirements, among other
things.
Upon any such assignment, Lessee agrees to execute (i) any document
reasonably requested by Lessor acknowledging such assignment and affirming to
Lessor's Assignee basic provisions of this Agreement and the Equipment
Schedule, and (ii) UCC-1 precautionary filings reasonably requested.
Only one executed counterpart of any Equipment Schedule shall be marked
"Original"; any other executed counterparts shall be marked "Duplicate
Original" or "Counterpart". No security interest in any Equipment Schedule
may be created through the transfer and possession of any counterpart other
than the "Original".
12. RISK OF LOSS ON LESSEE:
From and after the date that the Equipment is delivered to Lessee and
until the Equipment is returned to Lessor as provided in this Agreement,
Lessee shall bear all risk of loss, damage, theft or destruction to the
Equipment, howsoever caused. If any item of Equipment is rendered unusable
as a result of any physical damage to or destruction of the Equipment or if
any item of Equipment is lost or stolen, then:
(a) Lessee shall give Lessor immediate notice thereof, and
this Agreement as to such item shall continue in full force and effect
without any abatement of any Monthly Rental. Lessee shall determine and
notify Lessor, within fifteen (15) days after the date of occurrence of such
damage or destruction, whether such item of Equipment can be repaired.
(b) If Lessee determines that such item of Equipment can be
repaired, Lessee shall cause such item of Equipment to be promptly repaired.
(c) If Lessee determines that the item of Equipment cannot be
repaired or if the item of Equipment is lost or stolen, then at Lessor's
option, Lessee shall either (i) at its expense promptly replace such item of
Equipment with like equipment having a comparable or greater value and convey
title to such replacement to Lessor free and clear of all liens and
encumbrances, whereupon this Lease shall continue in full force and effect as
though such loss, damage, theft or destruction had not occurred; or (ii) pay
Lessor an amount equal to the Casualty Loss Value of the item of Equipment
determined under any Casualty Loss Schedule attached to the Equipment
Schedule, or if none is attached, then an amount equal to the replacement
cost of such item of Equipment.
All proceeds of insurance received by Lessor or Lessee under any
insurance policy shall be applied toward the cost of any such repair or
replacement.
13. INSURANCE:
During the continuance of this Agreement as to each Equipment Schedule,
Lessee, at its expense, shall keep in effect (a) an all risk casualty
insurance policy covering the Equipment designated in such Equipment Schedule
that includes, without limitation, coverage against extended coverage risks,
vandalism, theft and malicious mischief, for amounts not less than the
Casualty Loss Value of the item of Equipment determined under any Casualty
Loss Schedule attached to the Equipment Schedule, or if none is attached,
then for amounts not less than the replacement cost of each item of
Equipment, with Lessor and its assigns designated as insureds and loss payees
under such policy; and (b) a comprehensive general liability policy in
amounts acceptable to Lessor and that designates Lessor and its assigns as
co-insureds. All such insurance policies shall be with licensed insurance
companies acceptable to Lessor; shall prohibit cancellation or modification
thereof without at least thirty (30) days prior written notice to Lessor; and
shall provide that as to Lessor, its successors and assigns, the insurance
shall not be invalidated by any act, omission or neglect of Lessee. Lessee
shall be responsible for paying any deductibles on such policies. Lessee
shall furnish to Lessor a certificate of insurance or other evidence
satisfactory to Lessor that insurance coverage is in effect; provided,
however, that Lessor shall be under no duty either to ascertain the existence
of or to examine such insurance policy or to advise Lessee in the event such
insurance coverage shall not comply with the requirements hereof. Lessee
shall give Lessor prompt notice of any damage to, or loss of, any of the
Equipment, or any part thereof, or any personal injury or property damage
occasioned by the use of the Equipment.
14. INDEMNIFICATION:
Except for the gross negligence or willful misconduct of Lessor or as
otherwise provided herein, Lessee shall indemnify Lessor against and hold
Lessor harmless of and from any and all claims, (including without
limitation, claims involving strict or absolute liability), actions, suits,
proceedings, costs, expenses (including a reasonable attorney's fee incurred
by Lessor either in enforcing this indemnity or in defending against such
claims), damages and liabilities at law or in equity, arising out of,
connected with or resulting from this Agreement or the Equipment, including,
without limitation the delivery, possession, use, operation, condition,
lease, return, storage or disposition thereof. For purposes of this
paragraph, the term "Lessor" shall include Lessor, its successors and
assigns, shareholders, directors, officers, representatives and agents, and
the provisions of this paragraph shall survive expiration of this Agreement
with respect to events occurring prior thereto.
15. EVENTS OF DEFAULT:
The occurrence of any one or more of the following events (each an
"Event of Default") shall constitute a default under this Agreement:
(a) Lessee fails to pay any Monthly Rental when the same
becomes due and such failure shall continue uncured for ten (10) days after
written notice thereof is given to Lessee;
(b) Except as expressly provided herein, Lessee attempts to,
or does, remove, sell, assign, transfer, encumber, sublet or part with
possession of any one or more items of the Equipment, or any interest under
this Agreement, except as expressly permitted herein.
(c) Through the act or omission of Lessee, any item of
Equipment is subject to any levy, seizure, attachment, assignment or
execution; or Lessee abandons any item of Equipment;
(d) Lessee fails to observe or perform any of the other
obligations required to be observed or performed by Lessee hereunder and such
failure shall continue uncured for ten (10) days after written notice thereof
is given to Lessee.
(e) Lessee's representations and warranties made in this
Agreement or in connection herewith shall be false or misleading in any
material respect.
(f) Lessee ceases doing business as a going concern, makes an
assignment for the benefit of creditors, is insolvent, admits in writing its
inability to pay its financial obligations as they become due, files a
voluntary petition in bankruptcy, is adjudicated a bankrupt or an insolvent,
files a petition seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar arrangement
under any present or future statute, law or regulation or files an answer
admitting the material allegations of a petition filed against it in any such
proceeding, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of it or of all or any substantial part of its assets
or properties, or if it or its shareholders shall take any action looking to
its dissolution or liquidation.
(g) Within thirty (30) days after the commencement of any
proceedings against Lessee seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, such proceedings shall not have been dismissed,
or if within thirty (30) days after the appointment without Lessee's consent
or acquiescence of any trustee, receiver or liquidator of it or of all or any
substantial part of its assets and properties, such appointment shall not be
vacated.
16. REMEDIES:
Upon the occurrence of any Event of Default, Lessor shall have the
option, with or without giving notice to Lessee, to do any one or more of the
following:
(a) Lessor may enforce this Agreement according to its terms;
(b) Lessor may advance funds on Lessee's behalf to cure the
Event of Default, whereupon Lessee shall immediately reimburse Lessor
therefor, together with late charges accrued thereon;
(c) Lessor may refuse to deliver the Equipment to Lessee;
(d) By notice to Lessee, Lessor may terminate this Agreement
as to any or all Equipment Schedules;
(e) Lessee shall remain fully liable for and shall pay Lessor
for (i) all sums due and payable under the Equipment Schedule for all periods
up to and including the date on which Lessor has declared this Agreement to
be in default; (ii) all costs and expenses incurred by Lessor on account of
such default, including, but not limited to, all court costs and reasonable
attorneys' fees; and (iii) all reasonable damages as provided by law
(collectively "Lessor's Damages").
(f) Whether or not this Lease is terminated as to any or all
Equipment Schedules, Lessor may (i) take possession of any or all of the
Equipment listed on any or all Equipment Schedules, wherever situated, and
for such purpose, Lessor may enter upon any Lessee's premises without any
court order and without liability for so doing (Lessee hereby waives any
action for trespass or damages by reason of such entry or taking possession);
(ii) without removal, render the Equipment unusable and dispose of the same
on Lessee's premises; or (iii) cause Lessee (and Lessee hereby agrees) to
assemble the Equipment and either make it available to Lessor at a place
designated by Lessor or return it to Lessor as provided in this Agreement.
(g) Lessor may sue for and recover all rents and other
payments that accrue after the occurrence of the Event of Default, as the
same become due; or Lessor may recover from Lessee, as liquidated damages
("Liquidated Damages") for loss of a bargain and not as a penalty, an amount
equal to the present value of all unpaid Rentals required to be paid by
Lessee during the Initial Period or any renewal period then in effect,
discounted at the rate of five percent (5%) per annum, which payment shall
become immediately due and payable;
(h) If Lessee breaches any of its obligations under Section 7(d)
of this Agreement, Lessee shall be liable to Lessor for additional damages in
an amount not less than the original cost paid by Lessor for the Software,
and at Lessor's option, Lessor shall be entitled to injunctive relief.
(i) Lessor may sell, dispose of, hold, use or lease any
Equipment as Lessor in its sole discretion may determine without any duty,
except as provided below, to account to Lessee. Lessor may purchase at any
such sale, and Lessor shall not be obligated to give preference to the sale,
lease or other disposition of the Equipment over the sale, lease or other
disposition of similar equipment owned or leased by or through Lessor.
If Lessee shall have paid to Lessor all of the Liquidated Damages, then
Lessor shall pay to Lessee, promptly after receipt thereof, all rentals or
proceeds received from (a) the reletting of the Equipment during the
remainder of the Initial Period or any renewal periods then in effect (after
deduction of an amount equal to all Lessor's Damages); or (b) any sale of the
Equipment occurring during the remainder of the Initial Period or any renewal
periods then in effect less an amount equal to the estimated fair market
value of the Equipment at the end of the Initial Period or renewal period
then in effect (after deduction of an amount equal to all Lessor's Damages),
said amount never to exceed the amount of the Liquidated Damages paid by
Lessee. Any remaining amounts from reletting or sale shall be retained by
Lessor.
Lessor may exercise any and all rights and remedies available at law or
in equity, including those available under the Uniform Commercial Code
(including the section thereof dealing with Leases) as enacted in Utah or in
any state in which the Equipment is located or other applicable law.
The rights and remedies afforded Lessor hereunder shall not be deemed
to be exclusive, but shall be in addition to any rights or remedies provided
by law. Lessor's failure promptly to enforce any right hereunder shall not
operate as a waiver of such right, and Lessor's waiver of any default shall
not constitute a waiver of any subsequent or other default. Lessor may
accept late payments or partial payments of amounts due under this Agreement
and may delay enforcing any of Lessor's rights hereunder without losing or
waiving any of Lessor's rights under this Agreement.
17. TAX INDEMNITY:
This Agreement is entered into on the basis that Lessor shall be the
owner of the Equipment for federal and state income tax purposes and entitled
to such deductions, credits and other benefits as are provided an owner of
personal property, including but not limited to (i) the maximum Modified
Accelerated Cost Recovery System deductions ("depreciation") for the MACRS
Property Class life under the Internal Revenue Code of 1986 ("Code"); and
(ii) interest deductions in the full amount of any interest paid or accrued
with respect to any loan made to or assumed by Lessor or its assigns to
finance the purchase of the Equipment (collectively referred to herein as the
"Tax Benefits").
If, with respect to any item of Equipment, Lessor or its assigns shall
not have or shall lose the right to claim all or any portion of the Tax
Benefits or if all or any portion of the Tax Benefits shall be disallowed or
recaptured (hereinafter referred to as "Tax Benefit Loss") due to the acts or
omission of Lessee, then the following provisions shall be applicable:
(a) Subject to the exceptions set forth below, Lessee shall,
within thirty (30) days after written notice from Lessor that a Tax Benefit
Loss has occurred, pay to Lessor at Lessor's option, either a lump-sum
payment or an increase to the remaining monthly payments due under the
Equipment Schedule in an amount which, after taking into account the effects
of interest, penalties and additional taxes payable by Lessor as a result of
the Tax Benefit Loss and the receipt of payment hereunder, will cause
Lessor's net effective after-tax return over the term of the Equipment
Schedule to equal the net effective after-tax return which would have been
available if Lessor had been entitled to the utilization of all the Tax
Benefits.
(b) For purposes hereof a Tax Benefit Loss shall occur upon
the earliest of (i) the payment by Lessor to the Internal Revenue Service or
the applicable state revenue office of the tax increase resulting from such
Tax Benefit Loss, or (ii) the adjustment of the tax return of Lessor to
reflect such Tax Benefit Loss.
(c) Notwithstanding the foregoing, Lessor shall not be
entitled to a payment hereunder on account of any Tax Benefit Loss directly
attributable to any of the following: (i) any act on the part of Lessor which
causes a Tax Benefit Loss; (ii) the failure of Lessor to have sufficient
taxable income or tax liability to utilize such Tax Benefits; or (iii) the
happening of any other event with respect to Lessor (such as disqualifying
change in Lessor's business or characterization of Lessor as a personal
holding company) which causes a Tax Benefit Loss.
(d) This Section is expressly made for the benefit of, and
shall be enforceable, by Lessor, any person, firm, corporation or other
entity to which Lessor transfers title to all or a portion of the Equipment
and their successors and assigns (collectively, the "Owner"). For purposes
hereof, the term "Owner" shall include an affiliated group (within the
meaning of the Code) of which a person or entity is a member for any year in
which a consolidated income tax return is filed for such affiliated group.
Lessee shall indemnify and hold harmless any such Owner from any Tax Benefit
Loss on the same terms and to the same extent as it would have indemnified
Lessor and held Lessor harmless as if said Owner were the Lessor hereunder.
All of Lessor's rights and privileges arising from the indemnities contained
herein shall survive the expiration or other termination of this Lease.
18. COVENANT OF QUIET POSSESSION:
Lessor agrees that so long as no Event of Default has occurred and is
continuing, Lessee shall be entitled to quietly possess the Equipment subject
to and in accordance with the terms and conditions of this Agreement.
19. GENERAL:
(a) Integration. All schedules or riders to this Agreement;
Equipment Schedules executed hereunder; schedules or riders attached to
Equipment Schedules; other documents referred to in Equipment Schedules and
Acceptance Certificates, whether they are signed before, on or after the date
of this Agreement, are incorporated into this Agreement by this reference.
Such documents appertaining to any Equipment Schedule and this Agreement
constitute the entire agreement between the parties with respect to the items
of Equipment listed on such Equipment Schedule.
(b) Modification. This Agreement may not be amended or
modified except by a writing signed by a duly authorized representative of
each party, but no such amendment or modification needs further consideration
to be binding. Notwithstanding the foregoing, Lessee authorizes Lessor to
amend any Equipment Schedule to identify more accurately the Equipment
(including, without limitation, supplying serial numbers or other identifying
data), and such amendment shall be binding on Lessor and Lessee unless Lessee
objects thereto within 15 days after receiving notice of the amendment from
Lessor.
(c) Interpretation. The provisions of this Agreement shall be
deemed to be independent and severable. The invalidity or partial invalidity
of any one provision or portion of this Agreement under the laws of any
jurisdiction shall not affect the validity or enforceability of any other
provisions of this Agreement. The captions and headings set forth herein are
for convenience of reference only and shall not define or limit any of the
terms hereof.
(d) Notices. Notices hereunder shall be in writing and
addressed to the other party at the address herein or such other address
provided by notice hereunder and shall be effective (i) upon the next
business day, if sent by guaranteed overnight express service (such as
federal express); (ii) on the same day, if personally delivered; or (iii)
three days after mailing, if sent by certified or registered U.S. mail,
postage prepaid and addressed to the other party.
(e) Governing Law. This Lease shall be governed by and shall
be interpreted pursuant to the laws of the State of Utah.
(f) Binding Effect. The provisions of this Agreement shall
inure to the benefit of and shall bind Lessor and Lessee and their respective
permitted successors and assigns.
(g) Financing Statements. Lessee shall sign and deliver to
Lessor one or more financing statements, supplements thereto and other
instruments in order to establish, perfect, extend and/or enforce the
parties' interests in the Equipment and under this Agreement. Lessee shall
pay all costs of filing such statements. A photocopy of this Agreement shall
be sufficient as, and may be filed as, an original financing statement. If
Lessee defaults hereunder, then Lessor shall automatically be constituted as
Lessee's attorney-in-fact for the purpose of carrying out the provisions of
this paragraph.
(h) Opinion of Counsel. Upon request, Lessee shall provide to
Lessor an opinion of its counsel as to Lessee's legal standing, the
authorization and execution of this Agreement and other documents, the
enforceability of this Agreement against Lessee, and other matters reasonably
requested.
(i) Audited Financial Statements. Upon request, Lessee shall
provide to Lessor a copy of its annual audited financial statements.
(j) Provisional Security Interest. In the event a court of
competent jurisdiction or other governing authority shall determine that this
Agreement is not a "true lease" or that Lessor (or its assigns) does not hold
legal title to or is not the owner of the Equipment, then this Agreement
shall be deemed to be a security agreement with Lessee, as debtor, having
granted to Lessor, as secured party, a security interest in the Equipment
effective the date of this Agreement; and Lessor shall have all of the
rights, privileges and remedies of a secured party under the Utah Uniform
Commercial Code.
(k) Lessee's Options at End of Initial Period. At the end of the
Initial Period of any Equipment Schedule, or upon any expiration of any
renewal or extension thereof as provided for in option (2) herein or
otherwise, Lessee shall, provided at least one hundred eighty (180) days
prior written notice is received by Lessor from Lessee via certified mail, do
one of the following: (1) purchase the Equipment for a mutually agreeable
price, (2) extend the Lease for twelve (12) additional months at the rate
specified on the respective Equipment Schedule, or (3) return the Equipment
to Lessor at Lessee's expense to a destination within the continental United
States specified by Lessor and terminate the Equipment Schedule; provided,
however, that for option (3) to apply, all accrued but unpaid late charges,
interest, taxes, penalties, and any and all other sums due and owing under
the Equipment Schedule must first be paid in full, the provisions of Sections
6(d) and (e) and 7(c) and (d) hereof must be specifically complied with, and
Lessee must enter into a new Equipment Schedule with Lessor to lease
Equipment which replaces the Equipment listed on the old Equipment Schedule.
With respect to options (1) and (3), each party shall have the right in its
absolute and sole discretion to accept or reject any terms of purchase or of
any new Equipment Schedule, as applicable. In the event Lessor and Lessee
have not agreed to either option (1) or (3) by the end of the Initial Period
or any renewal or extension period then effect, or if Lessee fails to give
written notice of its option via certified mail at least one hundred eighty
(180) days prior to the termination of the Initial Period or any renewal or
extension period then in effect, then option (2) shall apply at the end of
the Initial Period or any renewal or extension period then in effect.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement on
the day and year first above written.
LESSOR:
MATRIX FUNDING CORPORATION
BY: ________________________________
TITLE: _____________________________
LESSEE:
ELEXSYS INTERNATIONAL, INC.
BY: ________________________________
TITLE: _____________________________
LEASE AGREEMENT
1. Parties. This Lease, dated for reference purposes only, March 11,
1996, is made by and between South Bay/Fortran, a California limited
partnership, ("Landlord"), and Elexsys International, Inc., a
California corporation ("Tenant").
2. Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, upon the terms and conditions hereinafter set forth,
those certain premises (the "Premises") presently known, as of the date
of this Lease, as 4405 Fortran Court, situated in the City of San
Jose, County of Santa Clara, State of California, described as
follows: for purposes of this Lease, the rentable square footage area
of the Building shall be deemed to be approximately sixty-six thousand
three hundred sixty-eight (66,368) square feet (the "Building"), as
shown cross-hatched on the site plan (the "Site Plan") attached hereto
as Exhibit A. The Building is located on a larger parcel (the
"Parcel") containing other buildings (the "Buildings") as shown on the
Site Plan, which Parcel is described in Exhibit B attached hereto.
In the event Landlord subdivides the Parcel in the future into two (2)
or more legal parcels, the term "Parcel" shall thereafter refer to the
legal parcel on which the Premises are located. Except as provided in
Exhibit C, Landlord shall not be required to make any alterations,
additions or improvements to the Premises and the Premises shall be
leased to Tenant in an "as-is" condition; provided, however, the
Premises will be delivered to Tenant in good condition and repair,
including the roof and structural integrity of the Building, and the
Premises as they exist on the date of execution of this Lease
(exclusive of any Tenant Improvements constructed pursuant to Exhibit
C), will be in compliance with all governmental codes, ordinances and
statutes, including Americans With Disabilities Act (ADA)
3. Term. The term of this Lease ("Lease Term") shall be for seven (7)
years, commencing on July 1, 1996, (the "Commencement Date") and ending
on June 30, 2003, unless sooner terminated pursuant to any provision
hereof. Notwithstanding said scheduled Commencement Date, if for any
reason Landlord cannot deliver possession of the Premises to Tenant on
said date, Landlord shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease or the obligations
of Tenant hereunder, but in such case Tenant shall not be obligated to
pay rent until possession of the Premises is tendered to Tenant and the
commencement and termination dates of this Lease shall be revised to
conform to the date of Landlord's delivery of possession. In the event
Landlord shall permit Tenant to occupy the Premises prior to the
Commencement Date, such occupancy shall be subject to all the
provisions of this Lease, including the obligation to pay the Monthly
Installment of rent, and Common Area Charges.
4. Rent.
A. Time of Payment. Tenant shall pay to Landlord as rent for the
Premises the sum specified in Paragraph 4.B below (the "Monthly
Installment") each month in advance on the first day of each
calendar month, without deduction or offset, prior notice or
demand, commencing on the Commencement Date and continuing
through the term of this Lease, together with such additional
rents as are payable by Tenant to Landlord under the terms of
this Lease. The Monthly Installment for any period during the
Lease Term which period is less than one (1) full month shall be
a prorata portion of the Monthly Installment based upon a thirty
(30) day month.
B. Monthly Installment
(1) Initial Monthly Installment. The initial Monthly
Installment of rent payable each month during the first (1st)
through the twenty-fourth (24th) month of the Lease Term shall be
the sum of Forty-six Thousand Four Hundred Fifty-eight and
no/100ths Dollars per month ($46,458.00).
(2) Rent Adjustments.
(a) Commencing with the twenty-fifty (25th) month of the Lease
Term, the Monthly Installment of rent shall be increased to
Forty-nine Thousand Seven Hundred Seventy-six and no/100ths
Dollars ($49,776.00);
(b) commencing with the forty-ninth (49th) month of the Lease
Term, the Monthly Installment of rent shall be increased to
Fifty-three Thousand Ninety-four and no/100ths Dollars
($53,094.00); and,
(c) commencing with the seventy-third (73rd) month of the Lease
Term, the Monthly Installment of rent shall be increased to
Fifty-six Thousand Four Hundred Thirteen and no/100ths Dollars
($56,413.00).
C. Late Charge. Tenant acknowledges that late payment by Tenant to
Landlord of rent and 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, and late charges which may be imposed on Landlord by the
terms of any mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or any other sum due from
Tenant shall not be received by Landlord within ten (10) days
after such amount shall be due, Tenant shall pay to Landlord, as
additional rent, a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of
such late charge by Landlord shall in no event constitute a
waiver of Tenant's default with respect to such overdue amount,
nor prevent Landlord from exercising any of its other rights and
remedies granted hereunder.
D. Additional Rent. All taxes, insurance premiums, Common Area
Charges, late charges, costs and expenses which Tenant is
required to pay hereunder, together with all interest and
penalties that may accrue thereon in the event of Tenant's
failure to pay such amounts, and all reasonable damages, costs
and attorneys' fees and expenses which Landlord may incur by
reason of any default of Tenant or failure on Tenant's part to
comply with the terms of this Lease, shall be deemed to be
additional rent ("Additional Rent") and shall be paid in addition
to the Monthly Installment of rent, and, in the event of
nonpayment of the Monthly Installment of rent.
E. Place of Payment. Rent shall be payable in lawful money of the
United States of America to Landlord at 511 Division Street,
Campbell CA, or to such other person (s) or at such other place
(s) as Landlord may designate in writing.
F. Advance Payment. Concurrently with the execution of this Lease,
Tenant shall pay to Landlord the sum of Forty-six Thousand Four
Hundred Fifty-eight and no/100ths Dollars ($46,458.00) to be
applied to the Monthly Installment of rent first accruing under
this Lease.
5. Security Deposit. Tenant shall deposit the sum of Fifty-six Thousand
Four Hundred Thirteen and no/100ths Dollars ($56,413.00) (the "Security
Deposit") upon execution of this Lease, to secure the faithful
performance by Tenant of each term, covenant and condition of this
Lease. If Tenant shall at any time fail to make any payment or fail to
keep or perform any term, covenant or condition on its part to be made
or performed or kept under this Lease, Landlord may, but shall not be
obligated to and without waiving or releasing Tenant from any
obligation under this Lease, use, apply or retain the whole or any part
of the Security Deposit (A) to the extent of any sum due to Landlord;
(B) to make any required payment on Tenant's behalf; or (C) to
compensate Landlord for any loss, damages, attorneys' fees or expense
sustained by Landlord due to Tenant's default. In such event, Tenant
shall, within five (5) days of written demand by Landlord, remit to
Landlord sufficient funds to restore the Security Deposit to its
original sum. No interest shall accrue on the Security Deposit.
Landlord shall not be required to keep the Security Deposit separate
from its general funds. Should Tenant comply with all the terms,
covenants, and conditions of this Lease and at the end of the term of
this Lease leave the Premises in the condition required by this Lease,
then said Security Deposit, less any sums owing to Landlord, shall be
returned to Tenant within thirty (30) days after the termination of
this Lease and vacancy of the Premises by Tenant.
6. Use of Premises. Tenant shall use the Premises only in conformance
with applicable governmental laws, regulations, rules and ordinances
for the purpose of general office, research and development, light
manufacturing, assembly, warehousing and distribution of electronic
products, and for no other purpose. Tenant shall indemnify, protect,
defend, and hold Landlord harmless against any loss, expense, damage,
attorneys' fees or liability arising out of the failure of Tenant to
comply with any applicable law. Tenant shall not commit or suffer to
be committed, any waste upon the Premises, or any nuisance, or other
acts or things which may disturb the quiet enjoyment of any other
tenant in the buildings adjacent to the Premises, or allow any sale by
auction upon the Premises, or allow the Premises to be used for any
unlawful purpose, or place any loads upon the floor, walls or ceiling
which endanger the structure, or place any harmful liquids in the
drainage system of the Building. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises
outside of the Building proper, except in trash containers placed
inside exterior enclosures designated for that purpose by Landlord. No
materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon
or permitted to remain on any portion of the Premises outside of the
Building proper. Tenant shall strictly comply with the provisions of
Paragraph 39 below.
7. Taxes and Assessments.
A. Tenant's Property. Tenant shall pay before delinquency any and
all taxes and assessments, license fees and public charges
levied, assessed or imposed upon or against Tenant's fixtures,
equipment, furnishings, furniture, appliances and personal
property installed or located on or within the Premises. Tenant
shall cause said fixtures, equipment, furnishings, furniture,
appliances and personal property to be assessed and billed
separately from the real property of Landlord. If any of
Tenant's said personal property shall be assessed with Landlord's
real property, Tenant shall pay Landlord the taxes attributable
to Tenant within ten (10) days after receipt of a written
statement from Landlord setting forth the taxes applicable to
Tenant's property.
B. Property Taxes. Tenant shall pay, as additional rent, its Pro
Rata Share (as defined below) of all Property Taxes levied or
assessed with respect to the land comprising the Parcel and with
respect to all buildings and improvements located on the Parcel
which become due or accrue during the term of this Lease. Tenant
shall pay such Property Taxes to Landlord within twenty (20) days
after receipt of billing. Provided that Landlord bills Tenant at
least thirty (30) days prior to the delinquency date of such
Property Taxes, Tenant shall pay such Property Taxes to Landlord
at least ten (10) days prior to the delinquency date, and if
Tenant fails to do so, Tenant shall reimburse Landlord, on
demand, for all interest, late fees and penalties that the taxing
authority charges Landlord. In the event Landlord's mortgagee
requires an impound for Property Taxes, then on the first day of
each month during the Lease Term, Tenant shall pay Landlord one
twelfth (1/12) of its annual share of such Property Taxes.
Tenant's liability hereunder shall be prorated to reflect the
Commencement and termination dates of this Lease. Tenant's share
of the Property Taxes shall be determined by Landlord from the
respective valuation assigned in the Assessor's worksheet or such
other information as may be reasonably available. Landlord's
reasonable determination thereof, in good faith, shall be
conclusive.
As used in this Lease, the term "Tenant's Pro Rata Share" shall
mean a fraction, expressed as a percentage, the numerator of
which is the number of square feet of floor space contained in
the Premises and the denominator of which is the number of square
feet of floor space contained in all of the Buildings located on
the Parcel. As of the Commencement Date, Tenant's Pro Rata Share
is twenty-two and forty-eight hundredths percent (22.48%).
Notwithstanding the foregoing, in the event of a reassessment of
the Property Taxes due to the voluntary sale of the Premises
which sale occurs any time after the expiration of the second
year of the Lease Term, Tenant shall not be responsible to pay
its Pro Rata Share of any increase in Property Taxes due to such
sale to the extent such increase exceeds twenty-five percent
(25%) of the Property Tax bill assessed immediately prior to the
sale of the Premises. This cap shall not apply to any sale that
occurs during the first two (2) years of the Lease Term or any
time after the initial Lease Term expires, and shall not apply
for any other reassessment of the property due to construction of
tenant improvements or any other increase in value of the
property. Also, this cap shall not apply to any increase in real
property taxes that result from a foreclosure sale, deed in lieu
of foreclosure or other involuntary transfer of the Premises.
For the purpose of this Lease, "Property Taxes" means and
includes all taxes, assessments (including, but not limited to,
assessments for public improvements or benefits), taxes based on
vehicles, utilizing parking areas, taxes based or measured by the
rent paid, payable or received under this Lease, taxes on the
value, use, or occupancy of the Premises, the Buildings and/or
the Parcel, Environmental Surcharges, and all other governmental
impositions and charges of every kind and nature whatsoever,
whether or not customary or within the contemplation of the
parties hereto and regardless of whether the same shall be
extraordinary or ordinary, general or special, unforeseen or
foreseen, or similar or dissimilar to any of the foregoing which,
at any time during the Lease Term, shall be applicable to the
Premises, the Buildings and/or the Parcel or assessed, levied or
imposed upon the Premises, the Buildings and/or the Parcel, or
become due and payable and a lien or charge upon the Premises,
the Buildings and/or the Parcel, or any part thereof, under or by
virtue of any present or future laws, statutes, ordinances,
regulations or other requirements of any governmental authority
whatsoever. The term "Environmental Surcharges" shall mean and
include any and all expenses, taxes, charges or penalties imposed
by the Federal Department of Energy, the Federal Environmental
protection Agency, the Federal Clean Air Act, or any regulations
promulgated thereunder or any other local, state or federal
governmental agency or entity now or hereafter vested with the
power to impose taxes, assessments, or other types of surcharges
as a means of controlling or abating environmental pollution or
the use of energy. The term "Property Taxes" shall not include
any federal, state or local net income, estate, or inheritance
tax imposed on Landlord.
C. Other Taxes: Tenant shall, as additional rent, pay or reimburse
Landlord for any tax based upon, allocable to, or measured by the
area of the Premises or the Buildings or the Parcel; or by the
rent paid, payable or received under this Lease; any tax upon or
with respect to the possession, leasing, operation, any tax upon
or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy of
the Premises or any portion thereof; any privilege tax, excise
tax, business and occupation tax, gross receipts tax, sales
and/or use tax, water tax, sewer tax, employee tax, occupational
license tax imposed upon Landlord or Tenant with respect to the
Premises; any tax upon this transaction or any document to which
Tenant is a party creating or transferring an interest or an
estate in the Premises.
8. Insurance.
A. Indemnity. Tenant agrees to indemnify, protect and defend
Landlord against and hold Landlord harmless from any and all
claims, causes of action, judgements, obligations or liabilities,
and all reasonable expenses incurred in investigating or
resisting the same (including reasonable attorneys' fees), on
account of, or arising out of, the operation, maintenance, use or
occupancy of the Premises and all areas appurtenant thereto.
This Lease is made on the express understanding that Landlord
shall not be liable for, or suffer loss by reason of, injury to
person or property, from whatever cause (except for active
negligence or willful misconduct of Landlord), which in any way
may be connected with the operation, use or occupancy of the
Premises specifically including, without limitation, any
liability for injury to the person or property of Tenant, its
agents, officers, employees, licensees and invitees.
B. Liability Insurance. Tenant shall, at Tenant's expense, obtain
and keep in force during the term of this Lease a policy of
comprehensive public liability insurance insuring Landlord and
Tenant against claims and liabilities arising out of the
operation, use, or occupancy of the Premises and all areas
appurtenant thereto, including parking areas. Such insurance
shall be in an amount of not less than Three Million Dollars
($3,000,000.00) for bodily injury or death as a result of any one
occurrence and Five Hundred Thousand Dollars ($500,000.00) for
damage to property as a result of any one occurrence. The
insurance shall be with companies approved by Landlord, which
approval Landlord agrees not to withhold unreasonably. Tenant
shall deliver to Landlord, prior to possession, and at least
thirty (30) days prior to the expiration thereof, a certificate
of insurance evidencing the existence of the policy required
hereunder and such certificate shall certify that the policy (1)
names Landlord as an additional insured, (2) shall not be
cancelled or altered without thirty (30) days prior written
notice to Landlord, (3) insures performance of the indemnity set
forth in Paragraph 8.A above, (4) the coverage is primary and any
coverage by Landlord is in excess thereto and (5) contains a
cross-liability endorsement. Landlord may maintain a policy or
policies of comprehensive general liability insurance insuring
Landlord (and such others as are designated by Landlord), against
liability for personal injury, bodily injury, death and damage to
property occurring or resulting from an occurrence in, on or
about the Premises or the Common Area, with such limits of
coverage as Landlord may from time to time determine are
reasonably necessary for its protection. The cost of any such
liability insurance maintained by Landlord shall be a Common Area
Charge and Tenant shall pay, as additional rent, its share of
such cost to Landlord as provided in Paragraph 12 below.
C. Property Insurance. Landlord shall obtain and keep in force
during the term of this Lease a policy or policies of insurance
covering loss or damage to the Premises and the Buildings, in the
amount of the full replacement value thereof, providing
protection against those perils included within the
classification of "all risk" insurance, plus a policy of rental
income insurance in the amount of one hundred percent (100%) of
twelve (12) months rent (including, without limitation, sums
payable as Additional Rent), plus, at Landlord's option, flood
insurance and earthquake insurance, and any other coverages which
may be required from time to time by Landlord's mortgagee.
Tenant shall have no interest in nor any right to the proceeds of
any insurance procured by Landlord on the Premises. Tenant
shall, within twenty (20) days after receipt of billing, pay to
Landlord as additional rent, the full cost of such insurance
procured and maintained by Landlord. Tenant acknowledges that
such insurance procured by Landlord shall contain a deductible
which reduces Tenant's cost for such insurance and, in the event
of loss or damage, Tenant shall be required to pay to Landlord
the amount of such deductible.
D. Tenant's Insurance. Release of Landlord. Tenant acknowledges
that the insurance to be maintained by Landlord on the Premises
pursuant to Subparagraph C above will not insure any of Tenant's
property. Accordingly, Tenant, at Tenant's own expense, shall
maintain in full force and effect on all of its fixtures,
equipment, leasehold improvements and personal property in the
Premises, a policy of "All Risk' coverage insurance to the extent
of at least ninety percent (90%) of their insurable value.
Tenant hereby releases Landlord, and its partners, officers,
agents employees and servants from any and all claims, demands,
losses, expenses or injuries to the Premises or to the
furnishings, fixtures, equipment, inventory or other personal
property of Tenant in, about, or upon the Premises, which are
caused by perils, events or happenings where the same are covered
by the insurance required by this Lease or which are the subject
of insurance carried by Tenant and in force at the time of such
loss.
9. Utilities. Tenant shall pay for all water, gas, light, heat, power,
electricity, telephone, trash pick-up, sewer charges and all other
services supplied to or consumed on the Premises, and all taxes and
surcharges thereon. In addition, the cost of any utility services
supplied to the Common Area or not separately metered to the Premises
shall be a Common Area Charge and Tenant shall pay its share of such
costs to Landlord as provided in Paragraph 12 below.
10. Repairs and Maintenance.
A. Landlord's Repairs. Subject to provisions of Paragraph 16,
Landlord shall keep and maintain the exterior roof, structural
elements and exterior walls of the Building in good order and
repair. Landlord shall not, however, be required to maintain,
repair or replace the interior surface of exterior walls, nor
shall Landlord be required to maintain, repair or replace
windows, doors, skylights or plate glass. Landlord shall have no
obligation to make repairs under this Subparagraph until a
reasonable time after receipt of written notice from Tenant of
the need for such repairs. Tenant shall reimburse Landlord, as
additional rent, within fifteen (15) days after receipt of
billing, for the cost of such repairs and maintenance which are
the obligation of Landlord hereunder, provided however, that
Tenant shall not be required to reimburse Landlord for the cost
of maintenance and repairs of the structural elements of the
Building unless such maintenance or repair is required because of
the negligence or willful misconduct of Tenant or its employees,
agents or invitees. As used herein, the term "structural
elements of the building" shall mean and be limited to the
foundation, footings, floor slab (but not flooring), structural
walls, and roof structure (but not roofing or roof membrane).
Notwithstanding anything itn the foregoing to the contrary,
Tenant shall not be responsible to reimburse Landlord for the
cost of any roof replacement during the first two (2) years of
the Lease Term; however, if, at any time after the expiration of
the second (2nd) year of the Lease Term, throughout the balance
of the term of this Lease or any extension thereof, the roof
membrane requires replacement, Landlord shall perform such
replacement and Tenant shall pay to Landlord, as Additional Rent,
a fraction of the cost of such replacement, which fraction shall
have as its numerator the number of calendar months remaining in
the Lease Term at the time of such replacement and shall have as
its denominator 240 months. If Tenant exercises any option to
extend the term of this Lease, then at the commencement of any
such option term, Tenant shall pay to Landlord an additional
fraction of the cost of such replacement, which fraction shall
have as its denominator the number of months in the option term
in question, and shall have as its denominator 240 months. All
payments required of Tenant under this Subparagraph 10.A. shall
be made within thirty (30) days after receipt of billing.
B. Tenant's Repairs. Except as expressly provided in Subparagraph A
above, Tenant shall, at its sole cost, keep and maintain the
entire Premises and every part thereof, including without
limitation, the windows, window frames, plate glass, glazing,
skylights, truck doors, doors and all door hardware, the walls
and partitions, and the electrical, plumbing, lighting, heating,
ventilating and air conditioning systems and equipment in good
order, condition and repair. The term "repair' shall include
replacements, restorations and/or renewals when necessary as well
as painting. Tenant's obligation shall extend to all
alterations, additions and improvements to the Premises, and all
fixtures and appurtenances therein and thereto. Tenant shall, at
all times during the Lease Term, have in effect a service
contract for the maintenance of the heating, ventilating and air
conditioning ("HVAC") equipment with an HVAC repair and
maintenance contractor approved by Landlord. The HVAC service
contract shall provide for periodic inspection and servicing at
least once every three (3) months during the term hereof, and
Tenant shall provide Landlord with a copy of such contract and
all periodic service reports.
Should Tenant fail to make repairs required of Tenant hereunder
forthwith upon five (5) days notice from Landlord or should
Tenant fail thereafter to diligently complete the repairs,
Landlord, in addition to all other remedies available hereunder
or by law and without waiving any alternative remedies, may make
the same, and in that event, Tenant shall reimburse Landlord as
additional rent for the cost of such maintenance or repairs
within five (5) days of written demand by Landlord.
Landlord shall have no maintenance or repair obligations
whatsoever with respect to the Premises except as expressly
provided in Paragraphs 10.A and 11. Tenant hereby expressly
waives the provisions of Subsection 1 of Section 1932 and
Sections 1941 and 1942 of the Civil Code of California and all
rights to make repairs at the expense of Landlord as provided in
Section 1942 of said Civil Code. There shall be no allowance to
Tenant for 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 or the failure to make,
any repairs, alterations, decorations, additions or improvements
in or to any portion of the Premises or the Building or Common
Area (or any of the areas used in connection with the operation
thereof, or in or to any fixtures, appurtenances or equipment),
or by reason of the negligence of Tenant or any other tenant or
occupant of the Parcel. In no event shall Landlord be
responsible for any consequential damages arising or alleged to
have arisen from any of the foregoing matters. Tenant hereby
agrees that Landlord shall not be liable for injury to Tenant's
business or any loss of income therefrom or for damage to the
goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers, or any other person in or about
the Premises, the Building, or the Common Area, nor shall
Landlord be liable for injury to the person of Tenant, Tenant's
employees, agents or contractors 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, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause,
whether the said damage or injury results from any other cause,
whether the said damage or injury results from conditions arising
upon the Premises or upon other portions of the Building, 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
inaccessible to Tenant. Landlord shall not be liable for any
damages arising from any act or neglect of any other tenant, if
any, of the Building or the Parcel.
11. Common Area. Subject to the terms and conditions of this Lease and
such rules and regulations as Landlord may from time to time prescribe,
Tenant and Tenant's employees, invitees and customers shall, in common
with other occupants of the Parcel, and their respective employees,
invitees and customers, and others entitled to the use thereof, have
the nonexclusive right to use the access roads, parking areas and
facilities provided and designated by Landlord for the general use and
convenience of the occupants of the Parcel, which areas and facilities
are referred to herein as "Common Area. This right shall terminate
upon the termination of this Lease. Landlord reserves the right from
time to time to make changes in the shape, size, location, amount and
extent of the Common Area. Landlord further reserves the right to
promulgate such reasonable rules and regulations relating to the use of
the Common Area, and any part or parts thereof, as Landlord may deem
appropriate for the best interest of the occupants of the Parcel. The
rules and regulations shall be binding upon Tenant upon delivery of a
copy of them to Tenant, and Tenant shall abide by them and cooperate
in their observance. Such rules and regulations may be amended by
Landlord from time to time, with or without advance notice, and all
amendments shall be effective upon delivery of a copy of them to
Tenant. Tenant shall have the non-exclusive use of no more than two
hundred fifty (250) of the parking spaces in the Common Area as
designated from time to time by Landlord. Tenant shall not at any time
park or permit the parking of Tenant's trucks or other vehicles, or the
trucks or other vehicles of others, adjacent to loading areas so as to
interfere in any way with the use of such areas, nor shall Tenant at
any time park or permit the parking of Tenant's vehicles or trucks, or
the vehicles or trucks of Tenant's suppliers or others, in any portion
of the Common Area not designated by Landlord for such use by Tenant.
Tenant shall not abandon any inoperative vehicles or equipment on any
portion of the Common Area. Tenant shall make no alterations,
improvements or additions to the Common Area.
Landlord shall operate, manage, insure, maintain and repair the Common
Area in good order, condition and repair. The manner in which the
Common Area shall be maintained and the expenditures for such
maintenance shall be at the discretion of Landlord. The cost of such
repair, maintenance, operation, insurance and management, including
without limitation, maintenance and repair of landscaping, irrigation
systems, paving, sidewalks, fences, and lighting, shall be a Common
Area Charge and Tenant shall pay to Landlord its share of such costs as
provided in Paragraph 12 below.
12. Common Area Charges. Tenant shall pay to Landlord, as additional rent,
upon demand but not more often than once each calendar month, an amount
equal to its Pro Rata Share of the Common Area Charges as defined in
Paragraphs 8.C, 9, 11 of this Lease. Tenant acknowledges and agrees
that the Common Area Charges shall include an additional five percent
(5%) of the actual expenditures in order to compensate Landlord for
accounting, management and processing services.
13. Alterations. Tenant shall not make, or suffer to be made, any
alterations, improvements or additions in, on, about or to the Premises
or any part thereof, without the prior written consent of Landlord and
without a valid building permit issued by the appropriate governmental
authority. As a condition to giving such consent, Landlord may require
that Tenant agree to remove any such alterations, improvements or
additions at the termination of this Lease, and to restore the Premises
to their prior condition. Unless Landlord requires that Tenant remove
any such alterations, improvement or addition, any alteration, addition
or improvement to the Premises, except movable furniture and trade
fixtures not affixed to the Premises, shall become the property of
Landlord upon termination of the Lease and shall remain upon and be
surrendered with the Premises at the termination of this Lease.
Without limiting the generality of the foregoing, all heating,
lighting, electrical (including all wiring, conduit, outlets, drops,
buss ducts, main and subpanels), air conditioning, partitioning,
drapery, and carpet installations made by Tenant regardless of how
affixed to the Premises, together with all other additions, alterations
and improvements that have become an integral part of the Building,
shall be and become the property of the Landlord upon termination of
the Lease, and shall not be deemed trade fixtures, and shall remain
upon and be surrendered with the Premises at the termination of this
Lease.
If, during the term hereof, any alteration, addition or change of any
sort to all or any portion of the Premises is required by law,
regulation, ordinance or order of any public agency, Tenant shall
promptly make the same at its sole cost and expense. If during the
term hereof, any alteration, addition, or change to the Common Area is
required by law, regulation, ordinance or order of any public agency,
Landlord shall make the same and the cost of such alteration, addition
or change shall be a Common Area Charge and Tenant shall pay its share
of said cost to Landlord as provided in Paragraph 12 above.
14. Acceptance of the Premises. By entry and taking possession of the
Premises pursuant to this Lease, Tenant accepts the Premises as being
in good and sanitary order, condition and repair and accepts the
Premises in their condition existing as of the date of such entry, and
Tenant further accepts the tenant improvements to be constructed by
Landlord, if any, as being completed in accordance with the plans and
specifications for such improvements, except for punch list items.
Tenant shall have thirty (30) days after it has taken possession of the
Premises to notify Landlord of any problems needing correction with
respect to the HVAC, plumbing, and electrical, excluding any work done
by Tenant or its contractors, employees or agents in retrofitting the
Premises to suit its specific requirements. Tenant acknowledges that
neither the Landlord nor Landlord's agents has made any representation
or warranty as to the suitability of the Premises to the conduct of
Tenant's business. Any agreements, warranties or representations not
expressly contained herein shall in no way bind either Landlord or
Tenant, and Landlord and Tenant expressly waive all claims for damages
by reason of any statement, representation, warranty, promise or
agreement, if any, not contained in this Lease. This Lease constitutes
the entire understanding between the parties hereto and no addition to,
or modification of, any term or provision of this Lease shall be
effective until set forth in a writing signed by both Landlord and
Tenant.
15. Default.
A. Events of Default. A breach of this Lease shall exist if any of
the following events (hereinafter referred to as "Event of
Default") shall occur:
1. Default in the payment when due of any installment of rent
or other payment required to be made by Tenant hereunder,
where such default shall not have been cured within three
(3) days after written notice of such default is given to
Tenant;
2. Tenant's failure to perform any other term, covenant or
condition contained in this Lease where such failure shall
have continued for twenty (20) days after written notice of
such failure is given to Tenant;
3. Tenant's vacating or abandonment of the Premises;
4. Tenant's assignment of its assets for the benefit of its
creditors:
5. The sequestration of, attachment of, or execution on, any
substantial part of the property of Tenant or on any
property essential to the conduct of Tenant's business
shall have occurred and Tenant shall have failed to obtain
a return or release of such property within thirty (30)
days thereafter, or prior to sale pursuant to such
sequestration, attachment or levy, whichever is earlier;
6. Tenant or any guarantor of Tenant's obligations hereunder
shall commence any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seek appointment of a receiver,
trustee, custodian, or other similar official for it or for
all or any substantial part of its property;
7. Tenant or any such guarantor shall take any corporate
action to authorize any of the actions set forth in Clause
6 above; or
8. Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be
commenced seeking to have an order for relief entered
against it as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of
debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or
any substantial part of its property, and such case,
proceeding or other action (i) results in the entry of an
order for relief against it which is not fully stayed
within seven (7) business days after the entry thereof or
(ii) remains undismissed for a period of forty-five (45)
days.
B. Remedies. Upon any Event of Default, Landlord shall have the
following remedies, in addition to all other rights and remedies
provided by law, to which Landlord may resort cumulatively, or in
the alternative:
1. Recovery of Rent. Landlord shall be entitled to keep this
Lease in full force and effect (whether or not Tenant shall
have abandoned the Premises) and to enforce all of its
rights and remedies under this Lease, including the right
to recover rent and other sums as they become due, plus
interest at the Permitted Rate (as defined in Paragraph 33
below) from the due date of each installment of rent or
other sum until paid.
2. Termination. Landlord may terminate this Lease by giving
Tenant written notice of termination. On the giving of the
notice all of Tenant's rights in the Premises and the
Building and Parcel shall terminate. Upon the giving of
the notice of termination, Tenant shall surrender and
vacate the Premises in the condition required by Paragraph
34, and Landlord may re-enter and take possession of the
Premises and all the remaining improvements or property and
eject Tenant or any of Tenant's subtenants, assignees or
other person or persons claiming any right under or through
Tenant or eject some and not others or eject none. This
Lease may also be terminated by a judgement specifically
providing for termination. Any termination under this
paragraph shall not release Tenant from the payment of any
sum then due Landlord or from any claim for damages or rent
previously accrued or then accruing against Tenant. In no
event shall any one or more of the following actions by
Landlord constitute a termination of this Lease:
a. maintenance and preservation of the Premises;
b. efforts to relet the Premises;
c. appointment of a receiver in order to protect
Landlord's interest hereunder;
d. consent to any subletting of the Premises or
assignment of this Lease by Tenant, whether pursuant
to provisions hereof concerning subletting and
assignment or otherwise; or
e. any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects from any
breach of this Lease by Tenant.
3. Damages. In the event this Lease is terminated pursuant to
Subparagraph 15.B.2 above, or otherwise, Landlord shall be
entitled to damages in the following sums:
a. the worth at the time of award of the unpaid rent
which has been earned at the time of termination; plus
b. 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 Tenant proves could
have been reasonably avoided; plus
c. the worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the
time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; and
d. any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure
to perform Tenant's obligations under this Lease, or
which in the ordinary course of things would be
likely to result therefrom including, without
limitation, the following: (i) expenses for
cleaning, repairing or restoring the Premises; (ii)
expenses for altering, remodeling or otherwise
improving the Premises for the purpose of reletting,
including installation of leasehold improvements
(whether such installation be funded by a reduction
of rent, direct payment or allowance to the
succeeding lessee, or otherwise); (iii) real estate
broker's fees, advertising costs and other expenses
of reletting the Premises; (iv) costs of carrying
the Premises such as taxes and insurance premiums
thereon, utilities and security precautions; (v)
expenses in retaking possession of the Premises;
(vi) attorneys' fees and court costs; and (vii) any
unamortized real estate brokerage commission paid in
connection with this Lease.
e. The "worth at the time of award" of the amounts
referred to in Subparagraphs (a) and (b) of this
Paragraph, is computed by allowing interest at the
Permitted Rate. The "worth at the time of award" of
the amounts referred to in Subparagraph (c) of this
Paragraph is computed by discounting such amount at
the discount rate of the Federal Reserve Board of San
Francisco at the time of award plus one percent
(1%). The term "rent" as used in this Paragraph
shall include all sums required to be paid by Tenant
to Landlord pursuant to the terms of this Lease.
16. Destruction. In the event that any portion of the Premises are
destroyed or damaged by an uninsured peril, Landlord or Tenant may,
upon written notice to the other, given within thirty (30) days after
the occurrence of such damage or destruction, elect to terminate this
Lease; provided, however, that either party may, within thirty (30)
days after receipt of such notice, elect to make any required repairs
and/or restoration at such party's sole cost and expense, in which
event this Lease shall remain in full force and effect, and the party
having made such election to restore or repair shall thereafter
diligently proceed with such repairs and/or restoration.
In the event the Premises are damaged or destroyed from any insured
peril to the extent of fifty percent (50%) or more of the then
replacement cost of the Premises, Landlord may, upon written notice to
Tenant, given within thirty (30) days after the occurrence of such
damage or destruction, elect to terminate this Lease. If Landlord does
not give such notice in writing within such period, Landlord shall be
deemed to have elected to rebuild or restore the Premises, in which
event Landlord shall, at its expense, promptly rebuild or restore the
Premises to their condition prior to the damage or destruction and
Tenant shall pay to Landlord upon commencement of reconstruction the
amount of any deductible from the insurance policy.
In the event the Premises are damaged or destroyed from any insured
peril to the extent of less than fifty percent (50%) of the then
replacement cost of the Premises, Landlord shall, at Landlord's
expense, promptly rebuild or restore the Premises to their condition
prior to the damage or destruction and Tenant shall pay to Landlord
upon commencement of reconstruction the amount of any deductible from
the insurance policy.
In the event that, pursuant to the foregoing provisions, Landlord is to
rebuild or restore the Premises, Landlord shall, within thirty (30)
days after the occurrence of such damage or destruction, provide Tenant
with written notice of the time required for such repair or
restoration. If such period is longer than two hundred seventy (270)
days from the issuance of a building permit, Tenant may, within thirty
(30) days after receipt of Landlord's notice, elect to terminate the
Lease by giving written notice to Landlord of such election, whereupon
the Lease shall immediately terminate. The period of time for Landlord
to complete the repair or restoration shall be extended for delays
caused by the fault or neglect of Tenant or because of acts of God,
acts of publication, labor disputes, strikes, fires, freight embargoes,
rainy or stormy weather, inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of contractors
or subcontractors due to such causes, or other contingencies beyond the
control of Landlord. Landlord's obligation to repair or restore the
Premises shall not include restoration of Tenant's trade fixtures,
equipment, merchandise, or any improvements, alterations or additions
made by Tenant to the Premises.
Unless this Lease is terminated pursuant to the foregoing provisions,
this Lease shall remain in full force and effect; provided, however,
that during any period of repairs or restoration, rent and all other
amounts to be paid by Tenant on account of the Premises and this Lease
shall be abated in proportion to the area of the Premises rendered not
reasonably suitable for the conduct of Tenant's business thereon.
Tenant hereby expressly waives the provisions of Section 1932,
Subdivision 2 and Section 1933, Subdivision 4 of the California Civil
Code.
17. Condemnation.
A. Definition of Terms. For the purposes of this Lease, the term
(1) "Taking" means a taking of the Premises or damage to the
Premises related to the exercise of the power of eminent domain
and includes a voluntary conveyance, in lieu of court
proceedings, to any agency, authority, public utility, person or
corporate entity empowered to condemn property; (2) "Total
Taking" means the taking of the entire Premises or so much of the
Premises as to prevent or substantially impair the use thereof by
Tenant for the uses herein specified; provided, however, in no
event shall a Taking of less than ten percent (10%) of the
Premises be deemed a Total Taking; (3) "Partial Taking" means
the taking of only a portion of the Premises which does not
constitute a Total Taking; (4) "Date of Taking" means the date
upon which the title to the Premises, or a portion thereof,
passes to and vests in the condemnor or the effective date of any
order for possession if issued prior to the date title vests in
the condemnor; and (5) "Award" means the amount of any award
made, consideration paid, or damages ordered as a result of a
Taking.
B. Rights. The parties agree that in the event of a Taking all
rights between them or in and to an Award shall be as set forth
herein and Tenant shall have no right to any Award except as set
forth herein.
C. Total Taking. In the event of a Total Taking during the term
hereof (1) the rights of Tenant under the Lease and the leasehold
estate of Tenant in and to the Premises shall cease and terminate
as of the Date of Taking; (2) Landlord shall refund to Tenant any
prepaid rent; (3) Tenant shall pay Landlord any rent or charges
due Landlord under the Lease, each prorated as of the Date of
Taking; (4) Tenant shall receive from Landlord those portions of
the Award attributable to trade fixtures of Tenant and for moving
expenses of Tenant; and (5) the remainder of the Award shall be
paid to and be the property of Landlord.
D. Partial Taking. In the event of a Partial Taking during the term
hereof (1) the rights of Tenant under the Lease and leasehold
estate of Tenant in and to the portion of the Premises taken
shall cease and terminate as of the Date of Taking; (2) from and
after the Date of Taking the Monthly Installment of rent shall be
an amount equal to the product obtained by multiplying the
Monthly Installment of rent immediately prior to the Taking by a
fraction, the numerator of which is the number of square feet
contained in the Premises after the Taking and the denominator of
which is the number of square feet contained in the Premises
prior to the Taking; (3) Tenant shall receive from the Award the
portions of the Award attributable to trade fixtures of Tenant;
and (4) the remainder of the Award shall be paid to and be the
property of Landlord.
18. Mechanics' Lien. Tenant shall (A) pay for all labor and services
performed for, materials used by or furnished to, Tenant or any
contractor employed by Tenant with respect to the Premises; (B)
indemnify, defend, protect and hold Landlord and the Premises harmless
and free from any liens, claims, liabilities, demands, encumbrances, or
judgements created or suffered by reason of any labor or services
performed for, materials used by or furnished to, Tenant or any
contractor employed by Tenant with respect to the Premises; (C) give
notice to Landlord in writing five (5) days prior to employing any
laborer or contractor to perform services related to, or receiving
materials for use upon the Premises; and (D) permit Landlord to post a
notice of nonresponsibility in accordance with the statutory
requirements of California Civil Code Section 3094 or any amendment
thereof. In the event Tenant is required to post an improvement bond
with a public agency in connection with the above, Tenant agrees to
include Landlord as an additional obligee.
19. Inspection of the Premises. Tenant shall permit Landlord and its
agents to enter the Premises at any reasonable time for the purpose of
inspecting the same, performing Landlord's maintenance and repair
responsibilities, posting a notice of non-responsibility for
alterations, additions or repairs and at any time within ninety (90)
days prior to expiration of this Lease, to place upon the Premises,
ordinary "For Lease" or "For Sale" signs.
20. Compliance with Laws. Tenant shall, at its own cost, comply with all
of the requirements of all municipal, county, state and federal
authorities now in force, or which may hereafter be in force,
pertaining to the use and occupancy of the Premises, and shall
faithfully observe all municipal, county, state and federal law,
statutes or ordinances now in force or which may hereafter be in
force. The judgement of any court of competent jurisdiction or the
admission of Tenant in any action or proceeding against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any such
ordinance or statute in the use and occupancy of the Premises shall be
conclusive of the fact that such violation by Tenant has occurred.
21. Subordination. The following provisions shall govern the relationship
of this Lease to any underlying lease, mortgage or deed of trust which
now or hereafter affects the Premises, the Building and/or the Parcel,
or Landlord's interest or estate therein (the "Project") and any
renewal, modification, consolidation, replacement, or extension thereof
(a "Security Instrument").
A. Priority. This Lease is subject and subordinate to Security
Instruments existing as of the Commencement Date. However, if
any Lender so requires, this Lease shall become prior and
superior to any such Security Instrument.
B. Subsequent Security Instruments. At Landlord's election, this
Lease shall become subject and subordinate to any Security
Instrument created after the Commencement Date. Notwithstanding
such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in
default and performs all of its obligations under this Lease,
unless this Lease is otherwise terminated pursuant to its terms.
C. Documents. Tenant shall execute any document or instrument
required by Landlord or any Lender to make this Lease either
prior or subordinate to a Security Instrument, which may include
such other matters as the Lender customarily requires in
connection with such agreements, including provisions that the
Lender not be liable for (1) the return of the Security Deposit
unless the Lender receives it from Landlord, and (2) any defaults
on the part of Landlord occurring prior to the time that the
Lender takes possession of the Project in connection with the
enforcement of its Security Instrument. Tenant's failure to
execute any such document or instrument within ten (10) days
after written demand therefor shall constitute a default by
Tenant or, at Landlord's option, Landlord may execute such
documents on behalf of Tenant as Tenant's attorney-in-fact.
Tenant does hereby make, constitute and irrevocably appoint
Landlord as Tenant's attorney-in-fact to execute such documents
in accordance with this Paragraph.
D. Tenant's Attornment. Tenant shall attorn (1) to any purchaser of
the Premises at any foreclosure sale or private sale conducted
pursuant to any Security Instrument encumbering the Project; (2)
to grantee or transferee designated in any deed given in lieu of
foreclosure; or (3) to the lessor under any underlying ground
lease should such ground lease be terminated.
E. Lender. The term "Lender" shall mean (1) any beneficiary,
mortgagee, secured party, or other holder of any deed of trust,
mortgage, or other written security device or agreement affecting
the Project; and (2) any lessor under any underlying lease under
which Landlord holds its interest in the Project.
22. Holding Over. This Lease shall terminate without further notice at the
expiration of the Lease Term. Any holding over by Tenant after
expiration shall not constitute a renewal or extension or give Tenant
any rights in or to the Premises except as expressly provided in this
Lease. Any holding over after the expiration with the consent of
Landlord shall be construed to be a tenancy from month to month, at one
hundred fifty percent (150%) of the monthly rent for the last month of
the Lease Term, and shall otherwise be on the terms and conditions
herein specified insofar as applicable.
23. Notices. Any notice required or desired to be given under this Lease
shall be in writing with copies directed as indicated below and shall
be personally served or given by mail. Any notice given by mail shall
be deemed to have been given when forty-eight (48) hours have elapsed
from the time such notice was deposited in the United States mails,
certified and postage prepaid, addressed to
the party to be served with a copy as indicated herein at the last
address given by that party to the other party under the provisions of
this Paragraph. At this date of execution of this Lease, the address
of Landlord is:
511 Division Street
Campbell CA 95008
and the address of Tenant is:
1188 Bordeaux Drive
Sunnyvale, CA 94089
Attn: Mr. Michael S. Shimada, CFO
After the Commencement Date, the address of Tenant shall be at the
Premises.
24. Attorneys' Fees. In the event either party shall bring any action or
legal proceeding for damages for any alleged breach of any provision of
this Lease, to recover rent or possession of the Premises, to terminate
this Lease, or to enforce, protect or establish any term or covenant of
this Lease or right or remedy of either party, the prevailing party
shall be entitled to recover as a part of such action or proceeding,
reasonable attorneys' fees and court costs, including attorneys' fees
and costs for appeal, as may be fixed by the court or jury. The term
"prevailing party" shall mean the party who received substantially the
relief requested, whether by settlement, dismissal, summary judgement,
or otherwise.
25. Nonassignment.
A. Landlord's Consent Required. Tenant's interest in this Lease is
not assignable, by operation of law or otherwise, nor shall
Tenant have the right to sublet the Premises, transfer any
interest of Tenant therein or permit any use of the Premises by
another party, without the prior written consent of Landlord to
such assignment, subletting, transfer or use, which consent
Landlord agrees not to withhold unreasonably subject to the
provisions of Subparagraph B below. A consent to one assignment,
subletting, occupancy or use by another party shall not be deemed
to be a consent to any subsequent assignment, subletting,
occupancy or use by another party. Any assignment or subletting
without such consent shall be void and shall, at the option of
Landlord, terminate this Lease.
Landlord's waiver or consent to any assignment or subletting
hereunder shall not relieve Tenant from any obligation under this
Lease unless the consent shall so provide.
B. Transferee Information Required. If Tenant desires to assign its
interest in this Lease or sublet the Premises, or transfer any
interest of Tenant therein, or permit the use of the Premises by
another party (hereinafter collectively referred to as a
"Transfer"), Tenant shall give Landlord at least thirty (30) days
prior written notice of the proposed Transfer and of the terms of
such proposed Transfer, including, but not limited to, the name
and legal composition of the proposed transferee, a financial
statement of the proposed transferee, the nature of the proposed
transferee's business to be carried on in the Premises, the
payment to be made or other consideration to be given to Tenant
on account of the Transfer, and such other pertinent information
as may be requested by Landlord, all in sufficient detail to
enable Landlord to evaluate the proposed Transfer and the
prospective transferee. It is the intent of the parties hereto
that this Lease shall confer upon Tenant only the right to use
and occupy the Premises, and to exercise such other rights as are
conferred upon Tenant by this Lease. The parties agree that this
Lease is not intended to have a bonus value nor to serve as a
vehicle whereby Tenant may profit by a future Transfer of this
Lease or the right to use or occupy the Premises as a result of
any favorable terms contained herein, or future changes in the
market for leased space. It is the intent of the parties that
any such bonus value that may attach to this Lease shall be and
remain the exclusive property of Landlord, except as provided for
in subparagraph (2) below. Accordingly, in the event Tenant
seeks to Transfer its interest in this Lease or the Premises,
Landlord shall have the following options, which may be exercised
at its sole choice without limiting Landlord in the exercise of
any other right or remedy which Landlord may have by reason of
such proposed Transfer:
(1) Landlord may elect to terminate this Lease effective as of
the proposed effective date of the proposed Transfer and
release Tenant from any further liability hereunder
accruing after such termination date by giving Tenant
written notice of such termination within twenty (20) days
after receipt by Landlord of Tenant's notice of intent to
transfer as provided above. If Landlord makes such
election to terminate this Lease, Tenant shall surrender
the Premises, in accordance with Paragraph 34, on or before
the effective termination date; or
(2) Landlord may consent to the proposed Transfer on the
condition that Tenant agrees to pay to Landlord, as
additional rent, fifty percent (50%) of any and all rents
or other consideration (including key money) received by
Tenant from the transferee by reason of such Transfer in
excess of the rent payable by Tenant to Landlord under this
Lease (less any brokerage commissions or advertising
expenses incurred by Tenant in connection with the
Transfer). Tenant expressly agrees that the foregoing is a
reasonable condition for obtaining Landlord's consent to
any Transfer; or
(3) Landlord may reasonably withhold its consent to the
proposed Transfer.
26. Successors. The covenants and agreements contained in this Lease shall
be binding on the parties hereto and on their respective heirs,
successors and assigns (to the extent the Lease is assignable).
27. Mortgagee Protection. In the event of any default on the part of
Landlord, Tenant will give notice by registered or certified mail to
any beneficiary of a deed of trust or mortgagee of a mortgage
encumbering the Premises, whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, including time to obtain possession of
the Premises by power of sale or judicial foreclosure, if such should
prove necessary to effect a cure.
28. Landlord Loan or Sale. Tenant agrees promptly following request by
Landlord to (A) execute and deliver to Landlord any documents,
including estoppel certificates presented to Tenant by Landlord, (i)
certifying that this Lease is unmodified and in full force and effect
and the date to which the rent and other charges are paid in advance,
if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, and
(iii) evidencing the status of the Lease as may be required either by a
lender making a loan to Landlord to be secured by a deed of trust or
mortgage covering the Premises or a purchaser of the Premises from
Landlord and (B) to deliver to Landlord the financial statement of
Tenant with an opinion of a certified public accountant, including a
balance sheet and profit and loss statement, for the last completed
fiscal year all prepared in accordance with generally accepted
accounting principles consistently applied. Tenant's failure to
deliver an estoppel certificate promptly following such request shall
be an Event of Default under this Lease.
29. Surrender of Lease Not Merger. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work
a merger and shall, at the option of Landlord, terminate all or any
existing subleases or subtenants, or operate as an assignment to
Landlord of any or all such subleases or subtenants.
30. Waiver. The waiver by Landlord or Tenant of any breach of any term,
covenant or condition herein contained shall not be deemed to be a
waiver of any preceding or succeeding breach of the same or any other
covenant or condition herein contained.
31. General.
A. Captions. The captions and paragraph headings used in this Lease
are for the purposes of convenience only. They shall not be
construed to limit or extend the meaning of any part of this
Lease, or be used to interpret specific sections. The word (s)
enclosed in quotation marks shall be construed as defined terms
for purposes of this Lease. As used in this Lease, the
masculine, feminine and neuter and the singular or plural number
shall each be deemed to include the other whenever the context so
requires.
B. Definition of Landlord. The term "Landlord" as used in this
Lease, so far as the covenants or obligations on the part of
Landlord are concerned, shall be limited to mean and include only
the owner at the time in question of the fee title of the
Premises, and in the event of any transfer or transfers of the
title of such fee, the Landlord herein named (and in case of any
subsequent transfers or conveyances, the then grantor) shall
after the date of such transfer or conveyance be automatically
freed and relieved of all liability with respect to performance
of any covenants or obligations on the part of Landlord contained
in this Lease, thereafter to be performed; provided that any
funds in the hands of Landlord or the then grantor at the time of
such transfer, in which Tenant has an interest, shall be turned
over to the grantee. It is intended that the covenants and
obligations contained in this Lease on the part of Landlord
shall, subject as aforesaid, be binding upon each Landlord, its
heirs, personal representatives, successors and assigns only
during its respective period of ownership.
C. Time of Essence. Time is of the essence for the performance of
each term, covenant and condition of this Lease.
D. Severability. In case any one or more of the provisions
contained herein, except for the payment of rent, shall for any
reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provision of this Lease, but this Lease
shall be construed as if such invalid, illegal or unenforceable
provision had not been contained herein. This Lease shall be
construed and enforced in accordance with the laws of the State
of California.
E. Joint and Several Liability. If Tenant is more than one person or
entity, each such person or entity shall be jointly and severally
liable for the obligations of Tenant hereunder.
F. Law. The term "law" shall mean any judicial decision, statute,
constitution, ordinance, resolution, regulation, rule,
administrative order, or other requirement of any government
agency or authority having jurisdiction over the parties to this
Lease or the Premises or both, in effect at the Commencement Date
of this Lease or any time during the Lease Term, including,
without limitation, any regulation, order, or policy of any
quasi-official entity or body (e.g., board of fire examiners,
public utility or special district).
G. Agent. As used herein the term Agent shall mean, with respect
to either Landlord or Tenant, its respective agents, employees,
contractors (and their subcontractors), and invitees (and in the
case of Tenant, its subtenants).
H.WAIVER OF JURY TRIAL. LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE
RIGHT TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM COUNTERCLAIM OR
CROSS-COMPLAINT IN ANY ACTION, PROCEEDING, AND/OR HEARING BROUGHT BY EITHER
LANDLORD AGAINST TENANT OR TENANT AGAINST LANDLORD ON ANY MATTER WHATSOEVER
ARISING OUT OF, OR AN ANY WAY CONNECTED WITH, THIS LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES OR ANY CLAIM OF
INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY LAW, STATUTE, OR
REGULATION, EMERGENCY OR OTHERWISE, NOW OR HEREAFTER IN EFFECT.
INITIALS:
LANDLORD_________ TENANT _________
32. Sign. Tenant shall not place or permit to be placed any sign or
decoration on the land or the exterior of the Building without the
prior written consent of Landlord. Tenant, upon written notice by
Landlord, shall immediately remove any sign or decoration that Tenant
has placed or permitted to be placed on the land or the exterior of the
Building without the prior written consent of Landlord, and if Tenant
fails to so remove such sign or decoration within five (5) days after
Landlord's written notice, Landlord may enter upon the Premises and
remove said sign or decoration and Tenant agrees to pay Landlord, as
additional rent upon demand, the cost of such removal. At the
termination of this Lease, Tenant shall remove any sign which it has
placed on the Parcel or Building and shall repair any damage caused by
the installation or removal of such sign.
33. Interest on Past Due Obligations. Any Monthly Installment of rent or
any other sum due from Tenant under this Lease which is received by
Landlord after the date the same is due shall bear interest from said
due date until paid, at an annual rate equal to the lesser of (the
"Permitted Rate"): (1) twelve percent (12%); or (2) five percent (5%)
plus the rate established by the Federal Reserve Bank of San Francisco,
as of the twenty-fifth (25th) day of the month immediately preceding
the due date, on advances to member banks under Section 13 and 13 (a)
of the Federal Reserve Act, as now in effect or hereafter from time to
time amended. Payment of such interest shall not excuse or cure any
default by Tenant. In addition, Tenant shall pay all costs and
attorneys' fees incurred by Landlord in collection of such amounts.
34. Surrender of the Premises. On the last day of the term hereof, or on
the sooner termination of this Lease, Tenant shall surrender the
Premises to Landlord in their condition existing as of the Commencement
Date of this Lease, ordinary wear and tear excepted, with all
originally painted interior walls washed, and other interior walls
cleaned, and repaired or replaced, all carpets shampooed and cleaned,
the air conditioning and heating equipment serviced and repaired by a
reputable and licensed service firm, all floors cleaned and waxed, all
to the reasonable satisfaction of Landlord. Tenant shall remove all of
Tenant's personal property and trade fixtures from the Premises, and
all property not so removed shall be deemed abandoned by Tenant.
Tenant, at its sole cost, shall repair any damage to the Premises
caused by the removal of Tenant's personal property, machinery and
equipment, which repair shall include, without limitation, the patching
and filling of holes and repair of structural damage. If the Premises
are not so surrendered at the termination of this Lease, Tenant shall
indemnify, defend, protect and hold Landlord harmless from and against
loss or liability resulting from delay by Tenant in so surrendering the
Premises including without limitation, any claims made by any
succeeding tenant or losses to Landlord due to lost opportunities to
lease to succeeding tenants.
35. Authority. The undersigned parties hereby warrant that they have
proper authority and are empowered to execute this Lease on behalf of
Landlord and Tenant, respectively.
36. Public Record. This Lease is made subject to all matters of public
record affecting title to the property of which the Premises are a
part.
37. Brokers. Tenant represents and warrants to Landlord that it has dealt
only with Jeff Duke of Equus Associates respecting this transaction
and hereby agrees to indemnify and hold Landlord harmless from and
against any brokerage commission or fee, obligation, claim or damage
(including attorneys' fees) paid or incurred respecting any other
broker claiming through Tenant or with which/whom Tenant has dealt. It
is acknowledged that one or more of Landlord's partners may be real
estate brokers.
38. Limitation on Landlord's Liability. Tenant, for itself and its
successors and assigns (to the extent this Lease is assignable), hereby
agrees that in the event of any actual, or alleged, breach or default
by Landlord under this Lease that:
A) Tenant's sole and exclusive remedy against Landlord shall be as
against Landlord's interest in the Building;
B) No partner or officer of any partner of Landlord shall be sued or
named as a party in a suit or action (except as may be necessary
to secure jurisdiction of the partnership);
C) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of
the partnership);
D) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
E) No judgment will be taken against any partner of Landlord;
F) Any judgment taken against any partner of Landlord maybe vacated
and set aside at any time nunc pro tunc;
G) No writ of execution will ever be levied against the assets of
any partner of Landlord;
H) The covenants and agreements of Tenant set forth in this Section
38 shall be enforceable by Landlord and any partner of Landlord.
39. Hazardous Material.
A. Definitions. As used herein, the term "Hazardous Material" shall
mean any substance: (i) the presence of which requires
investigation or remediation under any federal, state or local
statutes, regulation, ordinance, order, action, policy or common
law; (ii) which is or becomes defined "hazardous waste,"
"hazardous substance," pollutant or contaminant under any
federal, state or local statute, regulation, rule or ordinance or
amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.);
(iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is or becomes regulated by any governmental
authority, agency, department, commission, board, agency, or
instrumentality of the United States, the State of California or
any political subdivision thereof; (iv) the presence of which on
the Premises causes or threatens to cause a nuisance upon the
Premises or to adjacent properties or poses or threatens to pose
a hazard to the health or safety of persons on or about the
Premises; (v) the presence of which on adjacent properties could
constitute a trespass to Landlord or Tenant; (vi) without
limitation which contains gasoline, diesel fuel, or other
petroleum hydrocarbons; (vii) without limitation which contains
polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde
foam insulation; or (viii) without limitation radon gas.
B. Landlord's Indemnity. Landlord shall indemnify, defend, protect
and hold Tenant harmless from and against all liabilities,
claims, penalties, fines, response costs and other expenses
(including, but limited to, reasonable attorneys' fees and
consultants' fees and costs) arising out of, resulting from, or
caused by any Hazardous Material used, generated, discharged,
transported to or from, stored or disposed of by Landlord or its
Agents in, on, under, over, through or about the Premises and/or
the surrounding real property.
C. Permitted Use. Subject to the compliance by Tenant with the
provisions of Subparagraphs D, E, F, G, I, J and K below, Tenant
shall be permitted to use and store on the Premises those
Hazardous Materials listed in Exhibit "D" attached hereto in the
quantities attached set forth in Exhibit "D".
D. Hazardous Materials Management Plan. Prior to Tenant using,
handling, transporting or storing any Hazardous Material at or
about the Premises (including, without limitation, those listed
in Exhibit "D"), Tenant shall submit to Landlord a Hazardous
Materials Management Plan ("HMMP") for Landlord's review and
approval, which approval shall not be unreasonably withheld. The
HMMP shall describe: (i) the quantities of each material to be
used, (ii) the purpose for which each material is to be used,
(iii) the method of storage of each material, (iv) the method of
transporting each material to and from the Premises and within
the Premises, (v) the methods Tenant will employ to monitor the
use of the material and to detect any leaks or potential hazards,
and (vi) any other information any department of any governmental
entity (city, state or federal) requires prior to the issuance of
any required permit for the Premises or during Tenant's occupancy
of the Premises. Landlord may, but shall have no obligation to
review and approve the foregoing information and HMO, and such
review and approval or failure to review and approve shall not
act as an estoppel or otherwise waive Landlord's rights under
this Lease or relieve Tenant of its obligations under this
lease. If Landlord determines in good faith by inspection of the
Premises or review of the HMMP that the methods in use or
described by Tenant are not adequate in Landlord's good faith
judgment to prevent or eliminate the existence of environmental
hazards, then Tenant shall not use, handle, transport, or store
such Hazardous Materials at or about the Premises unless and
until such methods are approved by Landlord in good faith and
added to an approved HMMP. Once approved by Landlord, Tenant
shall strictly comply with the HMMP and shall not change its use,
operations or procedures with respect to Hazardous Materials
without submitting an amended HMMP for Landlord's review and
approval as provided above.
E. Use Restriction. Except as specifically allowed in Subparagraph
C above, Tenant shall not cause or permit any Hazardous Material
to be used, stored, generated, discharged, transported to or
from, or disposed of in or about the Premises, or any other land
or improvements in the vicinity of the Premises. Without
limiting the generality of the foregoing, Tenant, at its sole
cost, shall comply with all Laws relating to the storage, use,
generation, transport, discharge and disposal by Tenant or its
Agents of any Hazardous Material. If the presence of any
Hazardous Material on the Premises caused or permitted by Tenant
or its Agents results in contamination of the Premises or any
soil, air, ground or surface waters under, through, over, on, in
or about the Premises, Tenant, at its expense, shall promptly
take all actions necessary to return the Premises and/or the
surrounding real property to the condition existing prior to the
appearance of such Hazardous Material.
F. Tenant Indemnity. Tenant shall defend, protect, hold
harmless and indemnify Landlord and its Agents and Lenders with
respect to all actions, claims, losses (including, diminution in
value of the Premises), fines, penalties, fees, (including, but
not limited to, reasonable attorneys' and consultants' fees and
costs) costs, damages, liabilities, remediation costs,
investigation costs, response costs and other expenses arising
out of, resulting from, or caused by any Hazardous Material used,
generated discharged, transported to or from, stored, or disposed
of by Tenant or its Agents in, on, under, over, through or about
the Premises and/or the surrounding real property. Tenant shall
not suffer any lien to be recorded against the Premises as a
consequence for the disposal of any Hazardous Material on the
Premises by Tenant or its Agents, including any so called state,
federal or local "super fund" lien related to the "clean up" of
any Hazardous Material in, over, on, under through, or about the
Premises. Landlord agrees that Tenant shall have no liability or
obligation to Landlord under this Lease with respect to any
Hazardous Materials on or about the Premises, which were not
caused or contributed to by Tenant or Tenant's Agents.
G. Compliance. Tenant shall immediately notify Landlord of
any inquiry, test, investigation, enforcement proceeding by or
against Tenant or the Premises concerning any Hazardous
Material. Any remediation plan prepared by or on behalf of
Tenant must be submitted to landlord prior to conducting any work
pursuant to such plan and prior to submittal to any applicable
government authority and shall be subject to Landlord's consent.
Tenant acknowledges that Landlord, as the owner of the Property,
at its election, shall have the sole right to negotiate, defend,
approve and appeal any action taken or order issued with regard
to any Hazardous Material by any applicable governmental
authority.
H. Assignment and Subletting. It shall not be unreasonable for
Landlord to withhold its consent to any proposed assignment or
subletting if (i) the proposed assignee's or subtenant's
anticipated use of the Premises involves the storage, generation,
discharge, transport, use or disposal of any Hazardous Material
not permitted under Subparagraph C above; (ii) if the proposed
assignee or subtenant has been required by any prior landlord,
lender, or governmental authority to "clean up" or remediate any
Hazardous Material and has failed to promptly do so; (iii) if the
proposed assignee or subtenant is subject to investigation or
enforcement order or proceeding by any governmental authority in
connection with the use, generation, discharge, transport,
disposal or storage of any material amount of Hazardous Material;
provided that (ii) and (iii) will not apply in the case of a
Fortune 500 Company.
I. Surrender. Upon the expiration or earlier termination of the
Lease, Tenant, at its sole cost, shall remove all Hazardous
Materials from the Premises that Tenant or its Agents introduced
to the Premises. If Tenant fails to so surrender the Premises,
Tenant shall indemnify, protect, defend and hold Landlord
harmless from and against all damages resulting from Tenant's
failure to surrender the Premises as required by this Paragraph,
including, without limitation, any actions, claims, losses,
liabilities, fees (including, but not limited to, reasonable
attorneys' fees and consultants' fees and costs), fines, costs,
penalties, or damages in connection with the condition of the
Premises including, without limitation, damages occasioned by the
inability to relet the Premises or a reduction in the fair market
and/or rental value of the Premises by reason of the existence of
any Hazardous Materials in, on, over, under, through or around
the Premises.
J. Right to Appoint Consultant. Landlord shall have the right to
appoint a consultant to conduct an investigation to determine
whether any Hazardous Material is being used, generated,
discharged, transported to or from, stored or disposed of in, on,
over, through, or about the Premises, in an appropriate and
lawful manner. If Tenant has violated any Law or convenant in
this Lease regarding the use, storage or disposal of Hazardous
Materials on or about the Premises, Tenant shall reimburse
Landlord for the cost of such investigation. Tenant, at its
expense, shall comply with all reasonable recommendations of the
consultant required to conform Tenant's use, storage or disposal
of Hazardous Materials to the requirements of applicable Law or
to fulfill the obligations of Tenant hereunder.
K. Holding Over. If any action of any kind is required to be taken
by any governmental authority to clean-up, remove, remediate or
monitor Hazardous Material (the presence of which is the result
of the acts or omissions of Tenant or its Agents) and such action
is not completed prior to the expiration or earlier termination
of the Lease, Tenant shall be deemed to have impermissibly held
over until such time as such required action is completed, and
Landlord shall be entitled to all damages directly or indirectly
incurred in connection with such holding over, including without
limitation, damages occasioned by the inability to re-let the
Premises or a reduction of the fair market and/or rental value of
the Premises.
L Existing Environmental Reports. Tenant hereby acknowledges that
it has received, read and reviewed the reports and test results
described in Exhibit "E" attached hereto and made a part hereof
(the "Existing Environmental Reports").
M. Provisions Survive Termination. The provisions of this
Paragraph 39 shall survive the expiration or termination of this
Lease.
N. Controlling Provisions. The provisions of this Paragraph
39 are intended to govern the rights and liabilities of the
Landlord and Tenant hereunder respecting Hazardous Materials to
the exclusion of any other provisions in this Lease that might
otherwise be deemed applicable. The provisions of this Paragraph
39 shall be controlling with respect to any provisions in this
Lease that are inconsistent with this Paragraph 39.
40. Option to Extend.
A. Provided that Tenant is not in default under this Lease at the
time of exercise of the hereinafter described option or at the
time of termination of the then existing term of this Lease, as
the case may be, Tenant shall have one (1) option to extend the
term of this Lease for a period of five (5) years (the "Option
Term"). Said option shall be exercised only by written notice
delivered to Landlord not later than one hundred eighty (180)
days prior to the expiration date of the then existing term of
this Lease. In all respects, the terms, convenants and
conditions of this Lease shall remain unchanged during the Option
Term, except that the Monthly Installment of rent payable during
the Option Term, which shall be determined in accordance with
Subparagraph B and C below, and except that there shall be no
further option to extend the term of this Lease at the end of the
Option Term.
B. The Monthly Installment of rent payable during the Option Term
shall be ninety-five percent (95%) of the fair market rental for
the Premises as of the first day of the Option Term (the "Fair
Market Rental"); but in no event thsll the Monthly Installment of
rent payable during the Option Term be less than the Monthly
Installment of rent payable during the last calendar month of the
original Lease Term.
C. Promptly following exercise of the option to extend, the parties
shall meet and endeavor to agree on the Fair Market Rental of the
Premises as of the first day of the Option Term. In determining
the Fair Market Rental for the Premises, the Premises shall be
compared only to buildings of a similar quality and size. If
within thirty (30) days after exercise of the option, the parties
cannot agree upon the Fair Market Rental, the parties shall
submit the matter to binding appraisal in accordance with the
following procedure: Within sixty (60) days after exercise of
the option, the parties shall either (a) jointly appoint an
appraiser for this purpose or (b) failing this joint action,
separately designate a disinterested appraiser. No person shall
be appointed or designated an appraiser unless he or she has at
least five (5) years experience in appraising major commercial
property in Santa Clara County and is a member of a recognized
society of real estate appraisers. If, within thirty (30) days
after the appointment, the two appraisers reach agreement on the
Fair Market Rental, that value shall be binding and conclusive
upon the parties. If the two appraisers thus appointed cannot
reach agreement on the question presented within thirty (30) days
after their appointment, then the appraisers thus appointed shall
appoint a third disintereseted appraiser having like
qualifications. If within thirty (30) days after the appointment
of the third appraiser, a majority of the appraisers agree on the
Fair Market Rental, that value shall be binding and conclusive
upon the parties. If within thirty (30) days after the
appointment of the third appraiser, a majority of the appraisers
cannot reach agreement on the question presented, then the three
appraisers shall each submit their independent appraisal to the
parties, and the appraisal farthest from the median of the three
appraisals shall be disregarded and the mean average of the
remaining two appraisals shall be deemed to be the Fair Market
Rental of the Premises as of the first day of the Option Term and
shall be binding and conclusive upon the parties. Each party
shall pay the fees and expenses of the appraiser appointed by it
and shall share equally the fees and expenses of the third
appraiser. If the two appraisers appointed by the parties cannot
agree on the appointment of the third appraiser, they or either
of them shall give notice of such failure to agree to the parties
and if the parties fail to agree upon the selection of such third
appraiser within ten (10) days after the appraisers appointed by
the parties give such notice, then either of the parties, upon
notice to the other party may request such appointment by the
American Arbitration Association, or on its failure, refusal or
inability to act, may apply for such apppointment to the
presiding judge of the Superior Court of Santa Clara County,
California.
41. Third Opportunity to Lease.
A. Definitions. As used in this Paragraph 41, the following terms
shall have the following meanings:
(1) "Third Opportunity Space" shall mean the space
located in Building C commonly known as 4415 Fortran Court and
currently leased to Novellus Systems, Inc. ("Novellus").
(2) "Prior Right" or "Prior Rights" shall mean (a)
the option to expand into the Third Opportunity Space which has
been previously granted to AG Associates, Inc. ("AG") and/or (b)
the right of first refusal covering the Third Opportunity Space which
has been previously granted to Novellus Systems, Inc.
(3) "Novellus Lease" shall mean the existing lease
between Landlord and Novellus covering the Third Opportunity Space.
B. Third Opportunity to Lease. Provided that (i) Tenant is not in
default under this Lease; (ii) this Lease is in full force and
effect; (iii) Tenant has not assigned this Lease and is in
physical occupancy of at least fifty percent (50%) of the area of
the Premises; and (iv) neither AG nor Novellus has exercised its
respective Prior Right and all Prior Rights have expired; then,
and only then, Tenant shall have the right to lease the Third
Opportunity Space, as the Third Opportunity Space becomes
available upon the expiration of the Novellus Lease subject,
however, to the following terms and conditions.
C. Landlord's Notice. If Landlord proposes to lease the Third
Opportunity Space to a prospective tenant after the expiration of
Novellus Lease and all conditions set forth in Subparagraph B
above are satisfied, then Landlord shall notify Tenant in writing
("Landlord's Notice") of the form of lease Landlord intends to
use, and the following basic business terms upon which Landlord
is willing to lease such space (collectively referred to herein
as the "Basic Business Terms"): (i) the description of the
particular Third Opportunity Space then available (the "Proposed
Space"); (ii) the term of the lease; (iii) the tenant
improvements Landlord is willing to construct or that it will
require to be constructed and the contribution Landlord is
willing to make to pay for such tenant improvements, if any; (iv)
the rent for the initial term or the formula to be used to
determine such rent (including, if applicable the rental
commencement date, Tenant's share of taxes, assessments,
operating expenses, insurance costs and the like); (v) any option
or options to extend (including the rent to be charged or the
formula for such charges during the extension periods); and (vi)
any other material business term Landlord elects to specify.
D. Second Lease. If Tenant, within two (2) business days after
receipt of Landlord's Notice, indicates in writing its agreement
to lease the Proposed Space on the Basic Business Terms stated in
Landlord's Notice (the "Second Lease"), and within two (2) days
after Tenant's receipt thereof, Tenant executes and returns to
Landlord the Second Lease, Landlord shall lease to Tenant and
Tenant shall lease from Landlord the Proposed Space on the terms
and conditions contained in the Second Lease, provided, however,
that this Lease shall be modified to include, and the Second
Lease shall include, a cross-default provision providing that
Tenant will be in default under both the Second Lease and this
Lease, if Tenant is in default under either Lease.
E. Failure to Exercise. If Tenant does not indicate in writing its
agreement to lease the Proposed Space on the terms contained in
Landlord's Notice within the two (2) business day time period, or
if Tenant does not execute and return to Landlord the Second
Lease within two (2) business days after Tenant's receipt
thereof, then Landlord shall thereafter have the unfettered right
to lease the Proposed Space to any third party on any terms and
conditions.
F. Termination. The provisions of this Paragraph shall terminate
upon (i) the expiration of earlier termination of this Lease; or
(ii) any assignment by Tenant of its interest in this Lease or
the subletting by Tenant of substantially all of the Premises for
substantially all of the remainder of the Lease Term; or (iii) as
to any particular Proposed Space, Tenant's failure to exercise
its right to lease granted herein as to such Proposed Space at
its first opportunity to do so, or (iv) the exercise of any Prior
Right by any party then holding such Prior Right.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below.
TENANT: LANDLORD:
ELEXSYS INTERNATIONAL, INC. SOUTH BAY/FORTRAN, a California limited
a California corporation partnership
By: ____________________________ By: ____________________________
Printed:_________________________ Printed:_________________________
Title: ___________________________ Title: ___________________________
Dated: __________________________ Dated: __________________________
<PAGE>
EXHIBIT A
Site Plan
EXHIBIT B
LEGAL DESCRIPTION
All that real property situated in the City of San Jose, County of Santa Clara,
State of California, described as follows:
Beginning at the Southwesterly corner of that certain 31.74 acre tract of
land described in the deed from The First National Bank of San Jose, a
corporation, to F. W. Zanker and Curtner Zanker, dated May 5, 1939, recorded
May 8, 1939 in Book 934 Official Records, page 16, Santa Clara County
Records, in the Northerly line Alviso-Milpitas Road, thence from said point
of beginning N. 89 deg. 35' E. 630.30 feet to the Southeasterly corner
thereof; thence along the Easterly line of said 31.74 acre tract for the
three following courses and distances; N. 1 deg. 13' E. 768.90 feet, and N. 0
deg. 57' E. 597.96 feet and N. 0 deg. 31' E. 149.97 feet to the Southeasterly
corner of that certain 9.316 acre tract of land described in the deed from F.
W. Zanker, et al, to B.S. Brazil, a single man, dated October 25, 1943,
recorded November 16, 1943 in Book 1176 Official Records, page 21, Santa
Clara County Records; thence S. 89 deg. 35' W. along the Southerly line of
said 9.316 acre tract 651.78 feet to the Southwesterly corner thereof in the
Westerly line of said 31.74 acre tract; thence S. 0 deg. 08' W. along said
last mentioned line 1512.88 feet to the point of beginning.
Excepting therefrom that portion thereof conveyed to the City of San Jose, a
municipal; corporation, recorded September 2, 1985 in Book J828, page 1719,
Official Records, described as follows:
Beginning at the Southeasterly corner of that certain 31.74 acre tract of
land described in the deed from The First National Bank of San Jose, a
corporation, to F. W. Zanker and Curtner Zanker, dated May 5, 1939, recorded
May 8, 1939 in Book 934 Official Records, page 16, Santa Clara County
Records, said point being on the Northerly line of Alviso-Milpitas Road,
thence leaving said point of beginning along the Easterly line of said 31.74
acre parcel N. 1 deg. 13' E. 30.00 feet to the true point of beginning of the
parcel herein being described; thence leaving said true point of beginning
and said Easterly line along the following courses and distances; From a
tangent bearing of N. 88 deg. 47' 00" W. along a curve to the right with a
radius of 50.00 feet, through a central angle of 126 deg. 52' 12" for an arc
length of 110.71 feet to a point on reverse curvature; from a tangent bearing
of N. 38 deg. 05' 12" E. along a curve to the left with a radius of 50.00
feet, through a central angle of 36 deg. 52' 12" for an arc length of 32.18
feet; N. 1 deg. 13' 00" E. 361.13 feet; N. 0 deg. 57' 00" E. 597.93 feet; N.
0 deg. 31' 52" E. 18.69 feet; along a tangent curve to the left with a radius
of 40.00 feet, through a central angle of 90 deg. 56' 58" for an arc length
of 63.50 feet to a point on a line parallel with and distant 90.00 feet
Southerly, measured at right angles from the Southerly line of that certain
9.316 acre parcel of land described in the deed from F. W. Zanker, et al, to
B. S. Brazil, recorded November 16, 1943 in Book 1176 of Official Records, at
page 21, Santa Clara County Records; thence along said parallel line, S. 89
deg. 34' 54" W. 579.99 feet to a point on the Westerly line of said 31.74
acre parcel of land; thence leaving said parallel line along said Westerly
line, N. 0 deg. 06' 10" E. 90.00 feet to the Southwesterly corner of the
hereinabove described 9.316 acre parcel; thence leaving said Westerly line
along the Southerly line of said 9.316 acre parcel, N. 89 deg. 34' 54" E.
651.24 feet to the Southeasterly corner thereof, said corner lying in said
Easterly line of the hereinabove described 31.74 acre parcel; thence along
said Easterly line the following course and distances: S. 0 deg. 31' 52" W.
149.98 feet; S. 0 deg. 57' 00" W. 598.11 feet and S. 1 deg. 13' 00" W. 598.11
feet and S. 1 deg. 13' 00" W. 471.20 feet to the true point of beginning.
ALSO EXCEPTING THEREFROM all that portion conveyed to the State of California by
Grant Deed recorded August 31, 1994 in Book N 579, Page 2028, Official Records,
described as follows:
Being a portion of that certain parcel of land described in the Deed from Ray H.
Collishaw and Earlyn R. Collishaw, husband and wife, to William L. Marocco, a
single man, recorded May 4, 1982 in Book G 762 of Official Records at Page 218,
Santa Clara County Records.
Beginning at the Southeast corner of said parcel conveyed to Marocco;
thence from said Point of Beginning, along the Southerly line of said
parcel conveyed to Marocco N. 89 deg. 01' 16" W. 626.45 feet to the
Southwest corner of said parcel conveyed to Marocco ; thence along the
Westerly line of said parcel conveyed to Marocco, N. 1 deg. 13' 13" E.
227.77 feet; thence leaving said Westerly line, from a tangent bearing of
S. 67 deg. 46' 42" E., along a curve to the right with a radius of 275.00
feet; through a central angle of 18 deg. 08' 37" for an arc length of
87.08 feet; thence S. 49 deg. 38' 05" E., 103.64 feet; thence along a
tangent curve to the left with a radius of 275.00 feet, through a central
angle of 34 deg. 57' 21" for an arc length of 167.78 feet; thence S. 84
deg. 35' 26" E. 318.98 feet to a point in the Easterly line of said parcel
conveyed to Marocco, said Easterly line S. 2 deg. 20' 03" W., 31.97 feet
to the Point of Beginning.
ARB. No. 15-30-9 & 9.1
<PAGE>
EXHIBIT "C"
IMPROVEMENT AGREEMENT
This Improvement Agreement is made part of that Lease dated March 11,
1996 (the "Lease") by and between SOUTH BAY/FORTRAN, a California limited
partnership ("Landlord"), and ELEXSYS INTERNATIONAL, INC., a California
corporation ("Tenant"). Landlord and Tenant agree that the following terms
are part of the Lease:
1. Purpose of Improvement Agreement. The purpose of this
Improvement Agreement is to set forth the rights and obligations of Landlord
and Tenant with respect to the construction of the Tenant Improvements in the
Premises.
2. Definitions. As used in this Improvement Agreement, the
following terms shall have the following meanings, and initially capitalized
terms which are not defined below, but which are defined in the Lease and
which are used in this Improvement Agreement, shall have the meanings
ascribed to them by the Lease:
A. Final Tenant Improvement Plans. The term "Final Tenant
Improvement Plans" shall mean those plans and specifications for the Tenant
Improvements to be constructed by Landlord which are to be designed and
approved by Landlord and Tenant pursuant to Paragraph 3 below.
B. Tenant Improvements. The term "Tenant Improvements" shall
mean the tenant improvements to be constructed by Landlord in accordance with
the Final Tenant Improvement Plans.
C. Landlord's Code Work. The term "Landlord's Code Work"
shall mean all work required to bring the Premises as they exist on the date
of execution of this Lease (prior to the construction of any Tenant
Improvements) into compliance with all governmental codes, ordinances and
statutes, including Americans With Disabilities Act ("ADA"). If the Tenant
Improvements are going to replace or substantially alter any existing
improvement which are not now in compliance with any governmental codes, then
Landlord shall not be required to bring such existing improvements into
compliance with governmental codes and such work shall be excluded from the
definition "Landlord's Code Work". For example, if any existing bathrooms
which do not comply with ADA requirements are going to be replaced or
substantially altered by the Tenant Improvements, then Landlord shall not be
required to make any alterations to such existing bathrooms.
D. Substantial Completion and Substantially Complete. The
terms "Substantial Completion" and "Substantially Complete" shall each mean
the date when all of the following have occurred with respect to the Tenant
Improvements: (i) the construction of the Tenant Improvements has been
substantially completed in accordance with the provisions of this Improvement
Agreement (except for minor punch list items which do not substantially
interfere with Tenant's use of the Premises); and (ii) the Building
Department of the City of San Jose has completed its final inspection of such
improvements and has "signed off" the building inspection card approving such
work as complete.
E. TI Costs. The term "TI Costs" shall mean and include all
costs and expenses paid or incurred by Landlord for any or all of the
following: architectural and engineering fees and costs, all building permit
fees and taxes and other governmental fees and taxes required for the
construction and occupancy of the Tenant Improvements, all of Landlord's
contractors' and subcontractors' prices and fees for constructing the Tenant
Improvements, including the cost of all partitioning, utility systems, fire
sprinkler systems, heating, ventilating and air conditioning systems and
equipment, roof screens, electrical distribution facilities, wiring,
lighting, ceilings, installation of fixtures and equipment, restrooms,
carpeting, and all other improvements and alterations required to finish the
existing Building for occupancy by Tenant in accordance with the Final Tenant
Improvement Plans; provided, however, TI Costs shall not include any costs
attributable Landlord's Code Work. The Landlord's contractor's price for
constructing the Tenant Improvements shall include the cost of a job
superintendent and project manager plus a fee of five percent (5%) of all
other TI Costs.
F. Maximum TI Allowance. The term "Maximum TI Allowance"
shall mean a sum equal to $11.90 multiplied by the number of square feet of
floor space contained within the Premises. The square footage of the
Premises is 66,638 sq. ft. Accordingly, the Maximum TI Allowance is Seven
Hundred Eighty-Nine Thousand Seven Hundred Seventy-Nine Dollars ($789,779.00).
G. Excess TI Costs. The term "Excess TI Costs" shall mean all
TI Costs in excess of the Maximum TI Allowance.
3. Design of Tenant Improvements.
A. Preliminary Tenant Improvement Plans. Tenant shall, on or
before April 10, 1996, prepare and deliver to Landlord for its review and
approval preliminary plans for the Tenant Improvements, which preliminary
plans shall show Tenant's desired floor plan, layout, electrical
requirements, HVAC requirements and general requirements in sufficient detail
in order to permit Landlord to prepare working drawings for the Tenant
Improvements (the "Preliminary Tenant Improvement Plans"). Within five (5)
business days after receipt of the Preliminary Tenant Improvement Plans,
Landlord shall either approve such plans or notify Tenant in writing of any
request for changes to the Preliminary Tenant Improvement Plans. If Landlord
submits any request for changes, the parties shall meet and confer to develop
Preliminary Tenant Improvement Plans that are acceptable to both Landlord and
Tenant within five (5) business days after Landlord has notified Tenant of
its request for changes.
B. Development and Approval of Tenant Improvement Plans. Once
the Preliminary Tenant Improvement Plans have been approved by Landlord and
Tenant, Landlord shall complete and submit to Tenant for its approval final
working drawings for the Tenant Improvements. Tenant shall approve the final
working drawings for the Tenant Improvements or notify Landlord in writing of
its specific request for changes within five (5) business days after receipt
of the working drawings from Landlord. If Tenant submits any request for
changes, the parties shall confer and reach agreement upon the final working
drawings for the Tenant Improvements within five (5) business days after
Tenant has notified Landlord of its request for changes. When Landlord and
Tenant agree upon the final working drawings for the Tenant Improvements, a
representative of each shall sign the same. The final working drawings so
approved by Landlord and Tenant are referred to herein as the "Final Tenant
Improvement Plans".
4. Construction of Tenant Improvements. Landlord shall, at
the expense of Landlord and Tenant as specified in Paragraph 10 below,
construct the Tenant Improvements, in accordance with the following:
A. Building Permit. As soon as the Final Tenant Improvement
Plans have been approved by Landlord and Tenant, Landlord shall apply for a
building permit for the Tenant Improvements, and shall diligently pursue the
obtaining of such building permit.
B. Commencement of Tenant Improvements. As soon as the
building permit for the Tenant Improvements has been issued, Landlord shall
commence construction of the Tenant Improvements and shall diligently
prosecute such construction to completion.
5. Construction Contract. The following shall govern the
manner in which the construction contract shall be let by Landlord for the
construction of the Tenant Improvements:
A. Landlord shall engage South Bay Construction Company, a
California corporation ("SBCC") as the general contractor to construct the
Tenant Improvements. Tenant acknowledges that SBCC is an affiliate of the
Landlord.
B. All major subcontractors for the Tenant Improvements shall
be chosen by a competitive bid process where (i) Tenant shall have the right
to approve subcontractors who bid on specific parts of the job; (ii) the
subcontractor shall be awarded to the lowest responsible bidder unless
Landlord and Tenant otherwise agree (which decision may arise from concerns
as to whether the subcontractor will be able to complete its work in a timely
manner); and, (iii) Tenant shall have the right to review and approve all
subcontracts prior to submission to subcontractors.
C. The construction contract with SBCC shall provide for SBCC
to be compensated or reimbursed as follows with respect to the construction
of the Tenant Improvements: (i) to be paid a general contractor's fee equal
to five percent (5%) of all TI Costs; (ii) to be reimbursed for all payments
to subcontractors or material suppliers; (iii) to be reimbursed for the
following cost items (a) temporary electric power, (b) on-site office
trailer, (c) temporary on-site toilets, (d) trash removal and site clean up,
(e) long distance telephone charges, (f) messenger and air courier charges;
and (vi) to be reimbursed the following hourly rates for the cost of a job
superintendent ($55.00/hr) and of a project manager ($68.00/hr).
6. Substitutions. In developing the Preliminary Tenant
Improvement Plans and Final Tenant Improvement Plans, Tenant shall designate
and select material and equipment which can be obtained with normal lead
times. If at any time during the plan development process or the course of
construction, it becomes apparent that a particular material or item of
equipment is not or will not be obtainable within a reasonable period of
time, the parties shall meet and confer to find a substitute therefor.
7. Changes to Approved Plans. Once the Final Tenant
Improvement Plans have been approved by Landlord and Tenant, neither shall
have the right to order extra work or change orders with respect to the
construction of the Tenant Improvements without the prior written consent of
the other, which consent shall not be unreasonably withheld or delayed,
provided there is a reasonable basis for such change or such change is
required by any Law. All extra work or change orders requested by either
Landlord or Tenant shall be made in writing, shall specify any added or
reduced cost and/or construction time resulting therefrom, and shall become
effective and a part of the Final Tenant Improvement Plans once approved in
writing by both parties. If a change order requested by Tenant results in a
net increase in the TI Costs which causes the total TI Costs to exceed the
Maximum TI Allowance, Tenant shall pay to Landlord the amount of such
increase caused by the change order requested by Tenant in accordance with
the provisions of Paragraph 10 below.
8. Delivery of Possession, Punch List and Acceptance
Agreement. As soon as the Tenant Improvements are Substantially Completed,
Landlord and Tenant shall together walk through the Premises and inspect all
Tenant Improvements so completed, using reasonable efforts to discover all
uncompleted or defective construction in the Tenant Improvements. Unless any
uncompleted or defective construction would materially affect Tenant's
ability to conduct its business, then when such inspection has been
completed, Tenant shall sign an acceptance agreement which shall (i) include
a list of all "punch list" items which the parties agree are to be corrected
by Landlord and (ii) state the Commencement Date. As soon as such inspection
has been completed and such acceptance agreement executed, Landlord shall
deliver possession of the Premises to Tenant. Landlord shall use reasonable
efforts to complete and/or repair such "punch list" items within thirty (30)
days after receiving the acceptance agreement and punch list. Landlord shall
have no obligation to deliver possession of the Premises to Tenant until such
procedures regarding the preparation of a punch list and the execution of the
acceptance agreement have been completed. Tenant's taking possession of any
part of the Premises shall be deemed to be an acceptance by Tenant of
Landlord's work of improvement in such part as complete and in accordance
with the terms of the Lease except for the punch list items noted and latent
defects that could not reasonably have been discovered by Tenant during its
inspection of the Tenant Improvements prior to completion of the acceptance
agreement. Notwithstanding anything contained herein, Tenant's obligation to
pay the Monthly Installment of rent and Additional Rent shall commence as
provided in the Lease, regardless of whether Tenant completes such inspection
or executes such acceptance agreement.
9. Standard of Construction and Warranty. Landlord warrants
that the Tenant Improvements shall be constructed in a good and workmanlike
manner substantially in accordance with the Final Tenant Improvement Plans
(as modified by change orders approved by Landlord and Tenant). All
materials and equipment furnished shall be new, of good quality and installed
in accordance with the vendor's or manufacturer's specifications,
instructions and requirements. The foregoing warranty shall terminate one
(1) year following the date of Substantial Completion of the Tenant
Improvements unless Tenant makes a written claim against Landlord under the
foregoing warranty within said one (1) year period, in which case the
warranty shall survive only as to the specific matter described in such claim.
10. Payment of TI Costs. The TI Costs for the Tenant
Improvements shall be paid by Landlord and Tenant as follows:
A. Landlord shall pay all TI Costs up to the Maximum TI
Allowance. In no event shall Landlord be required to pay any TI Costs in
excess of the Maximum TI Allowance.
B. If the TI Costs exceed the Maximum TI Allowance, then
Tenant shall pay to Landlord the full amount of all Excess TI Costs in
accordance with the procedures set forth in Subparagraph C below.
C. During the course of constructing the Tenant Improvements,
each progress payment due to Landlord's contractor or to any subcontractor or
material supplier shall be paid by Landlord and Tenant as follows: (i)
Landlord shall pay a fraction of each progress payment, which fraction shall
have as its numerator the Maximum TI Allowance and shall have as its
denominator Landlord's estimate of the total TI Costs to complete the
construction of the Tenant Improvements; and (ii) Tenant shall pay the
balance of each progress payment ("Tenant's Share"). Tenant shall pay
Tenant's Share of each progress payment to Landlord within ten (10) days
after receipt of billing. If, at any time during the course of constructing
the Tenant Improvements, Landlord revises its estimate of the total TI Costs
to complete the Tenant Improvements so that the amount previously paid by
Tenant is not sufficient to pay Tenant's Share of the TI Costs paid to date,
then Tenant shall pay to Landlord, within ten (10) days after receipt of
billing, the amount necessary to increase Tenant's contribution toward the TI
Costs so that Landlord has paid only its fractional share of the TI Costs and
Tenant has paid the balance. Upon the completion of the Tenant Improvements,
Landlord shall provide Tenant with a reconciliation of the estimated TI Costs
to the actual TI Costs and Tenant's payments on account thereof, and Tenant
shall pay to Landlord, or Landlord shall refund to Tenant, a any net amount
due or refundable, as the case may be, within ten (10) days after Tenant's
receipt of the reconciliation. If Tenant shall fail to comply with any
demand for payment made pursuant to this Paragraph 10.C within ten (10) days
of receipt thereof, Landlord may (i) terminate, effective immediately, this
Lease by giving written notice of termination to Tenant, (ii) cease
construction of the Tenant Improvements, and/or (iii) exercise any and all
remedies available to Landlord at law or in equity, including those set forth
in Paragraph 15.B of the Lease.
11. Accounting. When the Tenant Improvements are
Substantially Completed and all TI Costs have been determined, Landlord shall
submit to Tenant a final and detailed accounting of all TI Costs paid by
Landlord. Tenant shall have the right to the audit books, records and
supporting documents of Landlord to the extent necessary to determine the
accuracy of such accounting during normal business hours after giving
Landlord at least five (5) business days prior written notice. Any such
audit must be conducted, if at all, within thirty (30) days after Landlord
delivers such accounting to Tenant.
12. Landlord's Code Work. Landlord shall perform all of
Landlord's Code Work at Landlord's sole cost and expense.
13. Effect of Agreement. In the event of any inconsistency
between this Improvement Agreement and the Lease, the terms of this
Improvement Agreement shall prevail.
TENANT:
ELEXSYS INTERNATIONAL, INC.,
a California corporation
DATED: __________________ By:
____________________________
Name: __________________________
Title: _________________________
LANDLORD:
SOUTH BAY/FORTRAN,
a California limited partnership
By: SBC&D CO., INC.,
a California corporation
General Partner
Dated: __________________ By: _______________________
JAMES D. MAIR
President
<PAGE>
EXHIBIT D
HAZARDOUS MATERIALS MANAGEMENT PLAN
(To be provided by Tenant prior to Occupancy)
<PAGE>
EXHIBIT E
1. ATT report dated July 9, 1992: Preliminary (Phase I) Environmental Site
Assessment Update for the Property at 4405 - 4445 Fortran Court, San Jose, CA
(Project No. 929368).
2. SECOR International Incorporated report dated July 10, 1995: Phase I
Environmental Site Assessment Report - 4405, 4415, 4425, 4435 and 4445 Fortran
Drive, San Jose, CA (Job No. 70076-001-01).
3. SECOR International Incorporated report dated July 24, 1995: Technical
Report Soil Sampling and Grab Groundwater Sampling - 4405-4445 Fortran Drive,
San Jose, CA
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of May 3,
1996 by and among: Anetec Technology, Inc., a California corporation ("Seller");
Helen Kwong (the "Shareholder"); Elexsys Acquisition Corporation, a California
corporation ("Purchaser") and Elexsys International Inc., a Delaware corporation
("Parent"). Certain other capitalized terms used in this Agreement are defined
in Exhibit A.
Recitals
A. The Shareholder has represented to Purchaser that she
is the sole stockholder of Seller.
B. The Shareholder and Seller wish to provide for the sale
of certain assets of Seller and Shareholder to Purchaser on the
terms set forth in this Agreement.
Agreement
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. Sale of Assets; Related Transactions
1.1 Sale of Assets.
(a) At the Closing (as hereinafter defined), the Shareholder and
Seller shall cause to be sold, assigned, transferred, conveyed and delivered to
Purchaser good, valid and marketable title to the Purchased Seller Assets, free
and clear of any and all Encumbrances, on the terms set forth in this Agreement.
(b) At the Closing, the Shareholder shall cause to be sold, assigned,
transferred, conveyed and delivered to Purchaser good, valid and marketable
title to the Purchased Shareholder Assets, free and clear of any and all
Encumbrances, on the terms set forth in this Agreement.
1.2 Purchase Price.
(a) As consideration for the sale of the Purchased Seller Assets to
Purchaser and as consideration for the non-competition covenants set forth in
the Noncompetition Agreement:
(i) Purchaser shall pay to Seller $1,000,000 in cash or by
wire transfer (payable in same-day funds) at the Closing (the
"Seller Closing Payment");
(ii) Purchaser shall deliver to Seller at the Closing a
promissory note executed by Parent in the principal amount of
$1,000,000 in the form attached hereto as Exhibit B (the "Promissory
Note");
(iii) Purchaser shall deliver to Seller 100,000 shares
of Parent's Common Stock (the "Shares") at the Closing; and
(iv) Purchaser shall assume the Specified Contractual
Liabilities at the Closing.
(b) As consideration for the sale of the Purchased Shareholder Assets
to Purchaser and as additional consideration for the non-competition covenants
set forth in the Noncompetition Agreement, Purchaser shall pay to Shareholder
$400,000 in cash at the Closing (the "Shareholder Closing Payment").
1.3 Closing.
(a) The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Cooley Godward
Castro Huddleson & Tatum, Five Palo Alto Square, Suite 400, 3000 El Camino Real,
Palo Alto, California 94306 at 2:00 p.m. on May __, 1996, or at such other time
and date as the parties hereto may mutually agree (the "Scheduled Closing
Time"). (The date on which the Closing actually takes place is referred to in
this Agreement as the "Closing Date.")
(b) At the Closing:
(i) the Shareholder shall execute and deliver to Parent and
Purchaser a Noncompetition Agreement in the form attached hereto
as Exhibit C (the "Noncompetition Agreement");
(ii) the Shareholder and Seller shall execute and deliver to
Purchaser and Parent a certificate (the "Closing Certificate") setting
forth the Shareholder's and Seller's representations and warranties
that (A) each of the representations and warranties made by Seller and
the Shareholder in this Agreement was accurate in all respects as of
the date of this Agreement, (B) except as expressly set forth in the
Closing Certificate, each of the representations and warranties made
by Seller and the Shareholder in this Agreement is accurate in all
respects as of the Closing Date as if made on the Closing Date, (C)
each of the covenants and obligations that Seller and the Shareholder
are required to have complied with or performed pursuant to this
Agreement at or prior to the Closing has been duly complied with and
performed in all respects, and (D) except as expressly set forth in
the Closing Certificate, each of the conditions set forth in Sections
7.3, 7.5 and 7.6 has been satisfied in all respects;
(iii) the Seller shall execute and deliver to Purchaser bills of
sale, endorsements and assignments in form acceptable to Purchaser
transferring title to the Purchased Seller Assets to Purchaser;
(iv) the Shareholder shall execute and deliver to Purchaser
bills of sale, endorsements and assignments in form acceptable to
Purchaser transferring title to the Purchased Shareholder Assets to
Purchaser; and
(v) the Shareholder and Seller shall cause to be executed and
delivered to Purchaser (A) such other documents evidencing the
transfer of the Purchased Seller Assets and Purchased Shareholder
Assets to Purchaser as are reasonably requested by Purchaser, (B)
estoppel certificates with respect to various contractual obligations
of Seller, and (C) evidence that any notices or filings required to
have been given to or made with Governmental Bodies in connection with
the Transactions have been given and made and that all Consents
required to have been obtained in connection with the Transactions
have been obtained.
1.4 No Other Liabilities. Neither Purchaser nor Parent
shall assume or be responsible for or liable to any Person for
any Liabilities of Seller or the Shareholder whatsoever, other
than the Specified Contractual Liabilities in the event the
Closing occurs.
1.5 Retained Payment. Purchaser may retain such portion of the Seller
Closing Payment as is required to satisfy in full Seller's outstanding
obligations to Mydata Automation Inc. and The Sumitomo Bank of California,
provided, that any payment retained by Purchaser shall be delivered in
satisfaction on such obligations on behalf of Seller within 15 days of the
Closing Date.
2. Representations and Warranties of the Shareholder and Seller
The Shareholder and Seller jointly and severally represent and
warrant, to and for the benefit of the Indemnitees, as follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used; and (iii) to perform
its obligations under all Seller Contracts.
(b) Except as set forth in Part 2.1(b) of the Disclosure Schedule,
Seller has not conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than the name "Anetec Technology, Inc."
(c) Seller is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on Seller. Seller is in good standing as a foreign corporation in each of the
jurisdictions identified in Part 2.1(c) of the Disclosure Schedule.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets forth (i)
the names of the members of Seller's board of directors, (ii) the names of the
members of each committee of Seller's board of directors, and (iii) the names
and titles of Seller's officers.
(e) Seller does not own any controlling interest in any Entity and,
except for the equity interests identified in Part 2.1(e) of the Disclosure
Schedule, Seller has never owned, beneficially or otherwise, any shares or other
securities of, or any direct or indirect equity interest in, any Entity. Seller
has not agreed and is not obligated to make any future investment in or capital
contribution to any Entity. Seller has not guaranteed and is not responsible or
liable for any obligation of any of the Entities in which it owns or has owned
any equity interest.
2.2 Articles of Incorporation and Bylaws; Records. Seller has delivered to
Parent and Purchaser accurate and complete copies of: (1) Seller's articles of
incorporation and bylaws, including all amendments thereto; (2) the stock
records of Seller; and (3) except as set forth in Part 2.2 of the Disclosure
Schedule, the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the stockholders of Seller, the board of directors of Seller and all
committees of the board of directors of Seller. There have been no formal
meetings or other proceedings of the stockholders of Seller, the board of
directors of Seller or any committee of the board of directors of Seller that
are not fully reflected in such minutes or other records. There has not been any
violation of any of the provisions of Seller's articles of incorporation or
bylaws, and Seller has not taken any action that is inconsistent in any material
respect with any resolution adopted by Seller's stockholders, Seller's board of
directors or any committee of Seller's board of directors. The books of account,
stock records, minute books and other records of Seller are accurate, up-to-date
and complete in all material respects, and have been maintained in accordance
with prudent business practices.
2.3 Capitalization, Etc.
(a) The authorized capital stock of Seller consists of: (i) 1,000,000
shares of Common Stock, no par value (the "Common Stock"), of which 1,000 shares
have been issued and are outstanding as of the date of this Agreement. All of
the outstanding shares of Common Stock have been duly authorized and validly
issued, and are fully paid and non-assessable. All of the outstanding shares of
Common Stock are held, beneficially and of record, by the Shareholder, free and
clear of any Encumbrances.
(b) There is no: (i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of Seller; or (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of Seller.
2.4 Financial Statements.
(a) Seller has delivered to Purchaser the following
financial statements and notes (collectively, the "Seller
Financial Statements"):
(i) The unaudited balance sheets of Seller as of December 31,
1995, and the related unaudited income statements, statements of
stockholders' equity of Seller for the year then ended together with the
notes thereto; and
(ii) the unaudited balance sheet of Seller as of March 31, 1996
(the "Unaudited Interim Balance Sheet"), and the related unaudited income
statement of Seller for the three months then ended.
(b) The Seller Financial Statements are accurate and complete in all
material respects and present fairly the financial position of Seller as of the
respective dates thereof and the results of operations. The Seller Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
that the financial statements referred to in Section 2.4(a)(ii) do not contain
footnotes). All of the records of Seller are in the actual possession and
control of Seller. Seller has in place an adequate and appropriate system of
internal controls which is at least as comprehensive and effective as the
systems of internal controls customarily maintained by similarly situated
companies.
2.5 Absence of Changes. Except as set forth in Part 2.5 of
the Disclosure Schedule, since March 31, 1996;
(a) there has not been any material adverse change in Seller's
business, condition, assets, liabilities, intellectual property rights,
operations, financial performance or prospects, and, to the best of the
knowledge of Seller and the Shareholder, no event has occurred that will,
or could reasonably be expected to, have a Material Adverse Effect on
Seller;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any
of Seller's assets (whether or not covered by insurance);
(c) Seller has not declared, accrued, set aside or paid any dividend
or made any other distribution in respect of any shares of capital stock,
and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) there has been no amendment to Seller's articles of incorporation
or bylaws, and Seller has not effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;
(e) Seller has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(f) Seller has not made any capital expenditure;
(g) Seller has not (i) entered into or permitted any of the assets
owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.9(a)), or (ii)
amended or prematurely terminated, or waived any material right or remedy
under, any such Contract;
(h) Seller has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except
for pledges of immaterial assets made in the ordinary course of business
and consistent with Seller's past practices;
(i) Seller has not (i) established or adopted any Employee Benefit
Plan, (ii) paid any bonus or made any profit-sharing or similar payment to,
or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
(j) Seller has not changed any of its methods of accounting
or accounting practices in any respect;
(k) Seller has not commenced or settled any Legal
Proceeding;
(l) Seller has not entered into any material transaction or taken any
other material action outside the ordinary course of business or
inconsistent with its past practices; and
(m) Seller has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(l)" above.
2.6 Title to Assets.
(a) Seller owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including: (i) all assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.7 and
2.8 of the Disclosure Schedule and all of Seller's rights under the Contracts
identified in Part 2.9 of the Disclosure Schedule; and (iii) all other assets
reflected in Seller's books and records as being owned by Seller. Except as set
forth in Part 2.6(a) of the Disclosure Schedule, all of said assets are owned by
Seller free and clear of any Encumbrances, except for (x) any lien for current
taxes not yet due and payable, and (y) minor liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of Seller.
(b) Part 2.6(b) of the Disclosure Schedule identifies all
assets that are material to the business of Seller and that are
being leased or licensed to Seller.
(c) Seller's aggregate obligations (i) to Mydata Automation
Inc. do not exceed $182,000 and (ii) to The Sumitomo Bank of
California do not exceed $112,000.
(d) The Shareholder owns, and has good, valid and marketable title to
the Purchased Shareholder Assets. All of the Purchased Shareholder Assets are
owned by the Shareholder free and clear of any Encumbrances, except for (x) any
lien for current taxes not yet due and payable, and (y) minor liens that have
arisen in the ordinary course of business and that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto.
2.7 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned
by or leased to Seller are adequate for the uses to which they are being put,
are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of Seller's business in the manner in which such
business is currently being conducted. Part 2.7 of the Disclosure Schedule
provides an accurate and complete list of all items of equipment, materials,
prototypes, tools, vehicles, furniture and other tangible assets owned by or
leased to Seller with an original value in excess of $500.
(b) Seller does not own any real property or any interest in real
property, except for the leasehold created under the real property lease
identified in Part 2.9 of the Disclosure Schedule.
2.8 Proprietary Assets.
(a) Other than common law tradename and trademark rights to
"Anetec Technology, Inc.", the Seller has no Seller Proprietary
Assets.
(b) Seller is not infringing, misappropriating or making any unlawful
use of, and Seller has not at any time infringed, misappropriated or made any
unlawful use of, or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by any
other Person.
2.9 Contracts.
(a) Part 2.9(a) of the Disclosure Schedule
identifies:
(i) each Seller Contract relating to the employment of, or
the performance of services by, any employee, consultant or
independent contractor;
(ii) each Seller Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology
or any Proprietary Asset;
(iii) each Seller Contract imposing any restriction on Seller's
right or ability (A) to compete with any other Person, (B) to acquire any
product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or
to transact business or deal in any other manner with any other Person, or
(C) develop or distribute any technology;
(iv) each Seller Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Seller Contract relating to the creation of any
Encumbrance with respect to any asset of Seller;
(vi) each Seller Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;
(vii) each Seller Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits,
losses, costs or liabilities;
(viii) each Seller Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by
or for, any Related Party (as defined in Section 2.16);
(ix) each Seller Contract constituting or relating to a
Government Contract or Government Bid;
(x) any other Seller Contract that was entered into outside
the ordinary course of business or was inconsistent with Seller's
past practices;
(xi) any other Seller Contract that has a term of more than 60
days and that may not be terminated by Seller (without penalty) within 60
days after the delivery of a termination notice by Seller; and
(xii) any other Seller Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $10,000 in the aggregate, or (B) the
performance of services having a value in excess of $10,000 in the
aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xii)" above are referred to in this Agreement as "Material Contracts.")
(b) Seller has delivered to Parent and Purchaser accurate and complete
copies of all written Contracts identified in Part 2.9(a) of the Disclosure
Schedule, including all amendments thereto. Part 2.9(b) of the Disclosure
Schedule provides an accurate description of the terms of each non-written
Seller Contract. Each Contract identified in Parts 2.9(a) and (b) of the
Disclosure Schedule is valid and in full force and effect, and, to the best of
the knowledge of Seller and the Shareholder, is enforceable by Seller in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.9(c) of the Disclosure
Schedule:
(i) Seller has not violated or breached, or committed any
default under, any Seller Contract, and, to the best of the knowledge of
Seller and the Shareholder, no other Person has violated or breached, or
committed any default under, any Seller Contract, which violation, breach
or default has not been waived or satisfied as of the date of this
Agreement;
(ii) to the best of the knowledge of Seller and the Shareholder,
no event has occurred, and no circumstance or condition exists, that (with
or without notice or lapse of time) will, or could reasonably be expected
to, (A) result in a violation or breach of any of the provisions of any
Seller Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Seller Contract, (C) give any Person the
right to accelerate the maturity or performance of any Seller Contract, or
(D) give any Person the right to cancel, terminate or modify any Seller
Contract;
(iii) since December 31, 1992, Seller has not received any
notice or other communication regarding any actual or possible violation or
breach of, or default under, any Seller Contract that has not been resolved
as of the date of this Agreement; and
(iv) Seller has not waived any of its material rights under
any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Seller Contract to renegotiate, any amount paid or payable to Seller
under any Material Contract or any other material term or provision of any
Material Contract.
(e) The Contracts identified in Parts 2.9(a) and (b) of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable Seller
to conduct its business in the manner in which its business is currently being
conducted.
(f) Part 2.9(f) of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has been submitted or received
by Seller since January 1, 1995.
(g) Part 2.9(g) of the Disclosure Schedule provides an
accurate description and breakdown of Seller's backlog under
Seller Contracts.
2.10 Liabilities. Seller has no accrued, contingent or other Liabilities of
any nature, either matured or unmatured (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles, and whether due or to become due), except for: (a) Liabilities
identified as such in the "liabilities" column of the Unaudited Interim Balance
Sheet; (b) accounts payable or accrued salaries that have been incurred by
Seller since March 31, 1996 in the ordinary course of business and consistent
with Seller's past practices; (c) Liabilities under Seller Contracts identified
in Parts 2.9(a) and (b) of the Disclosure Schedule, to the extent the nature and
magnitude of such Liabilities can be specifically ascertained by reference to
the text of such Seller Contracts; (d) the Liabilities identified in Part 2.10
of the Disclosure Schedule and (e) any Liabilities that neither Seller nor
Shareholder have any reason to be aware of.
2.11 Compliance with Legal Requirements. Seller is, and has at all times
been, in compliance in all material respects with all applicable Legal
Requirements. Except as set forth in Part 2.11 of the Disclosure Schedule,
Seller has not received any notice or other communication from any Governmental
Body regarding any actual or possible violation of, or failure to comply with,
any Legal Requirement.
2.12 Governmental Authorizations. Part 2.12 of the Disclosure Schedule
identifies each Governmental Authorization held by Seller, and Seller has
delivered to Parent and Purchaser accurate and complete copies of all
Governmental Authorizations identified in Part 2.12 of the Disclosure Schedule.
The Governmental Authorizations identified in Part 2.12 of the Disclosure
Schedule are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable Seller to conduct its business
in the manner in which its business is currently being conducted. Seller is, and
at all times has been, in substantial compliance with the terms and requirements
of the respective Governmental Authorizations identified in Part 2.12 of the
Disclosure Schedule. Seller has not received any notice or other communication
from any Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization.
2.13
Sales and Property Tax Matters.
(a) Each Sales and Property Tax required to have been paid, or claimed
by any Governmental Body to be payable, by Seller has been duly paid in full on
a timely basis. Each Sales and Property Tax required to have been withheld or
collected by Seller has been duly withheld and collected; and (to the extent
required) each such tax has been paid to the appropriate Governmental Body.
(b) Part 2.13(b) of the Disclosure Schedule accurately identifies each
examination or audit of any Tax Return of Seller concerning Sales and Property
Tax that has been conducted since December 31, 1990. The Shareholder and Seller
have delivered to Parent and Purchaser accurate and complete copies of all audit
reports and similar documents (to which the Shareholder or Seller has access)
relating to such Tax Returns.
(c) Except as set forth in Part 2.13(c) of the Disclosure Schedule, no
claim or other Proceeding is pending or has been threatened against or with
respect to Seller in respect of any Sales and Property Tax. There are no
unsatisfied liabilities for any Sales and Property Tax (including liabilities
for interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by Seller.
Seller has not entered into nor has become bound by any agreement or consent
pursuant to Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"Code").
(d) The Shareholder and Seller have delivered to Parent and Purchaser
accurate and complete copies of all Tax Returns relating to any Sales and
Property Tax that have been filed on behalf of Seller since December 31, 1990.
The information respecting Sales and Property Tax contained in each of the Tax
Returns so delivered to Parent and Purchaser is accurate and complete in all
respects.
2.14 Employee and Labor Matters; Benefit Plans.
(a) Part 2.14 of the Disclosure Schedule identifies and provides an
accurate and complete description of each Seller Plan. Seller has not
established, adopted, maintained, sponsored, contributed to, participated in or
incurred any Liability with respect to any Employee Benefit Plan, except for
Seller Plans identified in Part 2.14 of the Disclosure Schedule; and Seller has
not provided or made available any fringe benefit or other benefit of any nature
to any of its employees, except as set forth in Part 2.14 of the Disclosure
Schedule.
(b) Seller has delivered to Parent and Purchaser, with
respect to each Seller Plan:
(i) an accurate and complete copy of such Seller Plan and
all amendments thereto (including any amendment that is scheduled
to take effect in the future);
(ii) an accurate and complete copy of each Contract (including
any trust agreement, funding agreement, service provider agreement,
insurance agreement, investment management agreement or recordkeeping
agreement) relating to such Seller Plan;
(iii) an accurate and complete copy of any description, summary,
notification, report or other document that has been furnished to any
employee of either of Seller with respect to such Seller Plan;
(iv) an accurate and complete copy of any form, report,
registration statement or other document that has been filed with or
submitted to any Governmental Body with respect to such Seller Plan; and
(v) an accurate and complete copy of any determination letter,
notice or other document that has been issued by, or that has been received
by Seller from any Governmental Body with respect to such Seller Plan.
(c) Each Seller Plan is being and has at all times been operated and
administered in full compliance with the provisions thereof. Each contribution
or other payment that is required to have been accrued or made under or with
respect to any Seller Plan has been duly accrued and made on a timely basis.
(d) Each Seller Plan has at all times complied and been operated and
administered in full compliance with all applicable reporting, disclosure and
other requirements of ERISA and the Code and all other applicable Legal
Requirements.
2.15 Environmental Matters. Seller is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by Seller of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. Seller has not received any notice or other communication
(in writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that Seller is not in compliance with any
Environmental Law, and, to the best of the knowledge of Seller and the
Shareholder, there are no circumstances that may prevent or interfere with
Seller's compliance with any Environmental Law in the future. To the best of the
knowledge of Seller and the Shareholder, no current or prior owner of any
property leased or controlled by Seller has received any notice or other
communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or Seller is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by Seller pursuant to Environmental
Laws are identified in Part 2.15 of the Disclosure Schedule. (For purposes of
this Section 2.15: (i) "Environmental Law" means any federal, state, local or
foreign Legal Requirement relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
2.16 Related Party Transactions. Except as set forth in Part 2.16 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since December 31, 1992 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of Seller (other
than the interest of Shareholder in the Purchased Shareholder Assets); (b) since
December 31, 1992, no Related Party has entered into, or has had any direct or
indirect financial interest in, any material Contract, transaction or business
dealing involving Seller; and (c) no Related Party is competing, or has at any
time since December 31, 1992 competed, directly or indirectly, with Seller. (For
purposes of the Section 2.16 each of the following shall be deemed to be a
"Related Party": (i) each individual who is, or who has at any time since
December 31, 1992 been, an officer of Seller; (ii) each member of the immediate
family of each of the individuals referred to in clause "(i)" above; and (iii)
any trust or other Entity (other than Seller) in which any one of the
individuals referred to in clauses "(i)" and "(ii)" above holds (or in which
more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.)
2.17 Legal Proceedings; Orders.
(a) Except as set forth in Part 2.17 of the Disclosure Schedule, there
is no pending Legal Proceeding, and (to the best of the knowledge of Seller and
the Shareholder) no Person has threatened to commence any Legal Proceeding: (i)
that involves Seller or any of the assets owned or used by Seller or any Person
whose Liability Seller has or may have retained or assumed, either contractually
or by operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the
Transactions. To the best of the knowledge of Seller and the Shareholder, except
as set forth in Part 2.17 of the Disclosure Schedule, no event has occurred, and
no claim, dispute or other condition or circumstance exists, that will, or that
could reasonably be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.17 of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by or has
ever been pending against Seller.
(c) There is no order, writ, injunction, judgment or decree to which
Seller, or any of the assets owned or used by Seller, is subject. The
Shareholder is not subject to any order, writ, injunction, judgment or decree
that relates to Seller's business or to any of the assets owned or used by
Seller. To the best of the knowledge of Seller and the Shareholder, no officer
or other employee of Seller is subject to any order, writ, injunction, judgment
or decree that prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to Seller's business.
2.18 Authority; Binding Nature of Agreement. Seller and the Shareholder
have the absolute and unrestricted right, power and authority to enter into and
to perform their respective obligations under this Agreement. The execution,
delivery and performance by Seller of this Agreement have been duly authorized
by all necessary action on the part of Seller, its board of directors and the
Shareholder. This Agreement constitutes the legal, valid and binding obligations
of Seller and the Shareholder, enforceable against each of them in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
2.19 Non-Contravention; Consents. Except as set forth in Part 2.19 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other Transactional Agreements, nor (2) the consummation
of the Transactions will directly or indirectly (with or without notice or lapse
of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Seller's articles of incorporation or bylaws, or (ii) any
resolution adopted by Seller's stockholders, Seller's board of directors or
any committee of Seller's board of directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which Seller, the Shareholder or any of
the assets owned or used by Seller, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Seller or the Shareholder or that otherwise
relates to Seller's business or to any of the assets owned or used by
Seller;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Seller Contract that is
or would constitute a Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Seller
Contract, (ii) accelerate the maturity or performance of any such Seller
Contract, or (iii) cancel, terminate or modify any such Seller Contract; or
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by Seller (except for minor liens
that will not, in any case or in the aggregate, materially detract from the
value of the assets subject thereto or materially impair the operations of
Seller).
Except as set forth in Part 2.19 of the Disclosure Schedule, neither Seller nor
the Shareholder will be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of the Agreement or any of the other Transactional
Agreements, or (y) the consummation of the Transactions.
2.20 Brokers. Neither Seller nor the Shareholder have agreed or become
obligated to pay, or have taken any action that might result in any Person
claiming to be entitled to receive, any brokerage commission, finder's fee or
similar commission or fee in connection with any of the Transactions, except for
a payment to Harry Parmar.
2.21 Fair Consideration; No Fraudulent. Conveyance.
(a) After due inquiry and negotiation, the sale and purchase of the
Purchased Seller Assets is made in exchange for fair and equivalent
consideration, and Seller is not insolvent and will not be rendered
insolvent by the sale of the Purchased Seller Assets under the terms of the
Agreement. The transactions contemplated by the Agreement will not
constitute a fraudulent conveyance or any act with similar potential
consequences, or otherwise give any creditor of Seller or Shareholder any
rights to any of the Purchased Seller Assets transferred to Purchaser.
(b) After due inquiry and negotiation, the sale and purchase of the
Purchased Shareholder Assets is made in exchange for fair and equivalent
consideration, and Seller is not insolvent and will not be rendered
insolvent by the sale of the Purchased Shareholder Assets under the terms
of the Agreement. The transactions contemplated by the Agreement will not
constitute a fraudulent conveyance or any act with similar potential
consequences, or otherwise give any creditor of Shareholder or Seller any
rights to any of the Purchased Seller Assets transferred to Purchaser.
2.22 Full Disclosure. The Agreement (including the Disclosure Schedule)
does not, and the Closing Certificate will not, (i) contain any representation,
warranty or information that is false or misleading with respect to any material
fact, or (ii) omit to state any material fact or necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading.
2.23 All Necessary Assets. The Purchased Seller Assets and
the Purchased Shareholder Assets together consist of all of the
assets necessary for Seller to conduct its business in the manner
in which it is currently being conducted.
3. Representations and Warranties of Parent and Purchaser
Parent and Purchaser represent and warrant, to and for the benefit of
Seller, as follows:
3.1 Authority; Binding Nature of Agreements. Parent and Purchaser have the
absolute and unrestricted right, power and authority to enter into and perform
their obligations under the Agreement. The Agreement constitutes the legal,
valid and binding obligations of Parent and Purchaser and is enforceable against
Parent and Purchaser in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. The Shares when issued in compliance with the
provisions of this Agreement will be validly issued and will be fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares may be subject to restrictions on transfer under state and/or
federal securities laws. The Promissory Note when issued in compliance with the
provisions of this Agreement will be validly issued and will be free of any
liens or encumbrances; provided, however, that the Promissory Note may be
subject to restrictions on transfer under state and/or federal securities laws.
3.2 Brokers. Neither Parent nor Purchaser have agreed or become obligated
to pay, and have not taken any action that might result in any Person claiming
to be entitled to receive, any brokerage commission, finder's fee or similar
commission or fee in connection with any of the Transactions, except for a
payment by Purchaser to Harry Parmar.
4. Certain Securities Matters
4.1 Representations of Seller and Shareholder. The Seller
and Shareholder jointly and severally represent and warrant, to
and for the benefit of the Indemnitees, as follows:
(a) Each of Seller and Shareholder has received and reviewed (i) a
copy of Purchaser's report on Form 10-K for the year ending September 30,
1995, as filed with the SEC, (ii) a copy of Purchaser's report on Form 10-Q
for the quarter ending December 31, 1995, (iii) a copy of Purchaser's
annual report to shareholders for the fiscal year ended September 30, 1995,
and (iv) a copy of Purchaser's proxy statement for the annual meeting of
shareholder on January 30, 1996;
(b) Each of Seller and Shareholder is aware (i) that the Shares are
being issued under an exemption from the registration requirements of the
Securities Act, (ii) that neither Seller nor Shareholder are being provided
with any prospectus or other offering materials other than the documents
referred to in Section 4.1(a), and (iii) that the Transactions have not
been approved or reviewed by the Commission or by any other Governmental
Body;
(c) Each of Seller and Shareholder (i) is aware that because the
issuance of the Shares has not been registered under the Securities Act,
such shares must be held indefinitely unless their resale or other
disposition is registered under the Securities Act or is exempt from the
registration requirements of the Securities Act, (ii) is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resales of shares purchased in certain exempt transactions, subject
to the satisfaction of various requirements;
(d) Each of Seller and Shareholder realizes that, if the requirements
of Rule 144 are not satisfied, any disposition by Seller or Shareholder of
any of the Shares may require registration under the Securities Act, and
that Purchaser is not under any obligation to take any action to register
any of the Shares;
(e) Each of Seller and Shareholder (i) has such knowledge and
experience in financial and business matters, (ii) is capable of evaluating
the merits and risks of the Transactions and the merits and risks of
investing in the Common Stock of Purchaser, and (iii) has discussed the
Transactions, and the merits and risks of investing in the Common Stock of
Purchaser, with employees of Purchaser;
(f) Seller is acquiring the Shares for investment and for Seller's own
account and not with a view to, or for resale in connection with, any
unregistered distribution thereof (other than a distribution to Shareholder
upon dissolution of Seller), and has no present intention to sell or
otherwise dispose of any interest in or risk related to the Shares except
in accordance with Section 4.2 and except for a distribution of the Shares
to Shareholder upon dissolution of Seller;
(g) Upon Shareholder's acquisition of the Shares upon dissolution of
Seller, Shareholder will acquire the Shares for investment and for
Shareholder's own account and not with a view to, or for resale in
connection with, any unregistered distribution thereof, and will have no
present intention to sell or otherwise dispose of any interest in or risk
related to the Shares except in accordance with Section 4.2;
(h) Each of Seller and Shareholder has fully considered the risks of
an investment in the Shares, and understands that (i) such an investment is
suitable only for an investor who is able to bear the economic consequences
of losing the entire investment, (ii) such an investment is a speculative
investment which involves a high degree of risk of loss, and (iii) there
are substantial restrictions on the transferability of the Shares, and it
may not be possible for to liquidate an investment in the Shares in the
case of emergency;
(i) Each of Seller and Shareholder is able (i) to bear the economic
risk of his or her investment in the Shares, (ii) to hold the Shares, and
(iii) to afford a complete loss of their investment in the Shares;
(j) Each of Seller and Shareholder has been given the opportunity to
ask questions of, and to receive answers from, Representatives of Purchaser
concerning the terms and provisions of the Transactions and the business
and prospects of Purchaser, and to obtain any additional information
necessary to verify the accuracy of the information set forth in the
documents referred to in Section 4.1(a);
(k) Shareholder is a bona fide, full-time resident of the State of
California; Seller's principal place of business is in the State of
California and Seller only enters into contracts (including this Agreement)
in the State of California.
(l) Each of Seller and Shareholder understands that the certificates
representing the Shares may bear a legend identical or similar in effect to
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF
THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION"; and
(m) Each of Seller and Shareholder understands and intends that the
representations and warranties being made in this Section 4.1 (i) may be
relied upon by Purchaser in determining their suitability as an investor in
the Shares, and (ii) shall survive their receipt of the Shares.
4.2 Sale of the Shares by Shareholder. Seller or Shareholder may sell some
or all of the Shares if (i) the sale of such Shares is covered by an
registration statement declared effective by the Commission; or (ii) the Seller
or the Shareholder shall have delivered to Parent an unqualified opinion of
counsel satisfactory to Parent to the effect that such Shares may be sold
without registration or qualification because of the availability of exemptions
under the Securities Act and applicable state securities laws, provided,
however, that no such opinion shall be required for the distribution of the
Shares to Shareholder upon dissolution of Seller or such transfer is performed
in accordance with Section 6.8. Except as expressly permitted by this Section
4.2, Seller and Shareholder shall not, directly or indirectly, sell or otherwise
dispose of, or offer to sell or otherwise dispose of, any of the Shares at any
time on or after the Closing Date.
5. Certain Covenants of Seller
5.1 Access and Investigation. During the period from the date of this
Agreement through the Closing Date (the "Pre-Closing Period"), Seller shall, and
shall cause its Representatives to: (a) provide Parent, Purchaser and
Purchaser's Representatives with reasonable access to Seller's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to Seller; and (b) provide
Parent, Purchaser and Purchaser's Representatives with copies of such existing
books, records, Tax Returns, work papers and other documents and information
relating to Seller, and with such additional financial, operating and other data
and information regarding Seller, as Purchaser may reasonably request.
5.2 Operation of Seller's Business. During the Pre-Closing
Period:
(a) Seller shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations
have been conducted prior to the date of this Agreement;
(b) Seller shall use reasonable efforts to preserve intact its current
business organization, keep available the services of its current officers
and employees and maintain its relations and good will with all suppliers,
customers, landlords, creditors, employees and other Persons having
business relationships with Seller;
(c) Seller shall cause its officers to report regularly (but in no
event less frequently than weekly) to Purchaser concerning the status of
Seller's business;
(d) Seller shall not declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock, and
shall not repurchase, redeem or otherwise reacquire any shares of capital
stock or other securities;
(e) Seller shall not sell, issue or authorize the issuance of (i) any
capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into
or exchangeable for any capital stock or other security;
(f) Seller shall not amend or permit the adoption of any amendment to
Seller's articles of incorporation or bylaws, or effect or permit Seller to
become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(g) Seller shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(h) Seller shall not make any capital expenditures;
(i) Seller shall not (i) enter into, or permit any of the assets owned
or used by it to become bound by, any Contract that is or would constitute
a Material Contract, or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any such Contract;
(j) Seller shall not (i) acquire, lease or license any right or other
asset from any other Person, (ii) sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or
disposed of by Seller pursuant to Contracts that are not Material
Contracts;
(k) Seller shall not (i) lend money to any Person (except that Seller
may make routine travel advances to employees in the ordinary course of
business, or (ii) incur or guarantee any indebtedness for borrowed money;
(l) Seller shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees, or
(iii) hire any new employee whose aggregate annual compensation is expected
to exceed $50,000;
(m) Seller shall not change any of its methods of
accounting or accounting practices in any material respect;
(n) Seller shall not commence or settle any Legal
Proceeding;
(o) Seller shall not agree or commit to take any of the
actions described in clauses "(e)" through "(o)" above.
5.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, Seller shall promptly
notify Parent and Purchaser in writing of:
(i) the discovery by Seller of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by Seller or the Shareholder in this
Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty
made by Seller or the Shareholder in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or
(B) such event, condition, fact or circumstance had occurred, arisen or
existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of
Seller; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 7 or
Section 8 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 5.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Seller shall promptly deliver to Parent and Purchaser an
update to the Disclosure Schedule specifying such change. No such update shall
be deemed to supplement or amend the Disclosure Schedule for the purpose of (i)
determining the accuracy of any of the representations and warranties made by
Seller or the Shareholder in this Agreement, or (ii) determining whether any of
the conditions set forth in Section 7 has been satisfied.
5.4 No Negotiation. During the Pre-Closing Period, Seller
shall not, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry,
proposal or offer from any Person (other than Purchaser) relating
to a possible Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other
than Purchaser) relating to or in connection with a possible Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Purchaser) relating to a possible Acquisition
Transaction.
Seller shall promptly notify Parent and Purchaser in writing of any material
inquiry, proposal or offer relating to a possible Acquisition Transaction that
is received by Seller during the Pre-Closing Period.
5.5 Bulk Transfer Waiver and Indemnification. Although no party hereto
acknowledges that bulk transfer laws are applicable to the transactions
contemplated by this Agreement, to the extent that such laws are determined to
apply, Purchaser waives compliance by Seller with the provisions of any
applicable bulk transfer laws for the protection of creditors, and each of
Seller and the Shareholder agree to indemnify and hold Purchaser harmless from,
and reimburse Purchaser for, any loss, cost, expense, liability or damage
(including reasonable counsel fees and disbursements and expenses) which
Purchaser may suffer or incur by virtue of the non-compliance by Seller or
Purchaser with such bulk transfer laws.
6. Certain Covenants
6.1 Filings and Consents. As promptly as practicable after the execution of
this Agreement, each party to this Agreement (a) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Transactions, and (b) shall use all commercially reasonable
efforts to obtain all Consents (if any) required to be obtained (pursuant to any
applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Transactions. Seller shall (upon request) promptly deliver
to Parent and Purchaser a copy of each such filing made, each such notice given
and each such Consent obtained by Seller during the Pre-Closing Period.
6.2 Best Efforts. During the Pre-Closing Period, (a) Seller shall use its
best efforts to cause the conditions set forth in Section 7 to be satisfied on a
timely basis, and (b) Parent and Purchaser shall use their respective best
efforts to cause the conditions set forth in Section 8 to be satisfied on a
timely basis.
6.3 Change of Name. Within two business days after the Closing Date, the
Shareholder and Seller shall take such action as may be necessary to cause the
corporate name of Seller to be changed to a new name that is satisfactory to
Parent and Purchaser. Following the Closing, neither Seller nor the Shareholder
shall, without the prior written consent of Parent, make any use of the name
"Anetec" or any other name confusingly similar thereto, except as may be
necessary for Seller to pay its liabilities, prepare tax returns and other
reports, and to otherwise wind up and conclude its business.
6.4 Dissolution. Seller and the Shareholder agree that (a) as soon as
possible after the Closing Date, Seller shall be liquidated and dissolved, (b)
Seller shall not transact any business following the Closing Date except as
necessary to wind up its affairs and to be liquidated and dissolved, (c) Seller
shall not issue any securities on or after the Closing Date , and (d) no
stockholder of Seller (including the Shareholder) shall transfer, encumber or
dispose of any stock or other securities of Seller at any time on or after the
Closing Date. Prior to the liquidation and dissolution of Seller, Seller shall
pay and fully discharge all of its Liabilities (other than the Specified
Contractual Liabilities), including (i) all Liabilities to their current and
former employees for wages, commissions, severance pay and vacation pay, and
(ii) all accounts payable and long-term indebtedness relating to its business.
6.5 Tax Returns. At least ten days prior to the filing with any
Governmental Body (by Seller or the Shareholder) of any Tax Return relating to
or reflecting any of the Transactions, Seller and the Shareholder shall cause a
copy of such Tax Return (in the form proposed to be filed) to be delivered to
Parent and Purchaser for their review. Seller and the Shareholder shall ensure
that each such Tax Return is accurate and complete and is filed on a timely
basis with the appropriate Governmental Body.
6.6 Further Actions. From and after the Closing Date, the Shareholder and
Seller shall cooperate with Parent, Purchaser and their affiliates and
Representatives, and shall execute and deliver such documents and take such
other actions as Parent or Purchaser may reasonably request, for the purpose of
evidencing the Transactions and putting Purchaser in possession and control of
all of the Purchased Seller Assets and Purchased Shareholder Assets. Without
limiting the generality of the foregoing, from and after the Closing Date,
Seller shall promptly remit to Purchaser any funds that are received by Seller
under Contracts included in the Purchased Seller Assets and Purchased
Shareholder Assets. Seller hereby:
(a) irrevocably authorizes Parent and Purchaser to endorse in the name
of Seller any check or other instrument that is made payable to Seller and
that represents the payment of any amount due under any Contract included
in the Purchased Seller Assets; and
(b) irrevocably nominates, constitutes and appoints Parent and
Purchaser, and each of them, as true and lawful attorneys-in-fact of Seller
(with full power of substitution) and hereby authorizes Parent and
Purchaser, and each of them, in the name of and on behalf of Seller, to
execute, deliver, acknowledge, certify, file and record any document, to
institute and prosecute any Legal Proceeding and to take any other action
that Parent or Purchaser may deem appropriate for the purpose of (i)
collecting, asserting, enforcing or perfecting any claim, right or interest
of any kind that is included in or relates to any of the Purchased Seller
Assets, (ii) defending or compromising any claim or Legal Proceeding
relating to any of the Purchased Seller Assets, or (iii) otherwise carrying
out or facilitating any of the Transactions.
The power of attorney referred to in the preceding sentence is and shall be
coupled with an interest and shall be irrevocable, and shall survive the
liquidation and dissolution of Seller. Neither Parent nor Purchaser shall be
entitled to receive any payment by operation of this Section 6.6 with respect to
any accounts receivable of Seller existing as of the Closing Date.
6.7 Publicity. The Shareholder and Seller shall ensure
that, on and at all times after the Closing Date:
(a) no press release or other publicity concerning any of the
Transactions is issued or otherwise disseminated by or on behalf of the
Shareholder or Seller without Parent's prior written consent;
(b) the Shareholder and Seller continue to keep the terms
of this Agreement and the other Transactional Agreements strictly
confidential; and
(c) the Shareholder and Seller keep strictly confidential, and neither
the Shareholder nor Seller uses or discloses to any other Person, any
non-public document or other information that relates directly or
indirectly to any of the Purchased Seller Assets or Purchased Shareholder
Assets to the business of either of Seller, Purchaser or any affiliate of
Purchaser.
6.8 Standstill. Shareholder agrees that it will not, directly or
indirectly, sell, offer, contract to sell, transfer the economic risk of
ownership in, make any short sale against, pledge or otherwise dispose of any of
the Shares, without the prior written consent of Parent for a period of two
years from the date hereof, provided, however, that the two year period shall be
reduced to one year if, at any time, the Commission shall reduce the holding
period under Rule 144(d)(1) promulgated under the Securities Act from two years
to one year. Notwithstanding the foregoing, the Shareholder may transfer any of
the Shares either during her lifetime or on death by will or intestacy to her
immediate family or to a trust the beneficiaries of which are exclusively the
Shareholder and/or a member or members of her immediate family; provided,
however, that prior to any such transfer each transferee shall execute an
agreement, satisfactory to Parent, pursuant to which each transferee shall agree
to receive and hold such shares subject to the provisions of this paragraph, and
there shall be no further transfer except in accordance with the provisions
hereof. For the purposes of this paragraph, "immediate family" shall mean
spouse, lineal descendant, father, mother, brother or sister of the transferor.
Shareholder understands that this provision shall be binding upon Shareholder's
heirs, legal representatives, successors and assigns. Shareholder agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent against the Shares except in compliance with this agreement.
6.9 Release of Security Interests. Within 15 days of the
Closing Date, Seller shall satisfy in full its outstanding
obligations to Mydata Automation Inc. and The Sumitomo Bank of
California and obtain a UCC-2 release of any security interests
held in the Purchaser Seller Assets.
6.10 Allocation. The consideration referred to in Section 1.2(a) is to be
allocated among the Purchased Seller Assets in the manner described in Exhibit
D, which exhibit shall be attached to this Agreement upon the Closing. The
parties agree to negotiate in good faith to determine the allocation among the
Purchased Seller Assets and to complete such negotiation prior to Closing. The
allocation described in Exhibit D shall be conclusive and binding upon the
Shareholder and Seller for all purposes, and no party to this Agreement shall
file any Tax Return or other document with, or make any statement or declaration
to, any Governmental Body that is inconsistent with such allocation.
6.11 Contingent Registration Right. If, during the 90 day period
immediately after the holding period under paragraph (d) of Rule 144 promulgated
under the Securities Act or any successor rule ("Rule 144") is satisfied in
respect of the Shares by the Shareholder, and the Shareholder cannot sell all of
the Shares pursuant to Rule 144 (assuming the Shareholder takes all actions
within her control to comply with Rule 144) because of restrictions on the
number of share salable under paragraph (e) of Rule 144, upon the Shareholder's
written request made during the 30 days following such 90 day period, Parent, at
Parent's expense, will file a registration statement under the Securities Act on
Form S-3, if such form is then available to Parent, and after such filing, will
use its reasonable best efforts to cause such registration statement to become
effective and to remain effective for 90 days. The rights under this Section
6.11 are not transferrable. To the extent any of the Shares have been
transferred pursuant to Section 6.8, such transferred Shares may be incorporated
into the registration statement.
7. Conditions Precedent to Obligations of Parent and
Purchaser
The obligations of Parent and Purchaser to consummate the Transactions are
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions:
7.1 Accuracy of Representations. Each of the representations and warranties
made by Seller and the Shareholder in this Agreement and in each of the other
agreements and instruments delivered to Parent or Purchaser in connection with
the Transactions shall have been accurate in all material respects as of the
date of this Agreement (without giving effect to any "Material Adverse Effect"
or other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties), and
shall be accurate in all material respects as of the Scheduled Closing Time as
if made at the Scheduled Closing Time (without giving effect to any update to
the Disclosure Schedule and without giving effect to any "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications,
contained or incorporated directly or indirectly in such representations and
warranties).
7.2 Performance of Covenants. All of the covenants and obligations that
Seller or the Shareholder is required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all respects.
7.3 Consents. All Consents required or advisable to be obtained in
connection with the Transactions (including the Consents identified in Part 2.19
of the Disclosure Schedule) shall have been obtained and shall be in full force
and effect.
7.4 Agreements and Documents. Parent and Purchaser shall
have received the following agreements and documents, each of
which shall be in full force and effect:
(a) the Noncompetition Agreement, executed by the
Shareholder;
(b) the Closing Certificate;
(c) any bills of sale, endorsements and assignments in form
acceptable to Purchaser transferring title to the Purchased
Seller Assets and Purchased Shareholder Assets to Purchaser;
(d) such other documents evidencing the transfer of the
Purchased Seller Assets and Purchased Shareholder Assets to
Purchaser as are reasonably requested by Purchaser;
(e) estoppel certificates with respect to various
contractual obligations of Seller;
(f) evidence that any notices or filings required to have been given
to or made with Governmental Bodies in connection with the Transactions
have been given and made and that all Consents required to have been
obtained in connection with the Transactions have been obtained; and
(g) such other documents as Parent or Purchaser may request in good
faith for the purpose of (i) evidencing the accuracy of any representation
or warranty made by Seller or the Shareholder, (ii) evidencing the
compliance by Seller or the Shareholder with, or the performance by Seller
or the Shareholder of, any covenant or obligation set forth in the
Agreement, (iii) evidencing the satisfaction of any condition set forth in
this Section 7, or (iv) otherwise facilitating the consummation or
performance of any of the Transactions.
7.5 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Transactions shall
have been issued by any court of competent jurisdiction and remain in effect,
and there shall not be any Legal Requirement enacted or deemed applicable to the
Transactions that makes consummation of the Transactions illegal.
7.6 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Transactions or seeking to prohibit or
limit the exercise by Purchaser of any material right pertaining to its
ownership of the Purchased Seller Assets or the Purchased Shareholder Assets.
7.7 Key Employees. The Persons identified in Exhibit F (the "Key
Employees") shall have been employees of Seller at all times since the date of
this Agreement and none of the Key Employees shall have failed to accept an
offer of employment from Purchaser (conditional on the occurrence of the
Closing) or communicated to any Person any intent to terminate his or her
present or future employment with Purchaser or Seller.
7.8 Actions Satisfactory. All actions and proceeding taken
in connection with the Transactions, and all documents relating
to the Transactions, shall be reasonably satisfactory in form and
substance to Parent, Purchaser and their counsel.
7.9 Satisfactory Completion of Pre-Acquisition Review. Parent and Purchaser
shall have satisfactorily completed their pre-acquisition investigation and
review of the business, condition, assets, liabilities, operations, financial
performance, net income and prospects of Seller and shall be satisfied in their
sole discretion with the results of that investigation and review.
7.10 Customer References. Seller shall have provided to
Parent and Purchaser, and Parent and Purchaser shall be satisfied
with, in their sole discretion, customer references of Seller.
7.11 Mylex Profit Projection. Seller shall have provided to Parent and
Purchaser, and Parent and Purchaser shall be satisfied with, in their sole
discretion, a profit projection for Seller's Mylex turnkey project covering the
period from May 1, 1996 through September 30, 1996.
7.12 Board Approval. The transaction contemplated by this
Agreement shall have been duly authorized by the Boards of
Directors of Parent and Purchaser.
8. Conditions Precedent to Obligations of Seller and the
Shareholder
The obligations of Seller and the Shareholder to consummate the
Transactions are subject to the satisfaction, at or prior to the Closing, of the
following conditions:
8.1 Accuracy of Representations. Each of the representations and warranties
made by Parent and Purchaser in this Agreement shall have been accurate in all
material respects as of the date of this Agreement (without giving effect to any
materiality or similar qualifications contained in such representations and
warranties), and shall be accurate in all material respects as of the Scheduled
Closing Time as if made at the Scheduled Closing Time (without giving effect to
any materiality or similar qualifications contained in such representations and
warranties).
8.2 Performance of Covenants. All of the covenants and obligations that
Parent and Purchaser are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
8.3 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Transactions shall
have been issued by any court of competent jurisdiction and remain in effect,
and there shall not be any Legal Requirement enacted or deemed applicable to the
Transactions that makes consummation of any of the Transactions illegal.
9. Termination
9.1 Termination Events. This Agreement may be terminated
prior to the Closing:
(a) by Parent or Purchaser if a Material Adverse Effect on
Seller has occurred since the date of this Agreement;
(b) by Parent or Purchaser if either reasonably determines that the
timely satisfaction of any material condition set forth in Section 7 has
become impossible (other than as a result of any failure on the part of
Parent or Purchaser to comply with or perform any covenant or obligation of
Parent or Purchaser set forth in this Agreement);
(c) by Seller if Seller reasonably determines that the timely
satisfaction of any material condition set forth in Section 8 has become
impossible (other than as a result of any failure on the part of Seller to
comply with or perform any covenant or obligation set forth in this
Agreement);
(d) by Parent or Purchaser at or after the Scheduled
Closing Time if any material condition set forth in Section 7 has
not been satisfied by the Scheduled Closing Time;
(e) by Seller at or after the Scheduled Closing Time if any
material condition set forth in Section 8 has not been satisfied
by the Scheduled Closing Time;
(f) by Parent or Purchaser if the Closing has not taken place on or
before May 31, 1996 (other than as a result of any failure on the part of
Parent or Purchaser to comply with or perform any covenant or obligation of
Parent or Purchaser set forth in this Agreement);
(g) by Seller if the Closing has not taken place on or before May 31,
1996 (other than as a result of the failure on the part of Seller to comply
with or perform any covenant or obligation set forth in this Agreement); or
(h) by the mutual consent of Parent, Purchaser and Seller.
9.2 Termination Procedures. If Parent or Purchaser wishes to terminate this
Agreement pursuant to Section 9.1(a), Section 9.1(b), Section 9.1(d) or Section
9.1(f), Parent or Purchaser, as the case may be, shall deliver to Seller a
written notice stating that it is terminating this Agreement and setting forth a
brief description of the basis on which it is terminating this Agreement. If
Seller wishes to terminate this Agreement pursuant to Section 9.1(c), Section
9.1(e) or Section 9.1(g), Seller shall deliver to Parent and Purchaser a written
notice stating that Seller is terminating this Agreement and setting forth a
brief description of the basis on which Seller is terminating this Agreement.
9.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 9.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither Seller, Purchaser nor Parent
shall be relieved of any obligation or Liability arising from any prior breach
by such party of any provision of this Agreement; and (b) the parties shall, in
all events, remain bound by and continue to be subject to the provisions set
forth in Section 11.
10. Indemnification and Other Remedies
10.1 Survival of Representations and Covenants.
(a) The representations, warranties, covenants and
obligations of each party to this Agreement shall survive
(without limitation):
(i) the execution and delivery of this Agreement and the
sale of the Purchased Seller Assets and Purchased Shareholder
Assets to Purchaser;
(ii) any subsequent sale or other disposition of any or all
of the Purchased Seller Assets or Purchased Shareholder Assets by
Purchaser;
(iii) the liquidation and dissolution of Seller; and
(iv) the death of the Shareholder.
All of said representations, warranties, covenants and obligations shall remain
in full force and effect and shall survive for an unlimited period of time.
(b) The representations, warranties, covenants and obligations of the
Shareholder and Seller, and the rights and remedies that may be exercised by the
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule shall be deemed to be a
representation and warranty made by the Shareholder and Seller in this
Agreement.
10.2 Indemnification by the Shareholder and Seller. The Shareholder and
Seller, jointly and severally, shall hold harmless and indemnify each of the
Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages that are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third-party claim) and that arise directly or indirectly from or
as a direct or indirect result of, or are directly or indirectly connected with:
(a) any breach of any representation or warranty made by
the Shareholder or Seller in this Agreement or any of the other
Transactional Agreements;
(b) any breach of any representation, warranty, statement,
information or provision contained in the Disclosure Schedule;
(c) any breach of any covenant or obligation of the
Shareholder or Seller;
(d) any Liability of Seller, the Shareholder or any Related
Party, other than the Specified Contractual Liabilities;
(e) any Liability (other than the Specified Contractual
Liabilities) to which Parent, Purchaser or any of the other Indemnitees may
become subject and that arises directly or indirectly from or relates
directly or indirectly to (A) any product or system manufactured, assembled
or sold by Seller, (B) any services performed by or on behalf of Seller,
(C) the presence of any Hazardous Material in the soils, groundwater,
surface water or air on, under, about or emanating from any site owned,
leased, occupied or controlled by Seller on or at any time prior to the
Closing Date, (D) the generation, manufacture, production, transportation,
importation, use, treatment, refinement, processing, handling, storage,
discharge, release or disposal of any Hazardous Material (whether lawfully
or unlawfully) by or on behalf of Seller on or at any time prior to the
Closing Date, or (F) the operation of the business of Seller, or (G) any
claim, demand or action relating to Seller or the Transactions made by any
Person who at any time claims to have been a holder of capital stock of
Seller or any option, warrant or right (regardless of whether exercised or
converted) to acquire capital stock of Seller; or
(f) any Legal Proceeding relating directly or indirectly to (A)
any breach, Liability, statement, omission or other matter of the type
referred to in clause "(a)," "(b)," "(c)," "(d)" or "(e)" above (including
any Legal Proceeding commenced by any Indemnitee for the purpose of
enforcing any of its rights under this Section 10) or (B) any allegation of
any item referred to in the foregoing clause "(A)."
10.3 Indemnification by Parent and Purchaser. Parent and Purchaser shall
hold harmless and indemnify each of Seller and Shareholder from and against, and
shall compensate and reimburse each of the Seller and Shareholder for, any
Damages that are directly or indirectly suffered or incurred by Seller and
Shareholder, as the case may be, or to which Seller or Shareholder, as the case
may be, may otherwise become subject at any time (regardless of whether or not
such Damages relate to any third-party claim) and that arise directly or
indirectly from or as a direct or indirect result of, or are directly or
indirectly connected with:
(a) any breach of any representation or warranty made by
Parent or Purchaser in this Agreement or any of the other
Transactional Agreements;
(b) any breach of any covenant or obligation of Parent or
Purchaser in this Agreement; or
(c) any Legal Proceeding relating directly or indirectly to any
breach, Liability, statement, omission or other matter of the type referred
to in clause "(a)," or "(b)" above (including any Legal Proceeding
commenced by Seller or Shareholder for the purpose of enforcing any of its
rights under this Section 10).
10.4 Interest. Any party that is required to indemnify any other Person
pursuant to this Section 10 with respect to any Damages shall also be required
to pay such other Person interest on the amount of such Damages (for the period
commencing as of the date on which such other Person first incurred or otherwise
became subject to such Damages and ending on the date on which the applicable
indemnification payment is made by such party) at a floating rate two percentage
points above the rate of interest publicly announced by the Bank of America N.T.
& S.A. from time to time as its prime, base or reference rate.
10.5 Setoff. In addition to any rights of setoff or other rights that
Parent, Purchaser or any of the other Indemnitees may have at common law or
otherwise, each of Parent and Purchaser shall have the right to withhold and
deduct any sum that may be owed to any Indemnitee under this Section 10 from any
amount otherwise payable by any Indemnitee to Seller or the Shareholder,
including without limitation the Promissory Note. The exercise of such right of
setoff by Parent or Purchaser, whether or not ultimately determined to be
permitted pursuant to this Section 10.5, shall not constitute an event of
default under the Promissory Note. The withholding and deduction of any such sum
shall operate for all purposes as a complete discharge (to the extent of such
sum) of the obligation to pay the amount from which such sum was withheld and
deducted.
10.6 Nonexclusivity of Indemnification Remedies. The indemnification
remedies and other remedies provided in this Section 10 shall not be deemed to
be exclusive. Accordingly, the exercise by any Person of any of its rights under
this Section 10 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver of, any other
right or remedy that such Person may be entitled to exercise (whether under this
Agreement, under any other Contract, under any statute, rule or other Legal
Requirement, at common law, in equity or otherwise).
10.7 Defense of Third Party Claims.
(a) In the event of the assertion or commencement by any Person
other than an indemnified Section 10 Person (as hereinafter defined) of any
claim or Legal Proceeding (whether against Purchaser, against any other
Indemnitee or against any other Person) with respect to which an
indemnifying Section 10 Person may become obligated to indemnify, hold
harmless, compensate or reimburse any indemnified Section 10 Person
pursuant to this Section 10, such indemnified Section 10 Person shall have
the right, at its election, to designate the indemnifying Section 10 Person
to assume the defense of such claim or Legal Proceeding at the sole expense
of the indemnifying Section 10 Person. If an indemnified Section 10 Person
so elects to designate an indemnifying Section 10 Person to assume the
defense of any such claim or Legal Proceeding:
(i) the indemnifying Section 10 Person shall proceed to defend such
claim or Legal Proceeding in a diligent manner with counsel satisfactory to
the indemnified Section 10 Person;
(ii) the indemnified Section 10 Person shall make available to the
indemnifying Section 10 Person any non-privileged documents and materials
in the possession of the indemnified Section 10 Person that may be
necessary to the defense of such claim or Legal Proceeding;
(iii) the indemnifying Section 10 Person shall keep the indemnified
Section 10 Person informed of all material developments and events relating
to such claim or Legal Proceeding;
(iv) except where separate counsel has been engaged by the
indemnifying Section 10 Person as provided in Section 10.7(b), the
indemnified Section 10 Person shall have the right to participate in the
indemnifying Section 10 Person's defense of such claim or Legal Proceeding;
(v) the indemnifying Section 10 Person shall not settle, adjust or
compromise such claim or Legal Proceeding without the prior written consent
of the indemnified Section 10 Person; and
(vi) the indemnified Section 10 Person may at any time
(notwithstanding the prior designation of the indemnifying Section 10
Person to assume the defense of such claim or Legal Proceeding) assume the
defense of such claim or Legal Proceeding (it being understood that, where
separate counsel has been engaged by the indemnifying Section 10 Person
pursuant to Section 10.7(b), the indemnified Section 10 Person cannot
assume the defense being conducted by such separate counsel on behalf of
the indemnifying Section 10 Person).
If the indemnified Section 10 Person does not elect to designate the
indemnifying Section 10 Person to assume the defense of any such claim or Legal
Proceeding (or if, after initially designating the indemnifying Section 10
Person to assume such defense, the indemnified Section 10 Person elects to
assume such defense), the indemnified Section 10 Person may proceed with the
defense of such claim or Legal Proceeding on its own. If the indemnified Section
10 Person so proceeds with the defense of any such claim or Legal Proceeding on
its own:
(1) all expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the
indemnifying Section 10 Person;
(2) the indemnifying Section 10 Person shall make available to
the indemnified Section 10 Person any documents and materials in the
possession or control of the indemnifying Section 10 Person that may be
necessary to the defense of such claim or Legal Proceeding;
(3) the indemnified Section 10 Person shall keep the
indemnifying Section 10 Person informed of all material developments and
events relating to such claim or Legal Proceeding; and
(4) the indemnified Section 10 Person shall have the right to
settle, adjust or compromise such claim or Legal Proceeding with the
consent of the indemnifying Section 10 Person; provided, however, that the
indemnifying Section 10 Person shall not unreasonably withhold such
consent.
(b) If the defendants in any Legal Proceeding include both an
indemnified Section 10 Person and an indemnifying Section 10 Person and any
Section 10 Person shall have reasonably concluded that there may be a
conflict between the positions of an indemnifying Section 10 Person and an
indemnified Section 10 Person in conducting the defense of any such action
or that there may be legal defenses available to it and/or other Section 10
Persons similarly situated with respect to such Legal Proceeding under this
Section 10 which are different from or in addition to those available to
another Section 10 Person, such Section 10 Person shall have the right to
select separate counsel to conduct such legal defenses on behalf of such
Section 10 Person and to otherwise participate in the defense of such
action on behalf of such Section 10 Person. As used herein, any Person
indemnifying another Person under this Section 10 and any Person
indemnified by another Person under this Section 10 may be referred to as a
"Section 10 Person." In the event a Section 10 Person exercises its right
to separate counsel set forth in this Section 10.7(b), nothing in this
Section 10.7 shall limit or terminate any obligation of an indemnifying
Section 10 Person to an indemnified Section 10 Person under this Section 10
(including without limitation the obligations (i) to indemnify, hold
harmless, reimburse and compensate an indemnified Section 10 Person and
(ii) to pay the fees and expenses of the separate counsel of an indemnified
Section 10 Person).
10.8 Exercise of Remedies by Indemnitees Other Than Parent. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto or assign thereof) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
11. Miscellaneous Provisions
11.1 Joint and Several Liability. The Shareholder shall be jointly and
severally liable with Seller for the due and timely compliance with and
performance of each of the covenants and obligations of Seller set forth in the
Transactional Agreements. The Shareholder's obligations and Liability under this
Agreement and the other Transactional Agreements shall survive the Shareholder's
death (and shall be binding upon the Shareholder's personal representatives,
executors, administrators, estate, heirs and successors) and shall not be
limited in any way by:
(i) any failure on the part of Parent, Purchaser or any
other Indemnitee to exercise any right or assert any claim
against Seller or the Shareholder; or
(ii) the liquidation and dissolution of Seller.
11.2 Certain Disclaimers. Seller and the Shareholder acknowledge that,
notwithstanding anything to the contrary contained in this Agreement, neither
Parent nor Purchaser has made or provided, and neither Parent nor Purchaser is
making or providing, any representation, warranty, covenant or assurance of any
nature (implied or otherwise) regarding:
(a) the manner in which any of the Transactions will
be treated or characterized for Tax purposes, or the Tax
consequences of any of the Transactions to Seller or the
Shareholder; or
(b) the employment or retention by Parent or Purchaser of any
current or former employee of either of Seller, or the terms of employment
of any such employee that Parent or Purchaser may elect to hire.
11.3 Fees and Expenses.
(a) Subject to the provisions of Section 10 (including the
indemnification and other obligations of Parent and Purchaser thereunder),
Shareholder and Seller shall jointly and severally bear and pay all fees, costs
and expenses (including all legal fees and expenses) that have been incurred or
that are in the future incurred by, on behalf of or for the benefit of the
Shareholder or Seller in connection with:
(i) the negotiation, preparation and review of any letter
of intent or similar document relating to any of the
Transactions;
(ii) the investigation and review conducted by Parent, Purchaser
and their Representatives with respect to the business of Seller (and the
furnishing of information to Parent and Purchaser and their Representatives
in connection with such investigation and review);
(iii) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule), the other Transactional Agreements and
all bills of sale, assignments, certificates and other instruments and
documents delivered or to be delivered in connection with the Transactions;
(iv) the preparation and submission of any filing or notice
required to be made or given in connection with any of the Transactions,
and the obtaining of any Consent required to be obtained in connection with
any of the Transactions; and
(v) the consummation and performance of the Transactions.
(b) Subject to the provisions of Section 10 (including the
indemnification and other obligations of Seller and the Shareholder thereunder),
Parent and Purchaser shall bear and pay all fees, costs and expenses (including
all legal fees and expenses payable to Cooley Godward Castro Huddleson & Tatum)
that have been incurred or that are in the future incurred by or on behalf of
Parent or Purchaser in connection with:
(i) the negotiation, preparation and review of any letter
of intent or similar document relating to any of the
Transactions;
(ii) the investigation and review conducted by Parent,
Purchaser and their Representatives with respect to the business
of Seller;
(iii) the negotiation, preparation and review of this Agreement,
the other Transactional Agreements and all bills of sale, assignments,
certificates and other instruments and documents delivered or to be
delivered in connection with the Transactions; and
(iv) the consummation and performance of the Transactions.
11.4 Attorneys' Fees. If any legal action or other Legal Proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party to
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (in addition to any other relief to
which the prevailing party may be entitled).
11.5 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile number set forth beneath the name of such party below (or
to such other address or telephone number as such party shall have specified in
a written notice given to the other parties hereto):
if to Shareholder:
Helen Kwong
6082 Stewart Avenue
Fremont, CA 94538
Facsimile: 510-657-5863
if to Seller:
Anetec Technology, Inc.
6082 Stewart Avenue
Fremont, CA 94538
Facsimile: 510-657-5863
if to Parent:
Elexsys International Inc.
1188 Bourdeaux Drive
Sunnyvale, CA 94089
Facsimile: 408-743-5454
with a copy to:
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Alan C. Mendelson, Esq.
Facsimile: 415-857-0663
if to Purchaser:
ELXI Acquisition, Inc.
1188 Bourdeaux Drive
Sunnyvale, CA 94089
Facsimile: 408-743-5454
with a copy to:
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Alan C. Mendelson, Esq.
Facsimile: 415-857-0663
11.6 Time of the Essence. Time is of the essence of this
Agreement.
11.7 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
11.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
11.9 Governing Law; Venue.
(a) This Agreement shall be construed in accordance with, and governed
in all respects by, the internal laws of the State of California (without giving
effect to principles of conflicts of laws).
(b) Subject to Section 11.17, any legal action or other Legal
Proceeding relating to this Agreement, brought to enforce any award of an
arbitrator or to request provisional relief pursuant to Exhibit I hereof, may be
brought or otherwise commenced in any state or federal court located in the City
and County of Santa Clara, California. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the City and County
of Santa Clara, California (and each appellate court located in the State
of California) in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in the City
and County of Santa Clara, California shall be deemed to be a convenient
forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal
court located in the City and County of Santa Clara, California, any claim
that such party is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an inconvenient
forum, that the venue of such proceeding is improper or that this Agreement
or the subject matter of this Agreement may not be enforced in or by such
court.
(c) Notwithstanding anything in this Agreement to the contrary, if any
Legal Proceeding is commenced against any party to this Agreement by any Person
in or before any court or other tribunal anywhere in the United States, then
such party may proceed against any other party to this Agreement in such court
or other tribunal with respect to any indemnification claim or other claim
arising directly or indirectly from or relating directly or indirectly to such
Legal Proceeding or any of the matters alleged therein or any of the
circumstances giving rise thereto.
(d) Except as provided by Section 11.17, nothing contained in Section
11.9(b) or 11.9(c) shall be deemed to limit or otherwise affect the right of any
Indemnitee to commence any Legal Proceeding or otherwise proceed against any of
the Shareholder or either of Seller in any other forum or jurisdiction.
(e) Seller irrevocably constitutes and appoints the Shareholder as its
agent to receive service of process in connection with any legal proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement.
(f) Each party hereto irrevocably waives the right to a jury trial in
connection with any Legal Proceeding relating to this Agreement or the
enforcement of any provision of this Agreement.
11.10 Successors and Assigns; Parties in Interest.
(a) This Agreement shall be binding upon: the Seller and its
successors and assigns (if any); the Shareholder and his personal
representatives, executors, administrators, estate, heirs, successors and
assigns (if any); Parent and its successors and assigns (if any); and Purchaser
and its successors and assigns (if any). This Agreement shall inure to the
benefit of: Seller; the Shareholder; Parent; Purchaser; the other Indemnitees
(subject to Section 10.8); and the respective successors and assigns (if any) of
the foregoing.
(b) Parent and Purchaser may freely assign any or all of their
respective rights under this Agreement (including its indemnification rights
under Section 10), in whole or in part, to any other Person without obtaining
the consent or approval of any other party hereto or of any other Person.
Neither Shareholder nor Seller shall be permitted to assign any of his, her or
its rights or delegate any of his, her or its obligations under this Agreement
without Parent's prior written consent.
(c) Except for the provisions of Section 10 hereof, none of the
provisions of this Agreement is intended to provide any rights or remedies to
any Person other than the parties to this Agreement and their respective
successors and assigns (if any). Without limiting the generality of the
foregoing, (i) none of Seller's employees shall have any rights under this
Agreement or under any of the other Transactional Agreements (except for the
Shareholder as expressly agreed) and (ii) no creditor of either of Seller shall
have any rights under this Agreement or any of the other Transactional
Agreements.
11.11 Remedies Cumulative; Specific Performance. The
rights and remedies of the parties hereto shall be cumulative
(and not alternative). Parent, Purchaser, Shareholder and Seller
agree that:
(a) in the event of any breach or threatened breach by a party to
this Agreement of any covenant, obligation or other provision set forth in
this Agreement or any other Transaction Agreement, any non-breaching party
shall be entitled (in addition to any other remedy that may be available to
it) to (i) a decree or order of specific performance or mandamus to enforce
the observance and performance of such covenant, obligation or other
provision, and (ii) an injunction restraining such breach or threatened
breach; and
(b) neither party to this Agreement or Indemnitee shall be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related action or
Legal Proceeding.
11.12 Waiver.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any Person
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
11.13 Amendments. This Agreement may be amended, modified, altered or
supplemented only by means of a written instrument duly executed and delivered
on behalf of Purchaser and the Shareholder.
11.14 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
11.15 Entire Agreement. The Transactional Agreements set forth the entire
understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof, including, without limitation,
the Letter Agreement dated April 23, 1996 between Parent and Seller and the
Letter of Intent dated April 4, 1996 between Parent and Seller.
11.16 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to
Sections of this Agreement and Exhibits to this Agreement.
(e)
11.17 Arbitration. After the Closing, the parties agree to arbitrate any
dispute, claim or controversy of whatever nature arising out of or relating to
this Agreement through arbitration in accordance with Exhibit I hereto, which
Exhibit I is hereby incorporated by reference into this Agreement and made a
part hereof.
The parties to this Agreement have caused this Agreement to be executed
and delivered as of May 3, 1996.
Anetec Technology, Inc.,
a California corporation
By:
Helen Kwong, President
Helen Kwong,
an individual
Elexsys International Inc.,
a Delaware corporation
By:
W. Barry Hegarty, President
ELXI Acquisition, Inc.,
a California corporation
By:
W. Barry Hegarty, President
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall
mean any transaction involving:
(a) the sale, license, disposition or acquisition of all or
a material portion of Seller's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of Seller, (ii) any option, call, warrant or right
(whether or not immediately exercisable) to acquire any capital stock or
other equity security of Seller or (iii) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of Seller; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving Seller.
Agreement. "Agreement" shall mean the Asset Purchase
Agreement to which this Exhibit A is attached, as it may be
amended from time to time.
Commission. "Commission" shall mean the Securities and
Exchange Commission.
Consent. "Consent" shall mean any approval, consent,
ratification, permission, waiver or authorization (including any
Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to
Parent and Purchaser on behalf of Seller and the Shareholder.
Employee Benefit Plan. "Employee Benefit Plan" shall have
the meaning specified in Section 3(3) of ERISA.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
ERISA Affiliate. "ERISA Affiliate" shall mean any Person that is, or would
be treated as a single employer with Seller under Section 414 of the Code.
Excluded Assets. "Excluded Assets" shall mean the assets
identified on Exhibit G (to the extent owned by Seller on the
date of execution and delivery of this Agreement).
Government Bid. "Government Bid" shall mean any quotation,
bid or proposal submitted to any Governmental Body or any
proposed prime contractor or higher-tier subcontractor of any
Governmental Body.
Government Contract. "Government Contract" shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire any right or
interest.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
(a) nation, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; or (c) governmental or
quasi-governmental authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, organization, unit,
body or Entity and any court or other tribunal). (b) (b) Parent; (b) Purchaser;
(c) Parent's current and future affiliates; (d) the respective Representatives
of the Persons referred to in clauses "(a)", "(b)" and "(c)" above; and (e) the
respective successors and assigns of the Persons referred to in clauses "(a)",
"(b)", "(c)" and "(d)" above; provided, however, that in no event shall Seller
or the Shareholder be deemed to be "Indemnitees."
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Liability. "Liability" shall mean any debt, obligation, duty or liability
of any nature (including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability), regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on Seller if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement or in the Closing
Certificate but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) would have a material adverse effect on Seller's
business, intellectual property rights, condition, assets, liabilities,
operations, financial performance or prospects.
Net Revenues. "Net Revenues" means the gross amount collected on the sale
of products, maintenance or services less (a) discounts actually allowed, (b)
credits for claims, allowances, retroactive price reductions or returned items,
(c) prepaid freights, (d) sales taxes or other governmental charges actually
paid in connection with the sale (but excluding what is commonly known as income
tax), and (e) brokerage, commissions and other reasonable fees paid to others
for or in connection with sales of products, maintenance or services.
Person. "Person" shall mean any individual, Entity or
Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean: (a) any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; and (b) any right to use or exploit any of
the foregoing.
Purchased Seller Assets. "Purchased Seller Assets" shall mean and include
all of the properties, rights, interests and other tangible and intangible
assets of Seller (wherever located and whether or not required to be reflected
on a balance sheet prepared in accordance with generally accepted accounting
principles). Without limiting the generality of the foregoing, the Purchased
Seller Assets shall include:
(2) inventories; work-in-process; and finished goods;
(3) fixed assets;
(4) intangible assets (rights (but not duties or obligations) under
contracts, customer lists, supplier lists, trade secrets, software,
procedures and any other items required by Parent or Purchaser to continue
Seller's operations);
(5) any investments or securities held by Seller;
(6) all equipment, materials, prototypes, tools, supplies, vehicles,
furniture, fixtures, improvements and other tangible assets of Seller
(including the tangible assets identified in Part 2.9 of the Disclosure
Schedule);
(7) all advertising and promotional materials possessed by
Seller;
(8) all Seller Proprietary Assets and goodwill of Seller;
(9) all rights of Seller under Seller Contracts (including
the Contracts identified in Part 2.9 of the Disclosure Schedule);
(10) all Governmental Authorizations held by Seller
(including the Governmental Authorizations identified in
Part 2.12 of the Disclosure Schedule);
(11) all claims and causes of action of Seller against other Persons
(regardless of whether or not such claims and causes of action have been
asserted by Seller), and all rights of indemnity, warranty rights, rights
of contribution, rights to refunds, rights of reimbursement and other
rights of recovery possessed by Seller (regardless of whether such rights
are currently exercisable); and
(12) all books, records, files and data of Seller.
Purchased Shareholder Assets. "Purchased Shareholder Assets" shall
consist of all of the tangible assets owned by the Shareholder needed for the
conduct of or useful in connection with the business of Seller, including,
without limitation, the items identified on Exhibit J.
Representatives. "Representatives" shall mean officers,
directors, employees, agents, attorneys, accountants, advisors
and representatives.
Sales and Property Tax. "Sales and Property Tax" shall mean any tax
(including any value-added tax, surtax, excise tax, ad valorem tax, transfer
tax, stamp tax, sales tax, use tax, property tax, business tax, withholding tax
or payroll tax), levy, assessment, tariff, duty (including any customs duty),
deficiency or fee, and any related charge or amount (including any fine, penalty
or interest), imposed, assessed or collected by or under the authority of any
Governmental Body.
Securities Act. "Securities Act" shall mean the
Securities Act of 1933, as amended.
Seller Contract. "Seller Contract" shall mean any Contract:
(a) to which Seller is a party; (b) by which Seller or any of its
assets is or may become bound or under which Seller has, or may
become subject to, any obligation; or (c) under which Seller has
or may acquire any right or interest.
Seller Plan. "Seller Plan" shall mean any Employee Benefit
Plan that is currently in effect and:
(d) that was established or adopted by Seller or any ERISA
Affiliate or is maintained or sponsored by Seller;
(e) in which Seller participates;
(f) with respect to which Seller or any ERISA Affiliate is
or may be required or permitted to make any contribution; or
(g) with respect to which Seller or any ERISA Affiliate is
or may become subject to any liability.
Seller Proprietary Asset. "Seller Proprietary Asset" shall
mean any Proprietary Asset owned by or licensed to Seller or
otherwise used by Seller.
Specified Contractual Liabilities. "Specified Contractual Liabilities"
shall mean the obligations of Seller under the contracts identified on Exhibit H
to the Agreement, but only to the extent such obligations (i) arise after the
Closing Date, (ii) do not arise from or relate to any breach by Seller of any
provision of any of such contracts, (iii) do not arise from or relate to any
event, circumstance or condition occurring or existing on or prior to the
Closing Date that, with notice or lapse of time, would constitute or result in a
breach of any of such contracts, and (iv) are ascertainable (in nature and
amount) solely by reference to the express terms of such contracts; provided,
however, that notwithstanding the foregoing, and notwithstanding anything to the
contrary contained in the Agreement, the "Specified Contractual Liabilities"
shall not include, and Purchaser shall not be required to assume or to perform
or discharge:
(1) any Liability of Seller arising from or relating to any action
taken by Seller, or any failure on the part of Seller to take any action,
at any time prior to, on or after the Closing Date;
(2) any Liability of Seller arising from or relating to (x)
any services performed by Seller for any customer, or (y) any
claim or Legal Proceeding against Seller;
(3) any Liability of Seller for the payment of any Tax;
(4) any Liability of Seller under or with respect to any
Employee Benefit Plan;
(5) any Liability of Seller to any employee or former employee
(whether for salaries, wages, severance pay, vacation pay, benefits or
other compensation, or otherwise);
(6) any Liability of Seller to the Shareholder or any other
Related Party;
(7) any Liability under any Contract, if Seller shall not have
obtained, prior to the Closing Date, any Consent required to be obtained
from any Person with respect to the assignment or delegation to Purchaser
any rights or obligations under such Contract;
(8) any Liability that is inconsistent with or that constitutes an
inaccuracy in, or that arises or exists by virtue of any breach of, (x) any
representation or warranty made by the Shareholder or Seller in any of the
Transactional Agreements, or (y) any covenant or obligation of the
Shareholder or Seller in any of the Transactional Agreements; or
(9) any other Liability that is not specifically included
in the "Specified Contractual Liabilities."
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Transactional Agreements. "Transactional Agreements" shall
mean:
(h) the Agreement;
(i)
(i) the Promissory Note; and
(j) the agreements and instruments referred to in Section
1.3(b) of the Agreement.
Transactions. "Transactions" shall mean (a) the execution
and delivery of the respective Transactional Agreements, and
(b) all of the transactions contemplated by the respective
Transactional Agreements, including:
(i) the sale of the Purchased Seller Assets by Seller to
Purchaser in accordance with the Agreement;
(ii) the sale of the Purchased Shareholder Assets by
Shareholder to Purchaser in accordance with the Agreement;
(iii) the assumption of the Specified Contractual
Liabilities by Purchaser pursuant to the Agreement;
(iv) the liquidation and dissolution of Seller in accordance
with the Agreement; and
(v) the performance by Seller, the Shareholder, Parent and
Purchaser of their respective obligations under the Transactional
Agreements and the exercise by Seller, the Shareholder, Parent and
Purchaser of their respective rights under the Transactional Agreements.
ASSET PURCHASE AGREEMENT
among:
Anetec Technology, Inc.,
a California corporation;
Helen Kwong;
ELXI Acquisition, Inc.,
a California corporation;
and
Elexsys International Inc.,
a Delaware corporation
Dated as of May 3, 1996
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Sale of Assets; Related Transactions 1
1.1 Sale of Assets. 1
1.2 Purchase Price. 1
1.3 Closing. 2
1.4 No Other Liabilities. 3
1.5 Retained Payment. 3
Section 2.Representations and Warranties of the Shareholder and Seller 3
2.1 Due Organization; No Subsidiaries; Etc. 3
2.2 Articles of Incorporation and Bylaws; Records. 4
2.3 Capitalization, Etc. 4
2.4 Financial Statements. 5
2.5 Absence of Changes. 5
2.6 Title to Assets. 6
2.7 Equipment; Leasehold. 7
2.8 Proprietary Assets. 7
2.9 Contracts. 8
2.10 Liabilities. 10
2.11 Compliance with Legal Requirements. 10
2.12 Governmental Authorizations. 10
2.13 Sales and Property Tax Matters. 11
2.14 Employee and Labor Matters; Benefit Plans. 11
2.15 Environmental Matters. 12
2.16 Related Party Transactions. 13
2.17 Legal Proceedings; Orders. 13
2.18 Authority; Binding Nature of Agreement. 14
2.19 Non-Contravention; Consents. 14
2.20 Brokers. 15
2.21 Fair Consideration; No Fraudulent. Conveyance. 15
2.22 Full Disclosure. 15
2.23 All Necessary Assets. 15
Section 3. Representations and Warranties of Parent and Purchaser 15
3.1 Authority; Binding Nature of Agreements. 15
3.2 Brokers. 16
Section 4. Certain Securities Matters 16
4.1 Representations of Seller and Shareholder. 16
4.2 Sale of the Shares by Shareholder 18
Section 5. Certain Covenants of Seller 18
5.1 Access and Investigation. 18
5.2 Operation of Seller's Business. 19
5.3 Notification; Updates to Disclosure Schedule. 20
5.4 No Negotiation. 21
5.5 Bulk Transfer Waiver and Indemnification. 21
Section 6. Certain Covenants 21
6.1 Filings and Consents. 21
6.2 Best Efforts. 22
6.3 Change of Name. 22
6.4 Dissolution 22
6.5 Tax Returns 22
6.6 Further Actions. 22
6.7 Publicity. 23
6.8 Standstill. 23
6.9 Release of Security Interests. 24
6.10 Allocation. 24
6.11 Contingent Registration Right. 24
Section 7.Conditions Precedent to Obligations of Parent and Purchaser 24
7.1 Accuracy of Representations. 24
7.2 Performance of Covenants 25
7.3 Consents 25
7.4 Agreements and Documents 25
7.5 No Restraints 25
7.6 No Legal Proceedings. 26
7.7 Key Employees. 26
7.8 Actions Satisfactory. 26
7.9 Satisfactory Completion of Pre-Acquisition Review. 26
7.10 Customer References. 26
7.11 Mylex Profit Projection. 26
7.12 Board Approval. 26
Section 8. Conditions Precedent to Obligations of Seller
and the Shareholder 26
8.1 Accuracy of Representations 26
8.2 Performance of Covenants 27
8.3 No Restraints 27
Section 9. Termination 27
9.1 Termination Events. 27
9.2 Termination Procedures. 28
9.3 Effect of Termination. 28
Section 10. Indemnification and Other Remedies 28
10.1 Survival of Representations and Covenants. 28
10.2 Indemnification by the Shareholder and Seller. 29
10.3 Indemnification by Parent and Purchaser. 30
10.4 Interest. 30
10.5 Setoff. 30
10.6 Nonexclusivity of Indemnification Remedies. 30
10.7 Defense of Third Party Claims. 31
10.8Exercise of Remedies by Indemnitees Other Than Parent. 33
Section 11. Miscellaneous Provisions 33
11.1 Joint and Several Liability. 33
11.2 Certain Disclaimers 33
11.3 Fees and Expenses. 33
11.4 Attorneys' Fees. 34
11.5 Notices. 35
11.6 Time of the Essence. 36
11.7 Headings. 36
11.8 Counterparts. 36
11.9 Governing Law; Venue. 36
11.10 Successors and Assigns; Parties in Interest. 37
11.11 Remedies Cumulative; Specific Performance. 38
11.12 Waiver. 38
11.13 Amendments. 38
11.14 Severability. 38
11.15 Entire Agreement. 39
11.16 Construction. 39
11.17 Arbitration. 39
<PAGE>
EXHIBITS
Exhibit A: Certain Definitions
Exhibit B: Form of Promissory Note
Exhibit C: Form of Noncompetition Agreement
Exhibit D: Allocation of Consideration
Exhibit E: Form of Confidential Information and Invention Assignment
Agreement
Exhibit F: Key Employees
Exhibit G: Excluded Assets
Exhibit H: Assumed Contracts
Exhibit I: Dispute Resolution
Exhibit J: Purchased Shareholder Assets
<PAGE>
PROMISSORY NOTE
$1,000,000 Palo Alto, California
May __, 1996
For Value Received, the undersigned hereby unconditionally promises to
pay to the order of Anetec Technology, Inc., a California corporation (the
"Company") or holder, at 6082 Stewart Avenue, Fremont, California 94538, or
at such other place as the holder hereof may designate in writing, in lawful
money of the United States of America and in immediately available funds, the
principal sum of one million dollars ($1,000,000) together with interest
accrued from the date hereof on the unpaid principal at the rate of 8.00% per
annum, or the maximum rate permissible by law (which under the laws of the
State of California shall be deemed to be the laws relating to permissible
rates of interest on commercial loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder
shall be subject to scheduled amortized repayments on the dates and in
the amounts listed below:
Principal Repayment Date Repayment Amount
One year from the date hereof $500,000
Two years from the date hereof $500,000
Interest Payments. Interest shall be payable in arrears on each
Principal Repayment Date.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
Reference is made to that certain Asset Purchase Agreement dated May 3,
1996 among the Company, Helen Kwong, ELIX Acquisition, Inc., and the
undersigned, for addition terms to which this Note is subject.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict
of laws principles that would cause the application of laws of any other
jurisdiction.
Signed: Elexsys International Inc.,
a Delaware corporation
By: ________________________
W. Barry Hegarty,
President and Chief Operating Officer
<PAGE>
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement") is made as of May __,
1996, by and among ELEXSYS INTERNATIONAL INC., a Delaware corporation
("Parent"), ELXI Acquisition, Inc., a California corporation ("Purchaser") and
HELEN KWONG (the "Shareholder").
RECITALS
A. As an employee and shareholder of Anetec Technology, Inc., a California
corporation (the "Seller"), the Shareholder has obtained extensive and valuable
knowledge and information concerning the business of Seller (including
confidential information relating to Seller and its operations, assets,
contracts, customers, personnel, plans and prospects).
B. Concurrently with the execution and delivery of this Agreement,
Purchaser is purchasing from Seller, certain of Seller's assets, business and
goodwill, pursuant to the terms and conditions of an asset purchase agreement
dated as of May 3, 1996 by and among Parent, Purchaser, Seller and Shareholder
(the "Asset Purchase Agreement"). Section 7.4 of the Asset Purchase Agreement
requires that a noncompetition agreement be executed and delivered by the
Shareholder as a condition to the purchase of such assets by Purchaser, and the
Shareholder is entering into this Agreement in order to induce Purchaser to
purchase certain assets of Seller.
C. Seller has conducted and is conducting its business on a
worldwide basis.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
Capitalized terms used but not expressly defined in this Agreement shall
have the meanings ascribed to them in the Asset Purchase Agreement.
2. ACKNOWLEDGMENTS BY THE SHAREHOLDER
The Shareholder acknowledges that (a) the Shareholder has occupied a
position of trust and confidence with Seller prior to the date hereof and has
become familiar with the following, any and all of which constitute confidential
information of Seller, (collectively the "Confidential Information"): (i) any
and all trade secrets concerning the business and affairs of Seller, data,
know-how, compositions, processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans; (ii) any and
all information concerning the business and affairs of Seller (which includes
historical financial statements, financial projections and budgets, historical
and projected sales, capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training and techniques and materials),
however documented; and (iii) any and all notes, analysis, compilations,
studies, summaries, and other material prepared by or for Seller containing or
based, in whole or in part, on any information included in the foregoing, (b)
the business of Seller is international in scope, (c) Purchaser has required
that the Shareholder make the covenants set forth in this Agreement as a
condition to Purchaser's purchase of certain assets, business and goodwill of
the Shareholder; (d) the provisions of this Agreement are reasonable and
necessary to protect and preserve Seller's business, and (e) Seller would be
irreparably damaged if the Shareholder were to breach the covenants set forth in
Sections 3, 4, 5, 6 and 7 of this Agreement.
3. CONFIDENTIAL INFORMATION
The Shareholder acknowledges and agrees that all Confidential Information
known or obtained by the Shareholder, whether before or after the date hereof,
is the property of Purchaser. Therefore, the Shareholder agrees that the
Shareholder will not, at any time, disclose to any unauthorized Persons or use
for his own account or for the benefit of any third party any Confidential
Information, whether the Shareholder has such information in the Shareholder's
memory or embodied in writing or other physical form, without Purchaser's
written consent, unless and to the extent that the Confidential Information is
or becomes generally known to and available for use by the public other than as
a result of the Shareholder's fault or the fault of any other Person bound by a
duty of confidentiality to Purchaser or Seller. The Shareholder agrees to
deliver to Purchaser at the time of execution of this Agreement, and at any
other time Purchaser may request, all documents, memoranda, notes, plans,
records, reports, and other documentation, models, components, or computer
software, whether embodied in a disk or in other form (and all copies of all of
the foregoing), relating to the businesses, operations, or affairs of Seller and
any other Confidential Information that the Shareholder may then possess or have
under the Shareholder's control.
4. NONCOMPETITION
As an inducement for Parent and Purchaser to enter into the Asset Purchase
Agreement and as additional consideration for the consideration to be paid to
the Seller under the Asset Purchase Agreement (all or a part of which will be
distributed to the Shareholder), the Shareholder agrees that during the
Noncompetition Period (as hereinafter defined), the Shareholder will not,
directly or indirectly, engage or invest in, own, manage, operate, finance,
control, or participate in the ownership, management, operation, financing, or
control of, be employed by, associated with, or in any manner connected with,
lend the Shareholder's name or any similar name to, lend the Shareholder's
credit to, or render services or advice to, any business whose products, product
development, services or other activities compete in any respect with the
products, product development, services or other activities of or offered by
Seller, as such existed at or before the Closing (the "Restricted Business"),
anywhere in the world; provided, however, that the Shareholder may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended. The Shareholder agrees that this
covenant is reasonable with respect to its duration, geographical area, and
scope. As used herein, the "Noncompetition Period" shall commence upon the
Closing and end upon the first to occur of (i) the date three years after the
Closing or (ii) the date of the termination by Purchaser, Parent or any
subsidiary or Parent (each, a "Parent Company") without cause of the
Shareholder's employment with a Parent Company. A transfer of Shareholder
between two Parent Companies shall not be construed as a termination.
5. NONSOLICITATION.
The Shareholder further agrees that for a period of three years after the
Closing, she will not:
(a) directly or indirectly, personally or through others, encourage,
induce, attempt to induce, solicit or attempt to solicit (on the Shareholder's
own behalf or on behalf of any other person or entity) any employee of a Parent
Company to leave his or her employment with such Parent Company;
(b) employ, or permit any entity over which the Shareholder exercises any
control, to employ such employee who has terminated his or her employment with a
Parent Company during such three-year period; or
(c) directly or indirectly, personally or through others, approach,
contact, solicit, advise or do (or attempt to do) business with, or otherwise
interfere with the relationship of a Parent Company with, any person or entity
who is, was or is reasonably anticipated to become a customer or client of a
Parent Company or Seller with respect to the Restricted Business.
6. NO DISPARAGEMENT.
The Shareholder will not, at any time during or after the three-year
period, disparage any Parent Company, or any of their respective shareholders,
directors, officers, employees, or agents.
7. NEW EMPLOYMENT.
The Shareholder will, for a period of three years after the Closing,
within ten days after accepting any employment, advise Parent of the identity of
any employer of the Shareholder. Parent may serve notice upon each such employer
that the Shareholder is bound by this Agreement and furnish each such employer
with a copy of this Agreement or relevant portions thereof.
8. INDEPENDENCE OF OBLIGATIONS.
The covenants of the Shareholder set forth in this Agreement shall be
construed as independent of any other agreement or arrangement between the
Shareholder, on the one hand, and Parent, Purchaser or Seller, on the other. The
existence of any claim or cause of action by the Shareholder against Parent,
Purchaser or Seller shall not constitute a defense to the enforcement of such
covenants against the Shareholder.
9. REMEDIES
If the Shareholder breaches the covenants set forth in this Agreement,
each of Parent and Purchaser will be entitled to the following remedies:
(a) Damages from the Shareholder; and
(b) In addition to its right to Damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, it being agreed that money damages alone would be inadequate to
compensate the Parent or Purchaser and would be an inadequate remedy for such
breach.
(c) The rights and remedies of the parties to this Agreement
are cumulative and not alternative.
10. NON-EXCLUSIVITY.
The rights and remedies of Parent and Purchaser hereunder are not
exclusive of or limited by any other rights or remedies which Parent or
Purchaser may have, whether at law, in equity, by contract or otherwise, all of
which shall be cumulative (and not alternative). Without limiting the generality
of the foregoing, the rights and remedies of Parent and Purchaser hereunder, and
the obligations and liabilities of the Shareholder hereunder, are in addition to
their respective rights, remedies, obligations and liabilities under the law of
unfair competition, misappropriation of trade secrets and the like.
11. INDEMNIFICATION.
Without in any way limiting any of the rights or remedies otherwise
available to Purchaser, the Shareholder shall hold harmless and indemnify
Purchaser from and against, and shall compensate and reimburse Parent and
Purchaser from, any Damages which are directly or indirectly suffered or
incurred at any time by Parent or Purchaser, or to which Parent or Purchaser
otherwise becomes subject (regardless of whether or not such Damages relate to a
third-party claim) and that arise from or are directly or indirectly connected
with, any breach of any covenant or obligation of the Shareholder contained
herein.
12. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
13. GOVERNING LAW
This Agreement will be governed by the laws of the State of California
without regard to conflicts of laws principles.
14. JURISDICTION; SERVICE OF PROCESS
(a) Subject to Section 23, any legal action or other Legal
Proceeding relating to this Agreement or the enforcement of any provision of
this Agreement, brought to enforce any award of an arbitrator or to request
provisional relief pursuant to Exhibit A hereof, may be brought or otherwise
commenced in any state or federal court located in the City and County of Santa
Clara, California. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the City and
County of Santa Clara, California (and each appellate court located in the
State of California) in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in the
City and County of Santa Clara, California shall be deemed to be a
convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal
court located in the City and County of Santa Clara, California, any claim
that such party is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an inconvenient
forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in
or by such court.
(b) Notwithstanding anything in this Agreement to the contarary, if
any Legal Proceeding is commenced against any party to this Agreement by any
Person in or before any court or other tribunal anywhere in the United States,
then such party may proceed against other party to this Agreement in such court
or other tribunal with respect to any indemnification claim or other claim
arising directly or indirectly from or relating directly or indirectly to such
Legal Proceeding or any of the matters alleged therein or any of the
circumstances giving rise thereto.
(c) Except as provided by Section 23, nothing contained in Section
14(a) or 14(b) shall be deemed to limit or otherwise affect the right of each of
Parent and Purchaser to commence any Legal Proceeding or otherwise proceed
against the Shareholder in any other forum or jurisdiction.
15. SEVERABILITY
If any provision of this Agreement or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) such invalidity of
enforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this Agreement, and each
part of each provision of this Agreement is separable from every other part of
such provision.
16. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
17. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
18. NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand, (b) sent by facsimile, provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service or
registered mail (receipt requested), in each case to the appropriate addresses
and facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
Shareholder: Helen Kwong
6082 Stewart Avenue
Fremont, CA 94538
Facsimile No.: 510-657-5863
Parent: Elexsys International Inc.
1188 Bordeaux Drive
Sunnyvale, CA 94089
Attention: W. Barry Hegarty,
President
Facsimile No.: 408-743-5454
with a copy to: Cooley Godward Castro Huddleson &
Tatum
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Alan C. Mendelson, Esq.
Facsimile No.: 415-857-0663
Purchaser: ELXI Acquisition, Inc.
1188 Bordeaux Drive
Sunnyvale, CA 94089
Attention: W. Barry Hegarty,
President
Facsimile No.: 408-743-5454
with a copy to: Cooley Godward Castro Huddleson &
Tatum
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Alan C. Mendelson, Esq.
Facsimile No.: 415-857-0663
19. FURTHER ASSURANCES.
The Shareholder shall execute and/or cause to be delivered to Parent or
Purchaser such instruments and other documents and shall take such other actions
as Parent or Purchaser may reasonably request to effectuate the intent and
purposes of this Agreement.
20. ASSIGNMENT.
This Agreement and all obligations hereunder are personal to the
Shareholder and may not be transferred or assigned by the Shareholder at any
time. Each of Parent and Purchaser may assign its respective rights under this
Agreement to any entity in connection with any sale or transfer of all or a
substantial portion of its respective assets to such entity.
21. BINDING NATURE.
Subject to Section 20, this Agreement will be binding upon the Shareholder
and the Shareholder's representatives, executors, administrators, estate, heirs,
successors and assigns, and will inure to the benefit of Parent and Purchaser
and their respective successors and assigns.
22. ATTORNEYS' FEES AND EXPENSES.
If any legal action or other legal proceeding relating to the enforcement
of any provision of this Agreement is brought against the Shareholder, the
prevailing party shall be entitled to recover reasonable attorneys' fees, costs
and disbursements (in addition to any other relief to which the prevailing party
may be entitled).
23. ARBITRATION.
The parties agree to arbitrate any dispute, claim or controversy of whatever
nature arising out of or relating to this Agreement through arbitration in
accordance with Exhibit A hereto, which Exhibit A is hereby incorporated by
reference into this Agreement and made a part hereof.
[the remainder of this page is intentionally blank]
24. ENTIRE AGREEMENT
This Agreement and the other Transactional Agreements constitute the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior written and oral agreements and understandings
among Parent, Purchaser and the Shareholder with respect to the subject matter
of this Agreement. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
PARENT: SHAREHOLDER:
ELEXSYS INTERNATIONAL INC.,
a Delaware corporation
By:______________________ By:_____________
W. Barry Hegarty, Helen Kwong,
President an individual
ELXI ACQUISITION, INC.,
a California corporation
By:______________________
W. Barry Hegarty,
President
<PAGE>
A-5
EXHIBIT A
DISPUTE RESOLUTION
25. BINDING ARBITRATION.
Any dispute, claim or controversy of whatever nature arising out of
or relating to this Agreement, including, without limitation, any action or
claim based on tort, contract, or statute, or concerning the interpretation,
effect, termination, validity, performance and/or breach of any of the
provisions of this Agreement, shall be resolved by final and binding arbitration
administered by Judicial Arbitration & Mediation Services, Inc. ("JAMS"),
located at 111 North Market Street, Suite 800, San Jose, California 95113,
Telephone: (408) 288-2240 (the "Administrator").
Notwithstanding the foregoing or any other provision contained in this
Exhibit, the parties shall have the right to request provisional relief from a
court of competent jurisdiction pursuant to California Code of Civil Procedure
Section 1281.8.
26. INITIATION.
Arbitration shall be initiated in the following manner:
26.(a) Timing. Unless barred by an applicable statute or
period of limitations, either party may initiate an arbitration at any time
after a dispute has arisen by serving upon the other party and filing with the
Administrator a written Demand for Arbitration, including a general description
of the nature of the claim and the nature and amount of damages and/or other
relief sought (the "Demand for Arbitration"). A claim shall be forever barred if
on the date the Demand for Arbitration is filed with the Administrator, the
claim, if asserted in a civil action, would be barred under law by an applicable
statute or period of limitations.
26.(b) Response. If the responding party desires to file a
response and/or counterclaim to the Demand for Arbitration, it must do so within
20 calendar days after service of the Demand for Arbitration. Any response to a
counterclaim shall be filed and served within 10 calendar days after service of
the counterclaim, but no such response shall be required. A failure to file a
counterclaim or response will not operate to delay the arbitration proceedings.
26.(c) Further Pleadings. After the filing of the Demand for
Arbitration, any counterclaim, and/or any responses thereto, no further claims
or counterclaims may be made in that proceeding except by order of the
arbitrator made on a duly noticed motion to the arbitrator.
27. APPOINTMENT AND POWERS OF ARBITRATOR.
The dispute shall be submitted to a single arbitrator chosen by the
parties from a list of retired judges provided by the Administrator. The
Administrator shall provide such list to the parties 20 days after the Demand
for Arbitration is filed. Should the parties be unable to agree on a choice of
arbitrator within 10 days after receipt of the list from the Administrator, then
either party may request the Administrator to furnish a list of three names and
each side may strike one name, thereby nominating the remaining person as the
arbitrator. If more than one name remains, the Administrator shall choose an
arbitrator from the list of remaining names.
If the designated arbitrator shall die, become incapable of, unwilling to,
or unable to serve or proceed with the arbitration, the Administrator shall
appoint a replacement arbitrator, and such replacement arbitrator shall have all
such powers as if he or she had been originally appointed as the arbitrator.
Should either party refuse or neglect, after reasonable notice, to furnish
the arbitrator with any papers or information demanded or to attend hearings
before the arbitrator, the arbitrator is empowered by both parties to proceed
with the remainder of the arbitration process set forth in this Exhibit.
The arbitrator is authorized to issue an award for compensatory damages,
and/or to grant any equitable remedy or relief he or she deems just and
equitable and within the scope of the applicable Agreement, including, but not
limited to, an injunction or order for specific performance. The arbitrator
shall not have the authority to award punitive damages.
28. COSTS AND FEES.
The arbitrator, in his or her discretion, shall be authorized to
determine whether a party is the prevailing party, and if so, to award to that
prevailing party reimbursement for its share of the costs and fees of the
Administrator and the arbitrator, and reimbursement for its reasonable
attorneys' fees, disbursements pursuant to California Code of Civil Procedure
Section 1033.5, and costs arising from the arbitration. However, until any such
order is issued, the parties shall bear equally the costs and fees of the
Administrator and the arbitrator.
29. LOCATION AND DATE OF ARBITRATION HEARING.
The arbitration shall be held in San Jose, California, and shall
commence no later than six months following the service of the Demand For
Arbitration.
30. PRE-HEARING CONFERENCES.
Within 20 days of the time that the arbitrator is chosen, the
arbitrator shall hold a Pre-Hearing Conference with the parties for the purpose
of narrowing the issues, establishing a discovery schedule, arranging an
acceptable procedure for any law and motion proceedings and in all respects
arranging for the most expeditious hearing possible of the matters in dispute.
31. DISCOVERY.
The parties shall have the right to conduct the following discovery:
31.(a) Exchange of Documents. At the Pre-Hearing Conference,
the parties shall exchange requests for production of no more than 15 categories
of documents (the "Document Request List") that are relevant to the issues in
the arbitration and that are to be produced by the other side. Subject to any
disputes as to production, the responsive documents shall be produced by the
responding party, or made available for inspection, at the requesting party's
option, within 20 days of the exchange of the Document Request Lists. Any
disputes as to production of documents shall be addressed to the arbitrator as
promptly as possible, and in any event no more than 10 days after completion of
the 20-day production period, and shall promptly and informally be resolved by
the arbitrator.
31.(b) Exchange of Witness Lists. Within 20 days after the
production of documents, the parties shall exchange a list of: (i) any fact
witnesses they intend to call at the arbitration hearing, and (ii) any other
persons who may have material information about the dispute. The fact witness
list also shall include a brief description of each identified person's
knowledge.
31.(c) Fact Witness Depositions. The parties shall have the
right to take depositions of no more than five fact (non-expert) witnesses at
any time commencing 15 days after the production of documents and up until 15
days prior to the commencement of the arbitration hearing. The time available
for the deposition of each fact witness shall not exceed two 8-hour days,
including breaks.
31.(d) Expert Witnesses. The parties shall exchange lists of
up to three expert witnesses, along with a statement of the witnesses'
backgrounds and opinions, 30 days prior to the commencement of the arbitration
hearing. Between the 20th and 10th day preceding the arbitration hearing, each
party shall have the right to depose the other party's experts, however, the
time available for the deposition of each expert witness shall not exceed two
8-hour days, including breaks. At least five business days prior to any expert's
scheduled deposition, the party designating the expert shall provide the other
party with copies of any reports or other documents the expert intends to offer
at the arbitration hearing and all documents that have been provided to the
expert by such designating party.
31.(e) Additional Discovery. Any additional
discovery may occur only at the discretion of the arbitrator and allowed only
upon a showing of good cause.
32. CONDUCT OF THE ARBITRATION HEARING.
The arbitration hearing shall be conducted according to the
discretion of the arbitrator. Judicial rules relating to the order of proof, the
conduct of the hearing and the presentation and admissibility of evidence need
not be followed. Any relevant information, including hearsay, may be admitted by
the arbitrator regardless of its admissibility as evidence in court, but the
arbitrator also shall be authorized to exclude evidence.
The parties shall have the power to subpoena witnesses to attend the
arbitration hearing pursuant to California Code of Civil Procedure Section
1282.6. The arbitrator shall have full power to give such directions and to make
such orders in the conduct of the arbitration, including setting pre-arbitration
procedures and scheduling any motions to correct or amend the arbitration award,
as he or she deems just and appropriate.
33. AWARD.
The arbitrator shall, within 15 calendar days after the conclusion
of the arbitration hearing, issue a written award and a brief written statement
of decision describing the reasons for the award, including the calculation of
any compensatory damages awarded.
34. SURVIVAL.
The provisions in this Exhibit shall survive and apply in all
events, including, without limitation, after the breach, repudiation and/or
termination of the Agreement.
35. NOTICE.
Any notice or document required to be served by one party on the
other party under this Exhibit shall be served in accordance with Section 18 of
the Agreement. After a party appears in the arbitration proceeding through its
attorney, all further service shall be made upon that party's attorney.
36. FINALITY OF AWARD.
The award of the arbitrator shall be final and binding upon the
parties without appeal or review except as permitted by California law. Any
party may apply to any court of competent jurisdiction for confirmation and
entry of judgment based on said award. In connection with any application to
confirm, correct or vacate the arbitration award, any appeal of any order
rendered pursuant to any such application, or any other action required to
enforce the arbitration award, the prevailing party shall be entitled to recover
its reasonable attorneys' fees, disbursements and costs incurred in such
post-award activities.
<PAGE>
EXHIBIT I
DISPUTE RESOLUTION
1. BINDING ARBITRATION.
Any dispute, claim or controversy of whatever nature arising out of
or relating to this Agreement, including, without limitation, any action or
claim based on tort, contract, or statute, or concerning the interpretation,
effect, termination, validity, performance and/or breach of any of the
provisions of this Agreement, shall be resolved by final and binding arbitration
administered by Judicial Arbitration & Mediation Services, Inc. ("JAMS"),
located at 111 North Market Street, Suite 800, San Jose, California 95113,
Telephone: (408) 288-2240 (the "Administrator").
Notwithstanding the foregoing or any other provision contained in this
Exhibit, the parties shall have the right to request provisional relief from a
court of competent jurisdiction pursuant to California Code of Civil Procedure
Section 1281.8.
2. INITIATION.
Arbitration shall be initiated in the following manner:
2.1 Timing. Unless barred by an applicable statute or period
of limitations, either party may initiate an arbitration at any time after a
dispute has arisen by serving upon the other party and filing with the
Administrator a written Demand for Arbitration, including a general description
of the nature of the claim and the nature and amount of damages and/or other
relief sought (the "Demand for Arbitration"). A claim shall be forever barred if
on the date the Demand for Arbitration is filed with the Administrator, the
claim, if asserted in a civil action, would be barred under law by an applicable
statute or period of limitations.
2.2 Response. If the responding party desires to file a
response and/or counterclaim to the Demand for Arbitration, it must do so within
20 calendar days after service of the Demand for Arbitration. Any response to a
counterclaim shall be filed and served within 10 calendar days after service of
the counterclaim, but no such response shall be required. A failure to file a
counterclaim or response will not operate to delay the arbitration proceedings.
2.3 Further Pleadings. After the filing of the Demand for
Arbitration, any counterclaim, and/or any responses thereto, no further claims
or counterclaims may be made in that proceeding except by order of the
arbitrator made on a duly noticed motion to the arbitrator.
3. APPOINTMENT AND POWERS OF ARBITRATOR.
The dispute shall be submitted to a single arbitrator chosen by the
parties from a list of retired judges provided by the Administrator. The
Administrator shall provide such list to the parties 20 days after the Demand
for Arbitration is filed. Should the parties be unable to agree on a choice of
arbitrator within 10 days after receipt of the list from the Administrator, then
either party may request the Administrator to furnish a list of three names and
each side may strike one name, thereby nominating the remaining person as the
arbitrator. If more than one name remains, the Administrator shall choose an
arbitrator from the list of remaining names.
If the designated arbitrator shall die, become incapable of, unwilling to,
or unable to serve or proceed with the arbitration, the Administrator shall
appoint a replacement arbitrator, and such replacement arbitrator shall have all
such powers as if he or she had been originally appointed as the arbitrator.
Should either party refuse or neglect, after reasonable notice, to furnish
the arbitrator with any papers or information demanded or to attend hearings
before the arbitrator, the arbitrator is empowered by both parties to proceed
with the remainder of the arbitration process set forth in this Exhibit.
The arbitrator is authorized to issue an award for compensatory damages,
and/or to grant any equitable remedy or relief he or she deems just and
equitable and within the scope of the applicable Agreement, including, but not
limited to, an injunction or order for specific performance. The arbitrator
shall not have the authority to award punitive damages.
4. COSTS AND FEES.
The arbitrator, in his or her discretion, shall be authorized to
determine whether a party is the prevailing party, and if so, to award to that
prevailing party reimbursement for its share of the costs and fees of the
Administrator and the arbitrator, and reimbursement for its reasonable
attorneys' fees, disbursements pursuant to California Code of Civil Procedure
Section 1033.5, and costs arising from the arbitration. However, until any such
order is issued, the parties shall bear equally the costs and fees of the
Administrator and the arbitrator.
5. LOCATION AND DATE OF ARBITRATION HEARING.
The arbitration shall be held in San Jose, California, and shall
commence no later than six months following the service of the Demand For
Arbitration.
6. PRE-HEARING CONFERENCES.
Within 20 days of the time that the arbitrator is chosen, the
arbitrator shall hold a Pre-Hearing Conference with the parties for the purpose
of narrowing the issues, establishing a discovery schedule, arranging an
acceptable procedure for any law and motion proceedings and in all respects
arranging for the most expeditious hearing possible of the matters in dispute.
7. DISCOVERY.
The parties shall have the right to conduct the following discovery:
7.1 Exchange of Documents. At the Pre-Hearing Conference, the
parties shall exchange requests for production of no more than 15 categories of
documents (the "Document Request List") that are relevant to the issues in the
arbitration and that are to be produced by the other side. Subject to any
disputes as to production, the responsive documents shall be produced by the
responding party, or made available for inspection, at the requesting party's
option, within 20 days of the exchange of the Document Request Lists. Any
disputes as to production of documents shall be addressed to the arbitrator as
promptly as possible, and in any event no more than 10 days after completion of
the 20-day production period, and shall promptly and informally be resolved by
the arbitrator.
7.2 Exchange of Witness Lists. Within 20 days after the
production of documents, the parties shall exchange a list of: (i) any fact
witnesses they intend to call at the arbitration hearing, and (ii) any other
persons who may have material information about the dispute. The fact witness
list also shall include a brief description of each identified person's
knowledge.
7.3 Fact Witness Depositions. The parties shall have the right
to take depositions of no more than five fact (non-expert) witnesses at any time
commencing 15 days after the production of documents and up until 15 days prior
to the commencement of the arbitration hearing. The time available for the
deposition of each fact witness shall not exceed two 8-hour days, including
breaks.
7.4 Expert Witnesses. The parties shall exchange lists of up
to three expert witnesses, along with a statement of the witnesses' backgrounds
and opinions, 30 days prior to the commencement of the arbitration hearing.
Between the 20th and 10th day preceding the arbitration hearing, each party
shall have the right to depose the other party's experts, however, the time
available for the deposition of each expert witness shall not exceed two 8-hour
days, including breaks. At least five business days prior to any expert's
scheduled deposition, the party designating the expert shall provide the other
party with copies of any reports or other documents the expert intends to offer
at the arbitration hearing and all documents that have been provided to the
expert by such designating party.
7.5 Additional Discovery. Any additional discovery may
occur only at the discretion of the arbitrator and allowed only upon a
showing of good cause.
8. CONDUCT OF THE ARBITRATION HEARING.
The arbitration hearing shall be conducted according to the
discretion of the arbitrator. Judicial rules relating to the order of proof, the
conduct of the hearing and the presentation and admissibility of evidence need
not be followed. Any relevant information, including hearsay, may be admitted by
the arbitrator regardless of its admissibility as evidence in court, but the
arbitrator also shall be authorized to exclude evidence.
The parties shall have the power to subpoena witnesses to attend the
arbitration hearing pursuant to California Code of Civil Procedure Section
1282.6. The arbitrator shall have full power to give such directions and to make
such orders in the conduct of the arbitration, including setting pre-arbitration
procedures and scheduling any motions to correct or amend the arbitration award,
as he or she deems just and appropriate.
9. AWARD.
The arbitrator shall, within 15 calendar days after the conclusion
of the arbitration hearing, issue a written award and a brief written statement
of decision describing the reasons for the award, including the calculation of
any compensatory damages awarded.
10. SURVIVAL.
The provisions in this Exhibit shall survive and apply in all
events, including, without limitation, after the breach, repudiation and/or
termination of the Agreement.
11. NOTICE.
Any notice or document required to be served by one party on the
other party under this Exhibit shall be served in accordance with Section 11.5
of the Agreement. After a party appears in the arbitration proceeding through
its attorney, all further service shall be made upon that party's attorney.
12. FINALITY OF AWARD.
The award of the arbitrator shall be final and binding upon the
parties without appeal or review except as permitted by California law. Any
party may apply to any court of competent jurisdiction for confirmation and
entry of judgment based on said award. In connection with any application to
confirm, correct or vacate the arbitration award, any appeal of any order
rendered pursuant to any such application, or any other action required to
enforce the arbitration award, the prevailing party shall be entitled to recover
its reasonable attorneys' fees, disbursements and costs incurred in such
post-award activities.
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