UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-12194
ZITEL CORPORATION
(Exact name of Registrant as specified in its charter)
California 94-2566313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47211 Bayside Parkway 94538-6517
Fremont, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (510) 440-9600
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 such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----
The number of shares of the Registrant's Common Stock outstanding as of March
31, 1995 was 7,202,252.
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ZITEL CORPORATION AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1995 (unaudited) and September 30, 1994 .................. 3
Condensed Consolidated Statements of
Operations (unaudited) - Three and Six Months Ended
March 31, 1995 and 1994 ............................................ 4
Condensed Consolidated Statements of
Cash Flows (unaudited) - Six Months Ended
March 31, 1995 and 1994 ............................................ 5
Notes to Condensed Consolidated
Financial Statements ............................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations ............................................... 8
Exhibits to Part I.
Exhibit 11.1 - Computation of Net Income (Loss)
per Common and Common Equivalent Share .............................. 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K ............................... 12
Page 2
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ZITEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
($000's)
March 31, September 30,
1995 1994
-------- --------
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 5,486 $ 1,010
Accounts receivable, net ...................... 5,780 3,785
Inventories ................................... 3,672 4,988
Deferred and refundable taxes ................. 4,682 244
Other current assets .......................... 972 836
-------- --------
Total current assets ........................ 20,592 10,863
Fixed assets, net ............................... 1,140 1,616
Other assets, net ............................... 1,575 1,199
-------- --------
Total assets .................................. $ 23,307 $ 13,678
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ............. $ 47 $ 77
Accounts payable .............................. 627 2,023
Accrued liabilities ........................... 1,358 1,561
-------- --------
Total current liabilities ................... 2,032 3,661
Long-term debt .................................. 4 13
-------- --------
Total liabilities ............................. 2,036 3,674
Shareholders' equity:
Common stock .................................. 19,539 15,489
Retained earnings (deficit) ................... 1,732 (5,485)
-------- --------
Total shareholders' equity .................... 21,271 10,004
-------- --------
Total liabilities and
shareholders' equity ........................ $ 23,307 $ 13,678
======== ========
The accompanying notes are an integral part of these financial statements.
Page 3
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ZITEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net sales ...................... $ 1,259 $ 2,279 $ 3,969 $ 6,393
Royalty revenue ................ 4,592 0 8,737 0
-------- -------- -------- --------
Total revenue ................ 5,851 2,279 12,706 6,393
Cost of goods sold ............. 1,223 2,349 3,436 5,669
Research and development
expenses ..................... 1,595 1,640 2,992 3,136
Selling, general &
administrative expenses ...... 1,883 1,677 3,574 3,296
-------- -------- -------- --------
Operating income (loss) ...... 1,150 (3,387) 2,704 (5,708)
Interest and other expense ..... 62 123 98 287
Interest and other income,
net .......................... (89) (118) (141) (212)
-------- -------- -------- --------
Income (loss) before
income taxes ............... 1,177 (3,392) 2,747 (5,783)
Provision (benefit) for
income taxes ................. (4,564) 0 (4,470) 0
-------- -------- -------- --------
Net income (loss) ............ $ 5,741 $ (3,392) $ 7,217 $ (5,783)
======== ======== ======== ========
Net income (loss)
per share .................... $ .74 $ (.54) $ .97 $ (.92)
======== ======== ======== ========
Number of shares used
in per
share calculations ........... 7,763 6,304 7,476 6,284
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
Page 4
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ZITEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's)
(UNAUDITED)
Six Months Ended
March 31,
1995 1994
-------- --------
Cash flows provided by
operating activities:
Net income (loss) .............................. $ 7,217 $ (5,783)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization ................ 789 1,246
Provision for doubtful accounts .............. 259 102
Provision for inventory allowances ........... 89 310
Decrease (increase) in
accounts receivable ........................ (2,254) 814
Decrease in inventories ...................... 1,227 2,764
Decrease (increase) in deferred and
refundable taxes ........................... (4,438) 1,422
Increase in other current assets ............. (136) (484)
Decrease in accounts payable ................. (1,396) (93)
Decrease in accrued liabilities .............. (203) (125)
Decrease in other liabilities ................ 0 (45)
-------- --------
Net cash provided by operating activities ........ 1,154 128
-------- --------
Cash flows used in investing activities:
Purchase of fixed assets ......................... (282) (244)
Purchase of other assets ......................... (407) (27)
-------- --------
Net cash used in investing activities ............ (689) (271)
-------- --------
Cash flows provided by financing activities:
Issuance of common stock ....................... 4,050 226
Proceeds from borrowings ....................... 3,658 0
Repayments of borrowings ....................... (3,697) (186)
-------- --------
Net cash provided by financing activities ........ 4,011 40
-------- --------
Net increase (decrease) in cash .................. 4,476 (103)
Cash, beginning of period .......................... 1,010 3,394
-------- --------
Cash, end of period ................................ $ 5,486 $ 3,291
======== ========
The accompanying notes are an integral part of these financial statements.
Page 5
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ZITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Amounts in thousands except per share data)
1. The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission and should be read in conjunction with
the audited financial statements of the Company. Certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted although the Company believes the disclosures which are made are
adequate to make the information presented not misleading. Further, the
condensed consolidated financial statements reflect, in the opinion of
management, all adjustments necessary to present fairly the financial position
and results of operations as of and for the periods indicated. The results of
operations for the period ended March 31, 1995 are not necessarily indicative of
the results expected for the full year.
2. Inventories:
March 31, September 30,
1995 1994
--------- -------------
Raw materials $ 776 $2,074
Work in process 672 751
Finished goods 2,224 2,163
------ ------
$3,672 $4,988
====== ======
3. Effective November 23, 1994, the Company negotiated a $3 million accounts
receivable line of credit. The line is based on 80% of eligible receivables. The
line of credit is collateralized by accounts receivable, inventory, equipment,
and
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tangible assets. Interest is at prime plus 3 percentage points (12% at March 31,
1995) and is payable monthly. Repayments on the borrowings against the line are
paid back as the Company receives proceeds from customer accounts. The line of
credit expires on September 30, 1995. At March 31, 1995, the Company had no
borrowings against the line.
4. During the first quarter ended December 31, 1994, the Company issued 450,000
shares of common stock in a private placement. Net proceeds from this
transaction were $2,933,000.
5. Revenue recognition:
Revenue is recognized at the time products are shipped to customers and at
the time services are rendered. Royalty revenue is recognized when earned and
receipt is assured.
6. Income (loss) per share amounts are computed using the weighted average
number of common and common equivalent (dilutive stock options) shares
outstanding during each period presented, when dilutive.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company recorded net income of $5,741,000 ($0.74 per share) for the quarter
ended March 31, 1995 versus a net loss of $3,392,000 ($0.54 per share) for the
same quarter of the prior year. For the six-months ended March 31, 1995, the
Company recorded net income of $7,217,000 ($0.97 per share) versus a net loss of
$5,783,000 ($0.92 per share) for the same period a year earlier.
Total revenue for the quarter ended March 31, 1995 was $5,851,000 versus
$2,279,000 for the same period a year earlier. Revenue for the current quarter
included $4,592,000 in royalty revenue from the IBM RAMAC product. Net sales for
the quarter ended March 31, 1995 were $1,259,000 versus $2,279,000 for the same
quarter of the prior year. For the six-months ended March 31, 1995, total
revenue was $12,706,000 versus $6,393,000 for the same period of the prior year.
Revenue for the six-month period included royalty revenue of $8,737,000. Net
sales for the six months ended March 31, 1995 were $3,969,000 versus $6,393,000
for the same period of the prior year. The majority of the sales generated in
the current quarter and six-month period were to users of Unisys Corporation
computer equipment and OEM customers. A new product family, CASD-II, was
recently announced for the Unisys market with production shipments to customers
expected to begin in the late September 1995 quarter. Initial interest in this
new product family has been positive, but there is no assurance that the new
products can be successfully marketed at satisfactory margins.
The Company is continuing discussions with several companies regarding licensing
or joint development to exploit certain of the Company's technologies. Though
discussions have been positive, there is no assurance that there will be a
successful conclusion to any of these discussions.
Gross margin as a percent of net sales was 3% for the quarter ended March 31,
1995 compared to a negative 3% margin for the same period of the previous year.
For the six-month period ended March 31, 1995, gross margin was 13% versus 11%
for the same period of the prior year. Gross margins on net sales continue to
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be low due to the impact of other cost of sales which do not vary directly with
sales volume.
Research and development expenses for the quarter ended March 31, 1995 were 27%
of total revenue compared to 72% in the prior year. Actual spending decreased
$45,000. For the six-month period, research and development was 24% of total
revenue versus 49% in the prior year. Actual spending decreased $144,000.
Research and development spending is anticipated to be moderately higher for the
remainder of the year.
Selling, general and administrative expenses were 32% of total revenue for the
current quarter versus 74% in the prior year. Actual spending increased
$206,000. For the six-month period, selling, general and administrative expenses
were 28% of total revenue versus 52% in the prior year. Actual spending
increased $278,000. Spending increases in the two periods were primarily the
result of bonus and profit sharing pool accruals.
Year to date, the Company recorded a tax provision of 37.5% of income before
income taxes. This provision was offset with the recognition of approximately $5
million of deferred tax assets during the quarter in accordance with S.F.A.S.
No. 109, Accounting for Income Taxes.
LIQUIDITY AND CAPITAL RESOURCES
For the six-month period ended March 31, 1995, working capital increased
$11,358,000 and cash flows provided by operations was $1,154,000. Net income of
$7,217,000 and a decrease in inventory of $1,227,000 were the primary items
which generated a positive cash flow from operating activities. This was offset
by an increase in accounts receivable of $2,254,000, an increase in deferred and
refundable taxes of $4,438,000 and a decrease in accounts payable of $1,396,000.
Cash in the amount of $689,000 was used to purchase capital equipment and other
assets in the current year. Net cash provided by financing activities in the
current year was $4,011,000. This included the issuance of 450,000 shares of
common stock issued in a private placement which generated $2,933,000. In
addition, the Company entered into an agreement for a $3,000,000 accounts
receivable line of credit. At March 31, 1995, the Company had no borrowings
against the line of credit.
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Management believes that the Company will meet its cash requirements from net
income, existing working capital and the utilization of the line of credit.
- - --------------------------------------------------------------------------------
Zitel and CASD are registered trademarks of Zitel Corporation.
IBM and RAMAC are registered trademarks of IBM Corporation. Unisys is a
registered trademark of Unisys Corporation. All other product names and brand
names are trademarks or registered trademarks of their respective holders.
Page 10
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EXHIBIT 11.1
ZITEL CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARE
(In thousands except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Weighted average common
shares outstanding .............. 7,173 6,304 6,916 6,284
Computation of incremental
outstanding shares:
Net effect of dilutive
stock options based on
treasury stock method ........ 590 -- 560 --
-------- -------- -------- --------
7,763 6,304 7,476 6,284
======== ======== ======== ========
Net income (loss) ................ $ 5,741 $ (3,392) $ 7,217 $ (5,783)
======== ======== ======== ========
Net income (loss)
per share ....................... $ .74 $ (.54) $ .97 $ (.92)
======== ======== ======== ========
Primary and fully diluted income (loss) per share differ by less than one cent
in all periods presented.
Page 11
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.27, Lease agreement dated February 16, 1995 between
the Company and Renco Investment Company.
Exhibit 27, Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ZITEL CORPORATION
Date: May 11, 1995 Henry C. Harris
Henry C. Harris
Vice President, Finance &
Administration
(Chief Financial and
Accounting Officer)
Page 13
EXHIBIT 10.27
File No.
----------------------
INDUSTRIAL SPACE LEASE
(SINGLE TENANT NET)
THIS LEASE, dated February 16, 1995 for reference purposes only, is made by and
between Renco Investment Company, a California partnership ("Landlord"), and
Zitel Corporation, a California Corporation ("Tenant"), to be effective and
binding upon the parties as of the date the last of the designated signatories
to this Lease shall have executed this Lease (the "Effective Date of this
Lease")
ARTICLE 1:
REFERENCES
1.1 REFERENCES: All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
A. Tenant's Address for Notices:
47211 Bayside Parkway
Fremont, California 94538
B. Tenant's Representative: Mr. Henry C. Harris
Phone Number: (510) 440-9600
C. Landlord's Address for Notices:
1285 Oakmead Parkway
Sunnyvale, California 94086
D. Landlord's Representative: William N. Neidig
Phone Number: (408) 730-5500
E. Intended Commencement Date: April 1, 1995
F. Intended Term: Three (3) Years
G. Lease Expiration Date: March 31, 1998
H. Tenant's Punchlist Period: N/A
Page Ex 10.27-Page 1
<PAGE>
I. First Month's Prepaid Rent: To be Paid April 1, 1995
J. Last Month's Prepaid Rent: -0-
K. Tenant's Security Deposit: $41,872.32
L. Late Charge Amount: Five percent (5%) of the amount due
M. Tenant's Required Liability Coverage:
$3,000,000 single limit
N. Brokers: None
O. Property or Project: That certain real property, situated in the City of
Fremont, County of Alameda, State of California, as presently improved with one
building, which real property is shown on the Site Plan attached hereto as
Exhibit "A" and is commonly known as or otherwise described as follows:
47211 Bayside Parkway, Fremont, California 94538
P. Building: That certain Building within the Property in which the Leased
Premises are located, which Building is shown outlined in red on Exhibit "A"
hereto.
Q. Outside Areas: The "Outside Areas" shall mean all areas within the
Property which are located outside the buildings, such as pedestrian walkways,
parking areas, landscaped areas, open areas and enclosed trash disposal areas.
R. Leased Premises: All the space which is the Building, consisting of
approximately 67,536 square feet of rentable area and, for purposes of this
Lease, agreed to contain said number of square feet. The Leased Premises are
commonly known as or otherwise described as follows:
That certain building identified as Renco 35 located at 47211 Bayside
Parkway, Fremont, California.
S. Base Monthly Rent: The term "Base Monthly Rent" shall mean the following:
Forty one thousand eight hundred seventy two dollars and 32 cents
($41,872.32) for each month of the lease term.
T. Permitted Use: The term "Permitted Use" shall mean the following:
Page Ex 10.27-Page 2
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Manufacture, warehousing, repair and sales and service of electronic
equipment and all related support functions including office research and
development as such uses are permitted in Bayside Technology Park.
U. Exhibits: The term "Exhibits" shall mean the Exhibits to this Lease which
are described as follows:
Exhibit "A" - Site Plan showing the Property and delineating the
Building in which the Leased Premises are located
Exhibit "B" - Floor Plan outlining the Leased Premise
V. Addenda: The term "Addenda" shall mean the Addendum (or Addenda) to this
Lease which is (or are) described as follows:
First Addendum To Lease
ARTICLE 2:
LEASED PREMISES, TERM AND POSSESSION
2.1 DEMISE OF LEASED PREMISES: Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for Tenant's own use in the conduct of Tenant's
business and not for purposes of speculating in real estate, for the Lease Term
and upon the terms and subject to the conditions of this Lease, that certain
interior space described in Article I as the Leased Premises, reserving and
excepting to Landlord the exclusive right to all profits to be derived from any
assignments or sublettings by Tenant during the Lease Term by reason of the
appreciation in the fair market rental value of the Leased Premises*. Tenant's
lease of the Leased Premises, together with the appurtenant right to use the
Outside Areas as described in Article 2.2 below, shall be conditioned upon and
be subject to the continuing compliance by Tenant with (i) all the terms and
conditions of this Lease, (ii) all Laws governing the use of the Leased Premises
and the Property, (iii) all Private Restrictions, easements and other matters
now of public record respecting the use of the Leased Premises and the Property,
and (iv) all reasonable rules and regulations from time to time established by
Landlord.
*except as otherwise provided herein
2.2 RIGHT TO USE OUTSIDE AREAS: As an appurtenant right to Tenant's right to
the use and occupancy of the Leased Premises, Tenant shall have the right to use
the Outside Areas in conjunction with its use of the Leased Premises solely for
the
Page Ex 10.27-Page 3
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purposes for which they were designed and intended and for no other purposes
whatsoever. Tenant's right to so use the Outside Areas shall be subject to the
limitations on such use as set forth in Article 4 and shall terminate
concurrently with any termination of this Lease.
2.3 LEASE COMMENCEMENT DATE AND LEASE TERM: The term of this Lease shall
begin, and the Lease Commencement Date shall be deemed to have occurred, on the
Intended Commencement Date (as set forth in Article 1) unless either (i)
Landlord is unable to deliver possession of the Leased Premises to Tenant on the
Intended Commencement Date, in which case the Lease Commencement Date shall be
as determined pursuant to Article 2.4 below or (ii) Tenant enters into
possession of the Leased Premises prior to the Intended Commencement Date, in
which case the Lease Commencement Date shall be as determined pursuant to
Article 2.7 below (the "Lease Commencement Date" . The term of the Lease shall
end on the Lease Expiration Date (as set forth in Article I), irrespective of
whatever date the Lease Commencement Date is determined to be pursuant to the
foregoing sentence. The Lease Term shall be that period of time commencing on
the Lease Commencement Date and ending on the Lease Expiration Date (the "Lease
Term").
2.4 DELIVERY OF POSSESSION: Landlord shall deliver to Tenant possession of the
Leased Premises on or before the Intended Commencement Date (as set forth in
Article 1) in their presently existing condition, broom clean, unless Landlord
shall have agreed, as a condition to Tenant's obligation to accept possession of
the Leased Premises pursuant to a written Exhibit or Addenda attached to and
made a part of this Lease, to modify existing interior improvements or to make,
construct and/or install additional specified improvements within the Leased
Premises or to the Outside Areas, in which case Landlord shall deliver to Tenant
possession of the Leased Premises on or before the Intended Commencement Date as
so modified and/or improved. If Landlord is unable to so deliver possession of
the Leased Premises to Tenant in the agreed condition on or before the Intended
Commencement Date, for whatever reason, Landlord shall not be in default under
this Lease, nor shall this Lease be void, voidable or cancelable by Tenant until
the lapse of one hundred twenty days after the Intended Commencement Date (the
"delivery grace period"); however, the Lease Commencement Date shall not be
deemed to have occurred until such date as Landlord notifies Tenant that the
Leased Premises are in the agreed condition and are Ready for Occupancy.
Additionally, the delivery grace period above set forth shall be extended for
such number of days as
Page Ex 10.27-Page 4
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Landlord may be delayed in making the agreed improvements and/or delivering
possession of the Leased Premises to Tenant by reason of Force Majeure or the
actions of Tenant. If Landlord is unable to deliver possession of the Leased
Premises in the agreed condition to Tenant within the described delivery grace
period (including any extensions thereof by reason of Force Majeure or the
actions of Tenant), then Tenant's sole remedy shall be to cancel and terminate
this Lease, and in no event shall Landlord be liable in damages to Tenant for
such delay. Tenant may not cancel this Lease at any time after the date Landlord
notifies Tenant that the Leased Premises have been put into the agreed condition
and are Ready for Occupancy.
2.5 ACCEPTANCE OF POSSESSION: Tenant acknowledges that it has inspected the
Leased Premises and is willing to accept them in their existing condition, broom
clean, unless Landlord shall have agreed, as a condition to Tenant's obligation
to accept possession of the Leased Premises pursuant to a written Exhibit or
Addenda attached to and made a part of the Lease, to modify existing interior
improvements or to make, construct and/or install specified improvements within
the Leased Premises, in which case Tenant agrees to accept possession of the
Leased Premises when Landlord has substantially completed such modifications or
improvements and the Leased Premises are Ready for Occupancy. If Landlord shall
have so modified existing improvements or constructed additional improvements
within the Leased Premises for Tenant, Tenant shall, within Tenant's Punchlist
Period (as set forth in Article I) which shall commence on the date that
Landlord notifies Tenant that the agreed improvements have been completed and
the Leased Premises are Ready for Occupancy, submit to Landlord a signed copy of
the Acceptance Agreement attached hereto as Exhibit "D" together with a
punchlist of all incomplete and/or improper work performed by Landlord. Upon the
expiration of Tenant's Punchlist Period, Tenant shall be conclusively deemed to
have accepted the Leased Premises in their then-existing condition as so
delivered by Landlord to Tenant, except as to those items reasonably set forth
in the punchlist submitted to Landlord prior to the expiration of said period.
Landlord agrees to correct all items reasonably set forth in Tenant's punchlist,
provided that such punchlist was submitted to Landlord within Tenant's Punchlist
Period. Additionally, Landlord agrees to place in good working order all
existing plumbing, lighting, heating, ventilating and air conditioning systems
within the Leased Premises and all man doors and roll-up truck doors serving the
Leased Premises to the extent that such systems and/or items are not in good
operating condition as of the date Tenant accepts possession of the Leased
Page Ex 10.27-Page 5
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Premises; provided that, and only if, Tenant notifies Landlord in writing of
such failures or deficiencies within five business days from the date Tenant so
accepts possession of the Leased Premises.
2.6 SURRENDER OF POSSESSION: Immediately prior to the expiration or upon the
sooner termination of this Lease, Tenant shall remove all of Tenant's signs from
the exterior of the Building and shall remove all of Tenant's equipment, trade
fixtures, furniture, supplies, wall decorations and other personal property from
the Leased Premises, and shall vacate and surrender the Leased Premises to
Landlord in the same condition, broom clean, as existed at the Lease
Commencement Date*. Tenant shall repair all damage to the Leased Premises caused
by Tenant's removal of Tenant's property and all damage to the exterior of the
Building caused by Tenant's removal of Tenant's signs. Tenant shall patch and
refinish, to Landlord's reasonable satisfaction, all penetrations made by Tenant
or its employees to the floor, walls or ceiling of the Leased Premises, whether
such penetrations were made with Landlord's approval or not. Tenant shall clean,
repair or replace all stained or damaged ceiling tiles, wall coverings and clean
or replace as may be required floor coverings to the reasonable satisfaction of
Landlord. Tenant shall replace all burned out light bulbs and damaged light
lenses, and clean all painted walls. Landlord shall retain a mechanical
contractor at Tenant's expense to service all heating, ventilating, and
air-conditioning equipment, and Tenant shall pay the cost for the service and
the cost to restore (or replace as required) said equipment to good working
order. Tenant shall pay the cost of restoring or replacing all trees, shrubs,
plants, lawn and ground cover, and repair (or replace as required) all paved
surfaces of the Property, and otherwise satisfy all requirements to repair any
damage or excessive wear to the Leased Premises, Building, Outside Areas, and/or
Property. Tenant shall repair all damage caused by Tenant to the exterior
surface of the Building and the paved surfaces of the outside areas adjoining
the Leased Premises and, where necessary, replace or resurface same.
Additionally, Tenant shall, prior to the expiration or sooner termination of
this Lease, remove any improvements constructed or installed by Tenant which
Landlord requests be so removed by Tenant and repair all damage caused by such
removal. If the Leased Premises are not surrendered to Landlord in the condition
required by this Article at the expiration or sooner termination of this Lease,
Landlord may, at Tenant's expense, so remove Tenant's signs, property and/or
improvements not so removed and make such repairs and replacements not so made
or hire, at Tenant's expense, independent contractors to perform
Page Ex 10.27-Page 6
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such work. Tenant shall be liable to Landlord for all costs incurred by Landlord
in returning the Leased Premises to the required condition, plus interest on all
costs incurred from the date paid by Landlord at the then maximum rate of
interest not prohibited by Law until paid, payable by Tenant to Landlord within
ten days after receipt of a statement therefore from Landlord, and Tenant shall
be deemed to have impermissibly held over until such time as such required work
is completed, and Tenant shall pay Base Monthly Rent and Additional Rent in
accordance with the terms of Section 13.2 (Holding Over) until such work is
completed. Tenant shall indemnify Landlord against loss or liability resulting
from delay by Tenant in so surrendering the Leased Premises, including, without
limitation, any claims made by any succeeding tenant or any losses to Landlord
due to lost opportunities to lease to succeeding tenants.
*ordinary wear and tear excepted
2.7 EARLY OCCUPANCY: If Tenant enters into possession of the Leased Premises
prior to the Intended Commencement Date (or permits its contractors to enter the
Leased Premise prior to the Intended Commencement Date), unless otherwise agreed
in writing by Landlord, the Lease Commencement Date shall be deemed to have
occurred on such sooner date, and Tenant shall be obligated to perform all its
obligations under this Lease, including the obligation to pay rent, from that
sooner date.
ARTICLE 3:
RENT, LATE CHARGES AND SECURITY DEPOSITS
3.1 BASE MONTHLY RENT: Commencing on the Lease Commencement Date (as
determined pursuant to Article 2.3 above) and continuing throughout the Lease
Term, Tenant shall pay to Landlord, without prior demand therefore, in advance
on the first day of each calendar month, as base monthly rent, the amount set
forth as "Base Monthly Rent" in Article 1 (the "Base Monthly Rent").
3.2 ADDITIONAL RENT: Commencing on the Lease Commencement Date (as determined
pursuant to Article 2.3 above) and continuing throughout the Lease Term, in
addition to the Base Monthly Rent, Tenant shall pay to Landlord as additional
rent (the "Additional Rent") the following amounts:
A. An amount equal to all Property Operating Expenses (as defined in Article
13) incurred by Landlord. Payment shall be made by whichever of the following
methods (or combination of
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methods) is (are) from time to time designated by Landlord:
(1) Landlord may bill to Tenant, on a periodic basis not more frequently
than monthly, the amount of such expenses (or group of expenses) as paid or
incurred by Landlord, and Tenant shall pay to Landlord the amount of such
expenses within ten days after receipt of a written bill therefore from
Landlord; and/or
(2) Landlord may deliver to Tenant Landlord's reasonable estimate of any
given expense (such as Landlord's Insurance Costs or Real Property Taxes), or
group of expenses, which it anticipates will be paid or incurred for the ensuing
calendar or fiscal year, as Landlord may determine, and Tenant shall pay to
Landlord an amount equal to the estimated amount of such expenses for such year
in equal monthly, installments during such year with the installments of Base
Monthly Rent.
(3) Landlord reserves the right to change from time to time the methods of
billing Tenant for any given expense or group of expenses or the periodic basis
on which such expenses are billed.
B. Landlord's share of the consideration received by Tenant upon certain
assignments and sublettings as required by Article 7;
C. Any legal fees and costs that Tenant is obligated to pay or reimburse to
Landlord pursuant to Article 13; and
D. Any other charges or reimbursements due Landlord from Tenant pursuant to
the terms of this Lease other than late charges and interest on defaulted rent.
3.3 YEAR-END ADJUSTMENTS: If Landlord shall have elected to bill Tenant for
the Property Operating Expenses (or any group of such expenses) on an estimated
basis in accordance with the provisions of Article 3.2A(2) above, Landlord shall
furnish to Tenant within three months following the end of the applicable
calendar or fiscal year, as the case may be, a statement setting forth (i) the
amount of such expenses paid or incurred during the just ended calendar or
fiscal year, as appropriate, and (ii) the amount that Tenant has paid to
Landlord for credit against such expenses for such period. If Tenant shall have
paid more than its obligation for such expenses for the stated period, Landlord
shall, ii) refund in cash to Tenant the amount of such overpayment. If such
year-end statement shall show that Tenant did not pay its obligation for such
expenses in full, then Tenant shall pay to Landlord the amount of such
underpayment within ten
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<PAGE>
days from Landlord's billing of same to Tenant. The provisions of this Article
shall survive the expiration or sooner termination of this Lease.
3.4 LATE CHARGE AND INTEREST ON RENT IN DEFAULT: Tenant acknowledges that the
late payment by Tenant of any monthly installment of Base Monthly Rent or any
Additional Rent will cause Landlord to incur certain costs and expense not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include, without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within six calendar days after * the same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to the
amount set forth in Article 1 as the "Late Charge Amount", and if any Additional
Rent is not received by Landlord within six calendar days after * same becomes
due, Tenant shall immediately pay to Landlord a late charge in an amount equal
to * percent of the Additional Rent not so paid. Landlord and Tenant agree that
this late charge represents a reasonable estimate of such costs and expenses and
is fair compensation to Landlord for the anticipated loss Landlord would suffer
by reason of Tenant's failure to make timely payment. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within to pay any rental installment or prevent Landlord from
exercising any right or remedy available to Landlord upon Tenant's failure to
pay each rental installment due under this Lease when due, including the right
to terminate this Lease. If any rent remains delinquent for a period in excess
of six calendar days, then, in addition to such late charge, Tenant shall pay to
Landlord interest on any rent that is not so paid from said sixth day at the
then maximum rate of interest not prohibited or made usurious by Law until paid.
*receipt of written notice
*receipt of written notice
*five (5)
3.5 PAYMENT OF RENT: All rent shall be paid in lawful money of the United
States, without any abatement, reduction or offset for any reason whatsoever, to
Landlord at such address as Landlord may designate from time to time. Tenant's
obligation to pay Base Monthly Rent and all Additional Rent shall be
appropriately prorated at the commencement and expiration of the Lease Term. The
failure by Tenant to pay any Additional Rent as required
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<PAGE>
pursuant to this Lease when due shall be treated the same as a failure by Tenant
to pay Base Monthly Rent when due, and Landlord shall have the same rights and
remedies against Tenant as Landlord would have if Tenant failed to pay the Base
Monthly Rent when due.
3.6 PREPAID RENT:
3.7 SECURITY DEPOSIT: Concurrent with the execution of this Lease, Tenant
shall deposit with Landlord the amount set forth in Article 1 as the "Security
Deposit" as security for the performance by Tenant of the terms of this Lease to
be performed by Tenant, and not as prepayment of rent. Landlord may apply such
portion or portions of the Security Deposit as are reasonably necessary for the
following purposes: (i) to remedy any default by Tenant in the payment of Base
Monthly Rent or Additional Rent or a late charge or interest on defaulted rent;
(ii) to repair damage to the Leased Premises, the Building or the Outside Areas
caused by Tenant; (iii) to clean and repair the Leased Premises, the Building or
the Outside Areas following their surrender to Landlord if not surrendered in
the condition required pursuant to the provisions of Article 2; and (iv) to
remedy any other default of Tenant to the extent permitted by Law including,
without limitation, paying in full on Tenant's behalf any sums claimed by
materialmen or contractors of Tenant to be owing to them by Tenant for work done
or improvements made at Tenant's request to the Leased Premises. In this regard,
Tenant hereby waives any restriction on the uses to which the Security Deposit
may be applied as contained in Section 1950.7(c) of the California Civil Code
and/or any successor statute. In the event the Security Deposit or any portion
thereof is so used, Tenant shall pay to Landlord, promptly upon demand, an
amount in cash sufficient to restore the Security Deposit to the full original
sum. Landlord shall not be deemed a trustee of the Security Deposit. Landlord
may use the Security Deposit in Landlord's ordinary business and shall not be
required to segregate it from its general accounts. Tenant shall not be entitled
to any interest on the Security Deposit. If Landlord transfers the Building or
the Property during the Lease Term, Landlord may pay the Security Deposit to any
subsequent owner in conformity with the provisions of Section 1950.7 of the
California Civil Code and/or any successor statute, in which event the
transferring landlord shall be released from all liability for the return of the
Security Deposit. Tenant specifically grants to Landlord (and Tenant hereby
waives the provisions of California Civil Code Section 1950.7 to the contrary) a
period of * days following a surrender of the Leased Premises by Tenant to
Landlord within which to return the
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<PAGE>
Security Deposit (less permitted deductions) to Tenant, it being agreed between
Landlord and Tenant that * days is a reasonable period of time within which to
inspect the Leased Premises, make required repairs, receive and verify workmen's
billings therefore, and prepare a final accounting with respect to such deposit.
In no event shall the Security Deposit, or any portion thereof, be considered
prepaid rent.
*thirty (30)
*thirty (30)
ARTICLE 4:
USE OF LEASED PREMISES AND OUTSIDE AREA
4.1 PERMITTED USE: Tenant shall be entitled to use the Leased Premises solely
for the "Permitted Use" as set forth in Article 1 and for no other purpose
whatsoever. Tenant shall continuously and without interruption use the Leased
Premises for such purpose for the entire Lease Term. Any discontinuance of such
use for a period of thirty consecutive calendar days shall be, at Landlord's
election, a default by, Tenant under the terms of this Lease(*). Tenant shall
have the right to use the Outside Areas in conjunction with its Permitted Use of
the Leased Premises solely for the purposes for which they were designed and
intended and for no other purposes whatsoever.
(*)unless Tenant shall have maintained the Building and Premises as though
same were occupied by Tenant including maintaining utilities and Building,
Premises and Property maintenance.
4.2 GENERAL LIMITATIONS ON USE: Tenant shall not do or permit anything to be
done in or about the Leased Premises, the Building, the Outside Areas or the
Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload, corrode, or impair the
efficient operation of any electrical, plumbing, sewer, heating, ventilating or
air conditioning systems within or servicing the Leased Premises or the Building
or (iii) damage or impair the efficient operation of the sprinkler system (if
any) within or servicing the Leased Premises or the Building. Tenant shall not
install any equipment or antennas on or make any penetrations of the exterior
walls or roof of the Building. Tenant shall not affix any equipment to or make
any penetrations or cuts in the floor, ceiling or walls of the Leased Premises.
Tenant shall not place any loads upon the
Page Ex 10.27-Page 11
<PAGE>
floors, walls, ceiling or roof systems which could endanger the structural
integrity of the Building or damage its floors, foundations or supporting
structural components. Tenant shall not place any explosive, flammable or
harmful fluids or other waste materials including Hazardous Materials in the
drainage systems of the Leased Premises, the Building, the Outside Areas or the
Property. Tenant shall not drain or discharge any fluids in the landscaped areas
or across the paved areas of the Property. Tenant shall not use any of the
Outside Areas for the storage of its materials, supplies, inventory or
equipment, and all such materials, supplies, inventory or equipment shall at all
times be stored within the Leased Premises. Tenant shall not commit nor permit
to be committed any waste in or about the Leased Premises, the Building, the
Outside Areas or the Property.
4.3 NOISE AND EMISSIONS: *All noise generated by Tenant in its use of the
Leased Premises shall be confined or muffled so that it does not interfere with
the businesses of or annoy the occupants and/or users of adjacent properties.
All dust, fumes, odors and other emissions generated by Tenant's use of the
Leased Premises shall be sufficiently dissipated in accordance with sound
environmental practices and exhausted from the Leased Premises in such a manner
so as not to interfere with the businesses of or annoy the occupants and/or
users of adjacent properties, or cause any damage to the Leased Premises, the
Building, the Outside Areas or the Property or any component part thereof or the
property of adjacent property owners.
*Tenant shall take reasonable steps in order that
4.4 TRASH DISPOSAL: Tenant shall provide trash bins (or other adequate garbage
disposal facilities) within the trash enclosure areas provided or permitted by
Landlord outside the Leased Premises sufficient for the interim disposal of all
of its trash, garbage and waste. All such trash, garbage and waste temporarily
stored in such areas shall be stored in such a manner so that it is not visible
from outside of such areas, and Tenant shall cause such trash, garbage and waste
to be regularly removed from the Property at Tenant's sole cost. Tenant shall at
all times keep the Leased Premises, the Building, the Outside Areas and the
Property in a clean, safe and neat condition free and clear of all trash,
garbage, waste and/or boxes, pallets and containers containing same at all
times.
4.5 PARKING: Tenant shall not, at any time, park or permit to be parked any
recreational vehicles, inoperative vehicles or equipment in the Outside Areas or
on any portion of the Property.
Page Ex 10.27-Page 12
<PAGE>
Tenant agrees to assume responsibility for compliance by its employees and
invitees with the parking provisions contained herein. If Tenant or its
employees park any vehicle within the Property in violation of these provisions,
then Landlord may, in addition to any other remedies Landlord may have under
this Lease, charge Tenant, as Additional Rent, and Tenant agrees to pay, as
Additional Rent, Fifty Dollars per day for each day or partial day that each
such vehicle is so parked within the Property.
4.6 SIGNS: Other than one business identification sign which is first approved
by Landlord in accordance with this Article, Tenant shall not place or install
on or within any portion of the Leased Premises, the exterior of the Building,
the Outside Areas or the Property any sign, advertisement, banner, placard, or
picture which is visible from the exterior of the Leased Premises. Tenant shall
not place or install on or within any portion of the Leased Premises, the
exterior of the Building, the Outside Areas or the Property any business
identification sign which is visible from the exterior of the Leased Premises
until Landlord shall have first approved in writing the location, size, content,
design, method of attachment and material to be used in the making of such sign.
Any sign, once approved by Landlord, shall be installed only in strict
compliance with Landlord's approval, at Tenant's expense, using a person first
approved by Landlord to install same. Landlord may remove any signs (which have
not been first approved in writing by Landlord), advertisements, banners,
placards or pictures so placed by Tenant on or within the Leased Premises, the
exterior of the Building, the Outside Areas or the Property and charge to Tenant
the cost of such removal, together with any costs incurred by Landlord to repair
any damage caused thereby, including any cost incurred to restore the surface
upon which such sign was so affixed to its original condition. Tenant shall
remove all of Tenant's signs, repair any damage caused thereby, and restore the
surface upon which the sign was affixed to its original condition, all to
Landlord's reasonable satisfaction, upon the termination of this Lease.
4.7 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS: Tenant shall abide by and
shall promptly observe and comply with, at its sole cost and expense, all Laws
and Private Restrictions respecting the use and occupancy of the Leased
Premises, the Building, the Outside Areas or the Property including, without
limitation, all Laws governing the use and/or disposal of hazardous materials,
and shall defend with competent counsel, indemnify and hold Landlord harmless
from any claims, damages or liability resulting
Page Ex 10.27-Page 13
<PAGE>
from Tenant's failure to do so. The indemnity provision of this Article shall
survive the expiration or sooner termination of this Lease, with respect to any
activities of Tenant occurring on or about the Property while Tenant was in
possession of the Leased Premises.
4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS: With respect to any insurance
policies required or permitted to be carried by Landlord in accordance with the
provisions of this Lease, Tenant shall not conduct (or permit any other person
to conduct) any activities nor keep, store or use (or allow any other person to
keep, store or use) any item or thing within the Leased Premises, the Building,
the Outside Areas or the Property which (i) is prohibited under the terms of any
of such policies, (ii) could result in the termination of the coverage afforded
under any of such policies, (iii) could give to the insurance carrier the right
to cancel any of such policies, or (iv) could cause an increase in the rates
(over standard rates) charged for the coverage afforded under any of such
policies. Tenant shall comply with all requirements of any insurance company,
insurance underwriter, or Board of Fire Underwriters which are necessary to
maintain, at standard rates, the insurance coverages carried by either Landlord
or Tenant pursuant to this Lease.
4.9 LANDLORD'S RIGHT TO ENTER: Landlord and its agents shall have the right to
enter the Leased Premises during normal business hours after giving Tenant
reasonable notice and subject to Tenant's reasonable security measures for the
purpose of (i) inspecting the same; (ii) showing the Leased Premises to
prospective purchasers, mortgagees or tenants; (iii) making necessary
alterations, additions or repairs; (iv) performing any of Tenant's obligations
when Tenant has failed to do so. Landlord shall have the right to enter the
Leased Premises during normal business hours (or as otherwise agreed), subject
to Tenant's reasonable security measures, for purposes of supplying any
maintenance or services agreed to be supplied by Landlord. Landlord shall have
the right to enter the Outside Areas during normal business hours for purposes
of (i) inspecting the exterior of the Building and the Outside Areas, (ii)
posting notices of non-responsibility, or "For Lease" of "For Sale" signs, and
(iii) supplying any services to be provided by Landlord. Any entry into the
Leased Premises or the Outside Areas obtained by Landlord in accordance with
this Article shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of, the Leased Premises, or an
eviction, actual or constructive of Tenant from the Leased Premises or any
portion thereof.
Page Ex 10.27-Page 14
<PAGE>
4.10 USE OF OUTSIDE AREAS: Tenant, in its use of the Outside Areas, shall at
all times keep the Outside Areas in a safe condition free and clear of all
materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
opinion of Landlord, unauthorized persons are using any of the Outside Areas by
reason of, or under claim of, the express or implied authority or consent of
Tenant, then Tenant, upon demand of Landlord, shall restrain, to the fullest
extent then allowed by Law, such unauthorized use, and shall initiate such
appropriate proceedings as may be required to so restrain such use.
4.11 RULES AND REGULATIONS: Landlord shall have the right from time to time to
establish reasonable rules and regulations and/or amendments or additions
thereto resulting the use of the Leased Premises and the Outside Areas for the
care and orderly management of the Property. Upon delivery to Tenant of a copy
of such rules and regulations or any amendments or additions thereto, Tenant
shall comply with such rules and regulations. A violation by Tenant of any of
such rules and regulations shall constitute a default by Tenant under this
Lease. If there is a conflict between the rules and regulations and any of the
provisions of this Lease, the provisions of this Lease shall prevail. Landlord
shall not be responsible or liable to Tenant for the violation of such rules and
regulations by any other tenant of the Property.
4.12 ENVIRONMENTAL PROTECTION: Landlord may voluntarily cooperate in a
reasonable manner with the efforts of all governmental agencies in reducing
actual or potential environmental damage. Tenant shall not be entitled to
terminate this Lease or to any reduction in or abatement of rent by reason of
such compliance or cooperation. Tenant agrees at all times to *cooperate fully
with Landlord and to abide by all rules and regulations and requirements which
Landlord may reasonably prescribe in order to comply with the requirements and
recommendations of governmental agencies regulating, or otherwise involved in,
the protection of the environment.
*reasonably
4.13 OUTSIDE AREAS: No materials, pallets, supplies, tanks or containers
whether above or below ground level, equipment, finished products or
semifinished products, raw materials, inoperable vehicles or articles of any
nature shall be stored upon or permitted to remain outside of the Leased
Premises except
Page Ex 10.27-Page 15
<PAGE>
in fully fenced and screened areas outside the Building which have been designed
for such purpose and have been approved in writing by Landlord for such use by
Tenant.
4.14 HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect
to the existence or use of Hazardous Materials on the Property:
A. Any handling, transportation, storage, treatment, disposal or use of
Hazardous Materials by Tenant, Tenant's Agents, or any other party after the
Effective Date of this Lease in or about the Property shall strictly comply with
all applicable Hazardous Materials Laws. Tenant shall indemnify, defend upon
demand with counsel reasonably acceptable to Landlord, and hold harmless
Landlord from and against any and all liabilities, losses, claims, damages, lost
profits, consequential damages, interest, penalties, fines, court costs,
remediation costs, investigation costs, and other expenses which result from or
arise in any manner whatsoever out of the use, storage, treatment,
transportation, release, or disposal of Hazardous Materials on or about the
Property by Tenant , Tenant's Agents, Permittees, or Invites after the Effective
Date.
B. If the presence of Hazardous Materials on the Property caused or
permitted by Tenant , Tenant's Agents, Permittees, or Invites after the
Effective Date of this Lease results in contamination or deterioration of water
or soil or any other part of the Property, then Tenant shall promptly take any
and all action necessary to investigate and remediate such contamination. Tenant
shall further be solely responsible for, and shall defend, indemnify and hold
Landlord and its agents harmless from and against, all claims, costs and
liabilities, including attorney's fees and costs, arising out of or in
connection with any investigation and remediation (including investigative
analysis, removal, cleanup, and/or restoration work) required hereunder to
return the Leased Premises, Building, Common Areas, Outside Areas, and/or
Property and any other property of whatever nature to their condition existing
prior to the appearance of such Hazardous Materials.
C. Landlord and Tenant shall each give written notice to the other as soon
as reasonably practicable of (i) any communication received from any
governmental authority concerning Hazardous Materials which relates to the
Property, and (ii) any contamination of the Property by Hazardous Materials
which constitutes a violation of any Hazardous Materials Law. Tenant
acknowledges that Landlord, as the owner of the Property, at Landlord's
election, shall have the sole right at Tenant's expense to negotiate, defend,
approve, and/or appeal any action taken or order issued with regard to Hazardous
Materials by any
Page Ex 10.27-Page 16
<PAGE>
applicable governmental authority. Tenant may use small quantities of household
chemicals such as adhesives, lubricants, and cleaning fluids in order to conduct
its business at the Premises and such other Hazardous Materials as are necessary
to the operation of Tenant's business of which Landlord receives notice prior to
such Hazardous Materials being brought onto the Property (or any portion
thereof) and which Landlord consents in writing may be brought onto the
Property. In granting Landlord's consent, Landlord may specify the location and
manner or use, storage, or handling of any Hazardous Material. Landlord's
consent shall in no way relieve Tenant from any of its obligations as contained
herein. Tenant shall notify Landlord in writing at least ten (10) days prior to
the first appearance of any Hazardous Material on the Leased Premises, Building,
Common Areas, Outside Areas, and/or Property. Tenant shall provide Landlord with
a list of all Hazardous Materials and the quantities of each Hazardous Material
to be stored on any portion of the Property, and upon Landlord's request Tenant
shall provide Landlord with copies of any and all Hazardous Materials Management
Plans, Material Safety Data Sheets, Hazardous Waste Manifests, and other
documentation maintained or received by Tenant pertaining to the Hazardous
Materials used, stored, or transported or to be used, stored, or transported on
any portion of the Property. At any time during the Lease Term, Tenant shall,
within five days after written request therefor received from Landlord, disclose
in writing all Hazardous Materials that are being used by Tenant on the Property
(or have been used on the Property), the nature of such use, and the manner of
storage and disposal.
D. Landlord may cause testing wells to be installed on the Property, and may
cause the ground water to be tested to detect the presence of Hazardous Material
by the use of such tests as are then customarily used for such purposes. If
Tenant so requests, Landlord shall supply Tenant with copies of such test
results. The cost of such tests and of the installation, maintenance, repair and
replacement of such wells shall be paid by Tenant if such tests disclose the
existence of facts which give rise to liability of Tenant pursuant to its
indemnity given in A and or B above. Landlord may retain consultants to inspect
the Property, conduct periodic environmental audits, and review any information
provided by Tenant. Tenant shall pay the reasonable cost of fees charged by
Landlord and/or Landlord's consultants as a Property Maintenance Cost.
E. Upon the expiration or earlier termination of the Lease, Tenant, at its
sole cost, shall remove all Hazardous Materials from the Property and shall
provide a certificate to Landlord from a registered consultant satisfactory to
Landlord certifying
Page Ex 10.27-Page 17
<PAGE>
that Tenant has caused no contamination of building (s), soil or groundwater in
or about the Leased Premises, Building, Common Areas, Outside Areas, or
Property. If Tenant fails to so surrender the Property, Tenant shall indemnify
and hold Landlord harmless from all damages resulting from Tenant's failure to
surrender the Property as required by this Subsection, including, without
limitation, any claims or damages in connection with the condition of the
Property including, without limitation, damages occasioned by the inability to
release the Property (or any portion thereof) or a reduction in the fair market
and/or rental value of the Property, Building, Common Areas, Outside Areas,
and/or Property by reason of the existence of any Hazardous Materials in or
around the Leased Premises, Building, Common Areas, Outside Areas, and/or
Property. If any action is required to be taken by a governmental authority to
test, monitor, and/or clean up Hazardous Materials from the Leased Premises,
Building, Common Areas, Outside Areas, and/or Property 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 Tenant shall pay Base Monthly Rent and Additional Rent
in accordance with the terms of Section 13.2 (Holding Over). In addition,
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 release the Property or a reduction of the fair
market and/or rental value of the Leased Premises, Building, Common Areas,
Outside Areas, and/or Property.
F. As used herein, the term "Hazardous Materials(s)" means any hazardous or
toxic substance, material or waste, which is or becomes regulated by any
federal, state, regional or local governmental authority because it is in any
way hazardous, toxic, carcinogenic, mutagenic or otherwise adversely affects any
part of the environment or creates risks of any such hazards or effects,
including, but not limited to, petroleum; asbestos, and polychlorinated bipheyls
and any material, substance, or waste (a) defined as a "hazardous waste,"
"extremely hazardous waste" or "restricted hazardous waste" under Sections
25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California
Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law);
(b) defined as a "hazardous substance" under Section 25316 of the California
Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley Tanner
Hazardous Substance Account Act); (c) defined as a "hazardous material,"
"hazardous substance" or "hazardous waste" under Section 25501 of the California
Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release
Response Plans and Inventory); (d)
Page Ex 10.27-Page 18
<PAGE>
defined as a "hazardous substance" under Section 25281 of the California Health
and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous
Substances); (e) defined as a "hazardous substance" pursuant to Section 311 of
the Clean Water Act, 33 United States Code Sections 1251 et seq. (33 U.S.C.
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. 1317);
(f) defined as a "hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act, 42 United States Code Sections 6901 et seq. (42
U.S.C. 6903); or (g) defined as a "hazardous substance" pursuant to Section 101
of the Comprehensive Environmental Response, Compensation, and Liability Act, 42
United States Code Section 9601 et seq. (42 U.S.C. 9601) or (h) defined as a
"hazardous substance" pursuant to Section 311 of the Federal Water Pollution
Control Act, 33 U.S.C. 1251 et seq. or (i) listed pursuant to Section 307 of the
Federal Water Pollution Control Act (33 U.S.C. 1317 ) or ( j ) regulated under
the Toxic Substances Control Act (15 U.S.C. 2601 et seq.) or (k) defined as a
"hazardous material "under Section 66680 or 66084 of Title 22 of the California
Code of Regulations (Administrative Code) (l) listed in the United States
Department of Transportation Hazardous Materials Table (49 C. F.R. 172.101) or
(m) listed by the Environmental Protection Agency as "hazardous substances" ( 4
0 C.F.R. Part 302 ) and amendments thereto . The term "Hazardous Material Laws"
shall mean (i) all of the foregoing laws as amended from time to time and (ii)
any other federal, state, or local law, ordinance, regulation, or order
regulating Hazardous Materials.
G. Tenant's failure to comply with any of the requirements of this Section
regarding the storage, use, disposal, or transportation of Hazardous Materials,
or the appearance of any Hazardous Materials on the Leased Premises, Building,
Common Area, Outside Area, and/or the Property without Landlord's consent shall
be an Event of Default as defined in this Lease. The obligations of Landlord and
Tenant under this Section shall survive the expiration or earlier termination of
the Lease Term. The rights and obligations of Landlord and Tenant within respect
to issues relating to Hazardous Materials are exclusively established by this
section. In the event of any inconsistency between any other part of this Lease
and this Section, the terms of this Section shall control.
ARTICLE 5:
REPAIRS, MAINTENANCE, SERVICES AND UTILITIES
5.1 REPAIR AND MAINTENANCE: Except in the case of damage to or destruction
of the Leased Premises, the Building, the Outside Areas or the Property caused
by an Act of God or other peril, in
Page Ex 10.27-Page 19
<PAGE>
which case the provisions of Article 10 shall control, the parties shall have
the following obligations and responsibilities with respect to the repair and
maintenance of the Leased Premises, the Building and the Outside Areas.
A. Tenant's Obligation: Tenant shall, at all times during the Lease Term and
at its sole cost and expense, regularly clean and continuously keep and maintain
in good order, condition and repair the Leased Premises and every part thereof
including, without limiting the generality of the foregoing, (i) all interior
walls, floors and ceilings, (ii) all windows, doors and skylights, (iii) all
electrical wiring, conduits, connectors and fixtures, (iv) all plumbing, pipes,
sinks, toilets, faucets and drains, (v) all lighting fixtures, bulbs and lamps,
(vi) all heating, ventilating and air conditioning equipment, and (vii) all
entranceways to the Leased Premises. Tenant, if requested to do so by Landlord
shall hire, at Tenant's sole cost and expense, a licensed heating, ventilating
and air conditioning contractor to regularly and periodically (not less
frequently than every three months) inspect and perform required maintenance on
the heating, ventilating and air conditioning equipment and systems serving the
Leased Premises, or alternatively, Landlord may, at its election, contract in
its own name for such regular and periodic inspections of and maintenance on
such heating, ventilating and air conditioning equipment and systems and charge
to Tenant, as Additional Rent, the cost thereof. Tenant shall, at all times
during the Lease Term, keep in a clean and safe condition the Outside Areas.
Tenant shall regularly and periodically sweep and clean the driveways and
parking areas. Tenant shall, at its sole cost and expense, repair all damage to
the Leased Premises, the Building, the Outside Areas or the Property caused by
the activities of Tenant, its employees, invitees or contractors promptly
following written notice from Landlord to so repair such damage. If Tenant shall
fail to perform the required maintenance or fail to make repairs required of it
pursuant to this Article within a reasonable period of time following notice
from Landlord to do so, then Landlord may, at its election and without waiving
any other remedy it may otherwise have under this Lease or at Law, perform such
maintenance or make such repairs and charge to Tenant, as Additional Rent, the
costs so incurred by, Landlord for same. All glass within or a part of the
Leased Premises, both interior and exterior, is at the sole risk of Tenant and
any broken glass shall promptly be replaced by Tenant at Tenant's expense with
glass of the same kind, size and quality.
B. Landlord's Obligation: Landlord shall, at all times during
Page Ex 10.27-Page 20
<PAGE>
the Lease Term, maintain in good condition and repair: (i) the exterior and
structural parts of the Building (including the foundation, subflooring,
load-bearing and exterior walls, and roof); and (ii) the landscaped areas
located outside the Building. The provisions of this Subarticle B shall in no
way limit the right of Landlord to charge to Tenant, as Additional Rent pursuant
to Article 3 (to the extent permitted pursuant to Article 3), the costs incurred
by Landlord in performing such maintenance and/or making such repairs.
5.2 UTILITIES: Tenant shall arrange, at its sole cost and expense and in its
own name, for the supply of gas and electricity to the Leased Premises. In the
event that such services are not separately metered, Tenant shall, at its sole
expense, cause such meters to be installed. Landlord shall maintain the water
meter(s) in its own name; provided, however, that if at any time during the
Lease Term Landlord shall require Tenant to put the water service in Tenant's
name, Tenant shall do so at Tenant's sole cost. Tenant shall be responsible for
determining if the local supplier of water, gas and electricity can supply the
needs of Tenant and whether or not the existing water, gas and electrical
distribution systems within the Building and the Leased Premises are adequate
for Tenant's needs. Tenant shall be responsible for determining if the existing
sanitary and storm sewer systems now servicing the Leased Premises and the
Property are adequate for Tenant's needs. Tenant shall pay all charges for
water, gas, electricity, and storm and sanitary sewer services as so supplied to
the Leased Premises, irrespective of whether or not the services are maintained
in Landlord's or Tenant's name.
5.3 SECURITY: Tenant acknowledges that Landlord has not undertaken any duty
whatsoever to provide security for the Leased Premises, the Building, the
Outside Areas or the Property and, accordingly, Landlord is not responsible for
the security of same or the protection of Tenant's property or Tenant's
employees, invitees or contractors. To the extent Tenant determines that such
security or protection services are advisable or necessary, Tenant shall arrange
for and pay the costs of providing same.
5.4 ENERGY AND RESOURCE CONSUMPTION: Landlord may voluntarily cooperate in a
reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Property.
Tenant shall not be entitled to terminate this Lease or to any reduction in or
abatement of rent by reason of such compliance or cooperation. Tenant agrees at
all times to cooperate * with Landlord and to
Page Ex 10.27-Page 21
<PAGE>
abide by all reasonable rules established by Landlord (i) in order to maximize
the efficient operation of the electrical, heating, ventilating and air
conditioning systems and all other energy or other resource consumption systems
within the Property and/or (ii) in order to comply with the requirements and
recommendations of utility suppliers and governmental agencies regulating the
consumption of energy and/or other resources.
*reasonably
5.5 LIMITATION OF LANDLORD'S LIABILITY: Landlord shall not be liable to Tenant
for injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant's property or loss of Tenant's business or profits, nor shall Tenant be
entitled to terminate this Lease or to any reduction in or abatement of rent by
reason of (i) Landlord's failure to provide security services or systems within
the Property for the protection of the Leased Premises, the Building or the
Outside Areas, or the protection of Tenant's property or Tenant's employees,
invitees, agents or contractors, or (ii) Landlord's failure to perform any
maintenance or repairs to the Leased Premises, the Building, the Outside Areas
or the Property until Tenant shall have first notified Landlord, in writing, of
the need for such maintenance or repairs, and then only after Landlord shall
have had a reasonable period of time following its receipt of such notice within
which to perform such maintenance or repairs, or (iii) any failure,
interruption, rationing or other curtailment in the supply of water, electric
current, gas or other utility service to the Leased Premises, the Building, the
Outside Areas or the Property from whatever cause (other than sole active
negligence or willful misconduct)*, or (iv) the unauthorized intrusion or entry
into the Leased Premises by third parties (other than Landlord).
*of Landlord or any third party acting on behalf of Landlord.
ARTICLE 6:
ALTERATIONS AND IMPROVEMENTS
6.1 BY TENANT: Tenant shall not make any alterations to or modifications of
the Leased Premises or construct any improvements within the Leased Premises
until Landlord shall have first approved, in writing, the plans and
specifications therefore, which approval shall not be unreasonably withheld *.
All such modifications, alterations or improvements, once so approved, shall be
made, constructed or installed by Tenant at Tenant's expense (including all
permit fees and governmental charges related thereto), using a licensed
contractor first
Page Ex 10.27-Page 22
<PAGE>
approved by Landlord, in substantial compliance with the Landlord approved plans
and specifications therefore. All work under- taken by Tenant shall be done in
accordance with all Laws and in a good and workmanlike manner using new
materials of good quality. Tenant shall not commence the making of any such
modifications or alterations or the construction of any such improvements until
(i) all required governmental approvals and permits shall have been obtained,
(ii) all requirements regarding insurance imposed by this Lease have been
satisfied, (iii) Tenant shall have given Landlord at least five business days
prior written notice of its intention to commence such work so that Landlord may
post and file notices of non-responsibility, and (iv) if requested by Landlord,
Tenant shall have obtained contingent liability and broad form builder's risk
insurance in an amount satisfactory to Landlord to cover any perils relating to
the proposed work not covered by insurance carried by Tenant pursuant to Article
9. In no event shall Tenant make any modifications, alterations or improvements
whatsoever to the Outside Areas or the exterior or structural components of the
Building including, without limitation, any cuts or penetrations in the floor,
roof or exterior walls of the Leased Premises. As used in this Article, the term
"modifications, alterations and/or improvements" shall include, without
limitation, the installation of additional electrical outlets, overhead lighting
fixtures, drains, sinks, partitions, doorways, or the like.
*or delayed
6.2 OWNERSHIP OF IMPROVEMENTS: All modifications, alterations or improvements
made or added to the Leased Premises by Tenant. At the expiration or sooner
termination of this Lease, all such modifications, alterations and improvements
(other than Tenant's inventory, equipment, movable furniture, wall decorations
and trade fixtures) shall automatically become the property of Landlord and
shall be surrendered to Landlord as a part of the Leased Premises as required
pursuant to Article 2, unless Landlord shall require Tenant to remove any of
such modifications, alterations or improvements in accordance with the
provisions of Article 2, in which case Tenant shall so remove same. Landlord
shall have no obligation to reimburse to Tenant all or any portion of the cost
or value of any such modifications, alterations or improvements so surrendered
to Landlord. All modifications, alterations or improvements which are installed
or constructed on or attached to the Leased Premises by Landlord at Landlord's
expense shall be deemed real property and a part of the Leased Premises and
shall be the property of Landlord. All lighting, plumbing, electrical, heating,
ventilating and air conditioning fixtures, partitioning,
Page Ex 10.27-Page 23
<PAGE>
window coverings, wall coverings and floor coverings installed by Tenant shall
be deemed improvements to the Leased Premises and not trade fixtures of Tenant.
6.3 ALTERATIONS: Tenant shall, at its sole cost make all modifications,
alterations and improvements to the Leased Premises that are required by any Law
because of (i) Tenant's use or occupancy of the Leased Premises, the Building,
the Outside Areas, or the Property, (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's making of any modifications,
alterations or improvements to or within the Leased Premises. If Landlord shall,
at any time during the Lease Term, (i) be required by any governmental authority
to make any modifications, alterations or improvements to the Building or the
Project, (ii) modify the existing (or construct additional) capital improvements
or provide building service equipment for the purpose of reducing the
consumption of utility services or project maintenance costs for the property,
the cost incurred by Landlord in making such modifications, alterations or
improvements, including an * percent per annum cost of money factor, shall be
amortized by Landlord over the useful life of such modifications, alterations or
improvements, as determined in accordance with generally accepted accounting
standards, and the monthly amortized cost of such modifications, alterations and
improvements as so amortized shall be considered a Property Maintenance Cost(*).
*ten (10)
(*)provided, however, that in no event shall amortized cost
exceed the actual savings realized by such improvements or
equipment.
6.4 LIENS: Tenant shall keep the Property and every part thereof free from any
liens and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant's interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within ten days after the same has been so recorded. Tenant's failure
to do so shall be conclusively deemed a material default under the terms of this
Lease.
ARTICLE 7:
ASSIGNMENT AND SUBLETTING BY TENANT
7.1 BY TENANT: Tenant shall not sublet the Leased Premises (or
Page Ex 10.27-Page 24
<PAGE>
any portion thereof) or assign or encumber its interest in this Lease, whether
voluntarily or by operation of Law, without Landlord's prior written consent *
first obtained in accordance with the provisions of this Article 7. Any
attempted subletting, assignment or encumbrance without Landlord's prior written
consent, at Landlord's election, shall constitute a default by Tenant under the
terms of the Lease. The acceptance of rent by Landlord from any person or entity
other than Tenant, or the acceptance of rent by Landlord from Tenant with
knowledge of a violation of the provisions of this Article, shall not be deemed
to be a waiver by Landlord of any provision of this Article or this Lease or to
be a consent to any subletting by Tenant or any assignment or encumbrance of
Tenant's interest in this Lease.
*which consent shall not be unreasonably withheld
7.2 MERGER OR REORGANIZATION: If Tenant is a corporation, any dissolution,
merger, consolidation or other reorganization of Tenant, or the sale or other
transfer in the aggregate over the Lease Term of a controlling percentage of the
capital stock of Tenant, shall * be deemed a voluntary assignment of Tenant's
interest in this Lease. The phrase "controlling percentage" means the ownership
of and the right to vote stock possessing more than fifty percent of the total
combined voting power of all classes of Tenant's capital stock issued,
outstanding and entitled to vote for the election of directors. If Tenant is a
partnership, a withdrawal or change, whether voluntary, involuntary or by
operation of Law, of any general partner, or the dissolution of the partnership,
shall * be deemed a voluntary assignment of Tenant's interest in this Lease.
*not *not
7.3 LANDLORD'S ELECTION: If Tenant shall desire to assign its interest under
this Lease or to sublet the Leased Premises, Tenant must first notify Landlord,
in writing, of its intent to so assign or sublet, at least * days in advance of
the date it intends to so assign its interest in this Lease or sublet the Leased
Premises but not sooner than one hundred eighty days in advance of such date,
specifying in detail the terms of such proposed assignment or subletting,
including the name of the proposed assignee or subleasee, the proposed
assignee's or subleasee's intended use of the Leased Premises, a current
financial statement of such proposed assignee or subleasee and the form of
documents to be used in effectuating such assignment or subletting. Landlord
shall have a period of fifteen days following receipt of such notice within
which to do one of the following: (i) consent to such requested assignment or
subletting
Page Ex 10.27-Page 25
<PAGE>
subject to Tenant's compliance with the conditions set forth in Article 7.4
below or (ii) refuse to so consent to such requested assignment or subletting,
provided that such consent shall not be unreasonably refused. 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, use or disposal of a Hazardous Material. During
said fifteen day period, Tenant covenants and agrees to supply to Landlord, upon
request, all necessary or relevant information which Landlord may reasonably
request respecting such proposed assignment or subletting and/or the proposed
assignee or subleasee.
*thirty (30)
7.4 CONDITIONS TO LANDLORD'S CONSENT: If Landlord elects to consent, or shall
have been ordered to so consent by a court of competent jurisdiction, to such
requested assignment, subletting or encumbrance, such consent shall be expressly
conditioned upon the occurrence of each of the conditions below set forth, and
any purported assignment, subletting or encumbrance made or ordered prior to the
full and complete satisfaction of each of the following conditions shall be void
and, at the election of Landlord, which election may be exercised at any time
following such a purported assignment, subletting or encumbrance but prior to
the satisfaction of each of the stated conditions, shall constitute a material
default by Tenant under this Lease until cured by satisfying in full each such
condition by the assignee, subleases or encumbrances. The conditions are as
follows:
A. Landlord having approved in form and substance the assignment or sublease
agreement (or the encumbrance agreement), which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.
B. Each such subleases or assignee having agreed, in writing satisfactory to
Landlord and its counsel and for the benefit of Landlord, to assume, to be bound
by, and to perform the obligations of this Lease to be performed by Tenant (or,
in the case of an encumbrance, each such encumbrancer having similarly agreed to
assume, be bound by and to perform Tenant's obligations upon a foreclosure or
transfer in lieu thereof).
C. Tenant having fully and completely performed all of its obligations under
the terms of this Lease through and including the date of such assignment or
subletting.
D. Tenant having reimbursed to Landlord all reasonable costs
Page Ex 10.27-Page 26
<PAGE>
and attorneys' fees incurred by Landlord in conjunction with the processing and
documentation of any such requested subletting, assignment or encumbrance.
E. Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement, assignment agreement or
encumbrance (as applicable) and all related agreements.
F. Tenant having paid, or having agreed in writing to pay as to future
payments, to Landlord seventy five percent of all assignment consideration or
excess rentals to be paid to Tenant or to any other on Tenant's behalf or for
Tenant's benefit for such assignment or subletting as follows:
(1) If Tenant assigns its interest under this Lease and if all or a
portion of the consideration for such assignment is to be paid by the assignee
at the time of the assignment, that Tenant shall have paid to Landlord and
Landlord shall have received an amount equal to * percent of the assignment
consideration so paid or to be paid (whichever is the greater) at the time of
the assignment by the assignee; or
*seventy-five (75)
(2) If Tenant assigns its interest under this Lease and if Tenant is to
receive all or a portion of the consideration for such assignment in future
installments, that Tenant and Tenant's assignee shall have entered into a
written agreement with and for the benefit of Landlord satisfactory to Landlord
and its counsel whereby Tenant and Tenant's assignee jointly agree to pay to
Landlord an amount equal to * percent of all such future assignment
consideration installments to be paid by such assignee as and when such
assignment consideration is so paid.
*seventy-five (75)
(3) If Tenant subleases the Leased Premises, that Tenant and Tenant's
subleasee shall have entered into a written agreement with and for the benefit
of Landlord satisfactory to Landlord and its counsel whereby Tenant and Tenant's
subleasee jointly agree to pay to Landlord * percent of all excess rentals to be
paid by such subleases as and when such excess rentals are so paid.
*seventy-five (75)
7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED: For purposes of the
Article, the term "assignment consideration" shall mean all consideration to be
paid by the * assignee to
Page Ex 10.27-Page 27
<PAGE>
Tenant or to any other on Tenant's behalf or for Tenant's benefit as
consideration for such assignment, less any commissions paid by Tenant to a
licensed real estate broker for arranging such assignment * (not to exceed then
standard rates)*, and the term "excess rentals" shall mean all consideration to
be paid by the subleases to Tenant or to any other on Tenant's behalf or for
Tenant's benefit for the sublease of the Leased Premises in excess of the rent
due to Landlord under the terms of this Lease for the same period, less any
commissions paid by Tenant to a licensed real estate broker for arranging such
sublease (not to exceed then standard rates). Tenant agrees that the portion of
any assignment consideration and/or excess rentals arising from any assignment
or subletting by Tenant which is to be paid to Landlord pursuant to this Article
now is and shall then be the property of Landlord and not the property of
Tenant.
*or sublease *or sublease
*and excluding costs of improvements installed by Tenant to obtain
the Subtenant
7.6 PAYMENTS: All payments required by this Article to be made to Landlord
shall be made in cash in full as and when they become due. At the time Tenant,
Tenant's assignee or subleases makes each such payment to Landlord, Tenant or
Tenant's assignee or subleases, as the case may be, shall deliver to Landlord an
itemized statement in reasonable detail showing the method by which the amount
due Landlord was calculated and certified by the party making such payment as
true and correct.
7.7 GOOD FAITH: The rights granted to Tenant by this Article are granted in
consideration of Tenant's express covenant that all pertinent allocations which
are made by Tenant between the rental value of the Leased Premises and the value
of any of Tenant's personal property which may be conveyed or leased generally
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. If Tenant shall breach this Covenant of Good Faith,
Landlord may immediately declare Tenant to be in default under the terms of this
Lease and terminate this Lease and/or exexercise any other rights and remedies
Landlord would have under the terms of this Lease in the case of a material
default by Tenant under this Lease.
7.8 EFFECT OF LANDLORD'S CONSENT: No subletting, assignment or encumbrance,
even with the consent of Landlord, shall relieve Tenant of its personal and
primary obligation to pay rent and to perform all of the obligations to be
performed by Tenant
Page Ex 10.27-Page 28
<PAGE>
hereunder. Consent by Landlord to one or more assignments or encumbrances of
Tenant's interest in this Lease or to one or more sublettings of the Leased
Premises shall not be deemed to be a consent to any subsequent assignment,
encumbrance or subletting. If Landlord shall have been ordered by a court of
competent jurisdiction to consent to a requested assignment or subletting, or
such an assignment or subletting shall have been ordered over the objection of
Landlord, such assignment or subletting shall not be binding between the
assignee (or subleases) and Landlord until such time as all conditions set forth
in Article 7.4 above have been fully satisfied (to the extent not then
satisfied) by the assignee or subleases, including, without limitation, the
payment to Landlord of all agreed assignment considerations and/or excess
rentals then due Landlord.
ARTICLE 8:
LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY
8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE: Landlord shall not be
liable to Tenant for, and Tenant hereby releases Landlord and its partners,
principals, officers, agents and employees from, any and all liability, whether
in contract, tort or on any other basis, for any injury to or any damage
sustained by Tenant, Tenant's agents, employees, contractors or invitees; any
damage to Tenant's property; or any loss to Tenant's business, loss of Tenant's
profits or other financial loss of Tenant resulting from or attributable to the
condition of, the management of, the repair or maintenance of, the protection
of, the supply of services or utilities to, the damage to or destruction of the
Leased Premises, the Building, the Project or the Common Areas, including
without limitation (i) the failure, interruption, rationing or other curtailment
or cessation in the supply of electricity, water, gas or other utility service
to the Project, the Building or the Leased Premises; (ii) the vandalism or
forcible entry into the Building or the Leased Premises; (iii) the penetration
of water into or onto any portion of the Leased Premises through roof leaks or
otherwise; (iv) the failure to provide security and/or adequate lighting in or
about the Project, the Building or the Leased Premises; (v) the existence of any
design or construction defects within the Project, the Building or the Leased
Premises; (vi) the failure of any mechanical systems to function properly (such
as the HVAC systems); or (vii) the blockage of access to any portion of the
Project, the Building or the Leased Premises, except that Tenant does not so
release Landlord from such liability to the extent such damage was proximately
caused by active negligence, willful misconduct, or failure * to perform an
obligation expressly
Page Ex 10.27-Page 29
<PAGE>
undertaken pursuant to this Lease after a reasonable period of time shall have
lapsed following receipt of written notice from Tenant to so perform such
obligation. *In this regard, Tenant acknowledges that it is fully apprised of
the provisions of Law relating to releases, and particularly to those provisions
contained in Section 1542 of the California Civil Code which reads as follows:
*(1) *(2)
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
Article is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor.
8.2 TENANT'S INDEMNIFICATION OF LANDLORD: Tenant shall defend with competent
counsel satisfactory to Landlord any claims made or legal actions filed or
threatened against Landlord with respect to the violation of any law, or the
death, bodily injury, personal injury, property damage, or interference with
contractual or property rights suffered by any third party (including other
tenants within the Project) occurring within the Leased Premises or resulting
from Tenant's use or occupancy of the Leased Premises, the Building or the
Outside Areas, or resulting from Tenant's activities in or about the Leased
Premises, the Building, the Outside Areas or the Property, and Tenant shall
indemnify and hold Landlord, Landlord's principals, employees, agents and
contractors harmless from any loss, liability, penalties, or expense whatsoever
(including any loss attributable to vacant space which otherwise would have been
leased, but for such activities) resulting therefrom, except to the extent
proximately caused by the active negligence or willful misconduct of Landlord*.
This indemnity agreement shall survive until the latter to occur of (i) the date
of the expiration, or sooner termination, of this Lease, or (ii) the date Tenant
actually vacates the Leased Premises.*
*(1) *(2)
Page Ex 10.27-Page 30
<PAGE>
ARTICLE 9:
INSURANCE
9.1 TENANT'S INSURANCE: Tenant shall maintain insurance complying with all
of the following:
A. Tenant shall procure, pay for and keep in full force and effect, at all
times during the Lease Term, the following:
(1) Commercial General Liability insurance insuring Tenant against
liability for bodily injury, death, property damage and personal injury
occurring at the Leased Premises, or resulting from Tenant's use or occupancy of
the Leased Premises or the Building, Outside Areas, Property, or Common Areas or
resulting from Tenant's activities in or about the Leased Premises. Such
insurance shall be on an occurrence basis with a combined single limit of
liability of not less than the amount of Tenant's Required Liability Coverage
(as set forth in Article 1). The policy or policies shall be endorsed to name
Landlord and such others as are designated by Landlord as additional insureds in
the form equivalent to CG20111185 or successor and shall contain the following
additional endorsement: "The insurance afforded to the additional insureds is
primary insurance. If the additional insureds have other insurance which is
applicable to the loss on a contributing, excess or contingent basis, the amount
of this insurance company's liability under this policy shall not be reduced by
the existence of such other insurance. Any insurance carried by the additional
insureds shall be excess and non contributing with the insurance provided by the
tenant." The policy shall not be canceled or reduced without at least 30 days
written notice to additional insureds. Tenant's policy shall also contain the
severability of interest and cross-liability endorsement or clauses.
(2) Fire and property damage insurance in so-called Special Form insuring
Tenant against loss from physical damage to Tenant's personal property,
inventory, stock, trade fixtures and improvements within the Leased Premises
with coverage for the full actual replacement cost thereof;
(4) Boiler and machinery insurance, if applicable;
(5) Product Liability insurance (including without limitation Liquor
Liability insurance for liability arising out of the distribution, sale, or
consumption of food and/or beverages including alcoholic beverages at the Leased
Premises for not less than the Tenant's Required Liability Coverage as set forth
in Article 1;
(6) Workers' compensation insurance and any other employee benefit
insurance sufficient to comply with all Laws which policy shall be endorsed to
provide thirty (30) days written notice of cancellation to Landlord;
Page Ex 10.27-Page 31
<PAGE>
(7) With respect to making of alterations or the construction of
improvements or the like undertaken by Tenant, contingent liability and
builder's risk insurance, in an amount and with coverage * satisfactory to
Landlord;
*reasonably
(8) Business Income Insurance including coverage for loss of business
income due to damage to equipment from perils covered under the so called
Special Form; and
(9) Comprehensive Auto Liability insurance with a combined single limit
coverage of not less than the amount of Tenant's Required Liability Coverage (as
set forth in Article I) for bodily injury and/or property damage liability for:
b) Hired or borrowed autos c) Non-owned autos. The policy shall be endorsed to
provide 30 days written notice of cancellation to Landlord.
B. Each policy of liability insurance required to be carried by Tenant
pursuant to this Article or actually carried by Tenant with respect to the
Leased Premises or the Property (i) shall be in a form * satisfactory to
Landlord, (ii) Shall be provided by carriers admitted to do business in the
state of California, with a Best rating of "A/VI" or better and/or acceptable to
Landlord. Property insurance shall contain a waiver and/or a permission to waive
by the insurer any right of subrogation against Landlord, its principal,
employees, agents and contractors which might arise by reason of any payment
under such policy or by reason of any act or omission of Landlord, its
principals, employees, agents or contractors.
*reasonably
C. Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to the Landlord with respect to each policy of
insurance required to be carried by Tenant pursuant to this article, a
certificate of the insurer certifying, in a form satisfactory to the Landlord,
that the policy has been issued and premium paid providing the coverage required
by this Article and containing the provisions herein. Attached to such a
certificate shall be endorsements naming Landlord as additional insured, and
including the wording under primary insurance above. With respect to each
renewal or replacement of any such insurance, the requirements of this Article
must be complied with not less than 30 days prior to the expiration or
cancellation of the policy being renewed or replaced. Landlord may at any time
and from time-to-time inspect and/or copy any and all insurance policies
required to be carried by Tenant pursuant to this article.
D. The Commercial General Liability insurance carried by Tenant shall
specifically insure the performance by Tenant of the Indemnification provisions
set forth in Article 8.2 of this lease provided, however, nothing contained in
this Article 9 shall be
Page Ex 10.27-Page 32
<PAGE>
construed to limit the liability of Tenant under the Indemnification provisions
set forth in said Article 8.2. Tenant may carry Covered Contract Liability
insurance including coverage for this lease in satisfaction of this section D.
9.2 LANDLORD'S INSURANCE: With respect to insurance maintained by Landlord:
A. Landlord shall maintain, as the minimum coverage required of it by this
Lease, property insurance in so-called "Special" form insuring Landlord (and
such others as Landlord may designate) against loss from physical damage to the
Building with coverage of not less than one hundred percent of the full actual
replacement cost thereof and against loss of rents for a period of not less than
twelve months. Such property damage insurance, at Landlord's election but
without any requirement on Landlord's behalf to do so, (i) may be written in
so-called Special Form, excluding only those perils commonly excluded from such
coverage by Landlord's then property damage insurer; (ii) may provide coverage
for physical damage to the improvements so insured for up to the entire full
actual replacement cost thereof; (iii) may be endorsed to include or separate
policies may be carried to cover loss or damage caused by any additional perils
against which Landlord may elect to insure, including earthquake and/or flood;
(iv) may provide coverage for loss of rents for a period of up to twelve months;
and/or (v) may contain "deductibles" per occurrence in an amount reasonably
acceptable to Landlord. Landlord shall not be required to cause such insurance
to cover any of Tenant's personal property, inventory and trade fixtures, or any
modifications, alterations or improvements made or constructed by Tenant to or
within the Leased Premises.
B. Landlord shall maintain Commercial 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 in, on
or about, or resulting from the use or occupancy of the Property, or any portion
thereof, with combined single limit coverage of at least Three Million Dollars.
Landlord may carry such greater coverage as Landlord or Landlord's Lender,
insurance broker or advisor or counsel may from time to time determine is
reasonably necessary for the adequate protection of Landlord and the Property.
C. Landlord may maintain any other insurance which in the *opinion of its
insurance broker or advisor or legal counsel is prudent to carry under the given
circumstances.
*reasonable
9.3 MUTUAL WAIVER OF SUBROGATION: Landlord hereby releases Tenant, and
Tenant hereby releases Landlord and its respective
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<PAGE>
principals, officers, agents, employees and servants, from any and all liability
for loss, damage or injury to the property of the other in or about the Leased
Premises or the Property which is caused by or results from a peril or event or
happening which would be covered by insurance required to be carried by the
party sustaining such loss under the terms of this Lease, or is covered by
insurance actually carried and in force at the time of the loss, by the party
sustaining such loss; provided, however, that such waiver shall be effective
only to the extent permitted by the insurance covering such loss and to the
extent such insurance is not prejudiced thereby.
Each party shall notify its insurance company regarding the existence of this
mutual waiver of subrogation.
ARTICLE 10:
DAMAGE TO LEASED PREMISES
10.1 LANDLORD'S DUTY TO RESTORE: If the Leased Premises, the Building or the
Outside Areas are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the same, as and when required by this Article, unless
this Lease is terminated by Landlord pursuant to Article 10.3 or by Tenant
pursuant to Article 10.4. If this Lease is not so terminated, then upon
availability, of the insurance proceeds to Landlord (if the loss is covered by
insurance) and the issuance of all necessary governmental permits, Landlord
shall commence and diligently prosecute to completion the restoration of the
Leased Premises, the Building or the Outside Areas, as the case may be, to the
extent then allowed by Law, to substantially the same condition in which it
existed as of the Lease Commencement Date. Landlord's obligation to restore
shall be limited to the improvements constructed by Landlord. Landlord shall
have no obligation to restore any improvements made by Tenant to the Leased
Premises or any of Tenant's personal property, inventory or trade fixtures. Upon
completion of the restoration by Landlord, Tenant shall forthwith replace or
fully repair all of Tenant's personal property, inventory, trade fixtures and
other improvements constructed by Tenant to like or similar condition as existed
at the time of such damage or destruction.
10.2 INSURANCE PROCEEDS: All insurance proceeds available from the fire and
property damage insurance carried by Landlord shall be paid to and become the
property of Landlord. If this Lease is terminated pursuant to either Article 10.
3 or 10. 4, all insurance proceeds available from insurance carried by Tenant
which cover loss of property that is Landlord's property or would
Page Ex 10.27-Page 34
<PAGE>
become Landlord's property on termination of this Lease shall be paid to and
become the property of Landlord*, and the remainder of such proceeds shall be
paid to and become the property of Tenant. If this Lease is not terminated
pursuant to either Article 10.3 or 10.4, all insurance proceeds available from
insurance carried by Tenant which cover loss to property that is Landlord's
property shall be paid to and become the property of Landlord, and all proceeds
available from such insurance which cover loss to property which would only
become the property of Landlord upon the termination of this Lease shall be paid
to and remain the property of Tenant.
*(1)
10.3 LANDLORD'S RIGHT TO TERMINATE: Landlord shall have the option to
terminate this Lease in the event any of the following occurs, which option may
be exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:
A. The Building is damaged by any peril covered by valid and collectible
insurance actually carried by Landlord and in force at the time of such damage
or destruction (an "insured peril") to such an extent that the estimated cost to
restore the Building exceeds the lesser of (i) the insurance proceeds available
from insurance actually carried by Landlord, or (ii) seventy-five percent of the
then actual replacement cost thereof;
C. The Building is damaged by an uninsured peril, which peril Landlord was
not required to insure against pursuant to the provisions of Article 9 of this
Lease, to any extent.
D. The Building is damaged by any peril and, because of the Laws then in
force, the Building (i) can not be restored at reasonable cost or (ii) if
restored, can not be used for the same use being made thereof before such
damage.
10.4 TENANT'S RIGHT TO TERMINATE: If the Leased Premises, the Building or the
Outside Areas are damaged by any peril and Landlord does not elect to terminate
this Lease or is not entitled to terminate this Lease pursuant to this Article,
then as soon as reasonably practicable, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be complete. Tenant shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised in the case of A or B below only by delivery to Landlord
of a written notice of election to terminate within *days after Tenant receives
from Landlord the estimate of the time needed to complete such restoration:
*fourteen (14)
Page Ex 10.27-Page 35
<PAGE>
A. The Leased Premises are damaged by any peril and, in the reasonable
opinion of Landlord's architect or construction consultant, the restoration of
the Leased Premises cannot be substantially completed within * months after the
date of damage or;
*six (6)
B. The Leased Premises are damaged by any peril within nine months of the
last day of the Lease Term and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Leased Premises
cannot be substantially completed within ninety days after the date such
restoration is commenced.
10.5 TENANT'S WAIVER: Landlord and Tenant agree that the provisions of Article
10.4 above, captioned "Tenant's Right to Terminate", are intended to supersede
and replace the provisions contained in California Civil Code, Section 1932,
Subdivision 2, and California Civil Code, Section 1934, and accordingly, Tenant
hereby waives the provisions of said Civil Code Sections and the provisions of
any successor Code Sections or similar laws hereinafter enacted.
10.6 ABATEMENT OF RENT: In the event of damage to the Leased Premises which
does not result in the termination of this Lease, the Base Monthly Rent (and any
Additional Rent) shall be temporarily abated during the period of restoration in
proportion to the degree to which Tenant's use of the Leased Premises is
impaired by such damage.
ARTICLE 11:
CONDEMNATION
11.1 TENANT'S RIGHT TO TERMINATE: Except as otherwise provided in Article 11.4
below regarding temporary takings, Tenant shall have the option to terminate
this Lease if, as a result of any taking, (i) all of the Leased Premises is
taken, (ii) thirty-three and one-third percent or more of the Leased Premises is
taken and the part of the Leased Premises that remains cannot, within a
reasonable period of time, be made reasonably suitable for the continued
operation of Tenant's business, or (iii) there is a taking of a portion of the
Outside Areas and, as a result of such taking, Landlord cannot provide parking
spaces within the Property (or within a reasonable distance therefrom) equal in
number to at least sixty-six and two-thirds percent of the number of parking
spaces existing within the Outside Areas immediately prior to such taking,
whether by rearrangement of the remaining parking areas in the Outside Areas
(including, if Landlord
Page Ex 10.27-Page 36
<PAGE>
elects, construction of multi-deck parking structures or * for compact cars
where permitted by Law). Tenant must exercise such option within a reasonable
period of time, to be effective on the later to occur of (i) the date that
possession of that portion of the Leased Premises or the Outside Areas that is
condemned is taken by the condemnor or (ii) the date Tenant vacated the Leased
Premises.
*restriping
11.2 LANDLORD'S RIGHT TO TERMINATE: Except as otherwise provided in Article
11.4 below regarding temporary takings, Landlord shall have the option to
terminate this Lease if, as a result of any taking, (i) all or a substantial
part of the Leased Premises is taken, or (iii) because of the Laws then in
force, the Leased Premises may not be used for the same use being made thereof
before such taking, whether or not restored as required by Article 11.3 below.
Any, such option to terminate by Landlord must be exercisable within a
reasonable period of time*, to be effective as of the date possession is taken
by the condemnor.
*(1)
11.3 RESTORATION: If any part of the Leased Premises, the Building or the
Outside Areas is taken and this Lease is not terminated, then Landlord shall
repair any damage occasioned thereby to the remainder thereof to a condition
reasonably suitable for Tenant's continued operations and otherwise, to the
extent practicable, in the manner and to the extent provided in Article 10.1.
11.4 TEMPORARY TAKING: If any portion of the Leased Premises is temporarily
taken for a period of one year or less and such period does not extend beyond
the Lease Expiration Date, this Lease shall remain in effect. If any portion of
the Leased Premises is temporarily taken for a period which either exceeds one
year or which extends beyond the Lease Expiration Date, then Landlord and Tenant
shall each independently have the option to terminate this Lease, effective on
the date possession is taken by the condemnor.
11.5 DIVISION OF CONDEMNATION AWARD: Any award made for any taking of the
Property, the Building, the Outside Areas or the Leased Premises, or any portion
thereof, shall belong to and be paid to Landlord, and Tenant hereby assigns to
Landlord all of its right, title and interest in any such award; provided,
however, that Tenant shall be entitled to receive any portion of the award that
is made (i) for the taking of personal property, inventory or trade fixtures
belong to Tenant, (ii) for the
Page Ex 10.27-Page 37
<PAGE>
interruption of Tenant's business or its moving costs, (iii) for loss of
Tenant's goodwill*, or (iv) for any temporary taking where this Lease is not
terminated as a result of such taking. The rights of Landlord and Tenant
regarding any condemnation shall be determined as provided in this Article, and
each party hereby waives the provisions of Section 1265.130 of the California
Code of Civil Procedure, and the provisions of any similar law hereinafter
enacted, allowing either party to petition the Superior Court to terminate this
Lease and/or otherwise allocate condemnation awards between Landlord and Tenant
in the event of a taking of the Leased Premises.
*(1)
11.6 ABATEMENT OF RENT: In the event of a taking of the Leased Premises which
does not result in a termination of this Lease (other than a temporary taking),
then, as of the date possession is taken by the condemning authority, the Base
Monthly Rent shall be reduced in the same proportion that the area of that part
of the Leased Premises so taken (less any addition to the area of the Leased
Premises by reason of any reconstruction) bears to the area of the Leased
Premises immediately prior to such taking.
11.7 TAKING DEFINED: The term "taking" or "taken" as used in this Article 11
shall mean any transfer or conveyance of all or any portion of the Property to a
public or quasi-public agency or other entity having the power of eminent domain
pursuant to or as a result of the exercise of such power by such an agency,
including any inverse condemnation and/or any sale or transfer by Landlord of
all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power.
ARTICLE 12:
DEFAULT AND REMEDIES
12.1 EVENTS OF TENANT'S DEFAULT: Tenant shall be in default of its
obligations under this Lease if any of the following events occur:
A. Tenant shall have failed to pay Base Monthly Rent or any
Additional Rent* when due; or
*within 5 days after written notice
B. Tenant shall have done or permitted to have been done any act, use or
thing in its use, occupancy or possession of the Leased Premises or the Building
or the Outside Areas which is prohibited by the terms of this Lease; or
Page Ex 10.27-Page 38
<PAGE>
C. Tenant shall have failed to perform any term, covenant or condition of
this Lease, except those requiring the payment of Base Monthly Rent or
Additional Rent, within ten days after written notice from Landlord to Tenant
specifying the nature of such failure and requesting Tenant to perform same.
D. Tenant shall have sublet the Leased Premises or assigned or encumbered
its interest in this Lease in violation of the provisions contained in Article
7, whether voluntarily or by operation of Law; or
E. Tenant shall have failed to continuously occupy the Leased Premises for a
period of * consecutive days; or
*thirty (30)
F. Tenant or any Guarantor of this Lease shall have permitted or suffered
the sequestration or attachment of, or execution on, or the appointment of a
custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant's (or such Guarantors) business, and Tenant
(or such Guarantor) shall have failed to obtain a return or release of the same
within thirty days thereafter, or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier; or
G. Tenant or any Guarantor of this Lease shall have made a general
assignment of all or a substantial part of its assets for the benefit of its
creditors; or
H. Tenant or any Guarantor of this Lease shall have allowed (or sought) to
have entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or confirmation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as properly
filed a petition seeking liquidation or reorganization under said bankruptcy
laws or any other debtor's relief law or similar statute of the United States or
any state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant's
consent or over Tenant's objection, Landlord may not terminate this Lease
pursuant to this Subarticle if such decree or order is rescinded or reversed
within thirty days after its original entry.
I. Tenant or any Guarantor of this Lease shall have availed itself of the
protection of any debtor's relief law, moratorium
Page Ex 10.27-Page 39
<PAGE>
law or other similar Law which does not require the prior entry of a decree or
order.
12.2 LANDLORD'S REMEDIES: In the event of any default by Tenant, and without
limiting Landlord's right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by Law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:
A. Landlord may, at Landlord's election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by Law from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive
relief and specific performance to prevent Tenant from violating the terms of
this Lease and/or to compel Tenant to perform its obligations under this Lease,
as the case may be.
B. Landlord may, at Landlord's election, terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice. Any termination under this
Subarticle shall not relieve Tenant from its obligation to pay to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate the Lease, constitute a termination of the
Lease:
(1) Appointment of a receiver or keeper in order to protect Landlord's
interest hereunder;
(2) Consent to any subletting of the Leased Premises or assignment of this
Lease by Tenant, whether pursuant to the provisions hereof or otherwise; or
(3) Any other action by Landlord or Landlord's agents intended to mitigate
the adverse effects of any breach of this Lease by Tenant, including, without
limitation, any action taken
Page Ex 10.27-Page 40
<PAGE>
to maintain and preserve the Leased Premises or any action taken to relet the
Leased Premises, or any portion thereof, for the account of Tenant and in the
name of Tenant.
C. In the event Tenant breaches this Lease and abandons the Leased Premises,
Landlord may terminate this Lease, but this Lease shall not terminate unless
Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right to
recover rent as it becomes due under this Lease as provided in California Civil
Code Section 1951.4, as in effect on the Effective Date of this Lease.
D. In the event Landlord terminates this Lease, Landlord shall be entitled,
at Landlord's election, to damages in an amount as set forth in California Civil
Code Section 1951.2, as in effect on the Effective Date of this Lease. For
purposes of computing damages pursuant to Section 1951.2, an interest rate equal
to the maximum rate of interest then not prohibited by Law shall be used where
permitted. Such damages shall include, without limitation:
(1) 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, computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco, at the time of award plus one percent; and
(2) 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 Leased Premises; (ii) expenses for
altering, remodeling or otherwise improving the Leased Premises for the purpose
of reletting, including removal of existing leasehold improvements and/or
installation of additional leasehold improvements (regardless of how the same is
funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise); (iii) broker's fees, advertising costs and other expenses
of reletting the Leased Premises; (iv) costs of carrying and maintaining the
Leased Premises which costs would have been billed to Tenant as Additional Rent
had Tenant not defaulted and which include but are not limited to taxes,
insurance premiums, utility charges, landscape maintenance costs,
Page Ex 10.27-Page 41
<PAGE>
costs of maintaining electrical, plumbing and HVAC equipment and costs for
providing security; (v) expenses incurred in removing, disposing of and/or
storing any of Tenant's personal property, inventory or trade fixtures remaining
therein; (vi) attorneys' fees, expert witness fees, court costs and other
reasonable expenses incurred by Landlord but not limited to taxable costs) in
retaking possession of the Leased Premises, establishing damages hereunder, and
re-leasing the Leased Premises; and (vii) any other expenses, costs or damages
otherwise incurred or suffered as a result of Tenant's default.
12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES: In the event Landlord fails to
perform any of its obligations under this Lease, Landlord shall nevertheless not
be in default under the terms of this Lease until such time as Tenant shall have
first given Landlord written notice specifying the nature of such failure to
perform its obligations, and then only after Landlord shall have had a
reasonable period of time following its receipt of such notice within which to
perform such obligations. In the event of Landlord's default as above set forth,
then, and only then, Tenant shall have the following remedies only:
A. Tenant may then proceed in equity or at law to compel Landlord to perform
its obligations and/or to recover damages proximately caused by such failure to
perform (except as and to the extent Tenant has waived its right to damages as
provided in this Lease).
B. Tenant, at its option, may then cure any default of Landlord at
Landlord's cost. If, pursuant to this Subarticle, Tenant reasonably pays any sum
to any third party or does any act that requires the payment of any sum to any
third part at any time by reason of Landlord's default, the sum paid by, Tenant
shall be immediately due from Landlord to Tenant at the time Tenant supplies
Landlord with an invoice therefor (provided such invoice sets forth and is
accompanied by a written statement of Tenant setting forth in reasonable detail
the amount paid, the party to whom it was paid, the date it was paid, and the
reasons giving rise to such payment), together with interest at (1) from the
date of such invoice until Tenant is reimbursed by Landlord. Tenant may not
offset such sums against any installment of rent due Landlord under the terms of
this Lease.
(1) ten percent (10%)
12.4 LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association, or other form of
business entity, Tenant agrees that
Page Ex 10.27-Page 42
<PAGE>
(i) the obligations of Landlord under this Lease shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals of such business entity and
(ii) Tenant shall have recourse only to the assets of such business entity for
the satisfaction of such obligations and not against the assets of such
officers, directors, trustees, partners, joint venturers, members, owners,
stockholders or principals (other than to the extent of their interest in the
assets owned by such business entity). Additionally, if Landlord is a
partnership, then Tenant covenants and agrees:
A. No partner of Landlord shall be sued or named as a party in any suit or
action brought by Tenant with result to any alleged breach of this Lease (except
to the extent necessary to secure jurisdiction over the partnership and then
only for that sole purpose);
B. No service of process shall be made against any partner of Landlord
except for the sole purpose of securing jurisdiction over the partnership; and
C. No writ of execution will ever be levied against the assets of any
partner of Landlord other than to the extent of his interest in the assets of
the partnership. Tenant further agrees that each of the foregoing covenants and
agreements shall be enforceable by Landlord and by any partner of Landlord.
12.5 TENANT'S WAIVER: Landlord and Tenant agree that the provisions of Article
12.3 above are intended to supersede and replace the provisions of California
Civil Code Sections 1932(l), 1941 and 1942, and accordingly, Tenant hereby
waives the provisions of California Civil Code Sections 1932(l), 1941 and 1942
and/or any similar or successor Law regarding Tenant's right to terminate this
Lease or to make repairs and deduct the expenses of such repairs from the rent
due under this Lease. Tenant hereby waives any right of redemption or relief
from forfeiture under the Laws of the State of California, or under any other
present or future Law, in the event Tenant is evicted or Landlord takes
possession of the Leased Premises by reason of any default by Tenant.
ARTICLE 13:
GENERAL PROVISIONS
13.1 TAXES ON TENANT'S PROPERTY: Tenant shall pay before
Page Ex 10.27-Page 43
<PAGE>
delinquency any and all taxes, assessments, license fees, use fees, permit fees
and public charges of whatever nature or description levied, assessed or imposed
against Tenant or Landlord by a governmental agency arising out of, caused by
reason of or based upon Tenant's estate in this Lease, Tenant's ownership of
property, improvements made by Tenant to the Leased Premises or the Outside
Areas, improvements made by Landlord for Tenant's use within the Leased Premises
or the Outside Areas, Tenant's use (or estimated use) of public facilities or
services or Tenant's consumption (or estimated consumption) of public utilities,
energy, water or other resources. Upon demand by Landlord, Tenant shall furnish
Landlord with satisfactory evidence of these payments. If any such taxes,
assessments, fees or public charges are levied against Landlord, Landlord's
property, the Building or the Property, or if the assessed value of the Building
or the Property is increased by the inclusion therein of a value placed upon
same, then Landlord, after giving written notice to Tenant, shall have the
right, regardless of the validity thereof, to pay such taxes, assessment, fee or
public charge and bill Tenant, as Additional Rent, the amount of such taxes,
assessment, fee or public charge so paid on Tenant's behalf. Tenant shall,
within ten days from the date it receives an invoice from Landlord setting forth
the amount of such taxes, assessment, fee or public charge so levied, pay to
Landlord, as Additional Rent, the amount set forth in said invoice. Failure by
Tenant to pay the amount so invoiced within said ten day period shall be
conclusively deemed a default by Tenant under this Lease. Tenant shall have the
right, and the Landlord's full cooperation if Tenant is not then in default
under the terms of this Lease, to bring suit in any court of competent
jurisdiction to recover from the taxing authority the amount of any such taxes,
assessment, fee or public charge so paid.
13.2 HOLDING OVER: This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Article. Any such holding over shall be
deemed an unlawful detainer of the Leased Premises unless Landlord has consented
to same. Any such holding over to which Landlord has consented shall be
construed to be a tenancy from month to month, on the same terms and conditions
herein specified insofar as applicable, except that the Base Monthly Rent shall
be increased to an amount equal to * percent of the Base Monthly Rent payable
during the last full month immediately preceding
Page Ex 10.27-Page 44
<PAGE>
such holding over.
*125%
13.3 SUBORDINATION TO MORTGAGES: This Lease is subject to and subordinate to
all underlying ground leases, mortgages and deeds of trust which affect the
Building or the Property and which are of public record as of the Effective Date
of this Lease, and to all renewals, modifications, consolidations, replacements
and extensions thereof. However, if the lessor under any such ground lease or
any lender holding any such mortgage or deed of trust shall advise Landlord that
it desires or requires this Lease to be made prior and superior thereto, then,
upon written request of Landlord to Tenant, Tenant shall promptly execute,
acknowledge and deliver any and all documents or instruments which Landlord and
such lessor or lender deem necessary or desirable to make this Lease prior
thereto. Tenant hereby consents to Landlord's ground leasing the land underlying
the Building or the Property and/or encumbering the Building or the Property as
security for future loans on such terms as Landlord shall desire, all of which
future ground leases, mortgages or deeds of trust shall be subject to and
subordinate to this Lease. However, if any lessor under any such future ground
lease or any lender holding such future mortgage or deed of trust shall desire
or require that this Lease be made subject to and subordinate to such future
ground lease, mortgage or deed of trust, then Tenant agrees, within ten days
after Landlord's written request therefor, to execute, acknowledge and deliver
to Landlord any and all documents or instruments * requested by Landlord or by
such lessor or lender as may be necessary or proper to assure the subordination
of this Lease to such future ground lease, mortgage or deed of trust, but only
if such lessor or lender agrees to recognize Tenant's rights under this Lease
and agrees not to disturb Tenant's quiet possession of the Leased Premises so
long as Tenant is not in default under this Lease.
*reasonably
13.4 TENANT'S ATTORNMENT UPON FORECLOSURE: Tenant shall, upon request, attorn
(i) to any purchaser of the Building or the Property at any foreclosure sale or
private sale conducted pursuant to any security instrument encumbering the
Building or the Property, (ii) to any grantee or transferee designated in any
deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under any underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant's rights under this Lease.
Page Ex 10.27-Page 45
<PAGE>
13.5 MORTGAGEE PROTECTION: In the event of any default on the part of
Landlord, Tenant will give notice by registered mail to any Lender or lessor
under any underlying ground lease who shall have requested, in writing, to
Tenant that it be provided with such notice, and Tenant shall offer such Lender
or lessor a reasonable opportunity to cure the default, including time to obtain
possession of the Leased Premises by power of sale or judicial foreclosure or
other appropriate legal proceedings if reasonably necessary to effect a cure.
13.6 ESTOPPEL CERTIFICATES: Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate (i) certifying
that this Lease is unmodified and in full force and effect, or, if modified,
stating the nature of such modification and certifying that this Lease, as so
modified, is in full force and effect, (ii) stating the date to which the rent
and other charges are paid in advance, if any, (iii) acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed, and (iv) certifying
such other information about this Lease as may be reasonably requested by
Landlord, its Lender or prospective lenders, investor or purchaser of the
Building or the Property. Tenant's failure to execute and deliver such estoppel
certificate within ten days after Landlord's request therefor shall be a
material default by Tenant under this Lease, any statement delivered pursuant to
this Article may be relied upon by any Lender or purchaser or prospective Lender
or purchaser of the Building, the Property, or any interest herein.
13.7 TENANT'S FINANCIAL INFORMATION: Tenant shall, within ten (10) business
days after Landlord's request therefor deliver to Landlord a copy of a current
financial statement including an income statement for the most recent twelve
month period and a balance sheet and any such other information reasonably
requested by Landlord regarding Tenant's financial condition. Tenant
acknowledges that Landlord is relying upon the financial information provided to
Landlord by Tenant prior to entering into this lease and the information to be
provided to Landlord by Tenant during the term of this Lease. Landlord shall be
entitled to disclose such financial statements or other information to its
Lender, to any present or prospective principal of or investor in Landlord, or
to any prospective Lender or purchaser of the Building, the Property or any
portion thereof or interest therein. Any such financial statement or other
information which is marked "confidential" or "company secrets" (or is otherwise
similarly marked by Tenant) shall be confidential and shall not
Page Ex 10.27-Page 46
<PAGE>
be disclosed by Landlord to any third party except as specifically provided in
this Article, unless the same becomes a part of the public domain without the
fault of Landlord.
13.8 TRANSFER BY LANDLORD: Landlord and its successors in interest shall have
the right to transfer their interest in the Building, the Property, or any
portion thereof at any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term "Landlord" as used herein shall mean the transferee of such interest in the
Building or the Property.
13.9 FORCE MAJEURE: The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligation by reason of any
strikes, lockouts or labor disputes; inability to obtain labor, materials, fuels
or reasonable substitutes therefor; governmental restrictions, regulations,
controls, action or inaction; civil commotion; inclement weather, fire or other
acts of God; or other causes (except financial inability) beyond the reasonable
control of the party obligated to perform (including acts or omissions of the
other party) for a period equal to the period of any such prevention, delay or
stoppage.
13.10 NOTICES: Any notice required or desired to be given by a party regarding
this Lease shall be in writing and shall be personally served, or in lieu of
personal service may be given by (i) delivery by Federal Express, United Parcel
Service or similar commercial carrier, (ii) electronic fax transmission, or
(iii) depositing such notice in the United States mail, postage prepaid,
addressed to the other party as follows:
A. If addressed to Landlord, to Landlord at its Address for Notices (as set
forth in Article 1).
B. If addressed to Tenant, to Tenant at its Address for
Page Ex 10.27-Page 47
<PAGE>
Notices (as set forth in Article 1). Any notice given by registered mail shall
be deemed to have been given on the third business day after its deposit in the
United States mail.
Any notice given by registered mail shall be deemed given on the date receipt
was acknowledged to the postal authorities. Any notice given by mail other than
registered or certified mail shall be deemed given only if received by the other
party, and then on the date of receipt. Any notice delivered by commercial
carrier or by fax shall be deemed given on the date of confirmation of delivery
by the carrier or by electronic confirmation. Each party may, by written notice
to the other in the manner aforesaid, change the address to which notices
addressed to it shall thereafter be mailed.
13.11 ATTORNEYS FEES: In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party. In the event
that Landlord shall be required to retain counsel to enforce any provision of
this Lease, and if Tenant shall thereafter cure (or desire to cure) such
default, Landlord shall be conclusively deemed the prevailing party and Tenant
shall pay to Landlord all attorneys' fees, expert witness fees, court costs and
other reasonable expenses so incurred by Landlord promptly upon demand. Landlord
may enforce this provision by either (i) requiring Tenant to pay such fees and
costs as a condition to curing its default or (ii) bringing a separate action to
enforce such payment, it being agreed by and between Landlord and Tenant that
Tenant's failure to pay such fees and costs upon demand shall constitute a
breach of this Lease in the same manner as a failure by Tenant to pay the Base
Monthly Rent, giving Landlord the same rights and remedies as if Tenant failed
to pay the Base Monthly Rent.
13.12 DEFINITIONS: Any term that is given a special meaning by any provision
in this Lease shall, unless otherwise specifically stated, have such meaning
whenever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:
Page Ex 10.27-Page 48
<PAGE>
A. REAL PROPERTY TAXES: The term "Real Property Tax" or "Real Property
Taxes" shall each mean (i) all taxes, assessments, levies and other charges of
any kind or nature whatsoever, general and special, foreseen and unforeseen
(including all installments of principal and interest required to pay any
general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership or new
construction), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power or tax or levy assessments, which are levied or assessed for whatever
reason against the Project or any portion thereof, or Landlord's interest
herein, or the fixtures, equipment and other property of Landlord that is an
integral part of the Project and located thereon, or Landlord's business of
owning, leasing or managing the Project or the gross receipts, income or rentals
from the Project; (ii) all charges, levies or fees imposed by any governmental
authority against Landlord by reason of or based upon the use of or number of
parking spaces within the Project, the amount of public services or public
utilities used or consumed (e.g. water, gas, electricity, sewage or surface
water disposal) at the Project, the number of persons employed by tenants of the
Project, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Project, or the type of use or uses conducted
within the Project; and (iii) all costs and fees (including attorneys' fees)
incurred by Landlord in contesting any Real Property Tax and in negotiating with
public authorities as to any Real Property Tax*. If, at any time during the
Lease Term, the taxation or assessment of the Project prevailing as of the
Effective Date of this Lease shall be altered so that in lieu of or in addition
to any Real Property Tax described above there shall be levied, or imposed
(whether by reason of a change in the method of taxation or assessment, creation
of a new tax or charge, or any other cause) an alternate, substitute, or
additional tax or charge (i) on the value, size, use or occupancy of the Project
or Landlord's interest therein or (ii) on or measured by the gross receipts,
income or rentals from the Project, or on Landlord's business of owning, leasing
or managing the Project or (iii) computed in any manner with respect to the
operation of the Project, then any such tax or charge, however designated, shall
be included within the meaning of the terms "Real Property Tax" or "Real
Property Taxes" for purposes of this Lease**. If any Real Property Tax is partly
based upon property or rents unrelated to the Project, then only that part of
such Real Property Tax that is fairly allocable to the Project shall be included
within the meaning of the terms "Real Property Tax" or "Real Property Taxes."
Notwithstanding the foregoing, the
Page Ex 10.27-Page 49
<PAGE>
terms "Real Property Tax" or "Real Property Taxes" shall not include estate,
inheritance, transfer, gift or franchise taxes of Landlord or the federal or
state income tax imposed on Landlord's income from all sources.
*provided that such costs shall not exceed the actual savings received by Tenant
**to the extent such tax is in fact imposed in lieu of a Real Property Tax.
B. LANDLORD'S INSURANCE COSTS: The term "Landlord's Insurance Costs" shall
mean the costs to Landlord to carry and maintain the policies of fire and
property damage insurance including earth quake and flood for the Building and
the Property and general liability insurance required, or permitted, to be
carried by Landlord pursuant to Article 9, together with any deductible amounts
paid by Landlord upon the occurrence of any insured casualty or loss.
C. PROPERTY MAINTENANCE COSTS: The term "Property Maintenance Costs" shall
mean all costs and expenses (except Landlord's Insurance Costs and Real Property
Taxes) paid or incurred by Landlord in protecting, operating, maintaining,
repairing and preserving the Property and all parts thereof, including without
limitation, (i) professional management fees (equal to three percent of the
annualized Base Monthly Rent), (ii) the amortizing portion of any costs incurred
by Landlord in the making of any modifications, alterations or improvements as
set forth in Article 6, which are so amortized during the Lease Term, (iii)
costs of complying with governmental regulations governing Tenant's use of
Hazardous Materials, and Landlord's costs of monitoring Tenant's use of
Hazardous Materials including fees charged by Landlord's consultants to
periodically inspect the Premises and the Property, and (iv) such other costs as
may be paid or incurred with respect to operating, maintaining and preserving
the Property, such as repairing, replacing, and resurfacing the exterior
surfaces of the buildings (including roofs), repairing, replacing, and
resurfacing paved areas, repairing structural parts of the buildings, cleaning,
maintaining, restoring and/or replacing the interior of the Leased Premises both
during the term of the Lease and upon its termination, and maintaining,
repairing or replacing, when necessary electrical, plumbing, sewer, drainage,
heating, ventilating and air conditioning systems serving the buildings,
providing utilities to the common areas, maintenance, repair, replacement or
installation of lighting fixtures, directional or other signs and signals,
irrigation or drainage systems, trees, shrubs, materials, maintenance of all
landscaped areas, and
Page Ex 10.27-Page 50
<PAGE>
depreciation and financing costs on maintenance and operating machinery and
equipment (if owned) and rental paid for such machinery and equipment (if
leased)except as otherwise povided herein.
D. READY FOR OCCUPANCY: The term "Ready for Occupancy" shall mean the date
upon which (i) the Leased Premises are available for Tenant's occupancy in a
broom clean condition and (ii) the improvements, if any, to be made to the
Leased Premises by Landlord as a condition to Tenant's obligation to accept
possession of the Leased Premises have been substantially completed and the
appropriate governmental building department (i.e. the City building department,
if the Property is located within a City, or otherwise the County building
department) shall have approved the construction of such improvements as
substantially complete or is willing to so approve the construction of the
improvements as substantially complete subject only to compliance with specified
conditions which are the responsibility of Tenant to satisfy or is willing to
allow Tenant to occupy subject to its receiving assurances that specified work
will be completed.
E. PROPERTY OPERATING EXPENSES: The term "Property Operating Expenses" shall
mean and include the all Real Property Taxes, plus all Landlord's Insurance
Costs, plus the all Property Maintenance Costs.
F. LAW: The term "Law" shall mean any judicial decision and any statute,
constitution, ordinance, resolution, regulation, rule, administrative order, or
other requirement of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).
G. LENDER: The term "Lender" shall mean the holder of any Note or other
evidence of indebtedness secured by the Property or any portion thereof.
H. PRIVATE RESTRICTIONS: The term "Private Restrictions" shall mean all
recorded covenants, conditions and restrictions, private agreements, easements,
and any other recorded instruments affecting the use of the Property, as they
may exist from time to
Page Ex 10.27-Page 51
<PAGE>
time.
I. RENT: The term "rent" shall mean collectively Base Monthly Rent and all
Additional Rent.
13.13 GENERAL WAIVERS: One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be deemed
to waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. No waiver of any provision hereof or
any breach of any provision hereof shall be effective unless in writing and
signed by the waiving party. The receipt by Landlord of any rent or payment with
or without knowledge of the breach of any other provision hereof shall not be
deemed a waiver of any such breach. No waiver of any provision of this Lease
shall be deemed a continuing waiver unless such waiver specifically states so in
writing and is signed by both Landlord and Tenant. No delay or omission in the
exercise of any right or remedy accruing to either party upon any breach by the
other party under this Lease shall impair such right or remedy or be construed
as a waiver of any such breach theretofore or thereafter occurring. The waiver
by either party of any breach of any provision of this Lease shall not be deemed
to be a waiver of any subsequent breach of the same or any other provisions
herein contained.
13.14 MISCELLANEOUS: Should any provision of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for or against either
Landlord or Tenant. The captions used in this Lease are for convenience only and
shall not be considered in the construction or interpretation of any provision
hereof. When the context of this Lease requires, the neuter gender includes the
Page Ex 10.27-Page 52
<PAGE>
masculine, the feminine, a partnership or corporation or joint venture, and the
singular includes the plural. The terms "must","shall", "will", and "agree" are
mandatory. The term "may" is permissive. When a party is required to do
something by this Lease, it shall do so at its sole cost and expense without
right of reimbursement from the other party unless specific provision is made
therefor. Where Tenant is obligated not to perform any act or is not permitted
to perform any act, Tenant is also obligated to restrain any others reasonably
within its control, including agents, invitees, contractors, subcontractors and
employees, from performing said act. Landlord shall not become or be deemed a
partner or a join venture with Tenant by reason of any of the provisions of this
Lease.
ARTICLE 14:
CORPORATE AUTHORITY, BROKERS AND ENTIRE AGREEMENT
14.1 CORPORATE AUTHORITY: If Tenant is a corporation. each individual
executing this Lease on behalf of said corporation represents and warrants that
Tenant is validly formed and duly authorized and existing, that Tenant is
qualified to do business in the State in which the Leased Premises are located,
that Tenant has the full right and legal authority to enter into this Lease,
that he or she is duly authorized to execute and deliver this Lease on behalf of
Tenant in accordance with the bylaws and/or a board of directors' resolution of
Tenant, and that this Lease is binding upon Tenant in accordance with its terms.
Tenant shall, within thirty days after *, deliver to Landlord a certified copy
of the resolution of its board of directors authorizing or ratifying the
execution of this Lease, and if Tenant fails to do so, Landlord at its sole
election may elect to (i) extend the Intended Commencement Date by such number
of days that Tenant shall have delayed in so delivering such corporate
resolution to Landlord or (ii) terminate this Lease.
*request
14.2 BROKERAGE COMMISSIONS: Tenant warrants that it has not had any dealings
with any real estate broker(s), leasing agent(s), finder(s) or salesmen, other
than the Brokers (as named in Article I) with respect to the lease by it of the
Leased Premises pursuant to this Lease, and that it will indemnify, defend with
competent counsel, and hold Landlord harmless from any liability for the payment
of any real estate brokerage commissions, leasing commissions or finder's fees
claimed by any other real estate broker(s), leasing agent(s), finder(s), or
salesmen to be earned or due and payable by reason of Tenant's agreement or
promise implied or otherwise) to pay (or to have Landlord pay) such a
Page Ex 10.27-Page 53
<PAGE>
commission or finder's fee by reason of its leasing the Leased Premises pursuant
to this Lease.
14.3 ENTIRE AGREEMENT: This Lease, the Exhibits (as described in Article 1)
and the Addenda (as described in Article 1), which Exhibits and Addenda are by
this reference incorporated herein, constitute the entire agreement between the
parties, and there are no other agreements, understandings or representations
between the parties relating to the lease by Landlord of the Leased Premises to
Tenant, except as expressed herein. No subsequent changes, modifications or
additions to this Lease shall be binding upon the parties unless in writing and
signed by both Landlord and Tenant.
14.4 LANDLORD'S REPRESENTATIONS: Tenant acknowledges that neither Landlord nor
any of its agents made any representation or warranties respecting the Project,
the Building or the Leased Premises, upon which Tenant relied in entering into
this Lease, which are not expressly set forth in this Lease. Tenant further
acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant's
intended use under existing Law, or (ii) the suitability of the Leased Premises
for the conduct of Tenant's business, or (iii) the exact square footage of the
Leased Premises, and that Tenant relied solely upon its own investigations
respecting said matters. Tenant expressly waives any and all claims for damage
by reason of any state- management, representation, warranty, promise or other
agreement of Landlord or Landlord's agent(s), if any, not contained in this
Lease or in any Addenda hereto.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
respective dates below set forth with the intent to be legally bound thereby as
of the Effective Date of this Lease first above set forth.
Page Ex 10.27-Page 54
<PAGE>
AS LANDLORD: AS TENANT:
Renco Investment Company Zitel Corporation
A California Partnership a California corporation
By: Richard T. Peery By: Henry C. Harris
------------------------ --------------------------
Title: General Partner Title: V.P., Finance & Admin.
--------------------- -----------------------
By: Donald E. Vermeil By: Jack H. King
------------------------ --------------------------
Title: General Partner Title: President & CEO
--------------------- -----------------------
William N. Neidig, President
Riverside Interests, Inc.
-----------------------------
Dated: 3/16/95 Dated: 3/15/95
--------------------- -----------------------
If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. This Lease must
be executed by the chairman of the board, president or vice-president, and the
secretary, assistant secretary, the chief financial officer or assistant
treasurer, unless the bylaws or a resolution of the board of directors shall
otherwise provide, in which event a certified copy, of the bylaws or a certified
copy of the resolution, as the case may be, must be attached to this Lease.
Single Tenant Lease
Page Ex 10.27-Page 55
<PAGE>
FIRST ADDENDUM TO LEASE
THIS FIRST ADDENDUM TO LEASE ("Addendum") is made to that Industrial Space Lease
dated as of 2/16, 1995 (the "Lease") by and between Renco Investment Company, a
California general partnership (as "Landlord"), and Zitel Corporation, a
California corporation (as "Tenant"), for the lease of space located at 47211
Bayside Parkway in Fremont California (the "Leased Premises"). The parties
hereto agree that the Lease is amended, changed and modified by the following
provisions, which are hereby added to the Lease:
Unless otherwise expressly provided herein, all terms which are given a special
definition by the Lease that are used herein are intended to be used with the
definition given to them by the Lease. The provisions of the Lease shall remain
in full force and effect except as specifically amended hereby. In the event of
any inconsistency between the Lease and this Addendum, the terms of this
Addendum shall prevail.
General: Landlord represents to the best of its knowledge that the Building and
Leased Premises complied with appropriate governmental regulations at the time
of its initial construction. Landlord also represents that to the best of its
knowledge there were no man made Hazardous Materials on the Property at the time
the Building was initially occupied by Credence Corporation, and Landlord is not
currently aware of any Hazardous Materials existing on the Property in violation
of governmental regulations.
2.6 Surrender of Possession: Landlord and Tenant acknowledge that Tenant is
currently in possession of the Leased Premises subject to a sublease between
Tenant as Sublessee and Credence Corporation as sublessor, and that the
Commencement date of this Lease coincides with the expiration date of the
sublease and the simultaneous termination of the lease between Landlord and
Credence Corporation. Tenant shall not be required to restore the Leased
Premises, the Outside Areas, and the Property to a condition better than the
condition which existed on the Commencement Date of the lease between Landlord
and Credence Corporation.
Landlord, Tenant and Credence Corporation will conduct a walk through of the
Property prior to the expiration of the sublease and establish what work Tenant
will require of Credence Corporation prior to the expiration of the sublease so
that Credence may comply with the surrender of possession obligations
Page Ex 10.27,Addendum-Page 56
<PAGE>
of the lease by and between Credence and Landlord. Landlord shall also advise
Tenant if Landlord will require that any existing improvements installed by
Credence or by Tenant during the sublease to be removed upon the termination of
this Lease. Credence shall either perform the required work or shall deposit
funds with Landlord to cover the reasonable cost of any required work. Any funds
deposited with Landlord shall be maintained in an account for Tenant's benefit
and shall be used at the expiration of this Lease to pay for the cost of work
required pursuant to the surrender of possession clause of this Lease. In the
event the funds so maintained are not adequate to satisfy the requirements of
the surrender of possession clause, Tenant shall pay any additional amounts
required.
Not less than two months nor more than six months prior to the expiration of
this Lease, Tenant may contact Landlord and arrange a walk through of the
Property for the purpose of Landlord advising Tenant of the work required of
Tenant in order to surrender possession of the Property to Landlord at the end
of this Lease. Provided Tenant performs such work identified by Landlord and all
other work required by Landlord as a result of a subsequent occurrence, or
subsequent discovery by Landlord, Tenant will be deemed to comply with the terms
of this section.
Tenant may at its option remove any and all alterations, improvements,
additions, and Utility Installations installed upon the Premises by Tenant,
provided, however, if Tenant elects to remove its installations as aforesaid and
such installations cannot be removed without material change to the Leased
Premises, Tenant shall restore the Premises to a reasonable state of repair. In
addition if the installation of any Tenant alteration, improvement, addition, or
utility, has displaced the interior improvements installed and paid for by
Landlord, then as additional consideration for Landlord allowing Tenant to
remove such improvements, Tenant shall restore the Premises affected to their
original condition as of the commencement date of the Credence lease, allowing
for ordinary wear and tear.
4.6 Signs: Landlord hereby approves of Tenant's signs located on the Property as
of the date of this Lease and agrees not unreasonably withhold its consent to
any additional signs that Tenant may desire.
4.14 D. Tenant shall not be required to pay the cost of annual environmental
audits in excess of two hundred dollars ($200.00) per year unless the audits
disclose the use of Hazardous Materials in violation of any governmental
regulation or standard
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<PAGE>
of good practice.
Tenant shall not be responsible for the cost of treatment or removal of
Hazardous Materials that enter the Property from below and through the surface
of the ground from an adjacent location.
Alterations (2.6 and 6.2) Notwithstanding anything contained in Article 2.6 or
6.2 herein, it requested by Tenant, Landlord shall make a determination as to
whether or not the Tenant interior improvements or alterations which Tenant
intends to install within the Leased Premises shall be allowed to remain at the
expiration or sooner termination of the Lease hereof. In the event Landlord
approves the alteration or installation as one which may remain upon the
expiration or sooner termination of the Lease hereof, Tenant shall not be
required to remove said alterations or improvements upon the surrender of
possession but such alterations or improvements shall be left in a condition
comparable to the condition of the remainder of the Premises upon such
surrender. In addition, Tenant shall not be required to obtain the consent of
Landlord prior to making alterations or interior improvements to the subject
Premises the total value does not exceed $10,000.00, provided, however, that
Tenant shall provide Landlord with plans for any improvements constructed in the
Premises.
8.1 Limitation on Landlord's Liability and Release: The following is added in
the noted sections: (1) of Landlord or any party acting on behalf of Landlord ..
(2) and Landlord hereby saves, defends, indemnifies and holds Tenant harmless
from and against any liability, loss, claim, cost or expense resulting
therefrom. The provisions of this article shall survive the expiration or
earlier termination of this lease for a period of two (2) years.
8.2 Tenant's Indemnification of Landlord: The following is added in the noted
sections:
(1) or any third party acting on behalf of Landlord, or any prior tenant of the
premises.
(2) for a period of two (2) years
10.2 Insurance Proceeds: The following is added in the noted sections:
(1) and/or Tenant as their interests may appear..
Page Ex 10.27,Addendum-Page 58
<PAGE>
11.2 Landlord's Right to Terminate: The following is added in the noted
sections:
(1) not to exceed fourteen (14) days,
11.5 Division of Condemnation Award: The following is added as noted:
(1) or for the value of Tenant's leasehold interest,
12.3 Landlord's Default: The following is added as noted:
(1) at the highest rate permitted by low.
Destruction; Tenant's Right to Terminate (10.4). The following is added as
Article 10.4 C.:
Landlord does not complete the restoration within six months from the
date of the damage, provided that such six month period of time shall
be extended for such number of days as Landlord may be delayed by
reason of Force Majeure.
Events of Tenant's Default (12.1). The following is added to the end of Article
12.1 B.:
... and Tenant fails to discontinue such act, use, or thing or remedy
its effects within 10 days after written notice from Landlord
specifying the nature of Tenant's default and requesting a cessation
and/or remedy of the same;
13.12 A. Real Property Taxes: Notwithstanding anything to the contrary contained
elsewhere in section "A", real estate taxes shall not include Landlord's income,
franchise, or transfer tax.
13.12 C Property Maintenance Costs: Property Maintenance Costs shall not
include: leasing commissions, or attorney's fees except as provided in the
lease, depreciation on the building or the properties, expenses in connection
with services or other benefits of a type that are not provided to Tenant but
which are provided another tenant or occupant, costs incurred due to Landlord's
violation of any terms of this lease or any other lease, overhead profit
increments paid to Landlord's affiliates where such costs would be in excess of
costs charged by third parties, property loan interest or ground rent,
advertising or promotional costs, costs for repairs due to fire, wind storm, or
other insurable event in excess of deductibles which Tenant is
Page Ex 10.27,Addendum-Page 59
<PAGE>
obligated to pay, costs for art, salaries of executives of Landlord, costs of
correcting violations of building codes for work installed by Landlord, costs of
removing toxic from ground water where the Toxics were not caused by Tenant or
its employees, agents, invitees, or suppliers, any costs, fines, or penalties
incurred due to violations by landlord of any governmental rule or authority,
provided that Tenant has not contributed to such violation.
15. With regard to Article 10.2 and 11.5, contained herein, it is hereby agreed
between Landlord and Tenant that prior to the division of any condemnation
awards or fire insurance proceeds, the interest of the Landlord's lender or
lenders on the subject premises shall be fully provided for, to the extent that
if the entire award or awards shall be required to provide for the full
satisfaction of the interests of lender, that neither Landlord nor Tenant shall
have any claim or a portion of such award or proceeds.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First Addendum To
Lease with the intent to be legally bound thereby, to be effective as of the
date the second party signs this First Addendum To Lease.
AS LANDLORD: AS TENANT:
Renco Investment Company Zitel Corporation
a California general partnership a California corporation
By: Richard T. Peery By: Henry C. Harris
------------------------ -----------------------
Title: General Partner Title: V.P., Fin & Admin.
--------------------- --------------------
By: Donald E. Vermeil By: Jack H. King
------------------------ -----------------------
Title: General Partner Title: President & CEO
--------------------- --------------------
William N. Neidig, President
Riverside Interests, Inc.
---------------------
Dated: 3/16/95 Dated: 3/15/95
--------------------- --------------------
Page Ex 10.27,Addendum-Page 60
<PAGE>
EXHIBIT "A"
Site Plan showing the Property and delineating the Building in which the Leased
Premises are located
RENCO 35
47211 Bayside Parkway
One Story Building
67,536 SF
Page Ex 10.27,Addendum-Page 61
<PAGE>
EXHIBIT "B"
Floor Plan outlining the Leased Premise
RENCO 35 TENANT IMPROVEMENT
BAYSIDE TECHNOLOGY PARK
47211 BAYSIDE PARKWAY
FREMONT, CALIFORNIA
Page Ex 10.27,Addendum-Page 62
<PAGE>
EXHIBIT "B"
Floor Plan outlining the Leased Premise
RENCO 35 TENANT IMPROVEMENT
BAYSIDE TECHNOLOGY PARK
47211 BAYSIDE PARKWAY
FREMONT, CALIFORNIA
Page Ex 10.27,Addendum-Page 63
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