U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ____________
Commission File No.: 0-13117
ION NETWORKS, INC.
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(Name of Small Business Issuer in Its Charter)
Delaware 22-2413505
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
21 Meridian Road, Edison, New Jersey 08820
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (732) 494-4440
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Securities registered under Section 12(b) of the Exchange Act: None
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
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[X] Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No ___
[ ] Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
The issuer's revenues for its most recent fiscal year totaled $12,673,917.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average of the bid and asked prices as reported by the
Nasdaq Stock Market as of July 8, 1999 was approximately $40,127,256.
There were 10,572,091 shares of Common Stock outstanding as of July 8, 1999.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the issuer's Definitive Proxy
Statement for the 1999 Annual Meeting of Stockholders of the Company are
incorporated by reference into Part III hereof.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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GENERAL
ION Networks, Inc. ("ION" or the "Company"), a Delaware corporation
founded in 1999 through the combination of two network management developers -
MicroFrame, Inc., a New Jersey corporation (the predecessor entity to the
Company, originally founded in 1982) and SolCom Systems Limited ("SolCom"), a
Scottish corporation located in Livingston, Scotland (originally founded in
1994), is a developer and manufacturer of software and hardware solutions for
monitoring and managing mission critical voice, data, video and environmental
applications and networking systems. The Company is seeking to participate in
the rapidly growing market of Secure Business Oriented Network Management
("SBONM") solutions. The Company believes that it provides an integrated
end-to-end solution offering secure, Web-based application performance and
network management/monitoring.
The networking industry has experienced rapid growth over the past
decade. Voice networks in the telecom environment have expanded rapidly to
accommodate increased demand caused by telecommuting and booming business
economics. Data networks have grown at an even higher rate, as personal
computing platforms have become increasingly cost effective and Internet traffic
has significantly increased. Substantial infrastructure has been built to
support the dramatic increase of traffic in data and voice networks, as well as
in the emerging video and environmental network arenas. The Company believes the
demand for secure integrated network monitoring and management solutions will
increase as networking technology becomes more complex and companies become more
reliant on their applications and networks for revenue generation and employee
productivity.
Secure business oriented network monitoring and management has quickly
become mission critical for efficient business operations. International Data
Corporation estimates that network downtime can cost as much as $1,000 per
minute (for each group of 2 servers and 100 computers). In addition,
unauthorized network access causes system disruption, information piracy and
toll fraud costing millions of dollars annually. Monitoring and managing a
widely-dispersed heterogeneous networking system can be labor intensive, tedious
and expensive. Basic network management solutions use remote monitoring ("RMON")
probes and/or network management platforms to remotely collect large volumes of
data from within a network and to troubleshoot network elements (such as hubs,
routers, and switches). SBONM solutions overlay basic networking tools and use
them to proactively monitor and manage application and network performance.
The Company's products target the SBONM marketplace. They provide
proactive, real time, metric and exception-based alarm and fault monitoring. In
addition, hardware and software options provide several types of authentication
methods to insure that only authorized personnel gain access
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to various network elements and systems (such as computers, local area networks
(LANs), wide area networks (WANs), routers, hubs, servers and Private Branch
Exchange telephone switches ("PBXs").
Network management solutions have evolved in a fragmented fashion.
Networking equipment has evolved into a complex myriad of devices serving a wide
variety of functions. Although there are many competitors in the market that
offer solutions, there is no single player dominating or covering the entire
spectrum of the market. The general trend within the industry has been to
consolidate the functionality of these devices into integrated packages. In an
emerging market such as SBONM, the Company believes that the first entity to
define the industry and market a comprehensive end-to-end turnkey solution will
dominate the industry. The Company believes that it currently offers its
customers a solution to address many of these issues.
PRINCIPAL PRODUCTS AND MARKETS
The Company has established a strong customer base (both domestically
and internationally) through a family of modularly designed, industry
standards-based hardware and software products. These products are designed to
interface with a customer's existing dial-up and/or in-band WAN and LAN
communications and network management systems. The Company believes that each of
these offerings meets and supports a wide variety of customer intranet/internet
security requirements.
In fiscal 1998 and fiscal 1999, the Company has continued its
evolutionary development of products that address its strategic direction and
goal of establishing a competitive position in the SBONM marketplace. This has
been effectuated through in-house development and the strategic acquisitions of
SolCom and certain assets of LeeMAH DataCom Security Corporation, located in
Fremont, California ("LeeMAH").
The Company offers a range of products designed to proactively monitor
and manage critical and complex networks and applications on a real time basis
utilizing its "Active Management Technology." The Company's products can measure
and manage an individual element within a network, or with additional software,
measure and manage the entire network. The Company's products can be deployed
independently, or bundled together as an integrated suite, allowing application
diversity and scalability.
At the base of the Company's product pyramid lies the Company's
traditional data collection agents, such as the RMON Probe network monitoring
agent, the Sentinel remote access network site management agent, and, planned in
the future, NetworX, an integrated suite of data collection agents that combines
the capabilities of the RMON Probe, the Sentinel and additional functionality.
The Company's PRIISMS (Proactive, Remote, Integrated, Intelligent,
Secure, Management, Solutions) gather and consolidate data from all agents on
all network segments and present it to the network manager in an easily
understandable format. The Company's products automate the management and
control of complex networks. "PRIISMS Utilities" allows real time analysis and
trouble shooting; "PRIISMS Stats" provides historical analysis and trending
capabilities; and "PRIISMS Manager" enables secure network management via any
web browser.
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The Company's goal is to be the market leader in Web-based PRIISMS. The
PRIISMS management suite combined with the NetworX integrated suite of data
collection devices, provides a powerful integrated tool and solution in the
SBONM market.
The Company has also continued to enhance its existing Secure Network
Systems/2000 ("SNS/2000"). This family of industry standards-based products is
designed to address the growing demand for remote network monitoring and
management of WAN and LAN traffic, as well as mission critical integrated voice
and data network elements. The SNS/2000 product family consists of Sentinel
2000, Sentinel 2000S and Manager 2000 product offerings. Such products comprise
a suite of network management capabilities that increase the operational
integrity, availability and access of mission-critical networks and network
elements.
SECURE REMOTE TELEMANAGEMENT/TELEMAINTENANCE
One major aspect of the SNS/2000 family of products is its design which
is to specifically reduce network "downtime" by significantly enhancing and
bringing new capabilities for proactive detection, reporting, handling and
resolution of alarm/fault conditions. It also directly addresses the requirement
to manage both "legacy" as well as standards-based communications resources
across widely dispersed heterogeneous network environments. The SNS/2000 product
set is web-enabled and Simple Network Management Protocol ("SNMP") compliant. It
offers stand-alone network management and remote access solutions which can be
fully integrated into existing SNMP-based central management systems and/or
Trouble Ticket Management Systems. Its SNMP proxy agent and networking
capabilities enables non-SNMP legacy devices (such as PBXx and voicemail
systems) to have network access and connectivity as well as to communicate with
SNMP network managers (e.g., HP/Openview, Cabletron Spectrum and IBM's Netview)
for more cohesive centralized control and management of all communications
resources.
SNS/2000 provides redundant, secured access and alarm monitoring to all
network resource maintenance ports via both in-band and out-of-band connectivity
to increase system reliability, access and availability. All network access
and/or access to network elements may be channeled through a secure central
gateway where users are authenticated and transparently routed only to
authorized destinations. Network elements are monitored by local intelligent
agents to proactively detect (and in many cases resolve) alarms and fault
conditions as well as threshold violations. This monitoring includes ensuring
that environmental conditions (e.g. temperature, moisture, battery voltage,
etc.) at various points in the network are also within preset thresholds.
Critical fault conditions are promptly identified and either resolved via the
intelligent agent technology of these products and/or immediately transmitted to
the appropriate management center for analysis, trouble ticket generation,
corrective action and escalation where appropriate. This enables organizations
to improve network availability through proactive response to potential network
problems before they manifest themselves in potential network outages.
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SECURE REMOTE ACCESS
A second aspect of the SNS/2000 family of products is designed to
address a rapidly growing group of telecommuters who are redefining the
boundaries of the traditional workplace. They are placing an increasing demand
for convenient remote access to network resources. By opening the networks to
meet these demands, the networks are left vulnerable to unauthorized entry. Such
unauthorized access carries security liabilities and exposure to critical
company resources, data and information. In addition, unauthorized users are
consuming valuable network bandwidth, thus reducing availability for legitimate
users. SNS/2000 offers remote access security solutions for host computers, LANs
and WANs, as well as other network elements by providing front-end barriers/
firewalls to prevent unauthorized network entry. Access control is managed,
monitored and administered via web-based architecture. Centralized
administration is provided to facilitate ease of administration, monitoring and
maintenance. Alerts are issued when user defined events occur and/or thresholds
are exceeded. Reporting capabilities are provided which are useful for
identifying trends and analyzing network utilization. A wide range of
authentication technology is supported and, based on operational needs, can be
incorporated into the Company's remote access security solutions.
Based on the Motorola 68360 Multi-controller processor chip, the
Sentinel 2000 is administered and maintained with the Company's new GUI
web-based Manager 2000 software product. The Sentinel 2000 integrates a wide
range of applications that provide for Secure Remote Network Management for a
wide variety of network elements. These include access security, alarm
management, environmental monitoring and control, PBX toll fraud detection and
remote device reboot and power management capabilities.
The Company has continued seeing strong acceptance of the Sentinel 2000
from such companies as PTT Holland (KPN), MCI Worldcom, AT&T, Lucent, RHYTHMS
NetConnections, Vyvx, Ameritech, U.S. West, TeleFinland (Sonera), Kaiser
Permanente and Telstra Australia. In fiscal 1999, the Company shipped
approximately 3,200 units of the Sentinel 2000, generating net revenues of
approximately $6,700,000, representing approximately 53% of the Company's net
revenues for the year.
MANAGER 2000
A second member of the Company's SNS/2000 family of products, Manager
2000, is a set of software applications that collectively provide a solution for
remote site-management and the servicing of exception based real time alarms
generated by remote monitoring equipment. Manager 2000 integrates the Sentinel
2000 and IPC/Secure Sentinel programmable remote-site managers with central-site
management tools to provide network managers and technicians with a seamless
network overview. Manager 2000 automates many time-consuming remote management
tasks for a faster response time, improved fault isolation, identification and
resolution, and differentiation of critical and non-critical events. In
conjunction with Sentinel systems, Manager 2000 can limit access to network
elements, maintenance ports and devices to authorized individuals only. The
authorized access is controlled at the central management site and in
combination (where deployed) with a local
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system. This permits frequent changes and the assignment of temporary privileges
to outsiders. Manager 2000 features include Alarm Processing, Trouble Ticket
Management, Secured Remote Site Access, Security, and Remote Site
Administration. All of this is done based on web-based industry standard
architecture (e.g., Windows 3.1, Windows/95, Windows N/T and ODBC), and is
designed for scalability.
NEW PRODUCTS AND MARKETS
On March 31, 1999, the Company acquired all of the outstanding share
capital of SolCom, based in Livingston, Scotland. SolCom, founded in 1992, is a
developer of remote monitoring technology. Originally approved by the Internet
Engineering Task Force (IETF) in 1992, Remote MONitoring, or RMON, is a standard
protocol for users to proactively monitor network traffic on LANs and WANs
across an enterprise network. RMON 1 identifies errors, alerts administrators to
network problems and baselines networks in addition to its remote network
analyzer capabilities. RMON's recent enhancement, RMON 2, enables network
managers to access higher-level network- wide application and protocol
information. RMON 2 also provides enterprise-wide and/or point-to- point traffic
statistics that enables real time network traffic performance/utilization
monitoring as well as trouble-shooting and network capacity planning for a wide
range of WAN and LAN networks including Frame relay and ATM. These products
include:
RMON ENGINE
The RMON Engine - With full RMON1/RMON2 support and powerful hardware,
this product simplifies network management in mixed LAN/WAN environments. The
chassis can be customized via three slots which may be populated with
combinations of a wide range of network interface cards. Interface cards are now
available for many popular LAN and WAN topologies including ATM and Frame Relay.
As network environments evolve, managers will seek to keep pace by altering the
combination of interface cards in the RMON Engine. All of the data gathered by
the RMON Engine may be retrieved by a management station via the SLIP port or
the 10/100 Mbps Ethernet port, both of which are built into the engine.
ETHERNET + RMON PROBE
This single port RMON probe is designed for full wire speed monitoring
of 10MB Ethernet networks. The ION Networks Ethernet + probe has full RMON and
RMON2 support plus ION Networks MIB extensions. It is utilized for monitoring
heavily loaded distributed Ethernet segments.
4-PORT ETHERNET + RMON PROBE (MULTI-SEGMENT ETHERNET ENVIRONMENT)
This 4 Port Ethernet 10/100MB RMON probe provides monitoring for either
10BaseT or 100BaseT networks and automatically detects which type is being
monitored. It is utilized for multi- segment and multi-speed environment
monitoring. One of the ports can be reserved as a telemetry interface
restricting management traffic to a LAN used for management purposes.
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4-PORT 10/100 (FAST) ETHERNET + (MULTI-SEGMENT FAST ETHERNET ENVIRONMENT)
With up to 128 MB of memory and full RMON support, the four-port 10/100
Ethernet probe provides 10 MB or 100MB Ethernet monitoring on each port. This
product pinpoints potential faults and provides the reactive power of an
analyzer.
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TOKEN RING RMON PROBE
The Token Ring 4/16MB RMON Probe fully implements all 20 groups of the
RMON standard providing monitoring for management of Token Ring and automatic
detection of which speed of Token Ring is being monitored.
FDDI RMON PROBE
The Company's FDDI RMON probe is available for single and dual attach
connections. It implements groups 3 through 9 of the RMON MIB and all of the
RMON2 MIB and uses proprietary MIB extensions to monitor ANSI X3T9.5 FDDI rings,
giving FDDI specific and historical information including SMT packet statistics.
The Company is in the process of developing products with two new
technologies, "NetworX" products and "ASIC" products. NetworX is being developed
by the Company as the industry's first comprehensive remote network management
platform. NetworX will be the industry's first integrated platform for
proactive, remote, secure management and monitoring of voice, data and video
networks. It uses "Dial Up", "Telnet" or "SNMP" connections so that managers can
monitor, evaluate and control all aspects of their network from a single, remote
point.
An ASIC is an Application Specific Integrated Circuit that incorporates
all the hardware and software required to carry out specific tasks on a single
chip. This will lead to a substantial increase in processing speed and reduction
in build cost. Designing the ASIC requires the Company to experience a steep
learning curve while its engineers become familiar with this technology.
Initially there will be one ASIC but once the initial ASIC has been developed
there will be an ongoing development to introduce more capabilities and features
into ASICs.
OTHER PRODUCTS AND MARKETS
Recognizing that organizations were restructuring data processing away
from centralized mainframes and into various network configurations, the Company
re-engineered its original fixed- function, "black box" product into a flexible,
programmable hardware/software system capable of securing access at a wide
variety of "nodes" in the network. The foundation of this re-design was the
development of a proprietary software "engine," which maximizes the
programmability of the hardware, defining and controlling the functions to be
performed by various hardware components. Beginning in 1991, the Company
determined that an additional related market opportunity was developing with the
proliferation of PBXs, voice-mail systems and other privately owned voice
communications systems and security devices. The Company believes that theft of
long distance telephone services ("toll fraud") through unauthorized access to
these devices has resulted in substantial losses. Thus the support of PBXs
through the development and marketing of data communications security products
has witnessed substantial customer demand for greater system reliability,
protection against toll fraud and security against network intrusion.
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A vulnerability of these systems results from the fact that PBXs and
other devices used in the voice communications system have remote maintenance
and administrative "ports." These ports permit a system administrator or
maintenance personnel to "dial in" or gain access to a device electronically, by
telephone, and to monitor and, if necessary, change or manipulate the software
and hardware embedded in the equipment. This can be accomplished without having
a physical presence at the site where the equipment is located. Without proper
security, an unauthorized user can gain access to a system through one of these
ports, a potential exposure of PBX customers to toll fraud. With a remote
maintenance facility, PBX and other telecommunications product vendors can
respond to and provide their customers with cost-effective solutions that
address customer demand for highly responsive service for their products.
After initiating discussions with major PBX suppliers, the Company
developed a group of products, referred to as "Intelligent Port Controllers"
("IPC"), designed to provide security for the dial-in access remote ports. Among
these products are a Remote Port Security Device (RPSD(TM)), which was designed
and manufactured exclusively for AT&T (now Lucent Technologies) beginning in
1991 and the Secure Sentinel(TM) family of devices, which was introduced by the
Company in 1992.
The RPSD is provided on an original equipment manufacturer ("OEM")
basis under Lucent Technologies' own label as a security device for Lucent
Technologies' Definity PBX. Over 22,800 RPSD units have been shipped to Lucent
Technologies since 1991.
The Secure Sentinel(TM) is a family of programmable hardware platforms
that combine security management of remote maintenance ports, protection against
toll fraud, fault and alarm reporting functions and real-time call detail record
analysis. Since its introduction, the Company has expanded both the number of
Secure Sentinels(TM) offered and the functionality of each, shipping more than
13,200 units which has accounted for more than $15,500,000 in revenue. During
fiscal 1999, sales from the Secure Sentinel(TM) product line were responsible
for approximately 8% of the Company's overall revenue.
OVERALL TARGET MARKETS
The requirement for increased service levels and overall network
availability, especially for mission-critical applications and networks, has
created a rapidly growing market demand for products to address this business
demand. SBONM offerings include application performance monitoring products,
alarm monitoring systems which monitor network elements and their internal
diagnostic routines and fault tables, determine alarm status, and automatically
execute appropriate reporting and/or corrective action procedures.
The Company believes its products are well positioned to take advantage
of what it believes are current significant trends in data communications and
voice communications networks. In the view of the Company's management,
organizations are seeking to increase productivity by providing sophisticated
communications networks that connect all of their separate units, whether
locally, nationally or internationally. As the price of equipment decreases and
power increases, such networks
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become cost effective, justifiable and possible for more and more groups, and it
becomes feasible to introduce sophisticated networks into technologically less
advanced regions regardless of size. At the same time, more of such
organizations' data and other resources are being made available to more users
by means of these systems. These market dynamics are causing networks to become
an ever increasing and vital source of revenue generation as well as employee
productivity. Therefore, proactive management of these networks to insure
network availability, which, in turn supports employee productivity as well as
revenue generation, is increasingly becoming a necessary imperative for all
companies. Because of these market factors, the Company believes that the
security and network and application performance management issues resulting
from this growth will generate demand for the Company's products.
SUPPORT SERVICES
In addition to the normal training, installation and repair services,
the Company also provides professional services, including consulting,
specialized programming and turnkey installations.
MARKETING AND DISTRIBUTION
The Company believes that the market for SBONM products is rapidly
emerging and growing. Therefore, the Company is approaching this market with a
highly focused integrated marketing strategy. The Company's PRIISMS family of
products as well as SNS/2000 family of products have been sold and, the Company
believes, will continue to be sold to major telecommunications companies,
networking companies, network security customers, systems integrators, facility
managers and others via the Company's direct sales organization, OEM
relationships, in-house telemarketing efforts and selected distributors.
In fiscal 1999, the Company continued expansion of its direct sales
force and its network of distributors into major geographic markets in the
United States as well as internationally. As this sales and distribution network
is established and continues to grow, the telemarketing effort will be
redirected to generate sales leads by the Company and to provide support for the
field organization. In addition, the Company will look to continue to expand its
OEM relationships as well as channels of distribution via major systems
integrators, facilities management companies and network outsourcers.
COMPETITION
The market for network management and remote maintenance and security
products for mission critical voice and data communications networks is highly
competitive. There can be no assurance that the proprietary technology which
forms the basis for most of the Company's family of modular standards oriented
hardware and software components will continue to enjoy market acceptance or
that the Company will be able to compete successfully on an on-going basis. The
Company believes that the principal factors affecting competition in the network
management
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business are: (1) the products' ability to meet a multiplicity of network
management and security requirements; (2) the products' ability to conform to
the network topologies and/or computer systems; (3) the products' ability to
avoid technological obsolescence; (4) the willingness and the ability of a
vendor to support customization, training and installation; and (5) the price.
Although the Company believes that its present products and services are
competitive, the Company competes with a number of large computer, electronics
and telecommunications manufacturers which have financial, research and
development, marketing and technical resources substantially greater than those
of the Company, including without limitation, Net Scout Inc., Hewlett-Packard,
Inc., 3Com Corp., Technically Elite, Inc., Bay Networks Inc., Shomiti Systems
Inc., Visual Networks, Inc., Concord Communications, Inc. and Sync Research,
Inc. Such companies may succeed in producing and distributing competitive
products more effectively than the Company can produce and distribute its
products, and may also develop new products which compete effectively with those
of the Company.
SOURCES AND AVAILABILITY OF MATERIALS
The Company designs its products utilizing readily available parts
manufactured by multiple suppliers and the Company currently relies on and
intends to continue to rely on these suppliers. The Company has been and expects
to continue to be able to obtain the parts generally required to manufacture its
products without any significant interruption or sudden price increase, although
there can be no assurance that the Company will be able to continue to do so.
The Company sometimes utilizes a component available from only one
supplier. If a supplier was to cease to supply this component, the Company would
most likely have to redesign a feature of the affected device. In these
situations, the Company maintains a greater supply of the component on hand in
order to allow the time necessary to effectuate a redesign or alternative course
of action should the need arise.
DEPENDENCE ON PARTICULAR CUSTOMERS
The Company has continued to expand its customer base and broaden its
sales constituency. These efforts have resulted in the Company becoming less
reliant on any one particular customer. However, the Company sells a substantial
portion of its products to several major customers, i.e., PTT Holland (KPN),
Lucent Technologies, AT&T, RHYTHMS NetConnections and MCI Worldcom. Sales to
these customers represented approximately 61% of the Company's revenue in fiscal
1999. As a result of the SolCom and LeeMAH acquisitions, relationships with
Siemens Corporation, Hewlett-Packard, Inc. and Bell South were established. The
loss of any of these customers would be likely to have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company also has major OEM relationships with two of these
customers, Lucent Technologies and the Hewlett-Packard Company, which represent
in the aggregate approximately 21% of the Company's fiscal 1999 revenues.
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The Company's installed customer base is estimated to number over 200
companies constituting more than 2,300 customer sites and over 20,000 systems
worldwide. In the United States, virtually all of the Company's customers are
Fortune 1,000 industrial companies and large U.S. financial institutions.
Customers in the U.S. represented approximately 79% and 75% of the Company's
revenue in fiscal 1999 and fiscal 1998, respectively.
Under an agreement with Lucent Technologies, the Company has been
manufacturing the RPSD for Lucent's resale to its PBX customers. As of the end
of fiscal 1999, Lucent had purchased and installed more than 22,800 RPSD units.
INTELLECTUAL PROPERTY, LICENSES AND LABOR CONTRACTS
The Company holds no patents on any of its technology. Although the
Company licenses some of its technology from third parties, it does not consider
any of these licenses to be critical to the Company's operations.
The Company has made a consistent effort to minimize the ability of
competitors to duplicate the Company's software technology utilized in its
products. However, the possibility of duplication of the Company's products
remains and competing products have already been introduced.
The Company's name and the Secure Sentinel name are registered
trademarks of the Company filed with the United States Patent and Trademark
Office ("PTO"). The Company also has trademark applications pending with the PTO
for PRIISMS Manager, NetworX,Sentinel 2000, Sentinel 2000S, Manager 2000 and
Secure Network Systems 2000. The Company anticipates that these trademarks shall
be registered but there can be no assurance that such will occur.
GOVERNMENTAL APPROVALS REQUIRED AND EFFECT OF GOVERNMENT REGULATION
Due to the sophistication of the technology employed in the Company's
products, export thereof is subject to governmental regulation. As required by
law or demanded by customer contract, the Company obtains approval of its
products by Underwriters' Laboratories. Additionally, because many of the
Company's products interface with telecommunications networks, its products are
subject to several key Federal Communications Commission ("FCC") rules that
often requires FCC approval.
Part 68 of the FCC rules contains the majority of the technical
requirements with which telephone systems must comply to qualify for FCC
registration for interconnection to the public telephone network. Part 68
registration requires telecommunication equipment interfacing with the public
telephone network comply with certain interference parameters and other
technical specifications. FCC Part 68 registration for the Company's products
has been granted and the Company intends to apply for FCC Part 68 registration
for all of its new and future products.
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Part 15 of the FCC rules requires equipment classified as containing a
Class A computing device to meet certain radio and television interference
requirements, especially as they relate to operation of such equipment in a
residential area. Certain of the Company's products are subject to and comply
with Part 15.
The European Community has developed a similar set of requirements for
its members and the Company has begun the compliance process of its products for
Europe.
Additionally, the Company has certified certain of its products
(Sentinel 2000 and NetworX) to the NEBS (Network Equipment Business
Specification) level of certification. This is a certification that was
developed by Bellcore and is vital to meet the requirements of the Company's
telecommunications customers.
Although the Company has not experienced any difficulties obtaining
such approvals, failure to obtain approval for new and future products could
have a material adverse effect on the Company's business. The Company has
obtained licenses to export certain of its products in limited quantities to
Sweden, Norway, Switzerland, South Africa, the United Kingdom, France, Italy,
Germany, Australia and Singapore.
RESEARCH AND DEVELOPMENT ACTIVITIES
During fiscal 1999, the Company expanded its research and development
activities substantially, both internally and through the strategic acquisitions
of SolCom and the purchase of certain assets of LeeMAH. The Company continued
development of its "next generation" of products built on a new architecture
that is ultimately intended to replace its IPC products - the Secure
Sentinel(TM) and RPSD - referred to collectively as SNS/2000. This family of
products is designed to address the growing demand for application and network
performance monitoring, remote element network management and security of
mission-critical integrated voice and data networks. In addition, the Company
supported development on the RMON Probe network monitoring agent, NetworX and
PRIISMS in both the Livingston and Edison locations. Research and development
expenses in connection therewith were $2,952,897 in fiscal 1999 and $1,117,151
in fiscal 1998.
The purchase price allocation for SolCom included a charge for
in-process research and development ("IPR&D") of $3,490,177. IPR&D included
certain of the research and development projects which were currently underway
at SolCom at the time of the acquisition. These projects fall into two broad
categories: "NetworX" products and "ASIC" products. Modular and Sentinel III
products, although categorized and valued separately due to the nature of the
lifecycle and expense assumptions, come within the NetworX technology as
defined. NetworX products will allow network managers to evaluate and control
all aspects of their networks. ASIC products are designed to create an
integrated computer chip that carries all the application hardware and software
necessary to carry out specific tasks, with increased processing speed and lower
cost.
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COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company's business is not subject to regulations involving
discharge of materials into the environment.
EMPLOYEES
As of July 9, 1999, the Company had 126 employees, all of whom are
full-time employees, and of which 63 are technical personnel, 25 are in sales,
marketing and support, 14 are in production and 24 are in executive, financial
and administrative capacities. None of the Company's employees are represented
by labor unions. The Company considers its relations with its employees to be
satisfactory.
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ITEM 2. DESCRIPTION OF PROPERTY.
-----------------------
The Company currently leases 8,900 square feet of space at 21 Meridian
Road, Edison, New Jersey for its administrative, sales and marketing and
research and development functions. This lease, as amended, provides for a
monthly rental of $5,579.92 and expires on August 31, 1999. An additional 2,000
square feet of office space and 2,600 square feet of warehouse space is
currently leased to another tenant with an expiration date of June 30, 1999. The
Company is the sole guarantor for the full performance of this tenant's
obligations through the expiration date. In addition, the Company currently
leases 5,112 square feet of space at 300E Corporate Court, South Plainfield, New
Jersey for its finance, manufacturing, and warehousing functions. This lease, as
amended, provides for a monthly rental of $3,408.00 and expires on August 31,
1999.
The Company also leases 245 square meters of office space in Antwerp,
Belgium for its European operating headquarters. This lease provides for a
monthly rental of 81,083 Belgian Francs per month (US$2,316.00 at an exchange
rate of 35BEF to 1US$) and expires on July 31, 2005, with an option of the
Company to terminate the lease on either July 31, 1999 or July 31, 2002, as
applicable.
In addition, the Company leases 0.298 hectare of space at SolCom House,
Meikle Road, Kirkton Campus, Livingston EH547DE, Scotland as well as 436 square
feet of space at 1801 Robert Fulton Drive, Suite 400, Reston, Virginia 20191 in
connection with the operations of SolCom and SolCom Systems Inc., a wholly-owned
subsidiary of SolCom, respectively. These leases provide for monthly rentals of
(pound)3,583 and $3,675, respectively, and expire on August 31, 2011 and
February 28, 2000, respectively.
The Company also leases approximately 5,600 square feet of space at
48834 Kato Road, Fremont, California in the Bedford Fremont Business Center in
connection with the Company's LeeMAH division located in Fremont, California.
This lease commenced on June 1, 1999 and is for a term of 60 months with monthly
rent payable by the Company to the landlord as follows: $7,360 per month for the
first 12 months of the term; $7,590 per month for months 13-24; $7,820 per month
for months 25-36; $8,050 per month for months 37-48; and $8,280 per month for
months 49-60.
Commencing in August 1999, the Company will relocate its principal
executive offices to 1551 South Washington Avenue, Piscataway, New Jersey,
pursuant to a lease dated February 18, 1999, in which the Company will lease
26,247 square feet of space from Washington Plaza Associates, L.P. This lease is
for a term of ten (10) years with monthly rent payable by the Company to the
landlord as follows: $511,816.56 for the first two years of the term; $551,187
for the next year of the term; $557,748.72 for the next year of the term;
$610,242.72 for the next three years of the term; and $662,242.72 for the
remaining three years of the term. In accordance with the lease, the Company is
also obligated to make additional payments to the landlord relating to certain
taxes and operating expenses.
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The Company believes that it has adequate space to meet its current
operating needs and growth requirements for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
There are no material pending legal proceedings to which the Company is
a party or to which any of its properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
--------------------------------------------------------
MARKET INFORMATION
The Company's common stock, par value $.001 per share (the "Common
Stock"), is listed on the NASDAQ SmallCap Market under the symbol "IONN". The
following table sets forth the high ask and low bid prices of the Common Stock
for the periods indicated as reported on the NASDAQ SmallCap Market.
Fiscal Year 1999 HIGH LOW
---------------- ---- ---
June 30 43/4 23/4
September 30 3 7/16 1 1/8
December 31 3 5/8 11/2
March 31 3 13/4
Fiscal Year 1998
----------------
June 30 2 1/8 15/8
September 30 13/4 1 1/4
December 31 1 15/16 1 5/16
March 31 2 13/16 1 1/8
RECENT SALES OF UNREGISTERED SECURITIES
On March 31, 1999, the Company issued an aggregate of 2,200,233
shares of Common Stock (the "SolCom Shares") and options to purchase 451,188
shares of Common Stock to the holders of SolCom in consideration of the
acquisition by the Company of all of the outstanding share capital of SolCom.
The Company also granted to employees of SolCom options to purchase up to an
additional 48,369 shares of Common Stock. In addition, the Company granted
300,000 performance-based options to certain employees of SolCom, 150,000 of
which will vest in fiscal year 2000 and the remaining 150,000 of which will vest
in fiscal year 2001, provided that, the Company attains revenues of $30 million
and $60 million in fiscal years 2000 and 2001, respectively. Such options
terminate in the event the revenue targets are not achieved. The SolCom Shares
were issued pursuant to Section 4(2) of, and Regulation S promulgated under, the
Securities Act of 1933, as amended (the "Act"), to shareholders of SolCom
residing outside the United States and to one accredited investor residing in
the United States. The options granted are exercisable immediately and have
exercise prices ranging from $0.4826 per share to $1.8016 per share and
expiration dates ranging from four to ten years.
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On February 25, 1999, the Company acquired certain selected assets
of LeeMAH in consideration of the delivery by the Company to LeeMAH of a
promissory note in the principal amount of $1,000,000 with interest thereon at
the rate of six (6%) percent per annum, payable in one balloon payment within 90
days thereafter. Effective March 31, 1999, the Note was terminated by agreement
of the parties in exchange for the issuance to LeeMAH of 444,000 shares of
Common Stock, pursuant to Section 4(2) under the Act.
On June 7, 1999, the Company issued an aggregate of 1,000,000
shares of Common Stock and warrants to purchase an aggregate of 500,000 shares
of Common Stock to Special Situations Private Equity Fund, L.P. ("Special
Situations") and certain affiliated entities of Special Situations in
consideration of an amount equal to $3,000,000, pursuant to Section 4(2) under
the Act. The terms of the warrants are three years and the exercise prices
thereof are $4.50 per share for 250,000 warrants and $6.00 per share for the
remaining 250,000 warrants.
SECURITY HOLDERS
As of July 8, 1999, there were 232 holders of record of the Common
Stock (not including beneficial owners of Common Stock held by brokers in street
name).
DIVIDENDS
The Company has not paid any cash dividends on its Common Stock
during the two fiscal years ended March 31, 1999 and March 31, 1998. The Company
presently intends to retain all earnings to finance its operations and therefore
does not presently anticipate paying any cash dividends in the foreseeable
future.
Under the terms of the Company's credit agreement with United
National Bank ("United"), the Company may not, without the prior written consent
of United, declare or pay any dividends in cash or otherwise on any shares of
capital stock of the Company.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
---------------------------------------------------------
A NUMBER OF STATEMENTS CONTAINED IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 THAT
INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN THE APPLICABLE STATEMENTS. THESE
RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THE RECENT INTRODUCTION
AND THE COSTS ASSOCIATED WITH, A NEW FAMILY OF PRODUCTS; DEPENDENCE ON THE
ACCEPTANCE OF THIS NEW FAMILY OF PRODUCTS; UNCERTAINTY AS TO THE ACCEPTANCE OF
THE COMPANY'S PRODUCTS GENERALLY; RISKS RELATED TO TECHNOLOGICAL FACTORS;
POTENTIAL MANUFACTURING DIFFICULTIES; UNCERTAINTY OF PRODUCT DEVELOPMENT;
UNCERTAINTY OF ADEQUATE FINANCING; DEPENDENCE ON THIRD PARTIES; DEPENDENCE ON
KEY PERSONNEL; COMPETITION; A LIMITED CUSTOMER BASE; RISK OF SYSTEM FAILURE,
SECURITY RISKS AND LIABILITY RISKS; RISK OF REQUIREMENTS TO COMPLY WITH
GOVERNMENT REGULATIONS; VULNERABILITY TO RAPID INDUSTRY CHANGE AND TECHNOLOGICAL
OBSOLESCENCE; AND GENERAL ECONOMIC CONDITIONS. UNLESS OTHERWISE REQUIRED BY
APPLICABLE SECURITIES LAWS, THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH
FORWARD-LOOKING STATEMENTS, OR TO UPDATE THE REASONS WHY ACTUAL RESULTS COULD
DIFFER FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.
OVERVIEW/PLAN OF OPERATION
Fiscal 1999 was an important transition year in the Company's
history. The Company sought to capitalize on the emerging SBONM marketplace,
principally through a significant increase in research and development and sales
staff, as well as the strategic acquisitions of SolCom and LeeMAH.
In March 1999, the Company acquired all of the outstanding shares
of SolCom in exchange for 2,200,233 shares of Common Stock and an aggregate of
up to 499,557 options to purchase Common Stock, which had an aggregate value of
$6,211,880 at the time of issuance. The acquisition resulted in an allocation of
$1,869,034 to goodwill and $3,855,000 to existing technology. The amortization
periods for both are three years. SolCom is a developer of remote monitoring
technology, a standard protocol for users to proactively manage multiple LANs
and WANs from a central site. Following the acquisition by MicroFrame, Inc., a
New Jersey corporation and predecessor entity to the Company ("MicroFrame") of
SolCom, the Company changed its name to Ion Networks, Inc. principally to be
more reflective of the Company's market position and overall strategic
direction.
In February 1999, the Company acquired certain of the operating
assets of LeeMAH in exchange for a $1,000,000 promissory note, which was
exchanged in March 1999 for 444,000 shares of Common Stock. LeeMAH is a provider
of hardware and software security solutions designed to control both dial-in and
web-based access to critical corporate resources.
During the next 12 months, the Company plans to attempt to
capitalize on these two significant acquisitions in terms of both product
offerings and new customer relationships. The Company's goal is to develop a new
family of products through the incorporation of remote
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monitoring technology acquired in connection with the SolCom acquisition into
existing features of the Company's Sentinel product line via the Company's
"Active Management Technology." With the addition of a number of new customers,
the Company will seek to strengthen its worldwide customer base, which includes
U.S. and international telecommunication providers, CLECs, "Private Branch
Exchange" vendors, financial institutions, Fortune 500 companies and
governmental agencies.
During fiscal 1999, the Company maintained relationships with
Lucent Technologies, MCI WorldCom, KPN-Telecom (formerly PTT), AT&T, SBC
Communications, and US WEST Communications Services. Several new relationships
were formed during the fiscal year, the most significant being RHYTHMS
NetConnections. As a result of the SolCom and LeeMAH acquisitions, relationships
with Siemens Corporation, Hewlett-Packard, Inc. and BellSouth were gained.
The Company's employee base increased from 46 full-time employees
in fiscal 1998 to 126 in fiscal 1999. Of this growth of 80 employees, 46 were
added as a result of the SolCom acquisition, 12 were added as a result of the
LeeMAH acquisition, and the remaining 22 were a result of internal growth. As a
result of such growth, the Company has signed a lease commitment to move its
principal executive offices to Piscataway, New Jersey in August 1999.
RESULTS OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Revenues for the year ended March 31, 1999 were $12,673,917 as
compared with revenues of $10,217,911 for the year ended March 31, 1998, an
increase of approximately 24%. This increase was primarily due to a significant
increase (approximately 151%) in shipments of the Company's Sentinel 2000
product. The Company shipped approximately 3,200 units of the Sentinel 2000,
generating net revenues of approximately $6,700,000, representing approximately
53% of overall revenue. During fiscal 1998, approximately 1,100 such units were
sold, generating net revenues of approximately $2,670,000, or 26% of overall
revenue for such year.
From a geographic standpoint, the Company's net revenue increase
was achieved solely on the domestic side. Shipments to customers in the United
States were approximately $10,050,000 (79% of total revenues) in fiscal 1999 as
compared to approximately $7,430,000 (73%) in fiscal 1998, representing an
increase of 35%. Shipments by the Company to the European market, principally
including shipments under its contract with PTT Holland, were approximately
$2,580,000 (20%) for the year ended March 31, 1999 compared to approximately
$2,670,000 (26%) for the year ended March 31, 1998, a decrease of 3%. With the
acquisition of SolCom, it is the Company's intention to increase its presence in
the European market.
The Company's cost of goods sold increased to $5,464,708 for the
year ended March 31, 1999 compared to $4,285,134 for the year ended March 31,
1998 as a result of increased shipment levels. Cost of goods sold as a
percentage of sales increased from 42% for the previous comparable fiscal period
to 43% for this fiscal period, primarily due to product mix.
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Research and development expenses, net of capitalized software
development, increased from $1,117,151 in the year ended March 31, 1998 to
$2,952,597 in the current fiscal year, an increase of 164%. As a percentage of
revenues, research and development expenses increased from approximately 11% to
23%. This substantial increase is primarily due to two major reasons. First,
approximately $750,000 (of a total funding of $1,250,000, a portion of which was
capitalized as software development assets) was funded to SolCom for its ongoing
research and development operations in the second half of fiscal 1999. Second,
the internal research and development staff of the Company was more than doubled
during fiscal 1999 in order to continue to provide increased support to the
Sentinel 2000 family of products as well as to commence the development of the
next generation of products through a combination of MicroFrame and SolCom
technology.
Selling, general and administrative expenses increased 46% from
$4,419,521 for fiscal 1998 to $6,473,638 for the year ended March 31, 1999. As a
percentage of revenues, selling, general and administrative expenses increased
from approximately 43% to 51%. This increase was primarily due to the addition
of sales and administrative infrastructure to support the two aforementioned
acquisitions, as well as the Company's organic growth.
The Company had a loss before taxes of $5,764,764 for the year
ended March 31, 1999 compared to income before taxes of $406,649 for the year
ended March 31, 1998, primarily due to acquisition-related costs. The current
year loss includes a one-time charge for IPR&D of $3,490,177 in connection with
the SolCom acquisition. In addition, the loss has been incurred due to the large
increase in research and development expenses as well as the expansion of the
Company's infrastructure. The net loss for the year ended March 31, 1999 was
$5,997,003 compared to net income of $711,310 for the prior fiscal year. At
March 31, 1999, the Company had federal, state, and foreign net operating loss
carryforwards of approximately $3,893,996, $2,972,647, and $811,737,
respectively, to offset future taxable income. The expiration dates for its net
operating losses range from the years 2011 through 2014.
IN-PROCESS RESEARCH AND DEVELOPMENT
In connection with the acquisition of SolCom in the fourth quarter
of fiscal 1999, the Company allocated $3,490,177 of the purchase price thereof
to purchased IPR&D. The value allocated to purchased IPR&D was determined
utilizing an income approach that included an excess earnings analysis
reflecting the appropriate cost of capital for the investment. Estimates of
future cash flows related to the IPR&D were made for each project based on the
Company's estimates of revenue, operating expenses and income taxes from the
project. The valuation included a state of completion adjustment, which utilizes
the same cash flows as the excess earnings analysis, but removes all research
and development costs to complete the identified project.
The discount rates utilized to discount the projected cash flows
were based on consideration of the risk profile and the nature of each project
and the market. Other factors considered in the determination of the discount
rates include the useful life of each project, the
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anticipated profitability of each project, the uncertainty of technology
advances that were known at the time and the stage of completion of each
project.
DESCRIPTION OF PRODUCTS
SolCom's Modular product line, although valued separately, falls
under the NetworX technology as defined below. SolCom is developing NetworX as
the industry's first comprehensive management tool. NetworX will be the
industry's first integrated platform for proactive, remote, secure management
and monitoring of voice, data and video networks. It uses Dial up, Telnet or
SNMP connections so that managers can monitor, evaluate and control all aspects
of their network from a single, remote point.
Sentinel products offer a range of comprehensive site management
tools for centralized remote maintenance of large distributed voice and data
networks. All Sentinel products will feature Alarm & Fault Management, PBX Toll
Fraud Detection, Environmental Monitoring and Control as well as Security Access
Management. Sentinel III is an intelligent port controller that will secure
remote access to voice and data network node maintenance ports. The technology
will combine remote monitoring and Sentinel network device management, allowing
control of a network as well as a comprehensive picture of its activities. It is
expected to be a low cost integrated platform for proactive, remote, secure
management and monitoring of voice, data and video networks. Sentinel III has
all the security features of Sentinel and Sentinel Slimline, combined with the
remote monitoring capabilities of NetworX.
An ASIC is an Application Specific Integrated Circuit that
incorporates all the hardware and software required to carry out specific tasks
on a single chip. This will lead to a substantial increase in processing speed
and reduction in build cost. Designing the ASIC requires the Company to
experience a learning curve while the engineers become familiar with this
technology. Initially there will be one ASIC but once the initial ASIC has been
developed, there will be an ongoing development to introduce more capabilities
and features into ASICs.
In general, the major risks for the IPR&D products consists of:
Time to market; meeting anticipated sales and COGS levels; and providing
competitive products. On a more specific level, each IPR&D product still needs
developments to be completed prior to commercial release.
The remaining risks for the Modular products are ensuring that
the cards operate as expected when fitted to the "RMON" Engine. Furthermore,
SolCom must make sure that the Modular products reach the expected performance
levels during testing.
NetworX requires that the hardware development is complete with
all of the associated drivers. The new operating system has to be running
correctly and the developed code needs to be completed, ported to NetworX and
launched. Daughter cards for the NetworX system have to be completed along with
all associated drivers. The software needs to be completed for the daughter
cards and then the daughter cards need to be tested in the NetworX platform.
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Sentinel III requires that the hardware development is completed
and the associated software drivers are completed and operational.
The new ASIC-based products need much more extensive development
efforts. First, since the technology is so new, the engineers need to complete
their familiarization with the technology. SolCom needs to find a chip
manufacturer with which to work. The cards have to have their design verified
and have to be tested both with the NetworX motherboard and the new NetworX
operating system, with many expected refinements. Finally, the chip will need to
be manufactured. ASIC then needs to be tested to verify that it will meet the
required performance levels prior to releasing the technology.
Modular products have been in development since early fiscal
year 1999 and $230,928 was spent on Modular products as of March 31, 1999. An
additional $57,732 is expected to be spent in order to release the Modular
products. The Sentinel III product is expected to be released in the market in
June 1999. To date, SolCom has spent $67,354 on research and development and
expects to spend an additional $15,395 prior to release. Management has
projected revenues for Sentinel III beginning in 2000. As of March 31, 1999,
$250,172 was spent on research and development for the NetworX products. Another
$45,395 of research and development expenses has been budgeted to complete these
products. NetworX products are expected to be commercially released in June of
1999 but management has projected NetworX products to start generating revenues
in fiscal year 2000. ASIC-based products are less complete than NetworX. As of
consummation of the SolCom acquisition, only $105,842 in research and
development expenses were spent and it is expected that ASIC products will need
another $350,000 in order to become technologically and commercially feasible.
ASIC is expected to be launched in the first half of fiscal year 2001 and
management has projected revenues beginning in fiscal year 2001.
ANALYSIS OF PRODUCTS/IPR&D
SolCom was analyzed on a stand-alone basis. The analysis was adjusted so that
any projections for products that were known to include the Company's technology
and/or know-how were reduced to reflect only SolCom's efforts and contributions
as appropriate. The Company is contributing technology to both Sentinel III and
the NetworX Motherboard product of 30% and 20%, respectively. The percentage
attributable to the Company's technology was eliminated from the product's value
in the analysis. For example, the present value of cash flow for Sentinel III is
approximately $2.1 million. After adjusting the cash flows to exclude the
Company's portion of those cash flows, the SolCom value decreases to $1.5
million. After adjusting for the stage of completion, Sentinel III value
accounted for as IPR&D is $1.2 million.
The Company's professional appraisal firm has updated the
valuation models to comply with the stage of completion and multiple discount
rate guidance that has been issued by the Securities and Exchange Commission.
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The analysis that has been performed by the Company's
professional appraisal firm concluded an IPR&D value of $3,490,177. The IPR&D is
comprised of $77,062 for Modular Products, $2,043,539 for NetworX products,
$1,224,702 for Sentinel III and $144,874 for ASIC- based products. The following
discussion provides information regarding the expected revenue to be generated
by these projects, associated costs of the projects, the period over which the
revenues will be generated and the stage of completion of each project at the
time of acquisition.
The value allocated to acquired IPR&D for the SolCom acquisition
as of the closing on March 31, 1999 was determined utilizing the income approach
via an excess earnings analysis. This methodology requires the projection of
revenues and expense that will arise as a result of the successful completion of
the IPR&D project. The operating income attributable to each IPR&D project was
calculated as projected revenues less the projected operating expenses. Net
operating income is calculated after applying the projected effective tax rate
for the Company.
A charge was taken to reflect the economic rent related to the
net assets required to run the business and support future growth. This return
on the requisite assets was based on industry comparable companies and company
specific information. Where it was determined that core technology of the
existing technology would be utilized by the IPR&D, a charge was applied against
IPR&D revenues. Core technology was identified for all of the IPR&D projects. A
core technology charge of 30% of operating profit was applied for each of the
IPR&D projects. The charge for use of the core technology and the return on
requisite assets was subtracted from net income.
The value allocated to acquired IPR&D was determined utilizing
the Stage of Completion methodology. This methodology utilizes the same cash
flows as the excess earnings analysis, but removes all research and development
costs to complete the identified project. In addition, the discounted value of
these cash flows is reduced to represent the percentage of which the project has
been completed as of March 31, 1999. The determination of the percentage
completed is based primarily on the amount of effort (cost or time) expended to
date and remaining until completion. Consideration is also given to the amount
of risk and effort incorporated in the development steps in relation to the
development steps remaining to complete the project.
New Modular products that will replace the current Modular
products are expected to be released in the first quarter of fiscal 2000. Based
on the risk and effort to date, it has been determined that the Modular products
were 80% complete as of March 31, 1999. Based on historical research and
development expenditures as a percentage of total research and development costs
to bring the products to market, the percentage complete is calculated to be
85%. Sentinel III is expected to be released in the first quarter of fiscal
2000. Based on the risk and effort to date, it has been determined that Sentinel
III was 80% complete as of March 31,1999. Based on research and developments
spent to date as a percentage of total budgeted costs until release, the percent
complete is 80%. The NetworX products are expected to be released in the first
quarter of fiscal 2000. Two of these NetworX products are considered to be 70%
completed and two are considered to be 80% complete. The new ASIC based products
were determined to be approximately 20% complete and are expected to be released
in the first half of fiscal year 2001. Based on research and development
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expenditures as a percentage of total research and development costs needed to
complete the project, the percentage complete is calculated to be 23%.
The resulting cash flows were then discounted at an appropriate
rate based on the risk profile and the nature of each project and the market.
Due to the stage of each product, the expected release date and the reliability
of the projections, a range of 30% to 40% for the discount rates was selected as
appropriate. Specifically, Modular products, NetworX and Sentinel III were
discounted at 30% and ASIC was discounted at 40%. According to the HANDBOOK OF
MODERN FINANCE by Dennis E. Logue, 1997 Edition, the required rate of return by
venture capitalists generally ranged between 20% and 60%. We considered these
projects to be similar to a late stage venture capital or a mezzanine financing
company at a 20% to 40% range.
Modular products are expected to have a one-year life cycle. The
Company started to develop the Modular products in fiscal year 1999. They will
fully replace the existing Modular products that were developed in fiscal year
1998. Total revenues, including product, warranty and Hewlett Packard revenue,
are expected to be approximately $590,000 in fiscal year 2000 and zero in fiscal
year 2001. The associated expected costs of goods sold ("COGS") are 5% of
expected sales. Other operating expenses (sales, marketing, administrative,
internal support, maintenance research and development, etc.) are attributed to
each IPR&D product based on the overall Company expense margins. Those operating
expenses are expected to be approximately 48%. Research and development costs to
complete were determined to be $57,732.
NetworX products are expected to have a seven-year life cycle,
with its peak after three years. Total revenue growth, including product,
warranty and Hewlett Packard revenue is expected to increase by approximately
200% in fiscal year 2001 and then to 80% by fiscal year 2002. Revenue growth
will then decrease over the life of the products. The associated expected COGS
are 15% of expected sales. Other operating expenses (sales, marketing,
administrative, internal support, maintenance research and development, etc.)
are attributed to each IPR&D product based on the overall Company expense
margins. Those operating expenses are expected to be approximately 48%. Research
and development costs to complete were determined to be $49,244.
Sentinel III is expected to have an eight-year life cycle, with
its peak after four years. Total revenue growth, including product, warranty and
Hewlett Packard revenue is expected to increase by approximately 200% in 2001
and then to 80% by fiscal year 2003. Revenue growth will then decrease over the
life of the products. The associated expected COGS are 14% of expected sales.
Other operating expenses (sales, marketing, administrative, internal support,
maintenance research and development, etc.) are attributed to each IPR&D product
based on the overall Company expense margins. Those operating expenses are
expected to be approximately 48%. Research and development costs to complete
were determined to be $15,395.
ASIC based products are expected to have a seven-year life
cycle, with its peak after three years. Total revenue growth, including product,
warranty and Hewlett Packard revenue is expected to increase to 80% by fiscal
year 2003. Revenue growth will then decrease over the life of
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the products. The associated expected COGS are 9% of expected sales. Other
operating expenses (sales, marketing, administrative, internal support,
maintenance research and development, etc.) are attributed to each IPR&D product
based on the overall Company expense margins. Those operating expenses are
expected to be approximately 48%. Research and development costs to complete
were determined to be $350,000.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1999, the Company's working capital position
deteriorated substantially as a result of the acquisition of SolCom. While total
assets increased from $6,179,038 to $15,973,475, working capital (net of
deferred tax assets) decreased from $2,577,880 to ($1,124,360), an overall
reduction of $3,702,240. The working capital usage related to the SolCom
acquisition can be differentiated into three specific areas. First,
approximately $1,250,000 was funded to SolCom for its ongoing operations in the
second half of fiscal 1999, which was primarily used to fund ongoing research
and development efforts. Second, approximately $1,200,000 was spent by the
Company on acquisition-related expenses, primarily legal, accounting and other
professional fees. Third, the Company assumed approximately $1,260,000 in
current liabilities incurred by SolCom for legal, accounting and professional
fees related to the acquisition. The Company's negative working capital will be
improved during the first quarter of fiscal 2000 through the additional cash
raised as discussed below.
Net cash used by operating activities during fiscal 1999 was
$553,688 as compared to cash provided during fiscal 1998 of $332,671. The use of
cash was primarily attributed to the net loss as well as significant increases
in inventory and accounts receivable. The use of cash was partially offset by
the IPR&D charge included in the net loss, depreciation and amortization, and a
large increase in accounts payable due to acquisition related expenses as well
as the timing of payments at year-end.
Net cash used by investing activities during fiscal 1999 was
$2,999,904 as compared to $635,199 for the prior fiscal year. The increase is
due to acquisition related expenses, primarily legal, accounting and other
professional fees in addition to capitalized software.
Net cash provided by financing activities increased to
$3,211,860 from $271,040 in fiscal 1998. The increase is a direct result of the
Company's borrowings under the current line of credit and term loan.
Additionally, cash provided from the issuances of Common Stock increased due to
the exercise of options and warrants during fiscal 1999.
In October 1998, the Company entered into a line of credit
agreement with United with an available balance of $2,000,000 through July 30,
1999, which was extended in July 1999 through September 30, 1999. In April 1999,
the line of credit was increased to $2,250,000. At March 31, 1999, the Company
had borrowed $1,996,289 against this line of credit. The line is collateralized
by all business assets of the Company. The Company had an available line of
credit through July 30,
26
<PAGE>
1998, in the amount of $1,000,000 with United. Upon negotiation of the current
line of credit and term loan, this outstanding balance was rolled forward
effectively closing such line of credit.
In July 1999, the Company and United entered into a new
agreement whereby the existing line of credit ($2,250,000) was converted into a
three-year term loan. The term loan is payable in equal monthly installments
commencing on October 1, 1999.
In December 1998, the Company entered into a term loan agreement
with United in the principal amount of $500,000 through December 2003. At March
31, 1999, $475,000 was outstanding under such term loan.
From April 1999 through June 1999, the Company raised $1,618,544
through the exercise of warrants issued in connection with a private financing
of Common Stock and warrants to purchase Common Stock consummated in April 1996.
In addition, in June 1999, the Company raised $3,000,000 in connection with a
private financing of Common Stock.
The Company expects to fund the expansion of its business and
operations and meet its short and long-term liquidity needs from available cash
and cash flow, working capital and from funds derived from future operating
revenues as well as through additional financing from outside sources. The
Company currently believes that it will have sufficient cash flows to meet its
operational needs over the next twelve months.
ACCOUNTING PRONOUNCEMENTS
In June 1998, The Financial Accounting Standards Board issued
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" which
becomes effective for all fiscal quarters of fiscal years beginning after June
15, 1999. This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The adoption of this standard is
not expected to have a material impact on the Company's financial statements.
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." This standard
requires certain direct development costs associated with internal- use software
to be capitalized, including external direct costs of material and services and
payroll costs for employees devoting time to the software projects. The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. Management believes that SOP 98-1 will have an immaterial impact on the
Company's financial statements.
27
<PAGE>
YEAR 2000
GENERAL
Many currently installed computer systems and software products
are coded to accept only two digit entries in the date code field. Beginning in
the year 2000, these date code fields will need to accept four digit entries to
distinguish the twenty-first century dates from the twentieth century dates. The
Company uses software and related technologies that will be effected by the
"Year 2000 problem." The Company began the process of identifying the changes
required to their computer programs and hardware during 1996. The Company
believes that all of its major programs and hardware are Year 2000 compliant.
The Company believes that it will not incur any significant costs between now
and January 1, 2000 to resolve Year 2000 issues. However, there can be no
assurance that other companies' computer systems and applications on which the
Company's operations rely, will be timely converted, or that any such failure to
convert by another company would not have a material adverse effect on the
Company's systems and operations. Furthermore, there can be no assurance that
the software that the Company uses which has been designed to be Year 2000
compliant contains all necessary date code changes.
THIRD PARTIES
The Company has also initiated formal communications with
significant suppliers and other key third parties to determine the extent to
which the Company is vulnerable to those third parties' failure to resolve their
own Year 2000 compliance issues. There can be no assurance that the systems of
other companies on which the Company's systems rely will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company's results of operations.
RISK ASSESSMENT/CONTINGENCY PLANNING
At this time, the Company believes its most reasonable likely
worst case scenario would include (i) a key material vendor or service provider
experiencing problems with delivery of materials, components or services; or
(ii) the failure of infrastructure services provided by government agencies and
other third parties (e.g., electricity, telephone, transportation, Internet
services, etc.). As noted above, the Company is evaluating the Year 2000
compliance status of its key third-party vendors to identify potential risks for
contingency planning purposes. The Company anticipates that appropriate
contingency plans will be prepared throughout 1999 as determined to be
necessary.
28
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
--------------------
The financial statements required hereby are located on pages
F-1 through F-22.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------
FINANCIAL DISCLOSURES.
---------------------
None.
29
<PAGE>
PART III
The information called for by Part III (Items 9, 10, 11 and 12
of Form 10-KSB) is hereby incorporated by reference to the Company's Definitive
Proxy Statement to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended, in connection with the Company's 1999 Annual
Meeting of Stockholders.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
(a) EXHIBITS
Exhibit
No. Description
- ------- -----------
3.1* Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware on August 5, 1998.
3.2* Certificate of Amendment of the Certificate of Incorporation, as
filed with the Secretary of State of the State of Delaware on
December 11, 1998.
3.3* By-Laws of the Company.
3.4 Form of Specimen Common Stock Certificate of the Company.
4.1* 1998 Stock Option Plan of the Company.
4.2* 1998 U.K. Sub-Plan of the Company.
10.1 Lease Agreement for the Company's Edison, New Jersey facility
(Incorporated by Reference to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1991).
10.2 Amendments to Lease for the Company's Edison, New Jersey facility
(Incorporated by Reference to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1994).
10.3 Lease Agreement dated February 18, 1999 by and between the
Company and Washington Plaza Associates, L.P., as landlord.
10.4 Business Park Gross Lease dated May 17, 1999 by and between the
Company and Bedford Property Investors, Inc.
30
<PAGE>
10.5 Supply Agreement dated October 20, 1998 by and between the
Company and Lucent Technologies.
10.6 Technology License Agreement dated October 26, 1995, as amended,
by and between SolCom Systems Limited and the Hewlett-Packard
Company.
10.7 OEM Purchase Agreement dated April 13, 1999 by and between the
Company and the Hewlett-Packard Company.
10.8 Agreement dated as of December 19, 1994 by and between LeeMAH
DataCom Security Corporation and Siemens Rolm Communications Inc.
10.9 Equipment Lease Agreements dated June 10, 1999 and May 5, 1999 by
and between the Company and Siemens Credit Corporation.
10.10 Equipment Lease Agreement dated June 17, 1999 by and between the
Company and Lucent Technologies.
10.11 Employment Agreement dated as of April 1, 1998 between the
Company and Stephen B. Gray
10.12 Line of Credit Agreement with United National Bank dated November
17, 1997 (Incorporated by Reference to the Company's Annual
Report on Form 10-KSB for the fiscal year ended March 31, 1998).
10.13** Share Purchase Agreement, as amended, dated as of December 28,
1998 by and among the Company, SolCom Systems Limited ("SolCom"),
the shareholders of SolCom and certain representatives of such
shareholders.
10.14** Escrow Agreement, as amended, dated as of March 31, 1999 by and
among the Company, SolCom and certain shareholders and
shareholders' representatives thereof.
10.15** Employment Agreement Amendment dated as of March 31, 1999 by and
among the Company, SolCom and Peter Wilson.
10.16*** Agreement and Plan of Merger by and between the Company and
MicroFrame, Inc., a New Jersey corporation.
10.17o Asset Purchase Agreement dated as of February 25, 1999 by and
among the Registrant, LeeMAH and the Parent.
10.18o Promissory Note of the Registrant dated February 25, 1999.
31
<PAGE>
10.19o Confidentiality and Noncompetition Agreement dated as of February
25, 1999 by and among the Registrant, LeeMAH and the Parent.
10.20o Assignment of Patents of LeeMAH dated February 25, 1999.
10.21o Assignment of Trademarks of LeeMAH dated February 25, 1999.
23.1 Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule
- ------------------------------
* Incorporated by Reference to the Company's Registration Statement
on Form S-8 filed on April 22, 1999.
** Incorporated by Reference to Appendix A of the Company's
Definitive Information Statement on Schedule 14C filed on March
11, 1999.
*** Incorporated by Reference to Appendix I of the Company's
Definitive Information Statement on Schedule 14C filed on March
11, 1999.
o Incorporated by Reference to the Company's Current Report on Form
8-K filed on March 12, 1999.
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K on March 12, 1999
in connection with the acquisition of certain selected assets of LeeMAH DataCom
Security Corporation, a California corporation.
32
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DATED: July 9, 1999
ION NETWORKS, INC.
By: /s/ Stephen B. Gray
-------------------------------
Stephen B. Gray, President
POWER OF ATTORNEY
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
indicated on July 9, 1999:
Signature Title
/s/ Stephen B. Gray President, Chief Executive Officer, Chief
- --------------------------------- Operating Officer and Director
Stephen B. Gray
/s/ Stephen M. Deixler Chairman of the Board of Directors
- ----------------------------------
Stephen M. Deixler
/s/ Mark Simmons Principal Financial Officer and Principal
- ---------------------------------- Accounting Officer
Mark Simmons
/s/ Michael Radomsky Executive Vice President, Secretary and
- ---------------------------------- Director
Michael Radomsky
/s/ Alexander C. Stark
- ---------------------------------- Director
Alexander C. Stark
- ---------------------------------- Director
William Martin Ritchie
/s/ Alan Hardie
- ----------------------------------- Director
Alan Hardie
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
(FORMERLY MICROFRAME, INC. AND SUBSIDIARY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Report of Independent Accountants F-1
Consolidated Balance Sheets as of March 31, 1999
and March 31, 1998 F-2
Consolidated Statements of Operations for the years
ended March 31, 1999 and 1998 F-3
Consolidated Statements of Cash Flows for the years
ended March 31, 1999 and 1998 F-4
Consolidated Statements of Stockholders' Equity for
the years ended March 31, 1999 and March 31, 1998 F-5
Notes to Consolidated Financial Statements F-6-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
July 12, 1999
To the Board of Directors and Stockholders of
ION Networks, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of ION
Networks, Inc. and Subsidiaries (the "Company") at March 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the two years
in the period ended March 31, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
ION NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 165,994 $ 507,726
Accounts receivable, less allowance for doubtful accounts of
$150,000 and $126,000, respectively 3,092,867 2,667,319
Inventory, net 2,554,643 1,425,351
Deferred tax assets 422,310 366,137
Prepaid expenses and other current assets 433,031 153,568
--------------- --------------
Total current assets 6,668,845 5,120,101
Property and equipment at cost, net 1,010,369 421,701
Capitalized software, less accumulated amortization of
$1,951,715 and $1,054,827, respectively 5,350,388 396,351
Noncurrent deferred tax assets, net 129,689
Goodwill and other acquisition - related intangibles, less
accumulated amortization of $63,810 and $26,130, respectively 2,905,240 75,480
Security deposits 38,633 35,716
--------------- --------------
Total assets 15,973,475 6,179,038
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank borrowings $ -- $ 300,000
Current portion of long-term debt 488,948 30,009
Accounts payable and accrued expenses 3,890,152 910,842
Accrued payroll and related liabilities 813,266 348,397
Deferred income 269,457 181,573
Other current liabilities 1,909,072 405,263
--------------- --------------
Total current liabilities 7,370,895 2,176,084
--------------- --------------
Deferred tax liabilities, net 188,276 --
Long-term debt 2,013,266 --
Commitments and contingencies (Notes 9 and 10)
Stockholders' equity
Preferred stock - par value $10 peer share; authorized 200,000
shares, none issued --
Common stock - par value $.001 per share; authorized
50,000,000 shares issued 8,286,670 shares and outstanding
8,224,639 shares at March 31, 1999, issued 4,849,531 shares,
outstanding 4,849,131 shares and subscribed 50,000 shares at
March 31, 1998 8,287 4,899
Additional paid-in capital 14,858,560 6,345,613
Stock subscription receivable -- (104,000)
Accumulated deficit (8,228,641) (2,231,638)
Cumulative translation adjustment (29,969) (7,920)
--------------- --------------
6,608,237 4,006,954
Less-Treasury stock, 62,031 shares and 400 shares, at cost at
March 31, 1999 and 1998, respectively (207,199) (4,000)
--------------- ---------------
Total stockholders' equity 6,401,038 4,002,954
--------------- ---------------
Total liabilities and stockholders' equity $ 15,973,475 $ 6,179,038
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
ION NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- -----------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
Net sales $12,673,917 $10,217,911
Cost of sales 5,464,708 4,285,134
----------- -----------
Gross Margin 7,209,209 5,932,777
Research and development expenses 2,952,597 1,117,151
Selling, general and administrative expenses 6,473,638 4,419,521
In-process research and development charge 3,490,177 --
----------- -----------
(Loss) income from operations (5,707,203) 396,105
Interest income 43,012 14,888
Interest expense (100,573) (4,344)
------------ -----------
(Loss) income before income tax expense (benefit) (5,764,764) 406,649
Income tax expense (benefit) 232,239 (304,661)
----------- -----------
Net (loss) income $(5,997,003) $711,310
=========== ===========
Per share data
Basic ($1.09) $0.15
Diluted ($1.09) $0.14
Weighted average number of common shares outstanding:
Basic 5,499,556 4,840,357
----------- -----------
Diluted 5,499,556 5,195,357
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ION NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- ---------------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
Cash flows from operating activities $ (5,997,003) $ 711,310
Net (loss) income
Adjustments to reconcile net income to net cash provided by
operating activities
In-process research and development charge 3,490,177 --
Depreciation and amortization 731,160 485,738
Provision for doubtful accounts 23,793 26,000
Provision for inventory obsolescence - (15,000)
Noncash stock-based compensation charge 188,120 15,150
Deferred tax provision 232,239 (354,661)
Changes in operating assets and liabilities, net of effects of
acquisitions
Accounts receivable (546,951) (794,509)
Inventory (786,783) (380,008)
Prepaid expenses and other current assets (198,618) (32,578)
Security deposits (2,917) (1,013)
Accounts payable and accrued expenses 2,190,508 549,305
Accrued payroll and related liabilities 52,967 67,885
Deferred income (35,394) (86,945)
Other current liabilities 105,014 141,997
-------------- --------------
Net cash (used in) provided by operating activities (553,688) 332,671
-------------- --------------
Cash flows from investing activities
Capital expenditures (565,007) (311,846)
Capitalized software (1,285,245) (323,353)
Capitalized acquisition related expenditures, net of cash
acquired (1,149,652) -
-------------- --------------
Net cash used in investing activities (2,999,904) (635,199)
-------------- --------------
Cash flows from financing activities
Borrowings under line of credit 2,196,280 300,000
Repayments of debt (55,009) (42,655)
Issuance of common stock 1,070,589 13,695
-------------- --------------
Net cash provided by financing activities 3,211,860 271,040
-------------- --------------
Net (decrease) in cash and cash equivalents (341,732) (31,488)
Cash and cash equivalents - beginning of period 507,726 539,214
-------------- --------------
Cash and cash equivalents - end of period $ 165,994 $ 507,726
-------------- --------------
Supplemental information:
Cash paid during period for interest $ 100,573 $ 4,344
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ION NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Additional Stock Cumulative Total
Paid-In Subscription Accumulated Translation Treasury Stockholder's
Shares Par Value Capital Receivable Deficit Adjustment Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1997 4,838,803 $ 4,839 $ 6,212,828 $ - $ (2,942,948) $ - $ (4,000) $ 3,270,719
Net income 711,310 711,310
Issuances of common stock 10,328 10 13,685 13,695
Noncash stock-based 15,150 15,150
compensation
Stock subscription 50,000 50 103,950 (104,000)
Translation adjustments _________ _________ __________ ________ ___________ (7,920) ________ (7,920)
---------- ----------
Balance, March 31, 1998 4,899,131 4,899 6,345,613 $(104,000) $ (2,231,638) $ (7,920) $ (4,000) $ 4,002,954
---------- --------- ---------- -------- ------------- ---------- -------- ---------
Net loss $ (5,997,003) $(5,997,003)
Issuances of common stock 3,327,539 $ 3,328 $ 8,279,887 $ 104,000 8,387,215
Noncash stock-based 60,000 60 233,060 233,120
compensation
Acquisition of treasury $(203,199) (203,199)
shares
Translation adjustments _________ _________ __________ _________ ____________ $ (22,049) _________ (22,049)
-------- ---------
Balance, March 31, 1999 8,286,670 $8,287 $14,858,560 $ - $ (8,228,641) $ (29,969) $(207,199) $ 6,401,038
----------- --------- ----------- --------- ---------- -- -------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1. Organization
THE COMPANY
ION Networks, Inc., (the "Company"), a Delaware corporation founded
in 1999 through the combination of two network management developers
- MicroFrame, a New Jersey Corporation (the predecessor entity to
the Company, originally founded in 1982), and SolCom Systems
Limited, a Scottish corporation located in Livingston, Scotland
(originally founded in 1994), designs, develops and markets a broad
range of security, network management and remote maintenance
products for voice and data communications networks. By
incorporating a variety of hardware and software options for user
authentication, these products can deter unauthorized dial-in access
to both devices and systems (such as computers, local area networks
and Private Branch Exchange telephone switches), while allowing
authorized personnel access to perform needed administration and
maintenance of host devices and networks from remote locations. The
products also provide alarm monitoring and reporting capabilities, a
basis for remote network management and maintenance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of ION Networks, Inc. and its subsidiaries (collectively,
the "Company"). All material intercompany accounts and balances have
been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less at the time of purchase to be cash
equivalents.
INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or
market, and consists of hardware and software components designed to
interface with network communications environments. The markets for
the Company's products are characterized by rapidly changing
technology and the consequential obsolescence of relatively new
products. The Company has recorded estimated reserves against
inventories related to such technological obsolescence.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful
lives of the assets, which are generally three to five years.
Expenditures for maintenance and repairs, which do not extend the
economic useful life of the related assets, are charged to
operations as incurred. Gains or losses on disposal of property and
equipment are reflected in the statements of operations in the
period of disposal.
F-6
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
CAPITALIZED SOFTWARE
The Company capitalizes computer software development costs in
accordance with the provisions of Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed" ("SFAS 86"). SFAS 86 requires
that the Company capitalize computer software development costs upon
the establishment of the technological feasibility of a product, to
the extent that such costs are expected to be recovered through
future sales of the product.
The Company capitalized $1,285,229 and $323,353 of software
development costs for fiscal 1999 and 1998, respectively.
Additionally, the Company acquired $3,855,000 of existing technology
in connection with an acquisition (see Note 3). These costs are
amortized by the greater of the amount computed using (i) the ratio
that current gross revenues from the sales of software bear to the
total of current and anticipated future gross revenues from sales of
that software, or (ii) the straight-line method over the estimated
useful life of the product (generally three years). It is reasonably
possible that those estimates of anticipated future gross revenues,
the remaining estimated economic life of the product, or both, will
be reduced significantly in the near term (due to competitive
pressures). As a result, the carrying amount of the capitalized
software costs may be reduced materially in the near term.
Amortization expense totaled $371,740 and $242,570 for fiscal 1999
and fiscal 1998, respectively.
GOODWILL AND OTHER ACQUISITION RELATED INTANGIBLES
Goodwill is the excess of purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases.
The Company amortizes goodwill on a straight-line basis over the
periods benefited, ranging from three to ten years. Other
acquisition-related intangibles includes customer lists ($300,000).
The Company amortizes other acquisition-related intangibles over
periods not to exceed three years.
RESEARCH AND DEVELOPMENT COSTS
The Company charges all costs incurred to establish the
technological feasibility of a product or enhancement to research
and development expense.
REVENUE RECOGNITION POLICY
The Company records revenue from product sales upon shipment to the
customer if no significant vendor obligations exist and
collectibility is probable. Maintenance contracts are sold
separately and maintenance revenue is recognized on a straight-line
basis over the period the service is provided, generally one year.
WARRANTY COSTS
Estimated warranty costs associated with the sale of hardware and
software are accrued at the time of sale. The warranty reserve as of
March 31, 1999 and 1998 included in other current liabilities
amounts to $126,000 and $45,000, respectively.
F-7
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the year. Actual results could differ
from those estimates. The significant estimates include the
allowance for doubtful accounts, allowance for inventory
obsolescence, capitalized software and the related amortization
lives, deferred tax asset valuation allowance and depreciation and
amortization lives.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts
receivable, accounts payable, accrued payroll and related
liabilities, deferred income, and other current liabilities
approximates fair value because of the relatively short maturity of
these instruments. The Company's line of credit and term loan have
variable interest rates which adjust with changes in market interest
rates and the book value of such indebtedness is deemed to
approximate fair value.
VALUATION OF LONG-LIVED ASSETS
Long-lived assets such as property and equipment, goodwill, customer
lists and software are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. If the total of the expected future undiscounted
cash flows is less than the carrying amount of the asset, a loss is
recognized for the difference between the fair value and carrying
value of the asset.
PER SHARE DATA
Earnings per share has been calculated in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." The weighted average number of common shares outstanding
during 1999 and 1998 were used to compute basic earnings per share.
Diluted earnings per share is computed using the weighted average
number of common shares outstanding plus the dilutive potential
common shares outstanding. Dilutive potential common shares are
additional common shares assumed to be exercised, which approximated
355,000 in 1998. Potential common shares of 1,040,000 were excluded
from the computation of diluted earnings per share for 1999 because
their inclusion would have had an antidilutive effect on earnings
per share.
FOREIGN CURRENCY TRANSLATION
The financial statements of the foreign subsidiaries were prepared
in local currency and translated into U.S. dollars based on the
current exchange rate at the end of the period for the balance sheet
and a weighted-average rate for the period on the statement of
operations. Translation adjustments are reflected as foreign
currency translation adjustments in stockholders' equity and,
accordingly, have no effect on net income (loss). Transaction
adjustments for the foreign subsidiaries are included in income and
are not material.
INCOME TAXES
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
financial statements or tax return. Under this method, deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax
F-8
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
basis of assets and liabilities ("temporary differences") using
enacted tax rates in effect for the year in which the differences
are expected to reverse. Recognition of a deferred tax asset is
allowed if it is more likely than not that the asset will be
realized in the future.
RECLASSIFICATION
The Company has reclassified certain prior year amounts to conform
with the 1999 presentation.
3. ACQUISITIONS
On March 31, 1999, the Company acquired all the outstanding shares
of SolCom Systems Limited ("SolCom") in exchange for 2,200,233 of
common shares and 499,567 of options, which had an aggregate value
of $6,211,880. The Company also issued 300,000 performance-based
options (see Note 8) which have not been reflected in the purchase
price. The value of the options, if issued, will be contingent
consideration and will be reflected as goodwill in the Company's
financial statements. This acquisition has been accounted for under
the purchase method of accounting. Accordingly, the accompanying
consolidated statements of operations do not include any revenues or
expenses related to this acquisition prior to the closing date. The
acquisition resulted in an allocation of $1,869,034 to goodwill and
$3,855,000 to existing technology. The amortization periods for both
the goodwill and the existing technology are three years.
Included in the purchase price for the above acquisition was
purchased in-process research and development, which was a non cash
charge to earnings as this technology had not reached technological
feasibility and had no future alternative use. In accordance with
Statement of Financial Accounting Standards No. 2 "Accounting for
Research and Development Costs," amounts assigned to purchased
in-process research and development meeting the above criteria were
charged to expense for $3,490,177. This technology will require
varying additional development, coding and testing efforts, and
other rework over the next year to determine technological
feasibility.
The value allocated to purchased in-process research and development
was determined utilizing an income approach that included an excess
earnings analysis reflecting the appropriate cost of capital for the
investment. Estimates of future cash flows related to the in-process
research and development were made for each project based on the
Company's estimates of revenue, operating expenses and income taxes
from the project. The valuation included a state of completion
adjustment, which utilizes the same cash flows as the excess
earnings analysis, but removes all research and development costs to
complete the identified project.
The discount rates utilized to discount the projected cash flows
were based on consideration of the risk profile and the nature of
each project and the market. Other factors considered in the
determination of the discount rates include the useful life of each
project, the anticipated profitability of each project, the
uncertainty of technology advances that were known at the time and
the stage of completion of each project.
F-9
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Following is a summary of the pro forma results of ION Networks, Inc. as if
the merger had closed effective April 1, 1997:
FOR THE YEAR ENDED
MARCH 31, MARCH 31,
1999 1998
(UNAUDITED)
Revenues $13,988,252 $12,386,224
Net loss (6,027,379) (3,623,036)
Weighted-average common shares 7,699,789 7,040,357
Weighted-average common shares and potential
common shares 7,699,789 7,040,357
Basic earnings $(0.78) $(0.51)
per share
Diluted earnings per share $(0.78) $(0.51)
On February 25, 1999, the Company acquired certain of the operating
assets of LeeMAH Datacom Security Corporation ("LeeMAH") in exchange
for 444,000 shares of the Company's common stock. The purchase price
of approximately $1 million has been reflected primarily as goodwill
and other acquisition-related intangibles, mainly customer lists.
The acquired entity had sales of $209,000 and income from operations
of $149,000 for the period from the date of acquisition through
March 31, 1999; accordingly, the acquisition was not material to the
Company's statement of operations, its cash flows or its financial
position.
4. INVENTORY
Inventory, net of reserve for obsolescence of $185,000 at March 31,
1999 and 1998 consists of the following:
1999 1998
Raw materials $ 1,570,150 $ 818,132
Work-in-process 223,229 525,918
Finished goods 761,264 81,301
------------ ------------
$ 2,554,643 $ 1,425,351
------------ -----------
F-10
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
5. PROPERTY AND EQUIPMENT AT COST, NET
At March 31, 1999 and 1998 property and equipment consists of the
following:
1999 1998
Demonstration and service equipment $ 1,725,901 $ 1,125,987
FURNITURE AND FIXTURES 230,679 195,767
LEASEHOLD IMPROVEMENTS 45,136 71,850
------------ --------------
2,001,716 1,393,604
LESS: ACCUMULATED DEPRECIATION (991,347) (971,903)
------------ --------------
TOTAL $ 1,010,369 $ 421,701
------------ --------------
Depreciation expense for property and equipment for the years ended
March 31, 1999 and 1998 amounted to $321,740 and $233,268,
respectively. During the year ended March 31, 1999, the Company
retired fully depreciated assets amounting to $649,518.
6. BANK BORROWINGS
In October 1998, the Company entered into a line of credit agreement
with an available balance of $2,000,000 through July 30, 1999. In
July 1999, this line was extended through September 30, 1999. In
April 1999, the line of credit was increased to $2,250,000. At March
31 1999, $1,996,289 had been drawn down under this line of credit.
The line is collateralized by all business assets of the Company.
Advances under the bank line are payable at maturity, and bear
interest at the Wall Street prime rate (7.75% at March 31, 1999)
plus 0.5%.
On July 9, 1999, the Company and its lender, entered into a new
agreement whereby the existing line of credit ($2,250,000), was
converted to a three year term loan. The term loan bears interest at
the Wall Street prime rate plus 0.5% and is payable in equal monthly
installments commencing on October 1, 1999. Future principal
repayment under this loan is $375,000 for the year ended March 31,
2000.
In December 1998, the Company entered into a term loan agreement in
the amount of $500,000 through December 2003. At March 31, 1999,
$475,000 is outstanding under the term loan. The loan with a term of
five years is payable monthly at an interest rate of the Wall Street
prime (7.75% at March 31, 1999) plus 1.0%. Future principal
repayment under this loan is $100,000 for the year ending March 31,
2000.
The bank line of credit and term loan contain covenants which
restrict the payment of a dividend without the prior approval of the
bank. Additionally, the Company covenants that borrowings will not
exceed 75% of the aggregate amount of accounts receivable (the
"collateral limit") which are outstanding under 90 days. At certain
times during the year, the Company's borrowings exceeded
F-11
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
the collateral limit noted above. The Company received a waiver of
this covenant violation through April 1, 2000.
The Company had an available line of credit through July 30, 1998,
in the amount of $1,000,000. Upon negotiation of the current line of
credit and term loan, this outstanding balance was transferred to
and reflected as outstanding under the current term loan,
effectively closing the line of credit. At March 31, 1998, $300,000
had been drawn down under this line of credit. The line was
collateralized by all business assets of the Company.
The following table shows the maturities at March 31, 1999, of the
total bank borrowings including term loans:
2000 $ 488,948
2001 863,140
2002 853,847
2003 475,000
2004 75,000
Thereafter -
7. INCOME TAXES
As of March 31, 1999, the Company has available federal, state and
foreign net operating loss carryforwards of approximately
$3,893,996, $2,972,647 and $811,737, respectively, to offset future
taxable income. The federal net operating loss carryforwards expire
during the years 2011 through 2014. In addition, the Company has
investment credit and research and development credit carryforwards
aggregating approximately $186,524, which may provide future tax
benefits, expiring from 2008 through 2014.
The components of the income tax provision (benefit) for the years
ended March 31, 1999 and 1998 are as follows:
1999 1998
Current
Federal $ - $ 16,000
State - 34,000
-------------- ---------------
- 50,000
-------------- ---------------
Deferred
Federal 197,403 (301,442)
State 34,836 (53,219)
-------------- ---------------
232,239 (354,661)
-------------- ---------------
$ 232,239 $ (304,661)
-------------- ---------------
F-12
<PAGE>
<TABLE>
<CAPTION>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- ------------------------------------------------------------------------------------------------------------------------------------
The reasons for the difference between the Company's effective tax
rate and the United States federal statutory rate are as follows:
MARCH 31
1999 1998
Effective tax rate reconciliation
<S> <C> <C>
Statutory federal tax rate (34)% 34%
State taxes, net of federal benefit (6) 6
Effect of in-process research and development
write-off 24 -
Effect of reversal of valuation allowance - (76)
Foreign (income)/loss with no benefit (1) 29
Utilization of net operating loss carryforwards - (70)
Effect of recording valuation allowance on net
operating loss carryforwards 20 -
Other 1 2
------ -------
4% (75)%
------ -------
The tax effect of temporary differences which make up the
significant components of the net deferred tax asset and liability
at March 31, 1999 and 1998 are as follows:
1999 1998
Current deferred tax assets
Inventory $ 224,000 $ 214,000
Accrued expenses 118,393 83,737
Allowance for doubtful accounts 79,917 68,400
-------------- --------------
Total current deferred tax assets $ 422,310 $ 366,137
-------------- --------------
Noncurrent deferred tax assets
Net operating loss carryforwards $ 1,867,600 $ 715,669
Research and development credit 186,524 136,098
Alternative minimum tax credit 6,867 21,572
-------------- --------------
Total noncurrent deferred tax assets 2,060,991 873,339
Valuation allowance (1,696,459) (547,256)
-------------- --------------
Net noncurrent deferred tax assets $ 364,532 $ 326,083
-------------- --------------
Deferred tax liabilities
Depreciation $ (28,865) $ (37,854)
Capitalized software (523,943) (158,540)
--------------- --------------
Total deferred tax liabilities $ (552,808) $ (196,394)
--------------- --------------
Net noncurrent deferred tax (liabilities) assets $ (188,276) $ 129,689
--------------- --------------
</TABLE>
F-13
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
The Company has recorded a valuation allowance against a portion of
the federal and state net operating loss carryforwards and a full
valuation allowance against the foreign net operating loss
carryforwards and the research and development credit as management
believes that it is more likely than not that substantially all of
the net operating loss carryforwards and credits will expire
unutilized.
The increase in the valuation allowance is due primarily to current
year net operating loss carryforwards for federal and state
purposes, $1,144,653 - tax effected, and research and development
credits, $50,426, offset by the utilization of a small portion of
foreign net operating loss carryforwards, ($45,876) - tax effected,
during the year ended March 31, 1999.
The Company's net deferred tax assets recorded are expected to be
utilized as the Company's taxable temporary differences reverse in
the future.
8. STOCKHOLDERS' EQUITY
During the year ended March 31, 1998, the Company entered into a
stock subscription agreement with one of its directors, under which
the director agreed to acquire 50,000 shares of the Company's common
stock at $2.08 The shares were issued in fiscal year 1999 after the
receipt of $104,000 from the director.
During the years ended March 31, 1999 and 1998, respectively,
options to purchase 358,429 and 500 shares of common stock under the
Company's stock option plans were exercised, for an aggregate
consideration of $362,589 and $625. During the year ended March 31,
1999, 60,000 shares and 30,000 options were issued in connection
with the termination of a consulting contract (see Note 9). The
aggregate fair value of this consideration was $171,120 of which
$45,000 was provided for in prior years. During the year ended March
31, 1998, 9,828 shares of common stock were issued as part of the
stock earn out as stipulated in the Share Purchase Agreement. The
aggregate fair value of this consideration was $13,070.
In April 1996, the Company sold 860,000 shares of common stock to
unrelated investors, at $1.25 per share and received net proceeds of
approximately $1,023,559. In conjunction with this sale, warrants to
purchase 860,000 shares of common stock with an exercise price of
$1.50 and warrants to purchase additional 860,000 shares of common
stock with an exercise price of $2.00 were issued.
These warrants expire in April, 2000.
In April 1996, the Company sold 241,467 shares of common stock to
four current shareholders of record who held the contractual right
to maintain their share of ownership. The Company received net
proceeds of $301,834. In conjunction with this sale, warrants to
purchase 241,467 shares of common stock with an exercise price of
$1.50 and warrants to purchase an additional 241,467 shares of
common stock with an exercise price of $2.00 were issued. These
warrants expire in April, 2000. During the year ended March 31,
1999, warrants to purchase 376,000 shares were exercised for an
aggregate consideration of $604,000.
WARRANTS
During October 1995, in connection with services being performed by
a consultant, the Company
F-14
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
issued 250,000 warrants to the consultant to purchase shares of the
Company's common stock. Warrants to purchase 50,000 shares of common
stock at $3.25 per share vested immediately. Warrants to purchase
each additional block of 50,000 shares of common stock are
exercisable at $3.75, $4.25, $4.75 and $5.25 per share,
respectively, and shall vest on each three month anniversary of the
agreement. The warrants expire five years from the date of grant.
STOCK OPTION PLANS
The aggregate number of shares of common stock for which options may
be granted under the 1998 Stock Option Plan (the "1998 Plan") is
3,000,000. The maximum number of options which may be granted to an
employee during any calendar year under the Plan shall be 400,000.
The aggregate fair market value of shares which are exercisable
during any calendar year by any one individual may not exceed
$100,000. The term of these non-transferable stock options may not
exceed ten years. The exercise price of these stock options may not
be less than 100% (110% if the person granted such options owns more
than ten percent of the outstanding common stock) of the fair value
of one share of common stock on the date of grant.
On March 31, 1999 in conjunction with the Company's acquisition of
SolCom Systems Ltd. ("SolCom"), the Company granted options to
purchase 499,567 shares of its common stock under the 1998 Plan to
holders of SolCom vested options in accordance with the Share
Purchase Agreement for the transaction. At March 31, 1999 all of
these options were outstanding and all are exercisable. In addition,
the Company granted 300,000 performance -based options to the
holders of SolCom options. The options will vest in blocks of
150,000 options in each of fiscal years 2000 and 2001, respectively,
if the Company attains sales of $30 million and $60 million in 2000
and 2001, respectively. If the targets are not met, the options will
expire.
In August 1994, the Company adopted its 1994 Stock Option Plan (the
"1994 Plan"). The 1994 Plan, as amended, increased the number of
shares of common stock for which options may be granted to a maximum
of 1,250,000 shares. The aggregate fair market value (determined at
the time the option is granted) of shares which are exercisable
during any calendar year by any one individual may not exceed
$100,000. The term of these non-transferable stock options may not
exceed ten years. The exercise price of these stock options may not
be less than 100% (110% if the person granted such options owns more
than ten percent of the outstanding common stock) of the fair market
value of one common stock on the date of grant. During the year
ended March 31, 1999, the Company granted options to purchase
187,224 shares of its common stock under the 1994 Plan. At March 31,
1999, 770,664 options were outstanding under the 1994 Plan, of which
672,798 options were exercisable.
Of the options granted in fiscal 1998, 455,645 were granted under
the Company's Time Accelerated Restricted Stock Award Plan
("TARSAP"). The options vest after seven years, however, under the
TARSAP, the vesting is accelerated to the last day of the current
fiscal year if the Company meets certain predetermined sales and net
income targets. The Company met the targets for 1998 and, as such,
all options granted under the TARSAP in 1998 vested as of March 31,
1998.
OTHER OPTIONS
During the year ended March 31, 1999, the Company issued 70,000
options to various consultants. The term of these options is five
years from the date of grant. Of the 70,000 options issued, 30,000
are vested immediately with 20,000 to vest in fiscal 2000 and 2001,
respectively, contingent on
F-15
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
consulting services being provided in each year. Compensation
expense of $62,000 was recorded relative to the grant of the
original 30,000 options during 1999.
During the year ended March 31, 1998, the Company issued 30,000
options to a consultant, of which 15,000 were vested immediately and
15,000 were to vest contingent on an extension of the consulting
agreement. This agreement and the unvested options were subsequently
terminated. Compensation expense of $15,150 was recorded relative to
the grant of the original 15,000 options during 1998.
During September 1996, the Company issued options to certain
officers and directors to purchase 620,000 shares of the Company's
common stock, of which 420,000 vested immediately and 100,000 vest
each April 1 of 1998 and 1999. Options expire ten years from the
date of grant. The exercise price of the options is equal to the
market value of the Company's stock on the date of grant. During the
year ended March 31, 1999, 130,000 options to purchase shares were
exercised under this grant. At March 31, 1999, 490,000 options were
outstanding of which 390,000 options were exercisable.
The Company also has issued outstanding options to purchase 130,000
shares of the Company's stock. Options expire in terms ranging from
5 to 10 years from the date of grant. The exercise price of the
options is equal to the market value of the Company's stock on the
date of grant.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company continues to apply Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations in accounting for its options. Accordingly, no
compensation cost has been recognized for its fixed stock option
plans in its results of operations.
The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). If the Company had elected
to recognize compensation costs based on the fair value at the date
of grant for awards in fiscal 1999 and 1998, consistent with the
provisions of SFAS No. 123, the Company's net loss and loss per
share would have increased by $751,295 and $.14 for the year ended
March 31, 1999 and net income and earnings per share would have
decreased by $426,614 and $.09 for the year ended March 31, 1998.
The pro forma effect on net (loss) income for fiscal 1999 and 1998
may not be representative of the pro forma effect on net (loss)
income of future years because the SFAS No. 123 method of accounting
for pro forma compensation expense has not been applied to options
granted prior to April 1, 1995.
The weighted-average fair values at date of grant for options
granted during fiscal 1999 and 1998 were $1.64 and $1.00,
respectively. The fair value of each option grant for the Company's
common stock is estimated on the date of the grant using the Black
Scholes option pricing model, with the following weighted average
assumptions used for grants in fiscal 1999 and 1998:
1999 1998
Expected volatility 80% 77%
Risk-free interest rate 5.12% 6.34%
Expected option lives 5.87 years 5.54 years
F-16
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------------------------------------
Details of options granted are as follows:
WEIGHTED
AVERAGE
EXERCISE OPTION PRICE
SHARES PRICE PER SHARE ($)
<S> <C> <C> <C> <C>
Options outstanding at March 31, 1997 1,067,493 $1.49 $1.16 to $2.87
Granted 807,740 1.78 1.34 to 3.13
Canceled (79,937) 1.85 1.25 to 2.87
Exercised (500) 1.25 1.25
----------- ----- ------------
Options outstanding at March 31, 1998 1,794,796 1.60 1.16 to 3.13
Granted 1.282,067 2.34 1.96 to 3.54
Canceled (25,596) 1.94 1.54 to 2.31
Exercised (358,429) 1.47 1.16 to 2.87
----------- ----- ------------
Options outstanding at March 31, 1999 2,692,838 1.52 1.16 to 3.54
----------- ----- ------------
Options exercisable at March 31, 1999 2,065,704 1.88 $1.16 to $3.13
----------- ----- --------------
</TABLE>
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF YEARS OF AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
$1.16 - $1.78 1,060,008 5.25 $1.41 922,909 $1.45
$1.83 - $2.14 604,599 5.58 $1.96 351,349 $1.94
$2.16 - $3.54 1,028,231 5.89 $2.43 791,446 $2.43
9. COMMITMENTS
OPERATING LEASES
In June 1993, the Company amended its lease for office and
manufacturing facilities. Such amendment extends the term of the
lease until June 30, 1999. During March 1999, the Company entered
into an operating lease to consolidate their office and
manufacturing facilities, which has a commencement date of July 31,
1999. This lease expires in June 2009. The Company also leases
office space for its European operation in Antwerp, Belgium. The
lease expires on July 31, 2005.
F-17
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
In addition, the Company's wholly-owned subsidiary currently leases
office and manufacturing facilities, expiring in 2001.
The fixed minimum payments under operating leases for future periods
is as follows:
Year ending March 31,
2000 $ 471,555
2001 632,701
2002 661,769
2003 679,769
2004 723,064
Thereafter 3,580,333
----------
Total minimum lease payments $ 6,749,191
----------
Rent expense for the years ended March 31, 1999 and 1998
approximated $171,496 and $153,954, respectively.
CONSULTING CONTRACT
In connection with the acquisition of European Business Associates
BVBA of Brussels, Belgium from Mark Kegelaers, the Company entered
into a consulting agreement with Mr. Kegelaers for a term of five
years. The consulting agreement provides for an annual consulting
fee of $75,000 with 5% annual increments, as well as reimbursement
of certain expenses. During February 1999, the Company and Mark
Kegelaers mutually agreed to terminate the above consulting
contract. In connection with the termination Mr. Kegelaers received
60,000 common shares and 30,000 options. Compensation expense of
approximately $126,120 was recorded during fiscal 1999 in connection
with this issue of shares and options.
10. CONTINGENT LIABILITIES
In the normal course of business the Company and its subsidiaries
may be involved in legal proceedings, claims and assessments arising
in the ordinary course of business. Such matters are subject to many
uncertainties, and outcomes are not predictable with assurance. In
the opinion of management, the outcome of such current legal
proceedings, claims and assessments would not have a material effect
on the Company's reported financial position, results of operations
or cash flows as of and for the years ended March 31, 1999 and 1998.
11. EMPLOYEE BENEFIT PLANS
Effective April 1, 1993, the Company adopted a defined contribution
savings plan. The terms of the plan provide for eligible employees
("participants") who have met certain age and service requirements
to participate by electing to contribute up to 15% of their gross
salary to the plan, as defined, with the Company matching 30% of a
participant's contribution in cash up to a maximum of 6% of gross
salary, as defined. Company contributions vest at the rate of 25% of
the balance at each employee's second, third, fourth, and fifth
anniversary of employment. The employees' contributions
F-18
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
are immediately vested. The Company's contribution to the savings
plan for the years ended March 31, 1999 and 1998 was $37,058 and
$28,222, respectively.
12. SALES
The Company, which operates in a single industry segment, designs,
develops and markets a broad range of security, network management
and remote maintenance products for voice and data communications
networks. The Company's headquarters, physical production and
shipping facilities are located in the United States. The Company's
local and foreign export sales for the years ended March 31, 1999
and 1998 are as follows:
1999 1998
United States $ 10,054,769 $ 7,435,586
Europe 2,583,040 2,677,193
Pacific Rim -- 23,611
Other 36,108 81,521
------------- -------------
$ 12,673,917 $ 10,217,911
------------- -------------
The Company sold a substantial portion of its products to four
customers. Sales to these customers amounted to $6,914,525 (55% of
net sales) and $6,232,390 (61% of net sales) in 1999 and 1998,
respectively. At March 31, 1999 and 1998, amounts due from these
customers included in accounts receivable, were $1,362,061 and
$1,279,486, respectively. The loss of any of these four customers
would have a material adverse effect on the Company's financial
position and results of operations.
13. CONCENTRATION OF CREDIT RISK
The Company maintains deposits in a financial institution which is
insured by the Federal Deposit Insurance Corporation ("FDIC") up to
$100,000. At March 31, 1999 and periodically throughout 1999, the
Company had deposits in this financial institution in excess of the
amount insured by the FDIC.
The Company sells the majority of its products to customers within
the telecommunications industry. The Company's four largest
customers accounted for approximately 44% of net accounts receivable
at March 31, 1999. The Company provides for allowances for doubtful
accounts which management believes are adequate to cover potential
credit risk losses.
The Company designs its products utilizing readily available parts
manufactured by multiple suppliers and the Company currently relies
on and intends to continue to rely on these suppliers. The Company
has been and expects to continue to be able to obtain the parts
generally required to manufacture its products without any
significant interruption or sudden price increase, although there
can be no assurance that the Company will be able to continue to do
so.
F-19
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
The Company sometimes utilizes a component available from only one
supplier. If a supplier was to cease to supply this component, the
Company would most likely have to redesign a feature of the affected
device. In these situations, the Company maintains a greater supply
of the component on hand in order to allow the time necessary to
effectuate a redesign or alternative course of action should the
need arise.
14. OTHER CURRENT LIABILITIES
Other current liabilities consists mainly of additional liabilities
assumed by the Company in connection with the acquisition of SolCom
Systems Limited ("SolCom"). These liabilities relate to professional
fees incurred by SolCom and its directors for services provided in
conjunction with the acquisition. These liabilities will be paid in
equal monthly installments through February 2000.
15. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income". The following
table reflects the reconciliation between net income per the
financial statements and comprehensive income:
YEAR YEAR
ENDED ENDED
3/31/99 3/31/98
Net (loss) income $(5,997,003) $ 711,310
Effect of foreign currency translation (22,049) (7,920)
----------- ----------
Comprehensive income $(6,019,052) $ 703,390
----------- ----------
F-20
<PAGE>
<TABLE>
<CAPTION>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- -------------------------------------------------------------------------------------------------------------------------
16. SUPPLEMENTAL CASH FLOW INFORMATION
1999 1998
Non-cash acquisition of SolCom Systems Limited:
Operating activities:
<S> <C> <C>
Accounts receivable $422,423
Inventory 342,509
Prepaid expenses and other current assets 81,652
Accounts payable 788,801
Accrued payroll and related liabilities 411,902
Deferred income 123,278
Other current liabilities 1,398,796
Investing and financing activities:
Property and equipment, net 388,712
Capitalized software, net 185,532
Borrowings 30,935
Common stock and options issued in connection
with the purchase acquisition 6,211,880
Other Non-Cash Investing and Financing Activities:
Common stock issued in connection with the
purchase acquisition of LeeMAH
DatacomSecurity Corporation 1,000,000 --
Acquisition of treasury shares 203,199 --
Common stock and options issued in connection with
termination of consulting contract 126,120 --
Options issued to consultants as non-cash compensation 62,000 15,150
Common stock issued in connection with European
Business Associates Share earn out agreement -- 12,538
</TABLE>
17. RELATED PARTY TRANSACTIONS
The Company issued advances to two officers of the Company in the
amount of $50,000 each on August 31, 1998. These advances accrue
interest at the Wall Street prime rate plus 1%. These advances are
due and payable in full upon the officers cessation of employment
with the Company or August 31, 2000, whichever is earlier.
Subsequent to March 31, 1999, one of the officers, who has
subsequently terminated employment with the Company, repaid his
outstanding balance in full.
F-21
<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
18. NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." Among other provisions, it requires that entities
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. Gains and losses resulting from changes in the fair
values of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting.
This standard is effective for fiscal years beginning after June 15,
1999, though earlier adoption is encouraged and retroactive
application is prohibited. For the Company this means the standard
must be adopted no later than April 1, 2000. Management, based on
its current operations, does not expect the adoption of this
standard to have a material impact on the Company's results of
operations, financial position or cash flows.
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal
Use". This standard requires certain direct development costs
associated with internal-use software to be capitalized including
external direct costs of material and services and payroll costs for
employees devoting time to the software projects. The SOP is
effective for financial statements for fiscal years beginning after
December 15, 1998. Management believes that SOP 98-1 will have an
immaterial impact on the Company's financial statements.
19. SUBSEQUENT EVENTS
In April 1999, the Company offered a discount on the warrants issued
in conjunction with the sale of stock in April 1996. These warrants,
initially issued at $1.50 and $2.00 and carrying an expiration date
of April 2000, were reduced in price to $1.25 and $1.50,
respectively. The discount carried an expiration date of June 30,
1999. During the discount period, investors exercised 1,143,251
warrants and the Company received net proceeds of $1,618,544.
In June 1999, the Company sold 1,000,000 shares of common stock to a
Private Equity Fund at $3.00 per share and received net proceeds of
$3,000,000. In conjunction with this sale, warrants to purchase
250,000 shares of common stock with an exercise price of $4.50 and
warrants to purchase 250,000 shares of common stock with an exercise
price of $6.00 were issued. These warrants expire in June 2002.
F-22
Exhibit 3.4
-----------
NUMBER SHARES
IN
COMMON STOCK COMMON STOCK
CUSIP 46205P 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS
ION NETWORKS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.0001 PAR VALUE, OF
ION NETWORKS, INC. (hereinafter called the "Corporation"), transferable
on the books of the Corporation by the holder hereof in person or by
duly authorized attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the Certificate
of Incorporation to all of which the holder by acceptance hereof
assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation
and the facsimile signatures of its duly authorized officers.
THIS IS TO CERTIFY that
Dated:
ION NETWORKS, INC. COUNTER SIGNED AND REGISTERED
-- Corporate Seal -- AMERICAN STOCK TRANSFER & TRUST COMPANY
1998 (New York, New York)TRANSFER AGENT
DELAWARE BY: AND REGISTRAR
AUTHORIZED SIGNATURE
----------------------------- -------------------------------
, Secretary , Chief Executive Officer
Exhibit 10.3
------------
LEASE
between
WASHINGTON PLAZA ASSOCIATES, L.P.,
"Landlord"
and
MICROFRAME, INC.,
"Tenant"
February 18, 1999
<PAGE>
LEASE, dated February 18, 1999, between WASHINGTON PLAZA ASSOCIATES,
L.P., a New Jersey limited partnership, having an office c/o Lincoln Equities
Group, 301 Route 17 North, 9th Floor, Rutherford, New Jersey 07070 (herein
called "LANDLORD") and MICROFRAME, INC., a New Jersey corporation, having an
office at 21 Meridian Road, Edison, New Jersey 08820 (herein called "TENANT").
W I T N E S S E T H:
Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Premises (as hereinafter defined), for the Term (as hereinafter
defined), at the Rent (as hereinafter defined) and otherwise upon, subject to
and in accordance with the following terms and conditions of this Lease.
In respect thereof, Landlord and Tenant hereby agree as follows:
ARTICLE 1 BUILDING, PREMISES AND TERM
1.1 Building.
The building in which the Premises are located (herein called the
"BUILDING") is located on the land (herein called the "LAND") described in
Exhibit A attached hereto and made a part hereof, and the Building, together
with the Land, is known as Washington Plaza, having a street address of 1551
South Washington Avenue, Piscataway, New Jersey.
1.2 Premises
The premises demised by this Lease (herein called the "PREMISES")
are located on and comprise a portion of the first (1st) floor of the Building,
substantially as shown hatched on the floor plan attached hereto as Exhibit B
and made a part hereof. For purposes of this Lease, the Premises shall be
conclusively deemed to consist of 26,247 rentable square feet.
1.3 Term.
1.3.1 The term of this Lease (herein called the "Term") shall
commence on the Commencement Date (as hereinafter defined in Section 1.3.2
hereof), and shall end at 11:59 p.m. on the last day of the month in which
occurs the tenth (10th) anniversary of the day immediately preceding the
Commencement Date (herein called "Expiration Date"), or on such earlier date
upon which the term of this Lease shall expire or be cancelled or terminated
pursuant to any of the conditions or covenants of this Lease or pursuant to law.
1.3.2 The "COMMENCEMENT DATE", subject to the following provisions
of this Section 1.3.2, shall be the earliest of (a) the date that Tenant shall
have commenced occupancy of the Premises for the conduct of its usual business
or (b) five (5) days after the date that Landlord shall have (1) substantially
completed the Initial Tenant Work (as hereinafter defined in Section 1.5
<PAGE>
hereof), and (2) If required for the lawful occupancy of the Premises, obtained
a certificate of occupancy or other license or permit, if any, required by law
to permit the Premises to be used for office purposes. Notwithstanding the
foregoing, if Landlord is delayed causing the Commencement Date to occur by
reason of delays caused or occasioned by Tenant (herein called "Tenant Delays"),
then, in addition to any other rights or remedies that Landlord may have on
account thereof, the "Commencement Date" shall be deemed to be the date Landlord
would have caused the Commencement Date to occur absent such Tenant Delays.
Landlord and Tenant hereby acknowledge that the Commencement Date is
indeterminate and shall occur only as provided in this Section 1.3.2. Landlord
and Tenant, promptly after the occurrence of the Commencement Date, shall
execute, acknowledge and deliver to each other an instrument in form reasonably
satisfactory to Landlord and Tenant confirming the Commencement Date; but
neither Tenant's nor Landlord's failure to execute, acknowledge and deliver such
instrument shall affect the occurrence of the Commencement Date or otherwise
affect the validity of this Lease.
1.4 Delivery and Accepttance of Premises.
Tenant has heretofore inspected the Premises, is fully familiar with
the condition thereof and, subject only to the substantial completion of the
Initial Tenant Work pursuant to the provisions of Section 1.5 below and to
latent defects, shall accept the Premises on the Commencement Date in their "AS
IS" condition.
1.5 Initial Tenant Work.
Landlord, subject to, upon and in accordance with the following
provisions of this Section shall, at Landlord's sole cost and expense, perform
the work needed to prepare the Premises for Tenant's initial occupancy thereof
(such work being herein called the "INITIAL TENANT WORK"):
1.5.1 Landlord and Tenant have approved Space Plan SP-IC for the
Initial Tenant Work prepared by BFI, dated December 3, 1998, revised December 9,
1998 (the "PRELIMINARY PLAN"), and the Design Spec Package relating to the
Preliminary Plan a copy of which is attached to and made a part of this Lease as
Exhibit B-1 (the "SPECIFICATIONS"). Promptly after the execution of this Lease
by Landlord and Tenant, Landlord, at Landlord's sole cost and expense, shall
cause to be prepared a complete and coordinated set of working, finished and
detailed construction drawings and specifications for the Initial Tenant Work
(such drawings and specifications are herein called the "INITIAL TENANT WORK
PLANS"), which Initial Tenant Work Plans shall be prepared in conformity with
the Preliminary Plan and the Specifications.
1.5.2 Landlord represents that the Premises, after Landlord
substantially completes the Initial Tenant Work, shall be in compliance with the
Americans with Disabilities Act of 1990 (the "ADA"), and all other Legal
Requirements (as defined in Article 13 hereof) applicable to the use of the
Premises as general office space, as of the Commencement Date (except for
conditions created by Tenant in installing its furniture, fixtures and
equipment). With respect to any alterations or improvements that Tenant makes to
the interior of the Premises (or which are made on Tenant's
2
<PAGE>
behalf), other than the Initial Tenant Work, regardless of whether Tenant has
obtained Landlord's consent to such alterations or improvements, Tenant shall be
fully responsible for complying with and paying any costs associated with any
and all requirements of the ADA. In addition, if any alterations are required to
be made to the Premises due to changes in or regulations under the ADA or
judicial interpretations of the requirements of the ADA coming into existence
following the Commencement Date, or due to changes in Tenant's use of the
Premises or in the nature of Tenant's conduct of its business in the Premises
(including but not limited to any changes in use or business conduct arising out
of a sublease or assignment, or resulting in the Premises being deemed a "PLACE
OF PUBLIC ACCOMMODATION" under the ADA), Tenant shall be fully responsible for
complying with and paying any costs associated with any and all requirements of
the ADA arising in connection therewith. If the need for Alterations required by
the ADA arises for any other reason, Landlord shall be fully responsible for
complying with and paying any costs associated with any and all requirements of
the ADA arising in connection therewith.
1.5.3 Landlord, promptly after completion of the Initial Tenant Work
Plans, shall apply to and secure from the appropriate Governmental Authorities
(as defined in Article 13 hereof any building permit(s) or license(s) which
shall be required in connection with Landlord's performance of the Initial
Tenant Work.
1.5.4 Landlord, promptly after the date on which any required
building permit(s) or license(s) are issued, or if no building permit or license
is required, the date on which the Initial Tenant Work Plans have been
completed, shall commence to perform the Initial Tenant Work, and thereafter
diligently prosecute the Initial Tenant Work to completion. Landlord shall
perform the Initial Tenant Work in accordance with the approved Initial Tenant
Work Plans, in compliance with all Legal Requirements, in accordance with
Building standard specifications, and otherwise in a good and workmanlike
manner. In performing the Initial Tenant Work, Landlord shall use Building
standard materials unless otherwise specifically provided in the Initial Tenant
Work Plans or otherwise agreed to in writing by Landlord and Tenant.
1.5.5 Landlord, at Landlord's sole cost and expense, shall arrange
for any inspections, and shall apply for and obtain any certificate of
occupancy, permit, license or similar document required by any Governmental
Authority for the occupancy of the Premises for general office purposes.
1.5.6 The Initial Tenant Work shall be deemed to be "SUBSTANTIALLY
COMPLETED" even though minor details or adjustments of or in such work (herein
called " PUNCHLIST ITEMS ") are not then completed. Tenant, within thirty (30)
days after the Commencement Date, shall prepare, and deliver to Landlord, a list
(herein called the "PUNCHLIST") of all punchlist items with respect to the
Initial Tenant Work; any punchlist items (other than latent defects) not timely
and properly included on the Punchlist shall be deemed waived by Tenant.
Landlord shall, at its sole cost and expense, complete or correct all Punchlist
items timely and properly included on the Punchlist, within thirty (30) days of
the delivery of the Punchlist to Landlord (or if such completion or correction
work cannot with due diligence be completed or corrected within thirty (30)
days, then within a reasonable period of time thereafter, provided that Landlord
is prosecuting such work diligently); provided,
3
<PAGE>
however, that in no event shall Landlord be obligated to repair any damage to
any of the Initial Tenant Work that was caused by Tenant or any Tenant Parties
(as defined in Article 13 hereof). In completing and/or correcting punchlist
items, Landlord shall use commercially reasonable efforts to minimize disruption
of Tenant's business operations in the Premises.
1.5.7 Subject, to Landlord's completion and/or correction of the
punchlist items timely and properly included on the Punchlist (or, if latent
defects, after Tenant's discovery and reporting thereof to Landlord), Tenant's
occupancy of the Premises for the conduct of its usual business shall be deemed
Tenant's acceptance of the Premises and Tenant's agreement that Landlord has
substantially completed the Initial Tenant Work and that the Commencement Date
has occurred.
1.5.8 Tenant's employees, agents and contractors shall be permitted
entry to the Premises on or before the Commencement Date at all reasonable times
designated by Landlord provided such persons shall be accompanied by a
representative of Landlord. Landlord agrees to have such representative
available to accompany such representative(s) of Tenant during all reasonable
times designated by Landlord for entry to the Building and the Premises.
Tenant's access to the Premises shall be for the purposes of inspecting the
progress of the Initial Tenant Work as well as for installation/performance of
Tenant's telecommunications, data systems/hardware, Tenant installed internal
security systems, furniture and graphics/plans, provided that such inspections
and/or installations shall not unreasonably interfere with construction of the
improvements by Landlord. Any delays in completion of the Initial Tenant Work
caused by Tenant's activities permitted under this Section 1.5.8 shall
constitute Tenant Delays. In addition, with the prior written consent of
Landlord which will not be unreasonably withheld, conditioned or delayed, Tenant
shall be entitled to have any other vendors authorized by Tenant to enter and
work in the Premises provided that such vendors and their work shall not
unreasonably interfere with the construction by Landlord of the improvements
required to be performed by Landlord hereunder. In preparing the Premises,
Landlord shall make available to Tenant, its agents, employees, contractors and
approved vendors, reasonable quantities of Building services necessary for the
installations and work described herein so long as such does not unreasonably
interfere with Landlord's construction of the Premises or Building. Tenant's
access to and use of the Premises pursuant to the terms of this paragraph shall
be expressly subject to all terms of this Lease except Tenant's obligation to
pay Rent, specifically including but not limited to the provisions of Article 5
of this Lease.
1.5.9 In the event the Initial Tenant Work has not been
substantially completed by July 3 1, 1999 (as extended by any period of delay
attributable to Tenant Delays), then Tenant shall receive a credit against Fixed
Rent in an amount equal to the product of (i) the number of days from such date
(as so extended) through the date of such substantial completion times (ii) (a)
for the first (1st) fifteen (15) days after such date, $1,402.24, and (b) for
all days beyond such first (1st) fifteen (15) days after such date, $2,804.48.
In the event the Initial Tenant Work has not been substantially completed by
October 31, 1999 (as extended by any period of delay attributable to Tenant
Delays), then Tenant shall be entitled to terminate this Lease by delivery to
Landlord, prior to the date of such substantial completion, of written notice of
such termination.
4
<PAGE>
ARTICLE 2 - RENT
2.1 Rent - Generally.
2.1.1 The rents payable under this Lease (herein collectively
referred to as the "RENT") shall be and consist of (i) the Fixed Rent (as
hereinafter defined in Section 2.2 below), and (ii) additional rent (herein
called "ADDITIONAL CHARGES") consisting of Tax Payments (as hereinafter defined
in Section 2.3 below), Operating Payments (as hereinafter defined in Section 2.4
below) and all other charges as shall become due from and payable by Tenant to
Landlord pursuant to the terms of this Lease. All Additional Charges shall be
deemed "rent" for all purposes, including Landlord's remedies for non-payment
thereof.
2.1.2 Tenant covenants and agrees to pay all Rent, as and when the
same is due and payable hereunder, without notice or demand therefor and without
any abatement, deduction or setoff for any reason whatsoever, except, in either
case, as may be expressly provided in this Lease. If, pursuant to any provision
of this Lease, Tenant shall be obligated to pay any Additional Charges and no
due date or payment period therefor is specified herein, then such Additional
Charges shall be paid by Tenant to Landlord within ten (10) days after being
billed therefor. All Rent shall be paid in lawful money of the United States to
Landlord at its office, or such other place, or to Landlord's agent and at such
other place, as Landlord shall designate by notice to Tenant. All Rent shall be
paid by good and sufficient check (subject to collection) drawn on a New Jersey
or New York City bank.
2.2 Fixed Rent.
2.2.1 Tenant shall pay to Landlord a fixed rent (herein called
"Fixed Rent") at the following rates for the following periods:
(a) FIVE HUNDRED ELEVEN THOUSAND EIGHT HUNDRED
SIXTEEN and 56/100 DOLLARS ($511,816.56) (i.e., $19.50 per rentable
square foot of the Premises), per annum, for the period from the
Commencement Date to and including the day immediately preceding the
second (2nd) anniversary of the Commencement Date;
(b) FIVE HUNDRED FIFTY-ONE THOUSAND ONE
HUNDRED EIGHTY-SEVEN and 00/100 DOLLARS ($551,187.00) (i.e., $21.00
per rentable square foot of the Premises), per annum, for the period
from the second (2nd) anniversary of the Commencement Date to and
including the day immediately preceding the third (3rd) anniversary
of the Commencement Date;
(c) FIVE HUNDRED FIFTY-SEVEN THOUSAND SEVEN
HUNDRED FORTY-EIGHT and 72/100 DOLLARS ($557,748.72) (i.e., $21.25
per rentable square foot of the Premises), per annum, for the period
from the third (3rd) anniversary of the
5
<PAGE>
Commencement Date to and including the day immediately preceding the
fourth (4th) anniversary of the Commencement Date;
(d) SIX HUNDRED TEN THOUSAND TWO HUNDRED
FORTY- TWO and 72/100 DOLLARS ($610,242.72) (i.e., $23.25 per
rentable square foot of the Premises), per annum, for the period
from the fourth (4th) anniversary of the Commencement Date to and
including the day immediately preceding the seventh (7th)
anniversary of the Commencement Date; and
(e) SIX HUNDRED SIXTY-TWO THOUSAND SEVEN
HUNDRED THIRTY-SIX and 72/100 DOLLARS ($662,736.72) (i.e., $25.25
per rentable square foot of the Premises), per annum, for the period
from the seventh (7th) anniversary of the Commencement Date to and
including the Expiration Date.
2.2.2 The Fixed Rent shall be payable commencing on the Commencement
Date and thereafter in equal monthly installments in advance on the first day of
each and every calendar month during the Term, except as hereinafter provided in
this Section 2.2.2. Tenant will pay, upon the execution and delivery of this
Lease, an amount equal to 1/12th the annual rate of Fixed Rent set forth in
Section 2.2.1(a) above, which amount shall be applied against the Fixed Rent for
the calendar month immediately following the calendar month in which the
Commencement Date ocurs (and, to the extent not exhausted by such application,
by application against the Fixed Rent for the next succeeding calendar month).
Such payment shall be returned to Tenant if Tenant properly and timely
terminates this Lease pursuant to Section 1.5.9 hereof. If the Commencement Date
or the Expiration Date occurs on a day other than the first or last day,
respectively, of a calendar month, then the Fixed Rent for the partial calendar
month in which the Commencement Date or the Expiration Date occurs shall be a
prorated portion of a full monthly installment of Fixed Rent, and, in the case
of the partial amount in which Commencement Date occurs, shall be payable on the
Commencement Date.
2.2.3 Provided no Event of Default is then in existence under this
Lease, Tenant shall receive a concession against Fixed Rent in an amount equal
to the rent (including fixed rent, operating expenses, real estate taxes,
utilities and other occupancy related charges) payable by Tenant under Tenant's
existing lease(s) described on Exhibit C attached to and made a part of this
Lease ("Tenant's Existing Lease") for all months or partial months for which
such rent is payable by Tenant from the earlier of the Commencement Date or May
1, 1999, through July 31, 1999. Such concession (i) shall be determined by and
conditioned upon receipt by Landlord of evidence reasonably satisfactory to
Landlord of Tenant's incurring of the amounts to be included in such concession
in rent (including fixed rent, operating expenses, real estate taxes, utilities
and other occupancy related charges) under Tenant's Existing Lease(s) and (ii)
shall be applied until exhausted, in an amount up to $15,000 per month, against
the monthly installments of Fixed Rent becoming first due and payable by Tenant
under this Lease.
2.3 Tax Payments
6
<PAGE>
2.3.1 For the purposes of this Lease the following definitions shall
apply:
"TAX YEAR" shall mean such calendar year ( whether or
not such period is fixed as the fiscal year for Taxes (as hereinafter defined)
or any component thereof by any Governmental Authority) the whole or any portion
of which is within the Term. If a fiscal period fixed for any component of Taxes
by any Governmental Authority is a period other than a Tax Year, then such
component of Taxes shall be averaged over the number of calendar months in such
fiscal period and each such monthly portion shall be included in Taxes for the
Tax Year in which such calendar month occurs.
"BASE TAX YEAR" shall mean Tax Year commencing on
January 1, 1999, and ending December 31, 1999.
"BASE TAX AMOUNT" shall mean the Taxes for the Base Tax
Year, adjusted to reflect a fully completed and fully assessed Building during
the Base Tax Year.
"TENANT'S SHARE" shall mean a fraction (expressed as a
percentage, and carried to four decimal places), the numerator of which is the
number of rentable square feet contained in the Premises and the denominator of
which is 190,000. As of the date hereof, Tenant's Share is 13.8142%.
"TAXES", for any Tax Year, shall mean (A) all real
estate taxes, water and sewer rents or charges, school taxes, vault taxes,
assessments and special assessments levied, assessed or imposed upon or with
respect to the Real Property (as defined in Article 13 hereof) by any
Governmental Authority, and (B) any expenses incurred by Landlord in contesting
such taxes, charges or assessments and/or the assessed value of the Real
Property, which expenses shall be allocated to the Tax Year to which such
expenses relate (such expenses not to exceed the benefit derived from such tax
contest). Taxes shall also include all taxes assessed or imposed upon Landlord
with respect to the rents received from the Real Property (but not any income
taxes, gross receipts taxes, corporate franchise taxes, gift taxes, estate taxes
or transaction taxes of Landlord, except to the extent provided in the following
sentence). If, at any time during the Term, the methods of taxation prevailing
on the date hereof shall be altered so that in lieu of, or as an addition to or
as a substitute for, the whole or any part of the taxes, charges or assessments
now levied, assessed or imposed, there shall be levied, assessed or imposed a
new tax, assessment, levy, imposition, license fee or charge wholly or partially
as a capital levy or otherwise on the Real Property or the rents received from
the Real Property, then such additional or substitute tax, assessment, levy,
imposition, fee or charge shall be included within "Taxes" for purposes hereof.
Finally, "Taxes" shall also include any payments in lieu of "Taxes" payable in
connection with any exemption obtained from any Governmental Authority with
respect to the Real Property.
2.3.2 If Taxes for any Tax Year subsequent to the Base Tax Year
shall exceed the Base Tax Amount, Tenant, as hereinafter provided, shall pay to
Landlord an amount (herein called the "Tax Payment") equal to Tenant's Share of
the amount by which the Taxes for such Tax Year are greater
7
<PAGE>
than the Base Tax Amount. In respect of any such Tax Year which begins prior to
the Commencement Date or ends after the Expiration Date, the Tax Payment shall
be prorated to correspond to that portion of such Tax Year occurring within the
Term.
2.3.3 The Tax Payment for each Tax Year shall be due and payable as
provided in the following provisions of this Section 2.3.3. Landlord, at anytime
prior to, during, or after the end of, any Tax Year, may deliver to Tenant a
statement for the Tax Payment for such Tax Year together with a copy of the
invoice for the Taxes for such Tax Year (each such statement with such invoice
being herein called a "Tax Statement"). Tenant, for each Tax Year, shall pay to
Landlord the Tax Payment indicated by any such Tax Statement in installments,
consistent with the number and timing of the installments of and in which
Landlord shall pay Taxes to the applicable Governmental Authorities, with each
such installment of the Tax Payment being due on the later to occur of (x) the
date that is thirty (30) days prior to the date the corresponding installment of
Taxes is due or payable to the applicable Governmental Authority (or, with
respect to installments that may become due after the Expiration Date, the date
that is sixty (60) days prior to the Expiration Date), and (y) the date that is
twenty (20) days after the rendering of the Tax Statement.
2.3.4 If, at any time after the delivery of any Tax Statement for
any Tax Year, it is determined for any reason (including any reduction in Taxes
comprising the Base Tax Amount) that the Tax Payment for such Tax Year is
greater than the amount set forth on such Tax Statement, then Landlord may
furnish to Tenant a revised or corrected Tax Statement for such Tax Year, and,
in any such case, Tenant shall pay to Landlord the additional amount indicated
by the revised or corrected Tax Statement within ten (10) days after Tenant's
receipt thereof. Landlord's failure to render, or delay in rendering, a Tax
Statement, or a revised or corrected Tax Statement, for any Tax Year shall not
prejudice Landlord's right to thereafter render a Tax Statement, or a revised or
corrected Tax Statement, for such Tax Year or any other Tax Year, nor shall the
rendering of a revised or Corrected Tax Statement for any Tax Year prejudice
Landlord's right to thereafter render a further revised or corrected Tax
Statement for such Tax Year.
2.3.5 Only Landlord shall be eligible to institute tax reduction or
other proceedings to challenge Taxes or to reduce the assessed valuation of the
Real Property; Tenant hereby waives any right Tenant may, now or in the future
have to institute any such proceedings or otherwise challenge taxes. If, at any
time after the delivery of any Tax Statement for any Tax Year, Landlord shall
receive a refund of Taxes for such Tax Year, then Landlord shall furnish to
Tenant a revised Tax Statement for such Tax Year, and, if such revised Tax
Statement shall set forth a Tax Payment that is less than that set forth on the
previous Tax Statement, then Landlord, within ten (10) days after Tenant's
receipt of such revised Tax Statement, shall pay to Tenant the amount of the
overpayment indicated thereby. Nothing contained in this Lease shall obligate
Landlord to bring any application or proceeding seeking a reduction in Taxes or
assessed valuation. If the Taxes payable for the Base Tax Year or any other Tax
Year are later reduced by final determination of legal proceedings, settlement,
or otherwise, such reduced amount as finally determined shall become the Base
Tax Amount (in the event of a reduction applicable to the Base Tax Year) or the
Taxes for the Tax Year in question (in the event of a reduction applicable to a
Tax Year other than the Base Tax Year) for purposes of this
8
<PAGE>
Lease and such reduced amount shall be used to determine the Tax Payment payable
by Tenant applicable to any Tax Year affected by such reduction, and all Tax
Payments theretofore paid or payable under this Lease shall be recomputed on the
basis of such reduction, and, if applicable, Tenant shall pay to Landlord as an
Additional Charge within thirty (30) days after being billed therefor any
deficiency between the amount of such payments computed prior to the reduction
and the amount thereof due as a result of such recomputation.
2.4 Operating Payments
2.4.1 For the purposes of this Lease, the following definitions
shall apply:
"OPERATING YEAR" shall mean any calendar year, the whole
or any portion of which is included within the Term.
"BASE OPERATING YEAR" shall mean the Operating Year
commencing on January 1, 1999, and ending December 31, 1999.
"BASE OPERATING AMOUNT" shall mean the Operating
Expenses for the Base Operating Year (as recalculated pursuant to paragraph (C)
of the definition of "OPERATING EXPENSES" hereinafter provided).
"OPERATING EXPENSES", for any Operating Year, shall be
determined in accordance with the provisions of the following paragraphs (A)
through (C), sequentially applied:
(A) "Operating Expenses" shall mean all expenses paid or
incurred by, or on behalf of, Landlord in respect of the operation, management,
maintenance and/or repair of the Real Property, including, without limitation,
(i) salaries, wages and fringe benefits of employees and contractors engaged in
such operation, management, maintenance and/or repair; (ii) payroll taxes,
worker's compensation, uniforms and related expenses (whether direct or
indirect) for such employees; (iii) the cost of fuel, gas, steam, electricity,
heat, ventilation, air-conditioning and chilled or condenser water, water, sewer
and other utilities, together with any taxes and surcharges on, and fees paid in
connection with the calculation and billing of, such utilities; (iv) the cost of
painting, and/or decorating all areas of the Real Property (excluding, however,
any leasable areas of the Building); (v) the cost of casualty, liability,
fidelity, rent and all other insurance regarding the Real Property and/or an
property thereon (together with amounts paid or incurred on account of any
commercially reasonable deductible therein); (vi) the cost of all supplies,
tools, materials and equipment, whether by purchase or rental, used in the
operation, management, maintenance and/or repair of the Real Property; (vii) the
fair rental value of any Building, office or other space in the Building used in
connection with the operation, management, maintenance and/or repair of the Real
Property, and all office expenses (e.g., telephone, utility, stationery)
incurred in connection therewith; (viii) the cost of security services, and
cleaning and janitorial services, including, without limitation, glass cleaning,
snow and ice removal and garbage and waste collection and/or disposal; (ix) the
cost of all interior and exterior landscaping and all temporary exhibitions
located at or within the Real.
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Property; (x) the cost of alterations and/or repairs made in or to the Real
Property; (xi) management fees (or, if Landlord self-manages, or has an
Affiliate of Landlord manage, the Real Property, an amount in lieu thereof equal
to 3-1/2% of the gross receipts for the Real Property); (xii) all reasonable
costs and expenses of legal, bookkeeping, accounting and other professional
services; (xiii) fees, dues and other contributions paid by or on behalf of
Landlord to civic or other real estate or organization customarily joined by
landlords of similar buildings and computed as if this Building was the only
building owned by Landlord; (xiv) the cost of subsidizing the Building's
cafeteria or any similar specialty service provided for tenants and occupants of
the Building generally, and (xv) all other fees, costs, charges and expenses
properly allocable to the operation, management, maintenance and/or repair of
the Real Property, in accordance with then prevailing customs and practices of
the commercial office real estate industry in the general vicinity of the Real
Property.
(B) "Operating Expenses" shall not, however, include the
following items: (1) depreciation; (2) interest on, and amortization of,
Mortgages and other debts; (3) the cost of tenant improvements made for
tenant(s) of the Building (including Tenant) or for preparing any space for
occupancy or for leasing, including permit, license and inspection fees; (4)
brokerage commissions, legal fees and other costs, fees and expenses incurred in
connection with the leasing, sale, financing or refinancing of the Real Property
or any portion thereof or space therein, (5) financing or refinancing costs; (6)
the cost of any work or services performed for any tenant(s) of the Building
(including Tenant), whether at the expense of Landlord or such tenant(s), to the
extent that such work or services are in excess of the work or services which
Landlord, at its expense, is required to furnish Tenant under this Lease; (7)
the cost of any electricity consumed in the Premises or any other leasable area
of the Building; (8) Taxes; (9) all salaries, wages, benefits and taxes in
connection with employees and personnel above the grade of property manager;
(10) expenditures for capital improvements and all other costs which should be
capitalized in accordance with generally accepted accounting practices, other
than (a) those which under generally applied accounting practice are expenses or
regarded as deferred expenses and other than capital expenditures made by reason
of legal requirements or insurance requirements arising after the date hereof,
in any of which cases the cost thereof shall be included in Operating Expenses
for the calendar year in which the costs are incurred and subsequent calendar
years, on a straight-line basis, to the extent that such items are amortized
over an appropriate period in accordance with Generally applied accounting
practice, and (b) the cost of any item of capital equipment purchased by
Landlord or any capital expenditure made by Landlord which has the effect of
reducing the expenses which would otherwise be included in Operating Expenses,
in any of which cases the cost of such capital equipment or capital expenditure
shall be included in Operating Expenses for the calendar year in which the costs
are incurred and subsequent calendar years, on a straight-line basis, to the
extent that such items are amortized over such period of time as such savings or
reductions in Operating Expenses are expected to equal Landlord's costs for such
capital equipment or capital expenditure, determined in accordance with
generally applied accounting practice (provided, however, in no event shall the
amount so included in Operating, Expenses exceed the reasonably anticipated
amount of savings during any particular period), and (c) if Landlord shall lease
any items of capital equipment designed to result in savings or reductions in
expenses which would otherwise be included in Operating Expenses, then the
rentals and other costs paid pursuant to such leasing will be included in
Operating Expenses for the calendar
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year in which such rentals or other costs were incurred (provided, however, in
no event shall the amount of such rentals or other costs so included in
Operating Expenses exceed the reasonably anticipated amount of savings during
any particular period); (11) amounts received by Landlord through proceeds of
insurance to the extent they are compensation for sums previously included in
Operating Expenses hereunder; (12) costs of repairs or replacements incurred by
reason of fire or other casualty or condemnation (13) advertising, marketing and
promotional expenditures; (14) amortization and cost recovery (except as
permitted for capital costs as described in (10) above); (15) any costs or
expenses that are paid for, or for which Landlord is reimbursed, by any third
party including, without limitation, tenants and also including, without
limitation, insurance, warranty and condemnation proceeds; (16) court costs,
legal fees and expenses incurred by or on behalf of Landlord in connection with
disputes with tenants or occupants of the Building or with any Underlying Lessor
(as defined in Section 7.2 hereof) or any Mortgagee (as defined in Section 7.2
hereof); (17) costs of compliance (including, without limitation, legal fees)
with any Legal Requirements existing on the date of this Lease (including,
without limitation, the ADA) or with any violations against the Building; (18)
the amount of any fines or penalties incurred in connection with the matters
referred to in clause 17 above; (19) costs of removal, encapsulation, cleanup or
other treatment of asbestos or other Hazardous Substances (as defined in Section
8.7 hereof); (20) amounts paid by Landlord for supplies, materials and/or
services which exceed the commercially reasonable costs for such supplies,
materials and/or services in the municipality in which the Building is located;
(21) interest, penalties or late charges incurred by Landlord for late payment
of any bills or invoices for amounts otherwise includable as Operating Expenses;
(22) the costs or expenses (including fines, interest, penalties and legal fees)
arising out of Landlord's failure to timely pay Operating Expenses or Taxes; and
(23) costs or expenses incurred for the acquisition of sculpture, paintings or
works of art for the Building.
(C) If during any relevant period (i) any rentable space
in the Building shall be vacant or unoccupied, and/or (ii) the tenant or
occupant (including without limitation, Landlord or any Affiliates of Landlord)
of any space in the Building undertook to perform work or services therein in
lieu of having Landlord perform the same and the cost thereof, if the same were
performed by Landlord, would have been included in Operating Expenses, then, in
any such event(s), the Operating Expenses for such period shall be adjusted to
reflect the Operating Expenses that would have been incurred if such space had
been occupied or if Landlord had performed such work or services, as the case
may be.
2.4.2 For each Operating Year subsequent to the Base Operating Year,
Tenant, as Hereinafter provided, shall pay to Landlord an amount (the "OPERATING
PAYMENT") equal to Tenant's Share of the amount by which the Operating Expenses
for such Operating Year exceed the Base Operating Amount. In respect of any such
Operating Year which is partly within and partly without the Term, the Operating
Payment shall be prorated to correspond to that portion of such Operating Year
occurring within the Term.
2.4.3 Landlord, prior to the commencement of, or during, any
Operating Year, may furnish to Tenant a written statement setting forth
Landlord's reasonable estimate of the Operating Payment
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for such Operating Year (such estimate, as the same may be revised as
hereinafter provided, the "ESTIMATED OPERATING PAYMENT"). Tenant shall pay to
Landlord on the first day of each month during any Operating, Year, an amount
equal to one-twelfth (1/12th) of the Estimated Operating Payment for such
Operating Year. If, however, Landlord, for any Operating Year, shall not furnish
such a written statement or only furnish the same after the commencement of such
Operating Year, then (i) until the first day of the month following the month in
which such written statement is furnished, Tenant shall pay to Landlord on the
first day of each month an amount equal to the monthly sum payable by Tenant to
Landlord under this Section 2.4.3 for the last month of the preceding Operating
Year, (ii) after such written statement is furnished, Landlord shall give a
notice to Tenant indicating whether the installments of the Operating Payment
previously made for such Operating Year were greater or less than the
installments of the Operating Payment which would have theretofore been made had
such written statement been furnished prior to the commencement of such
Operating Year, and, within thirty (30) days of such notice, either Tenant shall
pay to Landlord the deficiency indicated thereby or Landlord shall refund to
Tenant the overpayment. Indicated thereby, and (iii) on the first day of the
month following the month in which such written statement is furnished, and on
the first day of each month thereafter throughout the remainder of such
Operating Year, Tenant shall pay to Landlord an amount equal to one-twelfth
(1/12th) of the Estimated Operating Payment set forth on such written statement.
Landlord may, during any Operating Year (but not more than once during any
Operating Year), furnish to Tenant a written statement revising the Estimated
Operating Payment for such Operating Year, and in each such case, the Estimated
Operating Payment for such Operating Year shall be adjusted, and amounts paid or
refunded, as the case may be, in substantially the same manner set forth in the
immediately preceding sentence.
2.4.4 Landlord, after the end of each Operating Year for which an
Operating Payment is due, shall furnish to Tenant a written statement (herein
called an "OPERATING STATEMENT") setting forth the Operating Payment for such
Operating Year. If, for any such Operating Year, the Operating Statement shall
show that the sums paid by Tenant under Section 2.4.3 above, exceeded the
Operating Payment for such Operating Year (such excess, for any Operating Year,
being herein called the "OPERATING OVERPAYMENT"), then Landlord, within twenty
(20) days after delivery of such Operating Statement, shall refund to Tenant the
amount of such Operating Overpayment. If the Operating Statement for such
Operating Year shall show that the sums paid by Tenant under Section 2.4.3 above
were less than the Operating Payment for such Operating Year (such deficiency,
for any Operating Year, being herein called the "OPERATING DEFICIENCY"), Tenant
shall pay the amount of such Operating Deficiency within twenty (20) days after
Tenant's receipt of the Operating Statement.
2.4.5 Landlord's failure to render, or delay in rendering, an
Operating Statement with respect to any Operating Year shall not prejudice
Landlord's right to thereafter render a Operating Statement for such Operating
Year or any other Operating, Year, nor shall the rendering of a Operating
Statement (or a revised or corrected Operating Statement) for any Operating Year
prejudice Landlord's right to thereafter render one or more revised or corrected
Operating Statements for such Operating Year.
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2.4.6 Each Operating Statement shall be conclusive and binding upon
Tenant as of the date that is sixty (60) days after the delivery thereof, except
to the extent that, prior thereto, Tenant shall have, in good faith, disputed
items or matters set forth on such Operating Statement by written notice to
Landlord, which notice shall set forth, in reasonable detail, the disputed items
or matters and clearly state the reasons that Tenant disputes the same. If
Tenant shall dispute in writing, any specific item or items in Landlord's
Operating Statement, and such dispute is not resolved within sixty (60) days
after Tenant's delivery of written notice to Landlord of such disputed item or
items, either party may, during the thirty (30) days next following the
expiration of such sixty (60) day period, refer such disputed item or items to
an independent certified public accountant mutually acceptable to Landlord and
Tenant (and if such accountant is selected by Tenant, such accountant shall not
be entitled to charge a contingent fee for its services rendered), for a
determination which shall be final, conclusive and binding upon Landlord and
Tenant. Prior to performing services hereunder, such accountant shall agree in
writing that the results of its investigation and review of the dispute shall
remain confidential, and that such accountant shall not solicit other tenants in
the Building for the purpose of disputing Operating Statement items. Landlord
shall provide such accountant with reasonable access to or with copies of all
records and information reasonably requested by such accountant and reasonably
necessary for such accountant's determination. Tenant agrees to pay all costs
involved in such determination (except as hereinafter provided). If it shall be
so determined that any portion of the amount set forth in the Operating
Statement in question that was charged to and paid by Tenant was not properly
chargeable to Tenant, then Landlord shall credit to Tenant the amount of such
improper charge against the next installment or installments of Fixed Rent
accruing under the Lease. If it is determined that the total Operating Payment
charged by Landlord to Tenant for the Operating Year regarding which such
accountant is making its determination was more than one hundred five percent
(105%) of the amount that Landlord should properly have included in such
Operating Payment, as so determined by such accountant, Landlord will reimburse
Tenant for such accountant's reasonable fees charged for making such
determination.
2.4.7 Landlord represents that Tenant's Share has been calculated,
and in the future will be calculated, using the identical formula for all
tenants in the Building and that the sum of such "proportionate shares" does
not, and in the future will not, exceed 100%.
ARTICLE 3 - TENANT'S USE AND OCCUPANCY
3.1 Use of Premises.
3.1.1 Tenant, subject to and in accordance with the provisions of
this Lease, shall use the Premises for central office use (including the use of
the gym and shower area by Tenant's on-site employees) and for no other purpose.
Tenant and Tenant's personnel and employees shall be permitted to prepare food
and beverages in the kitchen area of the Premises for on-site consumption in the
Premises.
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3.1.2 If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business at the Premises or any part
thereof, Tenant, at its expense, shall duly procure and thereafter maintain such
license or permit and submit the same to Landlord for inspection. Tenant shall
at all times comply with the terms and conditions of each such license or
permit.
3.2 Building Rules and Regulations.
Tenant shall, and shall cause all Tenant Parties, to faithfully
observe and comply with the rules and regulations annexed hereto as Exhibit D,
and such reasonable changes therein (whether by modification, elimination or
addition) as Landlord at any time or times hereafter may make and give notice
thereof to Tenant, which, in Landlord's reasonable judgment, shall be necessary
for the reputation, safety, care and appearance of the Real Property, or the
preservation of good order therein, or otherwise in connection with the
operation, management and/or maintenance of the Real Property (such rules and
regulations as changed from time to time being herein called "BUILDING RULES AND
REGULATIONS"); provided, however, that in case of any conflict or inconsistency
between the provisions of this Lease and any of the Building Rules and
Regulations, the provisions of this Lease shall control. Nothing in this Lease
contained shall be construed to impose upon Landlord any duty or obligation to
enforce the Building Rules and Regulations against any other tenant or any other
person, and Landlord shall not be liable to Tenant for violation of the Building
Rules and Regulations by any other tenant or any other person; provided,
however, that the Building Rules and Regulations shall be applied in a
nondiscriminatory manner against tenants of the Building.
3.3 Use of Public Areas.
Tenant (and all Tenant Parties and Tenant's clients and invitees),
incident to Tenant's use of the Premises, shall have (i) a non-exclusive right
to use the Core Lavatories (as defined in Article 13) hereof) located on the
floor of the Building on which the Premises are located for lavatory purposes
only, and (ii) a non-exclusive right of ingress and egress to and from the
Premises through the Public Areas (as defined in Article 13 hereof); subject, in
all events, to the Building Rules and Regulations.
3.4 Parking.
3.4.1 For purposes of this Lease, the following definitions shall
apply: (i) the "PARKING AREAS" shall mean those areas of the Land designated by
Landlord, from time to time, for parking to serve the Building; (ii) the
"RESERVED PARKING AREAS" shall mean those portions of the Parking Areas
designated by Landlord, from time to time, for reserved parking (i.e., for the
exclusive use of one or more persons): and (iii) the "GENERAL PARKING AREAS"
shall mean, from time to time, those portions of the Parking Areas which are not
then Reserved Parking Areas.
3.4.2 Tenant, incident to its use of the Premises, shall have the
right to use, and permit the Tenant Parties (and Tenant's clients and invitees)
to use, up to one hundred five (105) parking, spaces
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located in the General Parking Areas, on a "first come, first served" basis in
common with other persons designated by Landlord, subject, in all events, to the
Building Rules and Regulations.
3.5 Tenant's Signage.
3.5.1 Tenant, incident to its use of the Premises, shall have the
right to install and maintain a sign (consisting solely of lettering and logo
identifying Tenant's business name) on the entrance door for the Premises (such
sign being herein called "TENANT'S ENTRANCE SIGN"), provided, that (i) the
location, dimensions, design, materials and content of such sign shall be
subject to Landlord's approval (which shall not be unreasonably withheld,
conditioned or delayed), (ii) the installation of such sign shall be deemed
"Alterations" and, accordingly, shall be performed subject to and in accordance
with the provisions of Section 5.1 hereof, (iii) Landlord, at its expense, shall
have the right to temporarily remove any sign when reasonably necessary in
connection with the operation, management or maintenance of the Real Property
(e.g., to paint or incident to the performance of any alterations or repairs),
and shall reinstall or replace such sign, and (iv) the installation and
maintenance of such sign shall otherwise be subject to the Building Rules and
Regulations. Except as provided in this Section 3.5, Tenant shall not have the
right to install or maintain any signs in or at the Real Property which are
either located outside of the Premises or otherwise visible from the outside of
the Premises.
3.5.2 At any time after the earlier of (i) one (1) year after the
date of execution of this Lease by Landlord and Tenant or (ii) the date that
Landlord shall have erected on the Land a monument sign for the Building
("LANDLORD'S MONUMENT SIGN"), so long as Tenant has act theretofore elected to
be represented on Landlord's Monument Sign as hereinafter provided, Tenant shall
be entitled, at Tenant's sole cost and expense, to erect a monument sign
("TENANT'S MONUMENT SIGN") on the Land at a location reasonably designated by
Landlord and reasonably acceptable to Tenant. If Landlord erects Landlord's
Monument Sign, and Tenant has not theretofore erected Tenant's Monument Sign, so
long as there is space available on Landlord's Monument Sign, Tenant shall be
entitled to be represented on Landlord's Monument Sign (subject to payment of a
reasonable fee established by Landlord for such representation). Tenant's
Monument Sign shall be subject to Landlord's prior written approval as to both
location and design, which shall not be unreasonably withheld, conditioned or
delayed. Tenant acknowledges that Tenant is aware that a sign variance may be
required from the Township of Piscataway in order for Tenant to be able to erect
Tenant's Monument Sign, and Tenant shall be solely responsible for obtaining any
such variance. Tenant's Monument Sign shall constitute Alterations (as defined
in Section 5.1 hereof Lease), and the provisions of Article 5 of this Lease
shall apply thereto (provided, however, that Tenant shall not be required to pay
the supervision fee described in Section 5.1.3(a) in connection with the
erection of Tenant's Monument Sign).
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ARTICLE 4 - UTILITIES AND SERVICES
4.1 Definitions.
As used herein, the terms "BUSINESS HOURS" shall mean the hours
between 8:00 a.m. and 4.00 p.m. on Business Days, and the hours between 8:00
a.m. and 1:00 p.m. on Saturdays (other than Saturdays which are Holidays), and
"BUSINESS DAYS" shall mean all days except Saturdays, Sundays and Holidays. The
term "HOLIDAYS" shall mean New Year's Day, Presidents Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving, the day following Thanksgiving, and
Christmas. The term "BUILDING SERVICES" shall mean the services required to be
provided to Tenant by Landlord pursuant to this Article 4.
4.2 Electricity.
Landlord, subject to and in accordance with the provisions of this
Section 4.2, shall furnish electricity to Tenant for use in the Premises:
(a) Landlord, at Tenant's reasonable expense, shall furnish, install
and maintain one or more electrical submeters to measure Tenant's demand and
consumption with respect to the electricity furnished by Landlord for lighting,
electrical power and HVAC (as defined in Section 4.4.1) (such submeter(s) being
herein called "TENANT'S SUBMETER"). Tenant, throughout the Term, shall pay
Landlord for such electricity as measured by Tenant's Submeter at the rates set
forth in, and otherwise pursuant to the provisions of, Section 4.2(b) below.
(b) Tenant, for any billing period, shall pay Landlord an amount
determined by applying (i) Tenant's electrical demand (measured in KWs) and
consumption (measured in KWHRs) for such period, as measured by Tenant's
Submeter, to (ii) the rate schedule (inclusive of all taxes, surcharges and
other charges payable thereunder or in connection therewith) of the utility
company serving, the Building (herein called the "UTILITY COMPANY") which would
then be applicable to Tenant if it purchased electricity directly from the
Utility Company for such period. Tenant shall pay the amount due for any billing
period within fifteen (15) days after being billed therefor, which bills
Landlord may render from time to time (but no more frequently than monthly).
Tenant shall also pay to Landlord an amount equal to the actual costs incurred
by Landlord to a meter company or otherwise in respect of having Tenant's
Submeter read and having bills prepared and delivered based upon such readings.
(c) Landlord shall not be required to furnish, and Tenant shall not
install a connected load (including all of Tenant's equipment and systems, but
excluding the Building Systems and HVAC) or otherwise draw, in excess of six (6)
watts per usable square foot of Premises.
(d) If any tax is imposed upon Landlord's receipts from the sale or
resale of electric energy to Tenant (directly or indirectly through a general
tax on such receipts) by any federal, state or municipal authority, then Tenant
shall pay, or reimburse Landlord, such taxes (or its share thereof) in addition
to the submetered charges.
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(e) Tenant will at all times comply with all rules and regulations
of the Utility Company, to the extent the same are applicable to its use of
electric energy in the Premises.
(f) Tenant's use of electric energy shall never exceed the capacity
of the then existing, feeders, risers or wiring installations serving the
Premises.
(g) Landlord shall not in any way be liable or responsible to Tenant
for any loss, damage or expense which Tenant may sustain or incur if (i) the
supply of electric energy to the Premises is temporarily interrupted, or (ii)
the quantity or character of electric service is changed or is no longer
available or suitable for Tenant's requirements, except to the extent resulting
from Landlord's willful misconduct or gross negligence.
(h) Landlord, at its option, shall furnish and install all
replacement lighting, tubes, lamps, bulbs and ballasts required in the Premises;
and in such event, Tenant shall pay to Landlord or its designated contractor
upon demand the then established reasonable charges therefor of Landlord or its
designated contractor, as the case may be, which shall be at the then market
rates therefor.
4.3 Water.
Landlord shall furnish reasonable quantities of hot and cold water
to the Core Lavatories located on the floor(s) on which the Premises are located
for core lavatory and cleaning purposes only, and to the kitchen, bathrooms,
showers and other areas of the Premises requiring water service as part of the
Initial Tenant Work as provided in the Initial Tenant Work Plans. If Tenant
shall require water for any other purposes, then (i) Landlord need only furnish
additional cold water for such other purposes, which additional cold water shall
be furnished to a point in the Building's core on the floor(s) on which the
Premises are located, and (ii) Landlord may install and maintain, at Tenant's
expense, one or more meters to measure Tenant's consumption of such additional
water (in which event, Tenant, periodically upon demand, shall pay Landlord for
such additional water based upon the readings of such meter or meters). Except
for such distribution as may be provided as part of the Initial Tenant Work,
Tenant, at its expense, shall be solely responsible for distributing within the
Premises, and, to the extent Tenant requires hot water, heating, any additional
cold water furnished pursuant to this Section 4.3.
4.4 HVAC Service.
4.4.1 Landlord, during Business Hours, shall furnish heat,
ventilation and air conditioning ("HVAC") to the Premises as may be reasonably
required (except as otherwise provided in this Lease and except for any special
requirements of Tenant arising from its particular use of the Premises) for
reasonably comfortable occupancy of the Premises. Landlord represents and
warrants that the Building's HVAC systems have the capacity, flexibility and
ability to maintain in the Premises the design conditions specified in Exhibit E
attached to and made a part of this Lease.
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4.4.2 If Tenant shall require HVAC services at any time other than
during Business Hours (herein called "OVERTIME HVAC SERVICE"), Landlord shall
furnish such HVAC Overtime Service, subject to receiving advance notice from
Tenant as follows: (a) as to any Business Day upon which Tenant requires such
Overtime service prior to 8: 00 a.m., upon being notified by Tenant no later
than 2:00 p.m. on the Business Day immediately preceding such date; (b) as to
any Business Day upon which Tenant requires such overtime service after 6:00
p.m., upon being notified by Tenant no later than 2:00 p.m. on such date; and
(c) as to any day which is not a Business Day upon which Tenant requires such
overtime service, upon being notified by Tenant no later than 4:00 p.m. on the
Business Day immediately preceding such date, Tenant, in respect of such
Overtime HVAC Service, shall pay to Landlord, within twenty (20) days after
demand therefor, an amount equal to the Hourly Rate (as hereinafter defined) per
hour of Overtime HVAC Service to compensate for additional wear and tear to the
HVAC system and additional maintenance due to such Overtime HVAC Service; it
being agreed that (x) should Tenant request Overtime HVAC Service after Business
Hours on a Business Day, Landlord shall have the right to commence furnishing
such service immediately following the expiration of Business Hours, and (y)
should Tenant request Overtime HVAC Service prior to Business Hours on a
Business Day, Landlord shall have the right to continue furnishing such service
until the commencement of Business Hours; and, in either case, Tenant shall be
required to pay Landlord as herein provided whether or not Tenant utilizes such
service during, all hours that Landlord is furnishing same. Tenant shall comply
fully with such reasonable rules and regulations as Landlord may enact in
connection with its furnishing of Overtime HVAC Service. The "Hourly Rate" shall
equal $10.00 per hour.
4.4.3 Notwithstanding the foregoing, it is understood and agreed
that Tenant shall pay for the electricity needed to operate the HVAC system
serving the Premises and, incident thereto, the "heat pumps" for such system,
which are located in the ceiling plenum of the Premises or adjacent to the
Premises, shall be connected to Tenant's Submeter.
4.5 Access.
Landlord shall provide Tenant with 24 hour a day, 7 day week, access
to the Premises. Such access shall be subject, however, in all events, to the
Building, Rules and Regulations.
4.6 Cleaning.
Landlord shall cause the Premises, including the exterior and the
interior of the Building's exterior windows serving the Premises, to be cleaned
in accordance with the provisions of Exhibit F attached to the Lease and made a
part hereof. Tenant, however, shall pay to Landlord, on demand, the costs
incurred by Landlord for (x) extra cleaning work in the Premises required
because of (i) carelessness, indifference, misuse or neglect on the part of
Tenant or its subtenants or its or their employees or visitors, (ii) interior
glass partitions or unusual quantities of interior glass surfaces, and (iii)
non-building standard materials or finishes installed by Tenant or at its
request, and (y) removal from the Premises and the Building of any refuse and
rubbish of Tenant in excess of that ordinarily
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accumulated in business office occupancy or at times other than Landlord's
standard cleaning times. Notwithstanding the foregoing, Landlord shall not be
required to clean the gym and shower areas of the Premises or any portions of
the Premises used for preparation, serving, or consumption of food or beverages,
training rooms, data processing or reproducing operations, private lavatories or
toilets or other special purposes requiring greater or more difficult cleaning
work than office areas and Tenant agrees, at Tenant's expense, to retain
Landlord's cleaning contractor to perform such cleaning at rates reasonably
comparable to market rates for such service (provided, however, that Tenant
shall be entitled to use its own cleaning contractor (subject to Landlord's
approval, which shall not be unreasonably withheld, and Landlord's reasonable
and uniformly applied requirements concerning the use by tenants of outside
contractors for the provision of services in the Building) to clean the gym and
shower area of the Premises. Landlord and its cleaning contractor shall have
access to the Premises, and the right to use, without charge therefor, all
light, power and water in the Premises, as is reasonably required to clean the
Premises as required under this Section 4.6.
4.7 Building Directory.
Landlord shall maintain a main directory for the Building's tenants
and other occupants (which directory, from time to time, may be either manual or
computerized), and provide Tenant together with its permitted subtenants) with
up to five (5) listings on such main directory (or unlimited listings if such
directory is computerized). Listings provided at the commencement of the Lease
shall be entered at no cost to Tenant. Landlord, from time to time, shall, at
Tenant's reasonable expense, make such changes in the listings as Tenant shall
request.
4.8 Interruptions.
Notwithstanding anything to the contrary contained in this Lease,
Landlord reserves the right, without liability to Tenant and without it being
deemed a default hereunder or a constructive eviction, to stop or interrupt any
Building System(s) or Building Service(s) at such times as may be necessary and
for as long as may reasonably be required by reason of the making of alterations
and/or repairs in or to the Real Property or any portion thereof, or one or more
Events of Force Majeure. Landlord shall have no liability to Tenant as a result
of any such stoppage or interruption. Notwithstanding the foregoing, if, during
Business Hours for more than three (3) consecutive business days, access to the
Premises is prevented or an interruption of a Building System or a Building
service necessary for Tenant's business operations in the Premises continues,
and the cause or cure of such prevention or interruption is within Landlord's
reasonable control (a "LANDLORD CONTROLLED INTERRUPTION"), and such prevention
or interruption is not due to any negligence or willful misconduct by Tenant or
any Tenant Party, then beginning on the fourth (4th) consecutive business day of
such Landlord Controlled Interruption, Fixed Rent and Additional Charges shall
be abated until such Landlord Controlled Interruption ceases.
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ARTICLE 5 - TENANT'S ALTERATIONS, IMPROVEMENTS AND PROPERTY
5.1 Tenant's Alterations.
5.1.1 Tenant shall not make any Alterations (as defined below) of
any nature without Landlord's prior written approval. So long as Tenant complies
with the provisions of this Section 5,1 and there shall not otherwise exist an
Event of Default under this Lease, Landlord's approval of proposed Alterations
shall not be unreasonably withheld, conditioned or delayed, unless the proposed
Alterations are Material Alterations. Notwithstanding the foregoing, Tenant
shall not be required to obtain Landlord's consent to make Alterations that are
not Material Alterations if the estimated cost of such Alterations is less than
$10,000.00 and shall not be required to pay the supervision fee described in
Section 5.1.3(a) below in connection with such Alterations; provided, however,
that all other provisions of this Section 5.1 otherwise applicable to such
Alterations shall continue to apply thereto. As used herein, the following terms
shall have the following meanings: (I) "Alterations" shall mean any alterations
made, or proposed to be made, by Tenant in or to the Premises; and (II)
"Material Alterations" shall mean any Alterations which (a) affect the exterior
(including the appearance) of the Building or any other portion of the Building
outside of the premises, (b) are structural or affect the structural elements of
the Building, or (c) affect the usage or the proper functioning of the Building
Systems or any part thereof.
5.1.2 Tenant shall request Landlord's written approval of any
Alterations only by written notice to Landlord, which notice shall be
accompanied by two (2) sets of detailed plans and specifications setting forth
all such Alterations (such plans and specifications, with respect to any
Alterations, being herein called the "Tenant Plans"). All Tenant Plans shall be
prepared at Tenant's expense by an architect licensed to practice in the State
of New Jersey.
5.1.3 (a) Tenant, in connection with any Alterations, shall (i)
reimburse Landlord all reasonable costs incurred by Landlord (including the fees
of any outside architect, engineer or other professional employed by Landlord)
in connection with (x) any review of any Tenant Plans or any other items
submitted by Tenant in connection therewith, or (y) any on-site inspection of
Alterations, and (ii) pay to Landlord a general supervision fee equal to seven
and one-half (7-1/2%) of the aggregate cost of such Alterations (provided,
however, that such fee shall not be payable in connection with any Alterations
Tenant makes in conjunction with the Initial Tenant Work at the commencement of
the Lease Term and the preparations made by Tenant for its initial occupancy of
the Premises).
(b) Tenant acknowledges that any review or approval by Landlord of
any Tenant Plans with respect to any Alterations, and/or any on-site inspections
of any Alterations, and/or any supervision by Landlord of Alterations, are
solely for Landlord's benefit, and without any representation or warranty
whatsoever to Tenant with respect to the adequacy, correctness or efficiency of
any such Tenant Plans or Alterations, or the compliance thereof with Legal
Requirements, Insurance Requirements or the provisions of this Lease, and
Landlord shall have no liability or responsibility therefor.
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5.1.4 Alterations shall be performed only by contractors that have
been first approved by Landlord in writing, which approval shall not be
unreasonably withheld, conditioned or delayed.
5.1.5 Tenant shall cause all Alterations to be diligently performed
to completion substantially in accordance with the Tenant Plans approved by
Landlord, in compliance with Legal Requirements and Insurance Requirements, and
otherwise in a good and workmanlike manner (using materials at least equal in
quality and class to the then standards for the Building). Tenant, at its
expense, shall obtain (and furnish true and complete copies to Landlord of) all
governmental permits and certificates required for the commencement and
prosecution of Alterations and for final approval thereof upon completion.
Alterations shall be performed in such manner as not to interfere with, or
impose any additional expense (except to the extent Tenant reimburses Landlord
therefor) upon, Landlord in the operation, management, maintenance and/or repair
of the Real Property; without limiting the generality thereof, to the extent any
Alterations are performed on an overtime basis, Tenant shall reimburse Landlord
all additional reasonable costs incurred by Landlord by reason thereof.
Throughout the performance of any Alterations, Tenant, at its expense, shall
carry, or cause to be carried, (i) workers' compensation insurance in statutory
limits, and (ii) such general liability insurance and other insurance as
Landlord shall reasonably require. Tenant, promptly upon the completion of any
Alterations, shall deliver to Landlord "as built" drawings therefor.
5.1.6 Tenant, in connection with any Alterations or any other work,
shall comply with and observe, and shall cause each of its contractors to comply
with and observe, the rules and regulations annexed hereto as Exhibit G, and
such reasonable changes therein (whether by modification, elimination or
addition) as Landlord at any time or times hereafter may make and communicate to
Tenant (such rules and regulations, as changed from time to time, being, herein
called the "ALTERATION RULES AND REGULATIONS"); provided, however, that in case
of any conflict or inconsistency between the provisions of this Lease and any of
the Alteration Rules and Regulations, the provisions of this Lease shall
control. Landlord shall enforce the Alteration Rules and Regulations against
tenants in the Building in a non-discriminatory manner.
5.1.7 Before proceeding with any Alterations the cost of which is
estimated to exceed $25,000.00, at Landlord's option, Tenant shall furnish to
Landlord, as security for the full completion of such Alterations, a payment and
performance bond issued by a bonding company reasonably satisfactory to Landlord
naming Landlord as beneficiary, which bond (i) shall be in an amount equal to
one hundred twenty-five (125%) percent of Landlord's reasonable estimate of the
cost of such Alterations, (ii) shall not require any payment as a condition to
the bonding company performing its obligations under the bond, and (iii) shall
otherwise be in a form reasonably satisfactory to Landlord.
5.2 Tenant's Improvements and Tenant's Property.
5.2.1 For purposes of this Lease, the following definitions shall
apply:
"TENANT'S IMPROVEMENTS" shall mean all improvements, betterments,
fixtures (exclusive of trade fixtures that are capable of being removed from the
Premises without causing material damage
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thereto ("TRADE FIXTURES"), equipment and appurtenances attached to or built
into the Premises by or on behalf of Tenant (whether or not at Tenant's expense)
during the Term, including the Initial Tenant Work and all Alterations (and
including Tenmt's line, riser and other connections to the Building Systems and
any separate HVAC, electrical or other mechanical system or facility installed
by or on behalf of Tenant), but excluding Tenant's Property.
"TENANT'S PROPERTY" shall mean all office furniture and equipment,
Trade Fixtures, movable partitions, communications equipment and other articles
of movable personal property owned or leased by Tenant and located in the
Premises, including floor and/or wall coverings and computer and telephone
cables. For purposes of this Lease, Tenant's Entrance Sign shall be deemed
Tenant's Property.
5.2.2 All Tenant's Improvements, upon the installation thereof,
shall be and remain Landlord's property and shall not be removed by Tenant at
anytime during the Term (except in connection with permitted Alterations) or
upon the expiration or earlier termination of this Lease. Notwithstanding the
foregoing, Landlord, upon notice to Tenant given (i) at the time of Landlord's
approval of any Alterations for which Tenant has obtained Landlord's approval or
(ii) no later than thirty (30) days prior to the Expiration Date for Alterations
for which Tenant has act obtained Landlord's approval, may require Tenant, at
its expense, to remove all or any portion of any Tenant Improvements prior to
the expiration of this Lease (or within thirty (30) days following the earlier
termination hereof), provided, however, that Tenant shall not be required to
remove the Initial Tenant Work. In any such event, Tenant shall repair any
damage to the Real Property (including the Premises) resulting from any such
removal and restore any affected areas thereof.
5.2.3 All Tenant's Property shall be and shall remain the property
of Tenant throughout the Term and may be removed by Tenant at any time during
the Term. Upon the expiration of this Lease (or within fifteen (15) days after
the earlier termination hereof), Tenant, at its expense, shall remove all
Tenant's Property from the Premises. Tenant shall repair any damage to the Real
Property (including the Premises) resulting from any removal of Tenant's
Property and shall restore any affected areas of the Real Property. Any items of
Tenant's Property which shall remain in the Premises after the expiration of
this Lease (or, as the case may be, within fifteen (15) days following an
earlier termination of this Lease), may, at the option of Landlord, be deemed to
have been abandoned, and in such case such items may be retained by Landlord as
its property or disposed of by Landlord, without accountability, in such manner
as Landlord shall determine.
5.3 Title, Mechanics Liens, Union Conflicts. Etc..
5.3.1 All Alterations shall be fully paid for by Tenant. Except as
permitted in Section 11.7 hereof, no Tenant's Improvements shall be subject to
any conditional bills of sale, chattel mortgage or other title retention
agreements.
5.3.2 Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation arising from,
or otherwise connected with, Alterations (other
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than the Initial Tenant Work), or any other work, labor, services or materials
done for or supplied to Tenant, or any Tenant Party, which shall be issued by
any Governmental Authority. Tenant shall defend, indemnify and hold harmless
Landlord from and against any and all mechanic's and other liens and
encumbrances filed in connection with Alterations (other than the Initial Tenant
Work), or any other work, labor, services or materials done for or supplied to
Tenant or any Tenant Party and from and against all costs, expenses and
liabilities incurred in connection with any such lien or encumbrance or any
action or proceeding brought thereon. Tenant, at its expense, shall procure the
satisfaction or discharge of record by bonding, payment or otherwise, of all
such liens and encumbrances within sixty (60) days after actual knowledge or
notice thereof.
5.3.3 Tenant shall not perform any Alterations, or otherwise perform
any work or conduct any activities in or about the Real Property, in a manner
which violates any of Landlord's union contracts affecting the Real Property, or
create any work stoppage, picketing, labor disruption or dispute or any
interference with the operation, management and/or maintenance of the Real
Property. Tenant shall immediately stop, or cause to be stopped, any work or
other activity in violation of this Section 5.3.3 upon notice thereof from
Landlord.
ARTICLE 6 - RESERVATION OF REAL PROPERTY; LANDLORD'S ACCESS
6.1 Reservation of Real Property.
6.1.1 Except for the Premises (which, for purposes of this Lease,
shall consist only of the space within the inside surfaces of all demising and
exterior walls, hung ceilings, floors, windows and doors bounding the Premises),
all of the Real Property, including the Land and the Base Building, is reserved
to Landlord and persons authorized by Landlord, subject only to any rights of
Tenant, the Tenant Parties and Tenant's clients and invitees to use areas of the
Real Property outside of the Premises that may be expressly provided for
hereunder.
6.1.2 Landlord, without limiting the Generality of the foregoing,
hereby reserves the following rights (which may be exercised, in each and every
case, without any liability to Tenant): (a) the right to change the name and/or
address of the Building, together with the exclusive right to use the name of
the Building, at any time and from time to time; (b) the right to make, or
permit to be made, such alterations and/or repairs in or to the Real Property or
any part thereof (other than to the interior of the Premises), as Landlord shall
deem necessary or desirable; and (c) the right to close or render inoperable any
part of the Real Property (outside of the Premises). Notwithstanding the
foregoing, Landlord, at all times, shall provide the parking required hereunder
or, on a temporary basis, commercially reasonable alternate parking
arrangements, and shall not block entrances to the Building (other than on a
temporary basis so long as alternate access to the Premises is provided) or
windows of the Premises (other than on a temporary basis), and shall use
commercially reasonable efforts to minimize interference with Tenant's business
operations in the Premises in exercising Landlord's rights under (b) and (c) of
this Section 6.1.2.
6.1.3 Landlord's Access to Premises.
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Landlord, and persons authorized by Landlord, shall have the right,
upon reasonable notice (or, in the case of an emergency, without notice) to
enter upon and/or pass through the Premises, at reasonable times (or, in the
case of an emergency, at any time or times, for one or more of the following
purposes: (a) to examine and/or inspect the Premises or any portions of the Real
Property accessible through the Premises, (b) to show them to actual and
prospective purchasers, Underlying Lessors or Mortgagees, or, during the last
twelve (12) months of the Term, prospective tenants of the Building or any part
thereof, (c) to make such alterations and/or repairs in or to the Real Property
(other than to the interior of the Premises) or any part thereof as Landlord, or
persons authorized by Landlord, are required or desire to make, (d) to make such
alterations and/or repairs in or to the Premises or any part thereof as Landlord
is required or permitted to make, and/or (e) to read any utility meters located
therein. Landlord, and such authorized persons, may, without liability to Tenant
(except in connection with the gross negligence or willful misconduct of
Landlord or such authorized persons), take all materials into and upon the
Premises that may be required in connection therewith.
ARTICLE 7 - QUIET ENJOYMENT; UNDERLYING INTERESTS
7.1 Quiet Enjoyment.
So long as this Lease is in full force and effect, Tenant shall
peaceably and quietly have, hold and enjoy the Premises without hindrance,
ejection or molestation by Landlord or any person lawfully claiming through or
under Landlord, subject, nevertheless, to the provisions of this Lease and to
all Mortgages and Underlying Leases.
7.2 Underlying Interests.
7.2.1 For purposes of this Lease, the following definitions shall
apply:
"MORTGAGE" shall mean any mortgage or deed of trust which may now or
hereafter affect the Land and/or the Building, or any part of either (whether or
not such mortgage or deed of trust shall also cover other properties), and shall
include each and every advance made or hereafter to be made under such mortgage
or deed of trust, and to each and every renewal, modification, replacement or
extension of such mortgage or deed of trust and any spreader or consolidation of
such mortgage or deed of trust, and "Mortgagee" shall mean any holder of any
Mortgage.
"UNDERLYING LEASE" shall mean any ground lease, overriding lease or
underlying lease of the Land and/or the Building, or of the portion of the
Building of which the Premises are a part, now or hereafter existing, and
"Underlying Lessor" shall mean any lessor under an Underlying Lease.
7.2.2 This Lease, and all rights of Tenant hereunder are and shall
be subject and subordinate to all Underlying Leases and Mortgages for which
Landlord has obtained a Nondisturbance Agreement (as hereinafter defined) from
the Underlying Lessor or Mortgagee thereof as hereinafter provided. This Section
7.2.2 shall be self-operative and no further instrument of subordination shall
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be required. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, an Underlying
Lessor or a Mortgagee may reasonably request to evidence such subordination.
7.2.3 If any act or omission of Landlord would give Tenant the
right, immediately or after lapse of a period of time, to cancel or terminate
this Lease, or to abate or offset against the payment of Rent or to claim a
partial or total eviction, Tenant shall not exercise such right (a) until it has
given written notice of such act or omission to Landlord and each Mortgagee and
each Underlying Lessor whose name and address shall previously have been
furnished to Tenant, and (b) until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice and following
the time when such Mortgagee or Underlying Lessor shall have become entitled
under such Mortgage or Underlying Lease, as the case may be, to remedy the same
(which reasonable period shall in no event be less than the period to which
Landlord would be entitled under this Lease or otherwise, after similar notice,
to effect such remedy plus thirty (30) days), provided such Mortgagee or
Underlying Lessor shall give Tenant notice of its intention to, and with due
diligence commence and continue to, remedy such act or omission.
7.2.4 If any Mortgagee or Underlying Lessor, or any designee of any
Mortgagee or Underlying Lessor or any other person, shall succeed to the rights
of Landlord under this Lease, whether through possession or foreclosure action
or delivery of a new lease or deed, then at the request of such party so
succeeding to Landlord's rights (herein called "SUCCESSOR LANDLORD"), and upon
such Successor Landlord's written agreement to accept Tenant's attornment,
Tenant shall attorn to and recognize such Successor Landlord as Tenant's
landlord under this Lease and shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence such attornment.
Upon such attornment, this Lease shall continue in full force and effect as a
direct lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Lease, except that the
Successor Landlord shall not be (i) liable for any previous act or omission of
Landlord, (ii) responsible for any monies owing by Landlord to the credit of
Tenant, (iii) bound by any covenant to undertake or complete any work in the
Premises or to provide an allowance therefor, (iv) subject to any credits,
offsets, claims, counterclaims, demands or defenses which Tenant may have
against Landlord, (v) bound by any payments of rent which Tenant might have made
for more than one (1) month in advance to Landlord, (vi) required to account for
any security deposit other than any security deposit actually delivered to the
Successor Landlord, or (vii) bound by any modification of this Lease made
without Successor Landlord's written consent.
7.2.5 Promptly following the execution of this Lease by Landlord and
Tenant, and in any event prior to the Commencement Date, Landlord shall obtain
and deliver to Tenant a Nondisturbance Agreement from the holder of any existing
Mortgage on the Building and/or the Land.
7.2.6 With respect to any Mortgage or Underlying Lease that
hereafter becomes a lien or charge upon or affects the Land or the Building, the
provisions of Section 7.2.2 above shall be operative, and the rights of Tenant
under this Lease shall be subject and subordinate such Mortgage
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or Underlying Lease only if the Mortgagee of such Mortgage or Underlying Lessee
of such Underlying Lease executes and delivers to Tenant a Nondisturbance
Agreement with respect to such Mortgage or Underlying Lease.
7.2.7 As used herein, the term "NONDISTURBANCE AGREEMENT" shall mean
an agreement between Tenant and the Mortgagee of a Mortgage or the Underlying
Lessor of an Underlying Lease, pursuant to which such Mortgagee or Underlying
Lessor agrees that so long as Tenant is not in default under the terms of this
Lease (beyond any applicable notice and/or cure period), and provided Tenant
attorns to said Mortgagee or Underlying Lessor, Tenant's possession of the
Premises under and in accordance with the terms of this Lease shall not be
disturbed and Tenant's rights under this Lease shall not be affected by a
foreclosure of such Mortgage or termination of such Underlying Lease, and that,
upon such foreclosure or termination, this Lease shall continue as a direct
lease between the purchaser in foreclosure or the Underlying Lessor, as
Landlord, and Tenant, as Tenant. Tenant agrees to accept in satisfaction of the
requirement set forth in this Section 7.2 for the production of a Nondisturbance
Agreement the applicable Mortgagee or Underlying Lessor's standard form of
Nondisturbance Agreement, and to execute such standard form, so long as such
standard form provides materially the terms set forth in this Section 7.2.7 and
is reasonably acceptable to Tenant, Tenant's attorney and Tenant's lender(s).
Any such standard form may also include an agreement by Tenant to attorn to such
Mortgagee or Underlying Lessor following such foreclosure sale or termination,
and to confirm the subordination of this Lease to such Mortgage or Underlying
Lease, and such other commercially reasonable and/or customary terms as are
found in typical standard forms of subordination, nondisturbance and attornment
agreements of major commercial lenders.
ARTICLE 8 - BASIC LEASE OBLIGATIONS
8.1 Insurance.
8.1.1 Tenant, at its expense, shall maintain, at all times during
the Term, (i) "all risk" property insurance covering all Tenant's Improvements
and Tenant's Property to a limit of not less than the full replacement cost
thereof, (ii) comprehensive general liability insurance, including blanket
contractual liability coverage, with limits of not less than Two Million
($2,000,000.00) Dollars combined single limit for personal injury and property
damage liability in any one occurrence, and (iii) such other insurance, with
such limits, as Landlord shall from time to time reasonably require Tenant to
maintain. Landlord may, from time to time, reasonably require that the limits of
the aforesaid insurance be increased. Landlord (or, at Landlord's option, any
mortgagee or Underlying Lessor) shall be named as a "loss payee" under the
insurance policies providing "all risk" property coverage on Tenant's
Improvements; and Tenant shall cooperate with Landlord in connection with the
collection of any insurance proceeds thereunder. Landlord and its managing
agent, if any, and each Mortgagee and Underlying Lessor whose name and address
shall previously have been furnished to Tenant shall be named as additional
insureds under Tenant's insurance policies providing general liability coverage.
Each of the insurance policies required to be maintained pursuant to this
Section 8.1.1 shall be issued by companies licensed to do business in the State
of New Jersey and reasonably
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acceptable to Landlord and shall contain a provision whereby the same cannot be
canceled or modified unless Landlord and any additional insureds are given at
least thirty (30) days' prior written notice thereof. Tenant, at least ten (10)
days prior to the Commencement Date, and thereafter (for renewals of existing
policies) at least ten (10) days prior to the date of expiration of any existing
policy, shall deliver to Landlord a duplicate original insurance policy, an
insurance binder (counter signed by the insurer), or Evidence of Insurance (in
form ACORD 27) for each insurance policy required to be carried by Tenant
hereunder.
8.1.2 Tenant shall not violate, or permit any Tenant Party to
violate, any Insurance Requirements or any terms or conditions imposed by any
insurance policy then issued in respect of the Real Property. If, as a result of
any act or omission by Tenant (including a default under the immediately
preceding sentence), the premiums on any insurance policy issued in respect of
the Real Property shall be higher than the same would otherwise be, then,
without limiting any other rights or remedies that Landlord may have on account
thereof, Tenant, upon demand, shall pay Landlord an amount equal to the part of
such insurance premiums attributable to such act or omission; for which
purposes, a schedule "make-up" rates issued by, or any other finding of, any
insurance rating organization having jurisdiction over, or otherwise making
rates or findings in respect of, the Real Property shall be conclusive evidence
of the rates and facts therein stated.
8.1.3 Each party agrees to have included in each of its "all risk"
insurance policies (insuring the Base Building in case of Landlord, and insuring
Tenant's Improvements and Tenant's Property in the case of Tenant) a waiver of
the insurer's right of subrogation against the other party during the Term,
unless such a waiver of subrogation shall be Generally unobtainable (in which
event, the insured party shall so notify the other party promptly after learning
thereof). Each party hereby releases the other party, with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party, for loss, damage or destruction with respect to its property
occurring during, the Term, if, and to the extent, such loss, damage or
destruction is, or under this Section 8.1.3 is required to be, insured under a
policy or policies containing a waiver of subrogation.
8.2 Indemnification.
8.2.1 Tenant shall indemnify and hold harmless Landlord and any
Landlord Party (as hereinafter defined) from and against any and all claims
arising, from or in connection with: (a) the conduct or management of the
Premises or of any business therein, or any work or thing whatsoever done, or
any condition created (other than by Landlord or any Landlord Party) in or about
the Premises during the Term; (b) any negligence or willful act or omission of
Tenant or any Tenant Party (hereinafter defined); (c) any accident, injury or
damage whatever (except to the extent caused by the negligence or willful
misconduct of Landlord or any Landlord Party) occurring in, at or upon the
Premises; and (d) any breach or default by Tenant under this Lease; together
with all costs, expenses and liabilities incurred in or in connection with each
such claim, or any action or proceeding brought thereon, including all
reasonable attorneys' fees and expenses.
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8.2.2 Landlord shall indemnify, defend and hold harmless Tenant from
and against any and all claims arising from the gross negligence or willful
misconduct of Landlord or any Landlord Party. Such exclusion from Tenant's
indemnity obligation and such agreement by Landlord to indemnify Tenant are not
intended to and shall not relieve any insurance carrier of its obligations under
policies carried or required to be carried by Tenant pursuant to this Lease to
the extent such policies cover the alleged gross negligence or willful
misconduct of Landlord or any Landlord Party; provided, however, that this
sentence shall in no way be construed to imply the availability of any double or
duplicate coverage following the primary liability of such carrier. Tenant
waives no claim for damages or other relief against Landlord arising as a result
of Landlord's willful misconduct or gross negligence, except as specifically set
forth in this Lease.
8.3 Compliance with Laws.
Tenant, at its expense, shall (i) comply with all Legal Requirements
requiring compliance in respect of the Premises or the use and occupancy
thereof, and (ii) be responsible for the cost of any other compliance with Legal
Requirements in respect of the Real Property which arises from Tenant's use and
occupancy of the Premises; provided, however, that Tenant shall not be required
to perform, or be responsible for the cost of, any alterations to the Base
Building which are required to be performed to comply with any Legal
Requirements, unless the need for such compliance arises by reason of (w) the
particular manner of conduct of Tenant's business in the Premises (other than
general office use), (x) the performance of any Alterations or the operation,
use or presence of any Tenant's Improvements or Tenant's Property, (y) any cause
or condition created by or at the instance of Tenant (other than general office
use), or (z) the breach of any of Tenant's obligations hereunder. Landlord
represents that, as of the Commencement Date, the Premises shall be in
compliance with all Legal Requirements (other than those relating specifically
to Tenant's particular use of the Premises for purposes other than general
office use).
8.4 Repairs and Maintenance.
8.4.1 Except as otherwise specifically provided elsewhere in this
Lease, Tenant, throughout the Term, shall, at its expense, keep and maintain,
and take good care of, the Premises and make all needed interior and
non-structural repairs in and to, the Premises, including all needed repairs to
Tenant's Improvements and Tenant's Property. Tenant shall also be responsible
for the cost of repairs made by Landlord to the Base Building to the extent that
the need for the same arises out of (i) Tenant's performance of Alterations,
(ii) the operation, use or presence of any Tenant's improvements, and the
installation, operation, use or presence of Tenant's Property, (iii) the moving,
of any Tenant's Improvements or Tenant's Property, or (iv) any breach of
Tenant's obligations under this Lease, or any negligent or wrongful act or
omission by Tenant or any Tenant Party.
8.4.2 Landlord, throughout the Term, shall keep and maintain, and
make all needed repairs in and to, the Base Building (including all Parking
Areas), in such a manner so as to maintain the Building as a Class "A" office
building. Such repairs and maintenance shall be made at Landlord's expense,
except as provided in Section 8.4.1 above.
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8.5 Damage and Destruction.
8.5.1 If the Building or the Premises shall be partially or totally
damaged or destroyed by fire or other casualty, then, unless this Lease shall be
terminated as hereinafter provided in this Article, (i) Landlord shall repair
and restore (A) the Base Building (including the Parking Areas), and (B)
Tenant's Improvements (all such repair and restoration work being herein called
the "Landlord Restoration Work"), with reasonable dispatch after notice to it of
the damage or destruction and the collection of the insurance proceeds
attributable to such damage or destruction, and (ii) Tenant shall repair and
restore Tenant's Property with reasonable dispatch after such damage or
destruction and the completion of Landlord's Restoration Work and the collection
of the insurance proceeds attributable to such damage or destruction. The
proceeds of Tenant's insurance policies providing coverage for Tenant's
Improvements shall be paid to Landlord. Concurrently with the collection of any
such insurance proceeds, Tenant shall pay to Landlord (x) the amount of any
deductible under the policy insuring Tenant's Improvements, and (y) the amount,
if any, by which the cost of repairing and restoring Tenant's Improvements as
estimated by a reputable contractor designated by Landlord exceeds the available
insurance proceeds therefor. Tenant shall also pay to Landlord, upon demand, the
amount(s) by which the actual cost of repairing and restoring Tenant's
Improvements exceeds the aforesaid insurance proceeds plus the amounts described
in clauses (x) and (y) above.
8.5.2 If the Premises and/or the Building shall be damaged or
destroyed by fire or other casualty so as to render the Premises completely or
partially untenantable (untenantability to include unavailability for Tenant's
use thereof, even if the Premises or area thereof in question is not damaged),
then the Fixed Rent, Operating Payments and Tax Payments shall be abated in the
proportion that the untenantable area of the Premises bears to the total area of
the Premises for the period from the date of the damage or destruction to five
(5) days after the date that the Landlord Restoration Work shall be
substantially completed; provided, however, that (i) if in Landlord's reasonable
judgment the Landlord's Restoration Work would have been substantially completed
at an earlier date but for Tenant's having failed to reasonably cooperate with
Landlord in effecting, the same, then the Landlord Restoration Work shall be
deemed to have been substantially completed on such earlier date and,
accordingly, any abatement shall cease upon such earlier date, and (ii) if
Tenant or any of its subtenants shall reoccupy a portion of the Premises prior
to the substantial completion of the Landlord Restoration Work for any reason
other than Tenant's repair and/or restoration of Tenant's Property, then the
Fixed Rent, Operating Payment and Tax Payment allocable to such reoccupied
portion (on a pro-rata rentable square foot basis), shall be payable by Tenant
from the date of such occupancy.
8.5.3 If either (i) the Building shall be damaged or destroyed by
fire or other casualty (whether or not the Premises are damaged or destroyed)
such that its repair and restoration requires more than one hundred eighty (180)
days or the expenditure of more than twenty (20%) percent of the full insurable
value of the Building immediately prior to the date of the damage or destruction
or (ii) if the Premises shall be totally or substantially (i.e., for this
purpose, more than thirty (30%) percent) damaged or destroyed by fire or other
casualty (as estimated, in either case, by a reputable
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contractor, registered architect or licensed professional engineer which shall
be promptly designated for such purpose by Landlord), then, in either such case,
Landlord may terminate this Lease by giving Tenant notice to such effect within
ninety (90) days after the date of the casualty. For the purpose of this Section
only, "full insurable value" shall mean replacement cost less the cost of
footings, foundations and other structures below the street and first floors of
the Building.
8.5.4 If the Premises are damaged to the extent that they are not
reasonably tenantable, or damage or destruction to the Building prevents safe
access or elevator access to the Premises, and it is estimated by the party
designated by Landlord set forth in Section 8.5.3 above that such damage cannot
be repaired to substantially the condition existing prior to such damage within
two hundred ten (210) days from the date of such damage, or if such estimate is
not furnished to Tenant within sixty (60) days after the date of such damage,
then Tenant may terminate this Lease by written notice thereof delivered to
Landlord within ten (10) days after Tenant's receipt of such estimate. Tenant
shall also be entitled to so terminate this Lease, by written notice delivered
to Landlord after the expiration of such 210-day period but prior to substantial
completion of such repair, if in fact such damage is not substantially repaired
within two hundred ten (210) days after the date of said damage. Except as
provided in this Section 8.5.4, Tenant shall not be entitled to terminate this
Lease by reason of damage or destruction to the Real Property. In addition,
either Landlord or Tenant shall be entitled to terminate this Lease by written
notice to the other if damage to the Building or the Premises to the extent
described in the first (1st) sentence Section 8.5.3 above occurs during the last
twelve (12) months of the Term.
8.5.5 Except as provided under Section 4.8 hereof, Landlord shall
have no liability to Tenant, by reason of any inconvenience, loss of business or
annoyance arising from any repair or restoration work in respect of the Real
Property.
8.6 Condemnation.
8.6.1 If the whole or a material portion of either the Building or
the Premises or access to the Building or the Premises shall be taken by
condemnation or in any other manner for any public or quasi-public use or
purpose (whether permanently or temporarily for more than six (6) months), this
Lease shall terminate as of the date of vesting of title on such taking, and the
Rent shall be prorated and adjusted as of such date.
8.6.2 Landlord shall be entitled to receive the entire award or
payment in connection with any taking without reduction therefrom for any estate
vested in Tenant by this Lease or any value attributable to the unexpired
portion of the Term and Tenant shall receive no part of such award. Tenant
hereby expressly assigns to Landlord all of its right, title and interest in and
to every such award or payment and waives any right to the value of the
unexpired portion of the Term. Notwithstanding the foregoing, Tenant shall be
entitled to seek a separate award for the loss of Tenant's Property and moving
costs.
8.7 Compliance with ISRA.
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8.7.1 (a) Tenant agrees that it shall, at its sole cost and expense,
fulfill, observe and comply with all of the requirements of the Industrial Site
Recovery Act, N.J. S.A. 13:1K-6 et seq., and any amending and/or successor
legislation and/or regulations thereto (the "ACT"), and all rules, regulations,
opinions, orders and directives issued or promulgated in connection with the Act
by the New Jersey Department of Environmental Protection, or any other
governmental or quasi-governmental agency, authority, bureau, agency or body
which shall then have Jurisdiction over administration of the Act (collectively,
the "DEP"), as the same may be amended or substituted from time to time, to the
extent such fulfillment, observance or compliance is required due to the nature
of Tenant's business or due to Tenant's specific use and/or occupancy of, or any
act or omission of Tenant or any Tenant Party in or about, the Premises. (The
Act and all of said rules, regulations, ordinances, opinions, orders and
directives, as the same may be amended from time to time, and any amending
and/or successor legislation and/or regulations thereto, are hereinafter
collectively referred to as "ISRA").
(b) Without limiting the generality of the foregoing,
upon the written request of Landlord or the occurrence of a Triggering Event (as
hereafter defined), Tenant agrees to cooperate with Landlord in obtaining
evidence of compliance with ISRA. Specifically in that regard, Tenant agrees
that it shall (i) execute and deliver any affidavits, applications or other
filings required by the DEP, (ii) allow inspections and testing of the Premises,
and (iii) perform any requirement reasonably requested by Landlord as is
necessary in connection with such triggering event. Any representation or
certification made by Tenant in connection with any affidavit, application or
other filing request shall constitute a representation and warranty by Tenant in
favor of Landlord, and any misrepresentation or breach of warranty contained in
Tenant's response with any such request shall constitute an Event of Default
under this Lease.
8.7.2 Within ten (10) days after a written request by Landlord or
any Mortgagee or Underlying Lessee of Landlord, Tenant shall deliver to Landlord
and any Mortgagee or Underlying Lessee an affidavit of Tenant's chief executive
officer or the person having primary responsibility for the conduct of Tenant's
business operations at the Premises, duly executed by such officer or person in
such capacity with no personal liability, certifying:
(i) the proper four digit SIC Number (as hereafter
defined) relating to Tenant's then current use of the Premises; and
(ii) that Tenant's then current use of the Premises does
not involve the generation, manufacture, refining, transportation, treatment,
storage, handling or disposal of "Hazardous Substances" or "Hazardous Wastes" as
such terms are defined under ISRA (together, "HAZARDOUS SUBSTANCES"), on site,
above around or below ground, or the "Discharge" (as defined in ISRA) of
Hazardous Substances (all of the foregoing are hereinafter collectively referred
to as the "PRESENCE OF HAZARDOUS SUBSTANCES") in violation of any Environmental
Law (as hereinafter defined); and
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(iii) if Tenant's then current use does involve the
Presence of Hazardous Substances, then said affidavit shall describe in complete
detail the portion of Tenant's operations which involves the Presence of
Hazardous Substances. Such description shall, inter alia, identify each of the
Hazardous Substances and describe the manner in which Tenant generated, handled,
manufactured, refined, transported, treated, stored and/or disposed of same.
Tenant shall supply Landlord and any Mortgagee or Underlying Lessee with such
additional information relating to the Presence of Hazardous Substances as
Landlord or such Mortgagee or Underlying Lessee reasonably requests.
8.7.3 Tenant warrants that Tenant's Standard Industrial
Classification Number as designated in the most recent edition of the Standard
Industrial Classification Manual prepared by the Office of Management and Budget
in the Executive Office of the President of the United States is ("Tenant's SIC
Number"). Tenant's use of the Premises shall be restricted to uses classified
under Tenant's SIC Number. Tenant covenants and agrees that it will not do or
suffer anything which will cause Tenant's SIC Number to change. Tenant
recognizes that, for purposes of ISRA, it will acquire the Standard Industrial
Classification Number of any entity for which it provides all or substantially
all of its services or products, and further covenants and agrees to notify
Landlord at least thirty (30) days prior to any change of facts which would
result in the charge of Tenant's SIC Number. Upon receipt of such notice, if the
new Standard Industrial Classification Number would subject either Tenant or the
Premises to compliance with ISRA, Landlord shall have the right, at Landlord's
option, to terminate this Lease by notifying Tenant in writing, and delivering
such notice not later than thirty (30) days of Landlord's receipt of Tenant's
notice of such new Standard Industrial Classification Number change (provided
that Tenant shall, following written notice to Landlord delivered within five
(5) days after Tenant's receipt of Landlord's notice of termination, be entitled
to take such actions as are necessary to prevent such change, in which case this
Lease shall not terminate). Tenant's failure to provide such notice shall not
affect Landlord's right to terminate this Lease if Tenant's SIC Number changes
for any reason without Landlord's prior written consent.
8.7.4 (a) Tenant represents and warrants that the Premises will not
be an "Industrial Establishment" as that term is defined in ISRA. Tenant shall
not do or suffer anything that will cause the Premises to become an Industrial
Establishment during the Term of this Lease. Landlord, from time to time, may
require Tenant, at Tenant's sole expense, to provide proof reasonably
satisfactory to Landlord that the Premises are not an Industrial Establishment.
(b) Notwithstanding anything, herein to the contrary, if
Tenant's operations at the Premises now or hereafter constitute an Industrial
Establishment, then prior to (i) the expiration or sooner termination of this
Lease, (ii) any assignment of this Lease or any subletting of any portion of the
Premises, (iii) any sale or transfer of the Premises, (iv) "Closing Operations"
(as defined in ISRA) at the Premises, or (v) "Transferring Ownership or
Operations" (as defined in ISRA) with respect to the Premises (said conditions
(i) through (v) each being a "TRIGGERING EVENT"), regardless of whether such
Triggering Event is caused by Landlord or Tenant, or any other tenant of the
Building, Tenant, at its sole expense, shall comply with all requirements of
ISRA pertaining to Closing Operations or Transferring Ownership or Operations of
an Industrial Establishment. Without
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limitation of the foregoing, Tenant's obligations shall include (i) the proper
and timely filing of an initial notice to the DEP and all other parties entitled
to notice under ISRA, when and as required under ISRA, (ii) the performance of
any "Preliminary Assessment," "Site Investigation," "Remedial Investigation," or
"Remedial Action" (all as defined in ISRA) as required by the DEP, and (iii)
either obtaining the approval of a "Negative Declaration" (as defined in ISRA)
by the DEP or performing proper and approved "Remedial Action Workplan" (as
defined in ISRA) to the satisfaction of the DEP and Landlord. In the event that
an approved Remedial Action Workplan is authorized by the DEP, Tenant further
agrees that it shall, at its sole cost and expense: (a) secure remediation
financing, including, without limitation, posting any financial guarantee or
other bond required by the DEP or Landlord, in amounts sufficient to fully
implement and complete such Remedial Action Workplan; and (b) promptly and
diligently implement and prosecute same to completion, in accordance with the
schedules and criteria contained therein or as may otherwise be ordered or
directed by the DEP. Tenant expressly understands, acknowledges and agrees that
Tenant's compliance with the provisions of this Section 8.7 may require Tenant
to expend funds or do acts after the expiration or termination of the Tenant and
Tenant shall not be excused therefrom due to such expiration or termination. The
entry of a "Remediation Agreement" (as defined in ISRA) by Tenant with the DEP
shall not satisfy Tenant's obligations hereunder without obtaining the prior
written approval of Landlord for the use of same and of the terms thereof.
(c) In the event a Remedial Action Workplan or
Remediation Agreement is required, Tenant shall not undertake any Preliminary
Assessment, Site Investigation, Remedial Investigation, Remedial Action or any
other remediation without first obtaining the prior approval for the use and of
same and of the terms thereof from Landlord, and, notwithstanding any provisions
of ISRA to the contrary, Landlord shall have the right to require DEP approval
of same before Tenant shall be deemed to have satisfied its obligations
hereunder and under ISRA. Under no circumstances shall Tenant's obligations be
satisfied by remediation in accordance with "Residential Standards" (as defined
in ISRA) without first obtaining the prior written approval for the use of same
from Landlord, and, notwithstanding any provisions of ISRA to the contrary,
Landlord shall have the right to require DEP approval of same before Tenant
shall be deemed to have satisfied its obligations hereunder and under ISRA.
(d) Tenant shall promptly provide copies to Landlord of
all submissions to DEP concerning any remediation.
8.7.5 In the event that Tenant is not obligated to comply with
Section 8.7.4(b) above for any reason, including without limitation
inapplicability of ISRA to Tenant, then, (i) at least three (3) months prior to
the expiration or earlier termination of this Lease or any other Triggering
Event caused by Tenant, or (ii) within sixty (60) days after Tenant's receipt of
notice of a Triggering Event not caused by Tenant, Tenant shall, at Tenant's
sole expense, obtain from the DEP a "nonapplicability letter" or other written
statement in form reasonably satisfactory to Landlord's counsel, confirming that
the proposed Triggering Event does not subject either Tenant or the Premises to
the requirements of ISRA. (Any representation or certification made by Tenant in
connection with any such request shall constitute a representation and warranty
by Tenant in favor of Landlord, and any
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misrepresentation or breach of warranty contained in Tenant's request shall
constitute an Event of Default under this Lease).
8.7.6 All reasonable costs associated with Tenant's compliance with
this Section 8.7, including without limitation Landlord's reasonable costs in
reviewing any sampling plan and/or test results or any other materials required
to be submitted by Tenant to the DEP in connection with ISRA compliance, in
developing a plan for remediation and site detoxification or for any other
requirements of the DEP in connection with ISRA compliance, and monitoring of
same, and all reasonable consulting, engineering, and legal fees, shall be paid
by Tenant as Additional Charges upon demand from Landlord. In the event Tenant
fails to comply in full with its obligations hereunder, Landlord, at its option,
may perform any and all of Tenant's obligations as aforesaid (but shall not be
obligated to do so), and all reasonable costs and expenses incurred by Landlord
in the exercise of this right shall be deemed to be Additional Charges payable
by Tenant on demand, with interest at the Interest Rate, from the date of demand
until paid in full, it being the intention of the parties hereto that Landlord
shall be free of all expenses and obligations arising from, or necessary to
achieve, compliance to the extent such compliance is required of Tenant under
this Section 8.7.
8.7.7 Tenant does hereby agree to indemnify, defend and hold
harmless Landlord and each Mortgagee or Underlying Lessee of the Premises from
all losses, costs, damages and expenses (including fines, penalties, reasonable
engineering and other professional or expert fees, and reasonable legal fees)
resulting, directly or indirectly, whether foreseen or unforeseen, from any
claim, demand, liability, obligation, right or cause of action, including but
not limited to governmental or private rights of action (collectively, "CLAIMS"
or "CLAIM"), that may be asserted against Landlord or any such Mortgagee or
Underlying Lessee as a result of Tenant's breach of any representation, warranty
or covenant of this Section 8.7, it being the intention of the parties hereto
that Landlord shall be free of all expenses and obligations arising from, or
necessary to achieve, compliance with ISRA to the extent such compliance is
required of Tenant under this Section 8.7; provided, however, that Tenant shall
not be obligated to indemnify Landlord under this Section 8.7.7 if Tenant
demonstrates that the Claim was based on events occurring or conditions in
existence prior to the date of this Lease. Tenant further agrees, at its sole
cost and expense, to promptly discharge and remove any lien or encumbrance
against the Premises, the Building, or the Land or against any other property
owned or controlled, in whole or in part, by Landlord, imposed due to Tenant's
failure to comply with ISRA.
8.8 Spill Act.
8.8.1 Tenant agrees that it shall, at its sole cost and expense,
observe, comply and fulfill all of the terms land provisions of the Spill
Compensation and Control Act, N.J.S.A. 58:10-23. 11 et seq., as the same may be
amended from time to time, and all rules, regulations, ordinances, opinions,
orders and directives issued or promulgated pursuant to or in connection with
said Act by DEP, any subdivision or bureau thereof or governmental or
quasi-governmental agency or body having Jurisdiction thereof, to the extent
such fulfillment, observance or compliance is required due to the specific
nature of Tenant's business or due to Tenant's specific use and/or occupancy of,
or any act
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or omission of Tenant or any Tenant Party in or about, the Premises. (Said Act
and all said rules, regulations, ordinances, opinions, orders and directives are
hereinafter in this Section 8.8, collectively referred to as "SPILL ACT").
8.8.2 Without limiting the foregoing, the Tenant agrees:
(i) that it shall not do, omit to do or suffer the
commission or omission of any act which is prohibited by or may result in any
liability under the Spill Act, including without limitation the discharge of
petroleum products or other hazardous substances (as said terms are defined in
the Spill Act); and
(ii) whenever the Spill Act requires the "owner or
operator" to do any act, Tenant shall do such act and fulfill all such
obligations with respect to the Premises at its sole cost and expense, it being
the intention of the parties hereto that Landlord shall be free of all expense
and obligations arising from or in connection with compliance with the Spill
Act.
8.8.3 Without limiting the foregoing, Tenant agrees:
(i) at its sole cost and expense, to promptly discharge
and remove any lien or any encumbrance against the Premises, the Building, the
Land or any other property owned or controlled, in whole or in part, by
Landlord, imposed by Tenant's failure to comply with the Spill Act; and
(ii) to defend, indemnify and hold Landlord harmless
from and against any and all liability, penalty, loss, expense, damages, costs,
claims, causes of action, judgments and/or the like, of whatever nature,
including but not limited to reasonable attorneys' fees and other reasonable
expenses of litigation or preparation therefor, to the extent such costs arise
from or in connection with Tenant's failure or inability, for any reason
whatsoever, to observe or comply with the Spill Act and/or the provisions of
this Section 8.8.
8.8.4 Tenant agrees that each and every provision of this Section
8.8 shall survive the termination of this Lease by three (3) years. The parties
hereto expressly agree and acknowledge that the Landlord would not enter into
this Lease but for the provisions of this Section 8.8 and the aforesaid survival
thereof.
8.9 Other Environmental Laws.
Tenant agrees that it shall, at its sole cost and expense, promptly
comply and keep continually in full compliance with all federal, state and local
laws, ordinances, rules, regulations and requirements relating to air, ground
and water pollution and protection and/or preservation of the environment
("ENVIRONMENTAL LAWS").
8.10 Environmental Indemnification.
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Notwithstanding anything to the contrary contained in Sections 8.7,
8.8 and/or 8.9 hereof, as between Landlord and Tenant, Landlord will be solely
responsible for and will defend, indemnify and hold Tenant harmless from and
against all claims, judgments, actions, costs and liabilities, including
attorneys' fees and costs, arising out of or in connection with the generation,
manufacture, refining, transportation, treatment, storage, handling and/or
disposal by Landlord, any Landlord Party, Underlying Lessors and Mortgagees,
Landlord's invitees or other tenants of the Real Property of Hazardous
Substances in, on or about the Premises or the Real Property, or arising out of
or in connection with the existence of any Hazardous Substances located in, on
or about the Building prior to the Commencement Date of this Lease, including
but not limited to all claims, costs, and liabilities, including attorneys' fees
and costs, arising out of or in connection with the removal, clean-up and
restoration work and materials required as a result thereof. Landlord's
obligations under this Section 8.10 will survive the termination of this Lease
by three (3) years.
ARTICLE 9 - ASSIGNMENT, SUBLETTING AND MORTGAGING
9.1 General Prohibition.
Tenant shall not, except as otherwise provided herein, whether
voluntarily, involuntarily, or by operation of law or otherwise (a) assign or
otherwise transfer in whole or in part this Lease, (b) sublet the Premises or
any part thereof, or allow the same to be used or occupied by any person other
than Tenant for any purpose (including desk space, mailing privileges or
otherwise), or (c) mortgage, pledge, encumber or otherwise hypothecate this
Lease or the Premises or any part thereof in any manner whatsoever, without in
each instance obtaining the prior written consent of Landlord which shall not be
unreasonably withheld, conditioned or delayed so long as the requirements of
Section 9.1 hereof have been satisfied. The consent by Landlord to a particular
assignment, subletting or mortgaging shall not in any way be considered a
consent by Landlord to any other or further assignment, subletting, or
mortgaging.
9.2 Recapture.
9.2.1 If Tenant shall, at any time or from time to time, during the
Term propose to assign this Lease or sublet all or part of the Premises, Tenant
shall give notice thereof to Landlord ("TENANT'S NOTICE"), which notice shall be
accompanied by (i) a form of the proposed assignment or sublease, the effective
date or commencement date of which shall be not less than thirty (30) days, nor
more than one hundred and eighty (180) days, after the giving of such notice,
and the effectiveness of which shall be expressly conditioned upon the obtaining
of Landlord's written consent thereto, (ii) a statement setting forth in
reasonable detail the identity of the proposed assignee or subtenant, the nature
of its business and its proposed use of the Premises, (iii) current financial
information with respect to the proposed assignee or subtenant, including its
most recent financial report, and (iv) in the case of a proposed sublease of
less than the entire Premises, a floor plan clearly indicating the specific
portion of the Premises to be subleased and all means of ingress and egress to
and from such proposed sublease space. Tenant, upon request, shall also provide
Landlord with any
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additional information Landlord that shall reasonably request in respect of such
proposed assignment or sublease.
9.2.2 Upon Landlord's receipt of any Tenant's Notice, Landlord shall
have the following options, as applicable (collectively, the "RECAPTURE
OPTIONS"), any of which may be exercised by Landlord by written notice to Tenant
(the "RECAPTURE NOTICE") given at anytime within a period (the "RECAPTURE
PERIOD") of thirty (30) days after its receipt of the Tenant's Notice but not
later than three (3) days prior to the proposed effective date of the proposed
assignment or sublease:
(a) If a Tenant's Notice shall set forth either (i) a
proposed assignment or a proposed sublease of seventy-five percent (75%) or more
of the then rentable area of the Premises, then Landlord shall have the option
to terminate this Lease in its entirety. If Landlord exercises such option, then
this Lease shall terminate on the date that such proposed assignment or sublease
was to become effective or commence, as the case may be, and the Rent shall be
paid and apportioned to such date.
(b) If a Tenant's Notice shall set forth a proposed
sublease that either (i) demises more than twenty-five percent (25%) of the then
rentable area of the Premises or (ii) has a sublease term that expires later
than two (2) years prior to the then scheduled expiration of the Lease Term,
then Landlord shall have the option to terminate this Lease as to the proposed
sublease space. If Landlord exercises such option, then (i) Landlord, at
Tenant's expense, shall (x) erect all partitions required to separate such space
from the remainder of the Premises and (y) install all corridors, doors,
equipment and facilities required to (aa) allow for independent access from such
space to the applicable Public Areas, (bb) comply with any Legal Requirements or
Insurance Requirements relating to such separation and (cc) enable such space to
used, maintained and serviced as an independent unit, and (ii) this Lease shall
terminate with respect to such space on the date that such proposed sublease was
to commence and, effective as of such termination, this Lease shall be deemed
modified to (x) eliminate such space from the Premises, and (y) reduce the Fixed
Rent, on a pro rata, rentable square foot basis.
Notwithstanding the foregoing, if Landlord gives Tenant a Recapture Notice with
respect to a proposed assignment or sublease, Tenant may, by written notice
delivered to Landlord within ten (10) days after Tenant's receipt of such
Recapture Notice, withdraw Tenant's request for Landlord's consent to such
assignment or sublease, in which case Landlord's Recapture Notice shall be null
and void, Tenant shall not enter into such assignment or sublease, and this
Lease shall continue as if Tenant had never requested Landlord's consent to such
assignment or sublease.
9.3 Consent.
If (i) Landlord receives a Tenant's Notice and (ii) Landlord does
not exercise any of its Recapture Options within the Recapture Period, then,
provided that there is no Event of Default by Tenant continuing as of the date
of Tenant's Notice or at anytime thereafter prior to Landlord
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granting its written consent, Landlord's consent to the proposed assignment or
sublease set forth in the Tenant's Notice shall not be unreasonably withheld,
conditioned or delayed; provided, that:
(a) Tenant shall have complied with all the provisions of this
Article;
(b) the proposed assignment or sublease shall comply with the
provisions of this Article, and the form thereof shall otherwise be reasonably
satisfactory to Landlord;
(c) the proposed assignee or subtenant (i) shall be a reputable
person or entity of good character, (ii) shall be engaged in a business or
activity which is in keeping with the then standards the Building, and (iii)
shall have sufficient net worth considering the responsibility involved (and
Landlord shall have been furnished with reasonable proof thereof);
(d) the prospective occupancy of the proposed assignee or subtenant
(i) shall be limited to the use of the Premises specifically permitted by this
Lease, (ii) shall not violate any use restrictions set forth in this Lease,
(iii) shall otherwise be in keeping with the then standards of the Building, and
(iv) shall not, in the reasonable judgment of Landlord, increase the office
cleaning requirements or otherwise impose an extra burden upon services to be
supplied by Landlord to Tenant;
(e) the proposed assignment or sublease shall not result in there
being more than three occupants (inclusive of Tenant and all subtenants)
occupying space within the Premises;
(f) in the case of a sublease, the sublease shall not provide for an
option on behalf of the subtenant thereunder to extend or renew the term of such
sublease; and
(g) unless at the time of the proposed assignment or sublease there
is not available for lease, or scheduled to become available for lease within
three (3) months thereafter, rental space in the Building leasable in a single
block containing not less than eighty percent (80%) nor more than one hundred
twenty percent (120%) of the rentable square footage of the area to be covered
by the proposed assignment or sublease, neither the proposed assignee or
subtenant nor any company controlled by, under common control with or
controlling the proposed assignee or subtenant (i) shall then be a tenant or
occupant of any space in the Building, or (ii) shall have, within the nine (9)
month period prior to the date of Tenant's Notice, negotiated with Landlord with
respect to the leasing of any space in the Building.
Landlord's consent to any assignment or sublease shall be set forth in an
instrument prepared by Landlord in form satisfactory to Landlord; in the case of
any assignment, such instrument shall include an assumption by the proposed
assignee of the obligations of Tenant hereunder. Landlord's consent shall not be
effective until such instrument is executed and delivered by Landlord, Tenant
and the proposed assignee or subtenant. Tenant shall reimburse Landlord on
demand for any reasonable costs that may be incurred by Landlord in connection
with any proposed assignment or sublease, including (i) the costs of making
investigations as to the acceptability of the proposed assignee or subtenant,
and (ii) legal costs incurred in connection with the granting of any requested
consent.
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9.4 Profits.
9.4.1 For purposes of this Lease, the following definitions shall
apply:
"ASSIGNMENT CONSIDERATION", with respect to any
assignment, shall mean an amount equal to all sums and other considerations
payable to Tenant by the assignee for or by reason of such assignment (including
sums paid for the sale or rental of any Tenant's Property, less, in the case of
a sale thereof, the then net unamortized or undepreciated cost thereof
determined on the basis of Tenant's federal income tax returns).
"SUBLEASE CONSIDERATION", with respect to any sublease
with respect to any calendar year, shall mean the excess of (1) any and all
rents, additional charges or other consideration payable under the sublease to
Tenant by the subtenant (including sums paid for the sale or rental of Tenant's
Property located in the sublease premises, after deducting, in the case of the
sale thereof, the then net unamortized or undepreciated cost thereof, determined
on the basis of Tenant's federal income tax returns), over (ii) the Rent
accruing during such year in respect of the subleased space (at the rate per
square foot payable by Tenant hereunder) pursuant to the terms hereof.
"TRANSACTION EXPENSES", with respect to any assignment
or sublease, shall mean the sum of (i) the out-of-pocket and reasonable
advertising expenses and brokerage commissions paid by Tenant in connection with
the assignment or sublease, plus (ii) the out-of-pocket construction and work
allowance costs paid by Tenant in order to prepare the Premises (or portion
thereof) for the initial occupancy of the assignee or subtenant.
9.4.2 If Landlord shall consent to any assignment of this Lease,
then, in consideration therefor, Tenant within thirty (30) days after the
effective date of the assignment, shall (i) deliver to Landlord a written
statement, certified by an officer of Tenant, setting forth the Assignment
Consideration and the Transaction Expenses with respect to such assignment, and
(ii) pay to Landlord, as Additional Charges, an amount equal to fifty percent
(50%) of the excess of the Assignment Consideration over the Transaction
Expenses.
9.4.3 If Landlord shall consent to any sublease of all or any
portion of the Premises, then, in consideration therefore Tenant, within thirty
(30) days after the close of each calendar year during the Term in which such
sublease is in effect, shall (i) deliver to Landlord a written statement,
certified by an officer of Tenant, setting forth the Sublease Consideration for
such calendar year during the Transaction Expenses with respect to such
sublease, and (ii) either retain or pay to Landlord the Sublease Consideration
for such year, in accordance with the following: first, Tenant may retain the
entire Sublease Consideration for such year to the extent of the Transaction
Expenses incurred with respect to such sublease (except to the extent Tenant
retained amounts under this clause first in prior years); and second, Tenant
shall pay to Landlord an amount equal to fifty percent (50%) of the balance of
the Sublease Consideration for such year.
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9.5 Miscellaneous.
9.5.1 Notwithstanding any assignment or transfer of this Lease, and
notwithstanding the acceptance of Rent by Landlord from an assignee, transferee,
or any other party, Tenant shall remain fully liable for the payment of Rent and
for the performance and observance of all other obligations of this Lease on the
part of Tenant to be performed or observed. Tenant's liability shall be joint
and several with any immediate and remote successors in interest of Tenant, and
such joint and several liability in respect of Tenant's obligations under this
Lease shall not be discharged, released or impaired in any respect by any
agreement or stipulation made by Landlord extending the time of, or modifying
any of the obligations of, this Lease, or by any waiver or failure of Landlord
to enforce any of the obligations of this Lease.
9.5.2 All subleases shall be subject and subordinate to this Lease,
and each sublease shall expressly so provide and shall further provide that in
the event this Lease is terminated by Landlord by reason of an Event of Default,
Landlord may, at its option, take over all of the right, title and interest of
Tenant, as sublessor, under such sublease, and such subtenant shall, at
Landlord's option, attorn to Landlord pursuant to the then executory provisions
of such sublease, except that Landlord shall not be (1) liable for any previous
act or omission of Tenant under such sublease, (2) subject to any credit,
offset, claim, counterclaim, demand or defense which such subtenant may have
against Tenant, or responsible for any monies owing by Tenant to the subtenant,
(3) bound by any previous prepayment of more than one (1) month's rent, (4)
bound by any previous modification of such sublease (made without Landlord's
consent), (5) bound by any covenant to undertake or complete any construction in
the Premises or any part thereof, (6) required to account for any security
deposit of the subtenant other than any security deposit actually delivered to
Landlord by Tenant, or (7) required to remove any person occupying the Premises
or any part thereof. No sublease shall be for a term ending later than one day
prior to the Expiration Date. Each sublease shall provide that the subtenant may
not assign its rights thereunder or further sublet the space demised under the
sublease, in whole or in part, without Landlord's consent and shall include
provisions substantially the same as the provisions of Section 9.5.3 hereof. If
an Event of Default shall occur, then Landlord, thereafter at its option and
without waiving any such default, may collect Rent from any then existing
subtenant of the Premises. Notwithstanding any subletting by Tenant, and
notwithstanding the acceptance of Rent by Landlord from any subtenant, Tenant
shall and will remain fully liable for the payment of the Rent, for the
performance and observance of all other obligations of this Lease on the part of
Tenant to be performed or observed, and for all acts or omissions of any
subtenant (or anyone claiming under or through any subtenant which shall be in
violation of any of the terms and conditions of this Lease, each such violation
being deemed to be a violation by Tenant.
9.5.3 For purposes of this Lease, (i) a change in control of Tenant
(or of any subtenant of Tenant) shall be deemed an assignment of this Lease (or
of such sublease), (ii) a "take-over agreement" pursuant to which one or more
persons shall agree to assume the obligations of Tenant hereunder in
consideration of Tenant leasing space in another building shall be deemed an
assignment of this Lease, and (iii) a modification, unendment or extension of a
sublease shall be deemed a sublease.
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9.5.4 In no event shall Tenant ever (i) advertise or publicize in
any way the availability of the Premises without prior notice to and approval by
Landlord (which approval shall not be unreasonably withheld, conditioned or
delayed), nor shall any advertisement state the name (as distinguished from the
address) of the Building or the proposed rental, (ii) list the Premises for
subletting, whether through a broker, agent, representative, or otherwise at a
rental rate less than the greater of (1) the Rent payable hereunder for such
space, or (2) the rental rate at which Landlord is then offering to lease other
space in the Building.
9.5.5 If Landlord exercises any of its Recapture Options then
Landlord, thereafter, shall be free to, and shall have no liability to Tenant if
it shall, enter into a lease, sublease, assignment or other transaction with
Tenant's proposed assignee or subtenant or any other person concerning the whole
or any portion of the Premises or otherwise. If Landlord shall exercise any of
its Recapture Options, or if, after failing to exercise any of its Recapture
Options, Landlord shall decline to give its consent to any proposed assignment
or sublease, then, in any such case, Tenant shall indemnify, defend and hold
harmless Landlord against and from any and all loss, liability, damages, costs
and expenses (including reasonable counsel fees) resulting from any claims that
may be made against Landlord by the proposed assignee or subtenant or by any
brokers or other persons claiming a commission or similar compensation in
connection with the proposed assignment or sublease.
9.5.6 Notwithstanding anything contained hereinto the contrary,
without Landlord's consent but upon notice to Landlord, Tenant may assign this
Lease or sublet all or a portion of the Premises to (and Landlord shall not be
entitled to exercise its Recapture Options and the provisions of Section 9.4
hereof shall not apply with respect thereto):
(a) Tenant's parent entity or any wholly owned
subsidiary or affiliate of Tenant or Tenant's parent entity;
(b) a corporation or other entity acquiring all of the
assets of Tenant;
(c) any successor of Tenant by a sale of the stock of
Tenant or by consolidation, merger or other corporate action;
(d) the initial public offering of stock or other
interest in Tenant; or
(e) any trading of Tenant's securities on any nationally
recognized securities exchange, NASDAQ or other securities system on which it is
listed.
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ARTICLE 10 - SURRENDER; HOLDOVER
10.1 Surrender.
Upon the expiration or any earlier termination of this Lease, Tenant
shall fully vacate and surrender the Premises to Landlord in accordance with the
provisions of this Lease (including Article 5 hereof), "broom-clean" and in good
order, condition and repair, reasonable wear and tear excepted.
10.2 Holdover.
If Tenant shall fail to vacate and surrender the Premises upon due
expiration or earlier termination of this Lease, then, throughout the period
commencing on such expiration or earlier termination and continuing until Tenant
shall fully vacate and surrender the Premises (such period being herein called
the "HOLDOVER PERIOD"), Tenant shall be deemed a holdover tenant and shall be
liable to Landlord for rent, or a charge in respect of use and occupancy, at a
per diem rate, for each day of the Holdover Period, equal to one and one half
(1.5) times the average per diem rate of Fixed Rent payable by Tenant during the
last year of the Term( i.e., the year immediately prior to the Holdover Period),
plus all Additional Charges allocable to the Holdover Period. In addition to the
foregoing, Landlord shall be entitled to recover from Tenant any losses or
damages arising from such holdover. Nothing herein shall be deemed to grant
Tenant any right to holdover, and in no event shall the acceptance of any rent
preclude Landlord from commencing and prosecuting any holdover or eviction
proceeding.
ARTICLE 11 - DEFAULT BY TENANT; LANDLORD'S REMEDIES
11.1 Events of Default.
Each of the following events shall constitute an "EVENT OF DEFAULT":
(a) If Tenant shall default in the payment of any Rent, and such
default shall continue for five (5) days.
(b) If Tenant shall, whether by action or inaction, be in default of
any of its obligations under this Lease (other than a default in the payment of
Rent) and such default shall continue and not be remedied as soon as practicable
and in any event within thirty (30) days after Landlord shall have given to
Tenant a notice specifying the same, or, in the case of a default which cannot
with due diligence be cured within a period of thirty (30) days, if Tenant shall
not (x) within such thirty (30) day period advise Landlord of Tenant's intention
to take all steps necessary to remedy such default, (y) duly commence within
such 30-day period, and thereafter diligently prosecute to completion, all steps
necessary to remedy the default, and (z) complete such remedy within a
reasonable time after the date of such notice of Landlord.
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(c) If this Lease or the estate hereby granted or the unexpired
balance of the Term, by operation of law or otherwise, devolve upon or pass to
any person or entity other than Tenant, except as expressly permitted by Article
9 hereof.
(d) If Tenant shall vacate or abandon the Premises (and the fact
that any of Tenant's Property remains in the Premises shall not be evidence that
Tenant has not vacated or abandoned the Premises).
(e) If (i) Tenant shall commence a case in bankruptcy, or under the
insolvency laws of any state, naming Tenant as a debtor, or (ii) any other
person shall commence a case in bankruptcy, or under the insolvency laws of any
state, naming Tenant as a debtor, and such case shall not have been discharged
within sixty (60) days of the commencement thereof, or (iii) Tenant shall make
an assignment for the benefit of creditors or any other arrangement involving
all or substantially all of its assets under any state statute, or (iv) a
receiver or trustee shall be appointed for Tenant or for all or any portion of
the property of Tenant in any proceeding, which receivership shall not have been
set aside or otherwise stayed within sixty (60) days of such appointment.
11.2 Termination, Re-Entry, Damages, Etc..
11.2.1 This Lease and the estate hereby granted are subject to the
limitation that if an Event of Default shall occur, then, in any such case,
Landlord may give to Tenant a notice of intention to terminate this Lease and
the Term as of the fifth (5th) day after the giving, of such notice, and, in
which event, as of such fifth (5th) day, this Lease and the Term shall terminate
with the same effect as if such day was the Expiration Date, but Tenant shall
remain liable for damages as hereinafter provided.
11.2.2 If this Lease shall be terminated as provided in Section
11.2.1 above, Landlord, or its agents or employees, may reenter the Premises at
any time and remove therefrom Tenant and all Tenant Parties, together with any
of its or their property, either by summary dispossess proceedings or by any
suitable action or proceeding at law. In the event of such termination, Landlord
may repossess and enjoy the Premises. Landlord shall be entitled to the benefits
of all provisions of law respecting the speedy recovery of lands and tenements.
Tenant waives any rights to the service of any notice of Landlord's intention to
re-enter provided for by any present or future law. Landlord shall not be liable
in any way in connection with any action it takes pursuant to the foregoing.
Notwithstanding any such re-entry, recession, dispossession or removal, if this
Lease is terminated prior to the Expiration Date by reason of an Event of
Default, Tenant's liability under the provisions of this Lease shall continue
until the date the Term would have expired had such termination not occurred.
11.2.3 In any case of termination of this Lease, or re-entry or
repossession of the Premises, whether the same is the result of the institution
of summary or other proceedings, Tenant shall remain liable (in addition to
theretofore accrued liabilities) to the extent legally permissible for: (1) the
Rent, together with (A) all other charges provided for herein until the date
this Lease would have expired
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had such termination, re-entry or repossession not occurred, (B) all expenses
which Landlord may incur in (1) re-entering or repossessing the Premises, (2)
making good any default of Tenant, (3) painting, altering or dividing the
Premises, combining the same with other space, or placing the same in proper
repair, (4) protecting and preserving the Premises by placing therein watchmen
and caretakers, (C) all expenses which Landlord may incur in reletting the
Premises (including reasonable attorneys' fees and disbursements, marshall's
fees and brokerage fees), and (D) any expenses which Landlord may incur during
the occupancy of any new tenant, less (II) the proceeds of any reletting. Tenant
agrees to pay to Landlord the difference between items (I) and (II) hereinabove
with respect to each month, at the end of such month. Any suit brought by
Landlord to enforce collection of such difference for any one month shall not
prejudice Landlord's right to enforce the collection of any difference for any
subsequent month. In addition to the foregoing, Tenant shall reimburse Landlord
all reasonable attorneys' fees and disbursements incurred by Landlord with
respect to any such action or proceeding to collect such difference and/or any
action or proceeding to otherwise collect any rent and/or to enforce any of
Tenant's other obligations under this Lease and/or any summary or other
dispossess proceedings.
11.2.4 Landlord may, in its sole discretion, relet the whole or any
part of Premises for the whole or any part of the unexpired Term, or longer, or
from time to time for shorter periods, for any rental it wishes and giving such
concessions of rent and making such special repairs, alterations, decorations
and paintings for any new tenant as it may in its sole and absolute discretion
deem advisable, and Landlord may collect and receive the rents thereunder. In no
event shall Landlord ever be obligated to relet or to attempt to relet the
Premises or any part thereof.
11.2.5 If, after a termination of this Lease as aforesaid, Landlord,
in its sole discretion, so elects, Tenant shall pay Landlord, on demand, as
liquidated and agreed final damages, the present value (calculated at a discount
rate of 6 %) of (i) the Rent and all other charges which would have been payable
by Tenant from the date of such demand to the date that this Lease would have
expired if it had not been terminated as aforesaid, less (ii) the sum of (a) the
amount Landlord reasonably determines Landlord will receive in reletting the
Premises for the unexpired Term minus (b) Landlord's reasonable estimate of the
costs of so reletting the Premises (including but not limited to costs of tenant
improvements and other leasing incentives or concessions, leasing commissions,
and lease preparation). Upon payment of such liquidated and agreed final
damages, Tenant shall have no further liability with respect to the period after
the date of such demand.
11.3 Late Payments of Rent.
If Tenant shall fail to pay any Rent within ten (10) days after the
due date therefor, then Tenant, in addition to such Rent, shall pay Landlord a
late charge of five (5) cents for each dollar of the amount of Rent not so paid.
In addition, if any such failure to pay Rent shall continue for a period of
fifteen (15) days after notice thereof to Tenant, then the past due Rent shall
bear interest at the Interest Rate, from the expiration of such fifteen (15) day
period until paid. The amount of any such late charge and/or interest shall each
be an Additional Charge hereunder and shall be payable upon demand. The
assessment and receipt of late charges and interest as aforesaid shall be in
addition to,
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and shall in no way be deemed to limit, any other rights and remedies Landlord
may have under this Lease or otherwise for non-payment of Rent.
11.4 Landlord's Cure and Enforcement Rights.
11.4.1 If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, Landlord, without thereby waiving such default,
may (but shall not be obligated to) perform the same for the account and at the
expense of Tenant, without notice in any case of emergency, and, in any other
case, if such default continues after notice to Tenant thereof and after the
expiration of the applicable grace period set forth herein, if any.
11.4.2 Tenant, upon demand, shall reimburse Landlord for any
reasonable expenses incurred by Landlord (including reasonable attorneys' fees)
pursuant to, or in connection with, (i) any performance by Landlord for the
account of Tenant pursuant to Section 11.4.1 above, or (ii) collecting or
endeavoring to collect Rent or any component thereof, or enforcing or
endeavoring to enforce any of Landlord's rights against Tenant hereunder or any
of Tenant's obligations hereunder, together, in either case, with interest
thereon, at the Default Rate (as hereinafter defmed), from the date that such
expenses were incurred by Landlord to the date that the same are reimbursed to
Landlord by Tenant.
11.5 Additional Remedies.
The specific remedies granted to Landlord under this Lease are
cumulative and are not intended to be exclusive of each other or of any other
remedies which may be available to Landlord at law or in equity. Landlord may
exercise any and/or all such rights and remedies (whether Specifically granted
herein or otherwise available to Landlord at law or in equity) at such times, in
such order, to such extent, and as often, as Landlord deems advisable without
regard to whether the exercise of any such right or remedy precedes, is
concurrent with or succeeds the exercise of another such right or remedy.
11.6 Security.
Tenant, simultaneously herewith (but subject to the provisions of
Section 1.5.6 hereof, shall deposit with Landlord either the cash sum or a
letter of credit in the amount of $511,816.56, as security for the full and
punctual performance by Tenant of all of the terms and conditions of this Lease
(such amount, together with any interest earned thereon, if any, such letter of
credit, and/or any funds drawn by Landlord thereunder being herein called the
"SECURITY DEPOSIT"). In respect thereof, the following provisions shall apply:
(a) If Tenant defaults hereunder beyond the expiration of any
applicable grace, notice or cure period, Landlord may use, apply or retain the
whole or any part of the Security Deposit to the extent required for the payment
of any Rent or any other sum(s) as to which Tenant is in default or for any
sum(s) which Landlord may expend or may be required to expend by reason of
Tenant's
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default pursuant hereto, including any damages or deficiency with respect to the
reletting of the Premises, whether accruing before or after summary proceedings
or other re-entry by Landlord. In the case of every such use, application or
retention, Tenant shall, on demand, pay to Landlord the sum so used, applied or
retained such that the Security Deposit shall be replenished to its former
amount.
(b) If Tenant shall fully and punctually comply with all of the
terms and conditions of this Lease, then the Security Deposit (or portion
thereof to which Tenant is entitled) shall be returned or paid over to Tenant
(i) one half (1/2) within fifteen (15) days after the expiration or termination
of this Lease and the surrender of the Premises to Landlord in accordance
herewith (provided, if the Security Deposit is a letter of credit, that Tenant
has theretofore given to Landlord a replacement letter of credit in the amount
of the remaining one half (1/2) of the Security Deposit) and (ii) one half (1/2)
within ninety (90) days after the expiration or termination of this Lease and
the surrender of the Premises to Landlord in accordance herewith.
(c) in the event of a sale or lease of the Building (or the portion
thereof containing the Premises), Landlord shall have the right to transfer the
security to the vendee or lessee, and Landlord shall, upon such transfer and the
assumption in writing by such vendee or lessee of the Security Deposit and
Landlord's obligations hereunder, be released by Tenant from all liability for
the return of such security and Tenant agrees to look solely to the new landlord
for the return thereof. Except in connection with a permitted assignment of this
Lease, Tenant shall not assign or encumber or attempt to assign or encumber the
monies deposited as security and Landlord shall not be bound by any such
assignment, encumbrance or attempted assignment or encumbrance.
(d) Provided Tenant is not then in default hereunder beyond any
applicable notice or cure period, the Security Deposit shall be reduced to
$255,908.28 upon (i) Tenant's occupancy of the Premises and commencement of
conduct of normal business operations therein and (ii) Tenant's payment of Fixed
Rent for the first (1st) full calendar month for which Fixed Rent is payable by
Tenant following exhaustion of the rent concession described in Section 2.2.3
hereof (provided, if the Security Deposit is a letter of credit, that Tenant
provides to Landlord a replacement letter of credit in the applicable reduced
amount prior to such reduction).
(e) Tenant shall, promptly after the end of each fiscal year of
Tenant (such fiscal year expiring on March 31), deliver to Landlord Tenant's
financial statement current through the end of such fiscal year, prepared and
certified by Tenant's certified public accountants, and such other proof as
Landlord may reasonably require to confirm Tenant's gross sales for such fiscal
year. If Tenant's gross sales for such fiscal year just ending, as indicated by
such financial statement and other proof. exceeded $75,000,000.00, and Tenant is
not then in default under this Lease beyond the expiration of any applicable
grace notice or cure period, the Security Deposit shall be reduced to (or if
previously so reduced, shall remain at) $127,954.14 (provided, if the Security
Deposit is a letter of credit, that Tenant provides to Landlord a replacement
letter of credit in the applicable reduced amount prior to such reduction). If
Tenant's gross sales for such fiscal year just ending, as indicated bv such
financial statement and other proof, did not exceed $75,000,000.00, or if Tenant
fails to
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provide such financial statement and other information within ninety (90) days
after the end of such fiscal year, the Security Deposit shall be increased to
(or shall, if then at such amount, remain at) $255,908.28 (and Tenant shall
immediately pay to Landlord sufficient funds to so increase the Security Deposit
or a replacement letter of credit in such increased amount).
(e) If the Security Deposit is a letter of credit, the provisions of
this subparagraph (e) shall apply. The letter of credit shall be issued by a
reputable banking institution having an office in New Jersey and shall be
presentable for payment at an office of such institution located in New Jersey.
Tenant shall deliver to Landlord at least thirty (30) days prior to the
expiration of the letter of credit a replacement letter of credit issued by the
same financial institution as issued the expiring letter of credit (or such
other reputable banking institution as is reasonably acceptable to Landlord), in
the same form as the expiring letter of credit (or in such other form as is
acceptable to Landlord). If Tenant fails to timely deliver any such replacement
letter of credit, such failure shall, without the need for any additional notice
from Landlord, constitute an Event of Default under this Lease. The letter of
credit shall be irrevocable, shall name Landlord and any successor-in-interest
of Landlord as beneficiary, shall be unconditional except as to require a sight
draft drawn on the issuing bank to be tendered by the beneficiary at said bank's
office, and shall otherwise be in such form as may be required by Landlord. The
term "letter of credit" shall mean the original letter of credit delivered to
Landlord and each replacement thereof delivered to Landlord during the Term of
this Lease.
11.7 Lien on Personal Property.
Landlord hereby waives its statutory, common law or any other, lien
or right of distraint that Landlord as now or which may in the future become
available to it with regard to Tenant's Property. Landlord agrees, upon the
request of Tenant, to enter into an agreement with Tenant's lender, in a form
reasonably acceptable to Landlord, confirming the waiver stated in the preceding
sentence with respect to Teaant's Property and stating that Landlord will, in
the event of a default by Tenant under its agreement with its lender, allow such
lender to have reasonable access, in accordance with such agreement and on terms
reasonably acceptable to Landlord, to the Premises in order for such lender to
take possession of Tenant's Property.
ARTICLE 12 - LIMITATIONS ON LAINDLORD'S LIABILITY
12.1 Limitation to Landlord's Estate.
Tenant shall look only to Landlord's estate and property in the Real
Property for the satisfaction of Tenant's remedies, or for the collection of
judgment (or other judicial process), against Landlord hereunder, and no other
property or assets of Landlord or any Landlord Party shall be subject to levy,
execution or other enforcement procedure or the satisfaction of Tenant's
remedies under or with respect to this Lease, the relationship of Landlord and
Tenant hereunder or Tenant's use or occupancy of the Premises.
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12.2 No Liability For Certain Damages, Etc.
Landlord shall have no liability to Tenant for (a) any damage or
loss caused by other tenants or other persons in, upon or about the Real
Property, or caused by operations in construction of any public or quasi-public
work, or (b) except to the extent caused by Landllord's negligence or willful
misconduct, any other loss or damage to persons or property (including any
property of Tenant or any Tenant Party). Further, Landlord, even if negligent,
shall not be liable to Tenant for consequential damages, whether arising out of
any loss of use of the Premises or any Tenant Improvements or other Tenant's
Property therein or otherwise.
12.3 Events of Force Majeure
Landlord shall have no liability to Tenant if Landlord is unable to
fulfill, or is delayed in fulfilling, any of its obligations under this Lease by
reason of one or more Events of Force Majeure.
12.4 Withholding of Consents/Approvals.
If Tenant shall request Landlord's consent or approval and Landlord
shall fail or refuse to give such consent or approval, Tenant shall not be
entitled to any damages for any withholding by Landlord of its consent or
approval, it being intended that Tenant's sole remedy shall be an action for
specific performance or injunction, and that such remedy shall be available only
in those cases where Landlord has expressly agreed in writing not to
unreasonably withhold its consent or where as a matter of law Landlord may not
unreasonably withhold its consent or approval.
ARTICLE 13 - GENERAL DEFINITIONS
13.1 General Definitions.
For purposes of this Lease, the following terms shall have the
meanings indicated:
"AFFILIATE", of any person, shall mean a corporation, partnership or
other entity which controls, is controlled by or is under common control with
such person.
"BASE BUILDING" shall mean (i) the structural elements of the
Building, (ii) the walkways, plazas, outdoor stairways and all other
improvements and/or landscaping on the Land, (iii) the pedestrian, freight and
service entrances to the Building, (iv) the Public Areas and all improvements,
fixtures and equipment therein, (v) the Building's utility and other mechanical
rooms and closets (including electrical, telephone and janitorial rooms and
closets and fan rooms) and the Building's equipment, storage and service rooms
and areas, and all improvements, fixtures and equipment therein, (vi) the
Building's columns, shafts, stacks, pipes, ducts and other conduits, (vii) the
Building Systems and all other facilities and equipment which are used for the
provision of Building Services (whether or not located in the Premises);
excluding, however, in all events, the Premises, Tenant's
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Improvements and Tenant's Property as well as other leasable areas of the
Building and the improvements and betterments, and the moveable personal
property, of other tenants of the Building.
"BUILDING SYSTEMS" shall mean all the electrical, HVAC, mechanical,
chilled/condenser water, sanitary, sprinkler, utility, power, plumbing,
cleaning, fire control, alarm and prevention systems, elevator, escalator,
window washing, waste compacting and removal, lighting, life safety, security
and other systems of the Building (together with all related equipment), brought
to (and including), but not beyond, the point of distribution or connection to
the Premises or to Tenant's Improvements, provided, that all components of the
Building's sprinkler system up to and including the main sprinkler loop on each
floor (but excluding the sprinkler heads) and all components of the Building's
plumbing system in or serving the Core Lavatories shall be deemed to be included
in within the term "Building Systems"; excluding, however, in all events,
Tenant's Improvements and Tenant's Property as well as the improvements and
betterments, and the moveable personal Droperty, of other tenants of the
Building.
"CONTROL" shall mean (i) in the case of a corporation, either (A)
ownership or voting control, directly or indirectly, of at least fifty (50 %)
percent of all the voting stock, or (B) the power to direct the management and
policies of such corporation, (ii) in case of a partnership or joint venture,
either (x) ownership, directly or indirectly, of at least fifty (50%) percent of
all the general or other partnership (or similar) interests therein, or (y) the
power to direct the management and policies of such partnership or joint
venture, and (iii) in the case of any other entity, either (x) ownership,
directly or indirectly, of at least fifty (50%) percent of all the equity or
other beneficial interest(s) therein, or (y) the power to direct the management
and policies of such entity.
"CORE LAVATORIES" shall mean the Building's core lavatories
(including all toilets, urinals, partitions, flooring, tiling, sinks, piping,
counters and other equipment therein from time to time).
"DEFAULT RATE" shall mean an interest rate equal to the Interest
Rate, Plus four percent (4%) per annum.
"EVENT OF FORCE MAJEURE" shall mean (1) any strike, lock-out or
other labor trouble, governmental preemption of priorities, or other controls in
connection with a national or other public emergency, or any shortage of
materials, supplies or labor, or (ii) any failure or defect in the supply,
quantity or character of electricity, water, oil, gas, steam or other utility
furnished to the Premises, by reason of any Legal Requirement or any
requirement, act or omission of the public utility or other person(s) serving
the Building with electricity, water, oil, gas, steam or other utility, or (iii)
any accident, fire or other casualty, or other act of God, or (iv) any other
event, whether similar or dissimilar, beyond Landlord's reasonable control.
"GOVERNMENTAL AUTHORITY" shall mean the United States, the State of
New Jersey, the Township of Piscataway, and/or any political subdivision thereof
any thereof, and/or any agency, department, commission, board or instrumentality
of any thereof.
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"INSURANCE REQUIREMENTS" shall mean all orders, rules, regulations,
requirements, policies or recommendations of any board of fire underwriters,
fire rating organization, insurance rating organization any other body
exercising the same or similar functions to the foregoing (collectively,
insurance rating organizations) which have jurisdiction over, or otherwise make
rates or findings in respect of, all or any part of the Real Property.
"INTEREST RATE" shall mean an interest rate equal to two percent
(2%) above the so-called annual "BASE RATE" of interest established and approved
by The Bank of New York, from time to time, as its interest rate charged for
unsecured loans to its corporate customers, but in no event greater than the
highest lawful rate from time to time in effect.
"LANDLORD" shall mean only the fee owner, at the time in question,
of the Building or that portion of the Building of which the Premises are a
part, or of an Underlying Lease of the Building or that portion of the Building
of which the Premises are a part, so that in the event of any transfer or
transfers of title to the Building or of Landlord's interest in an Underlying
Lease of the Building or such portion of the Building, the transferor shall,
except as otherwise provided for herein, be and hereby is relieved and freed of
all obligations of Landlord under this Lease accruing after such transfer, and
it shall, except as otherwise provided for herein, be deemed, without further
agreement, that such transferee has assumed and agreed to perform and observe
all obligations of Landlord herein during the period it is the holder of
Landlord's interest under this Lease.
"LANDLORD PARTY" shall mean (1) any principal, partner, member,
officer, stockholder, director, employee or agent of Landlord or of any partner
or member of any partnership constituting Landlord, disclosed or undisclosed,
(2) any Underlying Lessor or any principal, partner, member, officer,
stockholder, director, employee or agent thereof, and (3) any Mortgagee or any
principal, partner, member, officer, stockholder, director, employee or agent
thereof; and "LANDLORD PARTIES" shall have the corresponding plural meaning.
"LEGAL REQUIREMENTS" shall mean all applicable laws, statutes and
ordinances (including codes, approvals, permits and zoning regulations and
ordinances) and the orders, rules, regulations, interpretations, directives and
requirements of all federal, state, county, city and borough departments,
bureaus, boards, agencies, offices, commissions and other sub-divisions thereof,
or of any official thereof, or of any other governmental, public or quasi-public
authority, whether now or hereafter in force.
"PERSON" shall mean any natural person or persons, a partnership, a
corporation, and any other form of business or legal association or entity.
"PUBLIC AREAS" shall mean, collectively, the areas of the Real
Property which, from time to time, are open to the public as means of ingress
and egress to and from the Building and the various parts thereof, including the
public walkways on the Land, the Building's public street entrances, the
Building's ground floor and other public lobbies (and, with respect to any
multi-tenanted floor, any common elevator lobbies thereon), the Building's
public hallways, corridors and passages (and, with
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respect to any multi-tenanted floor, any common corridors thereon), the
Building's public stairways, and, with respect to any multi-tenanted floor, the
Core Lavatories thereon serving more than one Tenant.
"REAL PROPERTY" shall mean, collectively, the Building, inclusive of
the Base Building, and all improvements, fixtures, facilities, machinery and
equipment comprising a part of, or located in or used in the operation of, the
Building (including without rotation all improvements and betterments of
tenants), as well as all personal property located in the Building which is used
in the operation thereof, the Land, the curbs, sidewalks and plazas immediately
adjoining the Land, and all easements, air rights, development rights and other
appurtenances to the Building and/or the Land.
"STRUCTURAL ELEMENTS", of the Building, shall mean the Building's
roof, roof terraces, slabs, beams, columns, girders and other structural members
and connections, as well as the Building's exterior walls, window frames and
windows and all other parts of the Building's structure and supports.
"TENANT" shall mean the Tenant herein named or any assignee or other
successor in interest (immediate or remote) of the Tenant herein named, which at
the time in question is the owner of the Tenant's estate and interest granted by
this lease; but the foregoing provisions of this subsection shall not be
construed to permit any assignment of this lease or to relieve the Tenant herein
named or any assignee or other successor in interest (whether immediate or
remote) of the Tenant herein named from the full and prompt payment, performance
and observance of the covenants, obligations and conditions to be paid,
performed and observed by Tenant under this lease.
"TENANT PARTY" shall mean (1) any principal, partner, member,
officer, stockholder, director, employee or agent of tenant or of any partner or
member of any partnership constituting Tenant, disclosed or undisclosed, or (2)
any subtenant of Tenant or any other party claiming by, through or under Tenant,
or any principal, partner, member, officer, stockholder, director, employee or
agent of such subtenant or such other party; and "Tenant Parties" shall have the
corresponding plural meaning.
"UNTENANTABLE", when used with respect to the Premises, or any
portion thereof, shall mean that the Premises, or such portion thereof, is not
capable of being occupied by Tenant (or any Tenant Party) for the purposes
demised hereunder (and, accordingly, that the Premises, or such portion thereof,
is not being occupied by Tenant (or any Tenant Party) for the purposes demised
hereunder); and "TENANTABLE", when used with respect to the Premises, or any
portion thereof, shall mean that the Premises, or such portion thereof, are not
untenantable.
13.2 Terms, Phrases and References.
In addition, as used in this Lease, the following terms, phrases and
references, shall have the meanings indicated:
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(a) The term "ALTERATIONS" shall include additions, deletions,
improvements and/or any other chances.
(b) The phrase "AND/OR" when applied to one or more matters or
things shall be construed to apply to any one or more or all thereof as the
circumstances warrant at the time in question.
(c) The terms "HEREIN," "HEREOF" and "HEREUNDER," and words of
similar import, shall be construed to refer to this Lease as a whole, and not to
any particular Article or Section, unless expressly so stated.
(d) The term "INCLUDING", whenever used herein, shall mean
"including, without limitation", except in those instances where it is expressly
provided otherwise.
(e) The term "REPAIRS" shall include, as appropriate, replacements.
(f) The provisions of this Lease which (i) provide that "LANDLORD
SHALL HAVE NO LIABILITY TO TENANT" for any act, omission or other event, (ii)
provide that any act, omission or other event shall be "WITHOUT LIABILITY ON THE
PART OF LANDLORD", (iii) provide that Landlord may perform an act or exercise a
right, or permit another person to do so, "WITHOUT INCURRING ANY LIABILITY TO
TENANT THEREFOR", or (iv) provide, with words of similar import, that Landlord
is similarly not liable to Tenant for a given act, omission or other event,
shall, in the case of each such provision, mean that (x) Tenant shall not be
entitled to terminate this Lease, or to claim actual or constructive eviction,
partial, or total, or to receive any abatement or diminution of Rent, or to be
relieved in any manner of any of its other obligations hereunder, and (y)
neither Tenant nor any Tenant Party shall have any claim (of any kind or nature
whatsoever, at law or in equity) against Landlord or any Landlord Party (or
otherwise be entitled to any compensation from Landlord or any Landlord Party)
for any loss or injury suffered by reason of such act, omission or other event.
ARTICLE 14 - MISCELLANEOUS
14.1 Notices.
Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
Landlord or Tenant pursuant to this Lease (collectively, "notices") shall be in
writing and shall be deemed to have been properly given, rendered or made only
if sent by (i) registered or certified mail, return receipt requested, posted in
a United States post office station or letter box in the States of New York or
New Jersey (in which event such notice shall be deemed to have been given,
rendered or made on the third (3rd) Business Day after the day, so mailed), or
(ii) overnight courier service (in which event such notice shall be deemed to
have been given, rendered or made when delivered), and to the other party at the
address(es) hereinabove set forth at the beginning of this Lease (except that,
after the Commencemenr Date, the address for Tenant shall be the Premises), and
in the case of a notice to Landlord, with copies to:
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Linque Management Company, Inc.
30l Route 17 North, 9th Floor
Rutherford, New Jersey 07070
Attn: Joel J. Bergstein, Vice President
and to:
Earp Cohn P.C.
222 Haddon Avenue
Westmont, New Jersey 08108
Attn: Richard B. Cohn, Esquire
and in the case of a notice to Tenant, with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attn: James Alterbaum, Esquire
Either party may, by notice as aforesaid, designate a different address or
addresses for notices intended for it.
14.2 Brokerage.
14.2.1 Tenant covenants, warrants and represents to Landlord that no
broker, other than Insignia/ESG, Inc., and Linque Management Company, Inc.
(together, "BROKER"), was instrumental in bringing about or consummating this
Lease and that Tenant has had no conversations or negotiations with any broker
except Broker concerning the leasing of the Premises. Tenant agrees to indemnify
and hold harmless Landlord against and from any claims for any brokerage
commissions and all costs, expenses and liabilities in connection therewith,
including, without limitation, attorneys' fees and expenses, arising out of any
conversations or negotiations had by Tenant with any broker other than Broker.
Landlord agrees to pay Broker pilrsuant to a separate agreement or agreements.
14.2.2 Landlord covenants, warrants and represents to Tenant that no
broker, other than Broker, was instrumental in bringing about or consummating
this Lease and that Landlord has had no conversations or negotiations with any
broker except Broker concerning the leasing of the Premises. Landlord agrees to
indemnify and hold harmless Tenant against and from any claims for any brokerage
commissions and all costs, expenses and liabilities in connection therewith,
including, without limitation, attorneys' fees and expenses, arising out of any
conversations or negotiations had by Landlord with any broker, including Broker.
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14.3 Estoppel Certificates.
Tenant, at any ime and from time to time, on or prior to the tenth
(10th) day following a written request by Landlord, shall execute and deliver to
Landlord (and/or to a party designated by Landlord) a statement (i) certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), (ii) certifying to the Commencement Date, Expiration
Date, and the dates to which Rent has been paid, (iii) stating whether or not,
to the best knowledge of Tenant, Landlord is in default in performance of any of
its obligations under this Lease (and, if so, specifying each such default of
Tenant shall have knowledge), and (iv) stating whether or not, to the best
knowledge of Tenant, any Event of Default has occurred which is then continuing
(or any event has occurred which with the giving of notice or passage of time,
or both, would constitute an Event of Default), and, if so, specifying each such
event. Tenant also shall include or confirm in any such statement such other
information concerning this Lease as Landlord may reasonably request. Upon
Tenant's request, Landlord shall provide Tenant and/or Tenant's lender, assignee
or subtenant with a similar certificate executed by Landlord or a party
designated by Landlord.
14.4 Affirmative Waivers.
Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
including any claim of injury or damage, and any emergency and other statutory
remedy with respect thereto. Tenant shall not interpose any counterclaim of any
kind in any action or proceeding ommenced by Landlord to recover possession of
the Premises. Tenant hereby waives any right of redemption or similar right that
it may have with respect to this Lease after the termiantion hereof.
14.5 No Waivers.
14.5.1 No delay or omission by Landlord in exercising a right or
remedy shall exhaust or impair such right or remedy or constitute a waiver of,
or acquiescence in, any default by Tenant. A single or partial exercise of a
right or remedy shall not preclude a further exercise thereof, or the exercise
of another right or remedy, from time to time.
14.5.2 The receipt by Landlord of Rent with knowledge of any default
by Tenant shall not be deemed a waiver of such default, and no provision of this
Lease, or anv default by Tenant hereunder, shall be deemed to have been waived
by Landlord unless such waiver be in writing signed by Landlord.
14.5.3 No payment by Tenant or receipt by Landlord of a lesser
amount than the Rent herein stipulated shall be deemed to be other than on
account of the stipulated Rent. No endorsement or statement of any check or any
letter accompanying any check or payment as rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
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Landlord's right to recover the balance of such rent or pursue any other remedy
in this Lease provided.
14.6 No Representations.
Tenant expressly acknowledges and agrees that Landlord has not made
and is not making and Tenant, in executing and delivering this Lease, is not
relying upon, any warranties, representations, promises or statements, except to
the extent that the same are expressly set forth in this Lease.
14.7 Memorandum of Lease.
Tenant shall not record this Lease or any memorandum hereof.
14.8 Partnership Tenant.
If, at anytime during the Term, Tenant shall be a partnership (or be
comprised of two (2) or more persons) (any such partnership and/or such persons
being herein called "Partnership Tenant"), then the liability of each of the
parties comprising Partnership Tenant (whenever such parties shall be admitted
or become partners) shall be joint and several.
14.9 Authority of Parties.
Tenant represents and warrants that this Lease has been duly
authorized, executed and delivered by Tenant and constitutes the legal, valid
and binding obligation of Tenant. Landlord represents and warrants that this
Lease has been duly authorized, executed and delivered by Landlord and
constitutes the legal, valid and binding obligation of Landlord.
14.10 Governing Law; Arbitration.
14.10.1 This Lease shall be governed by, and construed in accordance
with, the laws of the State of New Jersey.
14.10.2 Any controversy or claim arising out of or relating to this
Lease, or any breach or alleged breach thereof (except with respect to a failure
by Tenant to pay Rent in accordance with the terms of this Lease, which
specifically shall not be subject to this Section 14.10.2), shall be settled by
arbitration under the Expedited Procedures provisions of the Commercial
Arbitration Rules of the American Arbitration Association, or any successor
organization (the "AAA") (presently Rules 53 through 57 and, to the extent
applicable Rule 19), provided, however, that with respect to any such
arbitration, (a) the list of arbitrators referred to in Rule 54 shall be
returned within five (5) days from the date of mailing, but shall include only
real estate brokers, attorneys and/or appraisers licensed in New Jersey having
at least ten (10) years experience in commercial leasing, (b) the parties shall
notify the AAA by telephone, within four (4) days, of any objections to the
arbitrator appointed and will have no right to object if the arbitrator so
appointed was on the list
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submitted by the AAA and was not objected to in accordance with the second
paragraph of Rule 54, (c) the notice of hearing, referred to in Rule 55 shall be
four (4) days in advance of the hearing, (d) the hearing shall be held within
seven (7) days after the appointment of the arbitrator, (e) the arbitrator shall
have no right to award damages, (f) the decision and award of the arbitrator
shall be final and conclusive on the parties and (g) judgment may be had on the
decision and award of the arbitrator in any court of competent jurisdiction.
14.11 Entire Agreement; Modifications.
This Lease represents the entire agreement of the parties, and,
accordingly, all understandings and agreements heretofore had between the
parties are merged in this Lease, which alone fully and completely express the
agreement of the parties. No amendment, surrender or other modification of this
Lease shall be effective unless in writing and signed by the party to be charged
therewith.
14.12 Severability.
If any provisions of this Lease or the application thereof to any
person or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Lease and the application of that provision
to other persons or circumstances shall not be affected but rather shall be
enforced to the extent permitted by law.
14.13 Interpretation.
The table of contents, captions, headings and titles in this Lease
are solely for convenience of references and shall not affect its
interpretation. This Lease shall be construed without regard to any presumption
or other rule requiring construction against the party causing this Lease to be
drafted. Each covenant, agreement, obligation or other provision of this Lease
on Tenant's part to be performed, shall be deemed and construed as a separate
and independent covenant of Tenant, not dependent on any other provision of this
Lease. Whenever in this Lease the singular number is used, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter lenders, and, in each case, vice versa, as the context may require.
14.14 Third Party Beneficiaries.
The rights in favor of Landlord and Tenant set forth in this Lease
shall be for the exclusive benefit of Landlord and Tenant, respectively, it
being the express intention of the parties that in no event shall such rights be
conferred upon or for the benefit of any third party.
14.15 Submission of Draft Lease.
The submission of the lease in draft form shall be deemed submitted
solely for each party's consideration and not for acceptance and execution. Such
submission shall have no binding force
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or effect and shall confer no rights nor impose any obligations, including
brokerage obligations, on either party unless and until both Landlord and Tenant
shall have executed the lease and duplicate originals thereof shall have been
delivered to the respective parties.
14.16 Counterparts.
This Lease may be executed in several counterparts, all of which
constitute one and the same instrument.
14.17 Relocation.
INTENTIONALLY DELETED.
ARTICLE 15 - ADDITIONAL PROVISIONS
15.1 Renewal Options.
15.1.1 (a) Tenant, provided this Lease shall then be in full force
and effect, shall have the option (herein called the "FIRST RENEWAL OPTION") to
extend the Term for an additional five (5) year period (the "FIRST RENEWAL
TERM"), which First Renewal Term shall commence on the date immediately
succeeding the Expiration Date, and end on the fifth (5th) anniversary of the
Expiration Date (such anniversary being herein called the "FIRST RENEWAL
EXPIRATION DATE"). The First Renewal Option shall be exercisable only by Tenant
giving Landlord written notice of such exercise (herein called the "FIRST
RENEWAL NOTICE"), which notice shall be received by Landlord not later than the
date that is twelve (12) months prior to the Expiration Date (time being of the
essence). Landlord, at its option, may render the First Renewal Notice null and
void upon notice thereof to Tenant if, at the time that Landlord receives the
same, Tenant shall be in material default under this Lease beyond any applicable
notice and/or cure period.
(b) Tenant, provided this Lease shall then be in full
force and effect, shall have the option (herein called the "SECOND RENEWAL
OPTION"; the First Renewal Option and the Second Renewal Option are sometimes
referred to herein individually as a "RENEWAL OPTION") to extend the Term for an
additional five (5) year period (the "SECOND RENEWAL TERM"; the First Renewal
Term and the Second Renewal Term are sometimes referred to herein individually
as a "RENEWAL TERM"), which Second Renewal Term shall commence on the date
immediately succeeding the First Renewal Expiration Date, and end on the fifth
(5th) anniversary of the First Renewal Expiration Date (such anniversary being
herein called the "SECOND RENEWAL EXPIRATION DATE"; the First Renewal Expiration
Date, and the Second Renewal Expiration Date are sometimes referred to herein
individually as a "RENEWAL EXPIRATION DATE"). The Second Renewal Option shall be
exercisable only by Tenant giving Landlord written notice of such exercise
(herein called the "SECOND RENEWAL NOTICE", the First Renewal Notice and the
Second Renewal Notice are sometimes referred to herein individually as a
"Renewal Notice"), which notice shall be received bv Landlord not later than the
date that is twelve (12) months prior to the First Renewal
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Expiration Date (time being of the essence). Landlord, at its option, may render
the Second Renewal Notice null and void upon notice thereof to Tenant if, at the
time that Landlord receives the same, Tenant shall be in material default under
this Lease beyond any applicable notice and/or cure period.
15.1.2 If Tenant exercises the Renewal Option in question in
accordance with the terms set forth above, then this Lease shall thereupon be
extended for the Renewal Term in question upon all the same terms, covenants and
conditions as are contained in this Lease and applicable prior to such Renewal
Term, except that for, and during, the Renewal Term in question: (1) the Fixed
Rent shall be the Renewal Term Fixed Rent (as hereinafter defined) for the
Renewal Term in question, as determined as hereinafter set forth; (2) the
Expiration Date shall be the Renewal Expiration Date for the Renewal Term in
question; (3j) any provisions of this Lease setting forth (i) workletter or
other work obligations of Landlord, (ii) work allowances or contributions to be
made by Landlord or (iii) Rent concessions or "free rent" periods, shall not
apply; and (4) the provisions of Section 15.1.1 above relating to Tenant's right
to renew the Term for the Renewal Term in question or any prior Renewal Term
shall not be applicable.
15.1.3 (a) As used herein, the term "RENEWAL TERM FIXED RENT" for
the Renewal Term in question shall mean a fixed rent payable at a per annum rate
equal to the product of (i) the Renewal Fair Market Fixed Rent for such Renewal
Term, multiplied by (ii) the number of rentable square feet in the Premises.
(b) As used herein, the term "RENEWAL FAIR MARKET FIXED
RENT" for the Renewal Term in question shall mean the fixed rent, per rentable
square foot per annum, that a willing tenant would pay and a willing landlord
would accept for a hypothetical lease of the Premises having a 5-year term
(commencing with the commencement of the Renewal Term in question), and
providing for fixed annual rent on a level payment basis throughout such term
(i.e., no step-ups in fixed rent), assuming: (i) that the Premises were being
demised by such hypothetical lease in their "as is" condition as of the date
that Tenant exercised the Renewal Option in question; (ii) that the terms of
such hypothetical lease would (x) include a work allowance or contribution to be
paid by such willing landlord to such willing tenant in an amount equal to the
amount, if any, that Landlord in its Initial Renewal Rent Notice (as hereinafter
defined) has indicated it is willing to provide to Tenant (but Landlord shall
not be obligated to offer to provide any such work allowance or contribution),
(y) include a free rent period during which such willing tenant would not pay
any fixed rent having a duration equal to the free rent period, if any, that
Landlord in its Initial Renewal Rent Notice has indicated it is willing, to
provide to Tenant (but Landlord shall not be obligated to offer to provide any
such free rent period), and (z) otherwise be the same terms and conditions as
are provided for in this Lease for the Renewal Term in question; and (iii) that
such willing landlord would be paying a brokerage commission in respect of such
hypothetical lease equal to the brokerage commission, if any, payable by
Landlord to Broker or any other broker to whom a commission may be owing in
connection with the Renewal Term in question.
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(c) During the thirty (30) day period (the "RENEWAL
INITIAL PERIOD") following Tenant's exercise of the Renewal Option in question
(i.e., after Landlord's receipt of the Renewal Notice exercising such Renewal
Option), Landlord and Tenant shall attempt to agree upon the Renewal Term Fixed
Rent for the Renewal Term in question (including any concessions to be provided
in connection therewith), and prior to the expiration of the Renewal Initial
Period Landlord shall give Tenant written notice (the "INITIAL RENEWAL RENT
NOTICE") containing (i) Landlord's determination of the Renewal Term Fixed Rent
for the Renewal Term in question ("LANDLORD'S RENEWAL RENT DETERMINATION"), (ii)
the amount of any work allowance or contribution that Landlord is willing to
provide to Tenant (but Landlord shall not be obligated to offer to provide any
such work allowance or contribution), and (iii) the duration of any free rent
period that Landlord is willing to provide to Tenant (but Landlord shall not be
obligated to offer to provide any such free rent period). If Landlord and Tenant
fail to agree upon the Renewal Fair Market Fixed Rent for the Renewal Term in
question within the Renewal Initial Period, then Tenant may, by written notice
(a "RENEWAL APPRAISAL NOTICE") received by Landlord before the expiration of
twenty (20) days after the expiration of the Renewal Initial Period, elect to
have the Renewal Fair Market Fixed Rent for the Renewal Term in question
determined by appraisal in accordance with the provisions set forth on Exhibit H
annexed hereto. If Landlord fails to provide Tenant with an Initial Renewal Rent
Notice within the Renewal Initial Period, and Tenant gives Landlord a Renewal
Appraisal Notice, then, notwithstanding anything to the contrary contained
herein, Landlord shall pay the reasonable cost obtaining Tenant's Renewal Rent
Determination (as defined in Exhibit H). If Landlord does not receive a Renewal
Appraisal Notice from Tenant before the expiration of such twenty (20) day
period, Tenant and Landlord shall be conclusively deemed to have agreed to
Landlord's Renewal Rent Determination, and the Fixed Rent for the Renewal Term
in question shall equal Landlord's Renewal Rent Determination.
(d) Upon the final determination of the Renewal Fair
Market Fixed Rent (by appraisal in accordance with the provisions set forth on
Exhibit H annexed hereto or by agreement of Landlord and Tenant), the Renewal
Term Fixed Rent for the Renewal Term in question shall be finally determined.
If, as of the first day of the Renewal Term in question, the Renewal Fair Market
Fixed Rent shall not have been finally determined, then (i) for the period from
the commencement of the Renewal Term in question until the date that the Renewal
Fair Market Fixed Rent is finally determined (herein called the "RENEWAL
PRE-DETERMINATION PERIOD"), Tenant shall make payments, on account of the
Renewal Term Fixed Rent for the Renewal Term in question (as and when Fixed Rent
is payable under this Lease), in an amount equal to the Fixed Rent in effect
immediately prior to the commencement of the Renewal Term in question, and (ii)
upon the final determination of the Renewal Fair Market Fixed Rent, the Renewal
Term Fixed Rent for the Renewal Term in question shall be finally determined,
and if the payments made by Tenant on account of the Renewal Term Fixed Rent for
the Renewal Term in question during the Renewal Pre-Determination Period were
less than the Renewal Term Fixed Rent for the Renewal Term in question, then
Tenant shall pay to Landlord the amount of such deficiency, within twenty (20)
days after demand therefor. Tenant shall be provided the work allowance, if any,
and free rent period, if any, set forth in the Initial Renewal Rent Notice. Any
such free rent period shall commence on the first (1st) day of the Renewal Term
in question. Any such work allowance shall
59
<PAGE>
be paid to Tenant on account of Alterations performed by Tenant in the Premises
in accordance with this Lease during the Renewal Term in question, upon Tenant's
delivery to Landlord of invoices for such Alterations and proof of payment
thereof and that no construction, mechanic's or materialman's liens have been
filed in connection therewith.
15.1.4 Either party shall, upon the request of the other, execute,
acknowledge and deliver to the other an instrument or instruments in form
reasonably satisfactory to the requesting party confirming, any terms and
conditions of this Lease applicable to either Renewal Option or Renewal Term,
including without limitation whether or not a Renewal Option has been exercised
and the Fixed Rent for a particular Renewal Term, but any failure of either
party to execute, acknowledge and deliver such instrument(s) shall not affect
the validity of any Renewal Term or any of the provisions of this Section 15.1.
15.2 Tenant's Expansion Rights.
With respect to any portion of the Building not included in the
Premises that is now or hereafter leased to a third party, in the event any such
area under lease thereafter becomes available for lease to a party other than
the existing, tenant thereof, and no other tenant of the Building having, an
option or preferential right with respect to such area which was granted prior
to the execution of this Lease by Landlord and Tenant exercises such option or
preferential right with respect to such area, Landlord will notify Tenant of the
availability of such area and the terms upon which Landlord is willing to lease
such area. Landlord shall not be obligated by this provision to enter into a
lease with Tenant with respect to any such area or to negotiate with Tenant with
respect to the possible lease of any such area to the exclusion of other
potential tenants. The purpose of this provision is merely to assure Tenant that
Tenant will be made aware of the existence of newly available portions of the
Building that are now or hereafter leased to third parties when such space
becomes available.
60
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of the day and year first above written.
LANDLORD:
WASHINGTON PLAZA ASSOCIATES,
L.P., a New jersey limited partnership
By: LINQUE REALTY ADVISORS II,
L.L.C., its General Partner
By: /s/ Chaim A. Wachsman
Chaim A Wachsman, Managing Member
TENANT:
MICROFRAME, INC.,
a New Jersey Corporation
By:/s/ John F. McTigue
Name: John F. McTigue
Title: Executive Vice President
61
<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF BERGEN )
BE IT REMEMBERED, that on this 22 day of February 1999
before me, the subscriber, a Notary Public, of the State of New Jersey,
personally appeared Chaim A. Wachsman, the Managing Member of LINQUE REALTY
ADVISORS II, L.L.C., the limited liability company described in the within
instrument, which limited liability company is the general partner of WASHINGTON
PLAZA ASSOCIATES, L.P., the partnership described in the within instrument
(herein called the "Partnership"); who I am satisfied is the person who has
signed the within instrument; and he thereupon acknowledged that he signed and
delivered the said instrument on behalf of the Partnership, by authorization of
the aforesaid limited liability company, and that the within instrument is the
voluntary act and deed of the Partnership.
/s/ (Notary)
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MIDDLESEX)
BE IT REMEMBERED, that on this 9th day of February,
1999, before me, the subscriber, a Notary Public, of the State of personally
appeared before me, the subscriber, a Notary Public, of the State of New Jersey
personally appeared John F. McTigue, being [a] [the] Executive Vice President of
MicroFrame, Inc., the [corporation] described in the within instrument; who I am
satisfied is the person who has signed the within instrument; and he thereupon
acknowledged that he signed and delivered the said instrument on behalf of said
[corporation], by authorization of the board of directors of the aforesaid
[corporation], and that the within instrument is the voluntary act and deed of
said corporation.
/s/ (Notary)
62
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF LAND
Lot 14-C, Block 490 as shown on the Township of Piscataway,
Middlesex County, New Jersey, Tax Map, Sheet No. 41-A and being more
particularly described as follows:
Beginning at the point of intersection of the easterly line of lands
conveyed to the State of New Jersey, by deed dated January 15, 1986 and as
recorded in the Middlesex County Clerk's Office in Deed Book 3497, Page 744 with
the northerly line of State Highway Route No. 287 as shown on a map entitled
"New Jersey Department of Transportation, GENERAL PROPERTY PARCEL MAP, ROUTE 287
( 1953) section 2, from Somerset-Middlesex County Line to Route 95, Showing
Existing Right-of-Way and Parcels to be Acquired in the Township of Piscataway
and Borough of South Plainfield, County of Middlesex, Scale: As Indicated, March
1984"; from said beginning point running:
1. Along said easterly line, North 17 degrees 02 minutes 44
seconds West, 14.34 feet to a point of curvature
therein; thence
2. Northerly along the same on a curve bearing to the right
having a radius of 312.58 feet, an arc length of 161.57
feet to a point of tangency therein; thence
3. Along the same, North 12 degrees 34 minutes 10 seconds
East, 249.27 feet to a pint of curvature therein; thence
4. Northerly along the same on a curve bearing to the left
having a radius of 210.00 feet, an arc length of 113.62
feet to a point of tangency therein; thence
5. Along the same, North 18 degrees 25 minutes 50 seconds
West, 5.35 feet to a point of curvature therein; thence
6. Northerly along the same on a curve bearing to the right
having a radius of 24.64 feet, an arc length of 37.04
feet to a point; thence
7. Along the same, North 18 degrees 25 minutes 50 seconds
West, 47.30 feet to a point in the southerly line of Lot
14-A, Block 490, now or formerly Leewong Development
Co.; thence
8. Along said southerly line, North 71 degrees 34 minutes
10 seconds East, 411.49 feet to a point and corner;
thence
A-1
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9. Along the easterly line of lands now or formerly Leewong
Development Co., North 08 degrees 56 minutes 10 seconds
West, 100.00 feet to a point; thence
10. Along the southerly line of Lot 4-A, North 75 degrees 24
minutes 00 seconds East 163.00 feet to a point; thence
11. Along the westerly line of said Lot 4-A, South 07
degrees 48 minutes 27 seconds East, 478.94 feet to a
point; thence
12. Along the westerly line of said Lot 4-A and Lot 23,
South 35 degrees 56 minutes 00 seconds East, 85.80 feet
to a point; thence
13. Along the northwesterly line of Line 13, South 38
degrees 06 minutes 55 seconds West, 424.32 feet to a
point in the northerly line of said State Highway Route
No. 287; thence
14. Westerly along said northerly line on a curve bearing to
the right having a radius of 6,850.00 feet, an arc
length of 421.99 feet to the point and place of
beginning.
Contains 9,516 acres, more or less
A-2
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EXHIBIT B
[SEE MASTER FOR INPUT]
B-1
<PAGE>
EXHIBIT B-1
Specifications
DESIGN SPEC PACKAGE
PREPARED FOR:
MicraFrame
15 Corporate Place, First Floor
DEMOLITION AND CONSTRUCTION NOTES
1. REMOVE ALL EXISTING PARTITION WALLS, CEILING TILES,
LIGHTS, FINISHES, AND MILLWORK AND PATCH AND REPAIR AS
NECESSARY. ALL EXISTING DOORS TO BE REMOVED OR
RELOCATED.
2. CLEAN ALL EXISTING WINDOW BLINDS, REPLACE ANY DAMAGED
BLINDS.
3. WORKOUT ROOM TO HAVE MEN'S AND WOMEN'S SHOWER (H/C),
TOILET, SINK, AND ALL NECESSARY PLUMBING.
4. EXECUTIVE TO HAVE TOILET, SINK, AND ALL NECESSARY
PLUMBING.
5. REMOVE EXISTING COMPUTER FLOOR THROUGHOUT, FILL IN
LOWERED PORTION TO EXISTING FLOOR LEVEL AT THE FRONT
ENTRANCE.
6. ALL DEMISING PARTITIONS BETWEEN THE USABLE TENANT SPACES
AND EXISTING CORRIDORS, LOBBY, AND DOCK AREA ARE TO
REMAIN AS EXISTING. WALLBOARD IS TO BE PATCHED AS
NECESSARY AND SPACKLED SMOOTH TO ACCEPT WALL FINISHES.
7. INTERIOR PARTITIONS: PARTITIONS TO BE CONSTRUCTED OF
3-1/2 METAL STUDS WITH ONE LAYER OF1/2" GYPSUM WALLBOARD
ON EACH SIDE TO EXTEND TO UNDERSIDE OF CEILING GRID IN
TENANT'S INTERIOR SPACE, PARTITIONS TO BE TAPED AND
SPACKLED SMOOTH TO ACCEPT WALL FINISHES, PARTITIONS WITH
SOUND INSULATION (DESIGNATED ON PLAN) TO BE FULL 3-1/2"
ROCK WOOL BATTS, FLOOR TO FULL PARTITION HEIGHT.
8. NEW DEMISING PARTITIONS WILL BE CONSTRUCTED OF 3-1/2"
METAL STUDS WITH ONE LAYER OF 5/8" GYPSUM FIRE RATED
WALLBOARD ON
B-1-1
<PAGE>
EACH SIDE TO EXTEND TO THE UNDERSIDE OF DECK ABOVE
SUBJECT TO THE REQUIREMENTS OF THE BUILDINGS EXISTING
HVAC SYSTEM, PARTITIONS TO BE TAPED AND SPACKLED SMOOTH
TO ACCEPT WALL FINISHES, PARTITIONS WITH SOUND
INSULATION (DESIGNATED ON PLAN) TO BE FULL 3-1/2" ROCK
WOOL BATTS, FLOOR TO DECK.
9. 6'-0"X3'-6" CLEAR SAFETY GLASS TO BE INSTALLED IN QA LAB
AND NETWORK ROOM AT 3'-6" A.F.F. AS DESIGNATED ON PLAN.
10. 3'-0"X7'-0" FULL HEIGHT SIDELITE TEMPERED GLASS TO BE
INSTALLED ADJACENT TO DOORS AT FINISHED FLOOR LEVEL AS
DESIGNATED ON PLAN.
DOOR SCHEDULE
E EXISTING DOOR, FRAME, AND HARDWARE TO REMAIN.
Rl RELOCATED DOOR AND FRAME, PROVIDE NEW ADA COMPLAINT LEVER TYPE
HARDWARE, SATIN CHROME FINISH.
N1 NEW SOLID CORE OAK 3'-0"x7'-" DOOR TO MATCH EXISTING WITH HARDWARE
TO BE ADA COMPLAINT LEVER TYPE. SATIN CHROME FINISH.
N2 NEW PAIR OF SLIDINGOAK DOORS, 2'-0" WIDE EACH WITH HARDWARE, SATIN
CHROME FINISH.
N3 NEW PAIR OF HERECULITE ENTRY DOORS, 3'-0"x7'-0" (ea.) WITH ADA
COMPLAINT HARDWARE AND CLOSER, SATIN CHROME FINISH.
N4 NEW HOLLOW METAL 3'-0"x7'-0" DOOR WITH ADA COMPLAINT LEVER TYPE
HARDWARE AND CLOSER, SATIN CHROME FINISH.
N5 NEW PAIR OF HOLLOW METAL DOORS, 3'-0" X 7'-0" (ea.) WITH ADA
COMPLIANT LEVER TYPE HARDWARE AND CLOSER, SATIN CHROME FINISH
N7 NEW SOLID CORE OAK 3'-6"x7'-0" DOOR TO MATCH EXISTING WITH
HARDWARE TO BE ADA COMPLIANCE LEVER TYPE. SATIN CHROME FINISH.
N8 NEW 3'-0"X7'-0" UPGRADED TEMPERED GLASS DOOR TO MATCH ENTRY DOOR
AT FOURTH FLOOR. HARDWARE TO MATCH EXISTING IN FIRST FLOOR
LOBBY.
B-1-2
<PAGE>
FINISH SCHEDULE
C1 ALLOW $35 BUDGET FOR CARPET MATERIAL AND INSTALLATION. DIRECT
GLUE DOWN INSTALLATION. PROVIDE 4" VINYL STRAIGHT BASE,
JOHNSONITE OR EQUIVALENT, FINAL SECTION TO FOLLOW.
C2 ALLOW $25 BUDGET FOR CARPET MATERIAL AND INSTALLATION. DIRECT
GLUE DOWN INSTALLATION. PROVIDE 4" VINYL STRAIGHT BASE,
JOHNSONITE OR EQUIVALENT FINAL SELECTION TO FOLLOW
C3 ALLOW $25 MILDEW RESISTANT CARPET MATERIAL AND INSTALLATION.
PROVIDE 4" VINYL STRAIGHT BASE. FINAL SELECTION TO FOLLOW.
VT-1 NEW VINYL COMPOSITE TILE AND 4" BASE, ARMSTRONG PREMIUM
EXCELLON OR EQUIVALENT
VT-2 NEW ANTI STATIC VINYL TILE AND 4" BASE, ARMSTRONG STATIC DISIPATED
TILE OR EQUIVALENT
CT-1 NEW 18"X18" GRANITE TILE WITH 6" GRANITE BASE, MFG. TBD.
CT-2 NEW 2"X"2" CERAMIC TILE WITH 4" BASE, DAL-KEYSTONE PORCELAIN
CERAMIC TILE OR EQUIVALENT
P-1 BENJAMIN MOORE EGGSHELL FINISH PAINT OR EQUIVALENT. COLOR
SELECTION TO FOLLOW.
V-1 TYPE II VINYL WALLCOVERING, JM LYNN WALLCOVERING OR EQUIVALENT,
FINAL SELECTIONS TO FOLLOW
FINISH NOTES
1. ALL WALLS IN C-T AND CT-2 AREAS, DINING, AND LUNCHROOM
TO HAVE V-1 VINYL WALLCOVERING.
2. ALL WALLS TO BE P-1 UNLESS OTHERWISE NOTED.
ELECTRICAL NOTES
B-1-3
<PAGE>
1. IN 225 SF OFFICES, PROVIDE 5 DUPLEX ELECTRICAL OUTLETS
AND 3 DATA OUTLETS.
2. IN 180 SF OFFICES, PROVIDE 4 DUPLEX ELECTRICAL OUTLETS
AND 3 DATA OUTLETS.
3. IN 150 SF OFFICES, PROVIDE 4 DUPLEX ELECTRICAL OUTLETS
AND 3 DATA OUTLETS.
4. IN ALL OTHER OFFICES, PROVIDE 4 DUPLEX OUTLETS AND 2
DATA OUTLETS.
5. IN ALL OTHER AREAS, PROVIDE 1 WALL ELECTRICAL OUTLET
EACH WALL (MAXIMUM 10 FEET APART) AND 1 DATA OUTLET,
UNLESS OTHERWISE NOTED.
6. CORRIDORS AND OPEN OFFICE AREAS TO HAVE 1 DUPLEX OUTLET
PER 12'-0" LINEAR FEET.
7. PROVIDE 20 J BOXES FOR ELECTRIFIED FURNITURE PARTITIONS
(10 OF THE 20 TO BE CORE DRILLED)
8. PROVIDE ALLOWANCE FOR (1) SINGLE POLE WALL SWITCH FOR
EVERY ALLOTTED FROM OR (1) SINGLE POLE WALL SWITCH FOR
EVERY (16) FIXTURES UNLESS OTHERWISE NOTED.
9. ALL WALL SWITCHES (INCLUDING DIMMER SWITCHES) AND
OUTLETS (INCLUDING DATA) ARE TO BE SPECIFIED AS NEW AND
TO HAVE VINYL FACE PLATES TO COORDINATE WITH WALL COLOR.
10. ALL FLOOR OUTLETS ARE TO BE SPECIFIED AS NEW AND TO HAVE
CODE COMPLIANT FACE PLATES.
MILLWORK NOTES
1. IN THE LUNCHROOM AND COFFEE AREA, PROVIDE PLASTIC
LAMINATE COUNTER WITH FULL HEIGHT PLASTIC LAMINATE
BACKSPASH, FORMICA "MARTRIX" TYPE SPECKLED LAMINATE OR
EQUIVALENT. PROVIDE PLASTIC LAMINATE BASE AND UPPER
CABINETS, PROVIDE STAINLESS STEEL SINK AND ALL THE
NECESSARY PLUMBING AND FIXTURES
B-1-4
<PAGE>
2. IN THE LUNCHROOM, PROVIDE DISHWASHER AND ALL NECESSARY
PLUMBING.
3. AT THE COFFEE STATION AREA, PROVIDE PLASTIC LAMINATE
COUNTER ACROSS FROM SINK AREA, FORMICA LAMINATE OR
EQUIVALENT.
4. IN THE BOARDROOM, PROVIDE LIGHT STAINED CHERRY VENEER
BUILT-IN COUNTER WITH BASE CABINETS, TV MONITOR, AND A/V
SCREEN ABOVE.
5. IN THE MAILROOM, PROVIDE PLASTIC LAMINATE COUNTER WITH
BASE CABINETS BELOW, FORMICA LAMINATE OR EQUIVALENT.
6. PROVIDE ROD AND SHELF IN ALL COAT CLOSETS.
CEILING/HVAC/LIGHTING NOTES
1. PROVIDE NEW 2'-0"X4'-0" RECESSED FLORESCENT LIGHT
FIXTURE WITH DEEP CELL PARABOLIC LENS TO ACCOMMODATE (3)
34-WATT RAPID START TUBES THROUGHOUT SPACE UNLESS
OTHERWISE NOTED. QUANTITY OF FIXTURES SHALL BE (1) EVERY
NINETY SQUARE FEET OF NET USABLE TENANT AREA.
2. PROVIDE NEW 2'-0"X2'-0" RECESSED FLORESCENT LIGHT
FIXTURE WITH DEEP CELL PARABOLIC LENS TO ACCOMMODATE (3)
34-WATT RAPID START TUBES IN AREAS DESIGNATED ON PLAN
WITH LIGHTING NOTES.
3. ALL MODIFICATIONS OF HVAC AND SPRINKLERS ARE REQUIRED.
MUST COMPLY WITH ALL APPLICABLE CODES. CLEAN AND
RELOCATE EXISTING GRILLS, SUPPLY AND RETURN DUCTS, AND
SPRINKLER HEADS, PROVIDE ALLOWANCE FOR ADDITIONAL
GRILLS. SUPPLY AND RETURN DUCTS, AND SPRINKLER HEADS AS
REQUIRED.
4. PROVIDE NEW 2'-0"X4'-0X5/8" LAY-IN ACOUSTIC CEILING
TILES IN EXISTING GRID AS REQUIRED.
5. PROVIDE NEW 2'-0"X2'-0X5/8" LAY-IN ACOUSTIC CEILING
TILES (UPGRADE) IN EXISTING MODIFIED CEILING GRID IN
AREAS DESIGNATED ON PLAN AS CE-1.
B-1-5
<PAGE>
6. PROVIDE NEW RECESSED INCANDESCENT 75 WATT DOWNLIGHTS ON
DIMMER SWITCHES IN AREAS DESIGNATED ON PLAN WITH
LIGHTING NOTES.
7. TRAINING ROOM, BOARDROOM, CONFERENCE ROOM, PRODUCTION
AREA, AND CONFERENCE AREAS TO HAVE A SEPARATE THERMOSTAT
CONTROL SWITCH.
8. QA LAB AND NETWORK ROOM TO HAVE 24 HOUR AIR AND SEPARATE
THERMOSTAT CONTROL SWITCH.
9. PROVIDE ALLOWANCE FOR EMERGENCY LIGHTING, EXIT SIGNS,
AND FIRE PROTECTION SYSTEMS TO CONFORM TO CURRENT CODE
REQUIREMENTS.
B-1-6
<PAGE>
EXHIBIT C
TENANT'S EXISTING LEASES
1. Lease dated May 24, 1989 between Stabo Associates, as Landlord and
Microframe, Inc., as Tenant, as amended by agreements dated June 15,
1993 and November 1996 for 8,900 square feet of space at a certain
building located and known as 19-21 Meridian Road, Edison, New
Jersey.
2. Lease dated July 20, 1995 between 46.25 Associates, L.P., as
Landlord and MICROFRAME, Inc., as Tenant for certain space at the
premises in the Middlesex Business Center, South Plainfield, New
Jersey.
C-1
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EXHIBIT D
Building Rules and Regulations
1. Tenant shall not obstruct or permit its employees, agents, servants,
invitees or licensees to obstruct, in any way, the sidewalks, entry
passages, corridors, halls, stairways or elevators of the Building,
or use the same in any other way than as a means of passage to and
from the offices of Tenant; bring in, store, test or use any
materials in the Building which could cause a fire or an explosion
or produce any fumes or vapor; make or permit any improper noises in
the Building; smoke in the elevators; throw substances of any kind
out of the windows or doors, or down the passages of the Building,
or in the halls or passageways; sit on or place anything upon the
window sills; or clean the windows.
2. Water closets and urinals shall not be used for any purpose other
than those for which they are constructed; and no sweepings,
rubbish, ashes, newspaper, paper towels or any other substances of
any kind shall be thrown into them. Waste and excessive or unusual
use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit
light into the halls or other places of the Building shall not be
obstructed. NO SIGNS, ADVERTISEMENTS OR NOTICES SHALL BE INSCRIBED,
PAINTED, AFFIXED OR DISPLAYED IN, ON, UPON OR BEHIND ANY WINDOWS,
except as may be required by law or agreed upon by the parties; and
no sign, advertisement or notice shall be inscribed, painted or
affixed on any doors, partitions or other part of the inside of the
Building, without the prior written consent of Landlord. If such
consent be given by Landlord, any such sign, advertisement, or
notice shall be inscribed, painted or affixed by Landlord, or a
company approved by Landlord but the cost of the same shall be
charged to and be paid by Tenant, and Tenant agrees to pay the same
promptly, on demand. Landlord agrees that the Tenant shall be
suitably identified.
4. No contract of any kind with any supplier of towels, water, toilet
articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal
of waste paper, rubbish or garbage, or other like service shall be
entered by Tenant, nor shall any vending machine of any kind be
installed in the Building except for Tenant's leased premises
without the prior written consent of Landlord.
5. When electric wiring of any kind is introduced, it must be connected
as directed by Landlord, and no stringing or cutting of wires will
be allowed, except with the prior written consent of Landlord, and
shall be done only by contractors approved by Landlord. The number
and location of telephones, telegraph instruments, electric
appliances, call boxes, etc., shall be approved by Landlord.
6. Landlord shall have the right to reasonably prescribe the weight,
size and position of all safes and other bulky or heavy equipment
and all freight brought into the Building by the Tenant;
D-1
<PAGE>
and also the times of moving the same in and out of the Building.
All such moving must be done under the supervision of the Landlord.
Landlord will not be responsible for loss of or damage to any such
equipment or freight from any cause; but all damage done to the
Building by moving or maintaining any such equipment or freight
shall be repaired at the expense of Tenant. All safes shall stand on
a base of such size as shall be designated by the Landlord. The
Landlord reserves the rig ht to inspect all freight to be brought
into the Building and to exclude from the Building all freight which
violates army of these Rules and Regulations or the Lease of which
these Rules and Regulations are a part.
7. No machinery of any kind of articles of unusual weight or size will
be allowed in the Building, without the prior written consent of
Landlord, which shall not be unreasonably withheld, conditioned or
delayed. Business machines and mechanical equipment shall be placed,
and maintained by Tenant, at Tenant's expense, in settings
sufficient in Landlord's reasonable judgment to absorb and prevent
vibration, noise and annoyance to other tenants.
8. No additional look or lock shall be placed by Tenant on any door in
the Building, without prior written consent of Landlord. Twelve keys
will be furnished to Tenant by Landlord; any additional keys
requested by Tenant shall be paid by Tenant. Tenant, its agents and
employees, shall not change any locks. All keys to doors and
washrooms shall be returned to Landlord on or before the Termination
Date, and, in the event of loss of any keys furnished, Tenant shall
pay Landlord the cost thereof. Tenant may install its own cardkey
security system, which shall be integrated with the Building card
access system.
9. Tenant shall not employ any person or persons for the purpose of
cleaning the leased premises, without the prior written consent of
Landlord, which shall not be unreasonably withheld, conditioned or
delayed. Landlord shall not be responsible to Tenant for any loss of
property from the leased premises, however occurring; or for any
damage done to the effects of Tenant by such janitors or any of its
employees, or by any other person or any other cause.
10. No bicycles, vehicles or animals of any kind shall be brought into
or kept in or about the leased premises.
11. The requirements of Tenant will be attended to only upon the
application at the office of the Landlord. Employees of Landlord
shall not perform any work for Tenant or do anything outside of
their regular duties, unless under special instructions from
Landlord.
12. The leased premises shall not be used for lodging or sleeping
purposes, and cooking therein is prohibited except for microwaves.
13. Tenant shall not conduct, or permit any other person to conduct any
auction on the leased premises; manufacture or store good, wares or
merchandise upon the leased premises, without the prior written
approval of Landlord, except for the storage of unusual supplies and
D-2
<PAGE>
inventory to be used by Tenant in the conduct of its business;
permit the leased premises to be used for gambling, make any unusual
noises in the Building; permit to be played any musical instrument
in, disturb or annoy other tenants; or permit any unusual odors to
be produced upon the leased premises.
14. Between 6:00 p.m. and 8:00 a.m. on weekdays, before 8:00 a.m., and
after 1:00 p.m. on Saturdays, and all day Sunday and Building
Holidays, the Building is closed. Landlord reserves the right to
exclude from the Building during such periods all persons who do not
present a pass to the Building signed by Tenant. Each Tenant shall
be responsible for all persons to whom such passes are issued and
shall he liable to Landlord for all acts of such persons.
15. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall
be attached or hung in, or used in connection with any window or
door of the leased premises without the prior written consent of
Landlord. Such curtains, blinds and shades must be of a quality,
type, design and color and attached in a manner approved by
Landlord.
16. Canvassing, soliciting and peddling in the Building are prohibited,
and Tenant shall cooperate to prevent the same.
17. There shall not be used in the leased premises or in the Building,
either by Tenant or by others, in the delivery or receipt of
merchandise, any hand trucks except those equipped with rubber tires
and side guards.
18. Each Tenant, before closing and leaving the leased premises, shall
ensure that all lights are off and all entrance doors locked.
19. Landlord shall have the right to prohibit any advertising by Tenant
which in Landlord's opinion tends to impair the reputation of the
Building or its desirability as a building for offices, and upon
written notice from Landlord, Tenant shall refrain from or
discontinue such advertising.
20. Landlord hereby reserves to itself any and all rights not granted to
Tenant hereunder, including, but not limited to, the following
rights which are reserved to Landlord for its purposes in operating
the Building.
(a) the exclusive right to the use of the name of the Building for
all purposes, except that Tenant may use the name as its business
address and for no other purpose;
(b) the right to change the name or address of the Building, without
incurring any liability to Tenant for so doing;
D-3
<PAGE>
(c) the right to install and maintain a sign or signs on the
exterior of the Building in keeping with the image of the Building
as a corporate office building;
(d) the exclusive right to use or dispose of the use of the roof of
the Building;
(e) the right to limit the space on the directory of the Building to
be allotted to Tenant;
(f) the right to grant to anyone the right to conduct any particular
business or undertaking in the Building.
21. With respect to the Parking Areas, Landlord may issue parking,
permits, install a gate system, and impose any other system as
Landlord deems reasonably necessary for the use thereof. Tenant
agrees that it and its employees and invitees shall not park their
automobiles in parking, spaces allocated to others by Landlord and
shall comply with such rules and regulations for use of the parking
area as Landlord may from time to time prescribe. Landlord shall not
be responsible for any damage to or theft of any vehicle in the
parking, area and shall not be required to keep parking spaces clear
of unauthorized vehicles or to otherwise, supervise the use of the
parking area. Landlord reserves the right to change any existing, or
future parking, area, roads or driveways, and may make any repairs
or alterations it deems necessary to the parking area, roads and
driveways and to temporarily revoke or modify the parking, rights
granted to Tenant hereunder.
22. Tenant shall not use the leased premises or permit the leased
premises to be used for the sale of food or beverages other than its
vending machines. Except as may be specifically provided for in the
Lease, no cooking shall be done or permitted to be done by Tenant in
the Building or the Premises, including the preparation of coffee,
tea, or other hot beverages. Should Landlord subsequently
specifically permit any Tenant, within such Tenant's Premises, to
prepare hot coffee, tea or other beverages, then such activity shall
be performed only in an area of such Tenant's demised premises,
specifically designed for such use, including amongst others a hard
floor surface, such as composition or ceramic tile, and the
maintenance and cleaning of such area shall be the responsibility of
such Tenant. Any damage to the Building or the Premises on account
of such use shall be the responsibility of Tenant.
23. Tenant shall not use any method of heating or air-conditioning other
than that supplied by Landlord without the written approval of
Landlord which shall not be unreasonably withheld.
24. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Building's heating and air-conditioning
and to comply with any governmental energy-saving rules, laws, or
regulations, and shall refrain from attempting to adjust controls
other than room thermostats installed for Tenant's use. Tenant shall
keep corridor doors closed, and shall close window coverings at the
end of each business day.
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25. Tenant shall comply with all safety fire protection and excavation
procedures and regulations established by Landlord or any
governmental agency.
26. No tenant use or occupy its premises or the Building, or suffer or
permit anyone to use or occupy its premises, in a manner which
impairs the proper and economic maintenance, operation and repair of
the Building and/or its equipment, facilities or systems, (b)
constitutes a nuisance, public or private, (c) makes unobtainable
from reputable insurance companies authorized to do business in the
State of New Jersey all risk property insurance, or liability,
elevator, boiler or other insurance at standard rates, (d) increases
the premiums or rates under any insurance policy maintained by
Landlord for the Building, or (e) discharges objectionable fames,
vapors or odors into the Building's fumes or vents or otherwise,
except to the extent such fumes, vapors or odors are discharged into
flues or vents designed for such purposes and which Tenant, pursuant
to the terms of this lease, is permitted to use.
27. No tenant shall use, or suffer or permit anyone to use, its premises
or any part thereof, by or for (1) an agency, department or bureau
of the United States Government, (ii) any state or municipality
within the United States or any foreign government, or any political
subdivision of any of them, (iii) an employment or travel agency
(other than an executive search firm and other than an employment or
travel agency primarily serving Tenant's employees), (iv) any
charitable or religious organization or union, (v) a school or
classroom, medical or psychiatric offices, (vii) conduct of an
auction (other than in the ordinary course of the tenant's
business), (viii) gambling activities, (ix) the conduct of obscene,
pornographic or similarly disreputable activities, (x) a restaurant
and/or bar and/or the sale of confectionery and/or soda and/or
beverages and/or sandwiches and/or ice cream and/or baked goods,
(xi) the business of photographic reproductions and/or offset
printing (except that Tenant may use portions of the Premises for
photographic reproductions and/or offset printing in connection
with, either directly or indirectly, its own business and/or
activities), or (xii) retail use.
28. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of any lease of premises
in the Building. In the event of conflict between the provisions
contained in this Lease and these Rules and Regulations the
provisions of this Lease shall prevail.
29. Landlord reserves the right to make such other and reasonable Rules
and Regulations as, in its judgment, may from time to time be needed
for safety and security, for care and cleanliness of the Building
and for the preservation of good order therein Tenant agrees to
abide by all such Rules and Regulations hereinabove stated and any
additional Rules and Regulations which are adopted.
30. Tenant shall be responsible for the observance of all the foregoing
rules by Tenant's employees, agents, clients, customers, invitees
and guests.
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31. No smoking is permitted in any portion of the interior of the
Building, including all inside Public Areas and all tenant occupied
space in the Building.
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EXHIBIT E
HVAC Specifications
Teletrol Systems
Sequence of Operations
This text is a documentation of the Teletrol / HVAC sequence of operations at:
Washington Office Plaza, Piscataway, N.J.
INTRODUCTION:
The HVAC building sequence of operations is controlled by a Teletrol 486
Integrator. This IBM based computer is running a customized "C" based language
control program, which is written, on an IBM PC compatible text editor. This
text file is then compiled into object code and then further processed by the
linker locator to form an executable control program. This executable control
program consists of the point definitions, sequence of operations for control of
these points, user defined variables, and Library functions provided by Teletrol
& I.C.C. It is not the intent of this document to familiarize the reader with
the "C" programming language but rather with an understanding of the Sequence of
Operations. See the Teletrol MCP manual for further information. The control
program consists of a number of functions, which run consecutively and are
processed every scan of the processor. The following pages contain a Description
of each function & the tasks it executes.
WASHINGTON OFFICE PLAZA:
The DDC Controls incorporate two Teletrol 486 Integrators, which are networked
together. Controller #1 is supplied with a Modem for remote communications.
CONTROLLER #1:
This controller handles the operations of Rooftop Units #1 thru #7, Air Handlers
#1 thru #3, and Light Control.
Note: The sequence of operations for this controller applies to the rooftops &
air handlers except the air handlers do not use the HEAT CONTROL FUNCTION,
ECONOMIZER MODE FUNCTION, or DISCHARGE AIR RESET FUNCTION. The air handlers
Heating Coil & DX Cooling Coils are staged to maintain temperature setpoint.
CONTROLLER #2:
This controller handles the operations of Rooftop Units #8 thru #16.
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OCCUPIED FUNCTION
The purpose of the Occupied Function is to control the state in which the unit
is currently operating in. The different states are as follows: Unoccupied,
Occupied, MorningWarmUp, MorningCoolDown, NightSetBack, NightSetUp, Holiday, &
Override.
Unoccupied & Occupied:
A point is setup in Teletrol, which displays one of these point values. This
point (labeled as Occupied Indicator) is connected to a standard set of 10
Schedules, 1 for each day of the week & 3 special schedules. These schedules can
be viewed & set from the MCR. This function compares the current time to the
schedules & if one is active it will set the Occupied Indicator to Occupied
(which in turn will engage the unit). If not it will set the Occupied Indicator
to Unoccupied unless:
MorningWarmUp:
If the Average Space Temperature falls below the Optimum Start Heating Setpoint
the indicator is set to (if the unit is to run today) Opt Heat. Accordingly the
unit is switched on in heating mode with no outside air available. The unit now
runs till occupied mode.
MorningCoolDown:
If the Average Space Temperature rises above the Optimum Start Cooling Setpoint
the indicator is set to (if the unit is to run today) Opt Cool. Accordingly the
unit is switched on in cooling mode with outside air available. The unit now
runs till occupied mode.
NightSetBack:
If the Average Space Temperature falls below the Unoccupied Heating Setpoint the
indicator is set to NSB. Accordingly the unit is switched on in heating Mode /
with no outside air available. When the temperature rises 5 degrees above
setpoint the unit is shut down.
NightSetUp:
If the Average Space Temperature rises above the Unoccupied Cooling Setpoint the
indicator is set to NSU. Accordingly the unit is switched on in heating Mode /
with outside air available. When the temperature falls 5 degrees below setpoint
the unit is shut down.
Holiday:
When a schedule is set to be active the system checks the Holiday list to see if
this day is one. If it is the indicator is set to Unoccupied & the unit is left
off.
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Override:
If after hours operation is required the system monitors the override button. If
engaged it activates the unit for a greater amount of time. The unit is then set
to run in heating or cooling mode whichever is called for by the system.
OPTIMUM START FUNCTION
The purpose of the Optimum Start Function is set the states in which the unit is
operating in MorningWarmUp or MorningCoolDown. A point is setup in Teletrol,
which displays one of these point values. This function when active sets the
Occupied indicator & Optimum Start Indicator accordingly. The different states
are as follows: Schedule, MorningWarmUp, & MorningCoolDown.
This function constantly monitors the average space temperature and schedule
list. It looks ahead to see if a schedule is to be active today, what time, the
Rate of Rise of the unit, and minimum start time.
Example:
The unit is scheduled to be occupied at 8:00 am. The ROR is 1 degree per hour.
The minimum start time is 3:00 am. The average space temperature is 68 degrees.
The opt_heat setpoint is 72 degrees.
Solution:
The average space temperature is 4 degrees below the occupied temperature
setpoint (also the occupied setpoint). It can recover at 1 degree per hour. It
will need four hours to make up the 4 degrees. It then starts the unit at 4:00
am.
Example:
The unit is scheduled to be occupied at 8:00 am. The ROR is 1 degree per hour.
The minimum start time is 3:00 am. The average space temperature is 65 degrees.
The opt_heat setpoint is 72 degrees.
Solution:
The average space temperature is 6 degrees below the occupied temperature
setpoint (also the occupied setpoint). It can recover at 1 degree per hour. It
will need six hours to make up the 6 degrees. It then starts the unit at 3:00
am. It cannot set the unit on at 2:00 am (which is needed) because the minimum
start time is 3:00 am. Raise your minimum start time to 2:00 am.
Schedule:
If the average space temperature is at setpoint this function sets the optimum
start indicator and the occupied indicator to schedule.
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MorningWarmUp:
If the Average Space Temperature falls below the Optimum Start Heating Setpoint
the indicator is set to (if the unit is to run today) Opt_Heat. Accordingly the
unit is switched on in heating mode with no outside air available. The unit now
runs till occupied mode. If equipped with preheat coil it will be enabled in
this mode.
MorningCoolDown:
If the Average Space Temperature rises above the Optimum Start Cooling Setpoint
the indicator is set to (if the unit is to run today) Opt_Cool. Accordingly the
unit is switched on in cooling mode with outside air available. The unit now
runs till occupied mode.
FANS/FLOW/STATIC PRESSURE FUNCTION
The purpose of the Fans / Flow / Static Pressure Function is to control the
Start/Stop of the fans: supply, return, & exhaust. To monitor the status and
regulate VFD ramping and/or Inlet Guide Vanes.
Fans Start/Stop:
This function is directly tied into the occupied function since it commands the
state of the unit. The fans are started in every mode but unoccupied or holiday.
The safety relays are monitored. Fire, Smoke, High Static. If any of these are
tripped the supply fans are immediately shut down.
Fans Flow:
The status of the fans is monitored.
Fans in Commanded State ON:
The Current/Transducers and/or Flow Switches are checked. If an OFF reading is
sensed an alarm is generated and if critical will shut down the unit as
appropriate.
Fans in Commanded State OFF:
The Current/Transducers and/or Flow Switches are checked. If an OFF reading is
sensed switches are operating normally. If an ON reading is sensed the switches
may be stuck closed and an alarm is generated.
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Static Pressure Control:
The Pressure is controlled by the Trane factory controls by monitoring the
actual pressure against the desired pressure setpoint.
ECONOMIZER MODE FUNCTION
The purpose of the Economizer Mode Function is to set the mode of operations for
the Outdoor Air Dampers, Mechanical Cooling and to calculate the discharge air
temperature. There are two modes of operation: ECONOMIZER-Outdoor Air and
Mechanical Cooling (if above the lockout temperature). MINIMUM(no outdoor air) -
Mechanical cooling Only.
DISCHARGE AIR SETPOINT:
The Discharge Air Setpoint is calculated by comparing the average space
temperature against the desired space temperature setpoint. A standard sliding
scale is then used to determine the setpoint. As the average space temperature
rises the discharge air setpoint is lowered: As the average space temperature
falls the discharge air setpoint is raised:
AVERAGE SPACE TEMPERATURE
70.0 71.0 72.0 73.0 74.0
65.0 62.5 60.0 57.5 55.0
DISCHARGE AIR SETPOINT
MODES OF OPERATION:
The mode is selected on outside air enthalpy:
OUTSIDE AIR ENTHALPY
18.0 BTU 19.0 BTU 20.0 BTU 21.0 BTU 22.0 BTU
ECONO DEADBAND DEADBAND DEADBAND MECHANICAL
MODE
ECONO MODE:
In Econo Mode the system uses outside air and has mechanical cooling available
if the outside ambient temperature is above lockout setpoint. The discharge air
setpoint is compared to the actual discharge air temperature. A discharge air
reset signal is then sent to the controller to modulate the outdoor dampers
and/or to stage the mechanical cooling.
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MECHANICAL MODE:
In Econo Mode the systems uses minimum outside air and mechanical cooling. The
discharge air setpoint is compared to the actual discharge air temperature. A
discharge air reset signal is then sent to the controller to modulate the
outdoor dampers and to stage the mechanical cooling accordingly.
DISCHARGE AIR RESET CONTROL FUNCTION
The purpose of Discharge Air Reset Control Function is to control the discharge
air temperature by resetting the existing Trano Factory Reset Controller. This
in turn stages the compressors, and controls the damper operation to maintain
discharge air setpoint.
DISCHARGE AIR SETPOINT:
The Discharge Air Setpoint is calculated by comparing the average space
temperature against the desired average space temperature setpoint. A standard
sliding scale is then used to determine the setpoint. As the average space
temperature rises the discharge air setpoint is lowered. As the average space
temperature falls the discharge air setpoint is raised:
AVERAGE SPACE TEMPERATURE
70.0 71.0 72.0 73.0 74.0
65.0 62.5 60.0 57.5 55.0
DISCHARGE AIR SETPOINT
RESET CONTROLLER
Referencing the discharge air setpoint the Reset Controller is modulated to
maintain Discharge Air Temperature. As the Discharge Air Temperature rises the
signal is increased. As the Discharge Air Temperature falls the signal is
decreased. This is achieved by referencing the actual Discharge Air Temperature
& comparing it to the Discharge Air Temperature setpoint. An enhanced
Proportional, Integral, Derivative Loop sequence is incorporated in order to set
the output signal of the reset controller (See the Teletrol MCP Programming
Manual for a more detailed explanation of PID control). This effectively
eliminates reset controller "hunting". Teletrol analog output cards provide a
4-20mA and/or 0-10vdo signal to the reset controller on the unit. The value of
the output to the reset controller is the final calculation of the PID LOOP.
NOTE: The range (VDC/mA) & action (actual minus setpoint/setpoint minus actual)
of the output signal to the RESET CONTROLLER varies according to the reset
controller type.
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DISCHARGE AIR TEMPERATURE SETPOINT
55.0 57.0 59.0 61.0 63.0 65.0
DISCHARGE AIR TEMPERATURE
75.0 74.0 73.0 72.0 71.0 70.0
RESET CONTROLLER SIGNAL (0-10 vdm)
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
HEAT CONTROL FUNCTION
The purpose of the Heat Control function is to enable the electric baseboard
(when the unit is in occupied mode) heat on outside amount air temperature &
control of the preheat coil. As it falls below setpoint the electric baseboard
heat is enabled. When it rises three degrees above setpoint it is disabled. This
three-degree deadband prevents short cycling. When the electric baseboard heat
is enabled the baseboard thermostats achieve space temperature control.
HEAT CONTROL
The current setpoint for enabling/disabling the electric baseboard heat are 60.0
degrees and 63.0 degrees.
OUTSIDE AIR TEMPERATURE
59.0 60.0 61.0 62.0 63.0 64.0
ELECTRIC BASEBOARD HEAT ENABLE/DISABLE
ON HOLD HOLD HOLD HOLD OFF
PREHEAT COIL
The preheat coil is utilized for morningwarmup, nightsetback, & in occupied mode
when the unit cannot make discharge air temperature setpoint. When the return
air temperature is below setpoint in these modes the preheat coil is staged
accordingly.
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EXHIBIT F
Cleaning Specifications
I. TENANT AREA
A. Daily Cleaning:
1. Empty and clean waste baskets and remove contents to disposal
area.
2. Empty and clean all ash trays.
3. Vacuum clean all rugs and carpeted areas.
4. Dust furniture, files, fixtures, and all low reach areas.
5. Polish all glass furniture tops.
6. Clean all water fountains.
7. Sweep all private stairways nightly, vacuumed if carpeted.
8. Damp mop to remove spillage or spot on hard surface floors.
9. Dust all telephones as necessary.
10. Clean doors, door knobs, light switches and other door areas of
frequent use.
11. Dust all office partitions.
12. Dust window ledges.
B. Wash Rooms (Daily):
1. Sweep and wash all lavatory flooring, machine scrub where
necessary.
2. Wash and polish all mirrors, powder shelves, all metal and
porcelain work.
3. Wash and disinfect both sides of all toilet seats.
4. Wash and disinfect all basins, bowls and urinals.
5. Empty and clean all paper towel and sanitary disposal receptacles.
6. Fill toilet tissue, soap dispensers, and paper towel dispensers.
7. Clean flushometers and other metal work as required.
8. Wash all wall partitions, tile walls, and enamel surfaces from
trial to floor, as required.
9. Vacuum all louvers, ventilating grills and dust light
fixtures as required.
C. Glass:
1. Clean glass entrance doors and adjacent glass panels nightly.
2. Clean partition glass and interior glass doors monthly.
3. Clean acrylic in accordance with Tenant instructions.
D. High Dusting (Four (4) Months):
1. Dust all air conditioning diffusers.
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2. Dust the exterior surfaces of lighting fixtures.
3. Dust venetian blinds.
II. ENTRANCE LOBBY AND PUBLIC AREAS
1. Sweep and wash lobby and entrance vestibule floors nightly.
2. Machine scrub floors as necessary, not less than four (4) times
per year.
3. Wax, buff, and apply sealer monthly.
4. Clean sweep public elevator, lobby and corridor flooring nightly.
5. Wash stone, ceramic tile, marble or terrazzo flooring once per
week.
6. Carpeting shall be vacuumed sightly.
7. Wipe down all metal surfaces in the lobby, exterior of building,
entrance, and polish as required (once a week minimum).
8 Dust all lobby and public corridor walls nightly and wash as
required.
9. High dust and wash all electrical and air conditioning fixtures at
least once per month in elevator lobbies, corridors, and entrance
lobby.
10. Dust mail depository nightly.
11. Telephone booths shall be swept daily and the glass cleaned
nightly.
12. Clean cigarette urns and screen sand an a daily basis.
13. Clean entrances and lobby doors to remove dirt and finger marks.
14. Wash all rubber mats and clean wool or nylon runners daily.
15. Clean and polish marble walls once per week.
III. ELEVATORS
1. Clean saddles, doors, and frames of elevator nightly.
2. Clean saddles and frames on floors above lobby once per week and
vacuum dirt from door tacks nightly.
3. Clean inside surfaces of elevator cabs nightly.
4. Clean elevator pits weekly or more frequently as necessary.
5. Vacuum carpets in elevators nightly, and provide regular carpet
care which will include spot cleaning nightly and shampooing
as needed.
IV. STAIRWELLS
1. Sweep all stairways nightly.
2. Spot mop stairways nightly.
3. All stairways will be mopped weekly.
4. Remove and gum or other foreign debris nightly.
5. Dust all handrails nightly.
6. Remove all fingerprints from walls on a nightly basis.
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V. CARPETS
1. Spot clean carpets, nightly or as needed.
2. Carpets may be shampooed upon request additional cost.
VI. WINDOWS
Window cleaning will be done two or three times per year as
directed, inside and outside surfaces of glass.
VII. PARKING AREAS
Power sweep parking field and remove debris from site.
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EXHIBIT G
Alteration Rules and Regulations
A. General:
1. Tenant will make no alterations, decorations, installations,
repairs, additions, improvements or replacements (which are hereinafter called
"Alterations" and which are the Alterations referred to in the Lease) in, to or
about the Premises without the Landlord's prior written consent, which shall not
be unreasonably withheld, conditioned or delayed, and then only by contractors
or mechanics approved by Landlord.
2. Tenant shall, prior to the commencement of any work, submit for
Landlord's written approval, which shall not be unreasonably withheld,
conditioned or delayed, a complete plan of the Premises, or of the floor on
which the Alterations are to occur. Drawings are to be complete with full
details and specifications for all of the Alterations.
3. The proposed Alterations must comply with the Building, Code of
the Township of Piscataway, County of Middlesex, State of New Jersey and any
other agencies having jurisdiction.
4. No work shall be permitted to commence without the Landlord being
furnished with a valid permit from the Department of Buildings and/or other
agencies having Jurisdiction.
5. All demolition, removals, or other categories of work that may
inconvenience other tenants or disturb Building operations, must be scheduled
and performed before or after normal working hours and Tenant shall provide the
Landlord and the Building Manager with at least 24 hours' notice prior to
proceeding with such work.
6. All inquiries, submissions, approvals and all other matters shall
be processed through the Landlord and the Building Manager.
7. Additional and differing provisions in the Lease, if any, will be
applicable and will take precedence.
B. Procedures for Approval:
1. Tenant shall submit to the Landlord and the Building Manager a
request to perform the work. The request shall include the following enclosures:
(i) A list of Tenant's proposed contractors and/or
subcontractors for Landlord's approval, which shall not be unreasonably
withheld, conditioned or delayed.
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(ii) Four complete sets of plans and specifications
properly stamped by a registered architect and/or professional engineer.
(iii) A properly executed application form or Alteration
form as may be required by the Township of Piscataway and/or other agencies
having jurisdiction.
(iv) Four executed copies of the Insurance Requirements
agreement in the form attached to these Rules and Regulations from Tenant's
contractor and from the contractor's subcontractors.
(v) Contractor's and subcontractor's insurance
certificates including a "hold harmless" in accordance with the Insurance
Requirements agreement.
2. If alterations are generally acceptable and otherwise permitted
by the Lease, within ten (10) business days, Landlord will return the following
to Tenant:
(i) Plans approved or returned with comments (such
approval or comments shall not constitute a waiver of Department of Buildings
approval or approval of other jurisdictional agencies).
(ii) Signed application forms referred to in B.(iii)
above, providing proper submissions have been made.
(iii) Two fully executed copies of the Insurance
Requirements agreement.
(iv) Covering transmittal letter.
3. Tenant shall obtain Department of Buildings approval of plans and
a permit from the Department of Buildings and/or other agencies having
jurisdiction. Tenant shall be responsible for keeping current all permits.
C. Requirements and Procedures Prior to Commencement of Work:
1. At least 7 days prior to the commencement of any Alteration work,
Tenant shall submit copies of all approved plans and permits to Landlord and
shall post the original permit on the Premises.
2. All work shall be subject to inspection of Landlord's
representatives at reasonable times. Tenant covenants to pay as Additional
Charges Landlord's reasonable charges for such inspection. Such inspection shall
be solely for the benefit of Landlord, and without any obligation or liability
whatsoever to Tenant or Tenant's contractors or subcontractors.
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3. Landlord or Landlord's representative shall be reasonably
empowered, without any liability to Tenant, its contractors and/or
subcontractors, to issue orders of stop work, and/or bar access of the Premises
to any contractor and/or subcontractor, whose work is deemed in the reasonable
opinion of Landlord and/or Landlord's representative, to be not in accordance
with the approved plans and specifications, or to be otherwise detrimental to
the Building.
4. When necessary, in Landlord's reasonable judgment, Landlord will
require engineering and shop drawings, which drawings must be reasonably
approved by Landlord before work commences on such affected item. All such
drawings are to be prepared by Tenant and reviewed by Landlord at Tenant's cost
and expense. All approvals shall be obtained by Tenant.
5. All structural and floor loading requirements shall be subject to
the prior approval of Lanlord's structural engineer at Tenant's cost and
expense.
6. All mechanical (HVAC, plumbing and sprinkler) and electrical
requirements shall be subject to the approval of Landlord's mechanical and
electrical engineers at Tenant's cost and expense.
7. All demolition shall be supervised by Landlord's representative
at Tenant's expense.
8. Elevator service for construction work shall be charged to Tenant
at standard Building rates. Prior arrangements for elevator use shall be made
with Building Manager by Tenant. No material or equipment shall be carried under
or on top of elevators. If an operating engineer is required by any union
regulations, such engineer shall be paid for by Tenant.
9. If shutdown of risers and mains for electrical, HVAC, sprinkler
and plumbing work is required, such work shalt be supervised by Landlord's
representative at Tenant's expense. No work will be performed in Building
mechanical equipment rooms without Landlord's approval and under Landlord's
supervision at Tenant's expense.
10. Tenant's contractor shall:
(i) have a Superintendent or Foreman on the Premises
at all times;
(ii) police the job at all times, continually keeping
the Premises orderly;
(iii) maintain cleanliness and protection of all areas,
including elevators and lobbies;
(iv) protect all mechanical equipment and thoroughly
clean them at the completion of work;
(v) block off supply and return grills, diffusers and
ducts to keep dust from entering into the Building air conditioning system; and
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(vi) avoid the disturbance of other tenants.
11. If Tenant's contractor is negligent in any of its
responsibilities, Tenant shall be charged for the corrective work done by
Building porters and other personnel.
12. All equipment and installations must be equal to the Standards
of the Building. Any deviation from Building Standards will be permitted only if
indicated or specified oil the plans and specifications and approved by
Landlord.
13. A properly executed air balancing report signed by a
professional engineer shall be submitted to Landlord upon the completion of all
HVAC work.
14. Upon completion of the Alterations, Tenant shall submit to
Landlord properly executed documents indicating total compliance and final
approval by the Department of Buildings of the work, and/or other agencies
having jurisdiction.
15. Tenant shall submit to Landlord a final "as-built" set of
drawings showing all items of the Alterations in full detail.
D. Special Requirements Regarding, Fire Safety System
1. Tenant acknowledges being advised that the Building has an active
Fire Safety System. Tenant shall notify its contractors and subcontractors, an
well as all persons and entities who shall perform or supervise any alteration
or demolition within the Premises, of such facts.
2. Demolition by Tenant of all or any portion of the Premises shall
be carried out in such manner as to protect equipment and wiring of Landlord's
Fire Safety System.
3. Landlord, after receipt of Tenant's notice of demolition, and at
Tenant's expense, shall secure and protect Building, equipment connected to the
Fire Safety System in the Premises to be demolished.
4. Landlord, at Tenant's expense shall make such additions and
alterations to the existing Fire Safety System as may be necessary by reason. of
alterations made within the Premises either by or on behalf of Tenant or by
Landlord, as part of the initial installation, and work, if any, that Landlord
is required to perform pursuant to the provisions of this Lease or any work
letter or leasehold improvements agreement entered into by Landlord and Tenant.
5. Landlord's contract fire alarm service personnel shall be the
personnel permitted to adjust, test, alter, relocate, add to, or remove
equipment connected to the Fire Safety System. Tenant reserves the right to
propose, subject to Landlord's approval, use of other qualified contractors if
cost is excessive in Tenant's opinion.
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6. Landlord, at Tenant's expense, shall repair or cause to have
repaired any and all defects, deficiencies or malfunctions of the Fire Safety
System caused by Tenant's alterations or demolition of the Premises. Such
expense may include expenses of engineering, supervision and standby fire watch
personnel that Landlord deems necessary to protect the Building during the time
such defects, deficiencies and malfunctions are being corrected. Landlord will
notify Tenant prior to any action required by above.
7. During such times that Tenant's alterations or demolition of the
Premises require that fire protection afforded by the Fire Safety system be
disabled, Tenant, at Tenant's expense, shall maintain fire watch, service deemed
reasonably suitable to Landlord.
ADDITIONAL STANDARDS AND REQUIREMENTS
Dry Wall:
1. All drywall partitions are to be constricted in accordance with
Building Standard.
2. Drywall may not be fastened to any duct work.
3. All walls butting mullions shall have a proper channel to
receive the drywall.
Electrical:
1. Home runs shall be indicated on plans metallic armored cable
shall be used throughout for power and lighting wiring.
2. Light fixtures shall be Building Standard or as previously
approved by Landlord. All lighting fixtures shall be independently supported.
3. All wiring shall be properly supported and in accordance with
local code. All wiring, shall be concealed.
4. All electrical boxes shall meet code requirements.
5. All unused conduit and wiring shall be removed.
6. All wiring shall meet the requirements of the local governing
code and of Underwriter's Laboratory.
7. Special power shall be taken from main distribution board and not
from floor distribution panels.
8. Plans with requirements shall be submitted to Landlord to
determine riser capacity.
G-5
<PAGE>
9. Tenant shall pay for all electrical design and layout cost for
related work.
10. Building Mechanic or Engineer shall supervise all riser
shutdowns.
Telephone:
1. All telephone wire shall be concealed in conduit or thin wall
tubing or approved (NEC) raceway.
2. Telephone wiring in ceilings shall be Teflon in plenum areas and
kept in bundles to specific drops.
3. Telephone wire will be permitted to be run loose in periphery
enclosures only.
4. No telephone wire shall be run exposed on baseboards or walls.
Doors:
All wood doors shall be as per Building Standard shall be properly
fire rated and bear a fire rating label. All hollow metal doors shall be
properly fire rated if they are located in rated partitions.
Hardware:
1. All hardware shall be as per Building Standard.
All locks shall be keyed and mastered to Building setup. Two
individual keys must be supplied to the Building Manager.
Equipment:
1. Equipment where approved may be suspended with fish plates
through slab or from steel beams depending on load.
2. All floor loading and steel work shall be subject to the prior
approval of the Building structural engineer. All approvals shall be obtained by
the Tenant at Tenant's expense. Tenant shall also be responsible for the costs
of all inspections by any professional engineers in connection with this work.
Public Areas:
All public areas shall meet Department of Buildings requirements or
requirements of other agencies having jurisdiction.
G-6
<PAGE>
Air Conditioning
1. Tenant shall be responsible for alterations to existing air
conditioning duct work or systems and for insuring that such work is properly
integrated into the existing Building systems with no adverse effects on the
Buildings systems. Landlord shall not be responsible for the proper HVAC design
within the area of any Tenant Alterations.
2. The system shall be balanced at Tenant's expense at the
completion of the job.
3. Tenant shall furnish design balancing report to Landlord.
4. All air conditioning components shall match existing or shall
receive prior approval from Landlord.
5. Landlord will not permit any outside louvers.
6. All shutoff valves shall be accessible at all times.
7. All unused duct work shall be removed.
8. All unused equipment shall be removed and returned to Landlord.
9. All HVAC, kitchen, toilet and equipment exhaust fans systems and
any other systems shall be discharged to the atmosphere, and not in ceilings or
existing Building return, air systems.
Plumbing:
1. No water risers shall be shutdown during Building, office hours.
2. All plumbing work shall conform to local code.
3. All fixtures shall match existing fixtures.
4. No exposed plumbing is permitted.
5. All unused fixtures and piping shall be removed. All unused
piping shall be capped at its respective riser.
6. All unused fixtures shall be returned to Landlord.
7. A Building mechanic shall supervise all riser shutdowns.
8. All run-outs from risers shall be copper pipe.
G-7
<PAGE>
9. All hot water lines shall be properly insulated, and where
necessary, Landlord may require that cold water or waste water lines be
insulated.
Blinds and Curtains:
1. Where applicable, new blinds shall match existing blinds.
2. Drapery rods may not be supported by any part of the acoustical
ceiling system. Rods shall be supported by headers attached to the structure
above the ceiling,
3. If draperies are to be installed by Tenant, such draperies shall
be flameproof.
Ceilings:
1. All ceilings shall meet all requirements of the applicable
Building Code.
2. All acoustic tile ceiling shall meet shall match existing tile
ceiling, and conform to Building Standards.
3. All ceilings are to be supported independently and not from duct
work.
BUILDING STANDARDS FOR MATERIALS AND CONSTRUCTION
PARTITIONS
CORRIDORS
3-5/8" metal studs with one layer 5/8" firecode X drywall on each
side extending from the floor through suspended ceiling to the
structural slab above, filled with thermofiber insulation.
DEMISING WALLS
3-5/8" metal studs with one layer 5/8" drywall on each side
extending from the floor through suspended ceiling to the structural
slab above, filled with sound attenuating insulation.
INTERIOR DIVIDING WALLS WITHIN TENANT SPACE
3-5/8" metal studs with one layer 5/8" drywall on each side
extending from the floor to the suspended ceiling
PARTITIONS - GENERAL
Drywall partitions may not be fastened to ductwork
Partitions butting mullions shall be installed with a proper channel
to receive the drywall. Fastening to the window mullions is not
permitted.
G-8
<PAGE>
DOORS
TENANT ENTRANCE DOOR(S)
3'-0 " x 8'-0" - 1/2" Tempered glass door. Virginia Glass Products
Corp. Type P, square profile, clear anodized aluminum rails.
Concealed overhead closer, wire pulls, cylinder lockser, 2" x 6"
clear anodized aluminum frame and 6" square cut aluminum threshold.
TENANT SECONDARY ENTRANCE DOOR(S)
3'-0" x 8'-0" x 1 3/4" Particle core wood door, " C " label, -
Weyerhaeuser Marshfield Series plain sliced red oak veneer faces.
Four brushed chrome finish hinges, PDQ Industries ST Series/Spirit
Grade I extra heavy-duty Cylindrical lock set with lever handles
brushed chrome finish and keyed to Bui'Lding Master Key system, and
overhead door closer device, Frame shall be 2" x 6" x 16 ga. steel,
painted to match.
INTERIOR DOORS
3'-0" x 8'-0" x 1 3/4" Particle core wood door, - Weyerhaeuser
Marshfield Series plain sliced red oak veneer faces. Four brushed
chrome finish hinges, PDQ Industries ST Series/Spirit Grade I extra
heavy-duty Cylindrical latch set with ball knobs brushed chrome
finish. Frame shall be 2" x 6" x 16 ga. steel, painted to match.
CEILING
SUSPENSION SYSTEM
Chicago Metallic Corporation 200 Snap-Grid system. 2'-0" x 2'-0" and
module. Finish:
White.
CEILING PANELS
USG Interiors Acoustone "F" Fissured tile. 2'-0" x 2'-0" x 3/4
Shadowline, white finish.
LIGHTING
LUMINAIRES
2'-0" x 4'-0" recessed fluorescent parabolic troffers with 3" deep
18 cell aluminum louvers (Columbia Lighting Catalog No. P4 243
043363-1-277) with warm white lamps.
EXIT LIGHTING FIXTURE
Lightalarms Model UXE-8
G-9
<PAGE>
ELECTRICAL INSTALLATION
WIRING FOR POWER AND LIGHT
Wiring shall be installed concealed in partitions, and above
suspended ceilings. Conduit and wiring shall be properly supported,
and may not be attached to ceiling construction. Rigid conduit or
thin wall tubing shall be used throughout common areas and
electrical closets; flexible armored cable may be used in tenant
spaces for power and lighting circuits.
WIRING FOR VOICE AND SIGNAL
Telephone wire, and signal cable, in partitions shall be concealed
in conduit or thin wall tubing or approved (NEC) raceway. Telephone
wire and signal cable run in suspended ceiling plenums shall be
Teflon jacketed and kept in bundles to specific drops. Telephone
wire will not be permitted to be run loose except in movable wall
raceways, nor run exposed on baseboards or walls.
AIR DISTRIBUTION
AIR DIFFUSERS
24" x 24" panel type diffusers, white finish. Carnes SKTA.
RETURN AIR REGISTERS
T-Bar lay-in, 24" x 24" panels, 1/2" x 1/2" x '/,2", white finish,
Carnes RAPA
DUCTWORK
Ductwork to be constricted of galvanized steel sheets meeting
SMACCNA standards for fabrication and installation. Final
connections to diffusers may be flexible metal duct equal to
Wiremold 54, and limited to a maximum length of 8'-0".
INSURANCE REOUIREMEINTS
Tenant:
Premises:
The undersigned contractor or subcontractor (hereinafter called
"Contractor") has been hired by the tenant or occupant (hereinafter called
"Tenant") of the Building named above or by Tenant's contractor to perform
certain work (hereinafter called "Work") for Tenant in the Tenant's premises in
the Building, Contractor and Tenant have requested the undersigned
landlord'hereinafter called "Landlord") to grant Contractor access to the
Building and its facilities in connection with the
G-10
<PAGE>
performance of the Work and Landlord agrees to crant such access to Contractor
upon and subject to the following terms and conditions:
1. Contractor acrees to indemnify and save harmless the Landlord,
its officers, employees and agents and their affiliates, subsidiaries, and
partners, and each of them, from and with respect to any claims, demands, suits,
liabilities, losses and expenses, including reasonable attorneys' fees arisina
out of or in connection with the Work. (and/or imposed by law upon any or all of
them) because of personal injuries, including death at any time resulting
therefrom, and loss of or damage to property, including consequential damages,
whether such injuries to persons or property are claimed to be due to negligence
of the Contractor, Tenant, Landlord or any other party entitled to be
indemnified as aforesaid except to the extent specifically prohibited by law
(and any such prohibition shall not void this Agreement but shall be applied
only to the um extent required by law).
2. Contractor shall provide and maintain at its own expense, until
completion of the Work, the following insurance:
(a) Workers' Compensation and Employers'
Liability Insurance covering, each and every workman employed in, about or upon
the Work, as provided for in each and every statute applicable to Workers's
Compensation and Employers' Liability Insurance.
(b) Comprehensive General Liability
Insurance Including Coverage for Protective and Contractual Liability (to
specifically include coverage for the indemnification clause of this Agreement)
for not less than the following limits:
Bodily Injury and
Property Damage: $5,000,000 per occurrence
(c) Comprehensive Automobile Liability
Insurance (covering all owned, non-owned and/or hired motor vehicles to be used
in connection with the Work) for not less than the following limits;
Bodily Injury and
Property Damage: $5,000,000 per occurrence
Contractor shall furnish a certificate from its insurance carrier or carriers to
the Landlord before commencing the Work, showing that it has complied with the
above requirements regarding insurance and providing that the insurer will give
Landlord (20) twenty days' prior written notice of the cancellation of any of
the foregoing policies.
3. Contractor shall require all of its subcontractors engaged in
the Work to provide the following insurance;
G-11
<PAGE>
(a) Comprehensive General Liability
Insurance , including Protective and Contractual Liability Coverages with limits
of liability at least equal to the above stated limits.
(b) Comprehensive Automobile Liability
Insurance (covering all owned, non-owned and/or hired motor vehicles to be used
in connection with the Work) for not less than the following limits:
Bodily Injury and
Property Damage: $5,000,000 per occurrence
Upon the request of Landlord, Contractor shall require
all of its subcontractors en- aged in the Work to execute an Insurance
Requirements agreement in the same form as this Agreement.
Agreed to and executed this day of 19 .
Contractor Landlord
G-12
<PAGE>
EXHIBIT H
Appraisal Provisions
If Tenant shall serve upon Landlord, within the time and in the
manner required under the Lease, a Renewal Appraisal Notice, then the Renewal
Fair Market Fixed Rent shall be determined by appraisal in accordance with the
following:
1. Tenant, by designation in the Renewal Appraisal Notice, shall
appoint an appraiser ("TENANT'S APPRAISER"). Landlord or Tenant shall furnish to
Tenant's Appraiser a copy of the Initial Renewal Rent Notice. Within thirty (30)
days after the date of Landlord's receipt of the Renewal Appraisal Notice,
Tenant shall deliver to Landlord the written good-faith determination of
Tenant's Appraiser of the Renewal Fair Market Fixed Rent ("TENANT'S RENEWAL RENT
DETERMINATION"), based upon the parameters set forth in Section 15.1.3(b) of the
Lease. If Tenant falls to deliver to Landlord Tenant's Renewal Rent
Determination before the expiration of such thirty (30) day period, then Tenant
and Landlord shall be conclusively deemed to have agreed to Landlord's Renewal
Rent Determination, and the Fixed Rent for the Renewal Term in question shall
equal Landlord's Renewal Rent Determination.
2. Provided Landlord has received Tenant's Renewal Rent
Determination within the time set forth in Paragraph 1 above, Landlord and
Tenant's Appraiser, within fifteen (15) days after Landlord's receipt of the
Tenant's Renewal Rent Determination, shall jointly appoint a mutually agreeable
second appraiser who shall be impartial (herein called the "Final Appraiser")
and notify Tenant thereof. If Landlord and Tenant's Appraiser fail to agree upon
and appoint the Final Appraiser within such 15-day period, then either Landlord
or Tenant may request that the American Arbitration Association ("AAA") appoint
the Final Appraiser within ten (10) days after such request, and both parties
shall be bound by any appointment so made within such 10-day period. If the
Final Appraiser- shall not have been appointed within such 10-day period, then
either Landlord or Tenant may apply to any court having jurisdiction to make
such appointment. The Final Appraiser shall subscribe and swear to an oath to
fairly and impartially perform his duties hereunder.
3. Within fifteen (15) days after the appointment of the Final
Appraiser, Landlord shall submit a copy of the Initial Renewal Rent Notice to
the Final Appraiser, and Tenant shall submit a copy of Tenant's Renewal Rent
Determination to the Final Appraiser. If either Landlord or Tenant shall fail to
submit such materials in accordance with the provisions of this Paragraph 3 of
this Exhibit H, then the Final Appraiser shall notify any party which failed to
submit its required materials of its failure (which notice shall refer
specifically to this Paragraph 3 of this Exhibit H), and if, in such event, the
failing party does not, within a period of ten (10) days after its receipt of
such notice, submit its required materials, then (i) if Tenant failed to so
submit its required materials, the Fixed Rent for the Renewal Term shall be
determined using Landlord's Renewal Rent Determination, or (ii) if Landlord
failed to so submit its required materials, the Fixed Rent for the Renewal Term
in question shall be determined using Tenant's Renewal Rent Determination, and
any such determination shall be conclusive and binding upon both Landlord and
Tenant.
H-1
<PAGE>
4. If both Landlord and Tenant submit their respective required
materials in accordance with the provisions of Paragraph 3 of this Exhibit H,
then the Final Appraiser, within twenty (20) days after its receipt of both sets
of required materials, shall select which of Landlord's Renewal Rent
Determination or Tenant's Renewal Rent Determination, in his opinion, more
accurately reflects the Renewal Fair Market Fixed Rent, and shall notify
Landlord and Tenant of such selection in writing. The Renewal Fair Market Fixed
Rent set forth in the selected Fair Market Determination shall be conclusive and
binding upon both Landlord and Tenant.
5. The fees and expenses of any such appraisal process shall be
borne by the parties equally, except that Landlord shall bear the expense, if
any, of the Initial Renewal Rent Notice and Tenant shall bear the expense of
Tenant's Appraiser, and each party shall bear the expense of its attorneys and
experts.
6. Tenant's Appraiser and the Final Appraiser each shall be a
disinterested person of at least five (5) years experience as a real estate
appraiser in the State of New Jersey who shall be a member of the "MAI" society
of appraisers and shall have had experience as a broker or appraiser of
first-class commercial office real estate in the "Piscataway, New Jersey" office
market.
7. It is expressly understood, and each appraiser shall acknowledge
and agree, that any determination of the Renewal Fair Market Fixed Rent shall be
based solely on the definition thereof as set forth in Section 15.1.3(b) of the
Lease, including the assumptions and criteria set forth in such definitions. The
appraisers shall not have the power to add to, modify or change any such
Definitions or any other provisions of the Lease, and the Jurisdiction of the
appraisers is accordingly limited.
H-2
Exhibit 10.4
------------
BUSINESS PARK GROSS LEASE
48834 MILMONT DRIVE, UNIT 103-A
FREMONT, CALIFORNIA
BY AND BETWEEN
BEDFORD PROPERTY INVESTORS INC.,
A MARYLAND CORPORATION
(LESSOR)
AND
ION NETWORKS, INC.
(LESSEE)
<PAGE>
BUSINESS PARK GROSS LEASE
TABLE OF CONTENTS
1. SALIENT LEASE TERMS.................................................1
2. PREMISES............................................................3
3. TERM ...............................................................4
4. PRE-TERM POSSESSION.................................................4
5. DELAY IN DELIVERY OF POSSESSION.....................................5
6. MINIMUM RENT........................................................5
7. TAXES...............................................................6
8. COMMON AREAS AND COMMON AREA COSTS..................................8
9. ASSIGNMENT AND SUBLETTING..........................................11
10. PROPERTY INSURANCE................................................15
11. LIABILITY INSURANCE...............................................17
12. INSURANCE POLICY REQUIREMENTS.....................................18
13. LESSEE INSURANCE DEFAULT..........................................18
14. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION.................19
15. DESTRUCTION.......................................................21
16. ACCORD AND SATISFACTION...........................................22
17. SECURITY DEPOSIT..................................................22
18. USE ..............................................................23
19. COMPLIANCE WITH LAWS AND REGULATIONS..............................24
20. UTILITIES.........................................................31
21. ALTERATIONS.......................................................32
22. MAINTENANCE AND REPAIRS...........................................34
23. CONDEMNATION......................................................35
24. EMPLOYEE PARKING..................................................37
25. ABANDONMENT.......................................................37
26. ENTRY BY LESSOR...................................................37
27. SIGNS.............................................................38
28. DEFAULT...........................................................38
29. REMEDIES UPON DEFAULT.............................................39
30. FORFEITURE OF PROPERTY AND LESSOR'S LIEN..........................42
31. SURRENDER OF LEASE................................................43
32. LESSOR'S EXCULPATION..............................................43
33. ATTORNEYS' FEES...................................................43
34. NOTICES...........................................................44
35. SUBORDINATION.....................................................45
36. ESTOPPEL, CERTIFICATES............................................46
37. WAIVER............................................................46
38. HOLDING OVER......................................................46
39. SUCCESSORS AND ASSIGNS............................................47
i
<PAGE>
40. TIME...............................................................47
41. EFFECT OF LESSOR'S CONVEYANCE......................................47
42. TRANSFER OF SECURITY...............................................47
43. CORPORATE AUTHORITY................................................47
44. WAIVER OF CALIFORNIA CODE SECTIONS.................................48
45. WASTE..............................................................48
46. BANKRUPTCY.........................................................48
47. LATE CHARGES.......................................................50
48. MORTGAGEE PROTECTION...............................................50
49. MISCELLANEOUS PROVISIONS...........................................51
ii
<PAGE>
BUSINESS PARK GROSS LEASE
1. SALIENT LEASE TERMS
THIS LEASE (the "Lease") is dated for reference purposes only this 17th
day of May, 1999.
1.1 RENT PAYMENT: Bedford Property Investors, Inc. Lock
Box#: 73048 - "Bedford-Fremont" P.O. Box
60000 San Francisco, California
94160-3048
1.2 PARTIES AND NOTICE ADDRESS:
Lessor: BEDFORD PROPERTY INVESTORS, INC.
A MARYLAND CORPORATION 270 LAFAYETTE
CIRCLE LAFAYETTE, CALIFORNIA 94549
Lessee: ION-NETWORKS, INC. A DELAWARE
CORPORATION 48834 KATO ROAD, UNIT 103A
FREMONT, CALIFORNIA 94538 (If more than
one party, then the obligations
hereunder shall be joint and several.)
(Section 49.12)
1.3 PREMISES: (A) Name and Location of Complex:
BEDFORD FREMONT BUSINESS CENTER
CONSISTING OF FIVE (5) BUILDINGS LOCATED
AT (I) 48810 KATO ROAD, (II) 48820 KATO
ROAD, (III) 48334 KATO ROAD, (IV) 48860
MILMONT DRIVE AND (V) 48890 MILMONT
DRIVE, FREMONT, CALIFORNIA 94538.
(B) Leased Premises: 48834 KATO ROAD,
UNIT 103-A
FREMONT, CALIFORNIA 94538
(C) Approximately 4,600 square feet.
(Section 2.2) 1.4 TERM: (A) Commencing
June 1, 1999. (B) Sixty (60) Months
(Section 3. 1)
1
<PAGE>
1.5 RENT: (A) Minimum Rent:
Months 01-12: $7,360.00
Months 13-24: $7,5900.00
Months 25-36: $7,820.00
Months 37-48: $8,050.00
Months 49-60: $8,280.00
(Section 6.1)
(B) Advance Rent: $7,360.00
(Section 6.2)
1.6 BASE COSTS FOR THE COMPLEX:
(A) Real Property Taxes: Base amount
shall be the actual Real Property Taxes
incurred during the calendar year 1999.
(Section 7.4)
(B) Base Insurance Cost: Base amount
shall be the actual Complex Insurance
Premium incurred during calendar year
1999.
(Section 10.3)
(C) Base Common Area Costs: Base amount
shall be the Complex Common Area Costs
incurred during the calendar year 1999.
(Section 8.3)
1.7 SECURITY DEPOSIT: $8,280.00
(Section 17.1)
1.8 USE: Premises used solely for General office,
light assembly and distribution.
(Section 18.1)
1.9 INITIAL PRO RATA %: 3.14% (4,600 sq. ft. + 146,509 sq. ft.)
(Section 8.3)
1.10 DECLARATION OF RESTRICTIONS:
Date of Recordation June 30, 1989 Book
126 and 153 Pages 30-33 and Page 43
Document Number
2
<PAGE>
(Section 2.4)
1.11 CONTENTS: This Lease consists of
Pages 1 through 4)
Sections 1 through 43
Addenda: None
Exhibits:
A- Legal Description of Complex
B - Plan of the Complex
B1 - Floor Plan of the Leased Premises
C - Construction Obligations
D - Acknowledgment of Commencement of Term
E - Rules and Regulations
The above terms are incorporated in this Lease as indicated above and
referenced herein. Definitions of the terms in this Lease appear in the
following sections: bankruptcy event, 46. 1; alterations, 21.2; Award, 23.1(c);
Building, 2.2; Capital Costs, 8.4; Common Area Costs, 8.4; Common Areas, 8. 1;
Complex, 2.2; Complex Insurance Premium, 10.3(a); Condemnation, 23. 1 (a);
Condemnor, 23. 1 ((d); Date of taking, 23. 1 (b); Decision Period, 23.4; debtor,
46. 1 (a); employee parking, 24. 1; Environmental Laws, 19.3(a); Hazardous
Materials, 19.3(a); Hazardous Use, 19.3(b); HVAC, 22.2; Leased Premises, 2.2;
Minimum Rent, 6.1; Nonterminating Party, 23.4; notice, 34.2; obligor, 34.3;
Order for Relief, 46. 1 (a); person, 49.2; Plans, 21.2(b); pro rata %, 8.3; Real
Property Taxes, 7. 1; rent or rental, 29.2(a); Rentable Area, 9.6(a); Report,
19.3(c); restrictions, 2.3; Security Deposit, 6.2; tax bill, 7.4; Taxes, 7. 1;
Term, 1.4; Terminating Party, 23.4; Termination Notice, 9.6; Transfer or
Transfer of the Leased Premises, 9.2; uninsured property loss property loss, 15.
1; Usable Area, 9.6; Wetlands Laws, 19.4; Wetlands, 19.4; worth at the time of
award, 29.2(b).
2. PREMISES
2.1 DEMISING CLAUSE.
Lessor hereby leases to Lessee, and Lessee hires from Lessor a portion
of the Complex as hereinafter defined.
2.2 DESCRIPTION.
The term "Complex" shall refer to that parcel of real property of which
the Leased Premises forms a part, together with the parcel or parcels in common
ownership therewith and contiguous thereto. The Complex is described with
particularity in Exhibit A attached hereto and made a part hereof by reference,
and described generally in Section 1.3(A) hereof. The Complex contains, among
other things, communications, computer, audio and video, security and electrical
(other than electrical wiring terminating at or connected to Building standard
electrical outlets), cables, wires, duct work, sensors, switching equipment,
control boxes and related improvements at the Complex, Building or
3
<PAGE>
the Leased Premises ("Lines"). The premises leased herein are described in
Section 1.3(B) and delineated on Exhibit B, which is attached hereto and made a
part hereof by reference, consisting of the approximate amount of square footage
as specified in Section 1.3(C) hereof. The term "Building" shall refer to the
Building in which the Leased Premises are located. The portion leased herein to
Lessee is hereinafter referred to as the "Leased Premises." Lessee acknowledges
that Lessor may change the shape, size, location, number and extent of the
improvements to any portion of the Complex without consent of Lessee and without
affecting Lessee's obligations hereunder. Lessor reserves the area beneath and
above the Building as well as the exterior thereof together with the right to
install, maintain, rise, repair and replace pipes, ducts, conduits, wires, and
structural elements leading through the Leased Premises serving other parts of
the Complex, so long as such items are concealed by walls, flooring or ceilings.
Such reservation in no way affects the maintenance obligations imposed herein,
nor shall such reservation alter the parties' responsibilities and obligations
set forth in this Lease regarding "Hazardous Materials" (as defined in Section
19.3(a) below).
2.3 COVENANTS, CONDITIONS AND RESTRICTIONS.
The parties agree that this Lease is subject to the effect of (a) any
covenants, conditions, restrictions, easements, mortgages or deeds of trust,
ground leases, rights of way of record, and any other matters or documents of
record; (b) any zoning laws of the city, county and state where the Complex is
situated; and (c) general and special taxes not delinquent. Lessee agrees that
as to its leasehold estate, Lessee and all persons in possession or holding
under Lessee will conform to and will not violate the terms of any covenants,
conditions or restrictions of record which may now of hereafter encumber the
property (hereinafter the "restrictions"). This Lease is subordinate to the
restrictions and any amendments or modifications thereto.
2.4 DECLARATION OF RESTRICTIONS.
The Leased Premises are subject to a Declaration of Restrictions as
referenced in Section 1. 10 hereof.
3. TERM
3.1 COMMENCEMENT DATE.
The term of this Lease shall commence on the date specified in Section
1.4(A) hereof and shall be for the Term specified in Section 1.4(B) hereof, plus
any partial month at the commencement of the Term.
3.2 ACKNOWLEDGMENT OF COMMENCEMENT.
After delivery of the Leased Premises to Lessee, Lessee shall execute a
written acknowledgment of the date of commencement in the form attached hereto
as Exhibit D and by this reference it shall be incorporated herein.
4
<PAGE>
4. PRE-TERM POSSESSION
4.1 CONDITIONS OF ENTRY.
In the event the Leased Premises are to be constructed or remodeled by
Lessor, Lessor may notify Lessee when the Leased Premises are ready for Lessee's
fixturing or Lessee's work, which may be prior to substantial completion of the
Leased Premises by Lessor. Lessee may thereupon enter the Leased Premises for
such purposes at its own risk, to make such improvements as Lessee shall have
the right to make, to install fixtures, supplies, inventory and other property.
Lessee agrees that it shall not in any way interfere with the progress of
Lessor's work by such entry. Should such entry prove an impediment to the
progress of Lessor's work, in Lessor's judgment, Lessor may demand that Lessee
forthwith vacate the Leased Premises until such time as lessor's work is
complete, and Lessee shall immediately comply with this demand.
During the course of any pre-term possession, whether such pre-term
period arises because of an obligation of construction on the part of Lessor, or
otherwise, all terms and conditions of this Lease, except for rent and
commencement, shall apply, particularly with reference to indemnity by Lessee of
lessor under Article 14 herein for all occurrences within or about the Leased
Premises.
5. DELAY IN DELIVERY OF POSSESSION
5.1 DELAY.
If Lessor, for any reason whatsoever, cannot deliver possession of the
Leased Premises to Lessee at the commencement of the Term, this Lease shall not
be void or voidable, nor shall Lessor be liable for any loss or damage resulting
therefrom, but in that event, there shall be an abatement of rent covering the
period between the commencement of the Term and the time when Lessor can deliver
possession. The Term shall be extended by such delay for an equal period.
6. MINIMUM RENT
6.1 PAYMENT.
Lessee shall pay to Lessor at the address specified in Section 1.1, or
at such other place as Lessor may otherwise designate, as "Minimum Rent" for the
Leased Premises the amount specified in Section 1.5(A) hereof, payable in
advance on the first day of each month during the Term. If the Term commences on
other than the first day of a calendar month, the rent for the first partial
month shall be prorated accordingly. All payments of Minimum Rent (including sum
defined as rent in Section 29.2) shall be in lawful money of the United States,
and payable without deduction, setoff, offset, counterclaim, recoupment, notice
or demand.
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6.2 ADVANCE RENT.
The amount specified in Section 1.5(B) hereof is paid herewith to
Lessor upon execution of this Lease as advance rent, receipt of which is hereby
acknowledged, provided, however, that such amount shall be held by Lessor as a
"Security Deposit" pursuant to Section 17.1 hereof until it is applied by Lessor
to the first Minimum Rent due hereunder.
6.3 LATE PAYMENT.
If during any twelve (12) month period Lessee fails on more than one
occasion to make any payment of Minimum Rent to Lessor on the date when it is
due, then Lessor may, by giving written notice to Lessee, require that Lessee
pay the Minimum Rent to Lessor quarterly in advance.
7. TAXES
7.1 DEFINITION.
In this Article 7 the terms "Real Property Taxes" and "Taxes" are used
interchangeably. "Real Property Taxes" as used in this Lease shall include all
Real Property Taxes on the Building, the Complex, the land on which the Building
is situated, and the various estates in the Building and the Land, including
this Lease, as well as all personal property taxes levied on the property used
in the operation of the Building or land, whether or not now customary or within
the contemplation of the parties to this Lease. "Taxes" also shall include the
reasonable cost to Lessor of contesting the amount, validity, or applicability
of any Taxes mentioned in this Section. Further included in the definition of
Taxes herein shall be general and special assessments, fees of every kind and
nature, commercial rental tax, levy, penalty or tax (other than inheritance or
estate taxes) imposed by any authority having the direct or indirect power to
tax, as against any legal or equitable interest of Lessor in the Leased Premises
or in the real property of which the Leased Premises are a part, as against
Lessor's right to rent or other income therefrom, or as against Lessor's
business of leasing the Leased Premises, any tax, fee, or charge with respect to
the possession, leasing, transfer of interest, operation, management,
maintenance, alteration, repair, use, or occupancy by Lessee, of the Leased
Premises or any portion thereof, the Building, or the Complex, or any tax
imposed in substitution, partially or totally, for any tax previously included
within the definition of Taxes herein, or any additional tax, the nature of
which may or may not have been previously included within the definition of
Taxes. The term "Real Property Taxes" or "Taxes" shall not include any tax which
may be levied upon or against the net income or profits of Lessor or its
successors or assigns.
7.2 ASSESSMENTS.
With respect to any general or special assessments which may be levied
upon or against the Leased Premises, the Building, the Complex, or the
underlying realty, or which may be evidenced by improvement or other bonds, and
which may be paid in annual or semiannual installments, only the
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current amount of such installment, prorated for any partial year, and statutory
interest, shall be included within the computation of Taxes for which Lessee is
responsible hereunder.
7.3 SEPARATE ASSESSMENT.
If the Leased Premises are assessed separately by the county assessor
or other taxing agency, Lessee shall pay to Lessor as additional rent at least
ten (10) days prior to the date when such Taxes would be delinquent, all
increases in Real Property Taxes as hereinabove defined applicable to the Leased
Premises or arising under Section 7.1 above. In the event the Leased Premises
share parking and Common Areas with other Premises, the provisions of Section
7.4 below shall apply to Taxes thereon.
7.4 PRORATION.
If the Leased Premises are not separately assessed as all individual
tax unit as described in the previous Section, Lessee shall pay, as additional
rent, to Lessor, within ten (10) days after receipt of billing, its pro rata
share of all Real Property Taxes stated in the tax bill in which the Leased
Premises are included, including the parking and Common Areas, as well as the
improvements on all of said land, or otherwise arising under the provisions of
this Article, less the base specified in Section 1.6(A) hereof. The term "tax
bill" as used herein shall mean the tax bill which includes the Leased Premises,
or a group of tax bills aggregated at the option of Lessor, as long as all such
bills relate to the Complex. Pro rata share is defined as that fraction the
numerator of which is the square footage in the Leased Premises and the
denominator of which is the net leasable area included within the tax bill.
7.5 ESTIMATED PAYMENTS.
Lessor may, at its option, estimate the amount of Taxes next due and
collect from Lessee on a monthly or quarterly basis at Lessor's option, the
amount of Lessee's estimated tax obligation. On or before March 1 of each year
during the Term, Lessor shall provide Lessee with a reconciliation of Lessee's
account with respect to such estimated tax payments. In event it is established
upon such reconciliation that Lessee has not paid sufficient amount in estimated
tax payments to cover its pro rata share for the year in question, Lessee shall
pay to Lessor the full amount of any such shortage within ten (10) days of date
of billing. If it is established that Lessee has made an overpayment of its tax
shortage within the (10) days of date of billing. If it is established that
Lessee has made an overpayment of its tax obligation upon such reconciliation,
Lessee shall receive, at Lessor's option, either a credit applicable to the next
ensuing estimated tax payments, or a credit to a tax reserve account to be held
by Lessor for application to sums due in respect of reassessment or escape
assessments applicable to the period in question, but yet to be billed.
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7.6 PERSONAL PROPERTY AND OTHER TAXES.
Lessee shall pay prior to delinquency all Taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Leased Premises or elsewhere. When possible,
Lessee shall cause such trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Lessor. Lessee shall also pay prior to delinquency all Taxes and other taxes in
connection with any testing, investigation, abatement, remediation, removal,
transportation and/or disposal of any Hazardous Materials by Lessee (or by
Lessor, pursuant to any provision of this Lease granting to Lessor the right to
do any of the foregoing and to bill Lessee therefor). For purposes of this
Section 7.6, the terms "Taxes" and "taxes" shall include, but not be limited to,
any fees, charges, fines, penalties and costs (including, without limitation,
permit, approval or licensing fees, charges or costs). If any of Lessee's said
personal property shall be assessed with Lessor's real property, or if any other
Taxes or taxes which are payable by Lessee pursuant to this Lease or otherwise
are assessed against Lessor or Lessor's real property, Lessee shall pay Lessor
the Taxes and other taxes attributable to Lessee within ten (10) days after
receipt of a written statement setting forth in the Taxes and other taxes
attributable to Lessee.
8. COMMON AREAS AND COMMON AREA COSTS
8.1 DEFINITION OF COMMON AREAS.
The term "Common Areas" as used herein means all areas and facilities
outside the Leased Premises, within the exterior boundaries of the Complex, that
are provided and designated by Lessor from time to time for the general use and
convenience of Lessee and of other tenants of Lessor having the common use of
such areas, and their respective authorized representatives and invitees. Common
Areas include, without limitations driveways, parking areas, sidewalks, and
landscaped areas, all as generally described on Exhibit B attached hereto.
Exhibit B is tentative, and Lessor reserves the right to make alterations
thereto from time to time.
8.2 RIGHTS AND DUTIES OF LESSOR.
Lessor shall, in a manner it deems proper in its opinion, maintain the
Common Areas, establish and enforce reasonable rules and regulations concerning
such areas, close any of the Common Areas to whatever extent required in the
opinion of Lessor's counsel to prevent a dedication of any of the Common Areas
or the accrual of any rights of any person or of the public to the Common Areas,
close temporarily any of the Common Areas for maintenance purposes, and make
changes to the Common Areas including, without limitation, changes in the
location of driveways, entrances, exits, vehicular parking spaces, parking area,
the designation of areas for the exclusive use of others, the direction of the
flow of traffic or construction of additional Buildings thereupon. Lessee hereby
acknowledges that Lessor is under no obligation to provide security for the
Common Areas but may do so at its option.
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8.3 PAYMENT BY LESSEE.
Lessee shall pay to Lessor, as additional rent its proportionate share
of Common Area Costs as hereinafter defined, within ten (10) days of receiving a
bill therefor from Lessor, but no more frequently than monthly. Lessee's
proportionate share (or "pro rata %") shall be that fraction of Common Area
Costs the numerator of which is the number of square feet in the Leased Premises
and the denominator of which is the net leasable area of buildings in the
Complex having the use of the Common Areas. Lessee's initial pro rata % of
Common Area Costs is stated in Section 1.9. Lessor may bill Lessee estimated
charges in accordance with Section 8.5. Notwithstanding the preceding provisions
of this Section 8.3, Lessee's proportionate share as to certain expenses
included in Common Area Costs may be calculated differently to yield a higher
percentage share for Lessee as to certain expenses in the event Lessor permits
other tenants or occupants in the Complex to incur such expenses directly rather
than have Lessor incur the expense in common for the Complex. In such case
Lessee's proportionate share of the applicable expense shall be calculated as
having as its denominator the net leasable area of all Premises in the Complex
less the net leasable area of tenants who have incurred such expense directly.
Furthermore, in the event Lessee consumes extraordinary amounts of any provided
utility or other service as determined in Lessor's good faith judgment, Lessee's
Proportionate Share for such utility or service may, at Lessor's election, be
based on usage as opposed to Occupied Floor Area, that is, Lessee's
Proportionate Share of such a utility or service would be calculated as having
as its denominator the total usage of such utility or service in the Complex (or
Building as the case may be), and having as its numerator Lessee's usage of such
utility or service, as determined by Lessor in its sole good faith judgment. In
any case where Lessee, with Lessor's consent, incurs such expenses directly,
Lessee's proportionate share of Common Area Costs will be calculated specially
so that expenses of the same character which are incurred by Lessor for the
benefit of other tenants in the Complex shall not be prorated to Lessee. If
repairs are required for systems exclusively serving the Leased Premises
(whether within or outside of said Leased Premises), Lessee shall pay one
hundred percent (100%) of such repair costs. Nothing herein shall imply that
Lessor will permit Lessee or any other tenant of the Complex to incur Common
Area Costs. Any such permission shall be in the sole discretion of Lessor, which
Lessor may grant or withhold in its arbitrary judgment.
8.4 DEFINITION OF COMMON AREA COSTS.
"Common Area Costs" means all sums (including "Capital Costs" as
hereinafter defined and to the extent stated herein) expanded by Lessor, its
agents, contractors and employees for operating, maintaining, repairing,
replacing and administering of the Complex, including, without limitation,
painting the exterior walls of the buildings in the Complex, equipping, policing
and protecting, lighting, providing sanitation and sewer and other services,
insuring (including self-insurance and the payment of deductible amounts under
insurance policies), repairing, replacing and maintaining the (i) Common Areas
and (ii) all buildings and roofs within the Complex, and (iii) all other areas,
facilities and buildings, vertical transportation facilities, retention ponds
(if applicable), and any and all facilities and improvements connecting the
Complex to off-site buildings or areas, which are used in connection with the
maintenance and/or operation of, and whether located within or outside of, the
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Complex; such costs and expenses shall include, but shall not be limited to, the
full cost of: illumination and maintenance of Complex signs, whether located on
or off the Complex; refuse disposal, water, gas, sewage, electricity and other
utilities (without limitation), including any and all usage, service, hook up,
connection, availability and/or standby fees or charges pertaining to same, and
including all costs associated with the provision, maintenance and operation of
any central telephone service for the Complex and/or utility system and/or Lines
for the Complex; the operation, maintenance, repair and replacement of all or
any part of the parking areas; snow removal, maintenance and operation of any
temporary or permanent utility and/or utility system, including a sewage
disposal system, within or without the Complex, together with hook up or
connection fees and service charges; compliance with rules, regulations and
orders of governmental authorities pertaining to air pollution control,
including the cost of monitoring air quality; maintenance for wooded areas,
retention ponds, lakes and shoreline areas (if applicable); cleaning, lighting,
striping and landscaping; curbs, gutters, sidewalks, drainage and irrigation
ditches, conduits, pipes and canals located on or adjacent to the Complex;
premiums for liability, casualty, and property insurance; personal property
taxes; licensing fees and taxes, audit fees and expenses; supplies; costs of
complying with all governmental regulations, rules, laws, ordinances and codes;
cost, lease payment or depreciation of any equipment, improvements or facilities
used in the operation or maintenance of the Common Areas or project areas; total
compensation and benefits (including premiums for workers' compensation or any
other insurance or other retirement or employee benefits, and including all
costs incurred in providing such benefits) paid to or on behalf of employees
involved in the performance of the work specified in this Section or employees
otherwise providing services to tenants or customers of the Complex; public
transit or car pooling facilities; management fees paid to independent
contractors; reserve accounts established for the purchasing and/or replacement
of equipment; community association and/or property owner's association dues and
assessments which may be imposed upon Lessor by virtue of any recorded
instrument affecting title to the Complex; plus a management fee not to exceed
five percent (5%) of gross revenues. Common Area Costs shall also include,
without limitation, the repair and replacement, resurfacing and repaving of any
paved areas, curbs, gutters or other surfaces or areas within the Complex, the
repair and replacement of any equipment or facilities located within or serving
the Complex, and the cost of any capital repairs, replacements or improvements
made by Lessor to the Complex ("Capital Costs"). However, certain Capital Costs
(the "Restricted Capital Costs") shall be includable in Common Area Costs each
year only to the extent of that fraction allocable to the year in question
calculated by amortizing such Restricted Capital Costs over the reasonably
useful life of the improvement resulting therefrom, as determined by Lessor,
with interest on the unamortized balance at the higher of (i) tell percent (10%)
per annum; or (ii) the interest rate as may have been paid by Lessor for the
fluids borrowed for the purpose of performing the work for which the Restricted
Capital Costs have been expended, but in no event to exceed the highest rate
permissible by law. The Restricted Capital Costs subject to such amortization
procedure are the following: (x) those costs for capital improvements to the
Complex of a type which do not normally recur more frequently than every five
(5) years in the normal course of operation and maintenance of facilities such
as the Complex (specifically excluding painting of all or a portion of the
Complex); (y) costs incurred for the purpose of reducing other operating
expenses or utility costs, from which Lessee can expect a reduction in the
amounts it would otherwise expend, or reimburse Lessor, and (z) expenditures by
Lessor that are required by governmental law,
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ordinance, regulation or mandate, including, without limitation, any
"Environmental Laws" or "Wetlands Laws" (as such terms are defined in Article
19), which were not-applicable to the Complex at the time of the original
constriction
8.5 ESTIMATED PAYMENTS.
Lessor shall have the right, at its option, to estimate Lessee's pro
rata share of Common Area Costs due in the future from Lessee and to collect
from Lessee on a monthly or quarterly basis, as Lessor may elect, the amount of
Lessee's estimated pro rata share of such costs. Lessor shall provide Lessee
with a reconciliation of Lessee's account at least annually, and if such
reconciliation shall indicate that Lessee's account is insufficient to satisfy
Lessee's pro rata share of Common Area Costs for the period estimated, Lessee
shall immediately pay to Lessor any deficiency. Any excess in such account
indicated by the reconciliation shall be credited to Lessee's account to reduce
the estimated payments for the next ensuing period.
8.6 REFUSE DISPOSAL.
Lessee shall arrange and pay for Refuse Disposal service at the Leased
Premises. Lessee shall pay Lessor, within ten (10)days of being billed therefore
for the removal from the Common Areas, the Complex, or the Building of any
refuse or rubbish which Lessee may have permitted to accumulate therein to an
unreasonable extent.
9. ASSIGNMENT AND SUBLETTING
9.1 LEASE IS PERSONAL.
The purpose of this Lease is to transfer possession of the Leased
Premises to Lessee for Lessee's personal use in return for certain benefits,
including rent, to be transferred to the Lessor. Lessee's right to assign or
sublet as stated in this Article is subsidiary and incidental to the underlying
purpose of this Lease. Lessee acknowledges and agrees that it has entered into
this Lease in order to acquire the Leased Premises for its own personal use and
not for the purpose of obtaining the right to convey the leasehold to others.
9.2 "TRANSFER OF THE LEASED PREMISES" DEFINED.
The terms "Transfer of the Leased Premises" or "Transfer" as used
herein shall include any assignment of all or any part of this Lease (including
assignment by operation of law), subletting of all or any part of the Leased
Premises or transfer of possession, or granting of the right of possession or
contingent right of possession of all or any portion of the Leased Premises
including, without limitations license, concessions mortgage, devise,
hypothecation, agency, franchise or management agreement, or suffering any other
person (the agents and servants of Lessee excepted) to occupy or rise the Leased
Premises or any portion thereof. If Lessee is a corporation which is not deemed
a public corporation, or is an unincorporated association or partnership, or
Lessee consists of more
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than one party, the transfer, assignment or hypothecation of any stock or
interest in such corporation, association, partnership or ownership interest, in
the aggregate in excess of twenty-five percent (25%) shall be deemed a Transfer
of the Leased Premises.
9.3 NO TRANSFER WITHOUT CONSENT.
Lessee shall not suffer a Transfer of the Leased Premises or any
interest therein, or any part thereof, or any right or privilege appurtenant
thereto without the prior written consent of Lessor, and a consent to one
Transfer of the Leased Premises shall not be deemed to be a consent to any
subsequent Transfer of the Leased Premises. Any Transfer of the Leased Premises
without such consent shall (i) be voidable, and (ii) terminate this Lease, in
either case, at the option of Lessor.
9.4 WHEN CONSENT GRANTED.
(a) The consent of Lessor to a Transfer may not be
unreasonably withheld, provided that it is agreed to be reasonable for Lessor to
consider any of the following reasons, which list is not exclusive, in electing
to consent or to deny consent:
(i) Financial strength of the proposed transferee is
not at least equal to that of Lessee at the time of execution of this Lease;
(ii) proposed transferee whose occupation of the
Leased Premises would cause a diminution in the reputation of the Complex or the
other businesses located therein;
(iii) A proposed transferee whose impact of the
common facilities or the other occupants of the Complex would be
disadvantageous;
(iv) A proposed transferee whose rise presents a risk
of violation of Article 19;
(v) A proposed transferee whose occupancy will
require a variation in the terms of this Lease (for example, a variation in the
use clause) or which otherwise adversely affects any interest of Lessor;
(vi) Lessee agrees that its personal business skills
and philosophy were an important inducement to Lessor for entering into this
Lease agreement and that Lessor may reasonably object to the transfer of the
Leased Premises to another whose proposed use, while permitted by the use clause
of this Lease, would involve a quality manner or type of business skills
different from those of Lessee;
(vii) That the validity of the Transfer is not
conditioned on the conformity of the Lessee and transferee with all provisions
of this Lease at the time of Transfer, including,
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without limitations the requirement that there be no uncured notices of default
under the terms of this Lease; or
(viii) A proposed transferee who is or is likely to
be, or whose business is or is likely to be, subject to compliance with
additional laws or other governmental requirements beyond those to which Lessee
or Lessee's business is subject.
(b) Notwithstanding the foregoing, Lessee shall have the
right, without the consent of Lessor, but upon prior written notice to Lessor,
to assign this Lease to a company incorporated or to be incorporated by Lessee,
provided that Lessee owns or beneficially controls all the issued and
outstanding shares of capital stock of the company; further provided, however,
that in the event that at any time following such assignment, Lessee wishes to
sell, mortgage, devise, hypothecate or in any other manner whatsoever transfer
any portion of the ownership or beneficial control of the issued and outstanding
shares in the capital stock of such company, such transaction shall be deemed to
constitute a Transfer and shall be subject to all of the provisions of this
Article 9 with respect to a Transfer of the Premises including, by specific
reference, the provisions of Section 9.8.
9.5 PROCEDURE FOR OBTAINING CONSENT.
(a) Lessor need not commence its review of any proposed
Transfer, or respond to any request by Lessee with respect to such, unless and
until it has received from Lessee adequate descriptive information concerning
the transferee, the business to be conducted by the transferee, the transferee's
financial capacity, and such other information as may reasonably be required in
order to form a prudent judgment as to the acceptability of the proposed
Transfer, including, without limitation, the following:
(i) The past two years' federal income tax returns of
the proposed transferee (or, in the alternative, the past two years' audited
annual balance sheets and profit and loss statements, certified correct by a
Certified Public Accountant);
(ii) Banking references of the proposed transferee;
(iii) A resume of the business background and
experience of the proposed transferee;
(iv) At least five (5) business and three (3)
personal references for the proposed transferee;
(v) An executed copy of the instrument by which
Lessee proposes to effectuate the Transfer,
(vi) A certified statement, including the
calculation, of the amount of unamortized cost of Lessee's leasehold
improvements to the Leased Premises.
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(b) Lessee shall reimburse Lessor as additional rent for
Lessor's reasonable costs and attorneys' fees incurred in conjunction with the
processing and documentation of any proposed Transfer of the Leased Premises,
whether or not consent is granted.
9.6 RECAPTURE.
(a) By written notice to Lessee (the "Termination Notice")
within twenty (20) business days following submission to Lessor by Lessee of the
information specified in Section 9.5, Lessor may terminate this Lease in the
event of an assignment of this Lease or sublet of the entire Leased Premises, or
terminate this Lease as to the portion of the Leased Premises to be sublet, if
the sublet is to be of less than the entire Leased Premises. fit the event
Lessor elects to terminate this Lease as to that portion of the Leased Premises
to be sublet, an amendment to this Lease shall be executed whereby the
description of the Leased Premises is restated and Lessee's obligations for rent
and other charges are reduced in proportion to the reduction in Rentable Area of
the Leased Premises caused thereby.
For purposes hereof, the term "Rentable Area" of a floor shall mean all
areas available or held for the exclusive use and occupancy of the occupants or
future occupants of the Complex, measured from the inside finished surface of
the dominant portion of the permanent outer Building walls, excluding stairs,
elevator shafts, flues, pipe shafts, vertical ducts, and the like, and their
enclosing walls, which serve more than one floor of the Building, but not
stairs, dumbwaiters, lifts, and the like, exclusively serving a tenant occupying
offices on more than one floor. No deductions shall be made for columns and
projections necessary to the Building. For purposes hereof, the Rentable Area of
all office or other space on a floor shall be computed by multiplying (a) the
number of square feet computed by measuring to the finished surface of the
office side of corridor and other permanent walls, to the center of partitions
that separate the office from similar adjoining areas, and to the inside
finished surface of the permanent outer Building walls ("Usable Area") by (b)
that fraction the numerator of which is Rentable Area and the denominator of
which is Usable Area.
(b) In the event that Lessor terminates this Lease or
terminates this Lease as to that portion of the Premises to be sublet, Lessor
may, if it elects, enter into a new lease covering the Premises or the affected
portion thereof with the intended assignee or sublessee on such terms as Lessor
and such person may agree or enter into a new lease covering the Premises with
any other person; in such event, Lessee shall not be entitled to any portion of
the profit if any which Lessor may realize on account of such termination and
reletting. From and after the date of such termination of this Lease, the
parties shall have no further obligations to each other under this Lease except
for matters occurring or obligations arising prior to the date of such
termination.
9.7 REASONABLE RESTRICTION,
The restrictions on Transfer described in this Article 9 are
acknowledged by Lessee to be reasonable for all purposes, including, without
limitation, the provisions of California Civil Code (the
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"Code") Section 195 1.4(b)(2). Lessee expressly waives any rights which it might
otherwise be deemed to possess pursuant to applicable law, including, without
limitation, Section 1997.040 of the Code, to limit any remedy of Lessor pursuant
to Section 1951.2 or 1951.4 of the Code by means of proof that enforcement of a
restriction on use of the Leased Premises would be unreasonable.
9.8 EFFECT OF TRANSFER.
If Lessor consents to a Transfer, the following conditions shall apply:
(a) Each and every covenant, condition or obligation imposed
upon Lessee by this Lease and each and every right, remedy or benefit afforded
Lessor by this Lease shall not be impaired or diminished as a result of such
transfer.
(b) Lessee shall pay to Lessor on a monthly basis, eighty
percent (80%) of the excess of any sum of money, or other economic consideration
received by Lessee from the Transferee in such month (whether or not for a
period longer than one month), including higher rent, bonuses, key money, or the
like over the aggregate, of (i) the amortized portion of the reasonable expenses
actually paid by Lessee to unrelated third parties for brokerage commissions,
tenant improvements to the Premises, or design fees incurred as a direct
consequence of the Transfer, and, (ii) the total sums which Lessee pays Lessor
under this Lease in such month, or the prorated portion thereof if the Leased
Premises transferred is less than the entire Leased Premises. The amount so
derived shall be paid with Lessee's payment of Minimum Rent. The term "amortized
portion" is that portion of the applicable expenses derived by dividing such
expenses by the number of months in the original term of the Transfer
transaction.
(c) No Transfer, whether or not consent of Lessor is required
hereunder, shall relieve Lessee of its primary obligation to pay the rent and to
perform all other obligations to be performed by Lessee hereunder. The
acceptance of rent by Lessor from any person shall not be deemed to be a waiver
by Lessor of any provision of this Lease or to be a consent to any Transfer of
the Leased Premises.
(d) If Lessor consents to a sublease, such sublease shall not
extend beyond the expiration of the Term.
(e) No Transfer shall be valid and no transferee shall take
possession of the Leased Premises or any part thereof unless, within tell (10)
days after the execution of the documentary evidence thereof, Lessee shall
deliver to Lessor a duly executed duplicate original of the Transfer instrument
in form satisfactory to Lessor which provides that (i) the transferee assumes
lessee's obligations for the payment of rent and for the full and faithful
observance and performance of the covenants, terms and conditions contained
herein, (ii) such transferee will, at Lessor's election, attorn directly to
Lessor in the event Lessee's Lease is terminated for any reason on the terms set
forth in the instrument of transfer and (iii) such instrument of transfer
contains such other assurances as Lessor reasonably deems necessary.
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10. PROPERTY INSURANCE
10.1 USE OF PREMISES.
No use shall be made or permitted to be made on the Leased Premises,
nor acts done, which will increase the existing rate of insurance upon the
Building in which the Leased Premises are located or upon any other Building in
the Complex or cause the cancellation of any insurance policy covering the
Building, or any part thereof, nor shall Lessee sell, or permit to be kept, used
or sold, in or about the Leased Premises, any article which may be prohibited by
the standard form of "All Risk" fire insurance policies. Lessee shall, at its
sole cost and expense, comply with any and all requirements pertaining to the
Leased Premises, of any insurance organization or company, necessary for the
maintenance of reasonable property damage and commercial general liability
insurance, covering the Leased Premises, the Building, or the Complex.
10.2 INCREASE IN PREMIUMS.
Lessee agrees to pay to Lessor, as additional rent, any increase in
premiums on policies which may he carried by Lessor on the Leased Premises, the
Building or the Complex, or any blanket policies which include the Building or
Complex, covering damage thereto and loss of rent caused by fire and other
perils above the rates for the least hazardous type of occupancy for industrial
warehousing, office and distribution operations. Lessee further agrees to pay
Lessor, as additional rent, any increases in such premiums resulting from the
nature of Lessee's occupancy or any act or omission of Lessee. All payments of
additional rent by Lessee to Lessor pursuant to this Section 10.2 shall be made
within ten (10) days after receipt by Lessee of Lessor's billing therefor.
10.3 PRO RATA SHARE OF PREMIUMS.
(a) Lessee shall pay to Lessor, during the Term hereof, as
additional rent, its pro rata share of all increases in the insurance premiums
for any property insurance carried by Lessor covering the Complex (the "Complex
Insurance Premium"), over and above the Base Insurance Cost specified in 1.6(B)
hereof, irrespective of the nature or cause of such increase. Such pro rata
share is defined as that fraction of the insurance premiums the numerator of
which is the total square footage in the Leased Premises and the denominator of
which is the total square footage in all premises to which the Complex Insurance
Premium is applicable. In the event that the property insurance carried by
Lessor covering the Complex is a blanket policy in which other properties not
related to the Complex are included, the Complex Insurance Premium shall be
calculated as that portion of such blanket policy insurance premium which, in
Lessor's good faith judgment, is properly allocable to the Complex. The sum due
under this subsection shall be in addition to that which may be due under the
previous Section of this Lease.
(b) Lessee shall pay any such premium portion to Lessor within
ten (10) days after receipt by Lessee of Lessor's billing therefore.
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10.4 ESTIMATED PAYMENTS.
Lessor may, at its option, estimate the amount of insurance premiums
for property insurance to be due in the future from Lessee and collect from
Lessee on a monthly or quarterly basis, at Lessor's option, the amount of
Lessee's estimated insurance premium obligation. Prior to March 1 of each year,
Lessor shall provide Lessee with a reconciliation of Lessee's account along with
a billing for any shortage in the event of a deficiency or statement for credit
applicable to the next ensuing insurance premium payments, if an overpayment has
been made by Lessee.
10.5 PERSONAL PROPERTY INSURANCE.
Lessee shall maintain in full force and effect on all of its fixtures,
furniture, equipment and other business personal property in the Leased Premises
a policy or policies providing protection against any peril included in the
classification "All Risk" to the extent of at least ninety percent (90%) of
their replacement cost, or that percentage of the replacement cost required to
negate the effect of a coinsurance provision, whichever is greater. No such
policy shall have a deductible in a greater amount than One Thousand Dollars
($1,000.00). Lessee shall also insure in the same manner the physical value of
all its leasehold improvements and alterations in the Leased Premises. During
the Term, the proceeds from any such policy or policies of insurance shall be
used for the repair or replacement of the fixtures, equipment, and leasehold
improvements so insured. Lessor shall have no interest in said insurance, and
will sign all documents necessary or proper in connection with the settlement of
any claim or loss by Lessee. Lessee shall also maintain business interruption
insurance and insurance for all plate glass upon the Leased Premises. All
insurance specified in this Section 10.5 to be maintained by Lessee shall be
maintained by Lessee at its sole cost.
11. LIABILITY INSURANCE
11.1 LESSEE'S INSURANCE.
Lessee shall, at Lessee's expense, obtain and keep in force during the
Term, a commercial general liability insurance policy insuring Lessee against
the risks of bodily injury and property damage, personal injury, contractual
liability, completed operations, products liability, host liquor liability, and
owned and non-owned automobile liability arising out of the ownership, rise,
occupancy or maintenance of the Leased Premises and all areas appurtenant
thereto. Such insurance shall be a combined single limit policy in an amount not
less than ONE MILLION DOLLARS ($1,000,000.00) per occurrence with a TWO MILLION
DOLLAR ($2,000,000.00) annual aggregate; and an umbrella policy of THREE MILLION
DOLLARS ($3,000,000.00) any one occurrence. Lessor and any lender or other party
in interest designated by Lessor shall be named as additional insureds. The
policy shall contain cross liability endorsements and shall insure performance
by Lessee of the indemnity provisions of this Lease; shall be primary, not
contributing with, and not in excess of coverage which Lessor may carry; shall
state that Lessor is entitled to recovery for the negligence of Lessee even
though Lessor is named as all additional insured; shall provide for severability
of interest; shall
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provide that an act or omission of one of the insured or additional insureds
which would void or otherwise reduce coverage shall not void or reduce coverages
as to the other insured or additional insured; and shall afford coverage after
the Term (by separate policy or extension if necessary) for all claims based on
acts, omissions, injury or damage which occurred or arose (or the onset of which
occurred or arose) in whole or in part during the Term. The limits of said
insurance shall not limit any liability of Lessee hereunder. Not more frequently
than every three (3) years, if, in the reasonable opinion of Lessor, the amount
of liability insurance required hereunder is not adequate, Lessee shall promptly
increase said insurance coverage as required by Lessor.
11.2 WORKERS' COMPENSATION INSURANCE.
Lessee shall carry Workers' Compensation insurance as required by law,
including all employers' liability endorsement.
11.3 RENT LOSS/BUSINESS INTERRUPTION INSURANCE.
Lessee shall carry Rental Loss/Business Interruption insurance covering
those risks referred to in Section 11.1 in an amount equal to all Rent payable
under this Lease for a period of twelve (12) months at the their current rate of
charges.
12. INSURANCE POLICY REQUIREMENTS
12.1 GENERAL REQUIREMENTS.
All insurance policies required to be carried by Lessee hereunder shall
conform to the following requirements:
(a) The insurer in each case shall carry a designation in
"Best's Insurance Reports" as issued from time to time throughout the Term as
follows: Policyholders' rating of A; financial rating of not less than VII;
(b) The insurer shall be qualified to do business in the state
in which the Leased Premises are located;
(c) The policy shall be in a form and include such
endorsements as are acceptable to Lessor;
(d) Certificates of insurance shall be delivered to Lessor at
commencement of the Term and certificates of renewal at least thirty (30) days
prior to the expiration of each policy;
(e) Each policy shall require that Lessor be notified in
writing by the insurer at least thirty (30) days prior to any cancellation or
expiration of such policy, or any reduction in the amounts of insurance carried.
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13. LESSEE INSURANCE DEFAULT
13.1 RIGHTS OF LESSOR.
In the event that Lessee fails to obtain any insurance required of it
under the terms of this Lease, Lessor may, at its option, but is not obligated
to, obtain such insurance on behalf of Lessee and bill Lessee, as additional
rent, for the cost thereof. Payment shall be due within ten (10) days of receipt
of the billing therefor by Lessee.
14. INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION
14.1 INTENT AND PURPOSE.
This Article 14 is written and agreed to in respect of the intent of
the parties to assign the risk of loss, whether resulting from negligence of the
parties or otherwise, to the party who is obligated hereunder to cover the risk
of shelf loss with insurance. Thus, the indemnity and waiver of claims
provisions of this Lease have as their object, so long as such object is not in
violation of public policy, the assignment of risk for a particular casualty to
the party carrying the insurance for such risk, without respect to the causation
thereof.
14.2 WAIVER OF SUBROGATION.
Lessor and Lessee release each other, and their respective authorized
representatives, from any claims for damage to the Leased Premises and the
Building and other improvements in which the Leased Premises are located, and to
the furniture, fixtures, and other business personal property, Lessee's
improvements and alterations of either Lessor or Lessee, in or on the Leased
Premises and the Building and other improvements in which the Leased Premises
are located, including loss of income, that are caused by or result from risks
insured or required under the terms of this Lease to be insured against under
any property insurance policies carried or to be carried by either of the
parties.
14.3 FORM OF POLICY.
Each party shall cause each such insurance policy obtained by it to
provide that the insurance company waives all rights of recovery by way of
subrogation against either party in connection with any damage covered by such
policy. Neither party shall be liable to the other for any damage caused by any
peril included within the classification "All Risk" which is insured against
under any property insurance policy carried under the terms of this Lease.
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14.4 INDEMNITY.
Lessee, as a material part of the consideration to be rendered to
Lessor, shall indemnify, defend, protect and hold harmless Lessor against all
actions, claims, demands, damages, liabilities, losses, penalties, or expenses
of any kind which may be brought or imposed upon Lessor or which Lessor may pay
or incur by reason of injury to person or property or business, from whatever
cause, all or in any way connected with the acts and emissions of Lessee, and
the condition or use of the Leased Premises, or the improvements or personal
property therein or thereon, including without limitation any liability or
injury to the person or property or business of Lessee, its agents, officers,
employees or invitees. Lessee agrees to indemnify, defend and protect Lessor and
hold it harmless from any and all liability, loss, cost or obligation on account
of, or arising out of, any such injury or loss however occurring, including
breach of the provisions of this Lease and the negligence of the parties hereto.
Nothing contained herein shall obligate Lessee to indemnity Lessor against its
own sole or gross negligence or willful acts, for which Lessor shall indemnity
Lessee.
14.5 DEFENSE OF CLAIMS.
In the event any action, suit or proceeding is brought against Lessor
by reason of any such occurrence, Lessee, upon Lessor's request, will at
Lessee's expense resist and defend such action, suit or proceeding, or cause the
same to be resisted and defended by counsel designated either by Lessee or by
the insurer whose policy covers the occurrence and in either case approved by
Lessor. The obligations of Lessee under this Section arising by reason of any
occurrence taking place during the Term shall survive any termination of this
Lease.
14.6 WAIVER OF CLAIMS.
Lessee, as a material part of the consideration to be rendered to
Lessor, hereby waives all claims against Lessor for damages or injury, as
described below, from any cause arising at any time, including breach of the
provisions of this Lease and the negligence of the parties hereto:
(a) damages to goods, wares, merchandise and loss of business
in, upon or about the Leased Premises and injury to Lessee, its agents,
employees, invitees or third persons, in, upon, or about the Leased Premises;
and
(b) (notwithstanding anything to the contrary contained in
this Lease, including, without limitation, the definition of "Common Area Costs"
in Section 8.4, which includes "policing") damages to goods, wares, merchandise
and loss of business in, upon or about the Leased Premises or the Complex, and
injury to Lessee, its agents, employees, invites or third persons in, upon or
about the Leased Premises or the Complex, where such damage or injury results
from Lessor's failure to police or provide security for the Complex or Lessor's
negligence in connection therewith.
Lessee expressly acknowledges and agrees that the provisions of Section
19.6(b) below apply fully with respect to the matters waived pursuant to this
Section 14.6, and, for such purpose, the term
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"Released Matters," as used in Section 19.6(b), shall be deemed to include the
matters waived pursuant to this Section 14.6.
14.7 REFERENCES.
Wherever int his Article the term Lessor or Lessee is used and such
party is to receive the benefit of a provision contained in this Article, such
term shall refer not only to that party but also to its officers, directors,
shareholders, employees, partners, contractors, agents and mortgagees or other
lienholders.
15. DESTRUCTION
15.1 RIGHTS OF TERMINATION.
In the event the Leased Premises suffers (a) an uninsured property loss
(as hereinafter defined) or (b) a property loss which cannot be repaired within
one hundred twenty (120) days from the date of destruction under the laws and
regulations of state, federal, county or municipal authorities, or other
authorities with jurisdiction, Lessor may terminate this Lease as at the date of
the damage upon written notice to Lessee following the property loss. In the
event of a property loss to the Leased Premises which cannot be repaired within
one hundred ninety five (195) days of the occurrence thereof, Lessee shall have
the right to terminate the Lease by written notice to Lessor within twenty (20)
days following notice from Lessor that the time for restoration shall exceed one
hundred ninety five (195) days. For purposes of this Lease, the term "uninsured
property loss" shall mean any loss arising from a peril not covered by the
standard form of "All Risk" property insurance policy.
15.2 REPAIRS
In the event of a property loss which may be repaired within one
hundred twenty (120) days from the date of the damage, or, in the alternative,
in the event the parties do not elect to terminate this Lease under the terms of
Section 15.1 above, then this Lease shall continue in full force and effect and
Lessor shall forthwith undertake to make such repairs to reconstitute the Leased
Premises to as near the condition as existed prior to the property loss as
practicable. Such partial destruction shall in no way annul or void this Lease
except that Lessee shall be entitled to a proportionate reduction of Minimum
Rent following the property loss and until the time the Leased Premises are
restored. Such reduction shall be an amount which reflects the degree of
interference with lessee's business. So long as Lessee conducts its business in
the Leased Premises, there shall be no abatement until the parties agree on the
amount thereof. If the parties cannot agree within forty-five (45) days of the
property loss, the matter shall be submitted to arbitration under the rules of
the American Arbitration Association. Upon the resolution of the dispute, the
settlement shall be retroactive and Lessor shall within ten (10) days thereafter
refund to Lessee any sums due in respect of the reduced rental from the date of
the property loss. Lessor's obligations to restore shall in no way include any
construction originally performed by lessee or subsequently undertaken by
Lessee, but shall include solely that property constructed by Lessor prior to
commencement of the Term.
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15.3 REPAIR COSTS.
The cost of any repairs to be made by Lessor, pursuant to Section 15.2
of this Lease, shall be paid by Lessor utilizing available insurance proceeds.
Lessee shall reimburse Lessor upon completion of the repairs for any deductible
for which no insurance proceeds will be obtained under Lessor's insurance
policy, or if other premises are also repaired, a pro rata share based on total
costs of repair equitably apportioned to the Leased Premises. Lessee shall,
however, not be responsible to pay any deductible or its share of any deductible
to the extent that Lessee's payment would be in excess of $ $10,000 if Lessee's
consent has not been received by Lessor, unless such denial of consent by Lessee
is unreasonable.
15.4 WAIVER.
Lessee hereby waives all statutory or common law rights of termination
in respect to any partial destruction or property loss which Lessor is obligated
to repair or may elect to repair under the terms of this Article. Further, in
event of a property loss occurring during the last two (2) years of the original
Term hereof or of any extension, Lessor need not undertake any repairs and may
cancel this Lease unless Lessee has the right under the terms of this Lease to
extend the Term for an additional period of at least five (5) years and does so
within thirty (30) days of the date of the property loss.
15.5 LESSOR'S ELECTION.
In the event that the Complex or Building in which the Leased Premises
is situated be destroyed to the extent of not less than thirty-three and
one-third percent (33-1/3%) of the replacement cost thereof, Lessor may elect to
terminate this Lease, whether the Leased Premises be injured or not, in the same
manner as in Section 15.1 above. At all events, a total destruction of the
Complex of which the Leased Premises form a part, or the Leased Premises itself,
shall terminate this Lease.
16. ACCORD AND SATISFACTION
16.1 ACCEPTANCE OF PAYMENT.
No payment by Lessee or receipt by Lessor of a lesser amount of Minimum
Rent or any other sum due hereunder shall be deemed to be other than on account
of the earliest due rent or payment, nor shall any endorsement or statement on
any check or any letter accompanying any such check or payment be deemed an
accord and satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such rent or payment or
pursue any other remedy available in this Lease, at law or in equity. Lessor may
accept any partial payment from Lessee without invalidation of any contractual
notice required to be given therein (to the extent such contractual notice is
required) and without invalidation of any notice required to be given pursuant
to California Code of Civil Procedure Section 1161, et seq., or of any successor
statute thereto.
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17. SECURITY DEPOSIT
17.1 PAYMENT ON LEASE EXECUTION.
Lessee shall pay Lessor upon execution hereof the sum specified in
Section 1.7. This sum is designated as a Security Deposit and shall remain the
sole and separate property of Lessor until actually repaid to Lessee (or at
Lessor's option the last assignee, if any, of Lessee's interest hereunder), said
sum not being earned by Lessee until all conditions precedent for its payment to
Lessee have been fulfilled. As this sum both in equity and at law is Lessor's
separate property, Lessor shall not be required to (1) keep said deposit
separate from its general accounts, or (2) pay interest, or other increment for
its use. If Lessee fails to pay rent or other charges when due hereunder, or
otherwise defaults with respect to any provision of this Lease, inclining and
not limited to Lessee's obligation to restore or clean the Leased Premises
following vacation thereof, Lessee, at Lessor's election, shall be deemed not to
have earned the right to repayment of the Security Deposit, or those portions
thereof used or applied by Lessor for the payment of any rent or other charges
in default, or for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default, or to compensate Lessor for any loss or
damage which Lessor may suffer thereby. Lessor may retain such portion of the
Security Deposit as it reasonably deems necessary to restore or clean the Leased
Premises following vacation by Lessee. The Security Deposit is not to be
characterized as rent until and unless so applied in respect of a default by
Lessee.
17.2 RESTORATION OF DEPOSIT.
If Lessor elects to use or apply all or any portion of the Security
Deposit as provided in Section 17. 1, Lessee shall within ten (10) days after
written demand therefor pay to Lessor in cash, an amount equal to that portion
of the Security Deposit used or applied by Lessor, and Lessee's failure to so do
shall be a material breach of this Lease. The ten (10) day notice specified in
the preceding sentence shall insofar as not prohibited by law, constitute full
satisfaction of notice of default provisions required by law or ordinance.
18. USE
18.1 PERMITTED USE.
The Leased Premises may be used and occupied only for the purposes
specified in Section 1.8 hereof, and for no other purpose or purposes. Lessee
shall promptly comply with all laws, ordinances, orders and regulations
affecting the Leased Premises, their cleanliness, safety, occupation and rise.
18.2 HAZARDOUS ACTIVITIES.
Lessee shall not engage in any activities or permit to be kept, used,
or sold in or about the Leased Premises, any article which may be prohibited by
the standard form of fire insurance policies.
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Lessee shall, at its sole cost and expense, comply with any and all
requirements, pertaining to the Leased Premises, of any insurance organization
or company, necessary for the maintenance of reasonable fire and public
liability insurance covering the Building and appurtenances.
19. COMPLIANCE WITH LAWS AND REGULATIONS
19.1 LESSEE'S OBLIGATIONS. Lessee, shall, at its sole cost and expense,
comply with all of the requirements of all municipal, state and federal
authorities now in force, or which may hereafter be in force, pertaining to the
Leased Premises, and shall faithfully observe in the rise of the Leased premises
all municipal ordinances and state and federal statutes and regulations now in
force or which may hereafter be in force, including, without limitation,
"Environmental Laws" (as hereinafter defined), and the Americans with
Disabilities Act, 42 U.S.C. ss.ss. 12101-12213 (and any rules, regulations,
restrictions, guidelines, requirements or publications promulgated or published
pursuant thereto, collectively herein referred to as the "ADA"), whether or not
any of the foregoing were foreseeable or unforeseeable at the time of the
execution of this Lease. Lessee's obligation to comply with and observe such
requirements, ordinances, statutes and regulations shall apply to the extent
that such requirements, ordinances, statutes and regulations regulate or relate
to Lessee's particular use or occupancy of the Leased Premises or to any
employee, vendor or invitee of Lessee, and regardless of the cost thereof. The
judgment of any court of competent jurisdiction, or the admission of Lessee in
any action or proceeding against Lessee, whether Lessor be a party thereto or
not, that any such requirement, ordinance, statute or regulation pertaining to
the Leased Premises has been violated, shall be conclusive of that fact as
between Lessor and Lessee. Within five (5) days after receipt of notice or
knowledge of any violation or alleged violation of any Environmental Law(s)
and/or the ADA pertaining to the Complex, any governmental or regulatory
proceedings, investigations, sanctions and/or actions threatened or commenced
with respect to any such violation or alleged violation, and any claim made or
commenced with respect to such violation or alleged violation, Lessee share
notify Lessor thereof and provide Lessor with copies of any written notices or
information in Lessee's possession.
19.2 CONDITION OF LEASED PREMISES. Lessee hereby accepts the Leased
Premises in the condition existing as of the date of occupancy, subject to the
provisions of Exhibit C hereto and to all applicable zoning, municipal, county
and state laws, ordinances, rules, regulations, orders, restrictions of record,
and requirements in effect during the Term or any part of the Term hereof
regulating the Leased Premises, and without representation, warranty or covenant
by Lessor, express or implied, as to the condition, habitability or safety of
the Leased Premises, the suitability or fitness thereof for their intended
purposes, or any other matter, except as specifically set forth therein.
19.3 HAZARDOUS MATERIALS.
(a) Hazardous Materials Defined. As used herein, the Term
"Hazardous Materials" shall mean any wastes, materials or substances (whether in
the form of liquids, solids or gases, and whether or not air-borne), which are
or are deemed to be pollutants or contaminants, or which are or are deemed to be
hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
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injurious, or which present a risk, to public health or to the environment, or
which are or may become regulated by or under the authority of any applicable
local, state or federal laws, judgments, ordinances, orders, rules, regulations,
codes or other governmental restrictions, guidelines or requirements, any
amendments or successor(s) thereto, replacements thereof or publications
promulgated pursuant thereto (collectively "Environmental Laws"), including,
without limitation, any waste, material or substance which is:
(i) defined as "hazardous waste," "extremely
hazardous waste," or "restricted hazardous waste" under Sections 25115, 25117 or
25122.7, or listed pursuant to Section 25 140, of the California Health and
Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law);
(ii) 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);
(iii) 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);
(iv) 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);
(v) defined as a "waste" or "hazardous substance"
under Section 13050 of the California Water Code, Division 7, Chapter 2
(Porter-Cologne Water Quality Control Act);
(vi) listed as a chemical known to the State of
California to cause cancer or reproductive toxicity pursuant to Section 25249.8
of the California Health and Safety Code, Division 20, Chapter 6.6 (Safe
Drinking Water and Toxic Enforcement Act of 1986);
(vii) defined as a "hazardous substance" or
"pollutant or contaminant" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss. 9601 et seq.;
(viii) listed as an "extremely hazardous substance,"
"hazardous chemical," or "toxic chemical" pursuant to the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. ss. 11001 et seq.;
(ix) listed as a "hazardous substance" in the United
States Department of Transportation Table, 49 C.F.R. 172.101 and amendments
thereto, or by the Environmental Protection Agency (or any successor agency) in
40 C.F.R. Part 302 and amendments thereto;
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(x) defined, listed or designated by regulations
promulgated pursuant to any Environmental Law; or
(xi) any of the following: a pesticide; a flammable
explosive; petroleum, including crude on or any fraction thereof; asbestos or
all asbestos-containing material; a polychlorinated biphenyl; a radioactive
material; or urea formaldehyde.
In addition to the foregoing, the term "Environmental Laws" shall be
deemed to include, without limitation, local, state and federal laws, judgments,
ordinances, orders, rules, regulations, codes and other governmental
restrictions, guidelines and requirements, any amendments and successors
thereto, replacements thereof and publications promulgated pursuant thereto,
which deal with or otherwise in any manner relate to, air or water quality, air
emissions, soil or ground conditions or other environmental matters of any kind.
(b) Use, etc., of Hazardous Materials. Lessee agrees that
during the Term, there shall be no use, presence, disposal, storage, generation,
leakage, treatment, manufacture, import, handling, processing, release, or
threatened release of Hazardous Materials on, from or under the Leased Premises
by Lessee, its employees, agents, representatives, contractors, invitees,
subtenants and/or assigns (collectively, "Lessee's Parties"). Lessee shall not
be entitled to install any tanks under, on or about the Leased Premises for the
storage of Hazardous Materials without the express written consent of Lessor,
which may be given or withheld in Lessor's sole arbitrary judgment. The use,
presence, disposal, storage, generation, leakage, treatment, manufacture,
import, handling, processing, release or threatened release of Hazardous
Materials by Lessee's Parties are sometimes hereinafter individually or
collectively referred to as "Hazardous Use."
(c) Hazardous Materials Report; When Required, In the event
that Lessor consents in writing to Lessee's Hazardous Use in the Leased
Premises, Lessee shall submit to Lessor a written report with respect to
Hazardous Materials ("Report") in the form prescribed in subparagraph (d) below
on the following dates:
(i) Within ten (10) days prior to the commencement of
any Hazardous Use;
(ii) Within ten (10) days after each anniversary of
any Hazardous Use;
(iii) At any time within ten (10) days after written
request by Lessor, and
(iv) At any time when there has been or is planned
any condition which constitutes or would constitute a change in the information
submitted in the most recent Report, including any notice of violation as
referred to in subparagraph (d)(vii) below.
(d) Hazardous Materials Report; Contents. The Report shall
contain, without limitation, the following information:
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(i) Whether on the date of the Report and (if
applicable) during the period since the last Report there has been any Hazardous
Use on, from or under the Leased Premises.
(ii) If there was such Hazardous Use, the exact
identify of the Hazardous Materials, the dates upon which such materials were
brought upon the Leased Premises, the dates upon which the Hazardous Materials
were removed therefrom, and the quantity, location, use and purpose thereof.
(iii) If there was such Hazardous Use, any
governmental permits maintained by Lessee with respect to such Hazardous
Materials, the issuing agency, original date of issue, renewal dates (if any)
and expiration date. Copies of any such permits and applications therefor shall
be attached,
(iv) If there was such Hazardous Use, any
governmental reporting or inspection requirements with respect to such Hazardous
Materials, the governmental agency to which reports are made and/or which
conducts inspections, and the dates of all such reports and/or inspections (if
applicable) since the last Report. Copies of any such Reports shall be attached.
(v) If there was such Hazardous Use, identification
of any operation or business plan prepared for any government agency with
respect to Hazardous Use.
(vi) Any liability insurance carried by Lessee with
respect to Hazardous Materials, the insurer, policy number, date of issue,
coverage amounts, and date of expiration. Copies of any such policies or
certificates of coverage shall be attached.
(vii) Any notices of violation of Environmental Laws,
written or oral, received by Lessee from any governmental agency since the last
Report, the date, name of agency, and description of violation. Copies of any
such written notices shall be attached.
(viii) Any knowledge, information or communication
which Lessee has acquired or received relating to (x) any enforcement, cleanup,
removal or other governmental or regulatory action threatened or commenced
against Lessee or with respect to the Leased Premises pursuant to any
Environmental Laws; (y) any claim made or threatened by any person or entity
against Lessee or the Leased Premises on account of any alleged loss or injury
claimed to result from any alleged Hazardous Use on or about the Leased
Premises; or (z) any report, notice or complaint made to or filed with any
governmental agency concerning any Hazardous Use on or about the Leased
Premises. The Report shall be accompanied by copies of any such claim, report,
complaint, notice, warning or other communication that is in the possession of
or is available to Lessee.
(ix) Such other pertinent information or documents as
are requested by Lessor in writing.
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(e) Release of Hazardous Materials; Notification and Cleanup.
If at any time during the Term Lessee knows or believes that (i) any Hazardous
Materials have been or may be released onto the Leased Premises or the Complex
by Lessee's Parties, or (ii) any Hazardous Materials brought onto the Leased
Premises or the Complex by or for the benefit of Lessee's Parties have been or
may be released onto the Leased Premises or the Complex by ally party
whatsoever, then Lessee shall immediately, either prior to the release or
following the discovery thereof by Lessee, give verbal and follow-up written
notice of that condition to Lessor. Lessee covenants to investigate, clean up
and otherwise remediate any such release of Hazardous Materials at Lessee's cost
and expense; such investigation, clean up and remediation shall be performed
only after Lessee has obtained Lessor's written consent, which shall not be
unreasonably withheld; provided, however, that Lessee shall be cited to respond
immediately to an emergency without first obtaining Lessor's written consent.
All cleanup and remediation shall be done in compliance with Environmental Laws
and to the reasonable satisfaction of Lessor. Notwithstanding the foregoing,
whether or not such work is prompted by the foregoing notice from Lessee or is
undertaken by Lessor for any other reason whatsoever, Lessor shall have the
right, but not the obligation, in Lessor's sole and absolute discretion,
exercisable by written notice to Lessee at any time, to undertake within or
outside the Leased Premises all or any portion of any such investigation,
clean-up or remediation with respect to Hazardous Materials (or, once having
undertaken any of such work, to cease same, in which case Lessee shall perform
the work), all at Lessee's cost and expense, which shall be paid by Lessee as
additional rent within ten (10) days after receipt of written request therefor
by Lessor (and which Lessor may require to be paid prior to commencement of any
work by Lessor). No such work by Lessor shall create any liability on the part
of Lessor to Lessee or any other party in connection with such Hazardous
Materials or constitute an admission by Lessor of any responsibility with
respect to such hazardous Materials. It is the express intention of the parties
hereto that Lessee shall be liable under this Section 19.3(e) for any and all
conditions covered hereby which were caused or created by (a) any Hazardous
Materials brought onto the Leased Premises or the Complex by or for the benefit
of Lessee's Parties, whether released by Lessee's Parties or by third parties,
or (b) Lessee's Parties. Lessee shall not enter into any settlement agreement,
consent decree or other compromise with respect to any claims relating to any
(1) any Hazardous Materials brought onto the Leased Premises or the Complex by
or for the benefit of Lessee's Parties, or (2) any Hazardous Materials released
onto the Leased Premises or the Complex by Lessee's Parties, without first (A)
notifying Lessor of Lessee's intention to do so and affording Lessor the
opportunity to participate in any such proceedings, and (B) obtaining Lessor's
written consent.
(f) INSPECTION AND TESTING BY LESSOR. Lessor shall have the
right at all times during the Term to (i) inspect the Leased Premises, as well
as Lessee's books and records relating to Hazardous Materials, and to (ii)
conduct tests and investigations to determine whether Lessee is in compliance
with the provisions of this Section. Except in case of emergency, Lessor shall
give reasonable notice to Lessee before conducting any inspections, tests, or
investigations. The cost of all such inspections, tests and investigations shall
be borne by Lessee, if such test or inspections reveal a violation by Lessee's
Parties of the provisions of this Article 19. Neither any action nor inaction on
the part of Lessor pursuant to this Section 19.3(f) shall be deemed in any way
to release Lessee from,
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or in any way modify or alter, Lessee's responsibilities, obligations, and/or
liabilities incurred pursuant to Section 19.3 hereof.
19.4 INDEMNITY. Lessee shall indemnify, hold harmless, and, at Lessor's
option (with such attorneys as Lessor may approve in advance and in writing),
defend Lessor and Lessor's officers, directors, shareholders, trustees,
partners, employees, contractors, agents and mortgagees or other lien holders,
from and against any and all claims, demands, expenses, actions, judgments,
damages (whether consequential, direct or indirect, known or unknown, foreseen
or unforeseen), penalties, fines, liabilities, losses of every kind and nature
(including, without limitation, property damage, diminution in value of Lessor's
interest in the Leased Premises or the Complex, damages for the loss or
restriction on use of any space or amenity within the Leased Premises or the
Complex, damages arising from any adverse impact on marketing space in the
Complex, sum paid in settlement of claims and any costs and expenses associated
with injury, illness or death to or of any person), suits, administrative
proceedings, costs and fees, including, but not limited to, attorneys' and
consultants' fees and expenses, and the costs of cleanup, remediation, removal
and restoration (all of the foregoing being hereinafter sometimes collectively
referred to as "Losses"), arising from or related to (i) any violation or
alleged violation of any of the requirements, ordinances, statutes, regulations
or other laws referred to in this Article by Lessee's Parties, including,
without limitations the Environmental Laws and ADA, or (ii) any breach of the
provisions of this Article by Lessee's parties, or (iii) any Hazardous Use on,
about or from the Leased Premises by Lessee's Parties, or (iv) any release of
Hazardous Materials brought onto the Leased Premises or the Complex by or for
the benefit of Lessee's Parties, whether released by Lessee or by third parties
unrelated to Lessee. Lessee warrants that it is leasing the Leased Premises
"as-is, where-is," that it has thoroughly inspected the Leased Premises prior to
execution of this Lease, and that it intends to act as an insurer with respect
to any Hazardous Use on, under or about the Leased Premises by Lessee's Parties.
19.5 INDOOR AIR QUALITY. To prevent the generation, growth or deposit
of any mold, mildew, bacillus, virus, pollen or other microorganism
(collectively, "Biologicals") and the deposit, release or circulation of any
indoor contaminants, including, but not limited to, emissions from paint, carpet
and drapery treatments, cleaning, maintenance and construction materials and
supplies, pesticides, pressed wood products, insulation, tobacco and other
materials and products (collectively with Biologicals, "Contaminants"), that
could adversely affect the health, safety or welfare of any tenant, employee, or
other occupant of the Complex or their invitees (each, an "Occupant"), Lessee
shall, at Lessee's sole cost and expense, at all times during the Term (i)
maintain, operate and repair the HVAC system servicing the Leased Premises (to
the extent that Lessee is otherwise obligated to perform such maintenance,
operation and repair pursuant to this Lease) in a manner consistent with
preventing or minimizing the generation, growth, circulation, release or deposit
of any Contaminants, (ii) maintain the humidity level and the air exchange rate
within the Leased Premises (to the extent that Lessee has control thereof) at a
level recommended to prevent or minimize the growth of any Biologicals and the
circulation of any other Contaminants, (iii) maintain, operate and repair the
Leased Premises in such a manner to prevent or minimize the accumulation of
stagnant water all moisture in planters, kitchen appliances and vessels,
carpeting, insulation, water coolers and any other locations where stagnant
water and moisture could accumulate, and (iv) otherwise maintain, operate
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and repair the Leased Premises to prevent the generation, growth, deposit,
release or circulation of any Contaminants. If any governments entity or any
Occupant alleges that health, safety or welfare has been or could be adversely
affected by any such Contaminants, Lessee shall notify Lessor in writing within
twenty-four (24) hours of the time the allegation is made. Lessor may then elect
to engage the services of an industrial hygiene testing laboratory (or
alternatively or concurrently require Lessee to do the same) to determine
whether the cause of any alleged adverse health effect is or could be
attributable to any Contaminants present within the Leased Premises. Lessee
shall be responsible for all such testing costs and for any consequential
damages and costs (including, without limitations any third-party claims, loss
of rental, remediation, removal and/or abatement costs, and increases in
insurance premiums) resulting from Lessee's failure to comply in whole or in
part with the terms of this Section 19.5. The indemnity set forth in Section
19.4 above shall apply to Lessee's failure to comply with any of the terms of
this Section.
19.6 RELEASE AND ASSUMPTION OF RISK.
(a) Lessee, for itself, and its officers, directors,
shareholders, partners, agents, contractors, attorneys, brokers, servants,
employees, sublessee, lessees, invitees, concessionaires, licensees and
representatives (hereinafter referred to as "Releasors"), hereby waives,
releases, acquits and forever discharges Lessor and its officers, directors,
trustees, shareholders, partners, agents, contractors, attorneys, brokers,
servants, employees, lessees, invitees, licensees and representatives
(hereinafter referred to as "Releasees") of and from any and all Losses, which
are in any way connected with, based upon, related to or arising out of (i) any
Hazardous Use or Hazardous Materials on or about the Leased Premises or the
Complex, (ii) any violation by or relating to the Leased Premises or the Complex
(or the ownership, use, condition, occupancy or operation thereof), or by the
Releasors or any other persons or entities, of any Environmental or Wetlands
Laws affecting the Leased Premises or the Complex, or (iii) any investigation,
inquiry, order, hearing, action or other proceeding by or before any
governmental agency or any court in connection with any of the matters referred
to in clauses (i) or (ii) above (collectively, the "Released Matters"), except
to the extent caused by the gross negligence or wilful misconduct of the
Releasees. Releasors hereby expressly assume any and all risk of Losses based on
or arising out of or pertaining to the Released Matters.
(b) Lessee agrees, represents and warrants that the Released
Matters are not limited to matters which are known, disclosed or foreseeable,
and Lessee waives any and all rights and benefits which are conferred upon
Lessee by virtue of the provisions of Section 1542 of the California Civil Code,
which provides:
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 THIS
SETTLEMENT WITH THE DEBTOR.
Lessee agrees, represents and warrants that it is familiar with, has
read, understands, and has consulted legal counsel of its choosing with respect
to California Civil Code Section 1542 and Lessee
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realizes and acknowledges that factual matters now unknown to it may have given,
or may hereinafter give, rise to Losses which are presently unknown,
unanticipated and unsuspected. Lessee further agrees, represents and warrants
that the provisions of this Section 19.6 have been negotiated and agreed upon in
light of that realization and that Lessee nevertheless hereby intends to
release, discharge and acquit the Releasees from any such unknown Losses which
are in any way related to this Lease or the Complex.
20. UTILITIES
20.1 PAYMENT BY LESSEE.
Lessee, from the time it first enters the Leased Premises for the
purpose of setting fixtures, or from the commencement of this Lease, whichever
date shall first occur, and throughout the Term, shall pay all charges including
connection fees for water, gas, heat, sewer, power, telephone services and any
other utility supplied to or consumed in or on the Leased Premises. Lessee shall
not allow refuse, garbage or trash to accumulate outside of the Leased Premises
except on the day of scheduled scavenger pick-tip services, and then only in
areas designated for that purpose by Lessor. Lessor shall not be responsible or
liable for any interruption in utility services, nor shall such interruption
affect the continuation or validity of this Lease. Lessor does not warrant that
any of the utilities supplied to the Leased Premises will be free of
interruption or that any of the utility systems serving the Complex will be free
from the need for maintenance, repairs and/or replacements. Lessee acknowledges
that any one or more services may be suspended or reduced by reason of repairs,
alterations or improvements necessary to be made, by strikes or accidents, by
any cause beyond the reasonable control of Lessor, or by orders or regulations
of any federal, state, county or municipal authority. In addition, Lessor shall
have no liability for damages arising from, and Lessor does not warrant that
Lessee's use of any Lines will be from, (a) any eavesdropping or wiretapping by
unauthorized parties, (b) any failure of the Lines to satisfy Lessee's
requirements, or (c) any shortages, failures, variations, interruptions,
disconnections, loss or damage caused by installation, maintenance, replacement,
use or removal of Lines by or for other occupants of the Complex, by any failure
of the environmental conditions or the power supply for the Building to conform
to any requirements for the Lines or any associated equipment or any other
problems associated with any Lines by any other cause.
20.2 SEPARATE METERS.
Lessor reserves the right to install separate meters for any utility
servicing the Leased Premises for which a meter is not presently installed, in
which event Lessee shall make payments, when due, directly to the utility
involved.
20.3 JOINT METERS.
If any utility services are not separately metered to Lessee, Lessee
shall pay a proportion to be determined by Lessor of all charges jointly metered
with other leased premises or occupants in the
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Complex. All payments to Lessor in respect thereof shall be due within ten (10)
days after receipt of the billing by Lessee.
21. ALTERATIONS
21.1 CONSENT OF LESSOR; OWNERSHIP.
Lessee shall not make, or suffer to be made, any alterations to the
Leased Premises, the Building, or the Complex, and/or systems and facilities
therein, or any part thereof, without the written consent of Lessor first had
and obtained. Any additions to or alterations of the Leased Premises, the
Building, or the Complex, and/or systems and facilities therein, (except trade
fixtures) shall, immediately upon being made, constitute a part of the realty
and Lessor's property, and shall, at the expiration or earlier termination of
this Lease, remain upon the Leased Premises without compensation to Lessee.
Except as otherwise provided in this Lease, Lessee shall have the right to
remove its trade fixtures placed upon the Leased Premises provided that Lessee
restores the Leased Premises as indicated below. Any and all costs incurred by
Lessor, whether in complying with laws, governmental requirements or otherwise,
as a result of any "alterations" (as hereinafter defined), or as a result of
request by Lessee for increased telephone or other utility capacity above that
presently existing (or, in the event the Building is to be constructed or
substantially altered by Lessor prior to the delivery date, above that which is
planned by Lessor for the Building) shall be paid by Lessee within ten (10) days
after demand therefor by Lessor.
21.2 REQUIREMENTS.
Any alterations, additions or installations performed by Lessee
(hereinafter collectively "alterations") shall be subject to strict conformity
with the following requirements:
(a) All alterations shall be at the sole cost and expense of
Lessee;
(b) Prior to commencement of any work of alterations Lessee
shall submit detailed plans and specifications, including working drawings
(hereinafter referred to as "Plans"), of the proposed alterations, which shall
be subject to the consent of Lessor in accordance with the terms of Section 2 1.
1 above;
(c) Following approval of the Plans by Lessor, Lessee shall
give Lessor at least ten (10) days' prior written notice of commencement of work
in the Leased Premises so that Lessor may post notices of non-responsibility in
or upon the Leased Premises as provided by law;
(d) No alterations shall be commenced without Lessee having
previously obtained all appropriate permits and approvals required by and of
governmental agencies;
(e) All alterations shall be performed in a skillful and
workmanlike manner, consistent with the best practices and standards of the
construction industry, and pursued with
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diligence in accordance with fire Plans previously approved by Lessor and in
full accord with all applicable laws and ordinances. All material, equipment,
and articles incorporated in the alterations are to be new and of recent
manufacture and of the most suitable grade for the purpose intended;
(f) Lessee must obtain the prior written approval from Lessor
for Lessee's contractor prior to commencement of the work. Lessor may require
that Lessee use subcontractors designated by Lessor as to specified portions of
the work. Lessee's contractor shall maintain all of the insurance reasonably
required by Lessor, including, without limitation, commercial general liability,
workers' compensation, builder's risk and course of constriction insurance. The
limits of such insurance shall be the same as those specified in Article 11;
(g) As a condition of approval of the alterations, Lessor may
require performance and labor and materialmen's payment bonds issued by a surety
approved by Lessor, in a sum equal to the cost of the alterations guarantying
the completion of the alterations free and clear of all liens and other charges
in accordance with the Plans. Such bonds shall name Lessor as beneficiary;
(h) The alterations must be performed in a manner such that
they will not interfere with the quiet enjoyment of the other lessees in the
Complex;
(i) Lessor shall have the right to condition any approval of
the alterations upon (i) submission by Lessee of a Report with respect to
Hazardous Materials, and/or (ii) the performance by Lessee at Lessee's cost and
expense of such investigation, clean-up and remediation with respect to
Hazardous Materials as Lessor may request, in Lessor's sole and absolute
discretion; provided, however, that Lessor shall have the right, but not the
obligation, to undertake all or any portion of such investigation, cleanup or
remediation at Lessee's cost and expense in accordance with the provisions of
Section 19.3(e) above. Lessee acknowledges and agrees that Lessor shall have the
right, in its sole and absolute discretion, to disapprove the making of any such
alterations based upon the results of any investigation with respect to
Hazardous Materials.
21.3 LIENS.
Lessee shall keep the Leased Premises and the Complex in which the
Leased Premises are situated free from any liens arising out of any work
performed, materials furnished or obligations incurred by Lessee. In the event a
mechanic's or other lien is filed against the Leased Premises or the Complex of
which the Leased Premises forms a part as a result of a claim arising through
Lessee, Lessor may demand that Lessee furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to at least one hundred fifty percent
(150%) of the amount of the contested lien claim or demand, indemnifying Lessor
against liability for the same and holding the Leased Premises free from the
effect of such lien or claim. Such bond must be posted within ten (10) days
following notice from Lessor. In addition, Lessor may require Lessee to pay
Lessor's attorneys' fees and costs in participating in any action to foreclose
such lien if Lessor shall decide it is to its best interest to do so. Lessor may
pay the claim prior to the enforcement thereof, in which event Lessee shall
reimburse
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Lessor in full, including attorneys' fees, for any such expense, as additional
rent, with the next due rental.
21.4 RESTORATION
Lessee shall return the Leased Premises to Lessor at the expiration or
earlier termination of this Lease in good and sanitary order, condition and
repair, free of rubble and debris, broom clean, reasonable wear and fear
excepted. However, Lessee shall ascertain from Lessor at least thirty (30) days
prior to the termination of this Lease, whether Lessor desires the Leased
Premises, or any part thereof, restored to its condition prior to the making of
permitted alterations, installations and improvements, and if Lessor shall so
desire, then Lessee shall forthwith restore said Leased Premises or the
designated portions thereof, as the case may be, to its original condition,
entirely at its own expense, excepting normal wear and tear. All damage to the
Leased Premises caused by the removal of such trade fixtures and other personal
property that Lessee is permitted to remove under the terms of this Lease and/or
such restoration shall be repaired by Lessee at its sole cost and expense prior
to termination.
22. MAINTENANCE AND REPAIRS
22.1 OBLIGATIONS OF LESSOR AND LESSEE.
Lessee shall, at its sole cost and expense, keep and maintain the
Leased Premises and appurtenances, and every part thereof in good, clean and
sanitary order, condition and repair including all necessary replacements, and
shall maintain the appearance of the Leased Premises in a manner consistent with
the character, use and appearance of the Complex. Subject to the obligations of
Lessee pursuant to this Article and pursuant to Article 19 above, Lessor shall
perform all necessary repairs, maintenance and replacement of the foundation,
roof and structural parts of the Building. Lessee shall, at its sole cost, keep
and maintain all utilities, fixtures and mechanical equipment used by Lessee in
good order, condition and repair. In the case of equipment installed by Lessor
for Lessee, or installed by Lessee and being or to become the property of
Lessor, such as heating, ventilating and air conditioning equipment, or other
mechanical equipment, Lessee shall maintain a service contract for its regular
maintenance with a service company acceptable to Lessor, at Lessee's expense.
Evidence of such a service contract will be provided to Lessor at its request.
Prior to commencement of any repairs, Lessee shall give Lessor at least ten (10)
days' prior written notice thereof so that Lessor may post notices of
non-responsibility in or upon the Leased Premises as provided by law. Lessee
must obtain the prior written approval from Lessor for Lessee's contractor
before the commencement of the repair. Lessor may require that Lessee use a
specific contractor for certain types of repairs. Notwithstanding the foregoing,
Lessee shall not make any repairs to the equipment, facilities or systems of the
Building or Complex which are outside of the Leased Premises or which serve
other portions of the Building and/or Complex.
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22.2 HVAC SYSTEM.
Notwithstanding the provisions of the preceding Section, Lessor may
elect at any time upon written notice to Lessee to perform the maintenance of
the heating, ventilating and air conditioning system (hereinafter "HVAC") for
the account of Lessee. In such event, Lessee shall pay the full cost of the
maintenance contract for the HVAC in the Leased Premises within ten (10) days of
receipt of billing therefor from Lessor, as well as for costs of repair or
replacement of parts thereof as necessary, in the reasonable judgment of Lessor.
Lessor may, at its option, elect to have the HVAC in the Leased Premises
maintained in common with other equipment in the Complex. In such event Lessee
shall pay its pro rata share of such maintenance costs which share shall be
established in air equitable manner by Lessor based upon the relative tonnage in
the Leased Premises compared to the total tonnage under contract, or some other
reasonable means of allocation as selected by Lessor. Lessor's good faith
judgment as to the allocation of the charges described in this paragraph shall
be conclusive. Included in the charges to be allocated to Lessee shall be,
without limitation: the maintenance contract upon the HVAC, extended warranties
and any repairs and replacements not covered by the maintenance contract or
warranty. Lessor may elect to replace the HVAC system, if necessary, and in such
event the cost thereof shall be amortized in the manner provided in this Lease
with respect to amortization of other Capital Costs, Lessee shall pay to Lessor,
within ten (10) days after receipt of billing, its pro rata share of such
amortization, established on all equitable basis according to the relative
tonnage in the Leased Premises as compared to the entire area served by the
system.
22.3 CONDITION OF PREMISES.
Except as to the construction obligations of Lessor, if any, stated in
Exhibit C to this Lease, Lessee shall accept the Leased Premises in "as is"
condition as of the date of execution of this Lease by Lessee, and Lessee
acknowledges that the Leased Premises in such condition are in good and sanitary
order, condition and repair.
22.4 WAIVER.
Lessee waives all rights it may have under law to make repairs at
Lessor's expense.
23. CONDEMNATION
23.1 DEFINITIONS.
(a) "Condemnation" means (i) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a condemnor and/or (ii) a
voluntary sale or transfer by Lessor to any condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
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(b) "Date of taking" means the date the condemnor has the
right to possession of the property being condemned.
(c) "Award" means all compensation, stairs or anything of
value awarded, paid or received on a total or partial condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of condemnation.
23.2 TOTAL TAKING.
If the Leased Premises are totally taken by condemnation, this Lease
shall terminate on the date of taking.
23.3 PARTIAL TAKING; COMMON AREAS.
(a) If any portion of the Leased Premises is taken by
condemnation, this Lease shall remain in effect, except that Lessee can elect to
terminate this Lease if 33-1/3% or more of the total number of square feet in
the Leased Premises is taken.
(b) If any part of the Common Areas of the Complex is taken by
condemnation, this Lease shall remain in full force and effect so long as there
is no material interference with the access to the Leased Premises, except that
if thirty percent (30%) or more of the Common Areas is taken by condemnation,
either party shall have the election to terminate this Lease pursuant to this
Section.
(c) If fifty percent (50%) or more of the Building in which
the Leased Premises are located is taken, Lessor shall have the election to
terminate this Lease in the manner prescribed herein.
23.4 TERMINATION OR ABATEMENT.
If either party elects to terminate this Lease under the provisions of
Section 23.3 (such party is hereinafter referred to as the "Terminating Party"),
it must terminate by giving notice to the other party (the "Nonterminating
Party") within thirty (30) days after the nature and extent of the taking have
been finally determined (the "Decision Period"). The Terminating Party shall
notify the Nonterminating Party of the date of termination, which date shall not
be earlier than sixty (60) days after the Terminating Party has notified the
Nonterminating Party of its election to terminate nor later than the date of
taking. If Notice of Termination is not given within the Decision Period, the
Lease shall continue in full force and effect except that Minimum Rent shall be
reduced by subtracting therefrom an amount calculated by multiplying the Minimum
Rent in effect prior to the taking by a fraction the numerator of which is the
number of square feet taken from the Leased Premises and the denominator of
which is the number of square feet in the Leased Premises prior to the taking.
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23.5 RESTORATION.
If there is a partial taking of the Leased Premises and this Lease
remains in full force and effect pursuant to this Article, Lessor, at its cost,
shall accomplish all necessary restoration so that the Leased Premises is
returned as near as practical to its condition immediately prior to the date of
the taking, but in no event shall Lessor be obligated to expend more for such
restoration than the extent of funds actually paid to Lessor by the condemnor.
23.6 AWARD.
Any award arising from the condemnation or the settlement thereof shall
belong to and be paid to Lessor except that Lessee shall receive from the award
compensation for the following if specified in the award by the condemning
authority, so long as it does not reduce Lessor's award in respect of the real
property: Lessee's trade fixtures, tangible personal property, loss of business
and relocation expenses. At all events, Lessor shall be solely entitled to all
award in respect of the real property, including the bonus value of the
leasehold. Lessee shall not be entitled to any award until Lessor has received
the above sum in full.
24. EMPLOYEE PARKING
24.1 DESIGNATED AREAS.
Lessor shall have the right by written notice to Lessee, to designate
specific areas of the Complex for employee parking. If Lessor so designates an
employee parking area, then automobiles of Lessee, its employees and agents
shall not park within the parking area except in areas delineated by Lessor as
"employee parking." Lessee shall be entitled to park in common with other
tenants of Lessor. Lessee agrees not to overburden the parking facilities and
agrees to cooperate with Lessor and other tenants in the use of parking
facilities. Lessor reserves the right in its absolute discretion to determine
whether parking facilities are becoming crowded and, in such event, to allocate
and assign parking spaces among Lessee and other Lessees. Upon request, Lessee
shall provide Lessor with the license plate numbers of all employees,
25. ABANDONMENT
25.1 LESSEE TO OCCUPY.
Lessee shall not abandon the Leased Premises at any time during the
Term, nor permit the Leased Premises to remain unoccupied for a period longer
than ten (10) consecutive days during the Term, and if Lessee shall abandon,
vacate or surrender the Leased Premises, or be dispossessed by process of law,
or otherwise, any personal property belonging to Lessee and remaining on the
Leased Premises after such ten (10) day period shall, at the option of Lessor,
be deemed abandoned.
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26. ENTRY BY LESSOR
26.1 RIGHTS OF LESSOR.
Lessee shall permit Lessor and Lessor's agents to enter the Leased
Premises at all reasonable times for the purpose of inspecting the same or for
the purpose of maintaining the Building, the Complex, Lines and the systems and
facilities therein, or for the purpose of making repairs, replacements,
alterations or additions to any portion of the Building, the Complex, Lines and
the systems and facilities herein, including the erection and maintenance of
such scaffolding, canopies, fences and props as may be required, or for the
purpose of posting notices of responsibility for alterations, additions or
repairs, or for the purpose of placing upon the Building any usual or ordinary
"for sale" signs, without any rebate of rent and without any liability to Lessee
for any loss of occupation or quiet enjoyment of the Leased Premises thereby
occasioned, and shall permit Lessor, at any time within ninety (90) days prior
to the expiration of this Lease, to place upon the Leased Premises any usual or
ordinary "to let" or "to lease" signs. This Section in no way affects the
maintenance obligations of the parties hereto.
27. SIGNS
27.1 APPROVAL, INSTALLATION AND MAINTENANCE.
Lessee shall not place on the Leased Premises or on the Complex any
exterior signs or advertisements nor any interior signs or advertisements that
are visible from the exterior of the Leased Premises, without lessor's prior
written consent, which Lessor reserves the right to withhold for any aesthetic
reason in its sole judgment. The cost of installation and regular maintenance of
any such signs approved by Lessor shall be at the sole expense of Lessee. At the
termination of this Lease, or any extension thereof, Lessee shall remove all his
signs, and all damage caused by such removal shall be repaired at Lessee's
expense.
28. DEFAULT
28.1 DEFINITION.
The occurrence of any of the following shall constitute a material
default and breach of this Lease by Lessee;
(a) Any failure by Lessee to pay the rental or to make any
other payment required to be made by Lessee hereunder when due;
(b) The abandonment of the Leased Premises by Lessee in
violation of Section 25.1 hereof;
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(c) Any failure by Lessee to provide executed documents as and
when required under the provisions of Section 35.2 and/or Article 36;
(d) A failure by Lessee to observe and perform any other
provision of this Lease to be observed or performed by Lessee, where such
failure continues for ten (10) days after written notice thereof by Lessor to
Lessee; provided, however, that if the nature of the default is such that the
same cannot reasonably be cured within the ten (10) day period allowed, Lessee
shall not be deemed to be in default if Lessee shall, within such ten (10) day
period, commence to cure and thereafter diligently prosecute the same to
completion;
(e) Either (1) the appointment of a receiver (except a
receiver appointed at the instance or request of Lessor) to take possession of
all or substantially all of the assets of Lessee, or (2) a general assignment by
Lessee for the benefit of creditors, or (3) any action taken or suffered by
Lessee under any insolvency or bankruptcy act shall constitute a breach of this
Lease by Lessee. In such event, Lessor may, at its option, declare this Lease
terminated and forfeited by Lessee, and Lessor shall be entitled to immediate
possession of the Leased Premises. Upon such notice of termination, this Lease
shall terminate immediately and automatically by its own limitation;
(f) Any two (2) failures by Lessee to observe and perform any
provision of this Lease during any twelve (12) month period of the Term, as such
may be extended, shall constitute at the option of Lessor, a separate and
noncurable default.
29. REMEDIES UPON DEFAULT
29.1 TERMINATION AND DAMAGES.
In the event of any default by Lessee, then in addition to any other
remedies available to Lessor herein or at law or in equity, Lessor shall have
the immediate option to terminate this Lease and all rights of Lessee hereunder
by giving written notice of such intention to terminate. In the event that
Lessor shall elect to so terminate this Lease, then Lessor may recover from
Lessee:
(a) The worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(b) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Lessee proves could have been
reasonably avoided; plus
(c) The worth at the time of award of the amount by which the
unpaid rent for the balance of the Term after the time of award exceeds the
amount of such rental loss that Lessee proves could be reasonably avoided; plus
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(d) Any other amount necessary to compensate Lessor for all
the detriment proximately caused by Lessee's failure to perform its obligations
under this Lease or which in the ordinary course of events would be likely to
result therefrom; and
(e) At Lessor's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by the applicable
law in the state in which the Leased Premises are located.
29.2 DEFINITIONS
(a) The terms "rent" or "rental," as used in this Lease, shall
be deemed to be and to mean the Minimum Rent and all other sums required to be
paid by Lessee pursuant to the terms of this Lease.
(b) As used in subsections 29.1(a) and (b) above, the "worth
at the time of award" is computed by allowing interest at the rate of ten
percent (10%) per annum. As used in subsection 29.1(c) above, the "worth at the
time of award" is computed by discounting such amount at the discount rate of
the Federal Reserve Bank for the region in which the Complex is located at the
time of award plus one percent (1%).
29.3 PERSONAL PROPERTY.
(a) In the event of any default by Lessee, Lessor shall also
have the right, with or without terminating this Lease, to reenter the Leased
Premises and remove all persons and property from the Leased Premises; such
property may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of Lessee.
(b) In the event of default, all of Lessee's fixtures,
furniture, equipment, improvements, additions, alterations and other personal
property shall remain upon the Leased Premises and, in that event, and
continuing during the length of such default, Lessor shall have the sole right
to take exclusive possession of such property and to use it, rent or charge
free, until all defaults are cured or, at Lessor's option, at any time during
the Term, to require Lessee to forthwith remove such property. The rights stated
herein are in addition to Lessor's rights described in Section 30.1.
29.4 RECOVERY OF RENT; RELETTING.
(a) In the event of the vacation or abandonment of the Leased
Premises by Lessee or in the event that Lessor shall elect to reenter as
provided in Section 29.3 above, or shall take possession of the Leased Premises
pursuant to legal proceeding or pursuant to any notice provided by law, then if
Lessor does not elect to terminate this Lease as provided in Section 29.1 above,
this Lease shall continue in effect for so long as Lessor does not terminate
Lessee's right to possession, and Lessor may enforce all its rights and remedies
under this Lease, including, without limitation,
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Lessor's right from time to time, without terminating this Lease, to either
recover all rental as it becomes due or relet the Leased Premises or any part
thereof for such term or terms and at such rental or rentals and upon such other
terms and conditions as Lessor, in its sole discretion may deem advisable with
the right to make alterations and repairs to the Leased Premises. Acts of
maintenance or preservation or efforts to relet the Leased Premises or the
appointment of a receiver upon initiation of Lessor or other legal proceeding
granting Lessor or its agent possession to protect Lessor's interest under this
Lease shall not constitute a termination of Lessee's right to possession.
(b) In the event that Lessor shall elect to so relet, then
rentals received by Lessor from such reletting shall be applied: first, to the
payment of any indebtedness other than rent due hereunder from Lessee to Lessor;
second, to the payment of any cost of such reletting; third, to the payment of
the cost of any alterations and repairs to the Leased Premises; fourth, to the
payment of rent due and unpaid hereunder; and the residue, if any, shall be held
by Lessor and applied in payment of future rent as the same may become due and
payable hereunder. Should that portion of such rentals received from such
reletting during any month, which is applied by the payment of rent hereunder,
be less than the rent payable during that month by Lessee hereunder, then Lessee
shall pay such deficiency to Lessor immediately upon demand therefor by Lessor.
Such deficiency shall be calculated and paid monthly. Lessee shall also pay to
Lessor, as soon as ascertained, any costs and expenses incurred by Lessor in
such reletting or in making such alterations and repairs not covered by the
rentals received from such reletting.
(c) No reentry or taking possession of the Leased Premises or
any other action under this Section shall be construed as an election to
terminate this Lease unless a written notice of such intention be given to
Lessee or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Lessor
because of any default by Lessee, Lessor may at any time after such reletting
elect to terminate this Lease for any such default.
(d) Lessor has the remedy described in California Civil Code
Section 1951.4 (Lessor may continue Lease in effect after Lessee's breach and
abandonment and recover rent as it becomes due, if Lessee has right to sublet or
assign, subject only to reasonable limitations).
29.5 NO WAIVER.
Efforts by Lessor to mitigate the damages caused by Lessee's default in
this Lease shall not constitute a waiver of Lessor's right to recover damages
hereunder, nor shall Lessor have any obligation to mitigate damages hereunder.
29.6 CURING DEFAULTS.
Should Lessee fail to repair, maintain, keep clean, and/or service the
Leased Premises, or any part or contents thereof at any time or times, or
perform any other obligations imposed by this Lease or otherwise, their after
having given Lessee reasonable notice of the failure or failures and a
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reasonable opportunity, which in no case shall exceed ten (10) days, to remedy
the failure, Lessor may enter upon the Leased Premises and perform or contract
for the performance of the repair, maintenance, or other Lessee obligation, and
Lessee shall pay Lessor for all direct and indirect costs incurred in connection
therewith within ten (10) days of receiving a bill therefor from Lessor.
29.7 NO RIGHT TO CURE.
Notwithstanding anything to the contrary set forth in Section 28.1
above, Lessee shall be deemed to have committed a material default and breach of
this Lease, Without any right on Lessee's part to cure such default and breach,
upon the failure by Lessee to observe and perform the provisions of any one or
more of the following Sections (or indicated portions thereof) of this Lease:
9.3, 19.1, 2 1.1 (first sentence), 26.1, 35.2, 36.1 and 36.2.
29.8 CUMULATIVE REMEDIES.
The various rights, options, election powers, and remedies of Lessor
contained in this Article and elsewhere in this Lease shall be construed as
cumulative and no one of them exclusive of any others or of any legal or
equitable remedy which Lessor might otherwise have in the event of breach or
default, and the exercise of one right or remedy by Lessor shall not in any way
impair its right to any other right or remedy.
30. FORFEITURE OF PROPERTY AND LESSOR'S LIEN
30.1 REMOVAL OF PERSONAL PROPERTY.
Lessee agrees that as of the date of termination of this Lease or
repossession of the Leased Premises by Lessor, by way of default or otherwise,
it shall remove all personal property to which it has the right to ownership
pursuant to the terms of this Lease. Any and all such property of Lessee not
removed by such date shall, at the option of Lessor, irrevocably become the sole
property of Lessor. Lessee waives all rights to notice and all common law and
statutory claims and causes of action which it may have against Lessor
subsequent to such date as regards the storage, destruction, damage, loss of use
and ownership of the personal property affected by the terms of this Article.
Lessee acknowledges Lessor's need to relet the Leased Premises upon termination
of this Lease or repossession of the Leased Premises and understands that the
forfeitures and waivers provided herein are necessary to aid said reletting, and
to prevent Lessor incurring a loss for liability to deliver the Leased Premises
to a prospective lessee.
30.2 LESSOR'S LIEN.
Lessee hereby grants to Lessor a lien upon and security interest in all
fixtures, chattels and personal property of every kind now or hereafter to be
placed or installed in or on the Leased Premises and agrees that in the event of
any default on the part of Lessee, Lessor shall have all the rights and remedies
afforded the secured party by the chapter on "Default" of Division 9 of the
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Uniform Comniercial Code of the state in which the Leased Premises are located
and may, in connection therewith, also (a) enter on the Leased Premises to
assemble and take possession of the collateral, (b) require Lessee to assemble
the collateral and make its possession available to Lessor at the Leased
Premises, and (c) enter the Leased Premises, render the collateral, if
equipment, unusable and dispose of it in a manner provided by the Uniform
Commercial Code of the state in which the Leased Premises are located. Lessee
hereby designates Lessor as his attorney-in-fact for purposes of executing such
documents as may be necessary to perfect the lien and security interest granted
hereunder.
31. SURRENDER OF LEASE
31.1 NO MERGER.
The voluntary or other surrender of this Lease by Lessee, or a mutual
cancellation thereof, shall not work as a merger, and shall, at the option of
Lessor, terminate all or any existing subleases or subtenancies, or may, at the
option of Lessor, operate as an assignment to it of any or all such subleases or
subtenancies.
32. LESSOR'S EXCULPATION
32.1 LIMITED LIABILITY.
In the event of default, breach, or violation by Lessor (which term
includes Lessor's partners, co-venturers, co-tenants, officers, directors,
trustees, employees, agents, or representatives) of any of Lessor's obligations
under this Lease, Lessor's liability to Lessee shall be limited to its ownership
interest in the Leased Premises (or its interest in the Complex, if applicable)
or the proceeds of a public sale of such interest pursuant to foreclosure of a
judgment against Lessor. Lessor may, at its option, and among its other
alternatives, relieve itself of all liability under this Lease by conveying the
Leased Premises to Lessee. Notwithstanding any such conveyance, Lessee's
leasehold and ownership interest shall not merge.
32.2 NO RECOURSE.
Lessor (as defined in Section 32.1) shall not be personally liable for
any deficiency beyond its interest in the Leased Premises. All personal
liability of all trustees, their employees, agents or representatives, is
expressly waived by Lessee.
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33. ATTORNEYS' FEES
33.1 ACTIONS, PROCEEDINGS, ETC.
Lessee hereby agrees to pay, as additional rent, all attorneys' fees
and disbursements, and all other court costs or expenses of legal proceedings or
other legal services which Lessor may incur or pay out by reason of, or in
connection with:
(a) any action or proceeding brought by Lessor wherein Lessor
obtains a final judgment or award against Lessee (including arbitration) on
account of any default by Lessee in the observance or performance of any
obligation under this Lease including, but not limited to, matters involving
payment of rent and additional rent, Alterations or other Lessee's work and
subletting or assignment;
(b) any action or proceeding brought by Lessee against Lessor
(or any officer, partner, or employee of Lessor) in which Lessee fails to secure
a trial judgment against Lessor;
(c) any other appearance by Lessor (or any officer, partner,
or employee of Lessor) as a witness or otherwise in any action or proceeding
whatsoever involving or affecting Lessee or this Lease;
(d) any assignment, sublease, or leasehold mortgage proposed
or granted by Lessee (whether or not permitted under this Lease), and all
negotiations with respect thereto; and
(e) any alteration of the Leased Premises by Lessee, and all
negotiations with respect thereto.
In any action or proceeding referred to in subsection (a), Lessee shall
be entitled to recover its attorneys' fees and costs if Lessee is the prevailing
party against Lessor.
33.2 SURVIVAL.
Lessee's obligations under this Section shall survive the expiration or
any other termination of this Lease. This Section is intended to supplement (and
not to limit) other provisions of this Lease pertaining to indemnities and/or
attorneys' fees.
33.3 COUNSEL FEES.
Should it be necessary for Lessor to employ legal counsel to enforce
any of the provisions of this Lease, Lessee agrees to pay, as additional rent,
all attorneys' fees and court costs reasonably incurred thereby, whether or not
Lessor commences any legal action or proceeding.
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34. NOTICES
34.1 WRITING.
All notices, demands and requests required or permitted to be given or
made under any provision of this Lease, shall be in writing and shall be (i)
given or made by personal service, or (ii) by telephone facsimile upon which the
date and time are imprinted in the course of transmission to the number
indicated in Section 1.2, or (iii) by mailing same by registered or certified
mail, return receipt requested, postage prepaid, or (iv) by reputable courier
which provides written evidence of delivery, addressed to the respective party
at the address set forth in Section 1.2 of this Lease or at such other address
as the party may from time to time designate, by a written notice sent to the
other in the manner aforesaid.
34.2 EFFECTIVE DATE.
Any such notice, demand or request ("notice") shall be deemed given or
made on the third day after the date so mailed. Notwithstanding the foregoing,
notice given by personal delivery to the party at its address as aforesaid shall
be deemed given on the day on which delivery is made. Notice given by a
reputable courier service which provides written evidence of delivery shall be
deemed given on the business day immediately following deposit with the courier
service.
34.3 AUTHORIZATION TO RECEIVE.
Each person and/or entity whose signature is affixed to this Lease as
Lessee or as guarantor of Lessee's obligations ("obligor") designates such other
obligor its agent for the purpose of receiving any notice pertaining to this
Lease or service of process in the event of any litigation or dispute arising
from any obligation imposed by this Lease.
35. SUBORDINATION
35.1 PRIORITY OF ENCUMBRANCES.
Lease, at Lessor's option, shall be subordinate to any ground lease,
mortgage, deed of trust, or any other hypothecation for security now or
hereafter placed upon the real property of which the Leased Premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Leased Premises shall not be disturbed if Lessee is not in default and so long
as Lessee shall pay the rent and observe and perform all the provisions of this
Lease, unless this Lease is otherwise terminate pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust or ground lease, whether this Lease is dated prior or
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subsequent to the date of said mortgage, deed of trust or ground lease or the
date of recording thereof.
35.2 EXECUTION OF DOCUMENTS.
Lessee agrees to execute any documents required to effectuate such
subordination or to make this Lease prior to the lien of any mortgage, deed of
trust or ground lease, as the case may be, and failing to do so within ten (10)
days after written demand, does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney-in-fact and in Lessee's name, place and stead, to do
so. It is understood by all parties that Lessee's failure to execute the
subordination documents referred to above may cause Lessor serious financial
damage by causing the failure of a financing or sale transaction.
35.3 ATTORNMENT.
Lessee shall attorn to any purchaser at any foreclosure sale, or to any
grantee or transferee designated in any Deed given in lieu of foreclosure.
36. ESTOPPEL, CERTIFICATES
36.1 EXECUTION BY LESSEE.
Within ten (10) days of request therefor by Lessor, Lessee shall
execute a written statement acknowledging the commencement and termination dates
of this Lease, that it is in full force and effect, has not been modified (or if
it has, stating such modifications), and providing any other pertinent
information as Lessor or its agent might reasonably request. Failure to comply
with this Article shall be a material breach of this Lease by Lessee giving
Lessor all rights and remedies under Article 29 hereof, as well as a right to
damages caused by the loss of a loan or sale which may result from such failure
by Lessee.
36.2 FINANCING, SALE OR TRANSFER.
If Lessor desires to finance, refinance, sell, ground lease or
otherwise transfer the Leased Premises, or any part thereof, or the Building,
Lessee hereby agrees, within ten (10) days of request therefor by Lessor, to
deliver to any lender or to any prospective buyer, ground lessor or other
transferee designated by Lessor such financial statements of Lessee, its
Guarantor and its parent company, if any, as may be reasonably required by such
party. Such statements shall include the past three (3) years' financial
statements of Lessee. All such financial statements shall be received by Lessor
in confidence and shall be used only for the purposes herein set forth.
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37. WAIVER
37.1 EFFECT OF WAIVER.
The waiver by Lessor of any breach of any Lease provision shall not be
deemed to be a waiver of such Lease provision or any subsequent breach of the
same or any other term, covenant or condition therein contained. The subsequent
acceptance of rent hereunder by Lessor shall not be deemed to be a waiver of any
preceding breach by Lessee of any provision of this Lease, other than the
failure of Lessee to pay the particular rental so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
38. HOLDING OVER
38.1 MONTH-TO-MONTH TENANCY ON ACCEPTANCE.
If Lessee should remain in possession of the Leased Premises after the
expiration of the Term and without executing a new Lease, then, upon acceptance
of rent by Lessor, such holding over shall be construed as a tenancy from month
to month, subject to all the conditions, provisions and obligations of this
Lease as existed during the last month of the Term hereof, so far as applicable
to a month to month tenancy, except that the Minimum Rent shall be equal to
twice the Minimum Rent payable immediately prior to the expiration or sooner
termination of the Lease.
39. SUCCESSORS AND ASSIGNS
39.1 BINDING EFFECT.
The covenants and conditions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto; and all of the parties
hereto shall be jointly and severally liable hereunder.
40. TIME
40.1 TIME OF THE ESSENCE.
Time is of the essence of this Lease with respect to each and every
article, section and subsection hereof.
41. EFFECT OF LESSOR'S CONVEYANCE
41.1 RELEASE OF LESSOR.
If, during the Term, Lessor shall sell its interest in the Building or
Complex of which the Leased Premises forms a part, or the Leased Premises, then
from and after the effective date of the
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sale or conveyance, Lessor shall be released and discharged from any and all
obligations and responsibilities under this Lease, except those already accrued.
42. TRANSFER OF SECURITY
42.1 TRANSFER TO PURCHASER.
If any security be given by Lessee to secure the faithful performance
of all or any of the covenants of this Lease on the part of Lessee, Lessor may
transfer and/or deliver the security, as such, to the purchaser of the
reversion, in the event that the reversion be sold, and thereupon Lessor shall
be discharged from any and all liability in reference thereto.
43. CORPORATE AUTHORITY
43.1 AUTHORIZATION TO EXECUTE.
If Lessee is a corporation, each individual executing this Lease on
behalf of said corporation represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of said corporation in accordance with
a duly adopted resolution of the Board of Directors of said corporation or in
accordance with the Bylaws of said corporation, and that this Lease is binding
upon said corporation in accordance with its terms. Further, Lessee shall,
within thirty (30) days after execution of this Lease, deliver to Lessor a
certified copy of a resolution of the Board of Directors of said corporation
authorizing or ratifying the execution of this Lease.
44. WAIVER OF CALIFORNIA CODE SECTIONS
44.1 WAIVER BY LESSEE.
In this Lease, numerous provisions have been negotiated by the parties,
some of which provisions are covered by statute. Whenever a provision of this
Lease and a provision of any statute or other law cover the same matter, the
provisions of this Lease shall control. Therefore, Lessee waives (for itself and
all persons claiming under Lessee) the provisions of Civil Code Sections 1932(2)
and 1933(4) with respect to the destruction of the Leased Premises; Civil Code
Sections 1941 and 1942 with respect to Lessor's repair duties and Lessee's right
to repair; Civil Code Section 1995.310, granting to a tenant all remedies
provided by law fol- breach of contract (including, without limitations the
right to contract damages and the right to terminate the lease) in the event
that the landlord unreasonably withholds consent to a transfer in violation of
the tenant's rights under the lease; Code of Civil Procedure Section 1265.130,
allowing either party to petition the Superior Court to terminate this Lease in
the event of a partial taking of the Leased Premises by condemnation as herein
defined; and any right of redemption or reinstatement of Lessee under any
present or future case law or statutory provision (including Code of Civil
Procedure Sections 473 and 1179 and Civil Code Section 3275) in the event Lessee
is dispossessed from the Leased Premises for any reason.
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This waiver applies to future statutes enacted in addition to or in substitution
for the statutes specified herein.
45. WASTE
45.1 WASTE OR NUISANCE.
Lessee shall not commit, or suffer to be committed, any waste upon the
Leased Premises, or any nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant or occupant of the Complex in which the
Leased Premises are located.
46. BANKRUPTCY
46.1 BANKRUPTCY EVENTS.
If at any time during the Term there shall be filed by or against
Lessee in any court pursuant to any statute either of the United States or of
any State a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Lessee's
property, or if a receiver or trustee takes possession of any of the assets of
Lessee, or if the leasehold interest herein passes to a receiver, or if Lessee
makes an assignment for the benefit of creditors or petitions for or enters into
an arrangement (any of which are referred to herein as "a bankruptcy event"),
then the following provisions shall apply:
(a) At all events any receiver or trustee in bankruptcy or
Lessee as debtor in possession ("debtor") shall either expressly assume or
reject this Lease within sixty (60) days following the entry of an "Order for
Relief."
(b) In the event of an assumption of the Lease by a debtor,
receiver, or trustee, such debtor, receiver, or trustee shall immediately after
such assumption (1) cure any default or provide adequate assurances that
defaults will be promptly cured; and (2) compensate Lessor for actual pecuniary
loss or provide adequate assurances that compensation will be made for actual
pecuniary loss; and (3) provide adequate assurance of future performance.
For the purposes of this paragraph 46.1 (b), adequate assurance of
future performance of all obligations under this Lease shall include, but is not
limited to:
(i) written assurance that rent and any other
consideration due under the Lease shall first be paid before any other of
Lessee's costs of operation of its business in the Leased Premises are paid;
(ii) written agreement that assumption of this Lease
will not cause a breach of any provision hereof including, but not limited to,
any provision relating to use or exclusivity in this or any other Lease, or
agreement relating to the Leased Premises, or if such a breach is caused,
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the debtor, receiver or trustee will indemnify Lessor against such loss
(including costs of suit and attorneys' fees), occasioned by such breach;
(iii) where a default exists under the Lease, the
party assuming the Lease may not require Lessor to provide services or supplies
incidental to the Lease before its assumption by such trustee or debtor, unless
Lessor is compensated under the terms of the Lease for such services and
supplies provided before the assumption of such Lease.
(c) The debtor, receiver, or trustee may only assign this
Lease in accordance with the terms of Article 30 and if adequate assurance of
future performance by the assignee is provided, whether or not there has been a
default under the Lease. For the purpose hereof, adequate assurance of future
performance means written agreement that assignment of this Lease will not cause
a breach of any provision hereof including, but not limited to, any provision
relating to use or exclusivity in this or any other Lease or agreement relating
to the Leased Premises, and that if such a breach is caused, the debtor,
receiver or trustee will indemnify Lessor against such loss (including costs of
suit and attorney's fees), occasioned by such breach. Any consideration paid by
any assignee in excess of the rental reserved in the Lease shall be the sole
property of, and paid to, Lessor. Upon assignment by the debtor or trustee, the
obligations of the Lease shall be deemed to have been assumed and the assignee
shall execute an assumption agreement on request of Lessor.
(d) Lessor shall be entitled to the fair market value for the
Leased Premises and the services provided by Lessor (but in no event less than
the rental reserved in the Lease) subsequent to the commencement of a bankruptcy
event.
(e) Lessor specifically reserves any and all remedies
available to Lessor in Article 29 hereof or at law or in equity in respect of a
bankruptcy event by Lessee to the extent such remedies are permitted by law.
47. LATE CHARGES
47.1 LATE PAYMENT BY LESSEE.
Lessee acknowledges that late payment by Lessee to Lessor of rent or
any other payment due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impractical to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Lessor by the terms of any encumbrance and note secured by any encumbrance
covering the Leased Premises. Therefore, if any installment of rent, or any
other payment due hereunder from Lessee is not received by Lessor when due,
Lessee shall pay to Lessor an additional sum of ten percent (10%) of such rent
or other charge as a late charge. The parties agree that this late charge
represents a fair and reasonable estimate of the cost that Lessor will incur by
reason of late payment by Lessee. Acceptance of any late charge shall not
constitute a waiver of Lessee default with respect to the overdue amount, or
prevent Lessor from exercising any other rights or remedies available to Lessor.
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48. MORTGAGEE PROTECTION
48.1 NOTICE AND RIGHT TO CURE DEFAULT.
Lessee agrees to give any mortgagee(s) and/or trust deed holders, by
registered mail, a copy of any notice of default served upon Lessor, provided
that prior to such notice Lessee has been notified, in writing (by way of Notice
of Assignment of Rents and Leases, or otherwise), of the address of such
mortgages and/or trust deed holders. Lessee further agrees that if Lessor shall
have failed to cure such default within the time provided for in this Lease,
then the mortgagees and/or trust deed holders shall have an additional thirty
(30) days within which to cure such default or, if such default cannot be cured
within that time, then such additional time as may be necessary if, within such
thirty (30) days, any mortgagee and/or trust deed holder has commenced and is
diligently pursuing the remedies necessary to cure such default (including but
not limited to commencement of foreclosure proceedings, if necessary to effect
such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
49. MISCELLANEOUS PROVISIONS
49.1 CAPTIONS.
The captions of this Lease are for convenience only and are not a part
of this Lease and do not in any way limit or amplify the terms and provisions of
this Lease.
49.2 NUMBER AND GENDER.
Whenever the singular number is used in this Lease and when required by
the context, the same shall include the plural, the plural shall include the
singular, and the masculine gender shall include the feminine and neuter
genders, and the word "person" shall include corporation, firm or association.
If there be more than one Lessee the obligations imposed under this Lease upon
Lessee shall be joint and several.
49.3 MODIFICATIONS.
This instrument contains all of the agreements, conditions and
representations made between the parties to this Lease and may not be modified
orally or in any other manner than by an agreement in writing signed by all of
the parties to this Lease.
49.4 PAYMENTS.
Except as otherwise expressly stated, each payment required to be made
by Lessee shall be in addition to and not in substitution for other payments to
be made by Lessee.
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49.5 SEVERABILITY.
The invalidity of any provision of this Lease, as determined by a court
of competent jurisdiction, shall in no way affect the validity of any other
provision hereof.
49.6 NO OFFER.
The preparation and submission of a draft of this Lease by either party
to the other shall not constitute an offer, nor shall either party be bound to
any terms of this Lease or the entirety of the Lease itself until both parties
have fully executed a final document and an original signature document has been
received by both parties. Until such time as described in the previous sentence,
either party is free to terminate negotiations with no obligation to the other.
49.7 DISPUTED SUMS.
Under the terms of this Lease numerous charges are and may be due from
Lessee to Lessor including, without limitation, Common Area charges, real estate
taxes, insurance reimbursement and other items of a similar nature including
advances made by Lessor in respect of Lessee's default at Lessor's option. In
the event that at any time during the Term there is a bona fide dispute between
the parties as to the amount due for any of such charges claimed by Lessor to be
due, the amount demanded by Lessor shall be paid by Lessee until the resolution
of the dispute between the parties or by litigation. Failure by Lessee to pay
the disputed sums until resolution shall constitute a default under the terms of
the Lease.
49.8 LESSEE'S REMEDIES.
Notwithstanding anything to the contrary contained in this Lease, if
any provision of this Lease expressly or impliedly obligates Lessor not to
unreasonably withhold its consent or approval, an action for declaratory
judgment or specific performance will be Lessee's sole right and remedy in any
dispute as to whether Lessor has breached such obligation.
49.9 LIGHT, AIR AND VIEW.
No diminution of light, air, or view by any structure which may
hereafter be erected (whether or not by Lessor) shall entitle Lessee to any
reduction of Rent, result in any liability of Lessor to Lessee, or in any other
way affect this Lease or Lessee's obligations hereunder.
49.10 PUBLIC TRANSPORTATION INFORMATION.
Lessee shall establish and maintain during the Term hereof a program to
encourage maximum use of public transportation by personnel of Lessee employed
on the Leased Premises, including without limitation the distribution to such
employees of written materials explaining the convenience and availability of
public transportation facilities adjacent or proximate to the Complex,
staggering
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working hours of employees, and encouraging use of such facilities, all at
Lessee's sole reasonable cost and expense. Lessee shall comply with all
requirements of any local transportation management ordinance.
49.11 RULES AND REGULATIONS.
Lessee agrees to comply with all reasonable rules and regulations
adopted and promulgated by Lessor and applicable to all tenants in the Complex
for the lawful, orderly, clean, safe, aesthetic, quiet, and beneficial use,
operation, maintenance, management, and enjoyment of the Complex. The initial
rules and regulations concerning the Complex are attached hereto as Exhibit E.
Lessor reserves the right to make additional rules affecting the Complex
throughout the Term hereof. Lessor shall have no liability for violation by any
other lessee in the Complex of any rules or regulations nor shall such violation
or waiver thereof excuse Lessee from compliance. All delivery and dispatch of
supplies, fixtures, equipment and furniture shall be by means and during hours
established by Lessor. Lessee shall not at any time park its trucks or other
delivery vehicles in the Common Areas, except in such parts thereof as from time
to time designated by Lessor.
49.12 JOINT AND SEVERAL LIABILITY.
Should Lessee consist of more than one person or entity, they shall be
jointly and severally liable on this Lease.
49.13 SURVIVAL OF OBLIGATIONS.
All obligations of Lessee which may accrue or arise during the Term or
as a result of any act or emission of Lessee during said Term shall, to the
extent they have not been fully performed, satisfied or discharged, survive the
expiration or termination of this Lease.
49.14 REAL ESTATE BROKERS.
Lessor and Lessee each represents and warrants to the other party that
it has not authorized or employed, or acted by implication to authorize or
employ, any real estate broker or salesman to act for it in connection with this
Lease. Lessor and Lessee shall each indemnify, defend and hold the offer party
harmless from and against any and all claims by any real estate broker or
salesman whom the indemnifying party authorized or employed, or acted by
implication to authorize or employ, to act for the indemnifying party in
connection with this Lease.
49.15 NONLIABILITY OF LESSOR FOR APPROVALS.
Except as may otherwise be expressly stated by a provision of this
Lease, and only to the extent so stated, the consent or approval, whether
express or implied, or the act, failure to act or failure to object, by Lessor
in connection with any plan, specification, drawing, proposal, request, act,
emission, notice or communication (collectively, "act") by or for, or prepared
by or for, Lessee, shall
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not create any responsibility or liability of the part of Lessor, and shall not
Constitute a representation by Lessor, with respect to the completeness,
sufficiency, efficacy, propriety, quality or legality of such act.
49.16 INTEREST ON PAST DUE AMOUNTS.
If any sum due Lessor from Lessee is not received by Lessor within five
(5) calendar days after the date such sum is due and payable, such sum shall
bear interest from the due date until paid by Lessee at the rate of two percent
(2%) above the Prime Rate (as herein defined), not to exceed the maximum rate of
interest allowed by law in the state where the Leased Premises are located, and
such interest shall be deemed to be additional rent. "Prime Rate" means the
highest rate charged by Bank of America NT&SA, San Francisco Main Office, on
short-term unsecured loans to its most creditworthy corporate borrowers.
49.17 CONVERSION TO A LIMITED LIABILITY ENTITY.
(a) No Conversion Without Consent. Anything to the contrary in
this Lease notwithstanding, if Lessee is currently a partnership (either general
or limited), joint venture, cotenancy, joint tenancy or an individual, Lessee
may not convert (the "Conversion") the Lessee entity or person into any type of
entity which possesses the characteristic of limited liability such as, by way
of example only, a corporation, a limited liability company, limited liability
partnership or limited liability limited partnership (singularly and
collectively, "Limited Entity"), without the consent of Lessor, which consent,
subject to fulfillment of the conditions below, shall not be unreasonably
withheld.
(b) Conditions to Lessor's Consent. The following are
conditions precedent to Lessor's obligation to act reasonably with respect to a
Conversion to a Limited Entity:
(i) The Limited Entity assumes all of lessee's
liabilities and is assigned all of Lessee's assets as of the effective date of
the Conversion;
(ii) As of the effective date of the Conversion, the
Limited Entity shall have a net worth ("Net Worth"), which is not less than the
greater of (i) Lessee's Net Worth on the date of execution of the Lease or (ii)
Lessee's Net Worth as of the date Lessee requests Lessor's consent to the
Conversion;
(iii) Lessee has timely fulfilled all its obligations
under any of the terms, covenants or conditions of this Lease during the term of
the Lease;
(iv) Lessee delivers to Lessor an agreement, in form
and substance satisfactory to Lessor and executed by each equity interest holder
of Lessee, wherein each equity interest holder of Lessee agrees to remain
personally liable for all of the terms, covenants and conditions of the Lease
that are to be observed and performed by the Limited Entity; and
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(v) Lessee shall reimburse Lessor within ten (10)
days following Lessor's written demand therefor for any and all reasonable costs
and expenses that may be incurred by Lessor in connection with the Conversion
including, without limitations reasonable attorney's fees.
(c) Nothing in this section shall modify or reduce the
obligations of Lessee under this Lease.
IN WITNESS WHEREOF, Lessor and Lessee leave executed this Lease as of
the day and year first written
LESSOR: LESSEE:
Bedford Property Investors, Inc. Ion Networks, Inc.
a Maryland Corporation a Delaware Corporation
By: By: /s/ Mark A. Simmons
-------------------------- --------------------------------
James R. Moore (PRINT): Mark A. Simmons
ITS: Executive Vice President/COO ITS: Chief Financial Officer
---------------------------- --------------------------------
DATE: DATE: 5/26/99
---------------------------- --------------------------------
FOR OFFICE USE ONLY:
PREPARED BY:
REVIEWED BY:
APPROVED BY:
55
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EXHIBIT "A"
LEGAL DESCRIPTION
REAL PROPERTY in the City of Fremont, County of Alameda, State of California,
described as follows:
All of Lots 7 and 8 and a portion of Lot 5 and 6 as numbered and designated on
Tract Map 4642 recorded in Book 126 of Maps at Pages 30 through 33 in Alameda
County Records and a portion of Lot 3 of Parcel Map 4205 recorded in Book 152 of
Maps at Page 43 of Alameda County Records, further described as follows:
Beginning at the Southeasterly comer of Lot 5 in said Tract, thence South
67(degree) 28' 25" West, a distance of 200.05 feet;
Thence South 68(degree) 37' 10" West, a distance of 541.85 feet to a tangent
curve;
Thence along said curve, concave to the Northeast, having a radius of 40.00 feet
through a central angle of 90(degree)00' 00", an arc length of 62.83 feet;
Thence North 21(degree) 22' 50" West, a distance of 160.47 feet to a tangent
curve;
Thence along said curve, concave to the East, having a radius of 468.00 feet,
through a central angle of 27(degree) 53' 05", an arc length of 227.77 feet;
Thence North 6(degree) 30' 15" East, a distance of 68.67 feet;
Thence South 83(degree) 29' 45" East, a distance of 53.00 feet;
Thence North 6(degree) 30' 15" East, a distance of 155.00 feet;
Thence South 87(degree) 26' 19" East, a distance of 54.663 feet;
Thence North 68(degree) 37' 1 0" East, a distance of 384.32 feet;
Thence South 66(degree) 22' 50" East, a distance of 88.949 feet;
Thence North 69(degree) 37' 10" East, a distance of 78.89 feet;
Thence South 21(degree) 22' 50" East, a distance of 503.18 feet to the point of
beginning, as described in the Declaration of Merger, by New England Mutual Life
Insurance Company, recorded June 30, 1989, Series No. 89-177153, Official
Records.
A.P. Nos. 519-1010-078-03
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519-1010-080-01
519-1010-081-03
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EXHIBIT B
PLAN OF THE COMPLEX
58
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EXHIBIT B-1
FLOOR PLAN OF THE LEASED PREMISES
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EXHIBIT "C"
CONSTRUCTION OBLIGATIONS
Lessor shall, at Lessor's sole cost and expense, perform the following tenant
improvements in the Leased Premises:
1) Lessor to install new carpet and base throughout office area as
shown below.
2) Lessor to install vinyl tile (VCT) in the area as shown below.
3) Lessor to ensure that all mechanical, electrical (except data
and phone) and plumbing systems are good working order prior
to occupancy.
Except as stated above, the Leased Premises shall be delivered to Lessee in its
"As-Is, Where-is" condition. Any additional improvements, alterations or
modifications must obtain Lessor's written approval, upon which approval shall
not be reasonably withheld. Any and all improvements, alterations or
modifications shall be at Lessee's sole cost and expense and must be performed
in strict compliance with all laws and ordinances relating thereto and shall not
constitute a delay in term commencement. Lessor at its discretion reserves the
right to have Lessee, upon the expiration or earlier termination of the Lease,
restore any or all of Lessee's improvements, alterations or modifications to the
Leased Premises to its original condition prior to the making of any such
improvements, alterations or modifications all at Lessee's sole cost and
expense.
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EXHIBIT "D"
ACKNOWLEDGMENT OF COMMENCEMENT
This Acknowledgment is made as of May 26, 1999 with reference to that certain
Lease Agreement (hereinafter referred to as the "Lease") dated, May 17, 1999 by
and between BEDFORD PROPERTY INVESTORS, INC., A MARYLAND CORPORATION "Lessor"
therein, and ION NETWORKS, INC., A CORPORATION "Lessee", for the Leased Premises
situated at 48834 KATO ROAD, UNIT 103-A, FREMONT, CALIFORNIA 94538
The undersigned hereby confirms the following:
1. That the Lessee accepted possession of the Leased Premises (as described in
said Lease) on June 1, 1999, and acknowledges that the Leased Premises are as
represented by the Lessor and in good order, condition and repair, and that the
improvements, if any, required to be constructed for Lessee by Lessor under this
Lease have been so constructed and are satisfactorily completed in all respects.
2. That all conditions of said Lease to be performed by Lessor prerequisite to
the full effectiveness of said Lease have been satisfied and that Lessor has
fulfilled all of its duties of an inducement nature.
3. That in accordance with the provisions of said Lease the commencement date of
the term is June 1, 1999, and that, unless sooner terminated, the original term
thereof expires on May 31, 2004.
4. That said Lease is in full force and effect and that the same represents the
entire agreement between Lessor and Lessee concerning said Lease.
5. That there are no existing defenses which Lessee has against the enforcement
of said Lease by Lessor, and no offsets or credits against rentals.
6. That the minimum rental obligations of said Lease is presently in effect and
that all rentals, charges and other obligations on the part of Lessee under said
Lease commenced to accrue on June 1, 1999.
7. That the undersigned has not made any prior assignment, hypothecation or
pledge of said Lease or of the rents hereunder.
LESSEE:
ION NETWORKS, INC.,
A Delaware Corporation
By:/s/ Mark A. Simmons
- -----------------------------
(Print) Mark A. Simmons
Its: Chief Financial Officer
Date: 5/26/99
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EXHIBIT "E"
RULES AND REGULATIONS ATTACHED TO AND MADE
A PART OF THIS LEASE
1. No sign, placard, picture, advertisement, name of notice shall be
inscribed, displayed or printed or affixed on the Building or to any
part thereof, or which is visible from the outside of the Building,
without the written consent of Lessor, first had and obtained and
Lessor shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice and at the expense of
Lessee.
All approved signs or lettering on doors shall be printed, affixed or
inscribed at the expense of Lessee by a person approved by Lessor.
Lessee shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly
from outside the Premises.
2. If a directory is located at the Building, it is provided exclusively
for the display of the name and location of Lessee only and Lessor
reserves the right to exclude any other names therefrom.
3. The sidewalks, passages, exits, entrances, and stairways in and around
the Building shall not be obstructed by Lessee or used by it for any
purpose other than for ingress to and egress from the Premises. The
passages, exits, entrances, stairways, and roof are not for the use of
the general public and Lessor shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the
judgement of Lessor shall be prejudicial to the safety, character,
reputation and interests of the Building and its Lessees, provided that
nothing herein contained shall be construed to prevent such access to
person with whom Lessee normally deals in the ordinary course of
Lessee's business unless such persons are engaged in illegal
activities. Neither Lessee nor any employees or invitees of Lessee
shall go upon the roof of the Building.
4. Lessee shall not be permitted to install any additional lock or locks
on any door in the Building unless written consent of Lessor shall have
first been obtained. Two keys will be furnished by Lessor for every
room.
5. The toilets and urinals shall not be used for any purpose other than
those for which they were constricted, and no rubbish, newspapers or
other substances of any kind shall be thrown into them. Wastes and
excessive or unusual rise of water shall not be allowed. Lessee shall
be responsible for any breakage, stoppage or damage resulting from the
violation of this rule by Lessee or its employees or invitees.
6. Lessee shall not overload the floor of the Premises or mark, drive
nails, screw or drill into the partitions, woodwork or plaster or in
any way deface the Premises or any part thereof
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7. Lessee shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the
Premises to be occupied or used in a manner offensive or objectionable
to Lessor or other occupants of the Building by reason of noise, odors
and/or vibrations, or interfere in any way with other Lessees or those
having business therein.
8. The Premises shall not be used for the storage of merchandise, for
washing clothes, for lodging, or for any improper objectionable or
immoral purposes.
9. Lessee shall not use or keep in the Premises or the Building any
kerosene, gasoline, or inflammable or combustible fluid or material, or
use any method of heating or air conditioning other than that supplied
by Lessor.
10. Lessor will direct electricians as to the manner and location in which
telephone and telegraph wires are to be introduced. No boring or
cutting for wires will be allowed without the consent of Lessor. The
location of telephones, call boxes and other office equipment affixed
to the Premises shall be subject to the approval of Lessor.
11. Lessee shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises
in any manner except as approved by Lessor. The expense of repairing
any damage resulting from a violation of this rule or removal of any
floor covering shall be borne by Lessee.
12. Exterior blinds are furnished for each window by Lessor. Any additional
window covering desired by Lessee shall be approved by Lessor.
13. Lessor reserves the right to exclude or expel from the Building any
person who, in the judgement of Lessor, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the rules and regulations of the Building.
14. Lessee shall not disturb, solicit, or canvass any Occupant of the
Building .
15. Without the written consent of Lessor, Lessee shall not use the name of
the Building in connection with or in promoting or advertising the
business of Lessee except as Lessee's address.
16. Lessee shall not permit any contractor or other person making any
alterations, additions or installations within the Premises to use the
hallways, lobby or corridors as storage or work areas without the prior
consent of Lessor. Lessee shall be liable for and shall pay the expense
of any additional cleaning or other maintenance required to be
performed by Lessor as a result of the transportation or storage of
materials or work performed within the Building by or for Lessee.
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17. Lessee shall be entitled to use parking spaces as mutually agreed upon
between Lessee and Lessor subject to such reasonable conditions and
regulations, as may be imposed from time to time by Lessor. Lessee
agrees that vehicles of Lessee or its employees or agents shall not
park in driveways nor occupy parking spaces or other areas reserved for
any use such as Visitors, Delivery, Loading, or other tenants. Lessor
or its agents shall have the right to cause or be removed any car or
Lessee, its employees or agents, that may be parked in unauthorized
areas, and Lessee agrees to save and hold harmless Lessor, its agents
and employees from any and all claims, losses, damages and demands
asserted or arising in respect to or in connection with the removal of
any such, vehicle. Lessee, its employees, or agents shall not park
campers, trucks or cars on the Building parking areas overnight or over
weekends. Lessee will from time to time, upon request of Lessor, supply
Lessor with a list of license plate numbers of vehicles owned or
operated by its employees and agents.
18. Lessor reserves the right to make modifications hereto and such other
and further rules and regulations as in its sole judgement may be
required for the safety, care and cleanliness of the Premises and the
Building and for the preservation of good order therein. Lessee agrees
to abide by all such rules and regulations.
19. Canvassing, soliciting and peddling is prohibited in the Building and
each Lessee shall cooperate to prevent the same.
20. Lessor is not responsible for the violation of any rule contained
therein by any other Lessee.
21. Lessor may waive any one or more of these rules for the benefit of any
particular Lessee, but no such waiver shall be construed as a waiver of
lessor's right to enforce these rules against any or all Lessees
occupying the Building.
22. Lessee is responsible for purchasing and installing a security system
if required by the City of Fremont The cost of purchasing and
installation of any such system is the sole costs and expense of the
Lessee.
64
Exhibit 10.5
------------
10/20/98 Lucent Technologies
Bell Labs Innovations
Lucent Technologies Inc.
Global Purchasing Organization
211 Mount Airy Road
Basking Ridge. NJ 07920
Agreement No. WR71980036
Sheet 1 of 30
MicroFrame, Inc.
21 Meridian Road.
Edison, NJ 08820
This Agreement is made by and between Lucent Technologies Inc. ("Company")
having an office at 211 Mt. Airy Road, Basking Ridge, NJ 07920 and MicroFrame,
Inc. ("Supplier") having an office at 21 Meridian Road,. Edison, NJ 08820.
Company agrees to purchase and Supplier agrees to sell in accordance with the
terms and conditions stated in this Agreement and any attachments to this
Agreement.
WHEREAS. Company wishes to purchase products of Supplier's (design and)
manufacture for resale to Company's customers, and
WHEREAS, Supplier desires to sell such materials to Company for resale to
Company's customers,
THEREFORE, the parties agree as follows
1. AGREEMENT EFFECTIVE PERIOD
The term of this Agreement shall commence on, November 1,
1998, and shall, except as otherwise provided in this Agreement,
continue in effect thereafter until October 31, 2001.
2. MATERIAL
"MATERIAL" as used in this Agreement shall mean Supplier's ASG
Guard Electronic Communication Equipment as listed in Appendix A,
attached and made a part of this Agreement. Such MATERIAL is hereby
offered for sale by Supplier and may be purchased by Company in
accordance with the terms, conditions and specifications stated in this
Agreement. This Agreement is a non-commitment Agreement and MATERIAL
shall be furnished by Supplier on an as-ordered basis.
"Specification(s)" as used in this Agreement shall mean all of the
specifications made part of this Agreement.
<PAGE>
Agreement No. WR71980036
Sheet 2 of 31
3. OPTION TO EXTEND
Company shall have the right to extend the period specified in
the section "AGREEMENT EFFECTIVE PERIOD" for up to twelve (12) months
by giving Supplier at least thirty (30) business days prior written
notice.
Within ten (10) business days of the date of Company's notice
to extend the period, Supplier shall notify Company in writing whether
Supplier proposes to revise the price(s) under this Agreement. If the
parties fail to agree on the revised price(s) within twenty (20)
business days after the date of Supplier's notice, Company's notice of
extension shall be considered withdrawn and prices for outstanding
orders or orders placed during the term of this Agreement shall not be
revised.
4. PRICE
Prices shall be as shown in Appendix A. Prices as listed in
Appendix A shall remain in effect during the term of this Agreement.
5. COST REDUCTION
Both parties shall endeavor to reduce the costs of products
furnished under this Agreement.
6. BEST PRICE
If, at any time during the term of this Agreement Supplier
sells to any customer other than to affiliates or subsidiaries of
Supplier, MATERIAL at least equal or similar quality {and volume} at a
price lower than that in effect under this Agreement, Company shall pay
the lower price on all deliveries of MATERIAL which are made during the
period when such lower price is in effect. Upon ten (10) days written
notice, Company, or Company's authorized representatives, may audit
Supplier's applicable books and records for the purpose of verifying
Suppliers compliance with this provision.
7. TERMS OF PAYMENT
Net thirty (30) business days from the date of delivery of the
MATERIAL to Company or receipt of the applicable invoice therefor by
Company whichever occurs later.
8. FORECAST
Company shall provide Supplier with a twelve (12) month
non-binding rolling forecast submitted to Supplier by the fifth (5th)
business day of each calendar month. Such forecast shall be used by
Supplier for planning purposes only and shall not be deemed a
commitment by Company to purchase the MATERIAL shown in the forecast.
9. FOB
<PAGE>
Agreement No. WR71980036
Sheet 3 of 31
The MATERIAL shall be shipped FOB Supplier's location, 21
Meridian Road, Edison, N.J. 08820, or such other Supplier's location as
may be designated by Supplier. Supplier shall notify Company's
transportation representative on (303) 538-8278 or (303) 538-2907 when
MATERIAL is ready for shipment. Company shall select the carrier and
arrange at Company's expense for the transportation of the MATERIAL.
The 1990 INCOTERM manual shall govern interpretation of shipment terms
under this Agreement.
10. FREIGHT CLASSIFICATION
MATERIAL purchased under this Agreement shall be shipped to
Company or Company's customers subject to freight charges appropriate
for goods classified as Electronic Communications Equipment. Supplier
shall indicate on the bill of lading that Company's contract rates
apply.
11. NON-EXCLUSIVE MARKET RIGHTS
This Agreement neither grants to Supplier an exclusive right
or privilege to sell to Company any or all products of the type
described in the MATERIAL section which Company may require, nor
requires the purchase of any MATERIAL or other products from Supplier
by Company. Therefore, Company may contract with other manufacturers
and suppliers for the procurement of comparable products. In addition,
Company shall, at its sole discretion, decide the extent to which
Company will market advertise, promote, support or otherwise assist in
further offerings of the MATERIAL.
Purchases by Company under this Agreement shall neither
restrict the right of Company to cease purchasing nor require Company
to continue any level of such purchases.
12. SPECIFICATIONS OR DRAWINGS
Supplier's standard commercial Technical Specification and
Company's (referred to herein as "Technical MEMORANDUM" dated September
11, 1998, " or "Specification") is included by reference and further
described in Appendix B attached hereto and made a part of this
Agreement.
In accordance with the notification requirements outlined in
Section "PRODUCT CHANGE NOTICES", Supplier shall provide Company with
at least thirty (30) business days prior written notice of any change
proposed to be made by Supplier in the MATERIAL furnished pursuant to
said Technical Specification under this Agreement.
If Company, in its sole discretion, does not agree to the
change proposed by Supplier, then in addition to all other rights and
remedies at law or equity or otherwise, and without any cost to or
liability or obligation of Company, Company shall have the right to
terminate this Agreement and to terminate any or all purchase orders
for MATERIAL affected by such change.
<PAGE>
Agreement No. WR71980036
Sheet 4 of 31
Supplier shall continue to supply MATERIAL to Company pursuant
to the Technical Specification for the term of the Agreement. If
Supplier is unable to continue to thus supply or discontinues
manufacture of MATERIAL, Company shall be entitled to one (1) year's
advance notice plus a manufacturing license and appropriate
specifications and drawings to enable Company to manufacture or have
manufactured the MATERIAL.
13. ASSIGNMENT
Supplier shall not assign any right or interest under this
Agreement (excepting solely for moneys due or to become due) without
the prior written consent of Company, which shall not be unreasonably
withheld. Supplier shall be responsible to Company for all Work
performed by Supplier's subcontractor(s) at any tier.
14. BANKRUPTCY AND TERMINATION FOR FINANCIAL INSECURITY
Either party may terminate this Agreement by notice in
writing:
(i). if the other party makes an assignment for the benefit
of creditors (other than solely an assignment of monies due);
or
(ii). if the other party evidences an inability to pay debts
as they become due unless adequate assurance of such ability
to pay is provided within thirty (30) days of such notice.
If a proceeding is commenced under any provision of the United
States Bankruptcy Code, voluntary or involuntary, by or against either
party, and this Agreement has not been terminated, the non-debtor party
may file a request with the bankruptcy court to have the court set a
date within sixty (60) days after the commencement of the case, by
which the debtor party will assume or reject this Agreement, and the
debtor party shall cooperate and take whatever steps necessary to
assume or reject the Agreement by such date.
15. CFC PACKAGING
Supplier warrants that all packaging materials furnished under
this Agreement and all packaging associated with MATERIAL furnished
under this Agreement were not manufactured using and do not contain
chlorofluorocarbons. "Packaging" means all bags, wrapping, boxes,
cartons and any other packing materials used for packaging. Supplier
shall indemnify and hold Company harmless for any liability, fine or
penalty incurred by Company to any third party or governmental agency
arising out of Company's good faith reliance upon said warranty.
16. CHOICE OF LAW
This Agreement and all transactions under it shall be governed
by the laws of the State of New Jersey excluding its choice of law
rules and excluding the Convention for the
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Agreement No. WR71980036
Sheet 5 of 31
International Sale of Goods. Supplier agrees to submit to the
jurisdiction of any court wherein an action is commenced against
Company based on a claim for which Supplier has agreed to indemnify
Company under this Agreement.
17. COMPLIANCE WITH LAWS
Supplier and all persons furnished by Supplier shall comply at
their own expense with all applicable laws, ordinances, regulations and
codes, including the identification and procurement of required
permits, certificates, licenses, insurance, approvals and inspections
in performance under this Agreement.
18. CONTINUING AVAILABILITY
Supplier shall offer for sale to Company, during the term of
this Agreement and for at least one (1) year after the expiration of
this Agreement, MATERIAL conforming to the Technical Specifications and
other Specifications set forth in this Agreement. Supplier further
shall offer for sale to Company, during the term of this Agreement and
until five (5) years after the expiration of this Agreement,
maintenance, replacement, and repair parts ("Parts") which are
functionally equivalent and identical in form and fit for the MATERIAL
covered by this Agreement. The price for the MATERIAL and Parts shall
be the price set forth in Suppliers then current Agreement with Company
for said MATERIAL or Parts or, if no such Agreement exists, at a price
agreed upon by Company and Supplier. If the parties fail to agree on a
price, the price shall be a reasonably competitive price for said
MATERIAL or Parts at the time for delivery. The MATERIAL and Parts
shall be warranted as set forth in the "WARRANTY" section of this
Agreement. The term "Parts" is included in the term "MATERIAL."
19. DEFAULT
If Supplier shall be in breach or default of any of the terms,
conditions or covenants of this Agreement or of any purchase order, and
if such breach or default shall continue for a period of ten (10) days
after the giving of written notice to Supplier thereof by Company,
then, in addition to all other rights and remedies which Company may
have at law or equity or otherwise, Company shall have the right to
cancel this Agreement and/or any purchase orders placed by Company
without any charge to or obligation or liability of Company.
20. ELECTRONIC DATA INTERCHANGE
Supplier agrees, if requested by Company, to implement
Electronic Data Interchange (EDI) ordering and payment arrangements as
an electronic means of trading business document with Company. The
electronic business documents include purchase orders, acknowledgments,
purchase order changes, ship notices, invoices, remittance advice,
electronic funds transfer (EFT) or such purchasing communications as
may be requested by Company for transaction under this Agreement.
Supplier shall at its sole expense, obtain, make fully operational and
maintain all equipment, software and other materials set forth in
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Agreement No. WR71980036
Sheet 6 of 31
Company's EDI Planning Guide. Supplier shall also execute an Electronic
Purchasing Agreement with Company at the time of execution of this
Agreement.
21. EPIDEMIC CONDITION
If during the term of this Agreement and for one (1) year
after the last shipment date of MATERIAL under this Agreement Company
notifies Supplier that MATERIAL shows evidence of an "Epidemic
Condition," Supplier shall prepare and propose a Corrective Action Plan
("CAP") with respect to such MATERIAL within five (5) working days of
such notification, addressing implementation and procedure milestones
for remedying such Epidemic Condition(s). An extension of this
time-frame is permissible upon mutual written agreement of the parties.
Upon notification of the Epidemic Condition to Supplier,
Company shall have the right to postpone all or part of the shipments
of unshipped MATERIAL, by giving written notice of such postponement to
Supplier, pending correction of the Epidemic Condition. Such
postponement shall temporarily relieve Supplier of its shipment
liability and Company of its shipment acceptance liability. Should
Supplier not agree to the existence of an Epidemic Condition or should
Company not agree to the CAP, then Company shall have the right to
suspend all or part of its unshipped orders without liability to
Company until such time as a mutually acceptable solution is reached.
An Epidemic Condition will be considered to exist when one or
more of the following conditions occur:
(1) Failure reports or statistical samplings show that
MATERIAL shipped contain a potential safety hazard (such as personal
injury or death, fire, explosion, toxic emissions, etc.), or exhibit a
highly objectionable symptom (such as emissions of smoke, loud noises,
deformation of housing) or other disconcerting symptoms of this type.
(2) Reliability plots of relevant data indicate that the
MATERIAL has actual Mean Time Between Failures (MTBF) of less than 80%
of the MTBF stipulated in the Technical Specification. The MTBF
parameter of MATERIAL is defined as the total operating or power-on
time of any population under observation ("T"), in hours, divided by
the total number of critical failures ("n") that have occurred during
the observed period. A critical failure is defined as a failure to
operate per the requirements of the Technical Specification. The total
operating time of a population is the summation of operating time of
individual units in that population. MTBF is expressed as MTBF = T/n.
An Epidemic Condition shall exist when data derived from populations
being tracked confirms the condition with 80% confidence. (3) MATERIAL
Dead on Arrival (DOA) failures exceed the Epidemic DOA failure rate
which is defined as 1.2 x DOA specified in the section of this
Agreement entitled PRODUCT CONFORMANCE REVIEW.
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Agreement No. WR71980036
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Only major functional and visual/mechanical/appearance defects
are considered for determining Epidemic Condition. MATERIAL could be
either sampled or, a Company's option, 100% audited at Company
warehouses, factories or Company's customers' locations. If MATERIAL is
sampled, the data must have 80% or better statistical confidence.
For the purpose of this Agreement, functional DOA shall be
defined as any MATERIAL that during the test, installation or upon its
first use fails to operate as expected or specified.
Visual/mechanical/appearance DOA is defined as any MATERIAL containing
one or more major defects that would make the MATERIAL unfit for use or
installation.
An Epidemic Condition shall not include failures due to
customer misapplication, utilization of parts not approved by supplier,
or chain failures induced by internally or externally integrated
subassemblies.
In the event that Supplier develops a remedy for the defect(s)
that caused the Epidemic Condition and Company agrees in writing that
the remedy is acceptable Supplier shall:
(a) Incorporate the remedy in the affected MATERIAL in
accordance with Company's.
(b) Ship all subsequent MATERIAL incorporating the required
modification correcting the defect(s) at no additional charge to
Company; and
(c) Repair and/or replace MATERIAL that caused the Epidemic
Condition. In the event that Company incurs costs due to such repair
and/or replacement, including but not limited to labor and shipping
costs, Supplier shall reimburse Company for such costs. Supplier shall
bear risk of in transit loss and damage for such repaired and/or
replaced MATERIAL.
Supplier and Company shall mutually agree in writing as to the
remedy's implementation schedule. Supplier shall use its best efforts
to implement the remedy in accordance with the agreed-upon schedule.
If Supplier is unable to develop a mutually agreeable remedy,
or does not adequately take into account the business interests of
Company, as reasonably agreed by the parties, Company may (i) develop
and implement such remedy and, in such case, implementation costs and
risk of in- transit loss and damage shall be allocated between the
parties as set forth in this section, and/or (ii) cancel postponed
orders without liability and return all MATERIAL affected by such
Epidemic Condition for full refund, payable by Supplier within thirty
(30)
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Agreement No. WR71980036
Sheet 8 of 31
business days after receipt of returned MATERIAL (with risk of
loss or in-transit damage borne by Supplier) and/or (iii) terminate
this Agreement without further liability.
22. EXPORT CONTROL
Supplier will not use, distribute, transfer or transmit any
products, software or technical information (even if incorporated into
other products) provided under this Agreement except in compliance with
U.S. export laws and regulations (the "Export Laws"). Supplier will
not, directly or indirectly, export or re-export the following items to
any country which is in the then current list of prohibited countries
specified in the applicable Export Laws: (a) software or technical data
disclosed or provided to Supplier by Company or Company's subsidiaries
or affiliates; or (b) the direct product of such software or technical
data. Supplier agrees to promptly inform Company in writing of any
written authorization issued by the U.S. Department of Commerce office
of export licensing to export or re-export any such items referenced in
(a) or (b). The obligations stated above in this clause will survive
the expiration, cancellation or termination of this Agreement or any
other related agreement.
23. FORCE MAJEURE
Neither party shall be held responsible for any delay or
failure in performance of any part of this Agreement to the extent such
delay or failure is caused by fire, flood, strike, civil, governmental,
or military authority, act of God, or other similar causes beyond its
control and without the fault or negligence of the delayed or non
performing party or its subcontractors.
Supplier's liability for loss or damage to Company's MATERIAL
in Supplier's possession or control shall not be modified by this
section. When a party's delay or nonperformance continues for a period
of at least fifteen (15) days, the other party may terminate, at no
charge, this Agreement or an order under the Agreement.
24. GOVERNMENT CONTRACT PROVISIONS
The following provisions regarding equal opportunity, and all
applicable laws, rules, regulations and executive orders specifically
related thereto, including applicable provisions and sections from the
Federal Acquisition Regulation and all supplements thereto are
incorporated in this Agreement as they apply to work performed under
specific U.S. Government contracts: 41 CFR 60-1.4, Equal Opportunity;
41 CFR 60-1.7, Reports and Other Required Information 41 CFR 60-1.8,
Segregated Facilities; 41 CFR 60-250.4, Affirmative Action For Disabled
Veterans and Veterans of the Vietnam Era (if in excess of $10,000); and
41 CFR 60-741.4, Affirmative Action for Disabled Workers (if in excess
of $2,500), wherein the terms "contractor" and "subcontractor" shall
mean "Supplier". In addition, orders placed under this Agreement
containing a notation that the material or services are intended for
use under Government contracts shall be subject to such other
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Agreement No. WR71980036
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Government provisions printed, typed or written thereon, or on the
reverse side thereof, or in attachments thereto.
25. HEAVY METALS IN PACKAGING
Supplier warrants to Company that no lead, cadmium, mercury or
hexavalent chromium have been intentionally added to any packaging or
packaging component (as defined under applicable laws) to be provided
to Company under this Agreement and that packaging materials were not
manufactured using and do not contain chlorofluorocarbons. Supplier
further warrants to Company that the sum of the concentration levels of
lead, cadmium, mercury and hexavalent chromium in the package or
packaging component provided to Company under this Agreement does not
exceed 100 parts per million. Upon request, Supplier shall provide to
Company Certificates of Compliance certifying that the packaging and/or
packaging components provided under this Agreement are in compliance
with the requirements set forth above in this section.
26. IDENTIFICATION
Supplier shall not, without Company's prior written consent,
engage in publicity related to this Agreement, or make public use of
any Identification in any circumstances related to this Agreement.
"Identification" means any semblance of any trade name, trademark,
service mark, insignia, symbol, logo, or any other designation, or
drawing of Company or its affiliates. Supplier shall remove or
obliterate any Identification prior to any use or disposition of any
MATERIAL rejected or not purchased by Company.
27. IMPLEADER
Supplier shall not implead or bring an action against Company
based on any claim by any person for personal injury or death to an
employee of Company for which Company has previously paid or is
obligated to pay worker's compensation benefits to such employee or
claimant and for which such employee or claimant could not otherwise
bring legal action against Company.
28. INDEMNITY
At Company's request, Supplier agrees to indemnify, defend and
hold harmless Company, its affiliates, customers, employees, successors
and assigns (all referred to as "Company") from and against any losses,
damages, claims, fines, penalties and expenses (including reasonable
attorney's fees) that arise out of or result from: (i) injuries or
death to persons or damage to property, including theft, in any way
arising out of or caused or alleged to have been caused by the Work or
services performed by, or material provided by Supplier or persons
furnished by Supplier; (ii) assertions under Workers' Compensation or
similar acts made by persons furnished by Supplier; or (iii) any
failure of Supplier to perform its obligations under this Agreement.
<PAGE>
Agreement No. WR71980036
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29. INFRINGEMENT
Supplier shall indemnify and save harmless Company, its
affiliates and their customers, officers, directors, employees (all
referred to in this section as "Company") from and against any losses,
damages, liabilities, fines, penalties, and expenses (including
reasonable attorneys' fees) that arise out of or result from any and
all claims: (i) of infringement of any patent, copyright, trademark or
trade secret right, or other intellectual property right, private
right, or any other proprietary or personal interest, and (ii) related
by circumstances to the existence of this Agreement or performance
under or in contemplation of it (an Infringement Claim). If the
Infringement Claim arises solely from Suppliers adherence to Company's
written instructions regarding services or tangible or intangible goods
provided by Supplier (items) and if the Items are not (i) commercial
items available on the open market or the same as such items, or (ii)
items of Supplier's designated origin, design or selection, Company
shall indemnify Supplier. Company or Supplier shall defend or settle,
at its own expense any demand, action or suit on any Infringement Claim
for which it is indemnitor under the preceding provisions and each
shall timely notify the other of any assertion against it or any
Infringement Claim and shall cooperate in good faith with the other to
facilitate the defense of any such Claim.
30. INSIGNIA
Upon Company's written request, "Insignia", including certain
trademarks, trade names, insignia, symbols, decorative designs or
packaging designs of Company, or evidences of Company's inspection will
be properly affixed by Supplier to the MATERIAL furnished or its
packaging. Such Insignia will not be affixed, used or otherwise
displayed on the MATERIAL furnished or in connection therewith without
written approval by Company. The manner in which such Insignia will be
affixed must be approved in writing by Company in accordance with
standards established by Company. Company shall retain all right, title
and interest in any and all packaging designs, finished artwork and
separations furnished to Supplier. This section does not reduce or
modify Suppliers obligations under the "IDENTIFICATION" and "USE OF
INFORMATION" section.
31. INSURANCE
Supplier shall maintain and cause Supplier's subcontractors to
maintain during the term of this Agreement: (i) Workers' Compensation
insurance as prescribed by the law of the state or nation in which the
Work is performed; (ii) employer's liability insurance with limits of
at least $500,000 for each occurrence; (iii) automobile liability
insurance if the use of motor vehicles is required, with limits of at
least $1,000,000 combined single limit for bodily injury and property
damage for each occurrence; (iv) Commercial General Liability ("CGL")
insurance, ISO 1988 or later occurrence form of insurance including
Blanket Contractual Liability and Broad Form Property Damage, with
limits of at least $1,000,000 combined single limit for bodily injury
and property damage for each occurrence; and (v) if the furnishing to
Company (by sale or otherwise) of products or material is involved, CGL
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Agreement No. WR71980036
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insurance endorsed to include products liability and completed
operations coverage in the amount of $5,000,000 per occurrence. All CGL
and automobile liability insurance shall designate Company, its
affiliates, and its directors, officers and employees (all referred to
as "Company") as additional insured. All such insurance must be primary
and non-contributory and required to respond and pay prior to any other
insurance or self-insurance available. Any other coverage available to
Company shall apply on an excess basis. Supplier agrees that Supplier,
Supplier's insurer(s) and anyone claiming by, through, under or in
Supplier's behalf shall have no claim, right of action or right of
subrogation against Company and its customers based on any loss or
liability insured against under the foregoing insurance. Supplier and
Supplier's subcontractors shall furnish prior to the start of Work,
certificates or adequate proof of the foregoing insurance, including if
specifically requested by Company, endorsements and insurance Policies.
Company shall be notified in writing at least thirty (30) days prior to
cancellation of or any change in the policy. Insurance companies
providing coverage under this Agreement must be rated by A-M Best with
at least an A rating.
32. INVOICING FOR GOODS
Supplier shall: (i) render original invoice, or as otherwise
specified in this Agreement, showing Agreement and order number,
through routing and weight, (ii) render separate invoices for each
shipment within twenty-four (24) hours after shipment, and (iii) mail
invoices with copies of bills of lading and shipping notices to the
address shown on this Agreement or order. If shipping notices to
prepayment of transportation charges is authorized, Supplier shall
include the transportation charges from the F.O.B. point to the
destination as a separate item on the invoice stating the name of the
carrier used.
33. INVOICING FOR STOCKS
If Company requests for reasons other than covered by Section
"FORCE MAJEURE", that shipment be postponed beyond the date shown on a
purchase order, Supplier may invoice Company as of the original
scheduled delivery date for MATERIAL manufactured under this Agreement,
if it has been inspected and approved by Company's designated quality
organization (provided inspection has been specified in this Agreement
or in an order issued under this Agreement).
34. JURISDICTION
Subject to the section "MEDIATION", Supplier agrees that any
action or legal proceeding arising out of this Agreement shall be
brought only in a court of competent jurisdiction in the United States
of America and Supplier expressly submits to, and accepts the
jurisdiction of, any such court in connection with such action or
proceeding and Supplier further consents to the enforcement of any
judgment against it arising therefrom in any jurisdiction in which it
has or shall have any assets.
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Agreement No. WR71980036
Sheet 12 of 31
35. LICENSES
No Licenses, express or implied, under any patents are granted
by Company to Supplier under this Agreement or order.
36. MARKING
All MATERIA L furnished under this Agreement shall be marked
for identification purposes in accordance with the specifications set
forth in this Agreement and as follows:
(a) with Supplier model/serial number; and
(b) with month and year of manufacture.
(c) with Company's Comcode
In addition, Supplier shall add any other identification which
might be requested by Company such as but not limited to indicia
conforming to the Company's Serialization Plan (KS-23490) as shown in
Appendix C. Charges, if any, for such additional identification marking
shall be as agreed upon by Supplier and Company. This section does not
reduce or modify Supplier's obligations under the "IDENTIFICATION"
section.
37. MEDIATION
If a dispute relates to this Agreement, or its breach, and the
parties have not been successful in resolving such dispute through
negotiation, the parties shall attempt to resolve the dispute through
mediation by submitting the dispute to a sole mediator selected by the
parties or, at any time at the option of a party, to mediation by the
American Arbitration Association ("AAA"). Each party shall bear its own
expenses and an equal share of the expenses of the mediator and the
fees of the AAA. All defenses based on passage of time shall be
suspended pending the termination of the mediation. Nothing in this
section shall be construed to preclude any party from seeking
injunctive relief in order to protect its rights pending mediation.
38. MONTHLY ORDER AND SHIPMENT REPORTS
Supplier shall render monthly order and shipment reports on or
before the fifth working day of the succeeding month containing the
information as agreed by Company and Supplier.
39. NEW AND CHANGED METHODS, PROCESSES AND EQUIPMENT
Supplier shall keep abreast of major developments in
Supplier's industry and to promptly advise Company of any developments
which might affect the production of any MATERIAL under this Agreement.
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Agreement No. WR71980036
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40. NON WAIVER
The failure of either party at any time to enforce any right
or remedy available to it under this Agreement or otherwise with
respect to any breach or failure by the other party shall not be
construed to be a waiver of such right or remedy with respect to any
other breach or failure by the other party.
41. NOTICES
Any notice given or demand which under the terms of this
Agreement or under any statute, must or may be given or made by
Supplier or Company shall be in writing and shall be given or made by
confirmed facsimile, or similar communication or by certified or
registered mail addressed to the respective parties as follows
To Company: Lucent Technologies Inc.
Global Procurement Organization
211 Mt. Airy Road
Room 3W220
Basking Ridge, NJ 07920
Attn.: Sourcing and Manufacturing Manager
-OR-
To Supplier: MicroFrame, Inc.
21 Meridian Rd.
Edison, NJ 08820
Attn.: Henry Gold
Such notice or demand shall be deemed to have been given or
made when sent by facsimile, or other communication or when deposited,
postage prepaid in the U.S. mail. The above addresses may be changed at
any time by giving prior written notice as above provided.
The above addresses may be changed at any time by giving prior
written notice as above provided.
42. OPERATING SYSTEM SOFTWARE
The term MATERIAL includes any software (operating program in
machine readable form and related documentation) and storage media
therefor normally furnished with or embedded in the MATERIAL. Title to
the software, including copyright, shall remain in Supplier. The party
having title to the MATERIAL shall have title to the software storage
media. For the life of the MATERIAL listed in this Agreement, Supplier
grants to Company
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Agreement No. WR71980036
Sheet 14 of 31
and any subsequent purchaser, lessee or other end user (referred to
collectively in this section as "end user") a non-exclusive license to
use said software on the MATERIAL on which it was delivered. Company
and any subsequent end user may copy the software for use on such
MATERIAL with which it was originally delivered and for archival
purposes, but shall not knowingly reproduce either the original
software for distribution to others. Company and any subsequent end
user may add to, delete from or modify the software in any manner, but
no changes, however extensive, shall alter Supplier's title to such
original software. Title to any such modification or addition to the
software shall remain in the entity which creates the modification or
addition.
43. OZONE DEPLETING CHEMICALS
Supplier hereby warrants that it is aware of international
agreements and pending legislation in several nations, including the
United States, which would limit, ban and/or tax importation of any
product containing, or produced using ozone depleting chemicals
("ODCs"), including chloroflurocarbons, halons and certain chlorinated
solvents. Supplier hereby warrants that the MATERIAL furnished to
Company will conform to all applicable requirements established
pursuant to such agreements, legislation and regulations, and the
MATERIAL furnished to Company will be able to be imported and used
lawfully (and without additional taxes associated with ODCs not
reported to Company by Supplier as set forth in this section) under all
such agreements, legislation and requirements. Supplier also warrants
that it is currently reducing, or if Supplier is not the manufacturer
of the MATERIAL, is currently causing the manufacturing vendor to
reduce and will, in an expeditious manner, eliminate, or, as
applicable, have its manufacturing vendor eliminate the use of ODCs in
the manufacture of the MATERIAL.
If the MATERIAL furnished by Supplier under this Agreement is
manufactured outside the United States, Supplier shall, upon execution
of this Agreement, and at any time that new products are added to this
Agreement or changes are made to the MATERIAL furnished under this
Agreement, complete, sign and return to Company the attached ODC
Content Certification. The ODC Content Certification must be signed by
Supplier's facility manager, corporate officer or his delegate.
The term "ODC content" on the ODC Content Certification means
the total pounds of ODC used directly in the manufacture of each unit
of MATERIAL. This includes all ODCs used in the manufacturing and
assembly operations for the MATERIAL plus all ODCs used by Supplier's
vendors and any other vendors in producing components or other products
incorporated into the MATERIAL sold to Company.
Supplier is responsible to obtain information on the ODC
content of all components and other products acquired to manufacture
the MATERIAL and to incorporate such information into the total ODC
content reported to Company. Provided however, that
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Agreement No. WR71980036
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Supplier should not include in the ODC content those components or
other products which are manufactured in the United States. Supplier
hereby warrants to Company that all information furnished by Supplier
on the ODC Content Certification is complete and accurate and that
Company may rely on such information for any purpose, including but not
limited to providing reports to government agencies or otherwise
complying with applicable laws. Supplier shall defend, indemnify and
hold Company harmless of and from any claims, demands, suits,
judgments, liabilities, fines, penalties, costs and expenses (including
additional ODC taxes as provided for in paragraph one of this section
and reasonable attorney's fees) which Company may incur under any
applicable federal, state, or local laws or international agreements,
and any and all amendments thereto by reason of Company's use of
reliance on the information furnished to Company by Supplier on the ODC
Content Certification or by reason of Supplier's breach of this
section. Supplier shall cooperate with Company in responding to any
inquiry concerning the use of ODCs to manufacture the MATERIAL or
components thereof and to execute without additional charge any
documents reasonably required to certify the absence or quantity of
ODCs used to manufacture the MATERIAL or components thereof.
44. OZONE DEPLETING SUBSTANCES LABELING
Supplier warrants and certifies that all MATERIAL and other
products, including packaging and packaging components, provided to
Company under this Agreement have been accurately labeled, in
accordance with the requirements of 40 CFR, Part 82 entitled
"Protection of Stratospheric Ozone, Subpart E- The Labeling of Products
Using Ozone Depleting Substances."
45. PACKING
MATERIAL purchased, repaired, replaced or refurbished under
this Agreement shall be packed and labeled by Supplier at no additional
charge in accordance with Packing Specifications PKG-91NJ1045, Issue 6,
as changed from time to time with Supplier's written approval, which
Specifications are attached. and made a part of this Agreement as
Appendix D.
46. PRODUCT CHANGES
Supplier shall notify Company in advance, in writing of any
change proposed to be made in accordance with this Agreement, or in the
Specification and documentation covered by this Agreement that would
impact upon: (i) reliability, (ii) requirements of the Specification,
or (iii) form, fit or function (as defined below).
In order for Company to review these proposed changes, at
least thirty (30) business days advance notice will be required except
for those cases where an extremely unsatisfactory condition requires
immediate action. In that instance, verbal notification to Company
shall be used, followed by Supplier's immediate written confirmation.
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Agreement No. WR71980036
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"Form" shall mean changes in appearance visible to the user
(customer, repair personnel, developer) of the MATERIAL.
"Fit" shall mean changes in parts to components that are not
physically interchangeable.
"Function" shall mean changes that affect operational
characteristics of the MATERIAL or require the operator to change the
method of operation.
Supplier shall submit a proposal to Company, specifically
documenting all cost factors, implementation schedules, and repair
changes. The change notice shall be sent to the following address:
Lucent Technologies Inc.
211 Mt. Airy Road
Room 3W220
Basking Ridge, NJ 07920
Attn: Sourcing & Manufacturing Manager
The format of Suppliers notification document shall be the
responsibility of Supplier but said notification document shall contain
at least the following information.
1. Supplier's name.
2. Agreement number.
3. MATERIAL description.
4. Change number.
5. MATERIAL affected.
6. Reason for change.
7. Description of change (including the impact upon: (i)
reliability, (ii) requirements of the Specification and
(iii) form, fit or function..)
8. Cost impact.
9. Marking method of identifying changed units.
10. Documentation
a. Marked up documents shall be provided until the
document or drawing is re-issued.
b. Listing of documents and drawings to be changed.
c. Field repair or modification kit documentation
(if applicable).
11. Unit in process, in stock and installed affected by
change.
12. Date changes are proposed to be implemented.
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Agreement No. WR71980036
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13. All necessary and relevant temporary changes affected by
this notice.
14. All necessary and relevant attachments.
15. Additional comments.
If, as mutually agreed by Company and Supplier, sufficient
changes have been made to warrant a MATERIAL re-qualification, such
requalification will be performed at no cost to Company unless
otherwise agreed.
MATERIAL shall be in accordance with the latest information
stated or referenced in the Specification.
The quality of MATERIAL used and the method of manufacturing,
handling and shipping, shall be such that the finished MATERIAL meets
the properties and requirements shown in the Specification and in the
other sections of this Agreement.
If Company, in its sole discretion, does not agree to the
change(s) proposed by Supplier, then in addition to all other rights
and remedies at law or equity or otherwise, and without any cost to or
liability or obligation of Company, Company shall have the right to
terminate this Agreement and to terminate any or all orders for
MATERIAL affected by such change.
47. PRODUCT CONFORMANCE REVIEWS
Supplier shall, utilizing documented procedures specified
herein, make such tests and inspections as are necessary to insure that
MATERIAL meets all technical requirements of the MATERIAL
specification. Supplier shall provide, without charge, any production
testing facilities and personnel required to inspect the MATERIAL under
Quality Program Specification (QPS) Nos. 40.002 and 40.030, as changed
from time to time with Supplier's written approval, which specification
is attached and made a part of this Agreement as Appendix E. Company
reserves the right to inspect MATERIAL prior to shipment from Supplier
or Supplier's subcontractor(s). Such inspection shall be conducted by
Company's Engineering and Environmental Technologies (EE&T)
organization utilizing a 0.65% Acceptability Level (AQL) sampling plan
as described in QPS 40.030. If MATERIAL fails inspection, Supplier
agrees to pay for all re-inspection costs. Inspection requirements may
be waived only by written notification from Company's Engineering and
Environmental Technologies (EE&T) organization. In the event that any
or all work under this Agreement is subcontracted to another Supplier,
Company reserves the right to conduct the aforementioned inspections at
the subcontractors facilities.
48. PRODUCT DOCUMENTATION
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Agreement No. WR71980036
Sheet 18 of 31
Supplier shall furnish, at no charge, product documentation,
and any succeeding changes thereto, as described in the Technical
Specification. Company may use, reproduce, reformat, modify and
distribute such product documentation.
Company shall reproduce Suppliers copyright notice contained
in any documentation reproduced without change by Company. For
documentation which is reformatted; or modified by Company, Company
shall have the right to place only Company's own copyright notice on
the reformatted or modified documentation. It is the intent of the
parties that Company's copyright notice shall be interpreted to protect
the underlying copyright rights of Supplier to the documentation to the
extent such underlying rights are owned by Supplier.
49. PURCHASE ORDERS
Purchase orders issued under this Agreement shall be sent to
the following address:
MicroFrame, Inc.
21 Meridian Rd.
Edison, NJ 08820
Attn: Henry Gold
Purchase orders shall specify: (i) description of MATERIAL,
inclusive of any numerical/alphabetical identification referenced in
the price list in this Agreement, (ii) delivery date, (iii) applicable
price, (iv) location to which the MATERIAL is to be shipped and (v)
location to which invoices shall be sent for payment.
50. REGISTRATION AND RADIATION STANDARDS
When MATERIAL furnished under this Agreement is subject to
Part 68, Part 15 or any other part of the Federal Communication
Commission's Rules and Regulations, as may be amended from time to time
(hereinafter "FCC Rules"), Supplier warrants that such MATERIAL
complies with the registration, certification, type-acceptance and/or
verification standards of the FCC Rules including, but not limited to,
all labeling, customer instruction requirements, and the suppression of
radiation to specified levels. Supplier shall also establish periodic
on-going compliance retesting and follow a Quality Control program,
submitted by Company, to assure that MATERIAL shipped complies with the
applicable FCC Rules. Supplier shall indemnify and save Company
harmless from any liability, fines, penalties, claims or demands
(including the costs, expenses and reasonable attorney's fees on
account thereof) that may be made because of Supplier's noncompliance
with the applicable FCC Rules. Supplier shall defend Company, at
Company's request, against such liability, claim or demand.
In addition, should MATERIAL which is subject to Part 15 of
the FCC Rules, during use generate harmful interference to radio
communications, Supplier shall provide the
<PAGE>
Agreement No. WR71980036
Sheet 19 of 31
Company information relating to methods of suppressing such
interference and pay the cost of suppressing such interference or, at
the option of Company, accept the return of the MATERIAL and refund to
Company the price paid for the MATERIAL less a reasonable amount for
depreciation, if applicable.
To the extent that MATERIAL furnished under this Agreement is
also subject to FCC Rules governing the use of the MATERIAL as a
component in a system, Company shall be responsible for compliance with
the applicable FC Rules governing the system. Supplier shall fully
cooperate with Company, by providing technical support and information,
and, upon written request from Company, shall modify MATERIAL to enable
Company to ensure ongoing compliance with the FCC Rules. Company shall
pay any increase in Suppliers costs and/or expenses resulting from
Company's request to modify MATERIAL to enable Company to comply with
the FCC Rules.
Nothing in this section shall be deemed to diminish or
otherwise limit Supplier's obligations under the "WARRANTY" section or
any other section of this Agreement.
51. REJECTIONS
If Company rejects any or all of the MATERIAL, company may, in
addition to all its other rights and remedies at law or equity,
exercise one or more of the following remedies: (i) return rejected
MATERIAL for full credit at the price charged plus transportation
charges from Supplier's plant, and return; or (ii) accept a conforming
part of any shipment; or (iii) have rejected MATERIAL replaced by
Supplier at the purchase price stipulated in this Agreement.
52. RELEASES VOID
Neither party shall require (i) waivers or releases of any
personal rights or (ii) execution of documents which conflict with the
terms of this Agreement, from employees, representatives or customers
of the other in connection with visits to its premises and both parties
agree that no such releases, waivers or documents shall be pleaded by
them or third persons in any action or proceeding.
53. REPAIRS NOT COVERED UNDER WARRANTY
In addition to repairs provided for in the "WARRANTY" section
Supplier shall provide repair service on all MATERIAL ordered under
this Agreement during the term of this Agreement and until five (5)
years after the expiration of this Agreement. MATERIAL to be repaired
under this section will be returned to a location designated by
Supplier, and unless otherwise agreed upon by Supplier and Company,
Supplier shall ship the repaired MATERIAL which meets the
Specifications set forth in the "SPECIFICATIONS OR DRAWINGS" section
and all other Specifications within ten (10) business days of receipt
of
<PAGE>
Agreement No. WR71980036
Sheet 20 of 31
the defective or non-conforming MATERIAL. With the concurrence and
scheduling of Company, repair may be made by Supplier on site.
If MATERIAL is returned to Supplier for repair as provided for
in this section and is determined to be beyond repair, Supplier shall
so notify Company. If requested by Company, Supplier will sell to
Company a replacement at the price set forth in Supplier's then current
agreement with Company for said MATERIAL or, if no such agreement
exists, at a price agreed upon by Supplier and Company. If the parties
fail to agree on a price, the price shall be a reasonably competitive
price for such MATERIAL at the time for delivery. Further, if requested
by Company, Supplier shall take the necessary steps to dispose of the
unrepairable MATERIAL and pay to Company the salvage value, if any.
Replacement and repaired MATERIAL shall be warranted as set forth in
the "WARRANTY" section.
This Agreement does not grant Supplier an exclusive privilege
to repair any or all of the MATERIAL purchased under this Agreement for
which Company may require repair; and Company may perform the repairs
or contract with others for these services. In addition, Supplier
authorizes Company and any qualified repairer with whom Company may
contract to perform repairs on all MATERIAL purchased under this
Agreement.
All transportation costs of and in transit risk of loss and
damage to MATERIAL returned to Supplier for repair under this section
will be borne by Company and all transportation costs of and in transit
risk of loss and damage to such repaired or replacement MATERIAL
returned to Company will be borne by Company.
Price schedules for repairs under this section are listed in
Appendix A.
54. REPAIR PROCEDURES
Company shall furnish the following information with MATERIAL
returned to Supplier for repair: (a) Company's name and complete
address; (b) name(s) and telephone numbers(s) of Company's employee(s)
to contact in case of questions about the MATERIAL to be repaired; (c)
ship-to address for return of repaired MATERIAL if different than (a);
(d) a complete list of MATERIAL returned; (e) the nature of the defect
or failure if known; and (f) whether or not returned MATERIAL is in
warranty. Supplier shall, within ten (10) days of the execution of this
Agreement, provide a written notice to Company specifying (i) the
name(s) and telephone number(s) of the individual(s) to be contacted
concerning any questions that may arise concerning repair, and (ii) if
required, any special packing of MATERIAL which might be necessary to
provide adequate in-transit protection from transportation damage.
MATERIAL repaired by Supplier shall have the repair completion
date stenciled or otherwise identified in a permanent manner at a
readily visible location on the MATERIAL
<PAGE>
Agreement No. WR71980036
Sheet 21 of 31
and the repaired MATERIAL shall be returned with a tag or other papers
describing the repairs which have been made.
All invoices originated by Supplier for repair services must
be clearly identified as such, and must contain: (i) a reference to
Company's purchase order for these repair services, (ii) a detailed
description of repairs made by Supplier and the need therefor, and
(iii) an itemized listing of parts and labor charges, if any. Replaced
parts will, upon request, be available for inspection by or returned to
Company. Further, the provisions of the "INVOICING" and "SHIPPING"
sections, other than provisions relating to transportation charges with
respect to MATERIAL repaired under warranty, shall apply to Suppliers
return to Company of repaired MATERIAL.
55. RIGHT OF ENTRY
Each party shall have the right to enter the premises of the
other party during standard business hours with respect to the
performance of this Agreement, including an inspection or a Quality
Review, subject to all plant rules and regulations, clearances,
security regulations and procedures as applicable. Each party shall
provide safe and proper facilities for such purpose. No charge shall be
made for such visits. It is agreed that prior notification will be
given when access is required.
56. SAFETY CERTIFICATION
All MATERIAL purchased under this Agreement shall be designed
to be in compliance with the applicable Underwriters Laboratories (UL)
and Canadian Standards Association (CSA) rules and regulations. It is
agreed that Supplier shall be responsible for filing the required
documents to obtain compliance with said Underwriters Laboratories
Standards and Canadian Standards. Supplier shall be responsible for
making the MATERIAL available for testing.
57. SECTION HEADINGS
The headings of the sections in this Agreement are inserted
for convenience only and are not intended to affect the meaning or
interpretation of this Agreement.
58. SERVICES
Visits by Supplier's representatives or its suppliers'
representatives for inspection, adjustment or other similar purposes in
connection with MATERIAL purchased under this Agreement shall for all
purposes be deemed "Work under this Agreement" and shall be at no
charge to Company unless otherwise agreed in writing between the
parties.
59. SEVERABILITY
If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforcability shall not invalidate
or render unenforceable the entire Agreement,
<PAGE>
Agreement No. WR71980036
Sheet 22 of 31
but rather the entire Agreement shall be construed as if not containing
the particular invalid or unenforceable provision or provisions, and
the rights and obligations of Supplier and Company shall be construed
and enforced accordingly.
60. SHIPPING
Supplier shall: (i) ship the MATERIAL covered by this
Agreement or order complete unless instructed otherwise, (ii) ship to
the destination designated in the Agreement or order, (iii) ship
according to routing instructions given by Company, (iv) place the
Agreement and order number on all subordinate documents, (v) enclose a
packing memorandum with each shipment and, when more than one package
is shipped, identify the package containing the memorandum; and (vi)
mark the order number on all packages and shipping papers. Adequate
protective packing shall be furnished at no additional charge. Shipping
and routing instructions may be furnished or altered by Company without
a writing. If Supplier does not comply with the terms of the FOB
section of the Agreement or order or with Company's shipping or routing
instructions, Supplier authorizes Company to deduct from any invoice of
Supplier (or to charge back to Supplier), any increased cost incurred
by Company as a result of Supplier's noncompliance.
61. SHIPPING INTERVAL
The delivery schedule applicable to each purchase order will
be agreed upon by Supplier and Company and set forth in the purchase
order. (Note: Supplier has indicated that MATERIAL can usually be
shipped an average of fifteen (15) business days after receipt of
Company's purchase order; however, in no event shall the delivery
interval exceed forty-five (45) business days after receipt of purchase
order.)
If Supplier exceeds the above maximum interval then in
addition to all other rights and remedies at law or equity or
otherwise, and without any liability or obligation of Company, Company
shall have the right to: (a) cancel such purchase order, or (b) extend
such delivery date to a later date, subject, however, to the right to
cancel as in (a) preceding if delivery is not made or performance is
not completed on or before such extended delivery date. If Company
elects to extend such delivery date, Supplier shall absorb the
difference between the charges to ship normal transportation and the
charges to ship premium overnight.
If a purchase order is canceled by Company pursuant to the
above, Company shall have the right to retain or return any or all
MATERIAL received by or paid for by Company under such purchase order.
Within fifteen (15) business days of Supplier's receipt of returned
MATERIAL, Supplier shall reimburse Company for the costs of shipping
the MATERIAL returned to Supplier and for any amounts, including
shipping costs, previously paid by Company for the MATERIAL. Company
shall pay for any MATERIAL if retains at the prices set forth in
Appendix A, less applicable discounts which shall be applied on the
basis of the quantity specified in the purchase order.
<PAGE>
Agreement No. WR71980036
Sheet 23 of 31
If, during the course of this Agreement, Supplier determines
that Supplier will no longer be able to ship within the above interval,
Supplier shall immediately notify Company's buyer to that effect.
Supplier shall also notify Company's buyer, as soon as it becomes
apparent, if Supplier is unable to meet the delivery date for an order.
However, nothing contained in this paragraph shall waive Company's
rights as set forth above in this section.
62. STORAGE OF PAID FOR STOCK
Subject to the section "OPERATING SYSTEM SOFTWARE", Company
has and shall have at all times all right, title and interest in all
MATERIAL invoiced to Company in accordance with the section "INVOICING
FOR STOCKS". Such MATERIAL shall be referred to in this section as
"Company Property." Supplier shall store such Company Property without
cost to Company at Supplier's] 21 Meridian Road, Edison, NJ 08820,
facility and ship such Company Property as ordered by Company. In
addition, Supplier shall:
(i) Be responsible for the safekeeping of the Company
Property, assume all risks of loss or damage to the same and be liable
for the full actual value of such Company Property. In case of removal
of all or any part of the Company Property from one building to
another, Supplier's responsibility for loss or damage shall continue
and Supplier shall give Company at least ten (10) days advance notice
in writing of the removal, except when the removal is required to
comply with Company's shipping orders or to protect the Company
Property from loss or damage.
(ii) Permanently mark or if impracticable to do so then affix
labeling stating that the Company Property is the "PROPERTY OF LUCENT
TECHNOLOGIES INC." For purposes of this section, the term "LUCENT
TECHNOLOGIES INC." shall be deemed to mean Company or the Company
affiliated or associated company which owns the tooling, as applicable.
(iii) Store the Company Property safely, indoors in protected
areas approved by Company. Store the Company Property segregated from
other property in sections of Supplier's plant marked Property of
Company.
(iv) Deliver the Company Property only to Company or Company's
designated customers in accordance with Company's orders or upon
Company's demand, FOB Supplier's plant without additional charge for
removal, packing, or crating.
(v) Supplier shall not allow any security interest, lien, tax
lien or other encumbrance (collectively referred to as "encumbrance")
to be placed on any Company Property. Supplier shall give Company
immediate written notice should any third party attempt to place or
place an encumbrance on such Company Property. Supplier shall indemnify
and hold Company harmless from any such encumbrance. Supplier shall, at
<PAGE>
Agreement No. WR71980036
Sheet 24 of 31
Company's request, promptly execute a "protective notice" UCC-1 form
and all other documents reasonably necessary to enable Company to
protect its interest in such Company Property. This Agreement shall
constitute the security agreement required by the UCC of the
appropriate state.
(vi) Company may inspect, inventory, and authenticate the
account of the Company Property during Suppliers normal business hours.
Supplier shall provide Company access to the premises where all such
Company Property is located.
The obligations assumed by Supplier with respect to the
Company Property are for the protection of Company's property. If
Supplier defaults in carrying out Supplier's obligations under this
Agreement, then, at no cost to Company and upon twenty-four (24) hours
notice to Supplier, Company may cancel this Agreement in whole or in
part or withdraw all or any part of the Company Property, or both.
Supplier shall, at Company's option, return to Company or hold for
Company's disposition any or all of such Company Property in Suppliers
possession.
63. SUPPLIERS INFORMATION
Supplier shall not provide under, or have provided in
contemplation of, this Agreement any idea, data, program, technical,
business or other intangible information, however conveyed, or any
document, print, tape, disc, semiconductor memory or other
information-conveying tangible article, unless Supplier has the right
to do so, and Supplier shall not view any of the foregoing as
confidential or proprietary. If Supplier must furnish any such
information to Company with restrictions, it shall only be furnished
after negotiation and execution on behalf of Company of a separate
written agreement specifically identifying the documents to be
furnished and setting forth Company's rights and obligations with
respect hereto.
64. SURVIVAL OF OBLIGATIONS
The obligations of the parties under this Agreement which by
their nature would continue beyond the termination, cancellation or
expiration of this Agreement shall survive termination, cancellation or
expiration of this Agreement.
65. TAXES
Company shall reimburse Supplier only for the following tax
payments with respect to transactions under this Agreement unless
Company advises Supplier than an exemption applies: state and local
sales and use taxes, as applicable. Taxes payable by Company shall be
billed as separate items on Supplier's invoices and shall not be
included in Supplier's prices. Company shall have the right to have
Supplier contest any such taxes that Company deems improperly levied at
Company's expense and subject to Company's direction and control.
<PAGE>
Agreement No. WR71980036
Sheet 26 of 31
66. TECHNICAL SUPPORT
Company shall be entitled to ongoing technical support and
assistance, provided, however, that the availability or performance of
this technical support service shall not be construed as altering or
affecting Suppliers obligations as set forth in the "WARRANTY" section
or elsewhere provided for in this Agreement.
Ongoing Tier IV technical support via telephone will be at no
charge. Beyond the WARRANTY period, charges, if any for Tier 1 and 2
technical support, will be as shown in Appendix A.
67. TERMINATION OF PURCHASE ORDER
Company may at any time terminate any portion or the total
quantity of any purchase order(s) placed under this Agreement.
Company's liability to Supplier with respect to such termination shall
be limited to (i) Supplier's purchase price of all components for the
MATERIAL (not usable in Supplier's other operations or, saleable to
Supplier's other customers), plus (ii) the actual costs incurred by
Supplier in procuring and manufacturing MATERIAL (not usable in
Supplier's other operations or saleable to Supplier's other customers)
in process as of the date of giving notice of termination, less (iii)
any salvage value thereof. However, no such termination charges will be
invoiced if, within sixty (60) days of notice of termination, MATERIAL
equivalent in kind to that being terminated is ordered by Company. If
requested, Supplier shall substantiate such cost and price with proof
satisfactory to Company.
68. TIMELY PERFORMANCE
If Supplier has knowledge that anything prevents or threatens
to prevent the timely performance of the Work under this Agreement,
Supplier shall immediately notify Company's Representative thereof and
include all relevant information concerning the delay or potential
delay.
69. TITLE AND RISK OF LOSS
Title (other than software) and risk of loss and damage to
MATERIAL including software purchased by Company under this Agreement
or an order issued pursuant to this Agreement shall vest in Company
when the MATERIAL has been delivered at the FOB point. If this
Agreement or an order issued pursuant to this Agreement calls for
additional services including, but not limited to, unloading,
installation, or testing to be performed after delivery, Supplier shall
retain title and risk loss and damage to the MATERIAL until the
additional services have been performed. If Supplier is authorized to
invoice Company for MATERIAL prior to shipment or prior to the
performance of additional services, title to MATERIAL (other than
software) shall vest in Company upon payment of the invoice, but risk
of loss and damage shall pass to Company when the additional services
have been performed.
<PAGE>
Agreement No. WR71980036
Sheet 27 of 31
70. TOXIC SUBSTANCES AND PRODUCT HAZARDS
Supplier hereby warrants to Company that, except as expressly
stated elsewhere in this Agreement, all MATERIAL furnished by Supplier
as described in this Agreement is safe for its foreseeable use, is not
defined as a hazardous or toxic substance or material under applicable
federal, state or local law, ordinance, rule, regulation or order
(hereinafter collectively referred to as "law" or "laws"), and presents
no abnormal hazards to persons or the environment. Supplier also
warrants that it has no knowledge of any federal, state or local law,
that prohibits the disposal of the MATERIAL as normal refuse without
special precautions except as expressly stated elsewhere in this
Agreement. Supplier also warrants that where required by law, all
MATERIAL furnished by Supplier is either on the EPA Chemical Inventory
compiled under Section 8 (a) of the Toxic Substance Control Act, or is
the subject of an EPA-approved pre manufacture notice under 40 CFR Part
720. Supplier further warrants that all MATERIAL furnished by Supplier
complies with all use restrictions, labeling requirements and all other
health and safety requirements imposed under federal, state, or local
laws. Supplier further warrants that, where required by law, it shall
provide to Company, prior to delivery of the MATERIAL, a Material
Safety Data Sheet which complies with the requirements of the
Occupational Safety and Health Act of 1970 and all rules and
regulations promulgated thereunder.
Supplier shall defend, indemnify and hold Company harmless for
any expenses (including but not limited to, the cost of substitute
material, less accumulated depreciation) that Company may incur by
reason of the recall or prohibition against continued use or disposal
of MATERIAL furnished by Supplier as described in its Agreement whether
such recall or prohibition is directed by Supplier or occurs under
compulsion of law. Company shall cooperate with Supplier to facilitate
and minimize the expense of any recall or prohibition against use or
disposal of MATERIAL directed by Supplier or under compulsion of law.
Supplier further shall defend, indemnify and hold Company
harmless any claims, demands, suits, judgments, liabilities, costs and
expenses (including reasonable attorney's fees) which Company may incur
under any applicable federal, state or local laws, and any and all
amendments thereto, including but not limited to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980; the
Consumer Product Safety Act of 1972; the Toxic Substance Control Act;
Fungicide, Rodenticide Act; the Occupational Safety and Health Act; and
the Atomic Energy Act; and any and all amendments to all applicable
federal, state, or local laws, by reason of Company's acquisition, use,
distribution or disposal of MATERIAL furnished by Supplier under this
Agreement.
71. TRAINING
If requested by Company, Supplier will, without charge to
Company, provide five (5) separate training sessions at a location
agreed to by Company and Supplier. Supplier shall:
<PAGE>
Agreement No. WR71980036
Sheet 27 of 31
(a) provide instructors and the necessary instructional
material of Supplier's standard format to train Company's personnel in
the installation, planning and practices, operation, maintenance and
repair of MATERIAL furnished under this Agreement. These training
sessions shall be conducted at reasonable intervals at locations agreed
upon by Supplier and Company.
Or, at the option of Company,
(b) provide to Company training modules or manuals and any
necessary assistance, covering those areas of interest outlined in (a)
of this section, sufficient in detail, format and quantity to allow
Company to develop and conduct a training program.
72. USE OF INFORMATION
Supplier shall view as Company's property any idea, data,
program, technical, business or other intangible information, however
conveyed, and any document, print tape, disc, tool, or other tangible
information-conveying or performance-aiding article owned or controlled
by Company, and provided to, or acquired by, Supplier under or in
contemplation of this Agreement (information). Supplier shall, at no
charge to Company, and as Company directs, destroy or surrender to
Company promptly at its request any such article or any copy, of such
Information. Supplier shall keep Information confidential and use it
only in performing under this Agreement and obligate its employees,
subcontractors and others working for it to do so, provided that the
foregoing shall not apply to information previously known to Supplier
free of obligation, or made public through no fault imputable to
Supplier.
73. VARIATION IN QUANTITY
Company assumes no liability for MATERIAL produced, processed
or in excess of the amount specified in this Agreement or in an order
issue pursuant to this Agreement.
74. WARRANTY
Supplier warrants to Company and Customer, as defined in this
section, that MATERIAL furnished will be new, merchantable, free from
defects in design, material and workmanship and will conform to and
perform in accordance with the Specifications, drawings and samples set
forth in this Agreement. These warranties extend to the future
performance of the MATERIAL and shall continue for a period of eighteen
(18) months from the date of delivery to Company.
Supplier also warrants to Company and Customers that services
will be performed in a first class, workmanlike manner. In addition, if
MATERIAL furnished contains one or more manufacturers warranties,
Supplier hereby assigns such warranties to Company and Customers.
Supplier warrants that at the time of delivery to Company such MATERIAL
shall
<PAGE>
Agreement No. WR71980036
Sheet 28 of 31
be free of any security interest or any other lien or any other
encumbrance whatsoever. All warranties shall survive inspection,
acceptance and payment.
Defective or non-conforming MATERIAL will, at Company's
option, either be returned to Supplier for repair or replacement, at no
cost to Company, with risk of in-transit loss and damage borne by
Supplier and freight paid by Supplier, or be repaired or replaced by
Supplier on Customers site or another site designated by Company at no
cost to Company. Unless otherwise agreed upon by Supplier and Company,
Supplier shall complete repairs and ship the repaired MATERIAL within
ten (10) business days of receipt of defective or non-conforming
MATERIAL, or at Company's option, ship replacement MATERIAL within ten
(10) business days after verbal notification is given Supplier by
Company. Supplier shall bear the risk of in-transit loss and damage and
shall prepay and bear that cost of freight for shipments to Company of
repaired or replaced MATERIAL. If requested by Company, Supplier shall
begin on-site repairs within ten (10) business days after verbal
notification is given Supplier by Company.
If MATERIAL returned to Supplier or made available to Supplier
on site for repair as provided for in this section is determined to be
beyond repair, Supplier shall promptly so notify Company and, unless
otherwise agreed to in writing by Supplier and Company, Supplier shall
ship replacement MATERIAL without charge within ten (10) business days
of such notification.
Replacement, MATERIAL shall be warranted as set forth above in
this "WARRANTY" section. Any MATERIAL which is repaired, modified, or
otherwise serviced by Supplier shall be warranted as provided in this
"WARRANTY" section for the remainder of the warranty period (based upon
the date repair, modification or other service is completed and
accepted by Company) or ninety (90) business days after the MATERIAL is
returned to a Customer, whichever is later.
Supplier also warrants that software will record, store,
process and present calendar dates falling on or after January 1, 2000,
in the same manner and with the same functionality as it performed
before January 1, 2000. This maintenance will be considered part of and
covered under the maintenance provisions of the Agreement at no
additional charge to Company.
75. ENTIRE AGREEMENT
This Agreement shall incorporate the typed or written
provisions on Company's orders issued pursuant to this Agreement and
shall constitute the entire agreement between the parties with respect
to the subject matter of this Agreement and the order(s) and shall not
be modified or rescinded, except by a writing signed by Supplier and
company. Printed provisions on the reverse side of Company's orders
(except as specified otherwise in this
<PAGE>
Agreement No. WR71980036
Sheet 29 of 31
Agreement) and all provisions on Supplier's forms shall be deemed
deleted. Estimates or forecasts furnished by Company shall not
constitute commitments. The provisions of this Agreement supersede all
contemporaneous oral agreements and all prior oral and written
communications, and understandings of the parties with respect to the
subject matter of this Agreement.
Accepted (Date) October 28, 1998
MicroFrame, Inc. Lucent Technologies Inc.
By: /s/ John F. McTigue By: /s/ M.B. Fahmey
Name (Print) John F. McTigue Name (Print) M.B. Fahmey
Title Executive V.P. Finance Chief Title Global Purchasing Manager
Financial Officer
Appendices- The following Appendices are hereby made part of the Agreement:
Appendix A, Price Schedule
Appendix B, Specifications or Drawings
Appendix C, Marking
Appendix D, Packing
Appendix E, Quality Program Specifications
<PAGE>
Agreement No. WR71980036
Appendix A
Sheet 1 of 1
Price Schedule
1. Material
<TABLE>
<CAPTION>
Description Model No. Comcode Price
<S> <C> <C> <C> <C>
ASG Guard - U.S. (4 port) SEN-2000SD * 407995794 $ 1,524.00 ea.
ASG Guard - Intl. (4 port) SEN-2000SG *+ 407995810 $ 1,560.00 ea.
ASG Guard Plus - U.S. (1 6 port) SEN-2000HD * 407995828 $ 2,673.60 ea.
ASG Guard Plus - Intl. (16 port) SEN-2000HG *+ 407995836 $ 2,709.60 ea.
ASG Guard - US (80 Contact Closure) SEN-20001D * N/A $ 2,481.60 ea.
ASG Guard - Intl. (80 Contact Closure) SEN-2000IG *+ N/A $ 2,517.60 ea.
* Includes 2 modems, 32 MB Ram
+ EUROPEAN - 220-230VAC,5OHz IN, 16VAC OUT
</TABLE>
Part # Description Price
ASG-Key Token 407994060 $ 48.75 ea.
ASG-RMK19 Rack Mount 407997451 $ 25.00 ea.
ASG-WMK Wall Mount 407997469 $ 12.50 ea.
ASG-PS16-D Power Supply (U.S.) 408007409 $ 25.00 ea.
ASG-PS16-230 Power Supply (Europe) 408007417 $ 25.00 ea.
ASG-PS16-U Switching Power Supply 408007425 $ 90.00 ea.
ASG-K002 Cable Kit (5-DB9 to DB25 cables) 407997790 $ 20.00 ea.
SEN-HPX 12 port upgrade/ASG Guard Plus 407997782 $1,018.00 ea.
PMDM-336D Modem (U.S.) 408007433 $ 150.00 ea.
SEN-PS16-U Universal Power Supply 95-250 N/A $ 90.00 ea.
VAC, 47-63Hz In, 18VDC Out
PMDM-336G Modem (International) 408008043 $ 175.00 ea.
ASG-BAT Battery 408007441 $ 30.00 ea.
2. Out of Warranty Repair
ASG Guard $ 500.00 ea.
Hourly Tech Support Rate (Tier 1 & 2) $ 100.00
<PAGE>
Agreement No. WR71980036
Appendix B
TECHNICAL MEMORANDUM
ASG-GUARD
September 11, 1998
1. INTRODUCTION
This document provides the vendor, product functional and feature, requirements
for a Sentinel 2000 which will be labeled the ASG GUARD product that provides
secure access to dial-up communications ports. The initial application of this
product is to provide secure access to RS-232 console and Administration Ports
on LUCENT PBXS, adjunct processors (i.e.: CMS, Conversant, and the Voice
Messaging Systems) that can only be accessed by authorized personnel.
2. PRODUCT DESCRIPTION
The ASG GUARD is a single or double channel protection system that prevents
unauthorized access to four to twenty-eight communications ports. The ASG GUARD
is a device for "GUARDing" the console port so it cannot be accessed without
being provided an appropriate response via an authentication device such as ASG
KEY or ASG Manager. The ASG GUARD provides a secure access system by making use
of an encryption/decryption algorithm controlled by a programmable secret key
password.
The ASG GUARD will initially be used as a console port security enhancement for
DEFINITY and the Operations Support System (OSS) products that support it. The
ASG Guard, manufactured by MicroFrame Inc., will allow customers to control
access on incoming modem calls to the PBX system Maintenance and Administration
ports as well as the administrative and maintenance ports of adjunct devices.
The ASG GUARD shall provide a system activity log of access, attempts, both
allowed and denied that includes date and time of access, Login identification
and status information.
System administration and/or system activity recording of the ASG Guard system
shall be provided through attached equipment connected to an RS-232 auxiliary
port or via remote connection over phone lines or network access. Administration
equipment connected to the RS-232 port shall be customer provided, e.g.,
asynchronous terminal or personal computer.
The customized software within the ASG GUARD product shall meet the feature and
user interface requirements outlined by this document. The customized software
for LUCENT will be based upon and added to the same standard software feature
capabilities as offered by MicroFrame, Inc in their Sentinel 2000 product.
MicroFrame gives LUCENT certain rights with
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Agreement No. WR71980036
Appendix B
respect to Alarm Delivery (section 3.5), any LUCENT specific functionality
associated with User Secret Key Encryption (Section 3.6), and LUCENT Permanent
Users (Section 3.2. 1, Section 3.2.2, Section 3.2.3, and Section 3.2.4),
including all intellectual property to be used in ASG Guard. The LUCENT
customized features and capabilities cannot be offered to any other parties
without LUCENT's written consent. The ASG Guard shall meet YEAR 2000 compliance.
3. FUNCTIONAL REQUIREMENTS
3.1 Controlled Access
The ASG GUARD shall allow access to its host ports port only after receiving a
valid authentication response to the authentication challenge given by the ASG
Guard and independent of equipment connected to the ASG GUARD. The ASG GUARD
challenge and response handshake (verification process) shall make use of a data
encryption/decryption algorithm as specified by ANSI X3.92 - 1961, Data
Encryption Algorithm.
In response to an incoming call, the ASG GUARD shall prompt the calling user for
an authorized LOGIN identifier. The ASG GUARD will verify permission to the
reception of an authorized LOGIN identifier by issuing a challenge. The
challenge is on encrypted pseudo-random code, based on an algorithm using a
secret programmable secret key password associated with the received LOGIN
identifier, that is transmitted to the session originator. An authorized session
originator shall be able to send a valid response after processing the challenge
through a similar decryption/encryption procedure using the same secret key
password that the ASG GUARD used for encryption. The ASG GUARD after receiving a
valid response (calculated by the ASG KEY or other ASG compliant device) shall
provide access in the ASG Guard or connected external product as directed by the
originators LOGIN profile.
3.2 Administration of LOGIN Users
The ASG GUARD shall provide the capability for a total of 75 authorized LOGIN
users (i.e. identifiers and associated secret key passwords). All LOGIN's are to
be identified as either LUCENT or customer level LOGIN'S. The LUCENT level can
only be administered by LUCENT Technologies. The customer will only be able to
create additional customer level LOGIN's (via the Customer Master access class).
The customer level LOGINs can be administered by either LUCENT or the customer.
The customer shall be able to permit/restrict Lucent logins from administering
customer Logins (Permit is the default). The ASG GUARD shall be administrable to
block or restrict (number of Sessions allowed/Expiration Date)access from valid
LOGIN users, both LUCENT and customer users. Customers shall not be able to
delete LUCENT LOGIN's from the ASG GUARD. Only LUCENT will be allowed to add or
delete LUCENT LOGIN users. An initial default LOGIN user will be created and
designated for LUCENT Services.
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Agreement No. WR71980036
Appendix B
A single LOGIN can be administered to access multiple ASG GUARDS. Initially, ASG
GUARDS will be shipped with the same LUCENT permanent LOGIN user that will allow
LUCENT Services to gain access to all ASG GUARDS.
3.2.1 LUCENT Permanent Login User:
ASG GUARD administration of the permanent LOGIN user and the secret key password
shall require a special procedure referred to as Unit Initialization. ASG GUARDs
shall be initialized at the factory and shipped with the permanent login user
loaded into the firmware. Once delivered, adding or deleting LUCENT LOGIN
identifiers shall require LUCENT Master Users rights or for the unit to be
initialized, wiping the unit clean of all ASG application code.
3.2.2 Default Lucent User Administration:
The ASG GUARD shall provide means of administering authorized users through the
use of a special default LUCENT Master user or via loading a LUCENT
CONFIGURATION FILE.
The LUCENT CONFIGURATION FILE will contain the LUCENT MASTER USER with the
following information:
o One LOGIN identifier with access parameters (Rights
Level, Access Rights etc.)
o One secret key password the LUCENT LOGIN identifier
3.2.3 Customer Level Users:
Customers administration shall allow for provisioning up to a maximum of 55
customer level LOGINs including the deleting or changing of the non-LUCENT LOGIN
identifiers and associated secret key password(s). The secret key password can
be specified by the customer administrator or randomly assigned by the ASG
GUARD.
Four access levels for the customer user logins shall be provided. They are
Customer Master, Customer Sysop 1, Customer Sysop 2, and Host. The functionality
provided for the Sysop l, Sysop 2, and host classes is the same as the standard
functionality currently provided the Sysop 1, Sysop 2, and host classes by the
MicroFrame Sentinel product. The Customer Master access class shall be able to
use the dump and config capabilities for the Customer User Table and other parts
of the ASG Guard configuration. Customer users shall not be able to use the dump
or config capabilities for the Lucent User Table.
The ASG GUARD shall allow the customer to block or restrict (but not delete,
add, or change) individual LUCENT LOGIN users from accessing it (via the
Customer Master access class).
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Agreement No. WR71980036
Appendix B
The customer shall be able to display the customer LOGIN identifiers and their
associated secret key passwords only during the administrative session when they
are added to the ASG GUARD. The customer, via the Customer Master access class
only, shall be able to display or block the LUCENT LOGIN identifiers, but shall
not be able to display secret key passwords of the LUCENT LOGIN users.
As stated in Section 5.2, the ASG Guard shall not allow for customer access to
the internal programming mode (CCL).
3.2.4 Lucent Level Users:
Lucent administration shall allow for provisioning up to a maximum of 20 Lucent
LOGINS. Lucent logins can be added, changed, or deleted via the Lucent Master
access level only.
Four access levels for the Lucent user logins shall be provided. They are Lucent
Master, Lucent Sysop 1, Lucent Sysop 2, and Host. The functionality provided for
the Sysop l, Sysop 2, and host classes is the same as the standard functionality
currently provided the Sysop 1, Sysop 2, and host classes by the MicroFrame
Sentinel product. The Lucent Master access class shall be able to use the dump
and config capabilities for the Lucent User Table and other parts of the ASG
Guard configuration. It is not required that the Lucent Master access class be
able to dump or config the Customer User Table, nor is it prohibited that this
functionality be provided.
3.3 Invalid Attempts
An invalid attempt is defined to be either an invalid LOGIN identifier, an
invalid response to a challenge or the absence of a response to the Login or
Challenge request. The ASG GUARD shall drop the incoming line as the result of
three consecutive invalid attempts and the call attempt noted in the Failure
History Log, along with a status code to explain the access failure. The ASG
GUARD shall send the access failure status code to the connecting computer
explaining why the connection is being dropped.
3.4 Blocked/Restricted Attempts
A blocked attempt is defined to be valid LOGIN user (identifier) that has been
deliberately blocked from accessing the ASG GUARD through administration. A
restricted attempt is defined to be a valid LOGIN user (identifier) that has
tried to access the ASG GUARD during a time of day or day of week that has been
deliberately restricted blocked for that LOGIN user. The ASG GUARD shall send
the access failure status code to the connecting computer explaining why the
connection is being dropped.
3.5 ASG GUARD Transparency
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Agreement No. WR71980036
Appendix B
The GUARD shall be transparent when idle, i.e., the interface presented to the
user equipment shall appear as an idle Network interface. This will allow normal
maintenance testing on the port by the PBX or adjunct without impairment to the
ASG GUARD.
The ASG GUARD under any circumstance shall not impact outgoing call origination
from the ASG GUARD's host port(s), e.g., PBX alarm Origination. If the ASG
Guard's modem is in use, the host device originating an alarm will receive a
modem busy message.
The ASG GUARD shall become transparent on incoming calls after access permission
has been established, but shall monitor for a disconnect from either port
(Network or Host).
3.6 User Secret Key Encryption
User secret keys shall be stored on the ASG Guard securely in an encrypted
format. This will support a more secure approach to backup offline the User
Secret Key Table. This will also support a more secure approach to distribute a
User Secret Key Table to multiple ASG Guards from a remote location. The ASG
Guard will provide 1) a Lucent administrable key to encrypt the Lucent user
secret keys and 2) a separate customer administrable key to encrypt the
customers user secret keys. MicroFrame and Lucent will jointly define the
structure and administrative capabilities for the Lucent and customer keys used
to encrypt the Lucent and customer user secret keys.
3.7 Blocked Access
The system administrator shall be able to control access through a ASG GUARD (to
the host ports connected behind the ASG GUARD) by blocking specific LOGIN
(identifiers) or all LOGINS. Both permanent (LUCENT Services) and non-permanent
LOGINS may be blocked. Blocked LOGINS will not be able to access the ASG GUARD
until they are unblocked by ASG GUARD administration.
3.8 Time of Day/Day of Week Restriction
The system administrator shall be able to control access to a ASG GUARD by
administering time of day restrictions and/or days of the week for specific
LOGIN identifiers including LUCENT Services LOGIN identifiers. This function
shall be provided using a twenty-four hour clock.
3.9 Access Failure Messages
The ASG GUARD shall provide access failure codes and associated messages to
enable a system administrator or technician to:
o detect and diagnose equipment problems
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Agreement No. WR71980036
Appendix B
o detect that an invalid access attempt has occurred
o detect a Blocked user or time restriction call
attempt
o detect a forced disconnect, by either an issued
command or an outgoing call
3.10 Version Display
The ASG GUARD Version display shall contain the following:
o Software Version
o Equipment version number
o Firmware version number
o Memory
o Port information
o Number of Host Ports
o Number of Modem Ports
o Number of Telnet Ports
o Modem Type installed
o Current date and time
o Site Name
3.11 ASG GUARD History Log
The ASG GUARD shall provide the capability to record, display and print a log of
all ASG GUARD activity. The following data will be provided in the audit trail:
o Incoming call arrival date and time
o Call disposition (connected or disconnected)
o LOGIN identifier
o Disconnect time
o Reason for disconnect by access failure codes
o GUARD log identification if available
o LOGIN identifier(s) added and removed
o LOGIN identifier(s) Blocked and unblocked
o LOGIN identifier(s) restricted and unrestricted
o A Message Authentication Code (MAC) allowing LUCENT
to determine if a log report has been tampered with
The ASG GUARD History Log shall be available in real time. I.e., all activity
messages shall be sent to the connected administration equipment whenever there
is no software session running. The ASG GUARD activity messages shall also be
stored in the History Log buffer for retrieval. The ASG GUARD History Log shall
provide for the storage of at least the last 200 messages of ASG GUARD activity.
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Agreement No. WR71980036
Appendix B
3.12 ASG GUARD Access Log
The ASG GUARD shall provide the capability to store, display and print a log of
call access attempts for both incoming and outgoing calls. The following data
shall be provided in the audit trail:
o Date and time
o LOGIN identifier and device number
o Length of connection in hours. Minutes and seconds
o Session type and level
o A message Authentication Code (MAC) which will allow
LUCENT to determine if a log report has been tampered
with
o The Access History Log shall provide for storage of
at least the last 500 messages of ASG GUARD activity.
To provide this storage capacity, MicroFrame will
develop a feature that will write the Access History
Log entries on both static RAM and on the RAM drive.
This feature will be available in version 2 of the
code at no charge to Lucent. ASG Guards with code
prior to version 2 shall be able to be upgraded with
this feature.
3.13 GUARD Failure History Statistics
The GUARD shall provide the capability to store, display, and print a log of
attempt failures. The following data shall be provided in the audit trail:
o Incoming call arrival date and time
o LOGIN identifier and Port
o Failure reason
o A Message Authentication Code (MAC) which will allow
LUCENT to determine if a log report has been tampered
with
The Failure History Log shall provide for storage of at least
the last 500 access failures. To provide this storage
capacity, MicroFrame will develop a feature that will write
the Failure History Log entries on both static RAM and on the
RAM drive. This feature will be available in version 2 of the
code at no charge to Lucent. ASG Guards with code prior to
version 2 shall be able to be upgraded with this feature.
3.14 ASG GUARD Error Log
The ASG GUARD shall provide the capability to record, display and print a
statistical summary of system errors. The following data shall be provided in
the audit trail:
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Agreement No. WR71980036
Appendix B
o Date and time
o Error message
3.15 ASG GUARD Administration
The ASG GUARD shall provide an EIA RS-232 auxiliary port for the connection of
an asynchronous administration terminal or PC. The administration interface
shall be menu driven.
The ASG GUARD unit can also be administered remotely via the network port or
modem connection. This requires a user login with administration privileges such
as Master or Sysop. Then all administrative capabilities will be available by
dialing through the modem or telneting through the ethernet port. Access to
administrative functions will require authentication.
Administrative sessions on the modem port will not prevent an administrative
session on the AUX port.
3.16 Single Point Administration for multiple ASG GUARDs
As limited by the constraints of an EIA RS-232 connection, the system
administrator shall be able to administer multiple ASG GUARDs from a single
terminal. This means that in addition to being able to set the time and date,
and speed/parity, the administrator shall also be able to add/delete authorized
users, check ASG GUARD status (idle, busy), and collect the audit trail data
from a central location.
When multiple ASG GUARDs are used, ASG GUARD log identification should be
assigned to each ASG GUARD.
3.17 Power Outage
No ASG GUARD administration shall be required following a power outage, when
power is restored; the ASG GUARD shall automatically come back on-line and reset
itself to their idle states, respectively. ASG GUARD stored information and
parameters shall be unchanged by power outages.
3.18 Key Change Interface
ASG Guard shall provide a key change interface to enable the Lucent ASG Key
Change tool to change secret keys provisioned on the ASG Guard. This feature is
required for handling secret key corruption, key exposure to unauthorized users,
and expiration of key lifetime. It is required that the key change operation be
done via the Lucent MASTER access level only. This key change interface feature
shall be provided in version 2 of the code at no charge to Lucent. ASG
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Agreement No. WR71980036
Appendix B
Guards with code prior to version 2 shall be able to be upgraded with this
feature. MicroFrame and Lucent will jointly define the specifications for this
feature.
4. USER INTERFACE
4.1 Initialization and Test Response Code
The vendor shall provide LUCENT with the ability to reset an ASG GUARD to its
initial translations. An ASG GUARD shall not allow this reset function to be
accomplished from a remote location.
All ASG GUARDs are to be initialized in the factory before shipment with an
initial LUCENT level LOGIN user.
When a LOGIN user is added to the ASG GUARD's user list, a pseudo-random test
response code shall be generated that maps into the specific secret key password
administered for the added user. The secret key password can be chosen by the
administrator or randomly generated by the ASG GUARD. This test response code is
to be used to verify that the correct secret key password has been entered into
the appropriate authentication tool (i.e. ASG Key, ASG Mobile, ASG Manager,
etc.).
Customer authentication tools are to be shipped un-initialized and need to be
initialized/administered with their secret key & pin.
4.2 ASG GUARD Administration
LUCENT or the customer/system administrator, using an asynchronous terminal or
PC connected to the ASG GUARD's auxiliary port, through a dialup connection, or
network connection (LAN) will be able to administer the ASG Guard.
4.2.1 LUCENT Master Level ASG Guard Administration
o To set communications parameters of the auxiliary
port
o To set time and date
o To display ASG GUARD status (idle or busy) (i.e. PST
- Port Status Command)
o To add, delete or change any authorized LOGINs
(LUCENT can only administer LUCENT level LOGIN
Identifiers and secret key passwords. Lucent and
customer administrators can administer customer level
LOGINS)
o To enable/disable (block) all LOGIN users from
accessing the ASG GUARD (i.e., both LUCENT and
customer LOGINS)
o To connect to an established call or disconnect a
call in progress
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Agreement No. WR71980036
Appendix B
o To set a unique ASG GUARD identification and site
information
o To list the contents of the GUARD Error log
o To list the contents of the GUARD Access Log
o To list the contents of the GUARD History Log
o To list the contents of the GUARD Failure log
4.2.2 Customer Master Level ASG Guard Administration
o To set communications parameters of the auxiliary
port
o To set time and date
o To display ASG GUARD status (idle or busy) (i.e., PST
- Port Status Command)
o To add, delete or change only customer level
authorized LOGINs (LUCENT can only administer LUCENT
level LOGIN Identifiers and secret key passwords.
Lucent and customer administrators can administer
customer level LOGINS)
o To enable/disable (block) all LOGIN users from
accessing the ASG GUARD (i.e., both LUCENT and
customer LOGINS)
o To connect to an established call or disconnect a
call in progress
o To list the contents of the GUARD Error log
o To list the contents of the GUARD Access Log
o To list the contents of the GUARD History Log
o To list the contents of the GUARD Failure log
4.3 LED Indicators
The ASG GUARD shall have Several LEDs on the front panels to provide the
following functionality:
o Power On indicator
o Battery indicator
o Power Failure indicator
o Unit Pulse
o Alarm, Event & File Buffer indicator
o Auxiliary port activity
o Host port activity indicators
o Modem port activity indicators
o Ethernet port indicator
4.5 Test Capabilities
4.5.l LED Testing: When powered up, all the LEDs (except Power LEDs on the front
panel of the ASG GUARD shall blink on and off in unison three times, then settle
into an Idle/locked condition with 2 LEDs on (power and Idle/Locked).
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Agreement No. WR71980036
Appendix B
- --------------------------------------------------------------------------------
Group Led Function
- --------------------------------------------------------------------------------
power o AC Power is being supplied to the unit.
- --------------------------------------------------------------------------------
o 48VDC Power is being supplied to the unit from a
48VDC source (such as the PBX battery).
- --------------------------------------------------------------------------------
o Battery Internal battery is charging
- --------------------------------------------------------------------------------
o Power Fail Main power has filed and the internal
battery is supplying power to the unit
- --------------------------------------------------------------------------------
system o PULSE Flashes to indicate that the system is
operating correctly
- --------------------------------------------------------------------------------
green o Alarm - clear Pending indicates that an alarm is being
processed.
- --------------------------------------------------------------------------------
red o Alarm - pending
- --------------------------------------------------------------------------------
green o Event - clear Pending LED indicates that the Sentinel
has events (alarms) queued for processing.
- --------------------------------------------------------------------------------
red o Event - pending
- --------------------------------------------------------------------------------
green o File - clear Pending LED indicates that the amount of
data stored on the RAMdisk has reached the
critical level.
- --------------------------------------------------------------------------------
red o File - pending data stored on the RAMdisk has reached the
critical level
- --------------------------------------------------------------------------------
Ports Aux
o Aux - RX
o Aux - DTR
Host 1 The upper LED (RX) flashes when data is
being received
o RX
o DTR
Host 2
o RX
o DTR
Host 3 The lower LED (DTR) indicates that a
device is connected to the port.
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Agreement No. WR71980036
Appendix B
- --------------------------------------------------------------------------------
GROUP LED FUNCTION
- --------------------------------------------------------------------------------
o DTR
o Host 4
o RX
o DTR
- --------------------------------------------------------------------------------
Modem Modem 1 Upper LED (RX) indicates that data is
currently being transferred.
o RX
o CD
Modem 2 Lower LED (CD) indicates that the modem is
connected to a remote system.
o CD
- --------------------------------------------------------------------------------
Host Expansion
Board (for each port) The upper LED (RX) indicates the unit is
in the process of receiving data.
o RX
O DTR
The Lower LED (DTR) indicates that a
device is connected to the port
- --------------------------------------------------------------------------------
Ethernet o RX Indicate the reception and transmission
of network data.
O TX
- --------------------------------------------------------------------------------
4.5.2 GUARD Self-Check: The GUARD shall provide a test procedure on device boot
up (Self-Check) that checks if its firmware/hardware is operating properly.
5. PRODUCT DEVELOPMENT
This section states MicroFrame's development responsibilities. It also includes
signaling, protocol and physical requirement, for communicating with LUCENT
switches and OSS devices, and with non-LUCENT endpoints.
LUCENT acceptance criteria for the ASG GUARD will include LUCENT system test
results. In other words, LUCENT will system test the ASG GUARD with switches and
OSS devices it intends to support, prior to acceptance. The vendor may be
required to make changes to the product if the system test results indicate that
the product does not satisfy LUCENT ASG GUARD functional and feature
requirements.
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Agreement No. WR71980036
Appendix B
5.1 Other ASG GUARD Applications
The initial product offering will be to secure dial-up maintenance ports on the
LUCENT BCS products. In the future, the product is intended to be used to secure
other dial-up port applications on LUCENT BCS products, other LUCENT products,
and non-LUCENT products.
5.2 Internal Program Mode
The ASG GUARD product, specified by these requirements shall not allow for
customer access to the internal programming mode (CCL).
5.3 Timing Accuracy
The product shall keep accurate time for logging purposes. The time clock
provided shall not lose or gain more than five minutes per month.
5.4 Hardware Components
The ASG GUARD shall provide the following ports:
o One or two female RJ11 Network port for connection to
a CC 2-wire telephone line(s)
o A female DB-9 Auxiliary port (DCE interface) for
connection to either a terminal
o Four DB-9 RS232 ports (DCE interface) for connection
to host equipment such as PBX or Voice Mail systems
o A 10BaseT Ethernet port for TCP/IP connection to a
network
o 5 dry contact closures (Slimline)
o 8 dry contact closures for 16/28 port unit
o 2 relays (Slimline only)
o Temperature probe ports
o 1 5V analog to digital conversion port
The Auxiliary port shall support connected equipment with the following
Requirements:
o RS-232 DTE interface
o Asynchronous
o Full or half duplex
o 8 bits no parity, 7 bits no parity, 7 bits even
parity, 7 bits odd
o parity (ASG GUARD admin option)
o Baud rates of 2400, 4800, 9600, 19200, 38400, 57600
(ASG GUARD admin option)
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Agreement No. WR71980036
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6.0 Miscellaneous
6.1 Environmental
The product shall be consistent with switch environmental requirements as
specified by the "LUCENT Definity Generic 3, System Description" manual.
6.2 Network Port
The GUARD's network interface shall conform to Bellcore Technical Advisory
NPL-000912.
6.3 FCC & CSA Requirements
The product modem shall pass FCC Part 15 and part 68 requirements and equivalent
CSA standards.
6.4 UL and CSA Requirements
The product shall meet UL part 1459, Issue 2, requirements and equivalent CSA
6.5 Reliability
The GUARD shall have a minimal mean time between failure rate of 6.3 years.
14
DPA 38-095 EXHIBIT 10.6
------------
TECHNOLOGY LICENSE AGREEMENT
BETWEEN
SOLCOM SYSTEMS LIMITED
AND
HEWLETT-PACKARD COMPANY
<PAGE>
1.15 Any reference in this Agreement to "dollars" or "S" shall mean United
States Dollars, and any reference to "pounds" or "(pound)" shall mean
British Pounds Sterling.
DEVELOPMENT WORK
2.1 SolCom shall complete the development work ("NPE") in accordance with
Appendix A. Upon completion of each "Deliverable" specified in Appendix
A, SolCom shall deliver to HP up to five Probes (as determined by HP)
and one copy of the associated Firmware for the purpose of consistent
certification of the Deliverable by HP. Any Probes delivered to HP for
the purpose of certification of Deliverables, and not purchased by HP
under the terms of Item 4 of Appendix D, shall be returned to SolCom
within five working days from the end of the "HP Review Period"
specified in Appendix A.
2.2 HP shall pay the NPE of sixty-two thousand nine hundred sixty-eight
dollars in accordance with the "NPE Schedule" in Appendix A
2.3 SolCom shall ensure that any Probes delivered to HP in accordance with
Section 2.1 above and Item 4 in Appendix D are compatible with HP's
software as defined in Appendix F.
2.4 In an effort to keep the Technology current, SolCom shall provide HP
with RMON-11 within six months from Effective Date of this Agreement or
publication date of the Draft Standard, whichever is later. SolCom
shall provide any other developments that result in performance
enhancements or bug fixes when they become available at no additional
increase in the "License Fee" in Appendix D).
2.5 HP shall be entitled to terminate this Agreement and receive a
one-hundred percent refund of all NRE paid to date if SolCom fails to
deliver in accordance with the NRE Schedule detailed in Appendix A.
2.6 HP shall provide all necessary technical information to SolCom for
incorporating the BP Technology into the Probe by SolCom within five
days of receipt of a request.
2.7 SolCom shall deliver the Documentation to HP in accordance with the
schedule in Appendix A.
2
<PAGE>
2.8 The deliverables and acceptance process are defined in Appendix A.
3 LICENSE GRANT
3.1 SolCom hereby grants to HP and its subsidiaries a world-wide,
non-exclusive license in the Technology to use, make, have made,
display, disclose, reproduce, create derivative works, sell and
distribute with the right to grant licenses of or within the scope
of this license.
3.2 Except as expressly provided in this Agreement, SolCom retains all
rights to the specific implementation of the Technology.
3.3 HP shall own all right, title and interest in all modifications made
by HP pursuant to Section 3.1 above.
3.4 This Agreement does not preclude HP from independently developing,
acquiring, or manufacturing technology which is similar to or
competitive with the Technology, provided that such development does
not rely on, incorporate or use SolCom's intellectual property.
SolCom acknowledges that HP currently manufactures products based on
technology which is similar to the Technology, and will continue to
do so in the future; HP shall not be liable for any Licensing Fee or
other obligation to SolCom by reason of such products. HP
acknowledges that SolCom develops and plans to manufacture and sell
products based on the Technology, and will continue to do so in the
future; nothing in this Agreement shall prevent SolCom from doing
so.
3.5 Nothing in this Agreement requires HP to market a product using the
licensed Technology. HP shall have the authority to market or not
market the HP Product as it deems appropriate.
4 ENHANCEMENTS AND NEW TECHNOLOGIES
4.1 SolCom grants to HP the right of first refusal on any Enhancement or
New Technology developed by and for SolCom during the term of this
Agreement.
4.2 At least sixty days prior to the first commercial release of any
Enhancement or New Technology, SolCom shall notify and provide HP
with the related specification for HP to test and evaluate. HP shall
evaluate the Enhancement or New Technology and decide if HP wishes
to adopt it within thirty days from notification.
4.3 If HP wishes to adopt any Enhancement or New Technology after the
evaluation, HP shall so notify SolCom. SolCom and HP agree to
negotiate in good faith to define functionality, development costs,
licensing fee, term, and schedule for adding the Enhancement or New
Technology to this Agreement.
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4.4 Subject to Section 4.3 above, SolCom grants to HP the option to add any
Enhancement or New Technology to this Agreement on an exclusive basis.
4.5 HP may from time to time propose Enhancements. SolCom and HP agree to
negotiate in good faith to define functionality, development costs,
licensing fee, and schedule for adding the Enhancement to this
Agreement.
SUPPORT
5.1 SolCom shall provide HP with as much consulting and training as HP may
require in order to successfully manufacture HP Products, including HP
Products which incorporate Enhancements or New Technology. Up to five
days of consulting and training shall be at no charge to HP, and HP has
the option of paying for additional days at the rate of (pound)500.00
per SolCom person per day. An additional five days will be provided to
HP at no charge for each significant Enhancement or New Technology
adopted by HP pursuant to Section 4 above. HP shall pay reasonable,
actual travel and per diem expenses.
5.2 SolCom shall provide a knowledgeable Account Manager as described in
Article 11.1 below, for coordinating the support described in this
Article 5, as well as the resolution of any other issues that may arise
under this Agreement.
5.3 HP shall be responsible for support of its customers. If HP receives a
problem report from any customer, HP will attempt to reproduce the bug
on Derived Hardware. If HP is able to reproduce the bug then HP will
give notice of the problem to SolCom. SolCom shall take appropriate
action to resolve the problem in accordance with Section 5.8 below.
5.4 HP may duplicate and use, either internally or for HP's customers, all
training classes and training materials developed by SolCom with
respect to the HP Product, in any manner HP reasonably deems
appropriate.
5.5 The obligations of SolCom pursuant to this Article 5 shall continue for
a period of five years after the expiration or termination of this
Agreement.
5.6 For the term of this Agreement, at no additional charge to HP, SolCom
shall provide HP with ongoing technical support for the Technology,
such technical support shall include but not be limited to:
(a) Providing normal evolutionary enhancements to stay in compliance
with the FDDI RMON Standard;
(b) Receiving defect reports and fixing defects or providing
workarounds;
(c) Maintaining a telephone number for HP to call during normal
business hours or an
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electronic mail address to report problems and receive
assistance;
(d) Providing prompt communication and assistance to HP for the
resolution of problems;
(e) Providing updates from time to time, when appropriate, and
instructions for implementation; and
(f) Providing HP with either a written quarterly report of all known
defects in the Technology or electronic access to SolCom's Defect
Log.
5.7 At HP's option, SolCom will provide ongoing technical support as
described in Sections 5.6 and 5.8, for a period of five years after the
expiration of this Agreement, for an annual fee not to exceed
$5,000.00.
5.8 HP will notify SolCom of any defects or deficiencies in the Technology
and SolCom shall timely and reasonably remedy such defects in
accordance with HP's priority classification as defined in Phase 1 of
Appendix A. SolCom's obligation to rectify reported defects in the
Technology is contingent upon receiving a full description of the
defect and such information as necessary to characterize the defect and
the circumstances under which it is observed. In the event HP notifies
SolCom of a defect, SolCom shall respond in accordance with RP's
priority classification in Phase 1 of Appendix A. SolCom shall remedy
all defects by repairing the revision of the FDDI RMON Technology and
OS Software which HP is then currently distributing, or providing a
workaround that is acceptable to HP.
5.9 SolCom shall provide HP designated support personnel with a technical
training class at HP on the HP Product for up to two days. Such
training class shall provide HP support personnel with sufficient
information to fully support and maintain the HP Product and shall
include disclosure of principles of operation and disclosure of those
tools necessary to support the HP Product as well as any other content
as may be mutually agreed by the SolCom and HP support/Account
Managers. The class shall be taught in a manner to permit the HP
students to train other HP employees ("train-the-trainer method"). Such
training shall be at no charge to HP except for (i) reasonable, actual
travel and per diem charges for SolCom instructors and HP students and
(ii) reasonable costs for video tapes, technical notes or other
material which SolCom supplies to HP. HP shall have the right to copy
any materials provided by SolCom for the purpose of enabling HP to
train other employees on the operation of the HP Product. SolCom may
charge HP, at the rate of (pound)500.00 per SolCom person per day, for
additional HP Product training classes as requested by HP.
5.10 SolCom shall provide an additional technical training session under the
same conditions each time an Enhancement or New Technology is added to
this Agreement; the parties may mutually agree to a less extensive
training session for insubstantial Enhancements or
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New Technologies.
6 LICENSING FEES
6.1 In consideration for the rights granted to HP by SolCom in this
Agreement, HP shall pay a "License Fee" to SolCom in accordance with
this Article 6 and Appendix D.
6.2 HP shall pay SolCom a License Fee for each HP Product or any product
incorporating the licensed Technology licensed or distributed to
third parties by HP, HP's subsidiaries, or HP's licensee's. No
License Fee shall be due for:
(a) any HP Product or product incorporating the licensed
Technology subsequently returned for a refund or other
adjustment;
(b) any HP Product or product incorporating the licensed
Technology used by or distributed by HP for reasonable
demonstration, training, or support purposes;
(c) any user or technical documentation which may be distributed
in conjunction with the HP Product or product incorporating
the licensed Technology; or
(d) any enhancements, updates or replacement HP Products or
products incorporating the licensed Technology which are
shipped by HP to its resellers or end-users.
6.3 License Fee payments due SolCom may be bundled and remitted at the
end of each HP fiscal quarter, reflecting HP Products and any
product incorporating the licensed Technology shipped during the
previous fiscal quarter, less any recoverable fees already paid by
HP and any credits for returns, refunds to customers, or other
adjustments. HP will make best efforts to remit License Fee payments
to SolCom by the seventh working day after the end of each fiscal
quarter. The amount of these payments and any other information
associated to these payments is confidential information of HP.
6.4 HP shall provide to SolCom a monthly report due fifteen days after
the end of each calendar month of the sales for that month. SolCom
may, at its sole expense and no more frequently than once a year,
engage an independent auditor mutually acceptable to HP for the
purpose of verifying License Fee payments. HP will maintain
appropriate records, including sub-licensee sales, and make such
records reasonably available to the auditor. If such records are
found to be in error by more than five percent, then HP shall pay
the deficient amount and the cost of the audit.
6.5 SolCom shall be solely liable for taxes on all fees paid to SolCom
by HP under this Agreement, including all state withholding and
local use, sales, property (ad valorem), and other taxes but
excluding taxes calculated solely on HP's income.
6.6 All payments to SolCom are to be paid in Pounds Sterling ((pound))
based on the exchange rate of
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$ 1.575 is equivalent to one Pound Sterling and will be wired to:
The Bank of Scotland
38 St Andrew Square
Edinburgh, Scotland
Account #: 00-853-226
Sort Code #: 80-31-20
6.7 In accordance with the tax treaty between the United States and the
United Kingdom which exempts industrial royalties from taxation,
SolCom has completed a Department of the Treasury, Internal Revenue
Service Form 1001 and provided it to HP for inclusion into Appendix
I of this Agreement.
7 CONFIDENTIAL INFORMATION
7.1 During the term of this Agreement, both parties will require access
to information which the other considers confidential (collectively
"Confidential Information"), each party has agreed to disclose and
receive the information in confidence by signing a two-way
Non-Disclosure Agreement (Appendix G). The Confidential Information
shall be labeled confidential and shall only be used by those
employees of the receiving party who have a need to know such
information. Except as provided for in Article 9, on termination of
the Agreement, all Confidential Information (including all copies
made) shall be returned by the recipient to the originator or
destroyed, at the originator's option.
7.2 Confidential Information shall be safeguarded by the receiving party
for five years after receipt against disclosure to third parties by
employing the same degree of care as the receiving party uses for
its own information of a similar nature.
7.3 No obligations of confidentiality shall extend to information which
is:
(a) Publicly available through no fault of the receiving party;
(b) Independently developed by the receiving party;
(c) Already in the receiving party's possession;
(d) Rightfully received from a third party without an obligation
of confidentiality;
(e) Disclosed to a third party without a duty of confidentiality;
or
(f) Disclosed under operation of law.
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8 WARRANTIES
8.1 SolCom warrants that (excluding any claims arising by Willemijn
Houdstermaatschappij BV (a.k.a. Soderblom) toward the Technology,
which HP waives indemnification):
(a) It has full power and authority to grant HP the rights granted
herein; and
(b) The Technology does not infringe or otherwise violate any
patent, copyright, trade secret or other proprietary right of
any third party; and
(c) SolCom is not aware of any facts upon which such a claim for
violation or infringement could be based.
8.2 SolCom will indemnify and defend HP from any costs, claims, suit, or
proceeding brought against HP or its customers insofar as it is
based on a claim that any program, documentation, hardware,
technology, copyright, or trade name or any part thereof, furnished
by SolCom under this Agreement constitutes an infringement of any
patent copyright, trademark, trade name, or unauthorized trade
secret use, if notified promptly in writing of such claim, and given
authority, information and assistance (at SolCom's expense) to
handle the claim and the defense of any suit or proceeding. SolCom
agrees to pay all damages and costs awarded therein against HP and
its customers. In case any Program or documentation or any part
thereof is in such suit held to constitute an infringement and its
use is enjoined, SolCom shall, at its own expense and at its option,
either procure for HP and its customers the right to continue use
or, if applicable, replace the same with a noninfringing Program and
documentation of equivalent function and performance, or modify them
so they become noninfringing without detracting from function or
performance. SolCom warrants that all hardware, firmware, and
software provided within the scope of the Agreement shall conform
and perform in accordance with all specifications and documentation
provided by SolCom as part of this Agreement.
8.3 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SOLCOM MAKES NO
OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, REGARDING THE
TECHNOLOGY, ITS MERCHANTABILITY, OR ITS FITNESS FOR ANY PARTICULAR
PURPOSE.
8.4 EXCEPT AS PROVIDED IN SECTION 8.2 ABOVE, IN NO EVENT SHALL HP OR
SOLCOM BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS)
ARISING OUT OF ANY PERFORMANCE UNDER THIS AGREEMENT, WHETHER SUCH
DAMAGES ARE BASED ON TORT, CONTRACT, OR ANY OTHER LEGAL THEORY AND
WHETHER ADVISED OF POSSIBILITY OF SUCH DAMAGES
ACCESS TO SOURCE CODE
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9.1 SolCom agrees to escrow the source code to all OS Software at HP
Corporate Headquarters. The terms of such escrow are set forth in
Appendix J.
9.2 SolCom agrees to make the initial deposit of Source Code within
forty-five days of the Effective Date. All revisions and updates shall
be deposited into escrow within forty-five days of release.
9.3 SolCom agrees to maintain the source code in escrow for five years
after the expiration of this Agreement.
9.4 The Source Code Deposit Agreement (Appendix J) shall allow access to
the source code under the following conditions, providing HP gives
SolCom ten days notice of intent to access:
(a) If SolCom is in breach of this Agreement and the breach is
remediable and SolCom doe not remedy such breach within thirty
days of notice from HP, then HP shall be entitled access to
the source code and Documentation for the purpose of curing
the breach. License Fees will accrue, but no License Fees
shall be payable by HP until SolCom or its successor performs.
or,
(b) Failure of SolCom within thirty days of HP's giving notice to
SolCom, to fulfill its support obligations as required in this
Agreement.
9.5 Nothing in this Article 9 shall remove HP's obligation to pay License
Fees in the event of the contingencies in paragraph 9.4 (a) or (b).
9.6 Failure of SolCom to comply with this Article 9 shall constitute a
material breach of this Agreement.
TERMINATION
10.1 This Agreement shall expire three years from the first production
shipment of the HP Product. In the case of any Enhancement or New
Technology added to this Agreement in accordance with Article 4 above,
the term for the Enhancement or New Technology shall be mutually agreed
to by both parties.
10.2 In the event of a breach of this Agreement by a party hereto, the
non-breaching party shall give notice of such default to the other
party and, if the breach is not cured within sixty calendar days of
such notice, shall be entitled to terminate the Agreement.
10.3 The obligations and rights in Articles 5, 6, 7, 8, and 9 as well as
HP's rights in Section 3.1 shall survive the expiration or earlier
termination of this Agreement, except that the obligations regarding
confidentiality and support shall survive only through the end of the
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periods sat forth in the applicable provisions of this Agreement.
MISCELLANEOUS PROVISIONS
11.1 The parties shall each designate an Account Manager who shall act as an
overall coordinator for activities performed under this Agreement. The
parties' initial Account Managers are identified in Section 1 1.2
below. Either party may change its Account Manager by providing notice
to the other party.
11.2 All notices given pursuant to this Agreement shall be in writing, and
shall be considered given upon personal delivery, upon forty-eight
hours after sending by fax or air express, or upon ten days after
deposit in the United States Mail, certified mail return receipt
requested. All notices shall be addressed to the appropriate Account
Manager as specified below:
Solcom: HP:
SolCom Systems Limited Hewlett-Packard Company
2 Adam Square P.O. Box 7050
Brucefield Industrial Park Colorado Springs, Colorado 80933
Livingston, United Kingdom EH4 9 DE USA
Account Manager: Hugh Evans Account Manager: Ted Haller
11.3 Neither party shall publicize or otherwise disclose to any third party
the terms or content of this Agreement, except as required by law. In
particular, no press releases shall be made by either party without the
mutual consent of the other party.
11.4 This Agreement shall be governed by and construed under the laws of
England.
11.5 The captions of Articles of this Agreement are for reference only, and
shall not be construed as a part of this Agreement.
11.6 Neither party's failure to exercise any right under this Agreement
shall constitute a waiver or forfeiture of such right nor of any other
right. The remedies specified in this Agreement are in addition to any
other remedies available at law or in equity.
11.7 Each Appendix referred to in this Agreement is incorporated in fall in
this Agreement wherever reference to it is made.
11.8 Neither party shall be liable to the other under this Agreement for any
default or breach due to or caused by any fire, civil unrest, act of
God or other event beyond that party's control.
11.9 This Agreement constitutes the entire agreement between the parties as
to the matters set forth and integrates all prior discussions and
understandings between them.
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11.10 This Agreement may only be modified by a written instrument signed by
an authorized representative of both SolCom and HP.
11.11 This Agreement may be executed in counterparts, each of which shall be
deemed an original.
SOLCOM SYSTEMS LIMITED HEWLETT-PACKARD COMPANY
By: /s/ P.J. MacLaren By: /s/ William A. Tomeo
Type Name: P.J. MacLaren Type Name: William A. Tomeo
Title: Financial Director Title: General Manager
Date: 20 October 1995 Date: 26 October 1995
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Amendment to
DPA 38-097
aka DPA 0804-95097-1
AMENDMENT 1 TO AGREEMENT
NMO DPA 38-097
aka DPA 0804-95097-1
Between SolCom and HP
DATED October 26, 1995
Please amend the opening paragraph to include the following:
This Amendment ("Amendment) is entered into by SolCom Systems Limited,
a company registered in Scotland ("SolCom") the Hewlett-Packard Company, a
California corporation (HP). This Amendment is effective upon the date of the
last signature ("Amendment Effective Date") and shall remain in effect for three
years.
All Articles, Sections and Appendices of the original Agreement shall be binding
on this Amendment unless noted below.
Amend entire Agreement by inserting ",Token Ring and Ethernet" immediately after
FDDI wherever FDDI is referenced except for:
o section 1.4 insert "Token Ring or Ethernet"
o section 1.6 do not insert anything after FDDI
o section 1.8 do not insert anything after FDDI
o section 1. 10 insert ",Token Ring or Ethernet"
o Appendix B do not insert anything after any of the FDDI'S, this is a
FDDI specific Appendix
o Appendix D do not insert anything after FDDI
Amend section 1.1 by replacing "Probe " with "Probe(s)"
Amend section 2.2 by adding the following sentence:
"And, HP shall pay the NRE of thirty thousand dollars in accordance with the
"NRE Schedule" in Appendix A- 1."
Amend section 5.7 as follows.
At HP's option, SolCom will provide ongoing technical support as described in
Sections 5.6 and 5.8, for a period of five years after the expiration of this
Agreement, for an annual fee not to exceed $7,500.00.
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Amend section 6.6 as follows:
All payments to SolCom are to be paid in U.S. Dollars ($) and wired to:
The Bank of Scotland
120 St Vincent St
Glasgow, Scotland
Account # 86064USDO1
Sort Code #80 20 13
Amend Appendix A to include Appendix A-1 (see Appendix A-1):
Amend Agreement by inserting "and A-1" after each reference to Appendix A
Amend Appendix B to include Appendix B-1 (see Appendix B-1):
Amend Agreement by inserting "and B-1" after each reference to Appendix B
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Amendment to
DPA 38-097
aka DPA 0804-95097-1
Amend Appendix D to include Appendix D- 1 (see Appendix D- 1):
Amend Agreement by inserting "and D- 1 " after each reference to Appendix D
APPROVED AND AGREED TO:
SOLCOM SYSTEMS LIMITED HEWLETT-PACKARD COMPANY
By: /s/ Peter J. MacLaren By: /s/ Bill Tomeo
Type Name: Peter J. MacLaren Type Name: Bill Tomeo
Title: Financial Director Title: General Manager
Date: 26 February 1996 Date: March 4, 1996
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Amendment 2
DPA 0804-95097-2
AMENDMENT 2 TO AGREEMENT
NMO DPA 38-097
AKA DPA 0804-95097-2
Between SolCom and HP
DATED October 26, 1995
This Amendment ("Amendment") is entered into by SolCom Systems Limited, a
company registered in Scotland ("SolCom") the Hewlett-Packard Company, a
California corporation ("HP"). This Amendment is effective upon the date of the
last signature ("Amendment Effective Date") and shall remain in effect for three
years.
All Articles, Sections and Appendices of the original Agreement shall be binding
on this Amendment unless noted below:
Amend Section 1 to include the following definition:
1.16 "Fast-Ethernet" shall mean 100MB/second Ethernet Technology.
1.17 "Probe architecture" shall be a SolCom hardware and software design
combination which results in a new HP probe.
All Articles, Sections and Appendices of the original Agreement and any
Amendments shall be binding on this Amendment unless noted below:
Amend entire Agreement and any Amendments by inserting " and Fast-Ethernet "
immediately after Ethernet wherever Ethernet is referenced.
Amend section 5.7 as follows:
At HP's option, SolCom will provide ongoing technical support as described in
Sections 5.6 and 5.8 for a period of five years after the expiration of this
agreement, for an annual fee of $2000.00 per probe architecture. If HP elects
ongoing support, it must be purchased for all probe architectures covered by
this contract
Amend Appendix B to include Appendix B-2 (see Appendix B-2):
Amend Agreement by inserting "and B-2" after each reference to Appendix B
Amend Appendix D to include Appendix D-2 (see Appendix D-2):
Amend Agreement by inserting "and D-2 " after each reference to Appendix D
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Amend Agreement by adding Appendix K
APPROVED AND AGREED TO:
SOLCOM SYSTEMS LIMITED HEWLETT-PACKARD COMPANY
By: /s/ P.J. MacLaren By: /s/ Andy Belcher
Type Name: P.J. MacLaren Type Name: Andy Belcher
Title: Financial Director Title: NMO Business Manager
Date: 5 July 1996 Date: 7/17/96
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Amendment to
DPA 38-097
AMENDMENT 3 TO AGREEMENT
NMO DPA 38-097 (aka DPA 0804-95097-1)
Between SolCom and HP
Please amend the opening paragraph to include the following:
This Amendment ("Amendment") is entered into by SolCom Systems Limited,
a company registered in Scotland ("SolCom") the Hewlett-Packard
Company, a California corporation ("HP"). This Amendment is effective
upon the date of the last signature ("Amendment Effective Date") and
shall remain in effect for three years.
All Articles, Sections and Appendices of the original Agreement shall be binding
on this Amendment unless noted below:
Amend Section 2.2 by adding the following sentence:
"And, HP shall pay the NRE of Thirty nine thousand five hundred dollars
($39,500) in accordance with the "NRE Schedule" in Appendix A-2"
Add Section 2.9 as follows.
Bonus Clause
o For the FDDI LanProbe modifications which include the addition of an
ethernet port with DB-15 and RJ-45 connectors, there shall be a bonus
of $500.00 per day paid to Solcom for each day that the Deliverables in
Phase 6 are completed prior to the deadline (for example: completion 5
days early 5 x $500.00 = $2,500.00 bonus), with a maximum total bonus
of $5,000.00 available to Solcom. The money will be awarded for
completing Phase 6 of the NRE schedule in Appendix A-2 in accordance
with the established hardware and software quality requirements. Delays
in the completion of Phase 6 due to BP's actions shall not affect
Solcom's eligibility for the bonus.
o Any delays past the published completion date for phase 6, listed in
Appendix A-2 for each deliverable will result in damages to HP.
Liquidated Damages in the amount of $500.00 per day for each day late
shall be deducted from the NRE payment to Solcom in accordance with the
NRE schedule in Appendix A-2. Liquidated Damages will be limited to a
total of $5000.00. SolCom's liability for liquidated damages shall be
reduced by the extent to which delays in the completion of phase 6 are
due to HP's actions.
Amend Appendix A to include Appendix A-2 (See Appendix A-2):
Amend Agreement by inserting "and A-2" after each reference to Appendix A
Amend Appendix B to include Appendix B-3 (see Appendix B-3):
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Amend Agreement by inserting "and B-3 " after each reference to Appendix B
Amend Appendix D to include Appendix D-3 (see Appendix D-1):
Amend Agreement by inserting "and D-3" after each reference to Appendix D
APPROVED AND AGREED TO:
SOLCOM SYSTEMS LIMITED HEWLETT-PACKARD COMPANY
By: /s/ Peter James MacLaren By: /s/Greg Schiffman
Type Name: Peter James MacLaren Type Name: Greg Schiffman
Title: Financial Director Title: Controller
Date: 11 March 1997 Date: 2-23-97
Materials Manager /s/ Yvonne Peru
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Amendment to
DPA 38-097
AMENDMENT 4 TO AGREEMENT
NMO DPA 38-097 (aka DPA 0804-95097-1)
Between SolCom and HP
Please amend the opening paragraph to include the following:
This Amendment ("Amendment") is entered into by SolCom Systems Limited,
a company registered in Scotland ("SolCom") the Hewlett-Packard
Company, a California corporation ("HP"). This Amendment is effective
upon the date of the last signature ("Amendment Effective Date") and
shall remain in effect for three years.
All Articles, Sections and appendices of the original agreement shall be binding
on this amendment unless noted below:
Amend section 1.10 by inserting the following after the phrase "'FDDI RMON
Probe":
Multiport Ethernet daughter card or Multiport Token-Ring
daughter Card,"
Add sections 1.18, and 1.19:
1.18 Multiport Ethernet daughter card ('Multiport Ethernet daughter
card") shall mean the SolCom technology consisting of
schematics, parts list PAL equations and ROMable code to
implement a PCI bus card with the ability to simultaneously
monitor four interfaces on a switched 10MB/sec Ethernet switch
without the use an external hub.
1.19 Multiport Token-Ring daughter card ("Multiport Token-Ring
daughter card') shall mean the SolCom technology consisting of
schematics, parts list, PAL equations and ROMable code to
implement a PCI bus card with the ability to simultaneously
monitor two 4MB/sec or 16MB/sec Token Rings.
Amend section 2.2 by adding the following sentence:
"And, HP shall pay the NRE of seventy eight thousand four hundred
dollars ($78,400) in accordance with the "NRE Schedule" in Appendix A-3
for the development of a Multiport Ethernet PCI Bus daughter card
("Multiport Ethernet daughter card") and a Multiport Token-Ring PCI Bus
daughter card "Multiport Token-Ring daughter card").
Add section 2.10 as follows:
Bonus Clause
o For the Multiport Ethernet daughter card and Multiport
Token-Ring daughter card, there shall be a bonus of $400.00
per day paid to SolCom for each day that the Deliverables in
Phase 8 are completed prior to the deadline. For example:
completion 5 days early = 5 x $400.00 = $2,000.00 bonus, with
a maximum total bonus of $5000.00 available to SolCom. The
money will be awarded for completing Phase 8 of the NRE
schedule in Appendix A-3 in accordance with the Acceptance
Criteria and Test Plan included in Appendix B-5 (See
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Amendment 6). Delays in the completion of Phase 8 due to HP's
actions shall not affect SolCom's eligibility for the bonus.
o Any delays past the published completion date for phase 8,
listed in Appendix A-3 for each deliverable will result in
damages to HP. Liquidated Damages in the amount of $400.00 per
day for each day late shall be deducted from the final NRE
payment to SolCom in accordance with the NRE schedule in
Appendix A-3. Liquidated Damages will be limited to a total of
$5000.00. SolCom's liability for liquidated damages shall be
reduced by the extent to which delays in the completion of
Phase 8 are due to HP's actions.
Add section 3.6 as follows
"3.6 HP hereby grants to SolCom a world-wide, non-exclusive license to
use the system processor board layout of HP's Fast Ethernet Probe (HP
PIN J3458A) for the manufacture and distribution of SolCom Products. HP
does not grant SolCom the right to transfer this license or HP
Product/HP Technology, to any third party without the prior written
consent of HP."
Add section 3.7 as follows
"3.7 HP hereby grants to SolCom a world-wide, non-exclusive license to
use the design and layout of BP's Half and Full Duplex Fast Ethernet
daughter cards (HP P/N J3458A, Option 200 and Option 201, respectively)
for the manufacture and distribution of SolCom Products incorporating
similar Half and Full Duplex Fast Ethernet daughter cards. HP does not
grant SolCom the right to distribute individual Full Duplex daughter
cards for resale without their incorporation into a SolCom Fast
Ethernet Probe Product. HP does not grant SolCom the right to transfer
this license or HP Product Technology in respect of Full Duplex
daughter cards to any third party without the prior written consent of
HP."
Add section 6.8 as follows:
"6.8 SolCom shall pay an "NRE Refund" to HP in accordance with this
section 6.8 and Appendix D-4 for each SolCom Product sold incorporating
a Multiport Token-Ring daughter card.
6.8.1 SolCom shall pay HP an NRE Refund for each SolCom Product
incorporating a Multiport Token-Ring OR Full Duplex Fast
Ethernet daughter card per Appendix B- 4. No NRE Refund shall
be due for:
6.8.1.1 any SolCom Product or product incorporating
a Multiport Token-Ring daughter card
subsequently returned for a refund or other
adjustment;
6.8.1.2 any SolCom Product or product incorporating
a Multiport Token- Ring daughter card used
by or distributed by SolCom for reasonable
demonstration, training, or support
purposes;
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6.8.1.3 any enhancements, updates or replacement
SolCom Products or products incorporating a
Multiport Token-Ring daughter card which are
shipped by SolCom to its resellers or
end-users.
6.8.2 NRE refunds due HP may be bundled and reported at the end of
each HP fiscal quarter, reflecting SolCom Products and any
product incorporating a Multiport Token-Ring daughter card
shipped during the previous fiscal quarter, less any
recoverable fees already paid by SolCom and any credits for
returns, refunds to customers, or other adjustments. SolCom
will make best efforts to remit NRE Refund reports to HP by
the third working day after the end of each fiscal quarter.
The amount of these payments and any other information
associated to these payments is confidential information of
SolCorn. NRE Refunds due HP by SolCom shall be deducted from
License Fees due SolCom as specified in this article 6.
6.8.3 SolCom shall provide to HP a monthly report due fifteen days
after the end of each calendar month of the sales for that
month. BP may, at its sole expense and no more frequently than
once a year, engage an independent auditor mutually acceptable
to SolCom for the purpose of verifying NRE Refund reports.
SolCom will maintain appropriate records, including
sub-licensee sales, and make such records reasonably available
to the auditor. If such records are found to be in error by
more than five percent then SolCom shall pay the deficient
amount and the cost of the audit.
6.8.4 HP shall be solely liable for taxes on all fees paid to HP by
SolCom under this Agreement, including all state withholding
and local use, sales, property (ad valorem), and other taxes
but excluding taxes calculated solely on SolCom's income."
Add section 6.9 as follows:
6.9 SolCom shall pay a License Fee to HP in accordance with this section 6.9 and
Appendix D-4 for each SolCom Product sold incorporating a Full Duplex Fast
Ethernet daughter card.
6.9.1 SolCom shall pay HP a License Fee for each SolCom Product
incorporating Full Duplex Fast Ethernet daughter card, HP P/N J3458A,
Option 201. No NRE Refund shall be due for:
6.9.1.1 any SolCom Product or product incorporating a Full
Duplex Fast Ethernet daughter card subsequently returned for a
refund or other adjustment:
6.9.1.2 any SolCom Product or product incorporating Full
Duplex Fast Ethernet daughter card used by or distributed by
SolCom for reasonable demonstration training, or support
purposes:
3
<PAGE>
6.9.1.3 any enhancements, updates or replacement SolCom
Products or products incorporating a Full Duplex Fast Ethernet
daughter card which are shipped by SolCom to its rescilers or
end-users.
6.9.2 License Fees due BP may be bundled and reported at the end of
each HP fiscal quarter, reflecting SolCom Products and any product
incorporating a Full Duplex Fast Ethernet daughter card shipped during
the previous fiscal quarter, less any recoverable fees already paid by
SolCom and any credits for returns, refunds to customers, or other
adjustments. SolCom will make best efforts to remit License Fee reports
to HP by the third working day after the end of each fiscal quarter.
The amount of these payments and any other information associated to
these payments is confidential information of SolCom. License Fees due
HP by SolCom shall be deducted from Licensee Fees due SolCom as
specified in this article 6.
6.9.3 SolCom shall provide to HP a monthly report due fifteen days
after the end of each calendar month of the sales for that month. HP
may, at its sole expense and no more frequently than once a year,
engage an independent auditor mutually acceptable to SolCom for the
purpose of verifying NRE Refund reports. SolCom will maintain
appropriate records, including sub-licensee sales, and make such
records reasonably available to the auditor. If such records are found
to be in error by more than five percent, then SolCom shall pay the
deficient amount and the cost of the audit.
6.9.4 HP shall be solely liable for taxes on all fees paid to UP by
SolCom under this Agreement, including a state withholding and local
use, sales, property (ad valorem), and other taxes but excluding taxes
calculated solely on SolCom's income."
Add the following phrase to the beginning of section 8.2:
"Except to the extent of the indemnity set forth below"
Add the following phrase to the end of section 8.2:
"SolCom agrees to defend, indemnify and hold HP harmless from any
claims, suits, proceedings, costs and expenses brought against or
incurred by BP as a result of SolCom's use of the design and/or layout
of EP's Multiport Token-Ring daughter cards, Half and Full Duplex Fast
Ethernet daughter cards or Fast Ethernet Probe system processor boards"
Add section 8.5 as follows:
"8.5 HP MAKES NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED,
REGARDING THE TECHNOLOGY, ITS MERCHANTABILITY, OR ITS FITNESS
FOR ANY PARTICULAR PURPOSE."
Amend Appendix A to include Appendix A-3 (see Appendix A -3):
Amend Agreement by inserting "and A-3 " after each reference to Appendix A
Amend Appendix B to include Appendix B-4 (see Appendix B-4):
4
<PAGE>
Amend Agreement by inserting "and B-4" after each reference to Appendix B
Amend Appendix D to include Appendix D-4 (see Appendix D-4):
Amend Agreement by inserting "and D-4" after each reference to Appendix D
APPROVED AND AGREED TO:
SOLCOM SYSTEMS LIMITED HEWLETT-PACKARD COMPANY
By: /s / P.J. MacLaren By: /s/ Greg Schiffman
Type Name: P.J. MacLaren Type Name: Greg Schiffman
Title: Financial Director Title:
Date: 24 November 1997 Date:
Materials Manager
5
<PAGE>
Amendment to
DPA 38-097
AMENDMENT 5 TO AGREEMENT
NMO DPA 38-097 (aka DPA 0804-95097-1)
Between SolCom and HP
Please amend the opening paragraph to include the following:
This Amendment ("Amendment") is entered into by SolCom Systems Limited,
a company registered in Scotland ("SolCom") the Hewlett-Packard
Company, a California corporation ("HP"). This Amendment is effective
upon the date of the last signature ("Amendment Effective Date") and
shall remain in effect for three years.
All Articles, Sections and Appendices of the original Agreement shall be binding
on this Amendment unless noted below:
Add section 6.9 as follows:
6.9 Upon execution of this Amendment, HP agrees to make an additional
prepayment in the amount $153,000.00, for License Fees due SolCom in
accordance with the provisions of this Article 6 and Appendices D, D-1,
D-2, D-3 and D-4. This prepayment raises the outstanding balance of
prepayments issued by HP to SolCom to $350,000.00. Prepayment
("Prepayment") shall mean the outstanding balance of all prepayments at
the time of execution of this Amendment, including the $153,000
prepayment referenced above, which equals $350,000.00.
This Pre-payment of License Fees shall be subject to the following
conditions:
6.9.1 The Prepayment shall not affect the current monthly License
Fees due SolCom for a period of six (6) months from the
issuance of such Prepayment.
6.9.2 Should License Fees due SolCom exceed $100,000.00 in any one
month during the six (6)month period following the issuance of
the prepayment, HP reserves the right to reduce the amount of
such License Fee payment to $100,000.00 by deducting the amount
of the License Fees due in excess of $100,000.00 from the
outstanding Prepayment balance.
6.9.3 Six (6) months from the date of issuance of the Prepayment, HP
shall amortize the remaining balance of the Prepayment over the
succeeding six (6) month period and deduct that amount from the
monthly License Fee payment due SolCom.
6.9.4 SolCom agrees to provide HP with quarterly Financial Forecasts
until such time that HP recovers the Prepayment. The Financial
Forecasts shall include profit and loss statements, balance
sheets and cash flow projections. The Financial Forecasts shall
be subject to the confidentiality term in article 7.
6.9.5 HP reserves the right to extend the period before which the
amortization and recovery of the Prepayment begins based on
BP's assessment of SolCom's current business conditions.
1
<PAGE>
APPROVED AND AGREED TO:
SOLCOM SYSTEMS LIMITED HEWLETT-PACKARD COMPANY
By: /s /P.J. MacLaren By: /s/ Greg Schiffman
Type Name: Peter J. MacLaren Type Name: Greg Schiffman
Title: Financial Director Title: Controller
Date: 21 July 1997 Date: August 14, 1997
Materials Manager
2
<PAGE>
Amendment to
DPA 38-097
AMENDMENT 6 TO AGREEMENT
NMO DPA 38-097 (aka DPA 0804-95097-1)
Between SolCom and HP
Please amend the opening paragraph to include the following:
This Amendment ("Amendment") is entered into by SolCom Systems Limited,
a company registered in Scotland ("SolCom") and the Hewlett-Packard
Company, a California corporation ("HP"). This Amendment is effective
upon the date of the last signature ("Amendment Effective Date") and
shall remain in effect for three years.
All Articles, Sections and Appendices of the original Agreement shall be binding
on this Amendment unless noted below:
Amend entire agreement and any Amendments by inserting "and T1, E1, V-Series,
T3, HSSI, ATM-OC3, ATM-UTP, ATM-DS3, ATM-E3 "immediately after Fast Ethernet,
wherever Fast Ethernet is referenced, with the following exceptions:
Section 1.4 insert - "or T1, E1, V-Series, T3, HSSI, ATM-OC3, ATM-UTP,
ATM-DS3, ATM-E3" after Fast Ethernet
Section 2.9: Do not make any insertions
Section 2.10: Do not make any insertions
Appendix A-2 and A-3: Do not make any insertions
Appendix B-2, B-3, B-4: Do not make any insertions
Appendix D-2, D-3 and D4: Do not make any insertions
Appendix K: Do not make any insertions
Amend section 1.10 by inserting the following after "Quad Ethernet daughter card
or Dual Token-Ring daughter card"
"T1, E1 or V-Series, T3, HSSI, ATM-OC3, ATM-UTP, ATM-DS3, ATM-E3
daughter card"
Add sections 1.20, 1.21, 1.22, 1.23, 1.24, 1.25, 1.26 and 1.27 as follows:
1.20 T1 daughter card ("TI daughter card") shall mean a PCI bus
card for the J3458A chassis which connects to a Tl WAN
connection (per ANSI Tl.403) via an RJ-48C and mini-bantam
style connector to access full span (T1 1544 kbps access
channels) and fractional T1 (FTI) channels comprising an
arbitrary configuration and number of time slots up to the
maximum possible. Time slots may be 56kbps or 64 kbps.
1.21 El daughter card ("El daughter card") shall mean a PCI bus
card for the J3458A chassis which connects to a CEPIT El WAN
connection (per G.703 and G.704) 75- ohm and 120-ohm
interfaces via BNC and dual conductor (BR2) BNC to access full
1
<PAGE>
span (E I 1984 kbps access channels) and fractional El
channels comprising an arbitrary configuration and number of
time slots up the maximum possible.
1.22 V-Series daughter card ("V-Series daughter card") shall mean a
PCI bus card for the J3458A chassis which connects to V.24
(RS-232), V.35, V.36 (RS-449). ANSI/EIA/TIA-530 (25-pin
interface) and X.21 (V.11) supporting as appropriate line
rates up to 2048 kbps.
1.23 HSSI daughter card ("HSSI daughter card") shall mean a PCI bus
daughter card that is compatible with the HP J3458A Fast
Ethernet LANProbe motherboard. This daughter card shall
connect per ANSI/EIA/TIA-612 and ANSI/EIA/TIA-613 via a 50-pin
connector. It shall be capable of monitoring at speeds up to
52 Mbps.
1.24 T3 daughter card ("73 daughter card") shall mean a PCI bus
daughter card that is compatible with the HP J3458A Fast
Ethernet LANProbe motherboard. The daughter card shall connect
per T1.107a-1990. It shall be capable of monitoring full span
or fractional framed services up to 44.736 N4bps.
1.25 ATM-UTP daughter card ("ATM-UTP daughter card") shall mean a
PCI bus daughter card that is compatible with the HP J3458A
Fast Ethernet LANProbe motherboard. The daughter card shall
connect via RJ-45 connectors with Sonet and SDH framing. It
shall be capable of monitoring a 155 Mbps connection.
1.26 ATM-OC3 daughter card ("ATM-OC3 daughter card") shall mean a
PCI bus daughter card that is compatible with the HP J3458A
Fast Ethernet LANProbe motherboard. The daughter card shall
connect to OC-3c/STM-1 via fiber SC connectors with Sonet and
SDH framing.
1.27 ATM-DS3 daughter card ("ATM-DS3 daughter card"') shall mean a
PCI bus daughter card that is compatible with the HP J3458A
Fast Ethernet LANProbe motherboard. The daughter card shall
connect per T1.107a-1990. It shall be capable of monitoring
full span or fractional framed services up to 44.736 Mbps.
1.28 E3 ("E3 daughter card") ATMProbe daughter card shall mean a
PCI bus daughter card that is compatible with the HP J3458A
Fast Ethernet LANProbe motherboard. The daughter card shall
connect via 75-ohm unbalanced BNC connectors and support PLCP
and direct cell mapping, C-bit, M13, and G.804/G.832.G.751
framing and B3ZS and HDB3 line codes.
Amend section 2.2 by adding the following sentence:
"And, HP shall pay an NRE of one hundred twenty thousand two hundred
dollars ($120,200) in accordance with the "NRE Schedule" in Appendix
A-4 for the development of TI, El or V-Series, T3, HSSI ATM-OC3,
ATM-UTP, ATM-DS3, ATM-E3 daughter cards.
2
<PAGE>
Add section 8.6 as follows:
"Notwithstanding anything to the contrary in Article 8 of the
Agreement, SolCom's liability to HP for costs associated with design
defects in the T1, El, V-Series, T3, HSSI, ATM-OC3, ATM-UTP, ATM-DS3,
ATM-E3 daughter cards shall not exceed the greater of forty two
thousand dollars ($42,000) or twelve and a half percent (12.5%) of the
total license fees paid to date for each individual daughter card."
Amend Appendix A to include Appendix A-4 (see Appendix A-4):
Amend Agreement by inserting "and A-4" after each reference to Appendix A
Amend Appendix B to include Appendix B-5 (see Appendix B-5):
Amend Agreement by inserting "and B-5" after each reference to Appendix B
Amend Appendix D to include Appendix D-5 (see Appendix D-5):
Amend Agreement by inserting "and D-5" after each reference to Appendix D
Amend Agreement by adding Appendix L, Additional Firmware Requirements
Amend Agreement by adding Appendix M, Vesuvius High Level Architecture
APPROVED AND AGREED TO:
SOLCOM SYSTEMS LIMITED HEWLETT-PACKARD COMPANY
By: By:
Type Name: Type Name:
Title: Title:
Date: Date:
Materials Manager
(Rest of page intentionally left blank)
3
Exhibit 10.7
------------
OEM PURCHASE AGREEMENT #52-154
BY AND BETWEEN
HEWLETT-PACKARD COMPANY
AND
ION Networks, Inc.
- --------------------------------------------------------------------------------
<PAGE>
OEM PURCHASE AGREEMENT
----------------------
THIS AGREEMENT is entered into between HEWLETT-PACKARD COMPANY, a Delaware
corporation ("HP") and ION NETWORKS, INC., a Delaware corporation, effective as
of April 13, 1999. The parties hereby agree as follows:
1. SCOPE OF AGREEMENT
1.1 General. This Agreement specifies the terms and conditions
under which Supplier will sell, license and support the OEM
Products listed in Exhibit A to this Agreement. The OEM
Products are regarded as "Original Equipment Manufacturer"
products that will either be sold separately or incorporated
into HP Products for resale, worldwide, under ION Networks,
Inc. label or under HP's private label. The OEM Products and
the HP Products will be marketed, serviced, and supported by
HP's field organization and channel partners, subject to the
marketing, service, and support obligations of ION Networks,
Inc. pursuant to this Agreement. All OEM products must be new,
except as otherwise provided by the parties.
1.2 Eligible Purchasers. This Agreement enables HP, HP
Subsidiaries and HP Subcontractors to purchase OEM Products
from ION Networks, Inc. under the terms of this Agreement or
any subsequent Product Addendum. Unless a Product Addendum
specifically refers to and amends a term of this Agreement,
the terms and conditions of this Agreement will control and
take precedence over any conflicting terms in a Product
Addendum.
1.3 Term Of Agreement. This Agreement will commence as of the
Effective Date and continue for a 1 year period, unless
terminated earlier under the terms of this Agreement. After
the initial Term, this Agreement will continue automatically
for 2 additional one-year periods, unless terminated upon 60
days notice prior to expiration of the initial term or of any
additional periods.
2. DEFINITIONS
The following capitalized terms will have these meanings throughout
this Agreement.
2.1 "Days" means calendar days unless otherwise specified herein.
2.2 "Delivery Date" means the date specified in an Order for the
delivery of OEM Products by Supplier to the destination
required under the Order.
<PAGE>
2.3 "Documentation" means the user and technical manuals and other
documentation that Supplier will make available with the OEM
Products.
2.4 "Eligible Purchasers" mean those parties authorized to
purchase OEM Products under this Agreement as listed in
Section 1.2 above.
2.5 "Epidemic Failure" will mean those deviations which HP and ION
Networks, Inc. mutually agree impair the form, fit or function
of the product and which are evidenced by the same failure
occurring in the same series of products.
2.6 "Forecast" means HP's estimate of its purchase requirements
over a six-month period, or such other period designated by
the parties.
2.7 "HP Products" means the HP products or systems that will
incorporate the OEM Products and that will be marketed and
sold to end-user customers by HP and its distributors.
2.8 "HP Property" means all property, including without
limitation, models, tools, equipment, copies of designs and
documentation and other materials that may be furnished to ION
Networks, Inc. by HP or on HP's behalf or separately paid for
by HP for use by ION Networks, Inc. in connection with this
Agreement.
2.9 "Intellectual Property Rights" means all rights in patents,
copyrights, trade secrets, mask works, Marks and other similar
rights.
2.10 "Lead Time" means the time between the date an Order is
acknowledged by ION Networks, Inc. and the Delivery Date.
2.11 "Marks" means the trademarks, service marks, trademark and
service mark applications, trade dress, trade names, logos,
insignia, symbols, designs or other marks identifying a party
or its products.
2.12 "Noncomplying Product" means any OEM Product received by HP
that does not comply with the Specifications, Exhibit A or
Exhibit I or otherwise does not comply with the requirements
of an Order or other provisions of this Agreement.
Noncomplying Products include, without limitation, dead-on
arrival products, over shipment and early shipments.
2.13 "OEM Products" means the products listed in Exhibit A, all
related Documentation, Parts and other deliverables provided
pursuant to this Agreement.
2.14 "Orders" means a written or electronic purchase order or
release issued by HP to ION Networks, Inc. for purchase of the
OEM Products.
-2-
<PAGE>
2.15 "Parts" means the replacement parts, components, consumables
or other products that may be supplied in conjunction with or
as additions to the OEM Products.
2.16 "Product Addendum" means an addendum to this Agreement entered
into between ION Networks, Inc. and an Eligible Purchaser
naming additional OEM Products and product specific
requirements in addition to those requirements specified in
this Agreement.
2.17 "Software" means any software or firmware included or bundled
with the OEM Products, as designated in the description of OEM
Products in Exhibit A.
2.18 "Specifications" means the technical and functional
requirements for the OEM Products as specified or referenced
in Exhibit A or as agreed to by the parties in writing
addressed to the designated recipients specified in Exhibit G.
2.19 "Subcontractor" means a third party listed in Exhibit B that
may purchase OEM Products under the terms of this Agreement on
behalf of HP.
2.20 "Subsidiary" means an entity controlled by or under common
control with a party to this Agreement, through ownership or
control of more than 50% of the voting power of the shares or
other means of ownership or control, provided that such
control continues to exist.
2.21 "Support" means ongoing maintenance and technical support for
the OEM Products provided by Supplier to HP as more fully
described in Exhibit D.
2.22 "Technical Information" means ION Networks, lnc.'s
manufacturing information and technology deemed necessary by
HP to support OEM Products and to exercise any manufacturing
rights provided under this Agreement, including, but not
limited to: (i) specifications, software, schematics, designs,
drawings or other materials pertinent to the most current
revision level of manufacturing of the OEM Products; (ii)
copies of all inspection, manufacturing, test and quality
control procedures and any other work processes; (iii) jig,
fixture and tooling designs; (iv) ION Networks, Inc. history
files; (v) support documentation; and (vi) any additional
technical information or materials agreed to by the parties.
2.23 "Technical Materials" means jigs, fixtures and tools used by
Supplier to manufacture the OEM Products, and any production
software used in such manufacture.
-3-
<PAGE>
3. ORDER AND SHIPMENT OF OEM PRODUCTS
3.1 Orders. Each delivery of OEM Products will be initiated by an
Order issued to ION Networks, Inc. by HP. Each Order will
include (i) unit quantity; (ii) unit price; (iii) shipping
destination; (iv) Delivery Date; and (v) other instructions or
requirements pertinent to the Order. HP may schedule regular
intervals for deliveries by an appropriate Order setting forth
the intervals. To the extent of any inconsistency between the
terms of an Order and the terms of this Agreement, the terms
specified in this Agreement will control and take precedence.
3.2 Order Acknowledgment. An Order will be deemed to have been
placed as of the date of receipt of the Order by ION Networks,
Inc. ION Networks, Inc. will promptly confirm the receipt of
an Order electronically or through facsimile to HP within one
(1) working days. Orders within Forecasts and lead-time
requirements of this Agreement will be deemed accepted upon
receipt by ION Networks, Inc. For Orders exceeding Forecast,
ION Networks, Inc. will reject or acknowledge the order with
respect to the excess as soon as reasonably possible but
within two (2) working days. If a HP Order exceeds the
Forecast or shortens the lead-time, ION Networks, Inc. will
use its best efforts to fill such excess or accommodate such
shorter Lead Time.
3.3 Emergency Orders. If HP deems it necessary, HP may order OEM
Products by facsimile on an emergency basis ("Emergency
Order") subject to the availability of such OEM Products in
ION Networks, Inc.'s inventory. ION Networks, Inc. will use
commercially reasonable efforts to ship the emergency Order to
HP's stipulated destinations within one (1) business day after
recite by ION Networks, Inc. Subject to HP's approval, HP will
pay any additional expenses related to such Emergency Orders.
3.4 Forecasts. Upon the request of ION Networks, Inc., HP will
provide a six-month rolling Forecast of its projected Orders.
Any quantities listed in any Forecast or other correspondence
between the parties are only estimates made as an
accommodation for planning purposes and do not constitute a
commitment on HP's part to purchase such quantity. HP may
revise any Forecasts in its sole discretion.
3.5 Lead Time. ION Networks, Inc. will determine the Lead Time for
each OEM Product, which in no event will exceed 35 days
without HP's prior written consent. ION Networks, Inc. must
give HP no less than 35 days advance notice to approve or
reject any proposed increase in Lead Time.
3.6 Inventory Requirement. ION Networks, Inc. will maintain a
protective inventory equal to 10 percent (10%) of the average
monthly forecast for the most recent three (3) month rolling
forecast period of each OEM product. In addition, ION
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<PAGE>
Networks, Inc. will maintain a protective inventory equal to
20 percent (20%) of the average monthly forecast of each
critical, single sourced or long lead-time component. If this
inventory is depleted, ION Networks, Inc. will replenish the
inventory as soon as possible after depletion. ION Networks,
Inc. will rotate its supply of OEM Products in inventory to
maintain a fresh stock of inventory.
Upon termination of this agreement or cancellation of orders,
ION Networks, Inc. will make commercially reasonable efforts
to mitigate the excess unique material listed in Exhibit H
prior to making a request of HP to pay for the excess. If the
excess unique materials cannot be mitigated by ION Networks,
Inc., ION Networks, Inc. will request that HP pay for
reasonable costs associated with the excess unique materials
required to meet the inventory requirements above. HP will
review the request paying reasonable costs within 30 days of
ION Networks, Inc. request.
3.7 Order Changes. HP may without charge postpone, decrease,
increase, or cancel any Order by notice to ION Networks, Inc.
at least fifteen (15) days prior to the Delivery Date. HP may
cancel an Order by notice to ION Networks, Inc. at any time
prior to then agreed lead-time for the OEM products ordered.
If HP postpones, decreases, or cancels an Order after such
time period, ION Networks, Inc. will be entitled to be
reimbursed by HP for actual costs incurred by ION Networks,
Inc. as a direct result of such postponement, decrease, or
cancellation that are not recoverable by the shipment of the
affected OEM Products or their raw materials to other
purchasers (subject to ION Networks, Inc. duty to remove HP
Marks as specified in Section 6.3 below) within a reasonable
period of time or the exercise by ION Networks, Inc. in a
commercially reasonable manner, of other mitigation measures.
3.8 Shipment Requirements. All Orders are required to be shipped
complete. ION Networks, Inc. will give HP immediate notice if
it knows that it cannot meet a Delivery Date or that only a
portion of the OEM Products will be available for shipment to
meet a Delivery Date. For partial shipments, ION Networks,
Inc. will ship the available OEM Products unless directed by
HP to reschedule shipment. If ION Networks, Inc. ships any OEM
Product by a method other than as specified in the
corresponding Order, ION Networks, Inc. will pay any resulting
increase in the cost of freight. HP may utilize drop shipment
options to any HP designated delivery destination. If HP
designates a drop shipment location outside the country in
which the Order is placed, HP agrees to pay any additional
costs associated with the shipment.
3.9 HP Option To Accept Over shipments. If ION Networks, Inc.
ships more OEM Products than ordered, the amount of the over
shipment may either be kept by HP
-5-
<PAGE>
for credit against future Orders or returned to ION Networks,
Inc. pursuant to Article 6 below, at HP's election.
3.10 Meeting Delivery Dates. If due to ION Networks, Inc.'s failure
to make a timely shipment, the specified method of
transportation would not permit ION Networks, Inc. to meet the
Delivery Date, the OEM Products affected will be shipped by
air transportation or other expedient means acceptable to HP.
ION Networks, Inc. will pay for any resulting increase in the
freight cost over that which HP would have been required to
pay by the specified method of transportation.
3.11 No Advance Shipment. If OEM Products are delivered more than
three days in advance of the Delivery Date, HP may, at its
option, either return the OEM Products pursuant to Article 6
below or keep the OEM Products with payment due as provided in
Section 4.3 below.
3.12 Title And Risk Of Loss. Unless otherwise specified in writing
by HP, shipments will be FCA destination. If HP designates the
carrier, shipments will be FCA carrier. Title to OEM Product
hardware and media ordered under this Agreement and risk of
loss or damage will pass from ION Networks, Inc. to HP upon
ION Networks, Inc. delivery of the OEM Products to the common
carrier specified by HP, subject to the provisions in Sections
3.14 and 3.15 below with respect to packing and handling.
3.13 Packing List. Each delivery of OEM Products to HP must include
a packing list that contains at least:
(1) The Order number and the HP part number;
(2) The quantity of OEM Products or Parts shipped; and
(3) The date of shipment.
3.14 Packaging. ION Networks, Inc. must preserve, package, handle,
and pack all OEM Products so as to protect the OEM Products
from loss or damage, in conformance with good commercial
practice, the Specifications, government regulations, and
other applicable standards. Special static protection must be
provided for OEM Products requiring such packaging.
3.15 Responsibility For Damage. ION Networks, Inc. will only be
liable for any loss or damage due to its failure to properly
preserve, package, handle, or pack OEM Products. HP will not
be required to assert any claims for such loss or damage
against the common carrier involved. Further, HP will not be
liable for any loss
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<PAGE>
or damage due to a release of chemicals or other hazardous
materials to the environment prior to HP's actual receipt of
the corresponding OEM Products.
3.16 Purchase Hold. If HP determines that an OEM Product is
defective, then, irrespective of any rights provided HP
hereunder, HP may implement a purchase hold to suspend
purchases of such OEM Products without any liability provided
that HP promptly notifies ION Networks, Inc. of such
suspension and provides ION Networks, Inc. with information
specific to the purported defect such that ION Networks, Inc.
can identify the root cause of the defect or recreate and then
remedy the defect. Such purchase hold may be removed if HP
reasonably believes that ION Networks, Inc. has taken
sufficient action to correct the defect or given sufficient
assurances that such defect will be corrected within a
reasonable time.
4. PRICES AND PAYMENT TERMS
4.1 OEM Product Prices. ION Networks, Inc. prices for the OEM
Products are listed in Exhibit C, in U.S. currency unless
otherwise stated, and may not be increased without HP's
consent. The prices for Parts will be ION Networks, Inc.
published prices, less any applicable discounts, unless the
parties agree to a price schedule for Parts. OEM Products and
Parts will also be subject to any applicable prompt payment
discounts. ION Networks, Inc. and HP agree to review OEM
Product prices quarterly. If, during the term, ION Networks,
Inc. effectuates cost reductions in its manufacturing and
delivery processes, it will pass such reductions to HP and
amend the prices accordingly.
4.2 Changed Prices. If during the Term changed prices or price
formulas are put in effect by mutual agreement of HP and ION
Networks, Inc., or reduced prices or price formulas are
otherwise put in effect by ION Networks, Inc., such prices or
price formulas (if resulting in lower prices than the then
current price) will apply to all Orders issued by HP after the
effective date of such prices or price formulas and to all
unshipped Orders.
4.3 Payment Procedure. Payment for OEM Products will be net 37
days, after the latest of receipt by HP of an appropriate
invoice from ION Networks, Inc., the receipt by HP of the
corresponding OEM Products or Parts; or the Delivery Date
Except as otherwise provided in this Agreement, associated
freight expenses and duties will be paid directly by HP. HP
will not be liable for any costs related to or payments for
unordered or Nonconforming Products.
4.4 Most Favored Purchaser Warranty. If during the term, ION
Networks, Inc. offers a better price or pricing formula to
other purchasers for the same or lesser volumes of OEM
Products with substantially the same terms and conditions,
then ION Networks, Inc. agrees to offer such price or pricing
formula to HP retroactively
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as of the date first offered to the third party. ION Networks,
Inc. agrees to fulfill its obligations in this Section in good
faith and further agrees that it will not create any OEM
Product purchasing programs, pricing formulas or other
conditions that serve to deny HP the benefits of its favored
purchaser status. In addition, HP may credit any amounts due
under this Agreement against future invoices. ION Networks,
Inc. agrees to fulfill its obligations in this Section in good
faith.
4.5 Sales Taxes And Duties. Prices are exclusive of all taxes or
duties after delivery to the designated destination (other
than taxes levied on ION Networks, Inc. income) that ION
Networks, Inc. may be required to collect or pay upon shipment
of the OEM Products. Any such taxes or duties must appear as a
separate item on ION Networks, Inc. invoice. HP agrees to pay
such taxes or duties unless HP is exempt from such taxes or
duties. Where applicable, HP will provide ION Networks, Inc.
with an exemption resale certificate.
5. NONCOMPLYING PRODUCTS
5.1 Credit, Repair or Replacement. HP may elect in its sole
discretion, subject to the provisions of Article 18 below, to
return a Noncomplying Product for Credit or at HP option to
replacement or repair at ION Networks, Inc. expense. In
addition, HP may return for repair or replacement an entire
lot of OEM Products if a tested sample of that lot contains 3%
or greater Noncomplying Products.
5.2 Replenishment Period. ION Networks, Inc. will return the
replacement or repaired OEM Products as soon as possible but
in no event later than two (2) work days after receipt of the
Noncomplying Product from HP. ION Networks, Inc. opportunity
to cure any failure to meet such deadline, pursuant to Article
18 below, will apply to only one such breach per part number
during the Term.
6. RETURN OF OEM PRODUCTS
6.1 Return Materials Authorization. All OEM Products returned by
HP to ION Networks, Inc. must be accompanied by a Return
Materials Authorization ("RMA"). HP and ION Networks, Inc.
will follow a mutually agreed upon RMA process. Unless further
verification is reasonably required by ION Networks, Inc., ION
Networks, Inc. will supply an RMA within two work days of HP's
request.
6.2 Return Charges. All Early/Over Shipments and Noncomplying and
failing OEM Products returned by HP to ION Networks, Inc., and
all replacement or repaired OEM Products shipped by ION
Networks, Inc. to HP to Eady/Over Shipments and Noncomplying
and failing OEM Products, will be at ION Networks, Inc. risk
and expense, including transportation charges.
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6.3 Duty To Remove Marks Or Destroy Noncomplying Products. ION
Networks, Inc. agrees not to sell, transfer distribute or
otherwise convey any part, component, product or service
bearing or incorporating HP Marks, part numbers or other
identifiers, including any HP packaging, copyrights or code,
to any party other than to Eligible Purchasers. ION Networks,
Inc. will remove from all rejected, returned or un-purchased
OEM Products any such HP Marks or identifiers, even if such
removal would require destruction of the OEM Products. ION
Networks, Inc. further agrees not to represent that such OEM
Products are built for HP or to HP specifications. ION
Networks, Inc. will defend and indemnify HP against any
claims, losses, liabilities, costs or expenses that HP may
incur as a result of ION Networks, Inc. breach of this
obligation.
6.4 Field Failure Returns. All failing OEM Products may be
returned by HP to ION Networks, Inc. for repair or
replacement. Failure returns within warranty period will be
repaired or replaced at no cost. Failure returns of OEM
Products outside of the warranty period set forth herein will
be repaired or replaced at the agreed out of warranty repair
cost. ION Networks, Inc. will track the repair history of each
OEM Product. Any OEM Product returned for the third time to
ION Networks, Inc. will be scrapped and replaced with another
repaired or replacement OEM Product. No Trouble Found (NTF)
returned OEM Product would be tracked by ION Networks, Inc..
If the parties mutually agree that the NTF rate is
significant, the parties will agree to use commercially
reasonable means to reduce the number of NTF returns.
7. ENGINEERING PROCESS OR DESIGN CHANGES
7.1 ION Networks, Inc. Proposed Changes. ION Networks, Inc. will
not, without the prior written consent of HP, make or
incorporate in OEM Products any of the following changes
(collectively, "Engineering Changes"):
(1) Process or design changes;
(2) Geographical relocation of manufacturing processes; or
(3) Process step discontinuance's affecting the
electrical performance, the mechanical form, fit, or
function, the environmental compatibility or chemical
characteristics, software compatibility, or the life,
reliability, or quality of OEM Products.
7.2 Notice Of Proposed Changes. ION Networks, Inc. will give HP
notice of any proposed Engineering Change, and will provide
evaluation samples and other appropriate information as
specified by HP at least 90 days prior to the first proposed
shipment of any OEM Products involving an Engineering Change.
HP
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will respond within fifteen (15) days indicating its approval
or disapproval of any Engineering Change; provided, however,
if HP does not respond to notice of any Engineering Change
within fifteen (15) days, HP will be deemed to approve such
Engineering Change. Regardless of whether HP approves a
proposed Engineering Change, Lead Time will not be changed
except as provided in Section 3.4 above.
7.3 HP Proposed Changes. HP may change HP-supplied drawings,
designs, or Specifications at any time prior to manufacture of
corresponding released OEM Products. HP will submit proposed
changes to the OEM Product to ION Networks, Inc. for
investigation. ION Networks, Inc. will respond to HP's
proposed changes within ten (10) business days. The parties
will negotiate in good faith the terms and conditions of the
proposed change, including possible price adjustments, change
in delivery schedule, and testing, within thirty (30) days
after ION Networks, Inc. response. HP will pay all reasonable
and direct costs incurred by ION Networks, Inc. in
implementing the changes that are specific to the OEM Product.
7.4 Option To Terminate. If the parties are unable to agree,
acting reasonably and in good faith, upon an adjustment
pursuant to Section 7.3 above, HP may without any liability
terminate this Agreement as to any OEM Products affected. Upon
termination of this agreement, ION Networks, Inc. will make
commercially reasonably efforts to mitigate excess unique
materials listed in Exhibit H prior to making a request to HP
to pay for the excess. If the excess unique materials cannot
be mitigated by ION Networks, Inc., ION Networks, Inc. will
request that HP pay for reasonable costs associated with the
excess unique materials required to meet inventory
requirements as stated in section 3.6.
7.5 Safety Standard Changes. ION Networks, Inc. will immediately
give notice to HP if any upgrade, substitution or other change
to an OEM Product is required to make that product meet
applicable safety standards or other governmental statutes,
rules, orders or regulations, even those that are not defined
as Engineering Changes in Section 7.1 above. All affected OEM
Products already purchased by HP may, at HP's election, either
be returned to ION Networks, Inc. for upgrade to current
revisions or upgraded by ION Networks, Inc. or HP in the field
pursuant to the procedures outlined in Section 10.6 below. If
an OEM Product meets applicable safety standards and other
governmental requirements at the time of manufacture, HP and
ION Networks, Inc. will allocate the costs of any subsequent
upgrade, substitution or other required change required in an
equitable manner based on good faith discussions between the
parties. If such discussions render no equitable solution, the
parties may either mutually agree to escalate the matter to
their respective vice presidents or general managers, as
applicable, or in the alternative, divide the costs equally
between them.
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8. QUALITY
8.1 Quality Program. ION Networks, Inc. agrees to maintain an
objective quality program consistent with reasonable
commercial standards for all OEM Products. ION Networks, Inc.
program will be in accordance with the current revision of ION
Networks, Inc. quality system requirements which HP will have
the opportunity to review, and if applicable, any additional
or substitute quality requirements agreed to by both parties.
ION Networks, Inc. will, upon HP's request, provide to HP
copies of ION Networks, Inc. program and supporting documents.
8.2 HP has the right to inspect, at ION Networks, Inc. plant, the
OEM Products and associated manufacturing processes.
Manufacturing processes may be inspected at any time during
the Term. HP's inspection may be for any reason reasonably
related to this Agreement, including to assure ION Networks,
Inc. compliance with HP's requirements. HP's right of
inspection will apply as well to any vendor or subcontractor
of ION Networks, Inc. ION Networks, Inc. will inform such
vendors or subcontractors of HP's right to inspect, and, if
necessary, use all reasonable effort to secure such rights for
HP.
9. WARRANTIES
9.1 Product Warranties. ION Networks, Inc. warrants that all OEM
Products will:
(1) Be manufactured, processed, and assembled by ION
Networks, Inc. or by companies under ION Networks,
Inc. direction.
(2) Conform to the Specifications, and other criteria
referred to in this Agreement or agreed to by the
parties in writing.
(3) Be new, except as otherwise provided by the parties.
(4) Conform strictly to the requirements of all Orders.
(5) Be free from defects in design, material and
workmanship in accordance with HP specifications.
(6) Be free and clear of all liens, encumbrances,
restrictions, and other claims against title or
ownership.
(7) Be "Year 2000 Compliant." Year 2000 Compliant OEM
Products will perform without error, loss of data, or
loss of functionality arising from any failure to
process, calculate, compare, or sequence date data.
In
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addition, Year 2000 Compliant OEM Products will not
cause any associated products or systems in which
they may be used to fail in any of the ways described
above. This Year 2000 Compliance Warranty will remain
in effect through December 31, 2000, notwithstanding
any other warranty period specified in this
Agreement.
(8) Not violate or infringe any third party Intellectual
Property Rights and ION Networks, Inc. warrants that
it is not aware of any facts upon which such claim
could be made. If ION Networks, Inc. learns of any
claim or any facts upon which claim could be made, it
will promptly notify HP of this information.
9.2 Survival of Warranties. All warranties specified above will
survive any inspection, delivery, acceptance, or payment by HP
and be in effect for the longer of ION Networks, Inc. 13 month
warranty period, or the one year period following the date of
shipment of the OEM Product or the HP Product containing the
OEM Product to HP's end-user customers. HP understands that
the backup system battery has a 2-year life span and needs
regular maintenance.
9.3 Epidemic Failure Warranty. In addition to the warranties
specified above, ION Networks, Inc. warrants all OEM Products
against epidemic failure for a period of three (3) years after
receipt of that OEM Product or the associated HP Product by
HP's customers. An epidemic failure means the occurrence of
the same failure pertaining to form, fit, or function, in any
one percent (1%) of the OEM Products, within a one (1) year
time frame. HP understands that the backup system battery has
a 2 year life span and needs regular maintenance.
9.4 Out of Warranty Repair. For Products which fail to conform to
their Specifications after the warranty period has expired but
during the term of this agreement, HP may return such Products
to ION Networks, Inc. for repair or replacement at ION
Networks, Inc. then current prices and terms after obtaining
an RMA number. ION Networks, Inc. current out of warranty
repair terms and pricing are set forth in Exhibit C.
9.5 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 9
AND SECTION 14 (INTELLECTUAL PROPERTY PROTECTION), ION
Networks, Inc. MAKES NO OTHER WARRANTIES, WITH RESPECT TO
OEM PRODUCTS, AND ION Networks, Inc. EXPRESSLY DISCLAIMS ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, REGARDING ANY OEM
PRODUCTS, OR REGARDING THEIR MERCHANTABILITY OR THEIR
FITNESS FOR ANY PARTICULAR PURPOSE.
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10. SUPPORT SERVICES
10.1 General. ION Networks, Inc. will provide HP with Support for
the OEM Products as specified in the Support Terms attached as
Exhibit D. ION Networks, Inc. will maintain such number of
qualified personnel as is necessary to provide timely and
knowledgeable maintenance and support service. ION Networks,
Inc. warrants that all Support will be provided in a
professional and workmanlike manner.
10.2 New HP Products. Upon request by HP to adapt the OEM Product
for use in a Product, HP and ION Networks, Inc. will negotiate
in good faith the terms and additional costs associated with
such adapted OEM Products. Upon agreement, ION Networks, Inc.
will use all reasonable efforts to provide HP with the OEM
Products adapted for use with new releases of HP Products
provided that HP makes available to ION Networks, Inc. such HP
Property as may be reasonably necessary for ION Networks, Inc.
to develop any adaptation.
10.3 HP Property. HP may provide to ION Networks, Inc. HP Property
under the terms of an HP Equipment Loan Agreement, solely for
use in ION Networks, Inc. manufacturing, testing, adapting and
supporting the OEM Products. All HP Property will be clearly
segregated from ION Networks, Inc. property and identified as
the sole property of HP. HP Property may not be transferred,
assigned, loaned or otherwise encumbered in any way. HP
Property may be provided to third parties for fulfillment of
ION Networks, Inc. obligations hereunder only upon HP's prior
written consent. HP property will be returned to HP, at ION
Networks, Inc. expense, upon termination of this Agreement.
10.4 Substitute Products. If ION Networks, Inc. develops any
products that are more efficient or less expensive than the
comparable OEM Products available under this Agreement. ION
Networks, Inc. will promptly inform HP of such product
availability. AT HP's option, HP will have the right to
substitute the newer products at the same price as the
comparable OEM Products for all subsequent purchases under
this Agreement. The pricing of such substitute products will
be mutually agreed upon by the parties in good faith, but will
be no higher than the price or pricing formula offered to
other purchasers for similar volumes of the substitute
products in accordance with Section 4.4.
10.5 Failure Rate. Notwithstanding that the warranties given in
Section 9.1 above apply to 100% of OEM Products, ION Networks,
Inc. and HP acknowledge that a failure rate of 0.5 percent
(0.5%) delivered over a twelve (12) month period is expected.
If the actual failure rate for OEM Products exceeds this
expected rate, ION Networks, Inc. will provide additional
engineering and technical support needed to bring the actual
failure rate within the specified failure rate.
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10.6 Class Failure Remedies. Upon the occurrence of any of the
following events: (i) a failure rate exceeding the rate
specified in Section 10.5 above; (ii) an epidemic failure as
described in Section 9.3; or (iii) a safety standard change
under Section 7.5 above (each referred to as a "Class
Failure"), HP will have the following additional remedies for
a three year period commencing upon receipt by HP's end-user
customer of the OEM Product or the corresponding HP Product.
(1) In the event of a Class Failure, ION Networks, Inc.
will provide HP no later than 3 business days
following the Class Failure root cause analysis and
corrective action plan. In the event it is not
possible to provide the root cause analysis and
corrective action plan within ten (10) days, ION
Networks, Inc. will provide a status report as soon
as possible but no later than 10 days following the
Class Failure to HP a status on the progress of the
root cause analysis and corrective action plan and an
estimate of the completion when ION Networks, Inc.
will complete these reports and provide them to HP as
soon as possible. HP will make available such
information and assistance reasonably required
allowing ION Networks, Inc. to conduct its root cause
analysis and provide its corrective action report.
(2) If, after review of the root cause analysis and
corrective action plan, HP determines in its
reasonable opinion that the Class Failure
necessitates a field stocking recall or customer
based recall or retrofit, HP may then elect to have
the OEM Products: (i) returned to ION Networks, Inc.
for repair or replacement; (ii) repaired or replaced
by ION Networks, Inc. in the field; or (iii) repaired
or replaced by HP in the field, including products in
distributor inventory and HP's installed base. If a
field repair can be performed by HP service personal
(at HP or HP's customer sites) and is deemed
desirable by HP, ION Networks, Inc. will provide the
appropriate replacement OEM Products, Parts or
upgrades free of charge to HP. Such OEM Products,
Parts or upgrades will have the highest shipping
priority.
(3) Except as provided in Section 7.5 above, regarding
safety standard changes, ION Networks, Inc. will,
within 90 days after completion of the recalls or
retrofits, reimburse HP for its reasonable and direct
costs in performing such services.
10.7 Survival of Support Obligations. ION Networks, Inc.
maintenance and support obligations specified in this Section
10, and in the Support Terms in Exhibit D will run for the
Term and any additional periods under Section 1.3 above and
will continue for a period of five (5) years after the last
shipment to HP of the OEM Product. This obligation includes
making necessary Parts available to HP, as further provided in
the Support Terms.
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11. ASSURANCE OF SUPPLY
11.1 Discontinuance. ION Networks, Inc. acknowledges its obligation
to manufacture, supply and support the OEM Products without
interruption for the Term of this agreement. If, however,
after the third year of this agreement, it becomes impractical
to continue the supply or support of any OEM Product
("Discontinued"), ION Networks, Inc. will give notice to HP no
less than nine (9) months in advance of the last date the
discontinued product can be ordered. After receipt of the
notice of discontinuance, ION Networks, Inc. will offer a
lifetime buy to HP. If HP accepts the lifetime buy option this
requirement will be delivered within 12 months.
12. TRAINING
12.1 Technical Training. ION Networks, Inc. will provide to HP
technical training, for a period not to exceed two (2) weeks,
sufficient to allow HP to become fully familiar with each OEM
Product and its market. Such training will be at no charge to
HP except for any reasonable travel expenses that ION
Networks, Inc. incurs. HP may further request and ION
Networks, Inc. will provide additional training at no charge
as reasonably necessary to inform HP personnel of upgraded,
enhanced or new versions of the OEM Products except for any
reasonable travel expenses that ION Networks, Inc. incurs.
Other training will be provided upon mutually agreeable terms
and conditions.
12.2 HP's Rights In Training Classes And Materials. HP may at no
charge use, reproduce, modify, display and perform either
internally or for HP's customers, all training classes,
methods, and materials supplied or developed by ION Networks,
Inc. under this Agreement. HP's use may be in any manner HP
reasonably deems appropriate holding to terms stipulated in
the attach CDA exhibit F.
13. MARKETING AND LICENSING
13.1 Marketing Authority. HP will have the authority to market the
OEM Products and the HP Products containing the OEM Products
to the extent it deems appropriate, in its sole discretion.
Without limiting the generality of the foregoing sentence,
nothing in this Agreement will be construed or interpreted to
place a "best efforts" obligation upon HP with respect to
marketing the HP Products or OEM Products or preclude HP from
independently developing, purchasing, licensing, or marketing
any product which performs the same or similar function as the
OEM Products. HP will have the right to use its then current
standard form business and
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license terms for all marketing and distribution of the OEM
Products and HP Products.
13.2 No Rights In Marks. Except as otherwise specified in the
private labeling section below, nothing in this Agreement
should be construed to grant either party rights in the Marks
of the other party. ION Networks, Inc. acknowledges, however,
that HP may use the name of ION Networks, Inc. and the name of
the OEM Products in advertising and marketing the OEM Products
or the HP Products. The OEM Products will be affixed with
copyright notices sufficient to give notice as to the rights
of the parties in their respective products.
13.3 Private Labeling. If HP decides during the Term to create HP
private label versions of the OEM Products, ION Networks, Inc.
will ensure that the OEM Products contain the HP Marks, serial
number format and packaging specified by HP and conforming to
HP specifications for external appearance (which will not
require any material change in form or dimensions of the OEM
Products or require commercially unreasonable actions). Except
as provided herein, ION Networks, Inc. will have no other
right or license in any HP Marks.
13.4 Software License. If the OEM Products include Software, ION
Networks, Inc. hereby grants to HP, under ION Networks, Inc.
Intellectual Property Rights in such Software, a nonexclusive,
worldwide, fully paid up license to use, import, reproduce,
offer for sale and distribute the Software in object code form
as integrated with the OEM Products or the HP Products. These
rights will extend to HP Subsidiaries and third party channels
of distribution.
13.5 Documentation License. ION Networks, Inc. hereby grants HP a
nonexclusive, non-transferable, worldwide, fully paid up
license to use, reproduce, distribute and prepare derivative
works in HP's name all Documentation and other information,
other than confidential information, furnished by ION
Networks, Inc. under this Agreement. HP may reproduce such
Documentation without ION Networks, Inc. logo or other
identification of source, subject to affixing copyright
notices to all copies of Documentation. These rights with
respect to the Documentation will extend to HP Subsidiaries
and third party channels of distribution. Notwithstanding the
foregoing, ION Networks, Inc. will have no responsibility for,
and HP will defend, indemnify and hold harmless ION Networks,
Inc., and it's officers and employees from and against all
losses or damages (including reasonable attorney's fees) for
any claims, suits, actions, demands or threats (collectively
claims) arising from modifications of the documentation made
by HP if such claim would not have arisen but for such
modifications.
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14. INTELLECTUAL PROPERTY PROTECTION
14.1 ION Networks, Inc. Duty To Defend. Except as provided in
Section 14.4 below, ION Networks, Inc. will defend and hold
harmless HP and its Subsidiaries, Subcontractors and customers
from any claim that any OEM Product, any combination of an OEM
Product with an HP Product, any Software, Documentation or a
ION Networks, Inc. Mark, or any product provided as part of
ION Networks, Inc. Support services constitutes an
unauthorized use or infringement of any third party's
Intellectual Property Rights. ION Networks, Inc. will pay all
costs, damages and expenses (including reasonable attorneys
fees) incurred by HP, Subsidiaries, Subcontractors or
customers and will pay any award with respect to any such
claim or agreed to in any settlement of that claim.
14.2 HP's Duty To Notify. HP will give ION Networks, Inc. prompt
notice of any such claim or action, will give ION Networks,
Inc. control of the defense or settlement of such claim or
action, and will give ION Networks, Inc. the authority,
information, and reasonable assistance (at ION Networks, Inc.
expense) necessary to defend. If ION Networks, Inc. does not
diligently pursue resolution of the claim nor provide HP with
reasonable assurances that it will diligently pursue
resolution, then HP may, without in any way limiting its other
rights and remedies, defend the claim.
14.3 Remedies For Infringing Products. If the use or combination of
any product provided hereunder is enjoined (the "Infringing
Product"), ION Networks, Inc.
will, at its sole expense and option:
(1) Procure for HP and its customers the right to
continue using or combining the Infringing Product;
(2) Replace the Infringing Product with a non-infringing
product of equivalent function and performance; or
(3) Modify the Infringing Product to be non-infringing,
without detracting from function or performance.
14.4 Limitations. ION Networks, Inc. will be relieved of its
indemnification obligations under this Article 14 to the
extent that the claim arises solely and directly from ION
Networks, Inc. compliance with an HP Specification provided
that all implementations of that Specification constitute an
unauthorized use or infringement of a third party Intellectual
Property Right.
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15. COUNTRY OF MANUFACTURE AND DUTY DRAWBACK RIGHTS
15.1 Country Of Origin Certification. Upon HP's request, ION
Networks, Inc. will provide HP with an appropriate
certification stating the country of origin for OEM Products,
sufficient to satisfy the requirements of the customs
authorities of the country of receipt and any applicable
export licensing regulations, including those of the United
States.
15.2 Country Of Origin Marking. ION Networks, Inc. will mark each
OEM Product or the container if there is no room on the OEM
Product, with the country of origin. ION Networks, Inc. will,
in marking OEM Products, comply with the requirements of the
customs authorities of the country of receipt.
15.3 Duty Drawback. If OEM Products delivered under this Agreement
are imported, ION Networks, Inc. will when possible allow HP
to be the importer of record. If HP is not the importer of
record and ION Networks, Inc. obtains duty drawback rights to
OEM Products, ION Networks, Inc. will, upon HP's request,
provide HP with documents required by the customs authorities
of the country of receipt to prove importation and to transfer
duty drawback rights to HP.
16. GOVERNMENTAL COMPLIANCE
16.1 Duty To Comply. ION Networks, Inc. agrees to comply with all
federal, state, local and foreign laws, rules, and regulations
applicable to its performance of this Agreement or to OEM
Products. Without limiting the generality of the foregoing
sentence, ION Networks, Inc. represents that:
(1) ION Networks, Inc. will comply with all equal
employment opportunity and nondiscrimination
requirements prescribed by Presidential Executive
Orders, including the requirements of Executive Order
11246, the Vocational Rehabilitation Act, and the
Vietnam Era Veteran's Readjustment
Assistance Act;
(2) Each chemical substance contained in OEM Products is
on the inventory of chemical substances compiled and
published by the Environmental Protection Agency
pursuant to the Toxic Substances Control Act;
(3) All OEM Products will be shipped in conformance with
government or freight regulations and requirements
applicable to chemicals; and
(4) ION Networks, Inc. will provide complete and accurate
material safety data sheets prior to shipping any OEM
Product.
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16.2 Procurement Regulations. For OEM Products purchased under this
Agreement for incorporation into products to be sold under a
federal contract or subcontract, those applicable procurement
regulations that are required by federal statute or regulation
to be inserted in contracts or subcontracts will be deemed
incorporated in this Agreement and made to apply to all
Orders.
16.3 Ozone Depleting Substances. ION Networks, Inc. hereby
certifies that no OEM Product nor any component of any OEM
Product:
(1) Contains any "Class 1 Substance" or 'Class 2
Substance", as those term are defined in 42 USC
Section 7671 and implementing regulations of the
United States Environmental Protection Agency at 40
CFR Part 82, as now in existence or hereafter
amended; or
(2) Has been manufactured with a process that uses any
Class 1 or Class 2 Substance within the meaning of 42
USC Section 7671 and implementing regulations of the
United States Environmental Protection Agency at 40
CFR Part 82, as now in existence or hereafter
amended.
17. FORCE MAJEURE EVENTS
17.1 Delaying Causes. Subject to the provisions of this Article,
ION Networks, Inc. will not be liable for any delay in
performance under this Agreement caused by any "act of God" or
other cause beyond ION Networks, Inc. control and without ION
Networks, Inc. fault or negligence (a "delaying cause").
Notwithstanding the above, ION Networks, Inc. will not be
relieved of any liability for any delay or failure to perform
its defense obligations with respect to third party
Intellectual Property Rights or furnish remedies for
Infringing Products as described in Article 14 above.
17.2 HP Option. ION Networks, Inc. will immediately give HP notice
of any delaying cause and its best estimate of the expected
duration of such cause. In the event of a delaying cause, HP
may act in its sole discretion to:
(1) Terminate this Agreement or any part hereof as to OEM
Products not shipped; or
(2) Suspend this Agreement in whole or in part for the
duration of the delaying cause, buy similar products
elsewhere, and deduct from any quantities specified
under this Agreement the quantity so purchased.
17.3 Resumption Of Agreement. If HP elects to purchase other
similar products in the event of a delaying cause, HP may
resume performance under this Agreement once
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the delaying cause ceases and extend the Term up to the length
of time the delaying cause endured. Unless HP gives notice of
termination as provided above within 30 days after notice from
ION Networks, Inc. of the delaying cause, HP will be deemed to
have elected to suspend this Agreement for the duration of the
delaying cause.
18. EVENTS OF DEFAULT
18.1 Notice Of Breach. If either party is in breach of any
provision of this Agreement, the nonbreaching party may, by
notice to the breaching party, except as otherwise prohibited
by the United States bankruptcy laws, terminate the whole or
any part of this Agreement or any Order, unless the breaching
party cures the breach within 30 days after receipt of notice.
18.2 Causes Of Breach. For purposes of Section 18.1 above, the term
"breach" includes without limitation any:
(1) Proceeding, whether voluntary or involuntary, in
bankruptcy or insolvency by or against a party;
(2) Appointment, with or without a party's consent, of a
receiver or an assignee for the benefit of creditors;
(3) Failure by ION Networks, Inc. to make a delivery of
OEM Products in accordance with the requirements of
this Agreement or any Order;
(4) Failure by ION Networks, Inc. to replace or repair
Noncomplying Products in a timely manner as required
by Article 5 above; or
(5) Other failure by a party to comply with any material
provision of this Agreement with additional failure
to provide the nonbreaching party, upon request, with
reasonable assurances of future performance.
18.3 HP's Rights Upon Breach. In the event HP terminates this
Agreement in whole or in part as provided above, in addition
to any other remedies provided HP under this Agreement, HP may
procure, upon such terms and in such manner as HP reasonably
deems appropriate, products similar to the OEM Product as to
which this Agreement is terminated. ION Networks, Inc. agrees
to reimburse HP upon demand for all additional costs incurred
by HP in purchasing, qualifying and testing such similar
products. ION Networks, Inc. further agrees to continue the
performance of this Agreement to the extent not terminated
under the provisions of this Section.
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18.4 Purchase Hold. If any Eligible Purchaser having the right to
purchase an OEM Product under this Agreement or under any
other agreement with ION Networks, Inc. believes in good faith
that an OEM Product is defective, then, irrespective of any
other rights provided HP hereunder, HP may implement a
purchase hold to suspend purchases of such OEM Products
without any liability. Such purchase hold may be removed if HP
reasonably believes that ION Networks, Inc. has taken
sufficient action to correct the defect or given. sufficient
assurances that such defect will be corrected within a
reasonable time.
19. CONFIDENTIAL INFORMATION
19.1 Confidential Information. During the Term, a party (the
"Recipient") may receive or have access to certain information
of the other party (the "Discloser") that is marked as
"Confidential Information," including, though not limited to,
information or data concerning the Discloser's products or
product plans, business operations, strategies, customers and
related business information. The Recipient will protect the
confidentiality of Confidential Information with the same
degree of care as the Recipient uses for its own similar
information, but no less than a reasonable degree of care,
under the terms of the Confidential Disclosure Agreement
attached as Exhibit F (the "CDA"). To the extent any term of
this Agreement conflicts with any term in the CDA, the terms
of this Agreement will control and take precedence.
Confidential Information may only be used by those employees
of the Recipient who have a need to know such information for
the purposes related to this Agreement. The parties
acknowledge that all Technical Information and Forecasts are
deemed Confidential Information to be protected for a term of
three (3) from the date of disclosure. Upon request of
disclosure, Recipient will immediately return or at
Disclosures option, destroy confidential information in its
possession.
19.2 Exclusions. The foregoing confidentiality obligations will not
apply to any information that is (a) already known by the
Recipient prior to disclosure, (b) independently developed by
the Recipient prior to or independent of the disclosure, (c)
publicly available through no fault of the Recipient, (d)
rightfully received from a third party with no duty of
confidentiality, (e) disclosed by the Recipient with the
Discloser's prior written approval, or (f) disclosed under
operation of law.
20. INSURANCE REQUIREMENTS ION NETWORKS, INC.
20.1 Insurance Coverage. ION Networks, Inc. will maintain
Comprehensive or Commercial General Liability Insurance
(including but not limited to premises and operations,
products and completed operations, broad form contractual
liability, broad form property damage and personal injury
liability) with a minimum limit of $5,000,000 (five million)
combined single limit per occurrence and $10,000,000
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(ten million) in the aggregate, for claims of bodily injury,
including death, and property damage that may arise from use
of the OEM Products or acts or omissions of ION Networks, Inc.
under this Agreement. Each policy obtained by ION Networks,
Inc. will name HP, its officers, directors and employees as
additional insured. Such insurance will apply as primary
insurance and no other insurance will be called upon to
contribute to a loss covered thereunder. In addition, such
policies will permit ION Networks, Inc. to waive, on its own
behalf and on behalf of its insurers, any rights of
subrogation against HP. Such insurance policies will be
written with appropriately licensed and financially
responsible insurers, and will provide for a minimum of 30
days written notice to HP of any cancellation or reduction in
coverage. Certificates of insurance evidencing the required
coverage and limits will be furnished to HP before any work is
commenced hereunder, and ION Networks, Inc. will deliver
copies of policies or certificates to the HP contact listed in
Exhibit G.
20.2 Claims Made Coverage. If any policies have "claims made"
coverage, ION Networks, Inc. will maintain such coverage's
with HP named as an additional insured for a minimum of three
years after termination of this Agreement. Any such coverage
must have a retroactive date no later than the date upon which
work commenced under this Agreement.
20.3 Additional Requirements. All deductibles on policies providing
coverage will be paid by ION Networks, Inc. In the event ION
Networks, Inc. is self insured for matters described in
Section 20.1, ION Networks, Inc. agrees to respond to any
claims or losses made against or incurred by HP in the same
fashion as if insurance had been purchased with the same or
broader coverage terms than what is generally available to
similar ION Networks, Inc. In no event will the coverage's or
limits of any insurance required under this Article, or the
lack or unavailability of any other insurance, be deemed to
limit or diminish ION Networks, Inc. obligations or liability
to HP under this Agreement.
21. LIMITATION OF LIABILITY
UNLESS OTHERWISE STATED IN THIS AGREEMENT, NEITHER PARTY WILL BE LIABLE
FOR ANY SPECIAL OR CONSEQUENTIAL DAMAGES OF THE OTHER ARISING OUT OF
ANY PERFORMANCE OF THIS AGREEMENT OR IN FURTHERANCE OF THE PROVISIONS
OR OBJECTIVES OF THIS AGREEMENT, REGARDLESS OF WHETHER SUCH DAMAGES ARE
BASED ON TORT, WARRANTY, CONTRACT OR ANY OTHER LEGAL THEORY, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE ABOVE,
ION NETWORKS, INC. WILL BE RESPONSIBLE FOR ANY DAMAGES OF ANY KIND
INCLUDED IN AN AWARD OR SETTLEMENT OF A THIRD PARTY CLAIM UNDER ARTICLE
14 ABOVE.
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<PAGE>
22. TERMINATION
22.1 Outstanding Orders. All Orders issued prior to the expiration
of this Agreement must be fulfilled pursuant to and subject to
the terms of this Agreement, even if the Delivery Dates are
after expiration. Upon termination of this Agreement for ION
Networks, Inc. breach, HP may cancel any outstanding Order or
require Orders to be fulfilled even if a Delivery Date is
after the date of termination.
22.2 Return Of HP Property. ION Networks, Inc. must return all HP
Property to HP upon expiration or termination. All such
property must be in good condition, normal wear and tear
excepted. HP will determine the manner and procedure for
return. HP will bear all return freight costs if return is due
to HP convenience or an uncured breach by HP. Otherwise, ION
Networks, Inc. will bear all such costs.
22.3 Surviving Provisions. Notwithstanding the expiration or early
termination of this Agreement, the provisions regarding
Warranties in Article 9, Support in Article 10, Manufacturing
Rights in Article 11, Marketing and Licensing in Article 13,
Intellectual Property in Article 14, Confidentiality in
Article 19, Insurance Requirements in Article 20, Limitation
of Liability in Article 21, and the Miscellaneous provisions
below will each survive in accordance with their terms.
23. MISCELLANEOUS
23.1 Notices. All notices to be given under this Agreement must be
in writing addressed to the receiving party's designated
recipient specified in Exhibit G. Notices are validly given
upon the earlier of confirmed receipt by the receiving party
or [three days] [or seven days, for international notices]
after dispatch by courier or certified mail, postage prepaid,
properly addressed to the receiving party. Notices may also be
delivered by telefax and will be validly given upon oral or
written confirmation of receipt. Either party may change its
address for purposes of notice by giving notice to the other
party in accordance with these provisions.
23.2 Exhibits. Each Exhibit attached to this Agreement is deemed a
part of this Agreement and incorporated herein wherever
reference to it is made.
23.3 Independent Contractors. The relationship of the parties
established under this Agreement is that of independent
contractors and neither party is a partner, employee, agent or
joint venturer of or with the other. Nothing in this Agreement
precludes either party from independently developing,
manufacturing, selling or supporting products similar to the
OEM Products.
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<PAGE>
23.4 Assignment.
Neither this Agreement nor any right, license, privilege or
obligation provided herein may be assigned, transferred or
shared by either party without the other party's prior written
consent, and any attempted assignment or transfer is void. Any
merger, consolidation, reorganization, transfer of
substantially all assets of a party, or other change in
control or ownership will be considered an assignment for the
purposes of this Agreement {other than an HP merger into a
wholly owned subsidiary}. HP hereby gives its written consent
to transfer of ION Networks, Inc.'s rights and obligations
under this Agreement through merger, consolidation,
reorganization or transfer of all assets to a successor entity
named Ion Networks Inc. This Agreement will be binding on the
successors and permitted assigns of the parties and the name
of the party appearing herein will be deemed to include the
names of such party's successors or permitted assigns to the
extent necessary to carry out the intent of this Agreement.
23.5 No Waiver. The waiver of any term, condition, or provision of
this Agreement must be in writing and signed by an authorized
representative of the waiving party. Any such waiver will not
be construed as a waiver of any other term, condition, or
provision except as provided in writing, nor as a waiver of
any subsequent breach of the same term, condition, or
provision.
23.6 Reference To Days. All references in this Agreement to "days"
will, unless otherwise specified herein, mean calendar days.
23.7 Headings. The Section headings used in this Agreement are for
convenience of reference only. They will not limit or extend
the meaning of any provision of this Agreement, and will not
be relevant in interpreting any provision of this Agreement.
23.8 No Publication. Neither party may publicize or disclose to any
third party, without the written consent of the other party,
the terms of this Agreement. Without limiting the generality
of the foregoing sentence, no press releases may be made
without the mutual written consent of each party.
23.9 Severability. If any provision in this Agreement is held
invalid or unenforceable by a body of competent jurisdiction,
such provision will be construed, limited or, if necessary,
severed to the extent necessary to eliminate such invalidity
or unenforceability. The parties agree to negotiate in good
faith a valid, enforceable substitute provision that most
nearly effects the parties original intent in entering into
this Agreement or to provide an equitable adjustment in the
event no such provision can be added. The other provisions of
this Agreement will remain in full force and effect.
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<PAGE>
23.10 Entire Agreement. This Agreement comprises the entire
understanding between the parties with respect to its subject
matters and supersedes any previous communications,
representations, or agreements, whether oral or written. For
purposes of construction, this Agreement will be deemed to
have been drafted by both parties. No modification of this
Agreement will be binding on either party unless in writing
and signed by an authorized representative of each party.
23.11 Governing Law. This Agreement will be governed in all respects
by the laws of California, U.S.A. without reference to any
choice of laws provisions.
APPROVED AND AGREED TO:
- ----------------------
ION NETWORKS, Inc. HEWLETT-PACKARD COMPANY
BCC Server Manufacturing Unit
By:/s/ Steve B. Gray By: /s/ Margie Mourfield
------------------ -------------------------
Steve B. Gray Margie Mourfield
Title: ION Networks, Inc., President & CEO Title: Procurement Manager
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EXHIBIT 10.8
AGREEMENT
THIS IS AN AGREEMENT ("Agreement") entered into as of this 19th day of December,
1994.
BY AND BETWEEN: SIEMENS ROLM COMMUNICATIONS
INC., a Delaware corporation, with its
principal place of business at 4900 Old
Ironsides Drive, Santa Clara, California 95054
("Siemens Rolm");
AND: LEEMAH DATACOM SECURITY
CORPORATION, a California corporation,
with its principal place of business at 3948
Trust Way, Hayward, California 94545
("LeeMah").
WHEREAS, LeeMah has developed a product(s) consisting of both hardware
and software ("the Product(s)"), the primary purpose of which is to enable its
users to better secure certain maintenance ports, data applications, voicemail
applications and network access applications (DISA) of the computerized branch
exchange to which the Product is installed; and
WHEREAS, Siemens Rolm and LeeMah desire to enter into an agreement
whereby LeeMah will sell the hardware and license the software in the Product(s)
to Siemens Rolm for subsequent resale and sublicensing by Siemens Rolm to
Siemens Rolm Customers; and
WHEREAS, pursuant to the terms of this Agreement, Siemens Rolm has the
right to place periodic orders for the Product(s) with LeeMah on receipt of any
order, LeeMah will ship the Product(s) to Siemens Rolm or the Siemens Rolm
Customer, the Product(s) will be sold to a Siemens Rolm Customer; the software
component of the Product(s) will be sublicensed to the customer pursuant to a
current Siemens Rolm sublicense agreement; and, if applicable, Siemens Rolm will
install the Product(s) and maintain it under its current customer maintenance
agreement.
NOW THEREFORE, it is understood and agreed as follows:
1. DEFINITIONS
1.1 "Product(s)" shall mean the hardware and software items listed
in Exhibit A ("LeeMah Product and Price List"), which listing
LeeMah or Siemens Rolm may periodically revise pursuant to the
terms of Paragraph 4.2 hereto.
<PAGE>
1.2 "Software" shall mean the software component(s) of the
Product(s), which LeeMah licenses herein to Siemens Rolm for
subsequent sublicensing to Siemens Rolm Customers.
1.3 "System" shall mean the equipment that compromises a Siemens
Rolm computerized branch exchange.
1.4 "Territory" shall mean the United States of America (all fifty
states), Puerto Rico, and Canada.
1.5 "Distribute" or "Distribution" shall mean to ship, resell and
sublicense, install, and maintain the Product(s) for Siemens
Rolm Customers pursuant to the terms of this Agreement.
1.6 "Siemens Rolm Customer" shall mean any third party having (or
proposing to have) a System installed at any site in the
Territory and who uses or proposes to use with the System any
product by purchase and sublicense from Siemens Rolm.
1.6.1 The parties agree that "Siemens Rolm Customer" shall
also mean the Siemens Rolm's authorized distributors
of products and services ("Authorized Distributors"),
as to whom Siemens Rolm may grant certain rights to
sell and sublicense the Product(s) to Siemens Rolm
Customers. The current Authorized Distributors are
set forth in Exhibit B, which list may be amended
from time to time by Siemens Rolm in its sole
discretion.
1.7 "Sublicense" shall mean a sublicense for the Software granted
by Siemens Rolm to Siemens Rolm Customers pursuant to a
current Siemens Rolm sublicense agreement. A current form of
Sublicense is attached hereto as Exhibit C, which sublicense
may be amended from time to time by Siemens Rolm in its sole
discretion.
2. TERM
2.1 Regardless of when this Agreement is executed, the Agreement
will be effective from the 19th day of December, 1994
("Effective Date") for a period of three (3) years, unless
terminated by either party pursuant to provisions of Section
12. After such three (3) year period, the Agreement (if not
already terminated) will automatically extend on a
year-by-year basis at each anniversary date, unless either
party, in the exercise of its absolute and sole discretion,
elects to this terminate this Agreement by giving written
notice to the other party of its intention to so terminate not
less than six (6) months prior to the anniversary date.
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<PAGE>
3. APPOINTMENT AND GRANT OF LICENSE
3.1 LeeMah hereby appoints Siemens Rolm as a non-exclusive
distributor of the Products in the Territory, with the right
and license to market and Distribute Products to Siemens Rolm
Customers within the Territory during the term of this
Agreement. This appointment and grant includes the right to
license the Software within the Product(s) to Siemens Rolm
Customers (which customers may include Siemens Rolm's
authorized independent distributors of products and services
("Authorized Distributors"), as to whom Siemens Rolm may grant
certain rights to sell and sublicense the Product(s) to
Siemens Rolm Customers). The current Authorized Distributors
are set forth in Exhibit B, which list may be amended from
time to time by Siemens Rolm in its sole discretion.
4. PURCHASE AND PAYMENT
4.1 Products and Prices
Siemens Rolm to acquire Products from time to time, at its
sole discretion, exclusively from LeeMah. LeeMah will have
sole and absolute discretion to determine the price for each
of the Products, subject to the terms of Paragraph 4.2. LeeMah
will consider (but shall not be obligated to accept) any
reasonable discount proposal by Siemens Rolm for a discount by
LeeMah on any unusually large purchase by Siemens Rolm. LeeMah
warrants that the prices and discounts granted Siemens Rolm
for Products during the term of this Agreement will be no less
favorable than those extended to any other customer for the
same or similar product in similar quantity and with similar
terms and conditions.
4.2 Product and Price Changes
Additions and changes (including price changes) to Exhibit A
("Product and Price List") may be made by LeeMah upon ninety
(90) days' written notice to Siemens Rolm. Any deletions of
Products to Exhibit A require one hundred and eighty (180)
days' written notice by one party to the other party.
4.3 Shipping
Risk of loss, damage to or destruction of any Products ordered
by Siemens Rolm, shall transfer to Siemens Rolm, F.O.B.,
LeeMah, Hayward, California. LeeMah shall be responsible for
arranging shipping on behalf of Siemens Rolm and Siemens Rolm
will be responsible for paying all costs associated with such
shipping.
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<PAGE>
4.4 Payment Terms
Full payment for Products sold to Siemens Rolm under this
Agreement will be due and payable to LeeMah within the thirty
(30) days following the later of the date of shipment of the
Product or receipt by Siemens Rolm of an accurate LeeMah
invoice.
4.5 Siemens Rolm's Pricing Rights
Nothing in the Agreement shall be deemed to limit Siemens
Rolm's right to determine prices or terms for Distribution of
Products to Siemens Rolm Customer, subject to preservation of
LeeMah's proprietary rights in the Software as described in
Section 5 hereof.
4.6 Product Disclosures
LeeMah shall notify Siemens Rolm at least one hundred and
eighty (180) days before any major new release of the Product
or any software or hardware comprising the Product. Subject to
the provisions of the Agreement pertaining to the Confidential
Information, LeeMah will disclose to Siemens Rolm its product
strategies on an annual basis during the term of this
Agreement. Additionally, and subject to the provisions of the
Agreement pertaining to the Confidential Information, LeeMah
and Siemens Rolm will disclose to each other their respective
product strategies on an annual basis during the term of this
Agreement for any products and product features jointly
developed by Siemens Rolm and LeeMah under this or any other
agreement. Both parties acknowledge that any product
strategies disclosed pursuant to this Agreement will not in
any way obligate the disclosing party to pursue or implement
such product strategies.
5. PROPRIETARY RIGHTS
5.1 Software Ownership
LeeMah represents and warrants that it owns all right, title
and interest in the Software. LeeMah shall retain exclusive
title to and ownership of the Software, now or hereafter
developed, to all modifications, and to the source code
relating to each of the foregoing, and reserves all
proprietary rights in all design, engineering details and
other data pertaining to all the foregoing.
Siemens Rolm cannot transfer to Siemens Rolm Customers any
right, title or interest in any Software, other than the
rights granted under the Sublicense described in Section 6,
except as specifically permitted by this Agreement. Siemens
Rolm shall not modify, reproduce, copy (except one (1) copy
for back-up purposes), reverse engineer, disassemble, or
decompile the Software (or any part thereof) nor remove
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<PAGE>
any protective encryption nor circumvent or attempt to
circumvent any such protective coding nor any protective
hardware devices, without the express prior written permission
of LeeMah.
5.2 Trademarks and Copyrights
LeeMah grants to Siemens Rolm permission to refer to Siemens
Rolm as an "Authorized Distributor of the TraqNet 2000-SR
Series of Products", during the term of this Agreement. LeeMah
represents and warrants that trademark filings are currently
in process for the trade names listed in Exhibit D hereto, and
LeeMah agrees that Siemens Rolm may use trademark names and
copyright and materials in accordance with Exhibit D hereto or
as approved for use in writing by LeeMah. Siemens Rolm
acknowledges that it has paid no consideration for the
acquisition of any right, title or interest to LeeMah's
trademarks, logos, copyrights, trade names, documentation or
designations and nothing in this Agreement shall give Siemens
Rolm or Siemens Rolm Customers any interest in any of them
other than those specified in this Agreement.
5.3 Indemnification - Infringement
LeeMah represents and warrants that on the Effective Date,
there are no infringements of patents, copyrights, trademarks
or proprietary rights or misappropriation of proprietary
rights, claims or disputes pending or anticipated by LeeMah
with respect to the Software or the Products.
LeeMah will indemnify, hold harmless and defend Siemens Rolm
and any Siemens Rolm Customer at its own expense (including
attorney's fees) against any claims that any Product as
provided by LeeMah hereunder infringes any United States,
Canadian or Puerto Rican copyright, patent or trade secret;
provided, that Siemens Rolm or its Customer notifies LeeMah of
any such claim within a reasonable period of time (under the
circumstances) after receiving service of process, provides
all reasonable assistance to LeeMah and agrees in writing to
allow LeeMah to control any resulting litigation and/or
settlement negotiations. LeeMah shall have no obligation with
respect to any such claim of infringement based solely upon
Siemens Rolm or a Siemens Rolm Customer's modification of any
Product or its combination, operation or use with apparatus,
data or computer programs not furnished by LeeMah. Upon
occurrence of each and every claim of infringement described
in this paragraph in the Territory, LeeMah, at its option,
shall: 1) modify the Product so that it is no longer
infringing while performing substantially the same function,
or 2) obtain for the Siemens Rolm Customer the right to
continue using the Product, or 3) require the Siemens Rolm
Customer to return the Product in exchange for a refund of the
purchase price less depreciation based upon a straight-line
five (5) year basis.
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<PAGE>
6. SIEMENS ROLM RESPONSIBILITIES
6.1 Sale and Sublicensing to Siemens Rolm Customers
Siemens Rolm has the right to place periodic orders for the
Product(s) with LeeMah. On receipt of an order, LeeMah will
ship the Product(s) to Siemens Rolm or the Siemens Rolm
Customer. The Software component of the Product will be
licensed to the Siemens Rolm Customer on a current Siemens
Rolm sublicense agreement, a current version of which is
attached hereto as Exhibit C, and which Siemens Rolm may amend
from time to time in its sole discretion.
6.2 Vendor Support
A Product manager of Siemens Rolm will be dedicated to provide
LeeMah with marketing services, technical support and other
support services, including but not limited to product
specifications for current and planned products, product
documentation and testing assistance. Siemens Rolm personnel
will also attend from time to time LeeMah product planning
sessions.
6.3 Sales Support
LeeMah personnel will attend any appropriate Siemens Rolm
sales meetings, as determined by Siemens Rolm in its
reasonable discretion. At these meetings, Siemens Rolm will
provide to LeeMah, solely for the purpose of planning
manufacturing schedules, a forecast of new system sales, a
form of MAC activity for LeeMah products, and any special
promotional programs that for the coming year include LeeMah.
Siemens Rolm will update these forecasts and program
activities on a quarterly basis.
6.4 Additional Responsibilities
In addition to any other obligations set forth herein, Siemens
Rolm undertakes to perform the following additional
obligations.
6.4.1 if applicable, to install the Product purchased by a
Siemens Rolm Customer in the System in accordance
with LeeMah's installation instructions; and
6.4.2 if applicable, to maintain the Product for any
Siemens Rolm Customer under a Siemens Rolm customer
maintenance agreement.
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<PAGE>
7. LEEMAH RESPONSIBILITIES
7.1 Training
LeeMah will provide the following training at no cost to
Siemens Rolm: sales training covering all LeeMah's Products,
system applications, system pricing and system configuration
(scope and content of course to be agreed upon by LeeMah and
Siemens Rolm); and service and installation training (scope
and content of course to be agreed upon by Siemens Rolm and
LeeMah). At no cost to Siemens Rolm, LeeMah will provide
training with respect to each new release of hardware and/or
Software (scope and content of course to be agreed upon by
LeeMah and Siemens Rolm). LeeMah will also provide, at no cost
to Siemens Rolm, reasonable and appropriate content in these
areas to be incorporated into appropriate Siemens Rolm
training programs.
7.2 Sales Support
An employee of LeeMah who is acceptable to Siemens Rolm, in
Siemens Rolm's sole discretion, will be dedicated full time to
provide application and configuration design services and
technical support and other support services, including
configuration and pricing, to Siemens Rolm by responding to
telephone inquiries initiated by Siemens Rolm or Customers.
Additional LeeMah employees will provide application and
configuration design services and technical support and other
support services to Siemens Rolm as required to support
Siemens Rolm's purchase volume. Upon mutual agreement,
LeeMah's sales managers and other sales personnel will be made
available for joint sales calls with prospective Siemens Rolm
Customers. LeeMah personnel will also attend any appropriate
sales meetings, as determined by Siemens Rolm in its
reasonable discretion. LeeMah will provide an initial response
to all requests for support within twenty-four (24) hours of
receipt. Any services requested by Siemens Rolm which are not
expressly set forth in this Agreement, shall be provided to
Siemens Rolm at prices agreed upon by LeeMah and Siemens Rolm.
Siemens Rolm will be responsible for responding to all
requests for proposal for LeeMah Products. To assist Siemens
Rolm with responses to request for proposal, LeeMah will make
the following tools and support materials available to Siemens
Rolm, all of LeeMah's computer programs, manuals and other
support materials used to prepare responses to request for
proposal. LeeMah personnel will provide technical support to
Siemens Rolm to answer questions concerning responses to
requests for proposal which are not covered by the referenced
materials, by responding to telephone inquiries. LeeMah agrees
to sell demonstration systems as described in Exhibit A hereto
at the price set forth therein, which price represents
LeeMah's lowest price.
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<PAGE>
7.3 Marketing
Any customized sales and marketing literature prepared at the
written request of Siemens Rolm by LeeMah will be paid for by
Siemens Rolm.
LeeMah will make available to each branch office one complete
set of all standardized sales and marketing literature and
presentation materials, as attached in Exhibit E hereto,
together with all such additional materials hereafter
developed during the term of this Agreement. All additional
copies of sales and marketing literature and presentation
materials delivered to Siemens Rolm, shall be paid for by
Siemens Rolm at prices to be mutually agreed by both parries
to this Agreement.
LeeMah sales personnel will assist Siemens Rolm personnel at
up to four (4) trade shows per year. Additionally, Siemens
Rolm may offer and LeeMah may accept, based upon a mutually
agreed upon cost sharing arrangement, booth space at various
trade shows.
8. SERVICE AND SUPPORT
8.1 Responsibilities and Siemens Rolm
Siemens Rolm will provide first-line support for any requests
by Siemens Rolm Customers for repair or replacement of
problematic in-field Product(s). This first-line support will
consist of (a) removal of any allegedly problematic Product,
(b) installation of a replacement Product, and (c) return of
the allegedly problematic Product to LeeMah for repair or
replacement.
8.2 Responsibilities of LeeMah
LeeMah will provide second-line service support by telephone
for hardware and Software installations and in-field Product
failures. LeeMah's normal customer support hours are 7:00 A.M.
to 6:00 P.M., Pacific Time, Monday through Friday.
Additionally, a LeeMah support engineer will be on call
outside service hours. When the need arises, LeeMah will
support Siemens Rolm Customers directly during regular service
hours. LeeMah after hours support will be limited to assisting
Siemens Rolm personnel. LeeMah will also repair any allegedly
problematic Product returned by Siemens Rolm to LeeMah for
repair.
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9. WARRANTY
9.1 Warranty Period
LeeMah warrants to Siemens Rolm that the Product shall be free
from material defects for a period of two (2) years from the
date of acceptance of same by a Siemens Rolm Customer ("the
Warranty Period"). If a Product is determined to be defective
during the Warranty Period, such Product shall, at Siemens
Rolm's option, be replaced or repaired at LeeMah's expense.
This, together with payment to Siemens Rolm of associated
shipment expenses, will be LeeMah's sole liability. For
purposes of this Section 9, "acceptance" by the Siemens Rolm
Customer shall occur at the later of (i) the day that is
thirty (30) days following the Cutover Date, (ii) the Siemens
Rolm Customer returns a notice of acceptance, or (iii) the
Siemens Rolm Customer fails to respond within thirty (30) days
of Product installation, to a notice sent by Siemens Rolm or
LeeMah by certified mail. Siemens Rolm undertakes to use its
reasonable efforts to ensure that acceptance of each Product
occurs at the earliest possible moment.
9.2 Warranty Coverage
LeeMah's warranty is contingent upon proper use and
application of the Product in accordance with applicable
Product Specifications and Configuration Specifications, and
(1) does not cover any Product, if modified by anyone without
LeeMah's or Siemens Rolm's authorization; (2) does not cover
non-conformance to Product Specifications and Configuration
Specifications caused by accident, neglect or operating
conditions exceeding specifications (such as voltage
overloads); (3) does not cover non-conformance to Product
Specifications and Configuration Specifications caused by
defects in any Product not furnished by LeeMah; and (4) does
not cover non-conformance to Product Specifications and
Confiiguration Specifications caused by any person, other than
an employee or sub-contractor of LeeMah or Siemens Rolm,
involved with the manufacture, installation, modification or
removal of the Product.
9.3 Warranty Disclaimer
THE WARRANTY SET FORTH IN THIS SECTION 9 IS EXCLUSIVE AND IS
GIVEN IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED.
WITHOUT LIMITING THE GENERALITY OF THE PROCEEDING SENTENCE,
LEEMAH EXPRESSLY DISCLAIMS ANY IMPLIED OR EXPRESS WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
-9-
<PAGE>
10. LIMITATION OF LIABILITY
10.1 In each instance in which LeeMah seeks to recover damanges
from Siemens Rolm, regardless of the legal theory upon which
LeeMah's claim is based, Siemens Rolm will be liable only for
the amount of LeeMah's actual loss or damage arising from
Siemens Rolm's performance or non-performance under this
Agreement, up to a maximum of $100,000, except for any claim
alleging non-payment for Products provided pursuant to this
Agreement.
10.2 UNDER NO CIRCUMSTANCES WILL SIEMENS ROLM BE LIABLE FOR LOSS OR
DAMAGES FROM (1) THIRD PARTY CLAIMS AGAINST LEEMAH OR CLAIMS
BY LEEMAH BASED ON THIRD PARTY CLAIMS, (2) LOSS OF STORED,
TRANSMITTED OR RECORDED DATE, (3) CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS OR SAVINGS), OR INDIRECT, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES WITH RESPECT TO ANY MATTERS
RELATING TO THIS AGREEMENT, REGARDLESS OF WHETHER SIEMENS ROLM
IS INFORMED OF THE POSSIBILITY OF SAME, OR (4) FOR PRODUCT(S)
OR PARTS OUTSIDE OF THE UNITED STATES OR AMERICA, OR CANADA,
OR PUERTO RICO. IN ADDITION, SIEMENS ROLM WILL NOT BE LIABLE
FOR ANY COSTS, INCLUDING LONG DISTANCE CHARGES, WHETER OR NOT
AUTHORIZED, RESULTING FROM USE OF THE PRODUCT. THIS SECTION 10
SET SORTH THE MAXIMUM RESPONSIBILITY OF SIEMENS ROLM.
11. INDEMNIFICATION
11.1 Siemens Rolm agrees to indemnify and save LeeMah harmless from
and against any and all claims of loss or damage to or
destruction of real or tangible personal property or bodily
injury (including death) to the extent caused solely by the
negligence of Siemens Rolm, its employees, agents or
subcontractors, and arises out of the performance of this
Agreement by Siemens Rolm, provided that Siemens Rolm is
allowed to control, and LeeMah cooperates in the defense and
all related settlement negotiations.
11.2 LeeMah agrees to indemnify, defend and save Siemens Rolm
harmless from and against any and all claims, suits, actions,
liabilities, costs or any kind, including reasonable
attorneys's fees and costs of litigation, for any and all
claims by any party resulting directly or indirectly from any
actions or omissions by LeeMah, its agents, employees or
subcontractors, including any post-Warranty Period claims of
Product failures.
-10-
<PAGE>
12. TERMINATION
12.1 Election to Terminate. Subject to the terms of Section 2
hereto, either party may terminate this agreement, without or
without cause, upon giveiing the appropriate notice specified
in Parqagraph 2.1
12.2 Termination for Breach
In the event of material default by either party in the
performance of its duties and obligations hereunder, the party
in default shall be provided, by written notice, a sixty (60)
day period to substantially cure said default, and if said
default is not cured within that period, the non-defaulting
party may terminate this Agreement.
12.3 Termiantion for Bankruptcy
Either party hereto in its discretion may terminate this
Agreement at any time upon written notice to the other in the
event of any of the following: the appointment of a receiver
or similar officer for the other, the filing of a petition in
bankruptcy by or against the other under any bankruptcy or
debtor's law for its relief.
12.4 Post-Termination Obligations
Upon termination of this Agreement, LeeMah shall continue to
support each Product purchased and/or installed by Siemens
Rolm under this Agreement, for a period of ten (10) years
following the Distribution of such Product under the
Agreement, the whole in accordance with LeeMah's then
applicable prices, terms and conditions for licensing its
Products and providing its services. Upon termination of this
Agreement, provided that this Agreement is not terminated in
connection with a default by Siemens Rolm under Section 12.2
or 12.3, LeeMah and Siemens Rolm will enter into a mutually
acceptable agreement, pursuant to which Siemens Rolm will only
be authorized to Distribute LeeMah's products and services,
including maintenance services, to support Products
Distributed by Siemens Rolm pursuant to this Agreement. Any
such agreement shall be based upon LeeMah's then current
standard terms, conditions, prices and quantiy discounts for
selling and/or licensing its products and services through
value added resellers.
13. ASSIGNMENT
13.1 This Agreement or any rights hereunder shall not be assignable
by either party, and neither party may delegate any duties
hereunder, without the prior written consent of the other
party, which shall not be unreasonably withheld, and any
attempted assignment of this Agreement in contravention of
this provision shall be void and of no effect.
Nothwithstanding the foregoing, this Agreement may be assigned
and
-11-
<PAGE>
transferred by Siemens Rolm to any parent, subsidiary or
affiliate or successor to it or thereof.
14. CONFIDENTIAL INFORMATION
14.1 Each party acknowledges that in the course of performing its
obligations hereunder it will receive information which is
confidential and proprietary to the other. The term
"Confidential Information" means all information one party
discloses to the other either in writing and marked with a
Confidential or restrictive legend, or orally, visually or by
delivery of items which at the time of disclosure, the
disclosing party identified as Confidential Information. Each
party agrees to use all Confidential Information in accordance
with Confiddentialy and Non-Disclosure Agreement, attached
hereto as Exhibit F.
15. MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of
California, without regard to conflict of law provisions.
15.2 Non-Waiver. None of the terms and conditions of the Agreement
shall be deemed to have been waived by any delay or omission
on the part of either party to exercise any right or remedy
accruing upon breach by the other party or any one or more of
the terms of the Agreement.
15.3 Notices. All notices and demands hereunder shall be in writing
and shall be served by personal service or by mail at the
address of the receiving party set forth in this Agreement (or
at such different address as may be designated by such party
by written notice to the other party). All notices or demands
by mail shall be by telex, cable, telegram, facsimile, Federal
Express (or other reliable overnight courier service), or by
certified or registered airmail, return receipt requested, and
shall be deemed effective upon receipt. Unless otherwise
advised in accordance with the terms hereof, all notices and
demands shall be addressed as follows:
If to Siemens Rolm: Siemens Rolm Communications Inc.
4900 Old Ironsides Drive
Santa Clara, CA 95052
Attn: Bryan Keeter
Fax: 408/492-5768
-12-
<PAGE>
If to Leemah: LeeMah DataCom Security Corporation
3049 Trust Way
Hayward, California 94545
Attn: John Tuomy, President
Fax: 510/786-1123
15.4 Relationship of the Parties. The relationship of the parties
during the term of this Agreement will be that of independent
contractors. Neither party will have, nor will represent that
it has, any power, right or authority to bind the other, or to
assume or create any obligation or responsibility, express or
implied, on behalf of the other or in the other's name, except
as herein expressly provided.
15.5 Section Headings. The Section headings contained herein are
for reference only and shall not be considered substantive
parts of this Agreement.
15.6 Severability. Each term, condition, and provision of this
Agreement shall be valid and enforced to the fullest extent
permitted by law. If there is any conflict between any term,
condition or provision of this Agreement and any statute, law
or regulation, the latter shall prevail; provided that any
such conflicting term, condition, or provision shall be
curtailed and limited only to the extent necessary to bring it
within the legal requirements and the remainder of this
Agreement shall not be affected thereby.
15.7 Force Majeure. Neither party will be in default of this
Agreement to the extent that performance of its obligations is
delayed or prevented by reason of any act of God, fire,
natural disaster, accident, act of government, war shortages
of material or supplies or any other cause beyond the
reasonable control of such party ("Force Majeure"), provided
that such party gives the other party written notice thereof
promptly and, in any event, within fifteen (15) days of
discovery thereof and uses its good faith efforts to cure the
breach. In the event of such an event of Force Majeure, the
time for performance or cure will be extended for a period
equal to the duration of the event of Force Majeure but not in
excess of six (6) months.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have signed as of the date first above
mentioned.
LEEMAH DATACOM SECURITY CORPORATION
By: /s/ John E. Tuomy
---------------------------
Name: John E. Tuomy
Title: President, CEO
SIEMENS ROLM COMMUNICATIONS INC.
By: /s/
Name:
Title:
-14-
EXHIBIT 10.9
------------
SIEMENS
SIEMENS CREDIT CORPORATION
FLOATING RATE ADDENDUM
LEASING SCHEDULE 629-0002941-000
- --------------------------------------------------------------------------------
This Addendum shall become a part of that certain Leasing Schedule
#629-0002941-000 (the "Leasing Schedule" or "Lease") to Master Equipment Lease
Agreement dated June 10, 1999 (the "Agreement") between Lessor and Lessee. If
there is any conflict between the terms of this Addendum and the terms of the
Lease, the terms of this Addendum shall control. Capitalized terms used herein
and not otherwise defined herein, unless the context otherwise requires, shall
have the same meanings set forth in the Lease. For all purposes hereof, the date
of this Addendum shall be the date of execution by Lessor.
Add the following provision to Section 7 of the Leasing Schedule:
"The Lease Payments specified above are based upon current
money market rates, being 5.57% (the "Reference Rate"), which
is the yield to maturity of the U.S. Treasuy Note having a
5.25% coupon and maturing in May, 2004 ("Applicable Treasury
Note") as shown in the May 19, 1999 issue of THE WALL STREET
JOURNAL. The Applicable Treasury Note is that Note having a
remaining life closest to the Lease Term and in the case of
multiple notes, the one trading closest to par. If the
equipment cutover occurs after August 19, 1999, then the Lease
Payment actually used will be that specified on the Leasing
Schedule, increased or decreased by .00003 of the Equipment
Cost for each full five basis point (0.05%) change in the
Reference Rate as published in THE WALL STREET JOURNAL two
business days prior to the Commencement Date. Lessee
authorizes Lessor to unilaterally make the appropriate change
to the Leasing Schedule to reflect any changes to the Lease
Payments consistent with the foregoing."
ACCEPTED BY:
LESSOR: LESSEE:
SIEMENS CREDIT CORPORATION ION NETWORKS, INC.
BY: BY: /s/ Mark A. Simmons
--------------------------- -----------------------------
(Authorized Signature) (Authorized Signature)
NAME: NAME: Mark A. Simmons
--------------------------- -----------------------------
(Printed or Typed) (Printed or Typed)
TITLE: TITLE: Chief Financial Officer
--------------------------- -----------------------------
(Printed or Typed) (Printed or Typed)
DATE: DATE: 6/17/99
--------------------------- -----------------------------
<PAGE>
SIEMENS
TECHNOLOGY LICENSE AGREEMENT
----------------------------
This Technology License Agreement (the "Agreement") is entered into by SolCom
Systems Limited, a company registered in Scotland ("SolCom") and Hewlett-Packard
Company, a California corporation ("HP"). This Agreement is effective upon the
date of the last signature ("Effective Date").
1 DEFINITIONS
1.1 "Probe" shall mean the technology incorporated in the hardware
design of SolCom's LANrover(TM) FDDI RMON Probe.
1.2 "Derived Hardware" shall mean the Probe, modified by SolCom
pursuant to Article 2 below to meet the specifications in
Appendix E.
1.3 "OS Software" shall mean the software defined in Appendix C.
1.4 "Firmware" shall mean OS Software with HP Technology and FDDI
RMON Technology included, downloaded to a Flash ROM (see
Appendix C).
1.5 "RMON Technology" shall mean the software which provides
Remote Monitoring functions (as defined in RFC 1271 and 1513,
groups 1 through 10 inclusive), when running on the Probe.
1.6 "FDDI RMON Technology" shall mean the subset of RMON
Technology which provides RMON functionality on FDDI and
SolCom's implementation of FDDI equivalents for groups 1, 2
and 10.
1.7 "RMON-II Technology" shall mean the Draft Standard published
by the IETF to define the next generation of RMON standard.
1.8 "SMT" shall mean the FDDI Station Management Protocol.
1.9 "HP Technology" shall mean proprietary extensions developed by
HP and listed in items 3 and 4 of Appendix E.
1.10 "HP Product" shall mean an FDDI RMON Probe, which shall be
constructed from the Technology and packaged in a physical
enclosure provided by HP. This is specified in Appendix E.
1.11 "Enhancement" shall mean any major upgrade, revision, design
change, or other modification to the Technology.
1.12 "New Technology" shall mean any technology developed by SolCom
to supplement or replace the Technology.
-2-
<PAGE>
SIEMENS
1.13 "Technology" shall mean the Derived Hardware, OS Software,
FDDI RMON Technology, SMT, and HP Technology.
1.14 "Documentation" shall mean all schematics, prototypes,
specifications, manufacturing techniques, algorithms, and
other materials embodying or documenting Technology, FDDI RMON
Technology, Enhancements, or New Technology.
-3-
<PAGE>
SIEMENS SIEMENS CREDIT CORPORATION
LEASING SCHEDULE
#: 629-0002941-000
- --------------------------------------------------------------------------------
LESSOR: SIEMENS CREDIT CORPORATION LESSEE: ION NETWORKS, INC.
-------------------------------
991 U.S. Highway 22 (herein "Lessee")
Bridgewater, NJ 08807-2956 21 Meridian Road
-------------------------------
(800) 327-4443 Edison, NJ 08820
-------------------------------
LEASING SCHEDULE #629-0002941-000 , to that certain Master Equipment Lease
Agreement dated June 10, 1999 (herein "Agreement"), between Lessor and Lessee.
1. EQUIPMENT DESCRIPTION: NSG NETWORKING EQUIPMENT AS DESCRIBED IN THE
ATTACHED QUOTE #LUJA00101C AND A RIGHT TO USE LICENSE FOR ANY SOFTWARE
RELATED THERETO AND RELATED DOCUMENTATION.
2. TOTAL EQUIPMENT COST: 3. SUPPLIER: Siemens Information and
$131,719.19 Equipment Communication Networks, Inc.
8,000.00 Installation
$8,383.15 Tax
------------
$148,102.34 Total
4. LEASE TERM (in months): 60 5. COMMENCEMENT DATE: Upon Equipment
Cutover By Supplier
6. NO. OF LEASE PAYMENTS: 60 7. LEASE PAYMENT (per payment period):
$2,948.72
8. PAYMENT PERIOD Monthly 9. ADVANCE LEASE PAYMENT(S): #(S) 1;
TOTALING $2,948.72
10. EQUIPMENT LOCATION (if different from WASHINGTON PLAZA - FIRST FLOOR
Lessee's address above): 1551 SOUTH WASHINGTON AVENUE,
PISCATAWAY, NJ 08854
11. INTERIM RENT APPLICABLE: [X] YES [ ] NO; AMOUNT: $98.29 Per diem (Plus
Applicable Taxes)
12. PURCHASE OPTION: Lessee selects the following option:
OPTION A [ ] a FAIR MARKET VALUE purchase option.
OPTION B [ ] a FIXED PURCHASE OPTION at a Purchase Option Price of
[ ] % of the Total Equipment Cost.
OPTION C [X] a NOMINAL FIXED PURCHASE OPTION at a Purchase Option
Price of $ [ 1.00 ].
THE TERMS AND CONDITIONS OF THE FOREGOING OPTIONS AND OTHER IMPORTANT
PROVISIONS ARE SET FORTH ON THE BACK OF THIS SCHEDULE.
================================================================================
IN WITNESS WHEREOF, the parties hereto have duly executed the Lease as of the
dates set forth below. For all purposes hereof, the date of the Lease shall be
the date of Lessor's acceptance as set forth below. LESSEE ACKNOWLEDGES THAT
NEITHER LESSOR NOR THE SUPPLIER IS AN AGENT OR REPRESENTATIVE OF THE OTHER AND
NEITHER HAS AUTHORITY TO BIND THE OTHER.
BY EXECUTION HEREOF, THE SIGNOR
CERTIFIES THAT (S)HE HAS READ
THE ENTIRE LEASE, THAT LESSOR OR
ITS REPRESENTATIVES HAVE MADE NO
AGREEMENTS OR REPRESENTATIONS
EXCEPT AS SET FORTH HEREIN, OR
IN THE AGREEMENT, AND THAT (S)HE
IS DULY AUTHORIZED TO EXECUTE
THE LEASE ON BEHALF OF LESSEE.
ACCEPTED BY:
LESSOR: SIEMENS CREDIT CORPORATION LESSEE: ION NETWORKS, INC.
BY: BY: /s/ Mark A. Simmons
--------------------------- -----------------------------
(Authorized Signature) (Authorized Signature)
NAME: NAME: Mark A. Simmons
--------------------------- -----------------------------
(Printed or Typed) (Printed or Typed)
TITLE: TITLE: Chief Financial Officer
--------------------------- -----------------------------
DATE: DATE: 6/17/99
--------------------------- -----------------------------
-4-
<PAGE>
SIEMENS
OPTION A - FAIR MARKET VALUE PURCHASE OPTION: If Option A has been selected,
provided no Default has occurred and is continuing and provided the Lease shall
not have previously terminated, Lessee shall have the option, exercisable by
written notice to Lessor received by Lessor at least ninety (90) but not more
than one hundred eighty (180) days before the expiration of the (original) Lease
Term, to purchase on the day following the last day of such Lease Term (herein
"Purchase Date") all but not less than all of the Equipment subject to the Lease
for its "Fair Market Value. Fair Market Value shall mean the value of the
Equipment (on an installed and operating basis) which would be obtained in an
arm's-length transaction between an informed and willing buyer-user (other than
a lessee currently in possession or a used equipment dealer) under no compulsion
to buy, and an informed and willing seller under no compulsion to sell, and in
such determination, costs of removal from the location of current use shall not
be a deduction from such value. Fair Market Value shall be determined by the
mutual agreement of Lessor and Lessee in accordance with the preceding sentence.
If Lessor and Lessee cannot agree, Fair Market Value shall be determined by a
qualified independent equipment appraiser selected by Lessor and approved by
Lessee, and Lessee shall pay the cost of appraisal. Provided Lessee has timely
exercised its option to purchase, Lessee shall pay to Lessor on the Purchase
Date the aforementioned purchase price in cash, together with all sales and
other taxes or costs applicable to the transfer of the Equipment and any other
amounts as may be due and owing under the Lease, whereupon Lessor shall transfer
its interest in the Equipment to Lessee without recourse, on an AS-IS, WHERE-IS
basis and without any warranty, express or implied from Lessor, other than the
absence of any liens by or through Lessor, except those (if, any) Lessee is
obligated to discharge. In the event that Lessee fails to exercise such purchase
option, Lessee shall (upon termination of the Lease) return the Equipment to
Lessor on demand, in accordance with the provisions of the Lease.
OPTION B - FIXED PURCHASE OPTION: If Option B has been selected, provided no
Default has occurred and is continuing and provided the Lease shall not have
previously terminated, Lessee shall have the option, exercisable by written
notice to Lessor received by Lessor at least ninety (90) but not more than one
hundred eighty (180) days before the expiration of the (original) Lease Term, to
purchase on the day following the last day of such Lease Term (herein "Purchase
Date") all but not less than all of the Equipment subject to the Lease for the
amount specified in Option B. Provided Lessee has exercised its option to
purchase, Lessee shall pay to Lessor on the Purchase Date the aforementioned
purchase price in cash, together with all sales and other taxes or costs
applicable to the transfer of the Equipment and any other amounts as may be due
and owing under the Lease, whereupon Lessor shall transfer its interest in the
Equipment to Lessee without recourse, on an AS-IS, WHERE-IS basis and without
any warranty, express or implied from Lessor, other than the absence of any
liens by or through Lessor, except those (if any) Lessee is obligated to
discharge. In the event that Lessee fails to exercise such purchase option,
Lessee shall (upon termination of the Lease) return the Equipment to Lessor upon
demand, in accordance with the provisions of the Lease.
OPTION C - NOMINAL FIXED PURCHASE OPTION: If Option C has been selected,
provided no Default has occurred and is continuing and provided the Lease shall
not have previously terminated, Lessee may purchase all but not less than all of
the Equipment at the end of the (original) Lease Term for the nominal purchase
price specified in Option C. Lessee shall pay to Lessor on the day following the
last day of such Lease Term such purchase price together with all sales and
other taxes applicable to the transfer of the Equipment and any other amounts as
may be due and owing under the Lease, whereupon Lessor shall transfer its
interest in the Equipment to Lessee without recourse, on an AS-IS, WHERE-IS
basis and without any warranty, express or implied from Lessor, other than the
absence of any liens by or through Lessor, except those (if any) Lessee is
obligated to discharge.
-5-
<PAGE>
SIEMENS
13. ADJUSTMENTS: Lessee acknowledges that the Lease Payments herein, are based
upon the Total Equipment Cost set forth above, and as a result of authorized
changes to the Equipment, the final Total Equipment Cost may increase or
decrease by up to 10%. In such event, the Lease Payments shall be adjusted
accordingly, and Lessee authorizes Lessor to correct the Lease (and all related
documentation) to reflect such changes, and Lessee, if requested by Lessor,
shall confirm such changes to Lessor in writing.
14. SUPPLY CONTRACT: Lessee acknowledges either that (a) Lessee has reviewed and
approved any written purchase agreement or purchase order covering the Equipment
("Supply Contract") purchased from Supplier, or (b) Lessor has informed or
advised Lessee, in writing, either previously or by the Lease, of the following:
(i) the identity of the Supplier, (ii) that Lessee may have rights under the
Supply Contract and (iii) that Lessee may contact the Supplier for a description
of any such rights Lessee may have under the Supply Contract. If Lessee has
entered into a written Supply Contract, then Lessee hereby assigns to Lessor all
of Lessee's rights and interests in and to the Equipment and the Supply
Contract. If requested by Lessor, Lessee shall obtain any consent required for
such assignment. If Lessee has not entered into any such Supply Contract, Lessee
authorizes Lessor to (and Lessor may at its option) act on behalf of Lessee to
obtain a Supply Contract from Supplier. Lessor's sole obligation under the
Supply Contract shall be to pay the Supplier for the Equipment, if (and only if)
the Equipment is accepted by Lessee under the Lease, and Lessee, not Lessor,
shall at all times remain liable to perform all of the duties and obligations
under the Supply Contract. Lessee hereby represents and warrants that: (c)
Lessee has delivered herewith a true and correct copy of the Supply Contract,
neither Supplier nor Lessee is in default under the Supply Contract and it shall
not be amended without Lessees prior written consent; and (d) the Supply
Contract is free from all claims, security interests, liens and encumbrances,
except for the interest being conveyed hereunder. Lessee shall indemnify and
hold Lessor harmless with respect to any and all claims relating to the
performance of Lessee's obligations under the Supply Contract.
15. MISCELLANEOUS: THIS LEASING SCHEDULE AS INCORPORATING THE TERMS OF THE
AGREEMENT, TOGETHER WITH ANY APPLICABLE STIPULATED LOSS VALUE SCHEDULE, CONTAIN
THE COMPLETE AGREEMENT OF THE PARTIES WITH RESPECT TO ITS SUBJECT MATTER AND
SUPERSEDE AND REPLACE ANY PREVIOUSLY MADE PROPOSALS, REPRESENTATIONS, WARRANTIES
AND AGREEMENTS. Capitalized terms used herein, which are
not otherwise defined herein, shall have the same meanings as set forth in the
Agreement. Any amendments contained or incorporated into this Leasing Schedule,
which in any way alter the terms of the Agreement, shall be effective only with
respect to this Leasing Schedule and shall be ineffective with respect to any
other Leasing Schedule. The Lease shall become effective at the time of Lessor's
acceptance (by execution hereof) at the address set forth above, by an
authorized representative of Lessor. Lessor and Lessee agree that the terms and
conditions of the Agreement are hereby incorporated into this Leasing Schedule
(collectively the "Lease") and made a part hereof to the same extent as if such
terms and conditions were set forth in full herein. The Lease shall constitute a
lease of each item of Equipment described above. If Lessee has selected either
Option B or Option C, then, notwithstanding any applicable state laws to the
contrary, Lessee agrees to reimburse Lessor for all reasonable attorneys' fees
incurred by it incident to any action or proceeding involving the Lessee brought
pursuant to the Bankruptcy Code, as amended, which are allowable under Section
506(b) thereof. In addition to the disclaimers set forth in the Lease, Lessee
acknowledges that Lessor has made no representation or warranty express or
implied and has provided to Lessee no information whatsoever, regarding the
Equipments Year 2000 Compliance, i.e., that the Equipment is able or unable to
and will or will not accurately receive, process, store, and/or provide output
of date/time data relating to the twentieth and twenty-first centuries, and/or,
between the years 1999 and 2000, and/or during a leap year.
-6-
<PAGE>
SIEMENS
SIEMENS Siemens Credit Corporation
MASTER LOAN AND SECURITY AGREEMENT
DATED: May 5,1999
LENDER: SIEMENS CREDIT CORPORATION
991 US Highway 22
Bridgewater, NJ 08807-2956
(800) 327-4443
BORROWER: ION NETWORKS, Inc., 21 MERIDIAN ROAD, EDISON, NJ 08820
-------------------------------------------------------
(Exact Legal Name and Address)
TERMS AND CONDITIONS OF MASTER AGREEMENT
1. MASTER LOAN AND SECURITY AGREEMENT: This Master Loan and Security Agreement
(herein the "Master Agreement) sets forth the terms and conditions upon which
Lender shall lend to Borrower and Borrower shall borrow from Lender monies for
the acquisition by Borrower of items of property specified in loan schedules
(herein"Loan Schedules") to be entered into from time to time. Each Loan
Schedule shall incorporate the terms and conditions of the Master Agreement and
each shall constitute a loan and security agreement as to the property specified
in such Loan Schedule (herein "Equipment). The term "Loan Agreement" as used in
this Master Agreement shall mean the applicable Loan Schedule as incorporating
the terms and conditions of this Master Agreement.
2. A LOAN: Lender hereby agrees, on the terms stated in the Loan Agreement, to
lend to Borrower on an agreed upon date (herein "Loan Date"), the loan amount as
set forth in the Loan Schedule in immediately available funds (the "Loan"). The
proceeds of the Loan shall be applied by Borrower on the Loan Date to the
purchase price of the Equipment in accordance with the "Pay Proceeds
Authorization" previously given by Borrower to Lender (in a form supplied by
Lender). Borrowers obligation to pay the principal of and interest on the Loan
shall be evidenced by its promissory note in the form supplied by Lender (the
"Note"), dated the date of the Loan, payable to the order of Lender. Interest on
the Loan shall accrue on the outstanding principal amounts thereof in accordance
with the terms of the Note. Unless accelerated in accordance with the provisions
of the Loan Agreement, the principal of and interest on the Loan shall be paid
in accordance with the terms of the Note on the payment dates as set forth
therein. Borrower agrees to pay on demand, as a late charge, 1.3% per month
limited by the maximum rate permitted by law on all overdue
(CONTINUED ON FOLLOWING PAGES)
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have duly executed the Master Agreement
as set forth below. The Master Agreement shall become effective at the time of
Lender's acceptance (by execution hereof at its New Jersey address set forth
above, by an authorized representative of Lender. BORROWER ACKNOWLEDGES THAT
NEITHER LENDER NOR THE SUPPLIER IS AN AGENT OF THE OTHER AND NEITHER HAS
AUTHORITY TO BIND THE OTHER.
-7-
<PAGE>
SIEMENS
BY EXECUTION HEREOF, THE SIGNER
CERTIFIES THAT (S)HE HAS READ THE
ENTIRE MASTER AGREEMENT, THAT LENDER
OR ITS REPRESENTATIVES HAVE MADE NO
AGREEMENTS OR REPRESENTATIONS EXCEPT
AS SET FORTH HEREIN, THE LOAN
SCHEDULE OR THE NOTE, AND THAT (S)HE
IS DULY AUTHORIZED TO EXECUTE THE
MASTER AGREEMENT ON BEHALF OF
BORROWER.
ACCEPTED BY:
LESSOR: LESSEE:
SIEMENS CREDIT CORPORATION ION NETWORKS, INC.
BY: BY: /S/ STEVE GRAY
----------------------- --------------------------
(Authorized Signature) (Authorized Signature)
NAME: NAME: STEVE GRAY
----------------------- --------------------------
(Printed or Typed) (Printed or Typed)
TITLE: TITLE: PRESIDENT
------------------------ --------------------------
(Printed or Typed) (Printed or Typed)
DATE: DATE: 5/5/99
------------------------ --------------------------
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<PAGE>
SIEMENS
payments under the Loan Agreement and under the Note, whether such payments are
due prior to or after a Default (as hereinafter defined). All amounts payable to
Lender under the Loan Agreement and under the Note shall be made not later than
the date specified for payment, in lawful money of the United States of America
and in immediately available funds, free and clear of and without any
withholding, deduction, setoff or counterclaim. If any payment under the Loan
Agreement or under the Note is due on a day when banks are required to close in
New Jersey, such payment shall be due on the next succeeding business day.
Except as may otherwise be provided herein or in the Note, all payments to
Lender under the Loan Agreement and Note shall be paid to Lender at its address
above or any other address designated by Lender in writing. All amounts paid
shall be applied first, to the payment of all expenses and charges, including
attorneys' fees, incurred by Lender in the protection of its rights or the
pursuance of its remedies and to provide adequate indemnity to Lender against
all taxes and liens which by law have, or may have, priority over the rights of
Lender to any receipts or proceeds with respect to the Equipment; second, to the
payment of all other costs, expenses and indemnities payable under the Loan
Agreement to the extent Lender is aware of the same; third, to the payment of
all interest accrued and payable with respect to the Loan; and fourth, to the
payment of principal on the Loan. The Loan or any part thereof, may not be
prepaid.
3. CONDITIONS PRECEDENT: The obligation of Lender to make the Loan is subject to
the fulfillment of the following conditions: (a) on the Loan Date, no Default or
event which with the giving of notice or lapse of time or both would constitute
a Default has occurred and is continuing or would result from the performance of
the Loan Agreement; (b) no material adverse change from the date of the Master
Agreement shall have occurred prior to funding, in the financial condition or
business operations of Borrower; (c) the Equipment shall be in good working
condition; and (d) Lender shall have received from Borrower all documents
requested by Lender.
4. SECURITY INTEREST: To secure all payments under the Loan Agreement and under
the Note and all other obligations of Borrower to Lender under the Loan
Agreement and under the Note (all hereinafter called "Obligations"), Borrower
hereby grants to Lender a security interest in the Equipment, together with all
accessions, attachments, replacements, substitutions, modifications and
additions thereto, now or hereafter acquired, and all proceeds thereof
(including insurance proceeds). Borrower agrees to execute and authorizes Lender
to file with such authorities and at such locations as it may deem appropriate,
any further Uniform Commercial Code financing statements relating to the
Equipment and/or the Loan Agreement and Borrower agrees to reimburse Lender upon
demand for all costs incurred relative thereto. In addition, Borrower hereby
irrevocably appoints Lender its agent and attorney-in-fact to execute in the
name of Borrower and file any Uniform Commercial Code financing statements or
security agreements with respect to the Equipment in any place Lender deems
necessary. Borrower also agrees that a photocopy or original of the Loan
Agreement (including any addenda, attachments and amendments) may be filed by
Lender as a Uniform Commercial Code financing statement.
5. REPRESENTATIONS AND WARRANTIES: Borrower represents and warrants to Lender,
with respect to the Loan, as of the Loan Date that: (a) Borrower is an, entity
duly organized and validly existing in good standing under the laws of the state
of its organization.; (b) Borrower has full power to own its properties, to
carry on its business as now being conducted and has full power to execute,
deliver and perform all of its obligations under the Loan Agreement and the
Note; (c) the making and performance by Borrower of the Loan Agreement and the
Note have been duly authorized by all necessary action of Borrower and do not
and will not violate any provision of law, statute, rule or regulation, or any
judgment, franchise, permit, order, decree, ruling, writ or injunction of any
court or administrative body, or of Borrower's organizational or charter
documents, or the terms of any of its securities or result in the breach of, or
constitute a default under, or require any consent
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<PAGE>
SIEMENS
under, any indenture, bank loan, credit agreement or other agreement or
instrument to which Borrower is a party or by which Borrower or any of its
property may be bound or affected; (d) except for any Uniform Commercial Code
financing statement filings, fixture filings or other recordings required
hereunder with respect to the Equipment and the creation of the security
interests contemplated hereby, no filings, recordations, notifications,
registrations, notarizations, authentications or other formalities or property,
stamp or similar taxes or duties and no approvals, licenses, orders,
authorizations, consents or undertakings of any governmental bodies or
regulatory, supervisory authorities are necessary or appropriate in connection
with the execution, delivery and performance by Borrower of the Loan Agreement
or the Note or for the payment to Lender of all sums hereunder or under the Note
or for the legality, validity, binding effect or enforceability hereof or
thereof; (e) the Loan Agreement and the Note have been duly executed and
delivered by Borrower and are legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms; (f) there are no
agreements or understandings to which Borrower and Lender are parties respecting
the Equipment, verbal or written, other than those expressed herein and Borrower
has not created any liens or encumbrances against the Equipment, except the lien
created hereby; (g) Borrower has good title to the Equipment free and clear of
any liens and encumbrances except those granted to Lender hereunder, and the
security interest granted to Lender herein will at all times constitute a valid,
perfected and enforceable first priority security interest in favor of Lender,
subject to no other security interest, mortgage, lien or encumbrance, except as
may otherwise be permitted under the Loan Agreement; (h) financial statements
and other related financial information furnished by Borrower upon Lender's
request shall be prepared in accordance with generally accepted accounting
principles consistently applied and in all material respects shall accurately
present Borrower's financial position and results of its operations as of the
dates given on such statements.
6. COVENANTS: Borrower hereby covenants and agrees that until satisfaction of
the Obligations, it shall: (a) preserve and maintain its existence and all of
its rights, privileges and franchises, and continue the conduct of its present
business in an orderly, efficient and regular manner; (b) keep the Equipment
free and clear of all liens, charges, encumbrances, taxes and assessments, and
keep the Equipment at the Original Equipment Location as set forth on the Loan
Schedule and not change the location of any item of the Equipment without the
prior written consent of Lender which consent shall not be unreasonably
withheld: (c) retain possession of the Equipment and not sell, exchange, assign,
loan, deliver, lease, mortgage or otherwise dispose of such Equipment; not alter
the Equipment: not allow the Equipment to be affixed to realty in such manner as
to cause the Equipment to become a fixture: and not use, operate or locate the
Equipment in any manner or area so as to cause it to be excluded from coverage
by any insurance required under the Loan Agreement: (d) operate the Equipment by
qualified and duly authorized personnel only, in accordance with all applicable
laws and regulations, and for business purposes only and not for personal,
family or household purposes, and only for its normally intended purpose; and
keep the Equipment in good repair and condition, properly maintain the Equipment
or cause it to be properly maintained by a fully qualified service company, and
immediately notify Lender in writing of the entity maintaining the Equipment and
any change of such entity. Lender shall have the right upon advance notice to
inspect the Equipment and all maintenance records thereto, if any, at any
reasonable time during normal business hours and to require Borrower, at
Borrower's expense, to affix plates or markings on the Equipment indicating
Lender's interest; (e) pay when due all license fees, charges, assessments,
duties, privilege, sales, use, excise, ad valorem, intangible, stamp, property,
and other similar taxes now or hereafter imposed upon or relating to the
ownership, purchase, sale, use or operation of the Equipment or this transaction
(exclusive of franchise taxes or taxes based upon the net income of Lender), and
in the event that Lender shall pay any such taxes to reimburse Lender upon
demand therefor; (f) promptly and duly execute and deliver to Lender such
further documents, instruments and assurances and take such further action as
Lender may from time to time reasonably request in order to carry out the intent
and purpose of the Loan Agreement and to establish and protect the rights and
remedies created or intended to be created in favor of Lender hereunder,
including without limitation, the
-10-
<PAGE>
SIEMENS
execution and delivery of any Uniform Commercial Code financing statements,
landlord and mortgagee waivers or other documents reasonably requested by
Lender; (g) furnish Lender with, and cause any guarantor of any of Borrower's
Obligations (herein "Guarantor) to furnish, its annual and such interim
financial statements as Lender shall request, certified and audited (if
available), together with officer's certificates, opinions of counsel,
resolutions and such other information and documents as Lender may reasonably
request;.(h) timely file any and all tax returns and tax filings required under
any governmental statute and pay and discharge, when due, all material
obligations to third parties, except those obligations being contested in good
faith, and for which Borrower shall have maintained, in accordance with
generally accepted accounting principles, adequate reserves for the payment of
the same; (i) notify Lender immediately upon receipt of notice of any lien,
attachment or judicial proceeding affecting the Equipment in whole or in part;
and (j) provide written notice to Lender thirty (30) days prior to any change in
the name or address of Borrower, its identity or corporate structure, social
security or taxpayer identification number as applicable, or discontinuance of
any of its places of business, and immediately upon any Default or event which,
with the lapse of time or giving of notice, would constitute a Default.
7. DISCLAIMER OF WARRANTIES; LIMITATION OF REMEDIES; LIMITATION OF LIABILITY:
THE LOAN AGREEMENT IS SOLELY A FINANCING AGREEMENT. BORROWER HAS SELECTED BOTH
THE EQUIPMENT AND THE SUPPLIER (AS IDENTIFIED IN THE LOAN SCHEDULE) OF THE
EQUIPMENT AND ACKNOWLEDGES THAT LENDER IS NOT THE SUPPLIER OF THE EQUIPMENT.
LENDER HAS NOT MADE, DOES NOT MAKE, AND HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS
OR IMPLIED, RELATING TO THE EQUIPMENT, INCLUDING ALL EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY AND WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE. IN NO EVENT SHALL LENDER BE LIABLE (INCLUDING WITHOUT LIMITATION, UNDER
ANY THEORY IN TORTS) FOR ANY LOSS OF USE, REVENUE, ANTICIPATED PROFITS OR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THE LOAN AGREEMENT OR THE USE, PERFORMANCE OR MAINTENANCE OF THE
EQUIPMENT.
Borrower agrees to settle all claims relating to the Equipment directly with the
manufacturer, Supplier or service company of the Equipment, as applicable, and
not with Lender.
8. RISK OF LOSS; INSURANCE: (a) Borrower agrees that it shall bear all risk of
loss, damage to or destruction of the Equipment. Borrower shall give Lender
prompt notice of any damage to or loss of the Equipment or of any occurrence
arising from the possession, use or operation of the Equipment resulting in
death or bodily injury, or damage to property. In the event of damage to any
item(s) of Equipment, Borrower shall immediately place such item(s) in good
repair (with no abatement of payments under the Loan Agreement or under the
Note), with the proceeds of any insurance recovery applied to the cost of such
repair. If, however, any item(s) of Equipment shall become lost, stolen,
destroyed, worn out, damaged beyond repair, condemned, confiscated, seized or
requisitioned (herein "Event of Loss"), Borrower shall, at the option of Lender,
either replace the same with like equipment in good repair (with no abatement of
payments under the Loan Agreement or under the Note), or pay to Lender on the
next scheduled payment date immediately following such Event of Loss, the
remaining unpaid principal balance of the Note, all accrued but unpaid interest
thereon, plus all other amounts due from Borrower under the Loan Agreement,
whereupon the Loan Agreement shall terminate.
(b) Until satisfaction by Borrower of the Obligations, Borrower, at its
expense, shall maintain comprehensive general liability insurance, and "fire and
allied perils" and "all risks" property insurance covering the Equipment (as
primary insurance for Borrower and Lender), both in such amounts as Lender shall
require, except that such property insurance shall be in an amount at least
equal to the remaining unpaid principal balance
-11-
<PAGE>
SIEMENS
of the Note, and such insurance shall be placed with carriers acceptable to
Lender. The liability insurance policy shall name Lender (and any assignee of
Lender) as additional insured(s) and the property insurance policy shall name
Lender (and any assignee of Lender) as loss payee(s) to the extent its
interest(s) may appear, and both policies shall provide that they may not be
canceled or altered without at least thirty (30) days prior written notice to
Lender (and any assignee of Lender). Borrower irrevocably appoints Lender its
agent and attorney-in-fact for the purpose of adjusting and settling any
property insurance hereunder and endorsing in Borrower's name any instruments or
payments received in respect thereof. Borrower shall furnish to Lender, prior to
the Loan Date, a certificate of insurance that such coverage is in effect,
however, Lender shall be under no duty either to ascertain the existence of or
to examine such insurance policies or to advise Borrower in the event that such
insurance coverage does not comply with the requirements hereof.
9. DEFAULT AND REMEDIES: (a) Any of the following shall constitute a default by
Borrower hereunder (herein "Default"): (i) failure by Borrower to pay any
amounts under the Loan Agreement or Note thereto when due and such remains
unremedied for a period of ten (10) days from the due date; or (ii) failure of
Borrower to comply with any provisions or perform any of its obligations arising
under the Loan Agreement or under any other documents or agreements related
hereto and such remains unremedied by Borrower for a period of twenty (20) days;
or (iii) any representations or warranties made or given by Borrower in
connection with the Loan Agreement or any other document or agreement related
hereto were false or misleading in a material way when made; or (iv) subjection
of the Equipment to levy or execution or other judicial process which is not or
cannot be removed within thirty (30) days from the subjection thereof; or the
imposition of any unauthorized lien on or transfer of the Equipment by or
through Borrower; or (v) commencement of any insolvency, bankruptcy or similar
proceedings by or against Borrower or any Guarantor, including any assignment by
Borrower or any Guarantor for the benefit of creditors, and in the case of any
such involuntary proceedings, such is not dismissed within thirty (30) days of
institution; or the inability of Borrower to generally pay its debts as they
become due; or a material adverse change from the date of the Master Agreement
in the financial condition or business operations of Borrower; or (vi) any act
of Borrower which imperils the value of the Equipment or the prospect of full
performance of the Obligations, including but not limited to the liquidation or
dissolution of Borrower or the commencement of any acts relative thereto, or
without the prior written consent of Lender, any sale or other disposition of
all or substantially all of the assets of Borrower, or any merger or
consolidation of Borrower unless Borrower is the surviving entity, or the
cessation of business by Borrower; or (vii) a default by Borrower under any Loan
Agreement or other agreement or note with Lender or any assignee of the Loan
Agreement and/or Note; or under any agreement with any other party that in
Lender's sole opinion is a material agreement; or (viii) the death or
dissolution of Borrower or of any Guarantor, the withdrawal of any partner if
Borrower is a partnership, or the inability of Borrower or of any Guarantor
hereunder to perform any of the obligations contained in the Loan Agreement or
in any applicable guaranty.
(b) Upon any Default, Lender may exercise any one or more of the following
remedies (which remedies shall be cumulative to the extent permitted by law):
(i) terminate any obligation by Lender to lend monies under the Loan Agreement
or under any other agreement related thereto; (ii) declare the remaining unpaid
principal balance of the Note, plus all accrued but unpaid interest thereon,
plus all other amounts due from Borrower under the Loan Agreement, immediately
due and payable in full without notice or demand, whereupon such shall become
immediately due and payable; (iii) secure peaceable repossession and removal of
the Equipment by Lender or its agent without judicial process; (iv) demand and
Borrower shall at its own risk and expense immediately return the Equipment to
Lender, packed for shipment in accordance with manufacturer's specifications and
eligible for manufacturer's maintenance, freight prepaid and insured, to such
location as Lender shall designate; (v) sell, lease or otherwise dispose of the
Equipment at public or private sale without advertisement or notice except that
required by law, upon such terms and at such place as Lender may deem advisable
and Lender may be the
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SIEMENS
purchaser at any such sale: (vi) demand and Borrower shall pay exercise all
expenses in connection with the Equipment relating to its retaking,
refurbishing, selling or the like: (vii) exercise any other right or remedy
which may be available to it under the Uniform Commercial Code or any other
applicable law. Any proceeds received from Borrower or net proceeds received
with respect to disposition of the Equipment, shall be applied by Lender to the
Obligations, in the order of application as Lender shall elect.
10. INDEMNIFICATION: Borrower hereby indemnifies and agrees to hold Lender, its
employees, officers, directors and agents harmless from and against any and all
losses, claims, suits, damages, expenses and liabilities (including negligence,
tort and strict liability), together with reasonable attorneys' fees, caused by,
arising from, or related to, the manufacture, purchase, ownership, maintenance,
modification, delivery, installation, possession, condition, use, acceptance,
rejection, operation, disposition or return of the Equipment.
11. NOTICES; CHANGES: Notices, requests or other communications required
hereunder to be sent to either party shall be in writing and shall be (a) by
United States first class mail, postage prepaid, and addressed to the other
party at the address set forth above (or to such other address as such party
shall have designated by proper notice) or (b) by personal delivery. Borrower
consents to service of process by certified mail at its address above (or to
such other address as Borrower shall have designated by proper notice) in
connection with any legal action brought by Lender. Borrower authorizes Lender
to fill in descriptive material in the Loan Agreement (including serial numbers)
and to correct any patent errors in the Loan Agreement or the Note.
12. MISCELLANEOUS: THE LOAN AGREEMENT AND NOTE CONTAIN THE COMPLETE AGREEMENT OF
THE PARTIES WITH RESPECT TO ITS SUBJECT MATTER AND SUPERSEDE AND REPLACE ANY
PREVIOUSLY MADE PROPOSALS, REPRESENTATIONS, WARRANTIES OR AGREEMENTS. LENDER MAY
ASSIGN OR TRANSFER THE LOAN AGREEMENT, THE NOTE AND/OR LENDER'S INTEREST IN THE
EQUIPMENT WITHOUT NOTICE TO
BORROWER. Any assignee of Lender shall have all of the rights but none of the
obligations of Lender under the Loan Agreement and Note, and BORROWER AGREES
THAT IT WILL NOT ASSERT AGAINST ANY ASSIGNEE OF LENDER ANY DEFENSE, COUNTERCLAIM
OR OFFSET THAT BORROWER MAY HAVE AGAINST LENDER. BORROWER SHALL NOT ASSIGN OR IN
ANY WAY DISPOSE OF ALL OR ANY PART OF THE EQUIPMENT OR ITS RIGHTS OR OBLIGATIONS
UNDER THE LOAN AGREEMENT AND THE NOTE WITHOUT THE PRIOR WRITTEN CONSENT OF
LENDER. The Loan Agreement and the Note shall be binding upon and inure to the
benefit of the parties hereto, their legal representatives, permitted successors
and assigns. THE PARTIES HERETO WAIVE ALL RIGHTS TO A JURY TRIAL IN ANY
LITIGATION ARISING FROM OR RELATED IN ANY WAY TO THE LOAN AGREEMENT, NOTE OR THE
TRANSACTION CONTEMPLATED HEREBY. No amendment under the Loan Agreement shall be
effective unless in writing signed by the parties hereto and no waiver under the
Loan Agreement shall be effective unless in writing, signed by the party to be
charged. No failure to exercise, no delay in exercising, and no single or
partial exercise on the part of Lender of any right, remedy, or power under the
Loan Agreement, shall operate as a waiver thereof or preclude Lender from
exercising any other right, remedy or power under the Loan Agreement. Any
provision of the Loan Agreement or the Note which is unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability, without invalidating the remaining
provisions of the Loan Agreement or of the Note. The Loan Agreement, the Note
and all related documents, including (a) amendments, addenda, consents, waivers
and modifications which may be executed contemporaneously or subsequently
herewith, (b) documents received by Lender from Borrower, and (c) financial
statements, certificates and other information previously or subsequently
furnished to Lender, may be reproduced by Lender by any photographic,
photostatic, microfilm, micro-card, miniature photographic, compact disk
reproduction or other similar process and Lender may destroy any original
document so reproduced.
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Borrower waives all right to object to the admissibility of such reproduction
and stipulates that any such reproduction shall, to the extent permitted by law,
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original itself is in existence
and whether or not the reproduction was made by Lender in the regular course of
business) and that any enlargement, facsimile or further reproduction of the
reproduction shall likewise be admissible in evidence. No action regardless of
form arising out of the Loan Agreement or the Note may be brought by Borrower
more than two (2) years after the cause of action has accrued. The
representations, warranties, obligations and indemnities of the Borrower under
the Loan Agreement shall survive the termination of the Loan Agreement to the
extent required for their full observance and performance. The obligations of
each co-maker (if any) of the Loan Agreement or the Note shall be primary, joint
and several. In the event Borrower fails to meet any obligations of it
hereunder. Lender may at its option satisfy such obligation and Borrower shall
reimburse Lender on demand therefore. In the event that legal or other action is
required to enforce Lender's rights under the Loan Agreement or under the Note
(including but not limited to the exercise of remedies hereunder). Borrower
agrees to reimburse Lender on demand for its reasonable attorneys' fees and its
other related costs and expenses. Notwithstanding any applicable state laws to
the contrary, Borrower agrees to reimburse Lender for all reasonable attorneys'
fees incurred by it incident to any action or proceeding involving the Borrower
brought pursuant to the Bankruptcy Code, as amended, which are allowable under
Section 506(b) thereof. The captions in the Loan Agreement are for convenience
only and shall not define or limit any of the same therein. THE LOAN AGREEMENT
SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
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SIEMENS
SIEMENS SIEMENS CREDIT CORPORATION
PROMISSORY NOTE #: 1
TO LOAN SCHEDULE #: 759-0001448-000
TO MASTER LOAN AND SECURITY AGREEMENT DATED: May 5,1999
- --------------------------------------------------------------------------------
U.S. $3000,000.00 PROMISSORY NOTE
(Date of Note) ---------------
BRIDGEWATER, NEW JERSEY
-------------------------
The undersigned, organized and validly existing under the laws of its state of
organization, for value received, hereby unconditionally promises to pay to the
order of SIEMENS CREDIT CORPORATION (the "Payee") at 991 U.S. Highway 22,
Bridgewater, NJ 08807-2956 in lawful money of the United States of America and
in immediately available funds, the principal amount of U.S. Three hundred
Thousand Dollars, with interest (based on a year of 360 days and 30 day months)
at a per annum rate of Eight and Forty Seven Hundredths percent ( 8.47%) on the
principal amount hereof remaining from time to time unpaid, such principal and
interest to be paid in consecutive monthly installments of $9,465.00 each,
beginning on the first day of the month following execution of this document and
on the same day of each consecutive month thereafter until fully paid. A copy of
the Loan amortization schedule is attached hereto as Exhibit A and made a part
hereof.
This Note evidences a Loan by the Payee to the undersigned pursuant to the Loan
Schedule indicated above (as incorporating the terms of the Master Agreement
above) between the undersigned and the Payee (the "Loan Agreement") as from time
to time may be amended, restated, replaced, supplemented, substituted for or
renewed, and the holder of this Note is entitled to the benefits thereof,
including without limitation, the security interest in the Equipment granted
therein. Capitalized terms used herein and not otherwise defined herein shall
have the same meaning as in the Loan Agreement.
The principal hereof and accrued interest hereon shall become forthwith due and
payable as provided in the Loan Agreement. Payments hereunder not made when due
shall accrue late charges as provided in the Loan Agreement.
This Note may not be prepaid in whole or in part.
All payments made pursuant to the terms of this Note shall be made free and
clear of, and without deduction for, withholding, setoff or counterclaim of any
kind.
The undersigned hereby promises to pay all costs and expenses, including but not
limited to reasonable attorneys' fees which may be incurred in connection with
the enforcement and/or collection of this Note.
Neither the failure on the part of the holder of this Note in exercising any
right or remedy nor any single or partial exercise or the exercise of any other
right or remedy shall operate as any waiver. No amendment hereunder shall be
effective unless in writing signed by the undersigned and holder of this Note
and no waiver hereunder shall be effective unless in writing, signed by the
party to be charged. The undersigned hereby waives demand for payment,
presentment, protest and notice of any kind in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby consents
to any extensions of time, renewals, releases of any party to this Note, waivers
or modifications that may be granted or consented to by the holder of this Note
in respect of the time of payment or any other matter.
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Anything in this Note to the contrary notwithstanding, in the event that any
payment of interest hereunder shall exceed the legal limit, such amount in
excess of such limit shall be deemed a payment of principal hereunder.
The undersigned authorizes the Payee to insert above as the date of the Note,
the date on which the Payee disburses funds pursuant to the Loan Agreement.
THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW JERSEY, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICT OF LAWS THEREOF.
MAKER WAIVES ALL RIGHTS TO A JURY TRIAL IN ANY LITIGATION ARISING FROM OR
RELATED IN ANY WAY TO THIS NOTE OR THE TRANSACTION CONTEMPLATED HEREBY.
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by its
authorized representative, who certifies that (s)he has all necessary authority
on behalf of the undersigned to execute this Note and bind it to the terms
hereof.
ION Networks, Inc.
(Exact Legal Name of Borrower)
BY: /s/ Steve Gray
-------------------------------
(Authorized Signature)
NAME: Steve Gray
------------------------------
(Printed or Typed)
TITLE: President
------------------------------
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<PAGE>
SIEMENS
SIEMENS SIEMENS CREDIT CORPORATION
LOAN SCHEDULE
#:759-0001448-000
LENDER: SIEMENS CREDIT CORPORATION BORROWER: ION NETWORKS, INC.
991 U.S. Highway 22 -------------------------
Bridgewater, NJ 08807-2956 (herein "Borrower")
(800) 327-4443 21 Meridian Road
-------------------------
(Address)
Edison, NJ 08820
-------------------------
(City, State, Zip)
LOAN SCHEDULE #759-0001448-000, to that certain Master Loan and Security
Agreement dated May 5, 1999 (herein "Master Agreement"), between Lender and
Borrower.
1. EQUIPMENT DESCRIPTION (including related items): Computer Hardware and
Software Equipment; and Office Furniture as described in the attached
Sheets and a right to use license for any software related thereto and
related documentation.
2. SUPPLIER: ION NETWORKS
$275,065.25 Equipment
24,934.75 Office Furniture
3. LOAN AMOUNT: $ 300,000.00 Total Loan Amount
----------------------------
4. ORIGINAL EQUIPMENT LOCATION (if different from Borrowees address above):
(CONTINUED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have duly executed the Loan Agreement as
of the dates set forth below. The Loan Agreement shall become effective at the
time of Lender's acceptance (by execution hereof) at the address set forth
above, by an authorized representative of Lender and, for all purposes hereof,
the date of the Loan Agreement shall be the date of Lender's acceptance as set
forth below. BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR THE SUPPLIER IS AN
AGENT OR REPRESENTATIVE OF THE OTHER AND NEITHER HAS AUTHORITY TO BIND THE
OTHER.
BY EXECUTION HEREOF, THE SIGNER
CERTIFIES THAT (S)HE HAS READ THE
ENTIRE LOAN AGREEMENT, THAT LENDER
OR ITS REPRESENTATIVES HAVE MADE NO
AGREEMENTS OR REPRESENTATIONS EXCEPT
AS SET FORTH HEREIN, IN THE MASTER
AGREEMENT, OR NOTE, AND THAT (S)HE
IS DULY AUTHORIZED TO EXECUTE THE
LOAN AGREEMENT ON BEHALF OF
BORROWER.
ACCEPTED BY:
SIEMENS CREDIT CORPORATION ION NETWORKS, INC.
------------------------------------
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BY: /s/ John Unkles BY: /s/ Steve Gray
---------------------------- --------------------------
(Authorized Signature) (Authorized Signature)
NAME: John Unkles NAME: Steve Gray
--------------------------- --------------------------
(Printed or Typed) (Printed or Typed)
TITLE: Credit Mgr. TITLE: President
--------------------------- --------------------------
(Printed or Typed) (Printed or Typed)
DATE: 5/7/99 DATE: 5/5/99
--------------------------- --------------------------
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5. DEFINITIONS: Capitalized terms herein, which are not otherwise defined
herein, shall have the same meanings set forth in the Master Agreement.
6. TERMS OF SCHEDULE: Lender and Borrower agree that the terms and conditions of
the Master Agreement are hereby incorporated into this Loan Schedule
(collectively the "Loan Agreement) and made a part hereof to the same extent as
if such terms and conditions were set forth in full herein. The Loan Agreement
shall constitute a secured financing with respect to each item of Equipment
described above. THIS LOAN SCHEDULE, AS INCORPORATING THE TERMS OF THE MASTER
AGREEMENT, (ALONG WITH THE NOTE), CONTAINS THE COMPLETE AGREEMENT OF THE PARTIES
WITH RESPECT TO ITS SUBJECT MATTER AND SUPERSEDES AND REPLACES ANY PREVIOUSLY
MADE PROPOSALS, REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
7. AMENDMENTS: Any amendments to or incorporated into this Loan Schedule, which
in any way alter the terms of the Master Agreement, shall be effective only with
respect to this Loan Schedule and shall be ineffective with respect to any other
Loan Schedule.
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SIEMENS Siemens Credit Corporation
MASTER EQUIPMENT LEASE AGREEMENT
DATED: June 10,1999
- --------------------------------------------------------------------------------
LESSOR: SIEMENS CREDIT CORPORATION LESSEE: ION Networks, Inc.
991 US Highway 22 ----------------------
Bridgewater, NJ 08807-2956 (herein "Lessee")
(800) 327-4443 21 Meridian Road
-----------------------
(Address)
Edison, NJ 08820
-----------------------
City, State, Zip)
TERMS AND CONDITIONS OF AGREEMENT
1. MASTER LEASE: This master Equipment Lease Agreement (herein "Agreement") sets
forth the basic terms and conditions upon which Lessor shall lease to Lessee and
Lessee shall lease from Lessor items of property specified in leasing schedules
(herein "Leasing Schedules") to be entered into from time to time. Each Leasing
Schedule shall incorporate the terms and conditions of the Agreement and shall
constitute a lease as to the property specified in such Leasing Schedule (herein
"Equipment"). The term "Lease" as used in the Agreement shall mean the
applicable Leasing Schedule as incorporating the terms and conditions of the
Agreement. The Agreement shall become effective at the time of Lessor's
acceptance (by execution hereof at its New Jersey address set forth above, by an
authorized representative of Lessor.
2. TERM AND LEASE PAYMENTS: The lease term of the Equipment shall be for the
period specified in the Leasing Schedule (herein "Lease Term"). The Lease Term
shall commence upon the commencement date specified in the Leasing Schedule
(herein "Commencement Date") and thereupon Lessee, upon request by Lessor,
agrees to execute and deliver to Lessor a delivery and acceptance certificate in
the form supplied by Lessor. For the Lease Term, Lessee agrees to pay to Lessor
the number of lease payments specified in the Leasing Schedule, each in the
amount specified in the Leasing Schedule (herein "Lease Payments") for the
payment periods specified in the Leasing Schedule (herein "Payment Periods"),
including any Advance Lease Payments specified in the Leasing Schedule, with the
first Lease Payment being due on the Commencement Date (or if "Interim Rent" is
applicable as indicated on the Leasing Schedule, then on the first day of the
month immediately following the Commencement Date ("First Regular Payment
Date")), and the remaining Lease Payments on the same day of each consecutive
Payment Period thereafter for the duration of the Lease Term. If Interim Rent is
applicable, in addition to the foregoing, for the period from the Commencement
Date to the First Regular Payment Date ("Interim Period"), Lessee shall pay to
Lessor Rent in the amount set forth in the Leasing Schedule and such amount
shall be due and payable on the tenth day following the Commencement Date (and
the Stipulated Loss Value Schedule to the Lease, if any, shall be construed so
that the column tided "Month of Lease Term" shall mean - month of Lease Term
beginning with the First Regular Payment Date, except that month "1" shall also
include the Interim Period). Any Advance Lease Payments (unless otherwise
specified in the Leasing Schedule) will be applied upon the effective date of
the Lease to the first regular Lease Payment, then to the remaining Lease
Payments in reverse order. Lessee agrees to pay on demand, as a late charge,
1.3% per month, limited by the maximum rate permitted by law, on all overdue
amounts (including accelerated balances) under the Lease, whether such amounts
are due prior to or after a Default (as hereinafter defined). All payments
provided for in the Lease shall be payable at the office of Lessor set forth
above, or at any other place designated by Lessor. The Lease is a net lease and
Lessee shall not be entitled to any abatement of, reduction of, or setoff
against Lease Payments for any reason whatsoever. The Lease may not be
terminated or canceled for any reason whatsoever, except as expressly provided
in the Lease. No amounts under the Lease may be prepaid.
(CONTINUED ON FOLLOWING PAGES)
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IN WITNESS WHEREOF, the parties hereto have duly executed the Agreement as set
forth below. Lessee acknowledges that no amendment to any Leasing Schedule or
the Agreement shall be effective unless in writing signed by the parties hereto.
BY EXECUTION HEREOF, THE SIGNER CERTIFIES
THAT (S)HE HAS READ THE ENTIRE AGREEMENT,
THAT LESSOR OR ITS REPRESENTATIVES HAVE MADE
NO AGREEMENTS OR REPRESENTATIONS EXCEPT AS
SET FORTH HEREIN OR IN THE LEASING SCHEDULE
AND THAT (S)HE IS DULY AUTHORIZED TO EXECUTE
THE AGREEMENT ON BEHALF OF LESSEE ACCEPTED
BY:
LESSOR: LESSEE:
SIEMENS CREDIT CORPORATION ION NETWORKS, INC.
BY: BY: /s/ Mark A. Simmons
------------------------ -------------------------
(Authorized Signature) (Authorized Signature)
NAME: NAME: Mark A. Simmons
------------------------ -------------------------
(Printed or Typed) (Printed or Typed)
TITLE: TITLE: Chief Financial Officer
------------------------ --------------------------
(Printed or Typed) (Printed or Typed)
DATE: DATE: 6/17/99
------------------------ --------------------------
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3. DISCLAIMER OF WARRANTIES; LIMITATION OF REMEDY; LIMITATION OF LIABILITY:
Lessee has selected both the Equipment and the supplier (identified in the
Leasing Schedule, herein "Supplier") from whom at Lessee's request Lessor agrees
to purchase the Equipment. LESSEE ACKNOWLEDGES THAT LESSOR HAS NO SPECIAL
FAMILIARITY OR EXPERTISE WITH RESPECT TO THE EQUIPMENT. LESSEE AGREES THAT THE
EQUIPMENT LEASED UNDER THE LEASE IS LEASED "AS IS", AND IS OF A SIZE, DESIGN AND
CAPACITY SELECTED BY LESSEE AND THAT LESSEE IS SATISFIED THAT THE SAME IS
SUITABLE FOR LESSEE'S PURPOSES, AND THAT EXCEPT AS MAY OTHERWISE BE SPECIFICALLY
PROVIDED HEREIN OR IN THE LEASING SCHEDULE, LESSOR HAS MADE NO REPRESENTATION OR
WARRANTY AS TO ANY MATTER WHATSOEVER. LESSOR DISCLAIMS, AND LESSEE HEREBY
EXPRESSLY WAIVES AS TO LESSOR, ALL WARRANTIES WITH RESPECT TO THE EQUIPMENT
INCLUDING BUT NOT LIMITED TO ALL EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, QUALITY, CAPACITY, OR
WORKMANSHIP, ALL EXPRESS OR IMPLIED WARRANTIES AGAINST PATENT INFRINGEMENTS OR
DEFECTS, WHETHER HIDDEN OR APPARENT, AND ALL EXPRESS OR IMPLIED WARRANTIES WITH
RESPECT TO COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENTS OF ANY LAW,
REGULATION, SPECIFICATION OR CONTRACT RELATIVE THERETO. IN NO EVENT SHALL LESSOR
BE LIABLE (INCLUDING WITHOUT LIMITATION, UNDER ANY THEORY IN TORTS) FOR ANY LOSS
OF USE, REVENUE, ANTICIPATED PROFITS OR SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE LEASE OR THE USE,
PERFORMANCE OR MAINTENANCE OF THE EQUIPMENT. If the Equipment is, not properly
installed, does not operate as represented or warranted by the Supplier,
manufacturer and/or service company or is unsatisfactory for any reason, Lessee
shall make any claim on account thereof solely against the Supplier,
manufacturer and/or service company and shall, nevertheless, pay Lessor all
amounts payable under the Lease and shall not set up against Lessee's
obligations any such claims as a defense, counterclaim, deduction, setoff or
otherwise. For the Lease Term, for so long as no Default (as hereinafter
defined) has occurred and is continuing, Lessor assigns to Lessee (to the extent
permitted by law) any right Lessor may have against the Supplier (under a
"Supply Contract", as defined in the Leasing Schedule), manufacturer and/or
service company to enforce, at Lessee's expense (if any), any product warranties
with respect to the Equipment, provided however, that Lessee shall indemnify and
defend Lessor from and against all claims, expenses, damages, losses and
liabilities incurred or suffered by Lessor in connection with any such action
taken. TO THE EXTENT PERMITTED BY LAW, LESSEE HEREBY WAIVES ANY AND ALL RIGHTS
AND REMEDIES LESSEE MAY HAVE UNDER ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE.
4. TITLE; IDENTIFICATION; PERSONAL PROPERTY: Lessee acknowledges that subject to
the provisions of Section 12 of the Leasing Schedule, title to the Equipment
shall at all times be vested in Lessor, and no right, title or interest in the
Equipment shall pass to Lessee other than, conditioned upon Lessee's compliance
with and fulfillment of the terms and conditions of the Lease, the right to
possess and use the Equipment for the full Lease Term. Lessee agrees not to
sell, assign, sublet, pledge, or otherwise encumber any interest in the Lease or
the Equipment and agrees to keep the same free from any lien, encumbrance, right
of distraint or any other claim which may be asserted by any third party. Lessee
shall immediately notify Lessor in writing of any tax or other liens attaching
to the Equipment. Lessor may require plates or markings to be affixed to or
placed on the Equipment indicating Lessor's interest. Lessor and Lessee hereby
confirm their intent that the Equipment always remain and be deemed personal
property even though the Equipment may hereafter become attached or affixed to
realty. Lessee shall obtain all such waivers as Lessor may reasonably require to
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acknowledge Lessors title to and assure Lessor's right to remove the Equipment,
including any landlord and mortgagee waivers.
5. PAYMENT OF TAXES; GENERAL INDEMNIFICATION: Lessee shall pay promptly to
Lessor when due, all taxes, fees and assessments, including but not limited to,
all license and registration fees, sales, use, property, gross receipts, excise,
transaction, ad valorem, privilege, intangible, stamp or other taxes or charges,
together with any fines, penalties or interest thereon (unless such fines,
penalties or interest arise solely from Lessor's gross negligence or willful
misconduct) now or hereafter imposed by any governmental body, upon or with
respect to, any of the Equipment or the use, possession, ownership, leasing,
operation, delivery or return thereof (excluding, however, franchise taxes and
any taxes based on the net income of Lessor). Any fees, taxes or other amounts
paid by Lessor upon failure of Lessee to make such payments set forth in this
Section 5 shall be payable upon demand from Lessee to Lessor. Lessee agrees to
indemnify and hold Lessor harmless from and against any and all claims, losses,
damages, penalties, actions, suits and liabilities (including negligence, tort
and strict liability), together with all reasonable legal costs and expenses in
connection therewith incurred by Lessor which result from, or relate to, the
manufacture, purchase, ownership, maintenance, modification, delivery,
installation, possession. condition, use, acceptance, rejection, operation or
return of the Equipment.
6. INSTALLATION AND DELIVERY: Lessee shall provide a suitable installation
environment for the Equipment as specified in the applicable manufacturer's or
Supplier's manuals, and except as otherwise specified by the manufacturer or
Supplier, furnish all labor required for unpacking and placing each item of
Equipment in the desired location. Lessee shall also be responsible for any
delivery, rigging, destination and installation charges charged by the
manufacturer or Supplier with respect to the Equipment.
7. OPERATION; USE; INSPECTION: For the full Lease Term, Lessee shall operate the
Equipment in accordance with all applicable manufacturer and Supplier manuals or
instructions by fully qualified and duly authorized personnel only, in
accordance with all applicable laws and regulations. For said Lease Term, Lessee
shall properly maintain the Equipment, or cause it to be properly maintained, by
a fully qualified service company, and shall immediately notify Lessor in
writing of the entity maintaining the Equipment and of any change of such
entity. Such maintenance shall be performed in accordance with all requirements
necessary to enforce all product warranty rights. All operating and maintenance
costs with respect to the Equipment shall be borne by Lessee. Lessee shall not:
(a) use, operate or locate the Equipment in any manner or area so as to cause it
to be excluded from coverage by any insurance required under the Lease; (b)
abandon the Equipment or, without prior written notice to Lessor, take the
Equipment out of use; (c) alter the Equipment; (d) permit the Equipment to be
removed from the equipment location specified in the Leasing Schedule (herein
"Equipment Location"), or any subsequent location, without the prior written
consent of Lessor, which consent shall not be unreasonably withheld or (e)
without the prior written consent of Lessor, affix or install any accessory,
equipment or device on any item of Equipment if such (i) is not readily
removable, or (ii) will impair the value or the originally intended function or
use of such Equipment. All additions, repairs, parts, accessories, equipment and
devices attached or affixed to any item of Equipment which are not readily
removable, shall become the property of Lessor and part of the Equipment for all
purposes hereof. Lessor shall have the right from time to time during normal
business hours to enter upon the Equipment Location or elsewhere for the purpose
of confirming the existence, condition or proper maintenance of the Equipment.
8. RISK OF LOSS; INSURANCE: (a) Lessee agrees that it shall bear all risk of
loss, damage to or destruction of the Equipment. Lessee shall give Lessor prompt
notice of any damage to or loss of any Equipment or of any occurrence arising
from the possession, use or operation of the Equipment resulting in death or
bodily injury, or damage to property. In the event of damage to any item(s) of
Equipment, Lessee shall immediately
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place such item(s) in good repair (with no abatement of Lease Payments), with
the proceeds of any insurance recovery applied to the cost of such repair.
Should any item(s) of Equipment become ; lost, stolen, destroyed, worn out,
damaged beyond repair, condemned, confiscated, seized or requisitioned (herein
"Event of Loss"), Lessee shall, at the option of Lessor, either (i) replace the
same with like equipment in good repair (with no abatement of Lease Payments),
or (ii) in the event Option A of Section 12 of the applicable Leasing Schedule
has been selected ("Option A"), pay to Lessor on the lease payment date
immediately following such Event of Loss (herein "Loss Payment Date"), the pro
rata portion relating to such item(s) of the greater of (A) the Fair Market
Value (as defined in Option A) of the Equipment calculated as of the lease
payment date immediately prior to such Event of Loss, or (B) the stipulated loss
value of the Equipment as set forth in the schedule to the Lease and made a part
thereof ("Stipulated Loss Value") calculated for the Payment Period immediately
preceding the Loss Payment Date, plus all Lease and other payments due but
unpaid as of the day immediately preceding the Loss Payment Date relating to
such item(s), whereupon the Lease shall terminate as to such item(s) and Lessor
shall adjust the remaining Lease Payments and Stipulated Loss Value Schedule
accordingly, or if Option B or Option C of Section 12 of the applicable Leasing
Schedule has been selected ("Option B" or "Option C", as applicable), pay to
Lessor on the lease payment date immediately following such Event of Loss, the
pro rata portion relating to such item(s) of the sum of (A) the remaining Lease
Payments for the balance of the Lease Term and (B) the purchase option price
specified in Option B or Option C, as applicable (herein "Purchase Option
Price"), such sum discounted at the per annum rate implicit in the Lease
assuming exercise by Lessee of such purchase option (herein"Lease Rate"), plus
any other payments due from Lessee to Lessor with respect to such item(s),
whereupon the Lease shall terminate as to such item(s) and Lessor shall adjust
the remaining Lease Payments and Purchase Option Price accordingly.
(b) For the full Lease Term, Lessee, at its expense, shall maintain
comprehensive general liability insurance, and "fire and allied perils" and "all
risks" property insurance with respect to the Equipment (as primary insurance
for Lessee and Lessor), both in such amounts as Lessor shall require, except
that such property insurance shall be in an amount at least equal to the full
replacement value of the Equipment or, if Option A was selected, the applicable
Stipulated Loss Value thereof, if greater: and such insurance shall be placed
with carriers acceptable to Lessor. The liability insurance policy shall name
Lessor as additional insured and the property insurance policy shall name Lessor
as loss payee to the extent its interest may appear, and both policies shall
provide that they may not be canceled or altered without at least thirty (30)
days prior written notice to Lessor. Lessee irrevocably appoints Lessor its
agent and attorney-in-fact for the purpose of adjusting and settling any
property insurance hereunder and endorsing in Lessee's name any instruments or
payments received in respect thereof. Lessee shall furnish to Lessor within
thirty (30) days (or sooner if requested by Lessor) of delivery of the
Equipment, a certificate of insurance that such coverage is in effect, however,
Lessor shall be under no duty either to ascertain the existence of or to examine
such insurance policies or to advise Lessee in the event that such insurance
coverage does not comply with the requirements hereof. If Lessee fails to
provide Lessor appropriate evidence of property insurance as required hereunder,
Lessor shall have the right, but not the obligation, to obtain property
insurance covering its interest in the Equipment from an insurer of its choice
("Insurer"), including an affiliate. Lessor may add the costs of acquiring and
maintaining such insurance and fees for its services in placing and maintaining
such insurance (collectively, "Insurance Charge") to the amounts due from Lessee
under the Lease. Lessee shall pay such Insurance Charge in equal installments
allocated to the remaining Lease Payments (plus interest on such allocation at
1.3% per month). In the event that Lessor purchases such insurance, Lessee shall
cooperate with Lessor's insurance agent with respect to the placement of
insurance and the processing of claims. Nothing in the Lease shall create an
insurance relationship of any type between Lessor (including its Insurer and
agents), and Lessee. Lessee acknowledges that Lessor is not required to secure
or maintain any such insurance, and Lessor shall have no liability to Lessee if
Lessor terminates any insurance coverage arranged hereunder. If
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Lessor replaces or renews any such insurance coverage, Lessor shall not be
obligated to provide replacement or renewal coverage under the same terms,
costs, limits, or conditions as previously in affect.
9. DEFAULT AND REMEDIES: (a) Any of the following shall constitute a default by
Lessee under the Lease (herein "Default"): (i) failure by Lessee to pay any
amounts under the Lease when due and such remains unremedied for a period of ten
(10) days from the due date; or (ii) failure by Lessee to comply with any
provisions or perform any of its obligations arising under the Lease or under
any other documents or agreements relating to the Lease, and such remains
unremedied by Lessee for a period of twenty (20) days; or (iii) any
representations or warranties made or given by Lessee in connection with the
Lease or the Agreement, or any other document or agreement relating to the Lease
or the Agreement, were false or misleading in a material way when made; or (iv)
subjection of the Equipment to levy or execution or other judicial process which
is not or cannot be removed within thirty (30) days from the subjection thereof;
or the imposition of any unauthorized lien on or transfer of the Equipment by or
through Lessee; or (v) commencement of any insolvency, bankruptcy or similar
proceedings by or against Lessee or any guarantor of any of Lessee's obligations
under the Lease (herein "Guarantee"), including any assignment by Lessee or any
Guarantor for the benefit of creditors, and in the case of any such involuntary
proceedings, such is not dismissed within (30) days of institution; or the
inability of Lessee to generally pay its debt as they become due; or (vi) any
material adverse change from the date of the Leasing Schedule in Lessee's or
Guarantor's business operations or financial condition, or any act of Lessee
which imperils the value of the Equipment or the prospect of full performance of
Lessee's obligations under the Lease, including but not limited to the
liquidation or dissolution of Lessee or the commencement of any acts relative
thereto, or without the prior written consent of Lessor, any sale or other
disposition of all or substantially all of the assets of Lessee, or any merger
or consolidation of Lessee unless Lessee is the surviving entity and Lessee's
tangible net worth, after giving effect to such transaction. equals or exceeds
that which existed prior thereto, or the cessation of business by Lessee; or
(vii) a default by Lessee under any Lease or other agreement or note with
Lessor, or with any assignee of the Lease; or under any agreement with any other
party that in Lessor's sole opinion is a material agreement; or (viii) the death
or dissolution of Lessee or of any Guarantor, the withdrawal of any partner of
Lessee if Lessee is a partnership, or the inability of Lessee or of any
Guarantor of the Lease to perform any of the obligations contained in the Lease
or in any applicable guaranty.
(b) Upon any Default, Lessor may exercise any one or more of the following
remedies (which remedies shall be cumulative to the extent permitted by law):
(i) terminate the Lease; (ii) secure peaceable repossession and removal of the
Equipment by Lessor or its agent without judicial process; (iii) demand and
Lessee shall return the Equipment to Lessor in accordance with Section 11
hereof; (iv) sell, lease or otherwise dispose of the Equipment at public or
private sale without advertisement or notice except that required by law, upon
such terms and at such place as Lessor may deem advisable, and Lessor may be the
purchaser at any such sale; (v) demand and Lessee shall pay all expenses in
connection with the Equipment relating to its retaking, refurbishing, selling,
leasing or the like; (vi) exercise any other right or remedy which may be
available to it under the Uniform Commercial Code or any other applicable law.
To the extent permitted by applicable law, Lessee waives all rights it may have
to limit or modify any of Lessor's rights and remedies hereunder, including but
not limited to, any right of Lessee to require Lessor to dispose of the
Equipment or otherwise mitigate its damages hereunder.
(c) If Option A has been selected, Lessor may exercise one or more of the
following remedies in addition to the remedies set forth in Section 9 (b) above
(which remedies shall be cumulative to the extent permitted by law): (i) by
notice to Lessee declare the Stipulated Loss Value of the Equipment calculated
for the Payment Period immediately following the date of such notice (herein
"Calculation Date") immediately due and payable, together with (A) all due but
unpaid Lease Payments from the commencement of the Lease Term through the day
prior to the Calculation Date, and (B) all other amounts due under the Lease
(including late charges), whereupon such
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shall become immediately due and payable; (ii) declare all remaining Lease
Payments for the balance of the Lease Term discounted at a per annum rate of six
percent (6%), plus all other due and unpaid Lease Payments and all other amounts
due from Lessee hereunder, immediately due and payable in full, whereupon such
shall become immediately due and payable.
(d) If Option B or Option C has been selected, (i) Lessor, in addition to the
remedies set forth in Section 9(b) above, may exercise the following remedy
(which remedies shall be cumulative to the extent permitted by law): Lessor may
declare all remaining Lease Payments for the balance of the Lease Term
discounted at the Lease Rate, plus all other due but unpaid Lease Payments and
all other amounts due from Lessee, immediately due and payable in full,
whereupon such shall become immediately due and payable: (ii) in the event that
Lessor disposes of the Equipment, Lessee shall be liable for any deficiency
remaining after such disposition and application of the resulting net proceeds,
less the Purchase Option Price discounted at the Lease Rate, to Lessee's
obligations under the Lease in the order of application as Lessor shall elect.
10. QUIET ENJOYMENT: So long as no Default exists, Lessor (and any Assignee
shall be deemed to have warranted that it) shall not interfere with Lessee's
quiet enjoyment of the Equipment.
11. RETURN OF EQUIPMENT; EXTENSION OF TERM: Upon demand of Lessor pursuant to
Section 9 hereof, or unless Lessee purchases the Equipment pursuant to Option A
or Option B, Lessee, at its own risk and expense, shall at the end of the term,
immediately return the Equipment to Lessor, de-installed and packed for shipment
(by Supplier or a qualified service company) in accordance with manufacturer's
specifications, in good working order and eligible for manufacturer's
maintenance (if available), freight prepaid and insured, to such location within
the continental United States as Lessor shall designate. Should Lessee fail to
provide timely notice of exercise as provided in Option A or Option B or return
the Equipment to Lessor in the time and manner provided above, the Lease Term
shall be extended for successive 90 day periods until Lessee returns the
Equipment to Lessor in accordance herewith, or Lessor terminates the Lease by 10
days written notice to Lessee. In the event the Lease is extended pursuant to
the preceding sentence, the periodic Lease Payments and the Stipulated Loss
Value (if any) in effect prior to the expiration of the Lease Term, and all
other provisions of the Lease, shall continue to apply.
12. LESSEE REPRESENTATIONS AND COVENANTS: Lessee represents: (a) it is duly
organized and validly existing under the laws of its state of organization; (b)
by consummation of the Lease transaction, Lessee is not in violation of any
governmental statute or regulation, nor will consummation of the Lease
transaction cause any breach, default or violation of the organizational or
charter documents or any judgment, decree or agreement, all as may apply to
Lessee; (c) the Lease transaction was duly authorized by all appropriate action
by Lessee; (d) Lessee shall furnish Lessor with (and cause any Guarantor to
furnish) its annual and such interim financial statements as Lessor shall
request, certified and audited (if available), together with officer's
certificates, opinions of counsel, resolutions and such other information and
documents as Lessor may reasonably request; (e) financial statements and other
related financial information furnished by Lessee upon Lessor's request shall be
prepared in accordance with generally accepted accounting principles
consistently applied and in all material respects shall accurately present
Lessee's financial position and results of its operations as of the dates given
on such statements; (f) the Lease and all other related instruments or documents
hereunder are enforceable in accordance with their terms, shall be effective
against all creditors of Lessee under applicable law, including fraudulent
conveyance and bulk transfer laws, and shall raise no presumption of fraud: (g)
there are no pending or threatened actions or proceedings before any court,
administrative agency or other dispute resolution forum that could have a
material adverse effect on, Lessee or any document hereunder, unless such
actions are disclosed to Lessor and consented to in writing by Lessor, (h) all
Equipment is leased for business purposes only, and not
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for personal, family or household purposes, and only for its normally intended
purpose; and (i) all Equipment is and shall at all times be and remain tangible
personal property and shall not become a fixture or real property. Lessee shall
promptly execute and deliver to Lessor such further documents and take such
further action as Lessor may reasonably request in order to more effectively
carry out the intent and purpose of the Lease.
13. NOTICES; CHANGES; FILINGS: Notices, requests or other communications
required under the Lease to be sent to either party shall be in writing and
shall be (a) by United States first class mail, postage prepaid, and addressed
to the other party at the address specified above (or to such other address as
such party shall have designated by proper notice) or (b) by personal delivery.
Lessee consents to service of process by certified mail at its address above (or
to such other address as Lessee shall have designated by proper notice) in
connection with any legal action brought by Lessor. Lessee authorizes Lessor to
fill in descriptive material in the Lease (including serial numbers) and to
correct any patent errors in the Lease. Lessee shall execute and authorizes
Lessor to file with such authorities and at such locations as Lessor may deem
appropriate, Uniform Commercial Code financing statements relating to the
Equipment and/or the Lease, and Lessee agrees to reimburse Lessor upon demand
for all costs incurred relative thereto. In addition, Lessee hereby irrevocably
appoints Lessor its agent and attorney-in-fact to execute in the name of Lessee
and file any Uniform Commercial Code financing statements with respect to the
Equipment in any place Lessor deems necessary. Lessee also agrees that an
original or a photocopy of the Lease (including any addenda, attachments and
amendments to the Lease) may be filed by Lessor as a Uniform Commercial Code
financing statement. Lessee agrees to immediately notify Lessor in writing, of
any change in Lessee's name or address, identity, corporate structure, social
security or taxpayer identification number as applicable, or discontinuance of
any of its places of business.
14. ASSIGNMENT: LESSOR MAY ASSIGN OR TRANSFER ALL 0R ANY INTEREST OF LESSOR IN
THE LEASE OR THE EQUIPMENT WITHOUT NOTICE TO LESSEE. UPON NOTICE OF SUCH
ASSIGNMENT LESSEE AGREES TO PAY DIRECTLY TO ASSIGNEE WITHOUT ABATEMENT,
DEDUCTION OR SETOFF ALL AMOUNTS WHICH BECOME DUE UNDER THE LEASE AND FURTHER,
AGREES THAT IT WILL NOT ASSERT AGAINST ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR
SETOFF FOR ANY REASON WHATSOEVER IN ANY ACTION FOR PAYMENT OR POSSESSION BROUGHT
BY ASSIGNEE. Upon any such assignment, such assignee
(herein "Assignee") shall have and be entitled to any and all rights and
remedies of Lessor under the Lease and all references in the Lease to Lessor
shall include Assignee, except that Assignee shall not be chargeable with any
obligations or liabilities of Lessor under the Lease. Lessee acknowledges that
any assignment or transfer by Lessor shall not materially change Lessee's duties
or obligations under the Lease nor materially increase the burdens or risks
imposed on Lessee. Lessee shall (if requested by Lessor) acknowledge in writing
any assignments (including any material terms of the Lease) in a form supplied
by Lessor. LESSEE SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY PART OF
ITS RIGHTS OR OBLIGATIONS UNDER THE LEASE OR ENTER INTO ANY SUBLEASE OF ALL OR
ANY PART OF THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.
15. MISCELLANEOUS: The Lease shall be binding upon and inure to the benefit of
the parties hereto, their legal representatives, permitted successors and
assigns. THE PARTIES HERETO WAIVE ALL RIGHTS TO A JURY TRIAL IN ANY LITIGATION
ARISING FROM OR RELATED IN ANY WAY TO THE AGREEMENT, LEASE, OR THE TRANSACTION
CONTEMPLATED HEREBY. No waiver of any provision of the Lease shall be effective
unless in writing, signed by the party to be charged. No failure to exercise, no
delay in exercising, and no single or partial exercise on the part of Lessor of
any right, remedy, or power under the Lease, shall operate as a waiver thereof
or preclude Lessor from exercising any other right, remedy or power under the
Lease. Any provision of the Lease which is unenforceable in any jurisdiction
shall,
-27-
<PAGE>
SIEMENS
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions of the Lease.
The Lease, and all related documents, including (a) amendments, addenda,
consents, waivers and modifications which may be executed contemporaneously
therewith or subsequently thereto, (b) documents received by Lessor from the
Lessee, and (c) financial statements, certificates and other information
previously or subsequently furnished to Lessor, may be reproduced by Lessor by
any photographic, photostatic, microfilm, microcard, miniature photographic,
compact disk reproduction or other similar process and Lessor may destroy any
original document so reproduced. Lessee waives all right to object to the
admissibility of such reproduction and stipulates that any such reproduction
shall, to the extent permitted by law, be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the original
itself is in existence and whether or not the reproduction was made by Lessor in
the regular course of business) and that any enlargement, facsimile or further
reproduction of the reproduction shall likewise be admissible in evidence. No
action, regardless of form, arising out of the Lease may be brought by Lessee
more than two (2) years after the cause of action has accrued. The
representations, warranties, obligations and indemnities of Lessee under the
Lease shall survive the termination of the Lease to the extent required for
their full observance and performance. The obligations of each co-maker (if any)
of the Lease, shall be primary, joint and several. In the event the Lease is
deemed to be intended as security, Lessor shall have, to secure all payments and
all other obligations of Lessee to Lessor under the Lease, a security interest
in the Equipment together with all accessions, attachments, replacements,
substitutions, modifications and additions thereto, now or hereafter acquired,
and all proceeds thereof (including insurance proceeds). In the event that
Lessee fails to meet any of its obligations under the Lease, Lessor may at its
option satisfy such obligation and Lessee shall reimburse Lessor on demand
therefor. In the event that legal or other action is required to enforce
Lessor's rights under the Lease (including the exercise of remedies under
Section 9 hereof), Lessee agrees to reimburse Lessor on demand for its
reasonable attorneys' fees and its other related costs and expenses. The
captions in the Lease are for convenience only and shall not define or limit any
of the terms hereof. THE AGREEMENT AND THE LEASE SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
-28-
EXHIBIT 10.10
LEASE AGREEMENT
TO OUR VALUED CUSTOMER: This Lease has been written in "Plain English". When we
use the words you and your in this Lease, we mean you, our customer, which is
the Lessee indicated below. When we use the words we, us and our in this Lease,
we mean Lessor, Newcourt Communications Finance Corporation. Our address is 2
Gatehall Drive, Parsippany, New Jersey 07054. Phone 1-800-527-9876.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUSTOMER Lessee Name: Tax ID #
INFORMATION ION NETWORKS, INC. 22-2413505
- ------------------------------------------------------------------------------------------------------------------------------------
Billing Street Address/City/County/State/Zip Phone No. Lease #
21 Meridian Road, Edison, NJ 08820 (732) 494-4440 X311220
- ------------------------------------------------------------------------------------------------------------------------------------
Equipment Location Street Address/City/State/Zip Phone No. Schedule #
48834 Kato Road, Fremont, CA 94538 ( ) 00010
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Exempt #
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLIER Supplier Name ("Supplier") Phone No.
INFORMATION LUCENT TECHNOLOGIES INC. (908) 463-2200
- ------------------------------------------------------------------------------------------------------------------------------------
Street Address/City/State/Zip
371 Hoes Lane, Piscataway, NJ 08864
- ------------------------------------------------------------------------------------------------------------------------------------
END OF (Check one applicable box. If no box is checked, the Fair Plus
LEASE Market Value Purchase Option will apply.) Applicable
[ ]Fair Market Value Purchase Option Taxes
PURCHASE [X]Fixed Price Purchase Option of $1.00
OPTION [ ]Fixed Price Purchase Option of 0.0% of the Total Cash Price
- ------------------------------------------------------------------------------------------------------------------------------------
TERM AND Lease Term (Months) Lease Payment Documentation You agree to pay at the time you sign Plus
LEASE 60 $375.84 Fee this Lease: 1 Mos. $375.84 Total Advance Applicable
PAYMENT Lease Payment. If more than one Lease Taxes
SCHEDULE Payment is required in advance, the
additional amount will be applied at
the end of the original term.
- ------------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT Quantity Make/Model
DESCRIPTION 1 MERLIN LEGEND
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
INSURANCE & You are required to provide and maintain insurance related to the
TAXES Equipment, and to pay any property, use and other taxes related
to this Lease or the Equipment (See Sections 4 and 6 of this
Lease.) If you are tax-exempt, you agree to furnish us with
satisfactory evidence of your exemption.
- --------------------------------------------------------------------------------
TERMS & CONDITONS 1. LEASE; DELIVERY AND ACCEPTANCE. You agree to lease the
equipment described above (collectively, "Equipment") on the terms and
conditions of this lease agreement ("Lease"). If you have entered into any
purchase or supply contract ("Supply Contract") with any Supplier, you assign to
us your rights under such Supply Contract, but none of your obligations (other
than the obligation to pay for the equipment if it is accepted by you as stated
below and you timely deliver to us such documents and assurances as we request).
If you have not entered into a Supply Contract, you authorize us to enter into a
Supply Contract on your behalf. You will arrange for the delivery of the
Equipment to you. When you receive the Equipment, you agree to inspect it to
determine if it is in good working order. This Lease will begin on the date when
the Equipment is delivered to you and the Equipment will be deemed irrevocably
accepted by you upon: a) the delivery to us of a signed Delivery and Acceptance
Certificate (if requested by us); or b) 10 days after delivery of the Equipment
to you if previously you have not given written notice to us of your
non-acceptance. The first Lease Payment is due on or before the date the
Equipment is delivered to you. The remaining Lease Payments will be due on the
day of each subsequent month (or such other time period specified above)
designated by us. You will make all payments required under this Lease to us at
such address as we may specify in writing.. You authorize us to adjust the Lease
Payment if the Total Cash Price (which is all amounts we have paid in connection
with the purchase, delivery and installation of the Equipment, including any
upgrade and buyout amounts) differs from the estimated Total Cash Price,
specified by you (or on your behalf by the Supplier) in the credit application
submitted to us. However, if the Total Cash Price exceeds the amount approved by
us, we will not be obligated to purchase or lease the Equipment. If any Lease
Payment or other amount payable to us is not paid within 10 days of its due
date, you will pay us a late charge equal to the greater of (i) 5% of each late
payment or (ii) $5.00 for each late payment (or such lesser amount as is the
maximum amount allowable under applicable law).
<PAGE>
2. NO WARRANTIES. We are leasing the Equipment to you "AS-IS". YOU
ACKNOWLEDGE THAT WE DO NOT MANUFACTURE THE EQUIPMENT, WE DO NOT REPRESENT THE
MANUFACTURER OR THE SUPPLIER, AND YOU HAVE SELECTED THE EQUIPMENT AND THE
SUPPLIER BASED UPON YOUR OWN JUDGMENT. WE MAKE NO WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE. YOU AGREE THAT REGARDLESS OF CAUSE, WE ARE NOT RESPONSIBLE
FOR AND YOU WILL NOT ASSERT ANY CLAIM AGAINST US FOR ANY DAMAGES, WHETHER
CONSEQUENTIAL, DIRECT, SPECIAL, OR INDIRECT. YOU AGREE THAT NEITHER THE SUPPLIER
NOR ANY SALESPERSON, EMPLOYEE OR AGENT OF THE SUPPLIER IS OUR AGENT OR HAS ANY
AUTHORITY TO SPEAK FOR US OR TO BIND US IN ANY WAY. We transfer to you for the
term of this Lease any warranties made by the manufacturer or the Supplier under
a Supply Contract. (NOTE: Sections 3 through 16 of the Lease are on page 2.)
- --------------------------------------------------------------------------------
BY SIGNING THIS LEASE: (i) YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND ALL
OF THE TERMS AND CONDITIONS OF THIS LEASE, WHICH IS DOCUMENTED ON OUR FORM
LTPF-LA 8/98, (ii) YOU AGREE THAT IF A COPY OF THIS LEASE IS SIGNED BY YOU AND
THE FRONT OF THE COPY IS DELIVERED TO US BY A FACSIMILE TRANSMISSION OR
OTHERWISE, TO THE EXTENT ANY PROVISIONS ARE MISSING OR ILLEGIBLE OR CHANGED (AND
NOT INITIALED BY BOTH YOU AND US), THE TERMS AND CONDITIONS OF OUR FORM LTPF-LA
8/98 IN USE ON THE DATE WE RECEIVE THE COPY SIGNED BY YOU WILL BE THE TERMS AND
CONDITIONS OF THE LEASE, (iii) YOU AGREE THAT THIS LEASE IS A NET LEASE THAT YOU
CANNOT TERMINATE OR CANCEL, YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL
PAYMENTS DUE UNDER THIS LEASE, AND YOU CANNOT WITHHOLD, SETOFF OR REDUCE SUCH
PAYMENTS FOR ANY REASON, (iv) YOU AGREE THAT YOU WILL USE THE EQUIPMENT ONLY FOR
BUSINESS PURPOSES, (v) YOU WARRANT THAT THE PERSON SIGNING THIS LEASE FOR YOU
HAS THE AUTHORITY TO DO SO AND TO GRANT THE POWER OF ATTORNEY SET FORTH IN
SECTION 7 OF THIS LEASE, (vi) YOU CONFIRM THAT YOU HAVE DECIDED TO ENTER INTO
THIS LEASE RATHER THAN PURCHASE THE EQUIPMENT FOR THE LOWER TOTAL CASH PRICE,
AND (vii) YOU AGREE THAT THIS LEASE WILL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW JERSEY. YOU CONSENT TO THE JURISDICTION OF ANY COURT LOCATED WITHIN THAT
STATE. YOU AND WE EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY.
ION NETWORKS, INC. NEWCOURT COMMUNICATIONS FINANCE CORPORATION
(Lessee) (Lessor)
X X
-------------------------------- -------------------------------
Authorized Signature Authorized Signature
-------------------------------- -------------------------------
Print Name and Title Date Print Name and Title Date
2
<PAGE>
LEASE AGREEMENT - LTPF-LA 8/98
3. EQUIPMENT LOCATION; USE AND REPAIR; RETURN. You will keep and use the
Equipment only at the Equipment Location shown on Page 1 of this Lease. You may
not move the Equipment without our prior consent . At your own cost and expense,
you will keep the Equipment eligible for any manufacturer's certification, in
compliance with all applicable laws and in good repair, condition and working
order, except for ordinary wear and tear. You will not make any alterations or
replacements to the Equipment without our prior written consent. All
alterations, additions and replacements will become part of the Equipment and
our property at no cost or expense to us. We may inspect the Equipment at any
reasonable time. Unless this Lease is renewed or you purchase the Equipment in
accordance with this Lease, at the end of this Lease you will immediately
deliver the Equipment to us in as good condition as when you received it, except
for ordinary wear and tear, to any place in the United States that we tell you.
You will pay all expenses of deinstalling, crating and shipping, and you will
insure the Equipment for its full replacement value during shipping.
4. TAXES AND FEES. You will pay when due, either directly or to us upon our
demand, all taxes, fines and penalties relating to this Lease or the Equipment
that are now or in the future assessed or levied by any state, local or other
government authority. We will file all personal property, use or other tax
return (unless we notify you otherwise in writing) and you agree to pay us a fee
for making such filings. We do not have to contest any taxes, fines or
penalties. You will pay estimated property taxes with each Lease Payment or
annually, as involved.
5. LOSS OR DAMAGE. As between you and us, you are responsible for any loss,
theft or destruction of, or damage to, Equipment (collectively "Loss") from any
and all causes at all, whether or not insured, until it is delivered to us at
the end of the Lease. You are required to make all Lease Payments even if there
is a loss. You must notify us in writing immediately of any Loss. Then, at our
option, you will either (a) repair the Equipment so that it is in good condition
and working order, eligible for any manufacturer's certification, or (b) pay us
the amounts specified in Section 9(b) below.
6. INSURANCE. You will provide and maintain at your expense (a) property
insurance against the loss, theft or destruction of, or damage to, the Equipment
for its full replacement value, naming us as loss payee, and (b) public utility
and third party property insurance, naming us as an additional insured. You will
give us certificates or other evidence of such insurance when requested. Such
insurance will be in a form, amount and with companies acceptable to us, and
will provide that we will be given 30 days advance notice of any cancellation of
material change of such insurance. If you do not give us evidence of insurance
acceptable to us, we have the right, but not the obligation, to obtain insurance
covering our interest in the Equipment for the term of this Lease, including any
renewals or extensions, from an insurer (collectively, "Insurance Charge") to
the amount due from you under this Lease. You will pay the Insurance Charge in
equal installments allocated to the remaining Lease Payments. If we purchase
insurance, you will cooperate with our insurance agent with respect to the
placement of insurance and the processing of claims. Nothing in this Lease will
create and insurance relationship of any type between us and any other person.
You acknowledge that we are not required to secure or maintain any insurance,
and we will no be liable to you if we terminate any insurance coverage that we
arrange. If we replace or renew any insurance coverage, we are not obligated to
provide replacement or renewal coverage under the same terms, costs, limits, or
conditions as the previous coverage.
7. TITLE; RECORDING. We are the owner of and will hold title to the Equipment.
You will keep the Equipment free of all liens and encumbrances. Unless the
Purchase Option is $1.00, you agree that this transaction is a true lease..
However, if this transaction is deemed to be a lease intended for security, you
grant us a purchase money security interest in the Equipment (including any
replacements, substitutions, additions, attachments and proceeds). You will
deliver to us signed financing statements or other documents we request to
protect out interest in the Equipment. YOU AUTHORIZE US TO FILE A COPY OF THIS
LEASE AS A FINANCING STATEMENT AND APPOINT US OR DESIGNEE AS YOUR
ATTORNEY-IN-FACT TO EXECUTE AND FILE ON YOUR BEHALF, FINANCING STATEMENTS
COVERING THE EQUIPMENT.
3
<PAGE>
8. DEFAULT. Each of the following is s "Default" under this Lease: (a) you
fail to pay any Lease Payment or any other payment within 10 days of its due
date; (b) you do not perform any of your other obligations under this Lease or
in any other agreement with us or with any of our affiliates and this failure
continues for 10 days after we have notified you of it; (c) you become
insolvent, you dissolve or are dissolved, or you assign your assets for the
benefit of your creditors, or enter (voluntarily or involuntarily) any
bankruptcy or reorganization proceeding, or (d) any guarantor of this Lease
dies, does not perform its obligations under the guaranty, or becomes subject to
one of the events listed in clause (c) above.
9. REMEDIES. If a Default occurs, we may do one or more of the following: (a)
we may cancel or terminate this Lease or any and all other agreement that we
have entered into with you or withdraw any offer of credit; (b) we may require
you to immediately pay us, as compensation for loss of our bargain and not as a
penalty, a sum equal to (i) the present value of all unpaid Lease Payments for
the remainder of the term plus the present value of our anticipated residual
interest in the Equipment, each discounted at 5% per year, compounded monthly,
plus (ii) all other amounts due or that become due under this Lease: (c) we may
require you to deliver the Equipment to us as set forth in Section 3; (d) we or
our agent may peacefully repossess the Equipment without court order and you
will not make any claims against us for damages or trespass or any other reason;
and (e) we may exercise any other right or remedy available at law or in equity.
You agree to pay all our costs of enforcing our rights against you under,
including reasonable attorneys' fees. If we take possession of the Equipment, we
may sell or otherwise dispose of it with or without notice, at a public or a
private sale, and apply the net proceeds (after we have deducted all costs
related to the sale or disposition of the Equipment) to the amounts that you owe
us. You agree that if notice of sale is required by law to be given, 10 days'
notice will constitute reasonable notice. You will remain responsible for any
amounts that are due after we have applied such net proceeds.
10. FINANCE LEASE STATUS. You agree that if Article 2A-Leases of the Uniform
Commercial Code applies to this Lease, this Lease will be considered a "finance
lease" as that term is defined in Article 2A. By signing this Lease, you agree
that either (a) you have reviewed, approved, and received, a copy of the Supply
Contract or (b) that we have informed you of the identity of the Supplier, that
you may have rights under Supply Contract, and that you may contact the Supplier
for a description of those rights. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
YOU WAIVE ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY ARTICLE 2A.
11. ASSIGNMENT. YOU MAY NOT ASSIGN, SELL, TRANSFER OR SUBLEASE THE EQUIPMENT OR
YOUR INTEREST N THIS LEASE. We may, without notifying you, sell, assign, or
transfer this Lease or our rights in this Equipment. You agree that the new
owner will have the same rights and benefits that we now have under this Lease
but not our obligations. The rights of the new owner will not be subject to any
claim, defense or set off that ou may have against us.
12. PURCHASE OPTION; AUTOMATIC RENEWAL. If no default exists under this Lease,
you will have the option at the end of the original or any renewal terms to
purchase all (but not less than all) of the Equipment at the Purchase Option
price shown on Page 1 of this Lease, plus any applicable taxes. Unless the
Purchase Option Price is $1.00, you must give us at least 30 days written notice
before the end of the original term that you will purchase the Equipment or that
you will deliver the Equipment to us. If you do not give us such written notice
or if you do not purchase or deliver the Equipment in accordance with the terms
and conditions of this Lease, this Lease will automatically renew for an
additional 12 month renewal term and thereafter renew for successive one month
terms until you deliver the Equipment to us. During such renewal(s) the Lease
Payment will remain the same. We may cancel an automatic renewal term by sending
you written notice 10 days prior to such renewal term. If Fair Market Value
Purchase Price Option has been selected, we will use our reasonable judgment to
determine the Equipment's fair market value. If you do not agree with our
determination of the Equipment's fair market value, the fair market value (on a
retail basis) will be determined at your expense by an independent appraiser
selected by us. Upon payment of the Purchase Option price, we will transfer our
interest in the Equipment to you "AS IS, WHERE IS" without any representation or
warranty whatsoever and this Lease will terminate.
4
<PAGE>
13. INDEMNIFICATION. You are responsible for any losses, damages, penalties,
claims, suits and actions (collectively "Claims"), whether based on a theory of
strict liability or otherwise caused by or related to (a) the manufacture,
installation, ownership, use, lease, possession, or delivery of the Equipment,
or (b) any defects in the Equipment. You agree to reimburse us for, and if we
request to defend against, any Claims.
14. CREDIT INFORMATION. YOU AUTHORIZE US OR ANY OF OUR AFFILIATES TO
OBTAIN CREDIT BUREAU REPORTS, AND MAKE OTHER CREDIT INQUIRIES THAT WE DETERMINE
ARE NECESSARY. ON YOUR WRITTEN REQUEST, WE WILL INFORM YOU WHETHER WE HAVE
REQUESTED A CONSUMER CREDIT REPORT AND THE NAME AND ADDRESS OF ANY CONSUMER
CREDIT REPORTING AGENCY THAT FURNISHED A REPORT. YOU ACKNOWLEDGE THAT WITHOUT
FURTHER NOTICE WE MAY USE OR REQUEST ADDITIONAL CREDIT BUREAU REPORTS TO UPDATE
OUR INFORMATION SO LONG AS YOU OBLIGATIONS TO US ARE OUTSTANDING.
15. LEASING ADDITIONAL EQUIPMENT. You may request us to lease additional
equipment ("Additional Equipment") to you by sending a purchase order or by
contacting us or the Supplier by telephone or in writing. If we agree to Lease
such Additional Equipment to you, we will signify our agreement by preparing and
sending to you a writing ("Additional Lease") describing the Additional
Equipment and specifying the amount and frequency of the Lease Payments, the
Lease Term, the Purchase Option and such other terms and conditions that apply
to each such lease. YOU AGREE THAT IF WE DO NOT RECEIVE A WRITTEN OBJECTION TO
THE ADDITIONAL LEASE FROM YOU WITHIN 10 DAYS AFTER THE DATE OF THE ADDITIONAL
LEASE, SUCH ADDITIONAL LEASE SHALL BE GOVERNED BY ALL OF THE TERMS AND
CONDITIONS OF THIS LEASE.
16. MISCELLANEOUS. You agree that the terms and
conditions contained in this Lease make up the entire agreement between you and
us regarding the lease of the Equipment. This Lease is not binding on us until
we sign it. Any change in any of the terms and conditions of this Lease must be
signed in writing by us. You agree, however, that we are authorized, without
notice to you, to supply missing information or correct obvious errors in this
Lease. If we delay or fail to enforce any of our rights under this Lease, we
will still be entitled to enforce those rights at a later time. All notices
shall be given in writing by the party sending the notice and shall be effective
when deposited in the U.S. Mail, addressed to the party receiving the notice at
its address shown on Page 1 of this Lease (or to any other address specified by
that party in writing) with first class postage prepaid. All of our rights and
indemnities will survive the termination of this Lease. It is the express intent
of the parties not to violate any applicable usury laws or to exceed the maximum
amount of time price differential or interest, as applicable, permitted to be
charged or collected by applicable law, and any such excess payment will be
applied to Lease Payments in inverse order of maturity, and any remaining excess
will be refunded to you. If you do not perform any of your obligations under
this Lease, we have the right, but not the obligation, to take any action or pay
any amounts that we believe are necessary to protect our interests. You agree to
reimburse us immediately upon our demand for any such amounts that we pay. IF A
SIGNED COPY OF THIS LEASE IS DELIVERED TO US BY FACSIMILE TRANSMISSION, IT WILL
BE BINDING ON YOU. HOWEVER, WE WILL NOT BE BOUND BY THIS LEASE UNTIL WE ACCEPT
IT MANUALLY BY SIGNING IT OR BY PURCHASING THE EQUIPMENT SUBJECT TO THE LEASE,
WHICHEVER OCCURS FIRST. YOU WAIVE NOTICE OF OUR ACCEPTANCE AND WAIVE YOUR RIGHT
TO RECEIVE A COPY OF THE ACCEPTED LEASE. YOU AGREE, THAT, NOTWITHSTANDING ANY
RULE OF EVIDENCE TO THE CONTRARY, IN ANY HEARING, TRIAL OR PROCESSING OF ANY
SUCH KIND WITH RESPECT TO THIS LEASE, WE MAY PRODUCE A COPY OF THE LEASE, WE MAY
PRODUCE A COPY OF THE LEASE TRANSMITTED TO US BY FACSIMILE TRANSMISSION THAT HAS
BEEN MANUALLY SIGNED BY US AND SUCH SIGNED COPY SHALL BE DEEMED TO BE THE
ORIGINAL OF THIS LEASE. TO THE EXTENT (IF ANY) THAT THIS LEASE CONSTITUTES
CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS
LEASE MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COPY OR
COUNTERPART HEREOF EXCEPT THE COPY WITH OUR ORIGINAL SIGNATURE. IF YOU DELIVER
THIS LEASE TO US BY FACSIMILE TRANSMISSION, YOU ACKNOWLEDGE THAT WE ARE RELYING
ON YOUR REPRESENTATION THAT THIS LEASE HAS NOT BEEN CHANGED. If you are a
tax-exempt entity as defined in Section 168(h)(2) of the Internal revenue Code
and you have selected a Fair Market Value Purchase Option, the term of this
Lease, including any renewals or extensions, will not exceed a total of 60
months. If more than one Lessee has signed this Lease, each of you agree that
you liability is joint and several.
5
<PAGE>
LEASE AGREEMENT
TO OUR VALUED CUSTOMER: This Lease has been written in "Plain English". When we
use the words you and your in this Lease, we mean you, our customer, which is
the Lessee indicated below. When we use the words we, us and our in this Lease,
we mean Lessor, Newcourt Communications Finance Corporation. Our address is 2
Gatehall Drive, Parsippany, New Jersey 07054. Phone 1-800-527-9876.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUSTOMER Lessee Name: Tax ID #
INFORMATION ION NETWORKS, INC. 22-2413505
- ------------------------------------------------------------------------------------------------------------------------------------
Billing Street Address/City/County/State/Zip Phone No. Lease #
21 Meridian Road, Edison, NJ 08820 (732) 494-4440 X311220
- ------------------------------------------------------------------------------------------------------------------------------------
Equipment Location Street Address/City/State/Zip Phone No. Schedule #
48834 Kato Road, Fremont, CA 94538 ( ) 00010
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Exempt #
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLIER Supplier Name ("Supplier") Phone No.
INFORMATION LUCENT TECHNOLOGIES INC. (908) 463-2200
- ------------------------------------------------------------------------------------------------------------------------------------
Street Address/City/State/Zip
371 Hoes Lane, Piscataway, NJ 08864
- ------------------------------------------------------------------------------------------------------------------------------------
END OF (Check one applicable box. If no box is checked, the Fair Plus
LEASE Market Value Purchase Option will apply.) Applicable
[ ]Fair Market Value Purchase Option Taxes
PURCHASE [X]Fixed Price Purchase Option of $1.00
OPTION [ ]Fixed Price Purchase Option of 0.0% of the Total Cash Price
- ------------------------------------------------------------------------------------------------------------------------------------
TERM AND Lease Term (Months) Lease Payment Documentation You agree to pay at the time you sign Plus
LEASE 60 $375.84 Fee this Lease: 1 Mos. $375.84 Total Advance Applicable
PAYMENT Lease Payment. If more than one Lease Taxes
SCHEDULE Payment is required in advance, the
additional amount will be applied at
the end of the original term.
- ------------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT Quantity Make/Model
DESCRIPTION 1 DEFINITY G3SI
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
INSURANCE & You are required to provide and maintain insurance related to the
TAXES Equipment, and to pay any property, use and other taxes related
to this Lease or the Equipment (See Sections 4 and 6 of this
Lease.) If you are tax-exempt, you agree to furnish us with
satisfactory evidence of your exemption.
- --------------------------------------------------------------------------------
TERMS & CONDITONS 1. LEASE; DELIVERY AND ACCEPTANCE. You agree to lease the
equipment described above (collectively, "Equipment") on the terms and
conditions of this lease agreement ("Lease"). If you have entered into any
purchase or supply contract ("Supply Contract") with any Supplier, you assign to
us your rights under such Supply Contract, but none of your obligations (other
than the obligation to pay for the equipment if it is accepted by you as stated
below and you timely deliver to us such documents and assurances as we request).
If you have not entered into a Supply Contract, you authorize us to enter into a
Supply Contract on your behalf. You will arrange for the delivery of the
Equipment to you. When you receive the Equipment, you agree to inspect it to
determine if it is in good working order. This Lease will begin on the date when
the Equipment is delivered to you and the Equipment will be deemed irrevocably
accepted by you upon: a) the delivery to us of a signed Delivery and Acceptance
Certificate (if requested by us); or b) 10 days after delivery of the Equipment
to you if previously you have not given written notice to us of your
non-acceptance. The first Lease Payment is due on or before the date the
Equipment is delivered to you. The remaining Lease Payments will be due on the
day of each subsequent month (or such other time period specified above)
designated by us. You will make all payments required under this Lease to us at
such address as we may specify in writing.. You authorize us to adjust the Lease
Payment if the Total Cash Price (which is all amounts we have paid in connection
with the purchase, delivery and installation of the Equipment, including any
upgrade and buyout amounts) differs from the estimated Total Cash Price,
specified by you (or on your behalf by the Supplier) in the credit application
submitted to us. However, if the Total Cash Price exceeds the amount approved by
us, we will not be obligated to purchase or lease the Equipment. If any Lease
Payment or other amount payable to us is not paid within 10 days of its due
date, you will pay us a late charge equal to the greater of (i) 5% of each late
payment or (ii) $5.00 for each late payment (or such lesser amount as is the
maximum amount allowable under applicable law).
6
<PAGE>
2. NO WARRANTIES. We are leasing the Equipment to you "AS-IS". YOU
ACKNOWLEDGE THAT WE DO NOT MANUFACTURE THE EQUIPMENT, WE DO NOT REPRESENT THE
MANUFACTURER OR THE SUPPLIER, AND YOU HAVE SELECTED THE EQUIPMENT AND THE
SUPPLIER BASED UPON YOUR OWN JUDGMENT. WE MAKE NO WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE. YOU AGREE THAT REGARDLESS OF CAUSE, WE ARE NOT RESPONSIBLE
FOR AND YOU WILL NOT ASSERT ANY CLAIM AGAINST US FOR ANY DAMAGES, WHETHER
CONSEQUENTIAL, DIRECT, SPECIAL, OR INDIRECT. YOU AGREE THAT NEITHER THE SUPPLIER
NOR ANY SALESPERSON, EMPLOYEE OR AGENT OF THE SUPPLIER IS OUR AGENT OR HAS ANY
AUTHORITY TO SPEAK FOR US OR TO BIND US IN ANY WAY. We transfer to you for the
term of this Lease any warranties made by the manufacturer or the Supplier under
a Supply Contract. (NOTE: Sections 3 through 16 of the Lease are on page 2.)
- --------------------------------------------------------------------------------
BY SIGNING THIS LEASE: (i) YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND ALL
OF THE TERMS AND CONDITIONS OF THIS LEASE, WHICH IS DOCUMENTED ON OUR FORM
LTPF-LA 8/98, (ii) YOU AGREE THAT IF A COPY OF THIS LEASE IS SIGNED BY YOU AND
THE FRONT OF THE COPY IS DELIVERED TO US BY A FACSIMILE TRANSMISSION OR
OTHERWISE, TO THE EXTENT ANY PROVISIONS ARE MISSING OR ILLEGIBLE OR CHANGED (AND
NOT INITIALED BY BOTH YOU AND US), THE TERMS AND CONDITIONS OF OUR FORM LTPF-LA
8/98 IN USE ON THE DATE WE RECEIVE THE COPY SIGNED BY YOU WILL BE THE TERMS AND
CONDITIONS OF THE LEASE, (iii) YOU AGREE THAT THIS LEASE IS A NET LEASE THAT YOU
CANNOT TERMINATE OR CANCEL, YOU HAVE AN UNCONDITIONAL OBLIGATION TO MAKE ALL
PAYMENTS DUE UNDER THIS LEASE, AND YOU CANNOT WITHHOLD, SETOFF OR REDUCE SUCH
PAYMENTS FOR ANY REASON, (iv) YOU AGREE THAT YOU WILL USE THE EQUIPMENT ONLY FOR
BUSINESS PURPOSES, (v) YOU WARRANT THAT THE PERSON SIGNING THIS LEASE FOR YOU
HAS THE AUTHORITY TO DO SO AND TO GRANT THE POWER OF ATTORNEY SET FORTH IN
SECTION 7 OF THIS LEASE, (vi) YOU CONFIRM THAT YOU HAVE DECIDED TO ENTER INTO
THIS LEASE RATHER THAN PURCHASE THE EQUIPMENT FOR THE LOWER TOTAL CASH PRICE,
AND (vii) YOU AGREE THAT THIS LEASE WILL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW JERSEY. YOU CONSENT TO THE JURISDICTION OF ANY COURT LOCATED WITHIN THAT
STATE. YOU AND WE EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY.
ION NETWORKS, INC. NEWCOURT COMMUNICATIONS FINANCE CORPORATION
(Lessee) (Lessor)
X X
-------------------------------- -------------------------------
Authorized Signature Authorized Signature
-------------------------------- -------------------------------
Print Name and Title Date Print Name and Title Date
7
<PAGE>
LEASE AGREEMENT - LTPF-LA 8/98
3. EQUIPMENT LOCATION; USE AND REPAIR; RETURN. You will keep and use the
Equipment only at the Equipment Location shown on Page 1 of this Lease. You may
not move the Equipment without our prior consent . At your own cost and expense,
you will keep the Equipment eligible for any manufacturer's certification, in
compliance with all applicable laws and in good repair, condition and working
order, except for ordinary wear and tear. You will not make any alterations or
replacements to the Equipment without our prior written consent. All
alterations, additions and replacements will become part of the Equipment and
our property at no cost or expense to us. We may inspect the Equipment at any
reasonable time. Unless this Lease is renewed or you purchase the Equipment in
accordance with this Lease, at the end of this Lease you will immediately
deliver the Equipment to us in as good condition as when you received it, except
for ordinary wear and tear, to any place in the United States that we tell you.
You will pay all expenses of deinstalling, crating and shipping, and you will
insure the Equipment for its full replacement value during shipping.
4. TAXES AND FEES. You will pay when due, either directly or to us upon our
demand, all taxes, fines and penalties relating to this Lease or the Equipment
that are now or in the future assessed or levied by any state, local or other
government authority. We will file all personal property, use or other tax
return (unless we notify you otherwise in writing) and you agree to pay us a fee
for making such filings. We do not have to contest any taxes, fines or
penalties. You will pay estimated property taxes with each Lease Payment or
annually, as involved.
5. LOSS OR DAMAGE. As between you and us, you are responsible for any loss,
theft or destruction of, or damage to, Equipment (collectively "Loss") from any
and all causes at all, whether or not insured, until it is delivered to us at
the end of the Lease. You are required to make all Lease Payments even if there
is a loss. You must notify us in writing immediately of any Loss. Then, at our
option, you will either (a) repair the Equipment so that it is in good condition
and working order, eligible for any manufacturer's certification, or (b) pay us
the amounts specified in Section 9(b) below.
6. INSURANCE. You will provide and maintain at your expense (a) property
insurance against the loss, theft or destruction of, or damage to, the Equipment
for its full replacement value, naming us as loss payee, and (b) public utility
and third party property insurance, naming us as an additional insured. You will
give us certificates or other evidence of such insurance when requested. Such
insurance will be in a form, amount and with companies acceptable to us, and
will provide that we will be given 30 days advance notice of any cancellation of
material change of such insurance. If you do not give us evidence of insurance
acceptable to us, we have the right, but not the obligation, to obtain insurance
covering our interest in the Equipment for the term of this Lease, including any
renewals or extensions, from an insurer (collectively, "Insurance Charge") to
the amount due from you under this Lease. You will pay the Insurance Charge in
equal installments allocated to the remaining Lease Payments. If we purchase
insurance, you will cooperate with our insurance agent with respect to the
placement of insurance and the processing of claims. Nothing in this Lease will
create and insurance relationship of any type between us and any other person.
You acknowledge that we are not required to secure or maintain any insurance,
and we will no be liable to you if we terminate any insurance coverage that we
arrange. If we replace or renew any insurance coverage, we are not obligated to
provide replacement or renewal coverage under the same terms, costs, limits, or
conditions as the previous coverage.
7. TITLE; RECORDING. We are the owner of and will hold title to the Equipment.
You will keep the Equipment free of all liens and encumbrances. Unless the
Purchase Option is $1.00, you agree that this transaction is a true lease..
However, if this transaction is deemed to be a lease intended for security, you
grant us a purchase money security interest in the Equipment (including any
replacements, substitutions, additions, attachments and proceeds). You will
deliver to us signed financing statements or other documents we request to
protect out interest in the Equipment. YOU AUTHORIZE US TO FILE A COPY OF THIS
LEASE AS A FINANCING STATEMENT AND APPOINT US OR DESIGNEE AS YOUR
ATTORNEY-IN-FACT TO EXECUTE AND FILE ON YOUR BEHALF, FINANCING STATEMENTS
COVERING THE EQUIPMENT.
8
<PAGE>
8. DEFAULT. Each of the following is s "Default" under this Lease: (a) you
fail to pay any Lease Payment or any other payment within 10 days of its due
date; (b) you do not perform any of your other obligations under this Lease or
in any other agreement with us or with any of our affiliates and this failure
continues for 10 days after we have notified you of it; (c) you become
insolvent, you dissolve or are dissolved, or you assign your assets for the
benefit of your creditors, or enter (voluntarily or involuntarily) any
bankruptcy or reorganization proceeding, or (d) any guarantor of this Lease
dies, does not perform its obligations under the guaranty, or becomes subject to
one of the events listed in clause (c) above.
9. REMEDIES. If a Default occurs, we may do one or more of the following: (a)
we may cancel or terminate this Lease or any and all other agreement that we
have entered into with you or withdraw any offer of credit; (b) we may require
you to immediately pay us, as compensation for loss of our bargain and not as a
penalty, a sum equal to (i) the present value of all unpaid Lease Payments for
the remainder of the term plus the present value of our anticipated residual
interest in the Equipment, each discounted at 5% per year, compounded monthly,
plus (ii) all other amounts due or that become due under this Lease: (c) we may
require you to deliver the Equipment to us as set forth in Section 3; (d) we or
our agent may peacefully repossess the Equipment without court order and you
will not make any claims against us for damages or trespass or any other reason;
and (e) we may exercise any other right or remedy available at law or in equity.
You agree to pay all our costs of enforcing our rights against you under,
including reasonable attorneys' fees. If we take possession of the Equipment, we
may sell or otherwise dispose of it with or without notice, at a public or a
private sale, and apply the net proceeds (after we have deducted all costs
related to the sale or disposition of the Equipment) to the amounts that you owe
us. You agree that if notice of sale is required by law to be given, 10 days'
notice will constitute reasonable notice. You will remain responsible for any
amounts that are due after we have applied such net proceeds.
10. FINANCE LEASE STATUS. You agree that if Article 2A-Leases of the Uniform
Commercial Code applies to this Lease, this Lease will be considered a "finance
lease" as that term is defined in Article 2A. By signing this Lease, you agree
that either (a) you have reviewed, approved, and received, a copy of the Supply
Contract or (b) that we have informed you of the identity of the Supplier, that
you may have rights under Supply Contract, and that you may contact the Supplier
for a description of those rights. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
YOU WAIVE ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY ARTICLE 2A.
11. ASSIGNMENT. YOU MAY NOT ASSIGN, SELL, TRANSFER OR SUBLEASE THE EQUIPMENT OR
YOUR INTEREST N THIS LEASE. We may, without notifying you, sell, assign, or
transfer this Lease or our rights in this Equipment. You agree that the new
owner will have the same rights and benefits that we now have under this Lease
but not our obligations. The rights of the new owner will not be subject to any
claim, defense or set off that ou may have against us.
12. PURCHASE OPTION; AUTOMATIC RENEWAL. If no default exists under this Lease,
you will have the option at the end of the original or any renewal terms to
purchase all (but not less than all) of the Equipment at the Purchase Option
price shown on Page 1 of this Lease, plus any applicable taxes. Unless the
Purchase Option Price is $1.00, you must give us at least 30 days written notice
before the end of the original term that you will purchase the Equipment or that
you will deliver the Equipment to us. If you do not give us such written notice
or if you do not purchase or deliver the Equipment in accordance with the terms
and conditions of this Lease, this Lease will automatically renew for an
additional 12 month renewal term and thereafter renew for successive one month
terms until you deliver the Equipment to us. During such renewal(s) the Lease
Payment will remain the same. We may cancel an automatic renewal term by sending
you written notice 10 days prior to such renewal term. If Fair Market Value
Purchase Price Option has been selected, we will use our reasonable judgment to
determine the Equipment's fair market value. If you do not agree with our
determination of the Equipment's fair market value, the fair market value (on a
retail basis) will be determined at your expense by an independent appraiser
selected by us. Upon payment of the Purchase Option price, we will transfer our
interest in the Equipment to you "AS IS, WHERE IS" without any representation or
warranty whatsoever and this Lease will terminate.
9
<PAGE>
13. INDEMNIFICATION. You are responsible for any losses, damages, penalties,
claims, suits and actions (collectively "Claims"), whether based on a theory of
strict liability or otherwise caused by or related to (a) the manufacture,
installation, ownership, use, lease, possession, or delivery of the Equipment,
or (b) any defects in the Equipment. You agree to reimburse us for, and if we
request to defend against, any Claims.
14. CREDIT INFORMATION. YOU AUTHORIZE US OR ANY OF OUR AFFILIATES TO
OBTAIN CREDIT BUREAU REPORTS, AND MAKE OTHER CREDIT INQUIRIES THAT WE DETERMINE
ARE NECESSARY. ON YOUR WRITTEN REQUEST, WE WILL INFORM YOU WHETHER WE HAVE
REQUESTED A CONSUMER CREDIT REPORT AND THE NAME AND ADDRESS OF ANY CONSUMER
CREDIT REPORTING AGENCY THAT FURNISHED A REPORT. YOU ACKNOWLEDGE THAT WITHOUT
FURTHER NOTICE WE MAY USE OR REQUEST ADDITIONAL CREDIT BUREAU REPORTS TO UPDATE
OUR INFORMATION SO LONG AS YOU OBLIGATIONS TO US ARE OUTSTANDING.
15. LEASING ADDITIONAL EQUIPMENT. You may request us to lease additional
equipment ("Additional Equipment") to you by sending a purchase order or by
contacting us or the Supplier by telephone or in writing. If we agree to Lease
such Additional Equipment to you, we will signify our agreement by preparing and
sending to you a writing ("Additional Lease") describing the Additional
Equipment and specifying the amount and frequency of the Lease Payments, the
Lease Term, the Purchase Option and such other terms and conditions that apply
to each such lease. YOU AGREE THAT IF WE DO NOT RECEIVE A WRITTEN OBJECTION TO
THE ADDITIONAL LEASE FROM YOU WITHIN 10 DAYS AFTER THE DATE OF THE ADDITIONAL
LEASE, SUCH ADDITIONAL LEASE SHALL BE GOVERNED BY ALL OF THE TERMS AND
CONDITIONS OF THIS LEASE.
16. MISCELLANEOUS. You agree that the terms and
conditions contained in this Lease make up the entire agreement between you and
us regarding the lease of the Equipment. This Lease is not binding on us until
we sign it. Any change in any of the terms and conditions of this Lease must be
signed in writing by us. You agree, however, that we are authorized, without
notice to you, to supply missing information or correct obvious errors in this
Lease. If we delay or fail to enforce any of our rights under this Lease, we
will still be entitled to enforce those rights at a later time. All notices
shall be given in writing by the party sending the notice and shall be effective
when deposited in the U.S. Mail, addressed to the party receiving the notice at
its address shown on Page 1 of this Lease (or to any other address specified by
that party in writing) with first class postage prepaid. All of our rights and
indemnities will survive the termination of this Lease. It is the express intent
of the parties not to violate any applicable usury laws or to exceed the maximum
amount of time price differential or interest, as applicable, permitted to be
charged or collected by applicable law, and any such excess payment will be
applied to Lease Payments in inverse order of maturity, and any remaining excess
will be refunded to you. If you do not perform any of your obligations under
this Lease, we have the right, but not the obligation, to take any action or pay
any amounts that we believe are necessary to protect our interests. You agree to
reimburse us immediately upon our demand for any such amounts that we pay. IF A
SIGNED COPY OF THIS LEASE IS DELIVERED TO US BY FACSIMILE TRANSMISSION, IT WILL
BE BINDING ON YOU. HOWEVER, WE WILL NOT BE BOUND BY THIS LEASE UNTIL WE ACCEPT
IT MANUALLY BY SIGNING IT OR BY PURCHASING THE EQUIPMENT SUBJECT TO THE LEASE,
WHICHEVER OCCURS FIRST. YOU WAIVE NOTICE OF OUR ACCEPTANCE AND WAIVE YOUR RIGHT
TO RECEIVE A COPY OF THE ACCEPTED LEASE. YOU AGREE, THAT, NOTWITHSTANDING ANY
RULE OF EVIDENCE TO THE CONTRARY, IN ANY HEARING, TRIAL OR PROCESSING OF ANY
SUCH KIND WITH RESPECT TO THIS LEASE, WE MAY PRODUCE A COPY OF THE LEASE, WE MAY
PRODUCE A COPY OF THE LEASE TRANSMITTED TO US BY FACSIMILE TRANSMISSION THAT HAS
BEEN MANUALLY SIGNED BY US AND SUCH SIGNED COPY SHALL BE DEEMED TO BE THE
ORIGINAL OF THIS LEASE. TO THE EXTENT (IF ANY) THAT THIS LEASE CONSTITUTES
CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS
LEASE MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COPY OR
COUNTERPART HEREOF EXCEPT THE COPY WITH OUR ORIGINAL SIGNATURE. IF YOU DELIVER
THIS LEASE TO US BY FACSIMILE TRANSMISSION, YOU ACKNOWLEDGE THAT WE ARE RELYING
ON YOUR REPRESENTATION THAT THIS LEASE HAS NOT BEEN CHANGED. If you are a
tax-exempt entity as defined in Section 168(h)(2) of the Internal revenue Code
and you have selected a Fair Market Value Purchase Option, the term of this
Lease, including any renewals or extensions, will not exceed a total of 60
months. If more than one Lessee has signed this Lease, each of you agree that
you liability is joint and several.
10
<PAGE>
BCS-003
Lucent Technologies (8/98)
Equipment Agreement
- --------------------------------------------------------------------------------
Customer Name |LUCENT TECHNOLOGIES INC. |Equipment Agreement No.
ION Networks | |BCS-3-
- ------------------------------|-------------------------|-----------------------
Billing Address |Contact |Transaction Description
1551 Washington Avenue |Dean DeStefano |
- ------------------------------|-------------------------|
City State Zip Code |Telephone No. |
Piscataway NJ 08854 |732-271-2978 |
- ------------------------------|-------------------------|-----------------------
Customer Indentification |Branch Code |Scheduled Instal./
023 722 3516 |GBSBDX04 |Deliv. Date
| |JULY 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Transaction Details
(See Legend Below)
- ------------------------------------------------------------------------------------------------------------------------------------
Term In Post Purchase
Length/ Warr. Warr Price/SPP Term
Product/Service Price Prod. Wrn'ty Trans. Maint Maint Payment/ Installation Plan/Monthly SPP
Description Element Code Qty. Status Length Type Type. Type License Fee Charges Charge Charge
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
715BCS TERM W 6950-ET7 1 650.29 60.00
5MDW9030+HYB1 3204-DJS 1 4,088.07 392.00
DXS BLACK 32318 1 713.79 40.00
302B1 CONSOLE 3274-10B 1 1,362.59 140.00
6408D+ D 80 S 3304-8SG 100 26,901.00 4,000.00
6416D+ D 16B 3306-16G 20 6,615.00 800.00
PRT SENS SFW 1272-CSE 2 5,191.20 0.00
R6S1 VAS RTU 1272-S16 1 9,409.05 550.00
ECS TELCOMTG 1272-TM3 1 1,265.67 200.00
SAT CABLE H60 2725-18C 1 13.85 6.00
3003VAUPS/208 2403-517 1 2,530.71 275.00
- ------------------------------------------------------------------------------------------------------------------------------------
LeaseFinancing Notice: Third-party lease/financing Subtotals This Page
of Products acquired under this Agreement may --------------------------------------------------------------------------------
require you to transfer your ownership of Prod- Subtotal From ______
ucts to the lessor and you (the lessee) may only Attached Page(s)
have the right to repurchase the products at the --------------------------------------------------------------------------------
end of the lease term, e.g., for the product's
fair market value.
- ------------------------------------------------------------------------------------------------------------------------------------
Advance-Payment Schedule Service Protection
For Product Plan (SPP) Subtotals 176,293.69 56,691.00
- ------------------------------------------------------------------------------------------------------------------------------------
By Contract ---- Duration in years
Execution
$___________ Date [ ] Monthly payment
Plan (Price shown
in SPP Charge
Plus column is a
recurring monthly
charge Shipping Charge 2,151.34
$___________ By Install/ --------------------------------------------------------------------------------
Deliv. Date [ ] Prepayment Plan Service Charge
--------------------------------------------------------------------------------
$___ Prepayment Amount Other Charges 176,293.69 68,842.34
Due on invoice --------------------------------------------------------------------------------
Credits ( ) ( ) ( ) ( )
--------------------------------------------------------------------------------
Grand Totals Taxes
Not
Included
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL REMARKS/CONTRACTUAL PROVISIONS
- ------------------------------------------------------------------------------------------------------------------------------------
LUCENT TECHNOLOGIES SERVICE PROTECTION PLAN: If you have initiated the box at the right, you are CUSTOMER REP. INITIALS
acknowledging your selection of the Service Protection Plan (SPP) and any options specified above.
You also are acknowledging your receipt of the Lucent Technologies Service Protection Plan document
reference on the back of this Agreement.
- ------------------------------------------------------------------------------------------------------------------------------------
11
<PAGE>
YOUR SIGNATURE ACKNOWLEDGES THAT YOU HAVE READ AND UNDERSTAND EACH OF THE TERMS AND CONDITIONS ON THE FRONT AND REVERSE SIDE OF THIS
AGREEMENT INCLUDING THE LIMITED WARRANTY, WARRANTY DISCLAIMERS AND LIMITATION OF LIABILITY. THESE TERMS AND CONDITIONS WILL ALSO
APPLY TO ANY SUBSEQUENT ORDERS, ORAL OR WRITTEN, ACCEPTED BY LUCENT. YOUR SIGNATURE ALSO AUTHORIZED LUCENT TO REQUEST CREDIT
INFORMATION FROM ART CREDIT REPORTING AGENCY OR SOURCE, ACCEPTANCE BY LUCENT IS SUBJECT TO CREDIT APPROVAL.
- ------------------------------------------------------------------------------------------------------------------------------------
Customer
Lucent Technologies Inc.
By: ______________________________________________ Accepted By:______________________________________
(Authorized Customer Representative's Sign(Date)
__________________________________________________ __________________________________________________
(Typed or Printed Name) (Typed or Printed Name)
__________________________________________________ __________________________________________________
(Title) (Date)
__________________________________________________ __________________________________________________
(Product Location Address) (Lucent Address)
__________________________________________________ __________________________________________________
(City) (State) (Zip) (City) (State) (Zip)
- ------------------------------------------------------------------------------------------------------------------------------------
Legend Term Length/ In Warranty/Term Post Warranty
Product Status Warranty Length Transaction Type Plan Maint. Type Maint. Type
- -------------- --------------- ---------------- ---------------- -------------
K-Other A-One Year J None F-Other A-SPP
N-Not Applicable B-90 Days K Other G-Business Day C-Other
U-Used/Return/Remanufactured J-None L Software License H-Around-the -Clock D-Business Day
W-New K-Other N Not Applicable J-None E-Around-The-Clock
N-Not Applicable PUR Purchase N-Not Applicable J-None
T-Two Year MNT Post warranty Maint. only W-SPP N-Not Applicable
001 Month To Month
- ------------------------------------------------------------------------------------------------------------------------------------
(C) 1996 Lucent Technologies Retention Requirement
Preparer - 6 yrs
After Cancellation or Expiration
Distribute to: [ ]Part 1 (Original) [ ]Part 2 (Office Copy) [ ]Part 3 (Customer ______) [ ]Part 4 (Customer Preliminary)
</TABLE>
12
EXHIBIT 10.11
MICROFRAME
- --------------------------------------------------------------------------------
MicroFrame, Inc., 21 Meridian Road, Edison, New Jersey 08820
Tel. (732) 494-4440 Fax (732) 494-4570
To: Stephen B. Gray
From: Stephen Deixler
Date: April 1, 1998
RE: FY99 compensation package
The following will be the terms of your compensation for FY99. This package
represents recognition for the job you have done at Microframe over the last two
years as well as your increased span of responsibilities going forward after
being elected as Microframe's CEO, in addition to the past and continuing roles
you have as President and COO of Microframe.
Position: CEO and President
Salary: Your salary will be $225,000/yr.
Term: This agreement is effective for the next two years.
Other: In addition to your salary, you will be entitled to
and receive the following:
(1) Fully paid medical/dental, including any/all
out of pocket Expenses and/or costs
(2) $1,500/mo. net car allowance
(3) 28 days of vacation with contractual
provisions equivalent to other
Company officers. Specifically,
Section 3(d) which entitles the
officer to either a) 28 days to be
used/taken at officers' discretion
as business conditions allow and/or
b) compensation in respect of
earned, but unused vacation days per
the executive vacation policy
currently in place by the company.
(4) If company achieves its performance
objectives as set forth by the Board
for FY99 you will receive:
- 60,000 ISO options based on 4/1/98
share price
WE BRING WIZARDRY TO REMOTE NETWORK MANAGEMENT
WWW.MCFR.COM
<PAGE>
MICROFRAME
- --------------------------------------------------------------------------------
MicroFrame, Inc., 21 Meridian Road, Edison, New Jersey 08820
Tel. (732) 494-4440 Fax (732) 494-4570
- $25,000 cash bonus.
(5) $30,000 cash signing/retention bonus
(6) Acceleration of all options you own, if/when
MicroFrame, Inc. is sold or if there is a
change of control/ownership in MicroFrame.
(7) Any of your 400,000 non-qualified stock
options that are not vested will become
vested, transferrable, assignable and will be
Converted from non-qualified stock options to
Incentive Stock Options (ISO's) to allow for
immediate selling of Options without the one
year holding period non-qualified stock
options impose. This will be done in their
entirety immediately upon signing of this
agreement.
(8) Any options you elect to exercise/sell up to a
total of 400,000 over the next two years with
a maximum of 200,000 in any one year.... will
be backfilled in the exact same
quantities/type as were sold. These Options
will be replaced at a strike price based upon
the then current average of the bid/ask of
shares of MicroFrame, Inc.
Please let me know if you have any questions.
Good luck, Agreed:
/s/Stephen M. Deixler /s/ Stephen B. Gray
- ------------------------- ----------------------------
Stephen M. Deixler Stephen B. Gray
Chairman President and CEO
cc: John McTigue
WE BRING WIZARDRY TO REMOTE NETWORK MANAGEMENT
WWW.MCFR.COM
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
--------
We hereby consent to the incorporation by reference in the registration
statements on Form S-3 (File No. 333-09507) and Form S-8 (File Nos. 33-61837,
333-14681 and 333-76809) of our report dated July 12, 1999 relating to the
financial statements which appear in ION Networks, Inc. and Subsidiaries' Annual
Report on Form 10-KSB for the year ended March 31, 1999.
/s/ PricewaterhouseCoopers LLP
New York, New York
July 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-START> APR-01-1998 APR-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<PERIOD-TYPE> 12-MOS 12-MOS
<CASH> 165,994 507,726
<SECURITIES> 0 0
<RECEIVABLES> 3,242,867 2,793,319
<ALLOWANCES> 150,000 126,000
<INVENTORY> 2,554,643 1,425,351
<CURRENT-ASSETS> 6,668,845 5,120,101
<PP&E> 2,001,776 1,393,604
<DEPRECIATION> 991,347 971,903
<TOTAL-ASSETS> 15,973,475 6,179,038
<CURRENT-LIABILITIES> 7,370,895 2,176,084
<BONDS> 0 0
<COMMON> 8,287 4,899
0 0
0 0
<OTHER-SE> 6,392,751 3,998,055
<TOTAL-LIABILITY-AND-EQUITY> 15,973,475 6,179,038
<SALES> 12,673,917 10,217,911
<TOTAL-REVENUES> 12,673,917 10,217,911
<CGS> 5,464,708 4,285,134
<TOTAL-COSTS> 18,381,120 9,821,806
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (100,573) (4,344)
<INCOME-PRETAX> (5,764,764) 406,649
<INCOME-TAX> 232,239 (304,661)
<INCOME-CONTINUING> (5,997,003) 711,310
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,997,003) 711,310
<EPS-BASIC> (1.09) 0.15
<EPS-DILUTED> (1.09) 0.14
</TABLE>
