UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-18672
ZOOM TELEPHONICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Canada 04-2621506
------ -----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
207 South Street, Boston, Massachusetts 02111
--------------------------------------- -----
(Address of Principal Executive Offices in the U.S.) (Zip Code)
1200 Royal Center
1055 West Georgia Street, Vancouver, B.C. V6E 3P3
----------------------------------------- --------
(Address of Principal Executive Offices in Canada) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 423-1072
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
The number of shares outstanding of the registrant's Common Stock, No Par Value,
as of August 14, 1996 was 7,443,204 shares.
1
<PAGE>
ZOOM TELEPHONICS, INC.
INDEX
Page
----
Part I. Financial Information
Item 1. Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 3
Consolidated Statements of Income for the Three
Months Ending June 30, 1996 and 1995 4
Consolidated Statements of Income for the Six
Months Ending June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows for the Six
Months Ending June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management Discussion and Analysis of
Financial Condition and Results of Operations 9 - 11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ZOOM TELEPHONICS, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
6/30/96 12/31/95
ASSETS (Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,064,274 $ 150,671
Accounts receivable, net of reserves
for doubtful accounts, returns and allowances of
$3,617,960 at 6/30/96 and $2,717,463 at 12/31/95 10,385,501 20,396,314
Inventories 21,919,872 24,173,557
Deferred income taxes 3,280,176 1,513,461
Prepaid expenses and other assets 179,383 221,907
-------------- --------------
Total current assets 46,829,206 46,455,910
Property and equipment, net 3,699,312 3,138,907
Other non-current assets 1,423,620 -
-------------- --------------
$ 51,952,138 $ 49,594,817
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Credit line payable $ - $ 2,500,000
Accounts payable 3,728,739 18,635,269
Accrued expenses 948,669 948,911
Income taxes payable - 236,493
Total current liabilities 4,677,408 22,320,673
-------------- --------------
Stockholders' equity:
Common stock, no par value, 25,000,000 shares authorized; 7,439,804 shares
issued and outstanding at June 30, 1996
and 6,200,930 at December 31, 1995 24,820,047 7,289,577
Retained earnings 22,454,683 19,984,567
-------------- --------------
Total stockholders' equity 47,274,730 27,274,144
-------------- --------------
$ 51,952,138 $ 49,594,817
============== ==============
</TABLE>
3
<PAGE>
ZOOM TELEPHONICS, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ending June 30,
-------------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
Net sales $ 21,131,046 $ 17,122,043
Costs of goods sold 17,389,160 12,781,882
-------------- ---------------
Gross profit 3,741,886 4,340,161
Operating expenses:
Selling 1,951,639 1,719,363
General and administrative 868,914 518,626
Research and development 618,819 382,773
-------------- ---------------
Total operating expenses 3,439,372 2,620,762
-------------- ---------------
Income from operations 302,514 1,719,399
Other income, net 109,039 29,044
-------------- -----------------
Income before income taxes 411,553 1,748,443
Income tax expense 154,700 686,000
-------------- ---------------
Net income $ 256,853 $ 1,062,443
============== ===============
Income per common and common equivalent
share:
Primary $ .04 $ .18
============== ===============
Fully diluted $ .04 $ .18
============== ===============
Average common and common equivalent
shares outstanding:
Primary 7,260,203 6,014,971
============== ===============
Fully diluted 7,260,203 6,014,971
============== ===============
</TABLE>
4
<PAGE>
ZOOM TELEPHONICS, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ending June 30,
-------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Net sales $ 54,376,143 $ 37,461,007
Costs of goods sold 42,851,337 28,330,877
-------------- --------------
Gross profit 11,524,806 9,130,130
Operating expenses:
Selling 4,657,227 3,737,875
General and administrative 1,696,917 1,038,089
Research and development 1,229,903 786,568
-------------- --------------
Total operating expenses 7,584,047 5,562,532
-------------- --------------
Income from operations 3,940,759 3,567,598
Other income (expense), net (15,943) 50,295
------------- --------------
Income before income taxes 3,924,816 3,617,893
Income tax expense 1,454,700 1,415,000
-------------- --------------
Net income $ 2,470,116 $ 2,202,893
============== ==============
Income per common and common equivalent
share:
Primary $ .36 $ .37
============== ==============
Fully diluted $ .36 $ .37
============== ==============
Average common and common equivalent
shares outstanding:
Primary 6,783,672 6,015,260
============== ==============
Fully diluted 6,783,672 6,015,260
============== ==============
</TABLE>
5
<PAGE>
ZOOM TELEPHONICS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ending June 30,
----------------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,470,116 $ 2,202,893
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 233,472 116,562
Tax benefit from exercise of non-qualified
stock options 1,586,362 -
Changes in assets and liabilities:
Accounts receivable 10,010,813 3,604,362
Inventories 2,386,858 (3,337,553)
Prepaid expenses and other assets (1,760,033) (480,315)
Accounts payable and accrued expenses (14,906,772) (509,775)
Accrued income taxes (236,493) (209,241)
------------ -------------
Net cash provided by (used in) operating activities (215,677) 1,386,933
------------ -------------
Cash flows from investing activities:
Purchase of certain assets of a business product line (81,375) -
Additions to property, plant and equipment (642,524) (574,902)
------------ -------------
Net cash used in investing activities (723,899) (574,902)
------------ -------------
Cash flows from financing activities:
Net repayments under revolving bank line of credit (2,500,000) -
Proceeds from the issuance of common stock 11,596,524 -
Proceeds from exercise of stock options 2,756,655 -
------------ -------------
Net cash provided by financing activities 11,853,179 -
------------ -------------
Net increase in cash and cash equivalents 10,913,603 812,031
Cash and cash equivalents, beginning of period 150,671 975,400
------------ -------------
Cash and cash equivalents, end of period $11,064,274 $1,787,431
============ =============
</TABLE>
6
<PAGE>
ZOOM TELEPHONICS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The consolidated financial statements of Zoom Telephonics, Inc., (the
"Company") presented herein have been prepared pursuant to the rules of the
Securities and Exchange Commission for quarterly reports on Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. These statements should be read in conjunction
with the consolidated financial statements and notes thereto for the year ending
December 31, 1995 included in the Company's 1995 Annual Report on Form 10-K.
The consolidated balance sheet as of June 30, 1996, the consolidated
statements of income for the three and six months ending June 30, 1996 and 1995,
and the consolidated statements of cash flows for the six months ending June 30,
1996 and 1995 are unaudited, but, in the opinion of management, include all
adjustments (consisting of normal, recurring adjustments) necessary for a fair
presentation of results for these interim periods.
The results of operations for the three and six months ending June 30,
1996 are not necessarily indicative of the results to be expected for the entire
fiscal year ending December 31, 1996.
Certain expenses, including employee benefit and occupancy expenses,
have been reclassified from general and administrative expense to cost of goods
sold, selling, and research and development expenses in order to more accurately
reflect the Company's cost structure. These reclassifications have been made to
the 1995 statements in order to conform to the 1996 presentation.
(2) Inventories
<TABLE>
<CAPTION>
Inventories consist of the following: 6/30/96 12/31/95
-------------- -------------
<S> <C> <C>
Raw materials $ 12,585,589 $ 13,300,407
Work in process 4,428,969 6,647,963
Finished goods 4,905,314 4,225,187
-------------- -------------
$ 21,919,872 $ 24,173,557
============== ============
</TABLE>
(3) Secondary Stock Offering
On April 11, 1996 the Company sold 800,000 shares of its common stock
in a registered offering on a direct placement basis for proceeds of $11,596,524
net of expenses and underwriters fees of $903,476. The net proceeds were used to
repay certain current and long term debts of the Company.
7
<PAGE>
(4) Product Line Acquisition
On June 24, 1996, the Company issued 102,641 shares of common stock to
acquire certain assets, including inventory and property and equipment,
associated with a product line of Tribe Computer Works, Inc. The acquisition was
recorded using the purchase method of accounting, whereby the net assets
acquired were recorded at their estimated fair values and the excess of cost
over the fair value of the assets acquired of $1,387,777 was allocated to
goodwill and is being amortized over 10 years. Transaction costs incurred to
complete the acquisition amounted to $82,776 and are included in the total
consideration allocated to the assets purchased, including goodwill.
(5) Stock Options
Proceeds from the exercise of stock under the Company's stock option
plans and income tax benefits attributable to stock options exercised are
credited to common stock. During the six months ended June 30, 1996, options
with respect to 318,233 shares were exercised and such exercise resulted in a
tax benefit to the Company of $1,586,362. This amount is recorded as a deferred
tax asset on the balance sheet.
(6) Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
Six Months Ending June 30,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash paid during the year for interest: $ 163,138 $ -
Cash paid during the year for income taxes: 1,873,000 1,210,000
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
During the second quarter of 1996, the Company issued 102,641 shares of common
stock to acquire certain assets of Tribe Computer Works, Inc. This non-cash
transaction has been excluded from the statement of cash flows.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Zoom Telephonics, Inc. ("Zoom" or "the Company") achieved net sales of
$21,131,046 for its second quarter ending June 30, 1996, up 23% from the second
quarter of 1995. Net sales were $54,376,143 for the six-month period ending June
30, 1996, up 45% from the first half of 1995. Second quarter 1996 net income of
$256,853 or $.04 per share was down from $1,062,443 or $.18 per share in the
second quarter of 1996, primarily due to lower gross margin. Net income for the
first half of 1996 rose to $2,470,116 from $2,202,893 for the first half of 1995
due to increased sales, but fell to $.36 per share from $.37 per share due to an
increase in average shares to 6,783,672 from 6,015,260. Net income decreased to
1.2% of sales for the second quarter of 1996 from 6.2% of sales for the second
quarter of 1995 primarily because gross margin declined to 17.7% from 25.3%. Net
income for the first half of 1996 fell to 4.5% of sales from 5.9% for the first
half of 1995 as gross margin declined to 21.2% from 24.4%.
Net sales for the quarter ending June 30, 1996 increased $4,009,003 or
23% over the second quarter of 1995, primarily due to strong growth in OEM sales
and in sales of Zoom brand products outside North America. For the same reason,
sales for the first half of 1996 increased $16,915,136 or 45% over the first
half of 1995. OEM sales grew to 28% of overall sales in the second quarter of
1996 from 11% in the second quarter of 1995 as the percentage of personal
computers shipping with a faxmodem increased and as Zoom increased its efforts
in the OEM area.. Zoom brand sales outside North America grew to 22% of overall
sales in the second quarter of 1996 from 12% for the second quarter of 1995 due
to expansion of the number of products approved for sale outside of North
America and increased distribution.
Gross margin declined to 17.7% in the second quarter of 1996 from 25.4%
in the second quarter of 1995 due to increased price competition and resulting
lower selling prices and price protection allowances. In addition, gross margins
declined due to the significantly higher mix of OEM sales, which typically
result in lower gross margins and lower associated selling expenses. For the
same reasons, gross margins for the first half of 1996 declined to 21.2% from
24.4% for the first half of 1995.
Operating expenses increased by $818,610 to 16.3% of sales in the
second quarter of 1996 from 15.3% in the second quarter of 1995. Selling and
marketing expenses during the second quarter of 1996 increased over the second
quarter of 1995 by $232,276, but declined as a percentage of sales to 9.2% from
10.0% primarily due to the increased percentage of OEM sales and lower
associated selling expenses. Selling and marketing expenses for the first half
of 1996 increased by $919,352 over the first half of 1995; but declined as a
percentage of sales to 8.6% from 10.0% primarily due to the higher mix of OEM
sales.
General and administrative expenses increased by $350,288 to
4.1% of sales during the second quarter of 1996 from 3.0% of sales in the second
quarter of 1995. For the first half of 1996 general and administrative expenses
increased by $658,828 to 3.1% of sales from 2.8% for the first half of 1995.
These increases were primarily due to increased personnel expenses to support
the Company's growth.
9
<PAGE>
Research and development expenses increased by $236,046 to
2.9% of sales during the second quarter of 1996 from 2.2% of sales in the second
quarter of 1995. For the first half of 1996, research and development expenses
increased $443,335 to 2.3% of sales from 2.1% of sales for the first half of
1995. The increases were primarily due to the addition of personnel to support
the Company's development efforts and increased government approvals required
for international sales.
Liquidity and Capital Resources
- - -------------------------------
Zoom's balance sheet was strong on June 30, 1996. Working capital rose
to $42,151,798 from $24,135,237 on December 31, 1995, the current ratio improved
to 10.0 from 2.1, and cash increased to $11,064,274 from $150,671. In addition,
the Company had an unused $10 million line of credit on June 30, 1996. On April
11, 1996 the Company sold 800,000 shares of its common stock in a registered
offering on a direct placement basis for net proceeds of $11,596,524.
Operating activities used $215,677 in cash during the first six months
of 1996. The primary use of cash was reduction in accounts payable by
$14,906,772. The primary generators of cash were decreases in accounts
receivable of $10,010,813, decreases in inventory of $2,386,858, and net income
of $2,470,116. The reduction in accounts receivable was primarily due to a
reduction of days sales outstanding and lower sales in the second quarter of
1996 than in the fourth quarter of 1995.
Zoom's capital expenditures of $723,899 during the first six months of
1996 reflected purchases of computer equipment, leasehold improvements to a new
manufacturing facility to be occupied in the third quarter, and continuing
renovation of its headquarters. In addition, on June 24, 1996 the Company issued
102,641 shares of common stock to acquire certain assets of Tribe Computer
Works, Inc., including intellectual property, inventory, and property and
equipment. The acquisition was recorded using the purchase method of accounting,
whereby the net assets acquired were recorded at their estimated fair values and
the excess of cost over the fair value of the assets acquired of $1,387,777 was
allocated to goodwill that is being amortized over 10 years.
During the first six months of 1996 financing activities provided the
Company with $11,853,179 of cash. The Company realized net proceeds of
$11,596,524 from the sale of 800,000 shares of its common stock in a registered
offering on a direct placement basis, and proceeds of $2,756,655 from the
exercise of stock options. These proceeds were offset by $2,500,000 of
repayments against the Company's revolving line of credit.
It is anticipated that the Company's existing cash, together with funds
generated from operations and borrowings under its revolving credit agreement,
will be sufficient to meet its normal working capital requirements.
10
<PAGE>
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
- - ------------------------------------------------------------------------------
Forward-looking statements in this report, including without limitation
statements relating to the adequacy of the Company's resources, are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such forward-looking statements
involve risks and uncertainties, including without limitation: potential
quarterly fluctuations in the Company's operating results, seasonality of sales,
rapid technological change, competition, the concentration of the Company's
customers, the Company's dependence upon a principal supplier for its modem
chipsets and on third-party assemblers, risks associated with inventory
management, risk of product returns and price-protection, sales channel risks,
risks associated with international sales, the ability of the Company to manage
its growth, the Company's reliance on key employees, risks associated with
proprietary technology, and other risks and uncertainties indicated from time to
time in the Company's filings with the Securities and Exchange Commission.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. - Legal Proceedings
On March 21, 1996, James A. Storer and REFAC International, Ltd., a
company engaged in the business of acquiring and licensing patents, filed a
complaint in the United States District Court, District of Massachusetts, naming
Hayes Microcomputer Products, Inc. and the Company as defendants in a patent
lawsuit. The complaint alleges that the V.42 bis international
telecommunications standard for data compression in computer modems is covered
by a patent owned by the plaintiffs, and the defendants' modems that incorporate
this standard infringe the patent. While the complaint seeks to permanently
enjoin the defendants from infringing the patent and monetary damages for past
infringement, REFAC has offered to negotiate a royalty for licensing the patent.
The Company believes that the alleged infringement involves technology
incorporated in chipsets provided to it from Rockwell International and that, if
so, the Company will be indemnified by Rockwell. The Company forwarded a copy of
this complaint to Rockwell for further action. By an agreement dated July 12,
1996, Rockwell has agreed, subject to certain conditions, to assume defense of
Zoom against the action.
ITEM 4. - Submission of Matters to a Vote of Security Holders
Zoom held its Annual Meeting of Shareholders on June 11, 1996. At the
meeting, the shareholders approved (a) the re-election of the Board of Directors
of Zoom Telephonics, Inc., (b) the appointment of KPMG Peat Marwick LLP as
Zoom's independent auditors for the year ending December 31, 1996, (c) an
amendment to the Zoom 1991 Directors Stock Option Plan, (d) permission for Zoom
to enter into indemnification agreements with its directors and at the
discretion of Zoom's Board of Directors, with certain of its officers and (e)
that Zoom cease to be a reporting issuer in British Columbia and to apply for an
order under the Securities Act of British Columbia to that effect . The number
of shares present at the meeting was approximately 4,877,162 representing 68.42%
of shares entitled to vote. The results of the votes were as follows:
(a) Election of Directors:
<TABLE>
<CAPTION>
Nominee For Against Abstain
------- --- ------- -------
<S> <C> <C> <C>
Frank B. Manning 4,771,063 0 7,135
Peter R. Kramer 4,771,063 0 7,135
Bernard Furman 4,771,063 0 7,135
J. Ronald Woods 4,771,063 0 7,135
L. Lamont Gordon 4,771,063 0 7,135
</TABLE>
(b) Approval of the appointment of KPMG Peat Marwick LLP as
independent auditors for the year ending December 31,
1996:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Approval 4,852,497 0 8,325
</TABLE>
12
<PAGE>
(c) Approval of an amendment to the Zoom 1991 Directors
Stock Option Plan:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Approval 4,615,803 248,612 12,747
</TABLE>
(d) Approval to permit Zoom to enter into indemnification
agreements with its directors and at the discretion of
Zoom's Board of Directors, with certain of its officers.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Approval 4,653,088 116,375 15,415
</TABLE>
(e) Approval that Zoom cease to be a reporting issuer in
British Columbia and to apply for an order under the
Securities Act of British Columbia to that effect.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Approval 2,856,163 6,300 8,258
</TABLE>
ITEM 6 - Exhibits and reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibit Description
------- ---------------------------------------------------------
<S> <C>
10.1 Amendment to Zoom 1991 Directors Stock Option Plan
10.5 Lease Between Zoom Telephonics and "E" Street Associates
10.6 Form of Indemnification Agreement
11 Statement of Computation of Per Share Earnings
</TABLE>
(b) No reports on Form 8-K were filed by the Company during the
quarter ending June 30, 1996
13
<PAGE>
ZOOM TELEPHONICS, INC.
FINANCIAL INFORMATION NOT AUDITED
The preceding financial information, with the exception of the consolidated
balance sheet at December 31, 1995, has not been audited. However, in the
opinion of management, all material adjustments, consisting only of normal
recurring accruals necessary to present a fair statement of the results for
these periods, have been reflected. The results for these periods are not
necessarily indicative of the results for the full fiscal year.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZOOM TELEPHONICS, INC.
Date: August 14, 1996 By: /s/ Frank Manning
--------------------------
Frank B. Manning, President
Date: August 14, 1996 By: /s/ Steven T. Shedd
----------------------------
Steven T. Shedd, Vice President of Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
ZOOM TELEPHONICS, INC.
1991 DIRECTORS STOCK OPTION PLAN,
AS AMENDED THROUGH APRIL 19, 1996
Article 1 - Purpose
This 1991 Directors Stock Option Plan (the "Plan") is intended to enable
Zoom Telephonics, Inc. (the "Company") to attract and retain the services of
experienced and knowledgeable Directors for the benefit of the Company and its
stockholders by providing them with opportunities to purchase stock in the
Company pursuant to the exercise of options.
Article 2 - Administration of the Plan
The Plan shall be administered by the Board of Directors (the "Board") of
the Company. The Board may from time to time adopt such rules and regulations
for carrying out the Plan as it may determine in its sole discretion. No member
of the Board shall be liable with respect to any action or determination made in
good faith regarding the Plan or any option granted under it. The Board shall
have no discretion with respect to the selection of recipients of grants, or the
timing, pricing or the amount of stock option grants under the Plan.
Article 3 - Eligible Directors
Options shall be granted to each Director of the Company in accordance with
Article 5 hereof, except any Director who is a full-time employee or full-time
officer of the Company or its subsidiaries shall not be eligible to receive
options under the Plan.
Article 4 - Stock
The stock subject to the options granted hereunder shall be shares of the
Company's authorized but unissued shares of common stock or shares of common
stock reacquired by the Company including shares purchased in the open market
("Common Stock"). The maximum number of shares which are hereby reserved for
issuance and may be issued pursuant to this Plan is 198,000, subject to
adjustment as provided in Article 13. In the event any option granted under the
Plan shall expire, terminate or be cancelled for any reason without having been
exercised in full, or shall cease for any reason to be exercisable in whole or
in part, the unpurchased shares subject thereto, to the extent the option ceases
to be exercisable, shall again be available under the Plan.
Article 5 - Grant of Option
Each eligible Director shall automatically be granted an option to purchase
6,000 shares of Common Stock on each July 10 and January 10 of each year
beginning July 10, 1991, at a price per share determined in accordance with
Article 6 hereof. No option shall be granted hereunder to a person who ceases to
be a Director prior to the date on which such grant is to be made.
Article 6 - Price of Options
The price per share specified in each option granted under the Plan shall
be the fair market value per share of Common Stock on the date the option is
granted. Fair market value shall mean the closing price per share for the
Company's common shares on the Vancouver Stock Exchange on the date of the grant
or if such common shares are not listed on the Vancouver Stock Exchange, then on
such other stock exchange or market quotation system where such shares may from
time to time be listed on the date of the grant, subject to any applicable
regulatory rules.
Article 7 - Duration of Options
Subject to earlier termination as provided in Articles 9 and 10, each
option shall expire on the last day of the second year from the date of grant of
such option.
Article 8 - Restrictions on Exercise of Option
Subject to the provisions of Articles 9 through 12, each option granted
under of Article 5 shall become exercisable six months from the date on which
each such option is granted; provided that no option shall be exercisable prior
to approval of this Plan by the stockholders of the Company.
Article 9 - Termination of Service as a Director
If an optionee ceases to be a Director of the Company for any reason other
than death or disability (within the meaning of Section 105(d)(4) of the
Internal Revenue Code of 1986, as amended) his options shall terminate on the
date one month following the date of such cessation (but not later than their
specified expiration date).
Article 10 - Disability; Death
If an optionee ceases to be a Director as a result of disability, his
options shall terminate on the date one year following the date of such
cessation (but not later than their specified expiration date).
If an optionee dies while a Director or during the one month period
referred to in Article 9 or the one year period referred to above in this
Article 10, his options may be exercised to the extent they were exercisable on
the date of his death by his estate, or duly appointed representative, or
beneficiary who acquires the options by will or by the laws of descent and
distribution, and each such option shall terminate on the date one year
following the date of the optionee's death (but not later than its specified
expiration date).
Article 11 - Assignability
No option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution, and during the lifetime of the
optionee each option shall be exercisable only by him.
Article 12 - Terms and Conditions of Options
Options shall be evidenced by instruments (which need not be identical) in
such forms as the Board may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in Articles 6 through 11. The
Company shall not be obligated to deliver any shares unless and until, in the
opinion of the Company's counsel, all applicable United States, Canadian and
state and provincial laws and regulations have been complied with, nor, in the
event the outstanding common stock is at the time listed upon any stock
exchange, unless and until the shares to be delivered have been listed, or
authorized to be added to the list upon official notice of issuance, upon such
exchange, nor unless and until all other legal matters in connection with the
issuance and delivery of shares have been approved by the Company's counsel.
Without limiting the generality of the foregoing, the Company may require from
the optionee such investment representation or such agreement, if any, as
counsel for the Company may consider necessary in order to comply with the
Securities Act of 1933. The Company shall use its best efforts to effect any
such compliance and listing, and the optionee shall take any action reasonably
requested by the Company in such regard.
Article 13 - Adjustments
Upon the happening of any of the following described events, an optionee's
rights under options granted hereunder shall be adjusted as hereinafter
provided:
A. in the event shares of Common Stock of the Company shall be
subdivided or combined into a greater or smaller number of shares
or if, upon a merger, consolidation, reorganization, split-up,
liquidation, combination, recapitalization or the like of the
Company, the shares of the Company's Common Stock shall be
exchanged for other securities of the Company or of another
corporation, each optionee shall be entitled to purchase, subject
to the terms and conditions herein stated and to the terms and
conditions of each individual option, such number of shares of
Common Stock or amount of other securities of the Company or such
other corporation as were exchangeable for the number of shares of
Common Stock of the Company which such optionee would have been
entitled to purchase except for such action, and appropriate
adjustments shall be made in the purchase price per share to
reflect such subdivision, combination, or exchange; and
B. in the event the Company shall issue any of its shares as a stock
dividend upon or with respect to the shares of stock of the class
which shall at the time be subject to option hereunder, each
optionee upon exercising such an option shall be entitled to
receive (for the purchase price paid upon such exercise) the
shares as to which he is exercising his option and, in addition
thereto (at no additional cost), such number of shares of the
class or classes in which such stock dividend or dividends were
declared or paid, and such amount of cash in lieu of fractional
shares, as he would have received if he had been the holder of the
shares as to which he is exercising his option at all times
between the date of the granting of such option and the ate of its
exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares see forth in Article 4 hereof which are reserved for issuance
pursuant to the Plan or are subject to options which have heretofore been or may
hereafter be granted under the Plan shall also be appropriately adjusted to
reflect the events specified in paragraphs A and B above.
Article 14 - Exercise of Options
An optionee shall exercise an option (or any part or installment thereof)
by giving written notice to the Company at its principal office address,
identifying the option being exercised, specifying the number of shares as to
which such option is being exercised and accompanied by full payment of the
option price therefor either (1) in Canadian dollars, in cash or by certified
cheque or bank draft, or (2) in common shares without par value in the capital
of the Company owned by the optionee (and held at least one year if acquired
pursuant to the exercise of any stock option granted by the Company to the
optionee whether under the Plan or otherwise) having a fair market value (as
determined by the Board as of the date immediately preceding the date on which
the option is exercised and in accordance with all applicable laws and all
applicable rules and policies of relevant securities regulatory authorities)
equal to, or a fraction of a share less than, such purchase price (and if such
common shares are equal to a fraction of a share less than such purchase price,
then the option shall pay any balance remaining in cash), or (3) in a
combination of such common shares (as described above) and cash, certified
cheque or bank draft. However if the optionee desires to tender common shares in
payment of any part of the option price as contemplated in (2) or (3) above, the
optionee, before giving notice of exercise as aforesaid, shall first give
written notice (addressed to the principal office of the Company specifying the
number of shares which the optionee wishes to tender) that the optionee proposes
to tender common shares in order to exercise his option. The Board shall notify
the optionee whether the proposed tender is acceptable to the Board within ten
day of receipt of notice of the proposed tender. The acceptance of any tender of
common shares by an optionee pursuant to (2) or (3) in payment of the option
price shall be subject to the absolute discretion of the Board, who may only
accept the tender of such common shares in accordance with, and subject to the
requirements of, all applicable laws and all applicable rules and policies of
relevant securities regulatory authorities. If the proposed tender is
acceptable, the optionee must then give written notice of the exercise of his
option as aforesaid within five days of receipt of notice of the Board that the
proposed tender is acceptable. If the proposed tender is not acceptable and the
optionee, at that time, still desires to exercise this option, he may do so by
giving written notice of exercise of his option as aforesaid and paying the
option price in cash or by certified cheque or bank draft. The acceptance by the
Company of common shares tendered in payment of the option price shall be
treated as a purchase of those shares by the Company.
Unless the Board otherwise determines, the holder of an option shall have
no rights as a shareholder with respect to the shares issued upon exercise of
the option until the date of issuance of the certificate for those shares to
him. Unless the Board otherwise determines, no adjustment will be made for
dividends or similar rights for which the record date occurs after the exercise
of the option but before the date such certificates for shares is issued. In no
case may a fraction of a share be purchased or issued under the Plan.
Article 15 - Termination and Amendments to Plan
The Plan shall expire on April 30, 2001 (except as to options outstanding
on that date). Options may be granted under the Plan prior to the date of
stockholder approval of the Plan but such options shall be granted subject to
such approval The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders (a) the total number
of shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to Article 13); (b) the provisions of Article 3, regarding
eligibility, may not be modified; (c) the provisions of Article 5, relating to
the grants of options, may not be modified; (d) the provisions of Article 6,
regarding the exercise price at which shares may be offered pursuant to options,
may not be modified (except by adjustment pursuant to Article 13); and (e) the
expiration date of the Plan may not be extended. In no event shall the
provisions of Article 5 be modified more frequently than every six months. No
amendment shall have the effect of granting to any person or persons any
discretion as to the selection of any person to whom any option may be granted
under the Plan or the determination of the number or maximum number of shares of
stock which may be allocated to any Director or which may be covered by stock
options granted to any Director pursuant to the Plan. The foregoing restrictions
on the amendment to the Plan are intended to comport with the requirements of
Rule 16b-3 under the United States Securities Exchange Act of 1934, as amended
(together with any successor or supplementary law, rule or regulation, "Rule
16b-3"). Without limiting these restrictions, the Board shall not be permitted
to amend the Plan without the approval of the stockholders in any manner that
would result in the Plan not satisfying the conditions of Rule 16b-3 as then in
effect. No action of the Board or stockholders may, without the consent of an
optionee, substantially impair his rights under any option previously granted to
him.
Article 16 - Governmental Regulation
The Plan and the grant and exercise of options thereunder, and the
Company's obligation to sell and deliver shares of the Company's Common Stock
under such options, shall be subject to all applicable laws (including tax
laws), rules and regulations.
L E A S E
BETWEEN
"E" STREET ASSOCIATES
AND
ZOOM TELEPHONICS, INC.
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I N D E X
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Page
ARTICLE 1 BASIC LEASE PROVISIONS AND
ENUMERATION OF EXHIBITS........................................ 1
1.1 INTRODUCTION............................................. 1
1.2 BASIC DATA AND DEFINITION................................ 1
1.3 ENUMERATION OF EXHIBITS.................................. 5
ARTICLE 2 PREMISES, APPURTENANT RIGHTS AND RESERVATIONS............ 5
2.1 PREMISES................................................. 5
2.2 APPURTENANT RIGHTS AND RESERVATIONS...................... 6
2.3 COMMON BUILDING SIGN..................................... 7
ARTICLE 3 LEASE TERM AND EXTENSION RIGHTS.......................... 7
3.1 TERM..................................................... 7
3.2 EXTENSION OPTION......................................... 7
3.3 EXTENDED TERM RENT....................................... 8
ARTICLE 4 RENT, TAXES AND OTHER EXPENSES........................... 9
4.1 RENT..................................................... 9
4.2 ADDITIONAL RENT.......................................... 10
4.3 LATE CHARGE.............................................. 10
4.4 REAL ESTATE TAXES APPLICABLE TO THE
PROPERTY -- PAYMENT BY LANDLORD.............................. 10
4.5 TENANT'S SHARE OF REAL ESTATE TAXES...................... 11
4.6 TENANT'S RIGHT TO APPLY FOR ABATEMENT.................... 13
ARTICLE 5 USE OF PREMISES AND TENANT COVENANTS..................... 13
5.1 PERMITTED USE............................................ 13
5.2 TENANT COVENANTS......................................... 13
ARTICLE 6 IMPROVEMENTS TO THE PREMISES............................. 16
6.1 BY LANDLORD.............................................. 16
6.2 BY TENANT................................................ 17
6.3 SIGN..................................................... 17
6.4 DUMPSTER CHUTES.......................................... 18
6.5 STAGING PLATFORM......................................... 18
ARTICLE 7 ASSIGNMENT AND SUBLETTING................................ 18
7.1 PROHIBITION.............................................. 18
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ARTICLE 8 RESPONSIBILITY FOR REPAIRS AND
CONDITION OF PREMISES.......................................... 20
8.1 REPAIRS TO BE MADE BY LANDLORD........................... 20
8.2 TENANT'S AGREEMENT....................................... 21
8.3 NO DAMAGE................................................ 22
8.4 UTILITIES................................................ 22
ARTICLE 9 INDEMNITY AND PUBLIC LIABILITY INSURANCE................. 23
9.1 TENANT'S INDEMNITY....................................... 23
9.2 PUBLIC LIABILITY INSURANCE............................... 24
9.3 PROPERTY INSURANCE....................................... 24
9.4 TENANT'S RISK............................................ 25
9.5 INJURY CAUSED BY THIRD PARTIES........................... 25
9.6 TENANT'S FAILURE......................................... 25
9.7 WAIVER OF SUBROGATION.................................... 25
9.8 INSURANCE CERTIFICATES................................... 26
ARTICLE 10 CASUALTY AND TAKING...................................... 26
10.1 PARTIAL DAMAGE RESULTING FROM CASUALTY................... 26
10.2 SUBSTANTIAL DAMAGE RESULTING FROM CASUALTY............... 26
10.3 DAMAGE DURING THE LAST YEAR OF THE TERM.................. 27
10.4 DAMAGE TO OTHER PORTIONS OF THE BUILDING
AND UNINSURED CASUALTY....................................... 27
10.5 DEFINITION OF SUBSTANTIAL DAMAGE AND
PARTIAL DAMAGE............................................... 28
10.6 RIGHTS OF TERMINATION FOR TAKING......................... 28
10.7 ABATEMENT OF RENT........................................ 29
10.8 TEMPORARY TAKING......................................... 29
10.9 AWARD.................................................... 29
10.10 COMPLETION DATE FOR RESTORATION.......................... 30
ARTICLE 11 DEFAULT.................................................. 30
11.1 TENANT'S DEFAULT......................................... 30
11.2 LANDLORD'S DEFAULT....................................... 32
ARTICLE 12 BANKRUPTCY OR INSOLVENCY................................. 32
12.1 CHAPTER 7 PROCEEDINGS.................................... 32
ii
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Page
12.2 CHAPTER 11 PROCEEDINGS................................... 33
12.3 BANKRUPTCY EVENT FOLLOWING LEASE ASSUMPTION.............. 34
12.4 LEASE ASSIGNMENT FOLLOWING LEASE ASSUMPTION.............. 34
12.5 USE AND OCCUPANCY CHARGES................................ 34
12.6 FURTHER PROVISIONS....................................... 35
ARTICLE 13 MISCELLANEOUS PROVISIONS................................. 35
13.1 EXTRA HAZARDOUS USE...................................... 35
13.2 WAIVER................................................... 35
13.3 CUMULATIVE REMEDIES...................................... 36
13.4 COVENANT OF QUIET ENJOYMENT.............................. 36
13.5 NOTICE TO MORTGAGEE AND GROUND LESSOR.................... 37
13.6 ASSIGNMENT OF RENTS...................................... 37
13.7 SURRENDER................................................ 38
13.8 BROKERAGE................................................ 38
13.9 INVALIDITY OF PARTICULAR PROVISIONS...................... 38
13.10 PROVISIONS BINDING, ETC.................................. 38
13.11 RECORDING................................................ 39
13.12 NOTICES.................................................. 39
13.13 WHEN LEASE BECOMES BINDING............................... 39
13.14 PARAGRAPH HEADINGS....................................... 40
13.15 RIGHTS OF PARTIES HOLDING PRIOR INTERESTS................ 40
13.16 STATUS REPORT............................................ 41
13.17 SELF-HELP................................................ 41
13.18 HOLDING OVER............................................. 42
13.19 RULES AND REGULATIONS.................................... 42
13.20 REMEDYING DEFAULTS: INTEREST ON LATE RENT............... 42
13.21 NON-DISCRIMINATION....................................... 43
13.22 SURRENDER OF PREMISES.................................... 43
13.23 LANDLORD'S ACCESS TO PREMISES............................ 43
13.24 GOVERNING LAW............................................ 43
13.25 BINDING EFFECT........................................... 43
13.26 HAZARDOUS SUBSTANCES..................................... 43
ARTICLE 14 TENANT'S RIGHT TO TERMINATE LEASE........................ 44
ARTICLE 15 TENANT'S RIGHT TO LEASE.................................. 45
iii
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I N D E X (continued)
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Page
15.1 FIRST RIGHT TO LEASE..................................... 45
15.2 TENANT'S ELECTION........................................ 45
15.3 COMMENCEMENT DATE/NO REPRESENTATION
OR WARRANTY.................................................. 45
15.4 FORMAL LEASE AMENDMENT................................... 46
EXHIBIT A FLOOR PLAN......................................... 48
EXHIBIT 4.5 (C) TAX BILL........................................... 49
EXHIBIT ND NON-DISCRIMINATION AGREEMENT............................. 50
EXHIBIT B ROOF CONTRACT...................................... 51
EXHIBIT C GLUE CONTRACT...................................... 52
EXHIBIT D BROKER'S FEE AGREEMENT............................. 53
iv
<PAGE>
LEASE
THIS INSTRUMENT IS AN INDENTURE OF LEASE in which the Landlord and the
Tenant are the parties hereinafter named, and which relates to first and second
floor space in a certain two-story building (the "Building") known as or with an
address at 645 Summer Street, Boston, Massachusetts 02210, which Building,
together with the land on which the Building is located, is sometimes
hereinafter referred to as the "Property". The Property is located in Boston
Harbor Industrial Park, so-called (sometimes herein referred to as the
"Development") partially bounded by "E" Street, West First Street, Summer Street
and Pappas Way in Boston, Suffolk County, Massachusetts. The parties to this
instrument hereby agree with each other as follows:
ARTICLE 1
BASIC LEASE PROVISIONS AND
ENUMERATION OF EXHIBITS
1.1 INTRODUCTION. The following sets forth basic data elsewhere hereinafter
referred to in this Lease, and, where appropriate, constitute definitions
of the terms hereinafter listed.
1.2 BASIC DATA AND DEFINITION.
Lease Date: April 22, 1996.
Landlord: "E" STREET ASSOCIATES, a joint venture.
Present Mailing Address 655 Summer Street
of Landlord: Boston, MA 02210
Landlord's Representative: William T. Vrettas
Tenant: Zoom Telephonics, Inc.,
a Delaware corporation.
Present Mailing Address Zoom Telephonics, Inc.
<PAGE>
of Tenant: 207 South Street
Boston, MA 02111
ATTN: Peter Kramer,
Vice President
<TABLE>
<CAPTION>
Tenant's Representative:
<S> <C>
Initial Term: Sixty (60) calendar months (plus the partial month,
------------
if any, immediately following the Commencement
Date). The first twelve (12) month period
following the Lease Commencement Date (together
with the partial month (if any) immediately
following the Commencement Date) and each
twelve (12) month period thereafter shall be deemed
a "Lease Year" and collectively, "Lease Years."
Option to Extend: One five (5) year option as provided in Section .
----------------
Lease Commencement Date: The first business day after the earlier to occur of
-----------------------
(a) the expiration of six (6) weeks following the
completion of Landlord's Work or (b) the first day
that Tenant's personnel shall occupy all or any part
of the Premises for the conduct of its business
(which term "conduct of its business" shall in no
event mean or include the construction or
completion of Tenant's Work). Within thirty (30)
days following the Lease Commencement Date,
Landlord and Tenant shall execute and deliver a
written certificate confirming the date of the Lease
Commencement Date and the Rent Commencement
Date.
Rent Commencement Date: The Lease Commencement Date.
Fixed Rent: Lease Years
1 $3.25/SF NNN - $251,641/yr - $20,970.08/mo
2 $3.50/SF NNN - $270,998/yr - $22,583.17/mo
3 $4.25/SF NNN - $329,069/yr - $27,422.42/mo
4 $4.50/SF NNN - $348,426/yr - $29,035.50/mo
5 $4.50/SF NNN - $348,426/yr - $29,035.50/mo
Extended Term Rent: Fair Market Value, as defined in Section
hereof.
2
<PAGE>
Real Estate Taxes: As defined in Section hereof.
Tenant's Share of
Real Estate Taxes: As defined in Section hereof.
Permitted Uses: Light manufacturing; the assembling and
dismantling of certain equipment; warehouse and
distribution; and office space ancillary to the
foregoing uses.
Common Area Costs: Tenant's share of costs incurred by Landlord and
-----------------
chargeable to Tenant as Additional Rent for the
maintenance and repair of common areas within the
Development (which term "common areas" shall not
include the parking areas dedicated to each building
in the Development) shall be 10.2% (77,428 square
feet divided by 760,784 square feet = 10.2%).
Broker: CRF Partners, Inc. and Peter Elliot & Co.,
Incorporated.
Landlord's Work: Landlord's Work shall include, collectively, all of
---------------
the following: (i) Landlord shall deliver the
Premises in a broom-clean condition free of debris;
(ii) Landlord shall (a) strip the entire floor in the
Premises of all existing tile to bare concrete, (b)
repair or replace roof as necessary in conjunction
with Tenant's Work relating to the HVAC systems,
(c) repair any broken glass in the Premises, (d)
clean, repair or replace bathroom and bathroom
fixtures as necessary, (e) paint the steel and
concrete steps to the Property as necessary, (f)
repair entry overhangs to the Premises, (g) repair
drains, (h) generally clean-up the front of Property
including removal of debris and weed growth, (i)
ensure that the exterior flood lights are operable, (j)
ensure that the Building's elevator is operable and
(k) paint front of Building as necessary; (iii)
Landlord shall place the parking and truck turn-
around area serving the Building in good order and
condition; (iv) Landlord shall restore the front steps
to the Building; and (v) Landlord shall remove all
glue residue from approximately 30,000 square feet
of space located on the second floor of the Building
3
<PAGE>
at the southern end of the Premises.
Landlord's Work shall be completed by
Landlord prior to the Lease Commencement
Date at Landlord's sole cost and expense. In
order to effectuate the roof repairs
contemplated as part of Landlord's Work,
Landlord shall enter into the contract
attached hereto as Exhibit B (the "Roof
Contract") and cause the contractor (the
"Roof Contractor") set forth therein to
perform its obligations thereunder. In order
to effectuate the glue residue removal
contemplated as part of Landlord's Work,
Landlord shall enter into the contract
attached hereto as Exhibit C (the "Glue
Contract") and cause the contractor (the
"Glue Contractor") set forth therein to
perform its obligations thereunder.
Tenant's Work: Tenant's Work is anticipated to include, at a
-------------
minimum cost of $150,000, collectively, all of the
following, in each case subject to Landlord's prior
written consent, not to be unreasonably withheld or
delayed: (i) bringing the HVAC and electrical
systems servicing the Premises up to good working
order, condition and repair; (ii) installing air
conditioning units in the Premises at Tenant's
discretion for use in its manufacturing area; (iii)
performing the work contemplated in Sections ,
and hereof; and (iv) otherwise making the
Premises tenantable for its planned use,
including, without limitation, cosmetic
improvements as necessary. Tenant's Work
shall be completed by Tenant at Tenant's
sole cost and expense. Tenant shall have
access to the Premises from and after the
date hereof in order to complete Tenant's
Work, provided that (i) any Tenant's Work
commenced prior to the completion of
Landlord's Work shall be undertaken in a
manner so as to minimize any possible
disruption or interference with Landlord's
completion of Landlord's Work and (ii) upon
Landlord's request, Tenant agrees to cease
promptly any Tenant's Work which Landlord
reasonably believes shall interfere with or
delay the completion of any of Landlord's
Work. From and after the date hereof, Tenant
also shall have access to the
4
<PAGE>
first floor of the Building to the extent
reasonably necessary to complete Tenant's
Work. Tenant agrees to use reasonable
efforts to complete Tenant's Work as soon as
is reasonably possible.
</TABLE>
1.3 ENUMERATION OF EXHIBITS. The following Exhibits are a part of the Lease,
are incorporated herein by reference, attached hereto, and are to be
treated as a part of this Lease for all purposes. Undertakings contained
in such Exhibits are agreements on the part of Landlord and Tenant,
respectively, to perform the obligations stated therein to be performed by
Landlord and Tenant, as and where stipulated.
Exhibit A: Drawing First and Second Floor Plan,
645 Summer Street, Boston, MA dated
(the "Premises").
Exhibit 4.5 1996 Fiscal Year Tax Bill.
Exhibit ND: Non-Discrimination Compliance Agreement.
Exhibit B: Roof Contract.
Exhibit C: Glue Contract.
Exhibit D: Broker's Fee Agreement.
ARTICLE 2
PREMISES, APPURTENANT RIGHTS AND RESERVATIONS
2.1 PREMISES. Landlord hereby demises and leases to Tenant for the Term of
this Lease and upon the terms and conditions hereinafter set forth, and
Tenant hereby hires and accepts from Landlord, on such terms and
conditions, the Premises in its "as is" condition in the Building,
excepting Landlord's Work. The Premises contains 77,428 rentable square
feet of space and shall include sole control and exclusive use of the
freight elevator and two (2) loading docks located on the south side of
the Building and the freight elevator and one (1) loading dock located on
the north side of the Building, as more particularly described in Exhibit
A. Tenant shall have access to the Premises twenty-four (24) hours per
day, seven (7) days per week during the term hereof. Landlord hereby
represents to Tenant that, as of the date hereof, the Premises has
automatic sprinklers and that the Permitted Uses are permitted as of right
under the Zoning Code of the City of Boston, as amended.
2.2 APPURTENANT RIGHTS AND RESERVATIONS. (a) Tenant shall have, as
appurtenant to the Premises, the non-exclusive right to use in common
with others: (i) the common lobbies, toilets and corridors of the
Building, and the pipes, ducts, conduits,
5
<PAGE>
wires and appurtenant meters and equipment serving the Premises in common
with others, (ii) common walkways and driveways necessary for access to
the Building, and (iii) common parking spaces for seventy-seven (77)
automobiles within the common parking area of the Development (i.e.
parking areas not designated by suitable markings or otherwise as
exclusive parking spaces for other tenants of the Development), for the
parking of motor vehicles, but such rights shall always be subject to
reasonable rules and regulations of general application to tenants of the
Building and of the Development, as applicable, from time to time made by
Landlord of which Tenant is given notice, and to the right of Landlord to
reasonably designate and change from time to time areas and facilities so
to be used. Notwithstanding the foregoing, Landlord shall designate
seventy-seven (77) parking spaces as shown on the Plot Plan annexed hereto
as the Tenant's Parking Space Plan, such designated spaces at Lease
inception shall be known as Tenant's Parking Spaces, subject to
re-designation by Landlord from time to time as hereinabove provided,
subject to Tenant's prior written consent which shall not be unreasonably
withheld or delayed. Tenant acknowledges that the parking area is not
policed and Tenant's use thereof by Tenant and those claiming through or
under Tenant is at the sole risk of Tenant.
(b) Excepted and excluded from the Premises are the ceiling, floor,
perimeter walls and exterior windows, except the inner surfaces of each
thereof, and any space in the Premise used for shafts, stacks, conduits,
fan rooms, ducts, wires and appurtenant fixtures serving other parts of
the Building exclusively or in common with other parts of the Premises,
but the entry doors (and related glass and finish work) to the Premises
are a part thereof; and Tenant agrees that Landlord shall have the right
from time to time, without unreasonable interference with Tenant's use:
(i) to install, use, maintain, repair, replace and relocate for
service to the Premises and other parts of the Building, or
either, pipes, ducts, conduits, wires and appurtenant
fixtures, wherever located in the Premises or the Building,
and
(ii) to alter or relocate any other common facility, provided that
substitutions are substantially equivalent or better.
Installations, replacements and relocations referred to in (i)
above shall be located so far as practicable above ceiling
surfaces, below floor surfaces or within perimeter walls of
the Premises. Tenant shall install and maintain, as Landlord
may require reasonably, proper access panels in any hung
ceilings or walls as may be installed by Tenant in the
Premises to afford access to any facilities above the ceiling
or within or behind the walls.
(c) To assist Landlord in preserving the parking area referred to in (a)
above for Tenant's use, Landlord reserves the right to require Tenant to
cause its employees to affix to their automobiles one identification
sticker as furnished by Landlord which must be affixed as directed by
Landlord as evidence that they are entitled to use said
6
<PAGE>
designated parking area. However, Landlord shall not be obligated to
police the use of such area, Tenant recognizing that the parking area is
not located in an attended parking lot, but is part of a larger parking
area within which other tenants of the Development, and those having
business with such tenants, use the parking areas which service the
Development in common. Tenant agrees that it, and all persons claiming by,
through and under it, shall at all times abide by all reasonable rules and
regulations promulgated by Landlord with respect to the use of the parking
facilities provided by Landlord within the Development. Without
limitation, Tenant shall be fully responsible to cause all its employees
to park their cars only in such areas upon the Development as Landlord may
from time to time designate. To this end, Tenant shall furnish to
Landlord, upon Landlord's request at reasonable intervals, the license
numbers of automobiles of all its employees.
2.3 COMMON BUILDING SIGN. Landlord, at its sole cost and expense, shall add
Tenant to the existing sign in the Development promoting the tenants in
the Building.
ARTICLE 3
LEASE TERM AND EXTENSION RIGHTS
3.1 TERM. The Initial Term of this Lease shall be the period specified in
Section hereof, as the "Initial Term", unless sooner terminated as herein
provided. The Initial Term of this Lease shall commence on the Lease
Commencement Date. The "Term" of this Lease shall be the Initial Term as
same may be extended as herein provided.
3.2 EXTENSION OPTION. Tenant shall have the right to extend the term of this
Lease provided that this Lease at the time being in full force and effect,
and Tenant not then being in any default for which Landlord was at the
time entitled to terminate this Lease, for an additional period of five
(5) years, upon the following terms and conditions:
(a) Such right of extension shall be exercised, if at all, upon not less
than six (6) months', nor more than one (1) years' prior written notice
being given from Tenant to Landlord of Tenant's desire so to extend the
term of this Lease.
If a notice is given otherwise in compliance with this Section, no further
instrument shall be required to be executed but the term of this Lease
shall, thereupon, be extended, subject to the terms of this Section;
(b) Such right of extension, having been exercised, shall thereby be
terminated, so that there shall be no further right of extension with
respect to the option exercised;
(c) Such notice of extension executed by an individual who is, at the time
the President, Treasurer or any Vice President of Tenant shall
conclusively be treated as the
7
<PAGE>
valid and binding act of Tenant; and any notice of extension, to be
effective, must be signed by one of such officers;
(d) For the period of such extension of the term of this Lease, Fixed Rent
shall be the greater of (i) the then current rent; or (ii) the then fair
market value which shall be determined pursuant to Section hereof.
3.3 EXTENDED TERM RENT. If within thirty (30) days after Tenant exercises the
Right of Extension in accordance with Section , Landlord and Tenant fail
to reach mutual agreement as to the fair market rental value of the
Premises to be paid by Tenant as annual Fixed Rent during the Extended
Term, then the annual Fixed Rent (exclusive of payments on account of real
estate taxes, operating costs, Additional Charges and other amounts
provided herein) payable during such Extended Term shall be the fair
market rental value of the Premises determined without regard to Tenant's
Work, as follows:
Either the Landlord or the Tenant (the "Initiating Party") shall initiate
the proceedings for such determination by notice to the other, and by
designating the name and address of an MAI Appraiser willing to act in
such determination. Within fifteen (15) days after receipt by the other
party (the "Responding Party") of such notice, the Responding Party shall,
by notice to the Initiating Party, designate the name and address of
another MAI appraiser willing so to act. If the Responding Party shall
fail neglect or refuse within said 15-day period to designate another
appraiser willing so to act, the appraiser designated b the Initiating
Party shall alone conduct the appraisal. If two appraisers have been
designated as aforesaid, such appraisers shall appoint an additional MAI
Appraiser (the "Additional Appraiser") who is willing so to act, and
notice of such designation shall be given to the Landlord and to the
Tenant. The resulting board of appraisers shall, forthwith upon their
appointment, determine the fair rental value of the Premises. Landlord and
Tenant shall each pay the cost of the appraiser it designates and shall
share equally the cost of the Additional Appraiser. Any determination by
the sole appraiser, if there be only one, or by a majority of the
appraisers, shall be final and binding upon Landlord and Tenant, but if a
majority of the appraisers are unable to agree upon a determination, the
determination of the Additional Appraiser shall be conclusive of the fair
rental value of the Premises and binding upon the parties.
ARTICLE 4
RENT, TAXES AND OTHER EXPENSES
4.1 RENT. Tenant agrees to pay to Landlord, or as directed by Landlord, at
Landlord's Present Mailing Address specified in Section hereof, or at such
other place as Landlord shall from time to time designate by notice, on
the Rent Commencement Date, and thereafter monthly, in advance, on the
first day of each and every calendar month during the Lease Term, a sum
equal to the monthly Fixed Rent specified in Section hereof. Rent for any
partial month shall be paid by Tenant to Landlord at such monthly
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rate on a pro-rated basis, and, if the Lease term commences on a day other
than the first day of a calendar month, the first payment which Tenant
shall make to Landlord shall be a payment equal to a proportionate part of
such monthly Fixed Rent (adjusted as aforesaid) for the partial month from
the Rent Commencement Date to the first day of the succeeding calendar
month, payable on the first of the following calendar month. Other charges
payable by Tenant on a monthly basis, as hereinafter provided, likewise
shall be prorated, and the first payment on account thereof shall be
determined in similar fashion; and other provisions of this Lease calling
for monthly payments shall be read as incorporating this undertaking by
Tenant.
Except as herein expressly otherwise provided, Fixed Rent and all other
charges for which provision is herein made shall be paid by Tenant to
Landlord, without set-off, deduction or abatement.
Upon the execution of this Lease and the approval hereof by Landlord's
mortgagee, Landlord shall pay $10,000 to Broker in order to partially
satisfy Landlord's obligation to pay the brokerage fee set forth in the
initial paragraph of the Broker's Fee Agreement (hereinafter defined).
Pursuant to the initial paragraph of this Section and notwithstanding
anything to the contrary contained in this Lease, Landlord hereby
irrevocably directs Tenant (and Tenant hereby accepts such direction) to
make the following payments of Fixed Rent in full satisfaction of Tenant's
obligation to pay Fixed Rent attributable to the first fourteen (14)
months of the Initial Term:
(1) In order to fully satisfy Landlord's obligation to pay the
brokerage fee set forth in the initial paragraph of the Broker's Fee
Agreement, (a) an amount of Fixed Rent equal to $16,994.01 shall be
paid by Tenant directly to Broker upon the execution of this Lease
and the approval hereof by Landlord's mortgagee, and (b) an amount
of Fixed Rent equal to $26,994.02 shall be paid by Tenant directly
to Broker on the Rent Commencement Date;
(2) In order to fully satisfy Landlord's obligation to pay the
$18,850 contract price set forth in the Glue Contract, an amount of
Fixed Rent equal to $18,850 shall be paid by Tenant directly to the
Glue Contractor following the execution of this Lease, the approval
hereof by Landlord's mortgagee and the completion of the work
contemplated by the Glue Contract.
(3) In order to satisfy Landlord's obligation to pay the $215,000
contract price set forth in the Roof Contract, (a) an amount of
Fixed Rent equal to $17,138.08 shall be paid by Tenant directly to
the Roof Contractor on the Rent Commencement Date and on the first
day of the next eleven (11) calendar months thereafter, and (b) an
amount of Fixed Rent equal to $9,343.04 shall be paid by
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Tenant directly to the Roof Contractor on the first day of the next
calendar month thereafter; and
(4) An amount of Fixed Rent equal to $15,368.91 shall be paid to the
Landlord on the first day of the next calendar month thereafter.
4.2 ADDITIONAL RENT. All monies, if any, except Fixed Rent, required to be
paid by Tenant hereunder including, without limitation, payment for taxes,
utilities, and insurance premiums, shall be considered additional rent
("Additional Rent"). Tenant shall pay Additional Rent no later than the
times prescribed by the applicable provisions of this Lease, after tenant
has received and has had a reasonable opportunity to review documentation
evidencing such additional cost, and in any event within twenty (20) days
after written notice from Landlord.
4.3 LATE CHARGE. If any installment of Fixed Rent is not paid within ten (10)
days after written notice from Landlord, Tenant shall pay to Landlord a
late charge equal to four percent (4%) of the amount of such installment
not paid within ten (10) days as aforesaid. This provision shall not
relieve Tenant of Tenant's obligation to pay Fixed Rent at the time and in
the manner herein specified. The foregoing notwithstanding, no late charge
shall be due and payable hereunder for the first installment of Fixed Rent
not paid within ten (10) days after written notice from Landlord during
any particular Lease Year.
4.4 REAL ESTATE TAXES APPLICABLE TO THE PROPERTY -- PAYMENT BY
----------------------------------------------------------
LANDLORD. Landlord shall be responsible for the payment, before the same
become delinquent, of all Real Estate Taxes (as defined in Section ) which
may be lawfully charged, assessed or imposed upon the Premises, and the
parcel of land on which the Premises is located, including without
limitation, outside areas used in association with the Premises, as
reflected upon the tax bills furnished for the Premises, on or after the
Commencement Date. Tenant shall reimburse Landlord for Tenant's Share of
Real Estate Taxes.
References in this Article to the "Building" means the Building and the
land on which it is situated.
However, if authorities having jurisdiction assess real estate taxes which
Landlord deems excessive, Landlord may defer compliance therewith to the
same extent permitted by the laws of the jurisdiction in which the same
are located, so long as the validity or amount thereof is contested by
Landlord in good faith, and so long as Tenant's occupancy of the Premises
is not disturbed or threatened.
4.5 TENANT'S SHARE OF REAL ESTATE TAXES. With reference to the real estate
taxes referred to in Section , it is agreed that terms used herein are
defined as follows:
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(a) "Tax Year" means the 12-month period beginning July 1, (or if the
appropriate Governmental tax fiscal period shall begin on any date other
than July 1, such other date), any portion of which falls during the Lease
Term.
(b) "Real Estate Taxes" means all taxes and special assessments of every
kind and nature assessed by any Governmental authority on the Property
which Landlord shall be obligated to pay because of or in connection with
the ownership, leasing and operation of the Property and reasonable
expenses of any proceedings for abatement of such taxes. The amount of
special taxes or special assessments to be included shall be limited to
the amount of the installment (plus any interest other than penalty
interest payable thereon) of such special tax or special assessment
required to be paid during the year in respect of which such taxes are
being determined (Landlord being deemed to have elected to make
installment payments over the longest period of time permitted by law).
There shall be excluded from such taxes all income, estate, succession,
inheritance and transfer taxes; provided, however, that if at any time
during the Lease Term the present system of ad valorem taxation of real
property shall be changed so that in lieu of the whole or any part of the
ad valorem tax on real property, there shall be assessed on Landlord a
capital levy or other tax on the rents received with respect to the
Property, or a Federal, State, County, Municipal, or other local income,
franchise, excise or similar tax, assessment, levy or charge (distinct
from any now in effect in the jurisdiction in which the Development is
located) measured by or based, in whole or in part, upon any such rents,
then any and all of such taxes, assessments, levies or charges, to the
extent so measured or based, shall be deemed to be included within the
term Real Estate Taxes but only to the extent that the same would be
payable if the Property were the only property of Landlord.
(c) "Tenant's Share" is defined to mean one hundred percent (100%) of the
Real Estate Taxes assessed during each Tax Year of the Lease Term upon the
Premises, or 51.6% of the total tax bill assessed to the Property, (77,428
square feet divided by 150,000 square feet = 51.6%) (for the purposes
hereof the Premises tax bill is identified as 645 Summer Street, Ward No.
6, Parcel No. 02814-001; a copy of the FISCAL REAL ESTATE TAX BILL is
attached hereto for example purposes as Exhibit 4.5(c).
When the applicable tax bill is not available prior to the end of the
Lease Term, then a tentative computation shall be made on the basis of the
Real Estate Taxes for the next prior tax year, with a final adjustment to
be made between Landlord and Tenant promptly after Landlord shall have
received the applicable tax bill.
In order to provide Landlord with sufficient funds with which to make such
payments, payments by Tenant on account of Tenant's Share of Real Estate
Taxes shall be made monthly at the time and in the fashion herein provided
for payment of Fixed Rent. The amount of such payments shall be sufficient
to provide Landlord, in the aggregate, a sum equal to Tenant's Share of
each payment by Landlord on account of Real Estate Taxes,
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ten (10) days at least before the day on which such payments by Landlord
would become delinquent.
Promptly after receipt by Landlord of bills for such Real Estate Taxes,
Landlord shall give notice to Tenant of the amount thereof, sending Tenant
a copy of such bills along with Landlord's notice, and the computation of
Tenant's Share on account thereof for the Tax Year included within the
Lease Term covered by such bill. To the extent that Real Estate Taxes
shall be payable to the taxing authority in installments with respect to
periods less than a Tax Year, the statement to be furnished by Landlord
shall be rendered and payments made on account of such installments. If
payments theretofore made for such period by Tenant exceed Tenant's Share,
Landlord shall credit the amount of overpayment against subsequent
obligations of Tenant (or refund such overpayment, if the Lease Term has
ended and Tenant has no further obligation to Landlord); but if Tenant's
Share is greater than payments theretofore made on account for such
period, Tenant shall make suitable payment to Landlord promptly after
being so advised by Landlord. Further, if such Real Estate Taxes are
abated, reduced or refunded, an equitable adjustment shall be made to
reflect Tenant's pro rata share of the amount of such reduction less
Tenant's pro rata share of all costs incurred by Landlord in securing the
same; but the pendency of any application or other proceeding relating to
any such abatement, reduction or refund shall not delay the computation
and payment by Tenant to be made hereunder. In no event shall Tenant be
entitled to receive more than the payments made by Tenant on account of
Real Estate Taxes for such Tax Year.
Tenant's share of such Real Estate Taxes shall be equitably adjusted for
and with respect to any portion of the Lease Term which does not include
an entire Tax Year; and an equitable adjustment shall be made in the event
of any change in the method or system of taxation from that which is now
applicable, including the dates and periods for which such taxes are
levied, or otherwise, to the end that Tenant's share thereof shall be, to
the maximum extent practicable, comparable to that which the Tenant would
bear under the foregoing provisions.
If a tax (other than an Federal or State net income tax) is assessed on
account of the Rents or other charges payable by Tenant to Landlord under
this Lease, Tenant agrees to pay the same as additional rent within ten
(10) days after billing therefor unless applicable law prohibits the
payment of such tax by Tenant.
Payments by the Tenant to the Landlord on account of Real Estate Taxes
shall not be considered as being held in trust, in escrow or the like, by
the Landlord; it being the express intent of the Landlord and the Tenant
that the Tenant shall in no event be entitled to receive interest upon, or
any payments on account of earnings or profits derived from such payments
by the Tenant to the Landlord.
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Landlord shall have the same rights and remedies for the nonpayment by
Tenant of any amounts due on account of Real Estate Taxes as Landlord has
hereunder for the failure of Tenant to pay the Fixed Rent.
4.6 TENANT'S RIGHT TO APPLY FOR ABATEMENT. Tenant shall have the right to
require Landlord to apply for abatement of real estate taxes, but Tenant
shall not have the right to require Landlord to prosecute any abatement
proceedings. If within fifteen (15) calendar days after Tenant's written
request to Landlord to commence such abatement proceedings, Landlord has
not done so or if Landlord thereafter fails after fifteen (15) calendar
days' written request from Tenant diligently to prosecute such
proceedings, Tenant may at its option, at its own expenses, undertake to
commence and/or prosecute such proceedings; and Landlord will execute, at
no cost, appropriate abatement applications. If any real estate tax
abatement, however applied for and obtained, is granted with respect to
the Premises, Tenant's obligations under Section hereof shall be reduced
accordingly.
ARTICLE 5
USE OF PREMISES AND TENANT COVENANTS
5.1 PERMITTED USE. Tenant agrees that the Premises shall be used and occupied
by Tenant or any occupant claiming under Tenant only for the purposes
specified as the use thereof, in Section of this Lease, and for no other
purpose or purposes.
5.2 TENANT COVENANTS. Tenant covenants during the Term of this Lease and for
such further time as Tenant occupies any part of the Premises:
(a) To pay when due all Fixed Rent, Additional Rent, all charges for
utility services rendered to the Premises and service inspections
therefor, Tenant's allocable share of commercially reasonable insurance
costs, and 10.2% (77,428 square feet divided by 760,784 square feet =
10.2%) of the cost to Landlord of maintaining the paved areas of the
Development reasonably free of snow and ice (including the cost to remove
snow from the Development) and other reasonable charges allocable to the
Property, such payments to be made by Tenant within thirty (30) days after
the presentation by Landlord of bills therefor. Landlord shall also cause
snow and ice removal of walkways and paved areas of land adjacent to the
Premises and Tenant shall reimburse Landlord the cost thereof based upon
Tenant's Share of the actual cost of such services to the Building. Tenant
also shall reimburse Landlord the cost incurred by Landlord in maintaining
the parking and truck turn-around area serving the Building as set forth
in Section based upon Tenant's Share of the actual cost thereof.
(b) To use and occupy the Premises for the Permitted Uses only, not to
abandon the Premises nor permit the Premises to remain vacant or
unoccupied for a period of thirty
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(30) consecutive days (other than for events resulting from damage by fire
or other casualty or takings by eminent domain), and not to injure or
deface the Premises or the Property, nor to permit in the Premises any
auction sale, inflammable fluids or chemicals, or nuisance, or the
emission from the Premises of any objectionable noise or odor, nor to use
or devote the Premises or any part thereof for any purpose other than the
Permitted Uses, nor any use thereof which is inconsistent with the
maintenance of the Building as a warehouse building of the first class in
the quality of its maintenance, use and occupancy, or which is contrary to
law or ordinance or liable to invalidate any insurance maintained by
Landlord or Tenant on the Building or its contents or liable to render
necessary any alteration or addition to the Building. It is understood
that in connection with Tenant's use of the Premises, that Tenant may
introduce to the Premises certain cleaning solvents and machine oils in
relation to the operation of certain equipment to be located therein.
Tenant shall have full responsibility for any such materials and agrees to
indemnify and hold Landlord harmless from any liability or claim arising
from the presence of any such cleaning solvents and machine oils to the
Premises. Furthermore, nothing herein shall be deemed to modify the
provisions of Section of this Lease. Finally, Tenant's use of cleaning
solvents and/or machine oils may not interfere with any other tenants' use
and occupancy of the Building. In the event of interference, Tenant shall
promptly discontinue use of such offending materials.
(c) Not to obstruct in any manner any portion of the Building not hereby
leased or any portion thereof or of the Development used by Tenant in
common with others; not without prior consent of Landlord to permit the
painting or placing of any signs, curtains, blinds, shades, awnings,
aerials or flagpoles, or the like, visible from outside the Premises; and
to comply with all reasonable rules and regulations now or hereafter made
by Landlord, of which Tenant has been given notice, for the care and use
of the Building and the Development and their facilities and approaches,
but Landlord shall not be liable to Tenant for the failure of other
occupants of the Building to conform to such rules and regulations, but
shall exercise reasonable efforts to insure that all tenants of the
Building comply with such rules and regulations. The foregoing
notwithstanding, Tenant shall not be in violation of this paragraph on
account of the construction of the staging platform contemplated by
Section hereof, and the use thereof, provided that Landlord shall have
prior reviewed and approved plans thereof, such approval not to be
unreasonably withheld or delayed, and construction thereof shall be in
accordance with such plans.
(d) To comply with all statute, laws, rules, regulations and ordinances of
any governmental authority relating to Tenant's use of the Premises, to
keep the Premises equipped with all safety appliances required by law or
ordinance or any other regulation of any public authority because of any
use made by Tenant other than normal office use, and to procure all
licenses and permits so required because of such use and, if requested by
Landlord, to do any work so required because of such use, it being
understood that the foregoing provisions shall not be construed to broaden
in any way Tenant's Permitted Uses.
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(e) With reasonable prior oral notice (except in an emergency when no
notice of any kind need be provided to Tenant), to permit Landlord and its
agents to enter the Premises at all reasonable hours (except in an
emergency when Landlord shall have the right to enter the Premises at any
hour) for the purposes of inspecting or of making repairs to the same, and
to show the Premises to prospective tenants, prospective purchasers and
mortgagees at all reasonable times (provided that only in the case of such
tenants, such right of access shall be made available at all reasonable
hours only during the last twelve (12) months of the Term or in the event
that Tenant shall have validly exercised its right to terminate this Lease
pursuant to Article , from and after receipt by Landlord of Tenant's
written notice of its election to so terminate), such rights as are
conferred upon Landlord pursuant to this Section to be exercised in such
manner as will not cause unreasonable or unnecessary interference with the
permitted operations of Tenant in the Premises.
(f) Not to place any load upon the Premises exceeding a uniform
distributed "live load" of 120 pounds per square foot. Tenant's business
machines and mechanical equipment shall be placed and maintained by Tenant
at Tenant's expense in settings sufficient to absorb and minimize, to the
maximum extent reasonably possible, vibration or noise that may be
transmitted to the Building structure or to any other space in the
Building. This Paragraph shall not operate to exclude the placement upon
the Premises of general purpose printing equipment, provided that such
equipment does not exceed the load limitation set forth in this Paragraph.
(g) To cause all freight to be delivered or removed, and all garbage or
refuse to be removed, from the Premises in accordance with reasonable
rules and regulations from time to time established by Landlord therefor;
and in all events, removal shall be effected other than through that
portion of the Premises fronting on any interior public areas; and until
such removal is effected, Tenant shall keep all garbage or refuse in the
Premises suitably covered and deodorized; and Tenant shall take any and
all steps required reasonably to prevent insect and vermin infestation of
the Premises, and shall maintain such practices as Landlord may require
reasonably to that end. Tenant may place a dumpster for garbage at the
side of the Building immediately adjacent to the Tenant's shipping and
receiving doors.
(h) To pay promptly when due all taxes which may be imposed upon personal
property (including, without limitation, fixtures and equipment) in the
Premises to whomever assessed.
(i) In the event of any default by Tenant of any obligations of Tenant
under this Lease, to pay all reasonable costs, counsel and other fees
incurred by Landlord in connection with the successful enforcement by
Landlord of any such obligations of Tenant under this Lease.
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(j) To pay 51.6% (77,428 square feet divided by 150,000 square feet =
51.6%) of the costs of the fire alarm service for the Premises, such
payments to be made by Tenant within thirty (30) days after the
presentation by Landlord of bills therefor. To pay for the cost of
installation of security and any other fire alarm systems as may be
installed in the Premises by Tenant and all charges for service contracts,
service inspections and general maintenance of such systems whether now
installed in the Premises or as may be installed in the Premises by
Tenant.
(k) To comply, with respect to the employment of employees at the
Premises, with any provisions regarding non-discrimination and equal
opportunity in employment established by The United States of America, The
Commonwealth of Massachusetts and the Massachusetts Port Authority, unless
otherwise exempt pursuant to the provisions of applicable Federal or State
legislation or regulations promulgated thereunder.
ARTICLE 6
IMPROVEMENTS TO THE PREMISES
6.1 BY LANDLORD. Except for Landlord's Work, Tenant understands and agrees
that Landlord shall make no improvements to the Premises, and that Tenant
has leased same in "as in" condition after inspection thereof. Landlord
agrees to use reasonable efforts to complete Landlord's Work as soon as is
reasonably possible. Any and all improvements to be made by Tenant shall
be governed by the provisions of Section 1.2 relating to Tenant's Work and
to Sections , , and 6.5 hereof.
6.2 BY TENANT. Except as hereinafter permitted, Tenant shall not make
alteration and additions to the Premises, whether before or during the
Lease Term, except in accordance with plans and specifications first
approved by Landlord which approval shall not be withheld unreasonably or
delayed. The full responsibility and cost for completion of Tenant's work
shall be borne by Tenant. Landlord shall not be deemed unreasonable for
withholding approval of any alterations or additions which (a) involve or
might affect any structural or exterior element of the Building, any areas
or element outside of the Premises, or any facility serving any area of
the Building outside of the Premises, or (b) will require unusual expense
to readapt the Premises to normal warehouse and office use upon Lease
termination or increase the cost of construction or of insurance or taxes
on the Building unless Tenant first gives assurance acceptable to Landlord
for payment of such increased cost and that such readaptation will be made
prior to such termination without expense to Landlord. All alterations and
additions shall be part of the Building unless and until Landlord shall
specify the same for removal. All of Tenant's alterations and additions
and installation of furnishings shall be coordinated with any work
performed by Landlord and in such manner as to maintain harmonious labor
relations and not to damage the Building or interfere with Building
construction or operation. Tenant, before its work is started, shall
secure all licenses and permits necessary therefor; deliver
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to Landlord a statement of the names of all its contractors and
subcontractors and the estimated cost of all labor and material to be
furnished by them and security reasonably satisfactory to Landlord
protecting Landlord against liens arising out of the furnishing of such
labor and material; and cause each contractor to carry workmen's
compensation insurance in statutory amount covering all the contractor's
and subcontractors' employees and comprehensive general liability
insurance with such limits as Landlord may require reasonably, but in no
event less $1,000,000 and property damage insurance with limits of not
less than $500,000 (all such insurance to be written in companies approved
reasonably by Landlord and insuring Landlord and Tenant as well as the
contractors), and to deliver to Landlord certificates of all such
insurance. Tenant shall pay the entire cost of any work done on the
Premises by Tenant, its agents, employees or independent contractors, and
Tenant shall not cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises
or the Building or the Development. Tenant shall immediately discharge any
such liens which may so attach. Tenant shall pay, as additional rent, one
hundred percent (100%) of any increases in real estate taxes on the
Property which shall result from alterations, additions or improvements
made to the Premises by Tenant.
The provisions hereof shall apply, without limitation, to Tenant's Work.
6.3 SIGN. Subject to Landlord's prior written consent, which consent shall not
be unreasonably withheld or delayed, Tenant shall have the right, at
Tenant's sole cost and expense, to erect and place a sign at the central
entrance of the Building (which entrance shall be for the exclusive use of
Tenant) indicating Tenant's presence in the Building. In the event Tenant
violates the foregoing provision, Landlord, at its option following notice
to Tenant and in addition to any other right or remedy set forth in this
Lease arising from such violation, may remove any such sign in violation
hereof without any liability to Landlord, and Tenant shall pay Landlord's
costs incurred in connection therewith as an additional charge, upon
demand. Any such sign shall be constructed in accordance with all
applicable laws, ordinances and regulations, and otherwise shall comply
with all other provisions of this Lease.
6.4 DUMPSTER CHUTES. Subject to Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed, Tenant shall have
the right, at Tenant's sole cost and expense, to construct dumpster chutes
on the second floor of the Building within its Premises, and place
dumpsters outside the Building, the number and location of such chutes and
dumpsters shall be subject to the review and approval by Landlord of plans
and specifications therefor, such approval not to be unreasonably withheld
or delayed. In the event Tenant violates the foregoing provision,
Landlord, at its option following notice to Tenant and in addition to any
other right or remedy set forth in this Lease arising from such violation,
may remove any such dumpster chute or dumpster in violation hereof without
any liability to Landlord, and Tenant shall pay Landlord's costs incurred
in connection therewith as an additional charge, upon demand. Any such
dumpster chutes and dumpsters shall be constructed in accordance with all
applicable
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laws, ordinances and regulations, and otherwise shall comply with all
other provisions of this Lease.
6.5 STAGING PLATFORM. Subject to Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed, Tenant shall have
the right, at Tenant's sole cost and expense, to construct a staging
platform at the north end of the Building provided that plans and
specifications for such staging platform shall have been prior reviewed
and approved by Landlord, such approval not to be unreasonably withheld or
delayed, and the construction thereof shall be performed in accordance
with such approved plans and specifications. In the event Tenant violates
the foregoing provision, Landlord, at its option following notice to
Tenant and in addition to any other right or remedy set forth in this
Lease arising from such violation, may remove such staging platform
without any liability to Landlord, and Tenant shall pay Landlord's costs
incurred in connection therewith as an additional charge, upon demand.
Such staging platform shall be constructed in accordance with all
applicable laws, ordinances and regulations, and otherwise shall comply
with all other provisions of this Lease.
ARTICLE 7
ASSIGNMENT AND SUBLETTING
7.1 PROHIBITION. (a) Except as otherwise provided in this Article, Tenant
covenants and agrees that whether voluntarily, involuntarily, by operation
of law or otherwise, neither this Lease nor the Term and estate hereby
granted, nor any interest herein or therein, will be assigned, mortgaged,
pledge, encumbered or otherwise transferred, and that neither the Premises
nor any part thereof will be encumbered in any manner by reason of any act
or omission on the part of Tenant, or used or occupied or permitted to be
use or occupied by anyone other than Tenant, or for any use or purpose
other than a Permitted Use, or be sublet (which term, without limitation,
shall include granting of concessions, licenses and the like) in whole or
in part, or be offered or advertised for assignment or subletting,
without, in each instance, having first received the express consent of
Landlord, which consent may be withheld by Landlord in its unfettered
discretion, no obligation not to "unreasonably" withhold its consent being
intended or implied.
(b) No consent of Landlord shall be required, however, to transactions
with an entity into or with which Tenant is merged or consolidated or to
which substantially all of Tenant's assets are transferred or to any
entity which controls, is controlled by, or is under common control with,
Tenant, provided that in such events (i) the successor to Tenant has a net
worth computed in accordance with generally accepted accounting principles
at lease equal to the greater of (x) the net worth of Tenant first named
above (whichever is the greater) immediately prior to such merger,
consolidation, or transfer, (y) the net worth of Tenant first named above
(whichever is the greater) on the Date of
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this Lease, or (z) a net worth reasonably acceptable to Landlord, (ii)
proof satisfactory to Landlord of such net worth shall have been delivered
to Landlord at least ten (10) days prior to the effective date of any such
transaction, and (iii) the assignee agrees directly with Landlord, in form
satisfactory to Landlord, to be bound by all the obligations of the Tenant
hereunder, including, without limitation, the obligation to pay the rent
and other amounts provided for under this Lease and the covenant against
further assignment and subletting.
(c) Landlord shall not unreasonably withhold its consent to a subletting
of any portion, but not all, of the Premises, requested by Tenant,
provided that: (i) neither the proposed subtenant nor any entity
controlling, controlled by, or under common control with, the proposed
subtenant is, at the time of the proposed subletting, a tenant in the
Building; (ii) the proposed subtenant (whether or not an existing tenant
in the Building) has a credit rating and financial standing reasonably
acceptable to Landlord at the time of Tenant's request; (iii) the business
of the proposed subtenant will not adversely affect the reputation of the
Building or its operation; and (iv) Landlord shall have been furnished
with sufficient information on which to base a determination regarding
satisfaction as to each of the foregoing requirements and a reasonable
period of time (under no circumstance less than ten (10) days) to review
such information. If the rent and other sums received by Tenant on account
of such sublease exceeds the Fixed Rent and other charges allocable to the
space subject to the sublease, Tenant shall pay to Landlord, as an
additional charge, one hundred percent (100%) of such excess when received
by Tenant following Tenant's recovery of all reasonable out-of-pocket
costs and expenses incurred in connection with such sublease, including,
without limitation, brokerage commissions, legal expenses and the cost of
any necessary improvements to the Premises to conclude such sublease.
(d) If this Lease be assigned, or if the Premises or any part thereof be
sublet or occupied by anyone other than Tenant, Landlord may, at any time
and from time to time, collect rent and other charges from the assignee,
sublessee or occupant and apply the net amount collected to the rent and
other charges herein reserved, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of this covenant, or the
acceptance of the assignee, sublessee or occupant as a tenant or a release
of Tenant from the further performance by Tenant of covenants on the part
of Tenant herein contained and Tenant shall remain fully and primarily
liable therefor. No assignment, subletting or occupancy of the Premises
shall affect the purpose for which the Premises may be used as stated in
Section hereof.
(e) As Additional Rent, Tenant shall reimburse Landlord promptly for
reasonable legal and other expense incurred by Landlord in connection with
any request by Tenant for consent to assignment or subletting.
ARTICLE 8
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RESPONSIBILITY FOR REPAIRS AND
CONDITION OF PREMISES
8.1 REPAIRS TO BE MADE BY LANDLORD. Except as otherwise provided in this
Lease, Landlord agrees to keep in good order, condition and repair the
windows, the window joints servicing the Premises and the roof (but not
the inside surface thereof unless the condition requiring repair to the
inside surface is the result of external damage to the roof) of the
Building and the foundations and structural floors, load-bearing walls and
other structural portions of the Building, insofar as they affect the
Premises, and common areas and facilities as may be necessary to keep them
in serviceable condition, including without limitation, the gutters,
downspouts, plumbing, pipes, ducts, conduits and wiring above ceiling
surfaces, below floor surfaces or within perimeter walls of the Premises
or the Building which service or affect the Premises, and the exterior
surfaces of the Building walls (provided, however, that such obligation
shall not extend to repainting such exterior wall surfaces), except that
Landlord shall in no event be responsible to Tenant for the condition of
glass in an about the Premises or for the doors (or related glass or
finish work) leading to, or loading docks or platforms servicing the
Premises (except as otherwise provided above), or for any mechanical or
electrical system servicing the Premises, or for any condition in the
Premises or the Building caused by any act or neglect of Tenant, its
employees, invitees or contractors. In addition, Landlord shall make such
structural repairs and structural alterations to the Building of which the
Premises are a part as may be required validly by public authorities
having jurisdiction except under circumstances wherein such structural
repairs or alterations result form a particular use made of the Premises
by Tenant, in which event Tenant shall be obligated to undertake the work
of such structural repair or alteration. Without limitation, Landlord
shall not be responsible to make any improvements or repairs to the
Building or the Premises other than as expressly in this Section provided,
unless expressly other provided in this Lease.
Landlord also agrees to maintain the parking and truck turn-around area
serving the Building in good order, condition and repair during the Term
hereof.
Further, Landlord shall never be liable for any failure to make repairs
which, under the provisions of this Section or elsewhere in this Lease,
Landlord has undertaken to make unless:
(a) Tenant has given notice to Landlord of the need to make such repairs,
or a condition in the Building or in the Premises requiring any repair for
which Landlord is responsible where Tenant has, or should have reason to
have, knowledge of the condition; and
(b) Landlord has failed to commence to make such repairs within a
reasonable time after receipt of such notice, or fails to proceed with
reasonable diligence to complete such repairs.
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8.2 TENANT'S AGREEMENT. Tenant agrees that, from and after the date the
possession ------------------ of the Premises is delivered to Tenant and
until the end of the Term of this Lease, Tenant will keep neat and clean
and maintain in good order, condition and repair the Premises and every
part thereof, including but not limited to the HVAC, electrical and
mechanical system servicing the Premises, excepting only for ordinary wear
and tear, those repairs for which Landlord is responsible under the terms
of this Lease, damage by fire or other casualty and as a consequence of
the exercise of the power of eminent domain, and shall surrender the
Premises and all alterations and additions thereto, at the end of the Term
of this Lease, in such condition, first removing all goods and effects of
Tenant and repairing any damage caused by such removal and restoring the
Premises and leaving them clean and neat. Tenant shall not permit or
commit any waste, and Tenant shall be responsible for the cost of repairs
which may be made necessary by reason of damages to common areas in the
Building, or to the Development, by Tenant, Tenant's contractors, or
Tenant's invitees.
All items constructed or installed by Tenant pursuant to Sections , and
hereof shall be kept, maintained and repaired by Tenant in good order and
condition, at Tenant's sole cost and expense. At the expiration or earlier
termination of this Lease, Tenant, unless otherwise directed by Landlord
in writing, shall remove all such items and repair any and all damage to
the Premises or the Building resulting from such removal. Tenant's Work
relating to the HVAC and electrical systems shall be and remain the
property of Landlord.
If repairs are required to be made by Tenant pursuant to the terms hereof,
Landlord may demand that Tenant make the same with reasonable promptness,
and if Tenant refuses or neglects to commence such repairs and complete
the same with reasonable dispatch after such demand, Landlord may (but
shall not be required to do so) make or cause such repairs to be made, and
shall not be responsible to Tenant for any loss or damage that may accrue
to Tenant's stock or business by reason thereof. If Landlord makes or
causes such repairs to be made, Tenant agrees that Tenant will forthwith,
on demand, pay to Landlord the cost thereof, and if Tenant shall default
in such payment, Landlord shall have the remedies provided for the
non-payment of rent or other charges payable hereunder.
8.3 NO DAMAGE. Landlord shall not be liable to Tenant for any compensation or
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from the necessity of Landlord or its agents entering the
Premises for any purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building however the necessity may occur.
In case Landlord is prevented or delayed from making any repairs,
alterations or improvements, or furnishing any services or performing any
other covenant or duty to be performed on Landlord's part, by reason of
any cause reasonably beyond Landlord's control, including, without
limitation, strike, lockout, breakdown, accident, order or regulation of
or by any Governmental authority, or failure of supply, or inability by
the exercise of reasonable diligence to obtain supplies, parts
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or employees necessary to furnish such services, or because of war or
other emergency, or for any cause due to any act or neglect of Tenant or
Tenant's servants, agents, employees, licensees or any person claiming by,
through or under Tenant, Landlord shall not be liable to Tenant therefor,
nor, except as expressly otherwise provided in this Lease, shall Tenant be
entitled to any abatement or reduction of rent by reason thereof, nor
shall the same give rise to a claim in Tenant's favor that such failure
constitutes actual or constructive, total or partial, eviction from the
Premises.
Landlord reserves the right to stop any service or utility system, when
necessary by reason of accident or emergency, or until necessary repairs
have been completed; provided, however, that in each instance of stoppage,
Landlord shall exercise reasonable diligence to eliminate the cause
thereof. Except in case of emergency repairs, Landlord will give Tenant
advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
8.4 UTILITIES. Tenant acknowledges that Fixed Rent does not include the cost
of supplying utilities to the Premises, and further recognizes and
understands that Tenant shall pay for all utilities consumed by it in the
Premises directly to the utility companies furnishing the same where the
consumption is metered separately to the Premises of the Tenant, which now
is the case respecting electricity and gas furnished to the Premises
(Electric Meter No. D177724, Gas Meter No. 9168565121). In all other cases
where Tenant's consumption of utilities in the Premises is not metered or
measured separately from the Building of which the Premises are a part,
such as is the case respecting water and sewer use charges, and sprinkler
alarm services, Tenant shall pay to Landlord on account thereof amounts
equal to 51.6% of each payment by Landlord within twenty (20) days after
the presentation by Landlord of such bills therefore, together with
substantial evidence of the cost thereof. In the event that water usage by
other tenants in the Building results in Tenant being charged an amount in
excess of the cost of its actual use of water, as verified to Landlord's
reasonable satisfaction, Landlord shall install, at its sole cost and
expense, a submeter to measure Tenant's use thereof, in which case all
water charges thereafter incurred by Tenant shall be paid directly to the
applicable utility company.
Landlord shall not in any way be liable or responsible to Tenant for any
loss or damage or expense which Tenant may sustain or incur if, during the
Term of this Lease, either the quantity or character of the utilities
servicing the Premises is changed or is no longer available or suitable
for Tenant's requirements due to a fact or cause beyond Landlord's
control. Tenant, at its expense, shall purchase and install all lamps,
tubes, bulbs, starters and ballasts.
In the event Tenant introduces into the Premises personnel or equipment
which overloads the capacity of the Building systems or in any other way
interferes with the ability of the Building systems to perform adequately
its proper functions, supplementary systems may,
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if and as needed, at Landlord's option, be provided by Landlord, at
Tenant's expense, with prior notification to Tenant.
ARTICLE 9
INDEMNITY AND PUBLIC LIABILITY INSURANCE
9.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be effective
according to law, Tenant agrees to indemnify and save harmless Landlord
from and against all claims of whatever nature arising from any act,
omission or negligence of Tenant, or Tenant's contractors, licensees,
invitees, agents, servants or employees, or arising from any accident,
injury or damage whatsoever caused to any person, or to the property of
any person, occurring after the date that possession of the Premises is
first delivered to Tenant and until the end of the Term of this Lease and
thereafter, so long as Tenant is in occupancy of any part of the Premises,
in or about the Premises or arising from any accident, injury or damage
occurring outside the Premises but within the Building or on the
Development, where such accident, injury or damage results, or is claimed
to have resulted, from an act or omission on the part of Tenant or
Tenant's agents or employees, licensees, invitees or contractors, except
for such accident, injury or damage arising solely from the negligence of
Landlord, its agents or employees.
This indemnity and hold harmless agreement shall include indemnity against
all costs, expenses and liabilities incurred in or in connection with any
such claim or proceeding brought thereon, and the defense thereof with
counsel approved by Landlord which approval shall not be withheld
unreasonably.
9.2 PUBLIC LIABILITY INSURANCE. Tenant agrees to maintain in full force from
the date upon which Tenant first enters the Premises for any reason,
throughout the Term of this Lease, and thereafter, so long as Tenant is in
occupancy of any part of the Premises, a policy of general liability and
property damage insurance under which Landlord (and such other persons as
are in privity of estate with Landlord as may be set out in notice from
time to time) and Tenant are named as insureds, and under which the
insurer agrees to indemnify and hold Landlord, and those in privity of
estate with Landlord, harmless from and against all cost, expense and/or
liability arising out of or based upon any and all claims, accidents,
injuries and damages set forth in Section of this Article, in the broadest
form of such coverage from time to time available in the jurisdiction in
which the Premises are located. Each such policy shall be non-cancelable
and non-amendable with respect to Landlord and Landlord's said designees
without thirty (30) days' prior notice to Landlord, and shall be in at
least limits of One Million Dollars ($1,000,000) per occurrence (combined
single limit) for property damage, bodily injury or death, or in such
higher limits as Landlord shall from time to time reasonably request if,
during the Term of this Lease, such higher limits are carried customarily
in the Greater Boston Area with respect to similar properties. Tenant
agrees that, as a
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condition to first entering upon the Premises, Landlord shall be furnished
with a duplicate original or certificate of the insurance required to be
maintained by Tenant under this Section.
9.3 PROPERTY INSURANCE. Landlord shall procure and maintain, and Tenant shall
pay its allocable share of the cost thereof, monthly as additional rent
throughout the Term of this Lease, (for the purpose hereof, Tenant
Allocable Share of insurance cost shall mean 51.6% of the aggregate cost
of such insurance upon the Building), with respect to the Building a
policy or policies of All Risk of Physical Loss insurance with extended
coverage endorsement attached, including vandalism and malicious mischief
coverage, and any other endorsements required by the holder of any fee or
leasehold mortgage covering all of any portion of the property, in an
amount equal to one hundred percent (100%) of the full replacement value
of the Building at the time of loss, which shall include replacement cost
new, debris removal and demolition thereof, but exclusive of architectural
and engineering fees, excavation, footings and foundations Each such
policy shall be non-cancelable and non-amendable with respect to Landlord
and Landlord's said designees without thirty (30) days prior notice.
9.4 TENANT'S RISK. Landlord shall have no responsibility or liability for any
loss of or damage to fixtures or other personal property of Tenant. The
provisions of this Section shall be applicable from and after the
execution of this Lease and until the end of the Term of this Lease, and
during such further period as Tenant may use or be in occupancy of any
part of the Premises or of the Building.
In no event shall Landlord's agreement to make repairs as provided in this
Lease be construed as an agreement to indemnify the Tenant against any
loss or damage sustained by the Tenant resulting from the non-performance,
or negligent performance, of Landlord's repair obligations under this
Lease. The provisions of this Section shall be applicable from and after
the execution of this Lease and until the end of the Term of this Lease,
and during such further period as Tenant may use or be in occupancy of any
part of the Premises.
9.5 INJURY CAUSED BY THIRD PARTIES. To the maximum extent that this agreement
may be made effective according to law, Tenant agrees that Landlord shall
not be responsible or liable to Tenant, or to those claiming by, through
or under Tenant, for any loss or damage that may be occasioned by or
through the acts or omissions of persons occupying adjoining premises or
any part of the premises adjacent to or connecting with the Premises or
any part of the Building, or otherwise, of for any loss or damage
resulting to Tenant or those claiming by, through or under Tenant, or its
or their property, from the breaking, bursting, stopping or leaking of
electric cables and wires, and water, gas, sewer or steam pipes, except
that notwithstanding the foregoing, Landlord shall be responsible for its
own negligence.
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9.6 TENANT'S FAILURE. If Tenant fails to obtain and/or maintain any insurance
required by the terms of this Lease to be obtained by Tenant, Tenant shall
be liable for all losses and costs resulting from said failure. Nothing
herein shall be a waiver of any of Landlord's rights and remedies under
any other Article of this Lease or at law or equity.
9.7 WAIVER OF SUBROGATION. Insofar as, and to the extent that, the following
provisions shall not make it reasonable impossible to secure insurance
coverage obtainable from responsible insurance companies doing business in
the locality in which the Property is located (even though extra premium
may result therefrom) Landlord and Tenant mutually agree that any property
damage insurance carried by either shall provide for the waiver by the
insurance carrier of any right of subrogation against the other, and they
further mutually agree that, with respect to any damage to property, the
loss from which is covered by insurance then being carried by them,
respectively, the one carrying such insurance and suffering such loss
releases the other of and from any and all claims with respect to such
loss to the extent of the limits of insurance carried with respect
thereto, plus the amount of any deductible.
9.8 INSURANCE CERTIFICATES. Tenant shall furnish to Landlord on the Lease
Commencement Date, and thereafter within thirty (30) days prior to the
expiration of each such policy, original certificates of insurance
required by the terms of this Lease to be obtained and maintained by
Tenant. Each certificate shall evidence the thirty (30) days
non-cancellability and non-amendability of such policies, as required by
this Article. Landlord, Landlord's successors and assigns, and any nominee
or Landlord in privity of estate with Landlord or otherwise holding any
interest in the Premises, including, without limitation, any ground lessor
and the holder of any fee or leasehold mortgage, shall be named as loss
payees and/or additional insureds (as applicable) under each policy of
insurance required by the terms of this Lease to be obtained and
maintained by Tenant pursuant to this Article.
ARTICLE 10
CASUALTY AND TAKING
10.1 PARTIAL DAMAGE RESULTING FROM CASUALTY. If after the commencement
of the Term of this Lease and prior to the expiration or earlier
termination thereof, the Building or Premises shall be partially damaged
(as distinguished from "substantially damaged", as that term is
hereinafter defined) by fire or other casualty, Landlord shall use due
diligence to restore the Building or Premises (consistent, however, with
Governmental laws and codes then in existence) to substantially the
condition thereof at the time of such damage, but Landlord shall not be
responsible for delays which may result from any cause beyond the
reasonable control of Landlord.
10.2 SUBSTANTIAL DAMAGE RESULTING FROM CASUALTY.
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(a) If, after the commencement of the Term of this Lease and prior to the
expiration or earlier termination hereof, the Premises shall be
substantially damaged (as that term is hereinafter defined) by fire or
casualty, the risk of which is covered by Landlord's insurance, Landlord
shall, promptly after such damage and the determination of the net amount
of insurance proceeds available to Landlord, expend so much as may be
necessary of such net amount to restore the Premises (consistent, however,
with Governmental laws and codes then in existence) to substantially the
condition thereof at the time of such damage, except as hereinafter
provided, but Landlord shall not be responsible for delays which may
result from any cause beyond the reasonable control of Landlord. Should
the net amount of insurance proceeds available to Landlord be insufficient
to cover the cost of restoring the Premises, in the reasonable estimate of
Landlord, Landlord may, but shall have no obligation to, supply the amount
of such insufficiency and restore the Premises with all reasonable
diligence, or Landlord may terminate this Lease by giving notice to Tenant
not later than a reasonable time after Landlord has determined the
estimated net amount of insurance proceeds available to Landlord and the
estimated cost of such restoration.
In any event, Landlord agrees, not later than ninety (90) days after the
casualty, to advise Tenant of the status of Landlord's obligations in
respect of reconstruction, i.e., whether Landlord intends to restore,
regardless of the sufficiency of proceeds, or whether Landlord is
exercising its right to terminate pursuant to any right which Landlord may
have to do so. If Landlord fails, within ninety (90) days after such
casualty, to notify Tenant that Landlord intends to restore, regardless of
the sufficiency of proceeds, then Tenant shall have the right at any time
thereafter to terminate this Lease by notice to Landlord, such termination
to take effect thirty (30) days after the date of such Tenant's notice,
with the same force and effect as if such date were the date originally
established as the expiration date hereof. However, if Tenant has not
given such notice within thirty (30) days after Landlord's 90-day period
aforesaid, then a notice thereafter given by Tenant to Landlord shall be
rendered null and void if, prior to receipt of Tenant's notice terminating
this Lease given after such Tenant's 30-day period aforesaid, Landlord
notifies Tenant that it intends to restore the Premises without regard to
the sufficiency of proceeds.
(b) If, after the commencement of the Term of this Lease and prior to the
expiration or earlier termination hereof, the Premises shall be
substantially damaged by fire or casualty, Tenant shall have the right, by
giving notice to the Landlord not later than thirty (30) days after such
damage, to terminate this Lease, whereupon this Lease shall terminate
thirty (30) days after the date of such notice with the same force and
effect as if such date were the date originally established as the
expiration date hereof, provided, however, that Tenant, as a condition to
the effectiveness of any such termination notice, shall immediately
negotiate in good faith with Landlord and any affiliate thereof owning
property in the Development to lease space in the Development which is
comparable to the Premises (if same shall be available) on substantially
the same terms and conditions
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as this Lease for what otherwise would have been the unexpired term hereof
absent such termination.
10.3 DAMAGE DURING THE LAST YEAR OF THE TERM. If the Premises shall be
substantially damaged by fire or casualty when twelve (12) months or less
in the Term of this Lease remain unexpired, either party shall have the
right, by giving notice to the other not later than sixty (60) days after
such damage, to terminate this Lease, whereupon this Lease shall terminate
thirty (30) days after the date of such notice with the same force and
effect as if such date were the date originally established as the
expiration date hereof.
10.4 DAMAGE TO OTHER PORTIONS OF THE BUILDING AND UNINSURED
CASUALTY. If the Building of which the Premises are a part shall be
substantially damaged at any time during the Term of this Lease, or if, as
a result of a risk not covered by Landlord's insurance, the Building or
the Premises are substantially damaged, then Landlord shall have the
option of restoring the Building or the Premises to substantially the
condition thereof at the time of such damage or to notify Tenant, not
later than ninety (90) days after the casualty, of Landlord's election to
terminate, this Lease. If Landlord shall give such notice of termination,
then this Lease shall terminate as of the date of such notice with the
same force and effect as if such date were the date originally established
as the expiration date hereof. If, Landlord fails, within such 90- day
period, either to notify Tenant that it intends so to restore the Building
and the Premises (and shall diligently proceed to such restoration) or to
elect so to terminate, then Tenant shall have the right at any time
thereafter to terminate this Lease by notice to Landlord, such termination
to take effect thirty (30) days after the date of such Tenant's notice,
with the same force and effect as if such date were the date originally
established as the expiration date hereof. However, if Tenant has not
given such notice within thirty (30) days after Landlord's 90-day period
aforesaid, then a notice thereafter given by Tenant to Landlord shall be
rendered null and void if, prior to receipt of Tenant's notice terminating
this Lease given after such Tenant's 30-day period aforesaid, Landlord
notifies Tenant that it intends to restore the Premises without regard to
the sufficiency of proceeds.
10.5 DEFINITION OF SUBSTANTIAL DAMAGE AND PARTIAL DAMAGE. For the purpose of
defining the words "substantially damaged" used in this Article, such
terminology shall, when referring to the Premises or the Building, refer
to damage of such a character that the same cannot, in ordinary course,
reasonably be expected to be repaired within one hundred twenty (120) days
from the time that such work would commence; and for the purpose of
defining the words "partial damage" used in this Article, such terminology
shall, when such terminology refers to the Building, the same shall refer
to damage of such a character that the same cannot, in ordinary course,
reasonably be expected to be repaired within sixty (60) days from the time
that such work would commence.
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10.6 RIGHTS OF TERMINATION FOR TAKING. If twenty-five percent (25%) or more of
the floor area of the Premises shall be taken by condemnation or right of
eminent domain, or if, as a result of such condemnation, a reasonable
means of access to the Building does not exist, Landlord or Tenant shall
have the right to terminate this Lease by notice to the other of its
desire to do so, provided that such notice is given not later than thirty
(30) days after Tenant has been deprived of possession.
Further, if so much of the Building or the Development shall be so taken
that continued operation of the Building would be uneconomic, Landlord
shall have the right to terminate this Lease by giving notice to Tenant of
Landlord's desire to do so not later than thirty (30) days after the
effective date of such taking.
Should any part of the Premises be so taken or condemned during the Term
of this Lease, and should this Lease be not terminated in accordance with
the foregoing provisions, Landlord agrees to use due diligence to put what
may remain of the Premises into proper condition for use and occupation as
nearly like the condition of the Premises prior to such taking as shall be
practicable.
Landlord shall promptly provide Tenant with copies of all notices received
by the Landlord from any governmental entity in connection with a taking
or condemnation of any part of the Premises during the Term of the Lease.
10.7 ABATEMENT OF RENT. If the Premises shall be damaged by fire or other
casualty, Fixed Rent payable shall abate or be reduced proportionately for
the period in which, by reason of such damage, there is substantial
interference with operation of Tenant's use of the Premises, having regard
to the extent to which Tenant may be required to discontinue Tenant's use
of the Premises, but such abatement or reduction shall end if and when
Landlord shall have substantially restored the Premises to the condition
in which they were prior to such damage.
If the Premises shall be affected by any exercise of the power of eminent
domain, then the Fixed Rent shall be justly and equitable abated and
reduced according to the nature and extent of the loss of use thereof
suffered by Tenant.
10.8 TEMPORARY TAKING. In the event of any taking of the Premises or any part
thereof for a temporary use not in excess of six (6) months, (i) this
Lease shall be and remain unaffected thereby and Fixed Rent and additional
rent shall not abate, and (ii) Tenant shall be entitled to receive for
itself such portion or portions of any award made for such use with
respect to the period of the taking which is within the Term of this
Lease, provided that if such taking shall remain in force at the
expiration or earlier termination of this Lease, Tenant shall then pay to
Landlord a sum equal to the reasonable cost of performing Tenant's
obligations under Section with respect to surrender of the Premises and
upon such payment shall be excused from such obligations.
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10.9 AWARD. Except as is otherwise provided in Section hereof, and the
succeeding paragraph of this Section, Landlord shall have and hereby
reserves and excepts, and Tenant hereby grants and assigns to Landlord,
all rights to recover for damages to the Building, the Development and the
leasehold interest hereby created, and to compensation accrued or
hereafter to accrue by reason of such taking, damage or destruction, as
aforesaid, and by way of confirming the foregoing, Tenant hereby grants
and assigns, and covenants with Landlord to grant and assign to Landlord,
all rights to such damages or compensation. Nothing contained herein shall
be construed to prevent Tenant from prosecuting in any condemnation
proceedings a claim for the value of any of Tenant's usual trade fixtures
installed in the Premises by Tenant at Tenant's expense and for relocation
expenses.
10.10 COMPLETION DATE FOR RESTORATION. Where Landlord is obligated to effect
restoration of the Premises, unless such restoration is completed within
six (6) months from the date of the casualty or taking, such period to be
subject, however, to extension where the delay in completion of such work
is due to causes beyond Landlord's control (but in no event beyond twelve
(12) months from the date of the casualty or taking), Tenant shall have
the right to terminate this Lease at any time after the expiration of such
six (6) month (as extended) period until the restoration is substantially
completed, such termination to take effect as of the date of Tenant's
notice, with the same force and effect as if such date were the date
originally established as the expiration date hereof.
ARTICLE 11
DEFAULT
11.1 TENANT'S DEFAULT. If:
(a) Tenant shall fail to pay the Fixed Rent, additional rent or other
charges for which provision is made herein on or before the date on which
the same becomes due and payable (other than the Termination Amount
(hereinafter defined)), and the same continues for ten (10) days after
notice from Landlord thereof, or
(b) Landlord having rightfully given the notice specified in subdivision
(a) above more three (3) times in a period of three hundred sixty five
(365) days, Tenant shall thereafter in the same 365-day period fail to pay
the Fixed Rent, additional rent or other charges on or before the date on
which the same becomes due and payable (other than the Termination
Amount), or
(c) Tenant shall fail to timely pay to Landlord the Termination Amount,
or
(d) Tenant shall fail to perform or observe any other term or condition
contained in this Lease and Tenant shall not commence to cure such failure
within thirty (30) days
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after notice from Landlord to Tenant thereof and promptly and diligently
complete the curing of the same, or
(e) Tenant shall abandon the Premises, or
(f) The estate hereby created shall be taken on execution or by other
process of law and such taking shall not be discharged within ten (10)
days, or if Tenant shall be judicially declared bankrupt or insolvent
according to law, or if any assignment or trust mortgage arrangement,
so-called, shall be made of the property of Tenant for the benefit of
creditors, or if a receiver, guardian, conservator, trustee in involuntary
bankruptcy or other similar officer shall be appointed to take charge of
all or any substantial part of Tenant's property by a court of competent
jurisdiction and such proceeding is not dismissed within sixty (60) days
after such appointment, or if a petition shall be filed for the
reorganization of Tenant under any provisions of the Bankruptcy Act now or
hereafter enacted and such proceeding is not dismissed within sixty (60)
days after it is begun, or if Tenant shall file a petition for such
reorganization, or for arrangements under any provisions of the Bankruptcy
Act now or hereafter enacted and providing a plan for a debtor to settle,
satisfy or extend the time for payment of debts, then, in any such case,
(notwithstanding any license of a former breach of covenant or waiver of
the benefit hereof or consent in a former instance), Landlord may (x) give
to Tenant a notice (hereinafter called "notice of termination")
terminating this lease at the expiration of five (5) days from the date of
service of such notice of termination, and at the expiration of such 5-day
period, this Lease and the term of this Lease, as well as all of the
right, title and interest of the Tenant hereunder, shall fully cease and
expire in the same manner and with the same force and effect as if the
date of expiration of such 5-day period were the date originally specified
herein for the expiration of the Term, and Tenant shall then quit and
surrender the Premises to Landlord, and/or (y) Landlord or Landlord's
agents, by any suitable action or proceeding at law, may immediately or at
any time thereafter enter into and upon the Premises or any part thereof
in the name of the whole and repossess the same as of Landlord's former
estate, and expel Tenant and those claiming through or under Tenant and
remove its or their effects without being guilty of any manner or
trespass, and without prejudice to any remedies which might otherwise be
used for arrears of rent or preceding breach of covenant; and Tenant
covenants and agrees, notwithstanding any entry or re-entry by Landlord,
whether by summary proceedings, termination, or otherwise, to pay and be
liable for, on the days originally fixed herein for the payment thereof,
amounts equal to the several installments of rent and other charges
reserved as they would, under the term of this Lease, become due if this
lease has not been terminated or if Landlord had not entered or
re-entered, as aforesaid, and whether the Premises be relet or remain
vacant, in whole or in part, or for a period less than the remainder of
the Term of this Lease, and for the whole thereof, but, in the event the
Premises be relet by Landlord, Tenant shall be entitled to a credit in the
net amount of rent and other charges received by Landlord in reletting,
after deduction of all reasonable expenses incurred in reletting the
Premises (including, without limitation,
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remodeling costs, brokerage fees and the like), and in collecting the rent
in connection therewith, in the following manner:
Amounts received by Landlord after reletting shall first be applied
against such Landlord's expenses, until the same are recovered, and until
such recovery, Tenant shall pay, as of each day when a payment would fall
due under this Lease, the amount which Tenant is obligated to pay under
the terms of this Lease (Tenant's liability prior to any such reletting
and such recovery not in any way to be diminished as a result of the fact
that such reletting might be for a rent higher than the rent provided for
in this Lease); when and if such expenses have been completely recovered,
the amounts received from reletting by Landlord as have not previously
been applied shall be credited against Tenant's obligations as of each day
when a payment would fall due under this Lease, and only the net amount
thereof shall be payable by Tenant. Further, amounts received by Landlord
from such reletting for any period shall be credited only against
obligations of Tenant allocable to such period, and shall not be credited
against obligations of Tenant hereunder accruing subsequent or prior to
such period; not shall any credit of any kind be due for any period after
the date when the term of this lease is scheduled to expire according to
its terms.
As an alternative, at the election of Landlord, Tenant will, upon such
termination, pay to Landlord, as liquidated damages, such a sum as at the
time of such termination represents the amount of the excess, if any, of
the then value of the total rent and other benefits which would have
accrued to Landlord under this Lease for the remainder of the Lease Term
if the Lease terms had been fully complied with by Tenant over and above
the then cash rental value (in advance) of the Premises for the balance of
the Lease Term.
For the purpose of this Article, if Landlord elects to require Tenant to
pay damages in accordance with the immediately preceding paragraph, the
total rent shall be computed by assuming that Tenant's share of excess
taxes would be, for the balance of the unexpired Lease Term, the amount
thereof (if any) for the immediately preceding annual period payable by
Tenant to Landlord.
Nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove for and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time
when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater, equal to, or less than the
amount of the loss or damages referred to above.
11.2 LANDLORD'S DEFAULT. Landlord shall in no event be in default in the
performance of any Landlord's obligations hereunder unless and until
Landlord shall have failed to perform such obligations within thirty (30)
days, or such additional time as is reasonably
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required to correct any such default, after notice by Tenant to Landlord
properly specifying wherein Landlord has failed to perform any such
obligation.
ARTICLE 12
BANKRUPTCY OR INSOLVENCY
12.1 CHAPTER 7 PROCEEDINGS. If the Tenant shall become a debtor under Chapter 7
of the Bankruptcy Code and Tenant's trustee or Tenant shall elect to
assume this Lease for the purpose of assigning the same or otherwise, such
election and assignment may be made only if all of the provisions of
Sections and of this Article are satisfied. If Tenant or Tenant's trustee
shall fail to elect to assume this Lease within sixty (60) days after the
filing of a petition, or such additional time as provided by the court
within such 60-day period, this Lease shall be deemed to have been
rejected. Immediately thereupon, Landlord shall be entitled to possession
of the Premises without further obligation to Tenant or Tenant's trustee
and this Lease shall terminate, but Landlord's right to be compensated for
damages (including, without limitation, damages pursuant to Article )
in any such proceeding shall survive.
12.2 CHAPTER 11 PROCEEDINGS. If a petition for reorganization or adjustment of
debts is filed concerning Tenant under Chapter 11 of the Bankruptcy Code,
or a proceeding is filed under Chapter 7 of the Bankruptcy Code and is
transferred to Chapter 11, Tenant's trustee or Tenant, as
debtor-in-possession, must elect to assume this Lease within the earlier
of (i) confirmation of the Plan and (ii) one hundred twenty (120) days
from the date of the filing of the petition under Chapter 11 or such
transfer thereto or Tenant's trustee or Tenant, as debtor-in-possession,
shall be deemed to have rejected this lease. If Tenant's trustee or
Tenant, as debtor-in-possession, has failed to perform all of Tenant's
obligations under this Lease within the time periods (excluding grace
periods) required for such performance, no election by Tenant's trustee or
by Tenant, as debtor- in-possession, to assume this Lease, whether under
Chapter 7 or Chapter 11, shall be effective unless each of the following
conditions has been satisfied:
(a) Tenant's trustee or Tenant, as debtor-in-possession, has cured, or has
provided Landlord with Assurance (hereinafter defined) that it will cure
(i) all monetary defaults under this Lease within ten (10) days from the
date of such assumption, and (ii) all non-monetary defaults under this
Lease within thirty (30) days from the date of such assumption; and
(b) Tenant's trustee or Tenant, as debtor-in-possession, has provided
Landlord with Assurance of the future performance of each of the
obligations under this lease of Tenant, Tenant's trustee or Tenant,
debtor-in-possession, and has (i) deposited with Landlord, as security for
the timely payment of rent hereunder, an amount equal to the average
monthly Fixed Rent and additional rent which Tenant was obligated to pay
to
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Landlord under this Lease either (x) from the Commencement Date to the
date of such default, or (y) during the last three (3) Lease Years prior
to the date of such default, whichever is the greater, and (ii) paid in
advance to Landlord Tenant's annual obligations for other monetary charges
payable by Tenant under this Lease. The obligations imposed upon Tenant's
trustee or Tenant, as debtor-in-possession, shall continue with respect to
Tenant or any assignee of Tenant's interests in this Lease after the
completion of bankruptcy proceedings.
For purposes of this Section, Landlord and Tenant acknowledge that
"Assurance" shall mean no less than: (1) Tenant's trustee or Tenant,
debtor-in-possession, has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administration expenses to assure Landlord that sufficient funds will be
available to fulfill the obligations of Tenant under this Lease, and (ii)
the Bankruptcy Court shall have entered an order segregating sufficient
cash payment to Landlord, or Tenant's trustee or Tenant,
debtor-in-possession, or shall have granted a valid and perfected first
lien and security interest and mortgage in property of Tenant, acceptable
as to value and kind to Landlord, to secure to Landlord the obligations of
Tenant's trustee or Tenant, debtor-in-possession, to cure defaults under
this lease, both monetary and non-monetary, within the time period set
forth above.
12.3 BANKRUPTCY EVENT FOLLOWING LEASE ASSUMPTION. If this Lease is assumed in
accordance with the provisions of Section and thereafter Tenant is
liquidated or files or has filed against it a subsequent petition for
reorganization or adjustments of debts under Chapter 11 of the Bankruptcy
Code, Landlord may, at its option, terminate this Lease and all rights of
Tenant hereunder, by giving Tenant notice of its election to so terminate
within thirty (30) days after the occurrence of either of such events.
12.4 LEASE ASSIGNMENT FOLLOWING LEASE ASSUMPTION. If Tenant's trustee or
Tenant, debtor-in-possession, has assumed this Lease pursuant to the terms
and provisions of Sections and of this Article for the purpose of
assigning (or elects to assign) this Lease, this lease may be so assigned
only if the proposed assignee has provided adequate assurance of future
performance of all of the terms, covenants and conditions of this Lease to
be performed by Tenant. Landlord shall be entitled to receive all cash
proceeds of any such assignment. As used herein, "adequate assurance of
future performance" shall mean that all of the following conditions have
been satisfied:
(a) the proposed assignee has furnished Landlord with either (i) a current
financial statement audited by a certified public accountant indicating a
net worth and working capital in amounts which Landlord reasonably
determines to be sufficient to assure the future performance by such
assignee of Tenant's obligations under this Lease, or (ii) a guaranty or
guaranties in form and substance satisfactory to Landlord from one or more
persons or entities with aggregate net worth which Landlord reasonably
determines to be
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sufficient to assure the future performance by such assignee of Tenant's
obligations under this Lease; and
(b) Landlord has obtained all consents or waivers from others required
under any lease, mortgage, financing agreement or other agreement by which
Landlord is bound to permit Landlord to consent to such assignment.
12.5 USE AND OCCUPANCY CHARGES. When, pursuant to the Bankruptcy Code
Tenant's trustee or Tenant, debtor-in-possession, shall be obliged to pay
reasonably use and occupancy charges for the use of the Premises, such
charges shall not be less than the annual Fixed Rent and additional rent
payable by Tenant under this Lease.
12.6 FURTHER PROVISIONS. Neither the whole nor any portion of Tenant's interest
in this Lease or its estate in the Premises shall pass to any United
States trustee, receiver, assignee for the benefit of creditors, or any
other person or entity, or otherwise by operation of law under the laws of
any state having jurisdiction of the person or property of Tenant, unless
Landlord shall have consented to such transfer in writing. No acceptance
by Landlord of rent or any other payments from any United States trustee,
receiver, assignee, person or other entity shall be deemed to a waiver of
Landlord's right to terminate this Lease for any transfer of Tenant's
interest under this Lease without such consent.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 EXTRA HAZARDOUS USE. Tenant covenants and agrees that Tenant will not do
or permit anything to be done in or upon the Premises, or bring in
anything or keep anything therein, which shall increase the rate of
property or liability insurance on the Premises or on the Building above
the standard rate applicable to Premises being occupied for use to which
Tenant has agreed to devote the Premises; and Tenant further agrees that,
in the event that Tenant shall do any of the foregoing, Tenant will
promptly pay to Landlord, on demand, any such increase resulting
therefrom, which shall be due and payable as additional rent hereunder.
Tenant, at its sole expense, shall comply with all rules, orders,
regulations or requirements of the Board of Fire Underwriters, or any
other similar body, and in no event shall Tenant do or permit anything to
be done, in or upon the Premises, or bring or keep anything therein,
except as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization, or other authority
having jurisdiction.
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13.2 WAIVER. Failure on the part of Landlord or Tenant to complain of any
action or non-action on the part of the other, no matter how long the same
may continue, shall never be a waiver by Tenant or Landlord, respectively,
of any of the other's rights hereunder. Further, no waiver, at any time of
any of the provisions hereof by Landlord or Tenant shall be construed as a
waiver of any of the other provisions hereof, and a waiver at any time of
any of the provisions hereof shall not be construed as a waiver at any
subsequent time of the same provisions. The consent or approval of
Landlord or Tenant to or of any action by the other requiring such consent
or approval shall not be construed to waiver or render unnecessary
Landlord's or Tenant's consent or approval to or of any subsequent similar
act by the other.
No payment by Tenant, or acceptance by Landlord, of a lesser amount than
shall be due from Tenant to Landlord shall be treated otherwise than as a
payment on account. The acceptance by Landlord of a check for a lesser
amount with an endorsement or statement thereon, or upon any letter
accompanying such check, that such lesser amount is payment in full, shall
be given no effect, and Landlord may accept such check without prejudice
to any other rights or remedies which Landlord may have against Tenant.
13.3 CUMULATIVE REMEDIES. The specific remedies to which Landlord may resort
under the terms of this Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which it may be
lawfully entitled in case of any breach or threatened breach by Tenant of
any provisions of this Lease. In addition to the other remedies provided
in this Lease, Landlord shall be entitled to the restraint by injunction
of the violation or attempted or threatened violation of any of the
covenants, conditions or provisions of this Lease or to a decree
compelling specific performance of any such covenants, conditions or
provisions.
13.4 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and provisions
of this Lease, on payment of the rent and observing, keeping and
performing all of the terms and provisions of this Lease on Tenant's part
to be observed, kept and performed, shall lawfully, peaceably and quietly
have, hold, occupy and enjoy the Premises during the Term of this Lease,
without hindrance or ejection by any persons lawfully claiming under
Landlord to have title to the Premises superior to Tenant; the foregoing
covenant of quiet enjoyment is in lieu of any other covenant, express or
implied; and it is understood and agreed that this covenant and any and
all other covenants of Landlord contained in this Lease shall be binding
upon Landlord and Landlord's successors only with respect to breaches
occurring during Landlord's and Landlord's successors' respective
ownership of Landlord's interest hereunder.
Further, Tenant specifically agrees to look solely to Landlord's then
equity interest in the Building at the time owned, or in which Landlord
holds an interest as ground lessee, for recovery of any judgement from
Landlord; it being specifically agreed that Landlord (original or
successor), nor any beneficiary of any Trust of which any person holding
Landlord's interest is Trustee, shall never be personally liable for any
such judgement,
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or for the payment of any monetary obligation to Tenant. The provision
contained in the foregoing sentence is not intended to, and shall not,
limit any right that Tenant might otherwise have to obtain injunctive
relief against Landlord or Landlord's successors in interest, or any
action not involving the personal liability of Landlord (original or
successor), any successor Trustee to the persons named herein as Landlord,
or any beneficiary of any Trust of which any person holding Landlord's
interest is Trustee, to respond in monetary damages from Landlord's assets
other than Landlord's equity interest aforesaid in the Building.
In no event shall Landlord ever be liable to Tenant for any indirect or
consequential damages suffered by Tenant from whatever cause.
13.5 NOTICE TO MORTGAGEE AND GROUND LESSOR. After receiving notice from any
person, firm or other entity that it holds a mortgage which includes the
Premises, as part of the mortgaged premises, or that it is the ground
lessor under a lease with Landlord, as ground lessee, which includes the
Premises as a part of the demised premises, no notice from Tenant to
Landlord shall be effective unless and until a copy of the same is given
to such holder or ground lessor, and the curing of any of Landlord's
defaults by such holder or ground lessor within a reasonable time
thereafter (including a reasonable time to obtain possession of the
premises if the mortgagee or ground lessor elects to do so) shall be
treated as performance by Landlord. For the purposes of this Section or
Section , the term "mortgage" includes a mortgage on a leasehold interest
of Landlord (but not one on Tenant's leasehold interest).
13.6 ASSIGNMENT OF RENTS. With reference to any assignment by Landlord of
Landlord's interest in this Lease, or the rents payable hereunder,
conditional in nature or otherwise, which assignment is made to the holder
of a mortgage or ground lease on property which includes the Premises,
Tenant agrees:
(a) that the execution thereof by Landlord, and the acceptance thereof by
the holder of such mortgage, or the ground lessor, shall never be treated
as an assumption by such holder or ground lessor of any of the obligations
of Landlord hereunder, unless such holder, or ground lessor, shall, by
notice sent to Tenant, specifically otherwise elect; and
(b) that, except as aforesaid, such holder or ground lessor shall be
treated as having assumed Landlord's obligations hereunder only upon
foreclosure of such holder's mortgage and the taking of possession of the
Premises, or, in the case of a ground lessor, the assumption of Landlord's
position hereunder by such ground lessor. In no event shall the
acquisition of title to the Building and the land on which the same is
located by a purchaser which, simultaneously therewith, leases the entire
Building or such land back to the seller thereof be treated as an
assumption, by operation of law or otherwise, of Landlord's obligations
hereunder, but Tenant shall look solely to such seller-lessee, and its
successors from time to time in title, for performance of Landlord's
obligations hereunder. For all purposes, such seller-lessee, and its
successors in title, shall be the
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Landlord hereunder unless and until Landlord's position shall have been
assumed by such purchaser-lessor.
In the event that (a) such holder actually shall collect the rent payable
hereunder pursuant to said assignment and shall not assume (or be deemed
to have assumed) the Landlord's obligations hereunder and (b) a default by
Landlord shall exist under this Lease and shall not be cured by Landlord
or such holder within the time frame set forth in Section 13.5 hereof or
elsewhere in this Lease (Tenant having provided such holder with notice of
such default), then for so long as such default shall remain uncured,
Tenant shall have the right (but not the obligation) to cure such default
following notice to Landlord and such holder of its election to effectuate
such cure, and in the event that Tenant shall cure such default, Tenant
shall be entitled to deduct from its installment (or installments, if
applicable) of Fixed Rent an amount equal to the reasonable out-of-pocket
costs incurred by Tenant in effectuating such cure.
13.7 SURRENDER. No act or thing done by Landlord during the Term of this Lease
shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid, unless in writing
signed by Landlord. No employee of Landlord or of Landlord's agents shall
have any power to accept the keys of the Premises prior to the termination
of this Lease. The delivery of keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the Lease or a
surrender of the Premises. In the event that Tenant at any time desires to
have Landlord underlet the Premises for Tenant's account, the Landlord or
Landlord's agents are authorized to receive the keys for such purposes
without releasing Tenant from any of the obligations under this Lease, and
Tenant hereby relieves Landlord of any liability for loss of or damage to
any of Tenant's effects in connection with such underletting.
13.8 BROKERAGE. Tenant warrants and represents that Tenant has not dealt with
any broker in connection with the consummation of this Lease other than
Pappas Properties, Inc. and the Broker designated in Section hereof (whose
fee shall be the responsibility of Landlord); and in the event any claim
is made against the Landlord relative to dealings between Tenant and any
other brokers, excluding Pappas Properties, Inc. and the Broker identified
in Section hereof, Tenant shall defend the claim against Landlord with
counsel of Landlord's selection and save harmless and indemnify Landlord
on account of loss, cost or damage, including reasonable attorneys' fees,
which may arise by reason of such claim. The parties acknowledge that the
fee due Broker is the amount set forth in the Fee Agreement attached
hereto as Exhibit D (the "Broker's Fee Agreement").
13.9 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this
Lease, or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Lease, or
the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or
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unenforceable, shall not be affected thereby, and each term and provision
of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
13.10 PROVISIONS BINDING, ETC. The obligation of this Lease shall run with the
land, and except as herein otherwise provided, the terms hereof shall be
binding upon and shall inure to the benefit of the successors and assigns,
respectively, of Landlord and Tenant and, if Tenant shall be an
individual, upon and to his heirs, executors, administrators, successors
and assigns. Each term and each provision of this Lease to be performed by
Tenant shall be construed to be both a covenant and a condition. The
reference contained to successors and assigns of Tenant is not intended to
constitute a consent to assignment by Tenant, but has reference only to
those instances in which Landlord may later give consent to a particular
assignment as required by those provisions of Article
hereof.
13.11 RECORDING. Tenant agrees not to record this Lease, but, each party hereto
agrees, on the request of the other, to execute a so-called Notice of
Lease or short form lease in form recordable and complying with applicable
law and reasonably satisfactory to Landlord's attorneys. In no event shall
such document set forth the rent or other charges payable by Tenant under
this Lease; and any such document shall expressly state that it is
executed pursuant to the provisions contained in this Lease, and is not
intended to vary the terms and conditions of this Lease.
13.12 NOTICES. Whenever, by the terms of this Lease, a request demand, notice or
other communication is required or permitted to be given either to
Landlord or to Tenant, such notices shall be in writing and shall be sent
by registered or certified mail, postage prepaid:
If intended for Tenant, addressed to Tenant at Tenant's Original Address,
Attention: Property Management Department, with a copy to the Premises (or
to such other address or addresses as may from time to time hereafter be
designated by Tenant by like notice).
If intended for the Landlord, addressed to Landlord at 655 Summer Street,
Boston, Massachusetts 02210, Attention: William T. Vrettas, with a copy to
Michael S. Sophocles, Esq., at Eckert Seamans Cherin & Mellott, One
International Place, 18th Floor, Boston, Massachusetts 02110.
All such notices shall be effective when deposited in the United States
Mail within the Continental United States.
Where provision is made for notice to be given to the attention of an
individual or department, the notice shall be effective only if the
wrapper in which such notice is sent is addressed to the attention of such
individual or department.
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13.13 WHEN LEASE BECOMES BINDING. Employees or agents of Landlord have no
authority to make or agree to make a lease or any other agreement or
undertaking in connection herewith. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall
become effective and binding only upon the execution and delivery hereof
by both Landlord and Tenant. Landlord will exercise reasonable efforts to
secure such approvals, but shall incur no liability for failure to do so.
All negotiations, considerations, representations and understandings
between Landlord and Tenant are incorporated herein and may be modified or
altered only by written agreement between Landlord and Tenant, and no act
or omission of any employee or agent of Landlord shall alter, change or
modify any of the provisions hereof.
13.14 PARAGRAPH HEADINGS. The paragraph headings throughout this instrument are
for convenience and reference only, and the words contained therein shall
in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the provisions of this Lease.
13.15 RIGHTS OF PARTIES HOLDING PRIOR INTERESTS. This Lease shall be subject to
the consent of the Ground Lessor and subordinated to any mortgage now or
hereafter on the Development or the Building, or both and to each advance
made or hereafter to be made under any mortgage, and to all renewals,
modifications, consolidations, replacements and extensions thereof and all
substitutions therefor, and to those leases, identified as follows:
(a) Ground lease dated July 13, 1965 from Massachusetts Port Authority
(the "Authority") to Boston Harbor Industrial Development Corp. ("Boston
Harbor"), notice of which is recorded with Suffolk Deeds in Book 8000,
Page 584 (together with (c), collectively called the "Massport Leases");
(b) Sublease dated December 1, 1965 from Boston Harbor to the Landlord
named herein, notice of which is recorded with said Deeds in Book 8011,
Page 693 (together with (d), collectively called the "Boston Harbor
Leases");
(c) Ground Lease from the Authority to Boston Harbor, notice of which is
recorded with said Deeds in Book 8004, Page 771; and
(d) Sublease dated December 16, 1965 from Boston Harbor to the Landlord
named herein, notice of which is recorded with said Deeds in Book 8167,
Page 220.
This Section shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination,
Tenant shall execute and deliver promptly any certificate that Landlord or
any mortgagee may request. In the event that any mortgagee or its
respective successor in title shall succeed to the interest of Landlord,
then, at the option of such mortgagee or successor, this Lease shall
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nevertheless continue in full force and effect and Tenant shall and does
hereby agree to attorn to such mortgagee or successor and to recognize
such mortgagee or successor as its landlord. If any holder of a mortgage
which includes the Premises, executed and recorded prior to the Date of
this Lease, shall so elect, this Lease, and the rights of Tenant
hereunder, shall be superior in right to the rights of such holder, with
the same force and effect as if this Lease had been executed, delivered
and recorded, or a statutory Notice hereof recorded, prior to the
execution, delivery and recording of any such mortgage. The election of
any such holder shall become effective upon either notice from such holder
to Tenant in the same fashion as notices from Landlord to Tenant are to be
given hereunder or by the recording in the appropriate registry or
recorder's office of an instrument in which such holder subordinates its
rights under such mortgage to this Lease.
Upon the request of Tenant, Landlord will endeavor to obtain an agreement
from the holder of a mortgage which includes the Premises to recognize the
right of Tenant to use and occupy the Premises upon the payment of Fixed
Rent, additional rent and other charges payable by Tenant under this Lease
and the performance by Tenant of Tenant's obligations hereunder, any such
recognition agreement as may be obtained to be in such form and to contain
such terms and provisions as are required by the holder of any such
mortgage; but the inability of the Landlord to obtain such a recognition
agreement from the holder of any such mortgage shall in no wise affect the
obligations of the Tenant under this Lease.
Landlord warrants and represents to Tenant that it has full right and
lawful authority to enter into this Lease, and, subject to the provisions
of Section hereof, there is no provision contained in any of the leases
identified in this Section, which conflict with the terms and provisions
of this Lease, that each of the leases identified in (a) through (d) above
are in full force and effect in all respects, and neither the Landlord nor
the Landlord's lessor is in default thereunder and that the lease terms of
each of the Leases identified in (a) through (d) above extends beyond the
Initial Term of this Lease or any extension thereof in accordance with
Article hereof.
13.16 STATUS REPORT. Recognizing that both parties may find it necessary to
establish to third parties, such as accountants, banks, mortgagees or the
like, the then current status of performance hereunder, either party, on
the request of the other made from time to time, will promptly furnish to
Landlord, or the holder of any mortgage encumbering the Premises, or to
Tenant, as the case may be, a statement of the status of any matter
pertaining to this Lease, including, without limitation, acknowledgments
that (or the extent to which) each party is in compliance with its
obligations under the terms of this Lease. Any such statement delivered by
Tenant pursuant to this Section may be relied upon by any prospective
purchaser or mortgagee of the Premises or any prospective assignee of any
mortgagee of the Premises.
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13.17 SELF-HELP. If Tenant shall at any time default in the performance of any
obligation under this Lease, Landlord shall have the right, but shall not
be obligated, to enter upon the Premises and to perform such obligation
notwithstanding the fact that no specific provision for such substituted
performance by Landlord is made in this Lease with respect to default. In
performing such obligation, Landlord may make any payment of money or
perform any other act. All sums so paid by Landlord (together with
interest at the rate of one percentage point over the then prevailing
prime rate in Boston as set by The Bank of Boston) and all necessary
incidental costs and expenses in connection with the performance of any
such act by Landlord, shall be deemed to be additional rent under this
Lease and shall be payable to Landlord immediately on demand. Landlord may
exercise the foregoing rights without waiving any other of its rights or
releasing Tenant from any of its obligations under this Lease.
13.18 HOLDING OVER. Any holding over by Tenant after the expiration of the term
of this Lease shall be treated as a daily tenancy at sufferance at a rate
equal to one (1) and one-half (1/2) times the Fixed Rent then in effect
plus additional rent and Additional Charges and other charges herein
provided (prorated on a daily basis) and shall otherwise be on the terms
and conditions set forth in this Lease, as far as applicable. Tenant also
shall pay to Landlord any and all damages, of whatever nature, sustained
by reason of any such holding over.
13.19 RULES AND REGULATIONS. Tenant shall abide by rules and regulations from
time to time established by Landlord with respect to the Development, it
being agreed that such rules and regulations will be established and
applied by Landlord in a non-discriminatory fashion, such that all rules
and regulations shall be generally applicable to other tenants, of similar
nature to the Tenant named herein, of the Building. Landlord agrees to use
reasonable efforts to insure that any such rules and regulations are
uniformly enforced, but Landlord shall not be liable to Tenant for
violation of the same by any other tenant or occupant of any of the
Building, or persons having business with them. In the event that there
shall be a conflict between such rules and regulations of this Lease, the
provisions of this Lease shall prevail.
13.20 REMEDYING DEFAULTS: INTEREST ON LATE RENT. Landlord shall have the right,
but shall not be required, to pay such sums or do any act which requires
the expenditure of monies which may be necessary or appropriate by reason
of the occurrence of a Default of Tenant (as that term is defined in
Section hereof), and in the event of the exercise of such right by
Landlord, Tenant agrees to pay to Landlord forthwith upon demand all such
sums, together with interest thereon at a rate equal to four percent (4%)
over the so-called base rate as announced from time to time by the Bank of
Boston, as an additional charge. Any payment of Fixed Rent, Additional
Rent, additional charges or other sums payable hereunder not paid within
any 20-day period of the due date thereof contemplated by Section hereof
shall, at the option of Landlord, bear interest at a rate equal to the
lower of the highest rate allowed pursuant to applicable law or four
percent (4%) over the so-called base rate from time to time
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announced by the Bank of Boston, from the due date thereof (i.e., not
giving effect to said 20-day period) and shall be payable forthwith on
demand by Landlord, as an additional charge.
13.21 NON-DISCRIMINATION. Landlord represents and warrants that it is an equal
opportunity employer, Landlord further acknowledges that Tenant is subject
to the laws, rules regulations and order referred to in the form of
Non-Discrimination Compliance Agreement attached hereto as Exhibit ND, and
agrees that it will not during the Term of this Lease do anything or take
any action which impairs or interferes with Tenant's ability to comply
fully with any or all of such laws, rules, regulation and orders. Landlord
further agrees that, solely to the extent the same are applicable to it
and to this Lease, Landlord will comply with such laws, rules, regulations
and orders.
Notwithstanding anything hereinabove provided, in the event of a conflict
between any provision of this Lease and any provision of Exhibit ND, the
provisions of this Lease shall control, to the extent not inconsistent
with such laws, rules, regulations and orders as applicable to each party.
13.22 SURRENDER OF PREMISES. In addition to those provisions set forth in
Section hereof respecting Tenant's obligation to remove its good and
effects from the Premises and the Building, Tenant may, at any time during
the Term of this Lease, or upon expiration thereof, or within a reasonable
time after any sooner termination of the Term of this Lease which results
from a fire or other casualty or a taking by eminent domain, remove its
usual trade fixtures and furniture brought into the Premises at Tenant's
sole cost, again repairing any and all damage to the Premises or Building
resulting from such removal. Any or all property not so removed (whether
such property is required to be removed by this Section or Section hereof)
shall, at Landlord's option, either become the exclusive property of
Landlord or may be disposed of by Landlord, at Tenant's cost and expense,
without further notice to or demand upon Tenant if any of such property
remains on or about the Premises for a period in excess of thirty (30)
days after the termination or expiration of the Term of this Lease.
13.23 LANDLORD'S ACCESS TO PREMISES. In any case where Landlord desires or
requires access to the Premises, reasonable prior advice shall be given to
the employee from time to time in charge of Tenant's operations of such
desire or need, except in case of emergency, when Landlord may enter
without prior advice.
13.24 GOVERNING LAW. This Lease shall be governed exclusively by the provisions
hereof and by the laws of the Commonwealth of Massachusetts, as the same
may from time to time exist.
13.25 BINDING EFFECT. This Lease shall be binding upon the respective
successors and assigns of Landlord and Tenant.
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13.26 HAZARDOUS SUBSTANCES. Landlord agrees to indemnify and hold Tenant
harmless from and against any and all loss, cost, damage and expense
(including, without limitation, reasonable attorneys' fees and expenses)
incurred by Tenant in connection with any past, present or future release
of Hazardous Substances (hereinafter defined) in, on or about the
Premises, the Building or the Development, except to the extent that such
release is caused by the negligence, willful misconduct, acts or omissions
of Tenant, its sublessee(s), assignee(s) or its or their agents,
employees, independent contractors, licensees or invitees.
Tenant agrees to indemnify and hold Landlord harmless from and against any
and all loss, cost, damage and expense (including, without limitation,
reasonable attorneys' fees and expenses) incurred by Landlord in
connection with any release of Hazardous Substances in, on or about the
Premises, the Building or the Development to the extent that such release
is caused by the negligence, willful misconduct, acts or omissions of
Tenant, its sublessee(s), assignee(s) or its or their agents, employees,
independent contractors, licensees or invitees.
For purposes hereof, "Hazardous Substances" means any and all substances
and materials which are toxic, ignitable, reactive, or corrosive and which
are regulated by any federal, state or local laws, rules or regulations
pertaining to human health, safety, public welfare and the environment,
including, without limitation, asbestos, polchlorobiphenyls and petroleum.
The provisions of this Section shall survive any termination of this
Lease.
ARTICLE 14
TENANT'S RIGHT TO TERMINATE LEASE
Subject to the terms and conditions contained in this Article, Tenant shall have
the right and option to terminate this Lease effective as of the last day of any
calendar month during the Initial Term (but in no event earlier than the end of
the twenty-fourth (24th) calendar month of the Initial Term) (the "Lease
Termination Date") by providing Landlord with written notice of its election so
to do (the "Termination Notice") not earlier than six (6) months prior to the
Lease Termination Date. In the event that Tenant shall provide a Termination
Notice to Landlord and timely pay to Landlord the Termination Amount hereinafter
set forth in this Section, this Lease shall terminate on the Lease Termination
Date as if such date was the stated termination date of this Lease, and no
instrument of termination need be executed. It shall be a condition to the
effectiveness of any Termination Notice that Tenant pay to Landlord, on or
before the Lease Termination Date, an amount (the "Termination Amount") equal to
the unamortized value of all of Landlord's costs incurred in connection with the
Lease, including, without limitation, the cost of all brokerage and legal
expense, and the cost of Landlord's Work, as of the Lease Termination Date. Such
unamortized value shall be determined by multiplying the aggregate amount of
such costs, together with an interest factor, reasonably determined by Landlord
as
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being the interest rate then being charged for long term mortgages by
institutional lenders on property similar to the Building, by a fraction, the
numerator of which shall be sixty (60) minus the number of months during the
Initial Term which shall have expired as of the Lease Termination Date, and the
denominator of which shall be sixty (60).
ARTICLE 15
TENANT'S RIGHT TO LEASE
15.1 FIRST RIGHT TO LEASE. Subject to the terms and conditions contained in
this Article, Tenant shall have the right and option to lease any
Remaining Building Space (hereinafter defined) then available to lease as
set forth in a notice from Landlord to Tenant (the "Remaining Building
Space Notice"). For purposes hereof, the term "Remaining Building Space"
shall mean and include any and all premises rentable area located in the
Building, less and except the Premises. Tenant acknowledges and agrees
that certain Remaining Building Space currently is leased to existing
tenants under space leases which leases may contain the right or option to
extend or renew the term of an expiring lease by an existing tenant.
15.2 TENANT'S ELECTION. Landlord agrees to provide Tenant with notice of the
availability of Remaining Building Space as it becomes available from time
to time during the term hereof. Provided that this Lease then is in full
force and effect and there shall exist no default of Tenant hereunder,
Tenant may, by giving notice to Landlord before the close of business on
the thirtieth (30th) day after the giving of the Remaining Building Space
Notice to Tenant (the "Election Notice"), elect to lease all (but not
part) of the Remaining Building Space referenced in the Remaining Building
Space Notice to Tenant. Rent and other charges shall be determined in
accordance with Section hereof. If Tenant shall fail to timely give its
Election Notice to Landlord, then Landlord thereafter shall be free to
lease any portion or all of the Remaining Building Space referred to in
the Remaining Building Space Notice to a third party or parties from time
to time on such terms and conditions as it may deem appropriate, and
Tenant shall have no further right to lease any portion or all of such
Remaining Building Space, it being agreed that time shall be of the
essence with respect to the giving of the Election Notice by Tenant.
15.3 COMMENCEMENT DATE/NO REPRESENTATION OR WARRANTY. If Tenant has
validly exercised its right to lease the Remaining Building Space, this
Lease shall be deemed automatically amended to include the Remaining
Building Space as a part of the Premises for all purposes hereof as of the
forty-fifth (45th) day following the giving of the Election Notice (the
"Remaining Building Space Commencement Date"). Effective as of the
Remaining Building Space Commencement Date, all percentages set forth in
this Lease shall be adjusted accordingly. The Remaining Building Space
shall be leased
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on an "as is," "where is" basis by Tenant without any representation or
warranty (whether express or implied) by Landlord.
15.4 FORMAL LEASE AMENDMENT. At the request of either Landlord or Tenant, each
party agrees to execute and deliver a formal amendment to this Lease
confirming any amendment to this Lease pursuant to the terms of this
Article, but the failure of either party to execute and deliver such
confirmatory lease amendment shall not affect or impair the validity of
any amendment pursuant to the terms hereof.
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EXECUTED as a sealed instrument in two or more counterparts by persons or
officers hereunto duly authorized on the Lease Date set forth in Section hereof.
WITNESS: "E" STREET ASSOCIATES
By:
-----------------------------------
Pappas Management Corporation
Managing Agent
(LANDLORD)
By:
---------------------------------
Name: William T. Vrettas
Office: Vice President
Hereunto Duly Authorized
(CORPORATE SEAL)
WITNESS: ZOOM TELEPHONICS, INC.
(TENANT)
By:
Name:
Office:
Hereunto Duly Authorized
(CORPORATE SEAL)
46
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EXHIBIT A
FLOOR PLAN
<PAGE>
EXHIBIT 4.5 (C)
TAX BILL
<PAGE>
EXHIBIT ND
NON-DISCRIMINATION AGREEMENT
<PAGE>
EXHIBIT B
ROOF CONTRACT
<PAGE>
EXHIBIT C
GLUE CONTRACT
<PAGE>
EXHIBIT D
BROKER'S FEE AGREEMENT
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of this __ day of [ ]
("Agreement"), by and between Zoom Telephonics, Inc., a Canadian corporation
(the "Company"), and _____________________ (the "Indemnitee").
WHEREAS, highly competent persons are reluctant to serve corporations as
directors, officers or in other capacities unless they are provided with
adequate protection through insurance or adequate indemnification against
inordinate risks of claims and actions against them arising out of their service
to and activities on behalf of the corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that
Indemnitee be indemnified to the fullest extent permitted.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
ARTICLE I
Definitions
For purposes of this Agreement the following terms shall have the meanings
indicated:
1.01 "Board" shall mean the Board of Directors of the Company.
1.02 "Corporate Status" describes the status of a person who is or was a
director, officer, employee, agent, trustee or fiduciary of the Company or of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other Enterprise which such person is or was serving at the express written
request of the Company.
1.03 "Court" means the court in which the Proceeding in respect of which
indemnification is sought by the Indemnitee shall have been brought or is
pending, or another court having subject matter jurisdiction and personal
jurisdiction over the parties.
1.04 "Disinterested Director" means a director of the Company who is not
and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
1.05 "Enterprise" shall mean the Company and any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise of
which Indemnitee is or was serving at the express written request of the Company
as a director, officer, employee, agent, trustee or fiduciary.
1.06 "Expenses" shall include, without limitation, all reasonable
attorneys' fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees, facsimile transmission
charges, and all other disbursements or expenses of the types customarily
incurred in connection with prosecuting, defending, preparing to prosecute or
defend, investigating or being or preparing to be a witness in a Proceeding.
1.07 "Good Faith" shall mean Indemnitee having acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company or, in the case of an Enterprise which is an employee
benefit plan, the best interests of the participants or beneficiaries of said
plan, as the case may be, and, with respect to any Proceeding which is criminal
in nature, having had no reasonable cause to believe Indemnitee's conduct was
unlawful.
1.08 "Improper Personal Benefit" shall include, but not be limited to, the
personal gain in fact by reason of a person's Corporate Status of a financial
profit, monies or other advantage not also accruing to the benefit of the
Company or to the stockholders generally and which is unrelated to his usual
compensation including, but not limited to, (i) in exchange for the exercise of
influence over the Company's affairs, (ii) as a result of the diversion of
corporate opportunity, or (iii) pursuant to the use or communication of
confidential or inside information for the purpose of generating a profit from
trading in the Company's securities. Notwithstanding the foregoing, "Improper
Personal Benefit" shall not include any benefit, directly or indirectly, related
to actions taken in order to evaluate, discourage, resist, prevent or negotiate
any transaction with or proposal from any person or entity seeking control of,
or a controlling interest in, the Company.
1.09 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and may include law firms or
members thereof that are regularly retained by the Company but not any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the standards of professional conduct then prevailing and
applicable to such counsel, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee's rights
under this Agreement.
1.10 "Officer" means the president, vice presidents, treasurer, assistant
treasurer(s), clerk, assistant clerk and such other executive officers as are
appointed by the board of directors of the Company or any other Enterprise, as
the case may be.
1.11 "Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation (including any internal corporate
investigation), administrative hearing or any other actual, threatened or
completed proceeding, whether civil, criminal, administrative or investigative,
other than one initiated by Indemnitee. For purposes of the foregoing sentence,
a "Proceeding" shall not be deemed to have been initiated by Indemnitee where
Indemnitee seeks, pursuant to Article VIII of this Agreement, to enforce
Indemnitee's rights under this Agreement.
ARTICLE II
Term of Agreement
This Agreement shall continue until and terminate upon the later of: (i)
ten (10) years after the date that Indemnitee shall have ceased to serve as a
director, officer, employee, agent, trustee or fiduciary of the Company or of
any other Enterprise; or (ii) the final termination of all pending Proceedings
in respect of which Indemnitee is granted rights of indemnification or
advancement of expenses hereunder and of any proceeding commenced by Indemnitee
pursuant to Article VIII of this Agreement relating thereto.
ARTICLE III
Services by Indemnitee, Notice of Proceedings
3.01 Services. Indemnitee agrees to serve or continue to serve as a
Director or Officer of the Company for so long as he is duly elected or
appointed. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law).
3.02 Notice of Proceeding. Indemnitee agrees promptly to notify the Company
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder, but the omission so to notify the Company shall not relieve the
Company from its obligations hereunder.
ARTICLE IV
Indemnification
4.01 In General. In connection with any Proceeding, the Company shall
indemnify, and advance Expenses, to Indemnitee as provided in this Agreement and
to the fullest extent permitted by applicable law in effect on the date hereof
and to such greater extent as applicable law may hereafter from time to time
permit.
4.02 Proceedings Other Than Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 4.02 if, by reason of Indemnitee's Corporate Status, Indemnitee is, or
is threatened to be made, a party to or is otherwise involved in any Proceeding,
other than a Proceeding by or in the right of the Company. Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement, actually and reasonably incurred by Indemnitee or on Indemnitee's
behalf in connection with such Proceeding or any claim, issue or matter therein,
if Indemnitee acted in Good Faith and such Indemnitee has not been adjudged
before, during or after such Proceeding to have derived an Improper Personal
Benefit from the transaction or occurrence forming the basis of such Proceeding.
4.03 Proceedings by or in the Right of the Company.
(a) Indemnitee shall be entitled to the rights of indemnification provided
in this Section 4.03 if, by reason of Indemnitee's Corporate Status, Indemnitee
is, or is threatened to be made, a party to or is otherwise involved in any
Proceeding brought by or in the right of the Company to procure a judgment in
its favor. Indemnitee shall be indemnified against Expenses, judgments,
penalties, and amounts paid in settlement, actually and reasonably incurred by
Indemnitee or on Indemnitee's behalf in connection with such Proceeding if
Indemnitee acted in Good Faith and such Indemnitee has not been adjudged before,
during or after such Proceeding to have derived an Improper Personal Benefit
from the transaction or occurrence forming the basis of such Proceeding.
Notwithstanding the foregoing, no such indemnification shall be made in respect
of any claim, issue or matter in such Proceeding as to which Indemnitee shall
have been adjudged to be liable to the Company if applicable law prohibits such
indemnification; provided, however, that, if applicable law so permits,
indemnification shall nevertheless be made by the Company in such event if and
only to the extent that the Court which is considering the matter shall so
determine.
4.04 Indemnification of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of Indemnitee's Corporate Status, a party to or is
otherwise involved in and is successful, on the merits or otherwise, in any
Proceeding, Indemnitee shall be indemnified, to the maximum extent permitted by
law, against all Expenses, judgments, penalties, fines, and amounts paid in
settlement, actually and reasonably incurred by Indemnitee or on Indemnitee's
behalf in connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Company shall
indemnify Indemnitee, to the maximum extent permitted by law, against all
Expenses, judgments, penalties, fines, and amounts paid in settlement, actually
and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section 4.04 and without limitation, "successful" shall include (i) not having
been found on the merits, or otherwise, to have derived an Improper Personal
Benefit from the transaction or occurrence forming the basis of such Proceeding
or to have acted in any manner other than in Good Faith and (ii) the termination
of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice.
4.05 Indemnification for Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a witness in any Proceeding, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by Indemnitee
or on Indemnitee's behalf in connection therewith.
ARTICLE V
Advancement of Expenses
Notwithstanding any provision to the contrary in Article VI, the Company
(acting through the Chief Executive Officer, President or any Vice President of
the Company) shall advance all reasonable Expenses which, by reason of
Indemnitee's Corporate Status, were incurred by or on behalf of Indemnitee in
connection with any Proceeding, within thirty (30) days after the receipt by the
Company of a statement or statements from Indemnitee requesting such advance or
advances, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified against such
Expenses. Any advance and undertakings to repay pursuant to this Article V shall
be unsecured and interest free. Advancement of Expenses pursuant to this Article
V shall not require approval of the Board of Directors or the stockholders of
the Company, or of any other person or body. The Secretary or any Assistant
Secretary of the Company shall promptly advise the Board in writing of the
request for advancement of Expenses, of the amount and other details of the
advance and of the undertaking to make repayment pursuant to this Article V.
<PAGE>
ARTICLE VI
Procedures for Determination of Entitlement
to Indemnification and Defense of Claims
6.01 Initial Request. To obtain indemnification under this Agreement (other
than advancement of Expenses pursuant to Article V), Indemnitee shall submit to
the Company a written request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and is reasonable
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary or Assistant Secretary of the Company shall
promptly advise the Board in writing that Indemnitee has requested
indemnification.
6.02 Method of Determination. A determination (if required by applicable
law in the specific case) with respect to Indemnitee's entitlement to
indemnification shall be made (a) by the Board by a majority vote of a quorum
consisting of Disinterested Directors, or (b) in the event that a quorum of the
Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, such quorum of Disinterested Directors so directs, by Independent
Counsel in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee, or (c) by the holders of a majority of the votes of the outstanding
stock at the time entitled to vote on matters other than the election or removal
of directors, voting as a single class, including the stock of the Covered
Person seeking indemnification.
6.03 Selection, Payment, Discharge, of Independent Counsel. In the event
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 6.02 of this Agreement, the Independent Counsel
shall be selected, paid, and discharged in the following manner:
(a) The Independent Counsel shall be selected by the Board, and the
Company shall give written notice to Indemnitee advising
Indemnitee of the identity of the Independent Counsel so
selected.
(b) Following the initial selection described in clause (a) of
this Section 6.03, Indemnitee may, within seven (7) days
after such written notice of selection has been given,
deliver to the Company a written objection to such
selection. Such objection may be asserted only on the
ground that the Independent Counsel so selected does not
meet the requirements of "Independent Counsel" as defined in
Section 1.10 of this Agreement, and the objection shall set
forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person
so selected shall act as Independent Counsel. If such
written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and
until a court has determined that such objection is without
merit.
(c) Either the Company or Indemnitee may petition a Court if the
parties have been unable to agree on the selection of
Independent Counsel within twenty (20) days after submission
by Indemnitee of a written request for indemnification
pursuant to Section 6.01 of this Agreement. Such petition
may request a determination whether an objection to the
party's selection is without merit and/or seek the
appointment as Independent Counsel of a person selected by
the Court or by such other person as the Court shall
designate. A person so appointed shall act as Independent
Counsel under Section 6.02 of this Agreement.
(d) The Company shall pay any and all reasonable fees of
Independent Counsel and expenses incurred by such Independent
Counsel in connection with acting pursuant to this Agreement,
and the Company shall pay all reasonable fees and expenses
incident to the procedures of this Section 6.03, regardless of
the manner in which such Independent Counsel was selected or
appointed.
(e) Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 8.02 of this Agreement,
Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
6.04 Cooperation. Indemnitee shall cooperate with the person, persons or
entity making the determination with respect to Indemnitee's entitlement to
indemnification under this Agreement, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Company (irrespective
of the determination as to Indemnitee's entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
6.05 Defense of Claim. With respect to any Proceeding to which Indemnitee
shall have requested indemnification in accordance with Section 6.01:
(a) The Company will be entitled to participate in the defense
at its own expense.
(b) Except as otherwise provided below, the Company jointly with
any other indemnifying party will be entitled to assume the
defense with counsel reasonably satisfactory to Indemnitee.
After notice from the Company to the Indemnitee of its
election to assume the defense of a suit, the Company will
not be liable to the Indemnitee under this Agreement for any
legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense of the Proceeding
other than reasonable costs of investigation or as otherwise
provided below. The Indemnitee shall have the right to
employ his own counsel in such Proceeding but the fees and
expenses of such counsel incurred after notice from the
Company of its assumption of the defense shall be at the
expense of the Indemnitee unless (i) the employment of
counsel by the Indemnitee has been authorized by the
Company, (ii) the Indemnitee shall have concluded reasonably
that there may be a conflict of interest between the Company
and the Indemnitee in the conduct of the defense of such
action and such conclusion is confirmed in writing by the
Company's outside counsel regularly employed by it in
connection with corporate matters or (iii) the Company shall
not in fact have employed counsel to assume the defense of
such Proceeding, in each of which cases the fees and
expenses of counsel shall be at the expense of the Company.
The Company shall not be entitled to assume the defense of
any Proceeding brought by or in the right of the Company or
as to which the Indemnitee shall have made the conclusion
provided for in (ii) above and such conclusion shall have
been so confirmed by the Company's said outside counsel.
(c) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be liable to indemnify the
Indemnitee under this Article of any amounts paid in
settlement of any Proceeding or claim effected without its
written consent. The Company shall not settle any
Proceeding or claim in any manner which would impose any
penalty, limitation or disqualification of the Indemnitee
for any purpose without the Indemnitee's written consent.
Neither the Company nor the Indemnitee will unreasonably
withhold their consent to any proposed settlement.
6.06 Payment. If it is determined that Indemnitee is entitled to
indemnification not covered by defense of the claim afforded under Section 6.05
above, payment to Indemnitee shall be made within ten (10) days after such
determination.
ARTICLE VII
Presumptions and Effect of Certain Proceedings
7.01 Burden of Proof. In making a determination with respect to entitlement
to indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 6.01 of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
7.02 Effect of Other Proceedings. The termination of any Proceeding or of
any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of guilty or of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this Agreement) of itself
adversely affect the right of Indemnitee to indemnification or create a
presumption that Indemnitee did not act in Good Faith.
7.03 Reliance as Safe Harbor. For purposes of any determination of Good
Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's
action is based on the records or books of account of the Enterprise, including
financial statements, or on information supplied to Indemnitee by the Officers
of the Enterprise in the course of their duties, or on the advice of legal
counsel for the Enterprise or on information or records given or reports made to
the Enterprise by an independent certified public accountant or by an appraiser
or other expert selected with reasonable care by the Enterprise. The provisions
of this Section 7.03 shall not be deemed to be exclusive or to limit in any way
the other circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth in this Agreement.
7.04 Actions of Others. The knowledge and/or actions, or failure to act, of
any director, Officer, employee, agent, trustee or fiduciary of the Enterprise
shall not be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement.
ARTICLE VIII
Remedies of Indemnitee
8.01 Application. This Article VIII shall apply in the event of a Dispute.
For purposes of this Article, "Dispute", shall mean any of the following events:
(a) a determination is made pursuant to Article VI of this
Agreement that Indemnitee is not entitled to indemnification
under this Agreement;
(b) advancement of Expenses is not timely made pursuant to
Article V of this Agreement;
(c) the determination of entitlement to be made pursuant to Section
6.02 of this Agreement has not been made within sixty (60) days
after receipt by the Company of the request for
indemnification;
(d) payment of indemnification is not made pursuant to Section 4.05
of this Agreement within ten (10) days after receipt by the
Company of a written request therefor; or
(e) notice of election by the Company to assume defense of a claim
as provided for in Section 6.05 or payment of indemnification,
as the case may be, is not given or made within ten (10) days
after a determination has been made that Indemnitee is entitled
to indemnification or such determination is deemed to have been
made pursuant to Article VI of this Agreement.
8.02 Adjudication. In the event of a Dispute, Indemnitee shall be entitled
to an adjudication in an appropriate Court of Indemnitee's entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at
Indemnitee's option, may seek an award in arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration Association.
Indemnitee shall commence such proceeding seeking an adjudication or an award in
arbitration within one hundred eighty (180) days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 8.02. The Company shall not oppose Indemnitee's right to seek any such
adjudication or award in arbitration.
8.03 De Novo Review. In the event that a determination shall have been made
pursuant to Article VI of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Article VIII shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any such proceeding or arbitration, the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
8.04 Company Bound. If a determination shall have been made or deemed to
have been made pursuant to Article VI of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination in
any judicial proceeding or arbitration absent (i) a misstatement by Indemnitee
of a material fact, or any omission of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
8.05 Procedures Valid. The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Article VIII that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
8.06 Expenses of Adjudication. In the event that Indemnitee, pursuant to
this Article VIII, seeks a judicial adjudication of or an award in arbitration
to enforce Indemnitee's rights under, or to recover damages for breach of, this
Agreement, Indemnitee shall be entitled to recover from the Company, and shall
be indemnified by the Company against, any and all expenses (of the types
described in the definition of Expenses in Section 1.08 of this Agreement)
actually and reasonably incurred by Indemnitee in such adjudication or
arbitration, but only if Indemnitee prevails therein. If it shall be determined
in such adjudication or arbitration that Indemnitee is entitled to receive part
but not all of the indemnification or advancement of Expenses sought, the
expenses incurred by Indemnitee in connection with such adjudication or
arbitration shall be appropriately prorated.
ARTICLE IX
Non-Exclusivity, Insurance, Subrogation
9.01 Non-Exclusivity. The rights of indemnification and to receive
advancement of Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the Restated Articles of Organization, the By-Laws, any
agreement, a vote of shareholders or a resolution of directors, or otherwise. No
amendment, alteration, rescission or replacement of this Agreement or any
provision hereof shall be effective as to Indemnitee with respect to any action
taken or omitted by such Indemnitee in Indemnitee's Corporate Status prior to
such amendment, alteration, rescission or replacement.
9.02 Insurance. The Company may maintain an insurance policy or policies
against liability arising out of this Agreement or otherwise.
9.03 Subrogation. In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
9.04 No Duplicative Payment. The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
under any insurance policy, contract, agreement or otherwise.
ARTICLE X
General Provisions
10.01 Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and Indemnitee's legal representatives, heirs, executors and
administrators.
10.02 Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation,
each portion of any Section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable,
that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of
any Section of this Agreement containing any such provision
held to be invalid, illegal or unenforceable, that is not
itself invalid, illegal or unenforceable) shall be construed
so as to give effect to the fullest extent permitted by law
to the intent manifested by the provision held invalid,
illegal or unenforceable.
10.03 No Adequate Remedy. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by reason of a
failure to perform any of the obligations under this Agreement. Therefore, if
either party shall institute any action or proceeding to enforce the provisions
hereof, such party against whom such action or proceeding is brought hereby
waives the claim or defense that such party has an adequate remedy at law, and
such party shall not urge in any such action or proceeding the claim or defense
that the other party has an adequate remedy at law.
10.04 Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
10.05 Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
10.06 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, (ii) sent by prepaid commercial
overnight courier, or (iii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed:
If to Indemnitee, to: As shown with Indemnitee's
Signature below.
If to the Company, to: Zoom Telephonics, Inc.
207 South Street
Boston, MA 02111
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
10.07 Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts without application of the conflict of laws
principles thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
ZOOM TELEPHONICS, INC.
By:___________________________
Title
INDEMNITEE
-------------------------------
Address:
-------------------------------
-------------------------------
Exhibit 11. Statement of computation of per share earnings
<TABLE>
<CAPTION>
Six Months Ending June 30,
-------------------------------------------------------------
1996 1995
--------------------------- ---------------------------
Fully Fully
Primary diluted Primary diluted
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net income $ 2,470,116 $ 2,470,116 $ 2,202,893 $ 2,202,893
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 6,688,382 6,688,382 6,014,480 6,014,480
Incremental shares from the assumed
exercise of dilutive stock options 429,610 429,610 18,000 18,000
Common shares assumed to have been
repurchased, treasury stock method (334,320) (334,320) (17,220) (17,220)
------------ ---------- ------------ -----------
Weighted average common and
common equivalent shares
outstanding 6,783,672 6,783,672 6,015,260 6,015,260
============= ============== ============= ==============
Net income per share $ .36 $ .36 $ .37 $ .37
============= ============== ============= ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Jun-30-1996
<EXCHANGE-RATE> 1
<CASH> 11,064,274
<SECURITIES> 0
<RECEIVABLES> 10,385,501
<ALLOWANCES> 3,617,960
<INVENTORY> 21,919,872
<CURRENT-ASSETS> 3,459,559
<PP&E> 3,699,312
<DEPRECIATION> 1,607,156
<TOTAL-ASSETS> 51,952,138
<CURRENT-LIABILITIES> 4,677,408
<BONDS> 0
0
0
<COMMON> 24,820,047
<OTHER-SE> 22,454,683
<TOTAL-LIABILITY-AND-EQUITY> 51,952,138
<SALES> 63,808,129
<TOTAL-REVENUES> 54,376,143
<CGS> 42,851,337
<TOTAL-COSTS> 7,584,047
<OTHER-EXPENSES> (15,943)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,805
<INCOME-PRETAX> 3,924,816
<INCOME-TAX> 1,454,700
<INCOME-CONTINUING> 2,470,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,470,116
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
