<PAGE>
THIS CONFIRMING FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF
REGULATION S-T
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
_______________________
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 30, 1996
For the quarterly period ended .................................................
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from .................... to .........................
1-11109
Commission file number .........................................................
Lukens Medical Corporation
................................................................................
(Exact name of registrant as specified in its charter.)
Delaware 22-2429965
................................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3820 Academy Parkway North NE, Albuquerque, NM 87109
................................................................................
(Address of principal executive offices) (Zip Code)
(505-342-9638)
Issuer's telephone number, including area code .................................
Indicate by check mark whether the registrant has (1) 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at June 30, 1996
................................... ...................................
Common Stock, $.01 par value 2,710,255 shares
Page 1 of 33 Pages
Exhibit Index on Page 12
<PAGE>
LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II OTHER INFORMATION 9
SIGNATURES 11
EXHIBIT INDEX 12
EXHIBITS 13
</TABLE>
2
<PAGE>
LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
(UNAUDITED) AUDITED
JUNE 30, DECEMBER 31,
ASSETS 1996 1995
------ -------------------- -------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 150,358 $ 39,049
Accounts receivable, net of allowance
for doubtful accounts of $5,790 1,536,241 1,269,211
Inventory (Note 2) 4,096,944 3,849,051
Prepaid expenses 67,085 23,456
-------------------- -------------------
Total Current Assets 5,850,628 5,180,767
Land, building and equipment, net of accumulated depreciation
of $1,282,054 at June 30, and $1,150,024 at December 31 1,776,717 1,710,633
Intangible assets, net of accumulated amortization of
$876,716 at June 30, and $707,036 at December 31 1,018,538 469,408
Other assets 128,253 97,980
-------------------- -------------------
TOTAL ASSETS $ 8,774,136 $ 7,458,788
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 848,417 $ 665,080
Accrued liabilities 86,263 111,439
Current maturities of long-term debt and
capital leases 405,665 376,475
-------------------- -------------------
TOTAL CURRENT LIABILITIES 1,340,345 1,152,994
Long-term debt, excluding current maturities 1,290,206 729,979
Obligations under capital leases, excluding
current maturities 22,294 37,227
-------------------- -------------------
TOTAL LIABILITIES 2,652,845 1,920,200
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized
20,000,000 shares: issued and outstanding
2,710,255 shares 27,115 26,115
Additional paid-in capital 17,175,196 16,938,696
Accumulated deficit (11,081,020) (11,426,223)
-------------------- -------------------
TOTAL AND STOCKHOLDERS' EQUITY 6,121,291 5,538,588
-------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,774,136 $ 7,458,788
==================== ===================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets
-3-
<PAGE>
LUKENS MEDICAL CORPORATION AND SUBSIDIARES
------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
UNAUDITED
---------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sales $ 2,362,938 $ 1,188,644 $ 3,907,501 $ 2,192,442
Cost of sales 1,633,942 782,066 2,712,875 1,459,328
-------------- --------------- --------------- ---------------
GROSS PROFIT 728,996 406,578 1,194,626 733,114
-------------- --------------- --------------- ---------------
Selling expenses 164,382 66,523 265,099 159,186
General and administrative expenses 231,935 181,967 450,491 402,688
Research and development expenses 36,011 40,438 72,871 85,897
-------------- --------------- --------------- ---------------
TOTAL OPERATING EXPENSES 432,328 288,928 788,461 647,771
-------------- --------------- --------------- ---------------
Earnings from operations 296,668 117,650 406,165 85,343
-------------- --------------- --------------- ---------------
Other (expenses) income
Interest income 1,403 2,042 4,132 9,426
Interest expense (30,115) (78,704) (51,561) (150,925)
Other, net (26,618) 2,773 (13,533) 3,102
-------------- --------------- --------------- ---------------
TOTAL OTHER (EXPENSE) INCOME (55,330) (73,889) (60,962) (138,397)
-------------- --------------- --------------- ---------------
EARNINGS (LOSS) BEFORE INCOME TAXES 241,338 43,761 345,203 (53,054)
- - - -
-------------- --------------- --------------- ---------------
NET EARNINGS (LOSS) $ 241,338 $ 43,761 $ 345,203 $ (53,054)
============== =============== =============== ===============
Weighted average number of common and common
equivalent shares outstanding 3,017,388 2,619,005 3,017,388 2,619,005
============== =============== =============== ===============
Income (loss) per common and common
equivalent share: $ 0.08 $ 0.02 $ 0.11 $ (0.02)
============== =============== =============== ===============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-4-
<PAGE>
LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
-------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
UNAUDITED
---------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operations:
Net earnings (loss) $ 345,203 $ (53,054)
Adjustments to reconcile net earnings (loss)
to cash provided (used) by operating activities:
Depreciation 132,030 129,059
Amortization of intangible assets 169,680 30,421
Changes in current assets and liabilities:
Accounts receivable (267,030) (98,332)
Inventory (247,893) (163,365)
Prepaid expenses (43,629) (26,111)
Accounts payable 183,337 (140,398)
Accrued liabilities (25,176) 1,350
Change in other assets (30,273) (8,391)
---------------- ----------------
Net cash provided (used) by operating activities 216,249 (328,821)
---------------- ----------------
Cash flows from investing activities:
Purchase of plant and equipment (198,114) (45,484)
Purchase of intangible assets (718,810) -
---------------- ----------------
Net cash used in investing activities (916,924) (45,484)
---------------- ----------------
Cash flows from financing activities:
Proceeds from the issuance of common stock and equivalents 237,500 -
Borrowings on long-term debt & obligations under capital leases 625,283 500,000
Principal payments on long-term debt & obligations under capital leases (50,799) (484,146)
---------------- ----------------
Net cash provided by financing activities 811,984 15,854
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 111,309 (358,451)
Cash and cash equivalents at beginning of period 39,049 712,665
================ =================
Cash and cash equivalents at end of period $ 150,358 $ 354,214
================ =================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
5
<PAGE>
LUKENS MEDICAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1996
(unaudited)
(1) Summary of Significant Accounting Policies
------------------------------------------
The Company's principal business activity is the manufacture and sale of
disposable surgical products. The Company's main product lines are surgical
sutures, lancets, and diagnostic products. The accompanying unaudited
financial statements have been prepared in accordance with the instructions
to Form 10-QSB and therefore do not include all information and footnote
disclosure necessary for a full presentation of financial position, results
of operations, and cash flows. The information furnished, in the opinion of
management, reflects all adjustments necessary to present fairly the
results of operations of the Company for the six-month periods ended June
30, 1996 and 1995. The accounting policies followed by the Company are set
forth in note (1) of notes to the Company's consolidated financial
statements in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995 (the "1995 Form 10-K") filed with the Securities and
Exchange Commission. The results of operations of interim periods are not
necessarily indicative of results which may be expected for any other
interim period or for the year as a whole.
(2) Inventory
---------
Inventory consists of the following components at:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Raw materials $1,722,734 $1,821,321
Work-in-process 987,345 874,080
Finished goods $1,386,865 $1,153,650
---------- ----------
$4,096,944 $3,849,051
========== ==========
</TABLE>
(3) Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes.
6
<PAGE>
Components of the net deferred income tax asset at December 31, 1995 are as
follows:
<TABLE>
<S> <C>
Deferred income tax assets:
Resulting from net operating
loss carryforwards $ 3,844,000
Carryforward of capital loss $ 105,000
Carryforward credit from
Increasing research
activities $ 105,000
Other $ 244,000
------------
$ 4,298,000
Deferred income tax liabilities:
Depreciation and other
basis differences $ (62,000)
-------------
Net deferred tax asset before
valuation allowance $ 4,236,000
Valuation allowance $( 4,236,000)
Net deferred income tax asset $ -0-
=============
</TABLE>
The Company conducts a periodic evaluation of its valuation allowance.
Factors considered in the evaluation include recent demonstrable future
earnings, the Company's liquidity and equity positions. For 1995, all
deferred tax assets were reserved for in the valuation allowance given the
Company's limited history of profitable operations.
There is no income tax payable at December 31, 1995 or at June 30, 1996
because of the usage of net operating loss carryforwards, which expire as
follows:
<TABLE>
<CAPTION>
Approximate Increasing Research
Net Operating Activities Book/Tax
Loss Carryforward Credits
----------------- -------
State Loss Federal Loss
Amount Amount Tax Effect Tax Effect
------ ------ ---------- ----------
<S> <C> <C> <C> <C>
1998 $ 20,000 $ - $ 2,000 $ -
1999 2,601,000 225,000 202,000 3,800
2000 - 2,187,000 743,000 37,200
2001 - 1,835,000 624,000 37,500
2002 - 920,000 313,000 1,400
2003 1,480,000 2,086,000 780,000 25,100
2004 315,000 390,000 148,000 -
2005 161,000 278,000 103,000 -
2006 - 50,000 17,000 -
2008 - 86,000 29,000 -
2009 2,601,000 884,000 -
---------- ----------- ---------- --------
$4,577,000 $10,658,000 $3,844,000 $105,000
========== =========== ========== ========
</TABLE>
The capital loss carryforwards of approximately $271,000, tax effect of
$105,000, expire in 1998.
7
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
---------------------
Three Months Ended June 30, 1996
- --------------------------------
Sales increased approximately $1,174,000 or 99% for the quarter ended June 30,
1996 compared to the quarter ended June 30, 1995 due to higher veterinary and
U.S. Government suture sales, as well as approximately $950,000 in revenue
generated from the new product lines acquired from Ulster Scientific, Inc. in
March (the "Acquisition").
The gross margin percentage declined slightly due to shifts in product mix, with
the second quarter generating 31% margins compared to 34% last year. Selling
expenses increased $98,000 to $164,000 for the 1996 quarter, versus. $67,000 for
the 1995 quarter. Approximately all of this increase was a result of the
addition of sales personnel for new product lines purchased in the Acquisition.
General and Administrative expenses and Research & Development expenses
increased and decreased, respectively, in the 1996 quarter versus the 1995
quarter, with G&A up $50,000 to $232,000, and R&D reduced $4,000 to $36,000. The
increase in G&A expense is mostly attributable to the temporary employment of
Ulster personnel to assist the Company in the transition for the three months
following the closing of the Acquisition.
As a result of the higher revenues, Income from Operations increased 150%, or
$179,000, to $297,000 for the 1996 quarter versus income from Operations of
$118,000 for the same quarter 1995.
Interest expense was reduced $49,000 from $79,000 in 1995 to $30,000 in 1996 due
to the reductions in net borrowings resulting from the sale of the Company's Rio
Rancho facility in mid-1995 and the early retirement of various capital lease
obligations in September 1995.
As a result of the foregoing, the Company incurred a net profit for the quarter
of $241,000, or $.08 per share, for 1996, compared to a net profit of $44,000,
or $.02 per share, in 1995.
Six Months Ended June 30, 1996
- ------------------------------
Sales increased approximately $1,715,059, or 78% for the six months ended June
30, 1996, compared to the six months ended June 30, 1995 due to increased sales
in veterinary and U.S. Government suture sales, as well as approximately
$1,150,000 in revenue generated from the new product lines acquired from Ulster
Scientific, Inc.
Gross margins decreased to 31% from 33%. The margin decrease is due to shifts in
the product mix, as a result of the acquired product lines.
8
<PAGE>
Gross profits of $1,195,000 for the six months ended June 30, 1996, compared to
$733,000 for the six months ended June 30, 1995. Total operating expenses
increased $141,000 or 22% for the six months ended June 30, 1996 due, again, to
increases in Sales and Administrative Staff resulting from the Acquisition. For
the same reason, selling expenses increased $106,000 or 67% and G&A expenses
increased $48,000 or 12%.
Interest income decreased $5,000 during the 1996 six-month period as a result of
lower investment balances. Interest expense decreased $99,000 due to lower
levels of borrowing.
As a result of the foregoing, the Company incurred a net profit of $345,000, or
$.11 per share, for the six months ended June 30, 1996 compared to a loss of
$53,000, or $(.02) per share, during the comparable period of 1995.
Liquidity and Capital Resources
-------------------------------
At June 30, 1996, the Company had cash and cash equivalents of $150,000 and
working capital of $4,510,000.
In April, 1996, the Company's lines of credit were renewed through August 31,
1996. As part of this renewal, the working capital line of credit was increased
from $300,000 to $500,000, and the letter-of-credit line was increased from
$500,000 to $700,000.
As of June 30, 1996, the Company had drawn advances on the working capital line
of $350,000, and there were approximately $600,000 in letters-of-credit
outstanding relating to raw material purchases and other general purposes.
In February 1996, the Company received SBA approval for a new revolving working
capital line of credit which allows the Company to draw up to $420,000 to
finance labor costs and inventory purchases relating to U.S. Government
contracts. At June 30, 1996, the balance due on this line was approximately
$121,000, and proceeds from contracts in the same amount were assigned to the
bank.
The Company also has an SBA export working capital line-of-credit agreement,
which provides working capital for export sales up to the lesser of (a) $350,000
or (b) 80 percent of the face amount of negotiated Letters of Credit issued for
the benefit of the Borrower and delivered to Lender. At June 30, 1996, there was
$39,000 outstanding under this line-of-credit agreement.
In March 1996, the Company borrowed $400,000 from a major shareholder, with
interest at 9%, and principal and interest due in September 1997. These proceeds
were used to pay certain amounts assumed as a part of the Acquisition.
9
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
The Company held its Annual Meeting of Stockholders (the "Meeting") during the
fiscal quarter ending June 30, 1996.
(a) The date of the Meeting was June 18, 1996.
(b) At the Meeting, the following persons were elected as directors of the
Company, each receiving the number of votes set forth opposite their
names below:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
--- ------- --------
<S> <C> <C> <C>
Robert S. Huffstodt 2,400,693 - 17,300
John H. Robinson 2,392,570 - 25,423
Robert L. Priddy 2,392,270 - 25,723
</TABLE>
(c) The only other matter acted on at the Meeting was the ratification of
Neff & Company as the independent auditors of the Company. Such
ratification was approved with 2,411,067 affirmative votes, 5,326
negative votes, and 1,600 abstentions.
Item 5. Other Information
-----------------
During the quarter, the Company entered into a new lease and moved its principal
offices and certain other operations to a facility located in Albuquerque, New
Mexico. The facility consists of approximately 17,000 square feet at a base rent
of $9,500.00 per month. Negotiated into the lease agreement was an initial rent
discount, which allowed for a basic rent concession for the first three months
of occupancy. The term of the lease is for five years and three months
commencing June 1, 1996.
The Company's new address is 3820 Academy Parkway North NE, Albuquerque, New
Mexico 87109, and phone and fax numbers are (505) 342-9638 and (505) 342-9735,
respectively.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
(i) Exhibit 10.33 - Lease between Kenneth I. White as landlord, and
Lukens Medical Corporation as tenant dated May 31, 1996.
(ii) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On May 16, 1996, the Company filed an amendment on Form 8-K/A to its Current
Report on Form 8-K filed March 15, 1996 to provide the required financial
information in connection with its acquisition of certain product lines from
Ulster Scientific, Inc.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LUKENS MEDICAL CORPORATION
Date: August 9, 1996 By: /s/ Robert S. Huffstodt
----------------------------------
Robert S. Huffstodt
President and Chief
Executive Officer
Date: August 9, 1996 By: /s/ Robert S. Huffstodt
----------------------------------
Robert S. Huffstodt
Chief Financial Officer
11
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page #
- ------- ------
10.33 Lease between Kenneth I. White, as landlord, and Lukens
Medical Corporation, as tenant, dated May 31, 1996 13
27 Financial Data Schedule
12
<PAGE>
EXHIBIT 10.33
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-GROSS
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("Lease") dated for references purposes only as of
MAY 31ST , 19 96 , is made by and between KENNETH I. WHITE , ("LESSOR"), and
- ---------- ---- -----------------
LUKENS MEDICAL CORPORATION, A NEW MEXICO CORPORATION , ("LESSEE"),
- ------------------------------------------------------
(collectively the "PARTIES," or individually a PARTY").
1.2 PREMISES: That certain real property, legally described as LOT B-4,
----------
BLOCK B, UNIT 1, INTERSTATE INDUSTRIAL TRACT, including all improvements therein
- ----------------------------------------------
or to be provided by Lessor under the terms of this Lease, and commonly known by
the street address of 3820 ACADEMY PARKWAY NORTH, N.E. located in the country of
----------------------------------
BERNALILLO , State of New Mexico and generally described as (describe briefly
- ------------ ------------
the nature of the property) Approximately 17,000 rentable square feet consisting
-----------------------------------------------------
of approximately 7,000 square feet of office space and approximately 10,000
- ---------------------------------------------------------------------------
square feet of warehouse space ("PREMISES"). (See Paragraph 2 for further
- -------------------------------
provisions.)
1.3 TERM: Five (5) years and Three (3) months ("ORIGINAL TERM")
---------- -----------
commencing June 1st, 1996 ("COMMENCEMENT DATE") and ending August 31st,
----------------- --------------
2001 ("EXPIRATION DATE"). (see Paragraph 3 for further provisions.)
- -----
1.4 EARLY POSSESSION: Not Applicable ("EARLY POSSESSION
-------------------------------
DATE"). (See Paragraphs 3.2 and 3.3 for further provisions.)
1.5 BASE RENT: $ Nine Thousand Four Hundred Forty Nine Dollars and
---------------------------------------------------
Seventeen Cents ($9,449.17) per month ("BASE RENT"), payable on the First
- ---------------------------- ------
(1st) day of each month commencing September 1st, 1996 . (See Paragraph 4
- ------ -----------------------
for further provisions.)
[ ] If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: $ Nine Thousand Four Hundred Forty Nine
--------------------------------------
Dollars and Seventeen Cents ($9,449.17) as Base Rent for the period September
- ---------------------------------------- ----------
1996 .
- -----
1.7 SECURITY DEPOSIT: $ Nine Thousand Four Hundred Forty Nine Dollars
------------------------------------------------
Seventeen Cents ($9,449.17) ("SECURITY DEPOSIT"). (See Paragraph 5 for
- ---------------------------
further provisions.)
1.8 PERMITTED USE: Office/warehouse use, with light manufacturing of
---------------------------------------------------
medical related equipment (See Paragraph 6 for further provisions.)
- --------------------------
1.9 INSURING PARTY: Lessor is the "Insuring Party." $ Four Thousand Five
-------------------
Hundred Dollars and No Cents ( $4,500.00 ) is the "BASE PREMIUM." (See
- ------------------------------------------
Paragraph 8 for further provisions.) This is based upon a standard
office/warehouse quote. Should the Base Premium increase due to Lessee's use of
the Premises, the increase over the above stated Base Premium will be paid by
Lessee.
1.10 REAL ESTATE BROKERS: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes):
Charles S. Gara, The Gara Company represents [X] Lessor exclusively
- ---------------------------------------------
(LESSOR'S BROKER); [] both Lessor and Lessee and Michael Lubarsky and Mark
--------------------------
Edwards, Lubarsky Group represents repsents [X] Lessee exclusively ("LESSEE'S
- -------------------------
BROKER"); [] both Lessee and Lessor. (See Paragraph 15 for further provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by Not Applicable ("GUARANTOR"). (See paragraph 15 for further
--------------------
provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraph 1.13 & 7.3 all of which constitute a part of this Lease.
-------------------
2. PREMISES
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee, for a period of
twelve (12) months following the Commencement Date, that the existing plumbing,
lighting, air conditioning, and heating in the Premises other than those
constructed by Lessee, shall be in good operating condition.. If a non-
compliance with said warranty exists, Lessor shall, except as otherwise provided
in this Lease, promptly after receipt of written notice from Lessee setting
forth with specificity the nature and extent of such non-compliance, rectify
same at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within twelve (12) months after the
Commencement Date, correction of that non-compliance shall be the obligation of
Lessee at Lessee's sole cost and expense. Said warranty does not cover
negligence or mis-use by Lessee, Lessee's employees, Lessee's contractors or
invitees.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record, applicable building codes,
regulations and ordinances, and Applicable Law (as defined in Paragraph 6.3),
including but not limited to the Americans With Disabilities Act, on the
Commencement date and covenants to maintain, at Lessor's expense, the Premises'
compliance with respect thereto throughout the Term, including any extensions
thereof. The covenants of the Lessor hereunder shall not apply with respect to
compliances specific to the use to which Lessee will put the Premises or to any
Alterations or utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee throughout the Term, including any extensions thereof.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Broker to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
system, security, environmental aspects, compliance with Applicable Law, as
defined in paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes
13
<PAGE>
all responsibility therefor as the same relate to Lessee's occupancy of the
Premises and/or the term of this Lease, and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to the said matters other than as set forth in this Lease.
3. TERM
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period for such early possession. All other terms of this
Lease, however, shall be in effect during such period. Any such early possession
shall not affect nor advance the Expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in paragraph 1.4, or if no early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefore, such failure shall not affect the validity of this Lease,
or the obligations or Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided here, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does not terminate this Lease, as aforesaid, the period
free of the obligation to pay Base Rent, if any, that Lessee would otherwise
have enjoyed shall run from the date of delivery of possession and continue for
a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions of
Lessee.
4. RENT
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other person or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
4.2 RENTAL ABATEMENT. The Base Rent payments, excluding the portion for
real property taxes and property insurance, for the months of June, July and
August, 1996, and November of 1997, shall be abated. Tenant shall pay to
Landlord on the first day of each of the first three months , June, July and
August of 1996 , the sum of $906.67, and the then current proration for taxes
and insurance for November of 1997, for the taxes and insurance portion of the
Base Rent.
4.3 BASE RENT ADJUSTMENTS. The Base Rent, excluding that portion
attributable to taxes and insurance of $.63 per square foot ($10,710.00), shall
increase beginning on the fifteenth month of the lease term, and each 12 month
period thereafter, by three percent (3%) over the previous period's Base Rent.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or changes due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit from the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional moneys with Lessor sufficient to maintain the same ratio between the
Security Deposit and the Base Rent as those amounts are specified in the Basic
Provisions. Lessor shall not be required to keep all or any part of the
Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at the Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any moneys to be paid by Lessee under this Lease.
6. USE
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or cause damage to, neighboring premises or properties. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a modification
of said permitted purpose for which the premises may be used or occupied, so
long as the same will not impair the structural integrity of the improvements on
the Premise, the mechanical or electrical systems therein, is not significantly
more burdensome to the Premises and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within
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five (5) business days give a written notification of same, which notice shall
include an explanation of Lessor's reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE" as
used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be one the Premises,
is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liabilities of Lessor to any governmental agency
or third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products of fractions thereof. Lessee
shall not engage in any activity in, on or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of hazardous Substances with the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3.) "REPORTABLE USE" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used y Lessee in the
normal course of Lessee's business permitted on the Premises, so long as such
use is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or resulting
from same, has come to be located in, on, under or about the Premises, other
than as previously consented to by Lessor, Lessee shall immediately give written
notice of such fact to Lessor. Lessee shall also immediately give Lessor a copy
of any statement, report, notice, registration, application, permit, business
plan, license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, including but not limited to all such documents as may be involved in
any Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless for and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration, and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease shall, at Lessee's sole cost and expense, fully, diligently, and in a
timely manner, comply with all "APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with the Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ consultants in connection therewith and/or to advise Lessor with respect
to Lessee's activities, including but not limited to the installation,
operation, use, monitoring, maintenance, or removal of any Hazardous Substance
or storage tank on or from the premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease, violation of Applicable Law, or a contamination, caused or
materially contributed to by Lessee is found to exist or be imminent, or unless
the inspection is requested or ordered by a governmental authority as the result
of any such existing or imminent
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violation or contaminations. In any such case, Lessee shall upon request
reimburse Lessor or Lessor's Lender, as the case may be, for the costs and
expenses of such inspections.
7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of paragraphs 2.2 (Lessor's warranty as
to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc.,),
7.2 (Lessor's obligation to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair, (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of such portion of the Premises), including,
without limiting the generality of the foregoing, all equipment or facilities
serving the Premises, such as plumbing, heating, air conditioning, ventilating,
electrical, lighting facilities, , fixtures, walls (interior and exterior),
ceilings, floors, windows, doors, plate glass, skylights, landscaping,
driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways
located in, on, about, or adjacent to the Premises, but excluding foundations,
the exterior roof and the structural aspects of the Premises. Lessee shall not
cause or permit any Hazardous Substance to be spilled or released in, on, under
or about the Premises (including through the plumbing or sanitary sewer system)
and shall promptly, at Lessee's expense, take all investigatory and/or remedial
action reasonably recommended, whether or not formally ordered or required, for
the cleanup of any contamination of, and for the maintenance, security and/or
monitoring of, the Premises, the elements surrounding same, or neighboring
properties, that was caused or materially contributed to by Lessee, in keeping
the Premises in good order, condition and repair, shall exercise and perform
good maintenance practices. Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the heating, air conditioning and ventilation
equipment located or installed on the Premises.
(c) Lessee shall be responsible for the repair and maintenance of the
Premises, following the twelve (12) month warranty, provided by Lessor, of
mechanical, electrical and plumbing equipment located on the Premises, Lessee's
obligation for the replacement of mechanical, electrical and plumbing equipment
shall be limited to the Tenant's prorata share of the cost to replace the item
amortized over the manufacturer's suggested useful life of the item replaced, as
determined by the number of years remaining on the lease term or any extensions
thereof. For example, if an air conditioner unit is replaced at the end of the
third year of the lease term at a cost of $7,000.00, and the manufacturer's
suggested useful life is seven years, then Tenant shall be responsible for the
two years remaining on the lease, or $2,000.00 and the Landlord will be
responsible for the balance. Should Tenant extend the term of the lease by
exercising one or both of its options to renew, then Landlord shall receive the
additional prorated funds for the items replaced and which Tenant receives the
benefit of. Using the example from above, upon exercise of the first two year
option to renew, Tenant shall reimburse Landlord $2,000.00 for the option
period.
7.2 LESSOR'S OBLIGATIONS. Upon receipt of written notice of the need for
such repairs and subject to paragraph 13.5, Lessor shall, at Lessor's expense,
make such repairs as are required in the 12 month warranty provided for in
Paragraph 2.2 and keep the foundations, exterior roof and structural aspects of
the Premises in good order, condition and repair, Lessor shall not, however, be
obligated to paint the exterior surface of the exterior walls or to maintain the
windows, doors or plate glass or the interior surface of exterior walls. Lessor
shall not, in any event, have any obligation to make any repairs until Lessor
receives written notice of the need for such repairs. It is the intention of
the Parties that the terms for this Lease govern the respective obligations of
the Parties as to maintenance and repair of the Premises, Lessee and Lessor
expressly waive the benefit of any statute now or hereafter in effect to the
extent it is inconsistent with the terms of this Lease with respect to, or which
affords Lessee the right to make repairs at the expense of Lessor or to
terminate this Lease by reason of, any needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS"
is used in this Lease to refer to all carpeting, window coverings, air lines,
power panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing and fencing in, on or about the Premises. The
term "Utility Installations" shall not include Lessee's telephone system,
computer system, satellite dish, compressor or other personal property not
affixed to the Premises. The term "ALTERATIONS" shall mean any modification of
the improvements of the Premises from that which are provided by Lessor under
the terms of this Lease, other than Utility Installations or Trade Fixtures,
whether by addition or deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY
INSTALLATIONS" are defined as Alterations and/or Utility Installations made by
Lessee that are not yet owned by Lessor as defined in Paragraph 7.4(a). Lessee
shall not make any Alterations or Utility Installations in, on, under or about
the Premises without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof), as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during the term of this Lease as extended does not
exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consent
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt, and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with
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all Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefore. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be due by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) day's notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the premises as provided by law. If
Lessee shall, in good faith, context the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense defend and protect itself, Lessor
and the Premises against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor
a surety bond satisfactory to Lessor in an amount equal to one and one-half
times the amount of such contested lien claim or demand, indemnifying Lessor
against liability for the same, as required by law for the holding of the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorney's fees and costs in participating in
such action if Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alteration and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owner Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installation be removed by
the expiration or earlier termination of this Lease, notwithstanding their
installation may have been consented to by Lessor. Lessor may require the
removal, over a certain period of time, of all or any part of any Lessee Owned
Alterations or Utility Installations made with the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessor shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, and all
of the improvements, parts and surfaces thereof clean and free of debris and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "ORDINARY WEAR AND TEAR" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises as surrendered, shall include
the Utility Installations. The obligations of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, we well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good service practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation to
repair and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) Lessee shall pay to Lessor any insurance cost increase ("INSURANCE
COST INCREASE") occurring during the term of this Lease. "Insurance COST
INCREASE" is defined as any increase in the actual cost of the insurance
required under Paragraphs 8.2(b) and 8.3(b). ("REQUIRED INSURANCE"), over and
above the Base Premium, as hereinafter defined, calculated on an annual bases.
"INSURANCE COST INCREASE" shall include, but not be limited to, increases
resulting from the nature of Lessee's occupancy, any act or omission of Lessee,
requirements of the holder or a mortgage or deed of trust covering the Premises,
increased valuation of the Premises, and/or a premium rate increase. If the
parties insert a dollar amount in paragraph 1.9, such amount shall be considered
the "BASE PREMIUM". In lieu thereof, if the Premises have been previously
occupied, the "BASE PREMIUM" shall be the annual premium applicable to the most
recent occupancy. If the Premises have never been occupied, the "Base Premium"
shall be the lowest annual premium reasonably obtainable for the Required
Insurance as of the commencement of the Original Term, assuming the most nominal
use possible of the Premises. In no event, however, shall Lessee be responsible
for any portion of the premium cost attributable to liabilty insurance coverage
in excess of $1,000,000 procured under Paragraph 8.2(b) (Liability Insurance
Carried by Lessor).
(b) Lessee shall pay any such Insurance Cost Increase to Lessor
within thirty (30) days after receipt by Lessee of a copy of the premium
statement or other reasonable evidence of the amount due. If the insurance
policies maintained hereunder cover other property besides the Premises, Lessor
shall also deliver to Lessee a statement of the amount of such Insurance Cost
Increase attributable only to the Premises showing in reasonable detail the
manner in which such amount was computed. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Commencement or Expiration of the Lease term.
8.2 LIABILITY INSURANCE.
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(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims or bodily
injury, personal injury, and property damage based upon, involving or arising
out of the ownership, use, occupancy or maintenance of the Premises and all
areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease. The limits of
said insurance required by this Lease or as carried by Lessee shall not,
however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) CARRIED BY LESSOR. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph 8.2(a),
above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trust or ground leases on the Premises ("LEADERS"), insuring loss of damage
to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. Lessee Owned Alterations and Utility Installations shall be
insured by Lessee under Paragraph 8.4. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all risks
of direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender), including coverage for any additional costs
resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Premises required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered clause of loss, but not including plate glass insurance.
Said policy or policies shall also contain an agreed valuation provision in lieu
of any coinsurance clause, waiver or subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted US Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall, in addition, obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and Lender(s), insuring the loss of the full rental and
other charges payable by Lessee to Lessor under this Lease for one (1) year
(including all real estate taxes, insurance costs and any scheduled rental
increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expense, if any, otherwise
payable by Lessee, for the next (12) month period.
(c) ADJACENT PREMISES. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor which are
adjacent to the Premise, the Lessee shall pay for any increase in the premiums
for the property insurance of such building or buildings if said increase is
caused by Lessee's acts, omission, use or occupancy of the Premises.
(d) TENANT'S IMPROVEMENTS. Since Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owner Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property or the restoration of Lessee Owned
Alterations and Utility Installation. Lessee shall be the Insuring Party with
respect to the insurance required by this Paragraph 8.4 and shall provide Lessor
with written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other ratings as may be required by the Lender having
a lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. Lessee shall
cause to be delivered to Lessor certified copies of, or certificates evidencing
the existence and amounts of, the insurance, and with the additional insureds,
required under Paragraph 8.2(a) and 8.4. No such policy shall be cancelable or
subject to modification except after thirty (30) days prior written notice to
Lessor. Lessee shall at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable hereto.
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8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitee,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
forgoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought
against Lessor by reason of any of the foregoing matters, Lessee shall cooperate
with Lessor in such defense. Lessor need not have first paid any such claim in
order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Except for negligence by Lessor,
its agents, contractors, employees, or invitees, Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitee, customers, or any other person
in or about the Premises, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water, or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor' negligence or breach of this
Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is less than 50%
of the Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is 50% or more of the Replacement
Cost of the Premises immediately prior to such damage or destruction, excluding
From such calculation the value of the land and Lessee Owned Alterations and
Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. Notwithstanding the foregoing, if the required insurance
was not in force or the insurance proceeds are not sufficient to effect such
repair, the insuring Party shall promptly contribute the shortage in proceeds as
and when required to complete said repairs. In the event, however, the shortage
in proceeds was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice of
such shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, the party responsible for
making the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and
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******************************** otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of
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Lessor's desire to terminate this Lease, as of the date one hundred twenty (120)
days following the giving of such notice. In the event Lessor elects to give
such notice of Lessor's intention to terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's commitment to pay for the repair of such damage
totally at Lessee's expense and without reimbursement from Lessor. Lessee shall
provide Lessor with the required funds or satisfactory assurance thereof within
thirty (30) days following Lessee's said commitment. In such event this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
repairs as soon as reasonably possible and the required funds are available. If
Lessee does not give such notice and provide the funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one (1) month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ( "Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage of insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's election to do so within ten (10) days after the expiration of the
Exercise Period, notwithstanding any term or provision in the grant of option to
the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage - Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues, shall be abated in proportion
to the degree to which Lessee's use of the Premises is impaired. Except for
abatement of Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, as aforesaid, all other obligations of Lessee hereunder shall
be performed by Lessee, and Lessee shall have no claim against Lessor for any
damage suffered by reason of any such repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
sixty (60) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within fifteen (15) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "COMMENCE" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. To the best of Lessor's knowledge,
there are no Hazardous Substance Conditions on the Premises as of the
Commencement Date. If a Hazardous Substance Conditions occurs, unless Lessee is
legally responsible therefor (in which case Lessee shall make the investigation
and remediation thereof required by Applicable Law and this Lease shall continue
in full force and effect, but subject to Lessor's rights under Paragraph 13),
Lessor may at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the date
one hundred twenty (120) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
which ever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following said
commitment by Lessee. In such event this Lease shall continue in full force and
effect, and Lessor shall proceed to make such investigation and remediation as
soon as reasonably possible and the required funds are available. If Lessee does
not give such notice and provide the required funds or assurance thereof within
the times specified above, this Lease shall terminate as of the date specified
in Lessor's notice of termination. If a Hazardous Substance Condition occurs for
which Lessee is not legally responsible, there shall be abatement of Lessee's
obligations under this Lease to the same extend as provided in Paragraph 9.6(a)
for a period of not to exceed twelve (12) months.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition,
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return to Lessee so much of Lessee's Security Deposit as has not been, or is not
then required to be, used by Lessor under the terms of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises; provided, however, that
Lessee shall pay, in addition to rent, the amount, if any, by which Real
Property Taxes applicable to the Premises increase over the fiscal tax year
during which the Commencement Date occurs ("Tax Increase"). Subject to
Paragraph 10.1(b), payment of any such Tax Increase shall be made by Lessee
within thirty (30) days after receipt of Lessor's written statement setting
forth the amount due and the computation thereof. Lessee shall promptly furnish
Lessor with satisfactory evidence that such taxes have been paid. If any such
taxes to be paid by Lessee shall cover any period of time prior to or after the
expiration or earlier termination of the term hereof, Lessee's share of such
taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year this Lease is in effect, and Lessor shall reimburse Lessee for
any overpayment after such proration.
(b) ADVANCE PAYMENT. In order to insure payment when due and before
delinquency of any or all Real Property Taxes. Lessor reserves the right at
Lessor's option to estimate the current Real Property Taxes applicable to the
Premises, and to require such current year's Tax Increase to be paid in advance
to Lessor by Lessee, either: (i) in a lump sum amount equal to the amount due,
at least twenty (20) days prior to the applicable delinquency date, or (ii)
monthly in advance with the payment of the Base Rent. If Lessor elects to
require payment monthly in advance, the monthly payment shall be that equal
monthly amount which, over the number of months remaining before the month in
which the applicable tax installment would become delinquent (and without
interest thereon) would provide a fund large enough to fully discharge before
delinquency the estimated Tax Increase to be paid. When the actual mount of the
applicable Tax Increase is known, the amount of such equal monthly advance
payment shall be adjusted as required to provide the funds needed to pay the
applicable Tax Increase before delinquency. If the amounts paid to Lessor by
Lessee under the provisions of this Paragraph are insufficient to discharge the
obligations of Lessee to pay such Tax Increase as the same becomes due, Lessee
shall pay to Lessor, upon Lessor's demand, such additional sums as are necessary
to pay such obligation. All moneys paid to Lessor under this Paragraph may be
intermingled with other moneys of Lessor and shall not bear interest. In the
event of Breach by Lessee in the performance of the obligations of Lessee under
this Lease, then any balance of funds paid to Lessor under the provisions of
this Paragraph may, subject to proration as provided in Paragraph 10.1(a), at
the option of Lessor, be treated as an additional security Deposit under
Paragraph 5.
(c) ADDITIONAL IMPROVEMENTS. Notwithstanding Paragraph 10.1(a)
hereof, Lessee shall pay to Lessor upon demand therefor the entirety of any
increase in Real Property Taxes assessed by reason of Alterations or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"Real Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary, or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessee from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishing , equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other Premises.
12. ASSIGNMENT AND SUBLETTING.
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12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b) Lessee will provide Lessor with a thirty (30) day advance notice
and a description of any impending transaction which may result in a change in
control of Lessee. Lessor shall treat such information as confidential. Upon
review of the proposed transaction, Lessor may elect to terminate the lease with
a one hundred twenty (120) day notice.
(c) The involvement of Lessee or its assets in any transaction or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of the execution
by Lessor of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold consent. "Net Worth of Lessee"
for purposes of this Lease shall be the new worth of Lessee (excluding any
guarantors) established under generally accepted accounting principles
consistently applied.
(d) As assignment or subletting of Lessee's interest in*********
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****************************************************************e hundred ten
percent (110%) of the Base Rent then in effect, whichever is greater. Pending
determination of the new fair market rental value, if disputed by Lessee, Lessee
shall pay the amount set forth in Lessor's Notice, with any overpayment credited
against the next installment(s) of Base Rent coming due, and any underpayment
for the period retroactively to the effective date of the adjustment being due
and payable immediately upon the determination thereof. Further, in the event of
such Breach and market value adjustment, (i) the purchase price of any option to
purchase the Premises held by Lessee shall be subject to similar adjustment to
the then fair market value (without the Lease being considered an encumbrance or
any deduction or depreciation or obsolescence, and considering the Premises to
its highest and best use and in good condition), or one hundred ten percent
(110%) of the price previously in effect, whichever is greater, (ii) any index-
oriented rental or price adjustment formulas contained in this Lease shall be
adjusted to require that the base index be determined with reference to the
index applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be increased
in the same ratio as the new market rental bears to the Base Rent in effect
immediately prior to the market value adjustment.
(e) Lessor's remedy for any breach of this Paragraph 12.1 by Lessee
shall be limited to compensatory damages.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) after the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the lease or sublease and without obtaining their consent, and such
action shall not relieve such persons from liability under this Lease or
sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any one else responsible for the performance of the Lessee's obligations under
this Lease, including the sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any. Lessee agrees to provide Lessor
with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.1(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make
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the actual receipt by Lessor of the amount required to establish such Security
Deposit a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment structure of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment structure for property similar to the Premises as then constituted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rents and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon written notice from Lessor stating that a Breach exists in the
performance of Lessee's obligations under this Lease, to pay to Lessor the rents
and other charges due and to become due under the sublease. Sublessee shall rely
upon any such statement and request from Lessor and shall pay such rents and
other charges to Lessor without any obligation or right to inquire as to whether
such Breach exists and notwithstanding any notice from or claim from Lessee to
the contrary. Lessee shall have no right or claims against said sublessee, or,
until the Breach has been cured, against Lessor, for any such rents and other
charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior Defaults
or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by either party in connection with a Default or Breach (as hereinafter
defined), $350.00 is a reasonable minimum sum per such occurrence for legal
services and costs in the preparation and service of notices of Default or
Breach. Lessor may include the cost of such services and costs in said notice as
rent due and payable to cure said Default or Breach. Lessee may deduct the cost
of such services and costs from the rental payment next due to cure said Default
or Breach. A "DEFAULT" is defined as a failure by the Lessee to observe, comply
with or perform any of the terms, covenants, conditions or rules applicable to
Lessee under this Lease. A "BREACH" is defined as the occurrence of any one or
more of the following defaults, and, where a grace period for cure after notice
is specified herein, the failure by Lessee to cure such Default prior to the
expiration of the applicable grace period, shall entitle Lessor to pursue the
remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without intention to reoccupy same,
or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as and when due, the failure by Lessee with reasonable evidence of insurance or
surety bond required under this Lease, or the failure of Lessee to fulfill any
obligation under this Lease which endangers or threatens life or property, where
such failure continues for a period of three (3) days following written notice
thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with applicable law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the recission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10 days)
following written notice by or on behalf of Lessor or Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion.
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(e) The occurrence of any of the following items: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. (S) 101 or any
successor statue thereto (unless, in the case of a petition files against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor, (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a guarantor's refusal to honor the guaranty, or (v) a
guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may required all future payments to be made under this Lease by Lessee to be
made only by cashier's check. In the event of a Breach of this Lease by Lessee,
as defined in Paragraph 13.1, with or without further notice or demand, and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%). Efforts by Lessor to mitigate damages
caused by Lessee's Default or Breach of this Lease shall not waive Lessor's
right to recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve therein the right to recover all or
any part thereof in a separate suit for such rent and/or damages. If a notice
and grace period required under subparagraphs 13.1(b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d). In such
case, the applicable grace period under subparagraphs 13.1(b), (c) or (d) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute.
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constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent, consisting of two (2) of the four (4) months of free
rent, or other charges applicable to the Premises, or for the giving or paying
by Lessor to or for Lessee of any cash or other bonus, inducement or
consideration for Lessee's entering into this Lease, all of which concessions
are hereinafter
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referred to as "Inducement Provisions," shall be deemed conditioned upon
Lessee's full and faithful performance of all of the terms, covenants and
conditions of this Lease to be performed or observed by Lessee during the term
hereof as the same may be extended. Upon the occurrence of a Breach of this
Lease by Lessee, as defined in Paragraph 13.1, that remains uncured for fifteen
(15) days after written notice from Lessor to Lessee stating such Breach, any
such inducement Provision shall automatically be deemed deleted from this Lease
and of no further force or effect, and any rent, other charge, bonus, inducement
or consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to three percent (3%) of
such overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder, whether
or not collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purpose of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within the (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall continue in full force and effect as to the portion
of the Premises remaining, except that the Base Rent shall be reduced in the
same proportion as the rentable floor area of the Premises taken bears to the
total rentable floor area of the building located on the Premises. No reduction
of Base Rent shall occur if the only portion of the Premises taken is land on
which there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of severance damages received, repair any damage to the Premises caused
by such condemnation authority. Lessee shall be responsible for the payment of
any amount in excess of such severance damages required to complete such
repair.
15. BROKER'S FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
The Gara Company (Broker), said fee to be paid one-half (1/2) upon occupancy by
Tenant and one-half (1/2) on the first anniversary of the Lease Term provided
Tenant is not in default.
15.3 Unless Lessor and Brokers have otherwise agreed in writing,
Lessor further agrees that: (a) if Lessee exercises any Option (as defined in
Paragraph 39.1) or any Option subsequently granted which is substantially
similar to an Option granted to Lessee in this Lease, or (b) if Lessee acquires
any rights to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (c) if Lessee remains in possession of the
Premises, with the consent of Lessor, after the expiration of the term of this
Lease after having failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any other lease or sale entered into between the Parties
pertaining to the Premises and/or any adjacent property in which Lessor has an
interest, or (e) if Base Rent is increased, whether by agreement or operation of
an escalation clause herein, then as to any of said transactions, Lessor shall
pay said Brokers a fee in accordance with the schedule of said Brokers in effect
at the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed to
have assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
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15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend, and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorney's fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days
after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises,
any part thereof, or the building of which the Premises are a part, Lessee and
all Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Lessor shall provide written notice to Lessee of any transfer or assignment of
any Security Deposit. Except as provided in Paragraph 15, upon such transfer or
assignment and delivery of the Security Deposit as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined. Upon
insolvency or banruptcy of Lessor, the Security Deposit may be used as the last
months rent.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notice purposes. Either
Party may by written notice to the other specify a different address for notice
purposes, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate by
written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after
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delivery of the same to the United States Postal service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone confirmation of receipt of the
transmission thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Sunday or legal holiday, it shall be deemed received on
the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 Subordination. This Lease and any Option granted hereby
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********************************ny of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defense
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-disturbance
agreement as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding
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is pursued to decision or judgment. The term, "PREVAILING PARTY" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorney's fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorney's fees reasonably
incurred. Lessor shall be entitled to attorney's fees, costs and expenses
incurred in the preparation and service of notices of Default and consultations
in connection therewith, whether or not a legal action is subsequently commenced
in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any
time place on or about the Premises or building any ordinary "For Sale" signs
and Lessor may at any time during the last one hundred twenty (120) days of the
term hereof place on or about the Premises any ordinary "For Lease" signs. All
such activities of Lessor shall be without abatement of rent or liability to
Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations).
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will
incur in considering and responding to Lessee's request. Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph
1.11, the form of the guaranty to be executed by each such Guarantor shall be in
the form most recently published by the American Industrial Real Estate
Association, and each said Guarantor shall have the same obligations as Lessee
under this Lease, including but not limited to the obligation to provide the
Tenancy Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if
any such Guarantor fails or refuses, upon reasonable request by Lessor to give:
(a) evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signature of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
28
<PAGE>
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "Option" has
the following meaning: (a) the right to extend the term of this Lease or to
renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal to lease the Premises or the
right of first offer to lease the Premises or the right of first refusal to
lease other property of Lessor or the right of first offer to lease other
property of Lessor; (c) the right to purchase the Premises, or the right of
first refusal to purchase the Premises, or the right of first offer to purchase
the Premises, or the right to purchase other property of Lessor, or the right of
first refusal to purchase other property of Lessor, or the right of first offer
to purchase other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee named in Paragraph 1.1
hereof, and cannot be voluntarily or involuntarily assigned or exercised by any
person or entity other than said original Lessee while the original Lessee is in
full and actual possession of the Premises and without the intention of
thereafter assigning or subletting. The Options, if any, herein granted to
Lessee are not assignable, either as a part of an assignment of this Lease or
separately or apart therefrom, and no Option may be separated from this Lease in
any manner, by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any Multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of Default under Paragraph 13.1, whether or not the Defaults
are cured, during the twelve (12) month period immediately preceding the
exercise of the Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of Default under Paragraph 13.1 during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Lessee commits a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as the
convenience of other occupants or tenants of such other buildings and their
invites, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invites and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
29
<PAGE>
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder. Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such Multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE
ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN
CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED
SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at___________________________ Executed at___________________
on____________________________________ on____________________________
by LESSOR: KENNETH I. WHITE by LESSEE: LUKENS MEDICAL CORPORATION
By________________________________________ By____________________________
Name Printed:_____________________________ Name Printed:_________________
Title:____________________________________ Title:________________________
Address:______________________________ By_____________________________________
______________________________________ Name Printed:__________________________
Tel. No. ( )_________Fax No. ( )_______ Title:_________________________________
Address:_______________________________
Tel. No. ( ) Fax No. ( )
______________ _____
30
<PAGE>
ADDENDUM TO
STANDARD LEASE
DATED MAY 31, 1996
-------------------------------------------------------
BY AND BETWEEN (LESSOR) KENNETH I. WHITE
-------------------------------
(LESSEE) LUKENS MEDICAL CORPORATION
--------------------------------
PROPERTY ADDRESS: 3820 ACADEMY PARKWAY NORTH, N.E.,
-------------------------------------
ALBUQUERQUE, NEW MEXICO
----------------------------------
Paragraph 1.13
-------
A. OPTION(S) TO EXTEND:
Lessor hereby grants to Lessee TWO (2) options to extend the term of
---------
this Lease for TWO (2) additional years each commencing when the prior term
---------
expires upon each and all of the following terms and conditions:
(i) Lessee gives to Lessor written notice of Lessee's desire to renew the
term of the lease no later than ONE HUNDRED EIGHTY (180) DAYS prior to the
-----------------------------
termination of the primary Lease Term or the first renewal period. If said
notification of the exercise of said options is not so given and received, the
options shall automatically expire; said options may only be exercised
consecutively;
(ii) The provisions of paragraph 39, including the provision relating to
default of Lessee set forth in paragraph 39.4 of Lease are conditions of this
Option;
(iii) All of the terms and conditions of this Lease except where
specifically modified by this option shall apply;
(iv) The rental rate during the renewal terms shall be increased each year
by THREE PERCENT (3%) over the previous year's rental rate.
--------------------
B. NOTICE: Unless specified otherwise herein, notice of any escalations
other than Fixed Rental Adjustments shall be made as specified in paragraph 23
of the attached Lease.
Paragraph 7.3
------
(d) Initial Lessee Owned Alterations. Lessee, at Lessee's sole cost and
expense, is authorized to install the following Lessee Owned Alterations:
(i) Add partition with electrical on 2nd floor in workroom as specified on
attached floor plan;
(ii) Add door in workroom area per attached floor plan;
(iii) Remove counter and relocate water cooler as specified on attached
floor plan;
(iv) Remove partitioning in office and warehouse as specified on attached
floor plan;
(v) Relocate partitions, cabinets and plumbing in 1st floor lunchroom to
extend west corridor and create an additional windowed office
with door as specified in attached floor plan;
(vi) Replace carpet in entry way, and corridor to warehouse on east side of
the building;
(vii) Clean carpet in entire office area;
(vii) Paint/seal warehouse flooring with two part epoxy floor paint approved
by Lessee and Lessor
(e) Subject to Lessor's approval of final plans and specification, Lessee, at
Lessee's sole cost and expense, shall be permitted to install the following
alterations:
(i) Create an assembly room in a portion of the warehouse by installing
walls, doors, floor tile, lay-in ceiling, lighting, electrical, HVAC and
plumbing.
31
<PAGE>
ADDENDUM #2 TO
STANDARD LEASE
DATED JUNE 5, 1996
------------------------------------------------------
BY AND BETWEEN (LESSOR) KENNETH I. WHITE
-------------------------------
(LESSEE) LUKENS MEDICAL CORPORATION
---------------------------------
PROPERTY ADDRESS: 3820 ACADEMY PARKWAY NORTH, N.E.,
------------------------------------
ALBUQUERQUE, NEW MEXICO
---------------------------------
PARAGRAPH 4.2
------
A. RENTAL ABATEMENT
The Base Rent payment for the month of February 1997, shall be reduced
by $2,323.75, in consideration for the re-building of that portion of the
warehouse interior walls that were mistakenly removed by the previous tenant.
Tenant shall be responsible for the cost of re-building the warehouse walls and
associated mezzanine area. Landlord will have no further obligation to Tenant
for re-building interior warehouse walls.
PARAGRAPH 4.3
------
B. BASE RENT ADJUSTMENTS
Base Rent Adjustments calculated at three percent (3%) per 12 month
period following the fifteenth month of the lease shall result in the following
rent schedule:
<TABLE>
<CAPTION>
MONTHS MONTHLY BASE RENT
------ ------------------
<S> <C>
June, July & August 1996 $0.00 (Tenant pays $906.67 per month
for Taxes & Insurance)
September 1996-January 1997 $9,449.17
February 1997 $7,125.42
March 1997-August 1997 $9,449.17
September 1997-October 1997 $9,705.87
November 1997 The then applicable 1/12th of
the real estate taxes and
property insurance
December 1997-August 1998 $9,705.87
September 1998-August 1999 $9,970.27
September 1999-August 2000 $10,242.60
September 2000-August 2001 $10,523.10
</TABLE>
The parties hereto have executed this Addendum #2 at the place on the dates
specified above to their respective signatures.
Executed at_____________________________ Executed at_________________
on______________________________________ on__________________________
by LESSOR: KENNETH I. WHITE by LESSEE: LUKENS MEDICAL CORPORATION
By______________________________________ By_________________________
Name Printed:___________________________ Name Printed:______________
Title:__________________________________ Title:_____________________
32
<PAGE>
Address:_____________________________ By__________________________________
_____________________________________ Name Printed:_______________________
Tel. No. ( )__________Fax No. ( )______ Title:______________________________
Address:____________________________
Tel. No. ( ) Fax No. ( )
__________ ______
33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 0 150,358
<SECURITIES> 0 0
<RECEIVABLES> 0 1,542,031
<ALLOWANCES> 0 (5,790)
<INVENTORY> 0 4,096,944
<CURRENT-ASSETS> 0 5,850,628
<PP&E> 0 3,058,771
<DEPRECIATION> 0 1,282,054
<TOTAL-ASSETS> 0 8,774,136
<CURRENT-LIABILITIES> 0 1,340,345
<BONDS> 0 0
0 0
0 0
<COMMON> 0 27,115
<OTHER-SE> 0 6,094,176
<TOTAL-LIABILITY-AND-EQUITY> 0 8,774,136
<SALES> 2,362,938 3,907,501
<TOTAL-REVENUES> 2,362,938 3,907,501
<CGS> 1,633,942 2,712,875
<TOTAL-COSTS> 432,328 788,461
<OTHER-EXPENSES> 25,215 9,401
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30,115 51,561
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 241,338 345,203
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 241,338 345,203
<EPS-PRIMARY> .09 .13
<EPS-DILUTED> .08 .11
</TABLE>
