<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1998
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR TRANSITION PERIOD FROM TO .
Commission file number 1-11064
BRITESMILE, INC.
........................................................................
(Exact name of small business issuer as specified in its charter)
UTAH 87-0410364
................................. ...............................
(State or other jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
Airport Business Center
200 Diplomat Drive, Suite 204
Lester, Pennsylvania 19113
......................................................
(Address of principal executive offices with Zip Code)
(610) 362-1111
................................
(Issuer's telephone number)
Ion Laser Technology, Inc., 3828 South Main, Salt Lake City, Utah 84115
......................................................
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]
The number of shares of common stock of the Registrant outstanding as of
June 30, 1998 was 7,669,772.
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ITEM 1. FINANCIAL STATEMENTS
BRITESMILE, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
June 30, March 31,
1998 1998
-------- ---------
Assets
Current assets:
Cash and cash equivalents $ 3,915 $ 503
Accounts receivable, less allowance
of $196 and $190 at June 30, 1998
and March 31, 1998, respectively 228 531
Inventories 85 321
Prepaid expenses 44 59
Assets held for sale 1,668 1,668
------- -------
Total current assets 5,940 3,082
Property, plant and equipment, net 463 766
Investment in joint venture 175 175
Patent costs, net 436 426
Other assets - 213
------- -------
Total assets $ 7,014 $ 4,662
======= =======
SEE ACCOMPANYING NOTES.
2
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BRITESMILE, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(Dollars in Thousands)
June 30, March 31,
1998 1998
-------- ---------
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 21 $ 30
Accounts payable 778 723
Accrued expenses 485 953
Accrued warranty costs 67 85
Current portion of long-term debt 37 94
-------- --------
Total current liabilities 1,388 1,885
-------- --------
Long-term debt less current portion 894 931
-------- --------
Shareholders' Equity:
Common stock, $.001 par value:
Authorized shares - 50,000,000 8 6
Issued and outstanding shares -
June 30, 1998 - 7,669,772
March 31, 1998 - 5,809,307
Additional paid-in capital 16,900 11,902
Accumulated deficit (12,126) (10,012)
Cumulative translation adjustment (50) (50)
-------- --------
Total shareholders' equity 4,732 1,846
-------- --------
Total liabilities and shareholders'
equity $ 7,014 $ 4,662
========= ========
SEE ACCOMPANYING NOTES.
3
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BRITESMILE, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
For three months ended
----------------------
June 30, June 30,
1998 1997
---------- ----------
Net sales $ 360 $ 2,020
-------- --------
Cost of products sold:
Product sales 282 1,166
Inventory write-downs 354 -
-------- --------
Total cost of products sold 636 1,166
-------- --------
Gross Margin (276) 854
Selling and administrative expenses 880 784
Research and development expenses 239 135
Termination benefits, impairment charges
and asset write-downs 737 -
-------- --------
(2,132) (65)
Other income (expense) 17 (11)
-------- --------
Loss before income taxes (2,115) (77)
Income tax (expense) benefit - -
-------- --------
Net loss for the period $ (2,115) $ (77)
======== ========
Earnings (loss) per common share $ (.30) $ (.01)
======== ========
SEE ACCOMPANYING NOTES.
4
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BRITESMILE, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For three months ended
----------------------
June 30, June 30,
1998 1997
--------- ----------
OPERATING ACTIVITIES
Net loss $ (2,115) $ (77)
Adjustments to reconcile net income (loss) to
net cash provided(used) by operating activities:
Depreciation and amortization 41 120
Provision for losses on accounts receivable - (25)
Termination benefits, impairment charges and
asset write-downs 633 -
Changes in operating assets and liabilities:
Accounts receivable, inventory and prepaid expenses 15 (101)
Other assets - 68
Accounts payable and accrued liabilities (32) (283)
Income taxes payable 14
Accrued warranty costs (18) (10)
--------- ----------
Net cash provided by (used in) operating activities (1,476) (292)
--------- ----------
INVESTING ACTIVITIES
Patent costs (9) (91)
Additions to property, plant and equipment - (216)
--------- ----------
Net cash (used in) investing activities (9) (307)
--------- ----------
FINANCING ACTIVITIES
Payments on debt (103) 20
Proceeds from sale of common stock 5,000 3,101
--------- ----------
Net cash provided by (used in) financing activities 4,897 3,121
--------- ----------
Net increase (decrease) in cash and cash equivalents 3,412 2,522
Cash and cash equivalents at beginning of period 503 55
--------- ----------
Cash and cash equivalents at end of period $ 3,915 $ 2,577
SEE ACCOMPANYING NOTES.
5
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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
1. ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
On August 12, 1998, Ion Laser Technology, Inc. changed its name to BriteSmile,
Inc. The unaudited, consolidated, condensed financial statements of BriteSmile,
Inc. (the "Company") as of June 30, 1998 and for the three months ended June 30,
1998 and 1997 were prepared by the Company without audit in accordance with
generally accepted accounting principles for interim financial information and
in accordance with the instructions to Form 10-QSB and of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all necessary adjustments to the
financial statements have been made to present fairly the financial position and
results of operations and cash flows of the Company. The results of operations
for the periods presented are not necessarily indicative of the results for the
respective complete years. For further information, refer to the consolidated
financial statements and the notes thereto included in the Company's annual
report on Form 10-KSB for the year ended March 31, 1998.
Earnings Per Share
- ------------------
Earnings per share is computed based on the weighted average number of shares of
common stock and common stock equivalent shares outstanding during each period.
Common stock equivalent shares consist primarily of stock options that have a
dilutive effect when applying the treasury stock method. The weighted average
number of shares outstanding were 6,974,653 and 5,428,724 at June 30, 1998 and
1997, respectively.
Reclassifications
- -----------------
Certain reclassifications, none of which affect net income, have been made to
the prior periods' amounts in order to conform to the current presentation.
2. TERMINATION BENEFITS, IMPAIRMENT CHARGES AND ASSET WRITE-DOWNS
In April 1998, the Company's Board of Directors and management decided to close
its Utah operating facility, discontinue all activities related to the
industrial and scientific lines of business, and move its headquarters to
Pennsylvania. As a result of the Company's decision to relocate its operations
to Pennsylvania and to focus exclusively in the dental whitening market, nearly
all of the Company's workforce of 63 employees in Utah was scheduled for
termination. The plan of termination is expected to be completed by September
30, 1998 and a termination benefits liability of $200,000 was established and
charged to expense during the three months ended June 30, 1998. As of June 30,
1998, the Company had terminated 50 employees and paid termination benefits of
approximately $100,000.
During the three months ended June 30, 1998, the Company has recorded additional
charges of $891,000 related to the impairment and write-down of certain assets
which will provide limited or no future benefits to the Company. These charges
include the following: (i) $324,000 write-down of fixed assets; (ii) $213,000
write-down of aged accounts receivable; and (iii) $354,000 write-down of
inventories which were rendered obsolete or discontinued by the Company that
were either scrapped or sold at substantially reduced values. The inventory
write-downs have been classified as cost of products sold - inventory write-
downs.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes thereto contained
elsewhere in this report. The discussion of these results should not be
construed to imply any conclusion that any condition or circumstance discussed
herein will necessarily continue in the future.
When used in this report, the words "believes," "anticipates," "expects," and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements that
may be made to reflect events or circumstances after the date of this report, or
to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 (FISCAL 1999) VS. QUARTER ENDED JUNE 30, 1997
(FISCAL 1998)
Net Sales
- ---------
Sales for the fiscal 1999 quarter totaled $360,000 compared to $2,020,000 in the
fiscal 1998 quarter, a decrease of approximately $1,660,000 or 82%. The
decrease in sales was due to the fact that the Company had no sales of the arc
lamp tooth whitening (TW) system in the fiscal 1999 quarter and has discontinued
all development work on the arc lamp TW system. However, management anticipates
the introduction of a new Light Activated Tooth Whitening (LATW) Device,
BriteSmile 2000, during the second half of its 1999 fiscal year.
Sales of tooth whitening chemical products declined from $344,000 in the fiscal
1998 quarter to $191,000 in the fiscal 1999 quarter due to the termination of
marketing efforts from Utah. Marketing has been moved to Pennsylvania and sales
of tooth whitening chemical products are expected to improve.
Cost of Sales
- -------------
The Company's cost of sales, exclusive of the inventory write-downs, increased
from 58% of sales in the fiscal 1998 quarter to 78% of sales in the fiscal 1999
quarter. The increase is due to the reduced sales of the higher margin laser
tooth whitening systems, as well as increased warranty costs as a percentage of
sales.
Selling & Administrative Expenses
- ---------------------------------
Selling and administrative expenses increased from approximately 39% of sales in
the fiscal 1998 quarter to 244% of sales in the 1999 fiscal quarter. This
increase is mostly attributable to the decline in sales.
Research & Development Expenses
- -------------------------------
Research and development expenses were $239,000 in the fiscal 1999 quarter
compared with $135,000 in the fiscal 1998 quarter. This increase of $104,000 is
largely attributable to the research and development on the LATW Device,
BriteSmile 2000, which is expected to be introduced later in the current fiscal
year. During the 1999 fiscal quarter, the Company established a new research
and development facility in Evanston, Illinois. The research and development
team is currently focused on the development of a new Light Activated Tooth
Whitening Device, BriteSmile 2000. Management anticipates research and
development expenditures to continue at rates at least comparable to prior
years.
Termination Benefits, Impairment Charges and Asset Write-Downs
- --------------------------------------------------------------
7
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In April 1998, the Company's Board of Directors and management decided to close
its Utah operating facility, discontinue all activities related to the
industrial and scientific lines of business, and move its headquarters to
Pennsylvania. As a result of the Company's decision to relocate its operations
to Pennsylvania and to focus exclusively on the dental whitening market, nearly
all of the Company's 63 employees located in Utah were scheduled for
termination. The plan of termination is expected to be completed by September
30, 1998 and a termination benefits liability of $200,000 was established and
charged to expense during the fiscal 1999 quarter. As of June 30, 1998, the
Company had terminated 50 employees and paid termination benefits of
approximately $100,000.
During the fiscal 1999 quarter, the Company has recorded additional charges of
$891,000 related to the impairment and write-down of certain assets which
will provide limited or no future benefit to the Company. Included in the
charges were the following: (i) $324,000 write-down of fixed assets; (ii)
$213,000 write-down of aged accounts receivable; and (iii) $354,000 write-down
of inventories which were rendered obsolete or discontinued by the Company and
either scrapped or sold at substantially reduced values. The inventory write-
downs have been classified as cost of products sold--inventory write-downs.
Income Taxes
- ------------
The Company had no income tax expense during fiscal 1998 due to its operating
loss. Furthermore, no income tax benefit was recognized due to the uncertainty
associated with the Company's ability to realize its deferred assets, comprised
primarily of net operating loss carryforwards.
Inflation
- ---------
The Company actively strives to contain costs on parts from suppliers by
renegotiating purchase order contracts. Inflation has not been a major factor
in the past and is not seen as a major factor that will impact the Company'
operations in the immediate future.
Net Income (Loss)
- -----------------
For the 1998 fiscal quarter, the Company incurred a net loss of $77,000 compared
to a loss of $2,115,000 for the 1999 fiscal quarter, of which $1,091,000 was due
to termination benefits, impairment charges and asset write-downs. The
operating loss is due in large part to lower sales during the current fiscal
year as well as increased research and development costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing activities resulted in an increase of $4,897,000 due
primarily to the $5,000,000 of equity capital capital raised in May, 1998. This
increase was offset by the $1,476,000 of cash used by operating activities.
At March 31, 1998, the Company had outstanding purchase orders to acquire up to
approximately $2 million of inventory and supplies over an 18 month period. In
connection with the reduced level of operations, management has been attempting
to cancel these orders. As of July 31, 1998, the outstanding purchase orders
were approximately $750,000.
In this section, the term "Current Ratio" means current assets divided by
current liabilities. "Working Capital" means current assets less current
liabilities.
8
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The Company's Current Ratio and Working Capital at June 30, 1998 and March 31,
1998 were as follows:
June 30, 1998 March 31, 1998
------------- --------------
Current Ratio 4.28 1.63
Working Capital $4,552,000 $1,197,000
In May, 1998, the Company completed a private placement of its common stock in
which it obtained proceeds of approximately $5,000,000. As a result of the
curtailment of operations in Salt Lake City and reduced scope of operations,
the Company believes that cash on hand, cash flow from sales and amounts
generated through sale of certain assets will be sufficient to meet the
Company's needs for the next twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. This Standard will become effective for the
Company's 1999 fiscal year. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in a full set of general-
purpose financial statements. Management is currently assessing the impact of
implementation of this Standard on the consolidated financial statements of the
Company and does not believe that the implementation will have a material impact
on the Company's financial statements.
YEAR 2000
Many computer systems experience problems handling dates beyond the year 1999.
This is referred to widely as the "Year 2000" issue. As a result of the May
1998 closure of its Salt Lake City manufacturing facility and downsizing of its
operations, the potential impact of the Year 2000 issue on the Company is
greatly reduced. Additionally, the Company is in the process of upgrading its
primary financial and management systems, which upgrades are planned to be Year
2000 compliant. The Company continues to evaluate the Year 2000 exposures
presented by its significant suppliers and other vendors whose systems may
impact the Company's operations. However, based on the significant reduction in
operations noted above, management believes that the Year 2000 issue will not
have a material impact on the Company's operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no legal proceedings involving the Company or any of its directors,
officers or affiliates which are required to be discussed in this Report.
ITEM 2. CHANGES IN SECURITIES.
(c) Unregistered sales of equity securities during quarter (other
than in reliance on Regulation S).
During the quarter ended June 30, 1998, the Company issued equity securities
that were not registered under the Securities Act of 1933 (the "Act"), in
reliance on Regulation S under the Act. For a description of this transaction,
pursuant to which the Company sold 1,860,465 shares of its common stock for an
aggregate purchase price of $5,000,000, see the Company's Current Report on Form
8-K dated May 4, 1998.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
9
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ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description
----------- -----------
3.01 Articles of Amendment Adopting Revised Articles of
Incorporation, as filed with the Utah Division of
Corporations and Commercial Code on August 11, 1998.
10.15 Lease Agreement dated June 3, 1998 between the Company
and Ambassador II Joint Venture regarding the Lester,
Pennsylvania facility.
10.16 Employment Agreement dated as of June 1, 1998 between
the Company and David Bruhin.
10.17 Revised 1997 Stock Option and Incentive Plan of the
Company (incorporated by reference to Exhibit B to the
Company's Preliminary Proxy Statement on Schedule 14A
as filed with the Commission on July 6, 1998).
10.18 Office Lease dated June 23, 1998 between the Company
and Mortgage One Corporation, regarding Evanston,
Illinois facility.
10.19 Employment Letter dated July 16, 1998 between the
Company and William McCarthy.
10.20 Employment Agreement dated as of May 30, 1998 between
the Company and Richard Trefz.
10.21 LCO Investments Limited Incentive Compensation Plan,
dated as of May 11, 1998.
10.22 Form of Units Agreement between the Company and certain
directors or executive officers of the Company.
27.1 Financial Data Schedule for June 30, 1998 Form 10-QSB.
27.2 Amended Financial Data Schedule for March 31, 1998
Form 10-KSB.
(b) Reports on Form 8-K
During the quarter for which this report is filed, the Company
filed one Current Report on Form 8-K dated May 4, 1998. Pursuant
to Item 1 of the Report, the Company reported the closing of a
Stock Purchase Agreement dated as of May 4, 1998 between the
Company and LCO Investments Limited. Pursuant to Item 5 of the
Report, the Company reported plans for a significant
restructuring of the Company's operations, the appointment of a
new President and CEO, and a one-time charge against earnings.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
BRITESMILE, INC.
Date: August 13, 1998 /s/ William T. McCarthy
-------------------------
William T. McCarthy
Chief Financial Officer
11
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ARTICLES OF AMENDMENT
ADOPTING REVISED ARTICLES OF INCORPORATION
ION LASER TECHNOLOGY, INC.
to be known as
BRITESMILE, INC.
Pursuant to Section 16-10a-1007 of the Utah Revised Business Corporation
Act, as amended (the "Act"), Ion Laser Technology, Inc., a Utah corporation (the
"Corporation") adopts the following Articles of Amendment to its Articles of
Incorporation, which amendment constitutes a revision and restatement of the
Articles of Incorporation of Ion Laser Technology, Inc.
FIRST: The name of the Corporation is Ion Laser Technology, Inc.
SECOND: The Corporation's Articles of Incorporation are hereby amended
and restated to read in their entirety as follows:
ARTICLE I - NAME
----------------
The name of this corporation is BriteSmile, Inc.
ARTICLE II - DURATION
---------------------
The duration of this corporation is perpetual.
ARTICLE III - PURPOSE
---------------------
A. The purpose for which this corporation is organized is to engage in
the research, development, manufacture and sale of lasers and all business
associated therewith.
B. This corporation shall have all of the powers granted or allowed by
the Utah Business Corporation Act, as may be amended from time to time, and all
of the powers necessary or convenient to effect any or all of the purposes for
which this corporation is organized.
C. This corporation shall have power to acquire by purchase, exchange,
gift, bequest, subscription or otherwise, and to hold, own, mortgage, pledge,
hypothecate, sell, assign, transfer, exchange or otherwise dispose of or deal in
or with its own corporate securities or stock or other securities, including,
without limitation, any shares of stock, bonds, debentures, notes, mortgages, or
other obligations, and any certificates, receipts or other instruments
representing rights or interests therein or any property or assets created or
issued by any person, firm, association, or corporation, or any government or
subdivisions, agencies or instrumentalities thereof, to make payment therefor in
any lawful manner or to issue in exchange therefor its own securities or to use
its unrestricted and unreserved earned surplus and/or unrestricted and
<PAGE>
unreserved capital surplus for the purchase of its own shares, and to exercise
as owner or holder of any securities, any and all rights, power and privileges
in respect therefor.
D. This corporation shall have power to act as fully and to the same
extent as a natural person might, or could do, in any part of the world as
principal, agent, partner, general or limited, trustee or otherwise, either
alone or in conjunction with any person, firm or corporation.
ARTICLE IV - STOCK
------------------
The aggregate number of shares of common stock which this corporation shall
have authority to issue is 50,000,000 shares, $0.001 par value per share.
ARTICLE V - INDEMNIFICATION AND LIMITATION OF LIABILITY
-------------------------------------------------------
This corporation shall indemnify all officers, directors and agents to the
fullest extent permitted by law.
To the fullest extent permitted by the Utah Business Corporation Act as the
same exists or may hereafter be amended, a director of this corporation shall
not be liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director.
ARTICLE VI - PRE-EMPTIVE RIGHTS
-------------------------------
Shareholders shall not have pre-emptive rights to acquire shares of common
stock of this corporation.
ARTICLE VII - POWER OF DIRECTORS TO
-----------------------------------
MORTGAGE OR PLEDGE PROPERTY
---------------------------
The Directors shall have the power to mortgage, pledge, or otherwise
encumber the property of the corporation, including, but not limited to, all or
substantially all of the corporation's property or assets, with or without the
corporation's good will, and such action by the Directors shall be deemed to be
made in the usual and regular course of the corporation's business.
ARTICLE VII - COMMON DIRECTORS
------------------------------
No contract or other transaction between this corporation and one or more
of its Directors or any other corporation, firm, association or entity in which
one or more of its Directors are directors or officers or are financially
interested, shall be either void or voidable, because of such relationship or
interest, or because such Director or Directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves or
ratifies such contract or transaction, or because his or their votes are counted
for such purpose if: (a) the fact of such
2
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relationship or interest is disclosed known to the Board of Directors or
committee which authorizes, approves or ratifies the contract or transaction by
vote or consent sufficient for the purpose without counting the vote or consent
of such interested Director; or (b) the fact of such relationship or interest is
disclosed or known to the shareholders entitled top vote and they authorize,
approve or ratify such contract or transaction by vote or written consent; or
(c) the contract or transaction is fair and reasonable to the corporation.
Common or interested Directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves or ratifies such contract or transaction.
ARTICLE IX - REVISED ARTICLES
-----------------------------
These Revised Articles of Incorporation supersede the original Articles of
Incorporation and all amendments thereto.
THIRD: The amendment contained in the foregoing restated Articles of
Incorporation (i.e., the change of name as provided in Article I) was approved
and adopted by vote of the shareholders of the Corporation on August 11, 1998.
FOURTH: The number of shares of common stock of the Corporation
outstanding and entitled to vote thereon at the time of such adoption was
7,669,772.
FIFTH: The number of shares voted for such amendment was in excess of
6,095,527, and the number of shares voted against such amendment was 37,056.
DATED effective this 11th day of August, 1998.
ION LASER TECHNOLOGY, INC.
By: /s/ Richard V. Trefz
--------------------------
Richard V. Trefz, President
3
<PAGE>
LEASE AGREEMENT
---------------
THIS AGREEMENT, made the 3rd day of June one thousand nine hundred and ninety-
eight (1998), by and between AMBASSADOR II JOINT VENTURE (hereinafter called the
"Landlord") and ION LASER TECHNOLOGY, INC., a Utah corporation, licensed to do
business in Pennsylvania, (hereinafter called the "Tenant").
1. Demised Premises. Landlord does hereby demise and let unto Tenant all
----------------
that certain area known as Bay 204, consisting of approximately 4,666 square
feet, in the Ambassador Two Building ("Building"), in the Airport Business
Center ("Park") in the Township of Tinicum, in the County of Delaware,
Commonwealth of Pennsylvania, ("Demised Premises") as depicted on Exhibit "A",
which is attached hereto and incorporated herein by reference, to be used and
occupied as office and warehouse space and for no other purpose.
2. Term. This Lease shall be for a term of five (5) years (hereinafter
----
called "Demised Term") beginning the 1st day of July one thousand nine hundred
and ninety-eight (1998), and ending the 30th day of June two thousand and three
(2003).
3. Basic Rent. Commencing July 1, 1998 and ending June 30, 1999, Tenant
----------
agrees to pay a net Basic Rent ("Basic Rent") in the sum of Thirty-Seven
Thousand Three Hundred Twenty-Eight and 00/100 Dollars ($37,328.00) per annum
lawful money of the United States of America, payable in advance during the
Demised Term of this Lease, or any renewal hereof, in sums of Three Thousand One
Hundred Ten and 66/100 Dollars ($3,110.66) on the first day of each month, rent
to begin from the 1st day of July, 1998, the first installment to be paid at the
time of signing this lease. Rent due and payable without demand or offset, at
the office of Landlord (Attention: Accounting Department).
Commencing July 1, 1999 and ending June 30, 2000, Tenant agrees to pay a net
Basic Rent ("Basic Rent") in the sum of Thirty-Eight Thousand Four Hundred
Ninety-Four and 50/100 Dollars ($38,494.50) per annum lawful money of the United
States of America, payable in advance during the Demised Term of this Lease, or
any renewal hereof, in sums of Three Thousand Two Hundred Seven and 88/100
Dollars ($3,207.88) on the first day of each month, rent to begin from the 1st
day of July, 1999.
Commencing July 1, 2000 and ending June 30, 2001, Tenant agrees to pay a net
Basic Rent ("Basic Rent") in the sum of Thirty-Nine Thousand Six Hundred Sixty-
One and 00/100 Dollars ($39,661.00) per annum lawful money of the United States
of America, payable in advance during the Demised Term of this Lease, or any
renewal hereof, in sums of Three Thousand Three Hundred Five and 08/100 Dollars
($3,305.08) on the first day of each month, rent to begin from the 1st day of
July, 2000.
1
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Commencing July 1, 2001 and ending June 30, 2002, Tenant agrees to pay a net
Basic Rent ("Basic Rent") in the sum of Forty Thousand Eight Hundred Twenty
Seven and 50/100 Dollars ($40,827.50) per annum lawful money of the United
States of America, payable in advance during the Demised Term of this Lease, or
any renewal hereof, in sums of Three Thousand Four Hundred Two and 29/100
Dollars ($3,402.29) on the first day of each month, rent to begin from the 1st
day of July, 2001.
Commencing July 1, 2002 and ending June 30, 2003, Tenant agrees to pay a net
Basic Rent ("Basic Rent") in the sum of Forty-One Thousand Nine Hundred Ninety-
Four and 00/100 Dollars ($41,994.00) per annum lawful money of the United States
of America, payable in advance during the Demised Term of this Lease, or any
renewal hereof, in sums of Three Thousand Four Hundred Ninety-Nine and 50/100
Dollars ($3,499.50) on the first day of each month, rent to begin from the 1st
day of July, 2002.
4. Net Lease. It is the intent of the parties hereto that this is a net
---------
lease, and that all costs of ownership, maintenance and use of the Demised
Premises, shall be paid by Tenant in addition to the payments of Basic Rent
specified above, provided however, Landlord shall be responsible for property
management expenses, if any, structural repairs to the exterior foundation,
roofs, the plumbing in common areas and/or outside of the Building, and exterior
walls (but excluding the exterior of, and the frames surrounding all windows,
doors, plate glass, store fronts and signs). Said repairs by Landlord will be
made within a reasonable time after notice from Tenant.
5. Improvement of Demised Premises.
-------------------------------
a. "As-Is". Tenant is leasing the Demised Premises on as "As-Is" basis,
-------
except for the improvements provided by Landlord as noted on the attached Scope
of Work (Exhibit "B") dated May 27, 1998. Tenant represents that it has
inspected the Demised Premises and is satisfied with its present condition.
Tenant agrees that it will be responsible to pay all costs for repair and
maintenance of the Demised Premises from the date of execution of this Lease,
including maintenance and repair of the interior plumbing, electricity, hot
water and HVAC systems in the Demised Premises.
b. Landlord's Work. Utilizing a general contractor selected by Landlord,
---------------
Landlord shall complete and prepare the Demised Premises for Tenant's initial
occupancy in a good and workmanlike manner in accordance with Tenant's
Improvement Plan which has been initialed by both Landlord and Tenant.
c. Materials Used. Landlord shall use materials as outlined on the attached
--------------
Tenant Scope of Work (Exhibit "B"). Landlord reserves the right, however: (1)
to make substitutions of material of equivalent grade and quality when and if
any specified material shall not be readily and reasonably available, and (2) to
make changes necessitated by conditions met in the course of construction,
provided that Tenant's approval of any change shall first be obtained (which
approval shall not be unreasonably withheld) so long as there shall be general
conformity with Tenant's Improvement Plans and Tenant's intended use of the
Demised Premises and which approval must be given or denied (with reasons stated
in the case of denial) within forty-eight (48) hours after request or approval
shall be conclusively deemed to
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have been given.
6. Inability to Give Possession. If the Landlord shall be unable to give
----------------------------
possession of the Demised Premises on the date of the commencement of the
Demised Term by reason of the holding over of a previous occupant, or by reason
of any cause beyond the control of the Landlord, or because the Demised Premises
is located in a building being constructed and which has not been sufficiently
completed to make the property ready for occupancy, or because a certificate of
occupancy has not been procured, or for any other reason, the Landlord shall not
be subject to any liability for such inability to give possession; under such
circumstances the payment of rent shall not commence until possession of the
Demised Premises is given to or the Demised Premises is available for occupancy
by the Tenant. The failure to give possession on the date of commencement of
the Demised Term shall not affect the validity of this Lease or the obligations
of the Tenant hereunder, or extend the Demised Term, provided, however, in the
event Landlord is unable to give possession on or before August 15, 1998, then
Tenant shall have the option of declaring the Lease terminated by giving
Landlord written notification thereof by registered mail on or before August 30,
1998.
7. Additional Rent.
---------------
(a) Breach. Tenant agrees to pay as rent in addition to the Basic Rent any
------
and all sums which may become due by reason of the failure of Tenant to comply
with all of the covenants of this Lease and any and all damages, costs and
expenses, including attorney's fees, which the Landlord may suffer or incur by
reason of such default, and also any and all damages to the Demised Premises
caused by any act or neglect of the Tenant.
(b) Taxes, Assessments, Etc. Tenant will duly promptly pay as additional
------------------------
rent to Landlord, as the same shall become due and payable and before they
become delinquent, all taxes, rates, assessments and other governmental charges,
and charges of every kind and nature whatsoever, nonrecurring as well as
recurring, special or extraordinary as well as ordinary, foreseen and
unforeseen, and each and every installment thereof, which shall or may during
the term of the Lease be levied, assessed or imposed, or become due and payable
or become liens upon, or arise in connection with the use, occupancy or
possession of, or any interest in, the Demised Premises, or upon the rents,
issues, income and profits therefrom so as to prevent the same from becoming or
being an enforceable lien or claim against the property or the interest of
Landlord ("Expenses"). Landlord shall apply such payment by Tenant to the
payment of such Expenses, but in no event shall Landlord be required to pay such
Expenses early or during discount periods. Such Expenses shall include all real
estate taxes, assessments, water and sewer charges which may become liens upon
the Demised Premises or any part thereof. If Landlord requests Tenant to pay
such Expenses other than to Landlord, Tenant will furnish or cause to be
furnished to Landlord not less than fifteen (15) days prior to the date on which
payment of the same would become delinquent, or subject to penalty or interest,
receipts or other evidence satisfactory to Landlord of the payment of all such
Expenses. If Landlord requests in writing, Tenant shall pay to Landlord, or as
Landlord may direct, such Expenses in advance in installments as estimated and
determined by Landlord, and deposited with Landlord, or as directed by Landlord,
for payment of all such Expenses when the same may become due and payable.
Notwithstanding the foregoing, Tenant shall not be responsible for gross
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receipts or other income taxes incurred by Landlord on the rents received
hereunder unless it is imposed in lieu of another charge for which Tenant is
responsible hereunder.
If the Tenant deems excessive or illegal any such Expenses, with the written
consent of the Landlord, the Tenant may make payment under protest. Any
contest, whether before or after payment, may be made in the name of the
Landlord or the Tenant or both, with the written consent of the Landlord. If
requested by Tenant, Landlord may, but shall not be required to participate in
any such contest, but the Tenant shall be entitled to any refund of any such
Expenses, and any penalty or interest thereon which may have been paid by the
Tenant, but all costs in connection with such contest shall be borne by the
Tenant.
In case of failure of the Tenant to make any of the payments to be made by
Tenant for such Expenses, the Landlord may, but shall not be required to, pay
the amount of same, with penalty and interest thereon, if any. The amount so
paid by the Landlord, with interest thereon from the date of payment thereof by
the Landlord, shall be added to and become a part of the next installment of
rent.
If at any time during the term of this Lease the methods of taxation
prevailing at the commencement of the term hereof shall be altered so that in
lieu of or as a supplement to or a substitute for the whole or any part of the
real estate taxes or assessments now levied, assessed or imposed (1) a tax,
assessment, levy, imposition or charge, wholly or partially as a capital levy or
otherwise, on the rents received therefrom or (2) a tax, assessment, levy
(including but not limited to any municipal, state or federal levy), imposition
or charge measured by or based in whole or in part upon the premises and imposed
upon the Landlord, or (3) a license fee measured by the rent payable under this
Lease, then all such taxes, assessments, levies or impositions and charges, or
the part thereof so measured or based shall be deemed to be included in the
general real estate taxes and assessments payable by the Tenant pursuant hereto
to the extent that such taxes, assessments, levies, impositions and charges
would be payable if the premises were the only property of the Landlord subject
thereto, and the Tenant shall pay and discharge the same as herein provided in
respect of the payment of general real estate taxes and assessments.
(c) Insurance. Landlord shall keep all buildings and improvements now or
---------
hereafter erected upon the Demised Premises, insured for the benefit of Landlord
against loss by fire and other casualties and hazards usually covered by
extended coverage insurance in an amount not less than the replacement value of
the Demised Premises (excluding foundations and other parts below the surface of
the lowest floor), as determined not more than once annually by an appraiser or
rating bureau satisfactory to Landlord. Tenant agrees that it will, throughout
the Demised Term, pay and discharge as additional rent, the cost incurred by
Landlord in insuring the Demised Premises as above stated. Insurance premiums
at the beginning and end of the term shall be apportioned. It is expressly
understood and agreed that if for any reason attributable to Tenant it shall be
impossible to obtain Fire insurance on the building and improvements on the
Demised Premises in an amount and in the form and with fire insurance companies
acceptable to the Landlord, the Landlord may, if the Landlord elects, (a)
terminate this Lease and the term thereof on giving to the Tenant fifteen (15)
days' notice in writing of Landlord's intention so to do and upon the giving of
such notice this lease and the terms thereof, shall terminate and come to an
4
<PAGE>
end; (b) compute the additional costs for such insurance over and above the
standard cost as if the condition attributable to Tenant did not exist and
Tenant shall be obligated to pay all of such additional cost.
(1) Tenant shall also provide at its sole cost and expense, any insurance on
improvements made to or inside the Demised Premises by Tenant. Such policy
shall name as insured Landlord and Tenant, as their interests may appear and
shall name Landlord's first mortgagee, if any, as mortgagee. A copy of such
policy shall be furnished to Landlord and Landlord's first mortgagee.
(2) Tenant at its own cost and expense will provide and keep in force during
the Demised Term of this Lease commercial general liability insurance covering
at least the hazards of "premises-operations", "elevators" (if applicable) and
"independent contractors", in which Landlord shall be included as a named
insured, in such other limits of liability as may be required by Landlord from
time to time, but not less than One Million Dollars ($1,000,000.00) combined
single limit, with a deductible not to exceed Five Thousand Dollars ($5,000.00).
Such insurance shall cover not only the Demised Premises but shall also include
all elevators, hoists, hallways, entranceways, stairs or any other common areas
(exterior or interior), streets, driveways, alleys, lawns, parking and loading
areas, sidewalks and curbs adjacent thereto.
(3) All such policies shall contain provision for notice to the said Landlord
not less than ten (10) days in advance of any cancellation or material change of
such policy. In case of failure of the Tenant to make premium payments when
due, the Landlord may pay the amount of any such premiums, which amount with
interest thereon from the date of payment by Landlord shall be added to and
become part of the next installment of rent.
(4) Copies of renewal policies or certificates for any insurance required
under this Paragraph shall be deposited by Tenant with Landlord at least ten
(10) days prior to the expiration of existing policies, and upon failure so to
do Landlord may immediately purchase, for the account of Tenant, the necessary
insurance from any reputable insurance company without notice to Tenant, and
Tenant shall reimburse Landlord for cost thereof within ten (10) days after
demand.
(5) All insurance required hereunder shall be issued by companies licensed to
do business in Pennsylvania and acceptable to Landlord. Tenant shall have the
right to carry the insurance provided for in this Paragraph, or any portions of
such insurance under a blanket or comprehensive all-risks policy.
(6) Personal Property Insurance. Tenant shall maintain, at its expense,
----------------------------
insurance on all of its personal property, including removable trade fixtures,
located in the Demised Premises.
(d) Utilities. Tenant further agrees to pay as additional rent all charges
---------
for water, sewer, gas, oil, electricity, light, heat, power, telephone or other
utility used by Tenant at the Demised Premises during the Demised Term. Where
necessary in the opinion of the Landlord, water meters may be installed by
Landlord at the expense of Tenant. All charges for installation or repairs to
the said water meter or
5
<PAGE>
meters on the Demised Premises, whether such repairs are made necessary by
ordinary wear and tear, freezing, hot water, accident, or other causes, shall be
payable by Tenant as additional rent and shall be paid immediately when the same
become due.
(e) Miscellaneous. Tenant agrees to pay as additional rent its pro-rata
-------------
share of all charges for street repairs, signage repairs, sewer and water line
repair, exterior janitorial service, snow removal, grounds maintenance and
landscaping, parking lot maintenance, fences and site lighting.
8. Time, Place and Withholding of Payment. Unless provided otherwise herein,
--------------------------------------
all Basic Rent and additional rent shall be payable in advance without prior
notice or demand and without any set off or deduction whatsoever at the office
of Landlord (or at such other place as Landlord may from time to time designate
by notice in writing) and at such times provided for the payment of the Basic
Rent. Under no circumstances will Tenant be permitted to withhold rent for any
reason. All payments of rent by Tenant may be applied to Basic Rent, Additional
Rent, interest or penalties, if any, as Landlord deems appropriate.
9. Affirmative Covenants of Tenant. Tenant covenants and agrees that it will
-------------------------------
without demand:
(a) Interference and Waste. Conduct its business in such a manner as not to
----------------------
interfere with or be a nuisance to the conduct of the Landlord's business or
that of any of Landlord's other tenants, and shall not allow any noxious odors
or vapors to be emitted from the Demised Premises. Landlord agrees that it will
conduct its business so as not to interfere with that of the Tenant. Use of
explosives, flammables and/or corrosive agents and other like materials is not
approved unless authorized by Landlord in advance. Any cleaning agent apparatus
will be installed and vented to the outside at Tenant's cost and only if
installation is approved in writing in advance by Landlord. Tenant shall not
engage in activities that waste the premises.
(b) Maintenance and Repair. Keep the Demised Premises and improvements
----------------------
erected thereon in good condition and repair, including all plumbing, heating,
electrical and air conditioning systems and any loading facilities including
loading doors and dock bumpers. Tenant at its own expense shall enter into a
maintenance contract ("Maintenance Contract") with a heating and air
conditioning repair service acceptable to Landlord for the Demised Term and
shall provide Landlord with a copy of same. The specifications for the
Maintenance Contract are attached hereto as Exhibit "C". The Tenant shall
permit the Landlord or Landlord's duly authorized agents to enter upon the
Demised Premises and the buildings and improvements thereon erected at any
reasonable time, and from time to time, for the purpose of inspecting and
appraising the same. The Tenant shall comply with all orders, regulations,
rules and requirements of every kind and nature relating to the Demised
Premises, now or hereafter in effect, of the Federal, State, Municipal or other
governmental authorities having power to enact, adopt, impose or require the
same, whether they be usual or unusual, ordinary or extraordinary, and whether
they or any of them relate to structural changes or requirements of whatever
nature, or to changes or requirements incident thereto, or as the result of the
use or occupation thereof by Tenant, and the Tenant shall pay all costs and
expenses incidental to such compliance, and shall indemnify and save harmless
the Landlord from all expense, and damages by reason of any notices, orders,
violations or penalties filed against or imposed upon the Demised Premises or
against the Landlord as owner thereof, because of the failure of
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<PAGE>
the Tenant to comply with this covenant. Tenant further agrees to keep the
Demised Premises clean and free from all ashes, dirt and other refuse matter;
replace all glass windows, doors, etc., which are broken; and keep all waste and
drain pipes open.
In the event of the failure of Tenant promptly to perform the covenants of
Paragraph 9(b) hereof, Landlord may go upon the Demised Premises and perform
such covenants, the cost thereof, at the sole option of Landlord, to be charged
to Tenant as additional and delinquent rent.
(c) Compliance. Comply with any requirements of any of the constituted
----------
public authorities, and with the terms of any State or Federal statute or local
ordinance or regulation applicable to Tenant or its use of the Demised Premises
and save Landlord harmless from penalties, fines, costs or damages resulting
from failure so to do.
(d) Fire. Use every reasonable precaution against fire.
----
(e) Rules and Regulations. Comply with reasonable rules and regulations of
---------------------
Landlord promulgated as hereinafter provided (See attached Exhibit "D").
(f) Surrender of Demised Premises. Peacefully deliver up and surrender
-----------------------------
possession of the Demised Premises to Landlord at or prior to the expiration or
earlier termination of this Lease or any renewal thereof in the same good order
and broom clean condition in which Tenant has herein agreed to keep the same
during the continuance of this Lease. Tenant will at or prior to the expiration
or earlier termination of this Lease or any renewal thereof remove all of his
property from the Demised Premises so that Landlord may again have and repossess
the same not later than noon on the day on which this Lease or the renewal
thereof shall terminate, and will immediately thereafter deliver to Landlord at
its office all keys for the Demised Premises.
(g) Notice of Casualty. Give to Landlord prompt written notice of any
------------------
accident, fire, or damage occurring on or to the Demised Premises.
(h) Agency for Leasing. Not vacate or desert the Demised Premises during the
--------------------
Demised Term, or any renewal term, nor permit same to be empty and unoccupied
without permission of Landlord. If, with the permission in writing of Landlord,
Tenant shall vacate or decide at any time during the Demised Term to vacate the
herein Demised Premises prior to the expiration of this Lease, or any renewal
hereof, Tenant will not cause or allow any other agent to represent Tenant in
any subletting or reletting of the Demised Premises other than an agent approved
by the Landlord, and that should Tenant do so, or attempt to do so, the
Landlord, may remove any signs that may be placed on or about the Demised
Premises by such other agent without any liability to Landlord or to said agent,
the Tenant assuming all responsibility for such action.
(i) M.S.D.S. Supply Landlord with copies of the Material Safety Data Sheets
--------
("MSDS") as defined in the Worker and Community Right to Know Act, 35 P.S.
Section 7301 et. seq. ("Right to Know Act"), for all substances used in the
Demised Premises, within ten (10) days of first receipt of the material
7
<PAGE>
in the Demised Premises. Further, Tenant shall comply with all of the provisions
of the Right to Know Act, including, but not limited to, retaining copies of the
MSDS in the Demised Premises for inspection during regular business hours.
10. Negative Covenants of Tenant. Tenant covenants and agrees that he will do
----------------------------
none of the following things without the consent in writing of Landlord first
had and obtained:
(a) Use. Occupy the Demised Premises in any other manner or for any other
---
purpose than as above set forth.
(b) Assignment, Etc. Assign this Lease or hypothecate or mortgage the same
---------------
or sublet the Demised Premises or any part thereof. Any assignment, transfer,
hypothecation, mortgaging or subletting without the written consent of the
Landlord shall be void. The following shall be considered a violation of this
covenant:
(1) filing of a petition by or against the Tenant under Chapter 7, 11 or 13 of
Title 11, United States Code, Bankruptcy, as now or hereafter amended or
supplemented, or the filing of any petition by or against (and if against not
dismissed within thirty (30) days) the Tenant under any future bankruptcy act or
state law for the same or similar relief;
(2) the dissolution or the commencement of any action or proceeding for the
dissolution or liquidation of the Tenant, in connection with bankruptcy or other
insolvency, whether instituted by or against (and if against not dismissed
within thirty (30) days) the Tenant or for the appointment of a permanent
receiver or a permanent trustee of all or substantially all the property of the
Tenant;
(3) the taking possession of the property of the Tenant by any governmental
officer or agency pursuant to statutory authority for the dissolution,
rehabilitation, reorganization, or liquidation of the Tenant;or
(4) the making by the Tenant of any assignment for the benefit of creditors.
(c) Place or allow to be placed any stand, booth, or show case upon the
doorsteps, vestibules or outside walls, pavements of said Demised Premises, or
place, erect or cause to be placed or erected any projection or device on or in
part of the Demised Premises. Tenant shall remove any projection or device
placed or erected, if permission has been granted and restore the walls, etc.,
to their former conditions, at or prior to the expiration of this lease. In
case of the breach of this covenant (in addition to all other remedies given to
Landlord in case of the breach of any conditions or covenants of this Lease)
Landlord shall have the privilege of removing said stand, booth, show case,
projection or device, and restoring said walls, etc., to their former condition,
and Tenant, at Landlord's option, shall be liable to Landlord as additional rent
for any and all expenses so incurred by Landlord.
(d) Alterations and Improvements. Make any structural alterations,
----------------------------
improvements, or
8
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additions to the Demised Premises. All alterations, additions and improvements
(except trade fixtures, furniture and equipment other than building equipment
but including electrical installations, plumbing installations, heating units,
cooling and/or refrigeration units, fire and burglar alarms and associated
detection devices and related wiring, communication equipment and lighting
fixtures) which may be made or installed by Tenant upon the Demised Premises
shall upon the making or installation thereof be and become a part of the
Demised Premises and shall remain upon and be surrendered with the Demised
Premises as a part thereof at the termination of this Lease, unless Landlord
shall, prior to the termination of this Lease, have given written notice to
Tenant to remove the same, in which event Tenant will remove such alterations,
improvements, and additions and restore the Demised Premises to the same good
order and condition in which they now are. Should Tenant fail so to do, Landlord
may do so, collecting, at Landlord's option, the cost and expense thereof from
Tenant as additional rent.
(e) Machinery. Use or operate any machinery that, in Landlord's opinion, is
---------
harmful to the Demised Premises or building of which the Demised Premises is a
part.
(f) Weights. Place any weights in any portion of the Demised Premises beyond
-------
the safe carrying capacity of the structure.
(g) Removal. Remove, attempt to remove or manifest an intention to remove
-------
Tenant's goods or property from or out of the Demised Premises otherwise than in
the ordinary and usual course of business, without having first paid and
satisfied Landlord for all rent then due.
(h) Vacation. Vacate or desert the Demised Premises during the Demised Term,
---------
or permit the same to be empty and unoccupied without the permission of
Landlord.
(i) Recordation. Record this Lease. If Tenant violates this covenant,
-----------
Tenant hereby irrevocably authorizes, empowers and designates Landlord as its
lawful attorney for the purpose of having said Lease marked satisfied of record.
11. Landlord's Rights. Tenant covenants and agrees that Landlord shall have
-----------------
the right to do the following things and matters in and about the Demised
Premises:
(a) Inspection. At all reasonable times by himself or his duly authorized
----------
agent to go upon and inspect the Demised Premises and every part thereof, and/or
at his option to make repairs, alterations and additions to the Demised Premises
or the building of which the Demised Premises is a part.
(b) Rules and Regulations. At any time or times and from time to time to
---------------------
make such reasonable rules and regulations as in his judgement may from time to
time be necessary for the safety, care and cleanliness of the Demised Premises,
and for the preservation of good order herein. Such rules and regulations
shall, when notice thereof is given to Tenant, form a part of this Lease.
(c) For Sale or Rent. To display a "For Sale" sign at any time and also,
----------------
after notice from either party of intention to terminate this Lease, or at any
time within three months prior to the expiration of
9
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this Lease, a "For Rent" sign, or both "For Rent" and "For Sale" signs; and all
of said signs shall be placed upon such part of the Demised Premises as Landlord
may elect and may contain such matter as Landlord shall require. Prospective
purchasers or tenants authorized by Landlord may inspect the premises at
reasonable hours at any time.
(d) Discontinuance of Facilities and Services. The Landlord may discontinue
-----------------------------------------
all facilities furnished and services rendered, or any of them by Landlord, not
expressly covenanted for herein, it being understood that they constitute no
part of the consideration for this Lease.
12. Responsibility of Tenant. Landlord shall not in any event be
------------------------
responsible, and the Tenant hereby specifically assumes responsibility for any
personal or bodily injury or death of any persons (including employees of Tenant
and Landlord) and damage, destruction, or loss of use of any property, including
the Demised Premises (except as specifically provided otherwise herein)
occasioned by any event happening on or about the Demised Premises, hallways,
entranceways, stairs or any other common areas (exterior or interior),
elevators, hoists, streets, driveways, parking and loading areas, alleys, lawns,
sidewalks and curbs adjacent thereto including those resulting from any work in
connection with any alterations, changes, new construction or demolition, except
if same results solely from the negligence of Landlord, its agents, servants, or
employees. Tenant is subrogated to any rights of Landlord against any other
parties in connection therewith. Tenant shall defend, indemnify and hold
harmless Landlord from and against any and all claims, demands, suits, damages,
liability and costs (including counsel fees and expenses) arising out of or in
any manner connected with any act or omission, negligent or otherwise of Tenant,
third persons, or any of their agents, servants or employees which arise out of
or are in any way connected with the erection, maintenance, use, operation,
existence or occupation of the Demised Premises, hallways, entranceways, stairs
or any other common areas (exterior or interior), elevators, hoists, streets,
driveways, parking and loading areas, alleys, lawns, sidewalks and curbs
adjacent thereto unless due solely to the negligence of Landlord, its agents,
servants or employees.
The Landlord shall promptly notify the Tenant of any claim asserted against
the Landlord on account of any such injury or claimed injury to persons or
property and shall promptly deliver to the Tenant the original or a true copy of
any summons or other process, pleading or notice issued in any suit or other
proceeding to assert or enforce any such claim. The Tenant shall have the right
to defend any such suit with attorneys of its own selection and the Landlord
shall have the right, if it sees fit, to participate in such defense.
Tenant further shall defend, indemnify and hold harmless Landlord from claims,
demands, suits, liability for damages for personal or bodily injury or death of
any persons or damage or destruction of any property (including loss of use
thereof) caused by or in any manner arising out of any breach, violation or
nonperformance by Tenant of any covenant, term or provision of this Lease.
13. Damage to Demised Premises.
--------------------------
(a) In the event that the Demised Premises is totally destroyed or so damaged
by fire or other casualty not occurring through fault or negligence of the
Tenant or those employed by or acting for
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him, that, in Landlord's judgment, the same cannot be repaired or restored
within one hundred eighty (180) days, this Lease shall absolutely cease and
determine, and the rent shall abate as of the date of casualty for the balance
of the term.
(b) If the damage caused as above be only partial and such that the Demised
Premises, in Landlord's judgment, can be restored within one hundred eighty
(180) days, the Landlord may, at its option, restore the same, excluding
fixtures and improvements owned by Tenant, with reasonable promptness, reserving
the right to enter upon the Demised Premises for that purpose. The Landlord
also reserves the right to enter upon the Demised Premises whenever necessary to
repair damage caused by fire or other casualty to the building of which the
Demised Premises is a part, even though the effect of such entry be to render
the Demised Premises or a part thereof untenantable. In either event the rent
shall be apportioned and suspended during the time the Landlord is in
possession, taking into account the portion of the Demised Premises rendered
untenantable and the duration of the Landlord's possession. If a dispute arises
as to the amount of rent due under this clause, Tenant agrees to pay the full
amount claimed by Landlord. Tenant shall, however, have the right to proceed by
law to recover the excess payment, if any.
(c) In the event that Landlord does not notify Tenant that in the Landlord's
judgement, the damage cannot be repaired within 180 days, or in the event that
Landlord fails to notify Tenant if Landlord exercises its election to repair the
damage within 180 days, then Tenant shall have the right to give notice to
Landlord, after the expiration of 30 days from the date of damage, that unless
Landlord advises Tenant within 10 days after receipt of such notice that
Landlord intends to complete the repair of the damage to the Demised Premises
within 180 days from the date of the damage, it shall be deemed conclusive that
Landlord has elected not to complete said repairs, and the Tenant may elect to
terminate the Lease, commencing the 11th day after such notice, at any time
prior to the receipt of notice from Landlord of its election to repair the
damage to the Demised Premises.
(d) Notwithstanding the fact that Landlord may have given notice of election to
repair the Demised Premises within said thirty (30) day period, if the mortgagee
chooses to accelerate the mortgage due to damage by fire or other casualty to
the Demised Premises or the building of which the Demised Premises is a part,
Landlord shall have the right to rescind and/or cancel said election to repair
and shall have the right to elect not to repair the damaged to the Demised
Premises or the building of which the Demised Premises is a part, provided said
notification of election not to repair is given to Tenant within thirty (30)
days after date of the receipt of said notice of acceleration.
(e) Landlord shall not be liable for any damage, compensation or claim by
reason of inconvenience or annoyance arising from the necessity of repairing any
portion of the building, the interruption in the use of the Demised Premises, or
the termination of this Lease by reason of the destruction of the Demised
Premises.
14. Miscellaneous Agreements and Conditions.
---------------------------------------
(a) Non-Waiver by Landlord or Tenant. The failure of the Landlord or Tenant
--------------------------------
to insist
11
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upon strict performance of any of the covenants or conditions to this Lease, or
to exercise any option herein conferred in any one or more instances, shall not
be construed as a waiver or relinquishment for the future of any such covenants
or conditions of this Lease or option, but the same shall be and remain in full
force and effect.
(b) Accord and Satisfaction. No payment by Tenant or receipt by Landlord of
-----------------------
a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy herein.
(c) Jurisdiction and Law. Tenant hereby subjects itself to the jurisdiction
---------------------
of the Court of Common Pleas of Delaware County, Pennsylvania. The laws of the
Commonwealth of Pennsylvania shall be applicable to this lease and any
interpretations thereof.
(d) The Landlord has let the Demised Premises in its present condition and
without any representations on the part of Landlord, his officers, employees,
servants and/or agents.
(e) In the event that it is determined at any time during the Demised Term of
this Lease and any renewal period that the Tenant's proposed use of the Demised
Premises as set forth in Paragraph 1 is not permissible under the local Zoning
Ordinance or Regulations, then Tenant shall have the privilege of terminating
this Lease on the last day of any month thereafter, provided that at least sixty
(60) days prior to the termination date notice is given to Landlord in writing
and such privilege shall be Tenant's sole remedy against Landlord in such event.
15. Remedies of Landlord. If the Tenant:
--------------------
(a) Does not pay within five (5) days after it is due any and all
installments of rent and/or any other charge or payment herein reserved,
included, or agreed to be treated or collected as rent and/or any other charge,
expense, or cost herein agreed to be paid by the Tenant; or
(b) Violates or fails to perform or otherwise breaks any non-monetary
covenant or agreement herein contained which is not corrected in compliance
within twenty (20) days after the notice; or
(c) Vacates the Demised Premises or removes or attempts to remove or
manifests an intention to remove any goods or property therefrom otherwise than
in the ordinary and usual course of business without having first paid and
satisfied the Landlord in full for all rent and other charges then due; or
(d) Files or has filed against it (and if against not dismissed in thirty
(30) days) a petition under Title 11, United States Code, Bankruptcy, as now or
hereafter amended or supplemented, whether
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under Chapter 7, 11 or 13 of the aforesaid Bankruptcy Code; or if there is the
commencement of any action or proceeding under state or federal law for the
dissolution or liquidation of the Tenant in connection with bankruptcy or other
insolvency, whether instituted by or against (and if against not dismissed in
thirty (30) days) the Tenant or for the appointment of a receiver or trustee of
all or substantially all of the property of the Tenant; or if there is the
taking of possession of the property of the Tenant by any governmental officer
or agency pursuant to statutory authority for the dissolution, rehabilitation,
reorganization or liquidation of the Tenant; or if there is the making by the
Tenant of an assignment for the benefit of creditors;
Then and in any of said events, there shall be deemed to be a breach of this
Lease, and thereupon Landlord shall have the following rights:
(1) To accelerate the whole or any part of the Basic Rent and additional rent
(sometimes collectively referred to herein as "Rent") and other charges,
payments, costs and expenses herein agreed to be paid by Tenant for the entire
unexpired balance of the term of this Lease, and any Rent, other charges,
payments, costs and expenses if so accelerated shall, in addition to any and all
installments of Rent already due and payable and in arrears, and/or any other
charge, expense or cost herein agreed to be paid by Tenant which may be due and
payable and in arrears, be deemed due and payable as if, by the terms and
provisions of this Lease, such accelerated Rent and other charges, payments,
costs and expenses were on that date payable in advance.
(2) To enter the Demised Premises and without further demand or notice
proceed to distrain and sell the goods and personal property there found, to
levy the Rent and Tenant shall pay all costs and officers' commissions,
including watchmen's wages and sums chargeable to Landlord, and further
including the five percent (5%) chargeable by the Act of Assembly as commissions
to the constable or other person making the levy, and in such case all costs,
officers' commissions and other charges shall immediately attach and become part
of the claim of Landlord for Rent, and any tender of rent without said costs,
commissions and charges made, after the issuance of a warrant of distress, shall
not be sufficient to satisfy the claim of Landlord. Tenant specifically waives
any requirement of notice before distraint.
(3) To re-enter the Demised Premises and remove all persons and all or any
property therefrom, either by summary dispossess proceedings or by any suitable
action or proceeding at law, or by force or otherwise, without being liable to
indictment, prosecution or damages therefor, and repossess and enjoy the Demised
Premises, together with all alterations, fixtures, signs and other installations
of Tenant. Upon recovering possession of the Demised Premises by reason of or
based upon or arising out of a default on the part of Tenant, Landlord may, at
Landlord's option, either terminate this Lease or make such alterations and
repairs as may be necessary in order to relet the Demised Premises and relet the
Demised Premises or any part or parts thereof, either in Landlord's name or
otherwise, for a term or terms which may at Landlord's option be less than or
exceed the period which would otherwise have constituted the balance of the term
of this Lease and at such rent or rents and upon such other terms and conditions
as in Landlord's sole discretion may seem advisable and to such person or
persons as may in Landlord's discretion seem best; upon each such reletting all
rents received by Landlord from such reletting shall be applied: first, to the
payment of any indebtedness other than rent due hereunder from
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Tenant to Landlord; second, to the payment of any costs and expenses of such
reletting, including brokerage fees and attorney's fees and all costs of such
alterations and repairs; third, to the payment of Rent due and unpaid hereunder;
and the residue, if any, shall be held by Landlord and applied in payment of
future Rent as it may become due and payable hereunder. If such rentals received
from such reletting during any month shall be less than that to be paid during
that month by Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry
or taking possession of the Demised Premises or the making of alterations and/or
improvements thereto or the reletting thereof shall be construed as an election
on the part of Landlord to terminate this Lease unless written notice of such
intention be given to Tenant. Landlord shall in no event be liable in any way
whatsoever for failure to relet the Demised Premises or, in the event that the
Demised Premises or any part or parts thereof are relet, for failure to collect
the rent thereof under such reletting. Tenant, for Tenant and Tenant's
successors and assigns, hereby irrevocably constitutes and appoints Landlord as
Tenant's and Landlord's agent to collect the rents due and to become due under
all subleases of the Demised Premises or any parts thereof without in any way
affecting Tenant's obligation to pay any unpaid balance of Rent due or to become
due hereunder. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for such previous
breach.
(4) To terminate this Lease and the term hereby created without any right on
the part of Tenant to waive the forfeiture by payment of any sum due or by other
performance of any condition, term or covenant broken. Whereupon Landlord shall
be entitled to recover, in addition to any and all sums and damages for
violation of Tenant's obligations hereunder in existence at the time of such
termination, damages for Tenant's default in an amount equal to the greater of
(i) amount of the Rent reserved for the balance of the Demised Term, as well as
all other charges, payments, costs and expenses herein agreed to be paid by
Tenant, all discounted at the rate of nine percent (9%) per annum to their then
present worth, less the fair rental value of the Demised Premises for the
remainder of said term, also discounted at the rate of nine percent (9%) per
annum to its then present worth or (ii) three (3) months' rent, all of which
amount shall be immediately due and payable from Tenant to Landlord as
liquidated damages.
(5) If Tenant shall default in the payment of the Rent reserved or in the
payment of any other sums due hereunder by Tenant, Tenant hereby authorizes and
empowers any Prothonotary or attorney of any court of record to appear for
Tenant in any and all actions which may be brought for said Rent and/or said
other sums and to confess judgement against Tenant for all or any part of said
Rent and/or said other sums, including but not limited to the amounts due from
Tenant to Landlord under subsections (1), (2), (3) and/or (4) of this section;
and for interest and costs, together with an attorney's commission for
collection of ten percent (10%). The right to institute an action pursuant to
Pennsylvania Rules of Civil Procedure and the authority to confess judgement
granted herein shall not be exhausted by one or more exercises thereof, so long
as each exercise refers or relates to separate sums, and successive complaints
may be filed and successive judgements may be entered from time to time for
separate sums as aforedescribed, as or after they become due, as well as after
the expiration of the original term and/or during or after expiration of any
extension or renewal of this Lease.
(6) When this Lease and the term or any extension or renewal thereof shall
have been terminated on account of any default by Tenant hereunder, and also
when the term hereby created
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or any extension or renewal thereof shall have expired, it shall be lawful for
any attorney of any court of record to appear as attorney for Tenant as well as
for all persons claiming by, through or under Tenant, and to sign an agreement
for entering in any competent court a confession of judgement in ejectment
against Tenant and all persons claiming by, through or under Tenant and therein
confess judgement for the recovery by Landlord of possession of the Demised
Premises, for which this Lease shall be his sufficient warrant; thereupon, if
Landlord so desires, an appropriate writ of possession may issue forthwith,
without any prior writ or proceeding whatsoever, and provided that if for any
reason after such action shall have been commenced it shall be terminated and
possession of the Demised Premises remain in or be restored to Tenant, Landlord
shall have the right for the same default and upon any subsequent default or
defaults, or upon the termination of this Lease or Tenant's right of possession
as hereinbefore set forth, to bring one or more further confession of judgement
actions as hereinbefore set forth to recover possession of the Demised Premises.
(7) In any confession of judgement of ejectment and/or for rent and/or other
sums brought hereon, Landlord shall first cause to be filed in such action an
affidavit made by Landlord or someone acting for Landlord, setting forth the
facts necessary to authorize the entry of judgement of which facts such
affidavit shall be prima facie evidence, and if a true copy of this Lease (and
of the truth of the copy such affidavit shall be sufficient evidence) shall be
filed in such suit, action or actions, it shall not be necessary to file the
original as a warrant of attorney, any rule of Court, custom or practice to the
contrary notwithstanding.
16. Right of Injunctive Relief. In the event of a breach or threatened
--------------------------
breach by Tenant of any of the covenants or provisions hereof, Landlord shall
have the right of injunction and the right to invoke any remedy allowed at law
or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for.
17. Rights Not Exclusive. No right or remedy herein conferred upon or
--------------------
reserved to Landlord is intended to be exclusive of any other right or remedy
herein or by law provided but each shall be cumulative and in addition to every
other right or remedy given herein or now or hereafter existing at law or in
equity or by statute.
18. Waivers by Tenant. Tenant expressly waives:
-----------------
(a) The benefit of all laws, now or hereafter in force, exempting any goods
on the Demised Premises or elsewhere from distraint, levy or sale in any legal
proceedings taken by Landlord to enforce any rights under this Lease.
(b) The right to ten (10) days and/or fifteen (15) or thirty (30) days'
notice required under certain circumstances by The Landlord and Tenant Act of
1951, as amended in 1995, Tenant hereby agreeing that seven (7) days' notice
shall be sufficient in either or any such case.
19. Calculations of Amounts Due. For the purpose of calculating the
---------------------------
accelerated Rent payable under paragraph (1) of Paragraph 15 (d) of this Article
and the "Rent reserved for the balance of the term"
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of this Lease for the purposes of Paragraph (4) of Paragraph 15 (d) of this
Article, the amount payable as Tenant's share of real estate taxes, Tenant's
share of the cost of insurance on the Demised Premises and Tenant's share of
common area maintenance expenses and any other charges for which Tenant is
responsible hereunder for the balance of the term hereof shall be equal to the
sum of the highest amount paid or payable by Tenant in any calendar year for
each of the foregoing items multiplied by the number of calendar years
(including any fractional calendar year) remaining in the term of this Lease.
20. Right of Assignee of Landlord. The right to pursue the remedies herein
-----------------------------
provided against Tenant and to enforce all of the other provisions of this Lease
may, at the option of any assignee of this Lease, be exercised by any assignee
of the Landlord's right, title and interest in this Lease in his, her or their
own name, any statute, rule of court, custom, or practice to the contrary
notwithstanding.
21. Remedies Cumulative. All of the remedies hereinbefore given to Landlord
-------------------
and all rights and remedies given to it by law and equity shall be cumulative
and concurrent. No termination of this Lease or the taking or recovering of the
Demised Premises shall deprive Landlord of any of its remedies or actions
against Tenant for rent or sums due at the time or which, under the terms
hereof, would in the future become due as if there has been no termination; nor
shall the bringing of any action for rent or breach of covenant, or the resort
to any other remedy herein provided for the recovery of rent be construed as a
waiver of the right to obtain possession of the premises.
22. Condemnation. If at any time during the Demised Term or any renewal or
------------
extension thereof the Demised Premises, or any portion thereof, be lawfully
condemned or conveyed in lieu of condemnation, the Landlord shall be entitled
to, and shall receive the award or payment therefor, and the Tenant shall
assign, and does hereby assign and transfer to the Landlord such award or
payment as may be made therefor. Tenant, however, shall be entitled to make a
claim for damages payable specifically and solely to a business Tenant under the
terms of the Eminent Domain Code of Pennsylvania, Act of June 22, 1964, P.L. 84,
as now or hereafter amended, provided that any award to Tenant shall not in any
way diminish the Landlord's award. This Lease shall, as to the part so taken
terminate as of the date title shall vest in the condemnor, and rent shall abate
in proportion to the square feet of the leased space taken or condemned. In the
event, however, that more than thirty percent (30%) of the Demised Premises
(exclusive of Common Areas) is taken, Tenant shall have the option of
terminating this Lease upon thirty (30) days prior written notice to Landlord.
23. Execution of Estoppel Certificate. At any time, and from time to time,
---------------------------------
upon the written request of Landlord or any first mortgagee, Tenant within
twenty (20) days of the date of such written request agrees to execute and
deliver to Landlord and/or such first mortgagee, without charge and in a form
satisfactory to Landlord and/or such mortgagee, a written statement: (a)
ratifying this Lease; (b) confirming the commencement and expiration date of the
term of this Lease and the minimum annual rental rate payable during the lease
term; (c) certifying that Tenant is in occupancy of the Demised Premises, and
that the Lease is in full force and effect and has not been modified, assigned,
supplemented or amended except by such writings as shall be stated; (d)
certifying that all conditions and agreements under this Lease to be satisfied
or performed by Landlord have been satisfied and performed except as shall be
stated; (e) certifying that Landlord is not in default under the Lease and there
are no defenses or offsets
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against the enforcement of this Lease by Landlord or stating the defaults and/or
defenses claimed by Tenant; (f) reciting the amount of advance rent, if any,
paid by Tenant and the date to which such rent has been paid and, if requested
by Landlord and/or Mortgagee, agreeing that Tenant shall not pay rent to
Landlord more than thirty days in advance; (g) reciting the amount of security
deposited with Landlord, if any; (h) certifying that Tenant has no option or
right of first refusal to purchase the Demised Premises or option to extend the
term of the Lease (unless specifically set forth to the contrary in the Lease);
(i) if requested by Landlord and/or Mortgagee, agreeing that the Lease will not
be modified without the prior written consent of the Mortgagee; (j) certifying
that tenant will not generate, store, handle or otherwise deal with any amount
of any hazardous substances or hazardous waste (as defined in federal, state and
local law) in or about the Demised Premises, in excess of those levels or
quantities specified for regulatory purposes; (k) agreeing, if requested by
Mortgagee, that Tenant will give Mortgagee such notice of any default by
Landlord and reasonable opportunity to cure such default, not in excess of
thirty (30) days, unless the default cannot be cured within said time, before
exercising Tenant's remedies under the Lease; and (l) any other information
which Landlord or the mortgagee shall require.
24. Failure to Execute Estoppel Certificate. The failure of Tenant to
---------------------------------------
execute, acknowledge and deliver to Landlord and/or any first mortgagee a
statement in accordance with the provisions of Paragraph 23 above within the
said twenty (20) day period shall constitute acknowledgement by Tenant which may
be relied upon by any person holding or intending to acquire any interest
whatsoever in the Demised Premises that this Lease has not been assigned,
amended, changed, or modified, is in full force and effect and that the Basic
Rent and additional rent have been duly and fully paid not beyond the respective
due dates immediately preceding the date of the request for such statement and
shall constitute as to any persons entitled to rely on such statements a waiver
of any defaults by Landlord or defenses or offsets against the enforcement of
this Lease by Landlord which may exist prior to the date of the written request,
and Landlord at its option, may treat such failure as a deliberate event of
default.
25. Subordination and Attornment. Tenant agrees:
----------------------------
(a) that, except as hereinafter provided, this Lease is, and all of Tenant's
rights hereunder are and shall always be, subject and subordinate to any first
mortgage ("First Mortgage"); and
(b) That if the holder of any such First Mortgage ("Mortgagee") or if the
purchaser at any foreclosure sale or at any sale under a power of sale contained
in any Mortgage shall at its sole option so request, Tenant will attorn to, and
recognize such mortgagee or purchaser, as the case may be as Landlord under this
Lease for the balance then remaining of the term of this Lease, subject to all
terms of this Lease; and
(c) That the aforesaid provisions shall be self-operative and no further
instrument or document shall be necessary unless required by any such First
Mortgagee or purchaser. Notwithstanding anything to the contrary set forth
above, any First Mortgagee may at any time subordinate its Mortgage to this
Lease, without Tenant's consent, by notice in writing to Tenant, and thereupon
this Lease shall be deemed prior to such Mortgage without regard to their
respective dates of execution, delivery and/or recording and in that event such
First Mortgagee shall have the same rights with respect to this Lease as
17
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though this Lease had been executed and a memorandum thereof recorded prior to
the execution, delivery and recording of the Mortgage and as though this Lease
had been assigned to such First Mortgagee. Should Landlord or any First
Mortgagee or purchaser desire confirmation of either such subordination or such
attornment, as the case may be, Tenant upon written request, and from time to
time, will execute and deliver without charge and in form satisfactory to
Landlord, the First Mortgagee or the purchaser all instruments and/or documents
that may be requested to acknowledge such subordination and/or agreement to
attorn, in recordable form.
26. Failure to Execute Instruments and Documents. In the event Tenant fails
--------------------------------------------
to execute and deliver the instruments and documents as provided for in
Paragraphs 23 and 26 within twenty (20) days after request in writing by
Landlord or such First Mortgagee or purchaser, as the case may be, Tenant does
hereby make, constitute and appoint Landlord or such First Mortgagee or
purchaser, as the case may be, as Tenant's attorney-in-fact and in its name,
place and stead to do so, or Landlord may treat such failure as a deliberate
event of default. The aforesaid power of attorney is given as coupled with an
interest and is irrevocable.
27. Quiet Enjoyment; Eviction by Foreclosure. Tenant, on paying the rent
----------------------------------------
reserved, and performing all the covenants and conditions hereof, shall at all
times during the Demised Term, peaceably and quietly have, hold and enjoy the
Demised Premises; provided, however, eviction of the Tenant by reason of the
foreclosure of any First Mortgage now or hereafter on the Demised Premises shall
not be construed as a breach of this covenant, nor shall any action by reason
thereof be brought against the Landlord; and provided further, that no eviction
of the Tenant for any reason whatsoever, after the Landlord shall have conveyed
the fee of the Demised Premises shall be construed as a breach of this covenant,
and no action therefor shall be brought against the Landlord.
28. Termination of Lease. It is hereby mutually agreed that either party
---------------------
hereto may terminate this Lease at the end of the Demised Term by giving to the
other party written notice thereof at least 180 days prior thereto, but in
default of such notice, this Lease shall continue upon the same terms and
conditions in force immediately prior to the expiration of the Demised Term
hereof as are herein contained except for Basic Rent which shall be adjusted to
reflect the then current market rates for space comparable to the Demised
Premises as determined by Landlord based upon other of Landlord's rental
properties, for a further period of one year and so on from year to year unless
or until termination by either party hereto, giving the other 180 days written
notice for removal previous to expiration of the then current term; PROVIDED,
however, that should this Lease be continued for a further period under the
terms herein-above mentioned, any allowances given Tenant on the Basic Rent
during the original term shall not extend beyond such original term. In the
event that Tenant shall give notice, as stipulated in this Lease, of intention
to vacate the Demised Premises at the end of the Demised Term, or any renewal or
extension thereof, and shall fail or refuse so to vacate the same on the date
designated by such notice, then it is expressly agreed that Landlord shall have
the option either:
(a) To disregard the notice so given as having no effect, in which case all
the terms and conditions of this Lease shall continue thereafter, as set forth
above, with full force precisely as if such notice has not been given, or
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(b) Landlord may, at any time within thirty days after the Demised Term or
any renewal or extension thereof, as aforesaid, give the said Tenant ten days'
written notice of his intention to terminate the said Lease; whereupon the
Tenant expressly agrees to vacate said premises at the expiration of the said
ten day period.
All powers granted to Landlord by this lease may be exercised and all
obligations imposed upon Tenant by this Lease shall be performed by Tenant as
well during any extension of the Demised Term of this Lease as during the
Demised Term itself.
29. Notices. All notices required shall be in writing given by certified
-------
mail, return receipt requested or by a recognized overnight delivery service:
TO LANDLORD: AMBASSADOR II JOINT VENTURE
112 Chesley Drive, Suite 200
Media, PA 19063-1762
Attention: Marketing Department
TO TENANT: ION LASER TECHNOLOGY, INC.
Ambassador Two Building, Bay 204
Airport Business Center
Lester, PA 19113
Attn: Richard V. Trefz, President
Such address may be changed from time to time by either party by serving notices
as above provided.
30. Mechanic's Liens.
----------------
(a) Mechanic's Liens Prohibited. Tenant shall not suffer any mechanic's lien
---------------------------
to be filed against the Demised Premises by reason of work, labor, services or
materials performed or furnished to Tenant or anyone holding the Demised
Premises, or any part hereof, through or under Tenant. If any mechanic's lien
or any notice of intention to file a mechanic's lien shall at any time be filed
against the Demised Premises Tenant shall at Tenant's cost, within fourteen (14)
days after knowledge or notice of the filing of any mechanic's lien cause the
same to be removed or discharged of record by payment, bond, order of a court of
competent jurisdiction, or otherwise.
(b) Landlord's Remedy for Tenant's Breach. If Tenant shall fail to remove or
-------------------------------------
discharge any mechanic's lien or any notice of intention to file a mechanic's
lien within the prescribed time, then in addition to any other right or remedy
of Landlord, Landlord may, at its option, procure the removal or discharge of
the same by payment or bond or otherwise. Any amount paid by Landlord for such
purpose,
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together with all legal and other expenses of Landlord in procuring the
removal or discharge or such lien or notice of intention and together with
interest thereon at the highest permissible rate shall be and become due and
payable by Tenant to Landlord as additional rent, and in the event of Tenant's
failure to pay therefor within fifteen (15) days after demand, the same shall be
added to and be due and payable with the next month's rent.
(c) Non-Consent of Landlord to Filing of Liens. Nothing contained in this
------------------------------------------
Lease shall be construed as a consent on the part of Landlord to subject
Landlord's estate in the Demised Premises to any lien or liability arising out
of Tenant's use or occupancy of the premises.
31. Lease Contains All Agreements. It is expressly understood and agreed by
-----------------------------
and between the parties hereto that this Lease sets forth all the promises,
agreements, and conditions or understandings between Landlord or his Agent and
Tenant relative to the Demised Premises, and that there are no promises,
agreements, conditions or understandings, either oral or written, between them
other than are herein set forth. It is further understood and agreed that,
except as herein otherwise provided, no subsequent alteration, amendment, change
or addition to this Lease shall be binding upon Landlord or Tenant unless
reduced to writing and signed by them.
32. Heirs and Assignees. All rights and liabilities herein given to, or
-------------------
imposed upon, the respective parties hereto shall extend to and bind the several
and respective heirs, executors, administrators, successors and assigns of said
parties; and if there shall be more than one Tenant, they shall all be bound
jointly and severally by the terms, covenants and agreements herein, and the
word "Tenant" shall be deemed and taken to mean each and every person or party
mentioned as a Tenant herein, be the same one or more; and if there shall be
more than one Tenant, any notice required or permitted by the terms of this
Lease may be given by or to any one thereof, and shall have the same force and
effect as if given by or to all thereof. The words "his" and "him" or "its"
wherever stated herein, shall be deemed to refer to the "Landlord" or "Tenant"
whether such Landlord or Tenant be singular or plural and irrespective of
gender. No rights, however, shall inure to the benefit of any assignee of
Tenant unless the assignment to such assignee has been approved by Landlord in
writing as aforesaid.
33. Security Deposit. Tenant has deposited with Landlord at the signing of
----------------
this Lease, the sum of Nine Thousand Three Hundred Thirty-One and 98/100 Dollars
($9,331.98) representing three (3) months' security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this Lease. Tenant shall not be entitled to interest on any such security
deposit. It is agreed that in the event Tenant defaults in respect of any of
the terms, provisions and conditions of this Lease, including but not limited to
the payment of rent and additional rent, Landlord may use, apply or retain the
whole or any part of the security so deposited to the extent required for the
payment of any rent and additional rent or any other sum as to which Tenant is
in default or for any sum which Landlord may expend or may be required to expend
by reason of Tenant's default in respect of any of the terms, covenants and
conditions of this Lease, including but not limited to any damages or deficiency
accrued before or after summary proceedings or other re-entry by the Landlord.
In the event that Tenant shall fully and faithfully comply with all of the
terms, provisions, covenants and conditions of this Lease, the security shall be
returned to Tenant after the date fixed as the end of the Lease and after
delivery of entire possession of the Demised
20
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Premises to the Landlord.
In the event of a sale of the land and building or leasing of the building, of
which the Demised Premises form a part, Landlord shall have the right to
transfer the security to the vendee or lessee and Landlord shall thereupon be
released by Tenant from all liability for the return of such security; and it is
agreed that the provisions hereof shall apply to every transfer or assignment
made of the security to a new Landlord.
Tenant further covenants that it will not assign or encumber or attempt to
assign or encumber the monies deposited herein as security and that neither
Landlord nor its successors or assigns shall be bound by any such agreement,
encumbrance, attempted assignment or attempted encumbrance.
34. Headings No Part of Lease. Any headings preceding the text of the
-------------------------
several paragraphs and subparagraphs hereof are inserted solely for convenience
of reference and shall not constitute a part of this Lease nor shall they affect
its meaning, construction or effect.
35. Multitenanted Occupancy. In the event Tenant is leasing a portion of a
-----------------------
multitenant building with or without common areas, then Tenant shall be liable
for payment of any taxes, charges, premiums, rates, or assessments payable under
the terms of this Lease including, but not limited to those set forth in
Sections 7(b), (c), and (e) herein for the Demised Premises and common areas,
pro-rated based upon the ratio which the total number of leasable square feet of
floor space in the Demised Premises bears to the total number of square feet of
leasable floor space in the entire building as set forth below.
Tenant's Pro Rata Share: 6.66% (determined by dividing the area of the Demised
Premises [4,666 rentable square feet] by the area of the building of which the
Demised Premises is a part [ 70,000 square feet]).
36. Late Payment. In the event that any payment of Basic Rent or additional
------------
rent or any other charge required to be paid by Tenant under the provisions of
this Lease, shall not be paid within five (5) days of the due date, Tenant shall
pay to Landlord a late charge of five (5%) percent of such past due payment; and
such late charge shall be deemed "rent" for all purposes under this Lease.
37. Severability. If a provision of this Lease Agreement is held invalid, it
------------
is hereby agreed that all valid provisions that are severable from the invalid
provision remain in effect. If a provision in this Lease Agreement is held
invalid in one or more of its applications, the provision remains in effect in
all valid applications.
38. Landlord's Liability. Anything to the contrary herein notwithstanding,
--------------------
Landlord's liability for any damages or assessments hereunder shall be limited
solely to Landlord's interest in the Demised Premises or land and building of
which the Demised Premises is part, as the case may be. It is further
covenanted and agreed by the parties hereto that in no case shall the Landlord
be liable for any consequential damages.
21
<PAGE>
39. Signage. Tenant shall have the right to place neat, professionally
--------
executed signs at the front entrance and/or loading areas as shall adequately
advertise Tenant's occupancy of the Premises and direct visitors, guests and the
like to Tenant's Premises provided that they comply with any and all laws and
ordinances applicable thereto. Tenant shall not place any sign on any part of
the Building without the written consent of Landlord, which consent Landlord
shall not unreasonably withhold.
40. Landlord's Environmental Clause.
-------------------------------
(a) Tenant shall not (either with or without negligence ) cause or permit the
escape, disposal or release of any biologically or chemically active or other
hazardous substances or materials. Tenant shall not allow the storage or use of
such substances or materials in any manner not sanctioned by law or by the
highest standards prevailing in the industry for the storage and use of such
substances except to use in the ordinary course of Tenant's business, and then
only after written notice is given to Landlord of the identity of such
substances or materials. Without limitation, hazardous substances and materials
shall include those described in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq., any applicable state or local laws and the regulations adopted under these
acts. If any lender or governmental agency shall ever require testing to
ascertain whether or not there has been any release of hazardous materials, then
the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon
demand as additional charges if such requirement applies to the Premises. In
addition, Tenant shall execute affidavits, representations and the like from
time to time at Landlord's request concerning Tenant's best knowledge and belief
regarding the presence of hazardous substances or materials on the Premises. In
all events, Tenant shall indemnify Landlord in the manner elsewhere provided in
this lease from any release of hazardous materials on the Premises occurring
while Tenant is in possession, or elsewhere if caused by Tenant or persons
acting under Tenant. The within covenants shall survive the expiration or
earlier termination of the lease term.
(b) Tenant shall conduct all of its operations at the Premises in compliance
with all federal, state and local statutes (including, but not limited to the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et. seq, as amended by the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (October 17, 1986) ("CERCLA");
the Resources Conservation and Recovery Act, 42 U.S.C. Section 6901 et. seq.
("RCRA"); the Pennsylvania Solid Waste Management Act, 35 Pa.C.S. Section
6018.101 et. seq.; the Pennsylvania Clean Streams Law, 35 Pa.C.S. Section 691.1
et. seq.; and the Pennsylvania Hazardous Sites Cleanup Act, Act 108 of 1988, 35
Pa.C.S. Section 6020.101 et. seq. ("Pennsylvania Superfund"), the Clean Air Act,
42 U.S.C. Section 7401 et. seq., as amended by the Clean Air Act Amendments of
1990, the Clean Water Act, 33 U.S.C. Section 1251 et. seq., and all applicable
federal, state and local statutes related to the environment now or hereafter
enacted and any additions and amendments thereto and regulations enacted
thereunder, ordinances, regulations, orders and requirements of common law,
regarding, but not limited to, (i) discharges to the air, soil, surface or
groundwater; and (ii) handling, utilizing, storage, treatment or disposal of any
hazardous substances or toxic substances as defined therein ("Environmental
Statutes"). Tenant shall obtain all permits, licenses or approvals and shall
make all notifications and registrations required by Environmental Statutes and
shall submit to Landlord, upon request, for inspecting and copying all
documents, permits, licenses, approvals, manifests and records required to be
submitted
22
<PAGE>
and/or maintained by the provisions of the Environmental Statutes.
Tenant shall also provide promptly to Lessor copies of any correspondence,
notice of violation, summons, order, complaint or other document received by
Tenant pertaining to compliance with Environmental Statutes.
(c) Tenant shall not install at the Premises any temporary or permanent tanks
for the storage of any liquid or gas above or below ground except as in
compliance with the other provisions of this section and after obtaining written
permission to do so from Landlord.
(d) If, because of the manner in which Tenant operates its business, the
Landlord, Landlord's mortgage lender or a governmental agency shall require
testing by an environmental testing entity of its choice, to ascertain whether
there has been a release of Hazardous Materials by Tenant, its agents, servants,
employees or business invitees, in or around the Demised Premises, the
reasonable costs of such testing shall be reimbursed by Tenant to Landlord as
Additional Rent. Tenant shall execute affidavits or representations, at
Landlord's request, stating that, to the best of Tenant's knowledge and belief,
since the time that Tenant took possession of the Demised Premises, there have
been no and there presently are no Hazardous Materials present in the Demised
Premises.
(e) Tenant hereby agrees to indemnify Landlord and to hold Landlord harmless
of, from and against any and all expense, loss, cost, fines, penalties, loss of
value or liability suffered by Landlord by reason of Tenant's breach of any of
the provisions of this section.
(f) The provisions of this section shall survive the termination of Tenant's
tenancy or of this Lease.
41. Relocation. At Landlord's option, Landlord may relocate the Demised
-----------
Premises by substituting comparable space with comparable work in the building
or in the same business park in a similar building. In such case, Landlord will
pay the moving costs involved and the construction costs for comparable work in
the substitute space, including Tenant improvements. Landlord shall give Tenant
at least thirty (30) days notice of such relocation.
42. Early Occupancy. If the Demised Premises are ready for occupancy prior to
---------------
the commencement date, Tenant may occupy the Demised Premises under the
following terms and conditions:
a. Rent shall be due and payable for the period prior to the commencement
date at the monthly rental for the Lease prorated for the number of days of
occupancy prior to the commencement date of the lease as defined in paragraph 2,
Term; and
b. Said rent shall be paid prior to occupancy; and
c. All terms and provisions of the new lease shall be applicable to tenant's
occupancy during the period prior to commencement date specified in the new
lease; and
d. Landlord shall be in receipt of a signed lease document.
43. Early Termination. Tenant shall have the right to terminate this lease
------------------
after the end of the thrid year Lease Term upon giving Landlord at least one
hundred twenty (120) days' prior written notice, with termination to
23
<PAGE>
take place at the end of such notice period. At the time of giving such notice,
Tenant shall pay Landlord $34,022.90, the aggregate of which is the agreed
liquidated damages for Early Termination of this Lease.
44. Time is of the Essence. Time is of the essence in performing the
-----------------------
covenants contained herein.
IN WITNESS WHEREOF, the parties hereto have executed these presents the day
and year first above written, intending to be legally bound hereby.
SEALED AND DELIVERED IN
THE PRESENCE OF:
LANDLORD:
AMBASSADOR II JOINT VENTURE
WITNESS: BY: /s/ David C. Henderson
______________________ ___________________________
David C. Henderson, Partner
TENANT:
ION LASER TECHNOLOGY, INC.
ATTEST: /s/ Brian Delaney BY: /s/ Richard V. Trefz
________________________ ___________________________
Brian Delaney, Richard V. Trefz, President
Acting Secretary
24
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1998, by and between ION
LASER TECHNOLOGY, INC. (the "COMPANY"), a Utah corporation, and DAVID BRUHIN
(the "EMPLOYEE").
W I T N E S S E T H:
-------------------
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee desires
to accept employment by the Company;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Upon the terms and subject to the conditions of this
----------
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. Unless earlier terminated pursuant to
------------------
Section 6 below, the term (the "TERM") of this Agreement shall commence on the
date hereof and shall continue in effect through May 31, 2000; provided,
however, that commencing on May 31 and each anniversary thereof the term of this
Agreement shall be extended for an additional year from May 31, 2000 or such
anniversary as the case may be unless not later than 30 days prior to such
automatic execution date the Company or the Employee shall have given notice
that such party does not want to extend the term of this Agreement in which case
the term of this Agreement shall end on May 31, 2000 or, if later, on the date
to which the term of this Agreement was last automatically extended.
3. Duties; Extent of Services.
--------------------------
(a) Duties. During the Term, the Employee shall serve in such
------
capacity and may be reasonably designated by the Board of Directors, initially
as Vice President of Marketing, Business Development and Planning, and shall
perform the duties, undertake the responsibilities and exercise the authority
reasonably required of such an employee of the Company, and shall have such
other powers and perform such additional executive duties as may be assigned to
him from time to time by the Chief Executive Officer of the Company (the "CEO").
The Employee shall report to and carry out the lawful directions of the CEO.
(b) Extent of Services. Except for illness and permitted vacation
------------------
periods, during the Term the Employee shall (i) devote his full time and
attention during normal business hours to the businesses of the Company and its
subsidiaries and Affiliates (as defined herein); (ii) use his best efforts to
promote the interests of the Company and its subsidiaries and Affiliates; (iii)
discharge such executive and administrative duties not inconsistent with his
position as may be assigned to him by the Board; and (iv) serve, without
additional compensation, as a director or officer of any subsidiary of the
Company if elected as such.
<PAGE>
4. Compensation Benefits.
---------------------
(a) Salary. In consideration of the services rendered by the Employee
------
hereunder and provided that the Employee has substantially performed all of his
obligations provided for herein, the Company will pay to the Employee a salary
(the "SALARY") at the rate of $10,000 per month during the first year of the
Term and at the rate of $5,000 per month during the second year of the Term and
every year thereafter if the Term of this Agreement is extended. The Salary
shall be paid in accordance with the Company's normal payroll practice.
(b) Bonus. The Company also will pay to the Employee a bonus (the
-----
"BONUS") based on a percentage of sales of take home and whitening gels,
including light activated and other gels, isolation materials, syringes and
upscale maintenance products (all such gels, isolation materials, syringes and
upscale maintenance products being hereinafter referred to as the "PRODUCTS") of
the Company for each 12-month period beginning June 1, 1998 in accordance with
the following:
First 12-Month Period
- ---------------------
Base Sales
Between 0 and $999,000 0%
Between $1,000,000 and $2,999,999 2%
Between $3,000,000 and $7,999,999 3%
Between $8,000,000 and $9,999,999 2%
Over $10,000,000 1%
Second 12-Month Period And Each 12-Month Period Thereafter
- ----------------------------------------------------------
Base Sales
Between 0 and $999,000 0%
Between $1,000,000 and $2,999,999 5%
Between $3,000,000 and $7,999,999 3%
Between $8,000,000 and $9,999,999 2%
Over $10,000,000 1%
<PAGE>
If the Company completes an acquisition during the Term, the base annual sales
amounts set forth above for each 12-month period after the 12-month period in
which such acquisition occurs shall be increased by an amount equal to the
annual sales of the Products by the target company during the 12 months prior to
its acquisition by the Company (the "TARGET COMPANY'S LTM SALES") and the base
sales amount set forth above for the 12-month period in which the acquisition
occurs shall be increased by an amount equal to the Target Company's LTM Sales
multiplied by a fraction the numerator of which shall be the number of months
during such 12-month period after the date of acquisition and the denominator of
which is 12. The Company will pay the Bonus to the Employee within 45 days of
the end of each 12-month period.
(c) During the Term, the Employee shall be entitled (i) to vacation
time in accordance with the Company's policy from time to time in effect; (ii)
to participate in all employee insurance and other fringe benefit programs,
including, without limitation, life, health, dental and accident insurance plans
and long term disability now or hereafter maintained by the Company for senior
executive or other salaried personnel for which the Employee is eligible; and
(iii) to participate in a pension plan with terms similar to those applicable to
executives of the Company.
5. Options. In consideration for entering into this Agreement, the
-------
Employee shall be granted options to purchase up to 50,000 shares of the
Company's common stock at $1.75 per share pursuant to a separate option
agreement. If at or prior to the end of the second year of the Term, sales of
the Products (excluding the amount, if any, by which the base annual sales
amount in Section 4(b) was increased for such 12-month period pursuant to the
last paragraph of Section 4(b)) are at least $3,000,000 for a period of 12
consecutive months beginning on and after the date hereof, then with respect to
the first such 12-month period only, Employee will be granted by the Company
options to purchase 50,000 shares of the Company's Common Stock at $1.75 per
share pursuant to a separate option agreement. If at or prior to the end of the
fifth year of the Term, if extended, the sales of the Products (excluding the
amount, if any, by which the base annual sales amount in Section 4(b) was
increased for such 12-month period pursuant to the last paragraph of Section
4(b)) are at least $10,000,000 for a period of 12 consecutive months beginning
on and after the date hereof, then with respect to the first such 12-month
period only, Employee will be granted by the Company options to purchase 50,000
shares of the Company's Common Stock at $1.75 per share pursuant to another
separate option agreement. An example of the manner in which the options
referred to in this Section 5 are to be earned is set forth in EXHIBIT 5A.
<PAGE>
6. Termination Provisions.
----------------------
(a) Termination for Cause. The Board may terminate the Employee's
---------------------
employment hereunder for Cause, as hereinafter defined, immediately upon written
notice to the Employee. For purposes of this Agreement, "CAUSE" shall mean (i)
embezzlement, theft or other misappropriation of any property of the Company or
any Affiliate, (ii) gross or willful misconduct resulting in substantial loss to
the Company or any Affiliate or substantial damage to the reputation of the
Company or any Affiliate, (iii) any act involving moral turpitude which results
in a conviction for a felony involving moral turpitude, fraud or
misrepresentation, (iv) gross neglect of his assigned duties to the Company or
any Affiliate, (v) gross breach of his fiduciary obligations to the Company or
any Affiliate, or (vi) any chemical dependence which materially affects the
performance of his duties and responsibilities to the Company or any Affiliate;
provided that in the case of the misconduct set forth in clauses (iv)
- --------
and (vi) above, such misconduct shall continue for a period of 30 days following
written notice thereof by the Company to the Employee. During the Term, the
Employee shall be entitled to only one such notice and right to cure for any
single act or event. If the Employee's employment is terminated for Cause, the
Employee shall be entitled to receive only the unpaid portion of the Salary then
in effect which has accrued to the date of termination and any other payments
generally available to departing employees of the Company (such as unused
vacation and personal days). The Employee shall not be entitled to receive any
severance payment with respect to such termination. For the purpose of this
Agreement, the term "AFFILIATE" means, with respect to the Company, any person
or entity which, directly or indirectly, controls, is controlled by or under
common control with the Company, with "CONTROL" to be based on the ownership of
50% or more of the voting securities (or their equivalent) of a particular
entity.
(b) Termination By Reason of Permanent Disability. If at any time
---------------------------------------------
during the Term the Employee has been unable, as a result of physical or mental
illness or incapacity, to perform his duties hereunder for a period of four
consecutive months or for an aggregate of more than six months in any twelve
month period (a "PERMANENT DISABILITY"), the Employee's employment hereunder may
be terminated by the Board upon thirty days' written notice to the Employee. If
the Employee's employment is terminated by reason of Permanent Disability, the
Employee shall be entitled to receive only the unpaid portion of the Salary then
in effect which has accrued to the date of termination, plus any other payments
generally available to departing employees of the Company (such as unused
vacation and personal days), plus an amount equal to three months of Employee's
Salary. Such amount shall be paid within thirty days after such termination.
(c) Termination By Reason of Death. The Employee's employment
------------------------------
hereunder shall automatically terminate on the date of his death. If the
Employee's employment is so terminated by his death, the Company shall pay to
the Employee's estate in addition to the unpaid portion of the Salary then in
effect through date of Employee's death plus an amount equal to three months of
Employee's Salary, plus a pro rata portion of the Bonus which has accrued to the
date of Employee's death if such death occurs within the last six months of a
consecutive 12-month period during the Term, and plus any other payments
generally available to departing employees of the Company (such as unused
vacation and personal days). Such amount shall be paid within thirty days after
the date of his death if a personal representative has been appointed by the end
of such thirty day period or, if a personal representative has not been
appointed by the end of such thirty day period, promptly after a personal
representative has been appointed.
<PAGE>
(d) Termination Without Cause. The Board may terminate the Employee's
-------------------------
employment hereunder at any time for any reason without Cause in which case the
Employee shall be entitled to receive an amount (the "SEVERANCE AMOUNT") equal
to six months of Employee's Salary and a pro rata portion of the Bonus which has
accrued to the date of termination if such termination occurs within the last
six months of a consecutive 12-month period during the Term. The Severance
Amount shall be in lieu of any other severance payment to which Employee may be
otherwise entitled under any other severance plan maintained by the Company.
The Severance Amount shall be paid within 30 days of such termination. In
addition, the Employee shall be entitled to receive any other payments generally
available to departing employees of the Company (such as unused vacation and
personal days).
7. Covenants of the Employee.
-------------------------
(a) Non-Competition. Until the later of (X) the first anniversary of
---------------
the date of the termination of the Employee's employment hereunder and (Y) the
end of the then current Term in effect on the date of such termination, the
Employee shall not, directly or indirectly, engage in any business (a
"RESTRICTED BUSINESS") which manufactures or distributes a dental product line
similar to that of the Company's or be associated with any entity engaged in a
Restricted Business, whether as a director, officer, employee, agent,
consultant, partner, owner, independent contractor or otherwise.
(b) Non-Solicitation of Employees of the Employer. Until the later of
---------------------------------------------
(X) the first anniversary of the date of the termination of the employment of
the Employee hereunder and (Y) the end of the then current Term in effect on the
date of such termination, the Employee shall not, and shall cause each business
or entity with which he shall become associated in any capacity not to, solicit
for employment or employ any person who is then, or who was at any time after
the date four months prior to the date of such termination, employed in a
professional or managerial position by the Company, its subsidiaries or
Affiliates.
(c) Confidentiality. The Employee agrees and acknowledges that the
---------------
Confidential Information (as hereinafter defined) of the Company and its
subsidiaries and affiliates, is valuable, special and unique to their business;
that such business depends on such Confidential Information; and that the
Company wishes to protect such Confidential Information by keeping it
confidential for the use and benefit of the Company and its subsidiaries and
Affiliates. Based on the foregoing, the Employee agrees to undertake the
following obligations with respect to such Confidential Information:
(i) the Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and Affiliates;
(ii) the Employee agrees that, except as required by applicable
law or as authorized in writing by the Board, he will not at any time
during or after the termination of his employment hereunder, disclose,
directly or indirectly, any Confidential Information of the Company or any
of its subsidiaries or Affiliates;
(iii) the Employee agrees to take all reasonable steps necessary,
or reasonably requested by the Company, to ensure that all Confidential
Information is kept confidential for the use and benefit of the Company and
its subsidiaries and Affiliates; and
<PAGE>
(iv) the Employee agrees that, upon termination of his
employment hereunder or at any other time the Company may in writing so
request, he will promptly deliver to the Company all materials constituting
Confidential Information (including all copies thereof) that are in his
possession or under his control. The Employee further agrees, that if
requested by the Company, to return any Confidential Information pursuant
to this subparagraph (iv), he will not make or retain any copy or extract
from such materials.
For purposes of paragraph (c) of this Section 7, "CONFIDENTIAL
INFORMATION" means any and all information developed by or for the Company or
any of its subsidiaries or Affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment with
the Company that is (A) not generally known in any industry in which the Company
or any of its subsidiaries or Affiliates is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for the Company or any of its
subsidiaries or Affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices, plans
for development of products, services or expansion into new areas or markets,
internal operations, and any trade secrets and proprietary information of any
type owned by the Company or any of its subsidiaries or Affiliates, together
with all written, graphic and other materials relating to all or any part of the
same.
8. Improvements and Inventions.
---------------------------
(a) Disclosure of All Improvements and Inventions. All designs,
---------------------------------------------
discoveries, ideas and inventions, whether or not patentable, copyrightable or
protectable as trade secrets, and all innovations, improvements, variations,
modifications, and substitutions in each case to the extent relating to the
dental business, including the process of cleaning or treating human teeth with
a light source or relating to "curing" materials used in the treatment of human
teeth, whether or not patentable, copyrightable or protectable as trade secrets,
including all patent and patent application rights and copyright and copyright
application rights relating thereto which the Employee may make or conceive
jointly or commonly with others during the Term in the course of performing his
duties for the Company based, in whole or in part, upon the Confidential
Information, or resulting, in whole or in part, from any other resources,
supplies, facilities or equipment or business, technical or financial
information or materials provided by the Company are hereafter collectively
referred to as "INVENTIONS". The Employee shall promptly disclose all Inventions
to the Company.
(b) Assignment of Inventions.
------------------------
(i) In consideration of the compensation payable to the Employee
under Section 4 hereof, the Employee agrees that all Inventions described
in paragraph (a) above shall be the sole and exclusive property of the
Company and available to the Company at all times. At the request of the
Company, the Employee agrees to sell, assign, transfer and set over to the
Company, or its nominee, without royalty or any additional consideration,
his entire right, title and interest in, to and under any and all
Inventions.
(ii) The Employee agrees to execute, both during and after the
Term, such documents as the Company shall deem necessary or desirable for
the transfer of such rights, titles and interests
<PAGE>
described in clause (i) above to it or its designee and for the
preparation, filing, prosecution and procuring of trademark, copyright
and/or patent applications and/or trademarks, copyrights and letters patent
in any country of the world and for the transfer of interests therein,
including the execution of original, divisional, continuing and reissue
applications, preliminary statements, affidavits, and concessions.
(iii) The Employee further agrees that if it is legally or
otherwise impossible for the Company or its designees or assignees to apply
for any such trademark, copyright or letters patent, or if any court or
other body with appropriate jurisdiction finds the transfer of trademark,
copyright or patent rights and/or other rights in any Invention to the
Company hereunder to be unenforceable for any reason, then, in any such
case, the Employee in lieu of the Company shall pursue such trademark,
copyright or letter patent in his own name and shall grant the Company the
first option to an exclusive license, at a de minimis royalty to be
negotiated in good faith based on the respective parties' contributions and
relevant industry standards, to utilize the trademark or copyright or to
manufacture, utilize and/or sell Inventions which constitute and/or contain
such patent, trade secret, know-how and/or other proprietary information.
If such a license is not created, then the Company shall be able to use
such Invention or substance on a non-exclusive, royalty-free basis.
(iv) The Employee agrees to give testimony in any court action or
administrative proceeding with respect to any matters mentioned above.
9. Reimbursement for Assignment of Inventions. The Company shall
------------------------------------------
reimburse the Employee for all reasonable and properly documented out-of-pocket
expenses actually incurred by him in the performance of any of the terms of
Section 8 hereof, including the preparation of documents, drawings, models and
plans, the transfer and assignment of Inventions and any travel required to
fulfill any obligation thereunder.
10. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return receipt
requested, or delivered by overnight courier addressed as follows:
(i) If to the Company:
ION Laser Technology, Inc.
3828 South Main Street
Salt Lake City, Utah 84121
Telephone No.: 801-262-5555
Facsimile No.: 801-262-5770
Attention: President
<PAGE>
with a copy to:
Durham, Evans, Jones & Pinegar, P.C.
Key Bank Towers, Suite 850
50 South Main Street
Salt Lake City, Utah 84144
Telephone No.: 801-538-2424
Facsimile No.: 801-538-2425
Attention: Jeffrey M. Jones, Esq.
with a copy to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022-4873
Telephone No.: 212-207-1200
Facsimile No.: 212-750-9022
Attention: Craigh Leonard, Esq.
(ii) If to the Employee:
David Bruhin
Swarthmore Consulting Group
601 North Chester Road
Swarthmore, PA 19081
Telephone No.: 610-543-0523
Facsimile No.: 610-604-0843
or, in each case, at such other address as may from time to time be specified to
the other party in a notice similarly given.
11. Governing Law; Jurisdiction. The validity, interpretation,
---------------------------
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
12. Expenses. If a dispute arises out of or related to this
--------
Agreement, if either party to the Agreement brings legal action to enforce the
terms of the Agreement, the party who prevails in such legal action, whether
plaintiff or defendant, in addition to the remedy or relief obtained in such
legal action, shall be entitled to recover his or its expenses incurred in such
legal action, including without limitation, court costs and attorneys fees. A
party shall be deemed to have prevailed in such a legal action if such action is
concluded pursuant to a court order or final judgment in favor of such party
which is not subject to appeal, a settlement agreement or dismissal of the
principal claims.
13. Entire Agreement. This Agreement contains the entire agreement of
----------------
the parties and their Affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto.
<PAGE>
14. Severability. If any term or provision of this Agreement or the
------------
application thereof to any person, property or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons, property or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall remain valid and enforceable to
the fullest extent permitted by law.
15. Remedies.
--------
(a) Injunctive Relief. The Employee acknowledges and agrees that the
-----------------
covenants and obligations of the Employee contained in subsections (a), (b) and
(c) of Section 7 hereof relate to special, unique and extraordinary matters and
are reasonable and necessary to protect the legitimate interests of the Company
and its subsidiaries and Affiliates and that a breach of any of the terms of
such covenants and obligations will cause the Company irreparable injury for
which adequate remedies at law are not available. Therefore the Employee agrees
that the Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies under this
-------------------
Section 15 are cumulative and are in addition to any other rights and remedies
the Company may have at law or in equity.
16. Withholding Taxes. The Company may deduct any federal, state or
-----------------
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required to
deduct under applicable law.
17. Amendments, Miscellaneous, Etc. Neither this Agreement nor any
------------------------------
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
18. Survival. The covenants set forth in Sections 7 and 8 of this
--------
Agreement shall survive and shall continue to be binding upon the parties
notwithstanding the termination of this Agreement for any reason whatsoever.
The covenants set forth in Sections 7 and 8 of this Agreement shall be deemed
and construed as separate agreements independent of any other provision of this
Agreement. The existence of any claim or cause of action by the Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
ION LASER TECHNOLOGY, INC.
By:/s/ Richard V. Trefz
--------------------
Name:
Title:
/s/ David Bruhin
----------------
DAVID BRUHIN
<PAGE>
EXHIBIT 5A
Assume the Term begins on June 1, 1998 and the sales of the Products
are as follows for each of the following 6-month periods:
<TABLE>
<CAPTION>
6-Month Period Sales
- ---------------------------------- ---------
<S> <C>
June 1, 1998 - November 30, 1998.. 1,000,000
November 30, 1998 - June 1, 1999.. 1,500,000
June 1, 1999 - November 30, 1999.. 1,750,000
November 30, 1999 - June 1, 2000.. 2,000,000
June 1, 2000 - November 30, 2000.. 5,000,000
November 30, 2000 - June 1, 2001.. 4,000,000
June 1, 2001 - November 30, 2001.. 6,000,000
November 30, 2001 - June 1, 2002.. 6,000,000
</TABLE>
1. Bruhin is entitled to 50,000 options on November 30, 1999 because
sales of Products for the 12-month period from November 30, 1998 to November 30,
1999 total $3,250,000. Even though sales in each 12-month period succeeding
November 30, 1999 exceed $3,000,000, Bruhin is not entitled to another grant of
options on account of the $3,000,000 benchmark.
2. In addition to the 50,000 options to which Bruhin is entitled on
November 30, 1999, Bruhin is entitled to another 50,000 options on November 30,
2001 because sales of Products for the 12-month period from November 30, 2000 to
November 30, 2001 are at least $10,000,000. Even though sales for the period
June 1, 2001 through June 1, 2002 are also at least $10,000,000, Bruhin is not
entitled to another grant of options on account of the $10,000,000 benchmark.
<PAGE>
OFFICE LEASE
PREMISES:
820 DAVIS STREET BUILDING
820 DAVID STREET
EVANSTON, ILLINOIS 60201
LANDLORD
MORTGAGE ONE CORPORATION
TENANT
ION LASER TECHNOLOGY, INC.
SUITE 507
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into as of this 23/rd/ day of June,
1998, by and between Mortgage One Corporation, (hereinafter called the
"Landlord") and Ion Laser Technology, Inc. (hereinafter called the "Tenant").
W I T N E S S E T H:
That in consideration of the rents, covenants and conditions herein set
forth, Landlord and Tenant do hereby covenant, promise and agree as follows:
1.1 BASIC LEASE PROVISIONS.
LANDLORD: Mortgage One Corporation
ADDRESS OF LANDLORD: Mortgage One Corporation
C/O JCF Real Estate, Inc.
19 S. LaSalle Street -- Suite No. 1650
Chicago, IL 60603
TENANT: Ion Laser Technology, Inc.
ADDRESS OF TENANT:
TENANT'S TRADE NAME: Brite Smile
LEASE PREMISES: 820 David Street, Evanston, IL, Suite No. 507
APPROXIMATE RENTABLE AREA
OF LEASE PREMISES: 2,654 square feet
TENANT'S PROPORTIONATE SHARE: 3.27%
EXPENSE BASE STOP: Those expenses paid or incurred during the
calendar year 1998 as defined in Section 3.2(a)(1)
hereof.
TAXES BASE STOP: Those taxes paid during the calendar year 1998 as
defined in Section 3.2(a)(6) hereof.
LEASE TERM: Sixty-Two (62) Months
COMMENCEMENT DATE: August 1, 1998
1
<PAGE>
EXPIRATION DATE: September 30, 2003
BASE RENT (Subject to the provisions of rent adjustment in Section 3.2 of this
Lease):
----------------------------------------------------------
PERIOD PSF MONTHLY ANNUAL
----------------------------------------------------------
08/01/98-09/30/98 $ 0.00 $ 0.00 $ 0.00
----------------------------------------------------------
10/01/98-09/30/99 $17.50 $3,870.42 $ 46,445.00
----------------------------------------------------------
10/01/99-09/30/00 $18.00 $3,981.00 $ 47,772.00
----------------------------------------------------------
10/01/00-09/30/01 $18.50 $4,091.58 $ 49,099.00
----------------------------------------------------------
10/01/01-09/30/02 $19.00 $4,202.17 $ 50,426.00
----------------------------------------------------------
10/01/02-09/30/03 $19.50 $4,312.75 $ 51,753.00
----------------------------------------------------------
----------------------------------------------------------
TOTAL BASE RENT: $245,495.00
----------------------------------------------------------
PERMITTED USES: The Leased Premises shall be used solely to
conduct general office business, light electronic
assembly and research and development.
SECURITY DEPOSIT: $11,611.26
RENEWAL OPTION: Provided Tenant is not in default under this
Lease, Tenant shall have the option to renew this
Lease for an additional three (3) year term at the
then market rate.
TERMINATION OPTION: Provided Tenant is not in default under this
Lease, Tenant is hereby granted an option to
terminate the Lease at the end of the third year
of the Lease Term; provided, however, that Tenant
shall have given Landlord written notice of its
intent to exercise the option at least 120 days
prior to the expiration of the third year of the
Lease Term accompanied with a termination fee
equal to the unamortized portion of the
improvement
2
<PAGE>
and lease commission costs amortized at nine
percent (9%).
LANDLORD IMPROVEMENTS: Landlord, at Landlord's expense, shall buildout
the Leased Premises pursuant to an agreed upon
space plan prepared by PAL dated June 10, 1998
(with the exception of the plumbing and laminate
cabinets).
1.2 Significance of a Basic Lease Provisions. Each reference in this
----------------------------------------
Lease to any of the Basic Lease Provisions contained in Section 1.1 of this
Lease shall be deemed and construed to incorporate all of the terms provided
under each such Basic Lease Provision.
1.3 Enumeration of Exhibits. The exhibits listed in this Section and
-----------------------
attached to this Lease are incorporated in this Lease by this reference and are
to be construed as part of this Lease.
Exhibit A. Legal Description
Exhibit B. Landlord's Work.
2.1 Demise and Recording. In consideration of the obligation of Tenant to
--------------------
pay rent as herein provided, and in consideration of the other terms,
provisions, and covenants hereof, Landlord hereby demises and leases to Tenant,
and Tenant hereby accepts and leases from Landlord, the Leased Premises which
are located in the building commonly known as 820 Davis Street Building (the
"Building", situated on the real property described in Exhibit A attached hereto
(the "Property"). The Leases Premises shall be used for the purposes enumerated
in Section 1.1 hereof, and no others. Tenant agrees not to record this Lease;
however, Tenant agrees to execute, acknowledge and deliver at any time after the
date of this Lease, at the request of Landlord, a "short form lease" suitable
for recording, setting forth those items, except rental, contained herein.
Landlord shall have the right, at its sole option, to record said short form
lease at any time during the Lease Term, or any extensions or renewals thereof.
TO HAVE AND TO HOLD the same for the Lease Term beginning on the
Commencement Date and ending on the Expiration Date unless terminated or
extended pursuant to any provision hereof. Tenant acknowledges that the only
representations as to the repair of the Leased Premises, or promises to alter,
remodel or improve the Lease Premises by Landlord are those which are expressly
set forth in this Lease.
2.2 Commencement of the Terms. The Term of this Lease shall begin upon
-------------------------
the Commencement Date as defined in Section 1.1 of this Lease.
2.3 Alterations. Landlord agrees to perform at Landlord's cost and
-----------
expense those improvements described as Landlord's Work on Exhibit B attached
hereto as and by this reference made a part hereof. All alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Tenant during the term of this Lease and Tenant shall, unless Landlord
3
<PAGE>
otherwise elects as hereinafter provided, remove all alterations, additions,
improvements and partitions erected by tenant and restore the Leased Premises to
its original condition by the date of termination of this Lease or upon an
earlier date on which Tenant shall have vacated the Leased Premises; provided,
however, that, if at such time Landlord so elects, in Landlord's sole
discretion, such alterations, additions, improvements and partitions shall
become the property of Landlord as of the date of termination of this Lease or
upon an earlier date on which Tenant shall have vacated the Leased Premises and
title shall pass to Landlord under this Lease as by a bill of sale. All such
alterations, removals and restoration shall be accomplished in a good and
workmanlike manner by contractors approved in writing by Landlord so as not to
damage the primary structure or structural qualities of the Building. Tenant
shall, prior to any construction, provide such assurances to Landlord, including
but not limited to, waivers of lien, surety company performance bonds, letters
of credit and personal guaranties of individuals of substance, as Landlord, in
its sole discretion, shall require to assure payment of the costs thereof and to
protect Landlord against any loss from, or encumbrance of, the Leased Premises
by any mechanics', laborers', materialmen's or other liens.
2.4 Delivery of Possession. If the Landlord shall be unable to give
----------------------
possession of the Leases Premises on the Commencement Date by reason of any of
the following: (i) the Landlord has not completed its preparation of the Leases
Premises, (ii) the Landlord is unable to give possession of the Leased Premises
by reason of the holding over or retention of possession of any tenant, tenants
or occupants, or (iii) for any other reason, Landlord shall not be subject to
any liability for failure to give possession, although Tenant shall have the
right to terminate this lease if the Leased Premises are not Substantially
Completed (as hereinafter defined), for any reason other than delays caused by
Tenant, by the ninetieth (90/th/) day after the Commencement Date. Under such
circumstances the rent reserved and covenanted to be paid herein shall not
commence until the Leased Premises are available for occupancy, and no such
failure to give possession on the Commencement Date shall affect the validity of
this Lease or the obligations of the Tenant hereunder. In the event that the
Commencement Date is delayed pursuant to this Subsection 2.4, the expiration
Date shall be deemed automatically adjusted so as to cause the Lease Term to
remain the same. As used in this Lease, the term "Substantial Completion" shall
mean the date on which the earlier of the following three events shall occur:
(i) the Tenant occupies the Leased Premises or a portion thereof; (ii) the date
on which the Landlord or its agent sufficiently complete the Landlord's Work to
enable the Tenant to use the Leased Premises for the purposes intended; or (iii)
the date on which the Landlord or Landlord's Agents sufficiently complete the
Landlord's Work to enable the Tenant's contractors, if any, to begin or complete
any additional work or a portion thereof not to be performed by the Landlord or
its agents.
2.5 Acceptance. The taking of possession by Tenant shall be deemed
----------
conclusively to establish that the Building, other improvements, and the Leased
Premises are in good and satisfactory condition as of the date on which
possession is so taken. Upon the Commencement Date Tenant shall, if requested
by Landlord, execute and deliver to Landlord a letter of acceptance of delivery
of the Leased Premises, such letter to be on Landlord's standard from therefor.
4
<PAGE>
3. Rent. The term "Rent" for the Leased Premises shall include all of
----
the following items:
3.1 Base Rent. Tenant agrees to pay the Base Rent as described in Section
---------
1.1 of this Lease to Landlord for the Leased Premises in lawful money of the
United States for the entire Term hereof monthly in advance. The first monthly
payment shall be made upon execution hereof. Thereafter, one such monthly
installment shall be due and payable without demand on or before the first day
of each calendar month succeeding the Commencement Date; provided, however, that
the monthly payment of Base Rent for any fractional calendar month at the
Commencement or end of this Lease Term (or Renewal Term, if any) shall be
prorated.
3.2 Rent Adjustments. In addition to Base Rent, Tenant shall make
----------------
payments in accordance with the provisions of this Section 3.2
(a) Definitions.
-----------
(1) "Expenses" means and includes those expenses paid or incurred by
--------
Landlord for maintaining, operating and repairing the Building, the cost of
electricity for Common Areas used in the operation of the Building, steam,
water, fuel, heating, lighting, air-conditioning, window cleaning,
janitorial service, insurance, including but not limited to, fire, extended
coverage, liability, workmen's compensation, elevator, or any other
insurance carried in good faith by Landlord and applicable to the Building,
painting, uniforms, customary management fees, supplies, sundries, sales or
use taxes on supplies or services, costs of wages and salaries of all
persons engaged in the operation, maintenance and repair of the Building,
and so-called fringe benefits, including social security taxes,
unemployment insurance taxes, cost for providing coverage for disability
benefits, costs of any pensions, hospitalization welfare or retirement
plans, or any other similar of like expenses incurred under the provisions
of any collective bargaining agreement, or any other cost or expense which
Landlord pays or incurs to provide benefits for employees so engaged in the
operation, maintenance and repair of the Building, the charges of any
independent contractor who, under contract with Landlord or its
representatives, does any of the work of operating, maintaining or
repairing of the Building, legal and accounting expenses, including, but
not limited to, such expenses as relate in seeking or obtaining reductions
in and refunds of Taxes (as hereinafter defined), amortizable expenses, as
hereinafter described, or any other expense or charge, whether or not
hereinbefore mentioned, considered as an expense of owning (except for
ownership interest expenses for servicing mortgage indebtedness),
maintaining, operating, or repairing the Building. If any item of Expense,
though paid in one year, relates to more than on calendar year, at the
option of Lessor, such Expense shall be proportionately allocated among
such related calendar years. Amortizable Expenses shall include but not
limited to: (i) any item of operating expenses or group of similar items
in excess of $10,000.00 which Landlord, in Landlord's sole discretion,
determines to be distorting the amount of normal operating expenses in any
calendar year; (ii) the cost of capital improvements or depreciable
equipment which reduces some of the operating expenses or are required by
law or applicable government regulation; or (iii) the unamortized portions
5
<PAGE>
of such expenses, plus interest on any unamortized amount thereof at the
rate of ten percent (10%) per annum, may be amortized by Landlord over a
period of not less than five (5) years or more than (10) years. Expenses
shall not include depreciation, the cost of altering or finishing other
tenant space, rent under any ground lease and brokerage and leasing
commissions.
(2) "Rent Adjustment" means any amount owed by Tenant resulting from
---------------
increases in expenses and/or Taxes. The Rent Adjustment shall be paid in
addition to Base Rent and, notwithstanding anything herein to the contrary,
shall be determined on a calendar year basis as opposed to a Lease Year.
(3) "Rentable Area of the Building" is 81,044 square feet.
-----------------------------
(4) "Rentable Area of the Entire Leases Premises" is defined in
-------------------------------------------
Section 1.1 of the Lease. The parties acknowledge and agree that the
Rentable Area of the Entire Leased Premises is computed by multiplying the
usable square footage of the Leased Premises by a faction of 1.15.
(5) "Rent Adjustment Deposit" shall be equal to the Rent Adjustments
-----------------------
reasonably estimated by Landlord with respect to any calendar year (or any
portion of a calendar year) included in the term of this Lease, divided by
the number of months in said calendar year within the term hereof. The
Rent Adjustment Deposit shall be subject to change in accordance with
provisions of Section 3.2(e).
(6) "Taxes" means real estate taxes, assessments, sewer rents, rates
-----
and charges, transit taxes, taxes based upon the receipt of rent, and any
other federal, state or local government charges, general, special,
ordinary or extraordinary (but not including income of franchise taxes or
any other taxes imposed upon or measured by Landlord's income or profits,
unless the same shall be imposed in lieu of real estate taxes), which may
now or hereafter be levied or assessed against the Building or the real
estate underlying the Building excepting therefrom any interest and/or
penalties payable on any of the above amounts due as a result of late
payments. In case of special taxes or assessments which may be payable in
installments, only the amount of each installment paid during a calendar
year shall be included in Taxes for that year. Taxes shall also include
any personal property taxes (attributable to the year in which paid)
imposed upon the furniture, fixtures, machinery, equipment, apparatus,
systems and appurtenances used in connection with the Building for the
operation thereof. The amount of Taxes attributable to any calendar year
of the term of this Lease shall be the amount of Taxes payable in such
year, notwithstanding that in each case the assessments for such Taxes may
have been made for a different year or different years than the year in
which payable.
(7) "Tenant's Proportionate Share" is defined in Section 1.1 of the
----------------------------
Lease and means the proportion the Rentable Area of the Leased Premises
bears to the Rentable Area of the Building.
6
<PAGE>
(b) If the amount of Expenses attributable to any calendar year during the
term hereof is greater than the Expense Base Stop defined in Section 1.1 of the
Lease, then Tenant shall pay Landlord as a Rent Adjustment for such calendar
year, Tenant's Proportionate Share of such excess.
(c) If the amount of Taxes attributable to any calendar year during the
term hereof is greater than the Expense Base Stop defined in Section 1.1 of the
Lease, then Tenant shall pay Landlord as a Rent Adjustment for such calendar
year, Tenant's Proportionate Share of such excess.
(d) Tenant shall pay Landlord the Rent Adjustment Deposit in the same
manner as Base Rent, in advance on the first day of each month during the term
hereof, provided however, the first monthly payment shall be made upon execution
hereof.
(e) As soon as reasonably feasible after the expiration of each calendar
year during the term hereof, Landlord will furnish Tenant a statement (the
"Statement") showing the following: (1) Expenses and Taxes for said calendar
year; (2) The amount of Rent Adjustment due Landlord for said calendar year ,
less credits for Rent Adjustment Deposits paid and attributable to said calendar
year, if any; and (3) The Rent Adjustment Deposit due in the current calendar
year, and the amount or revised amount due for the months prior to the rendition
of the Statement or any Revised Statement as hereinafter defined. Any amount
due Landlord as shown on any such Statement shall be paid by Tenant within
thirty (30) days after it is furnished to Tenant. Any over-payment by Tenant
shall be credited towards the monthly Rent Adjustment Deposits next coming due.
If any increase in Expenses occurs at any time after the preparation of any
Statement which increase results in a projected increase of five (5%) percent or
more in Expenses, the Statement may be revised by Landlord and the Rent
Adjustment Deposits for the remainder of the then current calendar year shall be
revised by entering such increases in expenses into the annualized projection
used in the Statement and recalculating the Rent Adjustment Deposits to provide
for the full payment of the new projected estimate of calendar year Expenses in
the months remaining in said calendar year after the issuance of such a revised
statement (the "Revised Statement"). If a Revised Statement is issued, the
monthly amount due Landlord for the months prior to the rendition of the next
Statement in the succeeding calendar year shall be equal to one-twelfth (1/12th)
the amount of the recalculated annualized projection.
(f) If the Commencement Date is on any day other than the first day of
January, or if the termination date is on any day other than the last day of
December, any Rent Adjustment Deposit payment due Landlord shall be prorated,
and Tenant shall pay such amount within thirty (30) days after being billed.
This covenant shall survive the termination of this Lease.
3.3 Electric Service. To the extent Tenant is not billed directly by a
----------------
public utility, Tenant shall pay Landlord in advance monthly, upon demand, as
additional rent, Landlord's monthly estimate of all electricity used by Tenant
in the Leased Premises for lighting, convenience outlets, and other direct uses.
Any difference between the Landlord's estimate and the Tenant's actual use as
subsequently determined by Landlord shall either be billed or credited to
Tenant's subsequent rent
7
<PAGE>
bills as the case may require. Tenant's actual use shall be based upon Tenant's
pro-rata share of the total electrical charges of the Building, however,
Landlord may, in its sole discretion, adjust said amount based upon any
extraordinary use of electrical power by Tenant, including, without limitation,
extended hours of operation as compared to other tenants of the Building and the
operation of equipment requiring large amounts of electricity. Tenant shall
furnish, at its own expense, all electric light bulbs, tubes and ballasts during
the Lease Term, provided, however, that Landlord agrees that all lighting
fixtures, light bulbs, tubes and ballasts provided by Landlord shall be in
working condition at the commencement of the Lease Term. Tenant will not without
the written consent of Landlord use any apparatus or device, including but not
limited to any computers and other high technology equipment in the Leased
Premises, which will in any way increase its usage beyond the amount of
electricity which Landlord determines to be reasonable for use of the Leased
Premises for the permitted uses described herein, nor connect with electric
current (except through existing electrical outlets in the Leased Premises).
Tenant shall not use or require electric current in excess of that which is
reasonably obtainable from existing electric outlets and normal for use of the
Leased Premises as determined by the Landlord for the permitted uses described
herein, unless Tenant shall first have procured the consent of Landlord and
Tenant shall have paid all costs of installation of all facilities necessary to
furnishing such excess capacity and for such increased electricity usage.
Interruptions of any service provided by Landlord and Tenant shall have paid all
costs of installation of all facilities necessary to furnishing such excess
capacity and for such increased electricity usage. Interruptions of any service
provided by Landlord resulting in whole or in part from any cause of causes
beyond the reasonable control of Landlord shall not be deemed an eviction or
disturbance of Tenant's use and possession of the Leased Premises or any part
thereof, or render Landlord liable for damages by abatement of rent or otherwise
or relieve Tenant from performance of Tenant's obligations under this Lease.
3.4 Miscellaneous Charges. Tenant shall also pay to Landlord as
---------------------
additional rent hereunder all other sums payable to Landlord pursuant to any
other provision of this Lease.
4. Security Deposit. In addition Tenant agrees to deposit, as a Security
----------------
Deposit, with Landlord on the date hereof the sum defined in Section 1.1, which
sum shall be held by Landlord, as security for the full, timely and faithful
performance of Tenant's covenants and obligations under this Lease, it being
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Unless
specifically required by law, no interest shall be paid on the Security Deposit.
Upon the occurrence of any default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided by law, use
such fund to the extent necessary to make good any arrears of rent or other
payment due Landlord hereunder, and any other damage, injury, expense or
liability caused by any event of Tenant's default; and Tenant shall pay to
Landlord on demand the amount so applied in order to restore the Security
Deposit to its original amount. Although the Security Deposit shall be the
property of Landlord, any remaining balance of such deposit shall be returned by
Landlord to Tenant at such time after termination of this Lease when Landlord
shall have determined that Tenant's obligations under this Lease have been
fulfilled. If the Building is conveyed by Landlord, said deposit may, subject
to the other terms and conditions contained in this Lease, be turned over
8
<PAGE>
to Landlord's grantee, and in such event, Landlord shall be released from any
and all liability to Tenant with respect to said deposit and its application or
return. In the event that the Security Deposit is defined in Section 1.1 as a
specified number of months, then the initial Security Deposit shall be equal to
the product of the number of months specified in Section 1.1 multiplied by the
sum of the monthly Base Rent and the monthly Rent Adjustment Deposits.
Thereafter, Tenant shall maintain the Security Deposit at an amount at all times
equal to the product of the number of the months specified for the Security
Deposit in Section 1.1 multiplied by the sum of the monthly Base Rent and the
Rent Adjustment Deposits. Upon request from time to time, Tenant will
immediately deposit additional sums, if any, required to maintain the Security
Deposit at such amount based on Landlord's estimate of the Rent payable during
the twelve months following any such request.
5. Building Services. Landlord agrees to furnish Tenant, at Landlord's
-----------------
expense, while occupying the Leased Premises: (a) janitor and maintenance
service on a daily basis, excluding weekends and Holidays (as hereinafter
defined); (b) passenger elevator service in common with other tenants daily and
freight elevator service in common with other tenants upon request; (c) water,
at those points of supply provided for general use of tenants; and (d) heated or
cooled air in season at such times as Landlord normally furnishes these services
to all tenants of the Building, and at such temperatures and in such amounts as
are in accordance with any applicable statutes, rules or regulations such
service on Sunday and Holidays to be provided by Landlord at Landlord's sole
option, and upon prior written request from Tenant (Landlord hereby reserves the
right to charge Tenant for any such Sunday or Holiday service used by Tenant on
a prorated basis with those other tenants, if any, using the service during said
time periods). Holidays shall mean and include only the following days: New
Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. At night, the building shall be locked and access shall be the same
as now exists in the Building. If heat or air conditioning is furnished at the
request of the Tenant in hours other than normal working hours (Monday through
Friday from 8:00 A.M. to 8:00 P.M. and 8:00 A.M. to 4:00 P.M. on Saturday).
Tenant will pay Landlord charges to supply such services at Landlord's costs;
but neither failure to any extent to furnish, nor any stoppage or interruption
of, these defined services, resulting from any cause beyond Landlord's control,
shall render Landlord liable in any respect for damages to any person, property,
or business, nor be construed as an eviction of Tenant or work an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
Tenant shall pay Landlord Tenant's Proportionate Share of the costs of such
services, or if ascertainable, the costs of Tenant's actual use of such
services, in monthly installments fixed by Landlord in addition to the Expenses
described in Section 3.2 of this Lease. Should any equipment or machinery
furnished by Landlord cease to function properly, Landlord shall use reasonable
and diligent efforts to repair the same promptly. Whenever heat generating
machines or equipment are used by Tenant in the Leased Premises which affect the
temperature otherwise maintained by the air conditioning equipment, Landlord
reserves the right to install air conditioning units in the Leased Premises (or
for the use of the Leased Premises), and the expense of such purchase,
installation, maintenance, and repair shall be paid by Tenant upon demand as
additional rent or in the alternative, Tenant shall continue to occupy the
Leased Premises without further responsibility of Landlord for additional air
conditioning. Tenant acknowledges that Landlord does not provide 24-hour
security services in the Building, and hereby waives, on behalf of itself, its
officers, shareholders, partners,
9
<PAGE>
employees, agents and invitees, any and all claims of any nature or kind against
Landlord due to the fact that Landlord does not provide 24-hour security
services in the Building.
6. USE OF PREMISES
6.1 Manner of Use. Tenant will not occupy or use, nor permit any portion
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of Leased Premises to be occupied or used, for any business or purpose other
than that described in Section 1.1 or any other use or purpose which is unlawful
in part or in whole or deemed to be so in any manner, or which increases the
hazard of fire, nor permit anything to be done which will render void or in any
way increase the rate of fire insurance on the Building or its contents, and
Tenant shall immediately case and desist from such use, paying all costs and
expenses resulting therefrom.
6.2 Compliance with Laws. Tenant shall at its own cost and expense
--------------------
promptly obtain any and all licenses and permits necessary for any permitted
use. Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the permitted use and occupancy of the Leased Premises, and shall
promptly comply with all governmental orders and directors for the correction,
prevention and abatement of any violations or nuisances in or upon, or connected
with, the Leased Premises, all at Tenant's sole expense. If, as a result of any
change in the governmental laws, ordinances, and regulations, the Leased
Premises must be altered to lawfully accommodate Tenant's use and occupancy,
such alterations shall be made only with the consent of Landlord and in
compliance with the terms of this Lease, but the entire cost shall be borne by
Tenant, provided, that, the necessity of Landlord's consent shall in no way
create any liability against Landlord for failure of Tenant to comply with such
laws, ordinances and regulations.
6.3 Repairs. Tenant will maintain the Leased Premises (including all
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fixtures installed by Tenant and plate glass) is in good repair, reasonable wear
and tear excepted, and in a clean and healthful condition, and comply with all
laws, ordinances, orders, rules, and regulations (state, federal, municipal, and
other agencies or bodies having jurisdiction thereof) with reference to
condition, or occupancy of the Leased Premises. Any repairs or replacements
shall be made in compliance with the terms of this Lease and with materials and
workmanship of the same character, kind and quality as the original. Tenant
will not, without the prior written consent of Landlord, paint, install lighting
or decorations, or install any signs, window or door lettering or advertising,
media of any type on or about the Leased Premises.
6.4 Conduct of Business. Tenant will conduct its business and control its
-------------------
agents, employees and invitees in such a manner as not to create any nuisance,
nor interfere with, annoy, or disturb other tenants or Landlord in the
management of the Building, and shall strictly observe any rules Landlord shall
have prescribed.
6.5 Damage by Tenant. Tenant shall pay upon demand ad additional rent the
----------------
full cost of repairing any damage to the Leased Premises, Building or related
facilities resulting from and/or caused in whole or in part by the negligence or
misconduct of Tenant, its gents, servants, employees,
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patrons, customers, or any other person entering upon the Property as a result
of Tenant's business activities or resulting from Tenant's default hereunder.
6.6 Condition Upon Termination. At termination of this Lease, upon its
--------------------------
expiration or otherwise, Tenant shall deliver up the Leased Premises with all
improvements located thereon (except as herein provided) in good repair and
condition, reasonable wear and tear excepted, broom clean and free of all
debris.
7. Inspections. Landlord shall have the right to enter the Leased
-----------
Premises at any time, for the following purposes: (i) to ascertain the
condition of the Leased Premises; (ii) to determine whether Tenant is diligently
fulfilling Tenants' responsibilities under this Lease; (iii) to clean and to
make such repairs as may be required or permitted to be made by Landlord under
the terms of this Lease; (iv) to do any other act or thing which Landlord deems
reasonable to preserve the Leased Premises and the Building; or (v) to show the
Leased Premises to prospective purchasers or Mortgagees of the Leased Premises,
Building or Property. During the six (6) months prior to the end of the term
hereof and at any time Tenant is in default hereunder, Landlord shall have the
right to enter the Leased premises at any time for the purpose of showing the
premises. Tenant shall give written notice to Landlord at least thirty (30)
days prior to vacating and shall arrange to meet with Landlord for a joint
inspection of the Leased Premises. In the event of Tenant's failure to give
such notice or arrange such joint inspection, any list of needed restoration or
repairs prepared by Landlord as a result of Landlord's inspection at or after
Tenant's vacating the Leased Premises shall be conclusively deemed correct for
purposes of determining Tenant's responsibility for repairs and restoration.
8. ASSIGNMENT AND SUBLETTING
8.1 Restrictions. Tenant shall not have the right to assign or pledge
------------
this Lease or to sublet the whole or any part of the Leased Premises, whether
voluntarily or by operation of law, or permit the use or occupancy of the Leased
Premises by anyone other than Tenant, without the prior written consent of
Landlord, which consent shall be in Landlord's sole discretion, and such
restrictions shall be binding upon any assignee or subtenant to which Landlord
has consented. In the event Tenant desires to sublet the Leased premises, or
any portion thereof, or assign this Lease, Tenant shall give written notice
thereof to Landlord at least ninety (90) days prior to the proposed commencement
date of such subletting or assignment, which notice shall set forth the name of
the proposed subtenant or assignee, the relevant terms of any sublease and
copies of financial reports and other relevant financial information of the
proposed subtenant or assignee. Landlord shall notify Tenant in writing of its
decision to approve or disapprove of the proposed subletting or assignment or to
exercise its option to recapture the Leased Premises (as provided in Paragraph
8.2 below) within thirty (30) days after Landlord's actual receipt of Tenant's
written notice. Notwithstanding any assignment or subletting to which consent
is given, Tenant shall at all times remain directly, primarily and fully
responsible and liable from the payment of the rent herein specified and for
compliance with all of its other obligations under the terms, provisions and
covenants of this Lease. Any approved sublease shall be expressly assigned
subject to the terms and conditions of this Lease,
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and Tenant shall pay landlord on the first day of each month during the term of
the sublease, one hundred percent (100%) of the excess of all rent and other
consideration due from the subtenant for such month over that portion of the
Base Rent, Rent Adjustment Deposits and Rent Adjustment due under this Lease for
said month which is allocable to the space sublet. Upon the occurrence of an
Event of default (as hereinafter defined), if the Leased Premises or any part
thereof are then assigned or sublet, Landlord, in addition to any other remedies
herein provided or provided by law, may, at its option, collect directly from
such assignee or subtenant all such rents due and becoming due to Tenant under
such assignment or sublease and apply such rent against any sums due to Landlord
from Tenant hereunder, and no such collection shall be construed to constitute a
novation or release of Tenant from the further performance of Tenant's
obligations hereunder. No assignment, pledge, or subletting shall become
effective until said assignee, pledgee, or subtenant has agreed in writing, on a
form prescribed by Landlord, to be bound by this Lease just as if said assignee,
pledgee, or subtenant were the original tenant.
Notwithstanding anything to the contrary in this Section 8, if Tenant is a
closely-held corporation nd if during the Term of this Lease, the ownership of
shares of stock which constitute control of Tenant changes by reason of sale,
gift or death, Tenant shall notify Landlord of such change within five (5) days
thereof, and Landlord, at its option, may at any time thereafter terminate this
Lease by giving Tenant written notice of said termination at least sixty (60)
days prior to the date of termination stated in the notice. The term "control"
as used herein means the power to directly or indirectly direct or cause the
direction of the management or policies of the Tenant. A change or series of
changes in ownership of stock which would result in direct or indirect change in
ownership by the stockholders or an affiliated group of stockholders of less
than fifty percent (50%) of the outstanding voting stock shall not be considered
a change in control.
8.2 Recapture. In addition to, but not in limitation of, Landlord's right
---------
to approve of any subtenant or assignee, Landlord shall have the option, in its
sole discretion, in the event of any proposed subletting or assignment, to
terminate this Lease, or in the case of a proposed subletting of less than the
entire Leased Premises, to recapture the whole or the portion of the Leased
Premises to be sublet as of the date the subletting or assignment is to be
effective. The option shall be exercised, if at all, by Landlord giving Tenant
written notice thereof within thirty (30) days following Landlord's receipt of
Tenant's written notice as the effective date of the sublease or assignment as
if that date had been originally fixed in this Lease for the expiration of the
term hereof. If Landlord recaptures under this paragraph only a portion of the
Leased Premises, the rent during the unexpired term shall abate proportionately
based on the rent contained in this Lease as of the date immediately prior to
such recapture multiplied by a fraction, the numerator of which is the rentable
area recaptured and the denominator of which is the total rentable area of the
Leased Premises immediately prior to such recapture. Tenant shall, at Tenant's
own cost and expense, discharge in full any outstanding commission obligation on
the part of Landlord with respect to this Lease, and any commission which may be
due and owing as a result of any proposed assignment or subletting, whether or
not the Leased Premises are recaptured pursuant hereto and rented by Landlord to
the proposed tenant or any other tenant.
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9. FIRE AND CASUALTY DAMAGE.
9.1 Termination. If the Building, improvements, or Leased Premises are
-----------
rendered partially or wholly untenantable by fire or other casualty, and if such
damage cannot, in Landlords reasonable estimation, be materially repaired within
ninety (90) days of such damage, then Landlord may, at its sole option,
terminate this Lease as of the date of such fire or casualty. Landlord shall
exercise its option provided herein by written notice to Tenant within sixty
(60) days of such fire or other casualty. For purposes hereof, the Building,
improvements of Leased Premises shall be deemed "materially repaired" if they
are in such condition as would not prevent or materially interfere with Tenant's
use of the Leased Premises for the purpose for which it was being used before
such casualty.
9.2 Restoration. If this Lease is not terminated pursuant to Paragraph
-----------
9.1, then Landlord shall proceed with all due diligence to repair and restore
the Building, improvements or Leased Premises, as the case may be (except that
Landlord may elect not to rebuild if such damage occurs during the last year of
the Term exclusive of any option which is unexercised at the date of such
damage).
9.3 Effect of Termination. If this Lease shall be terminated pursuant to
---------------------
this Section 9, the term of this Lease shall end on the date of such damage as
if that date had been originally fixed in this Lease for the expiration of the
Term hereof. If this Lease shall not be terminated by Landlord pursuant to this
Section 9 and if the Leased Premises are untenantable in whole or in part
following such damage, the Rent payable during the period in which the Premises
are untenantable shall be abated in the proportion that the untenantable area of
the Leased Premises bears to the total area of the Leased Premises, for the
period from the date of such damage or destruction to (i) the date the damage or
destruction shall be materially repaired, or (ii) if the Building, but not the
Leased Premises, is so damaged or destroyed, the date on which the Leased
Premises shall be made tenantable; provided, however, should Tenant reoccupy a
portion of the Leased Premises during the period the restoration work is taking
place and prior to the date that the Leased Premises are substantially repaired
or restored, the Rent allocable to such reoccupied portion, based upon (A) the
proportion which the area of the reoccupied portion of the Premises bears to (B)
the total area of the Premises, shall be payable by Tenant from and after the
date of such occupancy. In the event that Landlord should fail to complete such
repairs and material restoration within one hundred fifty (150) days after the
date of such damage, Tenant may at its option and as its sole remedy terminate
this Lease by delivering written notice to Landlord, whereupon the Lease shall
end on the date of such notice as if the date of such notice were the date
originally fixed in this Lease for the expiration of the Term hereof, provided,
however, that if construction is delayed because of changes, deletions, or
additions in construction requested by tenant, strikes, lockouts, casualties,
acts of God, war, material or labor shortages, governmental regulation or
control or other causes beyond the reasonable control of Landlord, the period
for restoration, repair or rebuilding shall be extended for the amount of time
Landlord is so delayed.
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In no event shall Landlord be required to rebuild, repair or replace any
port of the partitions, fixtures, additions and other improvements which may
have been placed in or about the Leased Premises by Tenant. Any insurance which
may be carried by Landlord or Tenant against loss or damage to the Building or
Leased Premises shall be for the sole benefit of the party carrying such
insurance and under its sole control.
9.4 Insurance Proceeds. Notwithstanding anything herein to the contrary,
------------------
in the event the holder of any indebtedness secured by a mortgage or deed of
trust covering the Leased Premises, Building or Property requires that any
insurance proceeds be applied to such indebtedness, then Landlord shall have the
right to terminate this Lease by delivering written notice of termination to
Tenant within fifteen (15) days after such requirement is made by any such
holder, whereupon the Lease shall end on the date of such damage as if the date
of such damage were the date originally fixed in this Lease for the expiration
of the term hereof.
9.5 Waiver of Subrogation. Each of Landlord and Tenant hereby releases
---------------------
the other from any and all liability or responsibility to the other or anyone
claiming through or under them by way of subrogation or otherwise for any loss
or damage to property caused by fire or any other perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or anyone for whom such
party shall be responsible, including any other tenants or occupants of the
remainder of the Building in which the Leased Premises are located, provided,
however, that this release shall be lawful at that time and in any event only
with respect to loss or damage occurring during such times as the releasor's
policies shall contain a clause or endorsement to the effect that any such
release shall not adversely affect or impair said policies or prejudice the
right of the releasor to recover thereunder and then only to the extent of the
insurance proceeds payable under such policies. Each of Landlord and Tenant
agrees that it will request its insurance carriers to include in its policies
such a clause or endorsement. If extra cost shall be charged therefor, each
party shall advise the other thereof and of the amount of the extra cost, and
the other party, at its election, may pay the same, but shall not be obligated
to do so. If such other party fails to pay such extra cost, the release
provisions of this Paragraph shall be inoperative against such other party to
the extent necessary to avoid invalidation of such releasor's insurance.
9.6 Tenant' Property. In the event of any damage or destruction to the
----------------
Building or the Leased Premises by an peril covered by the provision of this
Section 9, Tenant shall, upon notice from Landlord, forthwith remove, at its
sole cost and expense, such portion or all of the property belonging to Tenant
or his licenses from such portion or all of the Building or the Leased Premises
as Landlord shall request and Tenant hereby indemnifies and holds Landlord
harmless from any loss, liability, costs and expenses, including attorney's
fees, arising out of any claim of damage or injury as a result of any alleged
failure to properly secure the Leased Premises prior to such removal and/or such
removal.
10. Liability. Landlord shall not be liable for and Tenant will indemnify
---------
and hold Landlord harmless from and against any and all loss, liability, costs
and expenses, including
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attorney's fees, arising out of any claim of injury or damage on or about the
Leased Premises and/or Property caused by the negligence or misconduct or breach
of this Lease by Tenant, its employees, subtenants, invitees or by any other
person entering the Leased Premises or the Building or Property under express or
implied invitation of Tenant or arising out of Tenant's use of the Leased
Premises. Landlord shall not be liable to Tenant or Tenant's agents, employees,
invitees or any person entering upon the Property in whole or in part because of
Tenant's use of the Leased premises for any damage to persons or property due to
condition, design, or defect in the Building or its mechanical systems which may
exist or occur, and Tenant assumes all risks of damage to such persons or
property. Landlord shall not be liable or responsible for any loss or damage to
any property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition or order
of governmental body or authority, or other matter beyond control of Landlord,
or for any injury or damage or inconvenience, which may arise through repair or
alteration of any part of the Building, or failure to make repairs, or from any
cause whatever except Landlord's willful acts or gross negligence. Tenant shall
procure and maintain throughout the term of this Lease a policy of insurance, in
form and substance satisfactory to Landlord, at a policy of insurance, in form
and substance satisfactory to Landlord, at Tenant's sole cost and expense,
naming Landlord as an additional named insured and insuring against all loss,
damage, claims, demands or actions arising out of or in connection with: (i) the
Leased Premises and the leasehold improvements, trade fixtures, merchandise, if
any, and other personal property located thereon; (ii) the condition of the
Leased Premises, and the leasehold improvements, trade fixtures, merchandise and
other personal property located thereon; (iii) the risk of damage to plate
glass, if any; (iv) all boilers, air conditioning equipment and other pressure
vessels and systems, whether fired or unfired, located in the Leased Premises,
if any; and if said objects and the damage that may be caused by them or result
from them are not covered by extended coverage insurance, then such boiler
insurance shall be in an amount not less than One Million Dollars ($1,000,000);
(v) Tenant's operations in and maintenance and use of the Leased Premises; and
(vi) Tenant's liability assumed under this Lease, the limits of such policy to
be in the amount of not less than $5,000,000 per occurrence in respect of injury
to persons (including death) and in the amount of not less than $1,000,000 per
occurrence in respect of property damage or destruction, including loss of use
thereof. Such policy shall be procured by Tenant from responsible insurance
companies satisfactory to Landlord. A certified copy of such policy, together
with receipt evidencing payment of the premium, shall be delivered to Landlord
prior to the Commencement Date of this Lease. Not less than thirty (30) days
prior to the expiration date of such policy, a certified copy of a renewal
thereof (bearing notations evidencing the payment of the renewal premium) shall
be delivered to Landlord. Such policy shall further provide that not less than
thirty (30) days prior to the expiration date of such policy, a certified copy
of a renewal thereof (bearing notations evidencing the payment of the renewal
premium) shall be delivered to Landlord. Such policy shall further provide that
not less than thirty (30) days written notice shall be given to Landlord before
such policy may be canceled or changed to reduce the insurance coverage provided
thereby and shall name Landlord's mortgagee, if any, as an additional named
insured.
11. CONDEMNATION.
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11.1 Taking of the Whole. If any substantial part of the Building,
-------------------
improvements, or Leased Premises should be taken for any public or quasi-public
use under governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, and the taking would prevent or
materially interfere with the use of the Building or Leased Premises for the
purpose of which they are then being used, this Lease shall automatically
terminate effective when the physical taking shall occur in the same manner as
if the date of such taking were originally fixed in this Lease for the
expiration of the Term hereof.
11.2 Partial Taking. If part of the Building, improvements, or Leased
--------------
Premises shall be taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof, this Lease shall not terminate and the Rent
payable hereunder shall not be reduced. Landlord shall undertake to restore the
Building, improvements and Leased Premises to a condition suitable for Tenant's
use, as near to the condition thereof immediately prior to such taking as is
reasonably feasible under all circumstances.
11.3 Condemnation Awards. In the event of any such taking or private
-------------------
purchase in lieu thereof, Landlord and Tenant shall each be entitled to receive
and retain such separate awards and/or portion of lump sum awards as may be
allocated to their respective interests in any condemnation proceedings;
provided that Tenant shall not be entitled to receive any award for Tenant's
loss of its leasehold interest, the right to such award being hereby assigned by
Tenant to Landlord.
12. Holding Over. Tenant will, at the termination of this Lease by lapse
------------
of time otherwise, yield up immediate possession to Landlord. If Tenant retains
possession of the Leased Premises or any part thereof after such termination,
then Landlord may, at its option, serve written notice upon Tenant that such
holding over constitutes any on of (i) renewal of this Lease for one year, and
from year to year thereafter, or (ii) creation of a month to month tenancy, upon
the terms and conditions set forth in this Lease, or (iii) creation of a tenancy
at sufferance, in any case upon the terms and conditions set forth in this
Lease; provided, however that the monthly rental (or daily rental under (iii))
shall, in addition to all other sums which are to be paid by Tenant hereunder,
whether or not as additional rent, be equal to double the Rent (including all
additional rent) being paid monthly to Landlord under this Lease immediately
prior to such termination (prorated in the case of (iii) on the basis of a 360
day year for each day Tenant remains in possession. If no such notice is
served, then a tenancy at sufferance shall be deemed to be created at the rent
in the preceding sentence. Tenant shall also pay to Landlord all damages
sustained by Landlord resulting from retention of possession by Tenant,
including the loss of any proposed subsequent tenant for any portion of the
Leased Premises. The provisions of this Section 12 shall not constitute a
waiver by Landlord of any right of re-entry as herein set forth; nor shall
receipt of any rent or any other act in apparent affirmance of the tenancy
operate as a waiver of the right to terminate this Lease for a breach of any of
the terms, covenants, or obligations herein on Tenant's part to be performed.
13. Quiet Enjoyment. So long as Tenant shall not be in default under this
----------------
Lease, Tenant shall be entitled to peaceful and quiet enjoyment of the Leased
Premises subject to the terms of this Lease.
16
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14. Events of Default. The following events shall be deemed to be "Events
------------------
of Default" by Tenant under this Lease:
(a) Tenant shall fail to pay when or before due any sum of money becoming
due to be paid to Landlord hereunder, whether such sum be any installment of the
Rent herein reserved, any other amount treated as Additional Rent hereunder, or
any other payment or reimbursement to Landlord required herein, whether or not
treated as additional rent hereunder, and such failure shall continue for period
of five (5) days from the date such payment was due; or
(b) Tenant shall fail to comply with any other term, provision or covenant
of this Lease other than; (i) by failing to pay when or before due any sum of
money becoming due to be paid to Landlord hereunder or (ii) those provided in
Section 8.1, and shall not cure such failure within twenty (20) days (or
forthwith, if the default involves a hazardous condition) after written notice
thereof to Tenant; or
(c) Tenant shall fail to observe or perform an of the restrictions or
covenants set forth in Section 8.1; or
(d) Tenant shall abandon or vacate any substantial portion of the Leased
Premises;
(e) Tenant shall fail to immediately vacate the Leased Premises upon
termination of this Lease, by lapse of time or otherwise, or upon termination of
Tenant's right to possession only; or
(f) The leasehold interest of Tenant shall be levied upon under execution
or be attached by process of law or Tenant shall fail to contest diligently the
validity of any lien or claimed lien and give sufficient security to Landlord to
insure payment thereof or shall fail to satisfy any judgment rendered thereon
and have the same released, and such default shall continue for ten (10) days
after written notice thereof to Tenant; or
(g) Tenant or any principal, shareholder, general partner or officer of
Tenant shall become insolvent, admit in writing its inability to pay its debts
generally as they become due, file a petition in bankruptcy or a petition to
take advantage of any insolvency statute, make an assignment for the benefit of
creditors, make a transfer in fraud of creditors, apply for or consent to the
appointment of a receiver of itself or of the whole or any substantial part of
its property, or file a petition or answer seeking reorganization or arrangement
under the federal bankruptcy laws, as now in effect or hereafter amended, or any
other applicable law or statute of the United States or any state thereof, or
(h) A court of competent jurisdiction shall enter an order, judgment or
decree adjudicating Tenant a bankrupt, or appointing a receiver of Tenant, or of
the whole or any substantial part of its property, without the consent of
Tenant, or approving a petition filed against Tenant seeking reorganization or
arrangement of Tenant under the bankruptcy laws of the United States, as
17
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now in effect or hereafter amended, or any state thereof, and such order,
judgment or decree shall not be vacated or set aside or stayed within thirty
(30) days from the date of entry thereof.
15. Remedies. Upon the occurrence of any of such Events of Default
---------
described in Section 14 hereof or elsewhere in this Lease, Landlord shall have
the option to pursue any one or more of the following remedies without any
notice or demand whatsoever:
(a) Landlord may, at its election, terminate this Lease or terminate
Tenant's right to possession only, without terminating the Lease;
(b) Upon any termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of Tenant's right to possession without
termination of the Lease, Tenant shall surrender possession and vacate the
Leased Premises immediately, and deliver possession thereof to Landlord, and
Tenant hereby grants to Landlord full and free license to enter into and upon
the Leased Premises in such event with or without process of law and to
repossess Landlord of the Leased Premises as of Landlord's former estate and to
expel or remove Tenant property therefrom, without being deemed in any manner
guilty of trespass, eviction or forcible entry or detainer, and without
incurring any liability for any damage resulting therefrom, Tenant hereby
waiving any right to claim damage for such reentry and expulsion, and without
relinquishing Landlord's right to rent or any other right given to Landlord
hereunder or by operation of law;
(c) Upon any termination of this Lease, whether by lapse of time or
otherwise, Landlord shall be entitled to recover as damages, all unpaid and
delinquent Rent, and other sums due and payable by Tenant on the date of
termination, plus the sum of (i) an amount equal to the then present value of
the Rent and other sums provided herein to be paid by Tenant for the residue of
the state Term hereof, less any sums received by Landlord upon reletting of the
Leased Premises (taking into account the time and expense necessary to obtain a
replacement tenant or tenants, including expenses hereinafter described in
subparagraph (d) relating to recovery of the Leased Premises, preparation for
reletting and for reletting itself), and (ii) the cost of performing any other
covenants which would have otherwise been performed Tenant;
(d) (i) Upon any termination of Tenant's right to possession only
without termination of the Lease, Landlord may, at Landlord's option,
enter into the Leased Premises, remove Tenant's signs and other
evidences of tenancy, and take and hold possession thereof as provided
in subparagraph (b) above, without such entry and possession terminate
the lease or releasing Tenant, in whole or in part, from any
obligation, including Tenant's obligation to pay the Rent, hereunder
for the full Term. In any case Tenant shall pay forthwith to Landlord,
if Landlord so elects, a sum equal to the entire amount of the Rent,
hereunder for the residue of the stated Term hereof plus any other sums
provided herein to be paid by Tenant for the remainder of the Lease
Term, less any sums received by Landlord upon reletting of the Leased
Premises (taking into account the time and expense necessary to obtain
a replacement tenant or tenants, including expenses described in this
Subparagraph (d)).
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(ii) Landlord may, and shall use reasonable efforts to relet the
Leased Premises or any part thereof for such rent and upon such terms
as Landlord in its sole discretion shall determine (including the right
to relet the Leased Premises for a greater or lesser term than that
remaining under this Lease, the right to relet the Leased Premises as a
part of a larger area, and the right to change the character or use
made of the Leased Premises)f and Land shall not be required to observe
any instructions given by Tenant about such reletting. In any such
case, Landlord may make repairs, alterations and additions in or to the
Leased Premises, and redecorate the same to the extent Landlord deems
desirable, and Tenant shall, upon demand, pay the cost thereof,
together with Landlord's expenses of reletting including, without
limitation, any broker's commission incurred by Landlord. If the
consideration collected by Landlord upon any such reletting plus any
sums previously collected form Tenant are not sufficient to pay the
full amount of all Rent and other sums reserved in this Lease for the
remaining Term hereof, together with the costs of repairs, alterations,
additions, redecorating and Landlord's expenses of reletting and the
collection of the rent accruing therefrom (including attorney's fees
and broker's commission), Tenant shall pay to Landlord the amount of
such deficiency upon demand and Tenant agrees that Landlord may file
suit to recover any sums falling due under this section from time to
time and nothing contained in this Lease shall be deemed to require
Landlord to postpone suit to the date when the Term would have expired,
nor limit or preclude recovery by Landlord of any sums or damage to
which, in addition to the damages particularly provided in this
Paragraph 15. Landlord may lawfully be entitled by reason of any
default hereunder on the part of the Tenant;
(e) Landlord may, at Landlord's option, enter into and upon the Leased
Premises, with or without process of law, if Landlord determines in its sole
discretion that Tenant is not acting within a commercially reasonable time to
maintain, repair or replace anything for which Tenant is responsible hereunder
and correct the same, without being deemed in any manner guilty of trespass,
eviction or forcible entry and detainer and without incurring any liability for
any damage resulting therefrom and Tenant agrees to reimburse Landlord, on
demand, as additional rent, for any expenses which Landlord may incur in so
attempting to effect Tenant's compliance with Tenant's obligations under this
Lease;
(f) Any and all property which may be removed from the Leased Premises by
Landlord pursuant to the authority of the Lease or of law, to which Tenant is or
may be entitled, may be handled, removed and stored, as the case may be, by or
at the direction of Landlord at the risk, cost and expense of Tenant, and
Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all
expenses incurred in such removal and all storage charges against such property
so long as the same shall be in Landlord's possession or under Landlord's
control. Any such property of Tenant not retaken by Tenant from storage within
thirty (30) days after removal from the Lease Premises shall, at Landlord's
option, conclusively be presumed to have conveyed by Tenant to Landlord under
this Lease as by a bill of sale without further payment or credit by Landlord to
Tenant.
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In the event Tenant fails to pay any installment of Rent or other sums
hereunder as and when such installment or other charge is due, Tenant shall pay
to Landlord on demand a late charge in an amount equal to five (5%) of such
installment or other charge overdue in any month and five percent (5%) each
month thereafter until paid in full to help defray the additional cost to
Landlord for processing such late payments, and such late charge shall be
additional rent hereunder and the failure to pay such late charge within ten
(10) days after demand therefor shall be an additional event of default
hereunder. The provisions for such late charge shall be in addition to all of
Landlord's other rights and remedies hereunder or at law and shall not be
construed as liquidated damages or as limiting Landlord's remedies in any
manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any
of the other remedies herein provided or any other remedies provided by law (all
such remedies being cumulative), nor shall pursuit of any remedy herein provided
constitute a forfeiture or waiver of any rent due to Landlord hereunder or of
any damages accruing to Landlord by reason of the violation of any of the terms,
provisions and covenants herein contained. No act or thing done by Landlord or
its agents during the Term hereby granted shall be deemed a termination of this
Lease or an acceptance of the surrender of the Leased Premises, and no agreement
to terminate this Lease or accept a surrender of said premises shall be valid
unless in writing signed by Landlord. No waiver by Landlord of any violation or
breach of any of the terms, provisions and covenants herein contained shall be
deemed or construed to constitute a waiver of any other violation or breach of
any of the terms, provisions and covenants herein contained. Landlord's
acceptance of the payment of rental or other payments hereunder after the
occurrence of an event of default shall not be construed as a waiver of such
default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord
to enforce one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of such default or of
Landlord's right to enforce any such remedies with respect to such default or
any subsequent default. Tenant shall pay all of Landlord's costs, charges and
expenses, including court costs and attorneys' fees, incurred in enforcing
Tenant's obligations under this Lease or incurred by Landlord in any litigation,
negotiation or transactions in which Tenant causes the Landlord, without
Landlord's fault, to become involved or concerned. As used herein attorneys'
fees shall be and mean the normal hourly rate charged by the attorney's (and
their staff) selected by Landlord multiplied by the actual number of hours spent
by such attorneys on such matters.
Without limited the foregoing, Tenant hereby: (i) appoints and designates
JCF Real Estate, Inc., 8601 West Bryn Mawr Avenue, Suite No. 114, Chicago,
Illinois 60631, or any party Landlord may from time to time hereinafter
designate, by notice to Tenant, as Tenant's true and lawful agent for service or
process only, and agrees that such service of process upon such party shall
constitute personal service of such process upon Tenant (provided, however,
Landlord does not hereby waive the right to serve Tenant with Process by and
other lawful means); and (ii) to the extent that it may lawfully be waived,
expressly waives the service of any notice under any existing or future law of
the State of Illinois applicable to Landlords and Tenants.
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16. Landlord's Lien. In addition to any statutory lien for rent in
----------------
Landlord's favor, Landlord shall have and Tenant hereby grants to landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, chattel paper and other
personal property of Tenant situated on the Leased Premises, and such property
shall not be removed therefrom without the consent of Landlord until all
arrearages in rent as well as any and all other sums of money then due to
Landlord hereunder shall first have been paid and discharged. In the event of a
default under this Lease, Landlord shall have, in addition to any other remedies
provided herein or by law, all rights and remedies under the Uniform Commercial
Code, including without limitation the right to sell the property described in
this Paragraph 16 at public or private sale upon five (5) days' notice to
Tenant. Tenant hereby agrees to execute such financing statements and other
instruments necessary to desirable in Landlord's discretion to perfect the
security interest hereby created. Any statutory lien for rent is not hereby
waived, the express contractual lien herein granted being in addition and
supplementary thereto.
17. SUBORDINATION, NOTICE TO SUPERIOR LESSORS AND MORTGAGEES.
17.1 Subordination of Lease. This Lease, and all right of Tenant hereunder
-----------------------
are and shall be subject and subordinate to all ground leases of the Building
now or hereafter existing and to all mortgages, or trust deeds in the nature of
a mortgage, both referred to hereafter as mortgages, which may now or hereafter
affect or encumber the Building and/or any of such lease (whether or not such
mortgages shall also cover other lands and/or building and/or leases). This
subordination shall likewise apply to each and every advance made or hereafter
to be made under such mortgages, and to spreaders and consolidations of such
mortgages. This Paragraph 17.1 shall be self-operative and no further
instrument of subordination shall be required. However, in confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such ground lease or the holder
of any such mortgage (or their respective successors-in-interest) may reasonably
request to evidence such subordination. If Tenant fails to execute, acknowledge
or deliver any such instrument within ten (10) days after request therefor,
Tenant hereby irrevocably constitutes and appoints landlord as Tenant's
attorney-in-fact, which appointment is agreed to be coupled with an interest, to
execute and deliver such instruments for and on behalf of Tenant. Any lease to
which this Lease is subject and subordinate is hereinafter referred to as a
"Superior Lease" and the lessor of a Superior Lease is hereinafter referred to
as "Superior Lessor" and the lessee as a "Superior Lessee"; and any mortgage to
which this Lease is subject and subordinate is hereinafter referred to as a
"Superior Mortgage" and the holder of a Superior Mortgage is hereinafter
referred to as a "Superior Mortgagee".
17.2 Notice in the Event of Default. If any act or omission of Landlord
-------------------------------
would give Tenant the right, immediately or after the lapse of a period of time,
to cancel or terminate this Lease or to claim a partial or total eviction,
Tenant shall not exercise such right (a) until it has given by registered or
certified mail written notice of such act or omission to Landlord and each
Superior Mortgagee and Superior Lessor and Superior Lessee whose name and
address shall previously have been furnished to Tenant, and (b) until a thirty
(30) day period for remedying (or if the act or
21
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omission cannot, by its nature, be cured within thirty (30) days - commencing
with diligence and good faith, to remedy) such act or omission shall have
elapsed following the giving of such notice.
17.3 Successor Landlord. If any Superior Lessor, Superior Lessee or
--------------------
Superior Mortgagee shall succeed to the rights of Landlord hereunder, whether
through possession or foreclosure action or delivery of a new lease or deed, or
otherwise, then at the request of such party (hereinafter referred to as
"Successor Landlord"), Tenant shall attorn to and recognize each Successor
Landlord as Tenant's landlord under this Lease and shall promptly execute and
deliver any instrument such Successor Landlord may reasonably request to further
evidence such attornment.
18. Landlord's Liability. In no event shall Landlord's liability for any
---------------------
breach of this Lease exceed the amount of rental then remaining unpaid for the
then current term (exclusive of any renewal periods which have not then actually
commenced). This provision is not intended to be a measure or agreed amount of
Landlord's liability with respect to any particular breach, and shall not be
utilized by any court or otherwise for the purpose of determining any liability
of Landlord hereunder, except only as a maximum amount not be exceeded in any
event.
19. Mechanic's and Other Liens. Tenant shall have no authority, express
---------------------------
or implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
Leased Premises or to charge the rentals payable hereunder for any claim in
favor of any person dealing with Tenant, including those who may furnish
materials or perform labor for any construction or repairs, and each such claim
shall affect and each such lien shall attach to, if at all, only the leasehold
interest granted to Tenant by this Lease. Tenant covenants and agrees that it
will pay or cause to be paid all sums legally due and payable by it on account
of any labor performed on the Leased Premises on which any lien is or can be
validly and legally asserted against its leasehold interest in the Leased
Premises, the Property or the improvements thereon and that it will and does
hereby save and hold Landlord harmless from any and all loss, liability, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the right, title and interest of the Landlord in the
Leased Premises, the Property or the Building under the terms of this Lease.
Tenant will not permit any mechanic's lien or liens or any other liens which may
be imposed by law affecting Landlord's or its mortgagees' interest in the Leased
Premises, the Property or the Building to be placed upon the Leased Premises,
the Property or the Building arising out of any acting or claimed action by
Tenant, and in case of the filing of any such lien, Tenant will promptly pay
same. If any such lien shall remain in force and effect for twenty (20) days
after written notice thereof from Landlord to Tenant, Landlord shall have the
right and privilege of paying and discharging the same or any portion thereof
without inquiry as to the validity thereof, and any amounts so paid, including
attorneys fees, court costs and other expenses and interest, shall be so much
additional rent hereunder due from Tenant to Landlord and shall be paid to
Landlord immediately on rendition of bill therefor. Notwithstanding the
foregoing, Tenant shall have the right to contest any such lien in good faith
and with all due diligence so long as any such contest, or action taken in
connection therewith, protects the interest of Landlord and Landlord's
mortgagee(s) in the Leased Premises, the Property and the improvements thereon,
and Landlord and any such mortgagee(s) are, by the expiration of said twenty
(20) day period, furnished such
22
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protection, and indemnification against any loss, liability, cost or expense
related to any such lien and the contest thereof as are satisfactory to Landlord
and any such mortgagee(s).
20. Notices. Each provision of this Lease or any of any applicable
--------
governmental laws, ordinance, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
shall be deemed to be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to the Landlord's agent as described in Section 1.1
of this Lease or such other entity at such other address as Landlord may specify
from time to time by written notice delivered in accordance herewith.
(b) Any notice or other document required or permitted to be delivered
hereunder shall be deemed to be delivered when personally delivered to, whether
actually received or not, when deposited in the continental United States Mail,
postage prepaid, certified or registered mail, addressed to the parties hereto
at the respective addresses set out in Section 1.1 or at such other address as
they have theretofore specified by written notice delivered in accordance
herewith. All parties included within the terms "Landlord" and "Tenant",
respectively, shall be bound by notices given in accordance with the provisions
of this paragraph to the same effect as if each had received such notice.
21. Miscellaneous.
--------------
21.1 Gender and Number. Words of any gender used in this Lease shall be
------------------
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.
21.2 Binding Effect. The terms provisions and covenants and conditions
---------------
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon, the parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this Lease and Landlord's grantee or Landlord's successor shall upon assignment,
become Landlord hereunder, thereby freeing and relieving the grantor or assignor
of all covenants and obligations of Landlord hereunder. Tenant agrees to
furnish promptly upon demand, a corporate resolution, proof of due authorization
by partners, or other documentation which Landlord may request evidencing the
due authorization of Tenant to enter into this Lease. Nothing herein contained
shall give any other tenant in the Building of which the Leased Premises are a
part any enforceable right either against Landlord or Tenant as a result of the
covenants and obligations of either party set forth herein.
21.3 Captions. The captions inserted in this Lease are for convenience
---------
only and in no way define, limit or otherwise describe the scope or intent of
this Lease, or any provisions hereof.
23
<PAGE>
21.4 Estoppel Letter. Tenant shall at any time and from time to time
----------------
within ten (10) days after written request from Landlord execute and deliver to
the Landlord any prospective landlord or mortgagee or prospective purchaser of
the Building a sworn and acknowledged estoppel certificate, in form reasonably
satisfactory to Landlord and/or Landlord's mortgagee or prospective mortgagee
certifying and stating as follows: (i) this Lease has not been modified or
amended (or if modified or amended, setting forth such modifications or
amendments); (ii) this Lease as so modified or amended is in full force and
effect (or if not in full force and effect, the reasons therefore);(iii) the
Tenant has no offsets or defenses to its performance of the terms and provisions
of this Lease, including the payment of Rent (or if there are any such defenses
or offsets, specifying the same); (iv) the amount of Base Rent, Rent Adjustment
Deposits and other charges under this Lease; (v) Tenant is in possession of the
Leased Premises, if such be the case; (vi) if an assignment of rents or leases
has been served upon Tenant by a mortgagee or prospective mortgagee, Tenant has
received such assignment and agrees to bound by the provisions thereof; and
(vii) any other accurate statements reasonably required by Landlord or its
mortgagee or prospective mortgagee. It is intended that any such statement
delivered pursuant to this subsection may be relied upon by any prospective
purchaser or mortgagee and their respective successors and assigns and Tenant
shall be liable for all loss, cost or expense resulting from the failure of any
sale or funding of any loan caused by any misstatement contained in such
estoppel certificate. Tenant hereby irrevocably appoints Landlord or if
Landlord is a trust, Landlord's beneficiary, as attorney-in-fact for the Tenant
with full power and authority to execute and deliver in the name of Tenant such
estoppel certificate if Tenant fails to deliver the same within such ten (10)
day period and such certificate as signed by Landlord or Landlord's beneficiary,
as the case may be, shall be fully binding on Tenant, if Tenant fails to deliver
a contrary certificate within five (5) days after receipt by Tenant of a copy of
the certificate executed by Landlord or Landlord's beneficiary, as the case may
be, on behalf of Tenant. In addition to any other remedy Landlord may have
hereunder, Landlord may, as its option; if Tenant does not deliver to Landlord
an estoppel certificate as set forth above within fifteen (15) days after Tenant
is request so to do, cancel this Lease effective the last day of the then
current month, without incurring any liability on account thereof, and the Term
hereby granted is expressly limited accordingly.
21.5 Entire Agreement. All of the contemporaneous and prior agreements of
-----------------
Landlord and Tenant with respect to the Leased Premises, the Building and the
Property are contained in this Lease; and no modifications, waiver or amendment
of this Lease or of any of its conditions or provisions shall be binding upon
Landlord unless in writing signed by Landlord.
21.6 Post Term Obligations. All obligations of Tenant hereunder not fully
----------------------
performed as of the expiration or earlier termination of the Term of this Lease
shall survive the expiration or earlier termination of the Term hereof,
including without limitation, all payment obligations with respect to taxes,
insurance, and all obligations concerning the condition of the Premises. Upon
the expiration or earlier termination of the Term hereof, Tenant shall pay to
Landlord the amount, as estimated by Landlord, necessary: (i) to repair and
restore the Lease Premises as provided herein; and (ii) to discharge Tenant's
obligation for unpaid Real Estate Taxes, insurance, electricity, or other
amounts due Landlord. All such amounts shall be used and held by Landlord for
payment of such
24
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obligations of Tenant, with Tenant being liable for any additional costs upon
demand by Landlord, or with any excess to be returned to Tenant after all such
obligations have been determined and satisfied. Any security deposit held by
Landlord may, at Landlord's option, be credited against the amount payable by
Tenant under this Section 21.6.
21.7 Severability. If any clause, phrase, provisions or portion of this
------------
Lease or the application thereof to any person or circumstance shall be invalid
or unenforceable under applicable law, such event shall not affect, impair or
render invalid or unenforceable the remainder of this Lease nor any other
clause, phrase, provision or portion hereof, to other persons or circumstances.
21.8 Not and Offer. Submission of this Lease shall not be deemed to be a
-------------
reservation of the Leased Premises. Landlord shall not be bound hereby until
its delivery to Tenant of an executed copy hereof signed by Landlord, already
having been signed by Tenant, and until such delivery Landlord reserves the
right to exhibit and lease the Leased Premises to other prospective tenants.
Notwithstanding anything contained herein to the contrary, Landlord may withhold
delivery of possession of the Leased Premises from Tenant until such time as
Tenant has paid to Landlord the Security Deposit required by Section 4 hereof,
the first month's rent as set forth in Section 3.1 hereof, and any other sums
owed pursuant to the terms hereof that are due upon the Commencement Date.
21.9 Force Majeure. Whenever a period of time is herein prescribed for
-------------
action to be taken by Landlord, the Landlord shall not be liable or responsible
for, and there shall be excluded from the computation of any such period of
time, any delays due to causes of any kind whatsoever which are beyond the
control of Landlord.
21.10 Proportionate Share. "Tenant's Proportionate Share" as used in this
-------------------
Lease and as agreed to in Section 1.1 of this Lease is equivalent to a fraction,
the numerator of which is the gross rentable area of the Leased Premises and the
denominator of which is the gross rentable are contained in the Building, in
each case as reasonably determined by Landlord.
21.11 Obligation Joint. If there be more than one Tenant, the obligations
----------------
hereunder imposed upon Tenant shall be joint and several. Any indemnification
of, insurance of, or option granted to Landlord shall also include or be
exercisable by Landlord's trustee, beneficiary, agents and employees, as the
case may be.
21.12 Brokers. Tenant covenants, warrants and represents that only
-------
Scribcor Real Estate Services, a duly licensed real estate broker in the State
of Illinois represented Tenant in the negotiation of this Lease ("Tenant's
Broker"). Landlord covenants, warrants and represents that only JCF Real Estate,
Inc., a duly licensed real estate broker in the State of Illinois, represented
Landlord in the negotiation of this Lease ("Landlord's Broker"). Pursuant to a
separate agreement with JCF Real Estate, Inc. Landlord agrees to pay the
brokerage commissions to be charged by Tenant's Broker and Landlord's Broker.
Further, neither Landlord nor Tenant have had any conversations or negotiations
with any broker except Landlord's Broker and Tenant's Broker concerning the
leasing of the Premises. Both parties hereby indemnify the other against and
from any claims for any
25
<PAGE>
brokerage commissions (except those payable by Landlord to Landlord's Broker and
Tenant's Broker) and all costs, expenses and liabilities in connection
therewith, including, without limitation, reasonable attorneys' fees and
expenses, for any breach of the foregoing.
21.13 Tenant's Warranty. Tenant warrants and represents to and covenants
-----------------
with Landlord that: (i) all financial statements and information relating to
Tenant which have been or may hereafter be delivered by Tenant to Landlord are
true and correct and have been prepared in accordance with generally accepted
accounting principles consistently employed, and Tenant will give prompt notice
of any material adverse change in the financial condition of Tenant since the
submission of any such financial information to Landlord or of the occurrence of
any event of default under this Lease; (ii) that Tenant is authorized and if
required, duly licensed to conduct the business and activities that it proposes
to conduct in the Leased Premises; (iii) Tenant has no knowledge of any actions
or proceeding which are pending or threatened against Tenant which might result
in any material adverse change in Tenants financial condition or which might in
any way materially affect any of the assets of Tenant' (iv) Tenant has duly
filed all federal, state and other governmental tax returns which it is required
by law to file, and that all taxes and other sums which may be due to the United
States, any state or other governmental authority have been fully paid and that
Tenant now has and shall at all time hereafter maintain reserves adequate in
amount to fully pay all such tax liabilities which may thereafter accrue during
the succeeding 12 month period; and (v) Tenant is now and shall be at times
hereafter able to pay its debts as they mature.
21.14 Relocation of Tenant. Landlord shall have the right upon 90 days'
--------------------
prior written notice, to relocate Tenant to another location in the Building In
the event of such a relocation, the cost of relocating Tenant and the cost of
altering the new space to make it comparable to the Leased Premises shall be
borne by Landlord. Landlord's right to relocate Tenant shall be subject to the
condition that the new premises designated by Landlord shall be substantially as
desirable as the Leased Premises with respect to layout and location in the
Building and shall not be smaller in area than the Leased Premises. If Landlord
shall exercise its right hereunder, the substituted space shall thereafter be
deemed for the purposes of this Lease as the Leased premises. In the event that
Tenant desires to be relocated to a larger space, all Base Rent, Rent Adjustment
Deposits and other charges under this Lease shall be increased proportionately
to the increase in the size of the Leased Premises.
21.15 Controlling Attachments. Clauses, plats and riders, if any, signed
-----------------------
by Landlord and Tenant and endorsed on or affixed to this Lease are part hereof
and in the event of variation or discrepancy the duplicate original hereof,
including such clauses, plats and riders, if any, held by Landlord shall
control.
21.16 Termination Right. The Landlord shall have the right to terminate
-----------------
this Lease on the thirtieth day of April in any year if the Landlord proposes or
is required, for any reason, to materially remodel, remove or demolish the
Building or any substantial portion of it. Such termination shall become
effective and conclusive by notice of the Landlord to the Tenant not less than
ninety (90) days prior to the thirtieth (30/th/) day of April fixed in the
notice. No money or other consideration shall be payable by the Landlord to the
Tenant for this right and the right hereby reserved to the
26
<PAGE>
Landlord shall inure to all purchasers, assignees, lessees, transferee and
groundlessees, as the case may be and is in addition to all other rights of the
Landlord.
22. Certain Rights Reserved to the Landlord. The Landlord reserves and
---------------------------------------
may exercise the following rights without affecting Tenant's obligations
hereunder:
(a) to change the name or street address of the Building;
(b) to install and maintain a sign or signs on the exterior of the
Building;
(c) to have access for the Landlord and the other tenants of the Building
to any mail chutes located on the Lease Premises according to the rules of the
United States Post Office;
(d) to designate all sources furnishing sign painting and lettering,
within reason;
(e) to retain at all times pass keys to the Leased Premises;
(f) to grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building except for the business conducted by
Tenant.
23. Parking. Landlord has advised Tenant that a limited number of
-------
parking spaces are available near the Building. Landlord agrees that, throughout
the Lease Term, Landlord shall provide Tenant with the use of three (3) parking
space. Tenant understands and agrees that Landlord shall not be obligated to
assign a particular designated parking space to Tenant; rather, Tenant shall
simply be entitled to use three (3) of the parking spaces available near the
Building. Landlord may, at its sole option and discretion, assign designated
parking spaces to Tenant. Landlord shall not charge Tenant for the use of the
three (3) parking spaces. If, at any time during the term of this Lease (a)
additional parking spaces become available, Landlord shall use its reasonable
efforts to notify Tenant of that fact and allow Tenant the opportunity to Lease
such spaces at the rental rate that Landlord is charged, from time to time, for
such spaces; and (b) Tenant desires additional parking spaces, Tenant shall
advise Landlord and Landlord shall reasonable attempt to provide Tenant with
such spaces, subject to availability and at the rental rate that Landlord is
charged, from time to time, for such spaces.
24. Exculpatory Provisions. It is expressly understood and agreed by and
----------------------
between the parties hereto, anything herein to the contrary notwithstanding,
that each and all of the representations, warranties, covenants, undertakings
and agreements of Landlord are nevertheless each and every one of them made and
intended, not as personal representations, warranties, covenants, undertakings
and agreements by Landlord or for the purpose of with the intention of binding
Landlord personally, but are made and intended for the purpose only of
subjecting Landlord's interest in said Building, the land on which it is
situated and the Leased Premises to the terms of this Lease and for no other
purposes whatsoever, and in case of default hereunder by Landlord, the Tenant
shall look solely to the interest of Landlord in said Building and said land.
27
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IN WITNESS WHEREOF, the parties have caused this Lease to be executed
as of the date first above written.
LANDLORD:
MORTGAGE ONE CORPORATION
BY:______________________________
Its______________________________
TENANT:
ION LASER TECHNOLOGY, INC.
BY: /s/ Richard V. Trefz
-----------------------------------------------
Its President
ATTEST:
BY________________________________
Its_______________________________
28
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EXHIBIT A
Lots 4 and 5 in Langworthy's Subdivision of Block 64 in Evanston of the East
1/2 of the South West 1/4 of Section 18, Township 41 North, Range 14, East of
the Third Principal Meridian, and all right, title and interest in and to that
Party Wall on the West line of the property in question arising by virtue of the
Party Wall Agreement dated February 12, 1891 and recorded February 17, 1891, as
Document No. 1420530 or as otherwise provided by law, all in Cook County,
Illinois.
29
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July 16, 1998
Mr. William T. McCarthy
386 Penn Road
Wynnewood, PA 19096
Dear Bill:
We are pleased to offer you a position with Ion Laser Technology, Inc. (the
"Company") for an annual salary of $150,000 which will be paid in accordance
with the Company's normal payroll practices.
Your employment will commence on August 3, 1998. You shall serve as the
Company's Chief Financial Officer and you will report to the President.
You will be granted options under the Company's 1997 Stock Option Program
to purchase up to 150,000 shares of the Company's common stock at a purchase
price of $1.75 per share. You will be entitled to exercise the option to
purchase one third of such shares (or 50,000 shares) if you remain in the
Company's employ on the first anniversary of the date ("Start Date") you begin
full time employment with the Company. You will be entitled to exercise the
option to purchase an additional one third of such shares if you remain in the
Company's employ on the second anniversary of your Start Date and to purchase an
additional one third of such shares if you remain in the Company's employ on the
third anniversary of the Start Date.
You will also be entitled to participate in all of the Company's benefit
programs which are available to the Company's executives generally.
Your employment is at will which means that you are free to leave the
Company at any time for any or no reason and that the Company is free to
discharge you at any time for any or no reason. However, in the event that a
Change of Control occurs and, as a result, you are discharged or resign because
of a material reduction in your duties and responsibilities, the Company will
pay you, in addition to all salary and benefits up to the date you leave the
<PAGE>
Company's employ, an amount equal to one times your then prevailing annual base
salary. A "Change of Control" of the Company shall mean (i) the sale, exchange
or other disposition of more than 50% of the shares of capital stock of the
Company to or with a person or entity (other than the Company or an affiliate of
the Company), (ii) the sale of all or substantially all of the assets of the
Company to a person or entity (other than an affiliate of the Company) or (iii)
the merger, consolidation or other business combination of the Company with or
into another entity not controlled by the Company or an affiliate of the
Company.
Please acknowledge your receipt and understanding of the above by signing
and dating the enclosed copy of this letter and returning it to me.
Please call if you have any questions.
Sincerely yours,
ION LASER TECHNOLOGY, INC.
By /s/ Richard Trefz
Richard Trefz, President
AGREED AND ACCEPTED:
/s/ William T. McCarthy
William T. McCarthy
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 30, 1998, by and between ION
LASER TECHNOLOGY, INC. (the "COMPANY"), a Utah corporation, and RICHARD TREFZ
(the "EMPLOYEE").
W I T N E S S E T H:
-------------------
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee desires
to accept employment by the Company;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. Upon the terms and subject to the conditions of this
----------
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company in the capacities hereinafter set forth.
2. Term of Employment. Unless earlier terminated pursuant to
------------------
Section 6 below, the term (the "TERM") of this Agreement shall commence on the
date hereof and shall continue in effect through May 31, 2000; provided,
however, that commencing on May 31, 2000 and each anniversary thereof the term
of this Agreement shall be extended for an additional year from May 31, 2000 or
such anniversary as the case may be unless not later than 30 days prior to such
automatic execution date the Company or the Employee shall have given notice
that such party does not want to extend the term of this Agreement in which case
the term of this Agreement shall end on May 31, 2000 or, if later, on the date
to which the term of this Agreement was last automatically extended.
3. Duties; Extent of Services.
--------------------------
(a) Duties. During the Term, the Employee shall serve in such
------
capacity and may be reasonably designated by the Board of Directors, initially
as President and Chief Executive Officer, and shall perform the duties,
undertake the responsibilities and exercise the authority reasonably required of
such an employee of the Company, and shall have such other powers and perform
such additional executive duties as may be assigned to him from time to time by
the Board of Directors of the Company (the "BOARD"). The Employee shall report
to and carry out the lawful directions of the Board.
(b) Extent of Services. Except for illness and permitted vacation
------------------
periods, during the Term the Employee shall (i) devote his full time and
attention during normal business hours to the businesses of the Company and its
subsidiaries and Affiliates (as defined herein);
<PAGE>
(ii) use his best efforts to promote the interests of the Company and its
subsidiaries and Affiliates; (iii) discharge such executive and administrative
duties not inconsistent with his position as may be assigned to him by the
Board; and (iv) serve, without additional compensation, as a director or officer
of any subsidiary of the Company if elected as such.
4. Compensation Benefits.
---------------------
(a) Salary. In consideration of the services rendered by the Employee
------
hereunder and provided that the Employee has substantially performed all of his
obligations provided for herein, the Company will pay to the Employee a salary
(the "SALARY") at the rate of $250,000 per year during the Term. The Salary
shall be paid in accordance with the Company's normal payroll practice.
(b) During the Term, the Employee shall be entitled (i) to vacation
time in accordance with the Company's policy from time to time in effect; (ii)
to participate in all employee insurance and other fringe benefit programs,
including, without limitation, life, health, dental and accident insurance plans
and long term disability now or hereafter maintained by the Company for senior
executive or other salaried personnel for which the Employee is eligible; and
(iii) to participate in a pension plan with terms similar to those applicable to
executives of the Company.
5. Options. In consideration of Employee's entering into and
-------
performing the Agreement, Employee will be granted by the Company options to
purchase 225,000 shares of the Company's Common Stock at $1.75 per share
pursuant to a separate option agreement.
6. Termination Provisions.
----------------------
(a) Termination for Cause. The Board may terminate the Employee's
---------------------
employment hereunder for Cause, as hereinafter defined, immediately upon written
notice to the Employee. For purposes of this Agreement, "CAUSE" shall mean (i)
embezzlement, theft or other misappropriation of any property of the Company or
any Affiliate, (ii) gross or willful misconduct resulting in substantial loss to
the Company or any Affiliate or substantial damage to the reputation of the
Company or any Affiliate, (iii) any act involving moral turpitude which results
in a conviction for a felony involving moral turpitude, fraud or
misrepresentation, (iv) gross neglect of his assigned duties to the Company or
any Affiliate, (v) gross breach of his fiduciary obligations to the Company or
any Affiliate, or (vi) any chemical dependence which materially affects the
performance of his duties and responsibilities to the Company or any Affiliate;
provided that in the case of the misconduct set forth in clauses (iv) and (vi)
- --------
above, such misconduct shall continue for a period of 30 days following written
notice thereof by the Company to the Employee. During the Term, the Employee
shall be entitled to only one such notice and right to cure for any single act
or event. If the Employee's employment is terminated for Cause, the Employee
shall be entitled to receive only the unpaid portion of the Salary then in
effect which has accrued to the date of termination and any other payments
generally available to
-2-
<PAGE>
departing employees of the Company (such as unused vacation and personal days).
The Employee shall not be entitled to receive any severance payment with respect
to such termination. For the purpose of this Agreement, the term "AFFILIATE"
means, with respect to the Company, any person or entity which, directly or
indirectly, controls, is controlled by or under common control with the Company,
with "CONTROL" to be based on the ownership of 50% or more of the voting
securities (or their equivalent) of a particular entity.
(b) Termination By Reason of Permanent Disability. If at any time
---------------------------------------------
during the Term the Employee has been unable, as a result of physical or mental
illness or incapacity, to perform his duties hereunder for a period of four
consecutive months or for an aggregate of more than six months in any twelve
month period (a "PERMANENT DISABILITY"), the Employee's employment hereunder may
be terminated by the Board upon thirty days' written notice to the Employee. If
the Employee's employment is terminated by reason of Permanent Disability, the
Employee shall be entitled to receive only the unpaid portion of the Salary then
in effect which has accrued to the date of termination, plus any other payments
generally available to departing employees of the Company (such as unused
vacation and personal days), plus an amount equal to three months of Employee's
Salary. Such amount shall be paid within thirty days after such termination.
(c) Termination By Reason of Death. The Employee's employment
------------------------------
hereunder shall automatically terminate on the date of his death. If the
Employee's employment is so terminated by his death, the Company shall pay to
the Employee's estate in addition to the unpaid portion of the Salary then in
effect through date of Employee's death plus an amount equal to three months of
Employee's Salary, plus any other payments generally available to departing
employees of the Company (such as unused vacation and personal days). Such
amount shall be paid within thirty days after the date of his death if a
personal representative has been appointed by the end of such thirty day period
or, if a personal representative has not been appointed by the end of such
thirty day period, promptly after a personal representative has been appointed.
(d) Termination Without Cause. The Board may terminate the Employee's
-------------------------
employment hereunder at any time for any reason without Cause in which case the
Employee shall be entitled to receive an amount (the "SEVERANCE AMOUNT") equal
to six months of Employee's Salary. The Severance Amount shall be in lieu of any
other severance payment to which Employee may be otherwise entitled under any
other severance plan maintained by the Company. The Severance Amount shall be
paid within 30 days of such termination. In addition, the Employee shall be
entitled to receive any other payments generally available to departing
employees of the Company (such as unused vacation and personal days).
-3-
<PAGE>
7. Covenants of the Employee.
-------------------------
(a) Non-Competition. Until the later of (X) the first anniversary of
---------------
the date of the termination of the Employee's employment hereunder and (Y) the
end of the then current Term in effect on the date of such termination, the
Employee shall not, directly or indirectly, engage in any business (a
"RESTRICTED BUSINESS") which manufactures or distributes a dental product line
similar to that of the Company's or be associated with any entity engaged in a
Restricted Business, whether as a director, officer, employee, agent,
consultant, partner, owner, independent contractor or otherwise.
(b) Non-Solicitation of Employees of the Employer. Until the later of
---------------------------------------------
(X) the first anniversary of the date of the termination of the employment of
the Employee hereunder and (Y) the end of the then current Term in effect on the
date of such termination, the Employee shall not, and shall cause each business
or entity with which he shall become associated in any capacity not to, solicit
for employment or employ any person who is then, or who was at any time after
the date four months prior to the date of such termination, employed in a
professional or managerial position by the Company, its subsidiaries or
Affiliates.
(c) Confidentiality. The Employee agrees and acknowledges that the
---------------
Confidential Information (as hereinafter defined) of the Company and its
subsidiaries and affiliates, is valuable, special and unique to their business;
that such business depends on such Confidential Information; and that the
Company wishes to protect such Confidential Information by keeping it
confidential for the use and benefit of the Company and its subsidiaries and
Affiliates. Based on the foregoing, the Employee agrees to undertake the
following obligations with respect to such Confidential Information:
(i) the Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company and its
subsidiaries and Affiliates;
(ii) the Employee agrees that, except as required by applicable
law or as authorized in writing by the Board, he will not at any time
during or after the termination of his employment hereunder, disclose,
directly or indirectly, any Confidential Information of the Company or
any of its subsidiaries or Affiliates;
(iii) the Employee agrees to take all reasonable steps necessary,
or reasonably requested by the Company, to ensure that all
Confidential Information is kept confidential for the use and benefit
of the Company and its subsidiaries and Affiliates; and
(iv) the Employee agrees that, upon termination of his employment
-4-
<PAGE>
hereunder or at any other time the Company may in writing
so request, he will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof)
that are in his possession or under his control. The Employee further
agrees, that if requested by the Company, to return any Confidential
Information pursuant to this subparagraph (iv), he will not make or
retain any copy or extract from such materials.
For purposes of paragraph (c) of this Section 7, "CONFIDENTIAL
INFORMATION" means any and all information developed by or for the Company or
any of its subsidiaries or Affiliates of which the Employee gains or has
acquired knowledge during or prior to the Term by reason of his employment with
the Company that is (A) not generally known in any industry in which the Company
or any of its subsidiaries or Affiliates is or may become engaged or (B) not
publicly available. Confidential Information includes, but is not limited to,
any and all information developed by or for the Company or any of its
subsidiaries or Affiliates concerning plans, marketing and sales methods,
customer lists, materials, processes, business forms, procedures, devices, plans
for development of products, services or expansion into new areas or markets,
internal operations, and any trade secrets and proprietary information of any
type owned by the Company or any of its subsidiaries or Affiliates, together
with all written, graphic and other materials relating to all or any part of the
same.
8. Improvements and Inventions.
---------------------------
(a) Disclosure of All Improvements and Inventions. All designs,
---------------------------------------------
discoveries, ideas and inventions, whether or not patentable, copyrightable or
protectable as trade secrets, and all innovations, improvements, variations,
modifications, and substitutions in each case to the extent relating to the
dental business, including the process of cleaning or treating human teeth with
a light source or relating to "curing" materials used in the treatment of human
teeth, whether or not patentable, copyrightable or protectable as trade secrets,
including all patent and patent application rights and copyright and copyright
application rights relating thereto which the Employee may make or conceive
jointly or commonly with others during the Term in the course of performing his
duties for the Company based, in whole or in part, upon the Confidential
Information, or resulting, in whole or in part, from any other resources,
supplies, facilities or equipment or business, technical or financial
information or materials provided by the Company are hereafter collectively
referred to as "INVENTIONS". The Employee shall promptly disclose
all Inventions to the Company.
-5-
<PAGE>
(b) Assignment of Inventions.
------------------------
(i) In consideration of the compensation payable to the Employee
under Section 4 hereof, the Employee agrees that all Inventions described in
paragraph (a) above shall be the sole and exclusive property of the Company and
available to the Company at all times. At the request of the Company, the
Employee agrees to sell, assign, transfer and set over to the Company, or its
nominee, without royalty or any additional consideration, his entire right,
title and interest in, to and under any and all Inventions.
(ii) The Employee agrees to execute, both during and after the
Term, such documents as the Company shall deem necessary or desirable for the
transfer of such rights, titles and interests described in clause (i) above to
it or its designee and for the preparation, filing, prosecution and procuring of
trademark, copyright and/or patent applications and/or trademarks, copyrights
and letters patent in any country of the world and for the transfer of interests
therein, including the execution of original, divisional, continuing and reissue
applications, preliminary statements, affidavits, and concessions.
(iii) The Employee further agrees that if it is legally or
otherwise impossible for the Company or its designees or assignees to apply for
any such trademark, copyright or letters patent, or if any court or other body
with appropriate jurisdiction finds the transfer of trademark, copyright or
patent rights and/or other rights in any Invention to the Company hereunder to
be unenforceable for any reason, then, in any such case, the Employee in lieu of
the Company shall pursue such trademark, copyright or letter patent in his own
name and shall grant the Company the first option to an exclusive license, at a
de minimis royalty to be negotiated in good faith based on the respective
parties' contributions and relevant industry standards, to utilize the trademark
or copyright or to manufacture, utilize and/or sell Inventions which constitute
and/or contain such patent, trade secret, know-how and/or other proprietary
information. If such a license is not created, then the Company shall be able to
use such Invention or substance on a non-exclusive, royalty-free basis.
(iv) The Employee agrees to give testimony in any court action or
administrative proceeding with respect to any matters mentioned above.
9. Reimbursement for Assignment of Inventions. The Company shall
------------------------------------------
reimburse the Employee for all reasonable and properly documented out-of-pocket
expenses actually incurred by him in the performance of any of the terms of
Section 8 hereof, including the preparation of documents, drawings, models and
plans, the transfer and assignment of Inventions and any travel required to
fulfill any obligation thereunder.
10. Notices. All notices and other communications hereunder shall be
-------
in
-6-
<PAGE>
writing and shall be deemed to have been given when delivered by hand, mailed
by first-class registered or certified mail, postage prepaid and return receipt
requested, or facsimilied or delivered by overnight courier addressed as
follows:
(i) If to the Company:
ION Laser Technology, Inc.
3828 South Main Street
Salt Lake City, UT 84121
Telephone No.: 801-262-5555
Facsimile No.: 801-262-5770
Attention: President
with a copy to:
Durham, Evans, Jones & Pinegar, P.C.
Key Bank Towers, Suite 850
50 South Main Street
Salt Lake City, Utah 84144
Telephone No.: 801-538-2424
Facsimile No.: 801-538-2425
Attention: Jeffrey M. Jones, Esq.
and to:
Richards & O'Neil, LLP
885 Third Avenue
New York, New York 10022
Attention: Craigh Leonard, Esq.
Telephone No.: 212-207-1200
Facsimile No.: 212-750-9022
(ii) If to the Employee:
428 Wheatsheaf Road
Springfield, Pennsylvania 19060
Telephone No.: 610-543-8798
Facsimile No.:
or, in each case, at such other address as may from time to time be specified to
the other party in
-7-
<PAGE>
a notice similarly given.
11. Governing Law; Jurisdiction. The validity, interpretation,
---------------------------
construction and performance of this Agreement shall be governed by the laws of
the State of New York applicable to contracts executed and to be performed
entirely within said State. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York or
in the United States District Court for the Southern District of New York, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
person other than the respective parties to this Agreement.
12. Expenses. If a dispute arises out of or related to this
--------
Agreement, if either party to the Agreement brings legal action to enforce the
terms of the Agreement, the party who prevails in such legal action, whether
plaintiff or defendant, in addition to the remedy or relief obtained in such
legal action, shall be entitled to recover his or its expenses incurred in such
legal action, including without limitation, court costs and attorneys fees. A
party shall be deemed to have prevailed in such a legal action if such action is
concluded pursuant to a court order or final judgment in favor of such party
which is not subject to appeal, a settlement agreement or dismissal of the
principal claims.
13. Entire Agreement. This Agreement contains the entire agreement
----------------
of the parties and their Affiliates relating to the subject matter hereof and
supersedes all prior agreements, representations, warranties and understandings,
written or oral, with respect thereto.
14. Severability. If any term or provision of this Agreement or the
------------
application thereof to any person, property or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons, property or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall remain valid and enforceable to
the fullest extent permitted by law.
-8-
<PAGE>
15. Remedies.
--------
(a) Injunctive Relief. The Employee acknowledges and agrees that
-----------------
the covenants and obligations of the Employee contained in subsections (a), (b)
and (c) of Section 7 hereof relate to special, unique and extraordinary matters
and are reasonable and necessary to protect the legitimate interests of the
Company and its subsidiaries and Affiliates and that a breach of any of the
terms of such covenants and obligations will cause the Company irreparable
injury for which adequate remedies at law are not available. Therefore the
Employee agrees that the Company shall be entitled to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from any such breach.
(b) Remedies Cumulative. The Company's rights and remedies under
-------------------
this Section 15 are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity.
16. Withholding Taxes. The Company may deduct any federal, state or
-----------------
local withholding or other taxes from any payments to be made by the Company
hereunder in such amounts which the Company reasonably determine are required to
deduct under applicable law.
17. Amendments, Miscellaneous, etc. Neither this Agreement nor any
------------------------------
term hereof may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
18. Survival. The covenants set forth in Sections 7, 8 and 9 of this
--------
Agreement shall survive and shall continue to be binding upon the parties
notwithstanding the termination of this Agreement for any reason whatsoever.
The covenants set forth in Sections 7 and 8 of this Agreement shall be deemed
and construed as separate agreements independent of any other provision of this
Agreement. The existence of any claim or cause of action by the Employee
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of any or all covenants.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
ION LASER TECHNOLOGY, INC.
By:_______________________________
Name:
Title:
__________________________________
RICHARD TREFZ
-10-
<PAGE>
LCO INVESTMENTS LIMITED
INCENTIVE COMPENSATION PLAN
AS OF MAY 11, 1998
------------------
1. Purpose. LCO Investments Limited (the "COMPANY") was on May 5,
-------
1998 the largest stockholder of Ion Laser Technology, Inc., a Utah corporation
("ILT"). The purpose of this Incentive Compensation Plan (the "PLAN") is to
provide a means by which certain employees of, consultants to and other persons
having key business relations with ILT (such employees, consultants and other
persons being hereinafter referred to individually as a "KEY PERSON" and
collectively as "KEY PERSONS"), may be given an opportunity to benefit from the
appreciation in the value of the Company's present equity holdings in ILT
through the issuance of incentive compensation units ("UNITS") whose value, as
described below, is based on the increase in value of the Company's present
equity holdings in ILT. The Plan is intended to advance the interests of the
Company by encouraging long-term employment with and diligent service to ILT on
the part of the Key Persons, by enabling ILT to retain their services and by
providing such Key Persons with an incentive to advance the success of ILT.
2. General Terms and Conditions of Rights; Definitions.
---------------------------------------------------
(a) General Terms. The Company may grant Units to one or more Key
-------------
Persons from time to time pursuant to the Plan. The selection of Key Persons to
whom Units are granted and the maximum number of Units that may be granted under
this Plan shall be made by the Company in its sole discretion.
(b) Units Agreements. Units that have been granted shall be
----------------
evidenced by written agreements (each a "UNITS AGREEMENT") between the Company
and each Key Person.
(c) No Affect on Employment. Nothing in this Plan or a Unit or
-----------------------
Units Agreement issued hereunder shall govern the rights and duties relating to
employment or other services between the holder of any Units and the Company or
ILT. Neither this Plan, nor any grant of Units pursuant thereto, shall
constitute an employment or other form of service or supply agreement among such
parties or establish a right of continued employment or a continued relationship
with the Company or ILT and the holder of any Unit.
3. Definitions. In this Section 3, the following words shall have
-----------
the following meanings unless the context otherwise requires:
(a) The "SCHEDULED ILT SHARES" means those 2,507,223 shares in ILT
held as at May 5, 1998 by the Company including any further ILT shares allotted
to the Company in respect of such 2,507,223 shares on any capitalization issue
or stock dividend of ILT.
<PAGE>
(b) The "SCHEDULED ILT OPTIONS" means those options to purchase
1,173,334 shares of ILT held as at May 5, 1998 by the Company including any
further ILT options allocated to the Company in respect of such options to
purchase 1,173,334 shares on any recapitalization or similar event of ILT.
(c) "ILT OPTION SHARES" means any shares of ILT issued upon exercise
by the Company or any designated entity of Scheduled ILT Options.
(d) "APPRECIATION" means, (i) in respect of any Scheduled ILT Share or
ILT Option Share, twenty percent (20%) of any increase in value thereof above a
per share price of $4.75; and (ii) in respect of any Scheduled ILT Options,
twenty percent (20%) of any increase in value thereof assuming that the exercise
price of such Option were $4.75 as opposed to the actual exercise price thereof.
(e) "INCENTIVE AMOUNT" means the sum of (i) the Appreciation of a
Scheduled ILT Share multiplied by the number of the Scheduled ILT Shares in
respect of which Incentive Amount is being calculated plus (ii) the Appreciation
of a Scheduled ILT Option multiplied by the number of Scheduled ILT Options in
respect of which the Incentive Amount is being calculated plus (iii) the
Appreciation of an ILT Option Share multiplied by the number of ILT Option
Shares in respect of which the Incentive Amount is being calculated.
(f) "KEY PERSON'S PRO RATA SHARE" means the percentage obtained by
dividing (x) the number of outstanding Units held by the relevant Key Person by
(y) the Number of All Units.
(g) "NUMBER OF ALL UNITS" shall mean the greater of (x) 1,000 or (y)
the aggregate number of Units that have been granted to all Key Persons at any
time under the Plan.
(h) "SALE" of any Scheduled ILT Share, Scheduled ILT Option or ILT
Option Share means a disposal for cash or securities that are freely tradable by
the Company (e.g., securities that are not subject to restrictions under Rules
144 or 145 of the Securities Act of 1933), except an exercise of an ILT Option
shall not be deemed a sale thereof, and "sold" shall be construed accordingly.
(i) "TERMINATION" means, as to any Key Person, Termination as such
term is defined in such Key Person's Units Agreement and also, and in the
alternative, the termination of all such Key Person's affiliations to ILT as an
employee, consultant or otherwise. A person's continuing status as a
stockholder of ILT or as a holder of Units shall not affect whether or not
Termination shall have occurred. In the case of any dispute, the good faith
determination by the Company that Termination has occurred as to a Key Person
shall be determinative as to such Key Person.
-2-
<PAGE>
(j) "TERMINATION DATE" means, as to any Key Person, the effective date
of such Key Person's Termination.
4. Incentive Scheme.
----------------
(a) If at any time prior to a Key Person's Termination all or any of
the Scheduled ILT Shares, Scheduled ILT Options or ILT Option Shares are sold,
each such Key Person shall be entitled to receive from the Company and be paid
within 15 days of such sale such Key Person's Pro Rata Share of the Incentive
Amount calculated in respect of those Scheduled ILT Shares, Scheduled ILT
Options or ILT Option Shares so sold. Except as may be provided in any Units
Agreement the right to receive a Key Person's Pro Rata Share of the Incentive
Amount with respect to Scheduled ILT Shares, Scheduled ILT Option and ILT Option
Shares sold prior to Termination shall be fully vested on the date such Key
Person enters into his or her Units Agreement.
(b) If on Key Person's Termination all or any Scheduled ILT Shares,
Scheduled ILT Options or ILT Option Shares remain unsold, the Incentive Amount
shall be calculated in respect of such Scheduled ILT Shares, Scheduled ILT
Options or ILT Option Shares and each Key Person shall be entitled to receive
from the Company (payable as provided below) an amount (the "RELEVANT AMOUNT")
calculated as follows and which shall vest on Termination:
(i) 20% of such Key Person's Pro Rata Share of such Incentive
Amount if Termination occurs between May 5, 1998 and April 30, 1999
inclusive; or
(ii) 40% of such Key Person's Pro Rata Share of such Incentive
Amount if Termination occurs between May 1, 1999 and April 30, 2000
inclusive; or
(iii) 60% of such Key Person's Pro Rata Share of such Incentive
Amount if Termination occurs between May 1, 2000 and April 30, 2001
inclusive; or
(iv) 80% of such Key Person's Pro Rata Share of such Incentive
Amount if Termination occurs between May 1, 2000 and April 30, 2002
inclusive; or
(v) 100% of such Key Person's Pro Rata Share of such Incentive
Amount if Termination occurs after May 1, 2002.
(c) The Relevant Amount payable with respect to Scheduled ILT Shares
or
-3-
<PAGE>
ILT Option Shares shall be payable to a Key Person within 180 days of such
Key Person's Termination either in cash or, at the Company's option, as to the
whole or any part (as determined by the Company) of the Relevant Amount, by the
Company transferring or causing to be transferred to such Key Person such number
of Scheduled ILT Shares or ILT Option Shares as had a value as at such Key
Person's Termination Date equal to the whole or such part of such Key Person's
entitlement to the Relevant Amount due to the Key Person on account of Scheduled
ILT Shares or ILT Option Shares.
(d) The Relevant Amount payable with respect to Scheduled ILT Options
shall be payable to a Key Person within 180 days of the exercise or sale by the
Company after such Key Person's Termination of any Scheduled ILT Options (and
only if any Scheduled ILT Options are so exercised or sold) either in cash or,
at the Company's option, as to the whole or any part (as determined by the
Company) of the Relevant Amount, by the Company transferring or causing to be
transferred to the Key Person such number of Schedule ILT Shares or ILT Option
Shares as had a value at such Key Person's Termination Date equal to the whole
or such part of the Relevant Amount due to the Key Person on account of
Scheduled ILT Options.
(e) For the purpose of this Section 4, the value of a Scheduled ILT
Share, Scheduled ILT Option or ILT Option Share shall be the average of the
closing sale prices of shares of ILT for the actual number of trading days
during the 30-day period preceding the applicable Termination Date, as such
prices appear in the Wall Street Journal or similar publication or screen
service or, if ILT shares cease to be publicly traded, shall be determined in
such manner as the parties may agree or failing agreement as may be fixed by the
Company's auditors acting as experts, not arbitrators, whose decision shall be
final and binding on the parties and whose costs and expenses shall be borne
equally by the Company and the applicable Key Persons.
(f) Notwithstanding the foregoing, the Relevant Amount shall not be
payable to any Key Person in the event that such Key Person's affiliation with
ILT is terminated for cause.
(g) In no event will the aggregate amount payable by the Company to
all Key Persons under this Plan exceed an amount equal to the Appreciation.
5. Amendment. The terms of this Plan may be amended with the written
---------
consent of the Company and holders of at least 50% of the then outstanding
Units. Any such amendment shall be binding on all Key Persons. The Company and
any individual Key Person may amend such person's Units Agreement and the
application of this Plan to such person by a written agreement between the
Company and such person.
-4-
<PAGE>
UNITS AGREEMENT
As of May __, 1998
Mr. ________________
Re: LCO Investments Limited Incentive Compensation Plan
---------------------------------------------------
Dear ___________:
We refer to the LCO Investments Limited Incentive Compensation Plan
dated as of May 11, 1998 attached as EXHIBIT A hereto (the "PLAN"). Capitalized
terms used but not otherwise defined in this Agreement shall have the meaning
given such terms in the Plan.
LCO Investments Limited (the "COMPANY") and the undersigned person
(the "UNIT HOLDER") hereby agree as follows:
1. Units Agreement. This Units Agreement constitutes the "Units
---------------
Agreement" referred to in Section 2(b) of the Plan.
2. Grant. The Company hereby grants to the Unit Holder ______ (___)
-----
Units under the Plan.
3. Termination. The Company and the Unit Holder agree that in
-----------
addition to the definition of "Termination" contained in the Plan, the term
"Termination" shall mean, as to the Unit Holder, the termination for any reason
whatsoever of the Employment Agreement dated May , 1998 between the Unit
Holder and Ion Laser Technology, Inc.
4. Acknowledgements. The Unit Holder acknowledges and agrees that
----------------
the Units granted hereby are governed by and subject to the terms and conditions
of the Plan.
<PAGE>
5. Non-Transferable. The Units are not transferable, in whole or in
----------------
part, by the Unit Holder other than by will or by the laws of descent and
distribution. The Unit Holder agrees not to transfer, assign, pledge,
hypothecate, pledge or otherwise encumber or dispose of the Units granted by
this Units Agreement without the consent of the Company.
6. Counterparts. This Units Agreement may be executed in one or
------------
more original or facsimile counterparts, each of which shall be an original and
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned parties have executed this Units
Agreement as of the date first written above.
LCO INVESTMENTS LIMITED
By:____________________________
Name:
Title:
_______________________________
Unit Holder
-2-
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<PERIOD-START> APR-01-1998
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<PERIOD-TYPE> 12-MOS
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<PERIOD-START> APR-1-1997
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