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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ____________ to _________.
Commission File Number 0-22718
ZAMBA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 41-1636021
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7301 OHMS LANE, SUITE 200, MINNEAPOLIS, MINNESOTA 55439
(Address of Principal Executive Offices, including Zip Code)
Registrant's Telephone Number, Including Area Code: (612) 832-9800
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT WAS APPROXIMATELY $54,114,338 BASED ON THE CLOSING SALE PRICE OF THE
COMPANY'S COMMON STOCK AS REPORTED ON THE NASDAQ NATIONAL MARKET ON MARCH 15,
1999:
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, AS OF MARCH
15, 1999: 29,017,952 SHARES.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on May 20, 1999, are incorporated by reference into Part III of
this report.
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PART I
DISCLAIMER REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and involve
known and unknown risks, uncertainties and other factors that may cause the
Company's actual results, performance or achievements to be materially different
from the results, performance or achievements expressed or implied by the
forward looking statements. Factors that impact such forward looking statements
include, among others, the growth rate of the customer care marketplace, the
ability of our partners to maintain competitive products, our ability to develop
skills in implementing customer care packages from additional partners, the
impact of competition and pricing pressures from actual and potential
competition with greater financial resources, our ability to obtain large-scale
consulting services agreements, changes in expectations regarding the
information technology industry, our ability to hire and retain competent
employees, possible changes in collections of accounts receivable, changes in
general economic conditions and interest rates, and other factors identified in
the Company's filings with the Securities and Exchange Commission.
ITEM 1. BUSINESS
Zamba Corporation ("Zamba" or the "Company") is a consulting and systems
integration company focused exclusively on the customer care market. Zamba is
committed to improving our clients' ability to care for their customers through
the use of innovative business practices and by leveraging package application
software. Our services include strategy development, business process alignment
and improvement, systems deployment, and systems support. Our goal is to assist
our clients in building lasting relationships with their customers, increase the
effectiveness of their customer service and sales operations, and improve
overall communication with their customers. Our customer care services include
the design, implementation and integration of several enterprise level
applications to facilitate sales automation, call center management, marketing
automation, and automated field service and sales. We offer our clients
end-to-end assistance with their implementations, including business case
evaluation, system planning and design, software implementation, modification
and development, training, installation, change management, network management,
and on-going support. Typically, we provide our services on a fixed-bid,
fixed-time basis, but we also perform some services on a time-and-expenses
basis. Under either method, our approach involves a rapid and iterative
methodology that requires significant client involvement.
Historically, the Company derived a substantial amount of its revenue from sales
of proprietary hardware and software that originally enabled data communication
over specialized mobile radio ("SMR") technology and, eventually, most types of
wireless networks. During 1996, the Company began a process to expand the
services it could offer to its clients by becoming a systems integrator focused
on wireless data communication and ceased production of its proprietary
hardware. During 1997, the Company reduced its workforce from approximately 95
employees to approximately 40 employees; consolidated and closed several
facilities; and reduced the carrying value of certain assets no longer expected
to be used in operations. As a result of these actions, the Company recorded
one-time charges totaling approximately $1.90 million during the third quarter
of 1997. The Company took these actions because of slower than expected market
and related revenue growth. Also, during the second half of 1997 and throughout
1998, the Company broadened its sales focus to providing systems integration
services for customer care including Sales Force Automation, Customer Support,
Marketing, Field Service & Sales Automation, and Call Centers.
In September 1998, the Company completed the acquisition of the QuickSilver
Group, Inc. ("QuickSilver"), a customer care consulting company specializing in
software package implementation for call center management, sales automation,
marketing automation, and automated field service and sales. This acquisition
enabled the Company to expand its consulting and systems integration
capabilities and geographic presence.
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In September 1998, the Company also annonuced the formation of NextNet, Inc., by
transferring its patented "NextNet" wireless data technology to an entity of
the same name, in conjunction with the receipt by that entity of $8 million in
private investment capital to fund the further development of the technology.
THE CUSTOMER CARE MARKET
Customer care is a subset of the package application software market. Reports
published by Forrester Research project the packaged application software market
to grow at a cumulative average growth rate ("CAGR") of 27%. Within this
market, the Company's segment is the implementation of packaged application
software for customer care solutions. The market for customer care
implementation is directly related to software-licensing activities. The
GartnerGroup anticipates that software-licensing revenue for customer care will
grow at a CAGR of 54%. The Company estimates that for every $1 of
software-licensing revenue, an additional $1 to $4 is spent on implementation,
training and consulting.
CUSTOMER CARE...THE ZAMBA APPROACH
Historically, companies have organized their business processes to ensure
efficient Enterprise Resource Planning. With this model, all front-office
functions that interact with the customer are disconnected, operating as
separate entities. Because the company is not operating as a unified whole with
a single face to the customer, customer confusion and an unsatisfactory customer
experience may result. Customer care practiced by Zamba helps companies put
their customers at the center of how the company organizes their business
processes and conducts its front office functions. The Zamba model calls for
companies to focus on achieving longer-term customer loyalty rather than only
short-term operational efficiencies. The objective is to give customers what
they deserve: to work with a company that at any given moment understands their
comprehensive history with the company and anticipates their needs. To
accomplish this radical transformation in customer care, Zamba consultants are
skilled in what the market refers to as front office applications, including
Sales Force Automation, Customer Support, Marketing, Field Service & Sales
Automation, and Call Centers.
SERVICES
Zamba delivers integrated customer care solutions quickly. Unlike traditional
consulting firms, which typically focus on customer "management" and measure
success in terms of short-term operational efficiency improvements, Zamba is
focused on deploying integrated customer care solutions and measures success in
terms of longer-term customer loyalty improvements and specific, measurable
business results.
Zamba offers the following services to its customers:
OPPORTUNITY ASSESSMENT
We assess our customers' current customer care performance against our
Competitive Assessment Model, a comprehensive set of benchmark data from
industry leaders. Following the assessment, a suggested plan for benefit
and value realization is developed and delivered.
BUSINESS CASE DEVELOPMENT
We provide our customers with a detailed financial and strategic
quantification of the value and return of the customer care opportunity.
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SOLUTION DEPLOYMENT
Using a fast, iterative approach to system implementation, we assist our
customers with deploying customer care solutions quickly so they begin to
receive high-impact business benefits immediately.
SOLUTION SUPPORT
Following the deployment of a customer care solution, the Zamba support
team will provide on-going technical and system support.
THE ZAMBA SOLUTION
- Help companies understand what opportunities they have to improve
customer care to positively improve customer loyalty
- Help companies determine the best strategy and plan for seizing those
opportunities
- Design and implement an integrated solution that takes full advantage
of industry-leading commercial software packages -- quickly,
effectively and with an unconditional guarantee
- Enhance the solutions we provide with ongoing innovation, change, and
support
CUSTOMERS
Zamba has a history of working with some of the most competitive, leading-edge
companies in the United States. Our customers have embraced Zamba's
results-oriented approach, reputation, and ability to deliver on-time, on-budget
solutions.
Zamba has implemented more than 75 customer care solutions for industry-leading
companies such as Ameritech Corporation, Bay Networks, Cisco Systems, 3-Com,
Compaq, Compucom, Hertz, Hewlett-Packard, Honeywell, MCI, Progressive Insurance,
Symbol, Qualcomm, Wang Global and Xerox, among others.
The Company has in the past, and may in the future, derive a significant portion
of its revenue from a relatively small number of clients. In 1998, two
customers each represented at least 10% of the Company's revenue: Hertz (17.7%)
and Compucom (11.3%).
SALES AND MARKETING
The Company has a dedicated sales and marketing organization to market and sell
its services. The business development team is chartered with building market
awareness of the Company's offerings, establishing partnerships with the
appropriate hardware, software and consulting vendors, and building a pipeline
of demand for our service solutions. The organization consists of 8 employees
operating throughout the United States. At any given time, numerous Zamba
professionals and senior practice leaders are active in the development of new
business. The coordination of their efforts and tracking of their results is
critical to Zamba's ability to forecast and adequately staff future work.
COMPETITION
The systems integration market is highly competitive and served by numerous
national, regional and local firms. The market includes participants from a
variety of market segments, including systems consulting and integration firms,
contract programming companies, application software firms, the professional
services groups of software companies and "Big Five" accounting firms. Primary
competitors in the customer care market include practices within Technology
Solutions Corporation, Sapient Corporation, and Cambridge Technology Partners.
The Company also faces competition from information services organizations
within potential clients. The Company believes
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that the principal competitive factors in the systems integration industry
include technical expertise, responsiveness to client needs, speed in delivering
solutions, quality of service and perceived value. The Company also believes
that its ability to compete depends in part on a number of competitive factors
outside its control, including the ability of its competitors to hire, retain,
and motivate employees, the price at which other companies offer comparable
services, and the extent of its competitors responsiveness to customer needs.
Many of the Company's direct, indirect and potential future competitors have
financial, technical, marketing, sales, distribution and other resources
substantially greater than those of the Company. Some of these competitors have
established market positions, greater name recognition, substantial
technological capabilities and generate greater consulting revenues than does
the Company. The Company faces competition not only from these established
companies, but also from start-up companies that have a niche expertise in
specific application technologies.
The competitive environment could adversely affect the Company's business,
results of operations, and financial condition.
EMPLOYEES
The Company's success depends to a significant degree upon the continued
contributions of its key management, sales and technical personnel. The
Company's success also depends upon its ability to attract and retain highly
qualified personnel. Competition for such personnel is intense, and there can
be no assurance that the Company will be successful in hiring or retaining
qualified personnel.
As of December 31, 1998, the Company had 95 full-time employees, consisting of
72 individuals in the professional staff, 15 in administrative roles and 8 in
business development.
The employees and the Company are not parties to any collective bargaining
agreements, and the Company believes that its relations with its employees are
good.
PRODUCT DEVELOPMENT
As noted earlier, Zamba is a systems integration consulting company, and as
such, derives a majority of its revenues from third party products instead of
from sales of its own products. However, the Company has legacy products from
our years developing wireless mobile data technology.
COMMUNICATIONS SOFTWARE
The Company's wireless technologies include its KeyWare-Registered Trademark-
middleware technology and other standard commercial software developed by the
Company, such as database interface software, as well as application software
customized by the Company for individual clients. The Company's technology also
includes certain network management software tools that the Company has
developed in order to identify and diagnose problems arising with clients'
wireless network configurations.
KeyWare was introduced to the market in the first quarter of 1995. KeyWare is a
wireless networking software product referred to as "middleware," and is built
upon an open client/server architecture. In the third quarter of 1997, the
Company decided to no longer sell KeyWare as a stand-alone product. Instead,
the Company sells KeyWare only to existing clients.
OTHER TECHNOLOGY
On September 21, 1998, the Company transferred its patented "NextNet" wireless
data technology to an entity of the same name, in conjunction with the receipt
by that entity of $8 million in private investment capital to fund the further
development of the technology. In concept, the NextNet technology will enable
high-speed data transmission over existing cellular infrastructures at rates
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not possible with existing systems. The Company received forty-four percent
(44%) ownership of NextNet, the new company, in exchange for the NextNet
technology. The Company's investment in NextNet is carried at $0, the
historical carrying basis of the technology transferred, as amounts incurred by
the Company up to the date of the transfer were charged to research and
development expense. The fourth quarter of 1998 was the first quarter in which
the Company did not incur expenses related to the development of the NextNet
technology. Several long-time employees, including two Vice Presidents, of the
Company also transferred to NextNet. These employees were previously engineers
who worked on KeyWare and our earlier computing devices for SMR.
For the years ended December 31, 1998, 1997, and 1996, the Company's research
and development expenses were approximately $1.16 million, $3.29 million, and
$4.21 million, respectively. The Company does not expect to have any research
and development costs in 1999, and does expect that clients will directly fund
product enhancements to KeyWare.
PROPRIETARY RIGHTS
The Company's success is dependent upon its software deployment and consulting
methodologies and other intellectual property rights. The Company relies upon a
combination of trade secret, nondisclosure and other contractual arrangements
and technical measures, and copyright and trademark laws, to protect its
proprietary rights. The Company generally enters into confidentiality
agreements with its employees, consultants, clients and potential clients and
limits access to, and distribution of its propriety information. There can be
no assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of its propriety information or that the Company will
be able to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights.
The Company's business includes the development of custom software applications
in connection with specific client engagements. Ownership of such software is
generally assigned to the client. In addition, the Company also develops
object-oriented software components that can be reused in software application
development and certain foundation and application software products, or
software "tools," most of which remain the property of the Company.
Although the Company believes that its services and products do not infringe on
the intellectual property rights of others, there can be no assurance that such
a claim will not be asserted against the Company in the future.
YEAR 2000 UPDATE
Year 2000 computer issues create risks for the Company. The full extent and
scope of such risks have not yet been fully assessed. In the event that internal
products and systems, or those products and systems provided or utilized by
third parties do not correctly recognize and process date data information
beyond the year 1999, material adverse effects on the Company's business,
operating results, and financial condition could result.
To address Year 2000 issues, the Company has initiated a program designed to
address the most critical Year 2000 items that would affect the Company's
products and the operations of the following functions: operations, finance,
sales, and human resources. The Company has not commenced work on contingency
plans to address potential problems with its internal systems or the systems of
its supplier and customers or other third parties.
In December 1998, the Company commenced a program to inventory, assess,
remediate, and test the Year 2000 capability of the Zamba software products. All
Zamba Year 2000 activities concerning the Company's current products are
expected to be completed by October 1999.
Other Year 2000 issues primarily consist of assessing the Year 2000 impact for
outside vendors, customers, and facilities. Project plans are being developed
and will include the process of identifying and prioritizing critical suppliers
and customers at the direct interface level, and
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communicating with them about their plans and progress in addressing Year 2000
issues. Detailed evaluations of the most critical third parties have been
initiated. It is expected that all Year 2000 project plans and 1999 budgets will
be completed by the second quarter of 1999 and the remaining inventories
completed by the end of the second quarter of 1999. This effort will be followed
by each business function conducting a focused level of ranking and functional
assessment of its inventory to establish the methods and actions required to
resolve any Year 2000 issues discovered. The assessment efforts are estimated to
be completed by the second quarter of 1999. The remediation (modification or
replacement of existing software or systems) and the testing phases of the
project plans are expected to take place throughout most of 1999 and are
estimated to be completed, for all business critical items, by the fourth
quarter of 1999. All remaining issues (which are considered low priority or low
risk to the business) are planned to be addressed as time permits and could
continue through the first half of 2000.
The Company has spent nominal amounts to date and doesn't expect the total cost
associated with required modifications to become Year 2000 ready to be
significant or to have a material adverse effect on the Company's business,
operating results and financial condition. The Company's current estimates of
the amount of time and costs necessary to implement and test its systems are
based on the facts and circumstances existing at this time. New developments may
occur that could affect the Company's estimates for the required modifications
to become Year 2000 ready. These developments include, but are not limited to:
(a) the availability and cost of personnel trained in this area, (b) the ability
to locate and correct all relevant computer code and equipment, and (c) the
planning and modification success needed to achieve full implementation.
Readers are cautioned that the foregoing discussion regarding Year 2000 computer
issues contains forward-looking statements based on current expectations that
involve risks and uncertainties and should be considered in conjunction with the
following. The failure to correct a material Year 2000 problem could result in
an interruption in, or a failure of, certain normal business activities or
operations of the Company. Such failures could materially and adversely affect
the Company's business, operating results, and financial condition. Due in large
part to the uncertainty of the Year 2000 readiness of third-party suppliers and
customers, as well as the lack of a final Year 2000 project plan for the
remaining internal business systems that are not yet assessed as Year 2000
ready, the Company is currently unable to determine whether the consequences of
Year 2000 issues will have a material impact on the Company's business,
operating results or financial condition. The Company's programs addressing Year
2000 computer issues are expected to reduce the Company's level of uncertainty
regarding Year 2000 issues and, in particular, about the Year 2000 readiness of
its material internal operations, suppliers, customers, and other third-parties.
In addition, the Company believes that the current Year 2000 activities
surrounding the Company's software products and internal systems have reduced
the risk of any disruption caused by any Year 2000 issues in these areas.
ITEM 2. PROPERTIES
The Company's headquarters consists of approximately 10,451 square feet located
in a multi-story building in suburban Minneapolis, Minnesota. The facility is
leased pursuant to an agreement that expires in August 2000. The Company also
maintains offices and leases space for operations and sales functions in
Cupertino and Pleasanton, California, and Boston, Massachusetts of 7,923, 4,905
and 3,942 square feet, respectively. The Company believes that its facilities
are adequate to meet its anticipated level of operations for the near term. For
additional information concerning the Company's lease obligations, see Note 3 to
the Company's consolidated financial statements included in this Annual Report
on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not currently involved in any legal proceedings the resolution of which, in
management's opinion, would have a material adverse effect on the Company's
business, financial position or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company conducted a ballot of its shareholders by written consent to amend
the Company's Certificate Incorporation to increase the authorized number of
shares of Common Stock of the Company from 35,000,000 to 55,000,000. The ballots
were tabulated on December 29, 1998, and shareholders approved the increase,
with 24,455,072 votes cast in favor of the increase, 544,376 votes cast against,
8,228 abstentions, and no broker non-votes.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock began trading on December 10, 1993, on the Nasdaq
National Market under the symbol "RACO," in connection with its initial public
offering. On October 5 1998, the Company changed its corporate name to Zamba
Corporation. As a result of this name change, the Company's Common Stock began
trading on the Nasdaq National Market under the symbol "ZMBA."
A summary of the range of high and low closing prices for the Company's Common
Stock for the each quarterly period in the two most recent fiscal, is presented
below. These prices reflect interdealer prices and do not include retail
markups, markdowns or commissions.
<TABLE>
<CAPTION>
HIGH LOW
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<S> <C> <C>
1997
First Quarter $ 4.88 $ 3.25
Second Quarter 3.50 2.13
Third Quarter 2.63 1.50
Fourth Quarter 2.06 1.00
1998
First Quarter $ 4.06 $ 1.31
Second Quarter 4.06 2.63
Third Quarter 3.19 1.56
Fourth Quarter 3.19 1.50
</TABLE>
The Company has never paid cash dividends on its capital stock and does not
anticipate declaring or paying any cash dividends in the foreseeable future.
The Company intends to retain future earnings, if any, for the development of
its business.
As of March 8, 1999, the Company had 3,407 stockholders of record.
In connection with the acquisition of QuickSilver on September 22, 1998, the
Company issued 2,337,980 shares of unregistered Company Common Stock to the
shareholders of QuickSilver, as partial consideration for receipt by the Company
of all of the common stock of QuickSilver. These shares were subsequently
registered on November 24, 1998. The Company also issued deferred promissory
notes to the QuickSilver shareholders with an aggregate principal value of $2.16
million. These notes are convertible into Company Common Stock at the option of
the holder and with the consent of the Company's Board of Directors. The
conversion ratio for the notes is determined by the average closing price of the
Company's Common Stock on the Nasdaq National Market for the twenty days
preceding the conversion request. On December 30, 1998, $1.2 million of the
notes were converted to Common Stock, in addition to $19,000 of interest payable
related to such notes.
On October 26, 1998, the Chairman of the Board of the Company, Joseph D.
Costello, purchased 1,000,000 shares of unregistered Series A Preferred Stock
from the Company for the purchase price of $2.00 per share, or a total price of
$2,000,000. The shares of Preferred Stock converted by their terms into Common
Stock on December 29, 1998, when the Company's shareholders approved increasing
the authorized number of Common Stock shares outstanding. Proceeds from the
sale of the Preferred Stock will be used to fund general corporate activities.
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ITEM 6. SELECTED FINANCIAL DATA.
CONSOLIDATED STATEMENTS OF OPERATIONS DATA (for the years ended December 31)
(In thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Net revenues:
Services $7,771 $ 4,744 $ 4,977 $ 2,790 $ 847
Products 350 876 1,906 3,298 3,106
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Total revenues 8,121 5,620 6,883 6,088 3,953
Cost and expenses:
Cost of services 4,835 4,227 3,499 1,314 370
Cost of products 9 1,266 2,027 3,001 2,953
Research and development 1,163 3,286 4,211 4,170 3,035
Sales and marketing 2,209 4,149 6,249 9,045 7,647
General and administrative 1,895 2,463 2,000 2,240 2,920
Amortization of intangibles 936 0 0 0 0
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Loss from operations (2,926) (9,771) (11,103) (13,682) (12,972)
Other income, net 179 427 859 1,335 1,447
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss ($2,747) ($9,344) ($10,244) ($12,347) ($11,525)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss per share - basic and diluted ($0.11) ($0.37) ($0.42) ($0.52) ($0.49)
Weighted average common shares outstanding 25,712 24,932 24,372 23,765 23,443
<CAPTION>
CONSOLIDATED BALANCE SHEET DATA (as of December 31)
(In thousands)
1998 1997 1996 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents and short-
term investments $2,962 $5,336 $11,947 $15,042 $27,407
Working capital 4,116 5,132 12,693 16,781 29,486
Total assets 13,941 7,237 16,919 27,116 38,070
Total stockholders' equity 11,122 6,277 15,381 25,378 36,613
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Zamba is a national customer care consulting company. Our services are designed
to assist clients in building lasting relationships with customers, increase the
effectiveness of customer service and sales operations, and improve overall
communication with customers. We deliver our services using a unique
combination of accumulated expertise in the customer care field, existing
technology, and client knowledge. Typically, we perform our services on a
fixed-bid, fixed-timetable basis. Rapid development and significant client
involvement are key aspects to our methodologies. We offer our clients
end-to-end assistance with their implementations, including business case
evaluation, system planning and design, software implementation, modification
and development, training, installation, change management, network management,
and on-going support. Our
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services include the design, implementation and integration of several
enterprise level applications to facilitate sales automation, call center
management, marketing automation and automated field service and sales.
The Company currently derives most of its revenue from systems integration
services including business case evaluation, system planning and design,
software package implementation, custom software development, training,
installation and change management. The Company also derives recurring revenue
from providing post implementation support.
The Company's revenues and earnings may fluctuate from quarter to quarter based
on the number, size and scope of projects in which the Company is engaged, the
contractual terms and degree of completion of such projects, any delays incurred
in connection with a project, employee utilization rates, the adequacy of
provisions for losses, the accuracy of estimates of resources required to
complete ongoing projects, and general economic conditions and other factors. In
addition, revenues from a large client may constitute a significant portion of
the Company's total revenues in a particular quarter.
Historically, the Company derived a substantial amount of its revenue from sales
of proprietary hardware and software that originally enabled data communication
over specialized mobile radio ("SMR") technology and, eventually, most types of
wireless networks. During 1996, the Company began a process to expand the
services it could offer to its clients by becoming a systems integrator focused
on wireless data communication and ceased production of its proprietary
hardware. During 1997, the Company reduced its workforce from approximately 95
employees to approximately 40 employees; consolidated and closed several
facilities; and reduced the carrying value of certain assets no longer expected
to be used in operations. As a result of these actions, the Company recorded
one-time charges totaling approximately $1.90 million during the third quarter
of 1997. The Company took these actions because of slower than expected market
and related revenue growth. Also, during the second half of 1997 and throughout
1998, the Company broadened its sales focus to providing systems integration
services for customer care including Sales Force Automation, Customer Support,
Marketing, Field Service & Sales Automation, and Call Centers.
KEY FINANCIAL TRANSACTIONS
On September 22, 1998, the Company completed the acquisition of the QuickSilver
Group, Inc. ("QuickSilver"), a customer care consulting company specializing in
software package implementation for call center management, sales automation,
marketing automation, and automated field service and sales. QuickSilver's
operating results are included in our operating results from September 22, 1998.
For additional information concerning the Company's acquisition of QuickSilver,
see Note 4 to the Company's consolidated financial statements included in this
Annual Report on Form 10-K.
On September 21, 1998, the Company transferred its patented "NextNet" wireless
data technology to an entity of the same name, in conjunction with the receipt
by that entity of $8 million in private investment capital to fund the further
development of the technology. In concept, the NextNet technology will enable
high-speed data transmission over existing cellular infrastructures at rates not
possible with existing systems. The Company received forty-four percent (44%)
ownership of NextNet, the new company, in exchange for the NextNet technology.
The Company's investment in NextNet is carried at $0, the historical carrying
basis of the technology transferred, as amounts incurred by the Company up to
the date of the transfer were charged to research and development expense. The
fourth quarter of 1998 was the first quarter in which the Company did not incur
expenses related to the development of the NextNet technology. Several
long-time employees of the Company also transferred to NextNet. These employees
were previously engineers who worked on KeyWare and our earlier computing
devices for SMR.
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On October 26, 1998, the Company issued 1 million shares of convertible Series A
Junior Participating Preferred Stock to our Chairman, Joe Costello, for the
purchase price of $2 million. The convertible Preferred Stock automatically
converted to common stock on a 1-to-1 basis upon the approval of the Company's
shareholders on December 29, 1998, to authorize an additional 20 million shares
of Common Stock.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998, COMPARED TO YEAR ENDED DECEMBER 31,1997
NET REVENUES
Net revenues increased 44% to $8.12 million in 1998 compared to $5.62 million in
1997, due principally to Company's transition to the sale of its system
integration services instead of selling stand-alone software products and the
acquisition of QuickSilver on September 22, 1998. As a result of the shift in
focus, services revenues increased to $7.77 million in 1998 from $4.74 million
in 1997 and product revenues decreased to $350,000 in 1998 from $876,000 in
1997. The Company expects to grow revenues at a similar if not greater rate in
1999. Product revenues should continue to decline.
COST OF REVENUES
Cost of revenues consists primarily of payroll and payroll related expenses for
personnel dedicated to client assignments and is directly associated with, and
varies with, the level of client services being delivered. Cost of revenues
were $4.84 million or 60% of revenues in 1998 compared to $5.49 million, or 98%
of net revenues in 1997. The dollar and percentage decrease resulted from the
cost reduction efforts in the third quarter of 1997, which significantly reduced
the number of employees and related expenses for most of 1998. Although the
cost of revenue decreased from 1997 compared to 1998 because of the 1997 cost
reduction efforts, due to the acquisition of QuickSilver on September 22, 1998,
project personnel headcount increased 160% to 65 at December 31, 1998, from 25
employees at December 31, 1997. While the Company expects to meet its hiring
goals in 1999, competition for personnel with information technology skills is
intense and the Company expects salaries and wages to continue to increase. The
Company periodically reviews and updates its billing rates to cover the expected
increase in costs.
RESEARCH AND DEVELOPMENT
Research and development expenses were $1.16 million or 14% of net revenues in
1998 compared to $3.29 million or 58% of net revenues in 1997. The dollar and
percentage decrease is due primarily to the decrease in research and development
personnel which occurred as a result of discontinuing any product development or
enhancements of the KeyWare product line throughout 1998, and the transfer of
the NextNet technology in September of 1998 to an entity of the same name
described in the Key Financial Transactions section in Item 7. The Company
anticipates no research and development expenses in 1999.
SALES AND MARKETING
Sales and marketing expenses were $2.21 million or 27% of net revenues in 1998
compared to $4.15 million or 74% of net revenues in 1997. The dollar and
percentage decrease resulted from the cost reduction efforts made by the Company
in the third quarter of 1997 which significantly reduced the number of employees
and related expenses for sales and marketing in 1998. In connection with the
Company's focus on systems integration services, a charge of approximately
$202,000 was recorded in the third quarter of 1997 for severance and facility
consolidation costs in the sales and marketing area. The Company anticipates
sales and marketing expenses to increase in 1999.
12
<PAGE>
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $1.90 million or 23% of net revenues in
1998 compared to $2.46 million or 44% of net revenues in 1997. The dollar and
percentage decrease resulted from the cost reduction efforts made by the Company
in the third quarter of 1997 that significantly reduced the number of employees
and related expenses for 1998. As the Company grows and expands geographically
in 1999, it anticipates general and administrative expenses to increase.
AMORTIZATION OF INTANGIBLES
Intangible asset amortization expense in 1998 was $936,000 compared to $0 in
1997. The increase is due to the acquisition of QuickSilver on September 22,
1998. The acquisition was accounted for using the purchase method of
accounting. The purchase price was allocated to tangible and identifiable
intangible assets. The fair value of the identifiable intangible assets
acquired was $7.70 million and was recorded in the following categories: people
and experiences, client references, client lists, and intellectual property and
delivery methodology. These amounts are being amortized over the economic
useful lives of between two and four years.
INTEREST INCOME
Interest income was $225,000 in 1998 compared to $427,000 in 1997. The decrease
is principally due to decreased cash and investment balances which were used to
fund operating activities.
INTEREST EXPENSE
Interest expense in 1998 was $46,000 compared to $0 in 1997. The increase is
due to interest expense related to the notes payable issued in September 1998 in
connection with the acquisition of QuickSilver.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO YEAR ENDED DECEMBER 31, 1996
NET REVENUES
Net revenues decreased 18% to $5.62 million in 1997 compared to $6.88 million in
1996 due principally to discontinuing the production, purchase and distribution
of SMR products. In 1997, the Company completed its exit from the SMR hardware
business and continued its transition to focusing on the sale of its system
integration services instead of selling stand-alone software products. As a
result of these decisions, product revenues decreased to $876,000 in 1997 from
$1.90 million in 1996. Additionally, the Company began to shift the focus of
its business from performing small, technical roles within larger projects to
providing its clients with management and implementation assistance for those
projects. These larger opportunities require longer sales development time than
do technical assistance, and the transition to this mode of sales required a
significant amount of time and attention from the Company's management and key
personnel.
COST OF REVENUES
Cost of revenues consists primarily of payroll and payroll related expenses.
Cost of revenues were $5.49 million or 98% of net revenues in 1997 compared to
$5.53 million or 80% of net revenues in 1996.
Cost of service revenues were $4.23 million and $3.50 million for the years
ended December 31, 1997, and 1996, respectively. The increases in costs
resulted primarily from the cost of recruiting personnel with the skills to
deliver large systems integration projects, and the transfer and utilization of
certain research and development and sales and marketing personnel into the
systems integration services group. The one-time charges recorded during the
third quarter of 1997 included approximately $211,000 of severance and related
costs associated with eliminating
13
<PAGE>
personnel with specializations in areas no longer pertinent to the Company's
systems integration offerings.
Cost of product revenues were $1.27 million and $2.03 million for the years
ended December 31, 1997, and 1996, respectively. The decrease from 1996 to 1997
is primarily due to a $900,000 charge recorded in the first quarter of 1996,
resulting from the Company's decision to write down its remaining SMR hardware
inventories to their net realizable values at that time. The Company recorded
one-time charges in the third quarter of 1997, including approximately $425,000
relating to completing the Company's exit from SMR hardware production and
distribution.
RESEARCH AND DEVELOPMENT
Research and development expenses were $3.29 million or 58% of net revenues in
1997 compared to $4.21 million or 61% of net revenues in 1996. The dollar and
percentage decrease is due primarily to the focus on systems integration
services rather than product sales, resulting in a reduction of research and
development staff during the third quarter of 1997.
SALES AND MARKETING
Sales and marketing expenses were $4.15 million or 74% of net revenues in 1997
compared to $6.25 million or 91% of net revenues in 1996. The dollar and
percentage decrease is primarily related to payroll and payroll related
expenditures associated with the decrease in sales and marketing personnel. In
connection with the Company's focus on systems integration services, a charge of
approximately $202,000 was recorded in the third quarter of 1997 for severance
and facility consolidation costs in the sales and marketing area.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $2.46 million or 44% of net revenues in
1997 compared to $2.0 million or 29% of net revenues in 1996. The increase in
1997 is primarily due to approximately $803,000 of facility and relocation
charges recorded in the third quarter of 1997.
INTEREST INCOME
Interest income decreased to $427,000 in 1997 from $859,000 in 1996. This
decrease is principally due to decreased cash and investment balances which were
used to fund operating activities.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had no significant capital spending or
purchase commitments and had cash and cash equivalents totaling $2.96 million
and working capital of $4.12 million. For the years ended December 31, 1998,
and 1997 the Company used $2.35 million and $6.71 million respectively of cash
for operating activities and $2.1 million, net of cash acquired, for the
acquisition of QuickSilver. The amount of cash used in operating activities
during 1998 and 1997 decreased as a result of cost-reduction efforts made by the
Company in the third quarter of 1997 which significantly reduced the number of
employees and related expenses for 1998. The Company enhanced its cash position
on October 26, 1998, when we issued 1.0 million shares of Series A Junior
Participating Preferred Stock to our Chairman, Joe Costello, for the purchase
price of $2.0 million. These shares were converted to Common Stock on December
29, 1998. The Company believes its existing capital resources will be
suffucient to meet its capital requirements into 2000.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standard No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), effective in 2000,
establishes new standards for recognizing all derivatives as either assets or
liabilities, and measuring those instruments at fair value. At the
14
<PAGE>
present time, the Company does not anticipate that SFAS No. 133 will have a
material impact on its financial position or results of operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
There can be no assurance that the Company's business will grow as anticipated
or that the Company will achieve or sustain profitability on a quarterly or
annual basis in the future. The Company derives a substantial part of its
revenues from a small number of clients whom, after evaluating the Company's
capabilities, decide whether to engage the Company to create business case
evaluations, consult on change management practices and, in some cases, to
design, implement and deploy their customer care systems. A decision by any one
of these clients to delay a customer care project may have a material adverse
effect on the Company's business and results of operations.
In order for the Company's revenues from consulting and integration services to
grow, the Company must continue to add more clients and larger projects to plan,
design and implement customer care systems. The Company's inability to obtain
clients for large-scale consulting and integration services could materially and
adversely affect the growth of its business.
In addition to the factors listed above, actual results could vary materially
from the foregoing forward-looking statements due to the Company's inability to
hire and retain qualified personnel, the risk that the Company may need to
enhance products and services beyond what is currently planned, the levels of
promotion and marketing required to promote the Company's products and services
so as to attain a competitive position in the marketplace, or other risks and
uncertainties identified in this Annual Report and the Company's other filings
with the SEC.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks based on the outstanding
long-term debt obligations of $1.03 million at December 31, 1998. As
discussed in Note 5 to the consolidated financial statements, the interest
rate on the Company's long-term debt obligation is 7%, and the obligation
matures quarterly on an installment basis commencing in December 1999 and
ending in December 2003. The Company does not invest in any derivative
financial instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE.
The following Financial Statements, Supplemental Schedule and Independent
Auditors' Report thereon are included herein (page numbers refer to pages in
this Report):
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report for the year ended December 31, 1998 - KPMG Peat Marwick LLP 21
Report of Independent Accountants for the years ended December 31, 1997 and 1996 - PricewaterhouseCoopers LLP 22
Consolidated Balance Sheets as of December 31, 1998 and 1997 23
Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996 24
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996 25
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 26
Notes to Consolidated Financial Statements 27 - 35
Supplemental Schedule - Schedule II Valuation and Qualifying Accounts 36
</TABLE>
15
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On January 25, 1999, PricewaterhouseCoopers LLP ("PwC") resigned as the
Company's independent accountants, because the Company intended to enter into a
business relationship with the technology consulting practice of PwC.
Subsequently, the Company has entered into a formal business relationship with
PwC. The reports of PwC on the financial statements of the Company for the
years ended December 31, 1997, and 1996, did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with the audits of the
Company's financial statements for the years ended December 31, 1997, and 1996,
and through January 25, 1999, there were no "reportable events" as that term is
described in Item 304(a)(1)(v) of Regulation S-K, and there were no
disagreements between the Company and PwC on any matters of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of PwC would
have caused PwC to make reference to the matter in their reports on the
financial statements for such years.
On February 8, 1999, the Audit Committee of the Board of Directors of the
Company approved the retention of KPMG Peat Marwick LLP ("KPMG") to be the
Company's new independent accountants. During the two fiscal years ended
December 31, 1997, and December 31, 1998, and for the interim period through
February 8, 1999, the Company did not seek advice from KPMG regarding (i) the
application of accounting principles to a specified transaction or the type of
audit opinion that might be rendered on the Company's financial statements; or
(ii) any matter that was either the subject of a disagreement, as defined in
paragraph (a)(1)(iv) of Item 304 of Regulation S-K or a reportable event, as
described in paragraph (a)(1)(v) of Item 304 of Regulation S-K.
The resignation of PwC and retention of KPMG were reported on 8-K filings with
the Securities and Exchange Commission on January 26, 1999, and February 12,
1999, respectively.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning the Company's directors and executive officers and
compliance with Section 16(a) required by this item is contained in the sections
entitled "Nominees" in Proposal No. 1, "Executive Officers" and "Section 16(a)
Beneficial Ownership Reporting Compliance," appearing in the Company's Proxy
Statement to be delivered to stockholders in connection with the Annual Meeting
of Stockholders to be held on May 20, 1999 ("Proxy Statement"). Such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is contained in the sections entitled
"Director Compensation" in Proposal No. 1, "Executive Compensation," and
"Compensation Committee Interlocks and Insider Participation," appearing in the
Company's Proxy Statement. Such information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is contained in the section entitled
"Security Ownership of Certain Beneficial Owners and Management" appearing in
the Company's Proxy Statement. Such information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is contained in the section entitled
"Certain Transactions" appearing in the Company's Proxy Statement. Such
information is incorporated herein by reference.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
(a)(3) and (c) Exhibits
3.01 Registrant's Fourth Amended and Restated Certificate of
Incorporation (12)
3.02 Certificate of Designation specifying the terms of the Series A
Junior Participating Preferred Stock of the Registrant as filed
with the Delaware Secretary of State on September 14, 1994 (3)
3.03 Registrant's Bylaws, as amended (3)
4.01 Form of specimen certificate for Registrant's Common Stock (1)
4.02 Rights Agreement dated September 12, 1994 between the Registrant
and Norwest Bank Minnesota, N.A., as Rights Agent, which includes
as exhibits thereto the form of rights certificate and the
summary of rights to purchase preferred shares (3)
10.01** Registrant's 1989 Stock Option Plan, as amended, and related
documents (1)
10.02** Registrant's 1993 Equity Incentive Plan and related documents, as
amended through January 10, 1998
10.03** Registrant's 1993 Directors Stock Plan, as amended, and related
documents, as amended through November 14, 1995 (5)
10.04** Registrant's 1994 Officer's Option Plan (4)
10.05 1997 Stock Option Plan for Key Employees, Consultants and
Directors of QuickSilver Group, Inc. (10)
10.06** Registrant's 1998 Non-Officer Stock Option Plan (8)
10.07 Form of Indemnification Agreement entered into by the Registrant
and each of its directors and executive officers (1)
10.08 Lease Agreement by and between the Registrant and Connecticut
General Life Insurance Company dated May 2, 1994, for premises at
7301 Ohms Lane, Edina, MN 55439 (2)
10.09** Letter agreement by and between Registrant and Steve Swantek
dated April 9, 1997 (6)
10.10** Letter agreement by and between Registrant and Isaac Shpantzer
dated April 4, 1997 (6)
10.11** Letter agreement by and between Registrant and Norm Smith dated
June 30, 1997 (6)
10.12** Letter agreement by and between Registrant and Norm Smith dated
September 29, 1997. (7)
10.13** Letter agreement by and between Registrant and Vladi Kelman dated
September 25, 1997 (7)
10.14** Letter agreement by and between Registrant and Dave Maenke dated
September 25, 1997 (7)
10.15** Letter agreement by and between Registrant and Paul Edelhertz
dated September 25, 1997 (7)
10.16 Sublease Agreement dated November 18, 1997, by and between
Registrant and ATIO Corporation USA, Inc. for premises at 7301
Ohms Lane, Edina, MN 55439 (11)
10.17** Change in Control Employment and Severance Agreement dated March
10, 1998, by and between Registrant and Michael A. Fabiaschi (11)
18
<PAGE>
10.18** Change in Control Employment and Severance Agreement dated March
10, 1998, by and between Registrant and Steve Swantek (11)
10.19** Change in Control Employment and Severance Agreement dated March
10, 1998, by and between Registrant and Paul Edelhertz (11)
10.20 Series A Preferred Stock Purchase Agreement dated October 22,
1998, between the Registrant and Joseph Costello (12)
10.21 Lease Agreement dated October 20, 1995, by and between the
Registrant and All Phase Telecommunication, Inc. for premises at
10061 Bubb Road, Cupertino, California 95014 (12)
10.22 Lease Agreement dated April 8, 1998, by and between the
Registrant and EOP-New England Executive Park, L.L.C. for
premises at 8 New England Executive Park, Burlington,
Massachusetts 01893 (12)
10.23 Lease Agreement dated September 14, 1998, by and between the
Registrant and Square 24 Associates (d.b.a. Square 24 Associates
L.P.) for premises at 3875 Hopyard Road, Pleasanton, California
94588 (12)
10.24 Asset Purchase Agreement dated October 23, 1995 between the
Registrant and Business Partner Solutions, Inc. (5)
10.25 Agreement and Plan of Merger and Reorganization dated July 6,
1998, between the Registrant, QuickSilver Acquisition Corp. and
QuickSilver Group, Inc., and Addendum dated September 2, 1998, to
the Agreement and Plan of Merger and Reorganization between the
Registrant, QuickSilver Acquisition Corp. and QuickSilver Group,
Inc. (9)
23.01 Consent of KPMG Peat Marwick LLP
23.02 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedule
* Confidential treatment has been obtained for certain portions of
this agreement
** Management contract or compensatory plan required to be filed as
an exhibit to Form 10-K
(1) Filed as an Exhibit to the Company's Registration Statement on
Form S-1 (No. 33-70728), that was declared effective December 9,
1993, and incorporated herein by reference
(2) Filed as an Exhibit to the Company's Form 10-Q for the quarterly
period ended June 30, 1994, and incorporated herein by reference
(3) Filed as an Exhibit to the Company's Report on Form 8-K that was
filed with the Securities and Exchange Commission on September
15, 1994, and incorporated herein by reference
(4) Filed as an Exhibit to the Company's Form 10-K for the year ended
December 31, 1994, and incorporated herein by reference
(5) Filed as an Exhibit to the Company's Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference
(6) Filed as an Exhibit to the Company's Form 10-Q for the quarterly
period ended June 30, 1997, and incorporated herein by reference
19
<PAGE>
(7) Filed as an Exhibit to the Company's Form 10-Q for the quarterly
period ended September 30, 1997, and incorporated herein by
reference
(8) Filed as an Exhibit to the Company's Registration Statement on
Form S-8 that was declared effective on September 2, 1998, and
incorporated herein by reference
(9) Filed as an Exhibit to the Company's Report on Form 8-K that was
filed with the Securities and Exchange Commission on October 7,
1998, and incorporated herein by reference
(10) Filed as an Exhibit to the Company's Form 10-K for the year ended
December 31, 1998, and incorporated herein by reference
(11) Filed as an Exhibit to the Company's Registration Statement on
Form S-8 that was declared effective on October 22, 1998, and
incorporated herein by reference
(12) Filed as an Exhibit to this Form 10-K
ITEM 14(B).REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on October 7, 1998, discussing the
acquisition of QuickSilver, the transfer of the NextNet technology to an entity
of the same name in conjunction with the venture financing of that entity, and
the change of the Company's name from "Racotek, Inc." to "Zamba Corporation."
Financial statements included with the Form 8-K included the balance sheets of
The QuickSilver Groups as of December 27, 1996, and December 26, 1997,
statements of operations, statements of stockholders' equity, and statements of
cash flows of The QuickSilver Group for each of the two years in the period
ended December 26, 1997.
On January 26, 1999, the Company filed a Form 8-K to report the resignation of
PricewaterhouseCoopers LLP ("PwC") as the Company's independent accountant, due
to the intended commencement of a business relationship between the Company and
the technology consulting practice of PwC. Subsequent to the 8-K filing, the
Company has formally entered a business relationship with PwC.
On February 12, 1999, the Company filed a Form 8-K to report the retention of
KPMG Peat Marwick LLP as the Company's new independent accountants.
20
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Zamba Corporation:
We have audited the consolidated financial statements of Zamba Corporation and
subsidiary as of and for the year ended December 31, 1998 as listed in the
accompanying index. In connection with our audit of the consolidated financial
statements, we also have audited the financial statement schedule as of and for
the year ended December 31, 1998 as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
and opinion on these consolidated financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Zamba
Corporation and subsidiary as of December 31, 1998 and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule as of and for the year ended December 31, 1998
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information
set forth therein.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 15, 1999
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Zamba Corporation:
We have audited the financial statements and the financial statement schedule of
Zamba Corporation, formerly known as Racotek, Inc. (the Company), as of December
31, 1997 and for each of the two years in the period ended December 31, 1997, as
listed in the accompanying index. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Zamba Corporation as of
December 31, 1997, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as whole, presents fairly, in all material
respects, the information required to be included therein.
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 12, 1998
22
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
1998 1997
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $2,962 $3,103
SHORT-TERM INVESTMENTS - 2,233
ACCOUNTS RECEIVABLE, NET 2,150 561
UNBILLED RECEIVABLES 284 -
PREPAID EXPENSES AND OTHER CURRENT ASSETS 299 195
---------------- ----------------
TOTAL CURRENT ASSETS 5,695 6,092
PROPERTY AND EQUIPMENT, NET 1,175 786
RESTRICTED CASH 200 355
IDENTIFIABLE INTANGIBLE ASSETS, NET 6,768 -
GOODWILL, NET 38 -
OTHER ASSETS 65 4
---------------- ----------------
TOTAL ASSETS $13,941 $7,237
---------------- ----------------
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT INSTALLMENTS OF LONG-TERM DEBT $285 $ -
ACCOUNTS PAYABLE 195 6
ACCRUED EXPENSES 765 651
DEFERRED REVENUE 334 303
---------------- ----------------
TOTAL CURRENT LIABILITIES 1,579 960
---------------- ----------------
LONG-TERM DEBT, LESS CURRENT INSTALLMENTS 1,240 -
---------------- ----------------
COMMITMENTS (NOTE 3)
TOTAL LIABILITIES 2,819 960
---------------- ----------------
STOCKHOLDERS' EQUITY :
PREFERRED STOCK, $0.01 PAR VALUE, 5,000,000 SHARES
AUTHORIZED, NONE ISSUED OR OUTSTANDING - -
COMMON STOCK, $0.01 PAR VALUE, 55,000,000 SHARES
AUTHORIZED, 29,014,203 AND 24,998,558
ISSUED AND OUTSTANDING AT DECEMBER 31, 1998
AND 1997, RESPECTIVELY 290 250
ADDITIONAL PAID-IN CAPITAL 78,667 71,265
ACCUMULATED DEFICIT (67,835) (65,088)
PROMISSORY NOTE RECEIVABLE - (150)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 11,122 6,277
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,941 $7,237
---------------- ----------------
---------------- ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
23
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
NET REVENUES:
SERVICES $7,771 $4,744 $4,977
PRODUCTS 350 876 1,906
---------------- ---------------- ----------------
8,121 5,620 6,883
COST AND EXPENSES:
COST OF SERVICES 4,835 4,227 3,499
COST OF PRODUCTS 9 1,266 2,027
RESEARCH AND DEVELOPMENT 1,163 3,286 4,211
SALES AND MARKETING 2,209 4,149 6,249
GENERAL AND ADMINISTRATIVE 1,895 2,463 2,000
AMORTIZATION OF INTANGIBLES 936 - -
---------------- ---------------- ----------------
LOSS FROM OPERATIONS (2,926) (9,771) (11,103)
OTHER INCOME (EXPENSE):
INTEREST INCOME 225 427 859
INTEREST EXPENSE (46) - -
---------------- ---------------- ----------------
179 427 859
---------------- ---------------- ----------------
NET LOSS ($2,747) ($9,344) ($10,244)
---------------- ---------------- ----------------
---------------- ---------------- ----------------
NET LOSS PER SHARE - BASIC AND DILUTED ($0.11) ($0.37) ($0.42)
---------------- ---------------- ----------------
---------------- ---------------- ----------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 25,712,000 24,931,750 24,372,464
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
24
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------
ADDITIONAL PROMISSORY TOTAL
$0.01 PAR PAID-IN ACCUMULATED NOTE STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT RECEIVABLE EQUITY
------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995 24,043,446 $240 $70,638 ($45,500) $- $25,378
EXERCISE OF STOCK OPTIONS 696,847 7 240 - - 247
NET LOSS - - - (10,244) - (10,244)
- -------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1996 24,740,293 247 70,878 (55,744) - 15,381
EXERCISE OF STOCK OPTIONS 258,265 2 241 - - 243
STOCK OPTIONS ISSUED TO CONSULTANTS - 1 146 - - 147
NET LOSS - - - (9,344) - (9,344)
PROMISSORY NOTE RECEIVABLE - - - - (150) (150)
- -------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1997 24,998,558 250 71,265 (65,088) (150) 6,277
EXERCISE OF STOCK OPTIONS 143,330 2 176 - - 178
SHARES ISSUED IN ACQUISITION 2,337,980 23 2,929 - - 2,952
OPTIONS AND WARRANTS ISSUED IN
ACQUISITION - - 1,275 - - 1,275
ISSUANCE AND CONVERSION OF
PREFERRED TO COMMON 1,000,000 10 1,990 - - 2,000
CONVERSION OF NOTE TO COMMON STOCK 534,335 5 1,032 - - 1,037
FORGIVENESS OF PROMISSORY NOTE
RECEIVABLE - - - - 150 150
NET LOSS - - - (2,747) - (2,747)
- -------------------------------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1998 29,014,203 $290 $78,667 ($67,835) $- $11,122
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
25
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS ($2,747) ($9,344) ($10,244)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 1,436 1,011 969
LOSS ON SALE OF FIXED ASSETS 8 - -
WRITE-DOWN OF FIXED ASSETS - 519 -
FORGIVENESS OF PROMISSORY NOTE RECEIVABLE 150 - -
PROVISION FOR BAD DEBTS 13 118 233
WRITE-DOWN OF INVENTORIES - 207 1,110
AMORTIZATION OF PREMIUMS (DISCOUNTS) ON INVESTMENTS (17) 8 (94)
STOCK ISSUED FOR CONSULTING SERVICES - 147 -
CHANGES IN OPERATING ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE 53 937 (195)
UNBILLED RECEIVABLES (284) - -
INVENTORIES - 167 (179)
PREPAID EXPENSES AND OTHER CURRENT ASSETS 54 99 224
ACCOUNTS PAYABLE (335) (651) 19
ACCRUED EXPENSES (604) (95) (232)
DEFERRED REVENUE (76) 168 13
-------------- ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (2,349) (6,709) (8,376)
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF INVESTMENTS (2,327) (2,250) (18,712)
PROCEEDS FROM MATURITY OF INVESTMENTS 4,577 9,000 25,512
PURCHASE OF PROPERTY AND EQUIPMENT (245) (105) (313)
PROCEEDS FROM SALE OF FIXED ASSETS 91 - -
ACQUISITION, NET OF CASH ACQUIRED (2,128) - -
PAYMENTS ON DEBT (39) - -
OTHER (54) 3 86
-------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (125) 6,648 6,573
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM EXERCISES OF OPTIONS AND WARRANTS 178 243 247
PROCEEDS FROM SALE OF PREFERRED STOCK 2,000 - -
CHANGES IN RESTRICTED CASH 155 115 115
ADVANCE TO STOCKHOLDER - (150) -
-------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,333 208 362
-------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (141) 147 (1,441)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,103 2,956 4,397
-------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,962 $3,103 $2,956
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
26
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS DESCRIPTION:
Zamba Corporation ("Zamba" or "the Company") is a national dedicated customer
care consulting company. The Company's services are designed to assist clients
in building lasting relationships with customers, increase the effectiveness of
customer service and sales operations and improve overall communication with
customers. Prior to October 1998, the Company was known as Racotek, Inc.
BASIS OF REPORTING
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, which was acquired during 1998 (see
Note 4). All intercompany accounts and balances have been eliminated in
consolidation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS AND INVESTMENTS:
The Company considers all highly liquid investments in money market funds or
other investments with initial maturities of three months or less to be cash
equivalents. Investments with original maturities in excess of three months are
classified as short-term or long-term investments based on their remaining
maturities.
The Company had no non-cash equivalent investments as of December 31, 1998 and
in 1997, investments were considered by management to be "held to maturity," and
therefore were reported at their amortized cost. Amortization of premiums or
discounts are included in results of operations (see Note 2).
REVENUE RECOGNITION:
Revenues from fixed bid contracts are recognized as the services are performed
based on the percent-of-completion method (the ratio of hours incurred to total
estimated hours to complete the contract). Revenue from time and material
contracts are recognized as the services are performed. Customer support
revenues are recognized ratably over the term of the underlying support
agreements.
Deferred revenue is comprised of amounts received or billed in advance of
services to be performed. Unbilled revenue represents amounts recognized on
services performed in advance of billings in accordance with the terms of the
contract.
Revenue from software sold under license agreements, included in product
revenue, is recognized as revenue upon shipment if there are no post-delivery
obligations, and if the terms of the agreement are such that the payment of the
obligation is non-cancelable and non-refundable. Generally, other product
revenue is recognized upon shipment.
Effective January 1, 1998, the Company adopted Statement of Position (SOP) 97-2,
"Software Revenue Recognition". The adoption of this SOP has had no effect on
the Company's revenue recognition practices or any impact on its financial
position or results of operations.
RESEARCH AND DEVELOPMENT COSTS:
The Company capitalizes software development costs incurred in developing a
product once technological feasibility of the product has been determined. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs requires considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenue, estimated economic life and changes in software
and hardware technology. Amortization of capitalized software development costs
begins when the product is available for general release to customers and is
computed on the basis of each
27
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
product's projected revenues, but not less than on a straight-line basis over
the remaining estimated economic life of the product.
There were no software development costs capitalized during 1998, 1997, and
1996. Amortization expense of $0, $121,000, and $120,000 relating to
capitalized costs was recognized for the years ended December 31, 1998, 1997,
and 1996, respectively.
All other research and development expenditures are charged to expense as
incurred.
After the transfer of the NextNet technology in September 1998 (see Note 6) the
Company does not anticipate significant research and development projects and
expenses in 1999.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Significant additions or
improvements extending asset lives are capitalized; normal maintenance and
repair costs are expensed as incurred. Depreciation is determined using the
straight-line method over the estimated useful lives of the assets which range
from two to seven years. Leasehold improvements are amortized on a
straight-line basis over the shorter of the estimated useful lives of the assets
or the underlying lease term (approximately five years). The cost and related
accumulated depreciation or amortization of assets sold or disposed of are
removed from the accounts and the resulting gain or loss is included in
operations.
INTANGIBLE ASSETS:
Intangible assets are being amortized over the economic useful lives of between
two and five years.
The Company assesses the potential impairment of its intangible assets based on
anticipated cash flows from operations. No impairment charges were recorded in
1998, 1997 or 1996.
INCOME TAXES:
The Company utilizes the asset and liability method of accounting for income
taxes whereby deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the years in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the sum of
the tax currently payable and the change in the deferred tax assets and
liabilities during the period.
STOCK-BASED COMPENSATION:
The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. The
Company accounts for stock-based compensation to non-employees using the fair
value method prescribed by Statements of Financial Accounting Standards (SFAS)
No. 123. Accordingly, compensation costs for stock options granted to employees
are measured as the excess, if any, of the value of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
Compensation cost for stock options granted to non-employees is measured as the
fair value of the option at the date of grant. Such compensation costs, if any,
are amortized on a straight-line basis over the underlying option vesting terms.
NET LOSS PER SHARE:
Basic and diluted net loss per share is computed by dividing the net loss by
the weighted average number of shares of common stock outstanding during the
period. Assumed conversion shares were excluded from the net loss per share
computation as their effect is antidilutive. Common stock options could
potentially dilute basic earnings per share in future periods if the Company
generates net income.
28
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
BUSINESS SEGMENTS:
Effective at year-end 1998, the Company adopted SFAS No. 131, "Disclosure
About Segments of an Enterprise and Related Information," which requires
disclosure of segment data in a manner consistent with that used by an
enterprise for internal management reporting and decision making. The
Company reports its operations as a single segment under SFAS No. 131.
RECLASSIFICATIONS:
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. SELECTED BALANCE SHEET INFORMATION:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS)
--------------
Accounts Receivable, Net: 1998 1997
---- ----
<S> <C> <C>
Accounts receivable $ 2,377 $ 785
Less allowance for doubtful accounts (227) (224)
------- --------
$ 2,150 $ 561
------- --------
------- --------
Property and Equipment, Net:
Computer equipment $ 2,462 $ 1,453
Furniture and equipment 507 679
Leasehold improvements 186 106
------- --------
3,155 2,238
Less accumulated depreciation
and amortization (1,980) (1,452)
------- --------
$ 1,175 $ 786
------- --------
------- --------
Accrued Expenses:
Compensation and relocation $ 140 $ 169
Vacation 265 120
Deferred rent - 101
Accrued legal 50 55
Accrued capital purchases 50 -
Other 260 206
------- --------
$ 765 $ 651
------- --------
------- --------
</TABLE>
INVESTMENTS
The Company's investments consisted of $0 and $2.23 million of U.S. Government
and agency debt securities in 1998 and 1997, respectively, including unamortized
discounts of $17,000 in 1997.
3. LEASE COMMITMENTS:
The Company maintains its corporate office in Minnesota and operating offices
in California and Massachusetts under terms of noncancelable operating leases
which expire between August 2000 and May 2003. These leases require the
Company to pay a pro rata share of the lessor's operating costs.
The Minnesota lease requires Zamba to maintain a restricted cash balance as
security for the Company's obligations under the lease. The remaining leases
require the Company to provide security deposits as part of the lease
agreement. Total rent expense, including a pro rata share of the lessor's
operating costs, were $286,000, $767,000, and $642,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
29
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
In 1997, the Company recorded an accrual of $93,000 to recognize costs to be
incurred under terms of a prior lease agreement for other premises in excess
of estimated sublease income to be earned under terms of the sublease
agreement for those premises.
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
Year Ending December 31 Operating Leases
----------------------- ----------------
(in thousands)
<S> <C>
1999 $ 596
2000 525
2001 183
2002 114
2003 48
</TABLE>
4. ACQUISITION:
On September 22, 1998, the Company completed the acquisition of the QuickSilver
Group, Inc., ("QuickSilver") a customer care consulting company specializing in
software package implementation for call center management, sales automation ,
marketing automation, and automated field service and sales. The acquisition is
intended to be a tax free reorganization under the Internal Revenue Code of
1986, and for financial statement purposes has been recorded using the purchase
method of accounting. The consolidated financial statements of the Company
include the results of QuickSilver since September 22, 1998. The purchase price
consists of the following :
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Cash Paid $ 2,416
Notes payable (see Note 5) 2,162
Equity Common Stock 23
Additional Paid In Capital - Common Stock 2,929
Additional Paid in Capital - Options Exchanged 684
Additional Paid in Capital - Warrants Exchanged 579
-------
$ 8,793
-------
-------
</TABLE>
The fair value of net tangible assets acquired was $1.09 million. The fair
value of the identifiable intangible assets acquired was $7.70 million and was
recorded in the following categories: people and experiences, client references,
client lists, and intellectual property and delivery methodology.
PROFORMA RESULTS
The following table presents the consolidated results of operations for the
Company for 1998 and 1997 on an unaudited pro forma basis as if the acquisition
had taken place at the beginning of each year:
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
-------------------
(in thousands)
1998 1997
---- ----
<S> <C> <C>
Total revenue $9,992 $11,530
Net (loss) (7,631) (13,020)
Net (loss) per share - basic and diluted (0.28) (0.48)
</TABLE>
30
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
5. NOTES PAYABLE:
As part of the acquisition of QuickSilver, the Company issued $2.16 million in
promissory notes payable. Interest on the notes is computed at 7% of the
outstanding balance and is paid quarterly on the final day of each quarter,
commencing December 31, 1999, and ending December 31, 2003. Principal payments
are due quarterly on the last day of each quarter in 16 equal installments,
commencing December 31, 1999. Holders may request conversion of their notes to
common stock of Zamba. Conversion, which is computed at fair market value, is
at the sole and absolute discretion of Zamba's Board of Directors. On December
30, 1998, $1.02 million of the notes were converted to common stock, in addition
to $19,000 of interest payable related to such notes.
As part of the acquisition of QuickSilver, the Company also acquired debt
related to loan obligations. Loan payments are made monthly and consist of
principal and interest which is computed at a rate of 9.75%. Of these
obligations, $77,000 are payable in 1999 and $12,000 are payable in 2000.
The Company also acquired debt related to third party obligations. Payments on
these obligations are made monthly and consist of principal and interest.
Intrest on these obligations range from 9.59% to 20.21%. Of these third party
obligations, $36,000 are payable in 1999 and $6,000 are payable in 2000.
In September of 1998, the Company purchased software for $300,000. A down
payment of $50,000 was made and the payment plan allows the Company to defer
payment of $100,000 until September of 1999 and $150,000 until September of
2000.
Aggregate annual maturities of notes payable, subsequent to December 31, 1998,
are as follows:
<TABLE>
<CAPTION>
Year Ending December 31 Payments on Notes
----------------------- -----------------
(in thousands)
<S> <C>
1999 $ 285
2000 454
2001 286
2002 286
2003 214
</TABLE>
Cash paid for interest charges in 1998 was $5,000. No cash was paid for
interest charges in 1997 or 1996.
6. NEXTNET:
On September 21, 1998, the Company transferred its patented "NextNet" wireless
data technology to an entity of the same name, in conjunction with the receipt
by that entity of $8.0 million in private investment capital to fund the further
development of the technology. The Company received forty-four percent (44%)
ownership of the new company NextNet in exchange for the technology. The
Company's investment in NextNet, the new company, is carried at $0, the
historical carrying basis of the technology transferred, as amounts incurred by
the Company up to the date of the transfer were charged to research and
development expense. The Company does not have any obligations to provide
funding for this investment.
7. STOCKHOLDERS' EQUITY:
The Company's stock incentive and option plans provide for grants of stock
options and stock awards. The number of common shares available for grant
pursuant to the plans were 3,107,226, 621,753, and 420,611 as of December 31,
1998, 1997 and 1996, respectively.
Options become exercisable over periods of up to four years from the date of
grant and expire within ten years from date of grant.
31
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
The following table details option activity:
<TABLE>
<CAPTION>
Weighted
Average
Price Per Exercise
Options Option Price
<S> <C> <C> <C>
Balances, December 31, 1995 2,833,925 $ 0.10-12.625 $ 2.08
Granted 1,215,346 3.625-6.00 5.35
Exercised (696,847) 0.10-4.75 0.96
Canceled (440,752) 0.40-12.625 4.90
Balances, December 31, 1996 2,911,672 0.10-12.625 3.04
Granted 2,078,572 1.50-4.3125 2.37
Exercised (255,265) 0.20-3.88 1.16
Canceled (1,284,714) 0.10-12.625 5.06
Balances, December 31, 1997 3,450,265 0.20-12.625 2.69
Granted 6,061,492 1.50-4.325 1.93
Exercised (143,330) 0.20-3.25 1.38
Canceled (3,090,228) 1.50-7.25 2.75
Balances, December 31, 1998 6,278,199 $ 0.20-12.625 1.83
Options exercisable at
December 31, 1998 2,025,768 $ 0.20-12.625 $ 1.99
</TABLE>
On October 13, 1998, the Company repriced outstanding stock options held by an
officer to the market value of the Company's stock as of October 13, 1998. In
connection with the repricing of outstanding stock options, all repriced options
started vesting on October 13, 1998, and become exercisable over periods of up
to four years from October 13, 1998. A total of 500,000 options, with an
original exercise price of $3.25, were repriced to $1.75.
On January 20, 1998, the Company repriced outstanding stock options held by
officers to the market value of the Company's stock as of January 20, 1998. In
connection with the repricing of outstanding stock options, all repriced options
started vesting on January 20, 1998, and become exercisable over periods of up
to four years from January 20, 1998. A combined total of 400,000 options, with
original exercise prices ranging from $3.00 to $3.9375, were repriced to $2.00
On October 20, 1997, the Company repriced outstanding stock options held by
employees to the market value of the Company's stock as of October 20, 1997. In
connection with the repricing of outstanding stock options, all repriced options
started vesting on October 20, 1997, and become exercisable over periods of up
to four years from October 20, 1997. Approximately 293,000 options, with
original exercise prices ranging from $2.25 to $12.625, were repriced to $1.50.
32
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY, CONTINUED:
STOCK-BASED COMPENSATION:
No compensation cost has been recognized for stock options granted to employees
or directors under the 1989 Stock Option Plan, the 1993 Equity Incentive Plan,
1993 Directors Option Plan, 1998 Non-Officers Plan or the 1997 Stock Option Plan
for Key Employees, Consultants and Directors of QuickSilver Group, Inc.
(collectively referred to as "the Plans"). Had compensation cost for the Plans
been determined based on the fair value of options at the grant date for awards
in 1998, 1997 and 1996, the Company's net loss and net loss per share would have
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
Net loss As reported $(2,747) $(9,344) $(10,244)
Pro forma (4,982) (10,508) (11,180)
Net loss per
share - As reported (.11) (.37) (.42)
basic and
diluted Pro forma (.20) (.42) (.46)
</TABLE>
The pro forma effect on the net loss for 1998, 1997 and 1996 is not fully
representative of the pro forma affect on net earnings (loss) in future years
because these years do not take into consideration pro forma compensation
expense related to grants made prior to 1995. In relation to the option
repricing described previously, the above proforma compensation expense includes
$120,000 and $37,000, for 1998 and 1997, respectively.
The aggregate fair value of options granted during 1998, 1997 and 1996,
respectively, was $3.53 million, $881,000 and $1.67 million for the 1993 Equity
Incentive Plan, $47,000, $193,000, and $328,000 for the 1993 Directors Option
Plan, $687,000, $0, and $0 for the 1998 Non-Officer Option Plan and $351,000,
$0, and $0 for the 1997 Stock Option Plan for Key Employees, Consultants and
Directors of QuickSilver Group, Inc. The aggregate fair value was calculated by
using the fair value of each option grant on the date of grant, utilizing the
Black-Scholes option-pricing model and the following key assumptions for the
Plans:
<TABLE>
<CAPTION>
Assumptions 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rates 4.18% - 5.71% 5.27% - 6.77% 5.27% - 6.77%
Volatility 79% 36% 50%
Expected lives (months) 60 60 60
- --------------------------------------------------------------------------------
</TABLE>
The Company does not anticipate paying dividends in the near future.
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- --------------------
Weighted-
Number Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise at December Contractual Exercise at Exercise
Prices 31, 1998 Life Price December 31, 1998 Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.20 - .84 606,055 6.29 $ 0.41 468,723 $ 0.34
1.50 - 2.38 4,518,602 9.13 1.71 1,047,569 1.70
2.44 - 3.88 810,036 8.62 3.00 186,916 3.22
4.12 - 5.13 313,881 7.37 4.70 293,185 4.73
5.50 -12.63 29,625 6.49 6.84 29,375 6.84
- --------------------------------------------------------------------------------
</TABLE>
PREFERRED STOCK:
The Company's certificate of incorporation authorizes issuance of up to 5.0
million preferred shares with a par value of $0.01 and allows the Company's
Board of Directors, without obtaining the stockholders' approval, to issue
preferred stock. In October 1998, 1.0 million shares of preferred stock were
purchased by the chairman of the
33
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
Board of Directors of the Company for $2.00 per share. These shares converted
by their terms to common stock on December 29, 1998. There were no preferred
shares issued or outstanding as of December 31, 1998 or 1997.
WARRANTS:
In connection with the acquisition of QuickSilver stock warrants to purchase
QuickSilver common stock were converted to 462,247 warrants to purchase Zamba
common stock. These warrants are immediately exercisable, but the underlying
acquired shares cannot be sold until after March 22, 1999, and expire on March
9, 2008.
STOCKHOLDER RIGHTS PLAN:
On September 7, 1994, the Board of Directors adopted a Stockholder Rights Plan.
Under this plan, the Board of Directors declared a dividend of one preferred
share purchase right (a "Right") for each share of common stock outstanding as
of September 28, 1994 (the "Record Date"). In addition, one Right will be
issued with each share of common stock that becomes outstanding after the Record
Date, except in certain circumstances. All Rights will expire on September 12,
2004, unless the Company extends the expiration date, redeems the Rights or
exchanges the Rights for common stock.
The Rights are initially attached to the Company's Common Stock and will not
trade separately. If a person or a group acquires 20 percent or more of the
Company's common stock (an "Acquiring Person") or announces an intention to make
a tender offer for 20 percent or more of the Company's common stock, then the
Rights will be distributed (the "Distribution Date") and will thereafter trade
separately from the common stock. Upon the Distribution Date, each Right may be
exercised for 1/100th of a share of a newly designated Series A Junior
Participating Preferred Stock at an exercise price of $25.00.
Upon a person or group becoming an Acquiring Person, holders of the Rights
(other than the Acquiring Person) will have the right to acquire shares of the
Company's common stock at a substantially discounted price in lieu of the
preferred stock. Additionally, if, after the Distribution Date, the Company
merges into or engages in certain other business combination transactions with
an Acquiring Person or 50 percent or more of its assets are sold in a
transaction with an Acquiring Person, the holders of Rights (other than the
Acquiring Person) will have the right to receive shares of common stock of the
acquiring corporation at a substantially discounted price.
After a person or a group has become an Acquiring Person, the Company's Board of
Directors may, at its option, require the exchange of outstanding Rights (other
than those held by the Acquiring Person) for common stock at an exchange ratio
of one share of the Company's common stock per Right. The board also has the
right to redeem outstanding Rights at any time prior to the Distribution Date
(or later in certain circumstances) at a price of $0.005 per Right. The terms
of the Rights, including the period to redeem the Rights, may be amended by the
Company's Board of Directors in certain circumstances.
8. INCOME TAXES:
The Company has incurred net operating losses since inception. Because of the
uncertainty about whether the Company will have taxable earnings in the future,
the Company has not reflected any benefit of such net operating loss
carryforwards in the accompanying consolidated financial statements.
At December 31, 1998, the Company has approximately $70.8 million of net
operating loss carryforwards for both financial statement and for federal income
tax purposes that begin to expire in 2005. The use of these carryforwards in
any one year is limited under Internal Revenue Code Section 382 because of
significant ownership changes. In addition, the net operating loss carryforward
of QuickSilver is limited under the federal consolidated tax return rules.
34
<PAGE>
ZAMBA CORPORATION
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
8. INCOME TAXES, CONTINUED:
The provision for income taxes differs from the expected tax benefit, computed
by applying the federal corporate tax rate, as follow:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Expected federal benefit $ (934,000)
Change in valuation allowance 1,649,000
State taxes, net (165,000)
Subsidiary net operating loss acquired (860,000)
Amortization 375,000
Other ( 65,000)
-----------
Total benefit $ -
-----------
-----------
</TABLE>
Valulation allowances have been established for the entire tax benefit
associated with the carryforwards and net future deductible temporary
differences as of December 31, 1998, 1997 and 1996.
The tax effect of items that comprise a significant portion of deferred tax
assets is:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 28,328,000 $ 26,796,000
Tax credits 670,000 627,000
Other 504,000 430,000
Valuation allowance (29,502,000) (27,853,000)
----------- -----------
Net deferred tax asset $ - $ -
----------- -----------
</TABLE>
Due to the uncertainty surrounding the timing of realizing the benefits of its
favorable tax attributes in future tax returns, the Company has placed a
valuation allowance against its otherwise recognizable deferred tax assets.
9. EMPLOYEE SAVINGS PLAN:
The Company offers a 401(k) defined contribution benefit plan for which all
regular employees are eligible. Participants may contribute up to 20% of
their compensation in any plan year subject to an annual limitation.
Employer contributions may be made at the discretion of the Company's Board
of Directors. No Company contributions have been made to the Plan.
10. MAJOR CUSTOMERS:
A portion of the Company's revenues have been derived from major clients for the
years ended December 31, 1998, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C>
Customer 1 18% 7% 5%
Customer 2 11% 5% -
Customer 3 - 8% 11%
</TABLE>
11. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount for cash and cash equivalents, short-term investments and
long-term debt approximates fair value because of the short maturity of those
instruments.
35
<PAGE>
ZAMBA CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------- ----------------------------------------------------------------------------
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
BEGINNING OF CHARGED TO FROM END OF
DESCRIPTION PERIOD EXPENSE ALLOWANCE PERIOD
- -------------------------------------------------- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998
Allowance for doubtful accounts (deducted
from accounts receivable)......................... $224 $13 ($10) $227
Year ended December 31, 1997
Allowance for doubtful accounts (deducted
from accounts receivable)......................... 340 118 (234) 224
Inventory obsolescence reserve (deducted
from inventories)................................. 856 207 (1,063) 0
Year ended December 31, 1996
Allowance for doubtful accounts (deducted
from accounts receivable)......................... 197 233 (90) 340
Inventory obsolescence reserve (deducted
from inventories)................................. 353 1,110 (607) 856
</TABLE>
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ZAMBA CORPORATION
Date: March 29, 1999 By /s/ Paul D. Edelhertz
-----------------------------------------
Paul D. Edelhertz,
President and Chief Executive Officer
Each person whose signature appears below constitutes and appoints Paul
Edelhertz and Michael H. Carrel, jointly and severally, his true and lawful
attorneys-in-fact, each with the power of substitution, for him in any and all
capacities, to sign amendments to this Report on Form 10-K, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
/s/ Paul D. Edelhertz President and Chief March 29, 1999
- ------------------------ Executive Officer
Paul D. Edelhertz
PRINCIPAL FINANCIAL OFFICER
/s/ Michael H. Carrel Vice President and Chief March 29, 1999
- ------------------------ Financial Officer
Michael H. Carrel
OTHER DIRECTORS:
/s/ Joseph B. Costello Chairman of the Board March 29, 1999
- ------------------------
Joseph B. Costello
/s/ Dixon R. Doll Director March 29, 1999
- ------------------------
Dixon R. Doll
/s/ Michael A. Fabiaschi Director March 29, 1999
- -------------------------
Michael A. Fabiaschi
/s/ Thomas W. Minick Vice President and Director March 29, 1999
- -------------------------
Thomas W. Minick
37
<PAGE>
ANNUAL MEETING
The Zamba Corporation annual stockholders' meeting will be held at the Marriott
City Center, 30 South Seventh Street, Minneapolis, Minnesota, 55402, at 3:00
p.m. C.S.T. on Thursday, May 20, 1999.
SHAREHOLDER INFORMATION
Zamba common stock trades on the Nasdaq National Market under the symbol ZMBA.
Stockholders and prospective investors are welcome to call, write or fax Zamba
with questions or requests for additional information. Copies of Zamba's Annual
Report on Form 10-K for the year ended December 31, 1998, may be obtained
without charge by directing inquiries to:
<TABLE>
<S> <C> <C>
ZAMBA CORPORATION DIRECTORS CORPORATE OFFICERS
INVESTOR RELATIONS Joseph B. Costello Paul D. Edelhertz
7301 OHMS LANE, SUITE 200 Chairman of the Board President and Chief
MINNEAPOLIS, MN 55439 Zamba Corporation Executive Officer
TEL: 612-832-9800 Chairman and Chief Executive Officer
FAX: 612-832-9383 think3 Michael H. Carrel
WEBSITE: http:\\www.gozamba.com Vice President and
Paul D. Edelhertz Chief Financial
Transfer Agent President and Chief Executive Officer Officer
Norwest Bank Minnesota, N.A. Zamba Corporation
Stock Transfer Department Thomas W. Minick
161 North Concord Exchange Dixon R. Doll Vice President
P.O. Box 738 Founder and Chairman
South St. Paul, MN 55075-0738 Doll Capital Management John G. Higgins
Tel: 612-450-4101 Vice President
Fax: 612-450-4078 Michael A. Fabiaschi
President and Chief Executive Officer Todd X. Fitzwater
Independent Auditors LPA Software, Inc. Vice President
KPMG Peat Marwick LLP
Minneapolis, MN Thomas W. Minick
Vice President
Zamba Corporation
COMMITTEES OF THE BOARD
AUDIT COMMITTEE
Joseph B. Costello
Michael A. Fabiaschi
COMPENSATION COMMITTEE
Joseph B. Costello
Dixon R. Doll
</TABLE>
38
<PAGE>
EXHIBIT 3.01
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
ZAMBA CORPORATION
Zamba Corporation, a corporation organized and existing under the laws of
the State of Delaware hereby certifies as follows:
FIRST: The name of this corporation (hereinafter the "Corporation") is
ZAMBA CORPORATION. The name was changed to Zamba Corporation from Racotek, Inc.
on October 5, 1998, in connection with a merger that was completed on September
22, 1998. The corporation was originally incorporated under the name RaCoTek,
Inc. and the date of filing of its original Certificate of Incorporation with
the Secretary of State of the State of Delaware is August 15, 1990. The current
articles of incorporation, the Third Amended and Restated Certificate of
Incorporation, are dated December 17, 1993.
SECOND: The text of the Third Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended and restated in its entirety
to become the Fourth Amended and Restated Certificate of Incorporation and to
read as follows:
ARTICLE 1
The name of this Corporation is Zamba Corporation.
ARTICLE 2
The address of the registered office of the Corporation in the State of
Delaware is The Prentice-Hall Corporation System, Inc., 1013 Centre Road,
Wilmington, Delaware 19805, County of New Castle, and the name of the registered
agent of the Corporation in the State of Delaware at such address is: The
Prentice-Hall Corporation System, Inc.
ARTICLE 3
The purposes and powers of the Corporation shall be to conduct any lawful
act or activity, for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE 4
SECTION 1. CLASSES OF STOCK
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock", both of which
shall have a par value of $0.01 per share. The total number of shares which the
Corporation is authorized to issue is 60,000,000, of which 55,000,000 shares
shall be Common Stock and 5,000,000 shares shall be Preferred Stock.
SECTION 2. DESIGNATION OF SERIES OF PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of the
shares of Preferred Stock in one or more series, and, by filing a certificate of
designation pursuant to the General Corporation Law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof,
and to increase or decrease the number of shares of any such series (but not
above the total number of shares of Preferred Stock authorized when combined
with other series of Preferred Stock nor below the number of shares of such
series then outstanding). In case the number of shares of any series shall be
so decreased, the shares constituting such decrease shall resume the status that
they had prior the adoption of the resolution originally fixing the number of
shares of such series.
Except as may be expressly provided in any Certificate of Designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article 4, any new series of Preferred Stock may be designated,
39
<PAGE>
fixed and determined as provided herein by the Board of Directors without
approval of the holders of Common Stock or the holders of Preferred Stock, or
any series thereof, and any such new series may have powers, preferences and
rights, including, without limitation, voting rights, dividend rights,
liquidation rights, redemption rights and conversion rights, senior to, junior
to or pari passu with the rights of the Common Stock, the Preferred Stock, or
any future class or series of Preferred Stock or Common Stock.
ARTICLE 5
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for (i) liability based on a breach of the duty of
loyalty to the Corporation or its stockholders; (ii) liability for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) liability based on the payment of an improper dividend
or an improper repurchase of the Corporation's stock under Section 174 of the
General Corporation Law of the State of Delaware; or (iv) liability for any
transaction for which the director derived an improper personal benefit. If the
General Corporation Law of the State of Delaware is hereafter amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended General Corporation Law of the State of
Delaware. Any repeal or modification of this Article by the stockholders of the
Corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
ARTICLE 6
The power to adopt, amend, or repeal the Bylaws of this Corporation is
hereby conferred upon the Board of Directors to the full extent permitted by
law, subject, however, to the power of the stockholders of this Corporation to
adopt, amend, or repeal Bylaws.
ARTICLE 7
Election of directors need not be by written ballot unless the Bylaws of
this Corporation shall so provide.
THIRD: This Fourth Amendment and Restated Certificate of Incorporation
has been duly adopted in accordance with the provisions of Sections 242 and 245
of the General Corporation Law of the State of Delaware, with notice to
nonconsenting stockholders having been given in accordance with Section 228(d)
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Zamba Corporation has caused this Fourth Amended and
Restated Certificate of Incorporation to be signed by its Chief Executive
Officer and attested to by its Secretary in Minneapolis, Minnesota this 29th day
of December, 1998.
ZAMBA CORPORATION
By: /s/ Paul Edelhertz
Paul Edelhertz, Chief Executive
Officer
ATTEST:
/s/ Ian Nemerov
Ian Nemerov, Secretary
40
<PAGE>
EXHIBIT 10.20
ZAMBA CORPORATION
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of October 22, 1998, by and among ZAMBA CORPORATION, a Delaware
corporation (the "Company") and Joseph Costello ("Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of one million (1,000,000) shares of its Series A Junior Participating
Preferred Stock (the "Shares");
WHEREAS, Purchaser desires to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
- - AGREEMENT TO SELL AND PURCHASE.
- 1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized (i) the sale and
issuance to Purchaser of the Shares and (ii) the issuance of such shares of
Common Stock to be issued upon conversion of the Shares (the "Conversion
Shares"). The Shares and the Conversion Shares shall have the rights,
preferences, privileges and restrictions set forth in the Certificate of
Designation in the form attached hereto as Exhibit A (the "Certificate of
Designation").
1.2 SALE AND PURCHASE. Subject to the terms and conditions
hereof, at the Closing (as hereinafter defined) the Company hereby agrees to
issue and sell to the Purchaser, and Purchaser agrees to purchase from the
Company one million (1,000,000) Shares at purchase price of $2.00 per Share.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares under
this Agreement (the "Closing") shall take place at 5:00 p.m. on the date hereof,
at the offices of Cooley Godward LLP, 975 Page Mill Road, Palo Alto, California
94306 or at such other time or place as the Company and Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to Purchaser certificates representing the
number of Shares to be purchased at the Closing by Purchaser, against payment of
the purchase price therefor by check, wire transfer made payable to the order of
the Company, cancellation of indebtedness or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by the
Company to Purchaser at the Closing, the Company hereby represents and warrants
to Purchaser as of the date of this Agreement as follows:
41
<PAGE>
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares (and, upon the approval by the
Company's shareholders of additional authorized shares of Common Stock, the
Conversion Shares) and to carry out the provisions of this Agreement and to
carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and
is in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its business.
3.2 CAPITALIZATION; VOTING RIGHTS. The rights, preferences,
privileges and restrictions of the Shares are as stated in the Certificate of
Designation. The Conversion Shares have been duly and validly reserved for
issuance. When issued in compliance with the provisions of this Agreement and
the Certificate of Designation, the Shares and the Conversion Shares will be
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Shares and the Conversion Shares may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time a
transfer is proposed.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the Certificate of Designation and the Investor
Rights Agreement of even date herewith between the Company and the Purchaser
(the "Related Agreements") and the Related Agreements, the performance of all
obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto (and,
upon the approval by the Company's shareholders of additional authorized shares
of Common Stock, the Conversion Shares) has been taken or will be taken prior to
the Closing. This Agreement, when executed and delivered, will be a valid and
binding obligation of the Company enforceable in accordance with its terms,
except as limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and (b) general principles of equity that restrict the
availability of equitable remedies. The sale of the Shares and the subsequent
conversion of the Shares into Conversion Shares are not and will not be subject
to any preemptive rights or rights of first refusal that have not been properly
waived or complied with.
3.4 FINANCIAL STATEMENTS. The Company has made available to the
Purchaser (a) its unaudited balance sheet as at December 31, 1997 and unaudited
statement of income and cash flows for the twelve months ending December 31,
1997 and (b) its unaudited balance sheet as at September 30, 1998 (the
"Statement Date") and unaudited consolidated statement of income and cash flows
for the nine month period ending on the Statement Date (collectively, the
"Financial Statements"). The Financial Statements, together with the notes
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated,
except as disclosed therein, and present fairly the financial condition and
position of the Company as of December 31, 1997 and the Statement Date;
provided, however, that the unaudited financial statements are subject to normal
recurring year-end audit adjustments (which are not expected to be material),
and do not contain all footnotes required under generally accepted accounting
principles.
3.5 LIABILITIES. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities not disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.6 CHANGES. Since the Statement Date, there has not been to the
Company's knowledge any event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company.
3.7 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or
42
<PAGE>
materially impair the operations of the Company, and (c) those that have
otherwise arisen in the ordinary course of business. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used. The Company is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.
3.8 PATENTS AND TRADEMARKS. To the best of its knowledge, the Company
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now conducted and
as presently proposed to be conducted, without any known infringement of the
rights of others. There are no outstanding options, licenses or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as presently proposed in the SEC Documents (as hereafter defined),
would violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company's business as presently proposed to be
conducted in the SEC Documents (as hereafter defined). The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Certificate of Incorporation or Bylaws,
or of any provision of any mortgage, indenture, contract, agreement, instrument
or contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to the Company which would materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects of
the Company. The execution, delivery, and performance of and compliance with
this Agreement, and the Related Agreements, and the issuance and sale of the
Shares pursuant hereto and of the Conversion Shares pursuant to the Restated
Charter, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
3.10 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company
that questions the validity of this Agreement, or the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
3.11 TAX RETURNS AND PAYMENTS. The Company has filed all tax
returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to
the Company's knowledge all other taxes due and payable by the Company on or
before the Closing have been paid or will be paid prior to the time they
become delinquent. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
3.12 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company is
not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which violation would materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained
43
<PAGE>
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects or financial condition of the Company
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.
3.13 OFFERING VALID. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 4.2 hereof, the offer, sale and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the Company nor
any agent on its behalf has solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Shares to any
person or persons so as to bring the sale of such Shares by the Company within
the registration provisions of the Securities Act or any state securities laws.
3.14 FULL DISCLOSURE. The Company has filed all required reports,
schedules, forms and other documents with the Securities and Exchange Commission
(the "SEC") between January 1, 1997 and the date of this Agreement (the "SEC
Documents"). As of the time each of the SEC Documents was filed with the SEC
(or, if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), (i) the SEC Documents complied in all material
respects with the requirements of applicable law and regulations, and (ii)
except to the extent that information contained in any SEC Document has been
revised or superseded by a later-filed SEC Document, none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
44
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
action on Purchaser's part required for the lawful execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except as limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable remedies.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Purchaser's representations contained in the Agreement. Purchaser
hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk
of this investment indefinitely unless the Shares (or the Conversion Shares)
are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that the Company has no
present intention of registering the Shares, the Conversion Shares or any
shares of its Common Stock. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will
be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion
Shares under the circumstances, in the amounts or at the times Purchaser
might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) PURCHASER CAN PROTECT HIS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that he is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Purchaser has received and read the
Financial Statements and SEC Documents and has had an opportunity to discuss the
Company's business, management and financial affairs with directors, officers
and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
4.3 TRANSFER RESTRICTIONS. Purchaser acknowledges and agrees that the
Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investor Rights Agreement.
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5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER' OBLIGATIONS AT THE CLOSING. Purchaser's
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section
3 hereof shall be true and correct in all material respects as of the Closing
Date with the same force and effect as if they had been made as of the Closing
Date, and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchaser and the
Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement (except for such
as may be properly obtained subsequent to the Closing).
(d) FILING OF CERTIFICATE OF DESIGNATION. The Certificate of
Designation shall have been filed with the Secretary of State of the State of
Delaware.
(e) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to Purchaser, and Purchaser shall
have received all such counterpart originals or certified or other copies of
such documents as he may reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by Purchaser shall be true and correct in all material
respects at the date of the Closing, with the same force and effect as if they
had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by Purchaser on or before the Closing.
(c) FILING OF CERTIFICATE OF DESIGNATION. The Certificate of
Designation shall have been filed with the Secretary of State of the State of
Delaware.
(d) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement (except for such
as may be properly obtained subsequent to the Closing).
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
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6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER. This Agreement may be amended, modified or
waived only upon the written consent of the Company and Purchaser.
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring.
6.8 WAIVER OF CONFLICTS. Each party to this Agreement acknowledges
that legal counsel for the Company, Cooley Godward LLP ("Cooley Godward"), has
in the past and may continue in the future to perform legal services for
Purchaser or his affiliates in matters unrelated to the transactions
contemplated by this Agreement. Each party to this Agreement hereby (a)
acknowledges that such party has had an opportunity to ask for and obtain
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation; (b)
acknowledges that with respect to the transactions contemplated herein, Cooley
Godward has represented the Company and not Purchaser; and (c) gives informed
consent to Cooley Godward's representation of the Company in the transactions
contemplated by this Agreement and Cooley Godward's representation of Purchaser
in matters unrelated to such transactions.
6.9 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof and to Purchaser at the
address set forth on the signature page hereof or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
6.10 EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement.
6.11 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
6.12 TITLES AND SUBTITLES. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.14 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any
47
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broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein. Each party hereto further
agrees to indemnify each other party for any claims, losses or expenses incurred
by such other party as a result of the representation in this Section 6.14 being
untrue.
6.15 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.16 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
IN WITNESS WHEREOF, the parties hereto have executed this SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
ZAMBA CORPORATION /s/ Joseph Costello
Joseph Costello
By: /s/ Paul Edelhertz
Paul Edelhertz
Chief Executive Officer
Address:
------------------------------
------------------------------
------------------------------
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SCHEDULE OF EXCEPTIONS
In connection with that certain Series A Preferred Stock Purchase Agreement
dated as of October 22, 1998 by and among ZAMBA CORPORATION (the "Company") and
Joseph Costello (the "Agreement"), the Company hereby delivers this Schedule of
Exceptions to the Company's representations and warranties given in the
Agreement. The section numbers in this Schedule correspond to the section
numbers in the Agreement; provided, however, that any information disclosed
herein under any section number shall be deemed to be disclosed and incorporated
in any other section of the Agreement where such disclosure would be
appropriate. References to any document do not purport to be complete and are
qualified in their entirety by the document itself. Capitalized terms used but
not defined herein shall have the same meanings given them in the Agreement.
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EXHIBIT 10.21
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes
only, October 20, 1995, is made by and between All Phase Telecommunication,
Inc. ("LESSOR") and The Quicksilver Group ("LESSEE"), (collectively the
"PARTIES," or individually a "PARTY").
1.2(a) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this
Lease, commonly known by the street address of 10061 Bubb Road, located in
the City of Cupertino, County of Santa Clara, State of California, with zip
code __________, as outlined on Exhibit "A" attached hereto ("PREMISES"). The
"BUILDING" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building): all of that
certain real property comprising 5,500 square feet of space being the most
northly portion of building in a building comprising approximately 14,500
square feet. In addition to Lessee's rights to use and occupy the Premises
as hereinafter specified, Lessee shall have non-exclusive rights to the
Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified,
but shall not have any rights to the roof, exterior walls or utility raceways
of the Building or to any other buildings in the Industrial Center. The
Premises, the Building, the Common Areas, the land upon which they are
located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "INDUSTRIAL CENTER." (Also see Paragraph 2.)
1.2(b) PARKING: twenty-five (25) unreserved vehicle parking
spaces ("UNRESERVED PARKING SPACES"); and ___________________________________
reserved vehicle parking spaces ("RESERVED PARKING SPACES"). (Also see
Paragraph 2.6.)
1.3 TERM: 3 years and 0 months ("ORIGINAL TERM") commencing
November 15, 1995 ("COMMENCEMENT DATE") and ending November 14, 1998
("EXPIRATION DATE"). (Also see Paragraph 3.)
1.4 EARLY POSSESSION: November 1, 1995 ("EARLY POSSESSION
DATE"). (Also see Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $6,600.00 per month ("BASE RENT"), payable on the
first day of each month commencing see paragraph 50 (Also see Paragraph 4.)
/ / If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum ______________, attached hereto.
1.6(a) BASE RENT PAID UPON EXECUTION: $6,600.00 as Base Rent for the
period November 15, 1995 - December 14, '96.
1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: thirty-eight
percent (38%) ("LESSEE'S SHARE") as determined by / / prorata square footage
of the Premises as compared to the total square footage of the Building or
/ / other criteria as described in Addendum ____.
1.7 SECURITY DEPOSIT: $8,580.00 ("SECURITY DEPOSIT"). (Also see
Paragraph 5.)
1.8 PERMITTED USE: sales, design, shipping and distribution of
software and related products. ("PERMITTED USE") (Also see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see
Paragraph 8.)
1.10(a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
/X/ Lalond Brokerage, Inc. represents Lessor exclusively ("LESSOR'S BROKER");
/X/ Bishop Hawk, Inc. represents Lessee exclusively ("LESSEE'S BROKER"); or
/ / ________________________ represents both Lessor and Lessee ("DUAL AGENCY").
(Also see Paragraph 15.)
1.10(b) PAYMENT TO BROKERS. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate
shares as they may mutually designate in writing, a fee as set forth in a
separate written agreement between Lessor and said Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $15,000.00) for brokerage services rendered by said Broker(s) in
connection with this transaction.
1.11 GUARANTOR. The obligations of the Lessee under this Lease are
to be guaranteed by _________________________________________________________
_____________________________________________________________________________
("GUARANTOR"). (Also see Paragraph 37.)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 49 through 54, and Exhibits "A" through
____, all of which constitute a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is
reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b))
based thereon is not subject to revision whether or not the actual square
footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition
on the Commencement Date. If a non-compliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within thirty (30) days after the
Commencement Date, correction of that non-compliance shall be the obligation
of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
Lessor warrants that any improvements (other than those constructed by Lessee
or at Lessee's direction) on or in the Premises which have been constructed
or installed by Lessor or with Lessor's consent or at Lessor's direction
shall comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances in effect on the
Commencement Date. Lessor further warrants to Lessee that Lessor has no
knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, or
ordinances exist with regard to the Premises as of the Commencement Date.
Said warranties shall not apply to any Alterations or Utility Installations
(defined in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises
do not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
given within six (6) months following the Commencement Date and setting forth
with specificity the nature and extent of such non-compliance, take such
action, at Lessor's expense, as may be reasonable or appropriate to rectify
the non-compliance. Lessor makes no warranty that the Permitted Use in
Paragraph 1.8 is permitted for the Premises under Applicable Laws (as defined
in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that
it has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and
fire sprinkler systems, security, environmental aspects, and compliance with
the Americans with Disabilities Act and applicable zoning, municipal, county,
state and federal laws, ordinances and regulations and any covenants or
restrictions of record (collectively, "APPLICABLE LAWS") and the present and
future suitability of the Premises for Lessee's intended use; (b) that Lessee
has made such investigation as it deems necessary with reference to such
matters, is satisfied with reference thereto, and assumes all responsibility
therefore as the same relate to Lessee's occupancy of the Premises and/or the
terms of this Lease; and (c) that neither Lessor, nor any of Lessor's agents,
has made any oral or written representations or warranties with respect to
said matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor
in this Paragraph 2 shall be of no force or effect if immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.
INITIALS: TF
-----
PS
MULTI-TENANT--GROSS -----
- -C- American Industrial Real Estate Association 1993
<PAGE>
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "PERMITTED
SIZE VEHICLES." Vehicles other than Permitted Size Vehicles shall be parked
and loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that
belong to or are controlled by Lessee or Lessee's employees, suppliers,
shippers, customers, contractors or invitees to be loaded, unloaded, or parked
in areas other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited
activities described in this Paragraph 2.6, then Lessor shall have the right,
without notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease,
provide the parking facilities required by Applicable Law.
2.7 COMMON AREAS--DEFINITION. The term "COMMON AREAS" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center and interior utility raceways within
the Premises that are provided and designated by the Lessor from time to time
for the general non-exclusive use of Lessor, Lessee and other lessees of the
Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.8 COMMON AREAS--LESSEE'S RIGHTS. Lessor hereby grants to
Lessee, for the benefit of Lessee and its employees, suppliers, shippers,
contractors, customers and invitees, during the term of this Lease, the
non-exclusive right to use, in common with others entitled to such use, the
Common Areas as they exist from time to time, subject to any rights, powers,
and privileges reserved by Lessor under the terms hereof or under the terms
of any rules and regulations or restrictions governing the use of the
Industrial Center. Under no circumstances shall the right herein granted to
use the Common Areas be deemed to include the right to store any property,
temporarily or permanently, in the Common Areas. Any such storage shall be
permitted only by the prior written consent of Lessor or Lessor's designated
agent, which consent may be revoked at any time. In the event that any
unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 COMMON AREAS--RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time,
to establish, modify, amend and enforce reasonable Rules and Regulations with
respect thereto in accordance with Paragraph 40. Lessee agrees to abide by
and conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees of the Industrial Center.
2.10 COMMON AREAS--CHANGES. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, including,
without limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas, walkways and
utility raceways;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the
Common Areas;
(e) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Industrial Center, or
any portion thereof; and
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial Center as
Lessor may, in the exercise of sound business judgment, deem to be
appropriate.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after
the Early Possession Date but prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early occupancy. All
other terms of this Lease, however, (including but not limited to the
obligations to pay Lessee's Share of Common Area Operating Expenses and to
carry the insurance required by Paragraph 8) shall be in effect during such
period. Any such early possession shall not affect nor advance the Expiration
Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by
the Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case, Lessee
shall not, except as otherwise provided herein, be obligated to pay rent or
perform any other obligation of Lessee under the terms of this Lease until
Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days after the end of said sixty (60) day period, cancel this
Lease, in which event the parties shall be discharged from all obligations
hereunder; provided further, however, that if such written notice of Lessee
is not received by Lessor within said ten (10) day period, Lessee's right to
cancel this Lease hereunder shall terminate and be of no further force or
effect. Except as may be otherwise provided, and regardless of when the
Original Term actually commences, if possession is not tendered to Lessee
when required by this Lease and Lessee does not terminate this Lease, as
aforesaid, the period free of the obligation to pay Base Rent, if any, that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to the period during which the
Lessee would have otherwise enjoyed under the terms hereof, but minus any
days of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or
charges, as the same may be adjusted from time to time, to Lessor in lawful
money of the United States, without offset or deduction, on or before the day
on which it is due under the terms of this Lease. Base Rent and all other
rent and charges for any period during the term hereof which is for less than
one full month shall be prorated based upon the actual number of days of the
month involved. Payment of Base Rent and other charges shall be made to
Lessor at its address stated herein or to such other persons or at such other
addresses as Lessor may from time to time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor
during the term hereof, in addition to the Base Rent, Lessee's Share (as
specified in Paragraph 1.6(b)) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for
purposes of this Lease, as all costs incurred by Lessor relating to the
ownership and operation of the Industrial Center, including, but not limited
to, the following:
(i) The operation, repair and maintenance, in
neat, clean, good order and condition, of the following:
(aa) The Common Areas, including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, fences and gates,
elevators and roof.
(bb) Exterior signs and any tenant
directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and
telephone to service the Common Areas.
(iii) Trash disposal, property management and
security services and the costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair
of Common Areas.
(v) Any increase above the Base Real Property Taxes
(as defined in Paragraph 10.2(b)) for the Building and the Common Areas.
(vi) Any "Insurance Cost Increase" (as defined in
Paragraph 8.1).
(vii) The cost of insurance carried by Lessor with
respect to the Common Areas.
(viii) Any deductible portion of an insured loss
concerning the Building or the Common Areas.
(ix) Any other services to be provided by Lessor
that are stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property
Taxes that are specifically attributable to the Building or to any other
building in the Industrial Center or to the operation, repair and maintenance
thereof, shall be allocated entirely to the Building or to such other
building. However, any Common Area Operating Expenses and Real Property Taxes
that are not specifically attributable to the Building or to any other
building or to the operation, repair and maintenance thereof, shall be
equitably allocated by Lessor to all buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and
services set forth in Subparagraph 4.2(a) shall not be deemed to impose an
obligation upon Lessor to either have said improvements or facilities or to
provide those services unless the Industrial Center already has the same,
Lessor already provides the services, or Lessor has agreed elsewhere in this
Lease to provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall
be payable by Lessee within ten (10) days after a reasonably detailed
statement of actual expenses is presented to Lessee by Lessor. At Lessor's
option, however, an amount may be estimated by Lessor from time to time of
Lessee's Share of annual Common Area Operating Expenses and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each 12-month
period of the Lease term, on the same day as the Base Rent is due hereunder.
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each calendar year a reasonably detailed statement showing Lessee's Share of
the actual Common Area Operating Expenses incurred during the preceding year.
If Lessee's payments under this Paragraph 4.2(d) during said preceding year
exceed Lessee's Share as indicated on said statement, Lessor shall be
credited the amount of such overpayment against Lessee's Share of Common
Area Operating Expenses next becoming due. If Lessee's payments under this
Paragraph 4.2(d) during said preceding year were less than Lessee's Share as
indicated on said statement, Lessee shall pay to Lessor the amount of the
deficiency within ten (10) days after delivery by Lessor to Lessee of said
statement.
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5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security
for Lessee's faithful performance of Lessee's obligations under this Lease.
If Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for any
liability, cost, expense, loss or damage (including attorneys' fees) which
Lessor may suffer or incur by reason thereof. If Lessor uses or applies all
or any portion of said Security Deposit, Lessee shall within ten (10) days
after written request therefore deposit monies with Lessor sufficient to
restore said Security Deposit to the full amount required by this Lease. Any
time the Base Rent increases during the term of this Lease, Lessee shall,
upon written request from Lessor, deposit additional monies with Lessor as an
addition to the Security Deposit so that the total amount of the Security
Deposit shall at all times bear the same proportion to the then current Base
Rent as the initial Security Deposit bears to the initial Base Rent set forth
in Paragraph 1.5. Lessor shall not be required to keep all or any part of the
Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use
or permit the use of the Premises in a manner that is unlawful, creates waste
or a nuisance, or that disturbs owners and/or occupants of, or causes damage
to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or
delay its consent to any written request by Lessee, Lessee's assignees or
subtenants, and by prospective assignees and subtenants of Lessee, its
assignees and subtenants, for a modification of said Permitted Use, so long
as the same will not impair the structural integrity of the improvements on
the Premises or in the Building or the mechanical or electrical systems
therein, does not conflict with uses by other lessees, is not significantly
more burdensome to the Premises or the Building and the improvements thereon,
and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects
to withhold such consent, Lessor shall within five (5) business days after
such request give a written notification of same, which notice shall include
an explanation of Lessor's reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected to
be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment, or the Premises; (ii) regulated
or monitored by any governmental authority; or (iii) a basis for potential
liability of Lessor to any governmental agency or third party under any
applicable statute or common law theory. Hazardous Substance shall include,
but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any
products or by-products thereof. Lessee shall not engage in any activity in
or about the Premises which constitutes a Reportable Use (as hereinafter
defined) of Hazardous Substances without the express prior written consent of
Lessor and compliance in a timely manner (at Lessee's sole cost and expense)
with all Applicable Requirements (as defined in Paragraph 6.3). "REPORTABLE
USE" shall mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use, transportation,
or disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filed with, any governmental authority, and (iii) the presence in, on
or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary
and customary materials reasonably required to be used by Lessee in the
normal course of the Permitted Use, so long as such use is not a Reportable
Use and does not expose the Premises or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any liability
therefor. In addition, Lessor may (but without any obligation to do so)
condition its consent to any Reportable Use of any Hazardous Substance by
Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in
its reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's option, removal on or before Lease expiration or earlier
termination) of reasonably necessary protective modifications to the Premises
(such as concrete encasements) and/or the deposit of an additional Security
Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building, other than as previously
consented to by Lessor, Lessee shall immediately give Lessor written notice
thereof, together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding
given to, or received from, any governmental authority or private party
concerning the presence, spill, release, discharge of, or exposure to, such
Hazardous Substance including but not limited to all such documents as may be
involved in any Reportable Use involving the Premises. Lessee shall not cause
or permit any Hazardous Substance to be spilled or released in, on, under or
about the Premises (including, without limitation, through the plumbing or
sanitary sewer system).
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any,
and the Premises, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under
Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the
cost of investigation (including consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at
Lessee's sole cost and expense, fully, diligently and in a timely manner,
comply with all "APPLICABLE REQUIREMENTS," which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, the requirements of any
applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any
manner to the Premises (including but not limited to matters pertaining to
(i) industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance), now
in effect or which may hereafter come into effect. Lessee shall, within five
(5) days after receipt of Lessor's written request, provide Lessor with copies
of all documents and information, including but not limited to permits,
registrations, manifests, applications, reports and certificates, evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or
the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("LENDERS") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this
Lease and all Applicable Requirements (as defined in Paragraph 6.3), and
Lessor shall be entitled to employ experts and/or consultants in connection
therewith to advise Lessor with respect to Lessee's activities, including but
not limited to Lessee's installation, operation, use, monitoring,
maintenance, or removal of any Hazardous Substance on or from the Premises.
The costs and expenses of any such inspections shall be paid by the party
requesting same, unless a Default or Breach of this Lease by Lessee or a
violation of Applicable Requirements or a contamination, caused or materially
contributed to by Lessee, is found to exist or to be imminent, or unless the
inspection is requested or ordered by a governmental authority as the result
of any such existing or imminent violation or contamination. In such case,
Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case
may be, for the costs and expenses of such inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor,
subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order,
condition and repair the foundations, exterior walls, structural condition of
interior bearing walls, exterior roof, fire sprinkler and/or standpipe and
hose (if located in the Common Areas) or other automatic fire extinguishing
system including fire alarm
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and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or
interior surfaces of exterior walls nor shall Lessor be obligated to
maintain, repair or replace windows, doors or plate glass of the Premises.
Lessee expressly waives the benefit of any statute now or hereafter in effect
which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Building, Industrial Center or Common Areas in good order, condition and
repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
systems, lighting fixtures, heating, ventilating and air conditioning
equipment, plumbing, and fencing in, on or about the Premises. The term
"TRADE FIXTURES" shall mean Lessee's machinery and equipment which can be
removed without doing material damage to the Premises. The term "ALTERATIONS"
shall mean any modification of the improvements on the Premises which are
provided by Lessor under the terms of this Lease, other than Utility
Installations or Trade Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR UTILITY
INSTALLATIONS" are defined as Alterations and/or Utility Installations made
by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
Lessee shall not make nor cause to be made any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior
written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof) without
Lessor's consent but upon notice to Lessor, so long as they are not visible
from the outside of the Premises, do not involve puncturing, relocating or
removing the roof or any existing walls, or changing or interfering with the
fire sprinkler or fire detection systems and the cumulative cost thereof
during the term of this Lease as extended does not exceed $2,500.00.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall
be presented to Lessor in written form with detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent
specific consent, shall be deemed conditioned upon: (i) Lessee's acquiring
all applicable permits required by governmental authorities; (ii) the
furnishing of copies of such permits together with a copy of the plans and
specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon; and (iii) the compliance by Lessee with all
conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and be in compliance with all Applicable Requirements. Lessee
shall promptly upon completion thereof furnish Lessor with as-built plans and
specifications therefor. Lessor may, (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation
that costs $2,500.00 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by
any mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior to
the commencement of any work in, on, or about the Premises, and Lessor shall
have the right to post notices of non-responsibility in or on the Premises as
provided by law. If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense, defend
and protect itself, Lessor and the Premises against the same and shall pay
and satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises. If Lessor shall
require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor
in an amount equal to one and one-half times the amount of such contested
lien claim or demand, indemnifying Lessor against liability for the same, as
required by law for the holding of the Premises free from the effect of such
lien or claim. In addition, Lessor may require Lessee to pay Lessor's
attorneys' fees and costs in participating in such action if Lessor shall
decide it is to its best interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal and to cause Lessee to become the owner thereof as hereinafter
provided in this Paragraph 7.4, all Alterations and Utility Installations
made to the Premises by Lessee shall be the property of and owned by Lessee,
but considered a part of the Premises. Lessor may, at any time and at its
option, elect in writing to Lessee to be the owner of all or any specified
part of the Lessee-Owned Alterations and Utility Installations. Unless
otherwise instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned
Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Lessor and remain upon the
Premises and be surrendered with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease,
notwithstanding that their installation may have been consented to by Lessor.
Lessor may require the removal at any time of all or any part of any
Alterations or Utility Installations made without the required consent of
Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the
Premises by the end of the last day of the Lease term or any earlier
termination date, clean and free of debris and in good operating order,
condition and state of repair, ordinary wear and tear excepted. Ordinary wear
and tear shall not include any damage or deterioration that would have been
prevented by good maintenance practice or by Lessee performing all of its
obligations under this Lease. Except as otherwise agreed or specified herein,
the Premises, as surrendered, shall include the Alterations and Utility
Installations. The obligation of Lessee shall include the repair of any damage
occasioned by the installation, maintenance or removal of Lessee's Trade
Fixtures, furnishings, equipment, and Lessee-Owned Alterations and Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Requirements and/or good practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation
to repair and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) As used herein, the term "INSURANCE COST INCREASE" is
defined as any increase in the actual cost of the insurance applicable to the
Building and required to be carried by Lessor pursuant to Paragraphs 8.2(b),
8.3(a) and 8.3(b), ("REQUIRED INSURANCE"), over and above the Base Premium,
as hereinafter defined, calculated on an annual basis. "Insurance Cost
Increase" shall include, but not be limited to, requirements of the holder of
a mortgage or deed of trust covering the Premises, increased valuation of the
Premises, and/or a general premium rate increase. The term "Insurance Cost
Increase" shall not, however, include any premium increases resulting from
the nature of the occupancy of any other lessee of the Building. If the
parties insert a dollar amount in Paragraph 1.9, such amount shall be
considered the "BASE PREMIUM." If a dollar amount has not been inserted in
Paragraph 1.9 and if the Building has been previously occupied during the
twelve (12) month period immediately preceding the Commencement Date, the
"Base Premium" shall be the annual premium applicable to such twelve (12)
month period. If the Building was not fully occupied during such twelve (12)
month period, the "Base Premium" shall be the lowest annual premium
reasonably obtainable for the Required Insurance as of the Commencement Date,
assuming the most nominal use possible of the Building. In no event, however,
shall Lessee be responsible for any portion of the premium cost attributable
to liability insurance coverage in excess of $1,000,000 procured under
Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to Lessor
pursuant to Paragraph 4.2. Premiums for policy periods commencing prior to,
or extending beyond, the term of this Lease shall be prorated to coincide
with the corresponding Commencement Date or Expiration Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of
insurance protecting Lessee, Lessor and any Lender(s) whose names have been
provided to Lessee in writing (as additional insureds) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $1,000,000
per occurrence with an "Additional Insured--Managers or Lessors of Premises"
endorsement and contain the "Amendment of the Pollution Exclusion"
endorsement for damage caused by heat, smoke or fumes from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an "INSURED CONTRACT" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance required
by this Lease or as carried by Lessee shall not, however, limit the liability
of Lessee nor relieve Lessee of any obligation hereunder. All insurance to be
carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be
named as an additional insured therein.
8.3 PROPERTY INSURANCE--BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and
keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to any Lender(s), insuring against
loss or damage to the Premises. Such insurance shall be for full replacement
cost, as the same shall exist from time to time, or the amount required by
any Lender(s), but in no event more than the commercially reasonable and
available insurable value thereof if, by reason of the unique nature or age
of the improvements involved, such latter amount is less than full
replacement cost. Lessee-Owned Alterations and Utility Installations, Trade
Fixtures and Lessee's personal property shall be insured by Lessee pursuant
to Paragraph 8.4. If the coverage is available and commercially appropriate,
Lessor's policy or policies shall insure against all risks of direct physical
loss or damage (except the perils of flood and/or earthquake unless required
by a Lender or included in the Base Premium), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building
required to be demolished or removed by reason of the enforcement of any
building, zoning, safety or land use laws as the result of a covered loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause,
waiver of subrogation, and inflation guard protection causing an increase in
the annual property insurance coverage amount by a factor of not less than
the adjusted U.S. Department of Labor Consumer Price Index for All Urban
Consumers for the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and any Lender(s), insuring the loss of the full
rental and other charges payable by all lessees of the Building to Lessor for
one year (including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases). Said insurance may
provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide
for one full year's loss of rental revenues from the date of any such loss.
Said insurance shall contain an agreed valuation provision in lieu of any
co-insurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, Real Property Taxes, insurance premium
costs and other expenses, if any, otherwise payable, for the next 12-month
period. Common Area Operating Expenses shall include any deductible amount in
the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase in
the premiums for the property insurance of the Building and for the Common
Areas or other buildings in the Industrial Center if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.
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(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring
Party, Lessor shall not be required to insure Lessee-Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, Trade Fixtures and
Lessee-Owned Alterations and Utility Installations in, on, or about the
Premises similar in coverage to that carried by Lessor as the Insuring Party
under Paragraph 8.3(a). Such insurance shall be full replacement cost
coverage with a deductible not to exceed $1,000 per occurrence. The proceeds
from any such insurance shall be used by Lessee for the replacement of
personal property and the restoration of Trade Fixtures and Lessee-Owned
Alterations and Utility Installations. Upon request from Lessor, Lessee shall
provide Lessor with written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or such other rating as may be required by a
Lender, as set forth in the most current issue of "Best's Insurance Guide."
Lessee shall not do or permit to be done anything which shall invalidate the
insurance policies referred to in this Paragraph 8. Lessee shall cause to be
delivered to Lessor, within seven (7) days after the earlier of the Early
Possession Date or the Commencement Date, certified copies of, or
certificates evidencing the existence and amounts of, the insurance required
under Paragraph 8.2(a) and 8.4 No such policy shall be cancelable or subject
to modification except after thirty (30) days' prior written notice to
Lessor. Lessee shall at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with evidence of renewals or "insurance
binders" evidencing renewal thereof, or Lessor may order such insurance and
charge the cost thereof to Lessee, which amount shall be payable by Lessee to
Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their property arising out of or
incident to the perils required to be insured against under Paragraph 8. The
effect of such releases and waivers of the right to recover damages shall not
be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto. Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor's master or ground lessor,
partners and Lenders, from and against any and all claims, loss of rents
and/or damages, costs, liens, judgements, penalties, loss of permits,
attorneys' and consultants' fees, expenses and/or liabilities arising out of,
involving, or in connection with, the occupancy of the Premises by Lessee,
the conduct of Lessee's business, any act, omission or neglect of Lessee, its
agents, contractors, employees or invitees, and out of any Default or Breach
by Lessee in the performance in a timely manner of any obligation on Lessee's
part to be performed under this Lease. The foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing
matters, Lessee upon notice from Lessor shall defend the same at Lessee's
expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be
liable for injury or damage to the person or goods, wares, merchandise or
other property of Lessee, Lessee's employees, contractors, invitees,
customers, or any other person in or about the Premises, whether such damage
or injury is caused by or results from fire, steam, electricity, gas, water
or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or from any other cause, whether said injury or damage
results from conditions arising upon the Premises or upon other portions of
the Building of which the Premises are a part, from other sources or places,
and regardless of whether the cause of such damage or injury or the means of
repairing the same is accessible or not. Lessor shall not be liable for any
damages arising from any act or neglect of any other lessee of Lessor nor
from the failure by Lessor to enforce the provisions of any other lease in
the Industrial Center. Notwithstanding Lessor's negligence or breach of this
Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is less than fifty
percent (50%) of the then Replacement Cost (as defined in Paragraph 9.1(d)) of
the Premises (excluding Lessee-Owned Alterations and Utility Installations and
Trade Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost of the Premises (excluding
Lessee-Owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction. In addition, damage or
destruction to the Building, other than Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building, the cost of
which damage or destruction is fifty percent (50%) or more of the then
Replacement Cost (excluding Lessee-Owned Alterations and Utility Installations
and Trade Fixtures of any lessees of the Building) of the Building shall, at the
option of Lessor, be deemed to be Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the
occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on,
or under the Premises.
9.2 PREMISES PARTIAL DAMAGE--INSURED LOSS. If Premises Partial
Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's
expense, repair such damage (but not Lessee's Trade Fixtures or Lessee-Owned
Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect. In the event, however,
that there is a shortage of insurance proceeds and such shortage is due to
the fact that, by reason of the unique nature of the improvements in the
Premises, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or
adequate assurance thereof, within ten (10) days following receipt of written
notice of such shortage and request therefor. If Lessor receives said funds
or adequate assurance thereof within said ten (10) day period, Lessor shall
complete them as soon as reasonably possible and this Lease shall remain in
full force and effect. If Lessor does not receive such funds or assurance
thereof within said period, Lessor may nevertheless elect by written notice
to Lessee within ten (10) days thereafter to make restoration and repair as
is commercially reasonable with Lessor paying any shortage in proceeds, in
which case this Lease shall remain in full force and effect. If Lessor does
not receive such funds or assurance within such ten (10) day period, and if
Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or
destruction. Unless otherwise agreed, Lessee shall in no event have any
right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood
or earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net
proceeds of any such insurance shall be made available for the repairs if
made by either Party.
9.3 PARTIAL DAMAGE--UNINSURED LOSS. If Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful
act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense and this Lease shall continue in full force and effect), Lessor may
at Lessor's option, either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in
full force and effect, or (ii) give written notice to Lessee within thirty
(30) days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60)
days following the date of such notice. In the event Lessor elects to give
such notice of Lessor's intention to terminate this Lease, Lessee shall have
the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the repair of such
damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following such commitment from Lessee. In
such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and
provide the funds or assurance thereof within the times specified above, this
Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the
repairs on or before the earlier of (i) the date which is ten (10) days after
Lessee's receipt of Lessor's written notice purporting to terminate this Lease,
or (ii) the day prior to the date upon which such option expires. If Lessee
duly exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii)
Hazardous Substance Condition for which Lessee is not legally responsible,
the Base Rent, Common Area Operating Expenses and other charges, if any,
payable by Lessee hereunder for the period during which such damage or
condition, its repair, remediation or restoration continues, shall be abated
in proportion to the degree to which Lessee's use of the Premises is
impaired, but not in excess of proceeds from insurance required to be carried
under Paragraph 8.3(b). Except for abatement of Base Rent, Common Area
Operating Expenses and other charges, if any, as aforesaid, all other
obligations of Lessee hereunder shall be performed by Lessee, and Lessee
shall have no claim against Lessor for any damage suffered by reason of any
such damage, destruction, repair, remediation or restoration.
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(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in
a substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice
of Lessee's election to terminate this Lease on a date not less than sixty
(60) days following the giving of such notice. If Lessee gives such notice
to Lessor and such Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. "COMMENCE" as used in this Paragraph 9.6 shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which case
Lessee shall make the investigation and remediation thereof required by
Applicable Requirements and this Lease shall continue in full force and effect,
but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor
may at Lessor's option either (i) investigate and remediate such Hazardous
Substance Condition, if required, as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) if the estimated cost to investigate and remediate such condition exceeds
twelve (12) times the then monthly Base Rent or $100,000 whichever is
greater, give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition of
Lessor's desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give such notice of
Lessor's intention to terminate this Lease, Lessee shall have the right within
ten (10) days after the receipt of such notice to give written notice to Lessor
of Lessee's commitment to pay for the excess costs of (a) investigation and
remediation of such Hazardous Substance Condition to the extent required by
Applicable Requirements, over (b) an amount equal to twelve (12) times the then
monthly Base Rent or $100,000, whichever is greater. Lessee shall provide
Lessor with the funds required of Lessee or satisfactory assurance thereof
within thirty (30) days following said commitment by Lessee. In such event this
Lease shall continue in full force and effect, and Lessor shall proceed to make
such investigation and remediation as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the required funds or assurance thereof within the time period specified above,
this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this
Lease pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and so much of Lessee's Security Deposit as
has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent it is
inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes,
as defined in Paragraph 10.2(a), applicable to the Industrial Center, and
except as otherwise provided in Paragraph 10.3, any increases in such amounts
over the Base Real Property Taxes shall be included in the calculation of
Common Area Operating Expenses in accordance with the provisions of Paragraph
4.2.
10.2 REAL PROPERTY TAX DEFINITIONS.
(a) As used herein, the term "REAL PROPERTY TAXES" shall
include any form of real estate tax or assessment, general, special, ordinary
or extraordinary, and any license fee, commercial rental tax, improvement
bond or bonds, levy or tax (other than inheritance, personal income or estate
taxes) imposed upon the Industrial Center by any authority having the direct
or indirect power to tax, including any city, state or federal government, or
any school, agricultural, sanitary, fire, street, drainage, or other
improvement district thereof, levied against any legal or equitable interest
of Lessor in the Industrial Center or any portion thereof, Lessor's right to
rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "REAL PROPERTY TAXES" shall also include any tax, fee,
levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the term
of this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this
Lease, or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties.
(b) As used herein, the term "BASE REAL PROPERTY TAXES"
shall be the amount of Real Property Taxes, which are assessed against the
Premises, Building or Common Areas in the calendar year during which the
Lease is executed. In calculating Real Property Taxes for any calendar year,
the Real Property Taxes for any real estate tax year shall be included in the
calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall
not include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable proportion
of the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, in good faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center.
When possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessor's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber (collectively,
"assign") or sublet all or any part of Lessee's interest in this Lease or in the
Premises without Lessor's prior written consent given under and subject to the
terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any
transaction or series of transactions (by way of merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of
Lessee, as hereinafter defined, by an amount equal to or greater than
twenty-five percent (25%) of such Net Worth of Lessee as it was represented
to Lessor at the time of full execution and delivery of this Lease or at the
time of the most recent assignment to which Lessor has consented, or as it
exists immediately prior to said transaction or transactions constituting
such reduction, at whichever time said Net Worth of Lessee was or is greater,
shall be considered an assignment of this Lease by Lessee to which Lessor may
reasonably withhold its consent. "NET WORTH OF LESSEE" for purposes of this
Lease shall be the net worth of Lessee (excluding any Guarantors) established
under generally accepted accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in
this Lease without Lessor's specific prior written consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1, or a
non-curable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unconsented to assignment or subletting as a
non-curable Breach, Lessor shall have the right to either: (i) terminate this
Lease, or (ii) upon thirty (30) days' written notice ("LESSOR'S NOTICE"),
increase the monthly Base Rent for the Premises to the greater of the then
fair market rental value of the Premises, as reasonably determined by Lessor,
or one hundred ten percent (110%) of the Base Rent then in effect. Pending
determination of the new fair market rental value, if disputed by Lessee,
Lessee shall pay the amount set forth in Lessor's Notice, with any
overpayment credited against the next installment(s) of Base Rent coming due,
and any underpayment for the period retroactively to the effective date of
the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or
any deduction for depreciation or obsolescence, and considering the Premises
at its highest and best use and in good condition) or one hundred ten percent
(110%) of the price previously in effect, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to
require that the base index be determined with reference to the index
applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be
increased in the same ratio as the new rental bears to the Base Rent in
effect immediately prior to the adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval
of an assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of any rent for performance shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the Default
or Breach by Lessee of any of the terms, covenants or conditions of this
Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment of subletting by the
assignee or sublessee. However, Lessor may consent to subsequent sublettings
and assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable under this Lease or the sublease
and without obtaining their consent, and such action shall not relieve such
persons from liability under this Lease or the sublease.
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(d) In the event of any Default or Breach of Lessee's
obligation under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or anyone else responsible for the performance of the Lessee's
obligations under this Lease, including any sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not
limited to the intended use and/or required modification of the Premises, if
any, together with a non-refundable deposit of $1,000 or ten percent (10%) of
the monthly Base Rent applicable to the portion of the Premises which is the
subject of the proposed assignment or sublease, whichever is greater, as
reasonable consideration for Lessor's considering and processing the request
for consent. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be
deemed, for the benefit of Lessor, to have assumed and agreed to conform and
comply with each and every term, convenant, condition and obligation herein
to be observed or performed by Lessee during the term of said assignment or
sublease, other than such obligations as are contrary to or inconsistent with
provisions of an assignment or sublease to which Lessor has specifically
consented in writing.
(g) The occurrence of a transaction described in Paragraph
12.2(c) shall give Lessor the right (but not the obligation) to require that
the Security Deposit be increased by an amount equal to six (6) times the
then monthly Base Rent, and Lessor may make the actual receipt by Lessor of
the Security Deposit increase a condition to Lessor's consent to such
transaction.
(h) Lessor, as a condition to giving its consent to any
assignment or subletting, may require that the amount and adjustment schedule
of the rent payable under this Lease be adjusted to what is then the market
value and/or adjustment schedule for property similar to the Premises as then
constituted, as determined by Lessor.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all
or a portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply same toward Lessee's
obligations under this Lease; provided, however, that until a Breach (as
defined in Paragraph 13.1) shall occur in the performance of Lessee's
obligations under this Lease, Lessee may, except as otherwise provided in
this Lease, receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of the foregoing provision or any other
assignment of such sublease to Lessor, nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's obligations under
this Lease, to pay to Lessor the rents and other charges due and to become
due under the sublease. Sublessee shall rely upon any such statement and
request from Lessor and shall pay such rents and other charges to Lessor
without any obligation or right to inquire as to whether such Breach exists
and notwithstanding any notice from or claim from Lessee to the contrary.
Lessee shall have no right or claim against such sublessee, or, until the
Breach has been cured, against Lessor, for any such rents and other charges
so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
other prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the
sublessor under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall
further assign or sublet all or any part of the Premises without Lessor's
prior written consent.
(e) Lessor shall deliver a copy of any notice of Default
or Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney
is consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in
said notice as rent due and payable to cure said default. A "DEFAULT" by
Lessee is defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to Lessee under
this Lease. A "BREACH" by Lessee is defined as the occurrence of any one or
more of the following Defaults, and, where a grace period for cure after
notice is specified herein, the failure by Lessee to cure such Default prior
to the expiration of the applicable grace period, and shall entitle Lessor to
pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease,
the failure by Lessee to make any payment of Base Rent, Lessee's Share of
Common Area Operating Expenses, or any other monetary payment required to be
made by Lessee hereunder as and when due, the failure by Lessee to provide
Lessor with reasonable evidence of insurance or surety bond required under
this Lease, or the failure of Lessee to fulfill any obligation under this
Lease which endangers or threatens life or property, where such failure
continues for a period of three (3) days following written notice thereof by
or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease,
the failure by Lessee to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination
of this Lease per Paragraph 30, (vi) the guaranty of the performance of
Lessee's obligations under this Lease if required under Paragraphs 1.11 and
37, (vii) the execution of any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor
may reasonably require of Lessee under the terms of this lease, where any
such failure continues for a period of ten (10) days following written notice
by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under
Paragraph 40 hereof that are to be observed, complied with or performed by
Lessee, other than those described in Subparagraphs 13.1(a), (b) or (c),
above, where such Default continues for a period of thirty (30) days after
written notice thereof by or on behalf of Lessor to Lessee; provided,
however, that if the nature of Lessee's Default is such that more than thirty
(30) days are reasonably required for its cure, then it shall not be deemed
to be a Breach of this Lease by Lessee if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (i) the
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code
Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within
thirty (30) days; or (iv) the attachment, execution or other judicial seizure
of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provision of this
Subparagraph 13.1(e) is contrary to any applicable law, such provision shall
be of no force or effect, and shall not affect the validity of the remaining
provisions.
(f) The discovery by Lessor that any financial statement
of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor,
was materially false.
(g) If the performance of Lessee's obligations under this
Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurances of security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at
its option (but without obligation to do so), perform such duty or obligation
on Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any check
given to Lessor by Lessee shall not be honored by the bank upon which it is
drawn, Lessor, at its own option, may require all further payments to be made
under this Lease by Lessee to be made only by cashier's check. In the event
of a Breach of this Lease by Lessee (as defined in Paragraph 13.1), with or
without further notice or demand, and without limiting Lessor in the exercise
of any right or remedy which Lessor may have by reason of such Breach, Lessor
may:
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises
to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i)
the worth at the time of the award of the unpaid rent which had been earned
at the time of termination; (ii) the worth at the time of award of the amount
by which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that the Lessee
proves could have been reasonably avoided; (iii) the worth at the time of
award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including
but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco or the Federal Reserve Bank District in which
the Premises are located at the time of award plus one percent (1%). Efforts
by Lessor to mitigate damages caused by Lessee's Default or Breach of this
Lease shall not waive Lessor's right to recover damages under this Paragraph
13.2. If termination of this Lease is obtained
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through the provisional remedy of unlawful detainer, Lessor shall have the
right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve the right to recover all or any
part thereof in a separate suit for such rent and/or damages. If a notice and
grace period required under Subparagraph 13.1(b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by Subparagraph 13.1(b), (c) or (d). In such
case, the applicable grace period under the unlawful detainer statute shall
run concurrently after the one such statutory notice, and the failure of
Lessee to cure the Default within the greater of the two (2) such grace
periods shall constitute both an unlawful detainer and a Breach of this Lease
entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after Lessee's
Breach and recover the rent as it becomes due, provided Lessee has the right to
sublet or assign, subject only to reasonable limitations. Lessor and Lessee
agree that the limitations on assignment and subletting in this Lease are
reasonable. Acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver to protect the Lessor's interest under this
Lease, shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters
occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by
Lessor for free or abated rent or other charges applicable to the Premises,
or for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this Lease, all
of which concessions are hereinafter referred to as "INDUCEMENT PROVISIONS"
shall be deemed conditioned upon Lessee's full and faithful performance of
all of the terms, covenants and conditions of this Lease to be performed or
observed by Lessee during the term hereof as the same may be extended. Upon
the occurrence of a Breach (as defined in Paragraph 13.1) of this Lease by
Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid
by Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor, as additional rent
due under this Lease, notwithstanding any subsequent cure of said Breach by
Lessee. The acceptance by Lessor of rent or the cure of the Breach which
initiated the operation of this Paragraph 13.3 shall not be deemed a waiver
by Lessor of the provisions of this Paragraph 13.3 unless specifically so
stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering
the Premises. Accordingly, if any installment of rent or other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10)
days after such amount shall be due, then, without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%)
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with
respect to such overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession, whichever first occurs. If more than ten percent
(10%) of the floor area of the Premises, or more than twenty-five percent
(25%) of the portion of the Common Areas designated for Lessee's parking, is
taken by condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (10) days
after the condemning authority shall have taken possession) terminate this
Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the Premises
remaining, except that the Base Rent shall be reduced in the same proportion
as the rentable floor area of the Premises taken bears to the total rentable
floor area of the Premises. No reduction of Base Rent shall occur if the
condemnation does not apply to any portion of the Premises. Any award for the
taking of all or any part of the Premises under the power of eminent domain
or any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
compensation, separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal
and other expenses incurred by Lessor in the condemnation matter, repair any
damage to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. BROKERS' FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined in Paragraph 39.1) granted under this Lease or any Option subsequently
granted, or (b) if Lessee acquires any rights to the Premises or other premises
in which Lessor has an interest, or (c) if Lessee remains in possession of the
Premises with the consent of Lessor after the expiration of the term of this
Lease after having failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any other lease or sale entered into between the Parties
pertaining to the Premises and/or any adjacent property in which Lessor has
an interest, or (e) if Base Rent is increased, whether by agreement or
operation of an escalation clause herein, then as to any of said
transactions, Lessor shall pay said Broker(s) a fee in accordance with the
schedule of said Broker(s) in effect at the time of the execution of this
Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each
represent and warrant to the other that it has had no dealings with any
person, firm, broker or finder other than as named in Paragraph 1.10(a) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity other than said named Broker(s) is entitled to any commission or
finder's fee in connection with said transaction. Lessee and Lessor do each
hereby agree to indemnify, protect, defend and hold the other harmless from
and against liability for compensation or charges which may be claimed by any
such unnamed broker, finder or other similar party by reason of any dealings
or actions of the indemnifying Party, including any costs, expenses, and/or
attorney's fees reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall
within ten (10) days after written notice from the other Party (the "REQUESTING
PARTY") execute, acknowledge and deliver to the Requesting Party a statement in
writing in a form similar to the then most current "TENANCY STATEMENT" form
published by the American Industrial Real Estate Association, plus such
additional information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance,
or sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In the
event of a transfer of Lessor's title or interest in the Premises or in this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit)
any unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding
shall be effective. Lessor and Lessee each represents and warrants to the
Brokers that it has made, and is relying solely upon, its own investigation
as to the nature, quality, character and financial responsibility of the
other Party to this Lease and as to the nature, quality and character of the
Premises. Brokers have no responsibility with respect thereto or with respect
to any default or breach hereof by either Party. Each Broker shall be an
intended third party beneficiary of the provisions of this Paragraph 22.
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23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease as shall be that Party's address
for delivery or mailing of notice purposes. Either Party may by written notice
to the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party of parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "SECURITY DEVICE"), now
or hereafter placed by Lessor upon the real property of which the Premises
are a part, to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Lessee agrees that the Lenders holding any such Security Device shall have no
duty, liability or obligation to perform any of the obligations of Lessor
under this Lease, but that in the event of Lessor's default with respect to
any such obligation, Lessee will give any Lender whose name and address have
been furnished Lessee in writing for such purpose notice of Lessor's default
pursuant to Paragraph 13.5. If any Lender shall elect to have this Lease
and/or any Option granted hereby superior to the lien of its Security Device
and shall give written notice thereof to Lessee, this Lease and such Options
shall be deemed prior to such Security Device, notwithstanding the relative
dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (i)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership, (ii) be subject to any offsets or
defenses which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance agreement")
from the Lender that Lessee's possession and this Lease, including any options
to extend the term hereof, will not be disturbed so long as Lessee is not in
Breach hereof and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) in any such proceeding, action, or appeal thereon, shall
be entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this
Lease are acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude the
impositions by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter for
which consent is being given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this
Lease per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
INITIALS: TF
-----
PS
MULTI-TENANT--GROSS -9- -----
- -C- American Industrial Real Estate Association 1993
<PAGE>
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a
Default of the Lessee under this Lease if any such Guarantor fails or
refuses, upon reasonable request by Lessor to give: (a) evidence of the due
execution of the guaranty called for by this Lease, including the authority
of the Guarantor (and of the party signing on Guarantor's behalf) to obligate
such Guarantor on said guaranty, and resolution of its board of directors
authorizing the making of such guaranty, together with a certificate of
incumbency showing the signatures of the persons authorized to sign on its
behalf, (b) current financial statements of Guarantor as may from time to
time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the performance of all of the covenants, conditions and provisions on
Lessee's part to be observed and performed under this Lease, Lessee shall have
quiet possession of the Premises for the entire term hereof subject to all of
the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Lease, the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee named in Paragraph 1.1
hereof, and cannot be voluntarily or involuntarily assigned or exercised by any
person or entity other than said original Lessee while the original Lessee is in
full and actual possession of the Premises and without the intention of
thereafter assigning or subletting. The Options, if any, herein granted to
Lessee are not assignable, either as a part of an assignment of this Lease or
separately or apart therefrom, and no Option may be separated from this Lease in
any manner, by reservation of otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i)
during the period commencing with the giving of any notice of Default under
Paragraph 13.1 and continuing until the noticed Default is cured, or (ii)
during the period of time any monetary obligation due Lessor from Lessee is
unpaid (without regard to whether notice thereof is given Lessee), or (iii)
during the time Lessee is in Breach of this Lease, or (iv) in the event that
Lessor has given to Lessee three (3) or more notices of separate Defaults
under Paragraph 13.1 during the twelve (12) month period immediately
preceding the exercise of the Option, whether or not the Defaults are cured.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability
to exercise an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding
Lessee's due and timely exercise of the Option, if, after such exercise and
during the term of this Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of thirty (30) days after such obligation
becomes due (without any necessity of Lessor to give notice thereof to
Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of separate
Defaults under Paragraph 13.1 during any twelve (12) month period, whether or
not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep
and observe all reasonable rules and regulations ("Rules and Regulations")
which Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants
or tenants of the Building and the Industrial Center and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of the
Premises, Lessee, its agents and invitees and their property from the acts of
third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights of way, utility raceways, dedications, maps and restrictions do not
reasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said Party to pay such sum or any part thereof, said Party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on behalf of
such entity represents and warrants that he or she is duly authorized to
execute and deliver this Lease on its behalf. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after request by
Lessor, deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or
Lessor's agent or Lessee's agent and submission of same to Lessee or Lessor
shall not be deemed an offer to lease. This Lease is not intended to be
binding until executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
INITIALS: TF
-----
PS
MULTI-TENANT--GROSS -10- -----
- -C- American Industrial Real Estate Association 1993
<PAGE>
THIS ADDENDUM IS IN REFERENCE TO AND MADE A PART OF THAT CERTAIN STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - GROSS, DATE OCTOBER 20, 1995, BY AND
BETWEEN ALL PHASE TELECOMMUNICATION, INC. AS LESSOR, AND THE QUICKSILVER GROUP
AS LESSEE, FOR THAT CERTAIN REAL PROPERTY KNOWN AS 10061 BUBB ROAD, CUPERTINO,
CALIFORNIA. PAGE 1 OF 2.
49. PRIOR OCCUPANCY: Lessee is granted possession and occupancy of the
demised premises on November 5, 1995. All possession and occupancy
shall be under all the terms, covenants and conditions in this Lease
contained, savings and excepting that Lessee shall not be called upon
to pay rental for any period of possession and occupancy prior to
November 15, 1996.
50. RENT SCHEDULE: November 15, 1995 through May 14, 1996, the rent shall
be Six Thousand Six Hundred and No/100 Dollars ($6,600.00) per month,
each and every month of the lease term. The remainder of the lease
term of thirty (30) months, the rent shall be Eight Thousand Five
Hundred Eighty and No/100 Dollars ($8,580.00) per month, each and
every month of the same lease term. The parties hereto agree that
Lessee, upon execution hereof, shall pay Six Thousand Six Hundred and
No/100 Dollars ($6,600.00) representing the first month's lease
payment. Lessee shall pay to Lessor one-half (1/2) of one (1) month's
rent representing the balance of the rent due for the month of
December (December 16, 1995 through January 15, 1996). Thereafter,
the rent shall be due on or before the first day of each and every
month of the lease term.
51. IMPROVEMENTS: It is understood by the parties hereto that Lessor
agrees that on or before November 15, 1995, to install a dividing wall
indicated on attached EXHIBIT A.
52. Notwithstanding anything contained herein to the contrary, it is
understood and agreed by the parties hereto that the rent stipulated
herein also includes Lessee's share of the utilities for the premises
leased by Lessee.
53. IMPROVEMENTS NOT SHOWN ON EXHIBIT A: Subject to the approval of
Lessor, Lessee shall have the right to install, at Lessee's sole cost
and expense, a conference room inside subject premises. All
improvements installed by Lessee shall be subject to Lessor's
approval, which shall not be unreasonably withheld and shall meet all
City, State and Municipal Building Codes.
54. ACKNOWLEDGMENT: The parties further agree and acknowledge the
following:
A. Brokers made no presentations or warranties with respect to the
physical and environmental condition of the premises, including
sub-surface conditions.
Brokers have no specific expertise with respect to making an
environmental assessment of the premises, including matters relating
to the disposal of hazardous or toxic substances or waste, and
environmental problems which may be posed by the premises being within
a Special Studies Zone as designated under the Alquist-Priolo Special
Studies Zone Act (Earthquake Zones). Section 2621-2630 inclusive of
the California Public Resources code or a HUD Flood Zone, as set forth
in the U.S. Department of Housing and Urban Development "Special Flood
Zone Area Maps", as applicable.
<PAGE>
THIS ADDENDUM IS IN REFERENCE TO AND MADE A PART OF THAT CERTAIN STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - GROSS, DATE OCTOBER 20, 1995, BY AND
BETWEEN ALL PHASE TELECOMMUNICATION, INC. AS LESSOR, AND THE QUICKSILVER GROUP
AS LESSEE, FOR THAT CERTAIN REAL PROPERTY KNOWN AS 10061 BUBB ROAD, CUPERTINO,
CALIFORNIA. PAGE 2 OF 2.
B. Brokers have not made an independent investigation of the premises or
determination with respect to the physical and environmental condition
of the premises, including without limitation, the existence or
non-existence of any underground tanks, dumps, piping, toxic or
hazardous substances on the premises. Brokers urge all parties to
obtain independent legal and technical advice with respect to the
physical and environmental condition of the premises. The parties
each agree that it will rely solely on its own investigation and/or
that of a licensed professional specializing in these areas and not of
the Brokers.
C. Brokers do not represent and warrant the accuracy or completeness of
all documents and information ("Reports") reviewed or received by any
of the parties in connection with this transaction, including
financial reports, structural, geological or engineering studies,
plans and specifications. The parties further agree to indemnify and
hold the Brokers harmless from any and all claims, demands, judgments,
including reasonable attorney's fees arising from or in connection
with any inaccuracy of the Reports.
D. The parties waive the benefits of California Civil Code Section 1542
and release the Brokers from any and all liabilities arising out of or
in connection with physical and environmental condition of the
premises, including without limitation, the existence of any hazardous
or toxic material unless the Brokers are found to have failed to fully
disclose to Tenant any fact, information or condition of which Brokers
have actual knowledge. The parties hereby acknowledge that at one
time there existed an underground fuel tank located on the
northeasterly portion of the property. (That portion of property
furthest away from the leased premises, the fuel tank was removed and
Lessor is awaiting closure.)
55. LESSEES RENT AS DEFINED IN PARAGRAPH 50 SHALL INCLUDE LESSEES SHARE OF
OPERATING EXPENSES. NO ADDITIONAL EXPENSES SHALL BE PASSED THROUGH TO
LESSEE DURING THE TERM OF THIS LEASE. Lessee agrees to pay their
share (38%) of operating expense increases above the base year,
defined as 1996.
ACKNOWLEDGED AND AGREED:
LESSOR: ALL PHASE TELECOMMUNICATION, INC.
BY: /s/ Paul Swanson DATE: 11/2/95
---------------------------- ----------------------------
LESSEE: THE QUICKSILVER GROUP
BY: /s/ Todd Fitzwater DATE: 10/24/95
---------------------------- ----------------------------
<PAGE>
THIS SECOND ADDENDUM IS IN REFERENCE TO AND MADE A PART OF THAT CERTAIN
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - GROSS DATED OCTOBER 20,
1995 BY AND BETWEEN ALL PHASE TELECOMMUNICATIONS, INC. AS LESSOR, AND THE
QUICKSILVER GROUP, INC., A CALIFORNIA CORPORATION, AS LESSEE, FOR THAT
CERTAIN REAL PROPERTY KNOWN AS 10061 BUBB ROAD, CUPERTINO, CALIFORNIA.
1. The address in the above referenced documents would read 10061 Unit "B".
2. Lessor shall remove the kitchen appliances from the subject premises prior
to the lease commencement date.
3. Lessor shall have two (2) parking spaces reserved for visitors at the
entrance to the driveway closest to Stevens Creek Blvd.
4. Notwithstanding anything contained in the lease to the contrary, and
a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
hereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located)
that serves only Lessee or the Premises, to the extent such cost is
attributed to causes beyond normal wear and tear. Lessee shall be
responsible for the cost if painting, repairing or replacing wall
coverings, and to repair or replace any premises improvements that are not
ordinarily a part of the Building standards. Lessor may, at its option,
upon reasonable notice elect to have Lessee perform any particular such
maintenance or repairs the cost of which is otherwise Lessee's
responsibility hereunder.
b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as
received, ordinary wear and tear excepted, clean and free of debris. Any
damage or deterioration of the Premises shall not be deemed ordinary wear
and tear if the same could have been prevented by good maintains practices
by Lessee. Lessee shall repair any damage to the Premises occasioned by
the installation or removal of Lessee's trade fixtures, alterations,
furnishings and equipment. Except as otherwise stated in this Lease,
Lessee shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, air conditioner, window coverings, wall
coverings, carpets, wall paneling, ceilings and plumbing on the Premises
and in good operating condition. Lessee shall be responsible for
maintenance of light fixtures.
5. The obligations of the Lessee under this lease are to be personally
guaranteed and said Guaranty of Lease Agreement is attached hereto and made
a part of this Second Addendum.
LESSOR: /s/ Paul Swanson LESSEE: /s/ Todd Fitzwater
---------------------- ----------------------
DATE: 11/2/95 DATE: 11/6/95
---------------------- ----------------------
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS
TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON
THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<S> <C>
Executed at: Executed at:
-------------------------------------- -------------------------------------
on: on:
---------------------------------------------- ----------------------------------------------
By LESSOR: All Phase Telecommunication, Inc. By LESSEE: The Quicksilver Group
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
By: Paul Swanson By: Todd Fitzwater
---------------------------------------------- ----------------------------------------------
Name Printed: Paul Swanson Name Printed: Todd Fitzwater
------------------------------------- -------------------------------------
Title: President Title: President
------------------------------------------- -------------------------------------------
By: By:
---------------------------------------------- ----------------------------------------------
Name Printed: Name Printed:
------------------------------------- -------------------------------------
Title: Title:
------------------------------------------- -------------------------------------------
Address: Address:
----------------------------------------- -----------------------------------------
- ------------------------------------------------- -------------------------------------------------
Telephone: ( ) Telephone: ( )
------------------------------- -------------------------------
Facsimile: ( ) Facsimile: ( )
------------------------------- -------------------------------
BROKER: BROKER:
Executed at: Executed at:
-------------------------------------- -------------------------------------
on: on:
---------------------------------------------- ----------------------------------------------
By: By:
---------------------------------------------- ----------------------------------------------
Name Printed: Name Printed:
------------------------------------- -------------------------------------
Title: Title:
------------------------------------------- -------------------------------------------
Address: Address:
----------------------------------------- -----------------------------------------
- ------------------------------------------------- -------------------------------------------------
Telephone: ( ) Telephone: ( )
------------------------------- -------------------------------
Facsimile: ( ) Facsimile: ( )
------------------------------- -------------------------------
</TABLE>
NOTE: These forms are often modified to meet changing requirements and needs
of the industry. Always write or call to make sure you are utilizing the most
current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So. Figueroa
St., M-1, Los Angeles, CA 90071. (213) 687-8777
INITIALS: TF
-----
MULTI-TENANT--GROSS -11- -----
- -C- American Industrial Real Estate Association 1993
<PAGE>
GUARANTY OF LEASE [LOGO]
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
WHEREAS, All Phase Telecommunication, Inc., hereinafter referred to as
"Lessor", and The Quicksilver Group, Inc., hereinafter referred to as "Lessee",
are about to execute a document entitled "Lease" dated October 20, 1995
concerning the premises commonly known as 10061-B Bubb Road, Cupertino wherein
Lessor will lease the premises to Lessee, and
WHEREAS, Mr. Thomas Minick and Mr. Todd Fitzwater hereinafter referred to
as "Guarantors" have a financial interest in Lessee, and
WHEREAS, Lessor would not execute the Lease if Guarantors did not execute
and deliver to Lessor this Guarantee of Lease.
NOW THEREFORE, for and in consideration of the execution of the foregoing
Lease by Lessor and as a material inducement to Lessor to execute said Lease,
Guarantors hereby jointly, severally, unconditionally and irrevocably guarantee
the prompt payment by Lessee of all rentals and all other sums payable by Lessee
under said Lease and the faithful and prompt performance by Lessee of each and
every one of the terms, conditions and covenants of said Lease to be kept and
performed by Lessee.
It is specifically agreed and understood that the terms of the foregoing
Lease may be altered, affected, modified or changed by agreement between Lessor
and Lessee, or by a course of conduct, and said Lease may be assigned by Lessor
or any assignee of Lessor without consent or notice to Guarantors and that this
Guaranty shall thereupon and thereafter guarantee the performance of said Lease
as so changed, modified, altered or assigned.
This Guaranty shall not be released, modified or affected by failure or
delay on the part of Lessor to enforce any of the rights or remedies of the
Lessor under said Lease, whether pursuant to the terms thereof or at law or in
equity.
No notice of default need be given to Guarantors, it being specifically
agreed and understood that the guarantee of the undersigned is a continuing
guarantee under which Lessor may proceed forthwith and immediately against
Lessee or against Guarantors following any breach or default by Lessee or for
the enforcement of any rights which Lessor may have as against Lessee pursuant
to or under the terms of the within Lease or at law or in equity.
Lessor shall have the right to proceed against Guarantors hereunder
following any breach or default by Lessee without first proceeding against
Lessee and without previous notice to or demand upon either Lessee or
Guarantors.
Guarantors hereby waive (a) notice of acceptance of this Guaranty, (b)
demand of payment, presentation and protest, (c) all right to assert or plead
any statute of limitations as to or relating to this Guaranty and the Lease,
(d) any right to require the Lessor to proceed against the Lessee or any
other Guarantor or any other person or entity liable to Lessor, (e) any right
to require Lessor to apply to any default any security deposit or other
security it may hold under the Lease, (f) any right to require Lessor to
proceed under any other remedy Lessor may have before proceeding against
Guarantors, (g) any right of subrogation.
Guarantors do hereby subrogate all existing or future indebtedness of
Lessee to Guarantors to the obligations owed to Lessor under the Lease and this
Guaranty.
Any married woman who signs this Guaranty expressly agrees that recourse
may be had against her separate property for all of her obligations hereunder.
The obligations of Lessee under the Lease to execute and deliver estoppel
statements and financial statements, as therein provided, shall be deemed to
also require the Guarantors hereunder to do and provide the same relative to
Guarantors.
The term "Lessor" whenever hereinabove used refers to and means the Lessor
in the foregoing Lease specifically named and also any assignee of said Lessor,
whether by outright assignment or by assignment for security, and also any
successor to the interest of said Lessor or of any assignee in such Lease or any
part thereof, whether by assignment or otherwise. So long as the Lessor's
interest in or to the leased premises or the rents, issues and profits
therefrom, or in, to or under said Lease, are subject to any mortgage or deed of
trust or assignment for security, no acquisition by Guarantors of the Lessor's
interest in the leased premises or under said Lease shall affect the continuing
obligation of Guarantors under this Guaranty which shall nevertheless continue
in full force and effect for the benefit of the mortgagee, beneficiary, trustee
or assignee under such mortgage, deed of trust or assignment, of any purchase at
sale by judicial foreclosure or under private power of sale, and of the
successors and assigns of any such mortgagee, beneficiary, trustee, assignee or
purchaser.
The term "Lessee" whenever hereinabove used refers to and means the Lessee
in the foregoing Lease specifically named and also any assignee or sublessee of
said Lease and also any successor to the interests of said Lessee, assignee or
sublessee of such Lease or any part thereof, whether by assignment, sublease or
otherwise.
In the event any action be brought by said Lessor against Guarantors
hereunder to enforce the obligation of Guarantors hereunder, the unsuccessful
party in such action shall pay to the prevailing party therein a reasonable
attorney's fee which shall be fixed by the court.
IF THIS FORM HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION
IS MADE BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS FORM OR
THE TRANSACTION RELATING THERETO.
Executed at /s/ Todd Fitzwater
---------------------------- ----------------------------------
on November 6, 1995 /s/ [ILLEGIBLE]
------------------------------------- ----------------------------------
Address 1054 Saratoga-Sunnyvale Rd.
-------------------------------- ----------------------------------
San Jose "GUARANTORS"
- ---------------------------------------
- -C- 1977--American Industrial Real Estate Association.
All rights reserved. No part of these works may be reproduced in any form
without permission in writing.
FOR THESE FORMS WRITE THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION, 350 S. FIGUEROA STREET,
LOS ANGELES, CALIFORNIA 90071 Form 600377
<PAGE>
ADDENDUM A
THIS ADDENDUM IS IN REFERENCE TO AND MADE A PART OF THAT CERTAIN STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS, DATED OCTOBER 20, 1995, BY
AND BETWEEN ALL PHASE TELECOM, INC. AS LESSOR, AND THE QUICKSILVER GROUP AS
LESSEE, FOR THAT CERTAIN REAL PROPERTY KNOWN AS 10061 BUBB ROAD, CUPERTINO,
CALIFORNIA.
A. As of date of occupancy, Rent shall commence at the rate of Seventeen
Thousand Four Hundred Thirty and No/100 Dollars ($17,430.00) for a period of
Thirty Six (36) months. Lessor is attempting to improve on the projected May
1, 1998 occupancy date.
B. Lessee as of signing, or no later than 1 April 1998 will have made a total
sum of payments of Sixty Five Thousand and No/100 Dollars ($65,000.00) for
tenant improvements.
C. Lessee agrees to pay their share, Fifty Eight Percent (58%) of Operating
Expense increases, above the base year defined as 1997 and will be reviewed
as of 1 April, 1999 and 1 April, 2000. Per original lease 1.6 (b) will
change from Thirty Eight Percent (38%) to Fifty Eight Percent (58%).
D. Parking per original lease 1.2 (b) will change from 25 parking spaces to
35 parking spaces.
E. Per original agreement, Lessee is responsible for Lighting, Electrical,
Plumbing, and for all, anything and everything within Lessee four walls.
F. Improvements: It is understood by the parties hereto that Lessor agrees
that on or before 1 May, 1998 to install and remove dividing walls indicated
on Attached EXHIBIT B.
By Lessor: All Phase Telecom By Lessee: The QuickSilver Group
By: /s/ Paul Swanson By: /s/ Todd Fitzwater
Name Printed: Paul Swanson Name Printed: Todd Fitzwater
Title: President Title: GM Systems Integration
3/6/98
<PAGE>
EXHIBIT 10.22
EXHIBIT 1, SHEET 1
Building No. Eight, New England Executive Park
Burlington, Massachusetts 01803
(the "Building")
Execution Date: April 8, 1998
-------------
Tenant: The Quicksilver Group, Inc.
-------------------------------------------------------
a California corporation
-------------------------------------------------------
(description of business organization)
10061 Bubb Road, Suite A, Cuperton, California 95014
-------------------------------------------------------
(principal place of business - mailing address)
Landlord: EOP-New England Executive Park, L.L.C., a Delaware
limited liability company. Mailing Address: EOP-New
England Executive Park, c/o Equity Office Properties
Trust, Three New England Executive Park, Burlington,
Massachusetts 01803, with a copy to: Equity Office
Properties Trust, Two North Riverside Plaza, Chicago,
Illinois 60606, Attention: General Counsel of
Property Operations.
Building: The Building in New England Executive Park in the
Town of Burlington, County of Middlesex,
Commonwealth of Massachusetts and known as and
numbered Eight New England Executive Park (Building
Eight). The Building is located on the parcel of
land ("Land") described on Exhibit 6.
Park: The buildings and the land owned by Landlord and its
affiliates in the New England Executive Park, from
time to time.
Art. 2 Premises: An area on the first (1st) floor of the Building,
-------------------------------------------------------
substantially as shown on Lease Plan, Exhibit 2
-----------------------------------------------
Art. 3.1 Specified Commencement Date: June 1, 1998
------------
Art. 3.2 Termination Date: Five (5) years after the Term Commencement Date
-----------------------------------------------
Art. 4.3 Final Plans Date: April 1, 1998
-------------
Art. 5 Use of Premises: General Business Office Use
---------------------------
<PAGE>
EXHIBIT 1, SHEET 2
Building No. Three, New England Executive Park
Burlington, Massachusetts 01803
(the "Building")
Tenant: The Quicksilver Group, Inc.
---------------------------
Execution Date: April 8, 1998
-------------
Art. 6 Yearly Rent:
<TABLE>
<CAPTION>
Lease Year(1) Yearly Rent Monthly Payment
------------- ----------- ---------------
<S> <C> <C>
1 $110,376.00 $9,198.00
2 $111,361.56 $9,280.13
3 $112,347.00 $9,362.25
4 $113,332.56 $9,444.38
5 $114,318.00 $9,526.50
</TABLE>
Art. 7 Total Rentable Area of Premises: 3,942 square feet
-----
Total Rentable Area of Building: 218,512 square feet
------
Art. 8 Electric current will be furnished by Landlord to Tenant and paid for
by Tenant in accordance with Article 8.1 of the Lease.
Electric Rate: $.11875 per kilowatt hour.
-------------------------
Base Electric Cost: $.95 per square foot of Total Rentable Area per
-----------------------------------------------
year.
-----
Initial Estimated Monthly Payment: $312.08
-------
Art. 9 Operating and Tax Escalation:
Operating Costs in the Base Year: The actual amount of Operating
-------------------------------
Costs for calendar year 1998
----------------------------
Tax Base: The actual amount of Taxes for fiscal year 1998 (i.e.,
------------------------------------------------------
July 1, 1997 - June 30, 1998)
-----------------------------
Tenant's Proportionate Share: 1.80%
-----
Art. 29.3 Broker: None
----
Art. 29.5 Arbitration: Massachusetts; Superior Court
-----------------------------
Art. 29.11 Security Deposit: $35,000.00
----------
Exhibit Dates: Lease Plan, Exhibit 2, dated April 8, 1998
------------------------------------------
- -----------------
(1) For the purposes of this Lease, "Lease Year" shall be defined as any
twelve-(12)-month period during the term of the Lease commencing as of the
Term Commencement Date, or as of any anniversary of the Term Commencement
Date.
-2-
<PAGE>
EXHIBIT 1, SHEET 3
Building No. Three, New England Executive Park
Burlington, Massachusetts 01803
(the "Building")
Tenant: The Quicksilver Group, Inc.
---------------------------
Execution Date: April 8, 1998
-------------
LANDLORD: TENANT:
EOP-NEW ENGLAND EXECUTIVE PARK, L.L.C. THE QUICKSILVER GROUP, INC.
By: EOP Operating Limited Partnership,
a Delaware limited partnership,
its sole member
By: Equity Office Properties Trust,
a Maryland real estate investment
trust, its managing general
partner
By: /s/ Thomas Q. Bakke By: /s/ Tom Minick
------------------------------ ----------------------------
Name: Thomas Q. Bakke Name: Tom Minick
----------------------------- ---------------------------
Title: Vice President Title: CEO
---------------------------- --------------------------
Date Signed: 5/26/98 Date Signed: 4/16/98
----------------------------- -------------------
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<PAGE>
NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MASSACHUSETTS
BUILDING EIGHT FLOOR 1
[SITE PLAN]
LEASE PLAN, EXHIBIT 2
TENANT: The Quicksilver Group, Inc.
DATE: April 8, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
1. REFERENCE DATA........................................................... 1
2. DESCRIPTION OF DEMISED PREMISES.......................................... 1
2.1 Demised Premises.................................................. 1
2.2 Appurtenant Rights................................................ 1
2.3 Exclusions and Reservations....................................... 1
3. TERM OF LEASE............................................................ 1
3.1 Definitions....................................................... 1
3.2 Habendum.......................................................... 2
4. READINESS FOR OCCUPANCY - ENTRY BY TENANT
PRIOR TO TERM COMMENCEMENT DATE.......................................... 2
4.1 Completion Date - Delays.......................................... 2
4.2 When Premises Deemed Ready........................................ 2
4.3 Plans and Specifications.......................................... 3
4.4 Preparation of Premises........................................... 3
4.5 Quality and Cost of Materials..................................... 4
4.6 Tenant's Delay - Additional Costs................................. 4
4.7 Entry by Tenant Prior to Term Commencement Date................... 4
4.8 Conclusiveness of Landlord's Performance.......................... 4
4.9 Tenant Payments of Construction Cost.............................. 4
5. USE OF PREMISES.......................................................... 5
5.1 Permitted Use..................................................... 5
5.2 Prohibited Uses................................................... 5
5.3 Licenses and Permits.............................................. 5
6. RENT .................................................................. 5
7. RENTABLE AREA............................................................ 6
8. SERVICES FURNISHED BY LANDLORD........................................... 6
8.1 Electric Current.................................................. 8
8.2 Water............................................................. 8
8.3 Elevators, Heat, Cleaning......................................... 8
8.4 Air Conditioning.................................................. 8
8.5 Additional Heat, Cleaning and Air Conditioning Services........... 9
8.6 Additional Air Conditioning Equipment............................. 9
8.7 Repairs........................................................... 9
8.8 Interruption or Curtailment of Services........................... 9
8.9 Energy Conservation............................................... 9
8.10 Miscellaneous..................................................... 10
9. ESCALATION............................................................... 10
9.1 Definitions....................................................... 10
9.2 Tax Excess........................................................ 12
9.3 Operating Expense Excess.......................................... 12
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9.4 Part Years........................................................ 13
9.5 Effect of Taking.................................................. 13
9.6 Disputes, etc. ................................................... 13
10. CHANGES OR ALTERATIONS BY LANDLORD....................................... 13
11. FIXTURES, EQUIPMENT AND IMPROVEMENTS - REMOVAL BY TENANT................. 14
12. ALTERATIONS AND IMPROVEMENTS BY TENANT................................... 14
13. TENANT'S CONTRACTORS - MECHANIC'S AND OTHER LIENS -
STANDARD OF TENANT'S PERFORMANCE - COMPLIANCE WITH LAWS.................. 15
14. REPAIRS BY TENANT - FLOOR LOAD........................................... 15
14.1 Repairs by Tenant................................................. 15
14.2 Floor Load - Heavy Machinery...................................... 16
15. INSURANCE, INDEMNIFICATION, EXONERATION AND EXCULPATION.................. 16
15.1 General Liability Insurance....................................... 16
15.2 Certificates of Insurance......................................... 16
15.3 General........................................................... 17
15.4 Property of Tenant................................................ 17
15.5 Bursting of Pipes, etc. .......................................... 17
15.6 Repairs and Alterations - No Diminution of Rental Value........... 18
16. ASSIGNMENT, MORTGAGING AND SUBLETTING.................................... 18
17. MISCELLANEOUS COVENANTS.................................................. 19
17.1 Rules and Regulations............................................. 19
17.2 Access to Premises - Shoring...................................... 19
17.3 Accidents to Sanitary and Other Systems........................... 20
17.4 Signs, Blinds and Drapes.......................................... 20
17.5 Estoppel Certificate.............................................. 20
17.6 Prohibited Materials and Property................................. 21
17.7 Requirements of Law - Fines and Penalties......................... 21
17.8 Tenant's Acts - Effect on Insurance............................... 21
17.9 Miscellaneous..................................................... 22
18. DAMAGE BY FIRE, ETC. .................................................... 22
19. WAIVER OF SUBROGATION.................................................... 23
20. CONDEMNATION - EMINENT DOMAIN............................................ 24
21. DEFAULT.................................................................. 24
21.1 Conditions of Limitation - Re-entry - Termination................. 24
21.2 Damages - Assignment for Benefit of Creditors..................... 25
21.3 Damages - Termination............................................. 26
21.4 Fees and Expenses................................................. 27
21.5 Waiver of Redemption.............................................. 27
21.6 Landlord's Remedies Not Exclusive................................. 27
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<PAGE>
21.7 Grace Period...................................................... 27
22. END OF TERM - ABANDONED PROPERTY......................................... 28
23. SUBORDINATION............................................................ 29
24. QUIET ENJOYMENT.......................................................... 30
25. ENTIRE AGREEMENT - WAIVER - SURRENDER.................................... 31
25.1 Entire Agreement.................................................. 31
25.2 Waiver by Landlord................................................ 31
25.3 Surrender......................................................... 31
26. INABILITY TO PERFORM - EXCULPATORY CLAUSE................................ 31
27. BILLS AND NOTICES........................................................ 32
28. PARTIES BOUND - SEISIN OF TITLE.......................................... 33
29. MISCELLANEOUS............................................................ 33
29.1 Separability...................................................... 33
29.2 Captions, etc. ................................................... 33
29.3 Broker............................................................ 33
29.4 Modifications..................................................... 33
29.5 Arbitration....................................................... 34
29.6 Governing Law..................................................... 34
29.7 Assignment of Rents............................................... 34
29.8 Representation of Authority....................................... 34
29.9 Expenses Incurred by Landlord Upon Tenant Requests................ 34
29.10 Survival.......................................................... 34
29.11 Notice of Lease; Recording........................................ 35
EXHIBITS
Exhibit 1 Lease Summary Sheet............................................
Exhibit 2 Lease Plan.....................................................
Exhibit 3 Building Standards.............................................
Exhibit 4 Building Services..............................................
Exhibit 5 Rules and Regulations..........................................
Exhibit 6 Building Legal Description.....................................
</TABLE>
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<PAGE>
THIS INDENTURE OF LEASE made and entered into on the Execution Date as
stated in Exhibit 1 and between the Landlord and the Tenant named in Exhibit
1.
Landlord does hereby demise and lease to Tenant, and Tenant does hereby hire
and take from Landlord, the premises hereinafter mentioned and described
(hereinafter referred to as "premises"), upon and subject to the covenants,
agreements, terms, provisions and conditions of this Lease for the term
hereinafter stated:
1. REFERENCE DATA
Each reference in this Lease to any of the terms and titles contained
in any Exhibit attached to this Lease shall be deemed and construed to
incorporate the data stated under that term or title in such Exhibit.
2. DESCRIPTION OF DEMISED PREMISES
2.1 DEMISED PREMISES. The premises are that portion of the Building as
described in Exhibit 1 (as the same may from time to time be constituted
after changes therein, additions thereto and eliminations therefrom pursuant to
rights of Landlord hereinafter reserved) and is hereinafter referred to as
"Building", substantially as shown hatched or outlined on the Lease Plan
(Exhibit 2) hereto attached and incorporated by reference as a part hereof.
Landlord reserves the right, at its own cost and expense, upon not less than
thirty (30) days' notice, to require Tenant to relocate its premises to an
area of substantially equivalent size, construction and finish as designated
by Landlord within the Building or another building owned by Landlord in the
office park in which the Building is located. If, within thirty (30) days
after Tenant's receipt of such notice, Landlord and Tenant have not agreed on
space to which the premises are to be relocated or the timing of such
relocation, Landlord, at its option, may either (i) rescind the relocation
notice, in which case the Lease shall remain in full force and effect in
accordance with its terms, or (ii) submit any dispute between the parties to
arbitration pursuant to Article 29.5 hereof to determine whether the proposed
relocation space is substantially equivalent.
2.2 APPURTENANT RIGHTS. Tenant shall have, as appurtenant to the
premises, rights to use in common, with others entitled thereto, subject to
reasonable rules from time to time made by Landlord of which Tenant is given
notice; (a) the common lobbies, hallways, stairways and elevators of the
Building, serving the premises in common with others, (b) common walkways
necessary for access to the Building, (c) if the premises include less than
the entire rentable area of any floor, the common toilets and other common
facilities of such floor, and (d) the common parking facilities adjacent to
the Building in accordance with the provisions of this Article 2.2; and no
other appurtenant rights or easements. Notwithstanding anything to the
contrary herein or in the Lease contained, Landlord has no obligation to
allow any particular telecommunication service provider to have access to the
Building or to Tenant's premises. If Landlord permits such access, Landlord
may condition such access upon the payment to Landlord by the service
provider of fees assessed by Landlord in its sole discretion.
As of the Execution Date of this Lease, there are approximately
3.4 parking spaces in the parking areas designated for use by the tenants of
the Building for every 1,000 square feet of Building Total Rentable Area (as
defined in Exhibit 1). Nothing contained in the Lease shall prohibit or
otherwise restrict Landlord from changing, from time to time, without notice
to Tenant, the location, layout or type of such parking areas, provided that
Landlord shall not substantially reduce the number of parking spaces
available for such tenants' use. Subject to reasonable rules from time to
time made by Landlord of which Tenant is given notice, Tenant shall have the
right, in common with all other tenants of the Building, to use such parking
areas, without charge, on a first-come, first-served basis.
2.3 EXCLUSIONS AND RESERVATIONS. All the perimeter walls of the
premises except the inner surfaces thereof, any balconies (except to the
extent same are shown as part of the premises on the Lease Plan (Exhibit 2)),
terraces or roofs adjacent to the premises, and any space in or adjacent to
the premises used for shafts, stacks, pipes, conduits, wires and appurtenant
fixtures, fan rooms, ducts, electric or other utilities, sinks or other
Building facilities, and the use thereof, as well as the right of access
through the
-1-
<PAGE>
premises for the purposes of operation, maintenance, decoration and repair,
are expressly excluded from the premises and reserved to Landlord.
3. TERM OF LEASE
3.1 DEFINITIONS. As used in this Lease the words and terms which
follow mean and include the following:
(a) "Specified Commencement Date" - The date (as stated in
Exhibit 1) on which it is estimated that the premises will be ready for
Tenant's occupancy for its use as stated in Exhibit 1.
(b) "Term Commencement Date" - If the "Term Commencement Date"
is a date certain agreed upon by the parties at the time of the execution of
this Lease, such date shall be inserted in Exhibit 1; otherwise, the "Term
Commencement Date" is the date on which the premises are ready for Tenant's
occupancy (as defined in Article 4.2) for use as set forth in Exhibit 1. If
the premises are not ready for such occupancy but if, pursuant to permission
therefor duly given by Landlord, Tenant takes possession of the whole or any
part of the premises for use as set forth in Exhibit 1, "Term Commencement
Date" shall be the date on which Tenant takes such possession.
3.2 HABENDUM. TO HAVE AND TO HOLD the premises for a term of years
commencing on the Term Commencement Date and ending on the Termination Date
as stated in Exhibit 1 or on such earlier date upon which said term may
expire or be terminated pursuant to any of the conditions of limitation or
other provisions of this Lease or pursuant to law (which date for the
termination of the terms hereof will hereafter be called "Termination Date").
Notwithstanding the foregoing, if the Termination Date as stated in Exhibit 1
shall fall on other than the last day of a calendar month, said Termination
Date shall be deemed to be the last day of the calendar month in which said
Termination Date occurs.
If the Term Commencement Date and the Termination Date are not
determined at the time that a notice of lease has been executed by the
parties, then each of the parties hereto agrees, upon demand of the other
party after the Term Commencement Date and Termination Date have been
determined, to join in the execution, in recordable form, of a statutory
notice, memorandum, etc. of lease and/or written declaration in which shall
be stated such Term Commencement Date and (if need be) the Termination Date.
If this Lease is terminated before the term expires, then upon Landlord's
request the parties shall execute, deliver and record an instrument
acknowledging such fact and the date of termination of this Lease, and Tenant
hereby appoints Landlord its attorney-in-fact in its name and behalf to
execute such instrument if Tenant shall fail to execute and deliver such
instrument after Landlord's request therefor within ten (10) days.
4. READINESS FOR OCCUPANCY - ENTRY BY TENANT PRIOR TO TERM COMMENCEMENT DATE
4.1 COMPLETION DATE - DELAYS. Subject to delay by causes beyond the
reasonable control of Landlord or caused by the action or inaction of Tenant,
Landlord shall use reasonable speed and diligence in the construction of the
Building and to have the premises ready for Tenant's occupancy on the
Specified Commencement Date. The failure to have the premises ready for
Tenant's occupancy on the Specified Commencement Date shall in no way affect
the validity of this Lease or the obligations of Tenant hereunder nor shall
the same by construed in any way to extend the term of this Lease. If the
premises are not ready for Tenant's occupancy within the meaning of Article
4.2 hereof on the Specified Commencement Date, Tenant shall not have any
claim against Landlord, and Landlord shall have no liability to Tenant, by
reason thereof.
4.2 WHEN PREMISES DEEMED READY.
-2-
<PAGE>
(a) The premises shall conclusively be deemed ready for Tenant's
occupancy as soon as Landlord's Work, as defined in Paragraph (b) of this
Article 4.2, has been substantially completed by Landlord insofar as is
practicable in view of delays or defaults, if any, of Tenant or its
contractors, as hereinafter specified, and the elevator, plumbing, air
conditioning and electric facilities are initially substantially available to
Tenant, in accordance with the obligations assumed by Landlord hereunder.
Such facilities shall not be deemed to be unavailable if only minor or
insubstantial details of construction, decoration or mechanical adjustments
remain to be done. The premises shall not be deemed to be unready for
Tenant's occupancy or incomplete if only minor or insubstantial details of
construction, decoration or mechanical adjustments remain to be done in the
premises or any part thereof, or if the delay in the availability of the
premises for occupancy is (i) due to special work, changes, alterations or
additions required or made by Tenant in the layout or finish of the premises
or any part thereof, (ii) caused in whole or in part by Tenant through the
delay of Tenant in submitting any plans and/or specifications, supplying
information, approving plans, specifications or estimates, giving
authorizations or otherwise or (iii) caused in whole or in part by delay
and/or default on the part of Tenant or its contractors including, without
limitation, the utility companies and other entities furnishing
communications, data processing or other service or equipment. If the
premises are deemed ready for Tenant's occupancy, pursuant to the foregoing,
(and the term shall have commenced by reason thereof), but the premises are
not in fact actually ready for Tenant's occupancy, Tenant shall not (except
with Landlord's consent) be entitled to take possession of the premises for
use as set forth in Exhibit 1 until the premises are in fact actually ready
for such occupancy. Landlord's architect's certificate of substantial
completion, as hereinabove stated, given in good faith, or of any other facts
pertinent to this Article 4.2 shall be deemed conclusive of the statements
therein contained and binding upon Tenant. Any of Landlord's work in the
premises not fully completed on the Term Commencement Date shall thereafter
be so completed with reasonable diligence by Landlord.
(b) Except for Landlord's Work, as hereinafter defined, the
premises shall be taken "as-is" in its then (i.e., as of the Execution Date
of this Lease) state of construction, finish, and decoration, without any
obligation on the part of Landlord to construct or prepare the premises for
Tenant's occupancy and without any representations and warranties by Landlord
with respect to the condition of the Building and premises. Landlord shall
construct the premises substantially in accordance with Space Plan SK-2,
dated February 27, 1998, prepared by Interior Architects, Inc., and in
accordance with Tenant's final approved plans, which plans shall be
consistent with said Space Plan SK-2 ("Landlord's Work").
(c) Landlord shall contribute up to Ninety-Eight Thousand Five
Hundred Fifty and 00/100 ($98,550.00) Dollars ("Landlords' Contribution")
towards the cost of Landlord's Work. Tenant shall, within thirty (30) days of
billing therefor, reimburse Landlord for all costs of Landlord's Work in
excess of Landlord's Contribution. Tenant shall not be entitled to any unused
portion of Landlord's Contribution.
4.3 PLANS AND SPECIFICATIONS. Tenant shall be solely responsible for
the timely preparation and submission to Landlord of the final architectural,
electrical and mechanical construction drawings, plans and specifications
(called "plans") necessary to construct the premises for Tenant's occupancy,
which plans shall be subject to approval by Landlord's architect and
engineers and shall comply with their requirements to avoid aesthetic or
other conflicts with the design and function of the balance of the Building.
Landlord's approval is solely given for the benefit of Landlord and neither
Tenant nor any third party shall have the right to reply upon Landlord's
approval of Tenant's plans for any purpose whatsoever. Without limiting the
foregoing, Tenant shall be responsible for all elements of the design of
Tenant's plans (including, without limitation, compliance with law,
functionality of design, the structural integrity of the design, the
configuration of the premises and the placement of Tenant's furniture,
appliances and equipment), and Landlord's approval of Tenant's plans shall in
no event relieve Tenant of the responsibility for such design. If Tenant
engages architects and engineers designated by Landlord to prepare Tenant's
plans, then, notwithstanding anything to the contrary herein contained,
Landlord shall pay for the
-3-
<PAGE>
architectural and engineering fees incurred by Tenant in preparing Tenant's
final approved plans, except that Landlord shall not be responsible for the
cost of any changes made by Tenant after Landlord has approved Tenant's
plans. Whether or not the layout and plans are prepared with the help (in
whole or in part) of an architect or engineer designated by Landlord, Tenant
agrees to remain solely responsible for the timely preparation and submission
of all such plans and for all elements of the design of such plans and for
all costs related thereto. Tenant has assured itself by direct communication
with the architect and engineers (Landlord's or its own, as the case may be)
that the final approved plans can be delivered to Landlord on or before the
Final Plans Date as stated in Exhibit 1, provided that Tenant promptly
furnishes complete information concerning its requirements to said architect
and engineers as and when requested by them; and Tenant covenants and agrees
to cause said final, approved plans and specifications to be delivered to
Landlord on or before said Final Plans Date and to devote such time as may be
necessary in consultation with said architect and engineers to enable them to
complete and submit all plans within the required time limit. Time is of the
essence in respect of preparation and submission of plans by Tenant. (The
word "architect" as used in this Article 4 shall include an interior designer
or space planner.)
4.4 PREPARATION OF PREMISES.
(a) By Landlord. Except as is otherwise herein provided or as may
be otherwise approved by the Landlord, all work necessary to prepare the
premises for Tenant's occupancy, including work to be performed at Tenant's
expense, shall be performed by contractors employed by Landlord.
(b) By Tenant. Subject always to the provisions of Articles 4.2 and
4.3, if other than building standard categories of work are to be performed
in preparing the premises for Tenant's occupancy by contractors other than
those employed by Landlord, Landlord will give Tenant reasonable advance
notice of the date on which the premises will be ready for such other
contractors and a reasonable time will be allowed from such date for doing
the work to be performed by such other contractors.
(c) If any work, including but not by way of limitation,
installation of built-in equipment by the manufacturer or distributor
thereof, shall be performed by contractors not employed by Landlord, Tenant
shall take necessary reasonable measures to the end that such contractor
shall cooperate in all ways with Landlord's contractors to avoid any delay to
the work being performed by Landlord's contractors or conflict in any other
way with the performance of such work.
4.5 QUALITY AND COST OF MATERIALS. Any construction or finish of the
premises, whether by Landlord or Tenant, shall equal or exceed the
specifications and quantities provided in Exhibit 3. Except for Landlord's
Contribution, Tenant shall bear all costs of preparing the premises for its
occupancy in accordance with the final plans.
4.6 TENANT'S DELAY - ADDITIONAL COSTS. If Tenant fails or omits
to make timely submission to Landlord of the layout and plans referred to in
Article 4.3, or other pertinent information, or delays in submitting any
other plans or specifications, or in supplying information, or in approving
plans, specifications or estimates, or in giving authorizations or fails to
comply with Section 4.4(c) hereof, or otherwise fails to honor or perform its
obligations under this Lease, any additional cost to Landlord in connection
with the completion of the premises in accordance with the terms of this
Lease and Exhibit 3 shall be promptly paid by Tenant to Landlord if such
additional cost is in whole or in part the result of such failure, omission
or delay of Tenant. For the purposes of the next preceding sentence, the
expression "additional cost to Landlord" shall mean the cost over and above
such cost as would have been the aggregate cost to Landlord of completing the
premises in accordance with the terms of this Lease and Exhibit 3 had there
been no such failure, omission or delay. Nothing contained in this Article
4.6 shall limit or qualify or prejudice any other covenants, agreements,
terms, provisions and conditions contained in this Lease, including, but
not limited to Article 4.2.
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<PAGE>
4.7 ENTRY BY TENANT PRIOR TO TERM COMMENCEMENT DATE. With Landlord's
prior written consent, which shall not be unreasonably withheld, Tenant
shall have the right to enter the premises prior to the Term Commencement
Date, during normal business hours and without payment of rent, to perform
such work or decoration as is to be performed by, or under the direction or
control of, Tenant and as is otherwise in compliance with the terms of this
Lease. Such right of entry shall be deemed a license from Landlord to Tenant,
and any entry thereunder shall be at the risk of Tenant.
4.8 CONCLUSIVENESS OF LANDLORD'S PERFORMANCE. Tenant shall be
conclusively deemed to have agreed that Landlord has performed all of its
obligations under this Article 4 unless not later than the end of the second
calendar month next beginning after the Term Commencement Date Tenant shall
give Landlord written notice specifying the respects in which Landlord has
not performed any such obligation.
4.9 TENANT PAYMENTS OF CONSTRUCTION COST. Landlord shall have the
same rights and remedies which Landlord has upon the nonpayment of Yearly
Rent and other charges due under this Lease for nonpayment of any amounts
which Tenant is required to pay to Landlord or Landlord's contractor in
connection with the construction and initial preparation of the premises
(including, without limitation, any amounts which Tenant is required to pay
in accordance with Articles 4.5 and 4.6 hereof) or in connection with any
construction in the premises performed for Tenant by Landlord, Landlord's
contractor or any other person, firm or entity after the Term Commencement
Date.
5. USE OF PREMISES
5.1 PERMITTED USE. Tenant shall continuously during the term hereof
occupy and use the premises only for the purposes as stated in Exhibit 1 and
for no other purposes. Service and utility areas (whether or not a part of
the premises) shall be used only for the particular purpose for which they
were designed. Without limiting the generality of the foregoing, Tenant
agrees that it shall not use the premises or any part thereof, or permit the
premises or any part thereof to be used for the preparation or dispensing of
food, whether by vending machines or otherwise. Notwithstanding the
foregoing, but subject to the other terms and provisions of this Lease,
Tenant may, with Landlord's prior written consent, which consent shall not be
unreasonably withheld, install at its own cost and expense so-called hot-cold
water fountains, coffee makers and so-called Dwyer refrigerator-sink-stove
combinations for the preparation of beverages and foods, provided that no
cooking, frying, etc., are carried on in the premises to such extent as
requires special exhaust venting, Tenant hereby acknowledging that the
Building is not engineered to provide any such special venting.
5.2 PROHIBITED USES. Notwithstanding any other provision of this
Lease, Tenant shall not use, or suffer or permit the use or occupancy of, or
suffer or permit anything to be done in or anything to be brought into or
kept in or about the premises or the Building or any part thereof (including,
without limitation, any materials appliances or equipment used in the
construction or other preparation of the premises and furniture and
carpeting): (i) which would violate any of the covenants, agreements, terms,
provisions and conditions of this Lease or otherwise applicable to or binding
upon the premises; (ii) for any unlawful purposes or in any unlawful manner;
(iii) which, in the reasonable judgment of Landlord shall in any way (a)
impair the appearance or reputation of the Building; or (b) impair, interfere
with or otherwise diminish the quality of any of the Building services or the
proper and economic heating, cleaning, ventilating, air conditioning or other
servicing of the Building; or premises, or with the use or occupancy of any
of the other areas of the Building, or occasion discomfort, inconvenience or
annoyance, or injury or damage to any occupants of the premises or other
tenants or occupants of the Building; or (iv) which is inconsistent with the
maintenance of the Building as an office building of the first class in the
quality of its maintenance, use, or occupancy. Tenant shall not install or
use any electrical or other equipment of any kind which, in the reasonable
judgment of Landlord, might cause any such impairment, interference,
discomfort, inconvenience, annoyance or injury.
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5.3 LICENSES AND PERMITS. If any governmental license or permit shall
be required for the proper and lawful conduct of Tenant's business, and if
the failure to secure such license or permit would in any way affect
Landlord, the premises, the Building or Tenant's ability to perform any of
its obligations under this Lease, Tenant, at Tenant's expense, shall duly
procure and thereafter maintain such license and submit the same to
inspection by Landlord. Tenant, at Tenant's expense, shall at all times
comply with the terms and conditions of each such license or permit. Tenant
shall furnish all data and information to governmental authorities and
Landlord as required in accordance with legal, regulatory, licensing or other
similar requirements as they relate to Tenant's use or occupancy of the
premises or the Building.
6. RENT
During the term of this Lease the Yearly Rent and other charges, at the
rate stated in Exhibit 1, shall be payable by Tenant to Landlord by monthly
payments, as stated in Exhibit 1, in advance and without demand on the first
day of each month for and in respect of such month. The rent and other
charges reserved and covenanted to be paid under this Lease shall commence on
the Term Commencement Date. Notwithstanding the provisions of the next
preceding sentence, Tenant shall pay the first monthly installment of rent on
the execution of this Lease. If, by reason of any provisions of this Lease,
the rent reserved hereunder shall commence or terminate on any day other than
the first day of a calendar month, the rent for such calendar month shall be
prorated. The rent shall be payable to Landlord or, if Landlord shall so
direct in writing, to Landlord's agent or nominee, in lawful money of the
United States which shall be legal tender for payment of all debts and dues,
public and private, at the time of payment, at the office of the Landlord or
such place as Landlord may designate, and the rent and other charges in all
circumstances shall be payable without any setoff or deduction whatsoever.
Rental and any other sums due hereunder not paid within ten (10) days after
the date due shall bear interest for each month or fraction thereof from the
due date until paid computed at the annual rate of two percentage points over
the so-called prime rate then currently from time to time charged to its most
favored corporate customers by the largest national bank located in the city
in which the Building is located, or at any applicable lesser maximum legally
permissible rate for debts of this nature.
7. RENTABLE AREA
Total Rentable Area of the Premises and the Building shall be deemed to
be as set forth in Exhibit 1.
8. SERVICES FURNISHED BY LANDLORD
8.1 ELECTRIC CURRENT.
(a) As stated in Exhibit 1, Landlord will furnish to Tenant, as
an incident of this Lease, on a sub-metered basis, electric current for the
operation of lighting fixtures, and the 120-volt electrical outlets initially
installed in the premises for the operation of Tenant's normal office
fixtures and equipment, but excluding any high energy consumption equipment,
or Landlord will require Tenant to contract with the company supplying
electric current for the purchase and obtaining by Tenant of electric current
directly from such company to be billed directly to, and paid for by, Tenant.
(b) Tenant shall pay to Landlord, as additional rent, the cost of
the electricity consumed on the premises during the term of this Lease as
shown on such sub-meter based upon the Electric Rate. The parties acknowledge
that the consumption of electricity in the premises (other than electricity
consumed for the purposes of providing the services which Landlord is
required to provide hereunder) will be measured by a separate sub-meter to be
installed by Landlord. Tenant shall reimburse Landlord for the entire cost of
such electric current as follows:
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1. Commencing as of the Term Commencement Date and continuing
until the procedures set forth in Paragraph 2 of this Article
8.1(b) are effected, Tenant shall pay to Landlord at the same
time and in the same manner that it pays its monthly payments
of Yearly Rent hereunder, estimated monthly payments on
account of Tenant's obligation to reimburse Landlord for
electricity consumed in the premises. Said estimated monthly
payments are based upon the Base Electric Cost and Electric
Rate set forth on Exhibit 1. The Initial Estimated Monthly
Electric Payment is set forth on Exhibit 1.
2. Periodically after the Term Commencement Date, Landlord shall
determine the actual cost of electricity consumed by Tenant in
the premises (i.e. by reading Tenant's sub-meter and by
applying the actual Electric Rate(s) applicable to the
preceding period). If the total of Tenant's estimated monthly
payments on account of such period is less than the actual
cost of electricity consumed in the premises during such
period, Tenant shall pay the difference to Landlord when billed
therefor. If the total of Tenant's estimated monthly payments
on account of such period is greater than the actual cost of
electricity consumed in the premises during such period, Tenant
may credit the difference against its next installment of
rental or other charges due hereunder.
3. After each adjustment, as set forth in Paragraph 2 above, the
amount of estimated monthly payments on account of Tenant's
obligation to reimburse Landlord for electricity in the
premises shall be adjusted based upon the actual cost of
electricity consumed during the immediately preceding period.
(c) If Landlord shall require Tenant to contract with the company
supplying electric current for the purchase and obtaining by Tenant of
electric current directly from such company, either initially or pursuant to
Landlord's option as set forth in Subparagraph 8.1(d) below, Tenant shall
contract with such company and shall pay all charges for such electric
current directly to such company promptly when due.
(d) If Landlord is furnishing Tenant electric current hereunder
either on an additional rent basis or a sub-metered basis, Landlord, at any
time, at its option and upon not less than thirty (30) days' prior written
notice to Tenant, may discontinue such furnishing of electric current to the
premises; and in such case Tenant shall contract with the company supplying
electric current for the purchase and obtaining by Tenant of electric current
directly from such company. In the event Tenant itself contracts for
electricity with the supplier, either initially or pursuant to Landlord's
option as above stated, Landlord shall (i) permit its risers, conduits and
feeders to the extent available, suitable and safely capable, to be used for
the purpose of enabling Tenant to purchase and obtain electric current
directly from such company, (ii) without cost or charge to Tenant, make such
alterations and additions to the electrical equipment and/or appliances in
the Building as such company shall specify for the purpose of enabling Tenant
to purchase and obtain electric current directly from such company, and (iii)
at Landlord's expense, furnish and install in or near the premises any
necessary metering equipment used in connection with measuring Tenant's
consumption of electric current and Tenant, at Tenant's expense, shall
maintain and keep in repair such metering equipment. In the event that
Landlord shall exercise the option set forth in this Subparagraph 8.1(d),
then (i) if Landlord is furnishing Tenant electric current on an additional
rent basis, Tenant shall have no further obligation to pay Electricity Rent
to Landlord after the date Landlord discontinues such furnishing of electric
current or (ii) if Landlord is furnishing Tenant electric current on a
sub-metered basis, Tenant shall have no further obligation to make any
Estimated Monthly Electric Payments after the date Landlord discontinues such
furnishing of electric current.
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(e) Whether or not Landlord is furnishing electric current to
Tenant, if Tenant shall require electric current for use in the premises in
excess of such reasonable quantity to be furnished for such use as
hereinabove provided and if (i) in Landlord's reasonable judgment, Landlord's
facilities are inadequate for such excess requirements or (ii) such excess
use shall result in an additional burden on the Building air conditioning
system and additional cost to Landlord on account thereof then, as the case
may be, (x) Landlord upon written request and at the sole cost and expense of
Tenant, will furnish and install such additional wire, conduits, feeders,
switchboards and appurtenances as reasonably may be required to supply such
additional requirements of Tenant if current therefor be available to
Landlord, provided that the same shall be permitted by applicable laws and
insurance regulations and shall not cause damage to the Building or the
premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations or repairs or interfere with or disturb
other tenants or occupants of the Building or (y) Tenant shall reimburse
Landlord for such additional cost, as aforesaid.
(f) Landlord, upon Tenant's request, shall purchase and install
all replacement lamps of types generally commercially available (including,
but not limited to, incandescent and fluorescent) used in the premises.
(g) Landlord shall not in any way be liable or responsible to
Tenant for any loss, damage or expense which Tenant may sustain or incur if
the quantity, character, or supply of electrical energy is changed or is no
longer available or suitable for Tenant's requirements.
(h) Tenant agrees that it will not make any material alteration
or material addition to the electrical equipment and/or appliances in the
premises without the prior written consent of Landlord in each instance first
obtained, which consent will not be unreasonably withheld, and will promptly
advise Landlord of any other alteration or addition to such electrical
equipment and/or appliances.
8.2 WATER. Landlord shall furnish hot and cold water for ordinary
premises, cleaning, toilet, lavatory and drinking purposes. If Tenant
requires, uses or consumes water for any purpose other than for the
aforementioned purposes, Landlord may (i) assess a reasonable charge for the
additional water so used or consumed by Tenant or (ii) install a water meter
and thereby measure Tenant's water consumption for all purposes. In the
latter event, Landlord shall pay the cost of the meter and the cost of
installation thereof and shall keep said meter and installation equipment in
good working order and repair. Tenant agrees to pay for water consumed, as
shown on said meter, together with the sewer charge based on said meter
charges, as and when bills are rendered, and on default in making such
payment Landlord may pay such charges and collect the same from Tenant. All
piping and other equipment and facilities for use of water outside the
building core will be installed and maintained by Landlord at Tenant's sole
cost and expense.
8.3 ELEVATORS, HEAT, CLEANING.
(a) Landlord at its expense shall: (i) provide necessary
elevator facilities (which may be manually or automatically operated, either
or both, as Landlord may from time to time elect) on Mondays through Fridays,
excepting legal holidays, from 8:00 a.m. to 6:00 p.m. and on Saturdays,
excepting legal holidays, from 8:00 a.m. to 1:00 p.m. (called "business
days") and have one elevator in operation available for Tenant's use,
non-exclusively, together with others having business in the Building, at all
other times; (ii) furnish heat (substantially equivalent to that being
furnished in comparably aged similarly equipped office buildings in the same
city) to the premises during the normal heating season on business days; and
(iii) cause the office areas of the premises to be cleaned on business days
(except on Saturdays) provided the same are kept in order by Tenant. Either
Exhibit 4 (if annexed hereto) or, otherwise, the cleaning standards generally
prevailing in first-class office buildings in the city or town where the
Building is located, shall represent substantially the extent and scope of
the cleaning by Landlord referred to in this Article 8.3.
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(b) The parties agree and acknowledge that, despite reasonable
precautions in selecting cleaning and maintenance contractors and personnel,
any property or equipment in the premises of a delicate, fragile or
vulnerable nature may nevertheless be damaged in the course of cleaning and
maintenance services being performed. Accordingly, Tenant shall take
reasonable protective precautions with such property and equipment
(including, without limitation, computers or other data processing components
or equipment and optical or electronic equipment, etc.), e.g., housing the
property and equipment in a separate, locked room, so as to render it
inaccessible to the Building's cleaning personnel.
8.4 AIR CONDITIONING. Landlord shall through the air conditioning
equipment of the Building furnish to and distribute in the premises air
conditioning as normal seasonal changes may require on business days during
the hours as aforesaid in Article 8.3 when air conditioning may reasonably be
required for the comfortable occupancy of the premises by Tenant. Tenant
agrees to lower and close the blinds or drapes when necessary because of the
sun's position, whenever the air conditioning system is in operation, and to
cooperate fully with Landlord with regard to, and to abide by all the
reasonable regulations and requirements which Landlord may prescribe for the
proper functioning and protection of the air conditioning system. The air
conditioning system referred to in this Article 8.4 shall be capable of
providing 78DEG. F dry bulb and 50% relative humidity with outside conditions
of 92DEG. F dry bulb and 74DEG. F wet bulb. The foregoing design conditions
shall be based upon an occupancy within each separately partitioned area in
the premises of not more than one person per 100 square feet of Total
Rentable Area and upon a combined lighting and standard electrical load not
to exceed 2 1/2 watts per square foot of Total Rentable Area.
8.5 ADDITIONAL HEAT, CLEANING AND AIR CONDITIONING SERVICES.
(a) Landlord will use reasonable efforts upon reasonable advance
written notice from Tenant of its requirements in that regard, to furnish
additional heat, cleaning or air conditioning services to the premises on
days and at times other than as above provided.
(b) Tenant will pay to Landlord a reasonable charge (i) for any
such additional heat, cleaning or air conditioning service required by
Tenant, (ii) for any extra cleaning of the premises required because of the
carelessness or indifference of Tenant or because of the nature of Tenant's
business, and (iii) for any cleaning done at the request of Tenant of any
portions of the premises which may be used for storage, shipping room or
other non-office purposes. If the cost to Landlord for cleaning the premises
shall be increased due to the installation in the premises, at Tenant's
request, of any materials or finish other than those which are building
standard, Tenant shall pay to Landlord an amount equal to such increase in
cost.
8.6 ADDITIONAL AIR CONDITIONING EQUIPMENT. In the event Tenant
requires additional air conditioning for business machines, meeting rooms or
other special purposes, or because of occupancy or excess electrical loads,
any additional air conditioning units, chillers, condensers, compressors,
ducts, piping and other equipment, such additional air conditioning equipment
will be installed and maintained by Landlord at Tenant's sole cost and
expense, but only if, in Landlord's reasonable judgment, the same will not
cause damage or injury to the Building or create a dangerous or hazardous
condition or entail excessive or unreasonable alterations, repairs or expense
or interfere with or disturb other tenants; and Tenant shall reimburse
Landlord in such an amount as will compensate it for the cost incurred by it
in operating such additional air conditioning equipment.
8.7 REPAIRS. Except as otherwise provided in Articles 18 and 20, and
subject to Tenant's obligations in Article 14, Landlord shall keep and
maintain the roof, exterior walls, structural floor slabs, columns,
elevators, public stairways and corridors, lavatories, equipment (including,
without limitation, sanitary, electrical, heating, air conditioning, or other
systems) and other common facilities of the Building in good condition and
repair.
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8.8 INTERRUPTION OR CURTAILMENT OF SERVICES. When necessary by reason
of accident or emergency, or for repairs, alterations, replacements or
improvements which in the reasonable judgment of Landlord are desirable or
necessary to be made, or of difficulty or inability in securing supplies or
labor, or of strikes, or of any other cause beyond the control of Landlord,
whether such other cause be similar or dissimilar to those hereinabove
specifically mentioned until said cause has been removed, Landlord reserves
the right to interrupt, curtail, stop or suspend (i) the furnishing of
heating, elevator, air conditioning, and cleaning services and (ii) the
operation of the plumbing and electric systems. Landlord shall exercise
reasonable diligence to eliminate the cause of any such interruption,
curtailment, stoppage or suspension, but there shall be no diminution or
abatement of rent or other compensation due from Landlord to Tenant
hereunder, nor shall this Lease be affected or any of the Tenant's
obligations hereunder reduced, and the Landlord shall have no responsibility
or liability for any such interruption, curtailment, stoppage, or suspension
of services or systems.
8.9 ENERGY CONSERVATION. Notwithstanding anything to the contrary in
this Article 8 or in this Lease contained, Landlord may institute, and
Tenant shall comply with, such policies, programs and measures as may be
necessary, required, or expedient for the conservation and/or preservation of
energy or energy services, or as may be necessary or required to comply with
applicable codes, rules regulations or standards.
8.10 MISCELLANEOUS. Other than air conditioning, all services provided
by Landlord to Tenant are based upon an assumed maximum premises population
of one person per two hundred (200) square feet of Total Rentable Area, which
limit Tenant shall in no event exceed.
9. ESCALATION
9.1 DEFINITIONS. As used in this Article 9, the words and terms which
follow mean and include the following:
(a) "Operating Year" shall mean a calendar year in which occurs
any part of the term of this Lease.
(b) "Operating Costs in the Base Year" shall be the amount as
stated in Exhibit 1.
(c) "Tenant's Proportionate Share" shall be the figure as stated
in Exhibit 1.
(d) "Taxes" shall mean the real estate taxes and other taxes,
levies and assessments imposed upon the Building and the land on which it
stands and upon any personal property of Landlord used in the operation
thereof, or Landlord's interest in the Building or such personal property;
charges, fees and assessments for transit, housing, police, fire or other
governmental services or purported benefits to the Building; service or user
payments in lieu of taxes; and any and all other taxes, levies, betterments,
assessments and charges arising from the ownership, leasing, operating, use
or occupancy of the Building or based upon rentals derived therefrom, which
are or shall be imposed by National, State, Municipal or other authorities.
As of the Execution Date, "Taxes" shall not include any franchise, rental,
income or profit tax, capital levy or excise, provided, however, that any of
the same and any other tax, excise, fee, levy, charge or assessment, however
described, that may in the future be levied or assessed as a substitute for
or an addition to, in whole or in part, any tax, levy or assessment which
would otherwise constitute "Taxes," whether or not now customary or in the
contemplation of the parties on the Execution Date of this Lease, shall
constitute "Taxes," but only to the extent calculated as if the Building and
the land upon which it stands is the only real estate owned by Landlord.
"Taxes" shall also include expenses of tax abatement or other proceedings
contesting assessments or levies.
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(e) "Tax Base" shall be the amount stated in Exhibit 1 and shall
apply to a Tax Period of twelve (12) months. Tax Base shall be reduced pro
rata if and to the extent that the Tax Period contains fewer than twelve (12)
months.
(f) "Tax Period" shall be any fiscal/tax period in respect of
which Taxes are due and payable to the appropriate governmental taxing
authority, any portion of which period occurs during the term of this Lease,
the first such Period being the one in which the Term Commencement Date
occurs.
(g) "Operating Costs":
(1) Definition of Operating Costs. "Operating Costs" shall
mean all costs incurred and expenditures of whatever nature made
by Landlord in the operation and management, for repair and
replacements, cleaning and maintenance of the Building and grounds
including, without limitation, vehicular and pedestrian
passageways related to the Building (but excluding those areas, if
any, outside the Building and for which operating expenses are
chargeable to non-office (i.e., commercial) tenants), related
equipment, facilities and appurtenances, elevators, cooling and
heating equipment. In the event that Landlord or Landlord's
managers or agents perform services for the benefit of the
Building off-site which would otherwise be performed on-site
(e.g., accounting), the cost of such services shall be reasonably
allocated among the properties benefiting from such service and
shall be included in Operating Costs. The Building's pro rata
share (as reasonably determined by Landlord) of the cost of
operating, managing (including, without limitation, the cost of
the management office for the buildings and facilities and the
Park), maintaining and cleaning (including, without limitation,
snow and ice removal) the parking and other common areas and
facilities of the Park shared by the Building and other buildings
in the Park shall be included in Operating Costs. Operating Costs
shall include, without limitation, those categories of
"Specifically Included Operating Costs," as set forth below, but
shall not include "Excluded Costs," as hereinafter defined.
(2) Definition of Excluded Costs. "Excluded Costs" shall
be defined as mortgage charges, brokerage commissions, salaries of
executives and owners not directly employed in the
management/operation of the Building, the cost of work done by
Landlord for a particular tenant for which Landlord has the right
to be reimbursed by such Tenant, and, subject to Subparagraph (3)
below, such portion of expenditures as are not properly chargeable
against income.
(3) Capital Expenditures.
(i) REPLACEMENTS. If, during the term of this Lease,
Landlord shall replace any capital items or make any capital
expenditures (collectively called "capital expenditures")
the total amount of which is not properly includible in
Operating Costs for the Operating Year in which they were
made, there shall nevertheless be included in such Operating
Costs and in Operating Costs for each succeeding Operating
Year the amount, if any, by which the Annual Charge-Off
(determined as hereinafter provided) of such capital
expenditure (less insurance proceeds, if any, collected by
Landlord by reason of damage to, or destruction of the
capital item being replace) exceeds the annual Charge-Off of
the capital expenditure for the item being replaced.
(ii) NEW CAPITAL ITEMS. If a new capital item is
acquired which does not replace another capital item which
was worn out, has become obsolete, etc., then there shall be
included in Operating Costs for each Operating Year in
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which and after such capital expenditure is made the Annual
Charge-Off of such capital expenditure.
(iii) ANNUAL CHARGE-OFF. "Annual Charge-Off" shall be
defined as the annual amount of principal and interest
payments which would be required to repay a loan ("Capital
Loan") in equal monthly installments over the Useful Life,
as hereinafter defined, of the capital item in question on a
direct reduction basis at an annual interest rate equal to
the Capital Interest Rate, as hereinafter defined, where the
initial principal balance is the cost of the capital item in
question. Notwithstanding the foregoing, if Landlord
reasonably concludes on the basis of engineering estimates
that a particular capital expenditure will effect savings in
Building operating expenses including, without limitation,
energy-related costs, and that such projected savings will,
on an annual basis ("Projected Annual Savings"), exceed the
Annual Charge-Off of such capital expenditure computed as
aforesaid, then and in such events, the Annual Charge-Off
shall be increased to an amount equal to the Projected
Annual Savings; and in such circumstances, the increased
Annual Charge-Off (in the amount of the Projected Annual
Savings) shall be made for such period of time as it would
take to fully amortize the cost of the capital item in
question, together with interest thereon at the Capital
Interest Rate as aforesaid, in equal monthly payments, each
in the amount of one-twelfth (1/12th) of the Projected
Annual Savings, with such payments being applied first to
interest and the balance to principal.
(iv) USEFUL LIFE. "Useful Life" shall be reasonably
determined by Landlord in accordance with generally accepted
accounting principles and practices in effect at the time of
acquisition of the capital item.
(v) CAPITAL INTEREST RATE. "Capital Interest Rate"
shall be defined as an annual rate of either one percentage
point over the AA Bond rate (Standard & Poor's corporate
composite or, if unavailable, its equivalent) as reported in
the financial press at the time the capital expenditure is
made or, if the capital item is acquired through third-party
financing, then the actual (including fluctuating) rate paid
by Landlord in financing the acquisition of such capital
item.
(4) Specifically Included Categories of Operating Costs.
Operating Costs shall include, but not be limited to, the
following:
Taxes (other than real estate taxes): Sales, Federal
Social Security, Unemployment and Old Age Taxes and contributions
and State Unemployment taxes and contributions accruing to and
paid by the Landlord on account of all employees of Landlord
and/or Landlord's managing agent, who are employed in, about or
on account of the Building, except that taxes levied upon the net
income of the Landlord and taxes withheld from employees, and
"Taxes" as defined in Article 9.1(d) shall not be included herein.
Water: All charges and rates connected with water
supplied to the Building and related sewer use charges.
Heat and Air Conditioning: All charges connected with
heat and air conditioning supplied to the Building.
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Wages: Wages and cost of all employee benefits of all
employees of the Landlord and/or Landlord's managing agent who
are employed in, about or on account of the Building.
Cleaning: The cost of labor and material for cleaning
the Building, surrounding areaways and windows in the Building.
Elevator Maintenance: All expenses for or on account
of the upkeep and maintenance of all elevators in the Building.
Electricity: The cost of all electric current for the
operation of any machine, appliance or device used for the
operation of the premises and the Building, including the cost of
electric current for the elevators, lights, air conditioning and
heating, but not including electric current which is paid for
directly to the utility by the user/tenant in the Building. (If
and so long as Tenant is billed directly by the electric utility
for its own consumption as determined by its separate meter, then
Operating Costs shall include only Building and public area
electric current consumption and not any demised premises electric
current consumption. Wherever separate metering is unlawful,
prohibited by utility company regulation or tariff or is otherwise
impracticable, relevant consumption figures for the purposes of
this Article 9 shall be determined by fair and reasonable
allocations and engineering estimates made by Landlord.
Furthermore, if and to the extent that the
Operating-Costs-in-the-Base-Year figure shall include any
component representing the cost to the Landlord of electric
current supplied to any tenant's premises under so-called
"rent-inclusion" lease arrangements, then if such cost is
eliminated from Operating Costs in an Operating Year in
accordance with the foregoing provisions, the figure for
Operating Costs in the Base Year for the purposes of this Article
9 shall likewise be reduced by the amount for such cost
component.)
Insurance, etc.: Fire, casualty, liability and such
other insurance as may from time to time be required by lending
institutions on first-class office buildings in the City or Town
wherein the Building is located and all other expenses
customarily incurred in connection with the operation and
maintenance of first-class office buildings in the City or Town
wherein the Building is located including, without limitation, a
management fee payable by Landlord and rental costs associated
with the Park's management office.
9.2 TAX EXCESS. If in any Tax Period the Taxes exceed the Tax
Base, Tenant shall pay to Landlord Tenant's Proportionate Share of such
excess, such amount being hereinafter referred to as "Tax Excess." Tax Excess
shall be due when billed by Landlord. In implementation and not in limitation
of the foregoing, Tenant shall remit to Landlord pro rata monthly
installments on account of projected Tax Excess, calculated by Landlord on
the basis of the most recent Tax data available. If the total of such monthly
remittances on account of any Tax Period is greater than the actual Tax
Excess for such Tax Period, Tenant may credit the difference against the next
installment of rental or other charges due to Landlord hereunder. If the
total of such remittances is less than the actual Tax Excess for such Tax
Period, Tenant shall pay the difference to Landlord when billed therefor.
Appropriate credit against Tax Excess shall be given for any
refund obtained by reason of a reduction in any Taxes by the Assessors or the
administrative, judicial or other governmental agency responsible therefor.
The original computations, as well as reimbursement or payments of additional
charges, if any, or allowances, if any, under the provisions of this Article
9.2 shall be based on the original assessed valuations with adjustments to be
made at a later date when the tax refund, if any, shall be paid to
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Landlord by the taxing authorities. Expenditures for legal fees and for other
similar or dissimilar expenses incurred in obtaining the tax refund may be
charged against the tax refund before the adjustments are made for the Tax
Period.
9.3 OPERATING EXPENSE EXCESS. If the Operating Costs in any Operating
Year exceed the Operating Costs in the Base Year, Tenant shall pay to
Landlord Tenant's Proportionate Share of such excess, such amount being
hereinafter referred to as "Operating Expense Excess." Operating Expense
Excess shall be due when billed by Landlord. In implementation and not in
limitation of the foregoing, Tenant shall remit to Landlord pro rata monthly
installments on account of projected Operating Expense Excess, calculated by
Landlord on the basis of the most recent Operating Costs data or budget
available. If the total of such monthly remittances on account of any
Operating Year is greater than the actual Operating Expense Excess for such
Operating Year, Tenant may credit the difference against the next installment
of rent or other charges due to Landlord hereunder. If the total of such
remittances is less than actual Operating Expense Excess for such Operating
Year, Tenant shall pay the difference to Landlord when billed therefor.
9.4 PART YEARS. If the Term Commencement Date or the Termination Date
occurs in the middle of an Operating Year or Tax Period, Tenant shall be
liable for only that portion of the Operating Expense or Tax Excess, as the
case may be, in respect of such Operating Year or Tax Period represented by a
fraction the numerator of which is the number of days of the herein term
which falls within the Operating Year or Tax Period and the denominator of
which is three hundred sixty-five (365), or the number of days in said Tax
Period, as the case may be.
9.5 EFFECT OF TAKING. In the event of any taking of the Building or
the land upon which it stands under circumstances whereby this Lease shall
not terminate under the provisions of Article 20 then, for the purposes of
determining Tax Excess, there shall be substituted for the Tax Base
originally provided for herein a fraction of such Tax Base, the numerator of
which fraction shall be the Taxes for the first Tax Period subsequent to the
condemnation or taking which takes into account such condemnation or taking,
and the denominator of which shall be the Taxes for the last Tax Period prior
to the condemnation or taking, which did not take into account such
condemnation or taking. Tenant's Proportionate Share shall be adjusted
appropriately to reflect the proportion of the premises and/or the Building
remaining after such taking.
9.6 DISPUTES, ETC. Any disputes arising under this Article 9 may, at
the election of either party, be submitted to arbitration as hereinafter
provided. Any obligations under this Article 9 which shall not have been paid
at the expiration or sooner termination of the term of this Lease shall
survive such expiration and shall be paid when and as the amount of same
shall be determined to be due.
10. CHANGES OR ALTERATIONS BY LANDLORD
Landlord reserves the right, exercisable by itself or its nominee, at any
time and from time to time without the same constituting an actual or
constructive eviction and without incurring any liability to Tenant therefor
or otherwise affecting Tenant's obligations under this Lease, to make such
changes, alterations, additions, improvements, repairs or replacements in or
to (i) the Building (including the premises) and the fixtures and equipment
thereof, (ii) the street entrances, halls, passages, elevators, escalators,
and stairways of the Building, as it may deem necessary or desirable, and
(iii) the arrangement and/or location of entrances or passageways, doors and
doorways, and corridors, elevators, stairs, toilets, or other public parts of
the Building, or (iv) the parking and other common areas of the Park,
provided, however, that there be no unreasonable obstruction of the right of
access to, or unreasonable interference with the use and enjoyment of, the
premises by Tenant. Nothing contained in this Article 10 shall be deemed to
relieve Tenant of any duty, obligation or liability of Tenant with respect to
making any repair, replacement or improvement or complying with any law,
order or requirement of any governmental or
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other authority. Landlord reserves the right to adopt and at any time and
from time to time to change the name or address of the Building. Neither this
Lease nor any use by Tenant shall give Tenant any right or easement for the
use of any door or any passage or any concourse connecting with any other
building or to any public convenience, and the use of such doors, passages and
concourses and of such conveniences may be regulated or discontinued at any
time and from time to time by Landlord without notice to Tenant and without
affecting the obligation of Tenant hereunder or incurring any liability to
Tenant therefor, provided, however, that there be no unreasonable obstruction
of the right of access to, or unreasonable interference with the use of the
premises by Tenant.
If at any time any windows of the premises are temporarily closed or
darkened for any reason whatsoever including but not limited to, Landlord's
own acts, Landlord shall not be liable for any damage Tenant may sustain
thereby and Tenant shall not be entitled to any compensation therefor nor
abatements of rent nor shall the same release Tenant from its obligations
hereunder nor constitute an eviction.
11. FIXTURES, EQUIPMENT AND IMPROVEMENTS--REMOVAL BY TENANT
All fixtures, equipment, improvements and appurtenances attached to or
built into the premises prior to or during the term, whether by Landlord at
its expense or at the expense of Tenant (either or both) or by Tenant shall
be and remain part of the premises and shall not be removed by Tenant during
or at the end of the term unless Landlord otherwise elects to require Tenant
to remove such fixtures, equipment, improvements and appurtenances, in
accordance with Articles 12 and/or 22 of the Lease. All electric, telephone,
telegraph, communication, radio, plumbing, heating and sprinkling systems,
fixtures and outlets, vaults, paneling, molding, shelving, radiator
enclosures, cork, rubber, linoleum and composition floors, ventilating,
silencing, air conditioning and cooling equipment, shall be deemed to be
included in such fixtures, equipment, improvements and appurtenances, whether
or not attached to or built into the premises. Where not built into the
premises, all removable electric fixtures, carpets, drinking or tap water
facilities, furniture, or trade fixtures or business equipment or Tenant's
inventory or stock in trade shall not be deemed to be included in such
fixtures, equipment, improvements and appurtenances and may be, and upon the
request of Landlord will be, removed by Tenant upon the condition that such
removal shall not materially damage the premises or the Building and that the
cost of repairing any damage to the premises or the Building arising from
installation or such removal shall be paid by Tenant. If this Lease shall be
terminated by reason of Tenant's breach or default, then, notwithstanding
anything to the contrary in this Lease contained, Landlord shall have a lien
against all Tenant's property in the premises or elsewhere in the Building at
the time of such termination to secure Landlord's rights under Article 21
hereof. Tenant shall, within ten (10) days of Landlord's written request,
from time to time, execute and deliver to Landlord such documentation (e.g.,
UCC statements) as may be necessary to enable Landlord to perfect such lien.
12. ALTERATION AND IMPROVEMENTS BY TENANT
Tenant shall make no alterations, decorations, installations, removals,
additions or improvements in or to the premises without Landlord's prior
written consent and then only those (i) which equal or exceed the
specifications and quantities provided in Exhibit 3, and (ii) made by
contractors or mechanics approved by Landlord. No installations or work shall
be undertaken or begun by Tenant until: (i) Landlord has approved written
plans and specifications and a time schedule for such work; (ii) Tenant has
made provision for either written waivers of liens from all contractors,
laborers and suppliers of materials for such installations or work, the filing
of lien bonds on behalf of such contractors, laborers and suppliers, or other
appropriate protective measures approved by Landlord; and (iii) Tenant has
procured appropriate surety payment and performance bonds. No amendments or
additions to such plans and specifications shall be made without the prior
written consent of Landlord. Landlord's consent and approval required under
this Article 12 shall not be unreasonably withheld. Landlord's approval is
solely given for the benefit of Landlord and neither Tenant nor any third
party shall have the right to rely upon Landlord's approval of Tenant's plans
for any purpose whatsoever. Without limiting the foregoing, Tenant shall be
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responsible for all elements of the design of Tenant's plans (including,
without limitation, compliance with law, functionality of design, the
structural integrity of the design, the configuration of the premises and the
placement of Tenant's furniture, appliances and equipment), and Landlord's
approval of Tenant's plans shall in no event relieve Tenant of the
responsibility for such design. Landlord shall have no liability or
responsibility for any claim, injury or damage alleged to have been caused by
the particular materials, whether building standard or non-building standard,
appliances or equipment selected by Tenant in connection with any work
performed by or on behalf of Tenant in the premises including, without
limitation, furniture, carpeting, copiers, laser printers, computers and
refrigerators. Any such work, alterations, decorations, installations,
removals, additions and improvements shall be done at Tenant's sole expense
and at such times and in such manner as Landlord may from time to time
designate. If Tenant shall make any alterations, decorations, installations,
removals, additions or improvements then Landlord may elect to require the
Tenant at the expiration or sooner termination of the term of this Lease to
restore the premises to substantially the same condition as existed at the
Term Commencement Date. Tenant shall pay, as an additional charge, the entire
increase in real estate taxes on the Building which shall, at any time prior
to or after the Term Commencement Date, result from or be attributable to
any alteration, addition or improvement to the premises made by or for the
account of Tenant in excess of the specifications and quantities provided in
Exhibit 3.
13. TENANT'S CONTRACTORS--MECHANICS' AND OTHER LIENS--STANDARD OF TENANT'S
PERFORMANCE--COMPLIANCE WITH LAWS
Whenever Tenant shall make any alterations, decorations, installations,
removals, additions or improvements in or to the premises--whether such work
be done prior to or after the Term Commencement Date--Tenant will strictly
observe the following covenants and agreements:
(a) Tenant agrees that it will not, either directly or
indirectly, use any contractors and/or materials if their use will create any
difficulty, whether in the nature of a labor dispute or otherwise, with other
contractors and/or labor engaged by Tenant or Landlord or others in the
construction, maintenance and/or operation of the Building or any part
thereof.
(b) In no event shall any material or equipment be incorporated
in or added to the premises, so as to become a fixture or otherwise a part of
the Building, in connection with any such alteration, decoration,
installation, addition or improvement which is subject to any lien, charge,
mortgage or other encumbrance of any kind whatsoever or is subject to any
security interest or any form of title retention agreement. No installations
or work shall be undertaken or begun by Tenant until (i) Tenant has made
provision for written waiver of liens from all contractors, laborers and
suppliers of materials for such installations or work, and taken other
appropriate protective measures approved by Landlord; and (ii) Tenant has
procured appropriate surety payment and performance bonds which shall name
Landlord as an additional obligee and has filed lien bonds(s) (in
jurisdictions where available) on behalf of such contractors, laborers and
suppliers. Any mechanic's lien filed against the premises or the Building for
work claimed to have been done for, or materials claimed to have been
furnished to, Tenant shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's expense by filing the bond required by law or
otherwise. If Tenant fails so to discharge any lien, Landlord may do so at
Tenant's expense and Tenant shall reimburse Landlord for any expense or cost
incurred by Landlord in so doing with fifteen (15) days after rendition of a
bill therefor.
(c) All installations or work done by Tenant shall be at its own
expense and shall at all times comply with (i) laws, rules, orders and
regulations of governmental authorities having jurisdiction thereof; (ii)
orders, rules and regulations of any Board of Fire Underwriters, or any other
body hereafter constituted exercising similar functions, and governing
insurance rating bureaus; (iii) Rules and Regulations of Landlord; and (iv)
plans and specifications prepared by and at the expense of Tenant theretofore
submitted to and approved by Landlord.
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(d) Tenant shall procure all necessary permits before
undertaking any work in the premises; do all of such work in a good and
workmanlike manner, employing materials of good quality and complying with
all governmental requirements; and defend, save harmless, exonerate and
indemnify Landlord from all injury, loss or damage to any person or property
occasioned by or growing out of such work. Tenant shall cause contractors
employed by Tenant to carry Worker's Compensation Insurance in accordance
with statutory requirements, Automobile Liability Insurance and, naming
Landlord as an additional insured, Commercial General Liability Insurance
covering such contractors on or about the premises in the amounts stated in
Article 15 hereof or in such other reasonable amounts as Landlord shall
require and to submit certificates evidencing such coverage to Landlord prior
to the commencement of such work.
14. REPAIRS BY TENANT--FLOOR LOAD
14.1 REPAIRS BY TENANT. Tenant shall keep all and singular the premises
neat and clean (including periodic rug shampoo and waxing of tiled floors and
cleaning of blinds and drapes) and in such repair, order and condition as the
same are in on the Term Commencement Date or may be put in during the term
hereof, reasonable use and wearing thereof and damage by fire or by other
casualty excepted. Tenant shall be solely responsible for the proper
maintenance of all equipment and appliances operated by Tenant, including,
without limitation, copiers, laser printers, computers and refrigerators.
Tenant shall make, as and when needed as a result of misuse by, or neglect or
improper conduct of, Tenant or Tenant's servants, employees, agents,
contractors, invitees, or licensees or otherwise, all repairs in and about
the premises necessary to preserve them in such repair, order and condition,
which repairs shall be in quality and class equal to the original work.
Landlord may elect, at the expense of Tenant, to make any such repairs or to
repair any damage or injury to the Building or the premises caused by moving
property of Tenant in or out of the Building, or by installation or removal
of furniture or other property, or by misuse by, or neglect, or improper
conduct of, Tenant or Tenant's servants, employees, agents, contractors, or
licensees.
14.2 FLOOR LOAD--HEAVY MACHINERY. Tenant shall not place a load upon
any floor of the premises exceeding the floor load per square foot of area
which such floor was designed to carry and which is allowed by law. Landlord
reserves the right to prescribe the weight and position of all business
machines and mechanical equipment, including safes, which shall be placed so
as to distribute the weight. Business machines and mechanical equipment shall
be placed and maintained by Tenant at Tenant's expense in settings sufficient
in Landlord's judgment to absorb and prevent vibration, noise and annoyance.
Tenant shall not move any safe, heavy machinery, heavy equipment, freight,
bulky matter, or fixtures into or out of the Building without Landlord's
prior written consent. If such safe, machinery, equipment, freight, bulky
matter or fixtures requires special handling, Tenant agrees to employ only
persons holding a Master Rigger's License to do said work, and that all work
in connection therewith shall comply with applicable laws and regulations. Any
such moving shall be at the sole risk and hazard of Tenant and Tenant will
defend, indemnify and save Landlord harmless against and from any liability,
loss, injury, claim or suit resulting directly or indirectly from such
moving. Proper placement of all such business machines, etc., in the premises
shall be Tenant's responsibility.
15. INSURANCE, INDEMNIFICATION, EXONERATION AND EXCULPATION
15.1 GENERAL LIABILITY INSURANCE. Tenant shall procure, and keep in
force and pay for Commercial General Liability Insurance insuring Tenant on
an occurrence basis against all claims and demands for personal injury
liability (including, without limitation, bodily injury, sickness, disease,
and death) or damage to property which may be claimed to have occurred from
and after the time Tenant and/or its contractors enter the premises in
accordance with Article 4 of this Lease, of not less than Two Million
($2,000,000) Dollars in the event of personal injury to any number of persons
or damage to
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property, arising out of any one occurrence, and from time to time thereafter
shall be not less than such higher amounts, if procurable, as may be
reasonably required by Landlord and are customarily carried by responsible
similar tenants in the City or Town wherein the Building is located.
15.2 CERTIFICATES OF INSURANCE. Such insurance shall be effected with
insurers approved by Landlord, authorized to do business in the State wherein
the Building is situated under valid and enforceable policies wherein Tenant
names Landlord and Landlord's managing agent as additional insureds. Such
insurance shall provide that it shall not be canceled or modified without at
least thirty (30) days' prior written notice to each insured named therein. On
or before the time Tenant and/or its contractors enter the premises in
accordance with Articles 4 and 14 of this Lease and thereafter not less than
fifteen (15) days prior to the expiration date of each expiring policy,
original copies of the policies provided for in Article 15.1 issued by the
respective insurers, or certificates of such policies setting forth in full
the provisions thereof and issued by such insurers together with evidence
satisfactory to Landlord of the payment of all premiums for such policies,
shall be delivered by Tenant to Landlord and certificates as aforesaid of
such policies shall upon request of Landlord, be delivered by Tenant to the
holder of any mortgage affecting the premises.
15.3 GENERAL. Tenant will save Landlord, its agents and employees,
harmless and will exonerate, defend and indemnify Landlord, its agents and
employees, from and against any and all claims, liabilities or penalties
asserted by or on behalf of any person, firm, corporation or public authority
arising from the Tenant's breach of the Lease or:
(a) On account of or based upon any injury to person, or loss of
or damage to property, sustained or occurring on the premises on account of
or based upon the act, omission, fault, negligence or misconduct of any
person whomsoever (except to the extent the same is caused by Landlord, its
agents, contractors or employees);
(b) On account of or based upon any injury to person, or loss of
or damage to property, sustained or occurring elsewhere (other than on the
premises) in or about the Building (and, in particular, without limiting the
generality of the foregoing, on or about the elevators, stairways, public
corridors, sidewalks, concourses, arcades, malls, galleries, vehicular
tunnels, approaches, areaways, roof, or other appurtenances and facilities
used in connection with the Building or premises) arising out of the use or
occupancy of the Building or premises by the Tenant, or by any person
claiming by, through or under Tenant, or on account of or based upon the act,
omission, fault, negligence or misconduct of Tenant, its agents, employees or
contractors; and
(c) On account of or based upon (including monies due on account
of) any work or thing whatsoever done (other than by Landlord or its
contractors, or agents or employees of either) on the premises during the
term of this Lease and during the period of time, if any, prior to the Term
Commencement Date that Tenant may have been given access to the premises.
(d) Tenant's obligations under this Article 15.3 shall be
insured either under the Commercial General Liability Insurance required
under Article 15.1, above, or by a contractual insurance rider or other
coverage; and certificates of insurance in respect thereof shall be provided
by Tenant to Landlord upon request.
15.4 PROPERTY OF TENANT. In addition to and not in limitation of the
foregoing, Tenant covenants and agrees that, to the maximum extent permitted
by law, all merchandise, furniture, fixtures and property of every kind,
nature and description related or arising out of Tenant's leasehold estate
hereunder, which may be in or upon the premises or Building, in the public
corridors, or on the sidewalks, areaways and approaches adjacent thereto,
shall be at the sole risk and hazard of Tenant, and that if the whole or any
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part thereof shall be damaged, destroyed, stolen or removed from any cause or
reason whatsoever no part of said damage or loss shall be charged to, or
borne by, Landlord.
15.5 BURSTING OF PIPES, ETC. Landlord shall not be liable for any
injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, air contaminants or emissions, electricity,
electrical or electronic emanations or disturbance, water, rain or snow or
leaks from any part of the Building or from the pipes, appliances, equipment
or plumbing works or from the roof, street or sub-surface or from any other
place or caused by dampness, vandalism, malicious mischief or by any other
cause of whatever nature, unless caused by or due to the negligence of
Landlord, its agents, servants or employees, and then only after (i) notice
to Landlord of the condition claimed to constitute negligence and (ii) the
expiration of a reasonable time after such notice has been received by
Landlord without Landlord having taken all reasonable and practicable means
to cure or correct such condition; and pending such cure or correction by
Landlord, Tenant shall take all reasonably prudent temporary measures and
safeguards to prevent any injury, loss or damage to persons or property. In
no event shall Landlord be liable for any loss, the risk of which is covered
by Tenant's insurance or is required to be so covered by this Lease; nor
shall Landlord or its agents be liable for any such damage caused by other
tenants or persons in the Building or caused by operations in construction of
any private, public, or quasi-public work; nor shall Landlord be liable for
any latent defect in the premises or in the Building.
15.6 REPAIRS AND ALTERATIONS--NO DIMINUTION OF RENTAL VALUE. Except as
otherwise provided in Article 18, there shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Landlord by reason
of inconvenience, annoyance or injury to Tenant arising from any repairs,
alterations, additions, replacements or improvements made by Landlord, Tenant
or others in or to any portion of the Building or premises or any property
adjoining the Building, or in or to fixtures, appurtenances, or equipment
thereof, or for failure of Landlord or others to make any repairs,
alterations, additions or improvements in or to any portion of the Building,
or of the premises, or in or to the fixtures, appurtenances or equipment
thereof.
16. ASSIGNMENT, MORTGAGING AND SUBLETTING
Tenant covenants and agrees that neither this Lease nor the term and
estate hereby granted, nor any interest herein or therein, will be assigned,
mortgaged, pledged, encumbered or otherwise transferred, voluntarily, by
operation of law or otherwise, and that neither the premises, nor any part
thereof will be encumbered in any manner by reason of any act or omission on
the part of Tenant, or used or occupied, or permitted to be used or occupied,
or utilized for desk space or for mailing privileges, by anyone other than
Tenant, or for any use or purpose other than as stated in Exhibit 1, or be
sublet, or offered or advertised for subletting. Notwithstanding the
foregoing, it is hereby expressly understood and agreed however, if Tenant is
a corporation, that the assignment or transfer of this Lease, and the term
and estate hereby granted, to any corporation into which Tenant is merged or
with which Tenant is consolidated which corporation shall have a net worth at
least equal to that of Tenant immediately prior to such merger or
consolidation (such corporation being hereinafter called "Assignee"), shall
not be deemed to be prohibited hereby if, and upon the express condition that
Assignee and Tenant shall promptly execute, acknowledge and deliver to
Landlord an agreement in form and substance satisfactory to Landlord whereby
Assignee shall agree to be independently bound by and upon all the covenants,
agreements, terms, provisions and conditions set forth in this Lease on the
part of Tenant to be performed, and whereby Assignee shall expressly agree
that the provisions of this Article 16 shall, notwithstanding such assignment
or transfer, continue to be binding upon it with respect to all future
assignments and transfers.
If Tenant is an individual who uses and/or occupies the premises with
partners, or if Tenant is a partnership, then:
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(i) Each present and future partner shall be personally bound by
and upon all of the covenants, agreements, terms, provisions and conditions
set forth in this Lease on the part of Tenant to be performed; and
(ii) In confirmation of the foregoing, Landlord may (but without
being required to do so) request (and Tenant shall duly comply) that Tenant,
at the time that Tenant admits any new partner to its partnership, shall
require each such new partner to execute an agreement in form and substance
satisfactory to Landlord whereby such new partner shall agree to be personally
bound by and upon all of the covenants, agreements, terms, provisions and
conditions of this Lease on the part of Tenant to be performed, without regard
to the time when such new partner is admitted to partnership or when any
obligations under any such covenants, etc., accrue.
The listing of any name other than that of Tenant, whether on the doors
of the premises or on the Building directory, or otherwise, shall not operate
to vest in any such other person, firm or corporation any right or interest
in this Lease or in the premises or be deemed to effect or evidence any consent
of Landlord, it being expressly understood that any such listing is a
privilege extended by Landlord revocable at will by written notice to Tenant.
If this Lease be assigned, or if the premises or any part thereof be
sublet or occupied by anybody other than Tenant, Landlord may, at any time and
from time to time, collect rent and other charges from the assignee,
subtenant or occupant, and apply the net amount collected to the rent and
other charges herein reserved then due and thereafter becoming due, but no
such assignment, subletting, occupancy or collection shall be deemed a waiver
of this covenant, or the acceptance of the assignee, subtenant or occupant as
a tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. Any consent by Landlord to
a particular assignment or subletting shall not in any way diminish the
prohibition stated in the first sentence of this Article 16 or the continuing
liability of the Tenant named on Exhibit 1 as the party Tenant under this
Lease. No assignment or subletting shall affect the purpose for which the
premises may be used as stated in Exhibit 1.
17. MISCELLANEOUS COVENANTS
Tenant covenants and agrees as follows:
17.1 RULES AND REGULATIONS. Tenant will faithfully observe and comply
with the Rules and Regulations, if any, annexed hereto and such other and
further reasonable Rules and Regulations as Landlord hereafter at any time or
from time to time may make and may communicate in writing to Tenant, which in
the reasonable judgment of Landlord shall be necessary for the reputation,
safety, care or appearance of the Building, or the preservation of good order
therein, or the operation or maintenance of the Building, or the equipment
thereof, or the comfort of tenants or others in the Building, provided,
however, that in the case of any conflict between the provisions of this
Lease and any such regulations, the provisions of this Lease shall control,
and provided further that nothing contained in this Lease shall be construed
to impose upon Landlord any duty or obligation to enforce the Rules and
Regulations or the terms, covenants or conditions in any other lease as
against any other tenant and Landlord shall not be liable to Tenant for
violation of the same by any other tenant, its servants, employees, agents,
contractors, visitors, invitees or licensees.
17.2 ACCESS TO PREMISES--SHORING. Tenant shall: (i) permit Landlord to
erect, use and maintain pipes, ducts and conduits in and through the
premises, provided the same do not materially reduce the floor area or
materially adversely affect the appearance thereof; (ii) upon prior oral
notice (except that no notice shall be required in emergency situations),
permit Landlord and any mortgagee of the Building or the Building and land or
of the interest of Landlord therein, and any lessor under any ground or
underlying lease, and their representatives, to have free and unrestricted
access to and to enter upon the premises at all
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reasonable hours for the purposes of inspection or of making repairs,
replacements or improvements in or to the premises or the Building or
equipment (including, without limitation, sanitary, electrical, heating, air
conditioning or other systems) or of complying with all laws, orders and
requirements of governmental or other authority or of exercising any right
reserved to Landlord by this Lease (including the right during the progress
of any such repairs, replacements or improvements or while performing work
and furnishing materials in connection with compliance with any such laws,
orders or requirements to take upon or through, or to keep and store within,
the premises all necessary materials, tools and equipment); and (iii) permit
Landlord, at reasonable times, to show the premises during ordinary business
hours to any existing or prospective mortgagee, ground lessor, space lessee,
purchaser, or assignee of any mortgage, of the Building or of the Building
and the land or of the interest of Landlord therein, and during the period of
12 months next preceding the Termination Date to any person contemplating
the leasing of the premises or any part thereof. If, during the last month of
the term, Tenant shall have removed all or substantially all of Tenant's
property therefrom, Landlord may immediately enter and alter, renovate and
redecorate the premises, without elimination or abatement of rent, or
incurring liability to Tenant for any compensation, and such acts shall have
no effect upon this Lease. If Tenant shall not be personally present to open
and permit an entry into the premises at any time when for any reason an
entry therein shall be necessary or permissible, Landlord or Landlord's
agents may enter the same by a master key, or may forcibly enter the same,
without rendering Landlord or such agents liable therefor (if during such entry
Landlord or Landlord's agents shall accord reasonable care to Tenant's
property), and without in any manner affecting the obligations and covenants
of this Lease. Provided that Landlord shall incur no additional expense
thereby, Landlord shall exercise its rights of access to the premises
permitted under any of the terms and provisions of this Lease in such manner
as to minimize to the extent practicable interference with Tenant's use and
occupation of the premises. If an excavation shall be made upon land adjacent
to the premises or shall be authorized to be made, Tenant shall afford to the
person causing or authorized to cause such excavation, license to enter upon
the premises for the purpose of doing such work as said person shall deem
necessary to preserve the Building from injury or damage and to support the
same by proper foundations without any claims for damages or indemnity
against Landlord, or diminution or abatement of rent.
17.3 ACCIDENTS TO SANITARY AND OTHER SYSTEMS. Tenant shall give to
Landlord prompt notice of any fire or accident in the premises or in the
Building and of any damage to, or defective condition in, any part or
appurtenance of the Building including, without limitation, sanitary,
electrical, ventilation, heating and air conditioning or other systems
located in, or passing through, the premises. Except as otherwise provided in
Articles 18 and 20, and subject to Tenant's obligations in Article 14, such
damage or defective condition shall be remedied by Landlord with reasonable
diligence, but if such damage or defective condition was caused by Tenant or
by the employees, licensees, contractors or invitees of Tenant, the cost to
remedy the same shall be paid by Tenant. In addition, all reasonable costs
incurred by Landlord in connection with the investigation of any notice
given by Tenant shall be paid by Tenant if the reported damage or defective
condition was caused by Tenant or by the employees, licensees, contractors,
or invitees of Tenant. Tenant shall not be entitled to claim any eviction
from the premises or any damages arising from any such damage or defect
unless the same (i) shall have been occasioned by the negligence of the
Landlord, its agents, servants or employees and (ii) shall not, after notice
to Landlord of the condition claimed to constitute negligence, have been
cured or corrected within a reasonable time after such notice has been
received by Landlord; and in case of a claim of eviction unless such damage
or defective condition shall have rendered the premises untenantable and they
shall not have been made tenantable by Landlord within a reasonable time.
17.4 SIGNS, BLINDS AND DRAPES. Tenant shall put no signs in any part of
the Building. No signs or blinds may be put on or in any window or elsewhere
if visible from the exterior of the Building, nor may the building standard
drapes or blinds be removed by Tenant. Tenant may hang its own drapes,
provided that they shall not in any way interfere with the building standard
drapery or blinds or be visible from the exterior of the Building and that
such drapes are so hung and installed that when drawn, the
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building standard drapery or blinds are automatically also drawn. Any signs
or lettering in the public corridors or on the doors shall conform to
Landlord's building standard design. Neither Landlord's name, nor the name of
the Building or the Park, or the name of any other structure erected therein
shall be used without Landlord's consent in any advertising material (except
on business stationery or as an address in advertising matter), nor shall any
such name, as aforesaid, be used in any undignified, confusing, detrimental
or misleading manner.
17.5 ESTOPPEL CERTIFICATE. Tenant shall at any time and from time to
time upon not less than ten (10) days' prior notice by Landlord to Tenant,
execute, acknowledge and deliver to Landlord a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), and the dates to which the Yearly
Rent and other charges have been paid in advance, if any, stating whether or
not Landlord is in default in performance of any covenant, agreement, term,
provision or condition contained in this Lease and, if so, specifying each
such default and such other facts as Landlord may reasonably request, it
being intended that any such statement delivered pursuant hereto may be
relied upon by any prospective purchaser of the Building or of the Building
and the land or of any interest of Landlord therein, any mortgagee or
prospective mortgagee thereof, any lessor or prospective lessor thereof, any
lessee or prospective lessee thereof, or any prospective assignee of any
mortgage thereof. Time is of the essence in respect of any such requested
certificate, Tenant hereby acknowledging the importance of such certificates
in mortgage financing arrangements, prospective sale and the like. Tenant
hereby appoints Landlord Tenant's attorney-in-fact in its name and behalf to
execute such statement if Tenant shall fail to execute such statement within
such ten-(10)-day period.
17.6 PROHIBITED MATERIALS AND PROPERTY. Tenant shall not bring or
permit to be brought or kept in or on the premises or elsewhere in the
Building (i) any inflammable, combustible or explosive fluid, material,
chemical or substance including, without limitation, any hazardous substances
as defined under Massachusetts General Laws chapter 21E, the Federal
Comprehensive Environmental Response Compensation and Liability Act (CERCLA),
42 USC Section 9601 ET SEQ., as amended, under Section 3001 of the Federal
Resource Conservation and Recovery Act of 1976, as amended, or under any
regulation of any governmental authority regulating environmental or health
matters (except for standard office supplies stored in proper containers),
(ii) any materials, appliances or equipment (including, without limitation,
materials, appliances and equipment selected by Tenant for the construction
or other preparation of the premises and furniture and carpeting) which pose
any danger to life, safety or health or may cause damage, injury or death;
(iii) any unique, unusually valuable, rare or exotic property, work of art or
the like unless the same is fully insured under all-risk coverage, or (iv)
any data processing, electronic, optical or other equipment or property of a
delicate, fragile or vulnerable nature unless the same are housed, shielded
and protected against harm and damage, whether by cleaning or maintenance
personnel, radiations or emanations from other equipment now or hereafter
installed in the Building, or otherwise. Nor shall Tenant cause or permit any
potentially harmful air emissions, odors of cooking or other processes, or
any unusual or other objectionable odors or emissions to emanate from or
permeate the premises.
17.7. REQUIREMENTS OF LAW--FINES AND PENALTIES. Tenant at its sole
expense shall comply with all laws, rules, orders and regulations, including,
without limitation, all energy-related requirements, of Federal, State,
County and Municipal Authorities and with any direction of any public officer
or officers, pursuant to law, which shall impose any duty upon Landlord or
Tenant with respect to or arising out of Tenant's use or occupancy of the
premises. Tenant shall reimburse and compensate Landlord for all expenditures
made by, or damages or fines sustained or incurred by, Landlord due to
nonperformance or noncompliance with or breach or failure to observe any
item, covenant, or condition of this Lease upon Tenant's part to be kept,
observed, performed or complied with. If Tenant receives notice of any
violation of law, ordinance, order or regulation applicable to the premises,
it shall give prompt notice thereof to Landlord.
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17.8 TENANT'S ACTS--EFFECT ON INSURANCE. Tenant shall not do or permit
to be done any act or thing upon the premises or elsewhere in the Building
which will invalidate or be in conflict with any insurance policies covering
the Building and the fixtures and property therein; and shall not do, or
permit to be done, any act or thing upon the premises which shall subject
Landlord to any liability or responsibility for injury to any person or
persons or to property by reason of any business or operation being carried
on upon said premises or for any other reason. Tenant at its own expense
shall comply with all rules, orders, regulations and requirements of the
Board of Fire Underwriters, or any other similar body having jurisdiction,
and shall not (i) do, or permit anything to be done, in or upon the premises,
or bring or keep anything therein, except as now or hereafter permitted by
the Fire Department, Board of Underwriters, Fire Insurance Rating
Organization, or other authority having jurisdiction, and then only in such
quantity and manner of storage as will not increase the rate for any
insurance applicable to the Building, or (ii) use the premises in a manner
which shall increase such insurance rates on the Building, or on property
located therein, over that applicable when Tenant first took occupancy of the
premises hereunder. If by reason of the failure of Tenant to comply with the
provisions hereof the insurance rate applicable to any policy of insurance
shall at any time thereafter be higher than it otherwise would be, the Tenant
shall reimburse Landlord for that part of any insurance premiums thereafter
paid by Landlord, which shall have been charged because of such failure by
Tenant.
17.9 MISCELLANEOUS. Tenant shall not suffer or permit the premises or
any fixtures, equipment or utilities therein or serving the same, to be
overloaded, damaged or defaced, nor permit any hole to be drilled or made in
any part thereof. Tenant shall not suffer or permit any employee, contractor,
business invitee or visitor to violate any covenant, agreement or obligations
of the Tenant under this Lease.
18. DAMAGE BY FIRE, ETC.
During the entire term of this Lease, and adjusting insurance coverages
to reflect current values from time to time:--(i) Landlord shall keep the
Building (excluding work, installations, improvements and betterments in the
premises which exceed the specifications provided in Exhibit 3,
[called "Over-Building-Standard Property"] and any other property installed
by or at the expense of Tenant) insured against loss or damage caused by any
peril covered under fire, extended coverage and all risk insurance in an
amount equal to one hundred percent (100%) of the full insurable value
thereof above foundation walls; and (ii) Tenant shall keep its personal
property in and about the premises and the Over-Building-Standard Property
insured against loss or damage caused by any peril covered under fire,
extended coverage and all risk insurance in an amount equal to one hundred
percent (100%) of the full insurable value thereof. Such Tenant's insurance
shall insure the interests of both Landlord and Tenant as their respective
interests may appear from time to time and shall name Landlord as an
additional insured; and the proceeds thereof shall be used only for the
replacement or restoration of such personal property and the
Over-Building-Standard Property.
If any portion of the premises required to be insured by Landlord under
the preceding paragraph shall be damaged by fire or other insured casualty,
Landlord shall proceed with diligence, subject to the then applicable
statutes, building codes, zoning ordinances, and regulations of any
governmental authority, and at the expense of Landlord (but only to the
extent of insurance proceeds made available to Landlord by any mortgagee
and/or ground lessor of the real property of which the premises are a part)
to repair or cause to be repaired such damage, provided, however, in respect
of any Over-Building Standard Property as shall have been damaged by such
fire or other casualty and which (in the judgment of Landlord) can more
effectively be repaired as an integral part of Landlord's repair work on the
premises, that such repairs to such Tenant's alterations, decorations,
additions and improvements shall be performed by Landlord but at Tenant's
expense; in all other respects, all repairs to and replacements of Tenant's
property and Over-Building-Standard Property shall be made by and at the
expense of Tenant. If the premises or any part thereof shall have been
rendered unfit for use and occupation hereunder by reason of such damage the
Yearly Rent or a just and proportionate part thereof, according to the nature
and extent to which the
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premises shall have been so rendered unfit, shall be suspended or abated
until the premises (except as to the property which is to be repaired by or
at the expense of Tenant) shall have been restored as nearly as practicably
may be to the condition in which they were immediately prior to such fire or
other casualty, provided, however, that if Landlord or any mortgagee of the
Building or of the Building and the land shall be unable to collect the
insurance proceeds (including rent insurance proceeds) applicable to such
damage because of some action or inaction on the part of Tenant, or the
employees, licensees or invitees of Tenant, the cost of repairing such damage
shall be paid by Tenant and there shall be no abatement of rent. Landlord
shall not be liable for delays in the making of any such repairs which are
due to government regulation, casualties and strikes, unavailability of labor
and materials, and other causes beyond the reasonable control of Landlord,
nor shall Landlord be liable for any inconvenience or annoyance to Tenant or
injury to the business of Tenant resulting from delays in repairing such
damage. If (i) the premises are so damaged by fire or other casualty (whether
or not insured) at any time during the last thirty months of the term hereof
that the cost to repair such damage is reasonably estimated to exceed one
third of the total Yearly Rent payable hereunder for the period from the
estimated date of restoration until the Termination Date, or (ii) the
Building (whether or not including any portion of the premises) is so damaged
by fire or other casualty (whether or not insured) that substantial
alteration or reconstruction or demolition of the Building shall in
Landlord's judgment be required, then and in either of such events, this
Lease and the term hereof may be terminated at the election of Landlord by a
notice in writing of its election so to terminate which shall be given by
Landlord to Tenant within sixty (60) days following such fire or other
casualty, the effective termination date of which shall be not less than
thirty (30) days after the day on which such termination notice is received
by Tenant. In the event of any termination, this Lease and the term hereof
shall expire as of such effective termination date as though that were the
Termination Date as stated in Exhibit 1 and the Yearly Rent shall be
apportioned as of such date; and if the premises or any part thereof shall
have been rendered unfit for use and occupation by reason of such damage the
Yearly Rent for the period from the date of the fire or other casualty to the
effective termination date, or a just and proportionate part thereof,
according to the nature and extent to which the premises shall have been so
rendered unfit, shall be abated.
19. WAIVER OF SUBROGATION
In any case in which Tenant shall be obligated to pay to Landlord any
loss, cost, damage, liability or expense suffered or incurred by Landlord,
Landlord shall allow to Tenant as an offset against the amount thereof (i)
the net proceeds of any insurance collected by Landlord for or on account of
such loss, cost, damage, liability or expense, provided that the allowance of
such offset does not invalidate or prejudice the policy or policies under
which such proceeds were payable, and (ii) if such loss, cost, damage,
liability or expense shall have been caused by a peril against which Landlord
has agreed to procure insurance coverage under the terms of this Lease, the
amount of such insurance coverage, whether or not actually procured by
Landlord.
In any case in which Landlord or Landlord's managing agent shall be
obligated to pay to Tenant any loss, cost, damage, liability or expense
suffered or incurred by Tenant, Tenant shall allow to Landlord or Landlord's
managing agent, as the case may be, as an offset against the amount thereof
(i) the net proceeds of any insurance collected by Tenant for or on account
of such loss, cost, damage, liability, or expense, provided that the
allowance of such offset does not invalidate the policy or policies under
which such proceeds were payable and (ii) the amount of any loss, cost,
damage, liability or expense caused by a peril covered by fire insurance with
the broadest form of property insurance generally available on property in
buildings of the type of the Building, whether or not actually procured by
Tenant.
The parties hereto shall each procure an appropriate clause in, or
endorsement on, any property insurance policy covering the premises and the
Building and personal property, fixtures and equipment located thereon and
therein, pursuant to which the insurance companies waive subrogation or
consent to a waiver of right of recovery in favor of either party, its
respective agents or employees. Having obtained
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such clauses and/or endorsements, each party hereby agrees that it will not
make any claim against or seek to recover from the other or its agents or
employees for any loss or damage to its property or the property of others
resulting from fire or other perils covered by such property insurance.
20. CONDEMNATION - EMINENT DOMAIN
In the event that the premises or any part thereof, or the whole or any
part of the Building, shall be taken or appropriated by eminent domain or
shall be condemned for any public or quasi-public use, or (by virtue of any
such taking, appropriation or condemnation) shall suffer any damage (direct,
indirect or consequential) for which Landlord or Tenant shall be entitled to
compensation, then (and in any such event) this Lease and the term hereof may
be terminated at the election of Landlord by a notice in writing of its
election so to terminate which shall be given by Landlord to Tenant within
sixty (60) days following the date on which Landlord shall have received
notice of such taking, appropriation or condemnation. In the event that a
substantial part of the premises or of the means of access thereto shall be
so taken, appropriated or condemned, then (and in any such event) this Lease
and the term hereof may be terminated at the election of Tenant by a notice
in writing of its election so to terminate which shall be given by Tenant to
Landlord within sixty (60) days following the date on which Tenant shall have
received notice of such taking, appropriation or condemnation.
Upon the giving of any such notice of termination (either by Landlord or
Tenant) this Lease and the term hereof shall terminate on or retroactively as
of the date on which Tenant shall be required to vacate any part of the
premises or shall be deprived of a substantial part of the means of access
thereto, provided, however, that Landlord may in Landlord's notice elect to
terminate this Lease and the term hereof retroactively as of the date on which
such taking, appropriation or condemnation became legally effective. In the
event of any such termination, this Lease and the term hereof shall expire as
of such effective termination date as though that were the Termination Date as
stated in Exhibit 1, and the Yearly Rent shall be apportioned as of such date.
If neither party (having the right so to do) elects to terminate Landlord
will, with reasonable diligence and at Landlord's expense, restore the
remainder of the premises, or the remainder of the means of access, as
nearly as practicably may be to the same condition as obtained prior to such
taking, appropriation or condemnation in which event (i) the Total Rentable
Area shall be equitably adjusted, (ii) a just proportion of the Yearly Rent,
according to the nature and extent of the taking, appropriation or
condemnation and the resulting permanent injury to the premises and the means
of access thereto, shall be permanently abated, and (iii) a just proportion
of the remainder of the Yearly Rent, according to the nature and extent of
the taking, appropriation or condemnation and the resultant injury sustained
by the premises and the means of access thereto, shall be abated until what
remains of the premises and the means of access thereto shall have been
restored as fully as may be for permanent use and occupation by Tenant
hereunder. Except for any award specifically reimbursing Tenant for moving or
relocation expenses, there are expressly reserved to Landlord all rights to
compensation and damages created, accrued or accruing by reason of any such
taking, appropriation or condemnation, in implementation and in confirmation
of which Tenant does hereby acknowledge that Landlord shall be entitled to
receive all such compensation and damages, grant to Landlord all and whatever
rights (if any) Tenant may have to such compensation and damages, and agree
to execute and deliver all and whatever further instruments of assignment as
Landlord may from time to time request. In the event of any taking of the
premises or any part thereof for temporary (i.e., not in excess of one (1)
year) use, (i) this Lease shall be and remain unaffected thereby, and (ii)
Tenant shall be entitled to receive for itself any award made to the extent
allocable to the premises in respect of such taking on account of such use,
provided, that if any taking is for a period extending beyond the term of this
Lease, such award shall be apportioned between Landlord and Tenant as of the
Termination Date or earlier termination of this Lease.
21. DEFAULT
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21.1 CONDITIONS OF LIMITATION - RE-ENTRY - TERMINATION. This Lease and
the herein term and estate are, upon the condition that if (a) subject to
Article 21.7, Tenant shall neglect or fail to perform or observe any of the
Tenant's covenants or agreements herein, including (without limitation) the
covenants or agreements with regard to the payment when due of rent,
additional charges, reimbursement for increase in Landlord's costs, or any
other charge payable by Tenant to Landlord (all of which shall be considered
as part of Yearly Rent for the purposes of invoking Landlord's statutory or
other rights and remedies in respect of payment defaults); or (b) Tenant
shall desert or abandon the premises or the same shall become, or shall
appear to have become, vacant (whether or not the keys shall have been
surrendered or the rent shall have been paid); or (c) Tenant shall be
involved in financial difficulties as evidenced by an admission in writing by
Tenant of Tenant's inability to pay its debts generally as they become due, or
by the making or offering to make a composition of its debts with its
creditors; or (d) Tenant shall make an assignment or trust mortgage, or other
conveyance or transfer of like nature, of all or a substantial part of its
property for the benefit of its creditors, or (e) an attachment on mesne
process, on execution or otherwise, or other legal process shall issue
against Tenant or its property and a sale of any of its assets shall be held
thereunder; or (f) any judgment, final beyond appeal or any lien, attachment
or the like shall be entered, recorded or filed against Tenant in any court,
registry, etc. and Tenant shall fail to pay such judgment within thirty (30)
days after the judgment shall have become final beyond appeal or to discharge
or secure by surety bond such lien, attachment, etc. within thirty (30) days
of such entry, recording or filing, as the case may be; or (g) the leasehold
hereby created shall be taken on execution or by other process of law and
shall not be revested in Tenant within thirty (30) days thereafter; or (h) a
receiver, sequesterer, trustee or similar officer shall be appointed by a
court of competent jurisdiction to take charge of all or any part of Tenant's
property and such appointment shall not be vacated within thirty (30) days;
or (i) any proceeding shall be instituted by or against Tenant pursuant to
any of the provisions of any Act of Congress or State law relating to
bankruptcy, reorganizations, arrangements, compositions or other relief from
creditors, and, in the case of any proceeding instituted against it, if Tenant
shall fail to have such proceedings dismissed within thirty (30) days or if
Tenant is adjudged bankrupt or insolvent as a result of any such proceeding,
or (j) any event shall occur or any contingency shall arise whereby this
Lease, or the term and estate thereby created, would (by operation of law or
otherwise) devolve upon or pass to any person, firm or corporation other
than Tenant, except as expressly permitted under Article 16 hereof - then,
and in any such event (except as hereinafter in Article 21.2 otherwise
provided) Landlord may, by notice to Tenant, elect to terminate this Lease;
and thereupon (and without prejudice to any remedies which might otherwise be
available for arrears of rent or other charges due hereunder or preceding
breach of covenant or agreement and without prejudice to Tenant's liability
for damages as hereinafter stated), upon the giving of such notice, this
Lease shall terminate as of the date specified therein as though that were
the Termination Date as stated in Exhibit 1. Without being taken or deemed to
be guilty of any manner of trespass or conversion, and without being liable
to indictment, prosecution or damages therefor, Landlord may, forcibly if
necessary, enter into and upon the premises (or any part thereof in the name
of the whole); repossess the same as of its former estate; and expel Tenant
and those claiming under Tenant. Wherever "Tenant" is used in subdivisions
(c), (d), (e), (f), (g), (h) and (i) of this Article 21.1, it shall be deemed
to include any one of (i) any corporation of which Tenant is a controlled
subsidiary and (ii) any guarantor of any of Tenant's obligations under this
Lease. The words "re-entry" and "re-enter" as used in this Lease are not
restricted to their technical legal meanings.
21.2 DAMAGES - ASSIGNMENT FOR BENEFIT OF CREDITORS. For the more
effectual securing to Landlord of the rent and other charges and payments
reserved hereunder, it is agreed as a further condition of this Lease that if
at any time Tenant shall make any transfer similar to or in the nature of an
assignment of its property for the benefit of its creditors, the term and
estate hereby created shall terminate ipso facto, without entry or other
action by Landlord; and notwithstanding any other provisions of this Lease,
Landlord shall forthwith upon such termination, without prejudice to any
remedies which might otherwise be available for arrears of rent or other
charges due hereunder or preceding breach of this Lease, be ipso facto
entitled to recover as liquidated damages the sum of (a) the amount described
in clause (x) of Article 21.3 and (b) (in view of the uncertainty of prompt
re-letting and the expense entailed in re-letting the
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premises) an amount equal to the rent and other charges payable for and in
respect of the twelve-(12)-month period next preceding the date of
termination, as aforesaid.
21.3 DAMAGES - TERMINATION. Upon the termination of this Lease under
the provisions of this Article 21, then except as hereinabove in Article 21.2
otherwise provided, Tenant shall pay to Landlord the rent and other charges
payable by Tenant to Landlord up to the time of such termination, shall
continue to be liable for any preceding breach of covenant, and in addition,
shall pay to Landlord as damages, at the election of Landlord
either:
(x) the amount by which, at the time of the termination of this
Lease (or at any time thereafter if Landlord shall have initially elected
damages under subparagraph (y), below), (i) the aggregate of the rent and
other charges projected over the period commencing with such termination and
ending on the Termination Date as stated in Exhibit 1 exceeds (ii) the
aggregate projected rental value of the premises for such period;
or:
(y) amounts equal to the rent and other charges which would have
been payable by Tenant had this Lease not been so terminated, payable upon
the due dates therefore specified herein following such termination and until
the Termination Date as specified in Exhibit 1, provided, however, if
Landlord shall re-let the premises during such period, that Landlord shall
credit Tenant with the net rents received by Landlord from such re-letting,
such net rents to be determined by first deducting from the gross rents as
and when received by Landlord from such re-letting the expenses incurred or
paid by Landlord in terminating this Lease, as well as the expenses of
re-letting, including altering and preparing the premises for new tenants,
brokers' commissions, and all other similar and dissimilar expenses properly
chargeable against the premises and the rental therefrom, it being understood
that any such re-letting may be for a period equal to or shorter or longer
than the remaining term of this Lease: and provided, further, that (i) in no
event shall Tenant be entitled to receive any excess of such net rents over
the sums payable by Tenant to Landlord hereunder and (ii) in no event shall
Tenant be entitled in any suit for the collection of damages pursuant to this
Subparagraph (y) to a credit in respect of any net rents from a re-letting
except to the extent that such net rents are actually received by Landlord
prior to the commencement of such suit. If the premises or any part thereof
should be re-let in combination with other space, then proper apportionment
on a square foot area basis shall be made of the rent received from such
re-letting and of the expenses of re-letting.
In calculating the rent and other charges under Subparagraph (x), above,
there shall be included, in addition to the Yearly Rent, Tax Excess and
Operating Expense Excess and all other considerations agreed to be paid or
performed by Tenant, on the assumption that all such amounts and
considerations would have remained constant (except as herein otherwise
provided) for the balance of the full term hereby granted.
Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had not
been terminated hereunder.
Nothing herein contained shall be construed as limiting or precluding
the recovery by Landlord against Tenant of any sums or damages to which, in
addition to the damages particularly provided above, Landlord may lawfully be
entitled by reason of any default hereunder on the part of Tenant.
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21.4 FEES AND EXPENSES.
(a) If Tenant shall default in the performance of any covenant
on Tenant's part to be performed as in this Lease contained, Landlord may
immediately, or at any time thereafter, without notice, perform the same for
the account of Tenant. If Landlord at any time is compelled to pay or elects
to pay any sum of money, or do any act which will require the payment of any
sum of money, by reason of the failure of Tenant to comply with any provision
hereof, or if Landlord is compelled to or does incur any expense, including
reasonable attorneys' fees, in instituting, prosecuting, and/or defending any
action or proceeding instituted by reason of any default of Tenant hereunder,
Tenant shall on demand pay to Landlord by way of reimbursement the sum or
sums so paid by Landlord with all costs and damages, plus interest computed
as provided in Article 6 hereof.
(b) Tenant shall pay Landlord's cost and expense, including
reasonable attorneys' fees, incurred (i) in enforcing any obligation of
Tenant under this Lease or (ii) as a result of Landlord, without its fault,
being made party to any litigation pending by or against Tenant or any
persons claiming through or under Tenant.
21.5 WAIVER OF REDEMPTION. Tenant does hereby waive and surrender all
rights and privileges which it might have under or by reason of any present
or future law to redeem the premises or to have a continuance of this Lease
for the term hereby demised after being dispossessed or ejected therefrom by
process of law or under the terms of this Lease or after the termination of
this Lease as herein provided.
21.6 LANDLORD'S REMEDIES NOT EXCLUSIVE. The specified remedies to which
Landlord may resort hereunder are cumulative and are not intended to be
exclusive of any remedies or means of redress to which Landlord may at any
time be lawfully entitled, and Landlord may invoke any remedy (including the
remedy of specific performance) allowed at law or in equity as if specific
remedies were not herein provided for.
21.7 GRACE PERIOD. Notwithstanding anything to the contrary in this
Article contained, Landlord agrees not to take any action to terminate this
Lease (a) for default by Tenant in the payment when due of any sum of money,
if Tenant shall cure such default within ten (10) days after written notice
thereof is given by Landlord to Tenant, provided, however, that no such
notice need be given and no such default in the payment of money shall be
curable if on two (2) prior occasions there had been a default in the payment
of money which had been cured after notice thereof had been given by Landlord
to Tenant as herein provided or (b) for default by Tenant in the performance
of any covenant other than a covenant to pay a sum of money, if Tenant shall
cure such default within a period of thirty (30) days after written notice
thereof given by Landlord to Tenant (except where the nature of the default
is such that remedial action should appropriately take place sooner, as
indicated in such written notice), or within such additional period as may
reasonably be required to cure such default if (because of governmental
restrictions or any other cause beyond the reasonable control of Tenant) the
default is of such a nature that it cannot be cured within such
thirty-(30)-day period, however, (1) that there shall be no extension of time
beyond such thirty-(30)-day period for the curing of any such default unless,
not more than ten (10) days after the receipt of the notice of default.
Tenant in writing (i) shall specify the cause on account of which the default
cannot be cured during such period and shall advise Landlord of its intention
duly to institute all steps necessary to cure the default and (ii) shall, as
soon as reasonably practicable, duly institute and thereafter diligently
prosecute to completion all steps necessary to cure such default and, (2)
that no notice of the opportunity to cure a default need be given, and no
grace period whatsoever shall be allowed to Tenant, if the default is
incurable or if the covenant or condition the breach of which gave rise to
default had, by reason of a breach on a prior occasion, been the subject of a
notice hereunder to cure such default.
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Notwithstanding anything to the contrary in this Article 21.7 contained,
except to the extent prohibited by applicable law, any statutory notice and
grace periods provided to Tenant by law are hereby expressly waived by Tenant.
22. END OF TERM - ABANDONED PROPERTY
Upon the expiration or other termination of the term of this Lease,
Tenant shall peaceably quit and surrender to Landlord the premises and all
alterations and additions thereto, broom clean, in good order, repair and
condition (except as provided herein and in Articles 8.7, 18 and 20)
excepting only ordinary wear and use and damage by fire or other casualty for
which, under other provisions of this Lease, Tenant has no responsibility of
repair or restoration. Tenant shall remove all of its property and, to the
extent specified by Landlord, all alterations and additions made by Tenant
and all partitions wholly within the premises, and shall repair any damages
to the premises or the Building caused by their installation or by such
removal. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of the term of this Lease.
Tenant will remove any personal property from the Building and the
premises upon or prior to the expiration or termination of this Lease and any
such property which shall remain in the Building or the premises thereafter
shall be conclusively deemed to have been abandoned, and may either be
retained by Landlord as its property or sold or otherwise disposed of in such
manner as Landlord may see fit. If any part thereof shall be sold, that
Landlord may receive and retain the proceeds of such sale and apply the same,
at its option, against the expenses of the sale, the cost of moving and
storage, any arrears of Yearly Rent, additional or other charges hereunder by
Tenant to Landlord and any damages to which Landlord may be entitled under
Article 21 hereof or pursuant to law.
If Tenant or anyone claiming under Tenant shall remain in possession of
the premises or any part thereof after the expiration or prior termination of
the term of this Lease without any agreement in writing between Landlord and
Tenant with respect thereto, then, prior to the acceptance of any payments
for rent or use and occupancy by Landlord, the person remaining in possession
shall be deemed a tenant-at-sufferance. Whereas the parties hereby
acknowledge that Landlord may need the premises after the expiration or prior
termination of the term of the Lease for other tenants and that the damages
which Landlord may suffer as the result of Tenant's holding-over cannot be
determined as of the Execution Date hereof, in the event that Tenant so holds
over, Tenant shall pay to Landlord, for each month or portion thereof that
Tenant shall retain possession of the premises after the expiration or
termination of the Lease, whether by lapse of time or otherwise, in addition
to all rental and other charges due and accrued under the Lease prior to the
date of termination, use and occupancy charges equal to one hundred fifty
percent (150%) of the greater of (a) the then fair market rent for the
premises as conclusively determined by Landlord or (b) the sum of the Yearly
Rent and additional rent at the rate payable monthly during the twelve (12)
months immediately preceding the expiration or termination of the Lease. In
addition, Tenant shall hold Landlord harmless from all damages which Landlord
may suffer as the result of Tenant's holdover after the termination of the
term of the Lease.
23. SUBORDINATION
(a) Subject to any mortgagee's or ground lessor's election, as
hereinafter provided for, this Lease is subject and subordinate in all
respects to all matters of record (including, without limitation, deeds and
land disposition agreements), ground leases and/or underlying leases, and all
mortgages, any of which may now or hereafter be placed on or affect such
leases and/or the real property of which the premises are a part, or any part
of such real property, and/or Landlord's interest or estate therein, and to
each advance made and/or hereafter to be made under such mortgages, and to
all renewals, modifications, consolidations, replacements and extensions
thereof and all substitutions therefor. This Article 23 shall be
self-operative and no further instrument or subordination shall be required.
In confirmation of such
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subordination, Tenant shall execute, acknowledge and deliver promptly any
certificate or instrument that Landlord and/or any mortgagee and/or lessor
under any ground or underlying lease and/or their respective successors in
interest may request, subject to Landlord's, mortgagee's and ground lessor's
right to do so for, on behalf and in the name of Tenant under certain
circumstances, as hereinafter provided. Tenant acknowledges that, where
applicable, any consent or approval hereafter given by Landlord may be
subject to the further consent or approval of such mortgagee and/or ground
lessor; and the failure or refusal of such mortgagee and/or ground lessor to
give such consent or approval shall, notwithstanding anything to the contrary
in this Lease contained, constitute reasonable justification for Landlord's
withholding its consent or approval.
(b) Any such mortgagee or ground lessor may from time to time
subordinate or revoke any such subordination of the mortgage or ground lease
held by it to this Lease. Such subordination or revocation, as the case may
be, shall be effected by written notice to Tenant and by recording an
instrument of subordinations or of such revocation, as the case may be, with
the appropriate registry of deeds or land records and to be effective without
any further act or deed on the part of Tenant. In confirmation of such
subordination or of such revocation, as the case may be, Tenant shall
execute, acknowledge and promptly deliver any certificate or instrument that
Landlord, any mortgagee or ground lessor may request, subject to Landlord's,
mortgagee's and ground lessor's right to do so for, on behalf and in the name
of Tenant under certain circumstances, as hereafter provided.
(c) Without limitation of any of the provisions of this Lease, if any
ground lease or mortgagee shall succeed to the interest of Landlord by reason
of the exercise of its rights under such ground lease or mortgage (or the
acceptance of voluntary conveyance in lieu thereof) or any third party
(including, without limitation, any foreclosure purchaser or mortgage
receiver) shall succeed to such interest by reason of any such exercise or
the expiration or sooner termination of such ground lease, however caused,
then such successor may, upon notice and request to Tenant (which, in the
case of a ground lease, shall be within thirty (30) days after such
expiration or sooner termination), succeed to the interest of Landlord under
this Lease, provided, however, that such successor shall not: (i) be liable
for any previous act or omission of Landlord under this Lease; (ii) be
subject to any offset, defense, or counterclaim which shall theretofore have
accrued to Tenant against Landlord; (iii) have any obligation with respect to
any security deposit unless it shall have been paid over or physically
delivered to such successor; or (iv) be bound by a previous modification of
this Lease or by any previous payment of Yearly Rent for a period greater
than one (1) month, made without such ground lessor's or mortgagee's consent
where such consent is required by applicable ground lease or mortgage
documents. In the event of such succession to the interest of the Landlord --
and notwithstanding that any such mortgage or ground lease may antedate this
Lease -- the Tenant shall attorn to such successor and shall ipso facto be
and become bound directly to such successor in interest to Landlord to
perform and observe all the Tenant's obligations under this Lease without the
necessity of the execution of any further instrument. Nevertheless, Tenant
agrees at any time and from time to time during the term hereof to execute a
suitable instrument in confirmation of Tenant's agreement to attorn, as
aforesaid, subject to Landlord's, mortgagee's and ground lessor's right to do
so for, on behalf and in the name of Tenant under certain circumstances, as
hereinafter provided.
(d) The term "mortgage(s)" as used in this Lease shall include any
mortgage or deed of trust. The term "mortgagee(s)" as used in this Lease
shall include any mortgages or any trustee and beneficiary under a deed of
trust or receiver appointed under a mortgage or deed of trust. The term
"mortgagor(s)" as used in this Lease shall include any mortgage or any
grantor under a deed of trust.
(c) Tenant hereby irrevocably constitutes and appoints Landlord or any
such mortgagee or ground lessor, and their respective successors in interest,
acting singly, Tenant's attorney-in-fact to execute and deliver any such
certificate or instrument for, on behalf and in the name of Tenant, but only
if Tenant
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fails to execute, acknowledge and deliver any such certificate or instrument
within ten (10) days after Landlord or such mortgagee or such ground lessor
has made written request therefor.
(f) Notwithstanding anything to the contrary contained in this Article
23, if all or part of Landlord's estate and interest in the real property of
which the premises are a part shall be a leasehold estate held under a ground
lease, then: (i) the foregoing subordination provisions of this Article 23
shall not apply to any mortgages of the fee interest in said real property to
which Landlord's leasehold estate is not otherwise subject and subordinate;
and (ii) the provisions of this Article 23 shall in no way waive, abrogate or
otherwise affect any agreement by any ground lessor (x) not to terminate this
Lease incident to any termination of such ground lease prior to its term
expiring or (y) not to name or join Tenant in any action or proceeding by
such ground lessor to recover possession of such real property or for any
other relief.
(g) In the event of any failure by Landlord to perform, fulfill or
observe any agreement by Landlord herein, in no event will the Landlord be
deemed to be in default under this Lease permitting Tenant to exercise any or
all rights or remedies under this Lease until the Tenant shall have given
written notice of such failure to any mortgagee (ground lessor and/or
trustee) of which Tenant shall have been advised and until a reasonable
period of time shall have elapsed following the giving of such notice, during
which such mortgagee (ground lessor and/or trustee) shall have the right, but
shall not be obligated, to remedy such failure.
24. QUIET ENJOYMENT
Landlord covenants that if, and so long as, Tenant keeps and performs
each and every covenant, agreement, term, provision and condition herein
contained on the part and on behalf of Tenant to be kept and performed,
Tenant shall quietly enjoy the premises from and against the claims of all
persons claiming by, through or under Landlord subject, nevertheless, to the
covenants, agreements, terms, provisions and conditions of this Lease and to
the mortgages, ground leases and/or underlying leases to which this Lease is
subject and subordinate, as hereinabove set forth.
Without incurring any liability to Tenant, Landlord may permit access to
the premises and open the same, whether or not Tenant shall be present, upon
any demand of any receiver, trustee, assignee for the benefit of creditors,
sheriff, marshal or court officer entitled to, or reasonably purporting to be
entitled to, such access for the purpose of taking possession of, or
removing, Tenant's property or for any other lawful purpose (but this
provision and any action by Landlord hereunder shall not be deemed a
recognition by Landlord that the person or official making such demand has
any right or interest in or to this Lease, or in or to the premises), or upon
demand of any representative of the fire, police, building, sanitation or
other department of the city, state or federal governments.
25. ENTIRE AGREEMENT -- WAIVER -- SURRENDER
25.1 ENTIRE AGREEMENT. This Lease and the Exhibits made a part hereof
contain the entire and only agreement between the parties and any and all
statements and representations, written and oral, including previous
correspondence and agreements between the parties hereto, are merged herein.
Tenant acknowledges that all representations and statements upon which it
relied in executing this Lease are contained herein and that the Tenant in no
way relied upon any other statements or representations, written or oral. Any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Lease in whole or in part unless
such executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
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25.2 WAIVER BY LANDLORD. The failure of Landlord to seek redress for
violation, or to insist upon the strict performance, of any covenant or
condition of this Lease, or any of the Rules and Regulations promulgated
hereunder, shall not prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an original
violation. The receipt by Landlord of rent with knowledge of the breach of
any covenant of this Lease shall not be deemed a waiver of such breach. The
failure of Landlord to enforce any of such Rules and Regulations against
Tenant and/or any other tenant in the Building shall not be deemed a waiver
of any such Rules and Regulations. No provisions of this Lease shall be
deemed to have been waived by Landlord unless such waiver be in writing
signed by Landlord. 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 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 in this Lease provided.
25.3 SURRENDER. No act or thing done by Landlord during the term hereby
demised shall be deemed an acceptance of a surrender of the premises, and no
agreement to accept such surrender shall be valid, unless in writing signed
by Landlord. No employee of Landlord or of Landlord's agents shall have any
power to accept the keys of the premises prior to the termination of this
Lease. The delivery of keys to any employee of Landlord or of Landlord's
agents shall not operate as a termination of the Lease or a surrender of the
premises. In the event that Tenant at any time desires to have Landlord
underlet the premises for Tenant's account, Landlord or Landlord's agents are
authorized to receive the keys for such purposes without releasing Tenant
from any of the obligations under this Lease, and Tenant hereby relieves
Landlord of any liability for loss of or damage to any of Tenant's effects in
connection with such underletting.
26. INABILITY TO PERFORM - EXCULPATORY CLAUSE
Except as provided in Article 4.1 and 4.2 hereof, this Lease and the
obligations of Tenant to pay rent hereunder and perform all the other
covenants, agreements, terms, provisions and conditions hereunder on the part
of Tenant to be performed shall in no way be affected, impaired or excused
because Landlord is unable to fulfill any of its obligations under this Lease
or is unable to supply or is delayed in supplying any service expressly or
impliedly to be supplied or is unable to make or is delayed in making any
repairs, replacements, additions, alterations, improvements or decorations or
is unable to supply or is delayed in supplying any equipment or fixtures if
Landlord is prevented or delayed from so doing by reason of strikes or labor
troubles or any other similar or dissimilar cause whatsoever beyond
Landlord's reasonable control, including but not limited to, governmental
preemption in connection with a national emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any
governmental agency or by reason of the conditions of supply and demand which
have been or are affected by war, hostilities or other similar or dissimilar
emergency. In each such instance of inability of Landlord to perform,
Landlord shall exercise reasonable diligence to eliminate the cause of such
inability to perform.
Tenant shall neither assert nor seek to enforce any claim against
Landlord, or Landlord's agents or employees, or the assets of Landlord or of
Landlord's agents or employees, for breach of this Lease or otherwise, other
than against Landlord's interest in the Building of which the premises are a
part and in the uncollected rents, issues and profits thereof, and Tenant
agrees to look solely to such interest for the satisfaction of any liability
of Landlord under this Lease, it being specifically agreed that in no event
shall Landlord or Landlord's agents or employees (or any of the officers,
trustees, directors, partners, beneficiaries, joint venturers, members,
stockholders or other principals or representatives, and the like, disclosed or
undisclosed, thereof) ever be personally liable for any such liability. This
paragraph shall not limit any right that Tenant might otherwise have to
obtain injunctive relief against Landlord or to take any other action which
shall not involve the personal liability of Landlord to respond in monetary
damages from Landlord's assets other than the Landlord's interest in said
real estate, as aforesaid. In no event shall
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Landlord or Landlord's agents or employees (or any of the officers, trustees,
directors, partners, beneficiaries, joint venturers, members, stockholders or
other principals or representatives and the like, disclosed or undisclosed,
thereof) ever be liable for loss of profits, loss of the value of Tenant's
business, or consequential or incidental damages. Without limiting the
foregoing, in no event shall Landlord or Landlord's agents or employees (or
any of the officers, trustees, directors, partners, beneficiaries, joint
venturers, members, stockholders or other principals or representatives and
the like, disclosed or undisclosed, thereof) ever be liable for lost profits
of Tenant. If by reason of Landlord's failure to acquire title to the real
property of which the premises are a part or to complete construction of the
Building or premises, Landlord shall be held to be in breach of this Lease,
Tenant's sole and exclusive remedy shall be a right to terminate this Lease.
27. BILLS AND NOTICES
Any notice, consent, request, bill, demand or statement hereunder by
either party to the other party shall be in writing and, if received at
Landlord's or Tenant's address, shall be deemed to have been duly given when
either delivered or served personally or mailed in a postpaid envelope,
deposited in the United States mail addressed to Landlord at its address as
stated in Exhibit 1 and to Tenant at the premises (or at Tenant's address as
stated in Exhibit 1, if mailed prior to Tenant's occupancy of the premises),
or if any address for notices shall have been duly changed as hereinafter
provided, if mailed as aforesaid to the party at such changed address. Either
party may at any time change the address or specify an additional address for
such notices, consents, requests, bills, demands or statements by delivering
or mailing, as aforesaid, to the other party a notice stating the change and
setting forth the changed or additional address, provided such changed or
additional address is within the United States.
If Tenant is a partnership, Tenant, for itself, and on behalf of all of
its partners, hereby appoints Tenant's Service Partner, as identified on
Exhibit 1, to accept service of any notice, consent, request, bill, demand or
statement hereunder by Landlord and any service of process in any judicial
proceeding with respect to this Lease on behalf of Tenant and as agent and
attorney-in-fact for each partner of Tenant.
All bills and statements for reimbursement or other payments or charges
due from Tenant to landlord hereunder shall be due and payable in full ten
(10) days, unless herein otherwise provided, after submission thereof by
Landlord to Tenant. Tenant's failure to make timely payment of any amounts
indicated by such bills and statements, whether for work done by Landlord at
Tenant's request, reimbursement provided for by this Lease or for any other
sums properly owing by Tenant to Landlord, shall be treated as a default in
the payment of rent, in which event Landlord shall have all rights and
remedies provided in this Lease for the nonpayment of rent.
28. PARTIES BOUND -- SEISIN OF TITLE
The covenants, agreements, terms, provisions and conditions of this Lease
shall bind and benefit the successors and assigns of the parties hereto with
the same effect as if mentioned in each instance where a party hereto is
named or referred to, except that no violation of the provisions of Article
16 hereof shall operate to vest any rights in any successor or assignee of
Tenant and that the provisions of this Article 28 shall not be construed as
modifying the conditions of limitation contained in Article 21 hereof.
If, in connection with or as a consequence of the sale, transfer or other
disposition of the real estate (land and/or Building, either or both, as the
case may be) of which the premises are a part, Landlord ceases to be the
owner of the reversionary interest in the premises. Landlord shall be
entirely freed and relieved from the performance and observance thereafter of
all covenants and obligations hereunder on the part of Landlord to be
performed and observed, it being understood and agreed in such event (and it
shall be deemed and construed as a covenant running with the land) that the
person succeeding to Landlord's
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ownership of said reversionary interest shall thereupon and thereafter
assume, and perform and observe, any and all of such covenants and
obligations of Landlord.
29. MISCELLANEOUS
29.1 SEPARABILITY. If any provision of this Lease or portion of such
provision or the application thereof to any person or circumstance is for any
reason held invalid or unenforceable, the remainder of the Lease (or the
remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.
29.2 CAPTIONS, ETC. The captions are inserted only as a matter of
convenience and for reference, and in no way define, limit or describe the
scope of this Lease nor the intent of any provisions thereof. References to
"State" shall mean, where appropriate, the District of Columbia and other
Federal territories, possessions, as well as a state of the United States.
29.3 BROKER. Tenant represents and warrants that it has not directly or
indirectly dealt, with respect to the leasing of office space in the Building
or the Park with any broker or had its attention called to the premises or
other space to let in the Building or the Park, by anyone other than the
broker, person or firm, if any, designated in Exhibit 1. Tenant agrees to
defend, exonerate and save harmless and indemnify Landlord and anyone
claiming by, through or under Landlord against any claims for a commission
arising out of the execution and delivery of this Lease or out of
negotiations between Landlord and Tenant with respect to the leasing of other
space in the Building or the Park, provided that Landlord shall be solely
responsible for the payment of brokerage commissions to the broker, person or
firm, if any, designated in Exhibit 1.
29.4 MODIFICATIONS. If in connection with obtaining financing for the
Building, a bank, insurance company, pension trust or other institutional
lender shall request reasonable modifications in this Lease as a condition to
such financing, Tenant will not withhold, delay or condition its consent
thereto, provided that such modifications do not increase the obligations of
Tenant hereunder or materially adversely affect the leasehold interest hereby
created.
29.5 ARBITRATION. Any disputes relating to provisions or obligations in
this Lease as to which a specific provision for a reference to arbitration is
made herein shall be submitted to arbitration in accordance with the
provisions of applicable state law (as identified on Exhibit 1), as from time
to time amended. Arbitration proceedings, including the selection of an
arbitrator, shall be conducted pursuant to the rules, regulations and
procedures from time to time in effect as promulgated by the American
Arbitration Association. Prior written notice of application by either party
for arbitration shall be given to the other at least ten (10) days before
submission of the application to the said Association's office in the City
wherein the Building is situated (or the nearest other city having an
Association office). The arbitrator shall hear the parties and their
evidence. The decision of the arbitrator shall be binding and conclusive, and
judgment upon the award or decision of the arbitrator may be entered in the
appropriate court of law (as identified on Exhibit 1); and the parties
consent to the jurisdiction of such court and further agree that any process
or notice of motion or other application to the Court or a Judge thereof may
be served outside the State wherein the Building is situated by registered
mail or by personal service, provided a reasonable time for appearance is
allowed. The costs and expenses of each arbitration hereunder and their
apportionment between the parties shall be determined by the arbitrator in
his award or decision. No arbitrable dispute shall be deemed to have arisen
under this Lease prior to (i) the expiration of the period of twenty (20)
days after the date of the giving of written notice by the party asserting
the existence of the dispute together with a description thereof sufficient
for an understanding thereof; and (ii) where a Tenant payment (e.g., Tax
Excess or Operating Expense Excess under Article 9 hereof) is in issue, the
amount billed by Landlord having been paid by Tenant.
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29.6 GOVERNING LAW. This Lease is made pursuant to, and shall be
governed by, and construed in accordance with, the laws of the State wherein
the Building is situated and any applicable local municipal rules,
regulations, by-laws, ordinances and the like.
29.7 ASSIGNMENT OF RENTS. With reference to any assignment by Landlord
of its interest in the Lease, or the rents payable hereunder, conditional in
nature or otherwise, which assignment is made to or held by a bank, trust
company, insurance company or other institutional lender holding a mortgage
or ground lease on the Building, Tenant agrees:
(a) that the execution thereof by Landlord and the acceptance
thereof by such mortgagee and/or ground lessor shall never be deemed and
assumption by such mortgagee and/or ground lessor of any of the obligations
of the Landlord thereunder, unless such mortgagee and/or ground lessor shall,
by written notice sent to the Tenant, specifically otherwise elect; and
(b) that, except as aforesaid, such mortgagee and/or ground
lessor shall be treated as having assumed the Landlord's obligations
thereunder only upon foreclosure of such mortgagee's mortgage or deed of
trust or termination of such ground lessor's ground lease and the taking of
possession of the demised premises after having given notice of its exercise
of the option stated in Article 23 hereof to succeed to the interest of the
landlord under this Lease.
29.8 REPRESENTATION OF AUTHORITY. By his execution hereof each of the
signatories on behalf of the respective parties hereby warrants and
represents to the other that he is duly authorized to execute this lease on
behalf of such party. If Tenant is a corporation, Tenant hereby appoints the
signatory whose name appears below on behalf of Tenant as Tenant's
attorney-in-fact for the purpose of executing this Lease for and on behalf of
Tenant.
29.9 EXPENSES INCURRED BY LANDLORD UPON TENANT REQUESTS. Tenant shall,
upon demand, reimburse Landlord for all reasonable expenses, including,
without limitation, legal fees, incurred by Landlord in connection with all
requests by Tenant for consents, approvals or execution of collateral
documentation related to this Lease, including, without limitation, costs
incurred by landlord in the review and approval of Tenant's plans and
specification in connection with proposed alterations to be made by Tenant to
the premises, requests by Tenant to sublet the premises or assign its
interest in the Lease, the execution by Landlord of estoppel certificates
requested by Tenant, and requests by Tenant for Landlord to execute waivers
of Landlord's interest in Tenant's property in connection with third party
financing by Tenant. Such costs shall be deemed to be additional rent under
the Lease.
29.10 SURVIVAL. Without limiting any other obligation of the Tenant
which may survive the expiration or prior termination of the term of the
Lease, all obligations on the part of Tenant to indemnify, defend, or hold
Landlord harmless, as set forth in the Lease (including, without limitation,
Tenant's obligations under Articles 13(d), 15.3, and 29.3) shall survive the
expiration or prior termination of the term of the Lease.
29.11 NOTICE OF LEASE; RECORDING.
(a) Tenant agrees not to record the Lease, but each party hereto
agrees, at the request of the other, to execute a notice of lease in
recordable form in compliance with applicable Massachusetts law and
reasonably satisfactory to Landlord and attorneys. In no event shall such
notice of lease set forth the rent or other charges payable by Tenant under
the Lease; and such notice shall expressly state that it is executed pursuant
to the provisions contained in the Lease, and is not intended to vary the
terms and conditions of the Lease. It is hereby agreed that the requesting
party shall pay all fees with respect to the recording of the notice of
lease, the recording of any amendments thereto and the recording of any
notice of termination thereof.
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(b) If the Term Commencement Date and the Termination Date are
not determined at the time that a notice of lease has been executed by the
parties, then each of the parties hereto agrees, upon demand of the other
party after the Term Commencement Date and Termination Date have been
determined, to join in the execution, in recordable form, of a statutory
notice, memorandum, etc. of lease and/or written declaration in which shall
be stated such Term Commencement Date and (if need be) the Termination Date.
If this Lease is terminated before the term expires, then upon Landlord's
request the parties shall execute, deliver and record an instrument
acknowledging such fact and the date of termination of this Lease, and Tenant
hereby appoints Landlord its attorney-in-fact in its name and behalf to
execute such instrument if Tenant shall fail to execute and deliver such
instrument after Landlord's request therefor within ten (10) days.
IN WITNESS WHEREOF the parties hereto have executed this Indenture of
Lease in multiple copies, each to be considered an original hereof, as a
sealed instrument on the day and year noted in Exhibit 1 as the Execution
Date.
LANDLORD: TENANT:
EOP-NEW ENGLAND EXECUTIVE PARK, L.L.C., THE QUICKSILVER GROUP, INC.
a Delaware limited liability company
By: EOP Operating Limited Partnership, a Delaware
limited partnership, its sole member
By: Equity Office Properties Trust, a Maryland
real estate investment trust, its managing
general partner
By: /s/ Thomas Q Bakke By: /s/ [illegible], CEO
--------------------------- -----------------------------
Name: THOMAS Q BAKKE (Name) (Title)
--------------------------
Title: VICE PRESIDENT Hereunto Duly Authorized
-------------------------
IF TENANT IS A CORPORATION, A SECRETARY'S OR CLERK'S CERTIFICATE OF
THE AUTHORITY AND THE INCUMBENCY OF THE PERSON SIGNING ON BEHALF OF TENANT
SHOULD BE ATTACHED.
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EXHIBIT 3
BUILDING STANDARDS
New England Executive Park
The following exhibit sets forth "Building Standard" materials and finishes for
Tenant Improvement Work. These are minimum standards. Substitutions will be
allowed for equivalent quality and upgrading only and must be approved by the
Landlord, which approval shall not be unreasonably withheld.
1. Partitions
a. Demising (type 'A')
Partitions separating premises shall be constructed of 2 1/2" metal
studs, 16" o.c., with two (2) layers of 5/8" wallboard on each side.
One layer on each side shall extend to the underside of the floor
above.
b. Standard Partition (type 'B')
Partitions separating spaces within single premises shall be
constructed of 3 5/8" metal studs, 16" o.c., with one (1) layer of
5/8" wallboard on each side. Both layers shall extend 3" minimum
above ceiling, unless otherwise required by applicable building
codes.
c. Privacy Partition (type 'B-1')
Where noise transmission is a concern within single premises (e.g.
partitions separating conference rooms, high-traffic hallways, toilet
rooms, and other such rooms from conference rooms or private
offices), partitions shall be constructed of 3 5/8" metal studs, 16"
o.c., with one (1) layer of 5/8" wallboard on each side. One layer
shall extend to the underside of the floor above and one layer shall
extend 3" minimum above ceiling, unless otherwise required by
applicable building code.
d. Perimeter Wall Partition (type 'C')
Perimeter Partitions shall be constructed of 3 5/8" metal studs with
one (1) layer of 5/8" drywall extending 3" minimum above the ceiling.
e. Other Partitions
Partitions creating mechanical shafts and rooms, electrical shafts
and rooms, communications shafts and rooms, and elevator shafts and
machine rooms shall be constructed in compliance with applicable
building code.
2. Doors, Frames, & Hardware
a. Tenant Entrance
At the Landlord's discretion, Tenant entrance shall match existing or
be the following:
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Door: 3' x 8' x 1 3/4" plain-sliced, premium grade,
solid core, red oak
Frame: Red oak frame assembly with 2' x 8' sidelight
(see BSD-1 in Building Standards Manual).
Lockset: Sargent 8205 LNF mortise lockset
Closer: LCN 4010T/4110T with metal cover 72MC
Two pairs of butts: Stanley FBB 179 4 1/2" x 4"
Door stop: Ives 436
b. Tenant Egress
Tenant egress shall be the following:
Door: 3' x 8' x 1 3/4" plain-sliced, solid core,
red oak
Frame: 3' x 8' 16 gauge, hollow metal, 3-piece,
knock-down
Lockset: Sargent 8204 LNF mortise lockset
Closer: LCN 4010T/4110T with metal cover 72MC
Two pairs of butts: Stanley FBB 179 4 1/2" x 4"
Door stop: Ives 436
b. Interior
Interior doorways shall be the following:
Door: 3' x 7' x 1 3/4" plain-sliced, solid core,
red oak
Frame: 3' x 7' 16 gauge, hollow metal, 3-piece,
knock-down
Latchset: Almet JB 1501 standard duty bored latchset
Lockset: Sargent 8205 LNF mortise lockset (lockset on
interior doors is above building standard.
See Exhibit 4)
1 1/2 pairs of butts: Stanley FBB 179 4 1/2" x 4"
Door stop: Ives 436
3. Signage
At the Landlord's discretion, signage shall match existing or shall be 12"
x 24" brushed aluminum panel shall be provided as a part of the entry frame
assembly (see BSD-1 in Building Standards Manual).
4. Light Fixtures
a. 2' x 4' "P4 Parabolume" fluorescent fixture with 3" deep 18 cell
parabolic louver, manufactured by Columbia, model P424.
b. 2' x 2' "P4 Parabolume" fluorescent fixture with 3" deep 9 cell
parabolic louver, manufactured by Columbia, model P422.
5. Life Safety
a. Fire Sprinkler
Flush, chrome pendant head, manufactured by Viking, model Horizon H,
with matching chrome escutcheon plate.
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<PAGE>
b. Exit Sign
Single or double faced LED exit sign, white housing, red letters,
manufactured by Dual Lite, Liteforms LX series.
6. HVAC
a. Diffuser
24" x 24" perforated diffuser with adjustable pattern controller for
supply air, manufactured by Titus, model PDS.
b. Return Air Grille
24" x 24" perforated return air grille, manufactured by Titus, model
PDR.
7. Finishes
a. Ceiling Tiles
24" x 24" "Natural Fissured" acoustic lay-in tiles with narrow
revealed edge manufactured by Celotex, model MF-450.
b. Grid
Exposed 24" x 24" slotted tee system manufactured by Chicago
Metallic, model Ultraline 3500.
c. Carpet
32 ounce cut-pile manufactured by JJ Industries with 2 1/2" x 1/8"
vinyl straight wall base.
d. Vinyl Composition Tile (VCT)
12" x 12" x 1/8" tiles manufactured by Armstrong or equal with 2 1/2"
x 1/8" vinyl cove wall base.
e. Paint
All wall surfaces shall receive one coat of Benjamin Moore satin
finish latex paint over one prime coat, or equal.
Doors shall have a natural finish of one coat of sealer and two coats
Benjamin Moore clear satin urethane or equal.
Hollow Metal Frames and painted wood trim shall receive one coat of
Benjamin Moore satin finish alkyd enamel over one prime coat, or
equal.
Public areas, corridors, and lobbies shall be finished as Landlord
may select.
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Paint colors shall be selected from the building standard color chart
with not more than one accent color (flat paint) on one wall in each
individual office.
f. Ceramic Tile
Toilet room walls are to be finished with ceramic tile and drywall.
g. Window Blinds
Vertical 3 1/2" perforated PVC blinds, manufactured by Louverdrape,
Model EL Elite.
h. Hardware, Face Plates on Electrical Receptacles and Switches
All hardware finishes are to be US26D, satin chrome.
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EXHIBIT 4
BUILDING SERVICES
I. CLEANING
A. GENERAL
1. All cleaning work will be performed between 7 a.m. and 12
midnight, Monday through Friday, unless otherwise necessary for
stripping, waxing, etc.
2. Abnormal waste removal (e.g., computer installation paper, bulk
packaging, wood or cardboard crates, refuse from cafeteria
operations, etc.) shall be Tenant's responsibility.
B. DAILY OPERATIONS (5 TIMES PER WEEK)
1. Tenant Areas
a. Empty and clean all waste receptacles; wash receptacles as
necessary.
b. Vacuum all rugs and carpeted areas.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot-clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal receptacles.
f. Refill toilet tissue, towel, soap, and sanitary napkin
dispensers.
3. Public Areas
a. Wipe down entrance doors and spot-clean glass (interior and
exterior).
b. Vacuum elevator carpets and wipe down doors and walls.
c. Clean water coolers.
4. Tenant and Public Areas--Dry-mop all resilient floor areas.
C. WEEKLY OPERATIONS--TENANT AREAS, LAVATORIES, PUBLIC AREAS
1. Hand-dust and wipe clean all horizontal surfaces with treated
cloths to include furniture, office equipment, windowsills, door
ledges, chair rails, baseboards, convector tops, etc., within
normal reach.
2. Remove finger marks from private entrance doors, light switches,
and doorways.
3. Sweep all stairways.
4. Wet-mop all resilient floor areas.
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<PAGE>
D. MONTHLY OPERATIONS
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories--Wash down interior walls and toilet partitions.
E. SEMI-ANNUALLY--ENTIRE BUILDING
1. Clean inside of all windows.
2. Clean outside of all windows.
3. Buff all resilient floor areas.
F. PERIODICALLY--Entire Building
1. Shampoo all common area hallways.
2. Shampoo all Building lobbies.
II. HEATING, VENTILATING, AND AIR CONDITIONING
A. Heating, ventilating, and air conditioning as required to provide
reasonably comfortable temperatures for normal business day occupancy
(excepting holidays); Monday through Friday from 8 a.m. to 6 p.m. and
Saturday from 8 a.m. to 1 p.m.
B. Maintenance of any additional or special air conditioning equipment
and the associated operating cost will be at Tenant's expense.
III. WATER
Hot water for lavatory purposes and cold water for lavatory and
toilet purposes.
IV. ELEVATORS (IF BUILDING IS ELEVATORED)
Elevators for the use of all tenants and the general public for access to
and from all floors of the Building. Programming of elevators (including,
but not limited to, service elevators) shall be as Landlord from time to
time determines best for the Building as a whole.
V. CAFETERIA AND VENDING INSTALLATIONS
A. Any space to be used primarily for lunchroom or cafeteria operation
shall be Tenant's responsibility to keep clean and sanitary, it being
understood that Landlord's approval of such use must be first obtained
in writing.
B. Vending machines or refreshment service installations by Tenant must
be approved by Landlord in writing and shall be restricted in use to
employees and business callers. All cleaning necessitated by such
installations shall be at Tenant's expense.
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EXHIBIT 5
RULES AND REGULATIONS
1. The entrances, lobbies, passages, corridors, elevators, halls, courts,
sidewalks, vestibules, and stairways shall not be encumbered or obstructed
by Tenant, Tenant's agents, servants, employees, licensees or visitors or
be used by them for any purposes other than ingress or egress to and from
the premises.
2. The moving in or out of all safes, freight, furniture, or bulky matter of
any description shall take place on weekends or after 6 p.m., Monday
through Friday, or during other hours that Landlord may decide from time to
time. Landlord reserves the right to inspect all freight and bulky matter
to be brought into the Building and to exclude from the Building all
freight and bulky matter which violates any of these Rules and Regulations
or the Lease of which these Rules and Regulations are a part. Landlord
reserves the right to have Landlord's structural engineer review Tenant's
floor loads on the premises at Tenant's expense.
3. Tenant or the employees, agents, servants, visitors or licensees of Tenant
shall not at any time place, lease or discard any rubbish, paper, articles,
or objects of any kind whatsoever outside the doors of the premises or in
the corridors or passageways of the Building. No animals or birds shall be
brought or kept in or about the Building. Bicycles shall not be permitted
in the Building.
4. Tenant shall not place objects against glass partitions or doors or windows
or adjacent to any common space which would be unsightly from the Building
corridors or from the exterior of the Building and will promptly remove the
same upon notice from Landlord.
5. Tenant or the employees, agents, servants, visitors or licensees of Tenant
shall not make noises, cause disturbances, create vibrations, odors or
noxious fumes or use or operate any electrical devices or other devices
that emit sound waves or are dangerous to other tenants and occupants of
the Building or that would interfere with the operation of any device or
equipment or radio or television broadcasting or reception from or within
the Building or elsewhere or with the operation of roads or highways in the
vicinity of the Building.
6. Tenant shall not place or install any projections, antennae, aerials, or
similar devices inside or outside of the premises without the prior written
approval of Landlord.
7. Tenant may not (without Landlord's approval therefor, which approval will
be signified on Tenant's Plans submitted pursuant to the Lease) and Tenant
shall not permit or suffer anyone to: (a) cook in the premises; (b) place
vending or dispensing machines of any kind in or about the premises; (c) at
any time sell, purchase or give away or permit the sale, purchase, or gift
of food in any form.
8. Tenant shall not: (a) use the premises for lodging, manufacturing or for
any immoral or illegal purposes; (b) use the premises to engage in the
manufacture or sale of, or permit the use of spirituous, fermented,
intoxicating or alcoholic beverages on the premises; (c) use the premises
to engage in the manufacture or sale of, or permit the use of, any illegal
drugs on the premises.
9. No awning or other projections shall be attached to the outside walls or
windows. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in, or used in connection
with any window or door of the premises without the prior written
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<PAGE>
consent of Landlord.
10. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside of the premises if visible from outside of the premises. Interior
signs on doors shall be painted or affixed for Tenant by Landlord or by
sign painters first approved by Landlord at the expense of Tenant and shall
be of a size, color and style acceptable to Landlord. Tenant shall not
place any temporary paper signs on any part of the outside or inside of the
premises.
11. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building in advertising or other publicity without the
prior written consent of Landlord. Landlord shall have the right to
prohibit any advertising by Tenant which, in Landlord's opinion, tends to
impair the reputation of the Building or its desirability for offices, and,
upon written notice from Landlord, Tenant will refrain from or discontinue
such advertising.
12. Door keys for doors in the premises will be furnished at the commencement
of the Lease by Landlord. No additional locks or bolts of any kind shall
be placed upon any of the doors or windows by Tenant, nor shall any changes
be made in existing locks or the mechanism thereof without the prior
written consent of Landlord. Tenant shall purchase duplicate keys only
from Landlord and will provide to Landlord the means of opening of safes,
cabinets, or vaults left on the premises. Upon the termination of its
tenancy, Tenant must return to Landlord all keys either furnished to or
otherwise procured by Tenant, and in the event of the loss of any keys so
furnished by Landlord, Tenant shall pay to Landlord the cost thereof.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other means
of entry to the premises closed and secured.
14. Tenant shall not make any room-to-room canvass to solicit business from
other tenants in the Building and shall not exhibit, sell or offer to sell,
use, rent or exchange any item or services in or from the premises unless
ordinarily embraced within Tenant's use of the premises as specified in its
Lease. Canvassing, soliciting and peddling in the Building are prohibited,
and Tenant shall cooperate to prevent the same. Peddlers, solicitors and
beggars shall be reported to Beacon Management Company.
15. Tenant shall not mark, paint, drill into, or in any way deface any part of
the Building or premises. No boring, driving of nails or screws, or
cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. Tenant shall not
install any resilient tile or similar floor covering in the premises except
with the prior written approval of Landlord. The use of cement or other
similar adhesive material is expressly prohibited.
16. Tenant shall not waste electricity or water and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed except when being used
for access.
17. The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein.
18. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of their
regular duties, unless under specific instructions from Beacon Management
Company.
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<PAGE>
19. Tenant may request heating and/or air conditioning during other periods in
addition to normal working hours by submitting its request in writing to
Beacon Management Company no later than 2:00 p.m. the preceding work day
(Monday through Friday). The request shall clearly state the start and
stop hours of the "off-hour" service. Tenant shall submit to Beacon
Management Company a list of personnel authorized to make such request.
The Tenant shall be charged for such operation in the form of additional
rent; such charges are to be determined by Beacon Management Company and
shall be fair and reasonable and reflect the additional operating costs
involved.
20. Tenant shall comply with all security measures from time to time
established by Landlord for the Building including, but not limited to, the
below-listed procedure for the control of all building access cards issued
to Tenant, Tenant's employees or agents.
(a) Upon occupancy, Tenant shall submit a list of all authorized personnel
who will require building access cards. This list is to be on the
form provided in the Tenant's Handbook.
(b) During tenancy, Tenant shall notify Landlord in writing when
additional building access cards are required for new employees.
Additionally, Tenant shall promptly notify Landlord in writing when a
cardholder's authorization has been revoked (e.g., upon termination of
employment).
(c) Upon termination of tenancy, Tenant shall promptly return all building
access cards issued to Tenant, Tenant's employees or agents. For all
access cards not returned to Landlord, Tenant will be charged a fee to
cover Landlord's cost to replace each card.
21. Prior to vacating the premises upon lease termination, Tenant shall remove
at Tenant's expense any and all telephone wires, computer cables, and
equipment related thereto, installed by Tenant for Tenant's use during
occupancy of the premises.
22. All wiring installed in Tenant's premises by Tenant or Tenant's agents
shall be done in compliance with the rules and regulations of the State
Building Code Commission and must be inspected and approved by Landlord.
23. Tenant shall become familiar with the proper use and handling of all fire
extinguishers provided by Landlord in Tenant's premises and shall be
responsible for the periodic inspection and maintenance of said
extinguishers in accordance with the manufacturer's instructions.
24. Tenant shall participate in Landlord's semi-annual fire drills for the
Building and shall appoint a fire marshall representing the Tenant and one
additional fire marshal for each group of 50 employees.
25. In accordance with Section 1.5 of the "Regulations Affecting Smoking in
Certain Places" adopted by the Town of Burlington Board of Health on
October 13, 1992, smoking is strictly prohibited by law (a) in all common
areas of the Building (e.g., lobbies, elevators, rest rooms, vacant tenant
spaces, entranceway, vestibules, stairwells, etc.) and (b) within Tenant's
premises unless said premises contain a specifically designated smoking
area which must be separated from nonsmoking areas by physical barriers
and/or ventilation systems. Tenant shall inform its employees of this law
and shall be responsible for any violation of this law by its employees.
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<PAGE>
26. In the event Landlord has deposited a check from Tenant, and said check is
returned to Landlord by Landlord's bank, then Landlord shall charge Tenant
as additional rent a $35 processing fee (the "Processing Fee") for the
returned check. In addition, until Landlord is able to redeposit Tenant's
check, Landlord shall charge interest on the uncollectible funds in
accordance with the provisions of Section 4.5 of the Lease. In the event
the fee charged to Landlord for the returned check increases, then the
Processing Fee shall be increased accordingly.
27. Parking is strictly prohibited in all handicapped spaces (unless vehicle
has the appropriate handicapped sticker or license plate), fire lanes, tow
zones, and other "no parking" areas (the "restricted areas"). Any vehicle
found parking in a restricted area will be issued a citation and fined by
the Burlington Police Department. Repeated violators of this rule will
have their vehicles towed without notice at their own expense. Tenant
shall be responsible for notifying its employees of this rule and shall be
responsible for any violation of this rule by its employees, including, but
not limited to, reimbursing Landlord for all costs incurred in towing
Tenant's employees' vehicles from the restricted areas.
28. Rollerblading and skateboarding are strictly prohibited within New England
Executive Park. Tenant shall be responsible for notifying its employees of
this rule and shall be responsible for any violation of this rule by its
employees.
29. Tenant shall abide by Landlord's move-in/move-out procedures contained in
the Tenant Handbook, including, but not limited to, (i) scheduling Tenant's
move-in and move-out only on weekends or after 6 p.m. Monday through
Friday, and (ii) using only one padded building elevator during these
moves. Tenant must notify Landlord 24 hours in advance so that Landlord
can arrange for the padding of the elevator.
30. The speed limit at all times within New England Executive Park is 20 miles
per hour. Tenant shall adhere to this speed limit, shall be responsible
for notifying its employees of this rule, and shall be responsible for any
violation of this rule by its employees.
31. In the event Landlord permits Tenant to hire its own contractors to perform
any tenant construction work, Tenant shall make its contractors aware of
these Rules and Regulations and shall be responsible for any violation of
these Rules and Regulations by Tenant's contractors.
32. The Building is open from 8 a.m. to 6 p.m., Monday through Friday
(excepting holidays), and from 8 a.m. to 1 p.m. on Saturdays; however, the
Building doors will be locked on weekends and holidays. Therefore, it will
be necessary for Tenant's employees to use their access cards to enter the
Building on weekends and holidays.
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EXHIBIT 6
BUILDING LEGAL DESCRIPTION
All that certain parcel of Registered land with the buildings thereon
situated on Entrance Road and Route 128 in the New England Executive Park in
the Town of Burlington, Middlesex County, Commonwealth of Massachusetts, and
being known and numbered as Eight New England Executive Park in said
Burlington. Said parcel is shown as Lot 40 on Land Court Plan No. 31049-L.
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<PAGE>
RIDER TO LEASE
LANDLORD: EOP-New England Executive Park L.L.C.,
a Delaware limited liability company
TENANT: The Quicksilver Group, Inc.
The subject Lease is hereby amended as follows:
1. SECURITY FOR TENANT'S OBLIGATIONS UNDER LEASE
Tenant shall, at the time that Tenant executes and delivers this Lease to
Landlord, pay to Landlord, in order to secure Tenant's obligations under this
Lease, a security deposit in the amount of Thirty-Five Thousand and 00/100
($35,000.00) Dollars. In no event shall said security deposit be deemed to be
a prepayment of rent nor shall it be considered a measure of liquidated
damages. Tenant agrees that no interest shall accrue on said deposit and
that Landlord shall have no obligation to maintain such deposit in a separate
account (i.e. Landlord shall have the right to commingle such deposit with
other funds of Landlord). In the event that Tenant shall default, beyond the
expiration of applicable notice and grace periods, in any of its obligations
under the Lease, Landlord shall have the right, without further notice to
Tenant, to apply said deposit (or any portion thereof) towards the cure of
any such default and Tenant shall promptly, upon notice from Landlord, pay to
Landlord any amount so applied by Landlord in order to restore the full
amount of said deposit. The application of all or any part of the deposit to
any obligation or default of Tenant under this Lease shall not deprive
Landlord of any other rights or remedies Landlord may have nor shall such
application by Landlord constitute a waiver by Landlord. In addition, in the
event of a termination based upon the default of Tenant under the Lease, or a
rejection of the Lease pursuant to the provisions of the Federal Bankruptcy
Code, Landlord shall have the right to apply the security deposit (from time
to time, if necessary) to cover the full amount of damages and other amounts
due from Tenant to Landlord under the Lease. Any amounts so applied shall, at
Landlord's election, be applied first to any unpaid Yearly Rent and other
charges which were due prior to the filing of the petition for protection
under the Federal Bankruptcy Code. Provided that Tenant is not in default of
any of its obligations under the Lease at the expiration of the term of the
Lease, Landlord shall refund to Tenant any portion of said security deposit
which Landlord is then holding.
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EXHIBIT 10.23
* * * * * * * * * * * * * * * * *
LEASE
HACIENDA WEST
* * * * * * * * * * * * * * * * *
BETWEEN
THE QUICKSILVER GROUP
(TENANT)
AND
SQUARE 24 ASSOCIATES (d.b.a. SQUARE 24 ASSOCIATES L.P.)
(LANDLORD)
<PAGE>
LEASE
THIS LEASE (the "LEASE") is made as of September 14, 1998, (dated for
reference purposes only) between SQUARE 24 ASSOCIATES (d.b.a. SQUARE 24
ASSOCIATES L.P.), a Maryland corporation (the "LANDLORD") and the Tenant as
named in the Schedule below. The term "PROJECT" means the two buildings (the
"BUILDINGS") and other improvements commonly known as "Hacienda West" located in
Pleasanton, California, as more particularly described in EXHIBIT A. The
"PREMISES" means that portion of the Building(s) described in the Schedule and
outlined on EXHIBIT A, attached hereto. The Building or Buildings in which the
Premises are located shall be collectively referred to herein as the "BUILDING".
The following schedule (the "SCHEDULE") is an integral part of this Lease. Terms
defined in this Schedule shall have the same meaning throughout the Lease.
SCHEDULE
1. TENANT: The Quicksilver Group, a _______________ corporation
2. PREMISES: Suite(s) 315 in the Building., as described in EXHIBIT A,
attached hereto
3. BUILDING: 3875 Hopyard Road, Pleasanton, California 94588
4. RENTABLE SQUARE FOOTAGE OF THE PREMISES: 4,905
5. TENANT'S PROPORTIONATE SHARE OF THE BUILDING: 4.92% of Building and 2.35%
of Project (based upon a total of 99,700 rentable square feet in the
Building and 208,624 rentable square feet in the Project)
6. LEASE DEPOSIT: Prepaid Rent $10,791 and Security Deposit $10,791
7. PERMITTED USE: General Office
8. TENANT'S REAL ESTATE BROKER FOR THIS LEASE: Cushman & Wakefield of
California, Inc.
9. LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: Colliers Parrish
International, Inc.
10. TENANT IMPROVEMENTS, IF ANY: None
11. COMMENCEMENT DATE: October 1, 1998
12. TERMINATION DATE/TERM: November 30, 2000 (26 months)
13. BASE YEAR: 1998
14. PARKING STALLS: 18
15. BASE RENT:
<TABLE>
<CAPTION>
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
<S> <C> <C>
Months 1 - 26 $129,492 $10,791
</TABLE>
2
<PAGE>
1. LEASE AGREEMENT. On the terms stated in this Lease, Landlord leases
the Premises to Tenant, and Tenant leases the Premises from Landlord, for the
Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.
A. COMMENCEMENT DATE. The commencement date ("COMMENCEMENT DATE")
for this Lease is the date set forth in the Schedule. Notwithstanding the
foregoing, if Landlord is unable to deliver possession of the Premises to Tenant
on or before the Commencement Date for any reason, then (i) this Lease shall not
be void or voidable by either party, (ii) Landlord shall not be liable to Tenant
for any loss or damage resulting therefrom, and (iii) the Commencement Date
shall be revised to mean the date on which Landlord delivers possession of the
Premises to Tenant and the Termination Date shall be revised accordingly so that
the Term (as defined below) is unaffected by such delay.
B. TERMINATION DATE. If the Commencement Date is revised pursuant to
Section IA above, then the termination date ("TERMINATION DATE") of this Lease
shall be revised to mean the last date of the Term, as set forth in the
Schedule, after the revised Commencement Date, or if the revised Commencement
Date is not the first day of a month, then after the first day of the following
month.
C. EARLY OCCUPANCY. During the period commencing on September 24,
1998 and ending on the Commencement Date (the "EARLY OCCUPANCY PERIOD"), Tenant
shall be permitted to enter the Premises for the sole purpose of installing
certain furniture, fixtures and equipment, provided that Tenant's occupancy of
the Premises during the Early Occupancy Period shall be subject to all of the
terms, covenants and conditions of this Lease (including, without limitation,
Tenant's obligations under Sections 5 (regarding obtaining Landlord's prior
written consent before commencing any alterations) and 9 (regarding Tenant's
indemnity and insurance obligations), except that Landlord agrees that Tenant's
obligation to pay Base Rent, Operating Cost Share Rent and Tax Share Rent (as
such terms are defined in Sections 2.B(1), (2) and (3) below) during the Early
Occupancy Period shall be waived.
2. RENT.
A. TYPES OF RENT. Tenant shall pay the following Rent pursuant to
instructions to be given to Tenant by Landlord prior to the Commencement Date:
(1) BASE RENT in monthly installments in advance, the first
monthly installment payable concurrently with the execution of this Lease and
thereafter on or before the first day of each month of the Term in the amount
set forth on the Schedule.
(2) OPERATING COST SHARE RENT in an amount equal to the
Tenant's Proportionate Share of the excess of Operating Costs for the applicable
fiscal year of the Lease (the "EXCESS OPERATING COSTS") over the Operating
Costs for the Base Year (the "BASE OPERATING COSTS"), paid monthly in advance in
an estimated amount. Definitions of Operating Costs and Tenant's Proportionate
Share, and the method for billing and payment of Operating Cost Share Rent are
set forth in Sections 2B, 2C and 2D.
3
<PAGE>
(3) TAX SHARE RENT in an amount equal to the Tenant's
Proportionate Share of the excess of Taxes for the applicable fiscal year of
this Lease (the "EXCESS TAXES") over the Taxes for the Base Year (the "BASE
TAXES"), paid monthly in advance in an estimated amount. A definition of Taxes
and the method for billing and payment of Tax Share Rent are set forth in
Sections 2B, 2C and 2D.
(4) ADDITIONAL RENT in the amount of all costs, expenses,
liabilities, and amounts which Tenant is required to pay under this Lease,
excluding Base Rent, Operating Cost Share Rent, and Tax Share Rent, but
including any interest for late payment of any item of Rent.
(5) RENT as used in this Lease means Base Rent, Operating
Cost Share Rent, Tax Share Rent and Additional Rent. Tenant's agreement to pay
Rent is an independent covenant, with no right of setoff, deduction or
counterclaim of any kind.
B. PAYMENT OF OPERATING COST SHARE RENT AND TAX SHARE RENT.
(1) PAYMENT OF ESTIMATED OPERATING COST SHARE RENT AND TAX
SHARE RENT. Landlord shall estimate the Operating Costs and Taxes of the Project
by April 1 of each fiscal year, or as soon as reasonably possible thereafter.
Landlord may revise these estimates whenever it obtains more accurate
information, such as the final real estate tax assessment or tax rate for the
Project.
Within ten (10) days after receiving the original or revised estimate
from Landlord setting forth (a) an estimate of Operating Costs for a particular
fiscal year, (b) the Base Operating Costs, and (c) the resulting estimate
of Excess Operating Costs for such fiscal year, Tenant shall pay Landlord
one-twelfth (1/12th) of Tenant's Proportionate Share of the estimated Excess
Operating Costs, multiplied by the number of months that have elapsed in the
applicable fiscal year to the date of such payment including the current month,
minus payments previously made by Tenant for the months elapsed. On the first
day of each month thereafter, Tenant shall pay Landlord one-twelfth (1/12th) of
Tenant's Proportionate Share of this estimate, until a new estimate becomes
applicable.
Within ten (10) days after receiving the original or revised estimate
from Landlord setting forth (a) an estimate of Taxes for a particular fiscal
year, (b) the Base Taxes, and (c) the resulting estimate of Excess Taxes for
such fiscal year, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's
Proportionate Share of the estimated Excess Taxes, multiplied by the number of
months that have elapsed in the applicable fiscal year to the date of such
payment including the current month, minus payments previously made by Tenant
for the months elapsed. On the first day of each month thereafter, Tenant shall
pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share of this
estimate, until a new estimate becomes applicable.
(2) CORRECTION OF OPERATING COST SHARE RENT. Landlord shall
deliver to Tenant a report for the previous fiscal year (the "OPERATING COST
REPORT") by May 15th of each year, or as soon as reasonably possible thereafter,
setting forth (a) the actual Operating Costs incurred, (b) the Base Operating
Costs, (c) the amount of Operating Cost Share Rent due from Tenant, and (d) the
amount of Operating Cost Share Rent paid by Tenant. Within twenty (20) days
after such delivery, Tenant shall pay to Landlord the amount due minus the
amount paid. If the amount paid
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exceeds the amount due, Landlord shall apply the excess to Tenant's payments of
Operating Cost Share Rent next coming due.
(3) CORRECTION OF TAX SHARE RENT. Landlord shall deliver to
Tenant a report for the previous fiscal year (the "TAX REPORT") by May 15th of
each year, or as soon as reasonably possible thereafter, setting forth (a) the
actual Taxes, (b) the Base Taxes, (c) the amount of Tax Share Rent due from
Tenant, and (d) the amount of Tax Share Rent paid by Tenant. Within twenty (20)
days after such delivery, Tenant shall pay to Landlord the amount due from
Tenant minus the amount paid by Tenant. If the amount paid exceeds the amount
due, Landlord shall apply any excess as a credit against Tenant's payments of
Tax Share Rent next coming due.
C. DEFINITIONS.
(1) INCLUDED OPERATING COSTS. "OPERATING COSTS" means any
expenses, costs and disbursements of any kind other than Taxes, paid or incurred
by Landlord in connection with the management, maintenance, operation, insurance
(including the related deductibles), repair and other related activities in
connection with any part of the Project and of the personal property, fixtures,
machinery, equipment, systems and apparatus used in connection therewith,
including the cost of providing those services required to be furnished by
Landlord under this Lease, and a reasonable management fee. Operating Costs
shall also include the costs of any capital improvements which are intended to
reduce Operating Costs or improve safety, and those made to keep the Project in
compliance with governmental requirements applicable from time to time or to
replace existing capital improvements, facilities and equipment within the
Building or the common areas of the Project, such as the roof membrane and
resurfacing of the parking areas (collectively, "INCLUDED CAPITAL ITEMS");
provided, that the costs of any Included Capital Item shall be amortized by
Landlord, together with an amount equal to interest at ten percent (10%) per
annum, over the estimated useful life of such item and such amortized costs are
only included in Operating Costs for that portion of the useful life of the
Included Capital Item which falls within the Term, unless the cost of the
Included Capital Item is less than Ten Thousand Dollars ($10,000) in which case
it shall be expensed in the year in which it was incurred.
If the Project contains more than one building, then Operating Costs
shall include (i) all Operating Costs fairly allocable to the Building, and
(ii) a proportionate share (based on the gross rentable area of the Building as
a percentage of the gross rentable area of all of the Buildings in the Project)
of all Operating Costs which relate to the Project in general and are not fairly
allocable to any one building in the Project.
If the Project is not fully occupied during any portion of any Fiscal
Year, Landlord may adjust (an "EQUITABLE ADJUSTMENT") Operating Costs to equal
what would have been incurred by Landlord had the Project been fully occupied.
This Equitable Adjustment shall apply only to Operating Costs which are variable
and therefore increase as occupancy of the Project increases. Landlord may
incorporate the Equitable Adjustment in its estimates of Operating Costs.
If Landlord does not furnish any particular service whose cost would
have constituted an Operating Cost to a tenant other than Tenant who has
undertaken to perform such service itself, Operating Costs shall be increased by
the amount which Landlord would have incurred if it had furnished the service to
such tenant.
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(2) EXCLUDED OPERATING COSTS. Operating Costs shall not
include:
(a) costs of alterations of tenant premises;
(b) costs of capital improvements other than Included
Capital Items;
(c) interest and principal payments on mortgages or
any other debt costs, or rental payments on any
ground lease of the Project;
(d) real estate brokers' leasing commissions;
(e) legal fees, space planner fees and advertising
expenses incurred with regard to leasing the
Building or portions thereof;
(f) any cost or expenditure for which Landlord is
reimbursed, by insurance proceeds or otherwise,
except by Operating Cost Share Rent;
(g) the cost of any service furnished to any office
tenant of the Project which Landlord does not make
available to Tenant;
(h) depreciation (except on any Included Capital
Items);
(i) franchise or income taxes imposed upon Landlord;
(j) costs of correcting defects in construction of the
Building (as opposed to the cost of normal repair,
maintenance and replacement expected with the
construction materials and equipment installed in
the Building in light of their specifications);
(k) legal and auditing fees which are for the benefit
of Landlord such as collecting delinquent rents,
preparing tax returns and other financial
statements, and audits other than those incurred
in connection with the preparation of reports
required pursuant to Section 2B above;
(l) the wages of any employee for services not related
directly to the management, maintenance, operation
and repair of the Building; and
(m) fines, penalties and interest.
(3) TAXES. "TAXES" means any and all taxes, assessments and
charges of any kind, general or special, ordinary or extraordinary, levied
against the Project which Landlord
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shall pay or become obligated to pay in connection with the ownership, leasing,
renting, management, use, occupancy, control or operation of the Project or of
the personal property, fixtures, machinery, equipment, systems and apparatus
used in connection therewith. Taxes shall include real estate taxes, personal
property taxes, sewer rents, water rents, special or general assessments,
transit taxes, ad valorem taxes, and any tax levied on the rents hereunder or
the interest of Landlord under this Lease (the "RENT TAX"). Taxes shall also
include all fees and other costs and expenses paid by Landlord in reviewing any
tax and in seeking a refund or reduction of any Taxes, whether or not the
Landlord is ultimately successful. Taxes shall also include any assessments or
fees paid to any business park owners association, or similar entity, which are
imposed against the Project pursuant to any Covenants, Conditions and
Restrictions ("CC&R's") recorded against the Project and any installments of
principal and interest required to pay any existing or future general or special
assessments for public improvements, services or benefits, and any increases
resulting from reassessments imposed in connection with any change in ownership
or new construction.
If the Project contains more than one building, then Taxes shall
include (i) all Taxes fairly allocable to the Building, and (ii) a proportionate
share (based on the gross rentable area of the Building as a percentage of the
gross rentable area of all of the Buildings in the Project) of all Taxes which
relate to the Project in general and are not fairly allocable to any one
building in the Project.
For any year, the amount to be included in Taxes (a) from taxes or
assessments payable in installments, shall be the amount of the installments
(with any interest) due and payable during such year, and (b) from all other
Taxes, shall at Landlord's election be the amount accrued, assessed, or
otherwise imposed for such year or the amount due and payable in such year. Any
refund or other adjustment to any Taxes by the taxing authority, shall apply
during the year in which the adjustment is made. Taxes shall not include any net
income (except Rent Tax), capital, stock, succession, transfer, franchise, gift,
estate or inheritance tax, except to the extent that such tax shall be imposed
in lieu of any portion of Taxes.
(4) LEASE YEAR. "LEASE YEAR" means each consecutive
twelve-month period beginning with the Commencement Date, except that if the
Commencement Date is not the first day of a calendar month, then the first Lease
Year shall be the period from the Commencement Date through the final day of the
twelve months after the first day of the following month, and each subsequent
Lease Year shall be the twelve months following the prior Lease Year.
(5) FISCAL YEAR. "FISCAL YEAR" means the calendar year,
except that the first Fiscal Year and the last Fiscal Year of the Term may be a
partial calendar year.
D. COMPUTATION OF BASE RENT AND RENT ADJUSTMENTS.
(1) PRORATIONS. If this Lease begins on a day other than the
first day of a month, the Base Rent, Operating Cost Share Rent and Tax Share
Rent shall be prorated for such partial month based on the actual number of days
in such month. If this Lease begins on a day other than the first day, or ends
on a day other than the last day, of the Fiscal Year, Operating Cost Share Rent
and Tax Share Rent shall be prorated for the applicable Fiscal Year.
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(2) DEFAULT INTEREST. Any sum due from Tenant to Landlord not
paid when due shall bear interest from the date due until paid at the lesser of
eighteen percent (18%) per annum or the maximum rate permitted by law.
(3) RENT ADJUSTMENTS. The square footage of the Premises and
the Building set forth in the Schedule are conclusively deemed to be the actual
square footage thereof, without regard to any subsequent remeasurement of the
Premises or the Building. If any Operating Cost paid in one Fiscal Year relates
to more than one Fiscal Year, Landlord may proportionately allocate such
Operating Cost among the related Fiscal Years.
(4) BOOKS AND RECORDS. Landlord shall maintain books and
records reflecting the Operating Costs and Taxes in accordance with sound
accounting and management practices. Tenant and its certified public accountant
shall have the right to inspect Landlord's records at Landlord's applicable
local office or other location designated by Landlord upon at least seventy-two
(72) hours' prior notice during normal business hours during the ninety (90)
days following the respective delivery of the Operating Cost Report or the Tax
Report. The results of any such inspection shall be kept strictly confidential
by Tenant and its agents, and Tenant and its certified public accountant must
agree, in their contract for such services, to such confidentiality restrictions
and shall specifically agree that the results shall not be made available to any
other tenant of the Project. Unless Tenant sends to Landlord any written
exception to either such report within said ninety (90) day period, such report
shall be deemed final and accepted by Tenant. Tenant shall pay the amount shown
on both reports in the manner prescribed in this Lease, whether or not Tenant
takes any such written exception, Without any prejudice to such exception. If
Tenant makes a timely exception, Landlord shall cause its independent certified
public accountant to issue a final and conclusive resolution of Tenant's
exception. Tenant shall pay the cost of such certification unless Landlord's
original determination of annual Operating Costs and Taxes in the aggregate
overstated the amounts thereof by more than five percent (5%).
(5) MISCELLANEOUS. So long as Tenant is in default of any
obligation under this Lease, Tenant shall not be entitled to any refund of any
amount from Landlord. If this Lease is terminated for any reason prior to the
annual determination of Operating Cost Share Rent or Tax Share Rent, either
party shall pay the full amount due to the other within fifteen (15) days after
Landlord's notice to Tenant of the amount when it is determined. Landlord may
commingle any payments made with respect to Operating Cost Share Rent or Tax
Share Rent, without payment of interest.
3. PREPARATION AND CONDITION OF PREMISES; TENANT'S POSSESSION.
A. CONDITION OF PREMISES. Except to the extent of any Tenant
Improvements item on the Schedule, Landlord is leasing the Premises to Tenant
"as is" with the existing paint and carpet, without any obligation to alter,
remodel, improve, repair or decorate any part of the Premises.
B. TENANT'S POSSESSION. Tenant's taking possession of any portion of
the Premises (including during the Early Occupancy Period) shall be conclusive
evidence that the Premises was in good order, repair and condition. Throughout
the Term, Tenant shall maintain the
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Premises in their condition as of the Completion Date, loss or damage caused by
the elements, ordinary wear, and fire and other casualty excepted, and at the
termination of this Lease, or Tenant's right to possession, Tenant shall return
the Premises to Landlord in the condition required under Section 14 below. To
the extent Tenant falls to perform either obligation, Landlord may, but need
not, restore the Premises to such condition and Tenant shall pay the cost
thereof.
4. PROJECT SERVICES.
Landlord shall furnish services as follows:
A. HEATING AND AIR CONDITIONING. During the normal business hours of
8:00 a.m. to 6:00 p.m., Monday through Friday, and 8:00 a.m. to 1:00 p.m. on
Saturday, Landlord shall furnish heating and air conditioning to provide a
comfortable temperature, in Landlord's judgment, for normal business operations,
except to the extent Tenant installs equipment which adversely affects the
temperature maintained by the air conditioning system. If Tenant installs such
equipment, Landlord may install supplementary air conditioning units in the
Premises, and Tenant shall pay to Landlord upon demand as Additional Rent the
cost of installation, operation and maintenance thereof.
Landlord shall furnish heating and air conditioning after business hours if
Tenant provides Landlord reasonable prior notice, and pays Landlord all the then
current charges for such additional heating or air conditioning.
B. ELEVATORS. If the Building is equipped with one or more
elevators, Landlord shall provide passenger elevator service during normal
business hours to Tenant in common with Landlord and all other tenants. Landlord
shall provide limited passenger service at other times, except in case of an
emergency. If applicable, Landlord shall provide freight elevator service at
reasonable hours at Tenant's request, subject to scheduling by the Landlord and
payment for the service by Tenant.
C. ELECTRICITY. Landlord shall provide sufficient electricity to
operate normal office lighting and office equipment. Tenant shall not install or
operate in the Premises any electrically operated equipment or other machinery,
other than business machines and equipment normally employed for general office
use which do not require high electricity consumption for operation, without
obtaining the prior written consent of Landlord. If any or all of Tenant's
equipment requires electricity consumption in excess of that which is necessary
to operate normal office equipment, such consumption (including consumption for
computer or telephone rooms and special HVAC equipment) shall be submetered by
Landlord at Tenant's expense, and Tenant shall reimburse Landlord as Additional
Rent for the cost of its submetered consumption based upon Landlord's average
cost of electricity. Such Additional Rent shall be in addition to Tenant's
obligations pursuant to Section 2A(2) to pay its Proportionate Share of
Operating Costs.
D. WATER. Landlord shall furnish hot and cold tap water for drinking
and toilet purposes. Tenant shall pay Landlord for water furnished for any other
purpose as Additional Rent at rates fixed by Landlord. Such Additional Rent
shall be in addition to Tenant's obligations pursuant to Section 2A(2) to pay
its Proportionate Share of Operating Costs. Tenant shall not permit water to be
wasted.
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E. JANITORIAL SERVICE. Landlord shall furnish janitorial service
Monday through Friday as generally provided to other tenants in the Project.
With reasonable prior notice from Tenant, Landlord shall also provide additional
janitorial service on weekends or holidays at Tenant's expense, and Tenant shall
reimburse Landlord as Additional Rent for the cost of such additional janitorial
services. Such Additional Rent shall be in addition to Tenant's obligations
pursuant to Section 2A(2) to pay its Proportionate Share of Operating Costs.
F. INTERRUPTION OF SERVICES. If any of the Building equipment or
machinery ceases to function properly for any cause Landlord shall use
reasonable diligence to repair the same promptly. Landlord's inability to
furnish, to any extent, the Project services set forth in this Section 4, or any
cessation thereof resulting from any causes, including any entry for repairs
pursuant to this Lease, and any renovation, redecoration or rehabilitation of
any area of the Building shall not render Landlord liable for damages to either
person or property or for interruption or loss to Tenant's business, nor be
construed as an eviction of Tenant, nor work an abatement of any portion of
Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
5. ALTERATIONS AND REPAIRS.
A. LANDLORD'S CONSENT AND CONDITIONS. Tenant shall not make any
improvements or alterations to the Premises (the "WORK") without in each
instance submitting plans and specifications for the Work to Landlord and
obtaining Landlord's prior written consent. Tenant shall pay Landlord's standard
charge (or, if Landlord does not have a standard charge, then Landlord's actual
costs incurred) for review of all of the plans and all other items submitted by
Tenant. Landlord will be deemed to be acting reasonably in withholding its
consent for any Work which (a) impacts the base structural components or systems
of the Building, (b) impacts any other tenant's premises, or (c) is visible from
outside the Premises.
Tenant shall pay for the cost of all Work, including the cost of any and
all approvals, permits, fees and other charges which may be required as a
condition of performing such Work. Upon completion, all Work shall become the
property of Landlord, except for Tenant's trade fixtures and for items which
Landlord requires Tenant to remove at Tenant's cost at the termination of the
Lease pursuant to Section 5E.
The following requirements shall apply to all Work:
(1) Prior to commencement, Tenant shall furnish to Landlord
building permits, certificates of insurance satisfactory to Landlord, and, at
Landlord's request, security for payment of all costs.
(2) Tenant shall perform all Work so as to maintain peace and
harmony among other contractors serving the Project and shall avoid interference
with other work to be performed or services to be rendered in the Project.
(3) The Work shall be performed in a good and workmanlike
manner, meeting the standard for construction and quality of materials in the
Building, and shall comply with all insurance requirements and all applicable
governmental laws, ordinances and regulations ("GOVERNMENTAL REQUIREMENTS").
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(4) Tenant shall perform all Work so as to minimize or
prevent disruption to other tenants, and Tenant shall comply with all reasonable
requests of Landlord in response to complaints from other tenants.
(5) Tenant shall perform all Work in compliance any
"Policies, Rules and Procedures for Construction Projects" which may be in
effect at the time the Work is performed.
(6) Tenant shall permit Landlord to supervise all Work.
Landlord may charge a supervisory fee not to exceed fifteen percent (15%) of
labor, material, and all other costs of the Work, if Landlord's employees or
contractors perform the Work.
(7) Upon completion, Tenant shall furnish Landlord With
contractor's affidavits and full and final statutory waivers of liens, as-built
plans and specifications, and receipted bills covering all labor and materials,
and all other close-out documentation related to the Work, including any other
information required under any "Policies, Rules and Procedures for Construction
Projects" which may be in effect at the time.
B. REPAIRS. If any part of the mechanical, electrical or other
systems in the Premises (e.g., HVAC, life safety or fire extinguisher/sprinkler
system) shall be damaged, Tenant shall promptly notify Landlord, and Landlord
shall repair such damage. Landlord may also at any reasonable time make any
repairs or alterations which Landlord deems necessary for the safety or
protection of the Project, or which Landlord is required to make by any court or
pursuant to any Governmental Requirement. Tenant shall at its expense make all
other repairs necessary to keep the Premises, and Tenant's fixtures and personal
property, in good order, condition and repair in compliance with all applicable
Governmental Requirements; to the extent Tenant falls to do so, Landlord may
make such repairs itself. The cost of any repairs made by Landlord on account of
Tenant's default, or on account of the mis-use or neglect by Tenant or its
invitees, contractors or agents anywhere in the Project, shall become Additional
Rent payable by Tenant on demand. It is a condition precedent to all Landlord's
obligations to repair and maintain that Tenant shall have notified Landlord of
the need of such repairs or maintenance. Tenant waives the provisions of
Sections 1941 and 1942 of the California Civil Code and any similar or successor
law regarding Tenant's right to make repairs and deduct the cost of such repairs
from the Rent due under this Lease.
C. NO LIENS. Tenant has no authority to cause or permit any lien or
encumbrance of any kind to affect Landlord's interest in the Project; any such
lien or encumbrance shall attach to Tenant's interest only. If any mechanic's
lien shall be filed or claim of lien made for work or materials furnished to
Tenant, then Tenant shall at its expense within ten (10) days thereafter either
discharge or contest the lien or claim. If Tenant contests the lien or claim,
then Tenant shall (i) within such ten (10) day period, provide Landlord adequate
security for the lien or claim, (ii) contest the lien or claim in good faith by
appropriate proceedings that operate to stay its enforcement, and (iii) pay
promptly any final adverse judgment entered in any such proceeding. If Tenant
does not comply with these requirements, Landlord may discharge the lien or
claim, and the amount paid, as well as attorney's fees and other expenses
incurred by Landlord, shall become Additional Rent payable by Tenant on demand.
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D. OWNERSHIP OF IMPROVEMENTS. All Work as defined in this Section 5,
partitions, hardware, equipment, machinery and all other improvements and all
fixtures except trade fixtures, constructed in the Premises by either Landlord
or Tenant, (i) shall become Landlord's property upon installation without
compensation to Tenant, unless Landlord consents otherwise in writing, and
(ii) shall at Landlord's option either (a) be surrendered to Landlord with the
Premises at the termination of the Lease or of Tenant's right to possession, or
(b) be removed in accordance with Subsection 5E below (unless Landlord at the
time it gives its consent to the performance of such construction expressly
waives in writing the right to require such removal).
E. REMOVAL UPON TERMINATION. Upon the termination of this Lease or
Tenant's right of possession Tenant shall remove from the Premises and Project
its trade fixtures, furniture, moveable equipment and other personal property,
any improvements which Landlord elects pursuant to Section 5D shall be removed
by Tenant, and any improvements to any portion of the Project other than the
Premises. If Tenant does not timely remove such property, then Tenant shall be
conclusively presumed to have, at Landlord's election (i) conveyed such property
to Landlord without compensation or (ii) abandoned such property, and Landlord
may dispose of or store any part thereof in any manner at Tenant's sole cost,
without waiving Landlord's right to claim from Tenant all expenses arising out
of Tenant's failure to remove the property, and without liability to Tenant or
any other person. Landlord shall have no duty to be a bailee of any such
personal property. If Landlord elects abandonment, Tenant shall pay to Landlord,
upon demand, any expenses incurred for disposition.
6. USE OF PREMISES.
A. LIMITATION ON USE. Tenant shall use the Premises only for the
Permitted Use stated in the Schedule. Tenant shall not allow any use of the
Premises which will negatively affect the cost of coverage of Landlord's
insurance on the Project. Tenant shall not allow any inflammable or explosive
liquids or materials to be kept on the Premises. Tenant shall not allow any use
of the Premises which would cause the value or utility of any part of the
Premises to diminish or would interfere with any other tenant or with the
operation of the Project by Landlord. Tenant shall not permit any nuisance or
waste upon the Project, or allow any offensive noise or odor in or around the
Project. At the end of each business day, or more frequently if necessary,
Tenant shall deposit all garbage and other trash (excluding any inflammable,
explosive and/or hazardous materials) in trash bins or containers approved by
Landlord in locations designated by Landlord from time to time. If any
governmental authority shall deem the Premises to be a "place of public
accommodation" under the Americans with Disabilities Act or any other comparable
law as a result of Tenant's use, Tenant shall either modify its use to cause
such authority to rescind its designation or be responsible for any alterations,
structural or otherwise, required to be made to the Building or the Premises
under such laws.
B. SIGNS. Tenant shall not place on any portion of the Premises any
sign, placard, lettering, banner, displays or other advertising or communicative
material which is visible from the exterior of the Building without the prior
written approval of Landlord. Any approved signs shall strictly conform to all
Governmental Restrictions, any CC&R's recorded against the Project, and
Landlord's Signage Standards in effect at the time, and shall be installed (and
removed upon the
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Termination Date) at Tenant's expense. Tenant, at its sole cost and expense,
shall maintain such signs in good condition and repair, including the repair of
any damage caused to the Building and/or Project upon the removal of such signs.
Landlord current Signage Standards are attached hereto as EXHIBIT C. Landlord
shall install the Building standard sign containing Tenant's name at the
entrance to the Premises and include Tenant's name in the tenant directory
located in the lobby in the first floor of the Building.
C. PARKING. Tenant shall have the right to park in the Project's
parking facilities in common with other tenants of the Project upon terms and
conditions, as may from time to time be established by Landlord. Tenant agrees
not to overburden the parking facilities (i.e., use more than the number of
parking stalls indicated on the Schedule) and agrees to cooperate with Landlord
and other tenants in the Project in the use of the parking facilities. Landlord
reserves the right in its discretion to determine whether the parking facilities
are becoming crowded and to allocate and assign parking spaces among Tenant and
the other tenants in the Project. Landlord shall not be liable to Tenant, nor
shall this Lease be affected, if any parking is impaired by moratorium,
initiative, referendum, law, ordinance, regulation or order passed, issued or
made by any governmental or quasi-governmental body.
D. PROHIBITION AGAINST USE OF ROOF AND STRUCTURE OF BUILDING.
Tenant shall be prohibited from using any all or any portion of the roof of the
Building or any portion of the structure of the Building during the Term of
this Lease (or any extensions thereof) for any purposes (including without
limitation for the installation, maintenance and repair of a satellite dish
and/or other telecommunications equipment), without the prior written consent of
Landlord, which consent Landlord may withhold in its sole and absolute
discretion. Any use of the roof or the structure of the Building for satellite
dish or antennae purposes shall be pursuant to the terms of a separate license
agreement and not this Lease. Nothing herein shall limit or restrict Landlord's
rights under Section 11.N, or require Landlord to obtain Tenant's consent prior
to exercising such rights.
7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall comply with
all Governmental Requirements applying to its use, repair and maintenance of the
Premises. Tenant shall also comply with all reasonable rules for the Project
which may be established and amended from time to time by Landlord. The present
rules and regulations are contained in Exhibit B. Failure by another tenant to
comply with the rules or failure by Landlord to enforce them shall not relieve
Tenant of its obligation to comply with the rules or make Landlord responsible
to Tenant in any way. Landlord shall use reasonable efforts to apply the rules
and regulations uniformly with respect to Tenant and any other tenants in the
Project under leases containing rules and regulations similar to this Lease. In
the event of alterations and repairs performed by Tenant, Tenant shall comply
with the provisions of Section 5 of this Lease and also any applicable
"Policies, Rules and Regulations for Construction Projects" which may be
established and in effect at the time.
8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.
A. WAIVER OF CLAIMS. To the extent permitted by law, Tenant waives
any claims it may have against Landlord or its officers, directors, employees or
agents for business interruption or damage to property sustained by Tenant as
the result of any act or omission of Landlord, its agents or employees. To the
extent permitted by law, Landlord waives any claims it may have against
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Tenant or its officers, directors, employees or agents for loss of rents or
damage to property sustained by Landlord as the result of any act or omission of
Tenant, its agents or employees.
B. INDEMNIFICATION. Tenant shall indemnify, defend and hold harmless
Landlord and its officers, directors, employees and agents against any claim by
any third party for injury to any person or damage to or loss of any property
occurring in or around the Project and arising from the use of the Premises or
from any other act or omission or negligence of Tenant, its employees, agents or
invitees, or Tenant's breach of its obligations under this Lease. Tenant's
obligations under this Section shall survive the termination of this Lease.
Landlord shall indemnify, defend and hold harmless Tenant and its officers,
directors, employees and agents against any claim by any third party for injury
or damage to person or the Premises to the extent caused by the gross negligence
or intentional misconduct of Landlord or any of Landlord's employees or agents,
or Landlord's breach of its obligations under this Lease. Landlord's obligations
under this section shall survive the termination of this Lease.
C. TENANT'S INSURANCE. Tenant shall maintain insurance as follows,
with such other terms, coverages and insurers, as Landlord shall reasonably
require from time to time:
(1) Commercial General Liability Insurance, with (a)
Contractual Liability including the indemnification provisions contained in this
Lease, (b) a severability of interest endorsement, (c) limits of not less than
Two Million Dollars ($2,000,000) combined single limit per occurrence and not
less than Two Million Dollars ($2,000,000) in the aggregate for bodily injury,
sickness or death, and property damage, and umbrella coverage of not less than
Five Million Dollars ($5,000,000).
(2) Property Insurance against "All Risks" of physical loss
covering the replacement cost of all improvements, fixtures and personal
property. Tenant waives all rights of subrogation, and Tenant's property
insurance shall include a waiver of subrogation in favor of Landlord.
(3) Workers' compensation or similar insurance in form and
amounts required by law, and Employer's Liability with not less than the
following limits*
Each Accident $500,000
Disease--Policy Limit $500,000
Disease--Each Employee $500,000
Such insurance shall contain a waiver of subrogation provision in
favor of Landlord and its agents.
Tenant's insurance shall be primary and not contributory to that
carried by Landlord, its agents, or mortgagee. Landlord, and if any, Landlord's
building manager or agent and ground lessor shall be named as additional
insureds as respects to insurance required of the Tenant in Section 8C(1). The
company or companies writing any insurance which Tenant is required to maintain
under this Lease, as well as the form of such insurance, shall at all times be
subject to Landlord's approval,
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and any such company shall be licensed to do business in the state in which the
Building is located. Such insurance companies shall have a A.M. Best rating of A
VI or better.
(4) Tenant shall cause any contractor of Tenant performing
work on the Premises to maintain insurance as follows, with such other terms,
coverages and insurers, as Landlord shall reasonably require from time to time:
(a) Commercial General Liability Insurance, including
contractor's liability coverage, contractual liability coverage, completed
operations coverage, broad form property damage endorsement, and contractor's
protective liability coverage, to afford protection with limits, for each
occurrence, of not less than One Million Dollars ($1,000,000) with respect to
personal injury, death or property damage.
(b) Workers' compensation or similar insurance in form
and amounts required by law, and Employer's Liability with not less than the
following limits:
Each Accident $500,000
Disease--Policy Limit $500,000
Disease--Each Employee $500,000
Such insurance shall contain a waiver of subrogation provision in
favor of Landlord and its agents.
Tenant's contractor's insurance shall be primary and not
contributory to that carried by Tenant, Landlord, their agents or mortgagees.
Tenant and Landlord, and if any, Landlord's building manager or agent, mortgagee
or ground lessor shall be named as additional insured on Tenant's contractor's
insurance policies.
D. INSURANCE CERTIFICATES. Tenant shall deliver to Landlord
certificates evidencing all required insurance no later than five (5) days prior
to the Commencement Date and each renewal date. Each certificate will provide
for thirty (30) days prior written notice of cancellation to Landlord and
Tenant.
E. LANDLORD'S INSURANCE. Landlord shall maintain "All-Risk" property
insurance at replacement cost, including loss of rents, on the Building, and
Commercial General Liability insurance policies covering the common areas of the
Project, each with such terms, coverages and conditions as are normally carried
by reasonably prudent owners of properties similar to the Project. With respect
to property insurance, Landlord and Tenant mutually waive all rights of
subrogation, and the respective "All-Risk" coverage property insurance policies
carried by Landlord and Tenant shall contain enforceable waiver of subrogation
endorsements.
9. FIRE AND OTHER CASUALTY.
A. TERMINATION. If a fire or other casualty causes substantial
damage to the Building or the Premises, and sufficient insurance proceeds will
be available to Landlord to cover the cost of any restoration to the Building
and Premises, Landlord shall engage a registered architect to
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certify within one (1) month of the casualty to both Landlord and Tenant the
amount of time needed to restore the Building and the Premises to tenantability,
using standard working methods without the payment of overtime and other
premiums. If the time needed exceeds twelve (12) months from the beginning of
the restoration, or two (2) months therefrom if the restoration would begin
during the last twelve (12) months of the Lease, then in the case of the
Premises, either Landlord or Tenant may terminate this Lease, and in the case of
the Building, Landlord may terminate this Lease, by notice to the other party
within ten (10) days after the notifying party's receipt of the architect's
certificate. If sufficient insurance proceeds will not be available to Landlord
to cover the cost of any restoration to the Building or the Premises, Landlord
may terminate this Lease by written notice to Tenant. Any termination pursuant
to this Section 9A shall be effective thirty (30) days from the date of such
termination notice and Rent shall be paid by Tenant to that date, with an
abatement for any portion of the space which has been untenantable after the
casualty.
B. RESTORATION. If a casualty causes damage to the Building or
the Premises but this Lease is not terminated for any reason, then subject to
the rights of any mortgagees or ground lessors, Landlord shall obtain the
applicable insurance proceeds and diligently restore the Building and the
Premises subject to current Governmental Requirements. Landlord's obligation,
should it elect or be obligated to repair or rebuild, shall be limited to the
basic Premises, the building-standard Tenant Improvements, or the basic
Building, as the case may be, and Tenant shall, at Tenant's expense, replace
or fully repair its damaged improvements (including any Tenant Improvements
in excess of the building standard), personal property and fixtures. Rent
shall be abated on a per diem basis during the restoration for any portion of
the Premises which is untenantable, except to the extent that the casualty
was caused by the negligence or intentional misconduct of Tenant, its agents
or employees. Tenant shall not be entitled to any compensation or damages
from Landlord for loss of the use of the Premises, damage to Tenant's
personal property and trade fixtures or any inconvenience occasioned by such
damage, repair or restoration. Tenant hereby waives the provisions of Section
1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil
Code, and the provisions of any similar law hereinafter enacted.
10. EMINENT DOMAIN. If a part of the Project is taken by eminent domain or
deed in lieu thereof which is so substantial that the Premises cannot reasonably
be used by Tenant for the operation of its business, then either party may
terminate this Lease effective as of the date of the taking. If any substantial
portion of the Project is taken without affecting the Premises, then Landlord
may terminate this Lease as of the date of such taking. Rent shall abate from
the date of the taking in proportion to any part of the Premises taken. The
entire award for a taking of any kind shall be paid to Landlord, and Tenant
shall have no right to share in the award; provided, however, that nothing
contained herein shall be deemed to give Landlord any interest in or require
Tenant to assign to Landlord any separate award made to Tenant for the taking of
Tenant's personal property and trade fixtures, or its relocation costs. All
obligations accrued to the date of the taking shall be performed by each party.
11. RIGHTS RESERVED TO LANDLORD.
Landlord may exercise at any time any of the following rights respecting
the operation of the Project without liability to the Tenant of any kind:
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A. NAME. To change the name of all or any of the Buildings or the
Project, or the street address of the Buildings or the suite number(s) of the
Premises.
B. SIGNS. To install, modify and/or maintain any signs on the
exterior and in the interior of the Buildings or on the Project, and to approve
at its sole discretion, prior to installation, any of Tenant's signs in the
Premises visible from the common areas or the exterior of the Building.
C. WINDOW TREATMENTS. To approve, at its discretion, prior to
installation, any shades, blinds, ventilators or window treatments of any kind,
as well as any lighting within the Premises that may be visible from the
exterior of the Building or any interior common area.
D. KEYS. To retain and use at any time passkeys to enter the
Premises or any door within the Premises. Tenant shall not alter or add any lock
or bolt.
E. ACCESS. To have access to the Premises with twenty four hour
prior notice (except in the case of an emergency in which case Landlord shall
have the right to immediate access) to inspect the Premises, and to perform its
obligations, or make repairs, alterations, additions or improvements, as
permitted by this Lease.
F. PREPARATION FOR REOCCUPANCY. To decorate, remodel, repair, alter
or otherwise prepare the Premises for reoccupancy at any time after Tenant
abandons the Premises, without relieving Tenant of any obligation to pay Rent.
G. HEAVY ARTICLES. To approve the weight, size, placement and time
and manner of movement within the Building of any safe, central filing system
or other heavy article of Tenant's property. Tenant shall move its property
entirely at its own risk.
H. SHOW PREMISES. To show the Premises to prospective purchasers,
tenants, brokers, lenders, investors, rating agencies or others at any
reasonable time, provided that Landlord gives prior notice to Tenant and does
not materially interfere with Tenant's use of the Premises.
I. RELOCATION OF TENANT. To relocate the Tenant, upon thirty days'
prior written notice, from all or part of the Premises (the "OLD PREMISES") to
another area in the Project (the "New Premises"), provided that:
(1) the size of the New Premises is at least equal to the
size of the Old Premises;
(2) Landlord pays the cost of moving the Tenant and improving
the New Premises to the standard of the Old Premises. Tenant shall cooperate
with Landlord in all reasonable ways to facilitate the move, including
supervising the movement of files or fragile equipment, designating new
locations for furniture, equipment and new telephone and electrical outlets, and
determining the color of paint in the New Premises.
J. USE OF LOCKBOX. To designate a lockbox collection agent for
collections of amounts due Landlord. In that case, the date of payment of Rent
or other sums shall be the date of
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the agent's receipt of such payment or the date of actual collection if payment
is made in the form of a negotiable instrument thereafter dishonored upon
presentment. However, Landlord may reject any payment for all purposes as of the
date of receipt or actual collection by mailing to Tenant within 21 days after
such receipt or collection a check equal to the amount sent by Tenant.
K. REPAIRS AND ALTERATIONS. To make repairs or alterations to the
Project and in doing so transport any required material through the Premises, to
close entrances, doors, corridors, elevators and other facilities in the
Project, to open any ceiling in the Premises, or to temporarily suspend services
or use of common areas in the Building. Landlord may perform any such repairs
or alterations during ordinary business hours, except that Tenant may require
any Work in the Premises to be done after business hours if Tenant pays Landlord
for overtime and any other expenses incurred. Landlord may do or permit any work
on any nearby building, land, street, alley or way.
L. LANDLORD'S AGENTS. If Tenant is in default under this Lease,
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.
M. BUILDING SERVICES. To install, use and maintain through the
Premises, pipes, conduits, wires and ducts serving the Building, provided that
such installation, use and maintenance does not unreasonably interfere with
Tenant's use of the Premises.
N. USE OF ROOF. To permit Landlord (or any entity selected by
Landlord) to install, operate, maintain and repair any satellite dish, antennae,
equipment, or other facility on the roof of the Building or to use the roof of
the Building in any other manner, provided that such installation, operation,
maintenance, repair or use does not unreasonably interfere with Tenant's use of
the Premises.
0. OTHER ACTIONS. To take any other action which Landlord deems
reasonable in connection with the operation, maintenance or preservation of the
Building.
12. TENANT'S DEFAULT.
Any of the following shall constitute a default by Tenant:
A. RENT DEFAULT. Tenant fails to pay any Rent when due;
B. ASSIGNMENT/SUBLEASE OR HAZARDOUS SUBSTANCES DEFAULT. Tenant
defaults in its obligations under Section 17 Assignment and Sublease or Section
28 Hazardous Substances;
C. OTHER PERFORMANCE DEFAULT. Tenant fails to perform any other
obligation to Landlord under this Lease, and this failure continues for ten (10)
days after written notice from Landlord, except that if Tenant begins to cure
its failure within the ten (10) day period but cannot reasonably complete its
cure within such period, then, so long as Tenant continues to diligently attempt
to cure its failure, the ten (10) day period shall be extended to sixty (60)
days, or such lesser period as is reasonably necessary to complete the cure;
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D. CREDIT DEFAULT. One of the following credit defaults occurs:
(1) Tenant commences any proceeding under any law relating to
bankruptcy, insolvency, reorganization or relief of debts, or seeks appointment
of a receiver, trustee, custodian or other similar official for the Tenant or
for any substantial part of its property, or any such proceeding is commenced
against Tenant and either remains undismissed for a period of thirty (30) days
or results in the entry of an order for relief against Tenant which is not fully
stayed within seven (7) days after entry;
(2) Tenant becomes insolvent or bankrupt, does not generally
pay its debts as they become due, or admits in writing its inability to pay its
debts, or makes a general assignment for the benefit of creditors;
(3) Any third party obtains a levy or attachment under
process of law against Tenant's leasehold interest.
E. VACATION OR ABANDONMENT DEFAULT. Tenant vacates or abandons the
Premises.
13. LANDLORD REMEDIES. Upon a default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively or
in the alternative:
A. Landlord may continue this Lease in full force and effect, and
this Lease shall continue in full force and effect as long as Landlord does not
terminate this Lease, and Landlord shall have the right to collect Rent when
due.
B. Landlord may enter the Premises and release them to third parties
for Tenant's account for any period, whether shorter or longer than the
remaining Term. Tenant shall be liable immediately to Landlord for all costs
Landlord incurs in reletting the Premises or any part thereof, including,
without limitation, broker's commissions, expenses of cleaning and redecorating
the Premises required by the reletting and like costs. Tenant shall pay to
Landlord the Rent and other sums due under this Lease on the date the Rent is
due, less the rent and other sums received by Landlord from any releasing. No
act by Landlord other than giving written notice to Tenant shall terminate this
Lease. Acts of maintenance, efforts to relet the Premises or the appointment of
a receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of Tenant's right to possession.
C. Landlord may terminate this Lease by giving Tenant written notice
of termination, in which event this Lease shall terminate on the date for
termination set forth in such notice. Tenant shall immediately vacate the
Premises and deliver possession to Landlord, and Landlord may repossess the
Premises and may, at Tenant's sole cost, remove any of Tenant's signs and any of
its other property, without relinquishing its right to receive Rent or any other
right against Tenant. On termination, Landlord has the right to recover from
Tenant as damages:
(1) The worth at the time of award of unpaid Rent and other
sums due and payable which had been earned at the time of termination; plus
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(2) The worth at the time of award of the amount by which the
unpaid Rent and other sums due and payable which after termination until the
time of award exceeds the amount of such Rent loss that Tenant proves could have
been reasonably avoided; plus
(3) The worth at the time of award of the amount by which the
unpaid Rent and other sums due and payable for the balance of the Term after the
time of award exceeds the amount of such Rent loss that Tenant proves could be
reasonably avoided; plus
(4) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which, in the ordinary course of things, would
be likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord: (i) in retaking possession of the Premises;
(ii) in maintaining, repairing, preserving, restoring, replacing, cleaning,
altering or rehabilitating the Premises or any portion thereof, including such
acts for reletting to a new tenant or tenants; (iii) for leasing commissions; or
(iv) for any other costs necessary or appropriate to relet the Premises; plus
(5) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by the laws of
the State of California.
The "worth at the time of award" of the amounts referred to in Sections
13C(1) and 13C(2) is computed by allowing interest at the maximum rate permitted
by law on the unpaid rent and other sums due and payable from the termination
date through the date of award. The "worth at the time of award" of the amount
referred to in Section 13C(3) is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%). Tenant waives redemption or relief from forfeiture under
California Code of Civil Procedure Sections 1174 and 1179, or under any other
present or future law, in the event Tenant is evicted or Landlord takes
possession of the Premises by reason of any default of Tenant hereunder.
D. LANDLORD'S REMEDIES CUMULATIVE. All of Landlord's remedies under
this Lease shall be in addition to all other remedies Landlord may have at law
or in equity. Waiver by Landlord of any breach of any obligation by Tenant shall
be effective only if it is in writing, and shall not be deemed a waiver of any
other breach, or any subsequent breach of the same obligation. Landlord's
acceptance of payment by Tenant shall not constitute a waiver of any breach by
Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or
termination of the Lease or of Tenant's right to possession, the acceptance
shall not affect such notice or termination. Acceptance of payment by Landlord
after commencement of a legal proceeding or final judgment shall not affect such
proceeding or judgment. Landlord may advance such monies and take such other
actions for Tenant's account as reasonably may be required to cure or mitigate
any default by Tenant. Tenant shall immediately reimburse Landlord for any such
advance, and such sums shall bear interest at the default interest rate until
paid.
E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN THE
EVENT OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS
LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH
THIS LEASE IN A FEDERAL OR
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STATE COURT LOCATED IN CALIFORNIA, CONSENTS TO THE JURISDICTION OF SUCH COURTS,
AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING TRANSFERRED FROM SUCH COURTS ON THE
GROUND OF IMPROPER VENUE OR INCONVENIENT FORUM.
F. LITIGATION COSTS. Tenant shall pay Landlord's reasonable
attorneys' fees and other costs in enforcing this Lease, whether or not suit is
filed.
14. SURRENDER. Upon the expiration or earlier termination of this Lease
for any reason, Tenant shall surrender the Premises to Landlord in its condition
existing as of the Commencement Date, normal wear and tear and damage by fire or
other casualty excepted, with all interior walls repaired and repainted if
marked or damaged, all carpets broom cleaned, all broken, marred or
nonconforming acoustical ceiling tiles replaced, all windows washed, the
plumbing and electrical systems and lighting in good order and repair, including
replacement of any burned out or broken light bulb or ballasts, and all floors
broom cleaned, all to the reasonable satisfaction of Landlord. Tenant shall
remove from the Premises all Tenant's personal property and all of Tenant's
alterations required to be removed pursuant to Section 5E, and restore the
Premises to its condition prior to their installation. If Tenant fails to remove
any alterations and/or Tenant's personal property, and such failure continues
after the termination of this Lease, Landlord may retain or dispose of such
property and all rights of Tenant with respect to it shall cease, or Landlord
may place all or any portion of such property in public storage for Tenant's
account. Tenant shall be liable to Landlord for costs of removal of any such
alterations and Tenant's personal property and storage and transportation costs
of same, and the cost of repairing and restoring the Premises, together with
interest at the Interest Rate from the date of expenditure by Landlord. If the
Premises are not so surrendered at the termination of this Lease, Tenant shall
indemnify Landlord against all loss or liability, including attorneys' fees and
costs, resulting from delay by Tenant in so surrendering the Premises.
15. HOLDOVER. Tenant shall have no right to holdover possession of the
Premises after the expiration or termination of this Lease without Landlord's
prior written consent which Landlord may withhold in its sole and absolute
discretion. If, however, Tenant retains possession of any part of the Premises
after the Term, Tenant shall become a month-to-month tenant for the entire
Premises upon all of the terms of this Lease as might be applicable to such
month-to-month tenancy, except that Tenant shall pay all of the Base Rent,
Operating Cost Share Rent and Tax Share Rent at double the rate in effect
immediately prior to such holdover, computed on a monthly basis for each full or
partial month Tenant remains in possession. Tenant shall also pay Landlord all
of Landlord's direct and consequential damages resulting from Tenant's holdover.
No acceptance of Rent or other payments by Landlord under these holdover
provisions shall operate as a waiver of Landlord's right to regain possession or
any other of Landlord's remedies.
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16. SUBORDINATION TO GROUND LEASES AND MORTGAGES.
A. SUBORDINATION. This Lease shall be subordinate to any present or
future ground lease or mortgage respecting the Project, and any amendments to
such ground lease or mortgage, at the election of the ground lessor or mortgagee
as the case may be, effected by notice to Tenant in the manner provided in this
Lease. The subordination shall be effective upon such notice, but at the request
of Landlord or ground lessor or mortgagee, Tenant shall within ten (10) days of
the request, execute and deliver to the requesting party any reasonable
documents provided to evidence the subordination.
B. TERMINATION OF GROUND LEASE OR FORECLOSURE OF MORTGAGE. If any
ground lease is terminated or mortgage foreclosed or deed in lieu of
foreclosure given and the ground lessor, mortgagee, or purchaser at a
foreclosure sale shall thereby become the owner of the Project, Tenant shall
attorn to such ground lessor or mortgagee or purchaser without any deduction
or setoff by Tenant, and this Lease shall continue in effect as a direct
lease between Tenant and such ground lessor, mortgagee or purchaser. The
ground lessor or mortgagee or purchaser shall be liable as Landlord only
during the time such ground lessor or mortgagee or purchaser is the owner of
the Project. At the request of Landlord, ground lessor or mortgagee, Tenant
shall execute and deliver within ten (10) days of the request any document
furnished by the requesting party to evidence Tenant's agreement to attorn.
C. SECURITY DEPOSIT. Any ground lessor or mortgagee shall be
responsible for the return of any security deposit by Tenant only to the extent
the security deposit, if any, is received by such ground lessor or mortgagee.
D. NOTICE AND RIGHT TO CURE. The Project is subject to any ground
lease and mortgage identified with name and address of ground lessor or
mortgagee in Exhibit D to this Lease (as the same may be amended from time to
time by written notice to Tenant). Tenant agrees to send by registered or
certified mail to any ground lessor or mortgagee identified either in such
Exhibit or in any later notice from Landlord to Tenant a copy of any notice of
default sent by Tenant to Landlord. If Landlord fails to cure such default
within the required time period under this Lease, but ground lessor or mortgagee
begins to cure within ten (10) days after such period and proceeds diligently to
complete such cure, then ground lessor or mortgagee shall have such additional
time as is necessary to complete such cure, including any time necessary to
obtain possession if possession is necessary to cure, and Tenant shall not begin
to enforce its remedies so long as the cure is being diligently pursued.
E. DEFINITIONS. As used in this Section 16, "mortgage" shall include
"trust deed" and "deed of trust", "mortgagee" shall include "trustee",
"beneficiary" and the mortgagee of any ground lessee, and "ground lessor",
"mortgagee", and "purchaser at a foreclosure sale" shall include, in each case,
all of its successors and assigns, however remote.
17. ASSIGNMENT AND SUBLEASE.
A. IN GENERAL. Tenant shall not, without the prior consent of
Landlord in each case, (i) make or allow any assignment or transfer, by
operation of law or otherwise, of any part of
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Tenant's interest in this Lease, (ii) grant or allow any lien or encumbrance, by
operation of law or otherwise, upon any part of Tenant's interest in this Lease,
(iii) sublet any part of the Premises, or (iv) permit anyone other than Tenant
and its employees to occupy any part of the Premises. Tenant shall remain
primarily liable for all of its obligations under this Lease, notwithstanding
any assignment or transfer. No consent granted by Landlord shall be deemed to be
a consent to any subsequent assignment or transfer, lien or encumbrance,
sublease or occupancy. Tenant shall pay all of Landlord's attorneys' fees and
other expenses incurred in connection with any consent requested by Tenant or in
reviewing any proposed assignment or subletting. Any assignment or transfer,
grant of lien or encumbrance, or sublease or occupancy without Landlord's prior
written consent shall be void. If Tenant shall assign this Lease or sublet the
Premises in its entirety any rights of Tenant to renew this Lease, extend the
Term or to lease additional space in the Project shall be extinguished thereby
and will not be transferred to the assignee or subtenant, all such rights being
personal to the Tenant named herein.
B. LANDLORD'S CONSENT. Landlord will not unreasonably withhold its
consent to any proposed assignment or subletting. It shall be reasonable for
Landlord to withhold its consent to any assignment or sublease if (i) Tenant is
in default under this Lease, (ii) the proposed assignee or sublessee is a tenant
in the Project or an affiliate of such a tenant or a party that Landlord has
identified as a prospective tenant in the Project, (iii) the financial
responsibility, nature of business, and character of the proposed assignee or
subtenant are not all reasonably satisfactory to Landlord, (iv) in the
reasonable judgment of Landlord the purpose for which the assignee or subtenant
intends to use the Premises (or a portion thereof) is not in keeping with
Landlord's standards for the Building or are in violation of the terms of this
Lease or any other leases in the Project, (v) the proposed assignee or subtenant
is a government entity, or (vi) the proposed sublease is for less than the
entire Premises or for less than the remaining Term of the Lease. The foregoing
shall not exclude any other reasonable basis for Landlord to withhold its
consent.
C. PROCEDURE. Tenant shall notify Landlord of any proposed
assignment or sublease at least thirty (30) days prior to its proposed
effective date. The notice shall include the name and address of the proposed
assignee or subtenant, its corporate affiliates in the case of a corporation
and its partners in a case of a partnership, an execution copy of the
proposed assignment or sublease, and sufficient information to permit
Landlord to determine the financial responsibility and character of the
proposed assignee or subtenant. As a condition to any effective assignment of
this Lease, the assignee shall execute and deliver in form satisfactory to
Landlord at least fifteen (15) days prior to the effective date of the
assignment, an assumption of all of the obligations of Tenant under this
Lease. As a condition to any effective sublease, subtenant shall execute and
deliver in form satisfactory to Landlord at least fifteen (15) days prior to
the effective date of the sublease, an agreement to comply with all of
Tenant's obligations under this Lease, and at Landlord's option, an agreement
(except for the economic obligations which subtenant will undertake directly
to Tenant) to attorn to Landlord under the terms of the sublease in the event
this Lease terminates before the sublease expires.
D. CHANGE OF MANAGEMENT OR OWNERSHIP. Any transfer of the direct or
indirect power to affect the management or policies of Tenant or direct or
indirect change in 25% or more of the ownership interest in Tenant shall
constitute an assignment of this Lease.
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E. EXCESS PAYMENTS. If Tenant shall assign this Lease or sublet any
part of the Premises for consideration in excess of the pro-rata portion of Rent
applicable to the space subject to the assignment or sublet, then Tenant shall
pay to Landlord as Additional Rent 75% of any such excess immediately upon
receipt.
F. RECAPTURE. Landlord may, by giving written notice to Tenant
within thirty (30) days after receipt of Tenant's notice of assignment or
subletting, terminate this Lease with respect to the space described in Tenant's
notice, as of the effective date of the proposed assignment or sublease and all
obligations under this Lease as to such space shall expire except as to any
obligations that expressly survive any termination of this Lease.
18. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its
interest in the Project or this Lease, Landlord shall be released of any
obligations occurring after such transfer, except the obligation to return to
Tenant any security deposit not delivered to its transferee, and Tenant shall
look solely to Landlord's successors for performance of such obligations. This
Lease shall not be affected by any such transfer.
19. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of
receiving a request from the other party, execute, acknowledge in recordable
form, and deliver to the other party or its designee a certificate stating,
subject to a specific statement of any applicable exceptions, that the Lease as
amended to date is in full force and effect, that the Tenant is paying Rent and
other charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has no
offsets or claims. The certifying party may also be required to state the date
of commencement of payment of Rent, the Commencement Date, the Termination Date,
the Base Rent, the current Operating Cost Share Rent and Tax Share Rent
estimates, the status of any improvements required to be completed by Landlord,
the amount of any security deposit, and such other matters as may be reasonably
requested. Failure to deliver such statement within the time required shall be
conclusive evidence against the non-certifying party that this Lease, with any
amendments identified by the requesting party, is in full force and effect, that
there are no uncured defaults by the requesting party, that not more than one
month's Rent has been paid in advance, that the non-certifying party has not
paid any security deposit, and that the non-certifying party has no claims or
offsets against the requesting party.
20. LEASE DEPOSIT. Tenant shall deposit with Landlord on the date Tenant
executes and delivers this Lease to Lease the cash sums set forth in the
Schedule for both Prepaid Rent and Security Deposit (collectively, the "LEASE
DEPOSIT"). The Prepaid Rent shall be applied by Landlord against the first full
month's Base Rent payment obligation hereunder. The Security Deposit shall be
held by Landlord as security for the performance of all of its obligations in
the amount set forth on the Schedule. If Tenant defaults under this Lease,
Landlord may apply all or any part of the Security Deposit for the payment of
any Rent or other sum in default, the repair of any damage to the Premises
caused by Tenant or the payment of any other amount which Landlord may spend or
become obligated to spend by reason of Tenant's default or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default to the full extent permitted by law. Tenant hereby waives any
restriction on the use or application of the Security Deposit by Landlord as set
forth in California Civil Code Section 1950.7. To the extent any portion of the
Security Deposit is used, Tenant shall within five (5) days after demand from
Landlord restore the
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deposit to its full amount. Landlord may keep the Security Deposit in its
general funds and shall not be required to pay interest to Tenant on the deposit
amount. If Tenant shall perform all of its obligations under this Lease and
return the Premises to Landlord at the end of the Term, Landlord shall return
all of the remaining Security Deposit to Tenant within thirty (30) days after
the end of the Term. The Security Deposit shall not serve as an advance payment
of Rent or a measure of Landlord's damages for any default under this Lease.
If Landlord transfers its interest in the Project or this Lease, Landlord
may transfer the Security Deposit to its transferee. Upon such transfer,
Landlord shall have no further obligation to return the Security Deposit to
Tenant, and Tenant's right to the return of the Security Deposit shall apply
solely against Landlord's transferee.
21. FORCE MAJEURE. Landlord shall not be in default under this Lease to
the extent Landlord is unable to perform any of its obligations on account of
any strike or labor problem, materials, supplies or energy shortage,
governmental pre-emption or prescription, national emergency, or any other cause
of any kind beyond the reasonable control of Landlord ("FORCE MAJEURE").
22. TENANT'S PERSONAL PROPERTY AND FIXTURES. Tenant hereby grants to
Landlord a security interest in all of its personal property and trade fixtures
now or hereafter located within the Premises as additional security for
performance of all of Tenant's obligations under this Lease. Tenant may replace
such personal property and fixtures with items of equal or better quality, but
shall not otherwise remove them from the Premises without the consent of
Landlord until all of the obligations of Tenant under this Lease have been
performed. This Lease constitutes a security agreement creating a security
interest in such property in favor of Landlord, subject only to the liens of
existing creditors, and Landlord may at any time file this Lease as a financing
statement under the Uniform Commercial Code of the state in which the Project is
located.
23. NOTICES. All notices, consents, approvals and similar communications
to be given by one party to the other under this Lease, shall be given in
writing, mailed or personally delivered as follows:
A. LANDLORD. To Landlord as follows:
CarrAmerica Realty Corporation
1810 Gateway Drive, Suite 150
San Mateo, CA 94404
Attn: Market Officer
with a copy to:
CarrAmerica Realty Corporation
1850 K Street N.W., Suite 500
Washington, D.C. 20006
Attn: Lease Administration
or to such other person at such other address as Landlord may designate by
notice to Tenant.
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B. TENANT. To Tenant as follows:
The Quicksilver Group
10061 Bubb Road,
Cupertino, California 95014
Attn: Todd Fitzwater
With a copy to:
Racotek, Inc.
7301 Ohms Lane, Suite 200
Minneapolis, MN 55439
Attn: Legal
or to such other person at such other address as Tenant may designate by notice
to Landlord.
Mailed notices shall be sent by United States certified or registered mail,
or by a reputable national overnight courier service, postage prepaid. Mailed
notices shall be deemed to have been given on the earlier of actual delivery or
three (3) business days after posting in the United States mail in the case of
registered or certified mail, and one business day in the case of overnight
courier.
24. QUIET POSSESSION. So long as Tenant shall perform all of its
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord, subject to all
of the terms of this Lease.
25. REAL ESTATE BROKER. Tenant represents to Landlord that Tenant has not
dealt with any real estate broker with respect to this Lease except for any
broker(s) listed in the Schedule, and no other broker is in any way entitled to
any broker's fee or other payment in connection with this Lease. Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind in connection with this Lease.
26. MISCELLANEOUS.
A. SUCCESSORS AND ASSIGNS. Subject to the limits on Tenant's
assignment contained in Section 17, the provisions of this Lease shall be
binding upon and inure to the benefit of all successors and assigns of Landlord
and Tenant.
B. DATE PAYMENTS ARE DUE. Except for payments to be made by Tenant
under this Lease which are due upon demand, Tenant shall pay to Landlord any
amount for which Landlord renders a statement of account within ten days of
Tenant's receipt of Landlord's statement.
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C. MEANING OF "LANDLORD", "RE-ENTRY," "INCLUDING" AND "AFFILIATE".
The term "Landlord" means only the owner of the Project and the lessor's
interest in this Lease from time to time. The words "re-entry" and "re-enter"
are not restricted to their technical legal meaning. The words "including" and
similar words shall mean "without limitation." The word "affiliate" shall mean a
person or entity controlling, controlled by or under common control with the
applicable entity. "Control" shall mean the power directly or indirectly, by
contract or otherwise, to direct the management and policies of the applicable
entity.
D. TIME OF THE ESSENCE. Time is of the essence of each provision
of this Lease.
E. NO OPTION. This document shall not be effective for any purpose
until it has been executed and delivered by both parties; execution and
delivery by one party shall not create any option or other right in the other
party.
F. SEVERABILITY. The unenforceability of any provision of this Lease
shall not affect any other provision.
G. GOVERNING LAW. This Lease shall be governed in all respects by
the laws of the state in which the Project is located, without regard to the
principles of conflicts of laws.
H. LEASE MODIFICATION. Tenant agrees to modify this Lease in any way
requested by a mortgagee which does not cause increased expense to Tenant or
otherwise materially adversely affect Tenant's interests under this Lease.
I. NO ORAL MODIFICATION. No modification of this Lease shall be
effective unless it is a written modification signed by both parties.
J. LANDLORD'S RIGHT TO CURE. If Landlord breaches any of its
obligations under this Lease, Tenant shall notify Landlord in writing and shall
take no action respecting such breach so long as Landlord promptly begins to
cure the breach and diligently pursues such cure to its completion. Landlord may
cure any default by Tenant; any expenses incurred shall become Additional Rent
due from Tenant on demand by Landlord.
K. CAPTIONS. The captions used in this Lease shall have no effect on
the construction of this Lease.
L. AUTHORITY. Landlord and Tenant each represents to the other that
it has full power and authority to execute and perform this Lease.
M. LANDLORD'S ENFORCEMENT OF REMEDIES. Landlord may enforce any of
its remedies under this Lease either in its own name or through an agent.
N. ENTIRE AGREEMENT. This Lease, together with all Appendices,
constitutes the entire agreement between the parties. No representations or
agreements of any kind have been made by either party which are not contained in
this Lease.
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0. LANDLORD'S TITLE. Landlord's title shall always be paramount to
the interest of the Tenant, and nothing in this Lease shall empower Tenant to do
anything which might in any way impair Landlord's title.
P. LIGHT AND AIR RIGHTS. Landlord does not grant in this Lease any
rights to light and air in connection with Project. Landlord reserves to itself,
the Project, the Building below the improved floor of each floor of the
Premises, the Building above the ceiling of each floor of the Premises, the
exterior of the Premises and the areas on the same floor outside the Premises,
along with the areas within the Premises required for the installation and
repair of utility lines and other items required to serve other tenants of the
Building.
Q. SINGULAR AND PLURAL. Wherever appropriate in this Lease, a
singular term shall be construed to mean the plural where necessary, and a
plural term the singular. For example, if at any time two parties shall
constitute Landlord or Tenant, then the relevant term shall refer to both
parties together.
R. NO RECORDING BY TENANT. Tenant shall not record in any public
records any memorandum or any portion of this Lease.
S. EXCLUSIVITY. Landlord does not grant to Tenant in this Lease any
exclusive right except the right to occupy its Premises.
T. NO CONSTRUCTION AGAINST DRAFTING PARTY. The rule of construction
that ambiguities are resolved against the drafting party shall not apply to this
Lease.
U. SURVIVAL. All obligations of Landlord and Tenant under this Lease
shall survive the termination of this Lease.
V. RENT NOT BASED ON INCOME. No Rent or other payment in respect of
the Premises shall be based in any way upon net income or profits from the
Premises. Tenant may not enter into or permit any sublease or license or other
agreement in connection with the Premises which provides for a rental or other
payment based on net income or profit.
W. BUILDING MANAGER AND SERVICE PROVIDERS. Landlord may perform any
of its obligations under this Lease through its employees or third parties hired
by the Landlord.
X. LATE CHARGE AND INTEREST ON LATE PAYMENTS. Without limiting the
provisions of Section 12A, if Tenant falls to pay any installment of Rent or
other charge to be paid by Tenant pursuant to this Lease within five (5)
business days after the same becomes due and payable, then Tenant shall pay a
late charge equal to the greater of five percent (5%) of the amount of such
payment or $250. In addition, interest shall be paid by Tenant to Landlord on
any late payments of Rent from the date due until paid at the rate provided in
Section 2D(2). Such late charge and interest shall constitute Additional Rent
due and payable by Tenant to Landlord upon the date of payment of the delinquent
payment referenced above.
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27. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel at
any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.
28. HAZARDOUS SUBSTANCES.
A. Tenant shall not cause or permit any Hazardous Substances to be
brought upon, produced, stored, used, discharged or disposed of in or near the
Project unless Landlord has consented to such storage or use in its sole
discretion. Any handling, transportation, storage, treatment, disposal or use of
any Hazardous Substances in or about the Project by Tenant, its agents,
employees, contractors or invitees shall strictly comply with all applicable
Governmental Requirements. Tenant shall indemnify, defend and hold Landlord
harmless from and against any liabilities, losses, claims, damages, penalties,
fines, attorneys' fees and court costs, remediation costs, investigation costs
and any other expenses which result from or arise out of the use, storage,
treatment, transportation, release, or disposal of any Hazardous Substances on
or about the Project by Tenant, its agents, employees, contractors or invitees.
If any lender or governmental agency shall require testing for Hazardous
Substances in the Premises, Tenant shall pay for such testing.
B. "HAZARDOUS SUBSTANCES" means any hazardous or toxic substances,
materials or waste which are or become regulated by any local government
authority, the state in which the Project is located or the United States
government, including those substances described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any other applicable federal, state or
local law, and the regulations adopted under these laws.
29. FINANCIAL STATEMENTS. Within ten (10) days after Landlord's written
request therefor, Tenant shall deliver to Landlord the current financial
statements of Tenant, and financial statements of the two (2) years prior to the
current financial statements year, with an opinion of a certified public
accountant, including a balance sheet and profit and loss statement for the most
recent prior year, all prepared in accordance with generally accepted accounting
principles consistently applied.
30. EXCULPATION. Landlord shall have no personal liability under this
Lease; its liability shall be limited to its interest in the Building, and
shall not extend to any other property or assets of the Landlord. In no event
shall any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's obligations
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the dates set forth below.
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<PAGE>
LANDLORD
SQUARE 24 ASSOCIATES
(D.B.A. SQUARE 24 ASSOCIATES L.P.)
By: Carr Real Estate Services, L.L.C.,
Its: General Partner
By: Carr Real Estate Services Partnership
Its: Managing partner
By: Carr Realty, L.P.,
Its: Managing partner
By: CarrAmerica Realty Corporation
Its: general partner
By: /s/ Philip L. Hawkins
----------------------------
Its: Managing Director
Date: 9/29/98
----------------------------
TENANT:
THE QUICKSILVER GROUP,
a ____________ corporation
By: /s/ Todd Fitzwater
----------------------------
Print Name: Todd Fitzwater
----------------------
Print Title: CFO
--------------------------
Date of Execution: 9/28/98
--------------------------
By: /s/ Tom Minick
----------------------------
Print Name: Tom Minick
----------------------
Print Title: CEO
--------------------------
Date of Execution: 9/28/98
--------------------------
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Exhibit A
Description of Premises
[To be attached prior to execution]
[FLOOR PLAN]
HACIENDA WEST
BUILDING B 4-22-97
THIRD FLOOR
<PAGE>
Exhibit B
RULES AND REGULATIONS
1. Tenant shall not place anything, or allow anything to be placed near
the glass of any window, door, partition or wall which may, in Landlord's
judgment, appear unsightly from outside of the Project.
2. The Project directory shall be available to Tenant solely to display
names and their location in the Project, which display shall be as directed by
Landlord.
3. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used by Tenant for any purposes
other than for ingress to and egress from the Premises. Tenant shall lend its
full cooperation to keep such areas free from all obstruction and in a clean and
sightly condition and shall move all supplies, furniture and equipment as soon
as received directly to the Premises and move all such items and waste being
taken from the Premises (other than waste customarily removed by employees of
the Building) directly to the shipping platform at or about the time arranged
for removal therefrom. The halls, passages, exits, entrances, elevators,
stairways, balconies and roof are not for the use of the general public and
Landlord shall, in all cases, retain the right to control and prevent access
thereto by all persons whose presence in the judgment of Landlord, reasonably
exercised, shall be prejudicial to the safety, character, reputation and
interests of the Project. Neither Tenant nor any employee or invitee of Tenant
shall go upon the roof of the Project.
4. The toilet rooms, urinals, wash bowls and other apparatuses shall
not be used for any purposes other than that for which they were constructed,
and no foreign substance of any kind whatsoever shall be thrown therein, and to
the extent caused by Tenant or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by Tenant.
5. Tenant shall not cause any unnecessary janitorial labor or services
by reason of Tenant's carelessness or indifference in the preservation of good
order and cleanliness.
6. Tenant shall not install or operate any refrigerating, heating or
air conditioning apparatus, or carry on any mechanical business without the
prior written consent of Landlord; use the Premises for housing, lodging or
sleeping purposes; or permit preparation or warming of food in the Premises
(warming of coffee and individual meals with employees and guests excepted).
Tenant shall not occupy or use the Premises or permit the Premises to be
occupied or used for any purpose, act or thing which is in violation of any
Governmental Requirement or which may be dangerous to persons or property.
7. Tenant shall not bring upon, use or keep in the Premises or the
Project any kerosene, gasoline or inflammable or combustible fluid or material,
or any other articles deemed hazardous to persons or property, or use any method
of heating or air conditioning other than that supplied by Landlord.
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8. Landlord shall have sole power to direct electricians as to where
and how telephone and other wires are to be introduced. No boring or cutting for
wires is to be allowed without the consent of Landlord. The location of
telephones, call boxes and other office equipment affixed to the Premises shall
be subject to the approval of Landlord.
9. No additional locks shall be placed upon any doors, windows or
transoms in or to the Premises. Tenant shall not change existing locks or the
mechanism thereof. Upon termination of the lease, Tenant shall deliver to
Landlord all keys and passes for offices, rooms, parking lot and toilet rooms
which shall have been furnished Tenant.
In the event of the loss of keys so furnished, Tenant shall pay
Landlord therefor. Tenant shall not make, or cause to be made, any such keys and
shall order all such keys solely from Landlord and shall pay Landlord for any
keys in addition to the two sets of keys originally furnished by Landlord for
each lock.
10. Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.
11. No furniture, packages, supplies, equipment or merchandise will be
received in the Project or carried up or down in the freight elevator, except
between such hours and in such freight elevator as shall be designated by
Landlord. Tenant shall not take or permit to be taken in or out of other
entrances of the Building, or take or permit on other elevators, any item
normally taken in or out through the trucking concourse or service doors or in
or on freight elevators.
12. Tenant shall cause all doors to the Premises to be closed and
securely locked and shall turn off all utilities, lights and machines before
leaving the Project at the end of the day.
13. Without the prior written consent of Landlord, Tenant shall not use
the name of the Project or any picture of the Project in connection with, or in
promoting or advertising the business of, Tenant, except Tenant may use the
address of the Project as the address of its business.
14. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Project's heating and air
conditioning, and shall refrain from attempting to adjust any controls, other
than room thermostats installed for Tenant's use. Tenant shall keep corridor
doors closed.
15. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which may arise from a cause other than Landlord's
negligence, which includes keeping doors locked and other means of entry to the
Premises closed and secured.
16. Peddlers, solicitors and beggars shall be reported to the office of
the Project or as Landlord otherwise requests.
17. Tenant shall not advertise the business, profession or activities of
Tenant conducted in the Project in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.
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18. No bicycle or other vehicle and no animals or pets shall be allowed
in the Premises, halls, freight docks, or any other parts of the Building except
that blind persons may be accompanied by "seeing eye" dogs. Tenant shall not
make or permit any noise, vibration or odor to emanate from the Premises, or do
anything therein tending to create, or maintain, a nuisance, or do any act
tending to injure the reputation of the Building.
19. Tenant acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Project.
Accordingly:
(a) Landlord may, at any time, or from time to time, or for
regularly scheduled time periods, as deemed advisable by Landlord and/or its
agents, in their sole discretion, require that persons entering or leaving the
Project or the Property identify themselves to watchmen or other employees
designated by Landlord, by registration, identification or otherwise.
(b) Tenant agrees that it and its employees will cooperate fully
with Project employees in the implementation of any and all security procedures.
(c) Such security measures shall be the sole responsibility of
Landlord, and Tenant shall have no liability for any action taken by Landlord in
connection therewith, it being understood that Landlord is not required to
provide any security procedures and shall have no liability for such security
procedures or the lack thereof.
20. Tenant shall not do or permit the manufacture, sale, purchase, use
or gift of any fermented, intoxicating, or alcoholic beverages without obtaining
written consent of Landlord.
21. Tenant shall not disturb the quiet enjoyment of any other tenant.
22. Tenant shall not provide any janitorial services or cleaning
without Landlord's written consent and then only subject to supervision of
Landlord and at Tenant's sole responsibility and by janitor or cleaning
contractor or employees at all times satisfactory to Landlord.
23. Landlord may retain a pass key to the Premises and be allowed
admittance thereto at all times to enable its representatives to examine the
Premises from time to time and to exhibit the same and Landlord may place and
keep on the windows and doors of the Premises at any time signs advertising the
Premises for Rent.
24. No equipment, mechanical ventilators, awnings, special shades or
other forms of window covering shall be permitted either inside or outside the
windows of the Premises without the prior written consent of Landlord, and then
only at the expense and risk of Tenant, and they shall be of such shape, color,
material, quality, design and make as may be approved by Landlord.
25. Tenant shall not during the term of this Lease canvas or solicit
other tenants of the Building for any purpose.
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26. Tenant shall not install or operate any phonograph, musical or
sound- producing instrument or device, radio receiver or transmitter, TV
receiver or transmitter, or similar device in the Building, nor install or
operate any antenna, aerial, wires or other equipment inside or outside the
Building, nor operate any electrical device from which may emanate electrical
waves which may interfere with or impair radio or television broadcasting or
reception from or in the Building or elsewhere, without in each instance the
prior written approval of Landlord. The use thereof, if permitted, shall be
subject to control by Landlord to the end that others shall not be disturbed.
27. Tenant shall promptly remove all rubbish and waste from the
Premises.
28. Tenant shall not exhibit, sell or offer for sale, Rent or exchange
in the Premises or at the Project any article, thing or service, except those
ordinarily embraced within the use of the Premises specified in Section 6 of
this Lease, without the prior written consent of Landlord.
29. Tenant shall list all furniture, equipment and similar articles
Tenant desires to remove from the Premises or the Building and deliver a copy of
such list to Landlord and procure a removal permit from the Office of the
Building authorizing Building employees to permit such articles to be removed.
30. Tenant shall not overload any floors in the Premises or any public
corridors or elevators in the Building.
31. Tenant shall not do any painting in the Premises, or mark, paint,
cut or drill into, drive nails or screws into, or in any way deface any part of
the Premises or the Building, outside or inside, without the prior written
consent of Landlord.
32. Whenever Landlord's consent, approval or satisfaction is required
under these Rules, then unless otherwise stated, any such consent, approval or
satisfaction must be obtained in advance, such consent or approval may be
granted or withheld in Landlord's sole discretion, and Landlord's satisfaction
shall be determined in its sole judgment.
33. Tenant and its employees shall cooperate in all fire drills
conducted by Landlord in the Building.
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FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is dated for reference
purposes only as October 15, 1998, by and between SQUARE 24 ASSOCIATES
(d.b.a. SQUARE 24 ASSOCIATES, L.P.), a Delaware limited liability company
("Landlord"), and QUICKSILVER GROUP, INC., a California corporation
("Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Office Lease dated
as of September 10, 1998 (the "Original Lease"), in which Landlord leased to
Tenant and Tenant leased from Landlord approximately 4,905 rentable square
feet within that certain building which contains approximately 99,7000
rentable square feet, commonly known as Hacienda West, 3875 Hopyard Road,
Pleasanton, California (the "Premises").
B. Tenant and Racotek, Inc., a Delaware corporation ("Racotek"),
entered into that certain Agreement and Plan of Merger and Reorganization
dated as of July 6, 1998 (the "Assignment") in which Tenant was merged into
Racotek, and Racotek assumed all Tenant's interest under the Lease. Racotek
subsequently changed its name to Zamba Corporation, a Delaware corporation
("Assignee"). Landlord consented to the assignment on the express condition
that the Assignment will not release or discharge Tenant from any liability
as the lessee under the Lease, including, without limitation, the obligation
to pay rent.
C. Subject to the terms and conditions set forth herein, Landlord and
Tenant now desire to amend the Original Lease.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties hereby mutually promise, covenant
and agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment not otherwise
defined herein shall have the meaning given such terms in the Lease (as
defined below). All of definitions contained in the Recitals are hereby
incorporated. In the event of any conflict between the terms of the
Original Lease and the terms of this Amendment, the parties agree that
the terms of this Amendment shall control. The Original Lease as amended
by the Commencement Agreement and this Amendment shall be referred to
herein as the "Lease."
2. PREMISES. Section 2 of the Schedule of the Original Lease is hereby
amended to delete the reference to "Suite(s) 315" and to insert in its
place "Suite(s) 345."
<PAGE>
3. TAX SHARE RENT. Section 2 (A)(3) of the Original Lease is hereby amended
to add to the end thereof the following: "Landlord agrees that the Base
Taxes shall include (or shall be adjusted to include) all increases in
Taxes arising from Landlord's recent acquisition of the Project."
4. FIRE DAMAGE RESTORATION. Section 9(A) of the Original Lease is hereby
amended to replace the second sentence thereof in its entirety with the
following: "If the time needed exceeds six (6) months from the beginning
of the restoration, or two (2) months therefrom if the restoration would
begin during the last twelve (12) months of the lease, then in the case
of the Premises, either Landlord or Tenant may terminate this Lease, and
in the case of the Building, Landlord may terminate this Lease, by
notice to the other party within (10) days after the notifying party's
receipt of the architect's certificate."
5. RELOCATION OF TENANT - PAINT AND CARPET. Section 11(I)(2) of the
Original Lease is hereby amended to provide that Tenant will cooperate
with Landlord in all reasonable ways in determining the color of the new
paint and carpet in the New Premises.
6. RELOCATION OF TENANT - RENT. Section 11(I) of the Original Lease is
hereby amended to add the following new subsection (3) at the end
thereof:
(3) the relocation of Tenant shall not result in an increase in
Tenant's Monthly Base Rent or Tenant's Proportionate Share of
the Building as each are described in the Schedule.
7. HOLDOVER. Section 15 of the Original Lease is hereby amended to replace
the reference therein to "double" in the second sentence thereof and to
insert in its place "175%."
8. ASSIGNMENT AND SUBLETTING. Section 17(A) of the Original Lease is hereby
amended to add the word "reasonable" before the words "attorneys' fees"
and before the word "expenses" in the fourth sentence thereof.
9. EXCESS PAYMENTS. Section 17(E) of the Original Lease is hereby amended
to delete the reference to "75%" and to insert in its place "50%."
10. HAZARDOUS SUBSTANCES. Section 28(A) of the Original Lease is hereby
amended to add to the end thereof the following: "to the extent such
testing is required as a result of Tenant's activities."
11. REAL ESTATE BROKERS. Landlord and Tenant each represent and warrant to
the other that neither has had any dealing with any broker other than
Cushman & Wakefield in connection with the negotiation or execution of
this Amendment, and Landlord and Tenant agree to indemnify each other
and hold the other harmless from any
2
<PAGE>
and all costs (including attorneys' fees), expenses or liability for
commissions or other compensation claimed by any broker or agent other
than the parties named above with respect to this Amendment.
12. NOTICES. Tenant's address for receipt of notices under the Lease is as
follows:
Quicksilver Group, Inc.
c/o Zamba Corporation
7301 Ohms Lane, Suite 200
Minneapolis, MN 55439
Attn: Legal
13. THE QUICKSILVER/RACOTEK/ZAMBA ASSIGNMENT. Tenant hereby acknowledges and
agrees that:
(a) Landlord's consent to the Assignment (as defined in Recital B)
shall not be deemed to be a consent to any subsequent assignment or
subletting;
(b) Landlord shall not be deemed to have waived any rights under the
Lease by virtue of Landlord's consent to the Assignment;
(c) The Assignment is in all respects subordinate to the terms of the
Lease;
(d) Insofar as the specific terms of the Assignment purport to amend or
modify or are in conflict with the specific terms of the Lease, the
terms of the Lease, as amended by this Amendment, shall control;
(e) Landlord assumes no liability whatsoever on account of anything
contained in the Assignment; and
(f) Any rights under the Assignment may be enforced only against Tenant.
14. GOVERNING LAW. This Amendment shall be governed by and be construed
under the laws of the State of California.
15. ATTORNEYS' FEES. In any arbitration, quasi-judicial or administrative
proceedings or any action in any court of competent jurisdiction,
brought by either party to enforce any covenant or any of such party's
rights or remedies under this covenant or any of such party's rights or
remedies under this Amendment, including any action for declaratory
relief, or any action to collect any payments required under this
Amendment or to quiet title against the other party, the prevailing
party shall be entitled to reasonable attorneys' fees and all costs,
expenses and disbursements in connection with such action, including the
costs of reasonable investigation, preparation and professional or
expert consultation, which sums may be included in any judgment or
decree entered in such action in favor of the prevailing party.
3
<PAGE>
16. SUCCESSORS. All terms and provisions of this Amendment shall be binding
upon, be enforceable by, and shall inure to the benefit of, the
respective assignees and successors of the parties hereof.
17. TIME. Time is of the essence for each and every provision of this
Amendment.
18. CONFIRMATION OF LEASE. Except as amended by this Amendment, the parties
hereby agree and confirm that the Lease is in full force and effect.
IN WITNESS HEREOF, the parties hereto have executed this Amendment as of
the date first written above.
"Landlord"
SQUARE 24 ASSOCIATES
(d.b.a. Square 24 Associates L.P.)
By: Carr Real Estate Services, L.L.C.,
Its: General Partner
By: Carr Real Estate Services Partnership
Its: Managing partner
By: Carr Realty, L.P.,
Its: Managing partner
By: CarrAmerica Realty Corporation
Its: general partner
By: /s/ Philip L. Hawkins
-------------------------------------
Philip L. Hawkins
Its: Chief Operating Operator
Date: 12-2-98
-----------------------------------
"Tenant"
QUICKSILVER GROUP, INC.,
a California corporation
By: /s/ Tom Minick
-------------------------------
Name: Tom Minick
-------------------------------
Its: Vice President
-------------------------------
Date: 11-30-98
-------------------------------
4
<PAGE>
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Zamba Corporation:
We consent to incorporation by reference in the Registration Statements (No.
333-66021, 333-62783, 333-45077, 333-35595, and 33-73456) of Zamba
Corporation on Form S-8 of our report dated March 15, 1999, relating to the
consolidated balance sheet of Zamba Corporation and subsidiary as of December
31, 1998 and the related consolidated statements of operations, stockholders'
equity and cash flows for the year then ended, and the related financial
statement schedule, which report appears in the 1998 annual report on Form
10-K of Zamba Corporation.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 26, 1999
50
<PAGE>
EXHIBIT 23.02
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statements of
Zamba Corporation, formerly Racotek, Inc., on Form S-8 (Registration No.'s
333-66021, 333-62783, 33-73456, 333-45077 and 333-35595) of our report dated
January 12, 1998, on our audits of the financial statements and financial
statement schedule of Zamba Corporation as of December 31, 1997 and for each of
the two years in the period ended December 31, 1997, which report is included in
this 1998 Annual Report on Form 10-K
/s/ Pricewaterhouse Coopers LLP
Minneapolis, Minnesota
March 26, 1999
51
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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