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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______
Commission File No. 0-20095
Stac, Inc
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(Exact Name of registrant as specified in its charter)
Delaware 95-3825313
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12636 High Bluff Drive, 4th Floor,
San Diego, California 92130-2093
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 794-4300
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK
(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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 of any amendment to this Form 10-K.
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of December 19, 1996 was $121,156,000.*
The number of shares outstanding of the Registrant's Common Stock was
30,710,560 as of December 19, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Definitive Proxy Statement to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A in connection
with the 1997 Annual Meeting of Shareholders to be held on February 26, 1997
(the "1997 Annual Meeting") is incorporated herein by reference into Part III
of this Report.
Certain Exhibits filed with the Registrant's Registration Statement on Form S-1
(Registration No. 33-46389), as amended, the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1995, Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, as amended, and Current Report on Form 8-K
filed on October 16, 1995, as amended, are incorporated herein by reference into
Part IV of this Report.
_______________
* Excludes the Common Stock held by executive officers, directors and
shareholders whose ownership exceeds 5% of the Common Stock
outstanding at December 19, 1996. Exclusion of such shares should not
be construed to indicate that any such person possesses the power,
direct or indirect, to direct or cause the direction of the management
or policies of the Registrant or that such person is controlled by or
under common control with the Registrant.
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PART I
ITEM 1. BUSINESS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risk and
uncertainties. The Company's (as defined below) future results could differ
materially from those discussed here. Factors that could cause or contribute to
such differences include, but are not limited to, fluctuations in the Company's
operating results, continued new product introductions by the Company, market
acceptance of the Company's new product introductions, new product introductions
by competitors, OEM and distributor inventory levels and customer demand for the
products incorporating Hi/fn (as defined below) semiconductors, technological
changes in the personal computer and communications industries, uncertainties
regarding intellectual property rights and the other factors referred to herein
(including, but not limited to, the factors discussed below under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Trends and Channel Inventories," "--Seasonality,"
"--Operating Systems," "--Competition and Risks Associated with New Product
Introductions" and "--Stock Price Volatility") and in the Company's Forms 10-Q.
Stac, Inc. ("Stac" or the "Company") designs, develops, markets and
supports storage management and communications software products and services
The Company also designs, develops and markets software and semiconductor
implementations of its proprietary LZS data compression technology and is
developing software and semiconductor implementations of data encryption
standards for use with its LZS products. Stac has organized its business into
three product groups: storage management solutions and communications
solutions which comprise Stac's software business, and networking products
which comprises the business of Hi/fn Inc., Stac's networking products
subsidiary ("Hi/fn").
Stac's software business designs, develops, markets and supports
storage management and communications solutions that feature disaster recovery,
communications and security capabilities important to Internet-connected
enterprises and individuals. Both the storage management solutions and
communications solutions are sold world-wide through solution providers,
resellers, original equipment manufacturers (OEMs), distributors and directly
through Stac's Internet site and sales personnel.
The storage management solutions group is comprised principally of
Replica, a software product which provides disaster recovery and backup for
servers. Replica for NetWare was introduced in February 1996, and Replica for
NT is expected to be available at the end of the March 1997 quarter.
Stac's communications solutions group is comprised principally of
ReachOut Remote Control software ("ReachOut"), a remote access software suite
which allows users to access a remote PC using another PC through the Internet,
or over ISDN lines, modems or networks. ReachOut works with Microsoft
Corporation's Windows 95, Windows 3.x and DOS operating systems and will
support Windows NT in a release expected to be available in January 1997.
Stac's semiconductor products business, formerly referred to as the
Technology Business Unit, has been organized as Hi/fn Inc., a Stac subsidiary.
Hi/fn is focused on improving the efficiency, security and manageability of
networks by providing solutions in software and silicon to packet
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processing bottlenecks. Hi/fn implements lossless data compression in software
libraries and semiconductors which are marketed and sold to manufacturers of
routers, firewalls, remote access servers, ISDN connectivity products, storage
hardware and printers. Hi/fn is also implementing data encryption standards in
software and silicon for use with data compression to provide fast, efficient
and secure data transmission capabilities for its customers' products. Hi/fn's
products are sold world-wide to OEMs both directly and through manufacturers'
representatives.
Stac also receives royalties from Microsoft and IBM Corporation for
licenses of its data compression technology. The Company will receive $4.0
million in royalties quarterly through December 1997, after which the license
agreements will be fully paid-up.
Stac has been engaged in a continuing program to diversify its
software business through acquisitions and internal product development. The
Company acquired ReachOut in October 1994 for $19.1 million from Ocean Isle
Software. ReachOut has provided a source of software revenue to offset the
decrease in Stacker disk compression sales. Stacker sales have declined during
each of fiscal 1994, 1995 and 1996 due primarily to the inclusion of disk
compression in Microsoft's operating systems and to the declining costs of hard
disk storage. Stac also purchased technology in March 1995 which has been used
as the basis of its Replica products and is incorporating Internet technology
acquired in its October 1995 purchase of California Software, Inc. into its
ReachOut and Replica products.
BACKGROUND
COMMUNICATIONS SOLUTIONS SOFTWARE
The Company's purchase of ReachOut Remote Control software in October
1994 and subsequent internally developed releases of ReachOut have established
the Company as a leading provider of products for the remote access market.
The remote access market has developed due to the following trends: i) the
need for users to access from outside the office the programs and data on their
work computer; ii) the need to transfer files from a remote computer to
another; iii) the growth in remote technical support via modem; and iv) the
growth in office PC networks and the need for users to access them remotely.
ReachOut provides a complete remote access solution comprised of
remote control, remote node and file transfer. ReachOut 6.0 supports PCs using
Windows 95, Windows 3.x and DOS. ReachOut 7.0 will add Windows NT support and
is expected to be available as an all-in-one-box solution in the March 1997
quarter. ReachOut remote control effectively allows one PC to take control of
another PC by using a connection made over a modem, an ISDN line, the Internet
or an internal network. The remote PC, or host, is operated by the user from
another PC, the viewer. The host accesses files and runs programs using
keystrokes and mouse directions sent by the user from the viewer PC. The
viewer PC displays what is on the host PC's screen and thus gives the user a
way to remotely operate the host PC and see the results of the work. ReachOut
includes a remote access client that allows users to log into a computer
network as a remote node. ReachOut also provides a file transfer utility that
performs fast file transfer from one PC to another and allows a user to
efficiently update a file by transmitting only the changes that have been made
since the last time the file was transferred.
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STORAGE MANAGEMENT SOFTWARE
Disaster Recovery and Back-up
The network server market has grown rapidly as more information is
being shared and processed across networks. Also, the storage capacity of hard
disk drives installed on servers has grown dramatically. With network servers
providing shared access to mission critical information twenty-four hours a day
seven days a week, the need for fast, reliable data backup and disaster
recovery has become acute. Traditionally servers have been backed up a file at
a time. If a lost or deleted file needed to be recovered, specialized software
would have to be run by a network systems administrator. If a server was lost
and the files destroyed, a new server would have to be formatted and the
network operating system reinstalled before going to tapes to try to recover
the data. The result has been costly server down time.
Stac began shipping Replica for NetWare in February 1996. Replica was
developed by Stac based on core backup and disaster recovery technology
purchased from Crossware Development Corporation and Rememory, Inc. in 1995.
Unlike traditional file-by-file backup technologies, Replica uses Stac's Object
Replication Technology to replicate entire servers or volumes. Replication
allows live servers to be backed up and is dramatically faster than
file-by-file software because Replica does not have to open and close each file
as it replicates. A replicated volume can be mounted directly as a NetWare
volume so that downtime due to a server crash can be minimized. Unlike
disaster recovery routines provided by file-by-file software, Replica creates a
complete server replica and can restore a server without having to reinstall
networking software or rebuild disk partitions.
The Company expects to ship Replica for Windows NT in late March 1997
and thus provide disaster recovery support for a rapidly growing segment of the
network server market.
Other Storage Management Products
The Company's family of Stacker products provided the majority of
Stac's software revenues for fiscal years 1991 though 1994. Stacker software
generally provides an average two-to-one compression ratio when compressing all
of the files stored on a personal computer disk drive. Stacker software is
sold to end users for data compression on personal computer storage devices and
operates on computers running the Windows 95, MS-DOS, PC-DOS, Windows 3.1, OS/2
or Macintosh operating systems.
Two factors have led to a decrease in the revenue the Company receives
from its Stacker products. Data compression utilities are now provided with
Windows NT, Windows 95, MS-DOS and PC-DOS under patent or software licenses
from Stac and, secondly, the cost per megabyte of hard disk drives has declined
significantly. As a result, customers have the choice of inexpensively
upgrading their hard disk drives or using compression utilities that are
included with the operating systems sold with most personal computers.
Due to the above factors, the Company no longer invests significant
resources in the development or marketing of its Stacker products, but does
support retail and OEM sales of the product line.
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HI/FN
As the need to communicate among and within organizations has
increased, the need for efficient and secure network communications equipment
has also grown. At the same time, Hi/fn's business has migrated from supplying
a range of semiconductors and software libraries to backup tape drive OEMs, to
supplying a range of data compression and data encryption semiconductors and
software libraries to network communications OEMs.
Hi/fn's current semiconductor and software libraries are based on
Hi/fn's patented LZS lossless data compression technology which compresses and
decompresses data rapidly, efficiently and transparently. LZS data compression
technology compresses all types of data found on a personal computer or
transmitted over communications systems, including executable files and text,
spreadsheet, graphics and database files. The amount of compression varies
depending on the inherent redundancy of the data in the files being compressed,
with text, spreadsheet, graphics and database files achieving higher
compression ratios than executable files. Hi/fn has also developed proprietary
semiconductor architectures that enable its semiconductor-based products to
achieve faster processing throughputs than those achievable through software
alone.
Hi/fn is currently developing semiconductors and software libraries
which implement data encryption standards. These products are intended to be
used with and integrated with Hi/fn's LZS products.
Hi/fn's family of semiconductors and software libraries are sold to
OEMs for use in network bridges and routers, ISDN and frame relay products,
high speed DLT back-up tape drives, printers and other applications. LZS
technology products have become the de facto standard for internetwork
communications.
STRATEGY
STORAGE MANAGEMENT AND COMMUNICATIONS SOFTWARE
Stac's strategy with respect to its storage management and
communications software groups is to provide software solutions for information
systems managers and end users, within an organization or at home, to help them
better manage and use their personal computer storage and communications
investments through the use of intranet and Internet enabled disaster recovery,
communications and security capabilities. The Company attempts to meet this
goal through internal research and development and product acquisitions.
In October 1994, Stac purchased ReachOut Remote Control software from
Ocean Isle Software. The acquisition of ReachOut expanded the Company's core
competencies from storage systems using data compression to include
communications. Following the acquisition of ReachOut, the Company has
introduced versions 5.0 and 6.0 of ReachOut, creating the first complete remote
access software product. ReachOut now offers high performance remote control,
rapid file transfer and remote node access to networks for Windows 95, Windows
3.x and DOS and, in its next release, Windows NT 4.0. ReachOut
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was named Editors' Choice by PC Magazine in each of 1995 and 1996 and has won a
number of other awards and recognition.
In March 1995 Stac acquired Novell NetWare server disaster recovery
and backup technology from Crossware Development and Rememory. The Company has
invested heavily in further development of those technologies and has added
additional features together with new, innovative technology. The result of
those development efforts was the February 1996 shipment of Replica for
NetWare. Replica introduces Stac's Object Replication Technology as a
replacement for file-by-file backup software solutions that do not provide
fast, effective disaster recovery.
In October 1995 the Company acquired Internet software and development
capability through the purchase of California Software. The Company's
acquisition of California Software has provided the Company with core
technology and development resources to integrate Internet functionality into
its ReachOut and Replica products.
HI/FN
The mission of Hi/fn, Stac's networking products subsidiary, is to
offer a range of products which incorporate the Company's LZS data compression
technology and industry standard data encryption that address its customers'
security, bandwidth and capacity needs. Today Hi/fn provides LZS data
compression technology in a range of software and semiconductor products that
meet a variety of customer performance needs. LZS data compression has
addressed a key issue for today's computer users: data communications
bandwidth. Efficient exchange of electronic data is vital to the growing ranks
of users linked across networks, over telecommunications channels and via
wireless communications systems. LZS data compression significantly
streamlines this process. By transmitting data in compressed form, the
effective rate of transmission is accelerated, the expense of data exchanges is
cut by half or more and the volume of traffic that can be carried over
communications channels is doubled or more. LZS implementations are also used
by tape backup and printer OEMs to increase capacity or reduce the cost of
memory in their products.
Hi/fn is now addressing the security needs of its communications
equipment customers. These needs have been brought on by the rapid adoption of
the Internet as an integrated part of enterprises' network infrastructure.
Hi/fn is implementing data encryption standards in software and silicon. Then,
by combining data encryption with LZS data compression, Hi/fn can provide
communications equipment OEMs with software and semiconductor products which
not only increase bandwidth through compression, but also offer security
through the more efficient encryption of compressed data.
PRODUCTS
The Company currently sells its storage management and communications
software solutions to end users and OEMs, and Hi/fn sells software libraries
and semiconductor products to equipment and software OEMs. Software solution
sales consist of the ReachOut and Replica products and, to a lesser extent,
CD-QuickShare and Stacker storage management products. Products sold to
Hi/fn's customers consist of semiconductors and LZS and MUM software libraries.
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REACHOUT REMOTE ACCESS SOFTWARE
ReachOut is a communications software program that allows one PC to
remotely control another PC by replicating the visual display and controlling
the keyboard and mouse. Using ReachOut and a modem, ISDN line or the Internet,
you can use your keyboard and mouse to operate a distant PC, synchronize it
with your local PC, transfer files or establish a remote node connection.
Using ReachOut over a network connection, you can control or monitor another PC
on the same Local Area Network (LAN) or Wide-Area Network (WAN).
ReachOut gives users, support personnel and administrators new tools
with which to do their jobs better. For example: i) telecommuters may access
and operate their desktop PC from home or while traveling for business; ii)
manufacturers' product support personnel can dial into a computer and diagnose
software or hardware problems without the expense and inconvenience of a
product return or an on-site visit by a technician; iii) corporate helpdesk
personnel can use ReachOut to instantly connect to any workstation on their
internal network to support Windows and DOS applications; iv) product
demonstration computers can be operated remotely to give demonstrations of
software products without having to load and configure each computer with the
application that is being demonstrated; v) files can be quickly and easily
transferred from a distant computer over a modem connection; or vi) using a
ReachOut gateway, any workstation on your corporate LAN or WAN can be accessed.
The following table lists each of the principal products in the
ReachOut family:
<TABLE>
<CAPTION>
EXPECTED DATE OF
PRODUCT DESCRIPTION SELLING PRICE FIRST SHIPMENT
------- ----------- ------------- --------------
<S> <C> <C> <C>
ReachOut modem and network Software for Windows 95, Windows $139 September 1991
version with host and 3.x and DOS-based computers
viewer
ReachOut modem and network Software for Windows 95, Windows $81 January 1992
version with host only. 3.x and DOS-based computers.
ReachOut modem and network Software for Windows 95, Windows $93 January 1992
version with viewer only 3.x and DOS-based computers.
</TABLE>
ReachOut modem and network version, currently sold as release 6.0, is
a communications software program that allows a user to connect to a PC by
modem or ISDN, through the Internet or over a network to access another PC in
order to remotely control that computer, transfer files between computers,
synchronize computers, or establish a remote node connection. The software is
sold with both the host and viewer software in one package for users who need a
one-to-one remote connection. The host only software is sold for applications
such as for manufacturers whose technical support
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personnel need to view many hosts from their support location. The viewer only
software is for users such as sales persons giving demonstrations who need to
view one host from many remote locations.
ReachOut 7.0 is presently in beta testing and is expected to be
commercially available in the March 1997 quarter. ReachOut 7.0 will support
Microsoft's Windows NT operating system as well as the other operating systems
supported by ReachOut 6.0.
REPLICA
Replica is a backup and disaster recovery software product currently
being sold as version 2.1 for Novell NetWare servers. Replica uses Stac's
Object Replication Technology to quickly replicate entire servers or volumes
and to provide easy access to backed up files plus fast, dependable disaster
recovery.
The following table lists each of the principal products in the
Replica family and their current pricing. The Company expects to change its
pricing for Replica in January 1997 to reflect competitive pricing models:
<TABLE>
<CAPTION>
EXPECTED DATE OF
PRODUCT DESCRIPTION SELLING PRICE FIRST SHIPMENT
------- ----------- ------------- --------------
<S> <C> <C> <C>
Replica for NetWare, one Software for Novell NetWare $740 February 1996
server license. servers.
Replica. High Performance Software to support DLT and $450 March 1996
Option other high speed backup devices
and autoloaders.
Replica. Multi-Server Software for Novell NetWare $450 March 1996
Agent Option. servers.
</TABLE>
HI/FN PRODUCTS
Hi/fn supplies OEMs with data compression coprocessors and software
libraries for applications in bridges, routers, ISDN and frame relay products
and for peripheral devices such as back-up storage devices and printers. Hi/fn
products accounted for 16% and 28% of revenues in fiscal 1995 and 1996
respectively.
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The following table lists each of the principal products that Hi/fn
sells to OEMs:
<TABLE>
<CAPTION>
DATE OF
PRODUCT DESCRIPTION FIRST SHIPMENT
------- ----------- --------------
<S> <C> <C>
9705 Data compression multitasking coprocessor for use on October 1991
computer and communication devices.
9706 Data compression multitasking coprocessor for use on December 1992
computer and communication devices.
9710 Data compression coprocessor for very high speed September 1996
applications. Provides LZS multi-history support.
9711 Data compression coprocessor for very high speed Expected June Quarter of
applications. Provides LZS and MPPC multi-history Fiscal 1997
support.
9732 Very high speed data compression for storage and June 1994
printer applications.
MUM 1.0 Software implementing encryption and compression. Expected March Quarter of
Fiscal 1997
LZS221 Compression software libraries licensed for November 1988
operation with various microprocessors.
MPPC Compression software libraries licensed for July 1996
operation with various microprocessors.
</TABLE>
The 9705 data compression coprocessor compresses data at approximately
2.5 megabytes per second and decompresses data at approximately 6 megabytes per
second. The power management and multitasking features of this coprocessor
suit it to communications applications. The 9705 can be used on local area
network adapter cards and network management devices, such as bridges, routers
and remote access servers, that allow communications with nodes on a remote
local area network as if they were local. The 9705 can quickly switch between
more than 1,500 concurrent two-way communications sessions over a single
communications line. The 9706 has the same performance as the 9705, but may be
configured for 16-bit or 32-bit data transfers.
The 9732 data compression coprocessor is used in communications and
peripheral storage products. The 9732 allows compression rates of 12 megabytes
per second and decompression rates of 16 megabytes per second and has on-chip
RAM for a single-chip Hi/fn LZS solution.
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The 9710 data compression coprocessor is used in communications
products. The 9710 is the next generation of the 9705 and 9706. It may be
configured for 16-bit or 32-bit data transfers, and compresses data at
approximately 8 megabytes per second and decompresses data at approximately 15
megabytes per second. The 9710 implements LZS multi-history support. The 9711
data compression coprocessor, expected to be available in the June quarter of
fiscal 1997, will have the same performance characteristics as the 9710, but
will also implement MPPC multi- history support.
MUM 1.0 encryption and LZS compression software will be used in
communications products. It will be implemented in C source code and in
optimized assembly for applications based on Motorola's 680xx processors. MUM
1.0 is expected to be available in the March quarter of fiscal 1997.
The LZS221 family is the Company's software implementation of its LZS
data compression technology in C source code and in optimized assembly for OEM
applications based on Intel's 80x86 and i960 processors as well as Motorola's
680x0 processors. MPPC software is licensed from Microsoft Corporation and
implements in C source code the Company's compression technology for use with
Microsoft's operating systems.
The Company currently grants annual, renewable licenses for both the
LZS and MPPC software to software developers and equipment OEMs. Pricing for
the licenses is based on related revenue from an OEM's licensed application.
RESEARCH AND DEVELOPMENT
The market for the Company's products is characterized by rapid
technological change, requiring continuous investment to develop and bring to
market new products. The Company believes that significant factors in its
future success will be its ability to identify and respond to customer needs,
to enhance its existing products, to introduce new products on a timely and
cost-effective basis, to extend its core technology into new platforms and
applications, and to anticipate and respond to emerging standards and other
technological changes.
The Company intends to continue to develop both its software products
and semiconductor products as market conditions warrant and to invest in the
development of new products. Foreign language versions of products will be
developed as market conditions warrant. The Company has developed fully
translated German and Japanese versions of its ReachOut and Replica software
products for sale in foreign markets and intends to work with partners in other
countries to produce other language translations as market conditions warrant.
The Company's research and development is conducted primarily by its
internal product development staff, through contractors, and through
acquisitions from third parties. Research and development expenses were $7.2
million in 1995 and $8.4 million in 1996, which represented 16% and 18% of
revenues in those periods, respectively.
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MARKETING AND SALES
The Company markets and sells its storage management and
communications software products domestically through: i) its internal direct
sales staff which, directly and together with corporate resellers, value added
resellers and systems integrators, sells to corporations, government entities
and other enterprises and ii) distributors that sell to software specialty
resellers, computer superstores, mass merchandisers and warehouse outlets. In
fiscal 1995 Ingram Micro accounted for 11% of total revenues and in fiscal 1996
accounted for less than 10% of total revenues. The Company's domestic
distributors resell the Company's products in North America on a nonexclusive
basis pursuant to distribution agreements that have one-year terms with
automatic one-year renewal periods. The Company retains ownership of its
proprietary rights associated with its products and agrees to indemnify the
distributor for third-party claims of proprietary rights infringement to the
extent such claims are brought against the distributor.
The Company's current return policy allows its distributors to return
any new, unused product in the distributor's inventory within a contractually
defined period of up to 180 days from the notice of discontinuance of any
product, or of any new version of a product, for a credit against balancing
orders for other products of the Company. In addition, distributors may
participate quarterly in a stock balancing program which, subject to certain
limitations, allows them to return purchased products within the second month
of each calendar quarter for credit towards future purchases or a cash refund.
The Company believes that this stock balancing provision is customary in the
industry and should not materially increase risks associated with the
relationship. End users may return defective products pursuant to policies
established by their dealer or directly to the Company within ninety days of
purchase. The Company reviews its allowances for returns and distributor
inventory levels on a monthly basis and believes its allowances for returns are
adequate. However, due to uncertainty regarding end user demand and
competitive product introductions, there can be no assurance that actual
returns in excess of recorded allowances will not occur and result in a
material adverse effect on the Company's business, operating results or
financial condition.
The Company also trains and otherwise supports distributors, resellers
and dealers and sponsors joint marketing programs designed to create end-user
demand for its products. The Company's marketing programs include advertising
in the trade press, targeted direct mail campaigns, sales brochures and
participation in trade shows and seminars. These marketing programs have three
objectives: create brand name awareness of the Company and its products;
generate sales leads for its resellers, distributors and inside direct sales
personnel; and support the efforts of its resellers through sales tools and
training. The Company seeks to educate individuals and key decision makers in
corporations and government about the benefits of its products through
specialized marketing programs.
The Company believes a significant competitive factor in the personal
computer business is the ability to provide a high level of customer support.
The Company provides telephone support to registered users and resellers. In
addition the Company provides automated and electronic support services through
its electronic bulletin board service, its Stac.com World Wide Web site, and
via automated fax-on-demand and voice response services.
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The Company sells its ReachOut, Replica, CD-QuickShare and Stacker
products internationally through a number of distributors in Europe, the
Pacific Rim and Latin America. The European distributors are managed by sales
personnel located in Stac's sales office in the United Kingdom ("Stac UK").
Distributors in the Pacific Rim and Latin America are managed by sales
personnel at the Company's headquarters in California. International sales
accounted for revenues of $4.8 million in each of fiscal 1995 and 1996.
Technical support for Stac products sold in foreign markets is provided by Stac
UK, Stac or through contracts with third parties. The Company's international
operations are subject to certain risks common to international activities,
such as changes in foreign governmental regulations, currency exchange rates,
tariffs and taxes, export license requirements, the imposition of trade
barriers, difficulties in staffing and managing foreign operations, and
political and economic instability.
In addition to the above channels used for marketing and selling the
Company's end-user software products, the Company's direct sales staff license
its software products to personal computer OEM's and other software and
hardware developers for incorporation into their own products.
Hi/fn sells its semiconductor products and software libraries directly
to OEMs and utilizes a domestic network of independent manufacturer's
representatives who are compensated on a commission basis to introduce Hi/fn's
products to OEMs and provide local sales support for existing OEM customers.
These manufacturer's representatives are managed and supported by Hi/fn's
internal sales and support staff. Hi/fn selects its representatives on the
basis of their reputation, industry knowledge and the product lines they
represent. Hi/fn also sells its semiconductor products in Japan and Hong Kong
through industrial distributors and directly elsewhere.
COMPETITION
The market for the Company's products is intensely competitive.
Increased competition could result not only in a decline in sales volume, but
also in price reductions that could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company's ReachOut product competes in the remote control software
market against more established products such as Symantec Corporation's
pcAnywhere, MicroCom, Inc.'s Carbon Copy and Traveling Software, Inc.'s
Laplink. Symantec, MicroCom and Traveling Software are shipping versions of
their remote control products that include Windows NT support. ReachOut also
competes against remote access products from companies such as Citrix, Inc. and
Shiva Corporation. Further, Microsoft could elect to incorporate remote
control or additional remote access capabilities into its operating systems
which are pre-installed on most personal computers.
The Company began shipping Replica back-up and disaster recovery
software for Novell NetWare during the second quarter of fiscal 1996. Replica
competes with well established back-up products from Cheyenne Software, Inc.,
recently purchased by Computer Associates, Inc., and Seagate Software, Inc.
(owned by Seagate Technologies, Inc.), both of which have established channels
of distribution and installed customer bases. Resellers could choose not to
sell Replica over competitors' products with the result that significant sales
of Replica could fail to materialize, or products similar to Replica could be
successfully introduced to resellers by the Company's competitors. Also,
Replica is
13.
<PAGE> 14
being introduced into a sophisticated NetWare server environment. While the
Company has invested significant resources in testing Replica under a variety
of conditions, configurations and circumstances, there are likely to be
environments which have not been anticipated for which additional development
of Replica will be necessary. In addition, many enterprises operate in a mixed
server environment which includes NetWare and Windows NT and requirements for
client back-up support. While the Company intends to provide support for a
mixed server environment and for client back-up, such versions will not be
available until fiscal 1997.
The Company's license agreement with IBM Corporation grants IBM the
right to implement the Company's LZS data compression technology in IBM
hardware and software products. Also, microprocessor and chip set suppliers,
customers and others could seek to expand their product offerings by designing
and selling products using competitive data compression or other technology
that could render obsolete or adversely affect sales of the Company's
semiconductor and LZS221 products.
MANUFACTURING AND BACKLOG
The majority of the Company's software products are manufactured in
accordance with the Company's specifications by third parties that specialize
in the duplication and assembly of software products. The principal materials
and components used in the Company's software products include diskettes and
CD's, used for distribution of the software code, and user manuals. The
software manufacturing process involves the duplication of media, the printing
of user manuals, assembly of components, and final packaging. The Company
believes there is an adequate supply of and source for the raw materials used
in its software products and that multiple sources are available for media
duplication, manual printing and final packaging.
The Company generally ships software products within ten days after
the receipt of an order, although rapid increases in demand as the result of
the release of a new product or a product upgrade could cause shipping delays.
Generally, the Company has relatively little, if any, backlog of orders for its
software products at any given time and does not consider backlog to be a
measure of sales for any future period.
Hi/fn's semiconductor products are manufactured by third-party
semiconductor manufacturers. In the past, most recently during fiscal 1995,
the lead times required by Hi/fn's manufacturers have increased due to growing
world-wide demand for semiconductor products. In addition, future worldwide
semiconductor capacity may not always be able to service demand. Lead times
from Hi/fn's manufacturers are currently from ten to fourteen weeks, but have
been as high as twenty weeks during times of capacity shortages. Hi/fn has
instituted programs to have its principal semiconductor products manufactured
by two different manufacturers where feasible. However, if Hi/fn has
difficulty procuring sufficient quantities of its semiconductor products to
meet customer demands, resulting shortages could have a material adverse affect
on the Company's financial results.
Hi/fn quotes lead times for its semiconductor products of twelve weeks
from receipt of order and generally ships semiconductor products within one
week of the quoted lead times. Hi/fn has a backlog of approximately three to
five months of semiconductor sales, representing order lead times. Backlog
14.
<PAGE> 15
for semiconductor products is subject to rescheduling and cancellation by
customers and is not necessarily indicative of future demand for semiconductor
products.
PATENTS, TRADEMARKS AND PRODUCT PROTECTION
The Company attempts to protect its products with a combination of
trade secret, patent, copyright, maskwork and trademark laws and with license
agreements. The Company or its subsidiaries own ten issued United States
patents relating to data compression, which expire from 2006 to 2013. One or
more of the patents are employed in the Company's data compression coprocessors
and Stacker, ReachOut, and LZS221 and MPPC software products. The company also
owns one patent relating to data compression in each of the United Kingdom,
Germany and Belgium and has other patents pending.
The status of patents covering technology is highly uncertain,
involving complex legal and factual questions. There can be no assurance that
patent applications filed by the Company will result in patents being issued or
that its patents, and any patents that may be issued to it in the future, will
afford protection against competitors with similar technology; nor can there be
any assurance that patents issued to the Company will not be infringed upon or
designed around by others or that others will not obtain patents that the
Company would need to license or design around or that the Company's
competitors will not independently develop non-infringing technologies or
products that are equivalent or superior in function or performance. If
patents held by competitors or others are upheld by the courts and found to be
infringed by Stac's products, the holders of such patents might be in a
position to require the Company to stop manufacturing, using or selling the
infringing products and to pay up to three times damages to the holders of the
infringed patents. There can be no assurance that any licenses that might be
required for the Company's products would be available on reasonable terms, if
at all.
In April 1993, a favorable judgment for Stac was entered as part of a
settlement in a patent infringement lawsuit against a competitor, Integrated
Information Technology. The judgment states that the two Stac data compression
patents involved were valid and infringed by the defendant. In February 1994,
a Federal jury found that two data compression patents asserted by the Company
against Microsoft were valid and infringed. The Company settled the suit in
June 1994.
The Company generally licenses its software products to end user
customers by use of a "shrink-wrap" license (a "shrink-wrap" license agreement
is a printed license agreement included within packaged software that sets
forth the terms and conditions under which the end user can use the product).
The terms of this license agreement determine how the software may be used and
generally limit the user to use of the software on a single computer and to
make a back-up copy and prohibit the end user from providing the product or
copies to multiple users. Shrink-wrap licenses are unenforceable under the
laws of certain jurisdictions. Judicial enforcement of copyright laws is also
uncertain. Policing unauthorized use of computer software is difficult, and
software piracy is a persistent problem for the packaged software industry.
These problems may be particularly acute in international markets. There can
be no assurance that misappropriation will not occur.
The Company's trademark rights include rights associated with its use
of its trademarks and rights obtained by registrations of its trademarks. The
Company has obtained United States trademark registrations for certain
trademarks, and has applied for or obtained registration in various
international
15.
<PAGE> 16
jurisdictions. The Company's rights to register and use its trademarks do not
ensure that the Company has superior rights to others that may have registered
or used identical or related trademarks on related goods or services, nor that
such registrations or uses will not be used to attempt to foreclose use of a
particular trademark by the Company.
Because the personal computer industry is characterized by rapid
technological change, the policing of the unauthorized use of personal computer
software is a difficult task and software piracy is expected to continue to be
a persistent problem for the packaged software industry. Despite steps taken
by Stac to protect its software products, third parties may still make
unauthorized copies of Stac's products for their own use or for sale to others.
The Company believes that the knowledge, abilities and experience of its
employees, its timely product enhancements and upgrades and the availability
and quality of its support services provided to users are more significant
factors in influencing end users to buy its products than are patent, trade
secret and copyright protection laws.
EMPLOYEES
As of December 15, 1996, Stac employed approximately 160 full-time
employees, of whom approximately 60 were employed in research and development,
75 in sales, marketing and customer support and 25 in operations and
administration. The Company also uses approximately 40 contractors,
principally for research and development activities. None of the Company's
employees is represented by a labor union or subject to a collective bargaining
agreement. Stac has never experienced a work stoppage due to labor
difficulties and believes that its employee relations are good.
ITEM 2. PROPERTIES
The Company's principal domestic administrative, marketing, sales and
product development activities are located in approximately 46,000 square feet
of leased facilities in San Diego, California. The space is occupied under
lease agreements that expire in March 2000. The Company has options to renew
the leases for an additional five year period on terms specified in the current
lease agreements. The Company leases approximately 1,600 square feet of
warehouse space in Carlsbad, California on a quarter-to-quarter basis and
approximately 2,000 square feet of office space in San Jose, California. The
Company's subsidiary in the United Kingdom leases 2,600 square feet of office
space near London under a ten year lease cancelable by either party after
November 1998. See Note 7 of Notes to Financial Statements for information
regarding the Company's obligations under its facilities leases.
ITEM 3. LEGAL PROCEEDINGS
In July 1992, separate shareholder class action complaints were filed
in the United States District Court for the Southern District of California,
alleging substantially identical violations of the federal securities laws
against the Company and certain of its Directors for allegedly misstating and
omitting material facts required to be stated in the Company's May 7, 1992
prospectus and in subsequent public announcements in order to artificially
inflate the price of the Company's stock. Each suit was purportedly brought on
behalf of all persons who purchased the Company's common stock during the
period May 7, 1992 through July 9, 1992, inclusive. Each suit seeks
compensatory damages in unspecified amounts and other relief. A motion to
consolidate the two actions was granted and a
16.
<PAGE> 17
consolidated complaint filed. A motion to dismiss the complaint was granted on
September 20, 1993 with leave to amend the complaint. On November 18, 1993,
plaintiffs amended the complaint and named additional Directors and Officers of
the Company as defendants. The amended complaint alleged substantially the
same violations as the complaint first filed in July 1992.
In July 1994 the San Diego Federal District Court dismissed the
action, with prejudice. The plaintiffs' appeals of the District Court's
decision were denied by the Ninth Circuit Court of Appeals and the District
Court's decision affirmed and entered. Plaintiffs have asked the United States
Supreme Court to review the Appellate Court's decision.
The Company and the individual defendants have vigorously defended
against the actions. Although the ultimate outcome of the litigation cannot be
predicted with certainty, based upon their present understanding of the law and
facts, management and the individual defendants believe that they have
meritorious defenses to the claims alleged.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended September 30, 1996.
17.
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Common Stock of Stac is traded on the Nasdaq National Market
("NNM") under the symbol "STAC." The following table sets forth the range of
high and low sales prices on the NNM for the Common Stock for the periods
indicated and since January 1, 1994. Such quotations represent inter-dealer
prices without retail markup, markdown or commission and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Common Stock Prices
High Low
----------- ----------
<S> <C> <C>
Calendar Year 1994:
First Quarter $ 8.25 $3.50
Second Quarter $ 7.375 $3.875
Third Quarter $ 6.63 $5.00
Fourth Quarter $ 6.75 $4.25
Calendar Year 1995:
First Quarter $ 6.38 $4.88
Second Quarter $ 8.13 $5.38
Third Quarter $10.25 $7.25
Fourth Quarter $15.13 $6.75
Calendar Year 1996:
First Quarter $14.50 $8.75
Second Quarter $13.88 $9.88
Third Quarter $11.25 $6.88
Fourth Quarter (through December 19, 1996) $ 8.63 $6.25
</TABLE>
The Company has not paid dividends on its Common Stock and presently
intends to continue this policy in order to retain earnings for use in its
business. The Company had approximately 426 shareholders of record as of
December 11, 1996. The Company believes it has in excess of 500 beneficial
shareholders. The last sales price for the Company's Common Stock, as reported
on the NNM on December 19, 1996, was $6.75.
18.
<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA
The following data, insofar as it relates to each of the fiscal years
1992 through 1996, have been derived from audited financial statements,
including the balance sheet at September 30, 1996 and 1995 and the related
statements of operations for each of the three years ended September 30, 1996
and notes thereto. This data should be read in conjunction with the
consolidated financial statements of the Company and related notes thereto for
the corresponding periods which are included herein.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $46,765 $45,804 $31,325 $36,984 $33,356
Operating income (loss) 2,352 (1,035) (750) (234) 12,106
Net income (loss) (1,675) 1,496 333 415 8,362
Net income (loss) available for
common shareholders (1,843) (102) (116) 415 8,362
Net income (loss) per common share (0.06) 0.00 0.00 0.02 0.34
Common shares used to compute per share 30,068 25,391 24,643 25,013 24,529
data
Working capital $68,498 $65,186 $71,800 $31,053 $30,773
Total assets 83,690 80,611 77,952 37,674 40,597
Common stock and other
shareholders' equity 78,999 36,395 34,705 33,001 32,314
</TABLE>
The Company has never declared or paid any cash dividends on its
common stock. The company currently intends to retain remaining future
earnings to finance the growth and development of its business.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Stac, Inc. ("Stac" or the "Company") designs, develops, markets and
supports storage management and communications software products and services
The Company also designs, develops and markets software and semiconductor
implementations of its proprietary LZS data compression technology and is
developing software and semiconductor implementations of data encryption
standards for use with its LZS products. Stac has organized its business into
three product groups: storage management solutions and communications
solutions which comprise Stac's software business, and networking products
which comprises the business of Hi/fn Inc., Stac's networking products
subsidiary ("Hi/fn").
Stac's software business designs, develops, markets and supports
storage management and communications solutions that feature disaster recovery,
communications and security capabilities important to Internet-connected
enterprises and individuals. Both the storage management solutions and
communications solutions are sold world-wide through solution providers,
resellers, original equipment manufacturers (OEMs), distributors and directly
through Stac's Internet site and sales personnel.
19.
<PAGE> 20
The storage management solutions group is comprised principally of
Replica, a software product which provides disaster recovery and backup for
servers. Replica for NetWare was introduced in February 1996, and Replica for
NT is expected to be available at the end of the March 1997 quarter.
Stac's communications solutions group is comprised principally of
ReachOut Remote Control software ("ReachOut"), a remote access software suite
which allows users to access a remote PC using another PC through the Internet,
or over ISDN lines, modems or networks. ReachOut works with Microsoft
Corporation's Windows 95, Windows 3.x and DOS operating systems and will
support Windows NT in a release expected to be available in the March 1997
quarter.
Stac's semiconductor products business, formerly referred to as the
Technology Business Unit, has been organized as Hi/fn Inc., a Stac subsidiary.
Hi/fn is focused on improving the efficiency, security and manageability of
networks by providing solutions in software and silicon to packet processing
bottlenecks. Hi/fn implements lossless data compression in software libraries
and semiconductors which are marketed and sold to manufacturers of routers,
firewalls, remote access servers, ISDN connectivity products, storage hardware
and printers. Hi/fn is also implementing data encryption standards in software
and silicon for use with data compression to provide fast, efficient and secure
data transmission capabilities for its customers' products. Hi/fn's products
are sold world-wide to OEMs both directly and through manufacturers'
representatives.
Stac also receives royalties from Microsoft and IBM Corporation for
licenses of its data compression technology. The Company will receive $4.0
million in royalties quarterly through December 1997, after which the license
agreements will be fully paid-up.
Stac has been engaged in a continuing program to diversify its
software business through acquisitions and internal product development. The
Company acquired ReachOut in October 1994 for $19.1 million from Ocean Isle
Software. ReachOut has provided a source of software revenue to offset the
decrease in Stacker disk compression sales. Stacker sales have declined during
each of fiscal 1996, 1995 and 1994 due primarily to the inclusion of disk
compression in Microsoft's operating systems and to the declining costs of hard
disk storage. Stac also purchased technology in March 1995 which has been used
as the basis of its Replica products and is incorporating Internet technology
acquired in its October 1995 purchase of California Software, Inc. into its
ReachOut and Replica products.
The following discussion should be read in conjunction with the
consolidated financial statements included elsewhere within this annual report.
Fluctuations in annual results may occur as a result of factors affecting
demand for the Company's products such as the timing of the Company's and
competitors' new product introductions and upgrades. Due to such fluctuations,
historical results and percentage relationships are not necessarily indicative
of the operating results for any future period.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risk and
uncertainties. The Company's future results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, fluctuations in the Company's operating
results, continued new product introductions by the Company, market acceptance
of the Company's new product introductions, new product introductions by
competitors, OEM and distributor inventory levels and customer demand for the
products incorporating Hi/fn semiconductors, technological changes in the
personal computer and communications industries, uncertainties regarding
intellectual property rights and the other factors referred to herein
(including, but not limited to, the factors discussed below under "Quarterly
Trends and Channel Inventories," "Seasonality," "Operating Systems,"
"Competition and Risks Associated with New Product Introductions" and "Stock
Price Volatility") and in the Company's Forms 10-Q.
RESULTS OF OPERATIONS
The following table sets forth for the Company's results of operations
and the percentage relationship of certain items to revenues during the periods
shown. Unless otherwise indicated, references to years are to fiscal years
which ended September 30.
20.
<PAGE> 21
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues 100% 100% 100%
Cost of revenues 14 12 16
--- --- ----
Gross margin 86 88 84
--- --- ----
Research and development 18 16 18
Purchased research and development 26 29 -
Sales and marketing 28 29 38
General and administrative 9 11 30
Restructuring - 5 -
--- --- ----
81 90 86
--- --- ----
Operating income (loss) 5 (2) (2)
Interest income 5 4 4
---- --- ----
Income before income taxes 10 2 2
Provision for (benefit from) income taxes 13 (1) 1
--- --- ----
Net income (loss) (3)% 3% 1%
==== === ====
</TABLE>
REVENUES
Revenues increased by 2% to $46.8 million in 1996 compared to 1995
revenues, and increased by 46% in 1995 to $45.8 million compared to 1994
revenues of $31.3 million. The increase in 1996 revenues was due to increased
Hi/fn sales offset in part by a decline in software sales as discussed below.
The increase in 1995 revenues was due primarily to license fees received from
Microsoft and IBM for Stac lossless data compression technology.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Net Revenue ($millions):
<S> <C> <C> <C> <C> <C> <C>
Software $17.9 38% $21.7 47% $20.1 64%
Hi/fn 12.9 28 7.3 16 5.7 18
Licenses 16.0 34 16.8 37 5.5 18
----- --- ----- --- ----- ---
Total $46.8 100% $45.8 100% $31.3 100%
----- --- ----- --- ----- ---
</TABLE>
Software sales, which are comprised of domestic and international
sales and licenses through distribution, retailers, solution providers, OEM and
direct channels, accounted for $17.9 million of revenues in 1996, $21.7 million
in 1995, and $20.1 million in 1994. Software sales decreased by 18% in 1996
from 1995 due primarily to declining sales of Stacker as discussed in the
Overview above, offset by revenues from ReachOut and, to a lesser extent, from
Replica. Software sales increased by 8% in 1995 from 1994 due primarily to
revenues from the October 1994 acquisition of ReachOut, offset by declines in
Stacker sales.
Revenues from Hi/fn, Stac's semiconductor subsidiary which develops,
markets and sells semiconductors and software libraries derived from the
Company's data compression technology and from data encryption standards, were
$12.9 million in 1996, $7.3 million in 1995, and $5.7 million in 1994. The
increase in revenues in both 1996 and 1995 are due primarily to sales of the
Company's data
21.
<PAGE> 22
compression coprocessors to providers of high speed networks and tape drives.
The Company expects Hi/fn semiconductor sales in the December 1996 quarter to
decrease significantly from the levels of the September 1996 quarter due to
high levels of inventory held by some OEM customers, and OEMs practice of
building product in large lots in order to achieve manufacturing efficiencies.
The Company expects Hi/fn revenues to then increase in the March 1997 quarter
from levels of the December 1996 quarter as OEM inventories are consumed and
new products from Hi/fn are shipped to customers.
Royalties from licenses of Stac's data compression technology to
operating system vendors were $16.0 million in 1996, $16.8 million in 1995, and
$5.5 million in 1994. In 1996 and 1995, royalty revenues were primarily from
license agreements with Microsoft and IBM, who are obligated to continue paying
royalties under those licenses at the rate of $4.0 million per quarter through
December 1997. Royalty revenues in 1994 were primarily from license agreements
with Microsoft and hardware OEMs.
International revenues, which are included above, are primarily from
sales of software products. International revenues were $4.8 million, or 10%
of revenues in 1996, $4.8 million, or 10% of revenues in 1995, and $5.2
million, or 17% of revenues in 1994. International revenues were unchanged in
1996 from 1995 levels and decreased 8% in 1995 from 1994 due primarily to
decreases in Stacker sales following the introduction of lossless disk
compression in personal computer operating systems as discussed above. Stac
markets and sells to its European accounts from its office in the United
Kingdom and markets and sells to the other principal international markets
through sales personnel in its San Diego office and through relationships with
distributors and resellers abroad.
GROSS MARGIN
Cost of revenues consists primarily of Stac's proprietary design
semiconductors, which are manufactured by third party foundries for resale by
Stac, and of the user manuals, packaging, media and assembly associated with
the Company's software products. Gross margins were 86% in 1996, 88% in 1995,
and 84% in 1994. The decrease in 1996's gross margin from that of 1995 was due
to the increase of Hi/fn semiconductor revenues as a percent of total revenue.
Semiconductor revenues have a lower gross margin than software revenues. The
increases in 1995's gross margin percent from that of 1994 was due primarily to
increased royalty revenues as a percent of total revenues.
RESEARCH AND DEVELOPMENT
The cost of product development consists primarily of salaries,
employee benefits, overhead, outside contractors and non-recurring engineering
fees. Such expenses were $8.4 million for 1996, $7.2 million for 1995, and
$5.6 million for 1994. The increases in product development in 1996 from that
of 1995 and in 1995 from that of 1994 were due to the addition of personnel for
development of new versions of ReachOut, development of the Company's Replica
product line, development of CD-QuickShare in 1995, and amortization of
capitalized research and development costs associated with the acquisition of
ReachOut. The Company expects to continue to invest in the development of
products for which it believes there is a need in the market. However, there
can be no assurance that product development programs invested in by the
Company will be successful or that products resulting from such programs will
achieve market acceptance.
Purchased research and development for 1996 includes $12.2 million
recognized in connection with the October 1995 acquisition of California
Software, Inc. and the related investment in DynaNet,
22.
<PAGE> 23
Inc. Purchased research and development for 1995 includes $12.7 million
related to the October 1994 acquisition of ReachOut from Ocean Isle Software
and $0.7 million related to the March 1995 technology acquisition from
Crossware Development Corporation and Rememory Corporation.
SELLING AND MARKETING EXPENSE
Selling and marketing expenses consist primarily of salaries and
commissions of sales and marketing personnel, customer service, product
technical support, consulting, advertising and promotion expenses and overhead.
Such expenses were $12.9 million for 1996, $13.3 million for 1995, and $11.9
million for 1994. There was no significant change in marketing and sales
expense in 1996 from that of 1995. The increase in 1995 spending from that of
1994 was due primarily to direct sales and marketing costs associated with the
acquisition of ReachOut. In June 1995, in order to reduce costs, the Company
closed its direct sales facility in Florida and consolidated its sales
operations at the Company's San Diego headquarters.
During 1996 the Company has invested in its sales organization in
order to reach corporate and enterprise end users of storage management and
communications products. To that end, the Company has hired sales staff to
support direct sales and OEMs, resellers and solution provider organizations.
The Company expects to continue to increase its spending on sales personnel and
marketing programs in 1997 in association with the introduction of new and
enhanced versions of ReachOut and Replica. As a result, consolidated sales and
marketing expenses are expected to remain the Company's most significant
ongoing operating expense.
GENERAL AND ADMINISTRATIVE
General and administrative expenses are comprised primarily of
salaries for administrative and corporate services personnel, legal, and other
professional fees. Such expenses were $4.4 million for 1996, $5.2 million for
1995, and $9.5 million for 1994. The decrease in 1996 expenses from those of
1995 was due to the inclusion in 1995 of a non-recurring expense of $1 million
related to terminated acquisition activities. The decrease in 1995 expenses
from those of 1994 was due to the settlement of patent litigation with
Microsoft and the resulting decrease in legal expenses. The Company expects to
hire additional management personnel in 1997 to manage operating activities of
the Company and to manage software service business opportunities. As a
result, consolidated general and administrative expenses are expected to
increase in 1997 from the levels incurred in 1996.
RESTRUCTURING CHARGES
In May 1995 the Company closed its Florida direct sales facility and
consolidated U.S. sales activities in its San Diego, California headquarters.
In conjunction with the closure the Company recorded a restructuring charge to
operations of $2.4 million. The principal components of the charge include $.6
million for lease termination and closure costs, $1.0 million for intangibles
written down, $.5 million for losses on fixed asset disposals, and $.3 million
for severance and employee related liabilities.
INTEREST INCOME
Interest income was $2.1 million in 1996, $2.0 million in 1995, and
$1.2 million in 1994. The increase in interest income in 1996 over that of 1995
was due to interest earned on net positive cash flow from operations. The
increase in interest income in 1995 over that of 1994 was due primarily to cash
23.
<PAGE> 24
received from Microsoft's purchase of the Company's preferred stock in June
1994. The Company invests the majority of its funds in tax exempt securities.
INCOME TAXES
For 1996, the Company reported a provision income for taxes of $6.1
million on income before income taxes of $4.5 million. In 1996 the Company
deducted purchased research and development of $12.2 million for which,
consistent with statutory guidelines, no tax benefit was recognized. Prior to
the purchased research and development, the effective tax rate for 1996 was
37%. For 1995 the Company recorded a tax benefit on pre-tax net income
principally as the result of tax exempt interest earned on cash equivalents
and marketable securities. For 1994 the effective tax rate was 31%. The
effective tax rates for both 1996 and 1994 are lower than the statutory federal
and state rates due primarily to tax exempt interest earned on cash equivalents
and marketable securities. Differences in effective tax rates among years is
also affected by the proportion of earnings from interest income and foreign
operations to total earnings and the different statutory tax rates associated
with them.
QUARTERLY TRENDS AND CHANNEL INVENTORIES
The Company historically has experienced significant fluctuations in
its revenues and operating results, including net income, and anticipates that
these fluctuations will continue. The Company operates with relatively little
backlog of its software sales, and the majority of its software revenues each
quarter result from orders received in that quarter. Consequently, if
near-term demand for the Company's products weakens in a given quarter or if
inventory of the Company's products in the retail and distribution channels
satisfies near-term demand, the Company's operating results for that quarter
would be adversely affected. In addition, when the Company announces enhanced
versions of its software products, the announcement may have the effect of
slowing sales of the current version of the product as buyers delay their
purchase. Quarterly results have been or may in the future be influenced by
the timing of announcements or introductions of new products and product
upgrades by the Company or its competitors, distributor ordering patterns,
product returns, delays in product development and licensing of the Company's
products and core technology.
Hi/fn's customers order semiconductor products to meet production
schedules based on forecasts of demand for their products. Additionally, OEMs
contract with third party manufacturers to build their products in large lot
sizes to achieve manufacturing efficiencies. As a result of these practices,
OEM semiconductor and finished product inventories can vary significantly
depending on actual sales, the continuation of sales trends, and the timing of
contractor manufacturing cycles with the result that demand for the Company's
semiconductor products may have cyclical increases and decreases.
SEASONALITY
The software industry has typically experienced some seasonal
variations in demand, with sales declining somewhat in the summer months. The
Company believes that its software sales are subject to similar seasonal
variations which, when combined with the other factors described above, are
likely to result in fluctuations in the Company's quarterly results. As a
result, historical quarter-to-quarter comparisons should not be relied upon as
indicative of future performance.
24.
<PAGE> 25
OPERATING SYSTEMS
Stac's ReachOut and Replica products currently operate on a limited
number of personal computer and network operating systems. ReachOut is
compatible with Microsoft Windows 95, Windows 3.x and DOS, while Replica
supports Novell NetWare servers. However, customer use of and demand for
products that support Microsoft's Windows NT server and workstation operating
systems is increasing. To respond to customer requests, the Company has most
recently announced that it intends to have versions of its ReachOut and Replica
products for Windows NT released by the end of December 1996 and the end of
March 1997, respectively. At this time, the ReachOut NT product is in beta
testing and is now expected to be released in the March 1997 quarter. The
projected release date for Replica for NT has not changed. If the Company is
unable to provide customers with products compatible with Windows NT, the
Company's ability to market and sell ReachOut and Replica would be adversely
affected.
COMPETITION AND RISKS ASSOCIATED WITH NEW PRODUCT INTRODUCTIONS
The market for the Company's products is intensely competitive.
Increased competition could result not only in a decline in sales volume, but
also in price reductions that could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company's ReachOut product competes in the remote control software
market against more established products such as Symantec Corporation's
pcAnywhere, MicroCom, Inc.'s Carbon Copy and Traveling Software, Inc.'s
Laplink. Symantec, MicroCom and Traveling Software are shipping versions of
their remote control products that were introduced subsequent to ReachOut 6.0
and that include Windows NT support. ReachOut also competes against remote
node products from companies such as Citrix, Inc. and Shiva Corporation.
Further, Microsoft could elect to incorporate remote control or additional
remote access capabilities into its operating systems which are pre-installed
on most personal computers.
The Company began shipping Replica back-up and disaster recovery
software for Novell NetWare during the second quarter of fiscal 1996. Replica
competes with well established back-up products from Cheyenne Software, Inc.,
recently purchased by Computer Associates, Inc., and Seagate Software, Inc.
(owned by Seagate Technologies, Inc.), both of which have established channels
of distribution and installed customer bases. Resellers could choose not to
sell Replica over competitors' products with the result that significant sales
of Replica could fail to materialize, or products similar to Replica could be
successfully introduced to resellers by the Company's competitors. Also,
Replica is being introduced into a sophisticated NetWare server environment.
While the Company has invested significant resources in testing Replica under a
variety of conditions, configurations and circumstances, there are likely to be
environments which have not been anticipated for which additional development
of Replica will be necessary. In addition, many enterprises operate in a mixed
server environment which includes NetWare and Windows NT and requirements for
client back-up support. While the Company intends to provide support for a
mixed server environment and for client back-up, such versions will not be
available until fiscal 1997.
The Company's license agreement with IBM Corporation grants IBM the
right to implement the Company's LZS data compression technology in IBM
hardware and software products. Also, microprocessor and chip set suppliers,
customers and others could seek to expand their product offerings
25.
<PAGE> 26
by designing and selling products using competitive data compression or other
technology that could render obsolete or adversely affect sales of the
Company's semiconductor and LZS221 products.
STOCK PRICE VOLATILITY
Due to the factors noted above, the Company's future earnings and
stock price may be subject to significant volatility, particularly on a
quarterly basis. Any shortfall in earnings from levels expected by securities
analysts could have an immediate and significant adverse effect on the trading
price of the Company's common stock in any given period. Shortfalls could be
caused by shortfalls in revenues, timing of the receipt of technology license
fees, and/or increased levels of expenditures. Additionally, the Company
participates in a highly dynamic industry, which often results in significant
volatility of the Company's stock price.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and marketable securities increased by $4.8 million
to $65.4 million at September 30, 1996 from that at September 30, 1995. The
increase was primarily attributable to cash generated from operations offset by
$11.2 million paid for the acquisition of California Software, Inc. and the
related investment in DynaNet. Accounts receivable decreased by $0.6 million
to $5.6 million at September 30, 1996 from that at September 30, 1995. Working
capital increased by $3.3 million to $68.5 million at September 30, 1996 from
that at September 30, 1995.
During 1996 and 1995 the company paid $.2 million and $1.6 million,
respectively, in dividends on its Series A Preferred Stock. The obligation to
pay the preferred dividend terminated when the preferred stock was converted to
common stock in November 1995.
The Company believes that existing cash balances and funds provided by
operations will be sufficient to finance its working capital requirements for
the foreseeable future.
26.
<PAGE> 27
Selected Quarterly Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Sept. 30, June 30, Mar. 31, Dec. 31,
Fiscal 1996 1996 1996 1996 1995
- ------------------------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 12,234 $ 10,988 $ 12,236 $ 11,307
Gross margin 10,522 9,168 10,712 9,832
Income (loss) from operations 3,214 2,618 4,358 (7,838)
Net income (loss) 2,527 1,916 3,062 (9,180)
Net income (loss) per common share $ .08 $ .06 $ .10 $ (.33)
Common stock price:
High $ 11.25 $ 13.88 $ 14.50 $ 15.13
Low $ 6.88 $ 9.88 $ 8.75 $ 6.75
</TABLE>
<TABLE>
<CAPTION>
Sept. 30, June 30, Mar. 31, Dec. 31,
Fiscal 1995 1995 1995 1995 1994
- ------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 11,277 $ 11,196 $ 12,582 $ 10,749
Gross margin 9,913 9,935 11,142 9,438
Income (loss) from operations 4,017 908 3,294 (9,254)
Net income (loss) 2,841 1,314 2,465 (5,124)
Net income (loss) per common share $ 09 $ .03 $ .08 $ (.22)
Common stock price:
High $ 0.25 $ 8.13 $ 6.38 $ 6.75
Low $ 7.25 $ 5.38 $ 4.88 $ 4.25
</TABLE>
As of December 11, 1996, there were 426 holders of record of the Company's
common stock.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements at September 30, 1996
and 1995, and for each of the three fiscal years in the period ended September
30, 1996 and the Report of Price Waterhouse, Independent Accountants, are
included in this report on pages F-1 through F-17.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27.
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by
reference to Registrant's Definitive Proxy Statement to be filed with the
Commission pursuant to Regulation 14A in connection with the 1997 Annual
Meeting (the "Proxy Statement") under the headings "Nominees" and "Background
of Executive Officers not Described Above."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by
reference to the Proxy Statement under the heading "Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by
reference to the Proxy Statement under the heading "Security Ownership of
Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by
reference to the Proxy Statement under the heading "Certain Transactions."
28.
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of the report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
(1) Report of Independent Accountants F-1
Consolidated Balance Sheet at
September 30, 1996 and 1995 F-2
Consolidated Statement of Operations for
Fiscal 1996, 1995 and 1994 F-3
Consolidated Statement of Cash Flows for
Fiscal 1996, 1995 and 1994 F-4
Consolidated Statement of Stockholders' Equity
for Fiscal 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
(2) Schedule I -- Marketable Securities S-1
All other schedules have been omitted because they are not
applicable or required, or the information required to be set
forth therein is included in the Financial Statements or notes
thereto.
</TABLE>
(b) The Registrant filed no reports on Form 8-K during the fourth quarter
of the fiscal year ended September 30, 1996.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit Exhibit
Footnote Number Description
- -------------------------------------------------------------------------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated
April 5, 1996, between the Registrant
and Stac, Inc., a
California corporation.
3.1 Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1,
3.2, 10.8, 10.9, 10.10 and 10.12.
(1) 10.1 Form of Indemnity Agreement entered
into between the Registrant and its
directors and officers with
related schedule.
</TABLE>
29.
<PAGE> 30
<TABLE>
<S> <C> <C>
(1)(7) 10.2 Registrant's 1992 Stock Option
Plan (the "1992 Plan").
(5)(7) 10.3 Registrant's 1992 Non-Employee
Directors' Plan, as amended
(the "Directors' Plan").
(1)(7) 10.4 Registrant's Employee Stock Purchase Plan
and related offering document.
(1) 10.5 Securities Purchase Agreement, dated
as of March 27, 1990, among the
Registrant and the other persons
named therein.
(1) 10.6 Distributor Agreement, between the
Registrant and Merisel, Inc., dated
as of March 1, 1991.
(1) 10.7 Distributor Agreement, between the
Registrant and Ingram Micro, Inc.,
dated as of March 13, 1991.
(3) 10.8 License Agreement, between the
Registrant and Microsoft Corporation,
dated as of June 20, 1994.
(5)(7) 10.9 Forms of Non-statutory Stock Option
Agreements under the Directors' Plan.
(6) 10.10 Stock Purchase Agreement dated
October 6, 1995 between the Registrant
and William T. Baker.
(6) 10.11 Option Purchase Agreement dated
October 6, 1995 among the Registrant
and Certain Holders of Options to
Purchase Common Stock of California
Software, Inc.
(6) 10.12 Indemnity Agreement dated
October 6, 1995 between the
Registrant and William T. Baker.
(6) 10.13 Series A Preferred Stock Purchase
Agreement dated October 6, 1995 by
and between DynaNet, Inc. and the
Registrant.
10.14 Office Lease date March 22, 1994
between the Registrant and
Weyerhaeuser Mortgage Company and
Fort Wyman, Inc.
10.15 Office Lease date March 22, 1994
between the Registrant and
Weyerhaeuser Mortgage Company
and Fort Wyman, Inc.
10.16 Office Lease dated July 12, 1994
between the Registrant and
Weyerhaeuser Mortgage
Company and Fort Wyman, Inc.
</TABLE>
30.
<PAGE> 31
<TABLE>
<S> <C>
10.17 Amendment No. 1 to the Office Lease
dated July 12, 1994 between the
Registrant and Weyerhaeuser Mortgage
Company and Fort Wyman, Inc.
10.18 Amendment No. 2 to the Office Lease
dated July 12, 1994 between the
Registrant and Weyerhaeuser Mortgage
Company and Fort Wyman, Inc.
11.1 Calculation of net income (loss)
per share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP.
24.1 Power of Attorney. Reference is
made to page 32.
- -------------------
</TABLE>
(1) Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (No. 33-46389) or amendments thereto and incorporated herein by
reference.
(2) Certain confidential portions deleted pursuant to Order Granting
Application Under the Securities Act of 1933, as amended, and Rule 406
thereunder respecting Confidential Treatment dated May 6, 1992.
(3) Filed as exhibit to the Company's Quarterly Report on Form 10-Q for
the Quarter ended June 30, 1994, as amended.
(4) Certain confidential portions deleted pursuant to order Granting
Application for Confidential Treatment pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934 dated October 21, 1994.
(5) Filed as exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995.
(6) Filed as an exhibit to the Company's Report on Form 8-K filed on
October 16, 1995, relating to the Company's (i) acquisition of all of
the outstanding capital stock and options to purchase the capital
stock of California Software, Inc. and (ii) acquisition of Series A
Preferred Stock of DynaNet, Inc.
(7) Indicates management or compensatory plan or arrangement required to
be identified pursuant to Item 14(a)(3).
31.
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
STAC, INC.
By: /s/ Gary W. Clow
------------------------------------
Gary W. Clow
Chairman of the Board, President
and Chief Executive Officer
Date: December 20, 1996
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gary W. Clow and John R. Witzel, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming that all said attorneys-in-fact
and agents, or any of them or their or his substitute or substituted, may
lawfully do or cause to be done by virtue hereof.
32.
<PAGE> 33
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gary W. Clow Chairman of the Board, December 20, 1996
- -------------------------------------- President and Chief
(Gary W. Clow) Executive Officer
(Principal executive officer)
/s/ John R. Witzel Vice President of Finance, December 20, 1996
- -------------------------------------- Chief Financial Officer and
(John R. Witzel) Secretary (principal
financial and accounting
officer)
/s/ Douglas L. Whiting, Ph.D. Vice President of December 20, 1996
- -------------------------------------- Technology and Director
(Douglas L. Whiting, Ph.D.)
/s/ Charles H. Gaylord, Jr. Director December 20, 1996
- ------------------------------------
(Charles H. Gaylord, Jr.)
/s/ Joseph W. Jennings Director December 20, 1996
- ------------------------------------
(Joseph W. Jennings)
/s/ Robert W. Johnson Director December 20, 1996
- ------------------------------------
(Robert W. Johnson)
/s/ Russell Robelen Director December 20, 1996
- ------------------------------------
(Russell Robelen)
</TABLE>
33.
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Stac, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Stac, Inc. and its subsidiaries at September 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Diego, California
October 25, 1996
F-1.
<PAGE> 35
STAC, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1996 1995
--------- ----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 35,942 $ 34,696
Marketable securities 29,463 25,867
Accounts receivable 5,577 6,226
Income taxes receivable - 251
Inventories 754 484
Deferred income taxes 979 1,484
Prepaid expenses and other current assets 232 119
---------- ----------
Total current assets 72,947 69,127
Property and equipment, net 3,673 3,455
Deferred income taxes 6,322 6,668
Other assets 748 1,361
---------- ----------
$ 83,690 $ 80,611
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,389 $ 1,007
Income taxes payable 390 -
Accrued expenses and other current liabilities 2,670 2,934
---------- ----------
Total current liabilities 4,449 3,941
Other liabilities 242 315
----------- ----------
4,691 4,256
----------- ----------
Commitments and contingencies (Notes 7 and 9 )
Series A mandatorily redeemable cumulative
convertible preferred stock, no par value; 444
shares authorized, issued, and outstanding in 1995;
redemption and liquidation value of $90,000
per share. - 39,960
------------ ----------
Common stock and other shareholders' equity:
Common stock, no par value; 100,000,000 shares
authorized; 30,687,000 and 25,671,000 shares issued
and outstanding in 1996 and 1995, respectively 73,547 29,101
Cumulative translation adjustment (118) (119)
Retained earnings 5,570 7,413
----------- ----------
Total common stock and other
shareholders' equity 78,999 36,395
----------- ----------
$ 83,690 $ 80,611
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2.
<PAGE> 36
STAC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-----------------------------------------------------
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
Revenues $ 46,765 $ 45,804 $ 31,325
Cost of revenues 6,531 5,376 5,018
----------- ---------- ----------
Gross margin 40,234 40,428 26,307
Research and development 8,356 7,212 5,594
Purchased research and development 12,217 13,354 -
Sales and marketing 12,923 13,268 11,933
General and administrative 4,386 5,201 9,530
Restructuring - 2,428 -
------------- ---------- ------------
Operating income (loss) 2,352 (1,035) (750)
Interest income 2,115 1,983 1,234
---------- ---------- ----------
Income before income taxes 4,467 948 484
Provision for (benefit from) income taxes 6,142 (548) 151
---------- ---------- -----------
Net income (loss) (1,675) 1,496 333
Less preferred dividends 168 1,598 449
---------- ---------- -----------
Net loss available for
common shareholders' $ (1,843) $ (102) $ (116)
========= ========== ===========
Net loss per common share, primary $ (0.06) $ 0.00 $ 0.00
Net loss per common share, fully diluted $ (0.05) $ 0.00 $ 0.00
Weighted average common shares
outstanding, primary 30,068 25,391 24,643
Weighted average common shares
outstanding, fully diluted 30,585 25,391 24,643
</TABLE>
See accompanying notes to consolidated financial statements.
F-3.
<PAGE> 37
STAC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------- ------------
1996 1995 1994
----------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,675) $ 1,496 $ 333
Adjustments required to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,945 2,289 1,249
Purchased research and development 12,217 13,354 -
Non-cash restructuring charges - 1,489 -
Deferred stock compensation 91 154 194
(Gain) loss on disposals of fixed assets (14) 79 -
Provision (benefit) for deferred income taxes 851 (6,274) (262)
Changes in assets and liabilities, net of
business acquisitions:
Accounts receivable 649 (864) 523
Income taxes receivable 251 327 2,200
Inventories (270) 245 (60)
Prepaid expenses and other current assets (113) 409 (99)
Other assets 11 96 (44)
Accounts payable 382 (971) (1,161)
Income taxes payable 390 - -
Accrued expenses and other current liabilities (264) 730 99
---------- ---------- --------
Net cash provided by operating activities 14,451 12,559 2,972
--------- --------- -------
Cash flows from investing activities:
Purchases of marketable securities (35,333) (24,612) (52,943)
Sales of marketable securities 31,737 59,404 15,679
Acquisitions, net of cash acquired (11,252) (18,860) -
Purchases of property and equipment (1,547) (2,225) (1,789)
--------- --------- --------
Net cash (used) provided by investing activities (16,395) 13,707 (39,053)
-------- -------- -------
Cash flows from financing activities:
Issuance of common stock, net 1,336 951 724
Tax benefits from exercise of stock options 1,853 730 568
Issuance of preferred stock, net - - 39,928
Preferred stock dividends - (1,598) (449)
------------ --------- ---------
Net cash provided by financing activities 3,189 83 40,771
---------- ----------- --------
Effect of exchange rate changes on cash 1 6 38
------------ ------------ ---------
Net increase in cash and cash equivalents 1,246 26,355 4,728
Cash and cash equivalents at beginning of period 34,696 8,341 3,613
---------- ----------- --------
Cash and cash equivalents at end of period $ 35,942 $ 34,696 $ 8,341
========== ========== ========
</TABLE>
F-4.
<PAGE> 38
<TABLE>
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Net cash paid (refunds received) for income taxes $ 2,797 $ 4,674 $ (2,396)
Supplemental non-cash activities:
Conversion of preferred stock to common stock 39,960 - -
Issuance of common stock for business acquisitions 965 - -
Issuance of preferred stock dividends in common
stock 168 - -
Conversion of deferred compensation to equity
upon exercise of common stock options 164 137 492
</TABLE>
See accompanying notes to consolidated financial statements.
F-5.
<PAGE> 39
STAC, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK CUMULATIVE EARNINGS
-------------------------- TRANSLATION (ACCUMULATED
SHARES AMOUNT ADJUSTMENT DEFICIT) TOTAL
------------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1993 24,284 $ 25,501 $ (163) $ 7,663 $ 33,001
Accretion of preferred stock - - - (32) (32)
Dividends paid on preferred stock - - - (449) (449)
Issuance of common stock upon
exercise of options 765 1,060 - - 1,060
Issuance of common stock under
Employee Stock Purchase Plan 47 154 - - 154
Tax benefits from exercise of
stock options - 568 - - 568
Equity adjustment from foreign
currency translation - - 38 - 38
Net income - - - 333 333
------ -------- -------- -------- --------
Balance at September 30, 1994 25,096 27,283 (125) 7,515 34,673
Dividends paid on preferred stock - - - (1,598) (1,598)
Issuance of common stock upon
exercise of options 518 817 - - 817
Issuance of common stock under
Employee Stock Purchase Plan 57 271 - - 271
Tax benefits from exercise of
stock options - 730 - - 730
Equity adjustment from foreign
currency translation - - 6 - 6
Net income - - - 1,496 1,496
------ ------- -------- -------- --------
Balance at September 30, 1995 25,671 29,101 (119) 7,413 36,395
Conversion of preferred stock 4,440 39,960 - - 39,960
Dividends paid on preferred stock 19 168 - (168) -
Issuance of common stock for
business acquisitions 105 965 - - 965
Issuance of common stock upon
exercise of options 412 1,204 - - 1,204
Issuance of common stock under
Employee Stock Purchase Plan 40 296 - - 296
Tax benefits from exercise of
stock options - 1,853 - - 1,853
Equity adjustment from foreign
currency translation - - 1 - 1
Net loss - - - (1,675) (1,675)
------ -------- ------- -------- --------
Balance at September 30, 1996 30,687 $ 73,547 $ (118) $ 5,570 $ 78,999
====== ======== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6.
<PAGE> 40
STAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
Description of Business
Stac, Inc. (the "Company") designs, develops, markets and supports
networking technologies, systems management software and applications for the
storage and communication of data for personal computers and computer networks.
The Company was incorporated in February of 1983.
Consolidation
The financial statements as of and for the years ended September 30,
1996 and 1995 consolidate the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Financial Statement Preparation
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make 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.
Revenue Recognition
Revenue from the sale of software is generally recognized upon
shipment, net of an allowance for estimated returns. Recognition of software
revenue is deferred when, in management's opinion, quantities of such products
in the distribution channel are above levels considered appropriate. Revenue
from the sale of semiconductors and board products is recognized upon shipment.
Royalty revenue and revenue from the licensing of software and technology
developed by the Company is recognized pursuant to the terms of the underlying
agreements.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash equivalents.
F-7.
<PAGE> 41
Marketable Securities
Marketable securities are classified according to the provisions of
Statement of Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." These investments are comprised of
funds on deposit with a liquid asset manager that have been invested
principally in municipal bonds. The carrying amount of these investments
approximates fair value due to the short maturities or demand nature of the
instruments. At September 30, 1996, all marketable securities are classified
as available-for-sale and carried at fair value. Unrealized gains or losses at
September 30, 1996 and 1995 are not material.
Inventories
Inventories are stated at the lower of cost, determined using the
first-in, first-out method, or market.
Property and Equipment
Property and equipment are stated at cost. Additions to property and
equipment, including significant betterments and renewals, are capitalized.
Maintenance and repair costs are charged to expense as incurred. Depreciation
is computed using the straight-line method over estimated useful lives of three
to five years and totals $1,343,000, $1,501,000 and $1,071,000 in fiscal 1996,
1995 and 1994, respectively. Leasehold improvements are amortized over the
shorter of the asset life or lease term.
Research and Development
Expenditures for research and development are charged to expense as
incurred. Financial accounting rules requiring the capitalization of certain
software development costs have not materially affected the Company.
Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (FAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which the Company will adopt prospectively as required in fiscal 1997.
Pursuant to this Statement, companies are required to investigate potential
impairments of long-lived assets, certain intangibles, and associated goodwill,
on an exception basis, when there is evidence that events or changes in
circumstances have made recovery of an asset's carrying value unlikely. An
impairment loss would be recognized when the sum of the expected future net
cash flows is less than the carrying amount of the asset. The adoption of FAS
121 is not expected to have significant impact on the Company's financial
position or results of operations.
F-8.
<PAGE> 42
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (FAS) No. 123, "Accounting for
Stock-Based Compensation." FAS 123 will be adopted by the Company as required
for its fiscal 1997 financial statements and is not expected to have a material
effect on the Company's financial position or results of operations. Upon
adoption of FAS 123, the Company will continue to measure compensation expense
for its stock-based employee compensation plans using the intrinsic value
method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and will provide pro forma disclosures of net income and earnings
per share as if the fair value- based method prescribed by FAS 123 had been
applied in measuring compensation expense.
Advertising
Expenditures for advertising costs are charged to expense as incurred
and total $1,758,000, $2,169,000 and $1,808,000 in fiscal 1996, 1995 and 1994,
respectively.
Income Taxes
Income taxes are computed under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." Current
income tax expense or benefit represents the amount of income taxes expected to
be payable or refundable for the current year. A deferred income tax liability
or asset, net of valuation allowance, is established for the expected future
consequences resulting from the differences between the financial reporting and
income tax bases of assets and liabilities and from net operating loss and
credit carryforwards. Deferred income tax expense or benefit represents the
net change during the year in the deferred income tax liability or asset.
Net Loss Per Common Share
Net loss per share has been computed by dividing net income, after
reduction for preferred dividends, by the weighted average number of common
shares outstanding.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries are
translated into U.S. dollars using period-end exchange rates for assets and
liabilities and weighted average exchange rates during the period for revenues
and expenses. Gains and losses from translation are excluded from results of
operations and accumulated as a separate component of shareholders' equity.
F-9.
<PAGE> 43
Diversification of Credit Risk
The Company's policy is to place its cash, cash equivalents and
marketable securities with high credit, quality financial institutions and to
limit the amount of credit exposure.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentations.
NOTE 2 -- BUSINESSES ACQUIRED AND NON-RECURRING CHARGES
In October 1995 the Company acquired the outstanding stock of
California Software, Inc. (CSI) for $9,252,000 in cash net of liabilities
assumed, and $965,000 in Stac common stock in a transaction accounted for under
the purchase method. In conjunction with the acquisition, the Company made an
additional $2,000,000 investment in the Series A Preferred Stock of DynaNet,
Inc. (DynaNet), a start up entity founded by the principal of CSI. The Company
has accounted for its investment in DynaNet as an addition to the purchase
price of CSI due to the lack of in place technology or operating activity at
DynaNet, consistent with its start up status. As a result of these
transactions the Company recorded a one time charge to earnings of $12,217,000
for purchased research and development. Because of the underlying tax
attributes of these transactions, the Company did not recognize an accompanying
tax benefit associated with this one time charge to earnings.
In October 1994 the Company acquired the assets of Ocean Isle
Software, Limited Partnership (Ocean Isle) for $19,100,000 in cash plus the
assumption of certain liabilities in a transaction accounted for under the
purchase method. In conjunction with the acquisition, the Company recorded a
one time charge to operations of $12,700,000 for purchased research and
development. The Company also recorded $3,029,000 as capitalized software and
other intangible assets which are being amortized on a straight-line basis over
a three year period. In March 1995 the Company acquired the assets of
Crossware Development Corporation and Rememory Corporation for $654,000 in cash
in a transaction also accounted for under the purchase method. In conjunction
with this acquisition, the Company recorded a one time charge to operations for
the full $654,000 acquisition cost as purchased research and development.
In May 1995 the Company closed its Florida facility (formerly the
offices of Ocean Isle), consolidating to its San Diego, California
headquarters. In conjunction with the closure the Company recorded a
restructuring charge to operations of $2,428,000. The principal components of
the charge include $594,000 for lease termination and closure costs, $986,000
for intangibles written down, $504,000 for losses on fixed asset disposals, and
$344,000 for severance and employee related liabilities.
F-10.
<PAGE> 44
NOTE 3 -- COMPOSITION OF CERTAIN CONSOLIDATED FINANCIAL
STATEMENT CAPTIONS (TABLE AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1996 1995
-------- -------
<S> <C> <C>
Accounts receivable:
Trade receivables $ 5,904 $ 7,088
Less allowance for doubtful accounts (327) (862)
-------- -------
$ 5,577 $ 6,226
======== =======
</TABLE>
Substantially all of the Company's customers are microcomputer
hardware and software distributors and resellers, which results in concentrated
credit risk with respect to the Company's trade receivables. Management
believes that its credit policies substantially mitigate such concentrated
credit risk. Bad debt expenses were $211,000 and $120,000 in fiscal 1996 and
fiscal 1995, and insignificant in fiscal 1994.
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1996 1995
-------- -------
<S> <C> <C>
Inventories:
Raw materials $ 88 $ 141
Finished goods 666 343
-------- -------
$ 754 $ 484
======== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1996 1995
-------- -------
<S> <C> <C>
Property and equipment:
Computer equipment $ 4,919 $ 3,761
Leasehold improvements 1,297 1,127
Office equipment 1,178 959
Furniture and fixtures 1,013 895
Vehicles 51 19
-------- -------
8,458 6,761
Less accumulated depreciation (4,785) (3,306)
-------- -------
$ 3,673 $ 3,455
======== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1996 1995
-------- -------
<S> <C> <C>
Accrued expenses and other current liabilities:
Customer support and upgrade accruals $ 1,052 $ 626
Compensation and employee benefits 971 670
Promotional accruals 204 462
Advanced royalty payment - 667
Other 443 509
-------- -------
$ 2,670 $ 2,934
======== =======
</TABLE>
F-11.
<PAGE> 45
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Revenues:
Software, semiconductors and
board products $ 30,765 $ 28,998 $ 25,171
Royalties and licenses 16,000 16,806 6,154
---------- --------- ---------
$ 46,765 $ 45,804 $ 31,325
========== ========= =========
</TABLE>
NOTE 4 -- MANDATORILY REDEEMABLE PREFERRED STOCK:
On November 7, 1995 Stac's Series A Mandatorily Redeemable Preferred
Stock held by Microsoft Corporation converted into 4,459,000 shares of Stac
common stock pursuant to the provisions of the preferred stock agreement as a
result of Stac's common stock maintaining a price per share in excess of $9.00
for twenty consecutive trading days.
Preferred dividends of $168,000 and $1,598,000 were paid during fiscal
1996 and fiscal 1995, respectively.
NOTE 5 -- INCOME TAXES:
Deferred income taxes are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
1996 1995
--------- -------
<S> <C> <C>
Deferred tax assets $ 7,850 $ 8,758
Deferred tax liabilities (549) (606)
------- -------
$ 7,301 $ 8,152
======= =======
</TABLE>
The principal components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------
1996 1995
------------- -----------
<S> <C> <C>
Revenue recognition for tax purposes $ 391 $ 806
Bad debts allowance 142 330
Inventory valuation accounts 246 184
Depreciation 197 214
Purchased research and development 6,050 6,352
Other 275 266
-------- -------
$ 7,301 $ 8,152
======== =======
</TABLE>
F-12.
<PAGE> 46
Components of pre-tax income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Domestic $ 4,591 $ 1,098 $ 684
Foreign (124) (150) (200)
-------- -------- --------
$ 4,467 $ 948 $ 484
======== ======== ========
</TABLE>
The provision (benefit) for income taxes is comprised of the
following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current tax expense
Federal $ 3,972 $ 4,481 $ 395
State 1,319 1,245 18
-------- -------- --------
5,291 5,726 413
-------- -------- --------
Deferred tax expense (benefit)
Federal 683 (4,860) (235)
State 168 (1,414) (27)
-------- -------- --------
851 (6,274) (262)
-------- -------- --------
$ 6,142 $ (548) $ 151
======== ======== ========
</TABLE>
A reconciliation of the provision for income taxes to the amount
computed by applying the statutory federal income tax rate to income before
income taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Amount computed at statutory
Federal rate of 34% $ 1,519 $ 322 $ 165
State income taxes, net of Federal
benefit 268 57 30
Expenses not deductible for tax purposes 4,949 122 99
Differentials from foreign operations 42 51 73
Tax credits (12) (155) (28)
Foreign sales corporation benefit - (54) -
Tax exempt interest (715) (672) (392)
Revision of prior year's tax estimates 33 (249) 132
Other 58 30 72
-------- -------- --------
$ 6,142 $ (548) $ 151
======== ======== ========
</TABLE>
F-13.
<PAGE> 47
NOTE 6 -- STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS:
1992 Stock Option Plan
In March 1992, the Company adopted a Stock Option Plan (the "1992
Plan"), which provides for the granting of incentive stock options and
non-qualified stock options to purchase up to 5,000,000 shares of the Company's
common stock. The 1992 Plan is administered by the Compensation Committee of
the Board of Directors and provides for options for the purchase of the
Company's common stock to be granted to employees, officers and consultants of
the Company at prices that are not less than 100% and 50% of the estimated fair
market value of the related shares at the date of grant for incentive stock
options and non-qualified stock options, respectively. Options vest as
determined by the Compensation Committee. The maximum term of options granted
under the 1992 Plan is ten years.
1992 Non-Employee Directors' Stock Option Plan
In March 1992, the Company adopted the 1992 Non-Employee Directors'
Stock Option Plan (the "Directors' Plan"), as amended in February 1995, which
provides for the automatic granting of non-qualified stock options to purchase
up to 400,000 shares, as amended, of the Company's common stock. The 1992 Plan
is administered by the Board of Directors and provides for options for the
purchase of the Company's common stock to each director of the Company (or an
affiliate of the Company) who is not otherwise employed by the Company (or an
affiliate of the Company) Such directors will automatically be granted an
option to purchase common stock upon election to the Board and on each
anniversary of that date thereafter so long as the director continues to serve
on the Board. Vesting periods are five years for initial options granted, and
four years for options granted in re-election years. The maximum term of
options granted under the Directors' Plan is ten years.
Combined information for all stock option activities for fiscal 1996,
1995, and 1994 is summarized below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------
EXERCISE
SHARES PRICE PER SHARE
---------- -----------------
<S> <C> <C> <C>
Balance at September 30, 1993 2,146,958 $ .025 $5.125
Options granted 969,500 2.75 6.75
Options exercised (764,716) .025 4.75
Options canceled (209,651) .25 6.375
----------
Balance at September 30, 1994 2,142,091 .025 6.75
Options granted 1,129,500 5.125 9.375
Options exercised (478,513) .025 6.375
Options canceled (687,143) .25 6.00
----------
Balance at September 30, 1995 2,105,935 .125 9.375
</TABLE>
F-14.
<PAGE> 48
<TABLE>
<S> <C> <C>
Options granted 785,000 7.875 13.25
Options exercised (413,739) .125 6.75
Options canceled (239,277) .25 12.375
-----------
Balance at September 30, 1996 2,237,919 $ .125 $13.25
===========
</TABLE>
The average exercise price of outstanding options at September 30,
1996 was $5.82 per share. There was an aggregate of 866,779 shares subject to
unexercised vested options and there were 2,770,646 shares available for future
grant at September 30, 1996
Employee Stock Purchase Plan
In March 1992, the Company adopted the Employee Stock Purchase Plan
(the "Purchase Plan") covering an aggregate of 1,000,000 shares of the
Company's common stock. The current offering under the Purchase Plan terminates
on September 30, 1997. The Purchase Plan is administered by the Board of
Directors and allows participating employees to have up to 15% of their
earnings withheld and used to purchase shares of common stock on specified
dates. The price of the common stock purchased under the Purchase Plan will be
equal to 85% of the lower of the fair market value of the common stock at the
commencement date or the relevant purchase date. During fiscal 1996, shares
totaling 20,599 and 19,879 were issued under the Plan at prices of $7.76 and
$6.80, per share, respectively. At September 30, 1996, 758,881 shares were
reserved for future issuance.
401(k) Plan
In July 1991 the Company adopted an employee savings and retirement
plan (the "401(k) Plan") covering all of the Company's employees. The 401(k)
Plan permits, but does not require matching contributions by the Company on
behalf of all participants. No such contributions were made during fiscal
1996, 1995 or 1994.
NOTE 7 -- COMMITMENTS:
The Company occupies its facilities under several non-cancelable
operating leases that expire at various dates through March 2000, and which
contain renewal options. Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
1997 $ 631,000
1998 603,000
1999 606,000
2000 252,000
Thereafter -
------------
$ 2,092,000
============
</TABLE>
F-15.
<PAGE> 49
Rent expense under all operating leases was approximately $566,000,
$1,074,000, and $679,000, in fiscal 1996, 1995, and 1994, respectively.
Certain facilities leases provide for scheduled rent increases. The total
lease commitment for such leases is being charged ratably to operations.
NOTE 8 -- SIGNIFICANT CUSTOMERS, BUSINESS SEGMENTS AND FOREIGN OPERATIONS:
A significant portion of the Company's revenues has been derived from
technology licenses and sales to major distributors or resellers as follows:
One customer accounted for 26% of fiscal 1996 revenues. Two customers
accounted for 26% and 11%, respectively, of fiscal 1995 revenues. Two
customers accounted for 16% and 11%, respectively, of fiscal 1994 revenues.
The Company classifies its operating activity into two principal
business segments. Stac Software develops, markets and supports a range of
systems management software which is sold and licensed through distribution,
retail, original equipment manufacturer, and direct channels. Hi/fn (formerly
the Technology Business Unit) develops and markets semiconductor and software
libraries which implement the Company's data compression technology and
industry standards for data encryption. Condensed financial information
related to the Company's business segments is as follows:
<TABLE>
<CAPTION>
Stac Software: 1996 1995 1994
------------- --------- --------- ---------
<S> <C> <C> <C>
Revenues $ 33,871 $ 38,462 $ 25,659
Operating loss $ (1,026) $ (3,331) $ (1,338)
Identifiable assets $ 4,863 $ 5,816 $ 1,899
</TABLE>
<TABLE>
<CAPTION>
Hi/fn: 1996 1995 1994
----- -------- ------- --------
<S> <C> <C> <C>
Revenues $ 12,894 $ 7,342 $ 5,666
Operating income $ 3,378 $ 2,296 $ 588
Identifiable assets $ 2,120 $ 2,148 $ 1,151
</TABLE>
Segment operating results reflect general corporate expense
allocations. Identifiable assets consist of accounts receivable, inventories,
capitalized software and other intangible assets. All other assets are either
corporate in nature, are not identifiable with particular segments or are not
material. Capital expenditures and depreciation are not identified as to
industry segments for similar reasons.
In fiscal 1996, 1995 and 1994, international revenues were $4,766,000,
$4,799,000 and $5,220,000, respectively, consisting primarily of sales to
customers in Canada, Europe and the Pacific Rim.
F-16.
<PAGE> 50
Condensed financial information related to the Company's wholly-owned
foreign subsidiaries is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ----------
<S> <C> <C> <C>
Revenues $ 2,893 $ 3,183 $ 3,480
Operating income (loss) $ 677 $ (270) $ (381)
Identifiable assets $ 1,010 $ 977 $ 1,257
</TABLE>
NOTE 9 -- LITIGATION:
A shareholder class action complaint originally filed in the United
States District Court for the Southern District of California in July 1992 has
been dismissed by the U.S. District Court, which dismissal has been upheld by
the Appellate Court. Plaintiffs in the suit have asked the U.S. Supreme Court
to review the Appellate Court decision. The suit alleges violations of the
federal securities laws by the Company and certain of its Directors related to
the Company's May 7, 1992 prospectus. The suit was purportedly brought on
behalf of all persons who purchased the Company's common stock during the
period May 7, 1992 through July 19, 1992, inclusive and seeks compensatory
damages in unspecified amounts and other relief.
The Company and the individual defendants have vigorously defended
against the actions. Although the final outcome of litigation cannot be
predicted with certainty, based upon their present understanding of the law and
the facts, management and the individual defendants believe that they have
meritorious defenses to the claims alleged. Based on the foregoing, management
believes that the final outcome of the lawsuit will not have a material adverse
effect on the financial condition or results of operations of the Company.
F-17.
<PAGE> 51
STAC, INC.
SCHEDULE I - MARKETABLE SECURITIES
AT SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NAME OF ISSUER PRINCIPAL MARKET CARRYING
TITLE OF ISSUE AMOUNT COST VALUE(a) VALUE(a)
- -------------- ---------- ------ --------- --------
<S> <C> <C> <C> <C>
InterCap Insd Municipal $2,000 $2,000 $2,006 $2,005
Bond Tr
Nevada St G/O 1,000 1,026 1,032 1,032
RFDG #3
Delaware State G/O 500 507 510 510
Ser B
Marietta GA Hsg Auth 2,000 2,000 2,015 2,015
Mfhr Fall
Harrisonburg VA Redev & Hsg 2,000 2,000 2,011 2,011
Auth Mfhr
Detroit MI 2,700 2,752 2,793 2,791
Distr ST Aid
LeHigh Cty PA 2,000 2,176 2,160 2,162
Gen Revs Hsp
Miami FLA 1,000 1,087 1,101 1,104
Hlth Facs Cedar
Miami FLA 1,000 1,089 1,104 1,106
Hlth Facs Cedar
Houston TX Wtr & 2,000 2,170 2,161 2,185
Swr Pr
Hawaii State G/O 1,000 1,001 1,010 1,008
RFDG SER CC
Cypress Fairbanks TX 2,000 1,878 1,887 1,892
G/O
Knox Cty Tenn 1,650 1,737 1,750 1,763
Ser B Pre-Re
Penn St GO 1,000 1,078 1,062 1,081
2nd Ser A Pre-Re
Distr Columbia 1,000 1,074 1,058 1,076
GO Ser B
Fairfax Cnty VA G/O 1,000 1,009 1,024 1,022
Illinois State G/O 1,600 1,738 1,764 1,759
</TABLE>
S-1.
<PAGE> 52
<TABLE>
<S> <C> <C> <C> <C>
Scocorro Tex Indp Sch 750 776 780 778
Dst RFD
Pima Cty AZ 2,000 2,149 2,154 2,163
Sch Tucson AZ
------------- ------------- ------------- -------------
Total $28,200 $29,247 $29,382 $29,463
------------- ------------- ------------- -------------
</TABLE>
(a) Includes accrued interest
S-2.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of April 5, 1996, by and between Stac, Inc., a California
corporation ("Stac California"), and Stac, Inc., a Delaware corporation ("Stac
Delaware"). Stac California and Stac Delaware are sometimes referred to as the
"Constituent Corporations."
The authorized capital stock of Stac California consists of one hundred
ten million (110,000,000) shares, of which one hundred million (100,000,000)
shares are designated Common Stock, no par value, and ten million (10,000,000)
shares are designated Preferred Stock, no par value. The authorized capital
stock of Stac Delaware consists of one hundred million (100,000,000) shares of
Common Stock, $.001 par value, and ten million (10,000,000) shares of Preferred
Stock, $.001 par value per share.
The directors of the Constituent Corporations deem it advisable and to
the advantage of said corporations that Stac California merge into Stac Delaware
upon the terms and conditions herein provided.
Following the Merger (as defined below) the subsidiaries of Stac
California shall be the subsidiaries of Stac Delaware.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Stac California
shall merge into Stac Delaware on the following terms, conditions and other
provisions:
1. TERMS AND CONDITIONS
1.1 MERGER. Stac California shall be merged with and into Stac Delaware
(the "Merger"), and Stac Delaware shall be the surviving corporation (the
"Surviving Corporation") effective at 10:00 a.m. (Pacific Daylight Time) on
April 9, 1996 (the "Effective Time").
1.2 SUCCESSION. At the Effective Time, Stac Delaware shall continue its
corporate existence under the laws of the State of Delaware, and the separate
existence and corporate organization of Stac California, except insofar as it
may be continued by operation of law, shall be terminated and cease.
1.3 TRANSFER OF ASSETS AND LIABILITIES. At the Effective Time, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each of
the Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations
1.
<PAGE> 2
shall be transferred to and vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest, shall be thereafter the property of the Surviving Corporation as they
were of the Constituent Corporations, and the title to any real estate vested by
deed or otherwise in either of the Constituent Corporations shall not revert or
be in any way impaired by reason of the Merger; provided, however, that the
liabilities of the Constituent Corporations and of their shareholders, directors
and officers shall not be affected and all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and any claim existing or action or proceeding pending by or against
either of the Constituent Corporations may be prosecuted to judgment as if the
Merger had not taken place except as they may be modified with the consent of
such creditors and all debts, liabilities and duties of or upon each of the
Constituent Corporations shall attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it.
1.4 COMMON STOCK OF STAC CALIFORNIA AND STAC DELAWARE. At the Effective
Time, by virtue of the Merger and without any further action on the part of the
Constituent Corporations or their shareholders, (i) each share of Common Stock
of Stac California issued and outstanding immediately prior thereto shall be
changed and converted into one fully paid and nonassessable share of Common
Stock of Stac Delaware; and (ii) each share of Common Stock of Stac Delaware
issued and outstanding immediately prior thereto shall be canceled and returned
to the status of authorized but unissued shares.
1.5 STOCK CERTIFICATES. At and after the Effective Time, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock of Stac California shall be deemed for all purposes to evidence
ownership of and to represent the shares of Stac Delaware into which the shares
of Stac California represented by such certificates have been converted as
herein provided and shall be so registered on the books and records of the
Surviving Corporation or its transfer agents. The registered owner of any such
outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for to the
Surviving Corporation or its transfer agent, have and be entitled to exercise
any voting and other rights with respect to and to receive any dividend and
other distributions upon the shares of Stac Delaware evidenced by such
outstanding certificate as above provided.
1.6 OPTIONS OF STAC CALIFORNIA. At the Effective Time, the Surviving
Corporation will assume and continue all of Stac California's stock option plans
in existence at the Effective Time, including without limitation all options
outstanding under such stock option plans and any other outstanding options,
shall become options to purchase the same number of shares of Common Stock of
Stac Delaware, with no other changes in the terms and conditions of such
options. Effective at the Effective Time, Stac Delaware hereby assumes the
outstanding and unexercised portions of such options and the obligations of Stac
California with respect thereto.
1.7 EMPLOYEE BENEFIT PLANS. At the Effective Time, the Surviving
Corporation shall assume all obligations of Stac California under any and all
employee benefit plans in effect as of
2.
<PAGE> 3
the Effective Time with respect to which employee rights or accrued benefits are
outstanding as of such time, including but not limited to the Company's 401(k)
Plan provided, however, that one share Common Stock of Stac Delaware shall be
substituted for each share of Common Stock of Stac California (if any)
thereunder. At the Effective Time, the Surviving Corporation shall adopt and
continue in effect all such employee benefit plans upon the same terms and
conditions as were in effect immediately prior to the Merger and shall reserve
that number of shares of Stac Delaware Common Stock with respect to each such
employee benefit plan as is equal to the number of shares of Stac California
Common Stock (if any) so reserved at the Effective Time.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of Stac Delaware in effect at the Effective Time shall
continue to be the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
2.2 DIRECTORS. The directors of Stac California immediately preceding
the Effective Time shall become the directors of the Surviving Corporation at
and after the Effective Time to serve until the expiration of their terms and
until their successors are elected and qualified.
2.3 OFFICERS. The officers of Stac California immediately preceding the
Effective Time shall become the officers of the Surviving Corporation at and
after the Effective Time to serve at the pleasure of its Board of Directors.
3. MISCELLANEOUS
3.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Stac California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other action,
as shall be appropriate or necessary in order to vest or perfect in or to
conform of record or otherwise, in the Surviving Corporation the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Stac California and otherwise to
carry out the purposes of this Merger Agreement, and the officers and directors
of the Surviving Corporation are fully authorized in the name and on behalf of
Stac California or otherwise to take any and all such action and to execute and
deliver any and all such deeds and other instruments.
3.2 AMENDMENT. At any time before or after approval by the shareholders
of Stac California, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the shareholders of Stac
California, the principal terms may not be amended without the further approval
of the shareholders of Stac California) as may be determined in the judgment of
the respective Board of Directors of Stac Delaware and Stac California to be
necessary, desirable, or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purpose and intent of this Merger
Agreement.
3.
<PAGE> 4
3.3 CONDITIONS TO MERGER. The obligation of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law):
(a) the Merger shall have been approved by the shareholders of
Stac California in accordance with applicable provisions of the General
Corporation Law of the State of California; and
(b) Stac California, as sole stockholder of Stac Delaware, has
approved the Merger in accordance with the General Corporation Law of the State
of Delaware; and
(c) any and all consents, permits, authorizations, approvals,
and orders deemed in the sole discretion of Stac California to be material to
consummation of the Merger shall have been obtained.
3.4 ABANDONMENT OR DEFERRAL. At any time before the Effective Time,
this Merger Agreement may be terminated and the Merger may be abandoned by the
Board of Directors of either Stac California or Stac Delaware or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
Stac California or Stac Delaware or the prior filing of this Merger Agreement
with the Secretary of State of the State of Delaware, or the consummation of the
Merger may be deferred for a reasonable period of time if, in the opinion of the
Boards of Directors of Stac California and Stac Delaware, such action would be
in the best interest of such corporations. In the event of termination of this
Merger Agreement, this Merger Agreement shall become void and of no effect and
there shall be no liability on the part of either Constituent Corporation or its
Board of Directors or shareholders with respect thereto, except that Stac
California shall pay all expenses incurred in connection with the Merger or in
respect of this Merger Agreement or relating thereto.
3.5 COUNTERPARTS. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
4.
<PAGE> 5
IN WITNESS WHEREOF, this Merger Agreement, having first been fully
approved by the Board of Directors of Stac California and Stac Delaware, is
hereby executed on behalf of each said corporation and attested by their
respective officers thereunto duly authorized.
STAC, INC.,
a California corporation
By: /s/ GARY W. CLOW
---------------------------------
Gary W. Clow, President and
Chief Executive Officer
ATTEST:
John R. Witzel, Vice President of
Finance, Chief Financial Officer and
Secretary
STAC, INC.,
a Delaware Corporation
By: /S/ GARY W. CLOW
---------------------------------
Gary W. Clow, President and
Chief Executive Officer
ATTEST:
John R. Witzel, Vice President of
Finance, Chief Financial Officer and
Secretary
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
STAC, INC.
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is Stac, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, 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.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is one hundred ten
million (110,000,000) shares. One hundred million (100,000,000) shares shall be
Common Stock, each having a par value of one-tenth of one cent ($.001). Ten
million (10,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series
1.
<PAGE> 2
or any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of the
corporation, and in further definition, limitation and regulation of the powers
of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
(1) The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
(2) Notwithstanding the foregoing provisions of this Article,
each director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(3) Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
(4) Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall
2.
<PAGE> 3
hold office for the remainder of the full term of the director for which the
vacancy was created or occurred and until such director's successor shall have
been elected and qualified.
B.
(1) Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the Voting Stock. The Board of Directors
shall also have the power to adopt, amend, or repeal Bylaws.
(2) The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
(3) No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws and, following the effective date of the merger
between the Corporation and Stac, Inc., a California corporation, no action
shall be taken by the stockholders by written consent.
(4) Special meetings of the stockholders of the corporation
may be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of the shares entitled to cast
not less than ten percent (10%) of the votes at the meeting, and shall be held
at such place, on such date, and at such time as the Board of Directors shall
fix.
(5) Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by
3.
<PAGE> 4
the stockholders of this Article to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director shall be eliminated or limited to the fullest extent permitted by
the Delaware General corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
VIII.
The name and the mailing address of the Sole Incorporator is as
follows:
NAME MAILING ADDRESS
David B. Berger Cooley Godward Castro Huddleson & Tatum
4365 Executive Drive, Suite 1200
San Diego, CA 92121-2128
IN WITNESS WHEREOF, this Certificate has been subscribed this 13th day
of February 1996 by the undersigned who affirms that the statements made herein
are true and correct.
/S/ DAVID B. BERGER
----------------------------------
David B. Berger
Sole Incorporator
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
STAC, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
ARTICLE I Officers..................................................... 1
Section 1. Registered Office................................... 1
Section 2. Other Offices....................................... 1
ARTICLE II Corporate Seal............................................... 1
Section 3. Corporate Seal...................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS...................................... 1
Section 4. Place of Meetings................................... 1
Section 5. Annual Meeting...................................... 2
Section 6. Special Meetings.................................... 4
Section 7. Notice of Meetings.................................. 4
Section 8. Quorum.............................................. 5
Section 9. Adjournment and Notice of Adjourned Meetings........ 5
Section 10. Voting Rights...................................... 5
Section 11. Joint Owners of Stock.............................. 6
Section 12. List of Stockholders............................... 6
Section 13. Action Without Meeting............................. 6
Section 14. Organization....................................... 7
ARTICLE IV DIRECTORS.................................................... 7
Section 15. Number and Term of Office.......................... 7
Section 16. Powers............................................. 8
Section 17. Election of Directors.............................. 8
Section 18. Vacancies.......................................... 8
Section 19. Resignation........................................ 8
Section 20. Removal............................................ 8
Section 21. Meetings........................................... 9
(a) Annual Meetings.................................... 9
(b) Regular Meetings................................... 9
(c) Special Meetings................................... 9
(d) Telephone Meetings................................. 9
(e) Notice of Meetings................................. 9
i
<PAGE> 3
(f) Waiver of Notice................................... 9
Section 22. Quorum and Voting.................................. 10
Section 23. Action Without Meeting............................. 10
Section 24. Fees and Compensation.............................. 10
Section 25. Committees......................................... 10
(a) Executive Committee................................ 10
(b) Other Committees................................... 11
(c) Term............................................... 11
(d) Meetings........................................... 12
Section 26. Organization....................................... 12
ARTICLE V OFFICERS.................................................... 12
Section 27. Officers Designated................................ 12
Section 28. Tenure and Duties of Officers...................... 13
(a) General............................................ 13
(b) Duties of Chairman of the Board of Directors....... 13
(c) Duties of Chief Executive Officer.................. 13
(d) Duties of Vice Chairman of the Board of Directors.. 13
(e) Duties of President................................ 14
(f) Duties of Vice Presidents.......................... 14
(g) Duties of Secretary................................ 14
(h) Duties of Chief Financial Officer.................. 14
Section 29. Delegation of Authority............................ 15
Section 30. Resignations....................................... 15
Section 31. Removal............................................ 15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION.................. 15
Section 32. Execution of Corporate Instruments................. 15
Section 33. Voting of Securities Owned by the Corporation...... 16
ARTICLE VII SHARES OF STOCK............................................ 16
Section 34. Form and Execution of Certificates................. 16
ii
<PAGE> 4
Section 35. Lost Certificates.................................. 17
Section 36. Transfers.......................................... 17
Section 37. Fixing Record Dates................................ 17
Section 38. Registered Stockholders............................ 18
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION........................ 18
Section 39. Execution of Other Securities...................... 18
ARTICLE IX DIVIDENDS.................................................... 19
Section 40. Declaration of Dividends........................... 19
Section 41. Dividend Reserve................................... 19
ARTICLE X FISCAL YEAR 19
Section 42. Fiscal Year........................................ 19
ARTICLE XI INDEMNIFICATION.............................................. 20
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents...................... 20
(a) Directors and Executive Officers................... 20
(b) Other Officers, Employees and Other Agents......... 20
(c) Expenses........................................... 20
(d) Enforcement........................................ 21
(e) Non Exclusivity of Rights.......................... 21
(f) Survival of Rights................................. 22
(g) Insurance.......................................... 22
(h) Amendments......................................... 22
(i) Saving Clause...................................... 22
(j) Certain Definitions................................ 22
ARTICLE XII NOTICES..................................................... 23
Section 44. Notices............................................ 23
(a) Notice to Stockholders............................. 23
(b) Notice to directors................................ 23
(c) Affidavit of Mailing............................... 24
(d) Time Notices Deemed Given.......................... 24
iii
<PAGE> 5
(e) Methods of Notice.................................. 24
(f) Failure to Receive Notice.......................... 24
(g) Notice to Person with Whom Communication Is
Unlawful......................................... 24
(h) Notice to Person with Undeliverable Address........ 24
ARTICLE XIII AMENDMENTS................................................. 25
Section 47. Amendments.......................................... 25
ARTICLE XIV LOANS TO OFFICERS........................................... 25
Section 48. Loans to Officers................................... 25
ARTICLE XV MISCELLANEOUS................................................ 26
Section 47. Annual Report....................................... 26
iv
<PAGE> 6
BYLAWS
OF
STAC, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICERS
SECTION 1. REGISTERED OFFICE. The registered office of the
corporation in the State of Delaware shall be in the City of Wilmington, County
of New Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
1.
<PAGE> 7
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the date of the corporation's proxy
statement released to stockholders in connection with the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stock holder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a
proponent to a stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
2.
<PAGE> 8
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
3.
<PAGE> 9
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation
may be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than ten percent (10%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by tele graphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
4.
<PAGE> 10
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with
5.
<PAGE> 11
Delaware law. An agent so appointed need not be a stockholder. No proxy shall be
voted after three (3) years from its date of creation unless the proxy provides
for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection
(c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING. Effective upon the effective date
of the merger between the corporation and Stac, Inc., a California corporation,
no action shall be taken by the stockholders except at an annual or special
meeting of stockholders called in accordance with these Bylaws, and no action
shall be taken by the stockholders by written consent.
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SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
Vice Chairman of the Board of Directors, or, if a Chairman has not been
appointed or is absent and a Vice Chairman has not been appointed or is absent,
the Chief Executive Officer, or, if a Chairman has not been appointed or is
absent and a Vice Chairman has not been appointed or is absent and a Chief
Executive Officer has not been appointed or is absent, the President, or, if all
of such officers are absent, a chairman of the meeting chosen by a majority in
interest of the stockholders entitled to vote, present in person or by proxy,
shall preside over the meeting. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the presiding officer, shall act as secretary of
the meeting.
(b) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
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SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. ELECTION OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year and each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the
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affirmative vote of the holders of at least sixty-six and two-thirds percent (66
2/3%) of the voting power of all the then-outstanding shares of the Voting
Stock.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and such meeting shall be
held for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the office
of the corporation required to be maintained pursuant to Section 2 hereof.
Unless otherwise restricted by the Certificate of Incorporation, regular
meetings of the Board of Directors may also be held at any place within or
without the State of Delaware which has been designated by resolution of the
Board of Directors or the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not
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present shall sign a written waiver of notice. All such waivers shall be filed
with the corporate records or made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a
quorum is present, all questions and business shall be determined by the
affirmative vote of a majority of the directors present, unless a different vote
be required by law, the Certificate of Incorporation or these
Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors
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shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation,
including without limitation the power or authority to declare a dividend, to
authorize the issuance of stock and to adopt a certificate of ownership and
merger, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
fix the designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint an audit committee, nominating committee and such other committees
as may be permitted by law. Such other committees appointed by the Board of
Directors shall consist of one (1) or more members of the Board of Directors and
shall have such powers and perform such duties as may be prescribed by the
resolution or resolutions creating such committees, but in no event shall such
committee have the powers denied to the Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may
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unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the Vice Chairman of the Board of Directors, or, if a Chairman has
not been appointed or is absent and a Vice Chairman has not been appointed or is
absent, the Chief Executive Officer, or, if a Chairman has not been appointed or
is absent and a Vice Chairman has not been appointed or is absent and a Chief
Executive Officer has not been appointed or is absent, the President, or, if all
of such officers are absent, a chairman of the meeting chosen by a majority of
the directors present, shall preside over the meeting. The Secretary, or in his
absence, an Assistant Secretary directed to do so by the presiding officer,
shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board
of Directors, the President, one or more Vice Presidents, the Secretary, the
Chief Financial Officer, the Treasurer, the Controller, all of whom shall be
elected at the annual organizational
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meeting of the Board of Directors. The Board of Directors may also appoint one
or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and
such other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no Chief Executive Officer or
President, then the Chairman of the Board of Directors shall also serve as the
Chief Executive Officer of the corporation and shall have the powers and duties
prescribed in paragraph (c) of this Section 28.
(c) DUTIES OF CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall preside at all meetings of the stockholders and at all meetings of
the Board of Directors, unless the Chairman of the Board of Directors has been
appointed and is present or, in the absence of the Chairman of the Board of
Directors, the Vice Chairman of the Board of Directors has been appointed and is
present. The Chief Executive Officer shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The Chief Executive Officer shall also perform such other duties
and have such other powers as the Board of Directors shall designate from time
to time.
(d) DUTIES OF VICE CHAIRMAN OF THE BOARD OF DIRECTORS. The
Vice Chairman of the Board of Directors shall preside at all meetings of the
stockholders and the Board of Directors, unless the Chairman of the Board of
Directors has been appointed and is present. The Vice Chairman of the Board of
Directors shall perform other duties
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commonly incident to his office and shall also perform such other duties and
have such other powers as the Board of Directors shall designate from time to
time.
(e) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present
or, in the absence of the Chairman of the Board of Directors, the Vice Chairman
of the Board has been appointed and is present or, in the absence of the
Chairman and Vice Chairman of the Board of Directors, the Chief Executive
Officer has been appointed and is present. If there is no Chief Executive
Officer, then the President shall also serve as the Chief Executive Officer of
the corporation and shall have the powers and duties prescribed in paragraph (c)
of this Section 28. The President shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors shall designate from time to time.
(f) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(g) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform all other duties given him
in these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(h) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and
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have such other powers as the Board of Directors or the President shall
designate from time to time. The President may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume and
perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the Chief Executive Officer shall
designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of
Directors or otherwise required by law, promissory notes, deeds of trust,
mortgages and other
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evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories on
funds to the credit of the corporation or in special accounts of the corporation
shall be signed by such person or persons as the Board of Directors shall
authorize so to do.
Unless authorized or ratified by the Board of Directors or
within the agency power of an officer, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on
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the face or back a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(A) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the
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Board of Directors may fix, in advance, a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty (60) days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture
18.
<PAGE> 24
pursuant to which such bond, debenture or other corporate security shall be
issued, the signatures of the persons signing and attesting the corporate seal
on such bond, debenture or other corporate security may be the imprinted
facsimile of the signatures of such persons. Interest coupons appertaining to
any such bond, debenture or other corporate security, authenticated by a trustee
as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the
corporation or such other person as may be authorized by the Board of Directors,
or bear imprinted thereon the facsimile signature of such person. In case any
officer who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
19.
<PAGE> 25
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The
corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer, of the corporation, or is or was serving at the request of
the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined
pursuant to paragraph (e) of this Bylaw, no advance shall be made by the
corporation to an executive officer of the corporation (except by reason of the
fact that such executive officer is or was a director of the corporation in
which event this paragraph shall not apply) in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, if a
20.
<PAGE> 26
determination is reasonably and promptly made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action
21.
<PAGE> 27
in his official capacity and as to action in another capacity while holding
office. The corporation is specifically authorized to enter into individual
contracts with any or all of its directors, officers, employees or agents
respecting indemnification and advances, to the fullest extent not prohibited by
the Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(i) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving of
testimony in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed
and shall include, without limitation, court costs, attorneys' fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.
(iii) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had
22.
<PAGE> 28
continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this Bylaw
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
(iv) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(v) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to
any director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such
23.
<PAGE> 29
address as such director shall have filed in writing with the Secretary, or, in
the absence of such filing, to the last known post office address of such
director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or
24.
<PAGE> 30
Bylaws of the corporation, to any stockholder to whom (i) notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to such person during the period
between such two consecutive annual meetings, or (ii) all, and at least two,
payments (if sent by first class mail) of dividends or interest on securities
during a twelve-month period, have been mailed addressed to such person at his
address as shown on the records of the corporation and have been returned
undeliverable, the giving of such notice to such person shall not be required.
Any action or meeting which shall be taken or held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the corporation a written notice setting forth
his then current address, the requirement that notice be given to such person
shall be reinstated. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate need not state that notice was
not given to persons to whom notice was not required to be given pursuant to
this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of these
Bylaws, the Bylaws may be amended or repealed and new Bylaws adopted by (a) the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock or (b)
the Board of Directors.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
25.
<PAGE> 31
ARTICLE XV
MISCELLANEOUS
SECTION 47. ANNUAL REPORT.
(a) Subject to the provisions of paragraph (b) of this Bylaw,
the Board of Directors shall cause an annual report to be sent to each
stockholder of the corporation not later than one hundred twenty (120) days
after the close of the corporation's fiscal year. Such report shall include a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year, accompanied by
any report thereon of independent accounts or, if there is no such report, the
certificate of an authorized officer of the corporation that such statements
were prepared without audit from the books and records of the corporation. When
there are more than 100 stockholders of record of the corporation's shares, as
determined by Section 605 of the California Corporations Code, additional
information as required by Section 1501(b) of the California Corporations Code
shall also be contained in such report, provided that if the corporation has a
class of securities registered under Section 12 of the 1934 Act, that Act shall
take precedence. Such report shall be sent to stockholders at least fifteen (15)
days prior to the next annual meeting of stockholders after the end of the
fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of record of the
corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
26.
<PAGE> 1
EXHIBIT 10.14
OFFICE BUILDING LEASE
TABLE OF CONTENTS
SECTION Page
1. Basic Lease Terms ......................... 1
2. Premises and Common Areas Leased .......... 2
3. Term ...................................... 2
4. Possession ................................ 2
5. Rent ...................................... 3
6. Rental Adjustment ......................... 3
7. Security Deposit .......................... 4
8. Use ....................................... 4
9. Notices ................................... 5
10. Brokers ................................... 5
11. Holding Over .............................. 5
12. Taxes on Tenant's Property ................ 5
13. Condition of Premises ..................... 5
14. Alterations ............................... 5
15. Repairs ................................... 6
16. Liens ..................................... 6
17. Entry By Landlord ......................... 6
18. Utilities and Services .................... 6
19. Bankruptcy ................................ 7
20. Indemnification and Exculpation of Landlord 7
21. Damage to Tenant's Property ............... 7
22. Tenant's Insurance ........................ 7
23. Damage or Destruction ..................... 8
24. Eminent Domain ............................ 9
25. Defaults and Remedies ..................... 9
26. Assignment and Subletting ................. 10
27. Subordination ............................. 10
28. Estoppel Certificate ...................... 11
29. Building Planning ......................... 11
30. Rules and Regulations ..................... 11
31. Conflict of Laws .......................... 11
32. Successors and Assigns .................... 11
33. Surrender of Premises ..................... 11
34. Professional Fees ......................... 11
35. Performance by Tenant ..................... 11
36. Mortgagee Protection ...................... 12
37. Definition of Landlord .................... 12
38. Waiver .................................... 12
39. Identification of Tenant .................. 12
40. Parking ................................... 12
41. Force Majeure ............................. 12
42. Terms and Headings ........................ 12
43. Examination of Lease ...................... 12
44. Time ...................................... 12
45. Prior Agreement or Amendments ............. 13
46. Separability .............................. 13
47. Recording ................................. 13
48. Limitation on Liability ................... 13
49. Modification For Lender ................... 13
50. Financial Statements ...................... 13
51. Quiet Enjoyment ........................... 13
52. Tenant as Corporation ..................... 13
- -------------------------------------------------------------
EXHIBITS
A Outline of Floor Plan or Premises
B The Project
C Notice of Lease Term Dates and Tenant's Percentage
D Standards for Utilities and Services
E Tenant Estoppel Certificate
F Rules and Regulations
G Parking Rules and Regulations
H Hazardous Materials
<PAGE> 2
<TABLE>
<CAPTION>
OFFICE LEASE
1. BASIC LEASE TERMS.
<C> <C> <S>
a. DATE OF LEASE EXECUTION: March 22, 1994
-------------------------------------------------------------------------------
b. TENANT: STAC Electronics, a California corporation
------------------------------------------------------------------------------------------------
Trade Name:
-------------------------------------------------------------------------------------------
Address (leased Premises): 12636 High Bluff Drive
---------------------------------------------------------------------------
San Diego, CA 92130
------------------------------------------------------------------------------------------------------
Floor(s) upon which the Premises are located: Fourth (4th) Suite Number(s): 400
------------------------------ ---------
Address (For Notices): 12636 High Bluff Drive, Suite 400
---------------------------------------------------------------------------------
San Diego, CA 92130
------------------------------------------------------------------------------------------------------
c. LANDLORD: Weyerhaeuser Mortgage Company, a California corporation and Fort Wayman, Inc.
-----------------------------------------------------------------------------------------------
Address (For Notices): c/o Weyerhaeuser Mortgage Company, 6320 Canoga Avenue, Woodland Hills, CA 91367
---------------------------------------------------------------------------------
with a copy to Voit Management, 12626 High Bluff Drive, Suite 350, San Diego, CA 92130 or to such other
place as Landlord may from time to time designate by notice to Tenant.
d. PREMISES AREA: Approximately Fourteen Thousand Twenty-Four (14,024) Rentable Square Feet
-----------------------------------------------------
e. PROJECT AREA: Fifty-Eight Thousand Ninety-Six (58,096) Rentable Square Feet
--------------------------------------------------------------------
f. TENANT'S PERCENTAGE: 24.14%
-------
g. TERM OF LEASE: The term of this Lease shall be for approximately thirty--eight (38) KB Months
------------------------------------------
commencing upon the earlier of:
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(3) January 6, 1997, expiring on March 5, 2000
--------- --
Reference in this lease to a "Lease Year" shall mean each successive twelve month period commencing
with the first day of the month in which the term of this Lease commences.
h. BASE MONTHLY RENT: $Seventeen Thousand Five Hundred Thirty and No/100 Dollars ($17,530.00)
-----------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
j. ANNUAL OPERATING EXPENSE ALLOWANCE: See Addendum "2."
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
k. PREPAID RENT: $ -0-
---------------------
l. TOTAL SECURITY DEPOSIT: $17,530.00 payable on January 6, 1997. ------------------------------------------
-----------
m. TENANT IMPROVEMENT ALLOWANCE: $ -0- -------------------------------------------------------------------
------
-----------------------------------------. The space shall be leased in "as is" condition.
n. TENANT'S USE OF PREMISES: General office
------------------------------------------------------------------------------
o. PARKING: Fifty-eight (58) spaces, including six (6) covered and reserved, free of charge.
----------------
p. BROKER(S): CB Commercial Real Estate Group, Inc. and Business Real Estate Brokerage Company, Inc.
--------------------------------------------------------------------------------------------
q. BROKERAGE COMMISSION PAYABLE BY: Landlord
---------------------------------------------------------------------
r. GUARANTOR(S) None
------------------------------------------------------------------------------------------
s. ADDITIONAL SECTIONS
Additional Sections of this lease numbered Addenda "1" through "4" --- are attached hereto and made a part
hereof. ---
t. ADDITIONAL EXHIBITS
Additional exhibits letters H --- are attached hereto and made a part hereof. ---
</TABLE>
* a Michigan corporation, tenants in common
1
<PAGE> 3
Section 1 represents a summary of the basic terms of this Lease. In the
event of any inconsistency between the terms contained in Section 1 and any
specific clause of this Lease, the terms of the more specific clause shall
prevail.
The parties hereto agree that said letting and hiring is upon and subject to
the terms, convenants and conditions herein set forth. Tenant covenants, as a
material part of the consideration for this Lease to keep and perform each and
all of said terms, convenants and conditions for which tenant is liable and that
this Lease is made upon the condition of such performance.
2. PREMISES AND COMMON AREAS LEASED.
a. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
those certain premises described in Section 1 and in Exhibit A attached hereto
(the "Premises"), * ----------------------------------------------------------
Landlord and Tenant stipulate that for purposes of this Lease the Premises
contain 14,024 rentable square feet and the Project contains 58,096 rentable
square feet.
b. The Premises are contained within the building at the address designated in
Section 1 located in the Project described on Exhibit B attached hereto (the
"Project").
c. Tenant's Percentage of the Project ** --------------------------------------.
d. Tenant shall have the nonexlusive right to use in common with other tenants
in the Building and the Project and subject to the Rules and Regulations
referred to in Paragraph 30 below the following areas ("Common Areas")
appurtenant to the Premises:
(1) The Building's common entrances, lobbies, restrooms, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any
passageways and serviceways thereto, and the common pipes, conduits, wires and
appurtenant equipment serving the Premises;
(2) Loading and unloading areas, trash areas, parking areas, roadways,
sidewalks, walkways, parkways, driveways and landscaped areas and similar areas
and facilities appurtenant to the Building.
e. Landlord reserves the right from time to time without unreasonable
interference with Tenant's use:
(1) To install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building above the ceiling surfaces, below the floor surfaces, within the
walls and in the central core areas, and to relocate any pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises which are
located in the Premises or located elsewhere outside the Premises, and to expand
the Building or Project;
(2) 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 and walkways;
(3) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available:
(4) To designate other land outside the boundaries of the Building or
Project to be a part of the Common Areas;
(5) To add additional buildings and improvements to the Common Areas;
(6) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building or the Project, or any
portion thereof,
(7) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas, the Building or the Project as Landlord
may, in the exercise of sound business judgment, deem to be appropriate.
3. TERM.
The term of this Lease shall be for the period designated in Section 1,
commencing on the Commencement Date, and ending on the expiration of such
period, unless the term hereby demised shall be sooner terminated as hereinafter
provided. If not specifically designated in Section 1, the Commencement Date,
the date upon which the term of this Lease shall end, the rentable square feet
within the Premises and Tenant's Percentage shall be determined in accordance
with the provisions of Paragraph 2 and will be specified in Landlord's Notice of
Lease Term Dates and Tenant's Percentage ("Notice"), in the form of Exhibit "C"
which is attached hereto and is incorporated herein by this reference, and shall
be served upon Tenant as provided in Paragraph 9. The Notice shall be binding
upon Tenant unless Tenant objects to the Notice in writing, served upon Landlord
as provided for in Paragraph 9 hereof, within five (5) days of Tenant's receipt
of the Notice.
4. POSSESSION.
Tenant agrees that, if Landlord is unable to deliver possession of the
Premises to Tenant on the scheduled commencement of the term of this Lease, this
Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom, nor shall the expiration date of the
above term be in any way extended, but in such event Tenant shall not be liable
for any rent until Landlord tenders possession of the Premises to Tenant.------
- ------------------------------------------------------------------------------.
* "as is" and in the condition that will exist on the Commencement Date.
** is stipulated to be 24.14%.
2
<PAGE> 4
5. RENT.
a. Tenant shall pay Landlord monthly base rent in the initial amount set forth
in Section 1 which shall be payable monthly in advance on the first day of each
and every calendar month ("Base Monthly Rent") provided, however, the first
month's rent shall be due and payable upon execution of this lease.
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d. All rent shall be paid by Tenant to Landlord monthly in advance on the first
day of every calendar month, at the address shown in Section 1, or such other
place as Landlord may designate in writing from time to time. All rent shall be
paid without prior demand or notice and without any deduction or offset
whatsoever. All rent shall be paid in lawful currency of the United States of
America. All rent due for any partial month shall be prorated at the rate of
1/30th of the total monthly rent per day. Tenant acknowledges that late payment
by Tenant to Landlord of any rent or other sums due under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impracticable to ascertain. Such costs
include, without limitation, processing and accounting charges and late charges
that may be imposed on Landlord by the terms of any encumbrance or note secured
by the Premises. Therefore, if any rent or other sum due from Tenant is not
received when due, Tenant shall pay to landlord an additional sum equal to 10%
of such overdue payment. Landlord and Tenant hereby agree that such late charge
represents a fair and reasonable estimate of the costs that Landlord will incur
by reason of any such late payment. Additionally, all such delinquent rent or
other sums, plus this late charge, shall bear interest at the then maximum
lawful rate permitted to be charged by Landlord. Any payments of any kind
returned for insufficient funds will be subject to an additional handling charge
of $25.00, and thereafter, Landlord may require Tenant to pay all future
payments of rent or other sums due by money order or cashiers check.
e. Upon the execution of the Lease, Tenant shall pay to Landlord the prepaid
rent set forth in Section 1 and if Tenant is not in default of any provisions of
the Lease, such prepaid rent shall be applied toward the rent due for the first
month of the term. Landlord's obligations with respect to the prepaid rent are
those of a debtor and not of a trustee, and Landlord can commingle the prepaid
rent with Landlord's general funds. Landlord shall not be required to pay Tenant
interest on the prepaid rent. Landlord shall be entitled to immediately endorse
and cash Tenant's prepaid rent; however, such endorsement and cashing shall not
constitute Landlord's acceptance of this Lease. In the event Landlord does not
accept this Lease, Landlord shall return said prepaid rent.
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g. "For purposes of Section 467 of the Internal Revenue Code, the parties to
this lease agreement hereby agree to allocate the stated rents, provided herein,
to the periods which correspond to the actual rent payments as provided under
the terms and conditions of this agreement."
6. RENTAL ADJUSTMENT.
a. For the purposes of this Paragraph 6, the following terms are defined as
follows:
(1) Tenant's Percentage shall mean that portion of the total rentable
area of the Project occupied by Tenant as set forth as a percentage in Section
1.
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(3) Operating Expenses shall consist of all direct costs of operation
and maintenance of the Project and the Common Areas, including any expansions to
the Common Areas by Landlord ("Operating Expenses"), as determined by standard
accounting practices, calculated assuming the Project is fully occupied,
including the following costs by way of illustration, but not limitation: any
and all assessments Landlord must pay for the Project pursuant to any covenants,
conditions or restrictions, reciprocal easement agreements, tenancy-in-common
agreements or similar restrictions and agreements affecting the Building or the
Project; real property taxes and assessments and any taxes or assessments
hereafter imposed in lieu thereof; rent taxes, gross receipt taxes
(whether assessed against Landlord or assessed against Tenant and paid by
Landlord, or both); water and sewer charges; accounting; legal and other
consulting fees; the net cost and expense of insurance for which Landlord is
responsible hereunder or which Landlord or any first mortgagee with a lien
affecting the Premises reasonably deems necessary in connection with the
operation of the Project; utilities; janitorial services; security; labor;
parking charges, utilities surcharges, or any other costs levied, assessed or
imposed by, or at the direction of, or resulting from statutes or regulations or
interpretations thereof, promulgated by any federal, state, regional, municipal
or local government authority in connection with the use or occupancy of the
Project or the Premises or the parking facilities serving the Project or the
Premises; the cost (amortized over such reasonable period as Landlord shall
determine together with Interest at the maximum rate allowed by law on the
unamortized balance) of any capital improvements made to the Project or the
Common Areas by the Landlord in order to comply with any governmental
requirements not in existence as of the date of this Lease or designed to
reduce Operating Expenses or replacement of any building equipment needed to
operate the Building or the Common Areas at the same quality levels as prior to
the replacement; costs incurred in the management of the Project, if any
(including supplies, wages and salaries of employees used in the management,
operation and maintenance of the Project, and payroll taxes and similar
governmental charges with respect thereto, Project management office rental, a
management fee and, in the event Landlord is directly participating in the
administration of the Project, an administrative fee in the amount of Landlord's
actual expenses, such administrative fee not to exceed fifteen percent (15%) of
the annual Operating Expenses excluding therefrom such fee); air conditioning;
waste disposal; heating; ventilating; elevator maintenance; supplies; materials;
equipment; tools; repair and maintenance of the structural portions of the
Project, including the plumbing, heating, ventilating, air conditioning and
electrical systems installed or furnished by Landlord; maintenance costs,
including utilities and payroll expenses, rental of personal property used in
maintenance, and all other upkeep of all parking and Common Areas; costs and
expenses of
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<PAGE> 5
gardening and landscaping; maintenance of signs (other than Tenant's signs);
personal property taxes levied on or attributable to personal property used in
connection with the entire Project, including the Common Areas; reasonable audit
or verification fees; and costs and expenses of repairs, resurfacing, repairing,
maintenance, painting, lighting, cleaning, refuse removal, security and similar
items, including appropriate reserves. Operating Expenses shall not include
depreciation on buildings or equipment therein, Landlord's executive salaries or
real estate brokers' commissions.
(4) As used herein, the term "real property taxes" shall include any
form of assessment, license fee, license tax, business license fee, commercial
rental tax, levy, charge, penalty, tax or similar imposition, imposed by any
authority having the direct power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, as against any legal or
equitable interest of Landlord in the Premises, including, but not limited to,
the following:
(a) any tax on Landlord's "right" to other income from the
Premises or as against Landlord's business of leasing the Premises;
(b) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real estate tax, including but not limited to,
any assessments, taxes, fees, levies and charges that may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants. It is the intention of
Tenant and Landlord that all such new and increased assessments, taxes, fees,
levies and charges be included within the definition of "real property taxes"
for the purposes of this Lease;
(c) any assessment, tax, fee, levy or charge allocable to or
measured by the area of the Premises or the rent payable hereunder, including,
without limitation, any gross income tax or excise tax levied by the State, city
or federal government, or any political subdivision thereof, with respect to the
receipt of such rent, or upon or with respect to the possession, leasing,
operating, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof;
(d) any assessment, tax, fee, levy or charge upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.
Notwithstanding any provision of this paragraph 6 expressed or implied
to the contrary, "real property taxes" shall not include Landlord's federal or
state income, franchise, inheritance or estate taxes.
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c. Even though the term has expired and Tenant has vacated the Premises, when
final determination is made of Tenant's Percentage of Operating Expenses for
the year in which this Lease terminates, Tenant shall immediately pay any
increase due over the estimated expenses paid and, conversely, any overpayment
made in the event said expenses decrease Shall be rebated by Landlord to Tenant.
7. SECURITY DEPOSIT.
Tenant shall deposit with Landlord the amount of the security deposit set forth
in Section 1 in part as security for the performance by Tenant of the provisions
of this Lease------------------. If Tenant is in default, Landlord can use the
security deposit or any portion of it to cure the default or to compensate
Landlord for all damage sustained by landlord resulting from Tenant's default.
Upon demand, Tenant shall immediately pay to Landlord a sum equal to the portion
of the security deposit expended or applied by Landlord to maintain the security
deposit in the amount initially deposited with Landlord. In no event will
Tenant have the right to apply any part of the security deposit to any rent or
other sums due under this Lease. If Tenant is not in default at the expiration
or termination of this Lease, Landlord shall return the entire security deposit
to Tenant. ----------------- Landlord's obligations with respect to the deposit
are those of a debtor and not of a trustee, and Landlord can commingle the
security deposit with Landlord's general funds. Landlord shall not be required
to pay Tenant interest on the deposit. Landlord shall be entitled to immediately
endorse and cash Tenant's prepaid deposit; however, such endorsement and cashing
shall not constitute Landlord's acceptance of this Lease. In the event Landlord
does not accept this Lease, Landlord shall return said prepaid deposit. Should
Landlord sell its interest in the Premises during the term hereof and if
Landlord deposits with the purchaser thereof the then unappropriated funds
deposited by Tenant as aforesaid, thereupon Landlord shall be discharged from
any further liability with respect to the Security Deposit.
8. USE.
Tenant shall use the Premises for the uses set forth in Section 1 above, and
shall not use or permit the Premises to be used for any other purpose without
the prior written consent of Landlord. Nothing contained herein shall be deemed
to give Tenant any exclusive right to such use in the Building. Tenant shall not
use or occupy the Premises in violation of law or of the Certificate of
Occupancy issued for the Building, and shall, upon written notice from Landlord,
discontinue any use of the Premises which is declared by any governmental
authority having jurisdiction to be a violation of law or of said Certificate of
Occupancy. Tenant shall comply with any direction of any governmental authority
having jurisdiction which shall, by reason of the nature of Tenant's use or
occupancy of the Premises, impose any duty upon Tenant or Landlord with respect
to the Premises or with respect to the use or occupation thereof. Tenant shall
comply with all rules, orders, regulations and requirements of the Insurance
Service Office or any other organization performing a similar function. Tenant
shall promptly, upon demand, reimburse Landlord for any additional premium
charged for such policy by reason of Tenant's failure to comply with the
provisions of this Paragraph. Tenant shall not do or permit anything to be done
in or about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Project, or injure or annoy them, or
use or allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about
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<PAGE> 6
the Premises. Tenant shall comply with all restrictive covenants and obligations
(created by private contracts which affect the use and operation of the
Premises, the Building, the Common Area or the Project. Subject to Paragraph 23
hereof, Tenant shall not commit or suffer to be committed any waste in or upon
the Premises and shall keep the Premises in first class repair and appearance,
normal wear and tear excepted. Landlord reserves the right to prescribe the
weight and position of all files, safes and heavy equipment which Tenant desires
to place in the Premises so as to properly distribute the weight thereof.
Further, Tenant's business machines and mechanical equipment which cause
vibration or noise that may be transmitted to the building structure or to any
other space in the building shall be so installed, maintained and used by Tenant
as to eliminate such Vibration or noise. Tenant shall be responsible all
structural engineering required to determine structural load.
9. NOTICES.
Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail, and if given by mail
shall be deemed sufficiently given if sent by registered or certified mail
addressed to Tenant at the address(es) designated in Section 1 or to Landlord at
both of the addresses designated in Section 1. Either party may specify a
different address for notice purposes by written notice to the other.
10. BROKERS.
Tenant warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease, except for those
certain brokers whose names are set forth in Section 1 and that it knows of no
other real estate broker or agent who is or might be entitled to a commission in
connection with this Lease. If Tenant has dealt with any other person or real
estate broker with respect to leasing or renting space in the Project, Tenant
shall be solely responsible for the payment of any fee due said person or firm
and Tenant shall hold Landlord free and harmless against any liability in
respect thereto, including attorneys' fees and costs.
11. HOLDING OVER.
If Tenant holds over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord, Tenant shall become
a Tenant at sufferance only, at a rental rate equal to the greater of Landlord's
scheduled rent for the space or one hundred twenty-five percent (125%) of the
rent in effect upon the date of such expiration (subject to adjustment as
provided in Paragraph 6 hereof and prorated on a daily basis), and otherwise
subject to the terms, covenants and conditions herein specified, so far as
applicable. Acceptance by Landlord of rent after such expiration or earlier
termination shall not result In a renewal of this Lease. The foregoing
provisions of this Paragraph 11 are in addition to and do not affect Landlord's
right of re-entry or any rights of Landlord hereunder or as otherwise provided
by law. If Tenant fails to surrender the Premises upon the expiration of this
Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or liability, including without limitation, any
claim made by any succeeding tenant founded on or resulting from such failure to
surrender and any attorneys fees and costs.
12. TAXES ON TENANT'S PROPERTY.
a. Tenant shall be liable for and shall pay, at least ten (10) days before
delinquency, all taxes levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property or if the assessed value of the Premises is increased by the inclusion
therein of a value placed upon such personal property or trade fixtures of
Tenant and if Landlord, after written notice to Tenant, pays the taxes based
upon such increased assessment, which Landlord shall have the right to do
regardless of the validity thereof, but only under proper protest if requested
by Tenant, Tenant shall, upon demand, repay to Landlord the taxes so levied
against Landlord, or the portion of such taxes resulting from such increase in
the assessment.
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13. CONDITION OF PREMISES.
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises, the building
or the Project or with respect to the suitability of either for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the building were in satisfactory
condition at such time. Without limiting the foregoing, Tenant's execution of
the Notice attached hereto as EXHIBIT "C" shall constitute a specific
acknowledgement and acceptance of the various start-up inconveniences that may
be associated with the use of the Common Areas such as certain construction
obstacles including scaffolding, delays in use of freight elevator service,
certain elevators not being available to Tenant, the passage of work crews using
elevators, uneven air conditioning services and other typical conditions
incident to recently constructed office buildings.
14. ALTERATIONS
a. Tenant shall make no alterations, additions or improvements in or to the
Premises without Landlord's prior written consent *, and then only by
contractors or mechanics approved by Landlord; such consents and approvals by
Landlord shall not be unreasonably withheld or delayed. Tenant shall submit to
Landlord plans and specifications for any proposed alterations, additions or
improvements to the Premises, and may not make such alterations, additions or
improvements until Landlord has approved of such plans and specifications.
Tenant shall construct such alterations, additions or improvements in accordance
with the plans and specifications approved by Landlord, and shall not amend or
modify such plans and specifications without Landlord's prior written consent.
If the proposed change requires the consent or approval of any lessor of a
superior lease, or the holder of a mortgage encumbering the Premises, such
consent or approval must be secured prior to the construction of such
alteration, addition or improvement and Landlord agrees to cooperate in
obtaining any such consent or approval. Tenant agrees that there shall be no
construction of partitions or other obstructions which might interfere with
Landlord's free access to mechanical installations or service facilities of the
building or interfere with the moving of Landlord's equipment to or from the
enclosures containing said installations or facilities. All such work shall be
done at such times and in such manner as Landlord may from time to time
designate. Tenant covenants and agrees that all work done by Tenant shall be
performed in full compliance with all laws, rules, orders, ordinances,
regulations and requirements of all governmental agencies, offices and boards
having jurisdiction, and in full compliance with the rules, regulations and
requirements of the Insurance Service Office, and of any similar body. Before
commencing any work, Tenant shall give Landlord at least ten (10) days written
notice of the proposed commencement of such work and shall, if required by
Landlord - secure at Tenant's own
*unless such alterations, additions, or improvements are less than a cost of
Five Thousand and No/100 Dollars
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cost and expense, a completion and lien indemnity bond satisfactory to Landlord
for said work if said work costs more than $100,000. Tenant further covenants
and agrees that any mechanic's lien filed against the Premises or against the
Building for work claimed to have been done for, or materials claimed to have
been furnished to Tenant, will be discharged by Tenant, by bond or otherwise,
within (10) ten days after the filing thereof, at the cost and expense of
Tenant. All alterations, additions or improvements upon the Premises made by
either party, including (without limiting the generality of the foregoing) all
wallcovering, built-in cabinet work, paneling and the like, shall,
- ---------------------- become the property of Landlord, and shall remain upon,
and be surrendered with the Premises,as a part thereof, at the end of the term
hereof.---------------------------------------------------.
b. All articles of personal property and all business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the
property of Tenant and may be removed by Tenant at any time during the lease
term ---------------------. If Tenant shall fail to remove all of its effects
from the Premises upon termination of this Lease for any cause whatsoever,
Landlord may, at its option, remove the same in any manner that Landlord shall
choose, and store said effects without liability to Tenant for loss thereof. In
such event, Tenant agrees to pay Landlord upon demand any and all expenses
incurred in such removal, including court costs and attorneys' fees and storage
charges on such effects, for any length of time that the same shall be in
Landlord's possession. Landlord may, at its option, without notice, sell said
effects, or any of the same, at private sale and without legal process, for such
price as Landlord may obtain and apply the proceeds of such sale upon any
amounts due under this Lease from Tenant to Landlord and upon the expense
incident to the removal and sale of said effects.
15. REPAIRS.
a. By entry hereunder, Tenant accepts the Premises as being in good and sanitary
order, condition and repair. Subject to Paragraph 23 hereof, Tenant shall keep,
maintain and preserve the Premises in first class condition and repair normal
wear and tear excepted and shall, when and if needed, at Tenant's sole cost and
expense, make all repairs to the Premises and every part thereof. Tenant shall,
upon the expiration or sooner termination of the term hereof, surrender the
Premises to Landlord in the same condition as when received, usual and ordinary
wear and tear excepted. Landlord shall have no obligation to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof. The parties
hereto affirm that Landlord has made no representations to Tenant respecting the
condition of the Premises, the building, the Project or the Common Area except
as specifically herein set forth.
b. Anything contained in Paragraph 15a above to the contrary notwithstanding,
Landlord shall repair and maintain the structural portions of the building and
the plumbing, heating, ventilating, air conditioning, elevator and electrical
systems installed or furnished by Landlord, unless such maintenance and repairs
are caused in part or in whole by the act, neglect or omission of any duty by
Tenant, its agents, servants, employees or invitees, in which case Tenant shall
pay to Landlord, as additional rent, the reasonable cost of such maintenance and
repairs. Landlord shall not be liable for any failure to make any such repairs
or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in Paragraph 23
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements in or to any portion of the
building or the Premises or in or to fixtures, appurtenances and equipment
therein. Tenant waives the right to make repairs at Landlord's expense under any
law, statute or ordinance now or hereafter in effect.
16. LIENS.
Tenant shall not permit any mechanics', materialmens' or other liens to be filed
against the building or the Project nor against Tenant's leasehold interest in
the Premises. Landlord shall have the right at all reasonable times to post and
keep posted on the Premises any notices which it deems necessary for protection
from such liens. If any such liens are filed, Landlord may, without waiving its
rights and remedies based on such breach of Tenant and without releasing Tenant
from any of its obligations, cause such liens to be released by any means it
shall deem proper, including payments in satisfaction of the claim giving rise
to such lien. Tenant shall pay to Landlord at once, upon notice by Landlord, any
sum paid by Landlord to remove such liens, together with interest at the maximum
rate per annum permitted by law from the date of such payment by Landlord.
17. ENTRY BY LANDLORD.
Landlord reserves and shall at any and all times (except as provided below)
have the right to enter the Premises to inspect the same upon reasonable prior
notice to Tenant to supply janitor service and any other service to be provided
by Landlord to Tenant hereunder, to show the Premises to prospective purchasers
or tenants upon reasonable prior notice to Tenant, to post notice of
nonresponsibility, to alter, improve or repair the Premises or any other
portion of the Building * , all without being deemed guilty of any eviction of
Tenant and without abatement of rent. Landlord may, in order to carry out such
purposes, erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, provided that the
business of Tenant shall be interfered with as little as reasonably
practicable. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss in, upon and about the
Premises. Landlord shall at all times have and retain a key with which to
unlock all doors in the Premises, excluding Tenant's vaults and safes. Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in an emergency in order to obtain entry to the Premises. Any
entry to the Premises obtained by Landlord by any of said means, or otherwise,
shall not be construed or deemed to be a forcible or unlawful entry into the
Premises, or an eviction of Tenant from the Premises or any portion thereof,
and any damages caused on account thereof shall be paid by Tenant. It is
understood and agreed that no provision of this Lease shall be construed as
obligating Landlord to perform any repairs, alterations or decorations except
as otherwise expressly agreed herein by Landlord.
18. UTILITIES AND SERVICES.
Provided that Tenant is not in default under this Lease, Landlord agrees to
furnish or cause to be furnished to the Premises the utilities and services
described in the Standards for Utilities and Services, attached hereto as
EXHIBIT "D", subject to the conditions and in accordance with the standards set
forth therein. Landlord's failure to furnish any of the foregoing items when
such failure is caused by (i) accident, breakage or repairs; (ii) strikes,
lockouts or other labor disturbance or labor dispute of any character; (iii)
governmental regulation, moratorium or other governmental action; (iv) inability
despite the exercise of reasonable diligence to obtain electricity, water or
fuel; or by (v) any other cause beyond Landlord's reasonable control, shall not
result in any liability to Landlord. In addition, Tenant shall not be entitled
to any abatement or reduction of rent by reason of such failure, no eviction of
Tenant shall result from such failure and Tenant shall not be relieved from the
performance of any covenant or agreement in this Lease because of such failure.
In the event of any failure, stoppage or interruption thereof, Landlord shall
diligently attempt to resume service promptly. If Tenant requires or utilizes
more water or electrical power than is considered reasonable or normal by
Landlord, Landlord may at its option require Tenant to pay, as additional rent,
the cost, as fairly determined by Landlord, incurred by such extraordinary
usage. In addition, Landlord may install separate meter(s) for the Premises at
Landlord's sole expense, and Tenant thereafter shall pay all charges of the
utility providing service and Landlord shall make an appropriate adjustment to
account for the fact Tenant is directly paying such metered charges.
* (with reasonable prior notice to Tenant for non-routine repairs and
maintenance)
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19. BANKRUPTCY.
If Tenant shall file a petition in bankruptcy under any provision of
the Bankruptcy Code as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall not
have been vacated within thirty (30) days from the date thereof, or if a
receiver or trustee shall be appointed of Tenant's property and the order
appointing such receiver of trustee shall not be set aside or vacated within
thirty (30) days after the entry thereof, or if Tenant shall assign Tenant's
estate or effects for the benefit of creditors, -------------------------------
then in any such event Landlord may terminate this Lease, if Landlord so elects,
with or without notice of such election and with or without entry or action by
Landlord. In such case, notwithstanding any other provisions of this Lease,
Landlord, in addition to any and all rights and remedies allowed by law or
equity, shall, upon such termination, be entitled to recover damages in the
amount provided in Paragraph 25b hereof. Neither Tenant nor any person claiming
through or under Tenant or by virtue of any statute or order of any court shall
be entitled to possession of the Premises but shall surrender the Premises to
Landlord. Nothing contained herein shall limit or prejudice the right of
Landlord to recover damages by reason of any such termination equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved; whether or
not such amount is greater, equal to or less than the amount of damages
recoverable under the provisions of this Paragraph 19.
20. INDEMNIFICATION AND EXCULPATION OF LANDLORD.
a. Tenant shall indemnity, defend and hold Landlord harmless from all claims
arising from Tenant's use of the Premises or the conduct of its business or from
any activity, work or thing done, permitted or suffered by Tenant in or about
the Premises, the Building, the Project or the Common Area **. Tenant shall
further indemnify, defend and hold Landlord harmless from all claims arising
from any breach or default in the performance of any obligation to be performed
by Tenant under the terms of this Lease, or arising from any act, neglect, fault
or omission of Tenant or of its agents or employees, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or about such claim
or any action or proceeding brought thereon. In case any action or proceeding
shall be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
approved in writing by Landlord. Tenant, as a material part of the consideration
to Landlord, hereby assumes all risk of damage to property or injury to person
in, upon or about the Premises from any cause whatsoever except that which is
caused by the failure of Landlord to observe any of the terms and conditions of
this Lease where such failure has persisted for an unreasonable period of time
after written notice of such failures. Tenant hereby waives all its claims in
respect thereof against Landlord.
b. Neither Landlord nor any partner, director, officer, agent or employee of
Landlord shall be liable to Tenant or its partners, directors, officers,
contractors, agents, employees, invitees, sublessees or licensees, for any
loss, injury or damage to Tenant or to any other person, or to its or their
property, irrespective of the cause of such injury, damage or loss, unless
solely caused by or solely resulting from the gross negligence or willful
misconduct of Landlord or its employees or agents in the operation or
maintenance of the Premises, the building, or the Project without contributory
negligence on the part of Tenant or any of its sublessees or licensees or its
or their employees, agents or contractors, or any other lessees or occupants of
the building or Project. Further, neither Landlord nor any partner, director,
officer, agent or employee of Landlord shall be liable (i) for any such damage
caused by other lessees or persons in or about the building or Project, or
caused by quasi-public work; or (ii) for consequential damages arising out of
any loss of the use of the Premises of any equipment or facilities therein by
Tenant or any person claiming through or under Tenant.
21. DAMAGE TO TENANT'S PROPERTY.
* Notwithstanding the provisions of Paragraph 20 to the contrary, Landlord or
its agents shall not be liable for (i) any damage to any property entrusted to
employees of the building or Project, (ii) loss or damage to any property by
theft or otherwise, (iii) any injury or damage to persons or property resulting
from fire, explosion, falling plaster, steam, gas, electricity, water or rain
which may leak from any part of the building or from the pipes, appliances or
plumbing work therein or from the roof, street or sub-surface or from any other
place or resulting from dampness or any other cause whatsoever. Landlord or
its agents shall not be liable for interference with light or other incorporeal
hereditaments, nor shall Landlord be liable for any latent defect in the
Premises or in the building. Tenant shall give prompt notice to Landlord in
case of fire or accidents in the Premises or in the building or of defects
therein or in the fixtures or equipment.
22. TENANT'S INSURANCE.
a. Tenant shall, during the term hereof and any other period of occupancy, at
its sole cost and expense, keep in full force and effect the following
insurance:
(1) Standard from property insurance insuring against the perils of
fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All-Risk") and sprinkler leakage. This insurance policy shall be
upon all property owned by Tenant, for which Tenant is legally liable or that
was installed at Tenant's expense, and which is located in the Project
including, without limitation, furniture, fittings, installations, fixtures
(other than Tenant improvements installed by Landlord), and any other personal
property, in an amount not less than ninety percent (90%) of the full
replacement cost thereof. In the event that there shall be a dispute as to the
amount which comprises full replacement cost, the decision of Landlord or any
mortgagees of Landlord shall be conclusive. This insurance policy shall also be
upon direct or indirect loss of Tenant's earnings attributable to Tenant's
inability to use fully or obtain access to the Premises, Building or Project in
any amount as will properly reimburse Tenant. Such policy shall name Landlord
and any mortgages of Landlord as insured parties, as their respective interests
may appear.
(2) Comprehensive General Liability Insurance insuring Tenant against
any liability arising out of the lease, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $1,000,000 Combined Single Limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence, with such liability amount to be adjusted from
year to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of the Premises and Tenant's Operations thereon, independent
contractors, contractual liability (covering the indemnity contained in
Paragraph 20 hereof) and shall (a) name Landlord as an additional insured, (b)
contain a cross liability provision and (c) contain a provision that the
insurance provided the Landlord hereunder shall be primary and non-contributing
with any other insurance available to the Landlord.
(3) Workers' Compensation and Employer's Liability insurance (as
required by state law).
(4) Any other form or forms of insurance as Tenant or Landlord or any
mortgagees of Landlord may reasonably require from time to time in form, in
amounts and for insurance risks against which a prudent tenant would protect
itself.
b. All policies shall be written in a form satisfactory to Landlord and shall
be taken out with insurance companies holding a General Policyholders Rating of
"A" and a Financial Rating of "X" or better, as set forth in the most current
issue of Best's Insurance Reports. Within ten (10) days after the execution of
this Lease, Tenant shall deliver to Landlord copies of policies or certificates
evidencing the existence of the amounts and forms of coverage satisfactory to
Landlord. No such policy shall be cancellable or reducible in coverage except
after thirty (30) days prior written notice to Landlord. Tenant shall, within
ten (10) days prior to the expiration of such policies, furnish Landlord with
renewals or "binders" thereof, or Landlord may order such insurance and charge
the cost thereof to Tenant as additional rent. If Landlord obtains any
insurance that is the responsibility of Tenant under this Paragraph, Landlord
shall deliver to Tenant a written statement setting forth the cost of any such
insurance and showing in reasonable detail the manner in which it has been
computed.
* Except to the extent of Landlord's or its employees' or agents' gross
negligence or willful misconduct,
** Except to the extent or Landlord's or its employees' or agents' negligence
or willful misconduct,
7
<PAGE> 9
c. During the term of this Lease, Landlord shall insure the Building (excluding
any property which Tenant is obligated to insure under Subparagraphs 22a and b
hereof) against damage with All-Risk insurance and public liability insurance,
all in such amounts and with such deductions as Landlord considers appropriate.
Upon written request of Tenant with reference to this Subparagraph 22c,
Landlord shall provide Tenant with a copy of a certificate of Landlord's
insurance. Landlord may, but shall not be obligated to, obtain and carry any
other form or forms of insurance as it or Landlord's mortgagees may determine
advisable. Notwithstanding any contribution by Tenant to the cost of insurance
premiums, as provided herein, Tenant acknowledges that it has no right to
receive any proceeds from any insurance policies carried by Landlord.
d. Tenant will not keep, use, sell or offer for sale in or upon the Premises any
article which may be prohibited by any insurance policy periodically in force
covering the Building. If Tenant's occupancy or business in, or on, the
Premises, whether or not Landlord has consented to the same, results in any
increase in premiums for the insurance periodically carried by Landlord with
respect to the Building, Tenant shall pay any such increase in premiums as
additional rent within ten (10) days after being billed therefore by Landlord.
In determining whether increased premiums are a result of Tenant's use of the
Premises, a schedule issued by the organization computing the insurance rate on
the Building or the Tenant Improvements showing the various components of such
rate, shall be conclusive evidence of the several items and charges which make
up such rate. Tenant shall promptly comply with all reasonable requirements of
the insurance authority or any present or future insurer relating to the
Premises.
e. If any of Landlord's insurance policies shall be cancelled or cancellation
shall be threatened or the coverage thereunder reduced or threatened to be
reduced in any way because of the use of the Premises or any part thereof by
Tenant or any assignee or subtenant of Tenant or by anyone Tenant permits on
the Premises and, if Tenant fails to remedy the condition giving rise to such
cancellation, threatened cancellation, reduction of coverage, threatened
reduction of coverage, increase in premiums, or threatened increase in
premiums, within forty-eight (48) hours after notice thereof, Landlord may, at
its option, either terminate this Lease or enter upon the Premises and attempt
to remedy such condition, and Tenant shall promptly pay the cost thereof to
Landlord as additional rent. Landlord shall not be liable for any damage or
injury caused to any property of Tenant or of others located on the Premises
resulting from such entry. If Landlord is unable, or elects not to remedy such
condition, then Landlord shall have all of the remedies provided for in this
Lease in the event of a default by Tenant. Notwithstanding the foregoing
provisions of this Subparagraph 22e, if Tenant fails to remedy as aforesaid,
Tenant shall be in default of its obligation hereunder and Landlord shall have
no obligation to remedy such default.
f. All policies of insurance required hereunder shall include a clause or
endorsement denying the insurer any rights of subrogation against the other
party to the extent rights have been waived by the insured before the
occurrence of injury or loss. Landlord and Tenant waive any rights of recovery
against the other for injury or loss due to hazards covered by policies of
insurance containing such a waiver of subrogation clause or endorsement to the
extent of the injury or loss covered thereby.
See Addendum "1" Item 8.
- --------------------------------------------------------------------------------
8
<PAGE> 10
24. EMINENT DOMAIN.
a. In case all of the premises, or such part thereof as shall substantially
interfere with Tenant's use and occupancy thereof, shall be taken for any
public or quasi-public purpose by any lawful power or authority by exercise of
the right of appropriation, condemnation or eminent domain, or sold to prevent
such taking, either party shall have the right to terminate this Lease effective
as of the date possession is required to be surrendered to said authority.
Tenant shall not assert any claim against Landlord or the taking authority for
any compensation because of such taking, and Landlord shall be entitled to
receive the entire amount of any award without deduction for any estate or
interest of Tenant. In the event the amount of property or the type of estate
taken shall not substantially interfere with the conduct of Tenant's business,
Landlord shall be entitled to the entire amount of the award without deduction
of any estate or interest of Tenant, Landlord shall restore the Premises to
substantially their same condition prior to such partial taking, and a
proportionate allowance shall be made to Tenant for the rent corresponding to
the time during which, and to the part of the Premises of which, Tenant shall be
so deprived on account of such taking and restoration. Nothing contained in
this paragraph shall be deemed to give Landlord any interest in any award made
to Tenant for the taking of personal property and fixtures belonging to Tenant
or for moving expenses or for the unamortized portion of tenant improvements
paid for by Tenant.
b. In the event of taking of the Premises or any part thereof for temporary
use, (1) this Lease shall be and remain unaffected thereby and rent shall not
abate, and (2) Tenant shall be entitled to receive for itself such portion or
portions of any award made for such use with respect to the period of the
taking which is within the term, provided that if such taking shall remain in
force at the expiration or earlier termination of this Lease, Tenant shall then
pay to Landlord a sum equal to the reasonable cost of performing Tenant's
obligations under Paragraph 15 with respect to surrender of the Premises and
upon such payment shall be excused from such obligations. For purpose of this
Subparagraph 24b, a temporary taking shall be defined as a taking for a period
of 270 days or less.
25. DEFAULTS AND REMEDIES.
a. The occurrence of any one or more of the following events shall constitute a
default hereunder by Tenant:
(1) The ------------------- abandonment of the Premises by Tenant.
Abandonment is herein defined to include, but is not limited to, any absence by
Tenant from the Premises for ten (10) business days or longer while in default
of any provision of this Lease.
(2) The failure by Tenant to make any payment of rent or additional
rent or any other payment required to be made by Tenant hereunder, ------------
within five days after notice to Tenant that such payment is due.
(3) The failure by Tenant to observe or perform any of the express
or implied covenants or provisions of this Lease to be observed or performed by
Tenant, other than as specified in Subparagraph 25a.(1) or (2) above, where
such failure shall continue for a period of ten (10) days after written notice
thereof from Landlord to Tenant. If the nature of Tenant's default is such that
more than ten (10) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such cure within said
ten (10) day period and thereafter diligently prosecute such cure to
completion. -------------------------------------------------------------------
(4) The making by Tenant of any general assignment for the benefit
of creditors; the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within thirty (30) days); the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in the Lease where such seizure is not
discharged within thirty (30) days.
*
b. In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder. In
the event that Landlord shall elect to so terminate this Lease then Landlord
may recover from Tenant:
(1) The worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
(2) 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 Tenant proves could have been
reasonable avoided; plus
(3) 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 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.
As used in Subparagraphs 25b (1) and (2) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law.
As used in Subparagraph 25b (3) above, the "worth at the time of award" 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%).
c. In the event of any such default by Tenant, Landlord shall also have the
right, with or without terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. No re-entry or taking possession of the Premises by Landlord
pursuant to this paragraph 25c shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant or
unless the termination thereof is decreed by a court of competent jurisdiction.
d. In the event of the ---------------- abandonment of the Premises by Tenant
or in the event that Landlord shall elect to re-enter as provided above or shall
take possession of the Premises pursuant to legal proceedings or pursuant to any
notice provided by law, then if Landlord does not elect to terminate this Lease
as provided above, Landlord may from time to time, without terminating this
Lease, either recover all rent as it becomes due and relet the Premises or any
part thereof for the term for this Lease on terms and conditions as Landlord in
its sole discretion may deem advisable with the right to make alterations and
repairs to the Premises.
In the event that Landlord shall elect to so relet, then rentals received
by Landlord from such reletting shall be applied: first, to the payment of any
indebtedness other than rent due hereunder from Tenant to Landlord; second, to
the payment of any cost of such reletting; third, to the payment of the cost of
any alterations and repairs to the Premises, fourth, to the payment of rent due
and unpaid hereunder and the residue, if any, shall be held by Landlord and
applied to payment of future rent as the same may become due and payable
hereunder. Should that portion of such rentals received from such reletting
during any month, which is applied to the payment of rent hereunder, be less
than the rent payable during that month by Tenant hereunder, then Tenant
* (5) A default by Tenant under the lease of even date herewith with
Landlord for Suite 200.
9
<PAGE> 11
shall pay such deficiency to Landlord immediately upon demand therefore by
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred,
including but not limited to brokers' commissions, by Landlord in such reletting
or in making such alterations and repairs not covered by the rentals received
from such reletting.
e. All rights, options and remedies of Landlord contained in this Lease shall be
construed and held to be cumulative, and no one of them shall be exclusive of
the other, and Landlord shall have the right to pursue any one or all of such
remedies or any other remedy or relief which may be provided by law, whether or
not stated in this Lease. No waiver of any default of Tenant hereunder shall be
implied from any acceptance by Landlord of any rent or other payments due
hereunder or any omission by Landlord to take any action on account of such
default if such default persists or is repeated, and no express waiver shall
affect defaults other than as specified in said waiver. The consent or approval
of Landlord to or of any act by Tenant requiring Landlord's consent or approval
shall not be deemed to waive or render unnecessary Landlord's consent to or
approval of any subsequent similar acts by Tenant.
26. ASSIGNMENT AND SUBLETTING.
a. Tenant shall not voluntarily assign or encumber its interest in this Lease or
in the Premises or sublease all or any part of the Premises, or allow any other
person or entity to occupy or use all or any part of the Premises, without first
obtaining Landlord's prior written consent which shall not be unreasonably
withheld or delayed. Any assignment, encumbrance or sublease without Landlord's
prior written consent shall be voidable at Landlord's election and shall
constitute a default. ------------------------------------------------------- No
consent to an assignment, encumbrance or sublease shall constitute a further
waiver of the provisions of this Paragraph. Tenant shall notify Landlord in
writing of Tenant's intent to assign, encumber or sublease this Lease, the name
of the proposed assignee or sublessee, information concerning the financial
responsibility of the proposed assignee or sublessee and the terms of the
proposed assignment or subletting, and Landlord shall, within thirty (30) days
of receipt of such written notice, and additional information requested by
Landlord concerning the proposed assignee's or sublessee's financial
responsibility, elect one of the following: (1) consent to such proposed
assignment, encumbrance or sublease; or (2) refuse such consent, which refusal
shall be on reasonable grounds.-------------------------------- In addition, a
condition to Landlord's consent to any assignment, transfer or hypothecation of
this Lease shall be the delivery to Landlord of a true copy of the fully
executed instrument of assignment, transfer or hypothecation, and the delivery
to Landlord of an agreement executed by the assignee in form and substance
satisfactory to Landlord and expressly enforceable by Landlord, whereby the
assignee assumes and agrees to be bound by all of the terms and provisions of
this Lease and to perform all of the obligations of Tenant hereunder.
b. As a condition to Landlord's consent to any sublease, such sublease shall
provide that it is subject and subordinate to this Lease and to all mortgages;
that Landlord may enforce the provisions of the sublease, including collection
of rent; that in the event of termination of this Lease for any reason,
including without limitation a voluntary surrender by Tenant, or in the event of
any reentry or repossession of the Premises by Landlord, Landlord may, at its
option, either (1) terminate the sublease or (2) take over all of the right,
title and interest of Tenant, as sublessor, under such sublease, in which case
such sublessee shall attorn to Landlord, but that nevertheless Landlord shall
not (1) be liable for any previous act or omission of Tenant under such
sublease, (2) be subject to any defense or offset previously accrued in favor of
the sublessee against Tenant, or (3) be bound by any previous modification of
any sublease made without Landlord's written consent, or by any previous
prepayment by sublessee of more than one month's rent.
c. In the event that Landlord shall consent to an assignment or sublease under
the provisions of this Paragraph 26, Tenant shall pay Landlord's processing
costs and attorneys' fees incurred in giving such consent. If Landlord shall
consent to any assignment of this Lease, Tenant shall pay to Landlord, as
additional rent, * ----------- of all sums and other considerations payable to
and for the benefit of Tenant by the assignee on account of the assignment, as
and when such sums and other consideration** are due and payable by the assignee
to or for the benefit of Tenant (or, if Landlord so requires, and without any
release of Tenant's liability for the same, Tenant shall instruct the assignee
to pay such sums and other consideration directly to Landlord). If for any
proposed sublease Tenant receives rent or other consideration, either initially
or over the term of the sublease, in excess of the rent called for hereunder or,
in case of the sublease of a portion of the Premises, in excess of such rent
fairly allocable to such portion, after appropriate adjustments to assure that
all other payments called for hereunder are taken into account. Tenant shall pay
to Landlord as additional rent hereunder,*------------ of the excess of each
such payment of rent or other consideration received by Tenant** promptly after
its receipt. Landlord's waiver or consent to any assignment or subletting shall
not relieve Tenant or any assignee or sublessee from any obligation under this
Lease whether or not accrued. Occupancy of all or part of the Premises by parent
or subsidiary companies of Tenant shall not be deemed an assignment or
subletting.--------------------------------------------------------------------
* one-half (1/2)
27. SUBORDINATION.
***
a. Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, and at the election of Landlord or
any mortgagee with a lien on the building or any ground lessor with respect to
the building, this Lease shall be subject and subordinate at all times to:
(1) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the building or the land upon which the building
is situated or both; and
(2) the lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the building, land, ground leases
or underlying leases, or Landlord's interest or estate in any of said items is
specified as security.
***
b. Notwithstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such ground leases or underlying
leases or any such liens to this Lease. In the event that any ground lease or
underlying lease terminates
** after Tenant's recovery of reasonable, actual, out-of-pocket expenses in
connection with such assignment or sublease (including, without limitation, a
subtenant improvement allowance) and other monetary concessions
*** Subject to Addendum 1, Item 2,
10
<PAGE> 12
for any reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord, at the option of such successor in interest. Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in the form requested
by Landlord, any additional documents evidencing the priority of subordination
of this Lease with respect to any such ground leases or underlying leases or the
lien of any such mortgage or deed of trust. Should Tenant fail to sign and
return any such documents within ten (10) business days of request Tenant shall
be in default, and Landlord may, at Landlord's option, terminate the Lease
provided written notice of such termination is received by Tenant prior to
Landlord's receipt of such documents. Tenant hereby irrevocably appoints
Landlord as attorney-in-fact of Tenant to execute, deliver and record any such
document in the name and on behalf of Tenant.
28. ESTOPPEL CERTIFICATE.
a. Within ten (10) days following any written request which Landlord may make
from time to time, Tenant shall execute and deliver to Landlord a statement, in
a form substantially similar to the form of Exhibit "E", certifying: (1) the
date of commencement of this Lease; (2) the fact that this Lease is unmodified
and in full force and effect (or, if there have been modifications hereto, that
this Lease is in full force and effect, and stating the date and nature of such
modifications); (3) the date to which the rental and other sums payable under
this Lease have been paid; (4) that there are no current defaults under this
Lease by either Landlord or Tenant except as specified in Tenant's statement;
and (5) such other matters requested by Landlord. Landlord and Tenant intend
that any statement delivered pursuant to this Paragraph 28 may be relied upon by
any mortgagee, beneficiary, purchaser or prospective purchaser of the Building
or any interest therein.
b. Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (1) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (2) that there are no
uncured defaults in Landlord's performance, and (3) that not more than one (1)
month's rental has been paid in advance. Tenant's failure to deliver said
statement to Landlord within ten (10) working days of receipt shall constitute a
default under this Lease and Landlord may, at Landlord's option, terminate the
Lease, provided written notice of such termination is received by Tenant prior
to Landlord's receipt of said statement.
[------------------------------------------------------------------------------]
30. RULES AND REGULATIONS.
Tenant shall faithfully observe and comply with the "Rules and
Regulations", a copy of which is attached hereto and marked Exhibit "F", and all
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord shall not be responsible
to Tenant for the violation or non-performance by any other tenant or occupant
of the building or Project of any of said Rules and Regulations.
31. CONFLICT OF LAWS.
This Lease shall be governed by and construed pursuant to the laws of
the state in which the premises are located.
32. SUCCESSORS AND ASSIGNS.
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
33. SURRENDER OF PREMISES.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies Upon the expiration or termination of this Lease, Tenant shall
peaceably surrender the Premises and all alterations and additions thereto,
broom clean the Premises, leave the Premises in good order, repair and
condition, reasonable wear and tear excepted, and comply with the provisions of
Paragraph 15. The delivery of keys to any employee of Landlord or to Landlord's
agent or any employee thereof shall not be sufficient to constitute a
termination of this Lease or a surrender of the Premises.
34. PROFESSIONAL FEES
a. If Landlord should bring suit for possession of the Premises, for the
recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder, or
in the event of any other litigation or appeal between the parties with respect
to this lease, then all costs and expenses, including without limitation, its
actual professional fees such as appraisers', accountants' and attorneys' fees,
incurred by the prevailing, party therein shall be paid by the other party,
which obligation on the part of the other party shall be deemed to have accrued
on the date of the commencement of such action and shall be enforceable whether
or not the action is prosecuted to judgment. If Landlord employs a collection
agency to recover delinquent charges, Tenant agrees to pay all collection agency
fees charged to Landlord in addition to rent, late charges, interest and other
sums payable under this Lease. Tenant shall pay a charge of $75 to Landlord for
preparation of a demand for delinquent rent
b. If Landlord is named as a defendant in any suit or appeal brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees.
35. PERFORMANCE BY TENANT.
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any sum
of money owed to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue for ten (10) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, making any such
payment or perform any such other act to be made or performed by Tenant. All
sums so paid by Landlord and all necessary incidental costs together with
interest thereon at the maximum rate permissible by law, from the date of such
payment by Landlord, shall be payable to Landlord on demand. Tenant covenants to
pay any such sums, and Landlord shall have (in addition to any other right or
remedy of Landlord) all rights and remedies in the event of the non-payment
thereof by Tenant as are set forth in Paragraph 25.
11
<PAGE> 13
36. MORTGAGEE PROTECTION.
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity
to cure the default, including time to obtain possession of the Premises by
power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure.
37. DEFINITION OF LANDLORD.
The term "Landlord," as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title of
the Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment or other conveyance or transfers of any such title,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed. Without further agreement, the transferee
of such title shall be deemed to have assumed and agreed to observe and perform
any and all obligations of Landlord hereunder, during its ownership of the
Premises. Landlord may transfer its interest in the Premises without the consent
of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on Landlord's part of any of the terms and conditions of this Lease.
38. WAIVER.
The waiver by Landlord of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of any subsequent breach of
the same or any other term, covenant or condition herein contained, nor shall
any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of or in any way affect
the right of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such rent. No acceptance by
Landlord of a lesser sum than the basic rental and additional rent or other sum
then due shall be deemed to be other than on account of the earliest installment
of such rent or other amount due, nor shall any endorsement or statement on any
check or any letter accompanying any check 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 installment or other amount or pursue any
other remedy in this Lease provided.
39. IDENTIFICATION OF TENANT.
If more than one person executes this lease as Tenant, (1) each of them
is jointly and severally liable for the keeping, observing and performing of all
of the terms, covenants, conditions, provisions and agreements of this Lease to
be kept, observed and performed by Tenant, and (2) the term "Tenant" as used in
this Lease shall mean and include each of them jointly and severally. The act of
or notice from, or notice or refund to, or the signature of any one or more of
them, with respect to the tenancy of this Lease, including, but not limited to,
any renewal, extension, expiration, termination or modification of this Lease,
shall be binding upon each and all of the persons executing this Lease as Tenant
with the same force and effect as if each and all of them had so acted or so
given or received such notice or refund or so signed.
40. PARKING.
a. Tenant shall have the right to use the type and number of spaces indicated
in Section 1. [-------] All such spaces shall be provided to Tenant at no cost.
b. The use by Tenant, its employees and invitees, of the parking facilities of
the Project shall be on the terms and conditions set forth in Exhibit G attached
hereto and by this reference incorporated herein, and shall be subject to such
other agreement between Landlord and Tenant as may hereinafter be established.
Tenant shall not permit or allow any vehicles that belong to or are controlled
by Tenant or Tenant's employees suppliers, shippers, customers or invitees to be
loaded, unloaded or parked in areas other than those designated by Landlord for
such activities. If Tenant permits or allows any of the prohibited activities
described in Exhibit G, then Landlord 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 Tenant, which cost shall be
immediately payable upon demand by Landlord.
41. FORCE MAJEURE.
Except as applied to Paragraph 23, Landlord shall have no liability
whatsoever to Tenant on account of (1) the inability of Landlord to fulfill, or
delay in fulfilling, any of Landlord's obligations under this Lease by reason of
strike, other labor trouble, governmental preemption of priorities or other
controls in connection with a national or other public emergency, or shortages
of fuel, supplies or labor resulting therefrom or any other cause, whether
similar or dissimilar to the above, beyond Landlord's responsible control; or
(2) any failure or defect in the supply, quantity or character of electricity or
water furnished to the Premises, by reason of any requirement, act or omission
of the public utility or others furnishing the Project with electricity or
water, or for any other reason, whether similar or dissimilar to the above,
beyond Landlord's reasonable control. If this Lease specifies a time period for
performance of an obligation of Landlord, that time period shall be extended by
the period of any delay in Landlord's performance caused by any of the events of
force majeure described above.
42. TERMS AND HEADINGS.
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in any gender include other genders.
The paragraph headings of this Lease are not a part of this Lease and shall have
no effect upon the construction or interpretation of any part hereof.
43. EXAMINATION OF LEASE.
Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for lease, and it is not effective as
a lease or otherwise until execution by and delivery to both Landlord and
Tenant.
44. TIME.
Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
12
<PAGE> 14
45. PRIOR AGREEMENT OR AMENDMENTS.
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in the Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective
successors-in-interest.
46. SEPARABILITY.
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
and such other provisions shall remain in full force and effect.
47. RECORDING.
Neither Landlord nor Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
48. LIMITATION ON LIABILITY.
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
(1) The sole and exclusive remedy shall be against the Landlord's
interest in the Project;
(2) No partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership);
(3) No service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(4) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(5) No judgment will be taken against any partner of Landlord;
(6) Any judgment taken against any partner of Landlord may be vacated
and set aside at any time nunc pro tunc;
(7) No writ of execution will ever be levied against the assets of any
partner of Landlord;
(8) The obligations of Landlord under this Lease do not constitute
personal obligations of the individual partners, directors, officers or
shareholders of Landlord, and Tenant shall not seek recourse against the
individual partners, directors, officers or shareholders of Landlord or any of
their personal assets for satisfaction of any liability in respect to this
Lease;
(9) These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
49. MODIFICATION FOR LENDER.
If, in connection with obtaining construction, interim or permanent
financing for the Project the lender shall request reasonable modifications in
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
50. FINANCIAL STATEMENTS.
At any time during the term of this Lease, Tenant shall upon ten (10)
days prior written notice from Landlord, provide Landlord with a current
financial statement and financial statements of the two (2) years prior to the
current financial statement year. Such statement shall be prepared in accordance
with generally accepted accounting principles and, if such is the normal
practice of Tenant, shall be audited by an independent certified public
accountant.
51. QUIET ENJOYMENT.
Landlord covenants and agrees with Tenant that upon Tenant paying the
rent required under this lease and paying all other charges and performing all
of the covenants and provisions aforesaid on tenant's part to be observed and
performed under this Lease, Tenant shall and may peaceably and quietly have,
hold and enjoy the Premises in accordance with this Lease.
52. TENANT AS CORPORATION.
Covenant executes this Lease as a corporation, then Tenant and the
persons executing this Lease on behalf of Tenant represent and warrant that the
individuals executing this Lease on Tenant's behalf are duly authorized to
execute and deliver this Lease on its behalf in accordance with a duly adopted
resolution of the board of directors of Tenant. a copy of which is to be
delivered to landlord on execution hereof, and in accordance with the bylaws of
Tenant and that this Lease is binding upon Tenant in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD: WEYERHAEUSER MORTGAGE COMPANY,
a California corporation and
FORT WYMAN, INC., a Michigan corporation,
tenants in common
ADDRESS: Weyerhaeuser Mortgage Company
6320 Canoga Avenue
Woodland Hills, CA 91367
By: WEYERHAEUSER MORTGAGE COMPANY,
managing tenant in common
ADDRESS: 12636 High Bluff
Drive, Suite 400
San Diego, CA 92130
By: /s/ Dorothy Forbes
--------------------------------
Dorothy Forbes, Vice President
TENANT: STAC ELECTRONICS,
a CALIFORNIA corporation
By: /s/ JOHN R. WITZEL
---------------------------------
John R. Witzel
<PAGE> 15
ADDENDUM "1"
1. NON-DISTURBANCE - Montgomery Watson/Stac Sublease. Concurrently with
the parties' execution of this Lease, Tenant is entering into a sublease with
the existing tenant in Suite 400, Montgomery Watson (the "Montgomery Watson/Stac
Sublease"). Landlord agrees that, in the event of any termination of Landlord's
master lease with Montgomery Watson for Suite 400 prior to the Commencement Date
of this Lease, so long as Tenant attorns to Landlord, Tenant's quiet possession
of Suite 400 under the Montgomery Watson/Stac Sublease will not be disturbed and
its rights and obligations under the Montgomery Watson/Stac Sublease will not be
altered.
2. Non-Disturbance - Section 27. Notwithstanding the provisions of
Section 27, in the event of a foreclosure of any mortgage or deed of trust or
termination of any ground lease, so long as Tenant attorns to the successor fee
owner or ground tenant, Tenant's quiet possession of the Premises will not be
disturbed and its rights and obligations under this Lease will not be altered.
3. Early Termination. Tenant shall have the right to terminate this
Lease by providing Landlord written notice at least six (6) months prior to the
Commencement Date of this Lease, accompanied by a payment in the amount of the
six (6) months' rent abatement provided to Tenant in the lease for the space
located at 12636 High Bluff Drive, Suite 200, San Diego, CA 92130, and the lease
commission for this Lease.
4. Building Signage. Tenant, at Tenant's expense, shall have the right
to place its name and/or logo on one (1) side of the exterior of the Building in
a location to be selected by Tenant, subject to approval by Landlord (not to be
unreasonably withheld or delayed provided such signage complies with the signage
criteria contained in the CC&R's affecting the Project) and all governmental
agencies. This sign is in addition to the signage provided in the lease for
12636 High Bluff Drive, Suite 200.
5. Hazardous Materials. The following provisions are added to Exhibit H
(Hazardous Materials): (i) Landlord's consent under clause (b) of Exhibit H
shall not be required for (1) Hazardous Materials, in reasonable quantities,
customarily used in business offices, and (2) Hazardous Materials used in
reasonable quantities in connection with the construction of repair of
Improvements in the Premises, provided such Hazardous Materials are used and
handled in accordance with all applicable laws. In addition, Landlord will not
unreasonably withhold or delay its consent required under said clause (b) of
Exhibit H for any other Hazardous Materials reasonably needed by Tenant in the
ordinary course of Tenant's business, provided such Hazardous Materials are used
and
<PAGE> 16
handled in accordance with all applicable laws.
(ii) Landlord warrants to its actual knowledge Tenant that neither the
Premises nor any other part of the Building in which the Premises are located
contain any asbestos. Landlord also agrees that Tenant shall have no
responsibility for any Hazardous Materials on or under the Premises, the
Building, or the Project existing at the time of commencement of the Lease, or
any such Hazardous Materials thereafter released on or under the Project by
anyone other than Tenant, its employees or agents.
6. Building Codes: ADA. Any work that is required by applicable law now
or hereafter in effect to be done within the Premises (excluding structural
components (except to the extent caused by Tenant) and restrooms, elevators, and
other common areas) shall be the sole responsibility of Tenant. Except as
provided in the preceding sentence, and notwithstanding any other provision of
this Lease, Tenant shall have no responsibility to make or pay for improvements
or other alterations to the Building to correct deficiencies under existing
building codes or other applicable laws, restrictions or requirements, or to
comply with future changes in building codes or other applicable laws,
restrictions or requirements. Without limiting the foregoing, in the event that
any improvements or alterations to the Building are required during the term of
the Lease to comply with requirements of the Americans With Disabilities Act or
applicable building codes relating to access to or within the Building (except
for the Premises) by disabled persons, Landlord will be solely responsible for
any such improvements or alterations.
7. Security. With Landlord's prior written approval, not to be
unreasonably withheld or delayed, Tenant at its cost and expense and not as part
of the costs described in Addendum "5" may install additional reasonable
security devices for the Premises.
8. Damage or Destruction. The following is inserted into the Lease as
Paragraph 23:
23. DAMAGE OR DESTRUCTION
If the Premises or any Common Areas providing access thereto shall be
damaged by fire or other casualty, Landlord shall restore the same subject to
the terms and conditions set forth in this Paragraph 23. Such restoration shall
be to substantially the condition prior to the casualty, except for
modifications required by zoning and building codes and other laws or by any
mortgagee, any other modifications to the Common Areas deemed desirable by
Landlord (provided access to the Premises is not materially impaired), and
except that Landlord shall not be required to repair or replace any of Tenant's
furniture, furnishings, fixtures or equipment, or any alterations or
improvements in excess of Tenant's improvements installed at a cost of up to $30
per usable square
<PAGE> 17
foot. Landlord shall not be liable for any inconvenience or annoyance
to Tenant or its visitors, or injury to Tenant's business resulting in any way
from such damage or the repair thereof. However, as Tenant's sole compensation
for such damage or destruction Landlord shall allow Tenant a proportionate
abatement of rent, during the time and to the extent the Premises are unfit for
occupancy for the purposes permitted under this Lease and not occupied by Tenant
as a result thereof (unless Tenant or its employees or agents caused the
damage). Notwithstanding the foregoing to the contrary, Landlord may elect to
terminate this Lease by notifying Tenant in writing of such termination within
sixty (60) days after the date of damage (such termination notice to include a
termination date providing at least ninety (90) days for Tenant to vacate the
Premises), if the Property shall be damaged by fire or other casualty or cause
such that: (a) repairs to the Premises and Building and access thereto cannot
reasonably be substantially completed within three hundred (300) days after the
date of casualty without the payment of overtime or other premiums; (b) more
than twenty-five percent (25%) of the Premises is substantially destroyed by the
damage and fewer than twenty-four (24) months remain in the Term, subject to
Tenant's right to avoid or limit such termination as set forth below; (c) the
cost of the repairs, alterations, restoration or improvement work would exceed
twenty-five percent (25%) of the replacement value of the Building and Landlord
determines in good faith not to repair or rebuild the Building in substantially
the same configuration as before the casualty; (d) the aggregate proceeds
available from insurance fall short of the reasonable cost of the restoration
required under this Paragraph 23 by an amount greater than $100,000 and Landlord
determines in good faith not to repair or rebuild the Building in substantially
the same configuration as before the casualty; or (e) as a result of the lawful
application of insurance proceeds by any mortgagee to retire the mortgage debt,
the insurance proceeds available for restoration fall short of the reasonable
cost of the restoration required under this Paragraph 23 by an amount greater
than $100,000 and Landlord determines in good faith not to repair or rebuild the
Building in substantially the same configuration as before the casualty. If
Landlord elects to terminate this Lease under the circumstances described in
Clause (b) of the preceding sentence, provided that the damage to the Property
was not caused by the willful misconduct or reckless disregard for life or
property of Tenant, Tenant may, by written notice to Landlord, given within
thirty (30) days after receipt of Landlord's termination notice, avoid such
termination by exercising a then available option to extend the term of this
Lease upon the terms and conditions set forth in Addendum "3".
Further, notwithstanding the foregoing, Tenant may terminate this Lease
if Tenant is unable to use all or any portion of the Premises as a result of
fire or other casualty not caused by the willful misconduct or reckless
disregard for life or property of Tenant, and: (a) Landlord fails to commence
restoration work to
<PAGE> 18
the Building and access thereto within sixty (60) days after the damage occurs
(Landlord's negotiation with insurance companies and consultation with
architects, engineers and contractors shall be deemed to be restoration work);
or (b) Landlord fails to substantially complete such work within three hundred
sixty five (365) days after the date of the casualty, or such additional time as
may be necessary due to strikes, lockouts or other labor troubles, shortages of
equipment or materials, governmental requirements, power shortages or outages or
other causes beyond Landlord's reasonable control; or (c) such work is
reasonably estimated (which estimate Landlord shall provide within sixty (60)
days following the casualty), to take more than three hundred sixty five (365)
days to substantially complete after the date of the casualty. In addition,
Tenant may terminate this Lease if Tenant is unable to use more than twenty-five
percent (25%) of the Premises as a result of fire or other casualty not caused
by the willful misconduct or gross negligence of Tenant or its employees or
agents, and fewer than twenty-four (24) months remain in the Term. In order to
exercise any of the foregoing termination rights, Tenant must send Landlord at
least sixty (60) but not more than one hundred twenty (120) days advance notice
specifying the basis for termination, and such notice must be given no later
than thirty (30) days following the occurrence of the condition serving as the
basis for the termination right invoked by Tenant. Such termination right shall
not be available to Tenant if Landlord substantially completes the repairs to
the Premises and access thereto within sixty (60) days after Tenant's notice.
Notwithstanding anything to the contrary contained herein, if Tenant, or its
officers, employees, contractors, invitees, partners, or agents delay Landlord
in performing the repairs, Landlord shall have additional time to complete the
work equal to such delay, and Tenant shall pay Landlord all Rent for the period
of such delay. If this Lease is terminated pursuant to this Paragraph 23, Tenant
shall have the right, to be exercised within 10 days of such termination, to
terminate any other lease it has for space within the Project.
Tenant agrees that Landlord's obligation to restore, and the abatement
of rent and the termination right provided herein, shall be Tenant's sole
recourse in the event of such damage, and waives any other rights Tenant may
have under any applicable Law to terminate the Lease by reason of damage to the
Premises, Project or Building, including all rights under California Civil Code,
Sections 1932(2), 1933(4), and 1942, as the same may be modified or replaced
hereafter. Tenant acknowledges that this Paragraph 23 represents the entire
agreement between the parties respecting damage to the Premises, Project or
Building.
<PAGE> 19
ADDENDUM "2"
OPERATING EXPENSES. For the purposes of this Section, the following
terms are defined as follows:
Base Year-The calendar year in which this Lease Term commences. For the
purposes of this Lease, the Base Year is defined as 1997.
Comparison Year-Each calendar year of the term after the Base Year.
Tenant's *----- Share of Operating Expenses shall be payable by Tenant
to Landlord as follows:
(a) Beginning with the calendar year following the Base Year and for
each calendar year thereafter ("Comparison Year"), Tenant shall pay Landlord an
amount equal to Tenant's *----- Share of the Operating Expenses incurred by
Landlord in the Comparison Year which exceeds the total amount of Operating
Expenses payable by Landlord for the Base Year. This excess is referred to as
the "Excess Expenses."
(b) To provide for current payments of Excess Expenses, Tenant shall,
at Landlord's request, pay as additional rent during each Comparison Year, an
amount equal to Tenant's *----- Share of the Excess Expenses payable during
such Comparison Year, as estimated by Landlord from time to time. Such payments
shall be made in monthly installments, commencing on the first day of the month
following the month in which Landlord notifies Tenant of the amount it is to pay
hereunder and continuing until the first day of the month following the month in
which Landlord gives Tenant a new notice of estimated Excess Expenses. It is the
intention hereunder to estimate from time to time the amount of the Excess
Expenses for each Comparison Year and Tenant's *----- Share thereof, and then
to make an adjustment in the following year based on the actual Excess Expenses
incurred for that Comparison Year.
(c) On or before April 1 of each Comparison Year after the first
Comparison Year (or as soon thereafter as is practical), Landlord shall deliver
to Tenant a statement setting forth Tenant's *----- Share of the Excess Expenses
for the preceding Comparison Year. If Tenant's *----- Share of the actual Excess
Expenses for the previous Comparison Year exceeds the total of the estimated
monthly payments made by Tenant for such year, Tenant shall pay Landlord the
amount of the deficiency within thirty (30) days of the receipt of the
statement. If such total exceeds Tenant's *----- Share of the actual Excess
Expenses for such Comparison Year, then Landlord shall credit against Tenant's
next ensuing monthly installment(s) of additional rent an amount equal to the
difference until the credit is exhausted. If a credit is due from Landlord on
the Expiration Date, Landlord shall pay Tenant the amount of the credit. The
obligations of Tenant and Landlord to make payments required under this Section
shall survive the Expiration Date.
(d) Tenant's *----- Share of Excess Expenses in any Comparison Year
having less than 365 days shall be appropriately prorated.
(e) If any dispute arises as to the amount of any additional rent due
hereunder, Tenant shall have the right after reasonable notice and at reasonable
times to inspect Landlord's accounting records at Landlord's accounting office
and, if after such inspection Tenant still disputes the amount of additional
rent owed, a certification as to the proper amount shall be made by Landlord's
certified public accountant, which certification shall be final and conclusive.
Tenant agrees to pay the cost of such certification unless it is determined that
Landlord's original statement overstated Operating Expenses by more than five
percent (5%).
(f) Operating Expenses including any additional real estate taxes will
be based on a ninety-five percent (95%) leased project for the entire base year
and other years regardless of the current occupancy.
(g) In no event shall Tenant be responsible for increases in Operating
Expenses in excess of six percent (6%) per year on a cumulative basis.
* Percentage
<PAGE> 20
ADDENDUM "3"
OPTION TO RENEW. Tenant shall have the right to extend the term of this
Lease for one (1) consecutive five (5) year period (the "Option Term"), on the
following terms and conditions:
(a) Each Option Term shall commence when the prior term expires. Tenant
must give written notice of its exercise of the option, and Landlord must
actually receive such notice, no earlier than twelve (12) months and no later
than six (6) months prior to the time that the Option Term would commence.
(b) The option(s) to extend this Lease for any Option Term must be
exercised consecutively.
(c) All terms and conditions of this Lease shall apply during the
Option Terms except as expressly provided in this Addendum.
(d) Tenant shall have no right to exercise an option, notwithstanding
any other provision of this Lease to the contrary, during the time commencing
from the date of any default *----- and continuing until the default is cured.
(e) The period of time within which Tenant may exercise an option to
extend the term of this Lease shall not be extended or enlarged by reason of
Tenant's inability to exercise an option because of the provisions of Section
(d) above.
- -----------------------------------------------------------------------------
(g) The options granted to Tenant may not be voluntarily or
involuntarily exercised by or assigned to any person or entity other than
Tenant, without the prior written consent of Landlord.
(h) The Base Monthly Rent during each option term shall be adjusted as
of the commencement of each option term to ninety-five percent (95%) of the fair
rental value of the Premises on the terms and conditions contained in this Lease
as mutually agreed by Landlord and Tenant or, if they cannot agree on or before
such commencement date, then as determined by an appraiser mutually selected by
Landlord and Tenant. If Landlord and Tenant cannot agree on a single appraiser
within five (5) days, then each shall select an appraiser. If the two appraisers
cannot agree on said fair rental value within thirty (30) days, then the two
appraisers shall appoint a third appraiser, and said fair rental value of the
Premises shall be deemed to be the average of the two closest appraisals. Each
appraiser shall be a disinterested member of the American Institute of Real
Estate Appraisers, or a body of comparable standing, with at least five years'
experience in commercial real estate appraisal. Landlord and Tenant shall each
bear the cost of the appraiser appointed by them, and shall share equally the
cost of the appraiser mutually selected by them or of the third appraiser
appointed, if any.
(i) Landlord will provide Tenant with a Ten Dollars ($10.00) per usable
square foot refurbishment allowance.
* in the payment of Base monthly Rent or Operating Expenses
<PAGE> 21
ADDENDUM "4"
RIGHT OF REFUSALS.
(a) At any time that Landlord determines to lease any space at 12626
High Bluff Drive or 12636 High Bluff Drive, subject to any other existing
tenants' rights of refusal or extension options, Landlord shall notify Tenant in
writing. Within five (5) business days after receipt of Landlord's notice,
Tenant shall have the option, to be exercised by delivery of written notice to
Landlord, to lease the respective space. In the event Landlord notifies Tenant
for multiple contiguous suites, then Tenant shall either lease none of the
suites or all of the suites being offered. In the event Tenant timely exercises
such option, the suites shall be added to the Premises, effective as of the date
specified in Landlord's notice. In the event Tenant does not timely exercise
such option, Tenant's rights shall terminate and shall not apply to any
subsequent leasing of the space unless Landlord does not execute a lease for the
space by a third party, in which case Tenant's rights shall be reinstated.
(b) In the event Tenant timely exercises such option, such space shall
be tendered to Tenant in "as is" condition.
(c) In the event Tenant timely exercises such option, such space shall
be subject to all of the terms and conditions of this Lease, provided that the
Base Monthly Rent shall be One and 25/100 Dollar ($1.25) per square foot per
month, plus electricity, and the Tenant's Share shall be proportionately
increased to reflect the inclusion of such space in the Premises, and provided
further that no free rent, abatement, discount, or other concession shall apply
with respect to the space except if Tenant is currently in the free rent period,
at which time the remaining free rent will apply.
(d) Tenant shall have no right to exercise its right of refusal,
notwithstanding any other provision of this Lease to the contrary, during the
time commencing from the date of any default* under Section 25 of this Lease and
continuing until the default is cured.
(e) The period of time within which Tenant may exercise its right of
refusal shall not be extended or enlarged by reason of Tenant's inability to
exercise such right of refusal because of the provisions in Section (d) above.
- -----------------------------------------------------------------------------
(g) The right of refusal granted to Tenant may not be voluntarily or
involuntarily exercised by or assigned to any person or entity other than Tenant
without the prior written consent of Landlord.
* in the payment of Base Monthly Rent or Operating Expenses
<PAGE> 22
EXHIBIT A
OUTLINE OF FLOOR
PLAN OR PREMISES
[MAP OF CORPORATE PLAZA II FLOOR 4]
<PAGE> 23
EXHIBIT B
THE PROJECT
[MAP]
<PAGE> 24
EXHIBIT C
NOTICE OF LEASE TERM DATES AND
TENANT'S PERCENTAGE
To: Date:
----------------------------------- ------------------
-----------------------------------
-----------------------------------
Re: Lease dated ______________________________ 19__,
between_______________, Landlord, and_____________________________________
Tenant, concerning Suite ______________________________ located
at__________________
Gentlemen:
In accordance with the subject Lease, we wish to advise and/or confirm as
follows:
1. That the Premises have been accepted herewith by the Tenant as being
substantially complete in accordance with the subject Lease and that there is no
deficiency in construction.
2. That the Tenant has possession of the subject Premises and
acknowledges that under the provisions of the subject Lease the term of said
Lease shall commence as of ______________________ for a term of
_____________________ ending on _____________________________.
3. That in accordance with the subject Lease, rental commenced to
accrue on _______________________________.
4. If the commencement date of the subject Lease is other than the
first day of the month, the first billing will contain a pro rata adjustment.
Each billing thereafter shall be for the full amount of the monthly installment
as provided for in said Lease.
5. Rent is due and payable in advance on the first day of each and
every month during the term of said Lease. Your rent checks should be made
payable to _________________________________ at_______________________________.
6. The exact number of rentable square feet within the Premises is
_________________________________ square feet.
7. Tenant's Percentage, as adjusted based upon the exact number of
rentable square feet within the Premises, is __________________ %.
<PAGE> 25
AGREED AND ACCEPTED
LANDLORD: TENANT
__________________________________ ______________________________
By: By:
__________________________________ ______________________________
By:
______________________________
C-1
<PAGE> 26
EXHIBIT D
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect.
Landlord reserves the right to adapt nondiscriminatory modifications and
additions hereto.
As long as Tenant is not in default under any of the terms, conditions,
provisions or agreements of this Lease, Landlord shall:
1. Provide non-attended automatic elevator facilities Monday through
Friday, except holidays from 8 A.M. to 6 P.M., and have one elevator
available at all other times.
2. On Monday through Friday, except holidays from 7 A.M. to 6 P.M., and
on Saturday mornings from 7 A.M. to 4 P.M. (and other times for an
agreed upon rate of $15.00 per hour), ventilate the Premises and
furnish air conditioning or heating on such days and hours, when in the
reasonable judgment of Landlord it may be required for the comfortable
occupancy of the Premises. The air conditioning system achieves maximum
cooling when the window coverings are closed. Landlord shall not be
responsible for room temperatures if Tenant does not keep all window
coverings in the Premises closed whenever the system is in operation.
Tenant agrees to cooperate fully at all times with Landlord, and to
abide by all reasonable regulations and requirements which Landlord may
prescribe for the proper function and protection of said air
conditioning system. Tenant agrees not to connect any apparatus,
device, conduit or pipe to the building chilled and hot water air
conditioning supply lines. Tenant further agrees that neither Tenant
nor its servants, employees, agents, visitors, licensees or contractors
shall at any time enter mechanical installations or facilities of the
building or adjust, tamper with, touch or otherwise in any manner
affect said installations or facilities. The cost of maintenance and
service calls to adjust and regulate the air conditioning system shall
be charged to Tenant if the need for maintenance work results from
either Tenant's adjustment of room thermostats or Tenant's failure to
comply with its obligations under this section, including keeping
window coverings closed as needed. Such work shall be charged at hourly
rates equal to then-current journeymen's wages for air conditioning
mechanics.
3. Landlord shall furnish to the Premises, during the usual business
hours on business days, electric current as required by the building
standard office lighting and fractional horsepower office business
machines in an amount not to exceed .025 KWH per square foot per normal
business day. Tenant agrees, should its electrical installation or
electrical consumption be in excess of the aforesaid quantity or extend
beyond normal business hours, to reimburse Landlord monthly for the
measured consumption at the average cost per kilowatt hour charged to
the building during the period. If a separate meter is not installed at
Tenant's cost, such excess cost will be established by an estimate
agreed upon by Landlord and Tenant, and if the parties fail to agree,
as established by an independent licensed engineer. Tenant agrees not
to use any apparatus or device in, or upon, or about the Premises which
may in any way increase the amount of such services usually furnished
or supplied to said Premises, and Tenant further agrees not to connect
any apparatus or device with wires, conduits or pipes, or other means
by which such services are supplied, for the purpose of using
additional or unusual amounts of such services without written consent
of Landlord. Should Tenant use the same to excess, the refusal on the
part of Tenant to pay upon demand of Landlord the amount established by
Landlord for such excess charge shall constitute a breach of the
obligation to pay rent under this Lease and shall entitle Landlord to
the rights therein granted for such breach. At all times Tenant's use
of electric current shall never exceed the capacity of the feeders to
the building or the risers or wiring installation and Tenants shall not
install or use or permit the installation or use of any computer or
electronic data processing equipment in the Premises without the prior
written consent of Landlord.
4. Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any
purposes in addition to ordinary drinking and lavatory purposes, of
which fact Tenant constitutes Landlord to be the sole judge, Landlord
may install a water meter and thereby measure Tenant's water
consumption for all purposes. Tenant shall pay Landlord for the cost of
the meter and the cost of the installation thereof and throughout the
duration of Tenant's occupancy Tenant shall keep said meter and
installation equipment in good working order and repair at Tenant's own
cost and expense, in default of which Landlord may cause such meter and
equipment to be replaced or repaired and collect the cost thereof from
Tenant. Tenant agrees to pay for water consumed, as shown on said
meter, as and when bills are rendered, and on default In making such
payment, Landlord may pay such charges and collect the same from
Tenant. Any such costs or expenses incurred, or payments made by
Landlord for any of the reasons or purposes hereinabove stated shall be
deemed to be additional rent payable by Tenant and collectible by
Landlord as such.
5. Provide janitor service to the Premises, provided the same are used
exclusively as offices, and are kept reasonably in order by Tenant, and
if to be kept clean by Tenant, no one other than persons approved by
Landlord shall be permitted to enter the Premises for such purposes. If
the Premises are not used exclusively as offices, they shall be kept
clean and in order by Tenant, at Tenant's expense, and to the
satisfaction of Landlord, and by persons approved by Landlord. Tenant
shall pay to Landlord the cost of removal of any of Tenant's refuse and
rubbish to the extent that the same exceeds the refuse and rubbish
usually attendant upon the use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning and electric systems, when necessary, by reason of
accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements, shall have been completed, and shall further have
no responsibility or liability for failure to supply elevator facilities,
plumbing, ventilating, air conditioning or electric service, when prevented from
so doing by strike or accident or by any cause beyond Landlord's reasonable
control, or by laws, rules, orders, ordinances, directions, regulations or
requirements of any federal, state, county or municipal authority or failure of
gas, oil or other suitable fuel supply or inability by exercise of reasonable
diligence to obtain gas, oil or other suitable fuel. It is expressly understood
and agreed that any convenants on Landlord's part to furnish any service
pursuant to any of the terms, covenants, conditions, provisions or agreements of
this Lease, or to perform any act or thing for the benefit of Tenant, shall not
be deemed breached if Landlord is unable to furnish or perform the same by
virtue of a strike or labor trouble or any other cause whatsoever beyond
Landlord's control.
6. This Lease is a "plus electricity" lease in which Tenant shall pay for
their use of electricity throughout the term of the Lease. Each floor
of the project is separately metered, and Tenant shall pay directly to
the utility company each month for their electrical consumption.
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EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
The undersigned,______________________________________ ("Landlord"),
with a mailing address c/o ______________________________________ and
______________________________________ ("Tenant"), hereby certify to ________,
a ______________________________________, as follows:
1. Attached hereto is a true, correct and complete copy of that certain
lease dated ___________, 19__, between Landlord and Tenant (the
"Lease"), which demises premises located at _____________________. The
Lease is now in full force and effect and has not been amended,
modified or supplemented, except as set forth in Paragraph 4 below.
2. The term of the Lease commenced on _______________________________
19__.
3. The term of the Lease shall expire on _________________________, 19__.
4. The Lease has (Initial one):
(____) not been amended, modified, supplemented, extended, renewed or
assigned.
(____) been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements copies of
which are attached hereto:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
5. Tenant has accepted and is now in possession of said premises.
6. Tenant and Landlord acknowledge that the Lease will be assigned to
_________________ and that no modification, adjustment, revision or
cancellation of the Lease or amendments thereto shall be effective
unless written consent of _________________ is obtained, and that until
further notice, payments under the Lease may continue as heretofore.
7. The amount of fixed monthly rent is $_________________.
8. The amount of security deposits (if any) is $ _________________. No
other security deposits have been made.
9. Tenant is paying the full lease rental which has been paid in full as
of the date hereof. No rent under the Lease has been paid for more than
thirty (30) days in advance of its due date.
10. All work required to be performed by Landlord under the Lease has been
completed.
11. There are no defaults on the part of the Landlord or Tenant under the
Lease.
12. Tenant has no defense as to its obligations under the Lease and claims
no set-off or counterclaim against Landlord.
13. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies except as
provided in the lease.
All provisions of the Lease and the amendments thereto (if any)
referred to above are hereby ratified.
The foregoing certification is made with the knowledge that
_________________ is about to fund a loan to Landlord and that_________________
is relying upon the representations herein made in funding such loan.
IN WITNESS WHEREOF, this certificate has been duly executed and
delivered by the authorized officers of the undersigned as of_________________,
19___.
LANDLORD:
By: _________________
TENANT:
By: _________________
By: _________________
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EXHIBIT F
RULES AND REGULATIONS
1. Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement,
name or notice shall be installed or displayed on any part of the
outside or inside of the building or Project without the prior written
consent of Landlord. Landlord shall have the right to remove, at
Tenant's expense and without notice, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors and
walls shall be printed, painted, affixed or inscribed at the expense of
Tenant by a person approved by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades, screens
or hanging plants or other similar objects attached to or used in
connection with any window or door of the Premises, or placed on any
windowsill, which is visible from the exterior of the Premises, Tenant
shall immediately discontinue such use. Tenant shall not place anything
against or near glass partitions or doors or windows which may appear
unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators or stairways of the Project. The
halls, passages, exits, entrances, shopping malls, elevators,
escalators and stairways are not open to the general public, but are
open, subject to reasonable regulations, to Tenant's business invitees.
Landlord shall in all cases retain the right to control and prevent
access thereto of all persons whose presence in the judgment of
Landlord would be prejudicial to the safety, character, reputation and
interest of the Project and its tenants; provided that nothing herein
contained shall be construed to prevent such access to persons with
whom any tenant normally deals in the ordinary course of its business,
unless such persons are engaged in illegal or unlawful activities. No
tenant and no employee or invitee of any tenant shall go upon the
roof(s) of the Project.
4. The directory of the building or Project will be provided exclusively
for the display of the name and location of tenants only and Landlord
reserves the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Project and the Premises
shall be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those
approved by Landlord shall be employed by Tenant or permitted to enter
the Project for the purpose of cleaning the same. Tenant shall not
cause any unnecessary labor by carelessness or indifference to the
good order and cleanliness of the Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may make a reasonable charge for
any additional keys. Tenant shall not make or have made additional
keys, and Tenant shall not alter any lock or install a new additional
lock or bolt on any door of its Premises. Tenant, upon the termination
of its tenancy, shall deliver to Landlord the keys of all doors which
have been furnished to Tenant, and in the event of loss of any keys so
furnished, shall pay Landlord therefor.
7 If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's
instructions in their installation.
8. Freight elevator(s) shall be available for use by all tenants in the
building, subject to such reasonable scheduling as Landlord, in its
discretion, shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise or other property will be received in
the building or carried in the elevators except between such hours and
in such elevators as may be designated by Landlord. Tenant's initial
move in and subsequent deliveries of bulky items, such as furniture,
safes and similar items shall, unless otherwise agreed in writing by
Landlord, be made during the hours of 6:00 p.m. to 6:00 a.m. or on
Saturday or Sunday. Deliveries during normal office hours shall be
limited to normal office supplies and other small items. No deliveries
shall be made which impede or interfere with other tenants or the
operation of the building.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry
and which is allowed by law. Landlord shall have the right to prescribe
the weight, size and position of all equipment, materials, furniture or
other property brought into the building. Heavy objects shall, if
considered necessary by Landlord, stand on such platforms as determined
by Landlord to be necessary to properly distribute the weight, which
platforms shall be provided at Tenant's expense. Business machines and
mechanical equipment belonging to Tenant, which cause noise or
vibration that may be transmitted to the structure of the building or
to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the building, shall be placed and
maintained by Tenant, at Tenant's expense, on vibration eliminators or
other devices sufficient to eliminate noise or vibration. The persons
employed to move such equipment in or out of the building must be
acceptable to Landlord. Landlord will not be responsible for loss of,
or damage to, any such equipment or other property from any cause, and
all damage done to the building by maintaining or moving such equipment
or other property shall be repaired at the expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office
equipment. Tenant shall not use or permit to be used in the Premises
any foul or noxious gas or substance, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the building by reason of noise, odors
or vibrations, nor shall Tenant bring into or keep in or about the
Premises any birds or animals.
11. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective
operation of the building's heating and air conditioning and to comply
with any governmental energy-saving rules, laws or regulations of which
Tenant has actual notice, and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed, and shall close
window coverings at the end of each business day.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the
building.
14. Landlord reserves the right to exclude from the building between the
hours of 6 p.m. and 7 a.m. the following day, or such other hours as
may be established from time to time by Landlord, and on Sundays and
legal holidays, any person unless that person is known to the person or
employee in charge of the building and has a pass or is properly
identified. Tenant shall be responsible for all persons for whom it
requests passes and shall be liable to Landlord for all acts of such
persons. Landlord shall not be liable for damages for any error with
regard to the admission to or exclusion from the building of any
person. Landlord reserves the right to prevent access to the building
in case of invasion, mob, riot, public excitement or other commotion by
closing the doors or by other appropriate action.
15. Tenant shall close and lock the doors of its Premises and entirely shut
off all water faucets or other water apparatus, and electricity, gas or
air outlets before tenant and its employees leave the Premises. Tenant
shall be responsible for any damage or injuries sustained by other
tenants or occupants of the building or by Landlord for noncompliance
with this rule.
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16. Tenant shall not obtain for use on the Premises ice, drinking water,
food, beverage, towel or other similar services or accept barbering or
bootblacking service upon the Premises, except at such hours and under
such regulations as may be fixed by Landlord.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by the tenant
who, or whose employees or invitees, shall have caused it.
18. Tenant shall not sell, or permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or
merchandise to the general public in or on the Premises. Tenant shall
not make any room-to-room solicitation of business from other tenants
in the Project. Tenant shall not use the Premises for any business or
activity other than that specifically provided for in Tenant's Lease.
19. Tenant shall not install any radio or television antenna, loudspeaker
or other devices on the roof(s) or exterior walls of the building or
Project. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Project or elsewhere.
20. Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork or plaster or in any way deface the Premises, or any part
thereof, except in accordance with the provisions of the Lease
pertaining to alterations. Landlord reserves the right to direct
electricians as to where and how telephone and telegraph wires are to
be introduced to the Premises. Tenant shall not cut or bore holes for
wires. Tenant shall not affix any floor covering to the floor of the
Premises in any manner except as approved by Landlord, Tenant shall
repair any damage resulting from noncompliance with this rule.
21. Tenant shall not install, maintain or operate upon the premises any
vending machines without the written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in the Project are prohibited, and
Tenant shall cooperate to prevent such activities.
23. Landlord reserves the right to exclude or expel from the Project any
person who, in Landlord's judgement, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules
and Regulations of the Building.
24. Tenant shall store all its trash and garbage within its premises or in
other facilities provided by Landlord. Tenant shall not place in any
trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal. All
garbage and refuse disposal shall be made in accordance with directions
issued from time to time by Landlord.
25. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any
kind, nor shall the Premises be used for any improper, immoral or
objectional purpose. No cooking shall be done or permitted on the
Premises without Landlord's consent, except that use by Tenant of
Underwriters' Laboratory approved equipment for brewing coffee, tea,
hot chocolate and similar beverages or use of microwave ovens for
employee use shall be permitted, provided that such equipment and use
is in accordance with all applicable, federal, state, county and city
laws, codes, ordinances, rules and regulations.
26. Tenant shall not use in any space or in the public halls of the Project
any hand truck except those equipped with rubber tires and side guards
or such other material-handling equipment as Landlord may approve.
Tenant shall not bring any other vehicles of any kind into the building
or Project.
27. Without the written consent of Landlord, Tenant shall not use the name
of the building or Project in connection with or in promoting or
advertising the business of Tenant except as Tenant's address.
28 Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
29. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.
30. Tenant's requirements will be attended to only upon appropriate
application to the Project management office by an authorized
individual. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord will admit any
person (Tenant or otherwise) to any office without specific
instructions from Landlord.
31. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations
in favor of Tenant or any other tenant, nor prevent Landlord from
thereafter enforcing any such Rules and Regulations against any or all
of the tenants of the Project.
32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of the Lease.
33. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for
safety and security, for care and cleanliness of the Project and for
the preservation of good order therein. Tenant agrees to abide by all
such Rules and Regulations hereinabove stated and any additional rules
and regulations which are adopted.
34. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and
guests.
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EXHIBIT G
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern use of the parking
facilities which are appurtenant to the Project.
1. All claimed damage or loss must be reported and itemized in writing
delivered to the Management Office within ten (10) business days after
any claimed damage or loss occurs. Any claim not so made is waived.
Landlord has the option to make repairs at its expense of any claimed
damage within two business days after filing of any claim. In all court
actions the burden of proof to establish a claim remains with Tenant.
Court actions by Tenant for any claim must be filed within ninety days
from date of parking in court of jursidiction where a claimed loss
occurred. Landlord is not responsible for damage by water, fire, or
defective brakes, or parts, or for the act or omissions of others, or
for articles left in the car. The total liability of Landlord is
limited to $250.00 for all damages or loss to any car. Landlord is not
responsible for loss of use.
2. Tenant shall not park or permit the parking of any vehicle under its
company in any parking areas designated by Landlord as areas for
parking by visitors to the Project. Tenant shall not leave vehicles in
the parking areas overnight nor park any vehicles in the parking areas
other than automobiles, motorcycles, motor driven or non-motor driven
bicycles or fourwheeled trucks.
3. Parking stickers or any other device or form of identification supplied
by landlord as a condition of use of the Parking Facilities shall
remain the property of Landlord. Such parking identification device
must be displayed as requested and may not be mutilated in any manner
The serial number of the parking identification device may not be
obliterated. Devices are not transferable and any device in the
possession of an unauthorized holder will be void.
4. No overnight or extended term storage of vehicles shall be permitted.
5. Vehicles must be parked entirely within painted stall lines of a single
parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross-hatched areas; and
(f) in such other areas as may be designated by Landlord or
Landlord's Parking Operator.
9. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
10. Loss or theft of parking identification devices from automobiles must
be reported to the Management Office immediately, and a lost or stolen
report must be filed by the customer at that time. Landlord has the
right to exclude any car from the parking facilities that does not have
an identification device.
11. Any parking identification devices reported lost or stolen found on any
unauthorized car will be confiscated and the illegal holder will be
subject to prosecution.
12. Lost or stolen devices found by the purchaser must be reported to the
Management Office immediately to avoid confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
14. Parking Facility managers or attendants are not authorized to make or
allow any exceptions to these Rules and Regulations.
15. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to any tenant or person and/or his
agents or representatives who willfully refuse to comply with these
Rules and Regulations and all unposted City, State or Federal
ordinances, laws or agreements.
16. Landlord reserves the right to establish and change parking fees and to
modify and/or adopt such other reasonable and non-discriminatory rules
and regulations for the parking facilities as it deems necessary for
the operation of the parking facilities. Landlord may refuse to permit
any person who violates these rules to park in the parking facilities,
and any violation of the rules shall subject the car to removal.
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EXHIBIT H
HAZARDOUS MATERIALS
THE FOLLOWING PROVISIONS DEALING WITH HAZARDOUS MATERIALS ARE MEANT TO BE IN
ADDITION TO, AND NOT SUPERSEDE OR LIMIT, ANY OTHER PROVISIONS OF THIS LEASE
WHICH MAY DEAL WITH THE SAME SUBJECT MATTER.
(a) DEFINITION. "Hazardous Materials" shall mean any hazardous or toxic
substance, material, or waste which is or becomes regulated by any local
governmental authority, the State of California, or the United States
Government, including, but not limited to, substances defined as "hazardous
substances," "hazardous materials," "toxic substances," or "hazardous wastes" in
the Comprehensive Environmental Responses, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq; the Resource Conversation
and Recovery Act, 42 U.S.C. Section 6901, et seq; the California Health & Safety
Code; and any law, ordinance, or regulation dealing with underground storage
tanks; and in the regulations adopted, published, and/or promulgated pursuant to
said laws, and in any other environmental law, regulation, or ordinance now
existing or hereinafter enacted (hereinafter "Hazardous Materials Laws").
(b) USE AND REMOVAL.
(1) Tenant hereby agrees that Tenant shall not use, generate,
manufacture, refine, process, store, or dispose of on, under, or about the
Premises or transport to or from the Premises any Hazardous Materials, except
with the written consent of Landlord in Landlord's sole discretion and in full
compliance with applicable Hazardous Materials Laws. Tenant further acknowledges
that Tenant does not intend to use the Premises in the future for the purpose of
generating, manufacturing, refining, producing, storing, handling, transferring,
processing, or transporting of Hazardous Materials.
(2) If at any time during the term of this Lease, Hazardous
Materials are used, or placed by Tenant on the Premises or Hazardous Materials
are discovered by Tenant on the Premises where no prior consent of Landlord was
obtained or otherwise in violation of any Hazardous Materials Laws, or if any
contamination of the Premises shall occur, Tenant, at Tenant's sole cost and
expense, shall immediately remove such Hazardous Materials from the Premises or
from the ground or groundwater underlying the Premises in accordance with
requirements of the appropriate governmental entity. Furthermore, Tenant shall,
at its own expense, procure, maintain in effect, and comply with all conditions
of any and all permits, licenses, and other governmental and regulatory
approvals required for Tenant's use of the Premises, including, without
limitation, discharge of (appropriately treated) materials or wastes into and
through any sanitary sewer serving the Premises.
(3) Except for discharges into the sanitary sewer in strict
accordance and conformity with all applicable Hazardous Materials Laws, Tenant
shall cause any and all permitted Hazardous Materials removed from the Premises
to be removed and transported solely by duly licensed haulers to duly licensed
facilities for final disposal of such materials and wastes. Tenant shall in all
respects handle, treat, deal with, and manage any and all Hazardous Materials
in, on, under, or about the Premises in total conformity with all applicable
Hazardous Materials Laws and prudent industry practices regarding management of
such Hazardous Materials. Tenant shall not take any remedial action in response
to the presence of any Hazardous Materials in or about the Premises nor enter
into any settlement agreement, consent, decree, or other compromise in respect
to any claims relating to any Hazardous Materials in any way connected with the
Premises without first notifying Landlord of Tenant's intention to do so and
affording Landlord ample opportunity to appear, intervene, or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition to all other rights and remedies of Landlord hereunder, if such
Hazardous Materials are not removed from the Premises or the ground or
groundwater underlying the Premises by Tenant within fifteen (15) days after
Landlord or Tenant discovers such Hazardous Materials, Landlord, at its sole
discretion, may, but shall not be obligated to, pay to have the same removed,
and Tenant shall reimburse Landlord within five (5) days of Landlord's demand
for payment.
(c) NOTICE.
(1) Tenant shall immediately notify Landlord in writing of (i)
any enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed, or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Tenant, or the Premises
relating to damage contribution, cost recovery, compensation, loss, or injury
resulting from or claimed to result from any Hazardous Materials; and (iii) any
reports made to any environmental agency arising out of or in connection with
any Hazardous Materials in or removed from the Premises, including any
complaints, notices, warnings, or asserted violations in connection therewith,
upon Tenant's receipt of actual knowledge of the above. Tenant shall also supply
to Landlord as promptly as possible, and in any event within five (5) business
days after Tenant first
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receives or sends the same, with copies of all claims, reports, complaints,
notices, warnings, or asserted violations relating in any way to the Premises,
or Tenant's use thereof. Tenant shall promptly deliver to Landlord copies of
hazardous waste manifests reflecting the legal and proper disposal of all
Hazardous Materials removed from the Premises.
(2) Tenant acknowledges that Tenant has been informed that
Section 25359.7 of the California Health and Safety Code provides that any
tenant of real property who knows, or has reasonable cause to believe, that any
release of hazardous substances has come to be located on or beneath the real
property shall, upon discovery by the tenant of the presence or suspected
presence of a hazardous substance release, give notice of that condition to the
owner of the real property. Failure of the tenant to provide written notice as
required to the owner shall make the lease voidable at the discretion of the
owner. The Health and Safety Code provides that if the tenant has actual
knowledge of the presence of any hazardous substance release and knowingly or
willingly fails to provide written notice as required by the owner, the tenant
is liable for a civil penalty not to exceed $5,000.00 for each violation.
(d) INDEMNIFICATION. Tenant shall indemnify, defend (by counsel
reasonably acceptable to Landlord), protect, and hold Landlord, and each and any
of Landlord's shareholders, partners, officers, directors, employees, agents,
attorneys, successors, and assigns, free and harmless from and against any and
all claims, liabilities, penalties, forfeitures, losses, or expenses (including
actual attorneys fees and costs) or death of or injury to any person or damage
to any property whatsoever, arising from or caused in whole or in part, directly
or indirectly, by (i) the presence in, on, under, or about the Premises or
discharge in or from the Premises of any Hazardous Materials placed or
discharged in, on, or under the Premises by Tenant or Tenant's use, analysis,
storage, transportation, disposal, release, threatened release, discharge, or
generation of Hazardous Materials to, in, on, under, about, or from the
Premises; or (ii) Tenant's failure to comply with any Hazardous Materials Laws.
Tenant's obligation hereunder shall include, without limitation, and whether
foreseeable or unforeseeable, all costs of any required or necessary repair,
cleanup, or detoxification or decontamination of the Premises and the
preparation and implementation of any closure, remedial action, or other
required plans in connection therewith. For purpose of the indemnity provisions
hereof, any acts or omissions of Tenant, or by employees, agents, assignees,
subtenant, concessionaire, contractors, or subcontractors of Tenant or others
acting for on behalf of Tenant (whether or not they are negligent, intentional,
willful, or unlawful) shall be strictly attributable to Tenant.
(e) SURVIVAL. All representations, warranties, obligations, and
indemnities with respect to Hazardous Materials shall survive the termination of
this Lease.
SECTION 10.2. WASTE MANAGEMENT REQUIREMENTS. Without limiting any other
obligations of Tenant under this Lease, Tenant covenants and agrees to comply
with all laws, rules, regulations, and guidelines now or hereafter made
applicable to the Premises respecting the disposal of waste, trash, garbage, and
other matter (liquid or solid), generated by Tenant, the disposal of which is
not otherwise the express obligation of Landlord under this Lease, including,
but not limited to, laws, rules, regulations, and guidelines respecting
recycling and other forms of reclamation (all of which are herein collectively
referred to as "Waste Management Requirements"). Tenant hereby covenants and
agrees to comply with all rules and regulations established by Landlord to
enable Landlord from time to time to comply with Waste Management Requirements
applicable to Landlord (i) as owner of the Premises, and (ii) in performing
Landlord's obligations under this Lease, if any. Tenant covenants and agrees to
indemnify, defend, protect, and hold Landlord harmless from and against all
liability (including costs, expenses, and attorneys' fees) that Landlord may
sustain by reason of Tenant's breach of its obligations under this Section 10.2.
Tenant obligations under this Section 10.2 shall survive the termination of this
Lease.
H-2
<PAGE> 1
EXHIBIT 10.15
OFFICE BUILDING LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. Basic Lease Terms ...................................... 1
2. Premises and Common Areas Leased ....................... 2
3. Term ................................................... 2
4. Possession ............................................. 2
5. Rent ................................................... 3
6. Rental Adjustment ...................................... 3
7. Security Deposit ....................................... 4
8. Use .................................................... 4
9. Notices ................................................ 5
10. Brokers ................................................ 5
11. Holding Over ........................................... 5
12. Taxes on Tenant's Property ............................. 5
13. Condition of Premises .................................. 5
14. Alterations ............................................ 5
15. Repairs ................................................ 6
16. Liens .................................................. 6
17. Entry By Landlord ...................................... 6
18. Utilities and Services ................................. 6
19. Bankruptcy ............................................. 7
20. Indemnification and Exculpation of Landlord ............ 7
21. Damage to Tenant's Property ............................ 7
22. Tenant's Insurance ..................................... 7
23. Damage or Destruction .................................. 8
24. Eminent Domain ......................................... 9
25. Defaults and Remedies .................................. 9
26. Assignment and Subletting .............................. 10
27. Subordination .......................................... 10
28. Estoppel Certificate ................................... 11
29. Building Planning ...................................... 11
30. Rules and Regulations .................................. 11
31. Conflict of Laws ....................................... 11
32. Successors and Assigns ................................. 11
33. Surrender of Premises .................................. 11
34. Professional Fees ...................................... 11
35. Performance by Tenant .................................. 11
36. Mortgagee Protection ................................... 12
37. Definition of Landlord ................................. 12
38. Waiver ................................................. 12
39. Identification of Tenant ............................... 12
40. Parking ................................................ 12
41. Force Majeure .......................................... 12
42. Terms and Headings ..................................... 12
43. Examination of Lease ................................... 12
44. Time ................................................... 12
45. Prior Agreement or Amendments .......................... 12
46. Separability ........................................... 13
47. Recording .............................................. 13
48. Limitation on Liability ................................ 13
49. Modification For Lender ................................ 13
50. Financial Statements ................................... 13
51. Quiet Enjoyment ........................................ 13
52. Tenant as Corporation .................................. 13
53. Work Letter Agreement .................................. 14
Exhibits
A Outline of Floor Plan or Premises
B The Project
C Notice of Lease Term Dates and Tenant's Percentage
D Standards for Utilities and services
E Tenant Estoppel Certificate
F Rules and Regulations
G Parking Rules and Regulations
H Hazardous Materials
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
OFFICE LEASE
1. BASIC LEASE TERMS.
<C> <C> <S>
a. DATE OF LEASE EXECUTION: March 22, 1994
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b. TENANT STAC Electronics, a California corporation
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Trade Name:
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Address (leased Premises): 12636 High Bluff Drive
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San Diego, CA 92130
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Floor(s) upon which the Premises are Located: Second (2nd) Suite Number(s): 200
-------------------------- -------------
Address (For Notices): 12636 High bluff Drive, Suite 400
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San Diego, CA 92130
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c. LANDLORD: Weyerhaeuser Mortgage Company, a California corporation and Fort Wayman, Inc.
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Address (For Notices): c/o Weyerhaeuser Mortgage Company, 6320 Canoga Avenue, Woodland Hills, CA 91367
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with a copy to Voit Management, 12626 High bluff Drive, Suite 350, San Diego, CA 92130 or to such other
place as Landlord may from time to time designate by notice to Tenant.
d. PREMISES AREA: Approximately Thirteen Thousand Six Hundred Eight-Six (13,686) Rentable Square Feet
-----------------------------------------------------
e. PROJECT AREA: Fifty-Eight Thousand Ninety-Six (58,096) Rentable Square Feet
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f. TENANT PERCENTAGE: 23.56 %
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g. TERM OF LEASE: The term of this Lease shall be for the approximately sixty-six (66) months
----------------------------------------------------
commencing upon the earlier of:
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(2) The date that Tenant opened for business in the Premises, or
(3) September 6, 1994, *
----------- --
Reference in this lease to a "Lease Year" shall mean each successive twelve month period commencing
with the first day of the month in which the term of this Lease commences.
h. BASE MONTHLY RENT: $ Seventeen Thousand One Hundred Seven and 50/100 Dollars ($17,107.50)
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-------------------------------------------------------------------------------------------------------
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j. ANNUAL OPERATING EXPENSE ALLOWANCE: See Addendum "2."
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----------------------------------------------------------------------------
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k. PREPAID RENT: $ 17,107.50 **
---------------------
l. TOTAL SECURITY DEPOSIT: $17,107.50, including a $ -0- non-refundable cleaning fee. **
--------- ----
m. TENANT IMPROVEMENT ALLOWANCE: -- See Addendum "5."--defined in the Work Letter Agreement).
n. TENANT'S USE OF PREMISES: General office use
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o. PARKING: Fifty-seven (57) spaces, including six (6) covered and reserved, free of charge.
----------------
p. BROKER(S): CB Commercial Real Estate Group, Inc. and Business Real Estate Brokerage Company, Inc.
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q. BROKERAGE COMMISSION PAYABLE BY: Landlord
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r. GUARANTOR(S) None
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s. ADDITIONAL SECTIONS
Additional Sections of this lease numbered Addenda "1" through "5" --- are attached hereto and made a part
hereof.
t. ADDITIONAL EXHIBITS
Additional exhibits letters H --- are attached hereto and made a part hereof.
KOL 3/88
* except as such September 6, 1994 date shall be extended for Landlord caused delays and delays due to
the Premises being physically inaccessible through no fault of Tenant, and expiring March 5, 2000.
** See Addendum "5"
*** a Michigan corporation, tenants in common.
</TABLE>
<PAGE> 3
Section 1 represents a summary of the basic terms of this Lease. In the event
of any inconsistency between the terms contained in Section 1 and any specific
clause of this Lease, the terms of the more specific clause shall prevail.
The parties hereto agree that said letting and hiring is upon and subject to
the terms, convenants and conditions herein set forth. Tenant covenants, as a
material part of the consideration for this Lease to keep and perform each and
all of said terms, convenants and conditions for which tenant is liable and that
this Lease is made upon the condition of such performance.
2. PREMISES AND COMMON AREAS LEASED.
a. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord those
certain premises described in Section 1 and in Exhibit A attached hereto (the
"Premises"). ----------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- --------------------------- Landlord and Tenant stipulate that for purposes of
this Lease the Premises contain 13,686 rentable square feet and the Project
contains 58,096 rentable square feet.
b. The Premises are contained within the building at the address designated in
Section 1 located in the Project described on Exhibit B attached hereto (the
"Project").
c. Tenant's Percentage of the Project is stipulated to be 23.56%.------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
d. Tenant shall have the nonexclusive right to use in common with other tenants
in the Building and the Project and subject to the Rules and Regulations
referred to in Paragraph 30 below the following areas ("Common Areas")
appurtenant to the Premises:
(1) The Building's common entrances, lobbies, restrooms, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any
passageways and serviceways thereto, and the common pipes, conduits, wires and
appurtenant equipment serving the Premises;
(2) Loading and unloading areas, trash areas, parking areas, roadways,
sidewalks, walkways, parkways, driveways and landscaped areas and similar areas
and facilities appurtenant to the Building.
e. Landlord reserves the right from time to time without unreasonable
interference with Tenant's use:
(1) To install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building above the ceiling surfaces, below the floor surfaces, within the
walls and in the central core areas, and to relocate any pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises which are
located in the Premises or located elsewhere outside the Premises, and to expand
the Building or Project;
(2) 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 and walkways;
(3) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available:
(4) To designate other land outside the boundaries of the Building or
Project to be a part of the Common Areas;
(5) To add additional buildings and improvements to the Common Areas;
(6) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building or the Project, or any
portion thereof;
(7) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas, the Building or the Project as Landlord
may, in the exercise of sound business judgment, deem to be appropriate.
3. TERM.
The term of this Lease shall be for the period designated in Section 1,
commencing on the Commencement Date, and ending on the expiration of such
period, unless the term hereby demised shall be sooner terminated as
hereinafter provided. If not specifically designated in Section 1, the
Commencement Date, the date upon which the term of this Lease shall end, the
rentable square feet within the Premises and Tenant's Percentage shall be
determined in accordance with the provisions of Paragraph 2 and will be
specified in Landlord's Notice of Lease Term Dates and Tenant's Percentage
("Notice"), in the form of Exhibit "C" which is attached hereto and is
incorporated herein by this reference, and shall be served upon Tenant as
provided in Paragraph 9. The Notice shall be binding upon Tenant unless Tenant
objects to the Notice in writing, served upon Landlord as provided for in
Paragraph 9 hereof, within five (5) days of Tenant's receipt of the Notice.
-----------------------
- -----------------------------------------------------------------------------
2
<PAGE> 4
5. RENT.
a. Tenant shall pay Landlord monthly base rent in the initial amount set forth
in Section 1 which shall be payable monthly in advance on the first day of each
and every calendar month ("Base Monthly Rent") provided, however, the first
month's rent shall be due and payable upon execution of this lease.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
d. All rent shall be paid by Tenant to Landlord monthly in advance on the first
day of every calendar month, at the address shown in Section 1, or such other
place as Landlord may designate in writing from time to time. All rent shall be
paid without prior demand or notice and without any deduction or offset
whatsoever. All rent shall be paid in lawful currency of the United States of
America. All rent due for any partial month shall be prorated at the rate of
1/30th of the total monthly rent per day. Tenant acknowledges that late payment
by Tenant to Landlord of any rent or other sums due under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impracticable to ascertain. Such costs
include, without limitation, processing and accounting charges and late charges
that may be imposed on Landlord by the terms of any encumbrance or note secured
by the Premises. Therefore, if any rent or other sum due from Tenant is not
received when due, Tenant shall pay to landlord an additional sum equal to 10%
of such overdue payment. Landlord and Tenant hereby agree that such late charge
represents a fair and reasonable estimate of the costs that Landlord will incur
by reason of any such late payment. Additionally, all such delinquent rent or
other sums, plus this late charge, shall bear interest at the then maximum
lawful rate permitted to be charged by Landlord. Any payments of any kind
returned for insufficient funds will be subject to an additional handling charge
of $25.00, and thereafter, Landlord may require Tenant to pay all future
payments of rent or other sums due by money order or cashier's check.
e. Upon the execution of the Lease, Tenant shall pay to Landlord the prepaid
rent set forth in Section 1, and if Tenant is not in default of any provisions
of the Lease, such prepaid rent shall be applied toward the rent due for the
first month of the term. Landlord's obligations with respect to the prepaid rent
are those of a debtor and not of a trustee, and Landlord can commingle the
prepaid rent with Landlord's general funds. Landlord shall not be required to
pay Tenant interest on the prepaid rent. Landlord shall be entitled to
immediately endorse and cash Tenant's prepaid rent; however, such endorsement
and cashing shall not constitute Landlord's acceptance of this Lease. In the
event Landlord does not accept this Lease, Landlord shall return said prepaid
rent.
- -----------------------------------------------------------------------------
g. "For purposes of Section 467 of the Internal Revenue Code, the parties to
this lease agreement hereby agree to allocate the stated rents, provided herein,
to the periods which correspond to the actual rent payments as provided under
the terms and conditions of this agreement."
6. RENTAL ADJUSTMENT.
a. For the purposes of this Paragraph 6, the following terms are defined as
follows:
(1) Tenant's Percentage shall mean that portion of the total rentable
area of the Project occupied by Tenant as set forth as a percentage in Section
1.
- -----------------------------------------------------------------------------
(3) Operating Expenses shall consist of all direct costs of operation
and maintenance of the Project and the Common Areas, including any expansions
to the Common Areas by Landlord ("Operating Expenses"), as determined by
standard accounting practices, calculated assuming the Project is fully
occupied, including the following costs by way of illustration, but not
limitation: any and all assessments Landlord must pay for the Project pursuant
to any covenants, conditions or restrictions, reciprocal easement agreements,
tenancy-in-common agreements or similar restrictions and agreements affecting
the Building or the Project; real property taxes and assessments and any taxes
or assessments hereafter imposed in lieu thereof; rent taxes, gross receipt
taxes (whether assessed against Landlord or assessed against Tenant and paid by
Landlord, or both); water and sewer charges; accounting; legal and other
consulting fees; the net cost and expense of insurance for which Landlord is
responsible hereunder or which Landlord or any first mortgagee with a lien
affecting the Premises reasonably deems necessary in connection with the
operation of the Project; utilities; janitorial services; security; labor;
parking charges, utilities surcharges, or any other costs levied, assessed or
imposed by, or at the direction of, or resulting from statutes or regulations
or interpretations thereof, promulgated by any federal, state, regional,
municipal or local government authority in connection with the use or occupancy
of the Project or the Premises or the parking facilities serving the
Project or the Premises; the cost (amortized over such reasonable period as
Landlord shall determine together with interest at the maximum rate allowed by
law on the unamortized balance) of any capital improvements made to the Project
or the Common Areas by the Landlord in order to comply with any governmental
requirements not in existence as of the date of this Lease or designed to
reduce Operating Expenses, or replacement of any building equipment needed to
operate the Building or the Common Areas at the same quality levels as prior to
the replacement; costs incurred in the management of the Project, if any
(including supplies, wages and salaries of employees used in the management,
operation and maintenance of the Project, and payroll taxes and similar
governmental charges with respect thereto, Project management office rental, a
management fee and, in the event Landlord is directly participating in the
administration of the Project, an administrative fee in the amount of
Landlord's actual expenses, such administrative fee not to exceed fifteen
percent (15%) of the annual Operating Expenses excluding therefrom such fee);
air conditioning; waste disposal; heating; ventilating; elevator maintenance;
supplies; materials; equipment; tools; repair and maintenance of the structural
portions of the Project, including the plumbing, heating, ventilating, air
conditioning and electrical systems installed or furnished by Landlord;
maintenance costs, including utilities and payroll expenses, rental of personal
property used in maintenance, and all other upkeep of all parking and Common
Areas; costs and expenses of
3
<PAGE> 5
gardening and landscaping; maintenance of signs (other than Tenant's signs);
personal property taxes levied on or attributable to personal property used in
connection with the entire Project, including the Common Areas; reasonable audit
or verification fees; and costs and expenses of repairs, resurfacing, repairing,
maintenance, painting, lighting, cleaning, refuse removal, security and similar
items, including appropriate reserves. Operating Expenses shall not include
depreciation on buildings or equipment therein, Landlord's executive salaries or
real estate brokers' commissions.
(4) As used herein, the term "real property taxes" shall include any
form of assessment, license fee, license tax, business license fee, commercial
rental tax, levy, charge, penalty, tax or similar imposition, imposed by any
authority having the direct power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, as against any legal or
equitable interest of Landlord in the Premises, including, but not limited to,
the following:
(a) any tax on Landlord's "right" to other income from the
Premises or as against Landlord's business of leasing the Premises;
(b) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real estate tax, including but not limited to,
any assessments, taxes, fees, levies and charges that may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants. It is the intention of
Tenant and Landlord that all such new and increased assessments, taxes, fees,
levies and charges be included within the definition of "real property taxes"
for the purposes of this Lease;
(c) any assessment, tax, fee, levy or charge allocable to or
measured by the area of the Premises or the rent payable hereunder, including,
without limitation, any gross income tax or excise tax levied by the State, city
or federal government, or any political subdivision thereof, with respect to the
receipt of such rent, or upon or with respect to the possession, leasing,
operating, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof;
(d) any assessment, tax, fee, levy or charge upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.
Notwithstanding any provision of this paragraph 6 expressed or implied
to the contrary, "real property taxes" shall not include Landlord's federal or
state income, franchise, inheritance or estate taxes.
- ------------------------------------------------------------------------------
c. Even though the term has expired and Tenant has vacated the Premises, when
final determination is made of Tenant's Percentage of Operating Expenses for the
year in which this Lease terminates, Tenant shall immediately pay any increase
due over the estimated expenses paid and, conversely, any overpayment made in
the event said expenses decrease shall be rebated by Landlord to Tenant.
7. SECURITY DEPOSIT.
Upon execution of this Lease, Tenant shall deposit with Landlord the
amount of the security deposit set forth in Section 1 in part as security for
the performance by Tenant of the provisions of this Lease.-----If tenant is in
default, Landlord can use the security deposit or any portion of it to cure the
default or to compensate Landlord for all damage sustained by landlord resulting
from Tenant's default. Upon demand, Tenant shall immediately pay to Landlord a
sum equal to the portion of the security deposit expended or applied by Landlord
to maintain the security deposit in the amount initially deposited with
Landlord. In no event will Tenant have the right to apply any part of the
security deposit to any rent or other sums due under this Lease. If Tenant is
not in default at the expiration or termination of this Lease, Landlord shall
return the entire security deposit to Tenant.--------------- Landlord's
obligations with respect to the deposit are those of a debtor and not of a
trustee, and Landlord can commingle the security deposit with Landlord's general
funds. Landlord shall not be required to pay Tenant interest on the deposit.
Landlord shall be entitled to immediately endorse and cash Tenant's prepaid
deposit; however, such endorsement and cashing shall not constitute Landlord's
acceptance of this Lease. In the event Landlord does not accept this Lease,
Landlord shall return said prepaid deposit. Should Landlord sell its interest in
the Premises during the term hereof and if Landlord deposits with the purchaser
thereof the then unappropriated funds deposited by Tenant as aforesaid,
thereupon Landlord shall be discharged from any further liability with respect
to the Security Deposit.
8. USE.
Tenant shall use the Premises for the uses set forth in Section 1
above, and shall not use or permit the Premises to be used for any other purpose
without the prior written consent of Landlord. Nothing contained herein shall be
deemed to give Tenant any exclusive right to such use in the Building. Tenant
shall not use or occupy the Premises in violation of law or of the Certificate
of Occupancy issued for the Building, and shall, upon written notice from
Landlord, discontinue any use of the Premises which is declared by any
governmental authority having jurisdiction to be a violation of law or of said
Certificate of Occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
thereof. Tenant shall comply with all rules, orders, regulations and
requirements of the Insurance Service Office or any other organization
performing a similar function. Tenant shall promptly, upon demand, reimburse
Landlord for any additional premium charged for such policy by reason of
Tenant's failure to comply with the provisions of this Paragraph. Tenant shall
not do or permit anything to be done in or about the Premises which will in any
way obstruct or interfere with the rights of other tenants or occupants of the
Project, or injure or annoy them, or use or allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about
4
<PAGE> 6
the Premises. Tenant shall comply with all restrictive covenants and obligations
created by private contracts which affect the use and operation of the Premises,
the Building, the Common Area or the Project. Subject to Paragraph 23 hereof,
tenant shall not commit or suffer to be committed any waste in or upon the
Premises and shall keep the Premises in first class repair and appearance normal
wear and tear excepted. Landlord reserves the right to prescribe the weight and
position of all files, safes and heavy equipment which Tenant desires to place
in the Premises so as to properly distribute the weight thereof. Further,
Tenant's business machines and mechanical equipment which cause vibration or
noise that may be transmitted to the building structure or to any other space in
the building shall be so installed, maintained and used by Tenant as to
eliminate such vibration or noise. Tenant shall be responsible for all
engineering required to determine structural load.
9. NOTICES.
Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail, and if given by mail
shall be deemed sufficiently given if sent by registered or certified mail
addressed to Tenant at the address(es) designated in Section 1 or to Landlord at
both of the addresses designated in Section 1. Either party may specify a
different address for notice purposes by written notice to the other.
10. BROKERS.
Tenant warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease, except for those
certain brokers whose names are set forth in Section 1 and that it knows of no
other real estate broker or agent who is or might be entitled to a commission in
connection with this Lease. If Tenant has dealt with any other person or real
estate broker with respect to leasing or renting space in the Project, Tenant
shall be solely responsible for the payment of any fee due said person or firm
and Tenant shall hold Landlord free and harmless against any liability in
respect thereto, including attorneys' fees and costs.
11. HOLDING OVER.
If Tenant holds over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord, Tenant shall become
a Tenant at sufferance only, at a rental rate equal to the greater of Landlord's
scheduled rent for the space or one hundred twenty-five percent (125%) of the
rent in effect upon the date of such expiration (subject to adjustment as
provided in Paragraph 6 hereof and prorated on a daily basis), and otherwise
subject to the terms, covenants and conditions herein specified, so far as
applicable. Acceptance by Landlord of rent after such expiration or earlier
termination shall not result in a renewal of this Lease. The foregoing
provisions of this Paragraph 11 are in addition to and do not affect Landlord's
right of re-entry or any rights of Landlord hereunder or as otherwise provided
by law. If Tenant fails to surrender the Premises upon the expiration of this
Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or liability, including without limitation, any
claim made by any succeeding tenant founded on or resulting from such failure to
surrender and any attorneys fees and costs.
12. TAXES ON TENANT'S PROPERTY.
a. Tenant shall be liable for and shall pay at least ten (10) days before
delinquency all taxes levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property or if the assessed value of the Premises is increased by the inclusion
therein of a value placed upon such personal property or trade fixtures of
Tenant and if Landlord, after written notice to Tenant, pays the taxes based
upon such increased assessment, which Landlord shall have the right to do
regardless of the validity thereof, but only under proper protest if requested
by Tenant, Tenant shall, upon demand, repay to Landlord the taxes so levied
against Landlord, or the portion of such taxes resulting from such increase in
the assessment.
- -------------------------------------------------------------------------------
13. CONDITION OF PREMISES.
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises, the building
or the Project or with respect to the suitability of either for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the building were in satisfactory
condition at such time. Without limiting the foregoing, Tenant's execution of
the Notice attached hereto as EXHIBIT "C" shall constitute a specific
acknowledgement and acceptance of the various start-up inconveniences that may
be associated with the use of the Common Areas such as certain construction
obstacles including scaffolding, delays in use of freight elevator service,
certain elevators not being available to Tenant, the passage of work crews using
elevators, uneven air conditioning services and other typical conditions
incident to recently constructed office buildings.
14. ALTERATIONS
a. Tenant shall make no alterations, additions or improvements in or to the
Premises without Landlord's prior written consent,* and then only by contractors
or mechanics approved by Landlord; such consents and approvals by Landlord shall
not be unreasonably withheld or delayed Tenant shall submit to Landlord plans
and specifications for any proposed alterations, additions or improvements to
the Premises, and may not make such alterations, additions or improvements until
Landlord has approved of such plans and specifications. Tenant shall construct
such alterations, additions or improvements in accordance with the plans and
specifications approved by Landlord, and shall not amend or modify such plans
and specifications without Landlord's prior written consent. If the proposed
change requires the consent or approval of any lessor of a superior lease, or
the holder of a mortgage encumbering the Premises, such consent or approval must
be secured prior to the construction of such alteration, addition or improvement
and Landlord agrees to cooperate in obtaining any such consent or approval.
Tenant agrees that there shall be no construction of partitions or other
obstructions which might interfere with Landlord's free access to mechanical
installations or service facilities of the building or interfere with the moving
of Landlord's equipment to or from the enclosures containing said installations
or facilities. All such work shall be done at such times and in such manner as
Landlord may from time to time designate. Tenant covenants and agrees that all
work done by Tenant shall be performed in full compliance with all laws, rules,
orders, ordinances, regulations and requirements of all governmental agencies,
offices and boards having jurisdiction, and in full compliance with the rules,
regulations and requirements of the Insurance Service Office, and of any similar
body. Before commencing any work, Tenant shall give Landlord at least ten (10)
days written notice of the proposed commencement of such work and shall, if
required by Landlord, ** secure at Tenant's own
*unless such alterations, additions, or improvements are less than a cost of
Five Thousand and No/100 Dollars ($5,000.00),
**and other than for the work described in the Work Letter Agreement of even
date herewith
5
<PAGE> 7
cost and expense, a completion and lien indemnity bond satisfactory to Landlord
for said work if said work costs more than $100,000. Tenant further covenants
and agrees that any mechanic's lien filed against the Premises or against the
Building for work claimed to have been done for, or materials claimed to have
been furnished to Tenant, will be discharged by Tenant, by bond or otherwise,
within (10) ten days after the filing thereof, at the cost and expense of
Tenant. All alterations, additions or improvements upon the Premises made by
either party, including (without limiting the generality of the foregoing) all
wall covering, built-in cabinet work, paneling and the like, shall, become the
property of Landlord, and shall remain upon, and be surrendered with the
Premises, as a part thereof, at the end of the term hereof.)
b. All articles of personal property and all business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the
property of Tenant and may be removed by Tenant at any time during the lease
term. If Tenant shall fail to remove all of its effects from the Premises upon
termination of this Lease for any cause whatsoever, Landlord may, at its option,
remove the same in any manner that Landlord shall choose, and store said effects
without liability to Tenant for loss thereof. In such event, Tenant agrees to
pay Landlord upon demand any and all expenses incurred in such removal,
including court costs and attorneys' fees and storage charges on such effects,
for any length of time that the same shall be in Landlord's possession. Landlord
may, at its option, without notice, sell said effects, or any of the same, at
private sale and without legal process, for such price as Landlord may obtain
and apply the proceeds of such sale upon any amounts due under this Lease from
Tenant to Landlord and upon the expense incident to the removal and sale of said
effects.
15. REPAIRS.
a. By entry hereunder, Tenant accepts the Premises as being in good and sanitary
order, condition and repair. Subject to Paragraph 23 hereof Tenant shall keep,
maintain and preserve the Premises in first class condition and repair, normal
wear and tear excepted and shall, when and if needed, at Tenant's sole cost and
expense, make all repairs to the Premises and every part thereof. Tenant shall,
upon the expiration or sooner termination of the term hereof, surrender the
Premises to Landlord in the same condition as when received, usual and ordinary
wear and tear excepted. Landlord shall have no obligation to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof. The parties
hereto affirm that Landlord has made no representations to Tenant respecting the
condition of the Premises, the building, the Project or the Common Area except
as specifically herein set forth.
b. Anything contained in Paragraph 15a above to the contrary notwithstanding,
Landlord shall repair and maintain the structural portions of the building and
the plumbing, heating, ventilating, air conditioning, elevator and electrical
systems installed or furnished by Landlord, unless such maintenance and repairs
are caused in part or in whole by the act, neglect or omission of any duty by
Tenant, its agents, servants, employees or invitees, in which case Tenant shall
pay to Landlord, as additional rent, the reasonable cost of such maintenance and
repairs. Landlord shall not be liable for any failure to make any such repairs
or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in Paragraph 23
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements in or to any portion of the
building or the Premises or in or to fixtures, appurtenances and equipment
therein. Tenant waives the right to make repairs at Landlord's expense under any
law, statute or ordinance now or hereafter in effect.
16. LIENS.
Tenant shall not permit any mechanics', materialmens' or other liens to
be filed against the building or the Project nor against Tenant's leasehold
interest in the Premises. Landlord shall have the right at all reasonable times
to post and keep posted on the Premises any notices which it deems necessary for
protection from such liens. If any such liens are filed, Landlord may, without
waiving its rights and remedies based on such breach of Tenant and without
releasing Tenant from any of its obligations, cause such liens to be released by
any means it shall deem proper, including payments in satisfaction of the claim
giving rise to such lien. Tenant shall pay to Landlord at once, upon notice by
Landlord, any sum paid by Landlord to remove such liens, together with interest
at the maximum rate per annum permitted by law from the date of such payment by
Landlord.
17. ENTRY BY LANDLORD.
Landlord reserves and shall at any and all times (except as provided
below) have the right to enter the Premises to inspect the same upon reasonable
prior notice to Tenant, to supply janitor service and any other service to be
provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers or tenants upon reasonable prior notice to Tenant, to post notices of
nonresponsibility, to alter improve or repair the Premises or any other portion
of the Building* all without being deemed guilty of any eviction of Tenant and
without abatement of rent. Landlord may, in order to carry out such purposes,
erect scaffolding and other necessary structures where reasonably required by
the character of the work to be performed, provided that the business of Tenant
shall be interfered with as little as reasonably practicable. Tenant hereby
waives any claim for damages for any injury or inconvenience to or interference
with Tenant's business, any loss of occupancy or quiet enjoyment of the
Premises, and any other loss in, upon and about the Premises. Landlord shall at
all times have and retain a key with which to unlock all doors in the Premises,
excluding Tenant's vaults and safes. Landlord shall have the right to use any
and all means which Landlord may deem proper to open said doors in an emergency
in order to obtain entry to the Premises. Any entry to the Premises obtained by
Landlord by any of said means, or otherwise, shall not be construed or deemed to
be a forcible or unlawful entry into the Premises, or an eviction of Tenant from
the Premises or any portion thereof, and any damages caused on account thereof
shall be paid by Tenant. It is understood and agreed that no provision of this
Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decorations except as otherwise expressly agreed herein by
Landlord.
18. UTILITIES AND SERVICES.
Provided that Tenant is not in default under this Lease, Landlord agrees
to furnish or cause to be furnished to the Premises the utilities and services
described in the Standards for Utilities and Services, attached hereto as
EXHIBIT "D", subject to the conditions and in accordance with the standards set
forth therein. Landlord's failure to furnish any of the foregoing items when
such failure is caused by (i) accident, breakage or repairs; (ii) strikes,
lockouts or other labor disturbance or labor dispute of any character; (iii)
governmental regulation, moratorium or other governmental action; (iv) inability
despite the exercise of reasonable diligence to obtain electricity, water or
fuel; or by (v) any other cause beyond Landlord's reasonable control, shall not
result in any liability to Landlord. In addition, Tenant shall not be entitled
to any abatement or reduction of rent by reason of such failure, no eviction of
Tenant shall result from such failure and Tenant shall not be relieved from the
performance of any covenant or agreement in this Lease because of such failure.
In the event of any failure, stoppage or interruption thereof, Landlord shall
diligently attempt to resume service promptly. If Tenant requires or utilizes
more water or electrical power than is considered reasonable or normal by
Landlord, Landlord may at its option require Tenant to pay, as additional rent,
the cost, as fairly determined by Landlord, incurred by such extraordinary
usage. In addition, Landlord may install separate meter(s) for the Premises, at
Landlord's sole expense, and Tenant thereafter shall pay all charges of the
utility providing service and Landlord shall make an appropriate adjustment to
account for the fact Tenant is directly paying such metered charges.
* (with reasonable prior notice to Tenant for non-routine repairs and
maintenance)
6
<PAGE> 8
19. BANKRUPTCY.
If Tenant shall file a petition in bankruptcy under any provision of
the Bankruptcy Code as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall not
have been vacated within thirty (30) days from the date thereof, or if a
receiver or trustee shall be appointed of Tenant's property and the order
appointing such receiver of trustee shall not be set aside or vacated within
thirty (30) days after the entry thereof, or if Tenant shall assign Tenant's
estate or effects for the benefit of creditors, then in any such event Landlord
may terminate this Lease, if Landlord so elects, with or without notice of such
election and with or without entry or action by Landlord. In such case,
notwithstanding any other provisions of this Lease, Landlord, in addition to any
and all rights and remedies allowed by law or equity, shall, upon such
termination, be entitled to recover damages in the amount provided in Paragraph
25b hereof. Neither Tenant nor any person claiming through or under Tenant or by
virtue of any statute or order of any court shall be entitled to possession of
the Premises but shall surrender the Premises to Landlord. Nothing contained
herein shall limit or prejudice the right of Landlord to recover damages by
reason of any such termination equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in which,
such damages are to be proved; whether or not such amount is greater, equal to
or less than the amount of damages recoverable under the provisions of this
Paragraph 19.
20. INDEMNIFICATION AND EXCULPATION OF LANDLORD.
a. Tenant shall indemnify, defend and hold Landlord harmless from all claims
arising from Tenant's use of the Premises or the conduct of its business or from
any activity, work or thing done, permitted or suffered by Tenant in or about
the Premises, the Building, the Project or the Common Area.** Tenant shall
further indemnify, defend and hold Landlord harmless from all claims arising
from any breach or default in the performance of any obligation to be performed
by Tenant under the terms of this Lease, or arising from any act, neglect, fault
or omission of Tenant or of its agents or employees, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or about such claim
or any action or proceeding brought thereon. In case any action or proceeding
shall be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
approved in writing by Landlord. Tenant, as a material part of the consideration
to Landlord, hereby assumes all risk of damage to property or injury to person
in, upon or about the Premises from any cause whatsoever except that which is
caused by the failure of Landlord to observe any of the terms and conditions of
this Lease where such failure has persisted for an unreasonable period of time
after written notice of such failures. Tenant hereby waives all its claims in
respect thereof against Landlord.
b. Neither Landlord nor any partner, director, officer, agent or employee of
Landlord shall be liable to Tenant or its partners, directors, officers,
contractors, agents, employees, invitees, sublessees or licensees, for any
loss, injury or damage to Tenant or to any other person, or to its or their
property, irrespective of the cause of such injury, damage or loss, unless
solely caused by or solely resulting from the gross negligence or willful
misconduct of Landlord or its employees or agents in the operation or
maintenance of the Premises, the building, or the Project without contributory
negligence on the part of Tenant or any of its sublessees or licensees or its
or their employees, agents or contractors, or any other lessees or occupants of
the building or Project. Further, neither Landlord nor any partner, director,
officer, agent or employee of Landlord shall be liable (i) for any such damage
caused by other lessees or persons in or about the building or Project, or
caused by quasi-public work; or (ii) for consequential damages arising out of
any loss of the use of the Premises of any equipment or facilities therein by
Tenant or any person claiming through or under Tenant.
21. DAMAGE TO TENANT'S PROPERTY.
* Notwithstanding the provisions of Paragraph 20 to the contrary, Landlord or
its agents shall not be liable for (i) any damage to any property entrusted to
employees of the building or Project, (ii) loss or damage to any property by
theft or otherwise, (iii) any injury or damage to persons or property resulting
from fire, explosion, falling plaster, steam, gas, electricity, water or rain
which may leak from any part of the building or from the pipes, appliances or
plumbing work therein or from the roof, street or sub-surface or from any other
place or resulting from dampness or any other cause whatsoever. Landlord or its
agents shall not be liable for interference with light or other incorporeal
hereditaments, nor shall Landlord be liable for any latent defect in the
Premises or in the building. Tenant shall give prompt notice to Landlord in case
of fire or accidents in the Premises or in the building or of defects therein or
in the fixtures or equipment.
22. TENANT'S INSURANCE.
a. Tenant shall, during the term hereof and any other period of occupancy, at
its sole cost and expense, keep in full force and effect the following
insurance:
(1) Standard form property insurance insuring against the perils of
fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All-Risk") and sprinkler leakage. This insurance policy shall be upon
all property owned by Tenant, for which Tenant is legally liable or that was
installed at Tenant's expense, and which is located in the Project including,
without limitation, furniture, fittings, installations, fixtures (other than
Tenant improvements installed by Landlord), and any other personal property, in
an amount not less than ninety percent (90%) of the full replacement cost
thereof. In the event that there shall be a dispute as to the amount which
comprises full replacement cost, the decision of Landlord or any mortgagees of
Landlord shall be conclusive. This insurance policy shall also be upon direct or
indirect loss of Tenant's earnings attributable to Tenant's inability to use
fully or obtain access to the Premises, Building or Project in an amount as will
properly reimburse Tenant. Such policy shall name Landlord and any mortgagees of
Landlord as insured parties, as their respective interests may appear.
(2) Comprehensive General Liability Insurance insuring Tenant against
any liability arising out of the lease, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $1,000,000 Combined Single Limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence, with such liability amount to be adjusted from
year to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of the Premises and Tenant's Operations thereon, independent
contractors, contractual liability (covering the indemnity contained in
Paragraph 20 hereof) and shall (a) name Landlord as an additional insured, (b)
contain a cross liability provision and (c) contain a provision that the
insurance provided the Landlord hereunder shall be primary and non-contributing
with any other insurance available to the Landlord.
(3) Workers' Compensation and Employer's Liability insurance (as
required by state law).
(4) Any other form or forms of insurance as Tenant or Landlord or any
mortgagees of Landlord may reasonably require from time to time in form, in
amounts and for insurance risks against which a prudent tenant would protect
itself.
b. All policies shall be written in a form satisfactory to Landlord and
shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the most
current issue of Best's Insurance Reports. Within ten (10) days after the
execution of this Lease, Tenant shall deliver to Landlord copies of policies or
certificates evidencing the existence of the amounts and forms of coverage
satisfactory to Landlord. No such policy shall be cancellable or reducible in
coverage except after thirty (30) days prior written notice to Landlord. Tenant
shall, within ten (10) days prior to the expiration of such policies, furnish
Landlord with renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereof to Tenant as additional rent. If Landlord
obtains any insurance that is the responsibility of Tenant under this Paragraph,
Landlord shall deliver to Tenant a written statement setting forth the cost of
any such insurance and showing in reasonable detail the manner in which it has
been computed.
* Except to the extent of Landlord's or its employees' or agents' gross
negligence or willful misconduct,
7
** Except to the extent of Landlord's or its employees' or agents'
negligence or willful misconduct,
<PAGE> 9
c. During the term of this Lease, Landlord shall insure the Building (excluding
any property which Tenant is obligated to insure under Subparagraphs 22a and b
hereof) against damage with All-Risk insurance and public liability insurance,
all in such amounts and with such deductions as Landlord considers appropriate.
Upon written request of Tenant with reference to this Subparagraph 22c,
Landlord shall provide Tenant with a copy of a certificate of Landlord's
insurance. Landlord may, but shall not be obligated to, obtain and carry any
other form or forms of insurance as it or Landlord's mortgagees may determine
advisable. Notwithstanding any contribution by Tenant to the cost of insurance
premiums, as provided herein, Tenant acknowledges that it has no right to
receive any proceeds from any insurance policies carried by Landlord.
d. Tenant will not keep, use, sell or offer for sale in or upon the Premises any
article which may be prohibited by any insurance policy periodically in force
covering the Building. If Tenant's occupancy or business in, or on, the
Premises, whether or not Landlord has consented to the same, results in any
increase in premiums for the insurance periodically carried by Landlord with
respect to the Building, Tenant shall pay any such increase in premiums as
additional rent within ten (10) days after being billed therefore by Landlord.
In determining whether increased premiums are a result of Tenant's use of the
Premises, a schedule issued by the organization computing the insurance rate on
the Building or the Tenant Improvements showing the various components of such
rate, shall be conclusive evidence of the several items and charges which make
up such rate. Tenant shall promptly comply with all reasonable requirements of
the insurance authority or any present or future insurer relating to the
Premises.
e. If any of Landlord's insurance policies shall be cancelled or cancellation
shall be threatened or the coverage thereunder reduced or threatened to be
reduced in any way because of the use of the Premises or any part thereof by
Tenant or any assignee or subtenant of Tenant or by anyone Tenant permits on the
Premises and, if Tenant fails to remedy the condition giving rise to such
cancellation, threatened cancellation, reduction of coverage, threatened
reduction of coverage, increase in premiums, or threatened increase in premiums,
within forty-eight (48) hours after notice thereof, Landlord may, at its option,
either terminate this Lease or enter upon the Premises and attempt to remedy
such condition, and Tenant shall promptly pay the cost thereof to Landlord as
additional rent. Landlord shall not be liable for any damage or injury caused to
any property of Tenant or of others located on the Premises resulting from such
entry. If Landlord is unable, or elects not to remedy such condition, then
Landlord shall have all of the remedies provided for in this Lease in the event
of a default by Tenant. Notwithstanding the foregoing provisions of this
Subparagraph 22e, if Tenant fails to remedy as aforesaid, Tenant shall be in
default of its obligation hereunder and Landlord shall have no obligation to
remedy such default.
f. All policies of insurance required hereunder shall include a clause or
endorsement denying the insurer any rights of subrogation against the other
party to the extent rights have been waived by the insured before the
occurrence of injury or loss. Landlord and Tenant waive any rights of recovery
against the other for injury or loss due to hazards covered by policies of
insurance containing such a waiver of subrogation of clause or endorsement to
the extent of the injury or loss covered thereby.
See Addendum "1" Item 8.
-------------------------------
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8
<PAGE> 10
24. EMINENT DOMAIN.
a. In case all of the Premises, or such part thereof as shall substantially
interfere with Tenant's use and occupancy thereof, shall be taken for any public
or quasi-public purpose by any lawful power or authority by exercise of the
right of appropriation, condemnation or eminent domain, or sold to prevent such
taking, either party shall have the right to terminate this Lease effective as
of the date possession is required to be surrendered to said authority. Tenant
shall not assert any claim against Landlord or the taking authority for any
compensation because of such taking, and Landlord shall be entitled to receive
the entire amount of any award without deduction for any estate or interest of
Tenant. In the event the amount of property or the type of estate taken shall
not substantially interfere with the conduct of Tenant's business, Landlord
shall be entitled to the entire amount of the award without deduction for any
estate or interest of Tenant, Landlord shall restore the Premises to
substantially their same condition prior to such partial taking, and a
proportionate allowance shall be made to Tenant for the rent corresponding to
the time during which, and to the part of the Premises of which, Tenant shall be
so deprived on account of such taking and restoration. Nothing contained in this
paragraph shall be deemed to give Landlord any interest in any award made to
Tenant for the taking of personal property and fixtures belonging to Tenant or
for moving expenses or for the unamortized portion of tenant improvements paid
for by Tenant.
b. In the event of taking of the Premises or any part thereof for temporary use,
(1) this Lease shall be and remain unaffected thereby and rent shall not abate,
and (2) Tenant shall be entitled to receive for itself such portion or portions
of any award made for such use with respect to the period of the taking which is
within the term, provided that if such taking shall remain in force at the
expiration or earlier termination of this Lease, Tenant shall then pay to
Landlord a sum equal to the reasonable cost of performing Tenant's obligations
under Paragraph 15 with respect to surrender of the Premises and upon such
payment shall be excused from such obligations. For purpose of this Subparagraph
24b, a temporary taking shall be defined as a taking for a period of 270 days or
less.
25. DEFAULTS AND REMEDIES.
a. The occurrence of any one or more of the following events shall constitute a
default hereunder by Tenant:
(1) The ------------------------ abandonment of the Premises by Tenant.
Abandonment is herein defined to include, but is not limited to, any absence by
Tenant from the Premises for ten (10) business days or longer while in default
of any provision of this Lease.
(2) The failure by Tenant to make any payment of rent or additional rent
or any other payment required to be made by Tenant hereunder, ----------------
within five days after notice to Tenant that such payment is due.
(3) The failure by Tenant to observe or perform any of the express or
implied covenants or provisions of this Lease to be observed or performed by
Tenant, other than as specified in Subparagraph 25a.(1) or (2) above, where such
failure shall continue for a period of ten (10) days after written notice
thereof from Landlord to Tenant. If the nature of Tenant's default is such that
more than ten (10) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such cure within said
ten (10) day period and thereafter diligently prosecute such cure to completion.
(4) The making by Tenant of any general assignment for the benefit of
creditors; the filing by or against Tenant of a petition to have Tenant adjudged
a bankrupt or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
the same is dismissed within thirty (30) days); the appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within thirty (30) days; or the attachment, execution or
other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease where such seizure is not
discharged within thirty (30) days.
*
b. In the event of any such default by Tenant, in addition to any other remedies
available to Landlord at law or in equity, Landlord shall have the immediate
option to terminate this Lease and all rights of Tenant hereunder. In the event
that Landlord shall elect to so terminate this Lease then Landlord may recover
from Tenant:
(1) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(2) 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 Tenant proves could have been
reasonable avoided, plus
(3) 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 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.
As used in Subparagraphs 25b (1) and (2) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law. As
used in Subparagraph 25b (3) above, the "worth at the time of award" 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%).
c. In the event of any such default by Tenant, Landlord shall also have the
right, with or without terminating this Lease to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. No re-entry or taking possession of the Premises by Landlord pursuant
to this paragraph 25c shall be construed as an election to terminate this Lease
unless a written notice of such intention is given to Tenant or unless the
termination thereof is decreed by a court of competent jurisdiction.
d. In the event of the ------------- abandonment of the Premises by Tenant or
in the event that Landlord shall elect to re-enter as provided above or shall
take possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, then if Landlord does not elect to terminate this Lease
as provided above, Landlord may from time to time, without terminating this
Lease, either recover all rent as it becomes due or relet the Premises or any
part thereof for the term for this Lease on terms and conditions as Landlord in
its sole discretion may deem advisable with the right to make alterations and
repairs to the Premises.
In the event that Landlord shall elect to so relet, then rentals received by
Landlord from such relenting shall be applied: first, to the payment of any
indebtedness other than rent due hereunder from Tenant to Landlord; second, to
the payment of any cost of such reletting; third, to the payment of the cost of
any alterations and repairs to the Premises, fourth, to the payment of rent due
and unpaid hereunder and the residue, if any, shall be held by Landlord and
applied to payment of future rent as the same may become due and payable
hereunder. Should that portion of such rentals received from such reletting
during any month, which is applied to the payment of rent hereunder, be less
than the rent payable during that month by Tenant hereunder then Tenant
* (5) A default by Tenant under the lease of even date herewith with
Landlord for Suite 400.
9
<PAGE> 11
shall pay such deficiency to Landlord immediately upon demand therefore by
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred,
including but not limited to brokers' commissions, by Landlord in such reletting
or in making such alterations and repairs not covered by the rentals received
from such reletting.
e. All rights, options and remedies of Landlord contained in this Lease shall be
construed and held to be cumulative, and no one of them shall be exclusive of
the other, and Landlord shall have the right to pursue any one or all of such
remedies or any other remedy or relief which may be provided by law, whether or
not stated in this Lease. No waiver of any default of Tenant hereunder shall be
implied from any acceptance by Landlord of any rent or other payments due
hereunder or any omission by Landlord to take any action on account of such
default if such default persists or is repeated, and no express waiver shall
affect defaults other than as specified in said waiver. The consent or approval
of Landlord to or of any act by Tenant requiring Landlord's consent or approval
shall not be deemed to waive or render unnecessary Landlord's consent to or
approval of any subsequent similar acts by Tenant.
26. ASSIGNMENT AND SUBLETTING.
a. Tenant shall not voluntarily assign or encumber its interest in this Lease or
in the Premises or sublease all or any part of the Premises, or allow any other
person or entity to occupy or use all or any part of the Premises, without first
obtaining Landlord's prior written consent which shall not be unreasonably
withheld or delayed. Any assignment, encumbrance or sublease without Landlord's
prior written consent shall be voidable at Landlord's election and shall
constitute a default. ----------------- No consent to an assignment, encumbrance
or sublease shall constitute a further waiver of the provisions of this
Paragraph. Tenant shall notify Landlord in writing of Tenant's intent to assign,
encumber or sublease this Lease, the name of the proposed assignee or sublessee,
information concerning the financial responsibility of the proposed assignee or
sublessee and the terms of the proposed assignment or subletting, and Landlord
shall, within thirty (30) days of receipt of such written notice, and additional
information requested by Landlord concerning the proposed assignee's or
sublessee's financial responsibility, elect one of the following: (1) consent to
such proposed assignment, encumbrance or sublease; or (2) refuse such consent,
which refusal shall be on reasonable grounds; ---------------- In addition, a
condition to Landlord's consent to any assignment, transfer or hypothecation of
this Lease shall be the delivery to Landlord of a true copy of the fully
executed instrument of assignment, transfer or hypothecation, and the delivery
to Landlord of an agreement executed by the assignee in form and substance
satisfactory to Landlord and expressly enforceable by Landlord, whereby the
assignee assumes and agrees to be bound by all of the terms and provisions of
this Lease and to perform all of the obligations of Tenant hereunder.
b. As a condition to Landlord's consent to any sublease, such sublease shall
provide that it is subject and subordinate to this Lease and to all mortgages;
that Landlord may enforce the provisions of the sublease, including collection
of rent; that in the event of termination of this Lease for any reason,
including without limitation a voluntary surrender by Tenant, or in the event of
any reentry or repossession of the Premises by Landlord, Landlord may, at its
option, either (1) terminate the sublease or (2) take over all of the right,
title and interest of Tenant, as sublessor, under such sublease, in which case
such sublessee shall attorn to Landlord, but that nevertheless Landlord shall
not (1) be liable for any previous act or omission of Tenant under such
sublease, (2) be subject to any defense or offset previously accrued in favor of
the sublessee against Tenant, or (3) be bound by any previous modification of
any sublease made without Landlord's written consent, or by any previous
prepayment by sublessee of more than one month's rent.
c. In the event that Landlord shall consent to an assignment or sublease under
the provisions of this Paragraph 26, Tenant shall pay Landlord's processing
costs and attorneys' fees incurred in giving such consent. If Landlord shall
consent to any assignment of this Lease, Tenant shall pay to Landlord, as
additional rent, * ------------- of all sums and other considerations payable to
and for the benefit of Tenant by the assignee on account of the assignment, as
and when such sums and other consideration ** are due and payable by the
assignee to or for the benefit of Tenant (or, if Landlord so requires, and
without any release of Tenant's liability for the same, Tenant shall instruct
the assignee to pay such sums and other consideration directly to Landlord). If
for any proposed sublease Tenant receives rent or other consideration, either
initially or over the term of the sublease, in excess of the rent called for
hereunder or, in case of the sublease of a portion of the Premises, in excess of
such rent fairly allocable to such portion, after appropriate adjustments to
assure that all other payments called for hereunder are taken into account.
Tenant shall pay to Landlord as additional rent hereunder * -------------- of
the excess of each such payment of rent or other consideration received by
Tenant** promptly after its receipt, Landlord's waiver or consent to any
assignment or subletting shall not relieve Tenant or any assignee or sublessee
from any obligation under this Lease whether or not accrued. Occupancy of all or
part of the Premises by parent or subsidiary companies of Tenant not be deemed
an assignment or subletting.
- -------------------------------------------------------------------------------
*one-half (112)
27. SUBORDINATION.
***
a. Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, and at the election of Landlord or any
mortgagee with a lien on the building or any ground lessor with respect to the
building, this Lease shall be subject and subordinate at all times to:
(1) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the building or the land upon which the building is
situated or both; and
(2) the lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the building, land, ground leases
or underlying leases, or Landlord's interest or estate in any of said items is
specified as security.
***
b. Notwithstanding the foregoing, Landlord shall have the right to subordinate
or cause to be subordinated any such ground leases or underlying leases or any
such liens to this Lease. In the event that any ground lease or underlying lease
terminates
** after Tenant's recovery of reasonable, actual, out-of-pocket expenses in
connection with such assignment or sublease (including, without limitation, a
subtenant improvement allowance) and other monetary concessions
*** Subject to Addendum 1, Item 2,
10
<PAGE> 12
for any reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord, at the option of such successor in interest. Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in the form requested
by Landlord, any additional documents evidencing the priority of subordination
of this Lease with respect to any such ground leases or underlying leases or the
lien of any such mortgage or deed of trust. Should Tenant fail to sign and
return any such documents within ten (10) business days of request Tenant shall
be in default, and Landlord may, at Landlord's option, terminate the Lease
provided written notice of such termination is received by Tenant prior to
Landlord's receipt of such documents. Tenant hereby irrevocably appoints
Landlord as attorney-in-fact of Tenant to execute, deliver and record any such
document in the name and on behalf of Tenant.
28. ESTOPPEL CERTIFICATE.
a. Within ten (10) days following any written request which Landlord may make
from time to time, Tenant shall execute and deliver to Landlord a statement, in
a form substantially similar to the form of Exhibit "E", certifying: (1) the
date of commencement of this Lease; (2) the fact that this Lease is unmodified
and in full force and effect (or, if there have been modifications hereto, that
this Lease is in full force and effect, and stating the date and nature of such
modifications); (3) the date to which the rental and other sums payable under
this Lease have been paid; (4) that there are no current defaults under this
Lease by either Landlord or Tenant except as specified in Tenant's statement;
and (5) such other matters requested by Landlord. Landlord and Tenant intend
that any statement delivered pursuant to this Paragraph 28 may be relied upon by
any mortgagee, beneficiary, purchaser or prospective purchaser of the Building
or any interest therein.
b. Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (1) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (2) that there are no
uncured defaults in Landlord's performance, and (3) that not more than one (1)
month's rental has been paid in advance. Tenant's failure to deliver said
statement to Landlord within ten (10) working days of receipt shall constitute a
default under this Lease and Landlord may, at Landlord's option, terminate the
Lease, provided written notice of such termination is received by Tenant prior
to Landlord's receipt of said statement.
- ------------------------------------------------------------------------------
30. RULES AND REGULATIONS.
Tenant shall faithfully observe and comply with the "Rules and
Regulations", a copy of which is attached hereto and marked Exhibit "F", and all
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord shall not be responsible
to Tenant for the violation or non-performance by any other tenant or occupant
of the building or Project of any of said Rules and Regulations.
31. CONFLICT OF LAWS.
This Lease shall be governed by and construed pursuant to the laws of the
state in which the premises are located.
32. SUCCESSORS AND ASSIGNS.
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
33. SURRENDER OF PREMISES.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies. Upon the expiration or termination of this Lease, Tenant shall
peaceably surrender the Premises and all alterations and additions thereto,
broom clean the Premises, leave the Premises in good order, repair and
condition, reasonable wear and tear excepted, and comply with the provisions of
Paragraph 15. The delivery of keys to any employee of Landlord or to Landlord's
agent or any employee thereof shall not be sufficient to constitute a
termination of this Lease or a surrender of the Premises.
34. PROFESSIONAL FEES.
a. If Landlord should bring suit for possession of the Premises, for the
recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder, or
in the event of any other litigation or appeal between the parties with respect
to this lease, then all costs and expenses, including without limitation, its
actual professional fees such as appraisers', accountants' and attorneys' fees,
incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment. If Landlord employs a collection agency to
recover delinquent charges, Tenant agrees to pay all collection agency fees
charged to Landlord in addition to rent, late charges, interest and other sums
payable under this Lease. Tenant shall pay a charge of $75 to Landlord for
preparation of a demand for delinquent rent.
b. If Landlord is named as a defendant in any suit or appeal brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees.
35. PERFORMANCE BY TENANT.
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any sum
of money owed to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue for ten (10) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, making any such
payment or perform any such other act to be made or performed by Tenant. All
sums so paid by Landlord and all necessary incidental costs together with
interest thereon at the maximum rate permissible by law, from the date of such
payment by Landlord, shall be payable to Landlord on demand. Tenant covenants to
pay any such sums, and Landlord shall have (in addition to any other right or
remedy of Landlord) all rights and remedies in the event of the non-payment
thereof by Tenant as are set forth in Paragraph 25.
11
<PAGE> 13
36. MORTGAGEE PROTECTION.
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity
to cure the default, including time to obtain possession of the Premises by
power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure.
37. DEFINITION OF LANDLORD.
The term "Landlord," as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title of
the Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment or other conveyance or transfers of any such title,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed. Without further agreement, the transferee
of such title shall be deemed to have assumed and agreed to observe and perform
any and all obligations of Landlord hereunder, during its ownership of the
Premises. Landlord may transfer its interest in the Premises without the consent
of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on Landlord's part of any of the terms and conditions of this Lease.
38. WAIVER.
The waiver by Landlord of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of any subsequent breach of
the same or any other term, covenant or condition herein contained, nor shall
any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of or in any way affect
the right of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such rent. No acceptance by
Landlord of a lesser sum than the basic rental and additional rent or other sum
then due shall be deemed to be other than on account of the earliest installment
of such rent or other amount due, nor shall any endorsement or statement on any
check or any letter accompanying any check 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 installment or other amount or pursue any
other remedy in this Lease provided.
39. IDENTIFICATION OF TENANT.
If more than one person executes this lease as Tenant, (1) each of them is
jointly and severally liable for the keeping, observing and performing of all of
the terms, covenants, conditions, provisions and agreements of this Lease to be
kept, observed and performed by Tenant, and (2) the term "Tenant" as used in
this Lease shall mean and include each of them jointly and severally. The act of
or notice from, or notice or refund to, or the signature of any one or more of
them, with respect to the tenancy of this Lease, including, but not limited to,
any renewal, extension, expiration, termination or modification of this Lease,
shall be binding upon each and all of the persons executing this Lease as Tenant
with the same force and effect as if each and all of them had so acted or so
given or received such notice or refund or so signed.
40. PARKING.
a. Tenant shall have the right to use the type and number of spaces indicated
in Section 1. All such spaces shall be provided to the tenant at no cost.
b. The use by Tenant, its employees and invitees, of the parking facilities of
the Project shall be on the terms and conditions set forth in Exhibit G attached
hereto and by this reference incorporated herein, and shall be subject to such
other agreement between Landlord and Tenant as may hereinafter be established.
Tenant shall not permit or allow any vehicles that belong to or are controlled
by Tenant or Tenant's employees suppliers, shippers, customers or invitees to be
loaded, unloaded or parked in areas other than those designated by Landlord for
such activities. If Tenant permits or allows any of the prohibited activities
described in Exhibit G, then Landlord 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 Tenant, which cost shall be
immediately payable upon demand by Landlord.
41. FORCE MAJEURE.
Except as applied to Paragraph 23, Landlord shall have no liability whatsoever
to Tenant on account of (1) the inability of Landlord to fulfill, or delay in
fulfilling, any of Landlord's obligations under this Lease by reason of strike,
other labor trouble, governmental preemption of priorities or other controls in
connection with a national or other public emergency, or shortages of fuel,
supplies or labor resulting therefrom or any other cause, whether similar or
dissimilar to the above, beyond Landlord's reasonable control; or (2) any
failure or defect in the supply, quantity or character of electricity or water
furnished to the Premises, by reason of any requirement, act or omission of the
public utility or others furnishing the Project with electricity or water, or
for any other reason, whether similar or dissimilar to the above, beyond
Landlord's reasonable control. If this Lease specifies a time period for
performance of an obligation of Landlord, that time period shall be extended by
the period of any delay in Landlord's performance caused by any of the events of
force majeure described above.
42. TERMS AND HEADINGS.
The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. Words used in any gender include other genders. The
paragraph headings of this Lease are not a part of this Lease and shall have no
effect upon the construction or interpretation of any part hereof.
43. EXAMINATION OF LEASE.
Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for lease, and it is not effective as
a lease or otherwise until execution by and delivery to both Landlord and
Tenant.
44. TIME.
Time is of the essence with respect to the performance of every provision
of this Lease in which time of performance is a factor.
12
<PAGE> 14
45. PRIOR AGREEMENT OR AMENDMENTS.
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in the Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective
successors-in-interest.
46. SEPARABILITY.
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
and such other provisions shall remain in full force and effect.
47. RECORDING.
Neither Landlord nor Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
48. LIMITATION ON LIABILITY.
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
(1) The sole and exclusive remedy shall be against the Landlord's interest
in the Project;
(2) No partner of Landlord shall be sued or named as a party in any suit or
action (except as may be necessary to secure jurisdiction of the partnership);
(3) No service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(4) No partner of Landlord shall be required to answer or otherwise plead
to any service of process;
(5) No judgment will be taken against any partner of Landlord;
(6) Any judgment taken against any partner of Landlord may be vacated and
set aside at any time nunc pro tunc;
(7) No writ of execution will ever be levied against the assets of any
partner of Landlord;
(8) The obligations of Landlord under this Lease do not constitute personal
obligations of the individual partners, directors, officers or shareholders of
Landlord, and Tenant shall not seek recourse against the individual partners,
directors, officers or shareholders of Landlord or any of their personal assets
for satisfaction of any liability in respect to this Lease;
(9) These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
49. MODIFICATION FOR LENDER.
If, in connection with obtaining construction, interim or permanent
financing for the Project the lender shall request reasonable modifications in
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
50. FINANCIAL STATEMENTS.
At any time during the term of this Lease, Tenant shall upon ten (10) days
prior written notice from Landlord, provide Landlord with a current financial
statement and financial statements of the two (2) years prior to the current
financial statement year. Such statement shall be prepared in accordance with
generally accepted accounting principles and, if such is the normal practice of
Tenant, shall be audited by an independent certified public accountant.
51. QUIET ENJOYMENT.
Landlord covenants and agrees with Tenant that upon Tenant paying the rent
required under this lease and paying all other charges and performing all of the
covenants and provisions aforesaid on Tenant's part to be observed and performed
under this Lease, Tenant shall and may peaceably and quietly have, hold and
enjoy the Premises in accordance with this Lease.
52. TENANT AS CORPORATION.
If Tenant executes this Lease as a corporation, then Tenant and the persons
executing this Lease on behalf of Tenant represent and warrant that the
individuals executing this Lease on Tenant's behalf are duly authorized to
execute and deliver this Lease on its behalf in accordance with a duly adopted
resolution of the board of directors of Tenant, a copy of which is to be
delivered to landlord on execution hereof, and in accordance with the bylaws of
Tenant and that this Lease is binding upon Tenant in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD: WEYERHAEUSER MORTGAGE COMPANY, ADDRESS: Weyerhaeuser Mortgage
a California corporation and Company
FORT WYMAN, INC., a Michigan corporation, 6320 Canoga Avenue
tenants in common Woodland Hills, CA 91367
By: WEYERHAEUSER MORTGAGE COMPANY, ADDRESS: 12636 High Bluff Drive,
managing tenant in common Suite 400
San Diego, CA 92130
By: /s/ Dorothy Forbes
------------------------------
Dorothy Forbes, Vice President
TENANT: STAC ELECTRONICS,
a California corporation
By: [UNSCANNABLE]
<PAGE> 15
WORK LETTER AGREEMENT
This Work Letter Agreement, is entered into as of the 28th day of January,
1994, by and between Weyerhaeuser Mortgage Company, * ("Landlord") and STAC
Electronics, a California corporation ("Tenant").
* a California corporation, and Fort Wyman, Inc., a Michigan corporation,
tenants in common
RECITALS:
A. Concurrently with the execution of this Work Letter Agreement, Landlord
and Tenant have entered into a lease (the "Lease") covering certain premises
(the "Premises") more particularly described in Exhibit "A" attached to the
Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work Letter
Agreement may apply thereto) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant hereby agree as follows:
- ------------------------------------------------------------------------------
2. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall include all work to be done
in the Premises pursuant to the Tenant Improvement Plans described in Paragraph
3 below, including, but not limited to, partitioning, doors, ceilings, floor
coverings, wall finishes (including paint and wallcovering), electrical
(including lighting, switching, telephones, outlets, etc.), plumbing, heating,
ventilating and air conditioning, fire protection, cabinets and other millwork.
Whenever Landlord's consent is required in this Work Letter Agreement it shall
not be unreasonably withheld or delayed.
3. TENANT IMPROVEMENT PLANS.
Immediately after the execution of the Lease, Tenant agrees to meet with
its architect and/or space planner for the purpose of preparing a space plan for
the layout of the Premises. Based upon such space plan, Tenant's architect shall
prepare final working drawings and specifications for the Tenant Improvements.
Such final working drawings and specifications may be referred to herein as the
"Tenant Improvement Plans." The Tenant Improvement Plans must be consistent with
Landlord's standard specifications (the "Standards") for tenant improvements for
the Building, as the same may be changed from time to time by Landlord.
4. NON-STANDARD TENANT IMPROVEMENTS.
Landlord shall permit Tenant to deviate from the Standards for the Tenant
Improvements; provided that (a) the deviations shall not be of a lesser quality
than the Standards; (b) the total lighting for the Premises shall not exceed
1.65 watts per rentable square foot; (c) the deviations conform to applicable
governmental regulations and necessary governmental permits and approvals have
been secured; (d) the deviations do not require building service beyond the
level normally provided to other tenants in the Building and do not overload the
floors; and (e) Landlord has determined in its sole discretion that the
deviations are of a nature and quality that are consistent with the overall
objectives of the Landlord for the Building.
5. FINAL PRICING AND DRAWING SCHEDULE.
After the preparation of the space plan and after Landlord's written
approval thereof, Tenant shall cause its architect to prepare and submit to
Landlord the final working drawings and specifications referred to in Paragraph
3 hereof. Such working drawings shall be approved by Landlord and Tenant and
- ------------- shall thereafter be submitted to the appropriate governmental body
by Tenant's architect for plan checking and the issuance of a building permit.
Tenant ------------ shall cause to be made any changes in the plans and
specifications necessary to obtain the building permit. Concurrent with the plan
checking, Tenant shall have prepared a final pricing for Tenant's approval,
- ----------- taking into account any modifications which may be required to
reflect changes in the plans and specifications required by the City or County
in which the Premises are located. After final approval of the working drawings,
no further changes to the Tenant Improvement Plans may be made without the prior
written approval from both Landlord and Tenant, such approval by Landlord not to
be unreasonably withheld, and then only after agreement by Tenant to pay any
excess costs resulting from the design and/or construction of such changes.
Tenant hereby acknowledges that any such changes shall be subject to the terms
of Paragraph 8 hereof.
6. CONSTRUCTION OF TENANT IMPROVEMENTS.
After the Tenant Improvement Plans have been prepared and approved, the
final pricing has been approved and a building permit for the Tenant
Improvements has been issued, Tenant shall enter into a construction contract
with its contractor for the installation of the Tenant Improvements in
accordance with the Tenant Improvement Plans. Landlord shall supervise the
completion of such work at no cost to Tenant. The cost of such work shall be
paid as provided in Paragraph 7 hereof. Landlord shall not be liable for any
direct or indirect damages as a result of delays in construction beyond
Landlord's reasonable control, including, but not limited to, acts of God,
inability to secure governmental approvals or permits, governmental
restrictions, strikes, availability of materials or labor or delays by Tenant
(or its architect or anyone performing services on behalf of Tenant).
7. PAYMENT OF COST OF THE TENANT IMPROVEMENTS.
a. Landlord hereby grants to Tenant a "Tenant Allowance" of Zero and
No/100------ Dollars ($-0-) per square foot of Usable Area (as defined below) of
the Premises for a total of Zero and No/100------ Dollars ($-0-). Such Tenant
Allowance shall be used only for:
(1) Payment of the cost of preparing the space plan and the final working
drawings and specifications, including mechanical, electrical, plumbing and
structural drawings and of all other aspects of the Tenant Improvement Plans.
The Tenant Allowance will not be used for the payment of extraordinary design
work not included within the scope of Landlord's building standard improvements
or for payments to any other consultants, designers or architects other than
Landlord's architect and/or space planner.
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<PAGE> 16
(2) The payment of plan check, permit and license fees relating to
construction of the Tenant Improvements.
(3) Construction of the Tenant Improvements, including, without
limitation, the following:
(a) Installation within the Premises of all partitioning, doors,
floor coverings, ceilings, wall coverings and painting, millwork and similar
items.
(b) All electrical wiring, lighting fixtures, outlets and
switches, and other electrical work to be installed within the Premises.
(c) The furnishing and installation of all duct work, terminal
boxes, diffusers and accessories required for the completion of the heating,
ventilation and air conditioning systems within the Premises, including the cost
of meter and key control for after-hour air conditioning.
(d) Any additional Tenant requirements including, but not limited
to, odor control, special heating, ventilation and air conditioning, noise or
vibration control or other special systems.
(e) All fire and life safety control systems such as fire walls,
sprinklers, halon, fire alarms, including piping, wiring and accessories
installed within the Premises.
(f) All plumbing, fixtures, pipes and accessories to be installed
within the Premises.
(g) Testing and inspection costs.
(h) Contractor's fees, including but not limited to any fees
based on general conditions.
(4) All other costs to be expended by Landlord in the construction of
the Tenant Improvements, including those costs incurred by Landlord for
construction of elements of the Tenant Improvements in the Premises, which
construction was performed by Landlord prior to the execution of this Lease by
Landlord and Tenant (i.e., during or after the construction of the base
Building) and which construction is for the benefit of tenants and is
customarily performed by Landlord prior to the execution of leases for such
space in the Building for reasons of economics (examples of such construction
would include the extension of mechanical [including heating, ventilating and
air conditioning systems] and electrical distribution systems outside of the
core of the Building, wall construction, column enclosures and painting outside
of the core of the Building, ceiling hanger wires and window treatment).
b. The cost of each item shall be charged against the Tenant Allowance. In the
event that the cost of installing the Tenant Improvements, as established by
Landlord's final pricing schedule, shall exceed the Tenant Allowance, or if any
of the Tenant Improvements are not to be paid out of the Tenant Allowance as
provided in Paragraph 7a above, the excess shall be paid by Tenant to Landlord
prior to the commencement of construction of the Tenant Improvements.
c. In the event that, after the Tenant Improvement Plans have been prepared and
a price therefore established by Landlord, Tenant shall require any changes or
substitutions to the Tenant Improvement Plans, any additional costs thereof
shall be paid by Tenant to Landlord prior to the commencement of such work.
Landlord shall have the right to decline Tenant's request for a change to the
Tenant Improvement Plans if such changes are inconsistent with Paragraphs 3 and
4 above, or if the change would, in Landlord's opinion, unreasonably delay
construction of the Tenant Improvements.
d. In the event that the cost of the Tenant Improvements increases as set forth
in Landlord's final pricing due to the requirements of any governmental agency,
Tenant shall pay Landlord the amount of such increase within five (5) days of
Landlord's written notice; provided, however, that Landlord shall first apply
toward such increase any remaining balance in the Tenant Allowance.
e. Any unused portion of the Tenant Allowance upon completion of the Tenant
Improvements shall not be refunded to Tenant or available to Tenant as a credit
against any obligations of Tenant under the Lease.
f. As used in this Work Letter Agreement, the term "Usable Area" means the area
of the Premises, as determined by measuring the area within the bounds of the
inside surface of the glass in the outer wall of the Building and the surface
facing the Premises of all partitions separating the Premises from the Building
core, adjoining tenant space and public corridors or other common areas. No
deductions shall be made for space occupied by structural or functional
columns or other projections. The Usable Area of the Premises is 11,911 usable
square feet.
8. COMPLETION AND RENTAL COMMENCEMENT DATE.
The commencement of the term of the Lease and Tenant's obligation for the
payment of rental under the Lease shall commence at the time provided in
Section 1.g. of the Lease.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the date
first above written.
LANDLORD: WEYERHAEUSER MORTGAGE COMPANY,
a California corporation and
FORT WYMAN, INC., a Michigan corporation,
tenants in common
By: WEYERHAEUSER MORTGAGE COMPANY,
managing tenant in common
By: /s/ Dorothy Forbes
----------------------------------
Dorothy Forbes, Vice President
TENANT: STAC ELECTRONICS,
a California corporation
By: /s/ John Witzel
----------------------------------
John Witzel, CFO
<PAGE> 17
ADDENDUM "1"
1. Rent Abatement. Notwithstanding the provisions of Section 5 of this
Lease, no Base Monthly Rent shall be due or payable for the second (2nd) through
seventh (7th) full calendar months, inclusive, following the Commencement Date.
2. Non-Disturbance. Notwithstanding the provisions of Section 27, in the
event of a foreclosure of any mortgage or deed of trust or termination of any
ground lease, so long as Tenant attorns to the successor fee owner or ground
tenant, Tenant's quiet possession of the Premises will not be disturbed and its
rights and obligations under this Lease will not be altered.
3. Early Termination. Tenant shall have the right to terminate the Lease,
effective on March 31, 1998, by providing Landlord at least six (6) months'
prior written notice.
4. Building Signage. Tenant, at Tenant's expense, shall have the right to
place its name and/or logo on one (1) side of the exterior of the Building in a
location to be selected by Tenant, subject to approval by Landlord (not to be
unreasonably withheld or delayed provided such signage complies with the signage
criteria contained in the CC&R's affecting the Project) and all governmental
agencies. This sign is in addition to the signage provided in the lease for
12636 High Bluff Drive, Suite 400.
5. Hazardous Materials. The following provisions are added to Exhibit H
(Hazardous Materials): (i) Landlord's consent under clause (b) of Exhibit H
shall not be required for (1) Hazardous Materials, in reasonable quantities,
customarily used in business offices, and (2) Hazardous Materials used in
reasonable quantities in connection with the construction of repair of
Improvements in the Premises, provided such Hazardous Materials are used and
handled in accordance with all applicable laws. In addition, Landlord will not
unreasonably withhold or delay its consent required under said clause (b) of
Exhibit H for any other Hazardous Materials reasonably needed by Tenant in the
ordinary course of Tenant's business, provided such Hazardous Materials are used
and handled in accordance with all applicable laws.
(ii) Landlord warrants to its actual knowledge Tenant that neither the
Premises nor any other part of the Building in which the Premises are located
contain any asbestos. Landlord also agrees that Tenant shall have no
responsibility for any Hazardous Materials on or under the Premises, the
Building, or the Project existing at the time of commencement of the Lease, or
any such Hazardous Materials thereafter released on or under the Project by
anyone other than Tenant, its employees or agents.
<PAGE> 18
6. Building Codes: ADA. Any work that is required by applicable law now or
hereafter in effect to be done within the Premises (excluding structural
components (except to the extent caused by Tenant) and restrooms, elevators, and
other common areas) shall be the sole responsibility of Tenant. Except as
provided in the preceding sentence, and notwithstanding any other provision of
this Lease, Tenant shall have no responsibility to make or pay for improvements
or other alterations to the Building to correct deficiencies under existing
building codes or other applicable laws, restrictions or requirements, or to
comply with future changes in building codes or other applicable laws,
restrictions or requirements. Without limiting the foregoing, in the event that
any improvements or alterations to the Building are required during the term of
the Lease to comply with requirements of the Americans With Disabilities Act or
applicable building codes relating to access to or within the Building (except
for the Premises) by disabled persons, Landlord will be solely responsible for
any such improvements or alterations.
7. Security. With Landlord's prior written approval, not to be unreasonably
withheld or delayed, Tenant at its cost and expense and not as part of the costs
described in Addendum "5" may install additional reasonable security devices for
the Premises.
8. Damage or Destruction. The following is inserted into the Lease as
Paragraph 23:
23. DAMAGE OR DESTRUCTION
If the Premises or any Common Areas providing access thereto shall be
damaged by fire or other casualty, Landlord shall restore the same subject to
the terms and conditions set forth in this Paragraph 23 . Such restoration shall
be to substantially the condition prior to the casualty, except for
modifications required by zoning and building codes and other laws or by any
mortgagee, any other modifications to the Common Areas deemed desirable by
Landlord (provided access to the Premises is not materially impaired), and
except that Landlord shall not be required to repair or replace any of Tenant's
furniture, furnishings, fixtures or equipment, or any alterations or
improvements in excess of Tenant's improvements installed at a cost of up to $30
per usable square foot. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair thereof. However, as Tenant's sole
compensation for such damage or destruction Landlord shall allow Tenant a
proportionate abatement of rent, during the time and to the extent the Premises
are unfit for occupancy for the purposes permitted under this Lease and not
occupied by Tenant as a result thereof (unless Tenant or its employees or agents
caused the damage). Notwithstanding the foregoing to the contrary, Landlord may
elect to terminate this Lease by notifying Tenant in writing of such termination
within
<PAGE> 19
sixty (60) days after the date of damage (such termination notice to include a
termination date providing at least ninety (90) days for Tenant to vacate the
Premises) , if the Property shall be damaged by fire or other casualty or cause
such that: (a) repairs to the Premises and Building and access thereto cannot
reasonably be substantially completed within three hundred (300) days after the
date of casualty without the payment of overtime or other premiums; (b) more
than twenty-five percent (25%) of the Premises is substantially destroyed by the
damage and fewer than twenty-four (24) months remain in the Term, subject to
Tenant's right to avoid or limit such termination as set forth below; (c) the
cost of the repairs, alterations, restoration or improvement work would exceed
twenty-five percent (25%) of the replacement value of the Building and Landlord
determines in good faith not to repair or rebuild the Building in substantially
the same configuration as before the casualty; (d) the aggregate proceeds
available from insurance fall short of the reasonable cost of the restoration
required under this Paragraph 23 by an amount greater than $100,000 and Landlord
determines in good faith not to repair or rebuild the Building in substantially
the same configuration as before the casualty; or (e) as a result of the lawful
application of insurance proceeds by any mortgagee to retire the mortgage debt,
the insurance proceeds available for restoration fall short of the reasonable
cost of the restoration required under this Paragraph 23 by an amount greater
than $100,000 and Landlord determines in good faith not to repair or rebuild the
Building in substantially the same configuration as before the casualty. If
Landlord elects to terminate this Lease under the circumstances described in
Clause (b) of the preceding sentence, provided that the damage to the Property
was not caused by the willful misconduct or reckless disregard for life or
property of Tenant, Tenant may, by written notice to Landlord, given within
thirty (30) days after receipt of Landlord's termination notice, avoid such
termination by exercising a then available option to extend the term of this
Lease upon the terms and conditions set forth in Addendum "3".
Further, notwithstanding the foregoing, Tenant may terminate this Lease if
Tenant is unable to use all or any portion of the Premises as a result of fire
or other casualty not caused by the willful misconduct or reckless disregard for
life or property of Tenant, and: (a) Landlord fails to commence restoration work
to the Building and access thereto within sixty (60) days after the damage
occurs (Landlord's negotiation with insurance companies and consultation with
architects, engineers and contractors shall be deemed to be restoration work);
or (b) Landlord fails to substantially complete such work within three hundred
sixty five (365) days after the date of the casualty, or such additional time as
may be necessary due to strikes, lockouts or other labor troubles, shortages of
equipment or materials, governmental requirements, power shortages or outages or
other causes beyond Landlord's reasonable control; or (c) such work is
reasonably estimated (which estimate Landlord shall provide within sixty (60)
<PAGE> 20
days following the casualty), to take more than three hundred sixty five (365)
days to substantially complete after the date of the casualty. In addition,
Tenant may terminate this Lease if Tenant is unable to use more than twenty-five
percent (25%) of the Premises as a result of fire or other casualty not caused
by the willful misconduct or gross negligence of Tenant or its employees or
agents, and fewer than twenty-four (24) months remain in the Term. In order to
exercise any of the foregoing termination rights, Tenant must send Landlord at
least sixty (60) but not more than one hundred twenty (120) days advance notice
specifying the basis for termination, and such notice must be given no later
than thirty (30) days following the occurrence of the condition serving as the
basis for the termination right invoked by Tenant. Such termination right shall
not be available to Tenant if Landlord substantially completes the repairs to
the Premises and access thereto within sixty (60) days after Tenant's notice.
Notwithstanding anything to the contrary contained herein, if Tenant, or its
officers, employees, contractors, invitees, partners, or agents delay Landlord
in performing the repairs, Landlord shall have additional time to complete the
work equal to such delay, and Tenant shall pay Landlord all Rent for the period
of such delay. If this Lease is terminated pursuant to this Paragraph 23, Tenant
shall have the right, to be exercised within 10 days of such termination, to
terminate any other lease it has for space within the Project.
Tenant agrees that Landlord's obligation to restore, and the abatement of
rent and the termination right provided herein, shall be Tenant's sole recourse
in the event of such damage, and waives any other rights Tenant may have under
any applicable Law to terminate the Lease by reason of damage to the Premises,
Project or Building, including all rights under California Civil Code, Sections
1932 (2) , 1933 (4) , and 1942, as the same may be modified or replaced
hereafter. Tenant acknowledges that this Paragraph 23 represents the entire
agreement between the parties respecting damage to the Premises, Project or
Building.
<PAGE> 21
ADDENDUM "2"
OPERATING EXPENSES. For the purposes of this Section, the following
terms are defined as follows:
Base Year-The calendar year in which this Lease Term commences. For the
purposes of this Lease, the Base Year is defined as 1994.
Comparison Year-Each calendar year of the term after the Base Year.
Tenant's *------ Share of Operating Expenses shall be payable by Tenant to
Landlord as follows:
(a) Beginning with the calendar year following the Base Year and for
each calendar year thereafter ("Comparison Year"), Tenant shall pay Landlord an
amount equal to Tenant's *------ Share of the Operating Expenses incurred by
Landlord in the Comparison Year which exceeds the total amount of Operating
Expenses payable by Landlord for the Base Year. This excess is referred to as
the "Excess Expenses."
(b) To provide for current payments of Excess Expenses, Tenant shall,
at Landlord's, request, pay as additional rent during each Comparison Year, an
amount equal to Tenant's *------ Share of the Excess Expenses payable during
such Comparison Year, as estimated by Landlord from time to time. Such payments
shall be made in monthly installments, commencing on the first day of the month
following the month in which Landlord notifies Tenant of the amount it is to pay
hereunder and continuing until the first day of the month following the month in
which Landlord gives Tenant a new notice of estimated Excess Expenses. It is the
intention hereunder to estimate from time to time the amount of the Excess
Expenses for each Comparison Year and Tenant's *------ Share thereof, and then
to make an adjustment in the following year based on the actual Excess Expenses
incurred for that Comparison Year.
(c) On or before April 1 of each Comparison Year after the first
Comparison Year (or as soon thereafter as is practical), Landlord shall deliver
to Tenant a statement setting forth Tenant's *------ Share of the Excess
Expenses for the preceding Comparison Year. If Tenant's* Share of the actual
Excess Expenses for the previous Comparison Year exceeds the total of the
estimated monthly payments made by Tenant for such year, Tenant shall pay
Landlord the amount of the deficiency within thirty (30) days of the receipt of
the statement. If such total exceeds Tenant's *------ Share of the actual Excess
Expenses for such Comparison Year, then Landlord shall credit against Tenant's
next ensuing monthly installment(s) of additional rent an amount equal to the
difference until the credit is exhausted. If a credit is due from Landlord on
the Expiration Date, Landlord shall pay Tenant the amount of the credit. The
obligations of Tenant and Landlord to make payments required under this Section
shall survive the Expiration Date.
(d) Tenant's *------ Share of Excess Expenses in any Comparison Year
having less than 365 days shall be appropriately prorated.
(e) If any dispute arises as to the amount of any additional rent due
hereunder, Tenant shall have the right after reasonable notice and at reasonable
times to inspect Landlord's accounting records at Landlord's accounting office
and, if after such inspection Tenant still disputes the amount of additional
rent owed, a certification as to the proper amount shall be made by Landlord's
certified public accountant, which certification shall be final and conclusive.
Tenant agrees to pay the cost of such certification unless it is determined that
Landlord's original statement overstated Operating Expenses by more than five
percent (5%).
(f) Operating Expenses including any additional real estate taxes
will be based on a ninety-five percent (95%) leased project for the entire base
year and other year regardless of the current occupancy.
(g) In no event shall Tenant be responsible for increases in Operating
Expenses in excess of six percent (6%) per year on a cumulative basis.
* Percentage
<PAGE> 22
ADDENDUM "3"
OPTION TO RENEW. Tenant shall have the right to extend the term of this
Lease for one (1) consecutive five (5) year period (the "Option Term"), on the
following terms and conditions:
(a) Each Option Term shall commence when the prior term expires. Tenant
must give written notice of its exercise of the option, and Landlord must
actually receive such notice, no earlier than twelve (12) months and no later
than six (6) months prior to the time that the Option Term would commence.
(b) The option(s) to extend this Lease for any Option Term must be
exercised consecutively.
(c) All terms and conditions of this Lease shall apply during the
Option Terms except as expressly provided in this Addendum.
(d) Tenant shall have no right to exercise an option, notwithstanding
any other provision of this Lease to the contrary, during the time commencing
from the date of any default * and continuing until the default is cured.
-------
(e) The period of time within which Tenant may exercise an option to
extend the term of this Lease shall not be extended or enlarged by reason of
Tenant's inability to exercise an option because of the provisions of Section
(d) above.
- --------------------------------------------------------------------------------
(g) The options granted to Tenant may not be voluntarily or
involuntarily exercised by or assigned to any person or entity other than
Tenant, without the prior written consent of Landlord.
(h) The Base Monthly Rent during each option term shall be adjusted as
of the commencement of each option term to ninety-five percent (95%) of the fair
rental value of the Premises on the terms and conditions contained in this Lease
as mutually agreed by Landlord and Tenant or, if they cannot agree on or before
such commencement date, then as determined by an appraiser mutually selected by
Landlord and Tenant. If Landlord and Tenant cannot agree on a single appraiser
within five (5) days, then each shall select an appraiser. If the two appraisers
cannot agree on said fair rental value within thirty (30) days, then the two
appraisers shall appoint a third appraiser, and said fair rental value of the
Premises shall be deemed to be the average of the two closest appraisals. Each
appraiser shall be a disinterested member of the American Institute of Real
Estate Appraisers, or a body of comparable standing, with at least five years'
experience in commercial real estate appraisal. Landlord and Tenant shall each
bear the cost of the appraiser appointed by them, and shall share equally the
cost of the appraiser mutually selected by them or of the third appraiser
appointed, if any.
(i) Landlord will provide Tenant with a Ten Dollars ($10.00) per usable
square foot refurbishment allowance.
* in the payment of Base Monthly Rent or operating Expenses
<PAGE> 23
ADDENDUM "4"
RIGHT OF REFUSALS.
(a) At any time that Landlord determines to lease any space at 12626
High Bluff Drive or 12636 High Bluff Drive, subject to any other existing
tenants' rights of refusal or extension options, Landlord shall notify Tenant in
writing. Within five (5) business days after receipt of Landlord's notice,
Tenant shall have the option, to be exercised by delivery of written notice to
Landlord, to lease the respective space. In the event Landlord notifies Tenant
for multiple contiguous suites, then Tenant shall either lease none of the
suites or all of the suites being offered. In the event Tenant timely exercises
such option, the suites shall be added to the Premises, effective as of the date
specified in Landlord's notice. In the event Tenant does not timely exercise
such option, Tenant's rights shall terminate and shall not apply to any
subsequent leasing of the space unless Landlord does not execute a lease for the
space by a third party, in which case Tenant's rights shall be reinstated.
(b) In the event Tenant timely exercises such option, such space shall
be tendered to Tenant in "as is" condition.
(c) In the event Tenant timely exercises such option, such space shall
be subject to all of the terms and conditions of this Lease, provided that the
Base Monthly Rent shall be One and 25/100 Dollar ($1.25) per square foot per
month, plus electricity, and the Tenant's Share shall be proportionately
increased to reflect the inclusion of such space in the Premises, and provided
further that no free rent, abatement, discount, or other concession shall apply
with respect to the space except if Tenant is currently in the free rent period,
at which time the remaining free rent will apply.
(d) Tenant shall have no right to exercise its right of refusal,
notwithstanding any other provision of this Lease to the contrary, during the
time commencing from the date of any default*under Section 25 of this Lease and
continuing until the default is cured.
(e) The period of time within which Tenant may exercise its right of
refusal shall not be extended or enlarged by reason of Tenant's inability to
exercise such right of refusal because of the provisions in Section (d) above.
-------------------------------------------------
(g) The right of refusal granted to Tenant may not be voluntarily or
involuntarily exercised by or assigned to any person or entity other than Tenant
without the prior written consent of Landlord.
*in the payment of Base Monthly Rent or Operating Expenses
<PAGE> 24
ADDENDUM "5"
TENANT IMPROVEMENTS/BASE MONTHLY RENTAL REDUCTION. Tenant, at Tenant's
expense, will pay for all the costs associated with the following:
(a) Space planning.
(b) Construction documents.
(c) Building permits.
(d) Construction of tenant improvements.
(e) Moving expenses.
(f) Tenant signage costs.
(g) All other costs relating to the build-out of the Premises.
As a concession for Tenant paying for these above mentioned costs,
Landlord will reduce Tenant's Base Monthly Rent in Section 1(h) of the Lease in
accordance with an amortization formula as follows:
Present Value: Total costs as outlined above, up to a maximum of Three
Hundred Fifty-Seven Thousand Three Hundred Thirty and No/100
Dollars ($357,330.00; $30.00 per usable square foot).
Amortization Term: Sixty (60) months. (Lease term is 66 months - 6 months' rent
abatement = 60 months.)
Interest Rate
of Amortization: Six percent (6%).
As an example, should Tenant expend the maximum amount of $357,330.00,
this amount shall be amortized at six percent (60%), which would reduce Tenant's
Base Monthly Rent by Six Thousand Nine Hundred Eight and 19/100 Dollars
($6,908.19) per month.
BID PROCESS. Tenant will cause at least two and not more than five contractors
to bid for the construction of tenant improvements including the following
contractors:
(a) Roel Construction
(b) Consolidated Contracting
(c)
(d)
(e)
The contractor selected shall be one of the two lowest bidders,
provided that all bids are adjusted for inconsistent assumptions to reflect an
"apples-to-apples" comparison. Tenant, at its sole discretion, shall select the
contractor in accordance with these terms.
Landlord will not impose any charge for profit overhead, or supervision
in connection with the construction of tenant improvements. Landlord, at
Landlord's expense, shall have the right to supervise the construction of tenant
improvements from a landlord's perspective. In no event shall Landlord's
election to supervise the tenant improvements relieve Tenant from its obligation
to perform the tenant improvements in accordance with this Lease.
Reduction in Prepaid Rent and Security Deposit. If the Base Monthly
Rent is reduced pursuant to the above provision entitled Tenant
Improvements/Base Monthly Rental Reduction, the required Prepaid Rent as set
forth in Section 1(k) and the required Total Security Deposit as set forth in
Section 1(1) shall be reduced by the same amount and Landlord shall refund to
Tenant any excess Prepaid Rent and Total Security Deposit paid to Landlord
within 10 days after the reduction is determined.
<PAGE> 25
EXHIBIT A
OUTLINE OF FLOOR
PLAN OR PREMISES
CORPORATE PLAZA II
12636 HIGH BLUFF DR
SAN DIEGO, CA 92130
SECOND FLOOR
Suite 200
13,686 Rentable Square Feet
[GRAPHIC]
A-1
<PAGE> 26
EXHIBIT B
THE PROJECT
[GRAPHIC]
<PAGE> 27
EXHIBIT C
NOTICE OF LEASE TERM DATES AND
TENANT'S PERCENTAGE
To:_____________________________________ Date:_______________________
_____________________________________
_____________________________________
Re: Lease dated__________________________, 19__, between____________________
____________________, Landlord, and ____________________________________ Tenant,
concerning Suite __________ located at _________________________________________
Gentlemen:
In accordance with the subject Lease, we wish to advise and/or confirm
as follows:
1. That the Premises have been accepted herewith by the Tenant as being
substantially complete in accordance with the subject Lease and that there is no
deficiency in construction.
2. That the Tenant has possession of the subject Premises and
acknowledges that under the provisions of the subject Lease the term of said
Lease shall commence as of ________________________________ for a term of
__________________ ending on ________________________________
3. That in accordance with the subject Lease, rental commenced to
accrue on __________________________
4. If the commencement date of the subject Lease is other than the
first day of the month, the first billing will contain a pro rata adjustment.
Each billing thereafter shall be for the full amount of the monthly installment
as provided for in said Lease.
5. Rent is due and payable in advance on the first day of each and
every month during the term of said Lease. Your rent checks should be made
payable to ________________________________ at ________________________________
6. The exact number of rentable square feet within the Premises is
__________ square feet.
7. Tenant's Percentage, as adjusted based upon the exact number of
rentable square feet within the Premises, is __________%
AGREED AND ACCEPTED
LANDLORD: TENANT
___________________________ ____________________________
By:________________________ By:_________________________
By:_________________________
C-1
<PAGE> 28
EXHIBIT D
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect.
Landlord reserves the right to adapt nondiscriminatory modifications and
additions hereto.
As long as Tenant is not in default under any of the terms, conditions,
provisions or agreements of this Lease, Landlord shall:
1. Provide non-attended automatic elevator facilities Monday through
Friday, except holidays from 8 A.M. to 6 P.M., and have one elevator
available at all other times.
2. On Monday through Friday, except holidays from 7 A.M. to 6 P.M., and on
Saturday mornings from 7 A.M. to 4 P.M. (and other times for an agreed
upon rate of $15.00 per hour, ventilate the Premises and furnish air
conditioning or heating on such days and hours, when in the reasonable
judgment of Landlord it may be required for the comfortable occupancy
of the Premises. The air conditioning system achieves maximum cooling
when the window coverings are closed. Landlord shall not be responsible
for room temperatures if Tenant does not keep all window coverings in
the Premises closed whenever the system is in operation. Tenant agrees
to cooperate fully at all times with Landlord, and to abide by all
reasonable regulations and requirements which Landlord may prescribe
for the proper function and protection of said air conditioning system.
Tenant agrees not to connect any apparatus, device, conduit or pipe to
the building chilled and hot water air conditioning supply lines.
Tenant further agrees that neither Tenant nor its servants, employees,
agents, visitors, licensees or contractors shall at any time enter
mechanical installations or facilities of the building or adjust,
tamper with, touch or otherwise in any manner affect said installations
or facilities. The cost of maintenance and service calls to adjust and
regulate the air conditioning system shall be charged to Tenant if the
need for maintenance work results from either Tenant's adjustment of
room thermostats or Tenant's failure to comply with its obligations
under this section, including keeping window coverings closed as
needed. Such work shall be charged at hourly rates equal to
then-current journeymen's wages for air conditioning mechanics.
3. Landlord shall furnish to the Premises, during the usual business hours
on business days, electric current as required by the building standard
office lighting and fractional horsepower office business machines in
an amount not to exceed .025 KWH per square foot per normal business
day. Tenant agrees, should its electrical installation or electrical
consumption be in excess of the aforesaid quantity or extend beyond
normal business hours, to reimburse Landlord monthly for the measured
consumption at the average cost per kilowatt hour charged to the
building during the period. If a separate meter is not installed at
Tenant's cost, such excess cost will be established by an estimate
agreed upon by Landlord and Tenant, and if the parties fail to agree,
as established by an independent licensed engineer. Tenant agrees not
to use any apparatus or device in, or upon, or about the Premises which
may in any way increase the amount of such services usually furnished
or supplied to said Premises, and Tenant further agrees not to connect
any apparatus or device with wires, conduits or pipes, or other means
by which such services are supplied, for the purpose of using
additional or unusual amounts of such services without written consent
of Landlord. Should Tenant use the same to excess, the refusal on the
part of Tenant to pay upon demand of Landlord the amount established by
Landlord for such excess charge shall constitute a breach of the
obligation to pay rent under this Lease and shall entitle Landlord to
the rights therein granted for such breach. At all times Tenant's use
of electric current shall never exceed the capacity of the feeders to
the building or the risers or wiring installation and Tenants shall not
install or use or permit the installation or use of any computer or
electronic data processing equipment in the Premises without the prior
written consent of Landlord.
4. Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any
purposes in addition to ordinary drinking and lavatory purposes, of
which fact Tenant constitutes Landlord to be the sole judge, Landlord
may install a water meter and thereby measure Tenant's water
consumption for all purposes. Tenant shall pay Landlord for the cost of
the meter and the cost of the installation thereof and throughout the
duration of Tenant's occupancy Tenant shall keep said meter and
installation equipment in good working order and repair at Tenant's own
cost and expense, in default of which Landlord may cause such meter and
equipment to be replaced or repaired and collect the cost thereof from
Tenant. Tenant agrees to pay for water consumed, as shown on said
meter, as and when bills are rendered, and on default in making such
payment, Landlord may pay such charges and collect the same from
Tenant. Any such costs or expenses incurred, or payments made by
Landlord for any of the reasons or purposes hereinabove stated shall be
deemed to be additional rent payable by Tenant and collectible by
Landlord as such.
5. Provide janitor service to the Premises, provided the same are used
exclusively as offices, and are kept reasonably in order by Tenant, and
if to be kept clean by Tenant, no one other than persons approved by
Landlord shall be permitted to enter the Premises for such purposes. If
the Premises are not used exclusively as offices, they shall be kept
clean and in order by Tenant, at Tenant's expense, and to the
satisfaction of Landlord, and by persons approved by Landlord. Tenant
shall pay to Landlord the cost of removal of any of Tenant's refuse and
rubbish to the extent that the same exceeds the refuse and rubbish
usually attendant upon the use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning and electric systems, when necessary, by reason of
accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements, shall have been completed, and shall further have
no responsibility or liability for failure to supply elevator facilities,
plumbing, ventilating, air conditioning or electric service, when prevented
from so doing by strike or accident or by any cause beyond Landlord's reasonable
control, or by laws, rules, orders, ordinances, directions, regulations or
requirements of any federal, state, county or municipal authority or failure of
gas, oil or other suitable fuel supply or inability by exercise of reasonable
diligence to obtain gas, oil or other suitable fuel. It is expressly understood
and agreed that any convenants on Landlord's part to furnish any service
pursuant to any of the terms, covenants, conditions, provisions or agreements of
this Lease, or to perform any act or thing for the benefit of Tenant, shall not
be deemed breached if Landlord is unable to furnish or perform the same by
virtue of a strike or labor trouble or any other cause whatsoever beyond
Landlord's control.
6. This Lease is a "plus electricity" lease in which Tenant shall pay for
their use of electricity throughout the term of the Lease. Each floor
of the project is separately metered, and Tenant shall pay directly to
the utility company each month for their electrical consumption.
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EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
The undersigned, ___________________________________ ("Landlord"), with
a mailing address c/o __________________________ and___________________________
___________________ ("Tenant"), hereby certify to__________________________,
a ____________________________________________________________, as follows:
1. Attached hereto is a true, correct and complete copy of that certain
lease dated____________________, 19__, between Landlord and Tenant (the
"Lease"), which demises premises located at________________________.
The Lease is now in full force and effect and has not been amended,
modified or supplemented, except as set forth in Paragraph 4 below.
2. The term of the Lease commenced on______________________________ 19___.
3. The term of the Lease shall expire on___________________________ 19___.
4. The Lease has (Initial one):
(___) not been amended, modified, supplemented, extended, renewed or
assigned.
(___) been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements copies of which
are attached hereto:
______________________________________________________________
______________________________________________________________
______________________________________________________________
5. Tenant has accepted and is now in possession of said premises.
6. Tenant and Landlord acknowledge that the Lease will be assigned
to____________________________ and that no modification, adjustment,
revision or cancellation of the Lease or amendments thereto shall be
effective unless written consent of____________________is obtained, and
that until further notice, payments under the Lease may continue as
heretofore.
7. The amount of fixed monthly rent is $______________________.
8. The amount of security deposits (it any) is $________________________.
No other security deposits have been made.
9. Tenant is paying the full lease rental which has been paid in full as
of the date hereof. No rent under the Lease has been paid for more than
thirty (30) days in advance of its due date.
10. All work required to be performed by Landlord under the Lease has been
completed.
11. There are no defaults on the part of the Landlord or Tenant under the
Lease.
12. Tenant has no defense as to its obligations under the Lease and claims
no set-off or counterclaim against Landlord.
13. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies except as
provided in the lease.
All provisions of the Lease and the amendments thereto (if any)
referred to above are hereby ratified.
The foregoing certification is made with the knowledge
that_______________________ is about to fund a loan to Landlord and
that___________________________ is relying upon the representations herein made
in funding such loan.
IN WITNESS WHEREOF, this certificate has been duly executed and
delivered by the authorized officers of the undersigned as of_________________,
19____.
LANDLORD:
By:___________________________
TENANT
By:___________________________
By:___________________________
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EXHIBIT F
RULES AND REGULATIONS
1. Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement,
name or notice shall be installed or displayed on any part of the
outside or inside of the building or Project without the prior written
consent of Landlord. Landlord shall have the right to remove, at
Tenant's expense and without notice, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors and
walls shall be printed, painted, affixed or inscribed at the expense of
Tenant by a person approved by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades, screens
or hanging plants or other similar objects attached to or used in
connection with any window or door of the Premises, or placed on any
windowsill, which is visible from the exterior of the Premises, Tenant
shall immediately discontinue such use. Tenant shall not place anything
against or near glass partitions or doors or windows which may appear
unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators or stairways of the Project. The
halls, passages, exits, entrances, shopping malls, elevators,
escalators and stairways are not open to the general public, but are
open, subject to reasonable regulations, to Tenant's business invitees.
Landlord shall in all cases retain the right to control and prevent
access thereto of all persons whose presence in the judgment of
Landlord would be prejudicial to the safety, character, reputation and
interest of the Project and its tenants; provided that nothing herein
contained shall be construed to prevent such access to persons with
whom any tenant normally deals in the ordinary course of its business,
unless such persons are engaged in illegal or unlawful activities. No
tenant and no employee or invitee of any tenant shall go upon the
roof(s) of the Project.
4. The directory of the building or Project will be provided exclusively
for the display of the name and location of tenants only and Landlord
reserves the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Project and the Premises
shall be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those
approved by Landlord shall be employed by Tenant or permitted to enter
the Project for the purpose of cleaning the same. Tenant shall not
cause any unnecessary labor by carelessness or indifference to the good
order and cleanliness of the Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may make a reasonable charge for
any additional keys. Tenant shall not make or have made additional
keys, and Tenant shall not alter any lock or install a new additional
lock or bolt on any door of its Premises. Tenant, upon the termination
of its tenancy, shall deliver to Landlord the keys of all doors which
have been furnished to Tenant, and in the event of loss of any keys so
furnished, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's
instructions in their installation.
8. Freight elevator(s) shall be available for use by all tenants in the
building, subject to such reasonable scheduling as Landlord, in its
discretion, shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise or other property will be received in
the building or carried in the elevators except between such hours and
in such elevators as may be designated by Landlord. Tenant's initial
move in and subsequent deliveries of bulky items, such as furniture,
safes and similar items shall, unless otherwise agreed in writing by
Landlord, be made during the hours of 6:00 p.m. to 6:00 a.m. or on
Saturday or Sunday. Deliveries during normal office hours shall be
limited to normal office supplies and other small items. No deliveries
shall be made which impede or interfere with other tenants or the
operation of the building.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry
and which is allowed by law. Landlord shall have the right to prescribe
the weight, size and position of all equipment, materials, furniture or
other property brought into the building. Heavy objects shall, if
considered necessary by Landlord, stand on such platforms as determined
by Landlord to be necessary to properly distribute the weight, which
platforms shall be provided at Tenant's expense. Business machines and
mechanical equipment belonging to Tenant, which cause noise or
vibration that may be transmitted to the structure of the building or
to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the building, shall be placed and
maintained by Tenant, at Tenant's expense, on vibration eliminators or
other devices sufficient to eliminate noise or vibration. The persons
employed to move such equipment in or out of the building must be
acceptable to Landlord. Landlord will not be responsible for loss of,
or damage to, any such equipment or other property from any cause, and
all damage done to the building by maintaining or moving such equipment
or other property shall be repaired at the expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office
equipment. Tenant shall not use or permit to be used in the Premises
any foul or noxious gas or substance, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the building by reason of noise, odors
or vibrations, nor shall Tenant bring into or keep in or about the
Premises any birds or animals.
11. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective
operation of the building's heating and air conditioning and to comply
with any governmental energy-saving rules, laws or regulations of which
Tenant has actual notice, and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed, and shall close
window coverings at the end of each business day.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the
building.
14. Landlord reserves the right to exclude from the building between the
hours of 6 p.m. and 7 a.m. the following day, or such other hours as
may be established from time to time by Landlord, and on Sundays and
legal holidays, any person unless that person is known to the person or
employee in charge of the building and has a pass or is properly
identified. Tenant shall be responsible for all persons for whom it
requests passes and shall be liable to Landlord for all acts of such
persons. Landlord shall not be liable for damages for any error with
regard to the admission to or exclusion from the building of any
person. Landlord reserves the right to prevent access to the building
in case of invasion, mob, riot, public excitement or other commotion by
closing the doors or by other appropriate action.
15. Tenant shall close and lock the doors of its Premises and entirely shut
off all water faucets or other water apparatus, and electricity, gas or
air outlets before tenant and its employees leave the Premises. Tenant
shall be responsible for any damage or injuries sustained by other
tenants or occupants of the building or by Landlord for noncompliance
with this rule.
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16. Tenant shall not obtain for use on the Premises ice, drinking water,
food, beverage, towel or other similar services or accept barbering or
bootblacking service upon the Premises, except at such hours and under
such regulations as may be fixed by Landlord.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by the tenant
who, or whose employees or invitees, shall have caused it.
18. Tenant shall not sell, or permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or
merchandise to the general public in or on the Premises. Tenant shall
not make any room-to-room solicitation of business from other tenants
in the Project. Tenant shall not use the Premises for any business or
activity other than that specifically provided for in Tenant's Lease.
19. Tenant shall not install any radio or television antenna, loudspeaker
or other devices on the roof(s) or exterior walls of the building or
Project. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Project or elsewhere.
20. Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork or plaster or in any way deface the Premises or any part
thereof, except in accordance with the provisions of the Lease
pertaining to alterations. Landlord reserves the right to direct
electricians as to where and how telephone and telegraph wires are to
be introduced to the Premises. Tenant shall not cut or bore holes for
wires. Tenant shall not affix any floor covering to the floor of the
Premises in any manner except as approved by Landlord. Tenant shall
repair any damage resulting from noncompliance with this rule.
21. Tenant shall not install, maintain or operate upon the premises any
vending machines without the written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in the Project are prohibited, and
Tenant shall cooperate to prevent such activities.
23. Landlord reserves the right to exclude or expel from the Project any
person who, in Landlord's judgement, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules
and Regulations of the Building.
24. Tenant shall store all its trash and garbage within its premises or in
other facilities provided by Landlord. Tenant shall not place in any
trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal. All
garbage and refuse disposal shall be made in accordance with directions
issued from time to time by Landlord.
25. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any
kind, nor shall the Premises be used for any improper, immoral or
objectional purpose. No cooking shall be done or permitted on the
Premises without Landlord's consent, except that use by Tenant of
Underwriters' Laboratory approved equipment for brewing coffee, tea,
hot chocolate and similar beverages or use of microwave ovens for
employee use shall be permitted, provided that such equipment and use
is in accordance with all applicable, federal, state, county and city
laws, codes, ordinances, rules and regulations.
26. Tenant shall not use in any space or in the public halls of the Project
any hand truck except those equipped with rubber tires and side guards
or such other material-handling equipment as Landlord may approve.
Tenant shall not bring any other vehicles of any kind into the building
or Project.
27. Without the written consent of Landlord, Tenant shall not use the name
of the building or Project in connection with or in promoting or
advertising the business of Tenant except as Tenant's address.
28. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
29. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.
30. Tenant's requirements will be attended to only upon appropriate
application to the Project management office by an authorized
individual. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord will admit any
person (Tenant or otherwise) to any office without specific
instructions from Landlord.
31. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations
in favor of Tenant or any other tenant, nor prevent Landlord from
thereafter enforcing any such Rules and Regulations against any or all
of the tenants of the Project.
32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of the Lease.
33. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for
safety and security, for care and cleanliness of the Project and for
the preservation of good order therein. Tenant agrees to abide by all
such Rules and Regulations hereinabove stated and any additional rules
and regulations which are adopted.
34. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and
guests.
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EXHIBIT G
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern use of the parking
facilities which are appurtenant to the Project.
1. All claimed damage or loss must be reported and itemized in writing
delivered to the Management Office within ten (10) business days after
any claimed damage or loss occurs. Any claim not so made is waived.
Landlord has the option to make repairs at its expense of any claimed
damage within two business days after filing of any claim. In all court
actions the burden of proof to establish a claim remains with Tenant.
Court actions by Tenant for any claim must be filed within ninety days
from date of parking in court of jursidiction where a claimed loss
occurred. Landlord is not responsible for damage by water, fire, or
defective brakes, or parts, or for the act or omissions of others, or
for articles left in the car. The total liability of Landlord is
limited to $250.00 for all damages or loss to any car. Landlord is not
responsible for loss of use.
2. Tenant shall not park or permit the parking of any vehicle under its
company in any parking areas designated by Landlord as areas for
parking by visitors to the Project. Tenant shall not leave vehicles in
the parking areas overnight nor park any vehicles in the parking areas
other than automobiles, motorcycles, motor driven or non-motor driven
bicycles or fourwheeled trucks.
3. Parking stickers or any other device or form of identification supplied
by landlord as a condition of use of the Parking Facilities shall
remain the property of Landlord. Such parking identification device
must be displayed as requested and may not be mutilated in any manner.
The serial number of the parking identification device may not be
obliterated. Devices are not transferable and any device in the
possession of an unauthorized holder will be void.
4. No overnight or extended term storage of vehicles shall be permitted.
5. Vehicles must be parked entirely within painted stall lines of a
single parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross-hatched areas; and
(f) in such other areas as may be designated by Landlord or
Landlord's Parking Operator.
9. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
10. Loss or theft of parking identification devices from automobiles must
be reported to the Management Office immediately, and a lost or stolen
report must be filed by the customer at that time. Landlord has the
right to exclude any car from the parking facilities that does not have
an identification device.
11. Any parking identification devices reported lost or stolen found on any
unauthorized car will be confiscated and the illegal holder will be
subject to prosecution.
12. Lost or stolen devices found by the purchaser must be reported to the
Management Office immediately to avoid confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
14. Parking Facility managers or attendants are not authorized to make or
allow any exceptions to these Rules and Regulations.
15. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to any tenant or person and/or his
agents or representatives who willfully refuse to comply with these
Rules and Regulations and all unposted City, State or Federal
ordinances, laws or agreements.
16. Landlord reserves the right to establish and change parking fees and to
modify and/or adopt such other reasonable and non-discriminatory rules
and regulations for the parking facilities as it deems necessary for
the operation of the parking facilities. Landlord may refuse to permit
any person who violates these rules to park in the parking facilities,
and any violation of the rules shall subject the car to removal.
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EXHIBIT H
HAZARDOUS MATERIALS
THE FOLLOWING PROVISIONS DEALING WITH HAZARDOUS MATERIALS ARE MEANT TO BE
IN ADDITION TO, AND NOT SUPERSEDE OR LIMIT, ANY OTHER PROVISIONS OF THIS
LEASE WHICH MAY DEAL WITH THE SAME SUBJECT MATTER.
(a) DEFINITION. "Hazardous Materials" shall mean any hazardous or
toxic substance, material, or waste which is or becomes regulated by any
local governmental authority, the State of California, or the United
States Government, including, but not limited to, substances defined as
"hazardous substances," "hazardous materials," "toxic substances," or
"hazardous wastes" in the Comprehensive Environmental Responses,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq; the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq; the Resource Conversation and Recovery Act, 42
U.S.C. Section 6901, et seq; the California Health & Safety Code; and any
law, ordinance, or regulation dealing with underground storage tanks; and
in the regulations adopted, published, and/or promulgated pursuant to said
laws, and in any other environmental law, regulation, or ordinance now
existing or hereinafter enacted (hereinafter "Hazardous Materials Laws").
(b) USE AND REMOVAL.
(1) Tenant hereby agrees that Tenant shall not use,
generate, manufacture, refine, process, store, or dispose of on, under, or
about the Premises or transport to or from the Premises any Hazardous
Materials, except with the written consent of Landlord in Landlord's sole
discretion and in full compliance with applicable Hazardous Materials
Laws. Tenant further acknowledges that Tenant does not intend to use the
Premises in the future for the purpose of generating, manufacturing,
refining, producing, storing. handling, transferring, processing, or
transporting of Hazardous Materials.
(2) If at any time during the term of this Lease, Hazardous
Materials are used, or placed by Tenant on the Premises or Hazardous
Materials are discovered by Tenant on the Premises where no prior consent
of Landlord was obtained or otherwise in violation of any Hazardous
Materials Laws, or if any contamination of the Premises shall occur,
Tenant, at Tenant's sole cost and expense, shall immediately remove such
Hazardous Materials from the Premises or from the ground or ground-water
underlying the Premises in accordance with requirements of the appropriate
governmental entity. Furthermore, Tenant shall, at its own expense,
procure, maintain in effect, and comply with all conditions of any and all
permits, licenses, and other governmental and regulatory approvals
required for Tenant's use of the Premises, including, without limitation,
discharge of (appropriately treated) materials or wastes into and through
any sanitary sewer serving the Premises.
(3) Except for discharges into the sanitary sewer in strict
accordance and conformity with all applicable Hazardous Materials Laws,
Tenant shall cause any and all permitted Hazardous Materials removed from
the Premises to be removed and transported solely by duly licensed haulers
to duly licensed facilities for final disposal of such materials and
wastes. Tenant shall in all respects handle, treat, deal with, and manage
any and all Hazardous Materials in, on, under, or about the Premises in
total conformity with all applicable Hazardous Materials Laws and prudent
industry practices regarding management of such Hazardous Materials.
Tenant shall not take any remedial action in response to the presence of
any Hazardous Materials in or about the Premises nor enter into any
settlement agreement, consent, decree, or other compromise in respect to
any claims relating to any Hazardous Materials in any way connected with
the Premises without first notifying Landlord of Tenants intention to do
so and affording Landlord ample opportunity to appear, intervene, or
otherwise appropriately assert and protect Landlord's interest with
respect thereto. In addition to all other rights and remedies of Landlord
hereunder, if such Hazardous Materials are not removed from the Premises
or the ground or groundwater underlying the Premises by Tenant within
fifteen (15) days after Landlord or Tenant discovers such Hazardous
Materials, Landlord, at its sole discretion, may, but shall not be
obligated to, pay to have the same removed, and Tenant shall reimburse
Landlord within five (5) days of Landlord's demand for payment.
(c) NOTICE.
(1) Tenant shall immediately notify Landlord in writing of
(i) any enforcement, cleanup, removal, or other governmental or regulatory
action instituted, completed, or threatened pursuant to any Hazardous
Materials Laws; (ii) any claim made or threatened by any person against
Tenant, or the Premises relating to damage contribution, cost recovery,
compensation, loss, or injury resulting from or claimed to result from any
Hazardous Materials; and (iii) any reports made to any environmental
agency arising out of or in connection with any Hazardous Materials in or
removed from the Premises, including any complaints, notices, warnings, or
asserted violations in connection therewith, upon Tenant's receipt of
actual knowledge of the above. Tenant shall also supply to Landlord as
promptly as possible, and in any event within five (5) business days after
Tenant first
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receives or sends the same, with copies of all claims, reports,
complaints, notices, Warnings, or asserted violations relating in any way
to the Premises, or Tenant's use thereof. Tenant shall promptly deliver
to Landlord copies of hazardous waste manifests reflecting the legal and
proper disposal of all Hazardous Materials removed from the Premises.
(2) Tenant acknowledges that Tenant has been informed that
Section 25359.7 of the California Health and Safety Code provides that
any tenant of real property who knows, or has reasonable cause to
believe, that any release of hazardous substances has come to be located
on or beneath the real property shall, upon discovery by the tenant of
the presence or suspected presence of a hazardous substance release,
give notice of that condition to the owner of the real property. Failure
of the tenant to provide written notice as required to the owner shall
make the lease voidable at the discretion of the owner. The Health and
Safety Code provides that if the tenant has actual knowledge of the
presence of any hazardous substance release and knowingly or willingly
fails to provide written notice as required by the owner, the tenant is
liable for a civil penalty not to exceed $5,000.00 for each violation.
(d) INDEMNIFICATION. Tenant shall indemnify, defend (by counsel
reasonably acceptable to Landlord), protect, and hold Landlord, and each
and any of Landlord's shareholders, partners, officers, directors,
employees, agents, attorneys, successors, and assigns, free and harmless
from and against any and all claims, liabilities, penalties, forfeitures,
losses, or expenses (including actual attorneys' fees and costs) or death
of or injury to any person or damage to any property whatsoever, arising
from or caused in whole or in part, directly or indirectly, by (i) the
presence in, on, under, or about the Premises or discharge in or from the
Premises of any Hazardous Materials placed or discharged in, on, or under
the Premises by Tenant or Tenant's use, analysis, storage,
transportation, disposal, release, threatened release, discharge, or
generation of Hazardous Materials to, in, on, under, about, or from the
Premises; or (ii) Tenant's failure to comply with any Hazardous Materials
Laws. Tenant's obligation hereunder shall include, without limitation,
and whether foreseeable or unforeseeable, all costs of any required or,
necessary repair, cleanup, or detoxification or decontamination of the
Premises and the preparation and implementation of any closure, remedial
action, or other required plans in connection therewith. For purpose of
the indemnity provisions hereof, any acts or omissions of Tenant, or by
employees, agents, assignees, subtenant, concessionaire, contractors, or
subcontractors of Tenant or others acting for on behalf of Tenant
(whether or not they are negligent, intentional, willful, or unlawful)
shall be strictly attributable to Tenant.
(e) SURVIVAL. All representations, warranties, obligations, and
indemnities with respect to Hazardous Materials shall survive the
termination of this Lease.
Section 10.2. WASTE MANAGEMENT REQUIREMENTS. Without limiting any
other obligations of Tenant under this Lease, Tenant covenants and agrees
to comply with all laws, rules, regulations, and guidelines now or
hereafter made applicable to the Premises respecting the disposal of
waste, trash, garbage, and other matter (liquid or solid), generated by
Tenant, the disposal of which is not otherwise the express obligation of
Landlord under this Lease, including, but not limited to, laws, rules,
regulations, and guidelines respecting recycling and other forms of
reclamation (all of which are herein collectively referred to as "Waste
Management Requirements"). Tenant hereby covenants and agrees to comply
with all rules and regulations established by Landlord to enable Landlord
from time to time to comply with Waste Management Requirements applicable
to Landlord (i) as owner of the Premises, and (ii) in performing
Landlord's obligations under this Lease, if any. Tenant covenants and
agrees to indemnify, defend, protect, and hold Landlord harmless from and
against all liability (including costs, expenses, and attorneys' fees)
that Landlord may sustain by reason of Tenant's breach of its obligations
under this Section 10.2. Tenant obligations under this Section 10.2 shall
survive the termination of this Lease.
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EXHIBIT 10.16
OFFICE BUILDING LEASE
TABLE OF CONTENTS
SECTION .............................................. Page
1. Basic Lease Terms ............................. 1
2. Premises and Common Areas Leased .............. 2
3. Term .......................................... 2
4. Possession .................................... 2
5. Rent .......................................... 3
6. Rental Adjustment ............................. 3
7. Security Deposit .............................. 4
8. Use ........................................... 4
9. Notices ....................................... 5
10. Brokers ....................................... 5
11. Holding Over .................................. 5
12. Taxes on Tenant's Property .................... 5
13. Condition of Premises ......................... 5
14. Alterations ................................... 5
15. Repairs ....................................... 6
16. Liens ......................................... 6
17. Entry By Landlord ............................. 6
18. Utilities and Services ........................ 6
19. Bankruptcy .................................... 7
20. Indemnification and Exculpation of Landlord.... 7
21. Damage to Tenants Property .................... 7
22. Tenants Insurance ............................. 7
23. Damage or Destruction ......................... 8
24. Eminent Domain ................................ 9
25. Defaults and Remedies ......................... 9
26. Assignment and Subletting ..................... 10
27. Subordination ................................. 10
28. Estoppel Certificate .......................... 11
29. Building Planning ............................. 11
30. Rules and Regulations ......................... 11
31. Conflict of Laws............................... 11
32. Successors and Assigns......................... 11
33. Surrender of Premises.......................... 11
34. Professional Fees.............................. 11
35. Performance by Tenant.......................... 11
36. Mortgagee Protection .......................... 12
37. Definition of Landlord ........................ 12
38. Waiver ........................................ 12
39. Identification of Tenant ...................... 12
40. Parking ....................................... 12
41. Force Majeure ................................. 12
42. Terms and Headings ............................ 12
43. Examination of Lease .......................... 12
44. Time .......................................... 12
45. Prior Agreement or Amendments ................. 13
46. Separability .................................. 13
47. Recording ..................................... 13
48. Limitation on Liability ....................... 13
49. Modification For Lender ....................... 13
50. Financial Statements .......................... 13
51. Quiet Enjoyment ............................... 13
52. Tenant as Corporation ......................... 13
53. WORK Letter Agreement ......................... 14
Exhibits
A Outline of Floor Plan or Premises
B The Project
C Notice of Lease Term Dates and Tenant's Percentage
D Standards for Utilities and Services
E Tenant Estoppel Certificate
F Rules and Regulations
G Parking Rules and Regulations
H Hazardous Materials
<PAGE> 2
OFFICE LEASE
1. BASIC LEASE TERMS
a. DATE OF LEASE EXECUTION: July 12, 1994
--------------------------------------------------
b. TENANT: STAC Electronics, a California corporation
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Trade Name:
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Address (leased Premises): 12626 High Bluff Drive
------------------------------------------------
San Diego, CA 92130
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Floor(s) upon which the Premises are Located: Third (3rd)
---------------
Suite Number(s): 370
------------
Address (For Notices): 12636 High Bluff Drive, Suite 400
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San Diego, CA 92130
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c. LANDLORD: Weyerhaeuser Mortgage Company, a California corporation, and
-----------------------------------------------------------------
Fort Wyman, Inc., a Michigan Corporation
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Address (For Notices) c/o Weyerhaeuser Mortgage Company, 6320 Canoga
-----------------------------------------------------
Avenue, Woodland Hills, CA 91367
-----------------------------------------------------
with a copy to Voit Management, 12626 High Bluff Drive, Suite 110, San
Diego, CA 92130 or to such other place as Landlord may from time to time
designate by notice to Tenant.
d. PREMISES AREA: Approximately Four Thousand Seven Hundred Twenty-Nine
------------------------------------------------------------
(4,729) Rentable Square Feet
------------------------------------------------------------
e. PROJECT AREA: Fifty-Seven Thousand Eight Hundred Ninety-Five (57,895)
------------------------------------------------------------
Rentable Square Feet
------------------------------------------------------------
f. TENANT'S PERCENTAGE: 8.2%
-------
g. TERM OF LEASE: The term of this Lease shall be for the approximately
-------------------
sixty-six (66) months commencing upon the earlier of:
---------------
---------------------------------------------------------------------------
(2) The date that Tenant opened for business in the Premises, or
(3) September 6, 1994, except as such September 6, 1994, date shall be
extended for Landlord caused delays and delays due to the Premises
being physically inaccessible through no fault of Tenant, and
expiring 3/
Reference in this lease to a "Lease Year" shall mean each successive twelve
month period commencing with the first day of the month in which the term
of this Lease commences.
h. BASE MONTHLY RENT: $ Five Thousand Nine Hundred Eleven and 25/100 Dollars
--------------------------------------------------------
($5,911.25)
--------------------------------------------------------
- -------------------------------------------------------------------------------
j. ANNUAL OPERATING EXPENSE ALLOWANCE: See Addendum "2."
- -------------------------------------------------------------------------------
k. PREPAID RENT: $ 5,911.25 (See Addendum "5")
-----------------------------
l. TOTAL SECURITY DEPOSIT: $ 5,911.25, including a $ -0- non-refundable
---------- ---
cleaning fee. (See Addendum "5")
m. TENANT IMPROVEMENT ALLOWANCE: $ See Addendum "5" ----------------------
------------------
n. TENANT'S USE OF PREMISES: General office use.
------------------------------------------------
o. PARKING: Nineteen (19) spaces, including two (2) covered and reserved,
---------------
free of charge.
p. BROKER(S): CB Commercial Real Estate Group, Inc. and Business Real Estate
----------------------------------------------------------------
Brokerage Company, Inc.
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q. BROKERAGE COMMISSION PAYABLE BY: Landlord
------------------------------------------
r. GUARANTOR(S): None
-------------------------------------------------------------
s. ADDITIONAL SECTIONS
Additional sections of this lease numbered Addenda "1" through "5" -----
-------------------------
t. ADDITIONAL EXHIBITS
Additional exhibits letters H ----- are attached hereto and made a part
hereof. -------------------------------------------------------------------
1
<PAGE> 3
Section 1 represents a summary of the basic terms of this Lease. In
the event of any inconsistency between the terms contained in Section 1 and any
specific clause of this Lease, the terms of the more specific clause shall
prevail.
The parties hereto agree that said letting and hiring is upon and
subject to the terms, covenants and conditions herein set forth. Tenant
covenants, as a material part of the consideration for this Lease to keep and
perform each and all of said terms, covenants and conditions for which tenant
is liable and that this Lease is made upon the condition of such performance.
2. PREMISES AND COMMON AREAS LEASED.
a. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain premises described in Section 1 and in Exhibit A
attached hereto (the "Premises"). ---------------------------------------------
Landlord and Tenant stipulate that for purposes of this Lease, the Premises
contains 4,729 rentable square feet and the Project contains 57,895 rentable
square feet.
b. The Premises are contained within the building at the address
designated in Section 1 located in the Project described on Exhibit B attached
hereto (the "Project").
c. Tenant's Percentage of the Project is stipulated to be 8.2%. ----------
d. Tenant shall have the nonexclusive right to use in common with other
tenants in the Building and the Project and subject to the Rules and
Regulations referred to in Paragraph 30 below the following areas ("Common
Areas") appurtenant to the Premises:
(1) The Building's common entrances, lobbies, restrooms, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any
passageways and serviceways thereto, and the common pipes, conduits, wires and
appurtenant equipment serving the Premises:
(2) Loading and unloading areas, trash areas, parking areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas and
similar areas and facilities appurtenant to the Building.
e. Landlord reserves the right from time to time without unreasonable
interference with Tenant's use:
(1) To install, use, maintain, repair and replace pipes,ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building above the ceiling surfaces, below the floor surfaces, within
the walls and in the central core areas, and to relocate any pipes, ducts,
conduits, wires and appurtenant meters and equipment included in the Premises
which are located in the Premises or located elsewhere outside the Premises,
and to expand the Building or Project;
(2) 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 and walkways.
(3) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available:
(4) To designate other land outside the boundaries of the Building
or Project to be a part of the Common Areas;
(5) To add additional buildings and improvements to the Common
Areas;
(6) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building or the Project, or any
portion thereof;
(7) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas, the Building or the Project as
Landlord may, in the exercise of sound business judgment, deem to be
appropriate.
3. TERM
The term of this Lease shall be for the period designated in Section 1,
commencing on the Commencement Date, and ending on the expiration of such
period, unless the term hereby demised shall be sooner terminated as
hereinafter provided. If not specifically designated in Section 1, the
Commencement Date, the date upon which the term of this Lease shall end, the
rentable square feet within the Premises and Tenant's Percentage shall be
determined in accordance with the provisions of Paragraph 2 and will be
specified in Landlord's Notice of Lease Term Dates and Tenant's Percentage
("Notice"), in the form of Exhibit "C" which is attached hereto and is
incorporated herein by this reference, and shall be served upon Tenant as
provided in Paragraph 9. The Notice shall be binding upon Tenant unless Tenant
objects to the Notice in writing, served upon Landlord as provided for in
Paragraph 9 hereof, within five (5) days of Tenant's receipt of the Notice.
------------------
----------------------------------------------------------------------------
2
<PAGE> 4
5. RENT.
a. Tenant shall pay Landlord monthly base rent in the initial amount set
forth in Section 1 which shall be payable monthly in advance on the first day of
each and every calendar month ("Base Monthly Rent") provided, however, the first
month's rent shall be due and payable upon execution of this lease.
- --------------------------------------------------------------------------------
d. All rent shall be paid by Tenant to Landlord monthly in advance on the
first day of every calendar month, at the address shown in Section 1, or such
other place as Landlord may designate in writing from time to time. All rent
shall be paid without prior demand or notice and without any deduction or
offset whatsoever. All rent shall be paid in lawful currency of the United
States of America. All rent due for any partial month shall be prorated at the
rate of 1/30th of the total monthly rent per day. Tenant acknowledges that late
payment by Tenant to Landlord of any rent or other sums due under this Lease
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of such costs being extremely difficult and impracticable to ascertain.
Such costs include, without limitation, processing and accounting charges and
late charges that may be imposed on Landlord by the terms of any encumbrance or
note secured by the Premises. Therefore, if any rent or other sum due from
Tenant is not received when due. Tenant shall pay to landlord an additional sum
equal to 10% of such overdue payment. Landlord and Tenant hereby agree that such
late charge represents a fair and reasonable estimate of the costs that
Landlord will incur by reason of any such late payment. Additionally, all such
delinquent rent or other sums, plus this late charge, shall bear interest at
the then maximum lawful rate permitted to be charged by Landlord. Any payments
of any kind returned for insufficient funds will be subject to an additional
handling charge of $25.00, and thereafter, Landlord may require Tenant to pay
all future payments of rent or other sums due by money order or cashier's
check.
e. Upon the execution of the Lease. Tenant shall pay to Landlord the
prepaid rent set forth in Section 1 and if Tenant is not in default of any
provisions of the Lease, such prepaid rent shall be applied toward the rent due
for the first month of the term. Landlord's obligations with respect to the
prepaid rent are those of a debtor and not of a trustee, and Landlord can
commingle the prepaid rent with Landlord's general funds. Landlord shall not be
required to pay Tenant interest on the prepaid rent. Landlord shall be entitled
to immediately endorse and cash Tenant's prepaid rent; however, such
endorsement and cashing shall not constitute Landlord's acceptance of this
Lease in the event Landlord does not accept this Lease. Landlord shall return
said prepaid rent.
- --------------------------------------------------------------------------------
g. "For purposes of Section 467 of the Internal Revenue Code, the parties
to this lease agreement hereby agree to allocate the stated rents, provided
herein, to the periods which correspond to the actual rent payments as provided
under the terms and conditions of this agreement."
6. RENTAL ADJUSTMENT.
A. For the purposes of this Paragraph 6, the following terms are defined
as follows:
(1) Tenant's Percentage shall mean that portion of the total
rentable area of the Project occupied by Tenant as set forth as a percentage in
Section 1.
- --------------------------------------------------------------------------------
(3) Operating Expenses shall consist of all direct costs of
operation and maintenance of the Project and the Common Areas, including any
expansions to the Common Areas by Landlord ("Operating Expenses"), as determined
by standard accounting practices, calculated assuming the Project is fully
occupied, including the following costs by way of illustration, but not
limitation; any and all assessments Landlord must pay for the Project pursuant
to any covenants, conditions or restrictions reciprocal easement agreements,
tenancy-in-common agreements or similar restrictions and agreements affecting
the Building or the Project; real property taxes and assessments and any taxes
or assessments hereafter imposed in lieu thereof, rent taxes, gross receipt
taxes (whether assessed against Landlord or assessed against Tenant and paid by
Landlord, or both); water and sewer charges; accounting; legal and other
consulting fees; the net cost and expense of insurance for which Landlord is
responsible hereunder or which Landlord or any first mortgagee with a lien
affecting the Premises reasonably deems necessary in connection with the
operation of the Project; utilities; janitorial services; security; ???? parking
charges, utilities surcharges, or any other costs levied, assessed or imposed
by, or at the direction of or resulting from statutes or regulations or
interpretations thereof, promulgated by any federal, state, regional, municipal
or local government authority in connection with the use or occupancy of the
Project or the Premises or the parking facilities serving the Project or the
Premises; the cost (amortized over such reasonable period as Landlord shall
determine together with interest at the maximum rate allowed by law on the
unamortized balance) of any capital improvements made to the Project or the
Common Areas by the Landlord* or replacement of any building equipment needed to
operate the Building or the Common Areas at the same quality levels as prior to
the replacement; costs incurred in the management of the Project, if any
(including supplies, wages and salaries of employees used in the management,
operation and maintenance of the Project, and payroll taxes and similar
governmental charges with respect thereto, Project management office rental, a
management fee and, in the event Landlord is directly participating in the
administration of the Project, an administrative fee in the amount of Landlord's
actual expenses, such administrative fee not to exceed fifteen percent (15%) of
the annual Operating Expenses excluding therefrom such fee); air conditioning;
waste disposal; heating; ventilating; elevator maintenance; supplies; materials;
equipment; tools; repair and maintenance of the structural portions of the
Project, including the plumbing, heating, ventilating, air conditioning and
electrical systems installed or furnished by Landlord; maintenance costs,
including utilities and payroll expenses, rental of personal property used in
maintenance, and all other upkeep of all parking and Common areas; costs and
expenses of
* in order to comply with any governmental requirements not in existence as of
the date of this Lease or designed to reduce Operating Expenses
3
<PAGE> 5
gardening and landscaping; maintenance of signs(other than Tenant's signs);
personal property taxes levied on or attributable to personal property used in
connection with the entire Project, including the Common Areas; reasonable
audit or verification fees; and costs and expenses of repairs, resurfacing,
repairing, maintenance, painting, lighting, cleaning, refuse removal, security
and similar items, including appropriate reserves. Operating Expenses shall not
include depreciation on buildings or equipment therein, Landlord's executive
salaries or real estate brokers' commissions.
(4) As used herein, the term "real property taxes" shall include any
form of assessment, license fee, license tax, business license fee, commercial
rental tax, levy, charge, penalty, tax or similar imposition, imposed by any
authority having the direct power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, as against any legal or
equitable interest of Landlord in the Premises, including, but not limited to,
the following:
(a) any tax on Landlord's "right" to other income from the
Premises or as against Landlord's business of leasing the Premises;
(b) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real estate tax, including but not limited
to, any assessments, taxes, fees, levies and charges that may be imposed by
governmental agencies for such services as fire protection, street, sidewalk
and road maintenance, refuse removal and for other governmental services
formerly provided without charge to property owners or occupants. It is the
intention of Tenant and Landlord that all such new and increased assessments,
taxes, fees, levies and charges be included within the definition of "real
property taxes" for the purposes of this Lease;
(c) any assessment, tax, fee, levy or charge allocable to or
measured by the area of the Premises or the rent payable hereunder, including,
without limitation, any gross income tax or excise tax levied by the State,
city or federal government, or any political subdivision thereof, with respect
to the receipt of such rent, or upon or with respect to the possession,
leasing, operating, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises, or any portion thereof;
(d) any assessment, tax, fee, levy or charge upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.
Notwithstanding any provision of this paragraph 6 expressed or implied to
the contrary, "real property taxes" shall not include Landlord's federal or
state income, franchise, inheritance or estate taxes.
- ------------------------------------------------------------- See Addendum "2."
c Even though the term has expired and Tenant has vacated the Premises,
when final determination is made of Tenant's Percentage of Operating Expenses
for the year in which this Lease terminates, Tenant shall immediately pay any
increase due over the estimated expenses paid and, conversely, any overpayment
made in the event said expenses decrease shall be rebated by Landlord to
Tenant.
7. SECURITY DEPOSIT.
Upon execution of this Lease, Tenant shall deposit with Landlord the amount
of the security deposit set forth in Section 1 in part as security for the
performance by Tenant of the provisions of this Lease ------------------. If
Tenant is in default, Landlord can use the security deposit or any portion of it
to cure the default or to compensate Landlord for all damage sustained by
Landlord resulting from Tenant's default. Upon demand, Tenant shall immediately
pay to Landlord a sum equal to the portion of the security deposit expended or
applied by Landlord to maintain the security deposit in the amount initially
deposited with Landlord. In no event will Tenant have the right to apply any
part of the security deposit to any rent or other sums due under this Lease. If
Tenant is not in default at the expiration or termination of this Lease,
Landlord shall return the entire security deposit to Tenant. ------------------
- ------------------------ Landlord's obligations with respect to the deposit are
those of a debtor and not of a trustee, and Landlord can commingle the security
deposit with Landlord's general funds. Landlord shall not be required to pay
Tenant interest on the deposit. Landlord shall be entitled to immediately
endorse and cash Tenant's prepaid deposit; however, such endorsement and cashing
shall not constitute Landlord's acceptance of this Lease. In the event Landlord
does not accept this Lease, Landlord shall return said prepaid deposit. Should
Landlord sell its interest in the Premises during the term hereof and if
Landlord deposits with the purchaser thereof the then unappropriated funds
deposited by Tenant as aforesaid, thereupon Landlord shall be discharged from
any further liability with respect to the Security Deposit.
8. USE.
Tenant shall use the Premises for the uses set forth in Section 1 above,
and shall not use or permit the Premises to be used for any other purpose
without the prior written consent of Landlord. Nothing contained herein shall
be deemed to give Tenant any exclusive right to such use in the Building.
Tenant shall not use or occupy the Premises in violation of law or of the
Certificate of Occupancy issued for the Building, and shall, upon written
notice from Landlord, discontinue any use of the Premises which is declared by
any governmental authority having jurisdiction to be a violation of law or of
said Certificate of Occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
thereof. Tenant shall comply with all rules, orders, regulations and
requirements of the Insurance Service Office or any other organization
performing a similar function. Tenant shall promptly, upon demand, reimburse
Landlord for any additional premium charged for such policy by reason of
Tenant's failure to comply with the provisions of this Paragraph. Tenant shall
not do or permit anything to be done in or about the Premises which will in any
way obstruct or interfere with the rights of other tenants or occupants of the
Project, or injure or annoy them, or use or allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about
4
<PAGE> 6
the Premises. Tenant shall comply with all restrictive covenants and obligations
created by private contracts which affect the use and operation of the Premises,
the Building, the Common Area or the Project. Subject to Paragraph 23 hereof,
Tenant shall not commit or suffer to be committed any waste in or upon the
Premises and shall keep the Premises in first class repair and appearance normal
wear and tear excepted. Landlord reserves the right to prescribe the weight and
position of all files, safes and heavy equipment which Tenant desires to place
in the Premises so as to properly distribute the weight thereof. Further,
Tenant's business machines and mechanical equipment which cause vibration or
noise that may be transmitted to the building structure or to any other space in
the building shall be so installed, maintained and used by Tenant as to
eliminate such vibration or noise. Tenant shall be responsible for all
structural engineering required to determine structural load.
9. NOTICES.
Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail and if given by mail
shall be deemed sufficiently given if sent by registered or certified mail
addressed to Tenant at the address(es) designated in Section 1 or to Landlord
at both of the addresses designated in Section 1. Either party may specify a
different address for notice purposes by written notice to the other. -------
- ----------------------------------------------------------
10. BROKERS.
Tenants warrants that it has no dealings with any real estate
broker or agent in connection with the negotiation of this Lease except for
those certain brokers whose names are set forth in Section 1 and that it knows
of no other real estate broker or agent who is or might be entitled to a
commission in connection with this Lease. If Tenant has dealt with any other
person or real estate broker with respect to leasing or renting space in the
Project. Tenant shall be solely responsible for the payment of any fee due said
person or firm and Tenant shall hold Landlord free and harmless against any
liability in respect thereto, including attorneys' fees and costs.
11. HOLDING OVER.
If Tenant holds over after the expiration or earlier termination of
the term hereof without the express written consent of Landlord, Tenant shall
become a Tenant at sufferance only, at a rental rate equal to the greater of
Landlord's scheduled rent for the space or one hundred twenty-five percent
(125%) of the rent in effect upon the date of such expiration (subject to
adjustment as provided in Paragraph 6 hereof and prorated on a daily basis),
and otherwise subject to the terms, covenants and conditions herein specified,
so far as applicable. Acceptance by Landlord of rent after such expiration or
earlier termination shall not result in a renewal of this Lease. The foregoing
provisions of this Paragraph 11 are in addition to and do not affect Landlord's
right of re-entry or any rights of Landlord hereunder or as otherwise provided
by law. If Tenant fails to surrender the Premises upon the expiration of this
Lease despite demand to do so by Landlord. Tenant shall indemnify and hold
Landlord harmless from all loss or liability, including without limitation, any
claim made by any succeeding tenant founded on or resulting from such failure
to surrender and any attorneys fees and costs.
12. TAXES ON TENANT'S PROPERTY.
a Tenant shall be liable for and shall pay, at least ten (10) days before
delinquency, all taxes levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property or if the assessed value of the Premises is increased by the inclusion
therein of a value placed upon such personal property or trade fixtures of
Tenant and if Landlord, after written notice to Tenant, pays the taxes based
upon such increased assessment, which Landlord shall have the right to do
regardless of the validity thereof, but only under proper protest if requested
by Tenant. Tenant shall, upon demand, repay to Landlord the taxes so levied
against Landlord, or the portion of such taxes resulting from such increase in
the assessment.
- --------------------------------------------------------------------------------
13. CONDITION OF PREMISES.
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises, the building
or the Project or with respect to the suitability of either for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the building were in satisfactory
condition at such time. Without limiting the foregoing, Tenant's execution of
the Notice attached hereto as EXHIBIT "C" shall constitute a specific
acknowledgement and acceptance of the various start-up inconveniences that may
be associated with the use of the Common Areas such as certain construction
obstacles including scaffolding, delays in use of freight elevator service,
certain elevators not being available to Tenant, the passage of work crews
using elevators, uneven air conditioning services and other typical
conditions incident to recently constructed office buildings.
14. ALTERATIONS.
a Tenant shall make no alterations, additions or improvements in or to the
Premises without Landlord's prior written consent,* and then only by
contractors or mechanics approved by Landlord such consents and approvals by
Landlord shall not be unreasonably withheld or delayed. Tenant shall submit to
Landlord plans and specifications for any proposed alterations, additions or
improvements to the Premises, and may not make such alterations, additions or
improvements until Landlord has approved of such plans and specifications.
Tenant shall construct such alterations, additions or improvements in
accordance with the plans and specifications approved by Landlord, and shall
not amend or modify such plans and specifications without Landlord's prior
written consent. If the proposed change requires the consent or approval of any
lessor of a superior lease, or the holder of a mortgage encumbering the
Premises, such consent or approval must be secured prior to the construction of
such alteration, addition or improvement.** Tenant agrees that there shall be
no construction of partitions or other obstructions which might interfere with
Landlord's free access to mechanical installations or service facilities of the
building or interfere with the moving of Landlord's equipment to or from the
enclosures containing said installations or facilities. All such work shall be
done at such times and in such manner as Landlord may from time to time
designate. Tenant covenants and agrees that all work done by Tenant shall be
performed in full compliance with all laws, rules, orders, ordinances,
regulations and requirements of all governmental agencies, offices and boards
having jurisdiction, and in full compliance with the rules, regulations and
requirements of the Insurance Service Office, and of any similar body. Before
commencing any work, Tenant shall give Landlord at least ten (10) days written
notice of the proposed commencement of such work and shall, if required by
Landlord and other than for the work described in the Work Letter Agreement of
even date herewith secure at Tenant's own
*unless such alterations, additions, or improvements are less than a cost of
Five Thousand and No/100 Dollars ($5,000.00).
**and Landlord agrees to cooperate in obtaining any such consent or approval.
5
<PAGE> 7
cost and expense, a completion and lien indemnity bond satisfactory to Landlord
for said work if said work costs more than $100,000. Tenant further covenants
and agrees that any mechanic's lien filed against the Premises or against the
Building for work claimed to have been done for, or materials claimed to have
been furnished to Tenant, will be discharged by Tenant, by bond or otherwise,
within (10) ten days after the filing thereof, at the cost and expense of
Tenant. All alterations, additions or improvements upon the Premises made by
either party, including (without limiting the generality of the foregoing) all
wallcovering, built-in cabinet work, paneling and the like, shall, ----------
- --------------, become the property of Landlord, and shall remain upon, and be
surrendered with the Premises as a part thereof, at the end of the term hereof.
- -------------------------------------------------------------------------------
b. All articles of personal property and all business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the
property of Tenant and may be removed by Tenant at any time during the lease
term.-------------------- If Tenant shall fail to remove all of its effects
from the Premises upon termination of this Lease for any cause whatsoever,
Landlord may, at its option, remove the same in any manner that Landlord shall
choose, and store said effects without liability to Tenant for loss thereof. In
such event, Tenant agrees to pay Landlord upon demand any and all expenses
incurred in such removal, including court costs and attorneys fees and storage
charges on such effects, for any length of time that the same shall be in
Landlord's possession. Landlord may, at its option, without notice, sell said
effects, or any of the same, at private sale and without legal process, for
such price as Landlord may obtain and apply the proceeds of such sale upon any
amounts due under this Lease from Tenant to Landlord and upon the expense
incident to the removal and sale of said effects.
15. REPAIRS.
a. By entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair. Subject to Paragraph 23 hereof. Tenant
shall keep, maintain and preserve the Premises in first class condition and
repair, normal wear and tear excepted, and shall, when and if needed, at
Tenant's sole cost and expense, make all repairs to the Premises and every part
thereof. Tenant shall, upon the expiration or sooner termination of the term
hereof, surrender the Premises to Landlord in the same condition as when
received, usual and ordinary wear and tear excepted. Landlord shall have no
obligation to alter, remodel, improve, repair, decorate or paint the Premises or
any party thereof. The parties hereto affirm that Landlord has made no
representations to Tenant respecting the condition of the Premises, the
building, the Project or the Common Area except as specifically herein set
forth.
b. Anything contained in Paragraph 15a above to the contrary notwithstanding,
Landlord shall repair and maintain the structural portions of the building and
the plumbing, heating, ventilating, air conditioning, elevator and electrical
systems installed or furnished by Landlord, unless such maintenance and repairs
are caused in part or in whole by the act, neglect or omission of any duty by
Tenant, its agents, servants, employees or invitees, in which case Tenant shall
pay to Landlord, as additional rent, the reasonable cost of such maintenance and
repairs. Landlord shall not be liable for any failure to make any such repairs
or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in Paragraph 23
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements in or to any portion of the
building or the Premises or in or to fixtures, appurtenances and equipment
therein. Tenant waives the right to make repairs at Landlord's expense under any
law, statute or ordinance now or hereafter in effect.
16. LIENS.
Tenant shall not permit any mechanics', materialmens' or other liens to
be filed against the building or the Project nor against Tenant's leasehold
interest in the Premises. Landlord shall have the right at all reasonable times
to post and keep posted on the Premises any notices which it deems necessary
for protection from such liens. If any such liens are filed, Landlord may,
without waiving its rights and remedies based on such breach of Tenant and
without releasing Tenant from any of its obligations, cause such liens to be
released by any means it shall deem proper, including payments in satisfaction
of the claim giving rise to such lien. Tenant shall pay to Landlord at once,
upon notice by Landlord, any sum paid by Landlord to remove such liens,
together with interest at the maximum rate per annum permitted by law from the
date of such payment by Landlord.
17. ENTRY BY LANDLORD.
Landlord reserves and shall at any and all times (except as provided
below) have the right to enter the Premises to inspect the same, upon reasonable
prior notice to Tenant, to supply janitor service and any other service to be
provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers or tenants, upon reasonable prior notice to Tenant, to post notices
of nonresponsibility, to alter, improve or repair the Premises or any other
portion of the Building,* all without being deemed guilty of any eviction of
Tenant and without abatement of rent. Landlord may, in order to carry out such
purposes, erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, provided that the
business of Tenant shall be interfered with as little as reasonably practicable.
Tenant hereby waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises, and any other loss in, upon and about the Premises. Landlord shall
at all times have and retain a key with which to unlock all doors in the
Premises, excluding Tenant's vaults and safes. Landlord shall have the right to
use any and all means which Landlord may deem proper to open said doors in an
emergency in order to obtain entry to the Premises. Any entry to the Premises
obtained by Landlord by any of said means, or otherwise, shall not be construed
or deemed to be a forcible or unlawful entry into the Premises, or an eviction
of Tenant from the Premises or any portion thereof, and any damages caused on
account thereof shall be paid by Tenant. It is understood and agreed that no
provision of this Lease shall be construed as obligating Landlord to perform any
repairs, alterations or decorations except as otherwise expressly agreed herein
by Landlord.
*(with reasonable prior notice to Tenant for non-routine repairs and
maintenance)
18. UTILITIES AND SERVICES.
Provided that Tenant is not in default under this Lease, Landlord agrees
to furnish or cause to be furnished to the Premises the utilities and services
described in the Standards for Utilities and Services, attached hereto as
EXHIBIT "D", subject to the conditions and in accordance with the standards set
forth therein. Landlord's failure to furnish any of the foregoing items when
such failure is caused by (i) accident, breakage or repairs; (ii) strikes,
lockouts or other labor disturbance or labor dispute of any character; (iii)
governmental regulation, moratorium or other governmental action; (iv) inability
despite the exercise of reasonable diligence to obtain electricity, water or
fuel; or by (v) any other cause beyond Landlord's reasonable control, shall not
result in any liability to Landlord. In addition, tenant shall not be entitled
to any abatement or reduction of rent by reason of such failure, no eviction of
Tenant shall result from such failure and Tenant shall not be relieved from the
performance of any covenant or agreement in this Lease because of such failure.
In the event of any failure, stoppage or interruption thereof, Landlord shall
diligently attempt to resume service promptly. If Tenant requires or utilizes
more water or electrical power than is considered reasonable or normal by
Landlord. Landlord may at its option require Tenant to pay, as additional rent,
the cost, as fairly determined by Landlord, incurred by such extraordinary
usage. In addition, Landlord may install separate meter(s) for the Premises, at
Landlord's -------- sole expense, and Tenant thereafter shall pay all charges of
the utility providing service and Landlord shall make an appropriate adjustment
to account for the fact Tenant is directly paying such metered charges.
KOL 3/88 6
<PAGE> 8
19. BANKRUPTCY.
If Tenant shall file a petition in bankruptcy under any provision of
the Bankruptcy Code as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall not
have been vacated within thirty (30) days from the date thereof, or if a
receiver or trustee shall be appointed of Tenant's property and the order
appointing such receiver of trustee shall not be set aside or vacated within
thirty (30) days after the entry thereof, or if Tenant shall assign Tenant's
estate or effects for the benefit of creditors, -------------------------------
then in any such event Landlord may terminate this Lease, if Landlord so
elects, with or without notice of such election and with or without entry or
action by Landlord. In such case, notwithstanding any other provisions of this
Lease, Landlord, in addition to any and all rights and remedies allowed by law
or equity, shall, upon such termination, be entitled to recover damages in the
amount provided in Paragraph 25b hereof. Neither Tenant nor any person claiming
through or under Tenant or by virtue of any statute or order of any court shall
be entitled to possession of the Premises but shall surrender the Premises to
Landlord. Nothing contained herein shall limit or prejudice the right of
Landlord to recover damages by reason of any such termination equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved; whether or
not such amount is greater, equal to or less than the amount of damages
recoverable under the provisions of this Paragraph 19.
20. INDEMNIFICATION AND EXCULPATION OF LANDLORD.
a. Tenant shall indemnify, defend and hold Landlord harmless from all
claims arising from Tenant's use of the Premises or the conduct of its business
or from any activity, work or thing done, permitted or suffered by Tenant in or
about the Premises, the Building, the Project or the Common Area.** Tenant shall
further indemnify, defend and hold Landlord harmless from all claims arising
from any breach or default in the performance of any obligation to be performed
by Tenant under the terms of this Lease, or arising from any act, neglect, fault
or omission of Tenant or of its agents or employees, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or about such claim
or any action or proceeding brought thereon. In case any action or proceeding
shall be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
approved in writing by Landlord. Tenant, as a material part of the consideration
to Landlord, hereby assumes all risk of damage to property or injury to person
in, upon or about the Premises from any cause whatsoever except that which is
caused by the failure of Landlord to observe any of the terms and conditions of
this Lease where such failure has persisted for an unreasonable period of time
after written notice of such failures. Tenant hereby waives all its claims in
respect thereof against Landlord.
b. Neither Landlord nor any partner, director, officer, agent or employee
of Landlord shall be liable to tenant or its partners, directors, officers,
contractors, agents, employees, invitees, sublessees or licensees, for any
loss, injury or damage to Tenant or to any other person, or to its or their
property, irrespective of the cause of such injury, damage or loss, unless
solely caused by or solely resulting from the gross negligence or willful
misconduct of Landlord or its employees or agents in the operation or
maintenance of the Premises, the building, or the Project without contributory
negligence on the part of Tenant or any of its sublessees or licensees or its
or their employees, agents or contractors, or any other lessees or occupants of
the building or Project. Further, neither Landlord nor any partner, director,
officer, agent or employee of Landlord shall be liable (i) for any such damage
caused by other lessees or persons in or about the building or Project, or
caused by quasi-public work; or (ii) for consequential damages arising out of
any loss of the use of the Premises of any equipment or facilities therein by
Tenant or any person claiming through or under Tenant.
21. DAMAGE TO TENANT'S PROPERTY.
*Notwithstanding the provisions of Paragraph 20 to the contrary,
Landlord or its agents shall not be liable for (i) any damage to any property
entrusted to employees of the building or Project, (ii) loss or damage to any
property by theft or otherwise, (iii) any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the building or from
the pipes, appliances or plumbing work therein or from the roof, street or
sub-surface or from any other place or resulting from dampness or any other
cause whatsoever. Landlord or its agents shall not be liable for interference
with light or other incorporeal hereditaments, nor shall Landlord be liable for
any latent defect in the Premises or in the building. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Premises or in the
building or of defects therein or in the fixtures or equipment.
22. TENANT'S INSURANCE.
a. Tenant shall, during the term hereof and any other period of occupancy,
at its sole cost and expense, keep in full force and effect the following
insurance:
(1) Standard form property insurance insuring against the perils of
fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All-Risk") and sprinkler leakage. This insurance policy shall be
upon all property owned by Tenant for which Tenant is legally liable or that
was installed at Tenant's expense, and which is located in the Project
including, without limitation, furniture, fittings, installations, fixtures
(other than Tenant improvements installed by Landlord), and any other personal
property in an amount not less than ninety percent (90%) of the full
replacement cost thereof. In the event that there shall be a dispute as to the
amount which comprises full replacement cost, the decision of Landlord or any
mortgagees of Landlord shall be conclusive. This insurance policy shall also be
upon direct or indirect loss of Tenant's earnings attributable to Tenant's
inability to use fully or obtain access to the Premises, Building or Project in
an amount as will properly reimburse Tenant. Such policy shall name Landlord
and any mortgagees of Landlord as insured parties, as their respective
interests may appear.
(2) Comprehensive General Liability insurance insuring Tenant against
any liability arising out of the lease, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $1,000,000 Combined Single Limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence, with such liability amount to be adjusted from
year to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of the Premises and Tenant's Operations thereon, independent
contractors, contractual liability (covering the indemnity contained in
Paragraph 20 hereof) and shall (a) name Landlord as an additional insured, (b)
contain a cross liability provision and (c) contain a provision that the
insurance provided the Landlord hereunder shall be primary and non-contributing
with any other insurance available to the Landlord.
(3) Workers' Compensation and Employer's Liability insurance (as
required by state law).
(4) Any other form or forms of insurance as Tenant or Landlord or any
mortgagees of Landlord may reasonably require from time to time in form, in
amounts and for insurance risks against which a prudent tenant would protect
itself.
b. All policies shall be written in a form satisfactory to Landlord and
shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the most
current issue of Best's Insurance Reports. Within ten (10) days after the
execution of this Lease, Tenant shall deliver to Landlord copies of policies or
certificates evidencing the existence of the amounts and forms of coverage
satisfactory to Landlord. No such policy shall be cancellable or reducible in
coverage except after thirty (30) days prior written notice to Landlord. Tenant
shall, within ten (10) days prior to the expiration of such policies, furnish
Landlord with renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereof to Tenant as additional rent. If Landlord
obtains any insurance that is the responsibility of Tenant under this Paragraph,
Landlord shall deliver to Tenant a written statement setting forth the cost of
any such insurance and showing in reasonable detail the manner in which it has
been computed.
*Except to the extent of Landlord's or its employees' or agents' gross
negligence or willful misconduct,
**Except to the extent of Landlord's or its employees' or agents' negligence or
willful misconduct,
7
<PAGE> 9
c. During the term of this Lease, Landlord shall insure the Building
(excluding any property which Tenant is obligated to insure under Subparagraphs
22a and b hereof) against damage with All-Risk insurance and public liability
insurance, all in such amounts and with such deductions as Landlord considers
appropriate.* Landlord may, but shall not be obligated to, obtain and carry any
other form or forms of insurance as it or Landlord's mortgagees may determine
advisable. Notwithstanding any contribution by Tenant to the cost of insurance
premiums, as provided herein, Tenant acknowledges that it has no right to
receive any proceeds from any insurance policies carried by Landlord. *upon
written request of Tenant with reference to this Subparagraph 22c, Landlord
shall provide Tenant with a copy of a certificate of Landlord's insurance.
d. Tenant will not keep, use, sell or offer for sale in or upon the
Premises any article which may be prohibited by any insurance policy
periodically in force covering the Building. If Tenant's occupancy or business
in, or on, the Premises, whether or not Landlord has consented to the same,
results in any increase in premiums for the insurance periodically carried by
Landlord with respect to the Building, Tenant shall pay any such increase in
premiums as additional rent within ten (10) days after being billed therefore
by Landlord. In determining whether increased premiums are a result of Tenant's
use of the Premises, a schedule issued by the organization computing the
insurance rate on the Building or the Tenant Improvements showing the various
components of such rate, shall be conclusive evidence of the several items and
charges which make up such rate. Tenant shall promptly comply with all
reasonable requirements of the insurance authority or any present or future
insurer relating to the Premises.
e. If any of Landlord's insurance policies shall be cancelled or
cancellation shall be threatened or the coverage thereunder reduced or
threatened to be reduced in any way because of the use of the Premises or any
part thereof by Tenant or any assignee or subtenant of Tenant or by anyone
Tenant permits on the Premises and, if Tenant fails to remedy the condition
giving rise to such cancellation, threatened cancellation, reduction of
coverage, threatened reduction of coverage, increase in premiums, or threatened
increase in premiums, within forty-eight (48) hours after notice thereof,
Landlord may, at its option, either terminate this Lease or enter upon the
Premises and attempt to remedy such condition, and Tenant shall promptly pay
the cost thereof to Landlord as additional rent. Landlord shall not be liable
for any damage or injury caused to any property of Tenant or of others located
on the Premises resulting from such entry. If Landlord is unable, or elects not
to remedy such condition, then Landlord shall have all of the remedies provided
for in this Lease in the event of a default by Tenant. Notwithstanding the
foregoing provisions of this Subparagraph 22e, if Tenant fails to remedy as
aforesaid, Tenant shall be in default of its obligation hereunder and Landlord
shall have no obligation to remedy such default.
f. All policies of insurance required hereunder shall include a clause or
endorsement denying the insurer any rights of subrogation against the other
party to the extent rights have been waived by the insured before the
occurrence of injury or loss. Landlord and Tenant waive any rights of recovery
against the other for injury or loss due to hazards covered by policies of
insurance containing such a waiver of subrogation clause or endorsement to the
extent of the injury or loss covered thereby.
23. DAMAGE OR DESTRUCTION.
See Addendum "1" Item 8.
- --------------------------------------------------------------------------------
8
<PAGE> 10
24. EMINENT DOMAIN.
a. In case all of the Premises, or such part thereof as shall substantially
interfere with Tenant's use and occupancy thereof, shall be taken for any
public or quasi-public purpose by any lawful power or authority by exercise of
the right of appropriation, condemnation or eminent domain, or sold to prevent
such taking, either party shall have the right to terminate this Lease effective
as of the date possession is required to be surrendered to said authority.
Tenant shall not assert any claim against Landlord or the taking authority for
any compensation of such taking, and Landlord shall be entitled to receive the
entire amount of an award without deduction for any estate or interest of
Tenant. In the event the amount of property or the type of estate taken shall
not substantially interfere with the conduct of Tenant's business, Landlord
shall be entitled to the entire amount of the award without deduction for any
estate or interest of Tenant, Landlord shall restore the Premises to
substantially their same condition prior to such partial taking, and a
proportionate allowance shall be made to Tenant for the rent corresponding to
the time during which and to the part of the Premises of which, Tenant shall be
so deprived on account of such taking and restoration. Nothing contained in
this paragraph shall be deemed to give Landlord any interest in any award made
to Tenant for the taking of personal property and fixtures belonging to Tenant,
or for moving expenses or for the unamortized portion of tenant improvements
paid by Tenant.
b. In the event of taking of the Premises or any part thereof for temporary
use, (1) this Lease shall be and remain unaffected thereby and rent shall not
abate, and (2) Tenant shall be entitled to receive for itself such portion or
portions of any award made for such use with respect to the period of the
taking which is within the term, provided that if such taking shall remain in
force at the expiration or earlier termination of this Lease, Tenant shall then
pay to Landlord a sum equal to the reasonable cost of performing Tenant's
obligations. For purpose of this Subparagraph 24b, a temporary taking shall be
defined as a taking for a period of 270 days or less.
25. DEFAULTS AND REMEDIES.
a. The occurrence of any one or more of the following events shall constitute
a default hereunder by Tenant:
(1) The ----------- abandonment of the Premises by Tenant. Abandonment
is herein defined to include, but is not limited to, any absence by Tenant
from the Premises for ten (10) business days or longer while in default of any
provision of this Lease.
(2) The failure by Tenant to make any payment of rent or additional
rent or any other payment required to be made by Tenant hereunder,
- --------------- within five (5) days after notice to Tenant that such payment
is due.
(3) The failure by Tenant to observe or perform any of the express or
implied covenants or provisions of this lease to be observed or performed by
Tenant, other than as specified in Subparagraph 25a.(1) or (2) above, where
such failure shall continue for a period of ten (10) days after written notice
thereof from Landlord to Tenant. If the nature of Tenant's default is such that
more than ten (10) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such cure with said
ten (10) day period and thereafter diligently prosecute such cure to
completion.
-----------------------------------------------------------------
(4) The making by Tenant of any general assignment for the benefit of
creditors; the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within thirty (30) days; the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease where such seizure is not
discharged within thirty (30) days.
*
b. In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder. In
the event that Landlord shall elect to so terminate this lease then Landlord
may recover from Tenant:
(1) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(2) 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 Tenant proves could have been
reasonably avoided; plus
(3) 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 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.
As used in Subparagraphs 25b(1) and (2) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law.
As used in Subparagraph 25b(3) above, the "worth at the time of award" 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%).
c. In the event of any such default by Tenant, Landlord shall also have the
right, with or without terminating this lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant. No re-entry or taking possession of the Premises by Landlord
pursuant to this paragraph 25c shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant or
unless the termination thereof is decreed by a court of competent jurisdiction.
d. In the event of the abandonment of the Premises by Tenant or in
-----------
the event that Landlord shall elect to re-enter as provided above or shall take
possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, then if Landlord does not elect to terminate this lease
as provided above, Landlord may from time to time, without terminating this
Lease, either recover all rent as it becomes due or relet the Premises or any
part thereof for the term for this lease on terms and conditions as Landlord in
its sold discretion may deem advisable with the right to make alterations and
repairs to the Premises.
In the event that Landlord shall elect to so relet, then rentals received
by Landlord from such reletting shall be applied: first, to the payment of any
indebtedness other than rent due hereunder from Tenant to Landlord; second, the
payment of any cost of such reletting; third, to the payment of the cost of
any alterations and repairs to the Premises; fourth, to the payment of rent due
and unpaid hereunder and the residue, if any, shall be held by Landlord and
applied to payment of future rent as the same may become due and payable
hereunder. Should that portion of such rentals received from such reletting
during any month, which is applied to the payment of rent hereunder, be less
than the rent payable during that month by Tenant hereunder, then Tenant
* (5) A default by Tenant under the lease with Landlord for Suites 200
and 400 at 12636 High Bluff Drive.
9
<PAGE> 11
shall pay such deficiency to Landlord immediately upon demand therefor by
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred,
including but not limited to brokers' commissions, by Landlord in such
reletting or in making such alterations and repairs not covered by the rentals
received from such reletting.
e. All rights, options and remedies of Landlord contained in this Lease shall
be construed and held to cumulative, and no one of them shall be exclusive of
the other, and Landlord shall have the right to pursue any one of all of such
remedies or any other remedy or relief which may be provided by law, whether or
not stated in this Lease. No waiver of any default of Tenant hereunder shall be
implied from any acceptance by Landlord of any rent or other payments due
hereunder or any omission by Landlord to take any action on account of such
default if such default persists or is repeated, and no express waiver shall
affect defaults other than as specified in said waiver. The consent or approval
of Landlord to or of any act by Tenant requiring Landlord's consent or approval
shall not be deemed to waive or render unnecessary Landlord's consent to or
approval of any subsequent similar acts by Tenant.
26. ASSIGNMENT AND SUBLETTING
a. Tenant shall not voluntarily assign or encumber its interest in this Lease
or in the Premises or sublease all or any part of the Premises, or allow any
other person or entity to occupy or use all or any part of the Premises,
without first obtaining Landlord's prior written consent which shall not be
unreasonably withheld or delayed. Any assignment, encumbrance or sublease
without Landlord's prior written consent shall be voidable at Landlord's
election and shall constitute a default. -------------------------------------
No consent to an assignment, encumbrance or sublease shall constitute a further
waiver of the provisions of this Paragraph. Tenant shall only notify Landlord
in writing of Tenant's intent to assign, encumber or sublease this Lease, the
name of the proposed assignee or sublessee, information concerning the
financial responsibility of the proposed assignee or sublessee and the terms of
the proposed assignment or subletting, and Landlord shall, within thirty (30)
days of receipt of such written notice and additional information requested by
landlord concerning the proposed assignee's or sublessee's financial
responsibility elect one of the following: (1) consent to such proposed
assignment, encumbrance or sublease; or (2) refuse such content, which refusal
shall be on reasonable grounds. ---------------------------------------------
In addition, a condition to Landlord's consent to any assignment, transfer or
hypothecation of this Lease shall be the delivery to Landlord of a true copy of
the fully executed instrument of assignment, transfer of hypothecation, and the
delivery to Landlord of an agreement executed by the assignee in form and
substance satisfactory to Landlord and expressly enforceable by Landlord,
whereby the assignee assumes and agrees to be bound by all of the terms and
provisions of this Lease and to perform all of the obligations of Tenant
hereunder.
b. As a condition to Landlord's consent to any sublease, such sublease shall
provide that it is subject and subordinate to this Lease and to all mortgages:
that Landlord may enforce the provisions of the sublease, including collection
of rent; that in the event of termination of this Lease for any reason,
including without limitation a voluntary surrender by Tenant, or in the event of
any reentry or repossession of the Premises by Landlord, Landlord may, at its
option, either (1) terminate the sublease or (2) take over all of the right,
title and interest of Tenant, as sublessor, under such sublease, in which case
such sublessee shall attorn to Landlord, but that nevertheless Landlord shall
not (1) be liable for any previous act or omission of Tenant under such
sublease. (2) be subject to any defense or offset previously accrued in favor of
the sublessee against Tenant, or (3) be bound by any previous modification of
any sublease made without Landlord's written consent, or by any previous
prepayment by sublessee of more than one month's rent.
c. In the event that Landlord shall consent to an assignment or sublease under
the provisions of this Paragraph 26, Tenant shall pay Landlord's processing
costs and attorney's fees incurred in giving such consent. If Landlord shall
consent to any assignment of this Lease, Tenant shall pay to Landlord, as
additional rent ------ of all sums and other considerations payable to and for
the benefit of Tenant by the assignee on account of the assignment, as and when
such sums and other consideration** are due and payable by the assignee to or
for the benefit of Tenant (or, if Landlord so requires, and without any release
of Tenant's liability for the same. Tenant shall instruct the assignee to pay
such sums and other consideration directly to Landlord). If for any proposed
sublease Tenant receives rent or other consideration, either initially or over
the term of the sublease, in excess of the rent called for hereunder or, in
case of the sublease of a portion of the Premises, in excess of such rent
fairly allocable to such portion, after appropriate adjustments to assure that
all other payments called for hereunder are taken into account. Tenant shall
pay to Landlord as additional rent hereunder* ------ of the excess of each such
payment of rent or other consideration received by Tenant** promptly after its
receipt. Landlord's waiver or consent to any assignment or subletting shall not
relieve Tenant or any assignee or sublessee from any obligation under this
Lease whether or not accrued. Occupancy of all or part of the Premises by
parent or subsidiary companies of Tenant shall not be deemed an assignment or
subletting. -----------------------------------------------------------------
* one-half (1/2)
** after Tenant's recovery of reasonable, actual, out-of-pocket expenses in
connection with such assignment or sublease (including, without limitation, a
subtenant improvement allowance) and other monetary concessions.
27. SUBORDINATION
a. Subject to Addendum 1. Item 2. Without the necessity of any additional
document being executed by tenant for the purpose of effecting a subordination
and at the election of Landlord or any mortgage with a lien on the building or
any ground lessor with respect to the building, this Lease shall be subject and
subordinate at all times to:
(1) all ground leases or underlying leases which may not exist or hereafter
be executed affecting the building or the land upon which the building is
situated or both; and
(2) the lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the building, land, ground leases
or underlying leases, or Landlord's interest or estate in any of said items is
specified as security.
b. Subject to Addendum 1, Item 2, Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated any such ground
leases or underlying leases or any such liens to this Lease. In the event that
any ground lease or underlying lease terminates
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for any reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason. Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord, at the option of such successor in interest. Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in the form requested
by Landlord, any additional documents evidencing the priority of subordination
of this Lease with respect to any such ground leases or underlying leases or the
lien of any such mortgage or deed of trust. Should Tenant fail to sign and
return any such documents within ten (10) business days of request Tenant shall
be in default, and Landlord may, at Landlord's option, terminate the Lease
provided written notice of such termination is received by Tenant prior to
Landlord's receipt of such documents. Tenant hereby irrevocably appoints
Landlord as attorney-in-fact of Tenant to execute, deliver and record any such
document in the name and on behalf of Tenant.
28. ESTOPPEL CERTIFICATE.
a. Within ten (10) days following any written request which Landlord may make
from time to time, Tenant shall execute and deliver to Landlord a statement, in
a form substantially similar to the form of Exhibit "E", certifying: (1) the
date of commencement of this Lease; (2) the fact that this Lease is unmodified
and in full force and effect (or, if there have been modifications hereto, that
this Lease is in full force and effect, and stating the date and nature of such
modifications); (3) the date to which the rental and other sums payable under
this Lease have been paid; (4) that there are no current defaults under this
Lease by either Landlord or Tenant except as specified in Tenant's statement;
and (5) such other matters requested by Landlord. Landlord and Tenant intend
that any statement delivered pursuant to this Paragraph 28 may be relied upon by
any mortgagee, beneficiary, purchaser or prospective purchaser of the Building
or any interest therein.
b. Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (1) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (2) that there are no
uncured defaults in Landlord's performance, and (3) that not more than one (1)
month's rental has been paid in advance. Tenant's failure to deliver said
statement to Landlord within ten (10) working days of receipt shall constitute a
default under this Lease and Landlord may, at Landlord's option, terminate the
Lease, provided written notice of such termination is received by Tenant prior
to Landlord's receipt of said statement.
- -------------------------------------------------------------------------------
30. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the "Rules and
Regulations", a copy of which is attached hereto and marked Exhibit "F" and all
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord shall not be responsible
to Tenant for the violation or non-performance by any other tenant or occupant
of the building or Project of any of said Rules and Regulations.
31. CONFLICT OF LAWS.
This Lease shall be governed by and construed pursuant to the laws of
the state in which the premises are located.
32. SUCCESSORS AND ASSIGNS.
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
33. SURRENDER OF PREMISES.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies. Upon the expiration or termination of this Lease. Tenant shall
peaceably surrender the Premises and all alternations and additions thereto,
broom clean the Premises, leave the Premises in good order, repair and
condition, reasonable wear and tear excepted, and comply with the provisions of
Paragraph 15. The delivery of keys to any employee of Landlord or to Landlord's
agent or any employee thereof shall not be sufficient to constitute a
termination of this Lease or a surrender of the Premises.
34. PROFESSIONAL FEES.
a. If Landlord should bring suit for possession of the Premises, for the
recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder, or
in the event of any other litigation or appeal between the parties with respect
to this lease, then all costs and expenses, including without limitation, its
actual professional fees such as appraisers', accountants' and attorneys' fees,
incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment. If Landlord employs a collection agency to
recover delinquent charges, Tenant agrees to pay all collection agency fees
charged to Landlord in addition to rent, late charges, interest and other sums
payable under this Lease. Tenant shall pay a charge of $75 to Landlord for
preparation of a demand for delinquent rent.
b. If Landlord is named as a defendant in any suit or appeal brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees.
35. PERFORMANCE BY TENANT.
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any sum
of money owned to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue for ten (10) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, making any such
payment or perform any such other act to be made or performed by Tenant. All
sums so paid by Landlord and all necessary incidental costs together with
interest thereon at the maximum rate permissible by law, from the date of such
payment by Landlord, shall be payable to Landlord on demand. Tenant covenants to
pay any such sums, and Landlord shall have (in addition to any other right or
remedy of Landlord) all rights and remedies in the event of the non-payment
thereof by Tenant as are set forth in Paragraph 25.
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<PAGE> 13
36. MORTGAGEE PROTECTION
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity
to cure the default, including time to obtain possession of the Premises by
power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure.
37. DEFINITION OF LANDLORD
The term "Landlord," as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title of
the Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment or other conveyance or transfers of any such title,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respects
the performance of any covenants or obligations on the part of Landlord
contained in this Lease thereafter to be performed. Without further agreement,
the transferee of such title shall be deemed to have assumed and agreed to
observe and perform any and all obligations of Landlord hereunder, during its
ownership of the Premises. Landlord may transfer its interest in the Premises
without the consent of Tenant and such transfer or subsequent transfer shall
not be deemed a violation on Landlord's part of any of the terms and conditions
of this Lease.
38. WAIVER
The waiver by Landlord of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of any subsequent breach of
the same or any other term, covenant or condition herein contained, nor shall
any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of or in any way affect
the right of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, other than the failure of
Tenant to pay the particular rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such rent. No
acceptance by Landlord of a lesser sum than the basic rental and additional
rent or other sum then due shall be deemed to be other than on account of the
earliest installment of such rent or other amount due, nor shall any
endorsement or statement on any check or any letter accompanying any check 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
installment or other amount or pursue any other remedy in this Lease provided.
39. IDENTIFICATION OF TENANT.
If more than one person executes this lease as Tenant, (1) each of them
is jointly and severally liable for the keeping, observing and performing of
all of the terms, covenants, conditions, provisions and agreements of this
Lease to be kept, observed and performed by Tenant, and (2) the term "Tenant"
as used in this Lease shall mean and include each of them jointly and
severally. The act of or notice from, or notice or refund to, or the signature
of any one or more of them, with respect to the tenancy of this Lease,
including, but not limited to, any renewal, extension, expiration, termination
or modification of this Lease, shall be binding upon each and all of the
persons executing this Lease as Tenant with the same force and effect as if
each and all of them had so acted or so given or received such notice or refund
or so signed.
40. PARKING.
a. Tenant shall have the right to use the type and number of spaces
indicated in Section 1. All such spaces shall be provided to Tenant at no cost.
b. The use by Tenant, its employees and invitees, of the parking
facilities of the Project shall be on the terms and conditions set forth in
Exhibit G attached hereto and by this reference incorporated herein, and shall
be subject to such other agreement between Landlord and Tenant as may
hereinafter be established. Tenant shall not permit or allow any vehicles that
belong to or are controlled by Tenant or Tenant's employees, suppliers,
customers or invitees to be loaded, unloaded or parked in areas other than
those designated by Landlord for such activities. If Tenant permits or allows
any of the prohibited activities described in Exhibit G, then Landlord 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 Tenant, which cost shall be immediately payable upon demand by
Landlord.
41. FORCE MAJEURE.
Except as applied to Paragraph 23, Landlord shall have no liability
whatsoever to Tenant on account of (1) the inability of Landlord to fulfill, or
delay in fulfilling, any of Landlord's obligations under this Lease by reason
of strike, other labor trouble, governmental preemption of priorities or other
controls in connection with a national or other public emergency, or shortages
of fuel, supplies or labor resulting therefrom or any other cause, whether
similar or dissimilar to the above, beyond Landlord's reasonable control; or
(2) any failure or defect in the supply, quantity or character of electricity
or water furnished to the Premises, by reason of any requirement, act or
omission of the public utility or others furnishing the Project with
electricity or water, or for any other reason, whether similar or dissimilar to
the above, beyond Landlord's reasonable control. If this Lease specifies a time
period for performance of an obligation of Landlord, that time period shall be
extended by the period of any delay in Landlord's performance caused by any of
the events of force majeure described above.
42. TERMS AND HEADINGS.
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in any gender include other genders.
The paragraph headings of this Lease are not a part of this Lease and shall
have no effect upon the construction or interpretation of any part hereof.
43. EXAMINATION OF LEASE.
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for lease, and is not effective
as a lease or otherwise until execution by and delivery to both Landlord and
Tenant.
44. TIME.
Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
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<PAGE> 14
45. PRIOR AGREEMENT OR AMENDMENTS.
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in the Lease and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of the Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective
successors-in-interest.
46. SEPARABILITY.
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
and such other provisions shall remain in full force and effect.
47. RECORDING.
Neither Landlord nor Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
48. LIMITATION ON LIABILITY.
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
(1) The sole and exclusive remedy shall be against the Landlord's
interest in the Project;
(2) No partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership);
(3) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(4) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(5) No judgment will be taken against any partner of Landlord;
(6) Any judgment taken against any partner of Landlord may be vacated
and set aside at any time nunc pro tunc;
(7) No writ of execution will ever be levied against the assets of any
partner of Landlord;
(8) The obligations of Landlord under this Lease do not constitute
personal obligations of the individual partners, directors, officers or
shareholders of landlord, and Tenant shall not seek recourse against the
individual partners, directors, officers or shareholders of Landlord or any of
their personal assets for satisfaction of any liability in respect to this
Lease;
(9) These covenants and agreements are enforceable both by landlord and
also by any partner of Landlord.
49. MODIFICATION FOR LENDER.
If in connection with obtaining construction, interim or permanent
financing for the Project the lender shall request reasonable modifications in
this lease as a condition to such financing. Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
50. FINANCIAL STATEMENTS.
At any time during the term of this Lease, Tenant shall upon ten (10)
days prior written notice from Landlord, provide Landlord with a current
financial statement and financial statements of the two (2) years prior to the
current financial statement year. Such statement shall be prepared in
accordance with generally accepted accounting principles and, if such is the
normal practice of Tenant, shall be audited by an independent certified public
accountant.
51. QUIET ENJOYMENT.
Landlord covenants and agrees with Tenant that upon Tenant paying the
rent required under this lease and paying all other charges and performing all
of the covenants and provisions aforesaid on Tenant's part to be observed and
performed under this Lease. Tenant shall and may peaceably and quietly have,
hold and enjoy the Premises in accordance with this Lease.
52. TENANT AS CORPORATION.
If Tenant executes this Lease as a corporation, then Tenant and the
persons executing this Lease on behalf of Tenant represent and warrant that the
individuals executing this lease on Tenant's behalf are duly authorized to
execute and deliver this Lease on its behalf in accordance with a duly adopted
resolution of the board of directors of Tenant, a copy of which is to be
delivered to landlord on execution hereof, and in accordance with the bylaws of
Tenant and that this Lease is binding upon Tenant in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD: Weyerhaeuser Mortgage Company, ADDRESS: Weyerhaeuser Mortgage Company
a California corporation, and 6320 Canoga Avenue
Fort Wyman, Inc., a Michigan Woodland Hills, CA 91367
corporation,
tenants in common
By: Weyerhaeuser Mortgage Company ADDRESS: 12626 High Bluff Drive,
managing tenant in common Suite 37
San Diego, CA 92130
By: /s/ Dorothy Forbes
------------------------------
Dorothy Forbes, Vice President
TENANT: STAC ELECTRONICS,
a California corporation
By: /s/ John Witzel
------------------------------
John Witzel, CFO
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<PAGE> 15
WORK LETTER AGREEMENT
This Work Letter Agreement, is entered into as of the 12th day of July,
1994, by and between Weyerhaeuser Mortgage Company, * ("Landlord") and STAC
Electronics, a California corporation ("Tenant")
* a california corporation, and Fort Wyman, Inc., a Michigan corporation,
tenants in c
RECITALS:
A. Concurrently with the execution of this Work Letter Agreement,
Landlord and Tenant have entered into a lease (the "Lease") covering certain
premises (the "Premises") more particularly described in Exhibit "A" attached
to the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work Letter
Agreement may apply thereto) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant hereby agree as follows:
- -------------------------------------------------------------------------------
2. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall include all work to be
done in the Premises pursuant to the Tenant Improvement Plans described in
Paragraph 3 below, including, but not limited to, partitioning, doors,
ceilings, floor coverings, wall finishes (including paint and wallcovering),
electrical (including lighting, switching, telephones, outlets, etc.),
plumbing, heating, ventilating and air conditioning, fire protection, cabinets
and other millwork. Whenever Landlord's consent is required in this Work Letter
Agreement it shall not be unreasonably withheld or delayed.
3. TENANT IMPROVEMENT PLANS.
Immediately after the execution of the Lease, Tenant agrees to meet
with its architect and/or space planner for the purpose of preparing a space
plan for the layout of the Premises. Based upon such space plan, Tenant's
architect shall prepare final working drawings and specifications for the
Tenant Improvements. Such final working drawings and specifications may be
referred to herein as the "Tenant Improvement Plans." The Tenant Improvement
Plans must be consistent with Landlord's standard specifications (the
"Standards") for tenant improvements for the Building, as the same may be
changed from time to time by Landlord.
4. NON-STANDARD TENANT IMPROVEMENTS.
Landlord shall permit Tenant to deviate from the Standards for the
Tenant Improvements; provided that (a) the deviations shall not be of a lesser
quality than the Standards; (b) the total lighting for the Premises shall not
exceed 1.65 watts per rentable square foot; (c) the deviations conform to
applicable governmental regulations and necessary governmental permits and
approvals have been secured; (d) the deviations do not require building service
beyond the level normally provided to other tenants in the Building and do not
overload the floors; and (e) Landlord has determined in its sole discretion
that the deviations are of a nature and quality that are consistent with the
overall objectives of the Landlord for the Building.
5. FINAL PRICING AND DRAWING SCHEDULE.
After the preparation of the space plan and after Landlord's written
approval thereof, Tenant ------------------------------------------------------
shall cause its architect to prepare and submit to Landlord the final working
drawings and specifications referred to in Paragraph 3 hereof. Such working
drawings shall be approved by Landlord and Tenant -----------------------------
and shall thereafter be submitted to the appropriate governmental body by
Tenant's architect for plan checking and the issuance of a building permit.
- --------- Tenant -------- shall cause to be made any changes in the plans and
specifications necessary to obtain the building permit. Concurrent with the
plan checking, Tenant shall have prepared a final pricing for Tenant's
approval, -------------------------------- taking into account any
modifications which may be required to reflect changes in the plans and
specifications required by the City or County in which the Premises are
located. After final approval of the working drawings, no further changes to
the Tenant Improvement Plans may be made without the prior written approval
from both Landlord and Tenant, such approval by Landlord not to be unreasonably
withheld, and then only after agreement by Tenant to pay any excess costs
resulting from the design and/or construction of such changes. Tenant hereby
acknowledges that any such changes shall be subject to the terms of Paragraph 8
hereof.
6. CONSTRUCTION OF TENANT IMPROVEMENTS.
After the Tenant Improvement Plans have been prepared and approved, the
final pricing has been approved and a building permit for the Tenant
Improvements has been issued, Tenant shall enter into a construction contract
with its contractor for the installation of the Tenant Improvements in
accordance with the Tenant Improvement Plans. Landlord shall supervise the
completion of such work at no cost to Tenant. ---------------------------------
The cost of such work shall be paid as provided in Paragraph 7 hereof. Landlord
shall not be liable for any direct or indirect damages as a result of delays in
construction beyond Landlord's reasonable control, including, but not limited
to, acts of God. Inability to secure governmental approvals or permits,
governmental restrictions, strikes, availability of materials or labor or
delays by Tenant (or its architect or anyone performing services on behalf of
Tenant).
7. PAYMENT OF COST OF THE TENANT IMPROVEMENTS.
a. Landlord hereby grants to Tenant a "Tenant Allowance" of Zero and
No/100------Dollars ($ -0- ) per square foot of Usable Area (as defined below)
of the Premises for a total of Zero and No/100------Dollars ($ -0- ). Such
Tenant Allowance shall be used only for:
(1) Payment of the cost of preparing the space plan and the final
working drawings and specifications, including mechanical, electrical, plumbing
and structural drawings and of all other aspects of the Tenant Improvement
plans. The Tenant Allowance will not be used for the payment of extraordinary
design work not included within the scope of Landlord's building standard
improvements or for payments to any other consultants, designers or architects
other than Landlord's architect and/or space planner.
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<PAGE> 16
(2) The payment of plan check, permit and license fees relating to
construction of the Tenant Improvements.
(3) Construction of the Tenant improvements, including without
limitation, the following:
(a) Installation within the Premises of all partitioning
doors, floor coverings, ceilings, wall coverings and painting millwork and
similar items.
(b) All electrical wiring, lighting fixtures, outlets and
switches, and other electrical work to be installed within the Premises.
(c) The furnishing and installation of all duct work, terminal
boxes, diffusers and accessories required for the completion of the heating,
ventilation and air conditioning systems within the Premises, including the
cost of meter and key control for after-hour air conditioning.
(d) Any additional Tenant requirements including, but not
limited to, odor control, special heating, ventilation and air conditioning,
noise or vibration control or other special systems.
(e) All fire and life safety control systems such as fire
walls, sprinklers, halon, fire alarms, including piping, wiring and accessories
installed within the Premises.
(f) All plumbing, fixtures, pipes and accessories to be
installed within the Premises.
(g) Testing and inspection costs.
(h) Contractor's fees, including but not limited to any fees
based on general conditions.
(4) All other costs to be expended by Landlord in the construction
of the Tenant Improvements, including those costs incurred by Landlord for
construction of elements of the Tenant improvements in the Premises, which
construction was performed by Landlord prior to the execution of this Lease by
Landlord and Tenant (i.e., during or after the construction of the base
Building and which construction is for the benefit of tenants and is
customarily performed by Landlord prior to the execution of leases for such
space in the Building for reasons of economics (examples of such construction
would include the extension of mechanical [including heating, ventilating and
air conditioning systems] and electrical distribution systems outside of the
core of the Building wall construction, column enclosures and painting outside
of the core of the Building, ceiling hanger wires and window treatment).
b. The cost of each item shall be charged against the Tenant Allowance. In
the event that the cost of installing the Tenant Improvements, as established
by Landlord's final pricing schedule, shall exceed the Tenant Allowance, or if
any of the Tenant Improvements are not to be paid out of the Tenant Allowance
as provided in Paragraph 7a above, the excess shall be paid by Tenant to
Landlord prior to the commencement of construction of the Tenant improvements.
c. In the event that, after the Tenant Improvement Plans have been prepared
and a price therefore established by Landlord, Tenant shall require any changes
or substitutions to the Tenant Improvement Plans, any additional costs thereof
shall be paid by Tenant to Landlord prior to the commencement of such work.
Landlord shall have the right to decline Tenant's request for a change to the
Tenant Improvement Plans if such changes are inconsistent with Paragraphs 3 and
4 above, or if the change would, in Landlord's opinion, unreasonably delay
construction of the Tenant Improvements.
d. In the event that the cost of the Tenant Improvements increases as set
forth in Landlord's final pricing due to the requirements of any governmental
agency, Tenant shall pay Landlord the amount of such increase within five (5)
days of Landlord's written notice, provided, however, that Landlord shall first
apply toward such increase any remaining balance in the Tenant Allowance.
e. Any unused portion of the Tenant Allowance upon completion of the
Tenant Improvements shall not be refunded to Tenant or available to Tenant as a
credit against any obligations of Tenant under the Lease.
f. As used in this Work Letter Agreement, the term "Usable Area" means the
area of the Premises, as determined by measuring the area within the bounds of
the inside surface of the glass in the outer wall of the Building and the
surface facing the Premises of all partitions separating the Premises from the
Building core, adjoining tenant space and public corridors or other common
areas. No deductions shall be made for space occupied by structural or
functional columns or other projections. The Usable Area of the Premises is
4,166 usable square feet.
8. COMPLETION AND RENTAL COMMENCEMENT DATE.
The commencement of the term of the Lease and Tenant's obligation for
the payment of rental under the Lease shall ----------------------------------
- ---------------------------------------- commence at the time provided in
Section 1.g of the Lease.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the
date first above written.
LANDLORD: Weyerhaeuser Mortgage Company, a California corporation, and
Fort Wyman, Inc., a Michigan corporation, tenants in common
Weyerhaeuser Mortgage Company,
managing tenant in common
By: /s/ Dorothy Forbes
-------------------------------
Dorothy Forbes, Vice President
TENANT: STAC Electronics, a California corporation
By: /s/ John Witzel
-------------------------------
John Witzel, CFO
By:
-------------------------------
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ADDENDUM "1"
1. RENT ABATEMENT. Notwithstanding the provisions of Section 5 of
this Lease, no Base Monthly Rent shall be due or payable for the second (2nd)
through seventh (7th) full calendar months, inclusive, following the
Commencement Date.
2. NON-DISTURBANCE. Notwithstanding the provisions of Section 27,
in the event of a foreclosure of any mortgage or deed of trust or termination
of any ground lease, so long as Tenant attorns to the successor fee owner or
ground tenant, Tenant's quiet possession of the Premises will not be disturbed
and its rights and obligations under this Lease will not be altered.
3. EARLY TERMINATION. Tenant shall have the right to terminate
the Lease, effective on March 31, 1998, by providing Landlord at least six (6)
months' prior written notice.
4. BUILDING SIGNAGE. Tenant, at Tenant's expense, shall have the
right to place its name and/or logo on one (1) side of the exterior of the
Building in a location to be selected by Tenant, subject to approval by
Landlord (not to be unreasonably withheld or delayed provided such signage
complies with the signage criteria contained in the CC&R's affecting the
Project) and all governmental agencies. This sign is in addition to the
signage provided in the lease for 12636 High Bluff Drive, Suite 400.
5. HAZARDOUS MATERIALS. The following provisions are added to
Exhibit H (Hazardous Materials): (i) Landlord's consent under clause (b) of
Exhibit H shall not be required for (1) Hazardous Materials, in reasonable
quantities, customarily used in business offices, and (2) Hazardous Materials
used in reasonable quantities in connection with the construction of repair of
Improvements in the Premises, provided such Hazardous Materials are used and
handled in accordance with all applicable laws. In addition, Landlord will not
unreasonably withhold or delay its consent required under said clause (b) of
Exhibit H for any other Hazardous Materials reasonably needed by Tenant in the
ordinary course of Tenant's business, provided such Hazardous Materials are
used and handled in accordance with all applicable laws.
(ii) Landlord warrants to its actual knowledge Tenant that neither
the Premises nor any other part of the Building in which the Premises are
located contain any asbestos. Landlord also agrees that Tenant shall have no
responsibility for any Hazardous Materials on or under the Premises, the
Building, or the Project existing at the time of commencement of the Lease, or
any such
<PAGE> 18
Hazardous Materials thereafter released on or under the Project by anyone other
than Tenant, its employees or agents.
6. Building Codes: ADA. Any work that is required by applicable law
now or hereafter in effect to be done within the Premises (excluding structural
components (except to the extent caused by Tenant) and restrooms, elevators, and
other common areas) shall be the sole responsibility of Tenant. Except as
provided in the preceding sentence, and notwithstanding any other provision of
this Lease, Tenant shall have no responsibility to make or pay for improvements
or other alterations to the Building to correct deficiencies under existing
building codes or other applicable laws, restrictions or requirements, or to
comply with future changes in building codes or other applicable laws,
restrictions or requirements. Without limiting the foregoing, in the event that
any improvements or alterations to the Building are required during the term of
the Lease to comply with requirements of the Americans With Disabilities Act or
applicable building codes relating to access to or within the Building (except
for the Premises) by disabled persons, Landlord will be solely responsible for
any such improvements or alterations.
7. Security. With Landlord's prior written approval, not to be
unreasonably withheld or delayed, Tenant at its cost and expense and not as part
of the costs described in Addendum "5" may install additional reasonable
security devices for the Premises.
8. Damage or Destruction. The following is inserted into the Lease as
Paragraph 23:
23. DAMAGE OR DESTRUCTION
If the Premises or any Common Areas providing access thereto shall be
damaged by fire or other casualty, Landlord shall restore the same subject to
the terms and conditions set forth in this Paragraph 23. Such restoration shall
be to substantially the condition prior to the casualty, except for
modifications required by zoning and building codes and other laws or by any
mortgagee, any other modifications to the Common Areas deemed desirable by
Landlord (provided access to the Premises is not materially impaired), and
except that Landlord shall not be required to repair or replace any of Tenant's
furniture, furnishings, fixtures or equipment, or any alterations or
improvements in excess of Tenant's improvements installed at a cost of up to $30
per usable square foot. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair thereof. However, as Tenant's sole
compensation for such damage or destruction Landlord shall allow Tenant a
proportionate abatement
<PAGE> 19
of rent, during the time and to the extent the Premises are unfit for occupancy
for the purposes permitted under this lease and not occupied by Tenant as
a result thereof (unless Tenant or its employees or agents caused the
damage). Notwithstanding the foregoing to the contrary, Landlord may elect
to terminate this Lease by notifying Tenant in writing of such termination
within sixty (60) days after the date of damage (such termination notice to
include a termination date providing at least ninety (90) days for Tenant to
vacate the Premises), if the Property shall be damaged by fire or other
casualty or cause such that: (a) repairs to the Premises and Building and
access thereto cannot reasonably be substantially completed within three
hundred (300) days after the date of casualty without the payment of
overtime or other premiums; (b) more than twenty-five percent (25%) of the
Premises is substantially destroyed by the damage and fewer than twenty-four
(24) months remain in the Term, subject to Tenant's right to avoid or limit such
termination as set forth below; (c) the cost of the repairs, alterations,
restoration or improvement work would exceed twenty-five percent (25%) of the
replacement value of the Building and Landlord determines in good faith not to
repair or rebuild the Building in substantially the same configuration as
before the casualty; (d) the aggregate proceeds available from insurance fall
short of the reasonable cost of the restoration required under this Paragraph
23 by an amount greater than $100,000 and Landlord determines in good faith not
to repair or rebuild the Building in substantially the same configuration as
before the casualty; or (e) as a result of the lawful application of insurance
proceeds by any mortgagee to retire the mortgage debt, the insurance proceeds
available for restoration fall short of the reasonable cost of the restoration
required under this Paragraph 23 by an amount greater than $100,000 and
Landlord determines in good faith not to repair or rebuild the Building in
substantially the same configuration as before the casualty. If Landlord elects
to terminate this lease under the circumstances described in Clause (b) of the
preceding sentence, provided that the damage to the Property was not caused by
the willful misconduct or reckless disregard for life or property of Tenant,
Tenant may, by written notice to Landlord, given within thirty (30) days after
receipt of Landlord's termination notice, avoid such termination by exercising
a then available option to extend the term of this Lease upon the terms and
conditions set forth in Addendum "3".
Further, notwithstanding the foregoing, Tenant may terminate this lease
if Tenant is unable to use all or any portion of the Premises as a result of
fire or other casualty not caused by the willful misconduct or reckless
disregard for life or property of Tenant, and: (a) Landlord fails to commence
restoration work to the Building and access thereto within sixty (60) days
after the damage occurs (Landlord's negotiation with insurance companies and
<PAGE> 20
consultation with architects, engineers and contractors shall be deemed to be
restoration work); or (b) Landlord fails to substantially complete such work
within three hundred sixty five (365) days after the date of the casualty, or
such additional time as may be necessary due to strikes, lockouts or other
labor troubles, shortages of equipment or materials, governmental requirements,
power shortages or outages or other causes beyond Landlord's reasonable
control; or (c) such work is reasonably estimated (which estimate Landlord shall
provide within sixty (60) days following the casualty), to take more than three
hundred sixty five (365) days to substantially complete after the date of the
casualty. In addition, Tenant may terminate this Lease if Tenant is unable to
use more than twenty-five percent (25%) of the Premises as a result of fire or
other casualty not caused by the willful misconduct or gross negligence of
Tenant or its employees or agents, and fewer than twenty-four (24) months
remain in the Term. In order to exercise any of the foregoing termination
rights, Tenant must send Landlord at least sixty (60) but not more than one
hundred twenty (120) days advance notice specifying the basis for termination,
and such notice must be given no later than thirty (30) days following the
occurrence of the condition serving as the basis for the termination right
invoked by Tenant. Such termination right shall not be available to Tenant if
Landlord substantially completes the repairs to the Premises and access thereto
within sixty (60) days after Tenant's notice. Notwithstanding anything to the
contrary contained herein, if Tenant, or its officers, employees, contractors,
invitees, partners, or agents delay Landlord in performing the repairs,
Landlord shall have additional time to complete the work equal to such delay,
and Tenant shall pay Landlord all Rent for the period of such delay. If this
Lease is terminated pursuant to this Paragraph 23, Tenant shall have the right,
to be exercised within 10 days of such termination, to terminate any other
lease it has for space within the Project.
Tenant agrees that Landlord's obligation to restore, and the abatement
of rent and the termination right provided herein, shall be Tenant's sole
recourse in the event of such damage, and waives any other rights Tenant may
have under any applicable Law to terminate the Lease by reason of damage to the
Premises, Project or Building, including all rights under California Civil
Code, Sections 1932(2), 1933(4), and 1942, as the same may be modified or
replaced hereafter. Tenant acknowledges that this Paragraph 23 represents the
entire agreement between the parties respecting damage to the Premises, Project
or Building.
<PAGE> 21
ADDENDUM "2"
OPERATING EXPENSES. For the purposes of this Section, the following
terms are defined as follows:
Base Year -- The calendar year in which this Lease Term commences. For
the purposes of this Lease, the Base Year is defined as 1994.
Comparison Year -- Each calendar year of the term after the Base Year.
Tenant's -------------* Share of Operating Expenses shall be payable by Tenant
to Landlord as follows:
(a) Beginning with the calendar year following the Base Year and for
each calendar year thereafter ("Comparison Year"), tenant shall pay Landlord an
amount equal to Tenant's ------------* Share of the Operating Expenses incurred
by Landlord in the Comparison Year which exceeds the total amount of Operating
Expenses payable by Landlord for the Base Year. This excess is referred to as
the "Excess Expenses."
(b) To provide for current payments of Excess Expenses, Tenant
shall, at Landlord's request, pay as additional rent during each Comparison
Year, an amount equal to Tenant's ------------* Share of the Excess Expenses
payable during such Comparison Year, as estimated by Landlord from time to time.
Such payments shall be made in monthly installments, commencing on the first day
of the month following the month in which Landlord notifies Tenant of the amount
it is to pay hereunder and continuing until the first day of the month following
the month in which Landlord gives Tenant a new notice of estimated Excess
Expenses. It is the intention hereunder to estimate from time to time the amount
of the Excess Expenses for each Comparison Year and Tenant's ------------* Share
thereof, and then to make an adjustment in the following year based on the
actual Excess Expenses incurred for that Comparison Year.
(c) On or before April 1 of each Comparison Year after the first
Comparison Year (or as soon thereafter as is practical), Landlord shall deliver
to Tenant a statement setting forth Tenant's ------------* Share of the Excess
Expenses for the preceding Comparison Year. If Tenant's ------------* Share of
the actual Excess Expenses for the previous Comparison Year exceeds the total of
the estimated monthly payments made by Tenant for such year, Tenant shall pay
Landlord the amount of the deficiency within thirty (30) days of the receipt of
the statement. If such total exceeds Tenant's ------------* Share of the actual
Excess Expenses for such Comparison Year, then Landlord shall credit against
Tenant's next ensuing monthly installment(s) of additional rent an amount equal
to the difference until the credit is exhausted. If a credit is due from
Landlord on the Expiration Date, Landlord shall pay Tenant the amount of the
credit. The obligations of Tenant and Landlord to make payments required under
this Section shall survive the Expiration Date.
(d) Tenant's ------------* Share of Excess Expenses in any
Comparison Year having less than 365 days shall be appropriately prorated.
(e) If any dispute arises as to the amount of any additional rent
due hereunder, Tenant shall have the right after reasonable notice and at
reasonable times to inspect Landlord's accounting records at Landlord's
accounting office and, if after such inspection Tenant still disputes the amount
of additional rent owed, a certification as to the proper amount shall be made
by Landlord's certified public accountant, which certification shall be final
and conclusive. Tenant agrees to pay the cost of such certification unless it is
determined that Landlord's original statement overstated Operating Expenses by
more than five percent (5%).
(f) Operating Expenses including any additional real estate taxes
will be based on a ninety-five percent (95%) lease project for the entire base
year and other years regardless of the current occupancy.
(g) In no event shall Tenant be responsible for increases in
Operating Expenses in excess of six percent (6%) per year on a cumulative
basis.
* Percentage
<PAGE> 22
ADDENDUM "3"
OPTION TO RENEW: Tenant shall have the right to extend the term of this
Lease for one (1) consecutive five (5) year period (the "Option Term"), on the
following terms and conditions:
(a) Each Option Term shall commence when the prior term expires. Tenant
must give written notice of its exercise of the option, and Landlord must
actually receive such notice, no earlier than twelve (12) months and no later
than six (6) months prior to the time that the Option Term would commence.
(b) The option(s) to extend this Lease for any Option Term must be
exercised consecutively.
(c) All terms and conditions of this Lease shall apply during the
Option Terms except as expressly provided in this Addendum.
(d) Tenant shall have no right to exercise an option, notwithstanding
any other provision of this Lease to the contrary, during the time commencing
from the date of any *-------------------------- and continuing until the
default is cured.
(e) The period of time within which Tenant may exercise an option to
extend the term of this Lease shall not be extended or enlarged by reason of
Tenant's inability to exercise an option because of the provisions of Section
(d) above.
- -----------------------------------------------------------------------------
(g) The options granted to Tenant may not be voluntarily or
involuntarily exercised by or assigned to any person or entity other than
Tenant, without the prior written consent of Landlord.
(h) The Base Monthly Rent during each option term shall be adjusted as
of the commencement of each option term to ninety-five percent (95%) of the fair
rental value of the Premises on the terms and conditions contained in this
Lease as mutually agreed by Landlord and Tenant or, if they cannot agree on or
before such commencement date, then as determined by an appraiser mutually
selected by Landlord and Tenant. If Landlord and Tenant cannot agree on a
single appraiser within five (5) days, then each shall select an appraiser. if
the two appraisers cannot agree on said fair rental value within thirty (30)
days, then the two appraisers shall appoint a third appraiser, and said fair
rental value of the Premises shall be deemed to be the average of the two
closest appraisals. Each appraiser shall be a disinterested member of the
American Institute of Real Estate Appraisers, or a body of comparable
standing, with at least five years' experience in commercial real estate
appraisal. Landlord and Tenant shall each bear the cost of the appraiser
appointed by them, and shall share equally the cost of the appraiser mutually
selected by them or of the third appraiser appointed, if any.
(i) Landlord will provide Tenant with a Ten Dollars ($10.00) per usable
square foot refurbishment allowance.
*in the payment of Base Monthly Rent or Operating Expenses
<PAGE> 23
ADDENDUM "4"
RIGHT OF REFUSALS.
(a) At any time that Landlord determines to lease any space at 12626
High Bluff Drive or 12636 High Bluff Drive, subject to any other existing
tenants' rights of refusal or extension options, Landlord shall notify Tenant
in writing. Within five (5) business days after receipt of Landlord's notice,
Tenant shall have the option, to be exercised by delivery of written notice to
Landlord, to lease the respective space. In the event Landlord notifies Tenant
for multiple contiguous suites, then Tenant shall either lease none of the
suites or all of the suites being offered. In the event Tenant timely exercises
such option, the suites shall be added to the Premises, effective as of the date
specified in Landlord's notice. In the event Tenant does not timely exercise
such option, Tenant's rights shall terminate and shall not apply to any
subsequent leasing of the space unless Landlord does not execute a lease for
the space by a third party, in which case Tenant's rights shall be reinstated.
(b) In the event Tenant timely exercises such option, such space shall
be tendered to Tenant in "as is" condition.
(c) In the event Tenant timely exercises such option, such space shall
be subject to all of the terms and conditions of this Lease, provided that the
Base Monthly Rent shall be One and 25/100 Dollar ($1.25) per square foot per
month, plus electricity, and the Tenant's Share shall be proportionately
increased to reflect the inclusion of such space in the Premises, and provided
further that no free rent, abatement, discount, or other concession shall apply
with respect to the space except if Tenant is currently in the free rent
period, at which time the remaining free rent will apply.
(d) Tenant shall have no right to exercise its right of refusal,
notwithstanding any other provision of this Lease to the contrary, during the
time commencing from the date of any default* under section 25 of this Lease
and continuing until the default is cured.
(e) The period of time within which Tenant may exercise its right of
refusal shall not be extended or enlarged by reason of Tenant's inability to
exercise such right of refusal because of the provisions in Section (d) above.
- -----------------------------------------------------------------------------
(g) The right of refusal granted to Tenant may not be voluntarily or
involuntarily exercised by or assigned to any person or entity other than
Tenant without the prior written consent of Landlord.
* in the payment of Base Monthly Rent or Operating Expenses
<PAGE> 24
ADDENDUM "5"
TENANT IMPROVEMENTS/BASE MONTHLY RENTAL REDUCTION. Tenant, at Tenant's
expense, will pay for all the costs associated with the following:
(a) Space planning.
(b) Construction documents.
(c) Building permits.
(d) Construction of tenant improvements.
(e) Moving expenses.
(f) Tenant signage costs.
(g) All other costs relating to the build-out of the Premises.
As a concession for Tenant paying for these above mentioned costs,
Landlord will reduce Tenant's* Base Monthly Rent in Section 1(h) of the Lease in
accordance with an amortization formula as follows:
Present Value: Total costs as outlined above, up to a maximum of One
Hundred Twenty-Three Thousand Four Hundred Eighty and
No/100 Dollars ($123,480.00; $30.00 per usable square
foot).
Amortization Term: Sixty (60) months. (Lease term is 66 months - 6 months'
rent abatement = 60 months.)
Interest Rate
of Amortization: Six percent (6%).
As an example, should Tenant expend the maximum amount of $123,480, this
amount shall be amortized at six percent (6%), which would reduce Tenant's Base
Monthly Rent by two Thousand Three Hundred Eighty Seven and 21/100 Dollars
($2,387.21) per month.
BID PROCESS. Tenant will cause at least two and not more than five
- ---------------------------- contractors to bid for the construction of tenant
improvements including the following contractors:
(a) Roel Construction
(b) Consolidated Contracting
The contractor selected shall be one of the two lowest bidders, provided
that all bids are adjusted for inconsistent assumptions to reflect an
"apples-to-apples" comparison. Tenant, at its sole discretion, shall select the
contractor in accordance with these terms.
Landlord will not impose any charge for profit, overhead, or supervision
in connection with the construction of tenant improvements. Landlord, at
Landlord's expense, shall have the right to supervise the construction of tenant
improvements from a landlord's perspective. In no event shall Landlord's
election to supervise the tenant improvements relieve Tenant from its obligation
to perform the tenant improvements in accordance with this Lease.
Reduction in Prepaid Rent and Security Deposit. If the Base Monthly
Rent is reduced pursuant to the above provision entitled Tenant
Improvements/Base Monthly Rental Reduction, the required Prepaid Rent as set
forth in Section 1(k) and the required Total Security Deposit as set forth in
Section 1(1) shall be reduced by the same amount and Landlord shall refund to
Tenant any excess Prepaid Rent and Total Security Deposit paid to Landlord
within 10 days after the reduction is determined.
* Landlord reserves the right to reimburse Tenant prior to the Commencement Date
of the Lease, the full amount expended by Tenant for the above-mentioned costs
but not to exceed $123,480 or 30.00 per usable square foot.
Should Landlord exercise this reimbursement right and make said reimbursement
to Tenant, there shall be no reduction in Tenants Base Monthly Rent, Prepaid
Rent, or Total Security Deposit as outlined below.
<PAGE> 25
EXHIBIT A
OUTLINE OF FLOOR
PLAN OR PREMISES
[FLOOR PLAN]
A-1
<PAGE> 26
EXHIBIT B
THE PROJECT
[MAP SHOWING INTERSTATE 5 AND HIGH BLUFF DRIVE,
WITH ADDRESSES OF 12626 AND 12636]
B-1
<PAGE> 27
EXHIBIT C
NOTICE OF LEASE TERM DATES AND
TENANT'S PERCENTAGE
To: _________________________________________ Date:_________________
_________________________________________
_________________________________________
Re: Lease dated _____________________________, 19___, between __________________
_________________________, Landlord, and _______________________________________
Tenant, concerning Suite ____________ located at _______________________________
Gentlemen:
In accordance with the subject Lease, we wish to advise and/or confirm
as follows:
1. That the Premises have been accepted herewith by the Tenant as
being substantially complete in accordance with the subject Lease and that
there is no deficiency in construction.
2. That the Tenant has possession of the subject Premises and
acknowledges that under the provisions of the subject Lease the term of said
Lease shall commence as of _______________________ for a term of _______________
ending on ____________________________.
3. That in accordance with the subject Lease, rental commenced to
accrue on _______________________________.
4. If the commencement date of the subject Lease is other than the
first day of the month, the first billing will contain a pro rata adjustment.
Each billing thereafter shall be for the full amount of the monthly installment
as provided for in said Lease.
5. Rent is due and payable in advance on the first day of each and
every month during the term of said Lease. Your rent checks should be made
payable to ____________________________________________________________________
at ____________________________________________________________________________.
6. The exact number of rentable square feet within the Premises is
_________________ square feet.
7. Tenant's Percentage, as adjusted based upon the exact number of
rentable square feet within the Premises, is ____________%.
AGREED AND ACCEPTED
LANDLORD: TENANT:
___________________________________ ____________________________________
By: _______________________________ ____________________________________
By: ________________________________
C-1
<PAGE> 28
EXHIBIT D
STANDARD FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect.
Landlord reserves the right to adapt nondiscriminatory modifications and
additions thereto.
As long as Tenant is not in default under any of the terms, conditions,
provisions or agreements of this Lease, Landlord shall:
1. Provide non-attended automatic elevator facilities Monday through
Friday, except holidays from 8 A.M. to 6 P.M., and have one elevator
available at all other times.
2. On Monday through Friday, except holidays, from 7 A.M. to 6 P.M., and on
Saturday mornings from 7 A.M. to 4 P.M. (and other times for an agreed
upon rate of $15.00 per hour), ventilate the Premises and furnish air
conditioning or heating on such days and hours, when in the reasonable
judgment of Landlord it may be required for the comfortable occupancy of
the Premises. The air conditioning system achieves maximum cooling when
the window coverings are closed. Landlord shall not be responsible for
room temperatures if Tenant does not keep all window coverings in the
Premises closed whenever the system is in operation. Tenant agrees to
cooperate fully at all times with Landlord, and to abide by all
reasonable regulations and requirements which Landlord may prescribe for
the proper function and protection of said air conditioning system.
Tenant agrees not to connect any apparatus, device, conduit or pipe to
the building chilled and hot water air conditioning supply lines. Tenant
further agrees that neither Tenant nor its servants, employees, agents,
visitors, licensees or contractors shall at any time enter mechanical
installations or facilities of the building or adjust, tamper with,
touch or otherwise in any manner affect said installations or
facilities. The cost of maintenance and service calls to adjust and
regulate the air conditioning system shall be charged to Tenant if the
need for maintenance work results from either Tenant's adjustment of
room thermostats or Tenant's failure to comply with its obligations
under this section, including keeping window coverings closed as
needed. Such work shall be charged at hourly rates equal to then-current
journeymen's wages for air conditioning mechanics.
3. Landlord shall furnish to the Premises, during the usual business hours
on business days, electric current as required by the building standard
office lighting and fractional horsepower office business machines in an
amount not to exceed .025 KWH per square foot per normal business day.
Tenant agrees, should its electrical installation or electrical
consumption be in excess of the aforesaid quantity or extend beyond
normal business hours, to reimburse Landlord monthly for the measured
consumption at the average cost per kilowatt hour charged to the
building during the period. If a separate meter is not installed at
Tenant's cost, such excess cost will be established by an estimate
agreed upon by Landlord and Tenant, and if the parties fail to agree, as
established by an independent licensed engineer. Tenant agrees not to
use any apparatus or device in, or upon, or about the Premises which may
in any way increase the amount of such services usually furnished or
supplied to said Premises, and tenant further agrees not to connect any
apparatus or device with wires, conduits or pipes, or other means by
which such services are supplied, for the purpose of using additional or
unusual amount of such services without written consent of Landlord.
Should Tenant use the same to excess, the refusal on the part of Tenant
to pay upon demand of Landlord the amount established by Landlord for
such excess charge shall constitute a breach of the obligation to pay
rent under this Lease and shall entitled Landlord to the rights therein
granted for such breach. At all times Tenant's use of electric current
shall never exceed the capacity of the feeders to the building or the
risers or wiring installation and Tenants shall not install or use or
permit the installation or use of any computer or electronic data
processing equipment in the Premises without the prior written consent
of Landlord.
4. Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any
purposes in addition to ordinary drinking and lavatory purposes, of
which fact Tenant constitutes Landlord to be the sole judge, Landlord
may install a water meter and thereby measure Tenant's water consumption
for all purposes. Tenant shall pay Landlord for the cost of the meter
and the cost of the installation thereof and throughout the duration of
Tenant's occupancy. Tenant shall keep said meter and installation
equipment in good working order and repair at Tenant's own cost and
expense, in default of which Landlord may cause such meter and equipment
to be replaced or repaired and collect the cost thereof from Tenant.
Tenant agrees to pay for water consumed, as shown on said meter, as and
when bills are rendered, and on default in making such payment, Landlord
may pay such charges and collect the same from Tenant. Any such costs or
expenses incurred, or payments made by Landlord for any of the reasons
or purposes hereinabove stated shall be deemed to be additional rent
payable by Tenant and collectible by Landlord as such.
5. Provide janitor service to the premises, provided the same are used
exclusively as offices, and are kept reasonably in order by Tenant, and
if to be kept clean by Tenant, non one other than persons approved by
Landlord shall be permitted to enter the Premises for such purposes. If
the Premises are not used exclusively as offices, they shall be kept
clean and in order by Tenant, at Tenant's expense, and to the
satisfaction of Landlord, and by persons approved by Landlord. Tenant
shall pay to Landlord the cost or removal of any of Tenant's refuse and
rubbish to the extent that the same exceeds the refuse and rubbish
usually attendant upon the use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning and electric systems, when necessary, by reason
of accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements, shall have been completed, and shall further have
no responsibility or liability for failure to supply elevator facilities,
plumbing, ventilating, air conditioning or electric service, when prevented
from so doing by strike or accident or by any cause beyond Landlord's
reasonable control, or by laws, rules, orders, ordinances, directions,
regulations or requirements of any federal, state, county or municipal
authority or failure of gas, oil or other suitable fuel supply or inability by
exercise of reasonable diligence to obtain gas, oil or other suitable fuel. It
is expressly understood and agreed that any convenants on Landlord's part to
furnish any service pursuant to any of the terms, covenants, conditions,
provisions or agreements of this Lease, or to perform any act or thing for the
benefit of Tenant, shall not be deemed breached if Landlord id unable to
furnish or perform the same by virtue of a strike or labor trouble or any other
cause whatsoever beyond Landlord's control.
6. This Lease is a "plus electricity" lease in which Tenant shall pay for
their use of electricity throughout the term of the Lease. Each floor of
the project is separately metered, and Tenant shall pay to Landlord each
month their pro rata share of electrical consumption.
D-1
<PAGE> 29
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
The undersigned, _________________________________ ("Landlord"), with a
mailing address c/o ___________________________ and ___________________________
_______________________ ("Tenant"), hereby certify to _________________________
a _________________________________________________________________, as follows
1. Attached hereto is a true, correct and complete copy of that certain
lease dated ______________________ 19 ___, between Landlord and Tenant
(the "Lease"), which demises premises located at ______________________
__________________________. The Lease is now in full force and effect
and has not been amended, modified or supplemented, except at set forth
in Paragraph 4 below.
2. The term of the Lease commenced on ____________________________ 19 ___
3. The term of the Lease shall expire on _________________________, 19 ___.
4. The Lease has (initial one):
(_____) not been amended, modified, supplemented, extended, renewed or
assigned.
(_____) been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements copies of which
are attached hereto:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
5. Tenant has accepted and is now in possession of said premises.
6. Tenant and Landlord acknowledge that the Lease will be assigned to
_____________________________ and that no modification, adjustment,
revision or cancellation of the Lease or amendments thereto shall be
effective unless written consent of _________________________________
is obtained, and that until further notice, payments under the Lease
may continue as heretofore.
7. The amount of fixed monthly rent is $________________.
8. The amount of security deposits (if any) is $_______________. No other
security deposits have been made.
9. Tenant is paying the full lease rental which has been paid in full as
of the date hereof. No rent under the Lease has been paid for more than
thirty (30) days in advance of its due date.
10. All work required to be performed by Landlord under the Lease has been
completed.
11. There are not defaults on the part of the Landlord or Tenant under the
Lease.
12. Tenant has no defense as to its obligations under the Lease and claims
no set-off or counterclaim against Landlord.
13. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies except as
provided in the lease.
All provisions of the Lease and the amendments thereto (if any) referred
to above are hereby ratified.
The foregoing certification is made with the knowledge that __________
________________________ is about to fund a loan to Landlord and that
__________________________________ is relying upon the representations
herein made in funding such loan.
IN WITNESS WHEREOF, this certificate has been duly executed
and delivered by the authorized officers of the undersigned as of
_______________________, 19 _____.
LANDLORD:
By:
_______________________________
TENANT:
By:
_______________________________
By:
_______________________________
E-1
<PAGE> 30
EXHIBIT F
RULES AND REGULATIONS
1. Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement, name or
notice shall be installed or displayed on any part of the outside or inside
of the building or Project without the prior written consent of Landlord.
Landlord shall have the right to remove, at Tenant's expense and without
notice, any sign installed or displayed in violation of this rule. All
approved signs or lettering on doors and walls shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved by
Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades, screens or
hanging plants or other similar objects attached to or used in connection
with any window or door of the Premises, or placed on any windowsill, which
is visible from the exterior of the Premises. Tenant shall immediately
discontinue such use. Tenant shall not place anything against or near glass
partitions or doors or windows which may appear unsightly from outside the
Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances,
elevators, escalators or stairways of the Project. The halls, passages,
exits, entrances, shopping malls, elevators, escalators and stairways are
not open to the general public but are open, subject to reasonable
regulations, to Tenant's business invitees. Landlord shall in all cases
retain the right to control and prevent access thereto of all persons whose
presence in the judgment of Landlord would be prejudicial to the safety,
character, reputation and interest of the Project and its tenants; provided
that nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of its
business unless such persons are engaged in illegal or unlawful activities.
No tenant and no employee or invitee of any tenant shall go upon the roof(s)
of the Project.
4. The directory of the building or Project will be provided exclusively for
the display of the name and location of tenants only and Landlord reserves
the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Project and the Premises shall
be provided exclusively through Landlord, and except with the written
consent of Landlord, no person or persons other than those approved by
Landlord shall be employed by Tenant or permitted to enter the Project for
the purpose of cleaning the same. Tenant shall not cause any unnecessary
labor by carelessness or indifference to the good order and cleanliness of
the Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not make or have made additional keys, and
Tenant shall not alter any lock or install a new additional lock or bolt on
any door of its Premises. Tenant, upon the termination of its tenancy, shall
deliver to Landlord the keys of all doors which have been furnished to
Tenant, and in the event of loss of any keys so furnished, shall pay
Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.
8. Freight elevator(s) shall be available for use by all tenants in the
building, subject to such reasonable scheduling as Landlord, in its
discretion, shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise or other property will be received in the
building or carried in the elevators except between such hours and in such
elevators as may be designated by Landlord. Tenant's initial move in and
subsequent deliveries of bulky items, such as furniture, safes and similar
items shall, unless otherwise agreed in writing by Landlord, be made during
the hours of 6:00 p.m. and 6:00 a.m. or on Saturday or Sunday. Deliveries
during normal office hours shall be limited to normal office supplies and
other small items. No deliveries shall be made which impede or interfere
with other tenants or the operation of the building.
9. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which is
allowed by law. Landlord shall have the right to prescribe the weight, size
and position of all equipment, materials, furniture or other property
brought into the building. Heavy objects shall, if considered necessary by
Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight, which platforms shall be provided at
Tenant's expense. Business machines and mechanical equipment belonging to
Tenant, which cause noise or vibration that may be transmitted to the
structure of the building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenants in the building, shall be placed
and maintained by Tenant, at Tenant's expense, on vibration eliminators or
other devices sufficient to eliminate noise or vibration. The persons
employed to move such equipment in or out of the building must be acceptable
to Landlord. Landlord will not be responsible for loss of, or damage to, any
such equipment or other property from any cause, and all damage done to the
building by maintaining or moving such equipment or other property shall be
repaired at the expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office equipment.
Tenant shall not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants
of the building by reason of noise, odors, or vibrations, nor shall Tenant
bring into or keep in or about the Premises any birds or animals.
11. Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and agrees to
cooperate fully with Landlord to assure the most effective operation of the
building's heating and air conditioning and to comply with any government
energy-saving rules, laws or regulations of which Tenant has actual notice,
and shall refrain from attempting to adjust controls. Tenant shall keep
corridor doors closed, and shall close window coverings at the end of each
business day.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the building.
14. Landlord reserves the right to exclude from the building between the hours
of 6 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal
holidays, any person unless that person is known to the person or employee
in charge of the building and has a pass or is properly identified. Tenant
shall be responsible for all persons for whom it requests passes and shall
be liable to Landlord for all acts of such persons. Landlord shall not be
liable for damages for any error with regard to the admission to or
exclusion from the building of any person. Landlord reserves the right to
prevent access to the building in case of invasion, mob, riot, public
excitement or other commotion by closing the doors or by other appropriate
action.
15. Tenant shall close and lock the doors of its Premises and entirely shut off
all water faucets or other water apparatus, and electricity, gas or air
outlets before tenant and its employees leave the Premises. Tenant shall be
responsible for any damage or injuries sustained by other tenants or
occupants of the building or by Landlord for noncompliance with this rule.
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16. Tenant shall not obtain for use on the Premises ice, drinking water, food,
beverage, towel or other similar services or accept barbering or
bootblacking service upon the Premises, except at such hours and under such
regulations as may be fixed by Landlord.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein.
The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees
or invitees, shall have caused it.
18. Tenant shall not sell, or permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise
to the general public in or on the Premises. Tenant shall not make any
room-to-room solicitation of business from other tenants in the Project.
Tenant shall not use the Premises for any business or activity other than
that specifically provided for in Tenant's Lease.
19. Tenant shall not install any radio or television antenna, loudspeaker or
other devices on the roof(s) or exterior walls of the building or Project.
Tenant shall not interfere with radio or television broadcasting or
reception from or in the Project or elsewhere.
20. Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork or plaster or in any way deface the Premises or any part thereof,
except in accordance with the provisions of the Lease pertaining to
alterations. Landlord reserves the right to direct electricians as to where
and how telephone and telegraph wires are to be introduced to the Premises.
Tenant shall not cut or bore holes for wires. Tenant shall not affix any
floor covering to the floor of the Premises in any manner except as
approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
21. Tenant shall not install, maintain or operate upon the premises any vending
machines without the written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Project are prohibited, and Tenant shall
cooperate to prevent such activities.
23. Landlord reserves the right to exclude or expel from the Project any person
who, in Landlord's judgement, is intoxicated or under the influence of
liquor or drugs or who is in violation of any of the Rules and Regulations
of the Building.
24. Tenant shall store all its trash and garbage within its premises or in
other facilities provided by Landlord. Tenant shall not place in any trash
box or receptacle any material which cannot be disposed of in the ordinary
and customary manner of trash and garbage disposal. All garbage and refuse
disposal shall be made in accordance with directions issued from time to
time by Landlord.
25. The Premises shall not be used for the storage of merchandise held for sale
to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for any improper, immoral or objectional
purpose. No cooking shall be done or permitted on the Premises without
Landlord's consent, except that use by Tenant of Underwriter's Laboratory
approved equipment for brewing coffee, tea, hot chocolate and similar
beverages or use of microwave ovens for employee use shall be permitted,
provided that such equipment and use is in accordance with all applicable,
federal, state, county and city laws, codes, ordinances, rules and
regulations.
26. Tenant shall not use in any space or in the public halls of the Project any
hand truck except those equipped with rubber tires and side guards or such
other material-handling equipment as Landlord may approve. Tenant shall not
bring any other vehicles of any kind into the building or Project.
27. Without the written consent of Landlord, Tenant shall not use the name of
the building or Project in connection with or in promoting or advertising
the business of Tenant except as Tenant's address.
28. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
29. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
30. Tenant's requirements will be attended to only upon appropriate application
to the Project management office by an authorized individual. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
31. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any
such Rules and Regulations against any or all of the tenants of the
Project.
32. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of the Lease.
33. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety
and security, for care and cleanliness of the Project and for the
preservation of good order therein. Tenant agrees to abide by all such
Rules and Regulations hereinabove stated and any additional rules and
regulations which are adopted.
34. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and
guests.
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EXHIBIT G
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern use of the parking facilities
which are appurtenant to the Project.
1. All claimed damage or loss must be reported and itemized in writing
delivered to the Management Office within ten (10) business days after any
claimed damage or loss occurs. Any claim not so made is waived. Landlord
has the option to make repairs at its expense of any claimed damage within
two business days after filing of any claim. In all court actions the
burden of proof to establish a claim remains with Tenant. Court actions by
Tenant for any claim must be filed within ninety days from date of parking
in court of jurisdiction where a claimed loss occurred. Landlord is not
responsible for damage by water, fire, or defective brakes, or parts, or
for the act or omissions of others, or for articles left in the car. The
total liability of Landlord is limited to $250.00 for all damages or loss
to any car. Landlord is not responsible for loss of use.
2. Tenant shall not park or permit the parking of any vehicle under its
company in any parking areas designated by Landlord as areas for parking by
visitors to the Project. Tenant shall not leave vehicles in the parking
areas overnight nor park any vehicles in the parking areas other than
automobiles, motorcycles, motor driven or non-motor driven bicycles or
fourwheeled trucks.
3. Parking stickers or any other device or form of identification supplied by
landlord as a condition of use of the Parking Facilities shall remain the
property of Landlord. Such parking identification device must be displayed
as requested and may not be mutilated in any manner. The serial number of
the parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder
will be void.
4. No overnight or extended term storage of vehicles shall be permitted.
5. Vehicles must be parked entirely within painted stall lines of a single
parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross-hatched areas; and
(f) in such other areas as may be designated by Landlord or Landlord's
Parking Operator.
9. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
10. Loss or theft of parking identification devices from automobiles must be
reported to the Management Office immediately, and a lost or stolen report
must be filed by the customer at that time. Landlord has the right to
exclude any car from the parking facilities that does not have an
identification device.
11. Any parking identification devices reported lost or stolen found on any
unauthorized car will be confiscated and the illegal holder will be
subject to prosecution.
12. Lost or stolen devices found by the purchaser must be reported to the
Management Office immediately to avoid confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
14. Parking Facility managers or attendants are not authorized to make or
allow any exceptions to these Rules and Regulations.
15. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to any tenant or person and/or his
agents or representatives who willfully refuse to comply with these Rules
and Regulations and all unposted City, State or Federal ordinances, laws or
agreements.
16. Landlord reserves the right to establish and change parking fees and to
modify and/or adopt such other reasonable and non-discriminatory rules and
regulations for the parking facilities as it deems necessary for the
operation of the parking facilities. Landlord may refuse to permit any
person who violates these rules to park in the parking facilities, and any
violation of the rules shall subject the car to removal.
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EXHIBIT H
HAZARDOUS MATERIALS
THE FOLLOWING PROVISIONS DEALING WITH HAZARDOUS MATERIALS ARE MEANT TO BE IN
ADDITION TO, AND NOT SUPERSEDE OR LIMIT, ANY OTHER PROVISIONS OF THIS LEASE
WHICH MAY DEAL WITH THE SAME SUBJECT MATTER.
(a) DEFINITION. "Hazardous Materials" shall mean any hazardous or
toxic substance, material, or waste which is or becomes regulated by any local
governmental authority, the State of California, or the United States
Government, including, but not limited to, substances defined as "hazardous
substances," "hazardous materials," "toxic substances," or "hazardous wastes"
in the Comprehensive Environmental Responses, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq; the Resource Conversation
and Recovery Act, 42 U.S.C. Section 6901, et seq; the California Health &
Safety Code; and any law, ordinance, or regulation dealing with underground
storage tanks; and in the regulations adopted, published, and/or promulgated
pursuant to said laws, and in any other environmental law, regulation, or
ordinance now existing or hereinafter enacted (hereinafter "Hazardous
Materials Laws").
(b) USE AND REMOVAL.
(1) Tenant hereby agrees that Tenant shall not use, generate,
manufacture, refine, process, store, or dispose of on, under, or about the
Premises or transport to or from the Premises any Hazardous Materials, except
with the written consent of Landlord in Landlord's sole discretion and in full
compliance with applicable Hazardous Materials Laws. Tenant further
acknowledges that Tenant does not intend to use the Premises in the future for
the purpose of generating, manufacturing, refining, producing, storing,
handling, transferring, processing, or transporting of Hazardous Materials.
(2) If at any time during the term of this Lease, Hazardous
Materials are used, or placed by Tenant on the Premises or Hazardous Materials
are discovered by Tenant on the Premises where no prior consent of Landlord was
obtained or otherwise in violation of any Hazardous Materials Laws, or if any
contamination of the Premises shall occur, Tenant, at Tenant's sole cost and
expense, shall immediately remove such Hazardous Materials from the Premises or
from the ground or groundwater underlying the Premises in accordance with
requirements of the appropriate governmental entity. Furthermore, Tenant shall,
at its own expense, procure, maintain in effect, and comply with all conditions
of any and all permits, licenses, and other governmental and regulatory
approvals required for Tenant's use of the Premises, including, without
limitation, discharge of (appropriately treated) materials or wastes into and
through any sanitary sewer serving the Premises.
(3) Except for discharges into the sanitary sewer in strict
accordance and conformity with all applicable Hazardous Materials Laws, Tenant
shall cause any and all permitted Hazardous Materials removed from the Premises
to be removed and transported solely by duly licensed haulers to duly licensed
facilities for final disposal of such materials and wastes. Tenant shall in all
respects handle, treat, deal with, and manage any and all Hazardous Materials
in, on, under, or about the Premises in total conformity with all applicable
Hazardous Materials Laws and prudent industry practices regarding management of
such Hazardous Materials. Tenant shall not take any remedial action in response
to the presence of any Hazardous Materials in or about the Premises nor enter
into any settlement agreement, consent, decree, or other compromise in respect
to any claims relating to any Hazardous Materials in any way connected with the
Premises without first notifying Landlord of Tenant's intention to do so and
affording Landlord ample opportunity to appear, intervene, or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition to all other rights and remedies of Landlord hereunder, if such
Hazardous Materials are not removed from the Premises or the ground or
groundwater underlying the Premises by Tenant within fifteen (15) days after
Landlord or Tenant discovers such Hazardous Materials, Landlord, at its sole
discretion, may, but shall not be obligated to, pay to have the same removed,
and Tenant shall reimburse Landlord within five (5) days of Landlord's demand
for payment.
(c) NOTICE.
(1) Tenant shall immediately notify Landlord in writing of (i)
any enforcement, cleanup, removal, or other governmental or regulatory action
instituted, completed, or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Tenant, or the Premises
relating to damage contribution, cost recovery, compensation, loss, or injury
resulting from or claimed to result from any Hazardous Materials; and (iii) any
reports made to any environmental agency arising out of or in connection with
any Hazardous Materials in or removed from the Premises, including any
complaints, notices, warnings, or asserted violations in connection therewith,
upon Tenant's receipt of actual knowledge of the above. Tenant shall also
supply to Landlord as possible, and in any event within five (5) business days
after Tenant first
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<PAGE> 34
receives or sends the same, with copies of all claims, reports, complaints,
notices, warnings, or asserted violations relating in any way to the Premises,
or Tenant's use thereof. Tenant shall promptly deliver to Landlord copies of
hazardous waste manifests reflecting the legal and proper disposal of all
Hazardous Materials removed from the Premises.
(2) Tenant acknowledges that Tenant has been informed that
Section 25359.7 of the California Health and Safety Code provides that any
tenant of real property who knows, or has reasonable cause to believe, that any
release of hazardous substances has come to be located on or beneath the real
property shall, upon discovery by the tenant of the presence or suspected
presence of a hazardous substance release, give notice of that condition to the
owner of the real property. Failure of the tenant to provide written notice as
required to the owner shall make the lease voidable at the discretion of the
owner. The Health and Safety Code provides that if the tenant has actual
knowledge of the presence of any hazardous substance release and knowingly or
willingly fails to provide written notice as required by the owner, the tenant
is liable for a civil penalty not to exceed $5,000.00 for each violation.
(d) INDEMNIFICATION. Tenant shall indemnify, defend (by counsel
reasonably acceptable to Landlord), protect, and hold Landlord, and each and
any of Landlord's shareholders, partners, officers, directors, employees,
agents, attorneys, successors, and assigns, free and harmless from and against
any and all claims, liabilities, penalties, forfeitures, losses, or expenses
(including actual attorneys' fees and costs) or death of or injury to any
person or damage to any property whatsoever, arising from or caused in whole or
in part, directly, or indirectly, by (i) the presence in, on, under, or about
the Premises or discharge in or from the Premises of any Hazardous Materials
placed or discharged in, on, or under the Premises by Tenant or Tenant's use,
analysis, storage, transportation, disposal, release, threatened release,
discharge, or generation of Hazardous Materials to, in, on, under, about, or
from the Premises, or (ii) Tenant's failure to comply with any Hazardous
Materials Laws. Tenant's obligation hereunder shall include, without
limitation, and whether foreseeable or unforseeable, all costs of any required
or necessary repair, cleanup, or detoxification or decontamination of the
Premises and the preparation and implementation of any closure, remedial
action, or other required plans in connection therewith. For purpose of the
indemnity provisions hereof, any acts or omissions of Tenant, or by employees,
agents, assignees, subtenant, concessionaire, contractors, or subcontractors of
Tenant or others acting for on behalf of Tenant (whether or not they are
negligent, intentional, willful, or unlawful) shall be strictly attributable
to Tenant.
(e) SURVIVAL. All representations, warranties, obligations, and
indemnities with respect to Hazardous Materials shall survive the termination
of this Lease.
Section 10.2 WASTE MANAGEMENT REQUIREMENTS. Without limiting any
other obligations of Tenant under this Lease. Tenant covenants and agrees to
comply with all laws, rules, regulations, and guidelines now or hereafter made
applicable to the Premises respecting the disposal of waste, trash, garbage,
and other matter (liquid or solid), generated by Tenant, the disposal of which
is not otherwise the express obligation of Landlord under this Lease,
including, but not limited to, laws, rules, regulations, and guidelines
respecting recycling and other forms of reclamation (all of which are herein
collectively referred to as "Waste Management Requirements"). Tenant hereby
covenants and agrees to comply with all rules and regulations established by
Landlord to enable Landlord from time to time to comply with Waste Management
Requirements applicable to Landlord (i) as owner of the Premises, and (ii) in
performing Landlord's obligations under this Lease, if any. Tenant covenants
and agrees to indemnify, defend, protect, and hold Landlord harmless from and
against all liability (including costs, expenses, and attorneys' fees) that
Landlord may sustain by reason of Tenant's breach of its obligations under this
Section 10.2. Tenant obligations under this Section 10.2 shall survive the
termination of this Lease.
H-2
<PAGE> 1
EXHIBIT 10.17
AMENDMENT NO. 1 TO THAT CERTAIN LEASE DATED JULY 12, 1994, BY AND BETWEEN
WEYERHAEUSER MORTGAGE COMPANY, A CALIFORNIA CORPORATION, AND FORT WYMAN, INC.,
A MICHIGAN CORPORATION, AS LANDLORD, AND STAC ELECTRONICS, A CALIFORNIA
CORPORATION, AS TENANT, FOR THAT CERTAIN PROPERTY COMMONLY KNOWN AS 12626 HIGH
BLUFF DRIVE, SUITE 370, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA.
_______________________________________________________________________________
WITNESSETH:
WHEREAS, Landlord and Tenant executed a lease under date of July 12, 1994,
relating to the demised premises described in Exhibit "A" thereto; and
WHEREAS, Landlord and Tenant now desire to amend said Lease to make certain
agreed upon changes in said Lease;
NOW, THEREFORE, to carry out the mutual desires of the parties thereto, it is
hereby agreed that said Lease shall be hereby amended as of June 7, 1995 as
follows:
1. The purposes of this Amendment is for Tenant to exercise its right of
first refusal on Suite 120.
2. SECTION 1(d), PREMISES AREA: Shall be increased by approximately 3,042
rentable square feet for a total of approximately Seven Thousand Seven
Hundred Seventy-One (7,771) Rentable Square Feet.
3. SECTION 1(f), TENANT'S PERCENTAGE: Shall be modified to reflect
Thirteen and 42/100 Percent (13.42%).
4. SECTION 1(g), TERM OF LEASE: The terms of this Amendment shall
commence on June 12, 1995. The expiration of the Lease shall remain
unchanged and is March 5, 2000.
5. SECTION 1(h), BASE MONTHLY RENT: Shall be modified to reflect Nine
Thousand Seven Hundred Thirteen and 75/100 Dollars ($9,713.75).
6. SECTION 1(I), TOTAL SECURITY DEPOSIT: Shall be increased to Nine
Thousand Seven Hundred Thirteen and 75/100 Dollars ($9,713.75).
7. SECTION 1(o), PARKING: Shall be modified to reflect thirty-one (31)
spaces, including three (3) covered and reserved, free of charge.
8. CONDITION OF PREMISES: Tenant shall accept the Premises in an "as is"
condition. Alterations to space Tenant deems necessary shall be at
Tenant's sole cost and only upon prior written approval of Landlord.
The terms and conditions of the Work Letter Agreement in the Lease, as
well as the Rules and Guidelines for contractors and the tenant
improvement contract, and payment policies for the property are
strictly adhered to.
9. ADDENDUM "1," BUILDING SIGNAGE: Paragraph 4, Building Signage, in
Addendum "1" of the Lease shall be deleted in its entirety.
10. EXHIBIT "A-2," OUTLINE OF INCREASED PREMISES: Exhibit "A-2," showing
the increased Premises, is attached hereto and by this reference made a
part of the lease.
The foregoing is hereby agreed to and accepted:
"LANDLORD" "TENANT"
WEYERHAEUSER MORTGAGE COMPANY, STAC ELECTRONICS, a California
a California corporation and corporation
FORT WYMAN, INC., a Michigan corporation
By: /s/ (signature illegible) By: /s/ John R. Witzel
--------------------------------- ---------------------------------
Date: June 29, 1995 Date: June 16, 1995
------------------------------- -------------------------------
By:
---------------------------------
Date:
-------------------------------
<PAGE> 2
EXHIBIT "A-2"
[FLOOR PLAN]
CORPORATE PLAZA II Floor 1
12626 High Bluff Drive
<PAGE> 1
EXHIBIT 10.18
AMENDMENT NO. 2 TO THAT CERTAIN LEASE DATED JULY 12, 1994, BY AND BETWEEN
WEYERHAEUSER MORTGAGE COMPANY, A CALIFORNIA CORPORATION, AND FORT WYMAN, INC.,
A MICHIGAN CORPORATION, AS LANDLORD, AND STAC ELECTRONICS, A CALIFORNIA
CORPORATION, AS TENANT, FOR THAT CERTAIN PROPERTY COMMONLY KNOWN AS 12626 HIGH
BLUFF DRIVE, SUITE 370, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA.
WITNESSETH:
WHEREAS, Landlord and Tenant executed a Lease under date of July 12, 1994, as
well as Amendment No. 1 To The lease, relating to the demised premises shown in
Exhibit A thereto; and
WHEREAS, Landlord and Tenant now desire to amend said Lease and First Amendment
To The Lease to make certain agreed upon changes in said Lease;
NOW THEREFORE, to carry out the mutual desires of the parties thereto, it is
hereby agreed that said Lease and First Amendment To The Lease shall be amended
as of December 18, 1995 as follows:
1. The purpose of this Amendment is for Tenant to exercise its right of first
refusal on Suite 250.
2. SECTION 1(d), PREMISES AREA: Premises area shall be increased by
approximately 2,863 rentable square feet for a total of approximately Ten
Thousand Six Hundred Thirty Four (10,634) rentable square feet.
3. SECTION 1(f), TENANT'S PERCENTAGE: Tenant's percentage shall be amended to
reflect Eighteen and 45/100 Percent (18.45%).
4. SECTION 1(g), TERM OF THE LEASE: Terms as stated in this amendment shall
commence February 5, 1996. The expiration of the lease, March 5, 2000, shall
remain unchanged.
5. SECTION 1(h), BASE MONTHLY RENT: Monthly Base Rent shall be amended to
reflect Thirteen Thousand Two Hundred Ninety Two and 50/100 Dollars
($13,292.50).
6. SECTION 1(l), TOTAL SECURITY DEPOSIT: Security Deposit shall be increased
by $3,578.75, to a total of Thirteen Thousand Two Hundred Ninety Two and 50/100
Dollars ($13,292.50). The increase amount shall be due and payable prior to
commencement of the Lease.
7. SECTION 1(O), PARKING: Shall be modified to reflect forty-three (43) spaces,
including five (5) covered and reserved, free of charge.
8. CONDITION OF PREMISES: Tenant shall accept the premises in an "as is"
condition. Alterations to space Tenant deems necessary shall be at Tenant's
sole cost, shall conform to the current Building Standards and may proceed only
upon prior written approval of Landlord. The terms and conditions of the Work
Letter Agreement in the Lease, as well as the Rules and Guidelines for
Contractors and the Tenant Improvement Contract and Payment Policies for the
property are strictly adhered to.
9. EXHIBIT A, OUTLINE OF ADDITIONAL LEASED PREMISES: Exhibit A, showing the
additional leased premises, is attached hereto and by this reference, made a
part of the Lease.
Except as modified herein, all other terms and conditions of the Lease between
the parties above described shall continue in full force and effect.
The foregoing is hereby agreed to and accepted:
LANDLORD: TENANT:
WEYERHAEUSER FINANCIAL INVESTMENTS, STAC ELECTRONICS, Inc.,
INC., a Nevada corporation, and FORT WYMAN, a California corporation
INC., a Michigan corporation, tenants in common
By: Weyerhaeuser Financial Investments, Inc.,
managing tenant in common
By: /s/ Dorothy Forbes By: /s/ John R. Witzel
-------------------------------- ---------------------
Date: 2-10-96 Date: Feb. 2, 1996
------------------------------ -------------------
<PAGE> 2
EXHIBIT A
[FLOOR PLAN]
12626 High Bluff Drive, Suite 250
<PAGE> 1
EXHIBIT 11.1
STAC, INC.
COMPUTATION OF LOSS PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------
1996 1995 1994
---------- ----------- ----------
<S> <C> <C> <C>
Primary loss per share:
Net income (loss) $ (1,675) $ 1,496 $ 333
Less preferred dividends 168 1,598 449
-------- -------- --------
Net loss available for common $ (1,843) $ (102) $ (116)
shareholders ======== ======== ========
Common and common stock
equivalent shares outstanding 30,068 25,391 24,643
Net loss per share, primary $ (.06) $ .00 $ .00
Fully diluted loss per share:
Net income (loss) $ (1,675) $ 1,496 $ 333
Less preferred dividends 1,598 449
-------- ------- --------
Net loss available for common
shareholders $ (1,675) $ (102) $ (116)
======== ======= ========
Common and common stock
equivalent shares outstanding 30,585 25,391 24,643
Net loss per share, fully diluted $ (.05) $ .00 $ .00
</TABLE>
<PAGE> 1
EXHIBIT 21.1
STAC, INC.
SUBSIDIARIES OF REGISTRANT
Hi/fn Inc.
Stac Electronics (U.K.), Limited
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-47733, 33-50038, and 33-55462) of Stac, Inc. of
our report dated October 25, 1996, appearing on page F-1 of this Form 10-K.
PRICE WATERHOUSE LLP
San Diego, California
December 20, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 35,942
<SECURITIES> 29,463
<RECEIVABLES> 5,904
<ALLOWANCES> 327
<INVENTORY> 754
<CURRENT-ASSETS> 72,947
<PP&E> 8,458
<DEPRECIATION> 4,785
<TOTAL-ASSETS> 83,690
<CURRENT-LIABILITIES> 4,449
<BONDS> 0
0
0
<COMMON> 73,547
<OTHER-SE> 5,452
<TOTAL-LIABILITY-AND-EQUITY> 83,690
<SALES> 46,765
<TOTAL-REVENUES> 46,765
<CGS> 6,531
<TOTAL-COSTS> 6,531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,467
<INCOME-TAX> 6,142
<INCOME-CONTINUING> (1,675)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,675)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.05)
</TABLE>
