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UNITED STATES
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 DECEMBER 31, 1996.
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
.
COMMISSION FILE NUMBER: 0-21471
AURUM SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 77-0292260
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3385 SCOTT BOULEVARD
SANTA CLARA, CALIFORNIA 95054
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(408) 986-8100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK,
$.001 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing sale price of the Common Stock on February
28, 1997, as reported on the Nasdaq National Market, was approximately
$71,194,085. Shares of Common Stock held by each executive officer and
director and by each person who may be deemed to be an affiliate of the
Registrant have been excluded from this computation. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes. As of February 28, 1997, the Registrant had 11,571,361 shares of
Common Stock, $.001 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant has incorporated by reference into Part III of this Form 10-K
portions of its Proxy Statement for the 1997 Annual Meeting of Stockholders,
which is currently scheduled to be held on May 30, 1997.
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AURUM SOFTWARE, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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<C> <S> <C>
PART I.................................................................... 3
ITEM 1. BUSINESS..................................................... 3
ITEM 2. PROPERTIES................................................... 12
ITEM 3. LEGAL PROCEEDINGS............................................ 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 12
PART II................................................................... 14
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.......................................... 14
ITEM 6. SELECTED FINANCIAL DATA...................................... 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................... 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................. 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.......................... 23
PART III.................................................................. 24
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........... 24
ITEM 11. EXECUTIVE COMPENSATION....................................... 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................... 24
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 24
PART IV................................................................... 24
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K..................................................... 24
SIGNATURES................................................................ 26
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PART I
ITEM 1. BUSINESS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or anticipated results, including those set forth
under "Factors That May Affect Future Results" under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and elsewhere
in, or incorporated by reference into, this report.
THE COMPANY
Aurum Software, Inc. is a leading provider of enterprise-wide sales and
marketing information software. The Company develops, markets and supports
application software that helps to automate the sales, marketing and customer
support functions of a business. The Company's products are based on advanced
client/server and Internet/Intranet technologies. They are designed to address
the sales and marketing requirements of businesses ranging from medium-sized
enterprises to large multinational corporations and specifically to improve
the operational efficiency of such companies' sales and marketing business
processes. The Company has deployed its applications in a diverse set of
industries, including financial services, chemicals, high technology, health
care, information services, manufacturing, publishing, telecommunications and
utilities.
The Company was initially incorporated in California in 1991 and
reincorporated in Delaware in 1996. Unless the context otherwise requires, the
terms "Aurum" and "Company" refer to Aurum Software, Inc., a Delaware
corporation and its predecessor Aurum Software, Inc., a California
corporation. The Company maintains its executive offices at 3385 Scott
Boulevard, Santa Clara, California 95054. Its telephone number at that address
is (408) 986-8100.
The market for the Company's products has developed in recent years as
businesses have sought new ways to improve organizational and operational
efficiency and as advanced client/server technologies have permitted user-
friendly, enterprise-wide automation solutions. In an effort to improve
administrative efficiency and reduce costs, many companies have already
applied such technologies to automate "back office" operations, including
manufacturing, finance, order entry and human resources. The automation of
these back office operations has not, however, addressed the competitive
challenges associated with "front office" sales and marketing functions.
Automation solutions for front office functions have been slower to develop,
in part due to the complex dynamics and highly individualized nature of sales
and marketing business processes within organizations. Companies are, however,
increasingly focusing on their front office sales and marketing operations as
the next major business function to be automated and are recognizing the
importance of integrating front office and back office applications. The
Company believes that many companies are now looking for packaged sales and
marketing application software capable of mapping to their specific business
processes, supporting multi-tiered distribution channels, interfacing with
back office applications, adapting to emerging technologies such as the
Internet and providing scalable synchronization capabilities to coordinate
customer information among geographically dispersed and mobile users.
The Company offers the Aurum Customer Enterprise, a suite of software
applications intended to address the functional needs of sales, marketing and
support organizations involved in the management of customer relationships.
Its client/server and Internet-enabled applications manage information
describing sales opportunities, customer relationships, forecasts and quoting,
sales methodologies, sales cycles and customer support. Aurum Customer
Enterprise is designed to enable a multi-tier team selling model by permitting
a company's sales force, marketing staff and administrative and operations
personnel to share information relating to customers and prospective customers
as well as information relating to products, pricing, forecasts, competitive
intelligence, sales metrics and optimal selling practices. The Company's
applications are intended to provide better customer support by providing
current information on customer issues to all members of the sales
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and support team. In addition, the Company provides technical support to its
customers, including business consulting, requirements definition,
installation, training and customer support.
The Company believes that the determining factors in its ability to achieve
broad market acceptance of its products will include the functionality of its
software, the ability of its software to integrate with other enterprise
applications, its database synchronization technology and the ability of its
products to scale to the growth requirements of large multinational
organizations. In that regard, the Company has focused its strategy on
maintaining and enhancing its technological position, including the
integration of Internet and corporate-based Intranets into its products, as
well as on improving its ability to deploy its products rapidly in large-scale
implementations. In addition, the Company has established a number of
strategic business and technology partnerships with industry leaders in
consulting services and implementation as well as strategic technology
partnerships with other technology companies. The Company intends to continue
to work with these firms and companies to address new markets and initiatives.
Finally, the Company is also seeking to extend distribution of its products in
North America through its direct sales force and internationally by adding
additional distributors and, where appropriate, by employing a direct sales
force.
SOFTWARE PRODUCTS
The Aurum Customer Enterprise application suite utilizes common
administrative modules and a central customer database that contains key
information about active and historical marketing campaigns, customer contacts
and relationships, account strategy, task and activity history, the account
sales team and the business accomplishments necessary to move each customer to
the next phase in the sales process. The Company's software makes customer
support histories available to a company's sales force and can also supply
relevant financial, order history and shipment data when its sales and
marketing applications are linked to other enterprise applications.
The Company's applications operate on a UNIX or NT based server with an
Oracle, Sybase, Informix or Microsoft SQL Server database accessed through
Windows 3.1, Windows NT or Windows 95 clients. In addition, mobile, detached
users may operate on a laptop database and perform on-demand real-time
database synchronization to a corporate or local database server using Aurum's
dbSync product through a LAN/WAN, dial-up, RAS, XcelleNet, wireless or
Internet connection. These applications may be used individually or as part of
an integrated customer management solution.
Business Applications
Aurum SalesTrak. SalesTrak is an enterprise-wide sales force automation
application designed to enable mobile and connected sales professionals to
manage leads, opportunities, customer relationships, contact information,
account activities, calendars, literature fulfillment, price lists, quotes and
forecasts. To support team selling, SalesTrak helps the mobile sales
professional manage all of the key milestone events and assign team
responsibilities during the sales cycle, including key contact information,
account information, account strategy, key influencers and team tasks.
Aurum TeleTrak. TeleTrak is a telemarketing/telesales application designed
to improve call center performance and enhance productivity in both inbound
and outbound operations. Customer inquiries enter the process through toll-
free telephone calls, the Internet, targeted marketing campaigns or seminars
and may be followed up by the pre-assigned or next available telemarketing
representative who will "work" the contact through a series of strictly or
loosely defined accomplishments to the pre-qualified phase. Activities can
include lead generation, call scripting, activity management, follow up
contact, literature fulfillment, quotes, order generation and forecasting.
Aurum SupportTrak. SupportTrak is a call management application for customer
support call centers. SupportTrak handles customer support calls through the
Web, telephone call, e-mail or facsimile through call resolution. It also
provides call routing or dispatch capabilities, call management, activity
tracking, calendaring, information bulletin and literature fulfillment.
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Aurum Management Information System. The Management Information System
includes Aurum Explorer and Aurum Reporter and provides a comprehensive
approach to utilizing Aurum's customer information system as a data warehouse.
It combines On-Line Analytical Processing ("OLAP") technology with the Aurum
Customer Enterprise and enables a variety of functions from ad-hoc reporting
to on-line analytical processing and drill down analysis of the customer data.
The Management Information System includes an Aurum-specific customer object
repository, a set of 35 predefined analyses and templates and end-user tools
for drill down and ad hoc analysis.
The Company believes that the determining factors in its ability to achieve
broad market acceptance of its products will include the functionality of its
software, the ability of its software to integrate with other enterprise
applications, its database synchronization technology and the ability of its
products to scale to the growth requirements of large multinational
organizations. In that regard, the Company has focused its strategy on
maintaining and enhancing its technological position, including the
integration of Internet and corporate-based Internets into its products, as
well as on improving its ability to deploy its products rapidly in large-scale
implementations. In addition, the Company has established a number of
strategic business and technology partnerships with industry leaders in
consulting services and implementation as well as strategic technology
partnerships with other technology companies. The Company intends to continue
to work with these firms and companies to address new markets and initiatives.
Finally, the Company is also seeking to extend distribution of its products in
North America through its direct sales force and internationally by adding
additional distributors and, where appropriate, by employing a direct sales
force.
Enabling Technology
Aurum dbSync. Aurum's dbSync technology employs a real-time scanning
approach to provide scalable database synchronization designed to facilitate
the timely exchange of information among sales team members with efficient
updates because only net changes and additions are exchanged. Its design
offers collision detection and error recovery capabilities and transport
independence with support for multiple communications links including dial-up,
LAN, WAN, RAS, XcelleNet, wireless and the Internet. dbSync is designed to
support server-to-server synchronization so that smaller regional SalesTrak
servers can be placed in foreign countries. dbSync also provides Electronic
Software Distribution which can be used to distribute the latest release of
SalesTrak or other Windows applications electronically to mobile users. The
Electronic Software Distribution feature also supports the transfer of
marketing encyclopedia files from the Company's Intranet-based marketing
encyclopedia system.
Aurum EventTrak. EventTrak is an escalation and workflow engine designed to
facilitate the mapping of an individual company's business process by defining
key business rules for escalation and notification of events and issues. This
module enables a user to set up pre-defined events and business processes for
handling specific customer processes such as a type of service call, a
literature fulfillment request or an information inquiry through
telemarketing.
Aurum CTITrak. CTITrak is a computer telephony interface that connects the
Company's applications with automatic call distributors ("ACD"), interactive
voice response ("IVR"), dialers and other telephony equipment. In connection
with an incoming customer call, CTITrak enables a company representative to
access and retrieve all data related to the calling customer from the sales
and marketing database and forward both the data and the call directly to the
call center representative.
Internet/Intranet Applications
Aurum WebTrak. WebTrak is an Internet-enabled application that provides an
interface to Aurum's sales and marketing applications from the World Wide Web.
WebTrak enables the publishing of Aurum database application forms on a Web
server HTML home page. These forms can be directly accessed by a prospect or
customer to indicate their interest in a specific product, to register for a
seminar or to place an order directly. Once the data is entered on the Web
server, WebTrak captures this information and transfers it to the sales and
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marketing database where it can be acted upon further with the aid of
intelligent agents. In addition, customer profile information is captured in
the Aurum customer database, enabling a company to understand and better
market to Internet visitors.
Aurum Smart Encyclopedia. The Smart Encyclopedia provides complete product,
competitive, industry and technical information and a set of monitoring agents
that can actively alert a representative to new information that affects the
sales cycle or existing customer relationships. This system enables marketing
and sales professionals to subscribe to product, company, technical and
competitive information from other Web sites on the Internet and from their
corporate Intranet server.
The Smart Encyclopedia contains intelligent agents which actively monitor
Internet Web sites and the Intranet marketing encyclopedia content for net
changes. Mobile representatives have the ability to periodically connect to
the corporate Intranet through the dbSync process to update the information
stored on their notebook computers and to download new information.
PRODUCT ARCHITECTURE
The Company's software is developed using technologies such as 3-Tier
client/server component architecture, modern graphical user-interface designs,
object-oriented rapid application development tools, relationship modeling
tools, commercial relational databases and Web-centric development tools. In
addition, the Company's software products employ a database synchronization
technology with a scalable architecture.
Aurum Customer Enterprise Server. The customer management database serves as
the foundation of all the Company's applications and contains information such
as leads, companies, contacts, tasks, sales cycle phases, price books, support
information, telemarketing scripts, campaign data and other related customer
information. The common database is a normalized schema that is optimized for
scalability. Data stored in the common database is distributed to mobile users
through the Company's database synchronization technology. The common database
schema is extensible and configurable to model a company's business
requirements.
Adaptable and Configurable Development Environment. The Company uses an
object-oriented rapid application development environment so the software can
be configured to support changing field names, field labels and changes in the
user interface and layout forms. The class library objects contain key
components and business processes which can be adapted to match a company's
sales and marketing process. This approach enables customers to prototype,
model and implement their specific business processes and also gives them the
ability to change their processes over time as business needs change.
3-Tier Client/Server Architecture. The Company developed a 3-Tier
client/server adaptable architecture that conceptually consists of a visual
layer, business layer and transaction layer. The architecture employs
Microsoft technology for ease of use and industry compatibility and Aurum
technology for high performance and remote user support. The visual layer,
which is the sales user component, provides a Windows interface and permits
the user to prioritize information views. The business layer allows managers
to adapt and implement management decisions and business process rules across
the enterprise. The transaction layer serves as the repository of customer
data and access point to other enterprise databases and is designed to manage
the connections between the client and server to optimize performance and
scalability to support a large number of clients. Each layer is designed to
support upgrades of user-defined content to newer versions of Aurum products.
Database Synchronization. The Company's database synchronization provides
on-demand database synchronization, heterogeneous database synchronization,
complex data distribution models (team selling support and other application-
specific logic), customizable business objects (business rules reside in the
database), high performance extraction of net data changes, collision
handling, full extensibility and customization, support for electronic
software distribution, transport independence (works over WAN, LAN, XcelleNet,
dial-up and the Internet) and full recoverability if the communications
session fails.
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SALES AND MARKETING
In North America, the Company markets its software primarily through its
direct sales organization. To support its sales efforts, the Company conducts
an active set of marketing programs including public relations, advertising,
direct mail, seminars, trade shows, and ongoing customer communications
including a user group council. As of December 31, 1996, the Company's sales
and marketing organization consisted of 57 full time employees.
The Company's direct sales force employs a consultative sales process,
working closely with customers to understand and define their needs to
determine how they are best addressed by both the Company's product offerings
and complementary technology and services offered by the Company's strategic
and technology partners. Because the implementation of sales and marketing
applications is typically mission-critical, the Company's sales and marketing
efforts are generally directed to the senior management of a prospective
customer.
The direct sales force works closely with strategic systems integration,
technology and sales methodology partners to identify specific customer
opportunities and requirements. The Company believes that joint marketing
activities conducted with these partners will assist it to increase market
coverage and acceptance of the Company's products. These activities include
jointly conducted seminars, trade shows and conferences. A key part of the
Company's strategy is to expand and enhance these marketing efforts with
leading systems integration partners.
Outside North America, the Company has historically marketed its software
through key distribution organizations. In March 1997, the Company acquired
all the outstanding shares of Aurum Software UK Limited, an English
corporation, which had previously acted as a distributor for the Company in
the United Kingdom. The Company is now marketing and selling its products in
the United Kingdom through a direct sales force employed by its new
subsidiary. The Company also has established distributor agreements in place
with Aurum France, GE Information Services, Inc. and IBM EMEA (Europe, Middle
East, and Africa). In addition to marketing and selling the Company's
software, these distributors provide technical support as well as educational
and consulting services.
The Company intends to continue to grow its direct sales force in North
America and to pursue international distribution primarily through key
distribution agreements and, in selected countries where management determines
it to be appropriate, through a direct sales force. The Company's existing
direct sales forces in the United States and the United Kingdom are relatively
small, however. The Company's ability to achieve revenue growth in the future
will depend in large part on its success in recruiting and training sufficient
direct sales, technical, and customer support personnel, in developing
distribution relationships with third party distributors outside the United
States, and establishing and maintaining relationships with its strategic
partners. Any failure by the Company to expand its direct sales force or other
distribution channels, or to expand its technical and customer support staff,
could materially and adversely affect the Company's business, operating
results and financial condition. Competition for suitable distribution
partners is intense in many markets outside North America. For example, the
Company has identified the Pacific Rim as an important international market
for the Company's products but has not yet entered into any distribution
partnerships. There can be no assurance that the Company will be successful in
attracting and retaining qualified international distributors or that it will
be successful in implementing direct sales programs in selected international
markets. If the Company is unable to obtain qualified international
distribution partners or is otherwise unable to penetrate strategically
important international markets, the Company's business, operating results and
financial condition could be materially and adversely affected.
In addition, although the Company believes that its continued growth and
profitability will require expansion of its international operations,
international expansion poses a number of risks. Specifically, international
expansion will require significant investments of management attention and
financial resources, which could adversely affect the Company's operating
margins and earnings, if any. Although international revenues
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comprised less than 5% of total revenues in the year ended December 31, 1996,
in the event that international revenues increase in the future as a
percentage of the Company's total revenues, the Company's business, operating
results or financial condition could be materially and adversely affected by
risks inherent in conducting business internationally, including changes in
foreign currency exchange rates, longer payment cycles, greater difficulty in
accounts receivable collection, difficulties in managing and staffing
international operations, seasonality in various parts of the world, including
the slow-down in European business activity during the Company's third fiscal
quarter, cultural differences in the conduct of business, tariffs, duties,
price controls or other restrictions on foreign currencies, trade barriers and
other factors.
RESEARCH AND DEVELOPMENT
As of December 31, 1996, there were 37 full time employees on the Company's
product development staff. The Company's research and development expenditures
in 1994, 1995 and 1996 were $2.2, $2.3 and $3.7 million, respectively, and
represented 38%, 22% and 13% of revenues in the respective periods.
The Company's growth and future financial performance will depend in part
upon its ability to enhance existing applications, develop and introduce new
applications that keep pace with technological advances, meet changing
customer requirements, respond to competitive products and achieve market
acceptance. As a result, the Company expects that it will continue to commit
substantial resources to product development in the future. To date, the
Company's development efforts have not resulted in any capitalized software
development costs.
The Company works closely with its customers and prospects to determine
their requirements and to design enhancements and new products to meet their
needs. The Company's current development initiatives include feature and
function enhancement of existing products, the development of new
complementary products and the development of integrated packages of its
products tailored to the requirements of certain market segments. The Company
plans to enhance its current product line, including new Internet/Intranet
capabilities as well as support for additional hardware and relational
database platforms. There can be no assurance, however, that such enhancements
will result in increased sales or market acceptance of the Company's products.
The client/server and Internet application software market is subject to
rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards that may render existing
products and services obsolete. As a result, the Company's position in its
existing markets or other markets that it may enter could be eroded rapidly by
product advancements. The life cycles of the Company's products are difficult
to estimate. The Company's product development efforts are expected to
require, from time to time, substantial investments by the Company in product
development and testing. There can be no assurance that the Company will have
sufficient resources to make the necessary investments. The Company has in the
past experienced development delays, and there can be no assurance that the
Company will not experience delays in the future. There can be no assurance
that the Company will be successful in developing and marketing enhancements
to its products that respond to technological developments, evolving industry
standards or changing customer requirements, or that the Company will not
experience difficulties that could delay or prevent the successful
development, introduction and sale of such enhancements or that such
enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products
or enhancements fail to achieve market acceptance when released, the Company's
business, operating results and financial condition could be materially and
adversely affected.
Software products as complex as those offered by the Company frequently
contain errors or failures, especially when first introduced or when new
versions or enhancements are released. Although the Company conducts extensive
product testing during product development, the Company has at times been
forced to delay commercial release of software until problems were corrected
and, in some cases, has provided enhancements to correct errors in released
software. The Company could, in the future, lose revenues as a result of
software errors or defects. There can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be found
in software or releases after commencement of commercial shipments,
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resulting in loss or delay of revenue or delay in market acceptance, diversion
of development resources, damage to the Company's reputation, or increased
service and warranty costs, any of which could have a material adverse effect
upon the Company's business, operating results and financial condition.
CONSULTING SERVICES, TRAINING AND SUPPORT
The Company devotes substantial resources to providing technical support to
its customers, including business consulting, requirements definition,
installation, consulting, training and customer support. The Company has
developed a comprehensive methodology for implementation of its sales and
marketing applications. This methodology is used by its own consulting
organization and is also available for license by its systems integration
partners. Systems integration partners include Cambridge Technology Partners,
Deloitte & Touche LLP, Ernst & Young LLP, GE Information Services, Inc., IBM,
KPMG Peat Marwick LLP and Technology Solutions Corporation. As of December 31,
1996, the Company employed 71 full time employees in its consulting services,
training and customer support organization. The Company provides the following
services:
Consulting Services The Company provides a range of professional services
for its customers including business consulting, project management,
requirements definition, installation and implementation, consulting, and roll
out and deployment. Consulting services costs are based on a time and
materials basis and are charged separately from the software license and
maintenance agreement.
The Company has an active certification program in place for training and
supporting large systems integration partners. The Company expects that over
time, the large systems integrators will perform more of the consulting
associated with the implementation of the Company's products as they complete
more engagements and increase the number of experienced consultants that have
been trained and certified on the Company's technology.
Support. The Company's customer service organization provides post-sales
support, including information and assistance on installation, operation and
administration of the Company's products. The Company offers telephone support
during business hours and 24-hour on-call support. Initial product license
fees do not cover software maintenance. Customers are entitled to receive
software updates, maintenance releases and technical support for an annual
license fee which is a percentage of the Company's list price for the software
licenses.
Training. The Company offers end user and technical training programs for
its customers and partners. The Company also offers customized training
courses to meet the specific needs of its customers. Fees are based on a per
class basis, per student basis or on a train the trainer basis. The Company
offers training at customer sites as well as at its offices in Santa Clara,
California. In addition, customers may choose to receive training from
selected systems integration partners.
COMPETITION
The market for the Company's client/server applications is highly
competitive, fragmented and subject to rapid technological change and frequent
new product introductions and enhancements. The Company has a large number of
competitors which range from internally developed custom application
development efforts to packaged application vendors. The Company offers a
suite of applications which can be used as part of an integrated customer
management application suite or can be used on a stand-alone basis. The
Company competes with packaged application vendors that provide tactical
departmental solutions in specific market segments as well as with competitors
that provide a broader suite of integrated customer management applications.
Many of these competitors have longer operating histories, significantly
greater financial, technical, product development, marketing and other
resources, greater name recognition or a larger installed base of customers
than the Company. As a result, these competitors may be able to respond more
quickly to new or emerging technologies and to changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their products than can the Company.
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The Company's principal competitors in the sales force automation market
include Brock Control Systems, Inc., Clarify Inc., Onyx Software Corporation,
SalesBook Systems, SalesKit Software Corporation, SaleSoft, Inc., Saratoga
Systems, Inc. and Siebel Systems, Inc. The Company also depends for the
marketing and implementation of its products upon a number of third party
systems integrators, including Cambridge Technology Partners, Deloitte &
Touche LLP, Ernst & Young LLP, GE Information Services, Inc., IBM and KPMG
Peat Marwick LLP. Many of these firms also have established relationships with
the Company's competitors. There can be no assurance that these third parties,
many of which have significantly greater financial resources than the Company,
will not in the future compete directly with the Company or otherwise
discontinue their support of the Company's products. The Company also faces
competition from customer support application vendors which are attempting to
expand from their customer support market into the sales automation area
either through internal product development or through acquisitions. These
customer support competitors include Astea International, Inc., Clarify Inc.,
Scopus Technology, Inc. and The Vantive Corporation. Over time, the Company
expects large enterprise software vendors such as Oracle Corporation and SAP
AG to extend their enterprise application suites by offering sales force
automation, telemarketing and customer support, with the appropriate
integration to leading financial, order entry and manufacturing applications.
In addition, because the barriers to entry in the software market are
relatively low, additional competitors may emerge as the sales and marketing
software market continues to develop and expand. It is also possible that
acquisitions of competitors by large software companies or alliances among
competitors could occur. The Company expects that significant consolidation in
its industry will occur over the next few years and increased competition from
new entrants or through strategic acquisitions or alliances could result in
price erosion, reduced gross margins or loss of market share, any of which
could have a material adverse effect on the Company's business, operating
results and financial condition.
The Company believes that it competes favorably in its marketplace based
upon its breadth and depth of application functionality, its architecture and
database synchronization technology, the scalability of its technology to
handle users on a global basis, its Internet and Intranet capabilities, the
ease of adapting its applications with its object-oriented rapid application
development tools and its ability to get large customers into production
quickly through its own consulting services organization as well as through
its partnerships with large systems integrators. Although the Company believes
that it currently competes favorably with respect to such factors, there can
be no assurance that the Company will be able to compete successfully against
current and future competitors, especially those with greater financial,
marketing, service, support, technical and other resources than the Company,
or that competitive pressures will not materially and adversely affect the
Company's business, operating results and financial condition.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright
laws, which afford only limited protection. The Company submitted a patent
application for its dbSync technology in August 1996, and such application is
still pending. There can be no assurance that any patent covering the
Company's inventions will issue or that any patent, if issued, will provide
sufficiently broad protection or will prove enforceable in actions against
alleged infringers. Despite precautions taken by the Company, it may be
possible for unauthorized third parties to copy aspects of its products or
future products or to obtain and use information that the Company regards as
proprietary. In particular, the Company provides its licensees with access to
its data model and other proprietary information underlying its licensed
applications. The Company makes source code available for certain of the
Company's products and occasionally enters into source code escrow agreements
with certain customers for the balance of the source code. There can be no
assurance that the Company's means of protecting its proprietary rights will
be adequate or that the Company's competitors will not independently develop
similar or superior technology or design around any patents owned by the
Company. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in
10
<PAGE>
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, operating results and financial condition.
Policing unauthorized use of the Company's products is difficult and, while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. The
Company is not aware that any of its product offerings infringe the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by the Company with respect to
current or future products. The Company expects that software product
developers will increasingly be subject to infringement claims as the number
of products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in the Company's products to perform key business functions.
Among the principal developers of these licensed technologies are Business
Objects, Inc., which licenses an On-Line Analytical Processing ("OLAP") tool
that enables the analysis of sales and customer data at both the server and
client sites of a user's network; Centura Corporation, which licenses a SQL-
based laptop database that is used principally in the Company's SalesTrak
product; and First Floor Software, Inc., which licenses an intelligent agent
that monitors changes in sales and customer data accessed through the World
Wide Web. The Company's license agreements with Business Objects, Centura and
First Floor expire in March 2000, December 1997 and June 1997, respectively,
and there can be no assurance that any of these agreements will be renewed
following expiration. Because the Company's products incorporate software
developed and maintained by third parties, the Company is to a certain extent
dependent upon such third parties' ability to maintain or enhance their
current products, to develop new products on a timely and cost-effective basis
and to respond to emerging industry standards and other technological changes.
In the event that the Company's agreements with its third-party vendors should
fail to be renewed or the products licensed from such vendors should fail to
address the requirements of the Company's software products, the Company would
be required to find alternative software products or technologies of equal
performance or functionality. There can be no assurance that the Company would
be able to replace such functionality provided by the third-party software
currently offered in conjunction with the Company's products in the event that
such software becomes obsolete or incompatible with future versions of the
Company's products or is otherwise not adequately maintained or updated. The
absence of or any significant delay in the replacement of that functionality
could have a material adverse effect on the Company's business, operating
results and financial condition.
EMPLOYEES
As of December 31, 1996, the Company had a total of 179 full time employees,
all of whom were based in the United States. Of the total, 57 were engaged in
sales and marketing, 71 in consulting services, training and support, 37 in
engineering and 14 in administration and finance. The Company's future
performance depends in significant part on the continued service of its key
technical and senior management personnel and on its continuing ability to
identify, attract and retain highly qualified technical, sales and management
personnel. Competition for such personnel is intense and there can be no
assurance that the Company will be able to retain its key technical and senior
management personnel or that it will be able to identify, attract and retain
qualified technical, sales and management personnel in the future. None of the
Company's employees is represented by a labor union. The Company has not
experienced any work stoppages and considers its relations with its employees
to be good.
11
<PAGE>
ITEM 2. PROPERTIES
The Company's principal administrative, sales, marketing and support
functions are located at its leased headquarters facility in Santa Clara,
California. The Company currently occupies 18,000 square feet of space at this
facility, and the lease will expire in July 1997. In addition, the Company
also leases 10,225 square feet at a nearby facility, which houses the
Company's research and development staff. The lease for this facility expires
in November 1999. The Company also leases domestic sales and support offices
in the metropolitan areas of Atlanta, Chicago, Dallas and Seattle and in
Salem, New Hampshire. In addition, the Company's subsidiary in the United
Kingdom, which the Company acquired in March 1997, leases space for a sales
and support office in Cambridgeshire, England.
In January 1997, the Company signed a lease for 38,288 square feet of space
in Santa Clara, California. The Company intends to relocate its headquarters
staff to this new facility in July 1997, upon the expiration of its existing
lease. The lease for the Company's new headquarters facility expires in
February 2003.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is party to various legal proceedings or
claims, either asserted or unasserted, which arise in the ordinary course of
business. Management has reviewed pending legal matters and believes that the
resolution of such matters will not have a significant adverse effect on the
Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's stockholders during the
fourth quarter of the year ended December 31, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages as of December 31, 1996
were as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
President, Chief Executive Officer and
Mary E. Coleman............. 42 Director
David D. Buchanan........... 43 Executive Vice President and Director
Susan K. Buchanan........... 44 Executive Vice President
Timothy E. Campbell......... 35 Vice President, Client Services
Christopher L. Dier......... 44 Vice President, Finance, Chief Financial
Officer and Secretary
Tuoc V. Luong............... 35 Vice President, Engineering
James W. Thanos............. 48 Vice President, Worldwide Operations
</TABLE>
Mary E. Coleman has served as the Company's President and Chief Executive
Officer and as a Director of the Company since November 1994. From May 1993 to
November 1994, Ms. Coleman served as the Company's Vice President of Marketing
and from January 1994 to September 1994 as Vice President of Engineering. From
March 1992 until April 1993, she served as Vice President of Marketing for
Radius, Inc., a manufacturer of peripherals for Apple Macintosh computers.
From October 1990 until March 1992, Ms. Coleman was Vice President of
Marketing at McData Corporation, a data center network switch supplier.
David D. Buchanan, a co-founder of the Company, has served as Executive Vice
President and as a Director of the Company since January 1993. From January
1992 until January 1993, Mr. Buchanan served as Chairman of the Company's
Board of Directors. From 1984 until founding the Company in 1991, Mr. Buchanan
served in various management positions at Ungerman-Bass Networks, Inc. and
Proteon, Inc., both networking companies. Mr. Buchanan is married to Susan K.
Buchanan, an Executive Vice President of the Company.
12
<PAGE>
Susan K. Buchanan, a co-founder of the Company, has served as Executive Vice
President since January 1993. From January 1992 until January 1993, she served
as a director of the Company and from January 1992 until June 1992 as the
Company's Chief Financial Officer and Secretary. From October 1986 until
October 1991, she served as a district sales manager for Unify Corporation, a
supplier of application development products for client/server environments.
Ms. Buchanan is married to David D. Buchanan, an Executive Vice President and
Director of the Company.
Timothy E. Campbell has served as the Company's Vice President of Client
Services since September 1995. From January 1988 to September 1995, Mr.
Campbell served in engineering, consulting and management roles at Electronic
Data Systems Corporation, a provider of information services.
Christopher L. Dier has served as the Company's Vice President, Finance,
Chief Financial Officer and Secretary since July 1996. From 1990 to July 1996,
Mr. Dier served as Chief Financial Officer of Veritas Software Corporation, a
storage management software company.
Tuoc V. Luong has served as the Company's Vice President of Engineering
since January 1996. From March 1992 to January 1996, Mr. Luong served as a
Vice President of Borland International Inc., a manufacturer of systems and
applications software products, where he was responsible for development of
Borland's Delphi client/server software product line. From February 1990 to
February 1992, Mr. Luong served as Director of Advanced Technology at Pyramid
Technology Corp., a manufacturer of open systems servers.
James W. Thanos has served as the Company's Vice President of Worldwide
Operations since January 1995. From May 1994 to December 1994, Mr. Thanos
served as Vice President of Sales for Digital Tools, Inc., a provider of
project management software. From January 1993 to April 1994, Mr. Thanos
served as Vice President of Sales for Harvest Software, Inc., a facsimile
forms company. From December 1988 to January 1993, Mr. Thanos served as Vice
President of Worldwide Operations at Metaphor Computer Systems, Inc., a
provider of decision support software.
13
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol "AURM" since the Company's initial public offering in October
1996. Prior to October 1996, there was no established public trading market
for the Company's Common Stock. The following table sets forth the quarterly
high and low closing sales prices for the Company's Common Stock as reported
by The Nasdaq Stock Market during the year ended December 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 HIGH LOW
---------------------------- -------- ----
<S> <C> <C>
Fourth Quarter........................................... $42 1/2 $19
</TABLE>
As of February 28, 1997, the Company had issued and outstanding 11,571,361
shares of its Common Stock held by 143 stockholders of record. The Company
estimates that there are approximately 1,300 beneficial stockholders.
The market price of the Company's Common Stock has fluctuated significantly
since its initial public offering in October 1996. The market price of the
Common Stock could be subject to significant fluctuations in the future based
on a number of factors, including any shortfall in the Company's revenues or
net income from revenues or net income expected by securities analysts;
announcements of new products by the Company or its competitors; quarterly
fluctuations in the Company's financial results or the results of other
software companies, including those of direct competitors of the Company;
changes in analysts' estimates of the Company's financial performance, the
financial performance of competitors, or the financial performance of software
companies in general; general conditions in the software industry; changes in
prices for the Company's products or competitors' products; changes in revenue
growth rates for the Company or its competitors; and conditions in the
financial markets. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations, which have particularly
affected the market price for the securities of many technology companies and
which have often been unrelated to the operating performance of the specific
companies. There can be no assurance that the market price of the Company's
Common Stock will not experience significant fluctuations in the future.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock.
The Company currently expects to retain future earnings, if any, for use in
the operation and expansion of its business and does not anticipate paying any
cash dividends in the foreseeable future. The Company's bank line of credit
agreement contains a restrictive covenant that limits the Company's ability to
pay cash dividends or make stock repurchases without the prior written consent
of the lender. See Note 5 of Notes to Financial Statements.
RECENT SALES OF UNREGISTERED SECURITIES
1. From January 1, 1994 to December 31, 1996, the Registrant issued options
to purchase 2,603,605 shares of Common Stock to employees and consultants at
exercise prices ranging from $0.12 to $35.38 per share pursuant to the
Registrant's 1993 Stock Option Plan and 1995 Stock Plan. Of such shares,
options to purchase 166,813 shares were originally granted under the 1993
Stock Option Plan and were cancelled and regranted under the 1995 Stock Plan
in connection with an option repricing that took place in 1995. The Company
terminated the 1993 Stock Option Plan in connection with adopting the 1995
Stock Plan.
2. From January 1, 1994 to December 31, 1996, the Registrant issued and sold
1,548,834 shares of Common Stock to employees and consultants at prices
ranging from $0.12 to $9.00 per share, upon exercise of stock options and
stock purchase rights, pursuant to the Registrant's 1992 Restricted Stock
Purchase Plan, 1993 Stock Option Plan and 1995 Stock Plan.
14
<PAGE>
3. On December 23, 1994, the Registrant issued and sold 5,000,000 shares of
Series C Preferred Stock to five (5) accredited investors for an aggregate
purchase price of $2,500,000 and issued warrants to such investors to acquire
an aggregate of 5,529,110 shares of Common Stock at an aggregate exercise
price of $5,529. The Company issued 5,529,110 shares of Common Stock upon
exercise of such warrants at various times during 1995.
4. On August 20, 1995, the Registrant issued and sold 7,607,719 shares of
Series D Preferred Stock to eight (8) accredited investors for an aggregate
purchase price of $6,010,097.
5. On November 17, 1996, the Registrant issued and sold 100,000 shares of
Series D Preferred Stock to Sales Technologies, Inc., a Georgia corporation,
in exchange for certain assets.
6. On March 29, 1996, the Registrant issued and sold an aggregate of
1,363,637 shares of Series E Preferred Stock to two (2) accredited investors
for an aggregate purchase price of $1,500,000.
7. On May 17, 1996, the Registrant issued and sold an aggregate of 6,250
shares of Common Stock to three (3) consultants associated with The Kappa
Group, Inc. for an aggregate purchase price of $37,500.
8. From August 20, 1996 to August 28, 1996, the Registrant issued and sold
an aggregate of 6,252 shares of Common Stock to six (6) consultants associated
with R.B. Webber & Company, Inc., for an aggregate purchase price of $37,500.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), in
reliance on Section 4(2) of the Securities Act, Regulation D promulgated
thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act,
as transactions not involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationship with the Company, to information about the Registrant.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Financial Statements and Notes thereto and other financial
information included elsewhere in this report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses..................... $ 16,430 $ 5,928 $ 3,356 $ 3,475 $2,169
Services..................... 11,154 4,547 2,556 1,426 1,011
-------- -------- ------- ------- ------
Total revenues............. 27,584 10,475 5,912 4,901 3,180
Cost of Revenues:
Licenses..................... 1,368 979 365 331 461
Services..................... 9,594 3,919 2,586 1,609 623
-------- -------- ------- ------- ------
Total cost of revenues..... 10,962 4,898 2,951 1,940 1,084
-------- -------- ------- ------- ------
Gross profit................... 16,622 5,577 2,961 2,961 2,096
-------- -------- ------- ------- ------
Operating expenses:
Sales and marketing.......... 11,171 6,626 3,240 3,107 1,021
Research and development..... 3,707 2,286 2,246 2,251 763
General and administrative... 1,662 1,023 1,780 1,861 922
-------- -------- ------- ------- ------
Total operating expenses... 16,540 9,935 7,266 7,219 2,706
-------- -------- ------- ------- ------
Income (loss) from operations.. 82 (4,358) (4,305) (4,258) (610)
Other income, net.............. 435 63 5 38 --
Interest expense............... (213) (157) (88) (42) (14)
-------- -------- ------- ------- ------
Income (loss) before provision
for income taxes.............. 304 (4,452) (4,388) (4,262) (624)
Provision for income taxes..... (25) -- -- -- --
-------- -------- ------- ------- ------
Net income (loss).............. $ 279 $ (4,452) $(4,388) $(4,262) $ (624)
======== ======== ======= ======= ======
Net income (loss) per share.... $ 0.03 $ (1.44)
======== ========
Shares used in per share
calculation................... 9,948 3,092
======== ========
Pro forma net income (loss) per
share(1)...................... $ (0.66)
========
Pro forma shares used in per
share calculation(1).......... 6,712
========
<CAPTION>
DECEMBER 31,
--------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)...... $ 44,356 $ 2,205 $ 1,034 $ 3,348 $ (900)
Total assets................... 56,281 9,795 5,744 6,188 1,169
Notes payable and capital lease
obligations less current
portion....................... 451 237 370 341 --
Mandatorily redeemable
convertible preferred
stock(2)...................... -- 17,356 11,302 8,845 --
Accumulated deficit............ (13,447) (13,726) (9,274) (4,886) (624)
Stockholders' equity (deficit). 47,009 (13,528) (9,080) (4,706) (452)
</TABLE>
- --------
(1) Reflects the conversion of the Company's outstanding Preferred Stock into
shares of Common Stock upon completion of its initial public offering. See
Note 2 of Notes to Financial Statements.
(2) In September 1996, the Company's Board of Directors and stockholders
approved an amendment to the Company's Articles of Incorporation to remove
the mandatory redemption feature of the Preferred Stock.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or anticipated results, including those set forth
under "Factors That May Affect Future Results" in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in, or incorporated by reference into, this report. The following
discussion and analysis should be read in conjunction with "Selected Financial
Data" and the Company's Financial Statements and Notes thereto included
elsewhere in this report.
OVERVIEW
The Company, which commenced operations in 1991, develops application
software for automating enterprise-wide sales, marketing and customer support
functions of businesses. From its inception through 1991, the Company was
engaged principally in research and development and in developing custom
software products. The Company commenced commercial shipments of its TeleTrak
and SupportTrak software products in 1992 and delivered consulting services
for implementation of its products. The Company's SalesTrak software product
began commercial shipment in September 1994.
Since the introduction of SalesTrak,, the Company's total revenues have
grown rapidly, increasing from $5.9 million in 1994 to $10.5 million in 1995
and $27.6 million in 1996. License revenues have increased from $3.4 million
in 1994 to $5.9 million in 1995 and $16.4 million in 1996, while service
revenues grew from $2.6 million in 1994 to $4.5 million in 1995 and $11.1
million in 1996. Service revenues include revenues from consulting services.
The Company realized operating losses from 1992 through 1995 and achieved
limited profitability in 1996. The losses from 1992 through 1994 primarily
reflect the Company's investment in research and development, in particular
the transition of its products from an early character-based technology to a
Windows user interface-based technology. In addition, in 1993 and 1994, the
Company made a substantial investment in the development of its SalesTrak
software product and database synchronization technology. The losses in 1995
primarily reflect the Company's continued investment in research and
development of its software and an increased investment in sales and marketing
to increase revenues and expand market share.
The Company has experienced significant fluctuations in its gross margins
due principally to changes in the mix of license and service revenues and in
the costs associated with each type of revenue. The Company's margins have
been favorably impacted in part by an improvement in the mix of license
revenues to service revenues, and in more recent periods by the reduced cost
of license revenues due to the reduction in the sales of third party database
applications and the reduced cost of service revenues resulting from the
Company's decreased use of outside contractors. The Company's gross margins
may continue to vary significantly in the future.
The Company derives revenues principally from licensing its software and
providing technical product support and consulting services to its customers.
License revenues for the Company's products consist of server fees for one or
more servers and software license fees based on the number of named users. The
Company also derives license revenues from sublicensing third party software
products. License revenues are recognized upon execution of a license
agreement and delivery of software if there are no significant post-delivery
vendor obligations and collection of the receivable is deemed probable. If
significant post-delivery obligations exist or if a product is subject to
customer acceptance, revenues are deferred until no significant obligations
remain or acceptance has occurred. Revenues from services consist primarily of
consulting services, including implementation and adaptation of licensed
software and training, maintenance and support. Consulting and training
revenues are generally recognized as services are performed, except for
revenues from certain fixed-price contracts or milestone deliverables, which
are recognized on a percentage-of-completion basis or upon milestone delivery.
Maintenance revenues are recognized ratably over the term of the maintenance
period, which is
17
<PAGE>
typically one year. For all periods presented, the Company has recognized
revenue in accordance with the Statement of Position 91-1 on "Software Revenue
Recognition" dated December 12, 1991, issued by the American Institute of
Certified Public Accountants.
RESULTS OF OPERATIONS
The following table sets forth the periods indicated the percentage of total
revenues represented by the Company's statement of operations:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses............................................ 60.0% 56.6% 56.8%
Services............................................ 40.0 43.4 43.2
----- ----- -----
Total revenues..................................... 100.0 100.0 100.0
Cost of Revenues:
Licenses............................................ 5.0 9.3 6.2
Services............................................ 34.8 37.4 43.7
----- ----- -----
Total cost of revenues............................. 39.8 46.7 49.9
----- ----- -----
Gross profit.......................................... 60.2 53.3 50.1
----- ----- -----
Operating expenses:
Sales and marketing................................. 40.5 63.3 54.8
Research and development............................ 13.4 21.8 38.0
General and administrative.......................... 6.0 9.8 30.1
----- ----- -----
Total operating expenses........................... 59.9 94.9 122.9
----- ----- -----
Income (loss) from operations......................... 0.3 (41.6) (72.8)
Other income, (expense) net........................... 1.6 0.6 0.1
Interest expense...................................... (0.8) (1.5) (1.5)
----- ----- -----
Income (loss) before taxes............................ 1.1 (42.5) (74.2)
Provision for income taxes............................ 0.1 -- --
----- ----- -----
Net income (loss)..................................... 1.0% (42.5)% (74.2)%
===== ===== =====
</TABLE>
Revenues
The Company's revenues are derived primarily from fees for software licenses
and to a lesser extent from services. Total revenues were $5.9 million, $10.5
million and $27.6 million in 1994, 1995 and 1996, respectively, representing
year-to-year increases of 77% between 1994 and 1995 and 163% between 1995 and
1996. The Company believes that the substantial revenue increases from 1994
through 1996 reflect increasing market acceptance of its software products,
particularly SalesTrak, which began commercial shipment in late 1994. Since
the beginning of 1995, a majority of the Company's license and service
revenues have come from SalesTrak. There can be no assurances that the Company
will be able to maintain the rates of revenue growth that it has experienced
in recent periods.
Licenses. License revenues were $3.4 million, $5.9 million and $16.4 million
in 1994, 1995 and 1996, respectively, representing 57%, 57% and 60% of total
revenues in the respective periods. The increase in license fees in each
period was due to increased market acceptance of the Company's Windows-based
products, the introduction of SalesTrak and the expansion of the Company's
direct sales force.
Services. Service revenues were $2.6 million, $4.5 million and $11.1 million
in 1994, 1995 and 1996, respectively, representing 43%, 43% and 40% of total
revenues in the respective periods. The dollar increase in service revenues is
primarily the result of an increase in demand for consulting and systems
integration services
18
<PAGE>
and, to a lesser extent, from an increase in maintenance revenues from a
larger installed base. The 3% decrease from 1995 to 1996 reflects Aurum's
strategy to use third-party integration partners, allowing the Company to
focus on higher margin license sales.
Cost of Revenues
Cost of Licenses. Cost of licenses consists primarily of license fees and
royalties paid to third party software providers and, to a lesser extent,
product media, product duplication and shipping. Cost of licenses was
$365,000, $979,000 and $1.4 million in 1994, 1995 and 1996, respectively,
representing 11%, 17% and 8% of related license revenues and 6%, 9% and 5% of
total revenues for each year, respectively. The increase in the dollar amount
of the cost of licenses in each successive year reflects the higher volume of
applications sold each year. Cost of licenses increased as a percentage of
related revenues from 1994 to 1995 due to higher third party database sales
which have a lower product margin than the Company's applications. Cost of
licenses decreased as a percentage of related revenues from 1995 to 1996 due
primarily to the reduction in the sales of third party database applications
and higher volume pricing discounts from third party software providers.
Cost of Services. Cost of services consists primarily of personnel-related
costs incurred in providing consulting services, training and maintenance to
customers. Cost of services was $2.6 million, $3.9 million and $9.6 million in
1994, 1995 and 1996, respectively, representing 101%, 86% and 86% of related
service revenues and 44%, 37% and 35% of total revenues for each year,
respectively. The increase in the dollar amount of cost of services in each
successive year reflects the higher volumes of services and maintenance
provided each year. Cost of services decreased as a percentage of related
service revenues from 1994 to 1996 due to economies of scale and a higher
revenue base.
Operating Expenses
Sales and Marketing. Sales and marketing expenses include salaries,
commissions, advertising, direct mail, seminars, public relations, trade
shows, travel and other related selling and marketing expenses. Sales and
marketing expenses were $3.2 million, $6.6 million and $11.2 million in 1994,
1995 and 1996, respectively, representing 55%, 63% and 41% of total revenues
for each year, respectively. The dollar increase in sales and marketing
expenses reflects the expansion of the Company's direct sales force and an
associated increase in marketing expenses over each of the respective years.
The increase in sales and marketing expenses as a percentage of total revenues
from 1994 to 1995 was principally due to a significant increase in the number
of sales and marketing personnel in 1995. The decline in sales and marketing
expenses as a percentage of total revenues from 1995 to 1996 was due to the
increase in the Company's total revenues and economies of scale.
Research and Development. Research and development expenses relate primarily
to engineering personnel. Costs related to research and development of
products are charged to research and development expenses as incurred.
Research and development expenses were $2.2 million, $2.3 million and $3.7
million in 1994, 1995 and 1996, respectively, representing 38%, 22% and 13% of
total revenues for each year, respectively. The dollar increase in research
and development expenses from 1995 to 1996 is attributable to an increase in
research and development personnel and related expenses. Research and
development expenses have decreased as a percentage of total revenues in each
period from 1994 to 1996 as the Company's total revenues have increased at a
faster rate.
General and Administrative. General and administrative expenses include
personnel costs for administration, finance, human resources and general
management in addition to legal and accounting expenses and other professional
services. General and administrative expenses were $1.8 million, $1.0 million
and $1.7 million in 1994, 1995 and 1996, respectively, representing 30%, 10%
and 6% of total revenues for each year, respectively. The dollar decrease in
general and administrative expenses from 1994 to 1995 was primarily due to
increased economies of scale and improved operational efficiencies resulting
principally from better receivables collections and the reallocation of
certain corporate overhead expenses to other operating departments within the
Company. The dollar increase from 1995 to 1996 was due primarily to expansion
of the Company's
19
<PAGE>
general and administrative staff and associated expenses necessary to manage
and support the Company's growth, including personnel expansion and increased
expenses associated with becoming a publicly traded company. General and
administrative expenses have decreased as a percentage of total revenues from
1994 to 1996 primarily due to increasing revenues over the relevant periods
and economies of scale.
Provision for Income Taxes. Provision for income taxes in 1996 represents
federal alternative minimum and state minimum taxes. There was no income tax
provision from 1994 to 1995 due to operating losses in those periods. As of
December 31, 1996, the Company, had for federal and state purposes, net
operating loss carry-forwards of approximately $9.9 million and $4.0 million,
respectively, and research and development credits of $270,000 and $220,000,
respectively. These federal and state carryforwards and research and
development credits expire in the years 2007 through 2010 and 1997 through
2000, respectively. Utilization of the net operating losses and credits may be
subject to a substantial annual limitation due to ownership change limitations
provided by the Internal Revenue Code of 1986 and similar state provisions.
The annual limitation may result in the expiration of the net operating losses
and credits before utilization. See Note 10 of Notes to Financial Statements.
IMPACT OF INFLATION
The effect of inflation on the Company's financial position has not been
significant to date.
LIQUIDITY AND CAPITAL RESOURCES
From inception until its initial public offering in October 1996, which
resulted in net proceeds of $41.9 million, the Company financed its operations
and met its capital expenditure requirements primarily through private
placements of equity securities, capital lease lines and bank borrowings.
The Company's operating activities used cash of $4.2 million, $4.1 million
and $4.6 million in 1994, 1995 and 1996, respectively. Accounts receivable
increased $8.6 million from 1995 to 1996 due primarily to increased sales
volume. Accrued compensation and other liabilities increased from $2.2 million
from 1995 to 1996 due primarily to increases in bonuses, commissions and other
compensation-related expenses attributable to an increase in headcount and
revenues.
Investing activities consisted primarily of purchases of property and
equipment. The Company used approximately $427,000, $933,000 and $2.6 million,
in 1994, 1995 and 1996, respectively for personal computers and for furniture
and other office equipment. The Company expects that the rate of purchases of
property and equipment will increase in the future as a function of
replacement cycles and as the Company's employee base grows. As of December
31, 1996, the Company's principal commitments consisted primarily of lease
lines of credit for equipment and software purchases and leases for office
facilities. See Notes 5 and 6 of Notes to Financial Statements.
Financing activities provided net cash of $2.8 million, $5.4 million and
$43.2 million in 1994, 1995 and 1996, respectively, due to $2.5 million, $6.0
million and $1.5 million in net proceeds from the issuance of convertible
Preferred Stock in 1994, 1995 and 1996, respectively, and $41.9 million in net
proceeds from the issuance of Common Stock in November 1996 in connection with
the Company's initial public offering. Borrowings under the bank line of
credit contributed $950,000 and $2.5 million in cash in 1994 and 1996,
respectively, but were offset by repayment of the same credit line in amounts
of $350,000, $600,000 and $2.5 million in 1994, 1995 and 1996, respectively.
The Company received $456,000 in 1995 and $2.0 million in 1996 from equipment
lease lines, which were offset by $224,000, $431,000 and $1.6 million in 1994,
1995 and 1996, respectively, due to the retirement of lease obligations.
At December 31, 1996, the Company had $39.0 million in cash and cash
equivalents and $44.4 million of working capital. The Company also has
available a $3.0 million bank line of credit, which is collateralized by
20
<PAGE>
the assets of the Company and requires that certain financial covenants be
maintained. The line of credit also contains a restrictive covenant that
limits the Company's ability to pay cash dividends or make stock repurchases
in excess of $350,000 without the prior written consent of the lender. The
line of credit expires on July 14, 1997 and bears interest at the lender's
prime rate. As of December 31, 1996, there were no amounts outstanding under
the line of credit agreement.
The Company believes that existing cash balances, cash available under its
line of credit and cash from operations will be sufficient to meet its working
capital and capital expenditure requirements for at least the next 12 months.
Although operating activities may provide cash in certain periods, to the
extent that the Company experiences growth in the future, the Company
anticipates that its operating and investing activities may use cash.
Consequently, any such growth may require the Company to obtain additional
equity or debt financing. There can be no assurances that any necessary
additional financing will be available to the Company on commercially
reasonable terms, if at all.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This report, including this Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking
statements and other prospective information relating to future events. These
forward-looking statements and other information are subject to certain risks
and uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including the following:
Although the Company has experienced significant growth in revenues during
the past three years, the Company does not believe that prior growth rates are
sustainable or indicative of future operating results. Although the Company
achieved limited profitability during the last three quarters of 1996 and for
the full year, there can be no assurance that the Company will be able to
sustain profitability on a quarterly or annual basis.
The Company's quarterly and annual operating results have varied
significantly in the past and may vary significantly in the future, depending
on a number of factors, many of which are beyond the Company's control and
many of which could have a material adverse effect on the Company's revenues
and profitability during any particular quarterly or annual period. These
factors include, among others, the ability of the Company to develop,
introduce and market new and enhanced versions of its software on a timely
basis, the demand for the Company's software, the size, timing and contractual
terms of significant orders, the timing and significance of software product
enhancements and new software product announcements by the Company or its
competitors, budgeting cycles of the Company's potential customers, customer
order deferrals in anticipation of enhancements of new software products, the
cancellations of licenses or maintenance agreements, software defects and
other product quality problems, and general domestic and international
economic and political trends. Moreover, the timing of revenue recognition can
be affected by many factors, including the timing of contract execution and
delivery and customer acceptance, if applicable. In part because of lengthy
sales and implementation cycles, the timing between initial customer contact
and fulfillment of criteria for revenue recognition can be lengthy and
unpredictable, and revenues in any given period may be adversely affected as a
result of such unpredictability. The Company has limited backlog. As a result,
software revenues in any quarter are substantially dependent on orders booked
and shipped in that quarter. The Company has also experienced seasonality in
its business, in part due to customer buying patterns. In recent years, the
Company has generally had stronger demand for its software products in the
quarters ending in June and December and weaker demand in the quarters ending
in March and September.
The Company incorporates into its products certain software and other
technologies licensed to it by third-party developers. Among the principal
developers of these licensed technologies are Business Objects, Inc., which
licenses an On-Line Analytical Processing ("OLAP") tool that enables the
analysis of sales and customer data at both the server and client sites of a
user's network; Centura Corporation, which licenses a SQL-based laptop
database that is used principally in the Company's SalesTrak product; and
First Floor Software, Inc., which licenses an intelligent agent that monitors
changes in sales and customer data accessed through the World Wide Web. The
Company's license agreements with Business Objects, Centura and First Floor
expire in March
21
<PAGE>
2000, December 1997 and June 1997, respectively, and there is no assurance
that any of these agreements will be renewed following expiration. Because the
Company's products incorporate software developed and maintained by third
parties, the Company is to a certain extent dependent upon such third parties'
abilities to maintain or enhance their current products, to develop new
products on a timely and cost-effective basis and to respond to emerging
industry standards and other technological changes. In the event that the
Company's agreements with its third-party vendors should fail to be renewed or
the products licensed from such vendors should fail to address the
requirements of the Company's software products, the Company would be required
to find alternative software products or technologies of equal performance or
functionality. There can be no assurance that the Company would be able to
replace such functionality provided by the third-party software currently
offered in conjunction with the Company's products in the event that such
software becomes obsolete or incompatible with future versions of the
Company's products or is otherwise not adequately maintained or updated. The
absence of or any significant delay in the replacement of that functionality
could have a material adverse effect on the Company's business, operating
results and financial condition.
The Company believes that its continued growth and profitability will
require expanded distribution for its products, particularly internationally.
In North America, the Company has sold its products primarily through its
direct sales organization and has supported its customers with its technical
and customer support staff. International sales have been insignificant to
date, but the Company intends to expands its international operations and
enter additional international markets through partnerships with international
distributors or, in selected countries, through direct sales. Continued
expansion, domestically and internationally, will require significant
investments of management attention and financial resources, which could
adversely affect the Company's operating margins and earnings, if any. The
Company's growth to date has already challenged the Company's personnel and
management resources. Internationally, the Company's ability to achieve
revenue growth in the future will depend in part on its ability to establish
productive relationships with distributors in Europe and the Pacific Rim. The
competition for qualified international distributors is intense, however. The
Company has in the past experienced difficulty in obtaining qualified
distributors, and there can be no assurance that the Company can attract and
retain qualified distributors. Both domestically and in selected foreign
countries, the Company continues to invest significant resources to expand its
direct sales force. The Company believes the complexity of its products and
the large-scale deployments anticipated by customers will also require a
number of highly trained support personnel. Competition for qualified sales
and consulting employees is intense, both domestically and internationally,
and the Company has at times experienced difficulty in recruiting qualified
personnel. Any failure by the Company to expand its direct sales force or
other distribution channels, or to expand its technical and customer support
staff, could materially and adversely affect the Company's business, operating
results and financial condition. There can be no assurance that any expansion
of the Company's direct or indirect distribution channels will result in an
increase in revenues or profitability. In addition, international expansion of
the Company's business poses a number of risks which could have a material
adverse effect on the Company's operating results in the event that revenues
from international operations comprise a greater percentage of the Company's
total revenues in the future. These risks include changes in foreign currency
exchange rates, longer payment cycles, greater difficulty in accounts
receivable collection, difficulties in managing and staffing international
operations, seasonal fluctuations in business activities in various parts of
the world, including the slow-down in European business activity during the
Company's third fiscal quarter, cultural differences in the conduct of
business, tariffs, duties, price controls or other restrictions on foreign
currencies, trade barriers and other factors.
As a result of the foregoing as well as other factors, the Company's
operating results and stock price may be subject to significant volatility,
particularly on a quarterly basis. The market price of the Company's Common
Stock has fluctuated significantly since its initial public offering in
October 1996 and could be subject to significant fluctuations in the future
based upon a number of factors, including any shortfall in the Company's
revenues or net income from revenues or net income expected by securities
analysts, announcements of new products by the Company or its competitors,
quarterly fluctuations in the Company's financial results or the financial
results of other software companies, including direct competitors of the
Company, changes in analysts' estimates of the Company's financial performance
or the financial performance of competitors or the financial
22
<PAGE>
performance of software companies in general, general conditions in the
software industry, changes in prices for the Company's products or
competitors' products, changes in revenue growth rates for the Company or its
competitors, as well as other events or factors. In addition, the stock market
has from time to time experienced extreme price and volume fluctuations, which
have particularly affected the market price for the securities of many
technology companies and which have often been unrelated to the operating
performance of the specific companies. Such broad market fluctuations may
adversely affect the market price of the Company's Common Stock.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth in the Company's
Financial Statements and Notes thereto beginning at page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
23
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item concerning the Company's directors is
incorporated by reference from the section captioned "Election of Directors"
contained in the Company's Proxy Statement related to the 1997 Annual Meeting
of Stockholders to be held on May 30, 1997, which will be filed by the Company
with the Securities and Exchange Commission within 120 days of the end of the
Company's fiscal year pursuant to General Instruction G(3) of Form 10-K (the
"Proxy Statement"). The information required by this item concerning executive
officers of the Registrant is set forth in Part I of this report. The
information required by this item concerning compliance with Section 16(a) of
the Securities Exchange Act of 1934 is incorporated by reference from the
section of the Proxy Statement captioned "Section 16(a) Beneficial Ownership
Reporting Compliance."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
information under the section captioned "Executive Compensation" contained in
the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
information under the section captioned "Security Ownership of Management and
Certain Beneficial Owners" contained in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
information under the sections captioned "Compensation Committee Interlocks
and Insider Participation" and "Certain Transactions" contained in the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. FINANCIAL STATEMENTS
The following statements are filed as part of this Report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants....................................... F-2
Balance Sheets.......................................................... F-3
Statements of Operations................................................ F-4
Statements of Stockholders' Equity (Deficit)............................ F-5
Statements of Cash Flows................................................ F-6
Notes to Financial Statements........................................... F-7
</TABLE>
(a)2. FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
II--Valuation and Qualifying Accounts................................... S-1
Independent Accountant's Report on Schedule............................. S-2
</TABLE>
24
<PAGE>
(a)3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT TITLE
----------- -------------
<C> <S>
3.1 (a) Amended and Restated Certificate of Incorporation filed with
the Secretary of State of Delaware on November 1, 1996.
3.2 (b) Bylaws of the Registrant, as amended to date.
4.1 (b) Specimen of Common Stock Certificate.
10.1 (b) Form of Indemnification Agreement between the Registrant and
each of its officers and directors.
10.2 (a) 1995 Stock Plan and form of Stock Option Agreement
thereunder.
10.3 (b) 1996 Director Option Plan and form of Director Stock Option
Agreement thereunder.
10.4 (b) 1996 Employee Stock Purchase Plan and forms of agreement
thereunder.
10.5 (b) Lease dated March 5, 1996 between the Registrant and
Cooperage-Rose Properties II.
10.6 (b) Letter agreement dated December 22, 1994 between the
Registrant and Mary E. Coleman, as amended.
10.7 (b) Letter Agreement dated July 8, 1996 between the Registrant
and Christopher L. Dier.
10.8 (c) OEM Software License Agreement, amended as of April 3, 1996,
between the Registrant and Gupta Corporation.
10.9 (b) Line of Credit Agreement dated July 15, 1996, modifying the
Business Loan Agreement dated July 13, 1993, between the
Registrant and Silicon Valley Bank.
10.10 (a) Loan Modification Agreement dated March 3, 1997 by and
between the Registrant and Silicon Valley Bank.
10.11 (b) Loan Modification Agreement dated September 25, 1996 by and
between Registrant and Silicon Valley Bank.
10.12 (b) Vertical Application Reseller Agreement, dated as of March
22, 1996, between the Registrant and Business Objects, Inc.
10.13 (b) Software Development License and Distribution Agreement,
dated as of June 3, 1996, between the Registrant and First
Floor Software, Inc.
10.14 (a) Lease dated October 3, 1996 between the Registrant and
Orbitek Engineering, Inc.
10.15 (a) Lease dated January 14, 1997 between the Registrant and
Mentor Graphics, Inc.
11.1 (a) Calculation of pro forma net loss per share.
22.1 (a) Subsidiaries of the Registrant.
27.1 (a) Financial Data Schedule.
</TABLE>
- ------------------
(a)Filed herewith.
(b) Incorporated by reference to the exhibit bearing the same number filed with
the Registrant's Registration Statement on Form SB-2 (Registration No. 333-
11947), which the Securities and Exchange Commission declared effective on
October 28, 1996.
(c) Incorporated by reference to the exhibit bearing the same number filed with
the Registrant's Registration Statement on Form SB-2 (Registration No. 33-
11947), which the Securities and Exchange Commission declared effective on
October 28, 1996. The Registrant has received confidential treatment with
respect to certain portions of this exhibit. Such portions have been
omitted from this exhibit and have been filed separately with the
Securities and Exchange Commission.
(b) REPORTS ON FORM 8-K
The Registrant filed no Current Reports on Form 8-K during the year ended
December 31, 1996.
(c) EXHIBITS
See Item 14(a)(3) above.
(d) FINANCIAL STATEMENT SCHEDULES
See Item 14(a)(2) above.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Santa
Clara, California this 25th day of March, 1997.
AURUM SOFTWARE, INC.
By /s/ Mary E. Coleman
---------------------------------
Mary E. Coleman
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS MARY E. COLEMAN AND CHRISTOPHER L. DIER
AND EACH OF THEM ACTING INDIVIDUALLY, AS HIS OR HER ATTORNEY-IN-FACT, EACH
WITH FULL POWER OF SUBSTITUTION, FOR HIM OR HER IN ANY AND ALL CAPACITIES, TO
SIGN ANY AND ALL AMENDMENTS TO THIS REPORT ON FORM 10-K, AND TO FILE THE SAME,
WITH ALL EXHIBITS THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH
THE SECURITIES AND EXCHANGE COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT ON FORM 10-K HAS BEEN SIGNED ON BEHALF OF THE REGISTRANT BY THE
FOLLOWING PERSONS AND IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mary E. Coleman President, Chief Executive March 25, 1997
____________________________________ Officer, and Director
(Mary E. Coleman) (Principal Executive
Officer)
/s/ Christopher L. Dier Vice President, Finance, March 25, 1997
____________________________________ Chief Financial Officer
(Christopher L. Dier) (Principal Financial and
Accounting Officer)
/s/ David D. Buchanan Executive Vice President March 25, 1997
____________________________________ and Director
(David D. Buchanan)
/s/ Oliver D. Curme Director March 25, 1997
____________________________________
(Oliver D. Curme)
/s/ Mark J. Leslie Director March 25, 1997
____________________________________
(Mark J. Leslie)
/s/ Robert J. Loarie Director March 25, 1997
____________________________________
(Robert J. Loarie)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Obuch Director March 25, 1997
____________________________________
(Robert M. Obuch)
/s/ Jeffrey T. Webber Director March 25, 1997
____________________________________
(Jeffrey T. Webber)
/s/ Charles C. Wu Director March 25, 1997
____________________________________
</TABLE> (Charles C. Wu)
27
<PAGE>
AURUM SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Equity (Deficit)............................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Aurum Software, Inc.
Santa Clara, California
We have audited the accompanying balance sheets of Aurum Software, Inc. as
of December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 1996. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aurum Software, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
San Jose, California
January 28, 1997, except for
Note 12 as to which the
date is March 18, 1997
F-2
<PAGE>
AURUM SOFTWARE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 38,955 $ 2,795
Accounts receivable, net of allowance for doubtful
accounts of $317
and $340 at December 31, 1996 and 1995, respectively..... 13,329 4,702
Prepaid expenses and other current assets................. 893 438
-------- --------
Total current assets.................................... 53,177 7,935
Property and equipment, net................................. 2,899 1,559
Other assets................................................ 205 301
-------- --------
Total assets............................................ $ 56,281 $ 9,795
======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable............................................. $ 186 $ 217
Current portion of capital lease obligations.............. 464 304
Accounts payable.......................................... 1,303 1,191
Accrued compensation...................................... 2,285 898
Other accrued liabilities................................. 1,584 817
Deferred revenue.......................................... 2,999 2,303
-------- --------
Total current liabilities............................... 8,821 5,730
Notes payable, less current portion......................... 37 121
Capital lease obligations, less current portion............. 414 116
-------- --------
Total liabilities....................................... 9,272 5,967
-------- --------
Commitments and contingencies (Note 6).
Mandatorily redeemable convertible preferred stock, no par
value:
Authorized: 24,000,000 shares
Issued and outstanding: 21,901,892 shares in 1995....... 17,356
(Liquidation value: $17,504 in 1995)
--------
Stockholders' equity (deficit):
Preferred stock; $0.001 par value:
Authorized: 5,000,000 shares;
Issued and Outstanding: None............................
Common stock; $0.001 par value in 1996 and no par value in
1995:
Authorized: 25,000,000 shares;
Issued and outstanding: 11,568,146 shares in 1996 and
2,526,159 shares in 1995............................... 12 236
Additional paid-in capital.............................. 61,561
Notes receivable from stockholders........................ (1,117) (38)
Accumulated deficit....................................... (13,447) (13,726)
-------- --------
Total stockholders' equity (deficit).................... 47,009 (13,528)
-------- --------
Total liabilities, mandatorily redeemable convertible
preferred stock and stockholders' equity (deficit)... $ 56,281 $ 9,795
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AURUM SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues:
Licenses.......................................... $16,430 $ 5,928 $ 3,356
Services.......................................... 11,154 4,547 2,556
------- ------- -------
Total revenues.................................. 27,584 10,475 5,912
------- ------- -------
Cost of revenues:
Licenses.......................................... 1,368 979 365
Services.......................................... 9,594 3,919 2,586
------- ------- -------
Total cost of revenues.......................... 10,962 4,898 2,951
------- ------- -------
Gross profit........................................ 16,622 5,577 2,961
------- ------- -------
Operating expenses:
Sales and marketing............................... 11,171 6,626 3,240
Research and development.......................... 3,707 2,286 2,246
General and administrative........................ 1,662 1,023 1,780
------- ------- -------
Total operating expenses........................ 16,540 9,935 7,266
------- ------- -------
Income (loss) from operations....................... 82 (4,358) (4,305)
Other income, net................................... 435 63 5
Interest expense.................................... (213) (157) (88)
------- ------- -------
Income (loss) before provision for income taxes. 304 (4,452) (4,388)
Provision for income taxes.......................... (25)
------- ------- -------
Net income (loss)............................... $ 279 $(4,452) $(4,388)
======= ======= =======
Net income (loss) per share......................... $ 0.03 $ (1.44) $ (2.18)
======= ======= =======
Shares used in per share calculation................ 9,948 3,092 2,010
======= ======= =======
Pro forma net loss per share........................ $ (0.66)
=======
Pro forma shares used in per share calculation...... 6,712
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AURUM SOFTWARE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE STOCKHOLDERS'
--------------------- -------------------- PAID-IN FROM ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS DEFICIT (DEFICIT)
----------- -------- ---------- -------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1993................... 946,919 $ 228 $ (48) $ (4,886) $ (4,706)
Issuance of common
stock under stock
purchase plan......... 2,688 4 4
Issuance of common
stock under incentive
stock option plan..... 297
Repurchase of common
stock................. (118,766) (37) (37)
Payments and
cancellation of notes
receivable from
stockholders.......... 47 47
Net loss............... (4,388) (4,388)
----------- -------- ---------- -------- ------- ------- -------- --------
Balances, December 31,
1994................... 831,138 195 (1) (9,274) (9,080)
Exercise of warrants by
preferred investors... 1,382,280 5 5
Issuance of common
stock under incentive
stock options plan for
cash and notes
receivable............ 317,954 38 (37) 1
Repurchase of common
stock................. (5,213) (2) (2)
Net loss............... (4,452) (4,452)
----------- -------- ---------- -------- ------- ------- -------- --------
Balances, December 31,
1995 2,526,159 236 (38) (13,726) (13,528)
Repurchase of common
stock................. (54,738) (118) (118)
Issuance of common
stock under incentive
stock option plan for
cash, notes receivable
and services.......... 1,227,870 1,121 (1,079) 42
Issuance of common
stock under stock
purchase clause....... 12,502 75 75
Reclass due to
elimination of
mandatory redemption
provisions related to
convertible preferred
stock................. 21,905,398 $ 18,356 18,356
Conversion of
convertible preferred
stock................. (21,905,398) (18,356) 4,958,853 18,356
Issuance of common
stock................. 2,897,500 41,903 41,903
Reincorporation into
Delaware corporation.. (61,561) $61,561
Net income............. 279 279
----------- -------- ---------- -------- ------- ------- -------- --------
Balances, December 31,
1996................... 11,568,146 $ 12 $61,561 $(1,117) $(13,447) $ 47,009
=========== ======== ========== ======== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AURUM SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ 279 $(4,452) $(4,388)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization.................... 1,243 589 518
Provision for doubtful accounts.................. 125 87
Write-off of intangibles......................... 220
Changes in operating assets and liabilities:
Accounts receivable............................ (8,627) (3,453) (1,050)
Prepaid expenses and other current assets...... (451) (10) (52)
Other assets................................... (29) (130) (4)
Accounts payable............................... 112 692 77
Accrued compensation and other accrued
liabilities................................... 2,162 795 236
Deferred revenue............................... 696 1,475 380
------- ------- -------
Net cash used in operating activities.......... (4,615) (4,149) (4,196)
------- ------- -------
Cash flows from investing activities:
Sales of short-term investments.................... 2,889
Acquisition of property and equipment.............. (2,583) (933) (427)
Decrease (increase) in restricted cash............. 128 (44) (104)
------- ------- -------
Net cash provided by (used in) investing
activities.................................... (2,455) (977) 2,358
------- ------- -------
Cash flows from financing activities:
Proceeds from borrowings under line of credit...... 2,500 950
Repayments of borrowings under line of credit...... (2,500) (600) (350)
Proceeds from issuance of mandatorily redeemable
convertible preferred stock, net of issuance
costs............................................. 1,486 5,975 2,456
Proceeds from issuance of common stock............. 42,005 6
Repurchase of mandatorily redeemable convertible
preferred and common stock........................ (604) (2)
Proceeds from repayment of notes receivable from
stockholders...................................... 10
Repayments of note payables and capital lease
obligations....................................... (1,641) (431) (224)
Proceeds from notes payable and sales and
leasebacks of property and equipment.............. 1,984 456
------- ------- -------
Net cash provided by financing activities...... 43,230 5,404 2,842
------- ------- -------
Net increase in cash and cash equivalents........... 36,160 278 1,004
Cash and cash equivalents at beginning of year...... 2,795 2,517 1,513
------- ------- -------
Cash and cash equivalents at end of year............ $38,955 $ 2,795 $ 2,517
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for:
Interest......................................... $ 212 $ 157 $ 88
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Issuance of notes receivable from stockholders in
exchange for common stock......................... $ 1,079 $ 37
Cancellation of note receivable from stockholder... $ 37
Property and equipment acquired under capital
lease obligations................................. $ 58 $ 394
Property and equipment purchased included in
accounts payable.................................. $ 434 $ 15
Common stock issued in consideration for services
performed......................................... $ 15 $ 4
Issuance of mandatorily redeemable convertible
preferred stock in exchange for technology........ $ 79
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1.Business of the Company:
Aurum Software, Inc. (the "Company") is a provider of enterprise-wide sales
and marketing information software. The Company develops, markets and
supports the Aurum Customer Enterprise suite of applications which helps
automate the field sales, telemarketing, telesales and customer support
functions of a business. The Company's products are based on advanced
client/server and Internet/Intranet technologies and are designed to
address the sales and marketing requirements of businesses ranging from
medium-sized enterprises to large multinational corporations. The Company
sells its products in North America primarily through its direct sales
force and sells its products outside of North America primarily through key
distribution organizations and, in selected countries, through direct sales
personnel. In addition, the Company provides an array of services to its
customers, including business consulting, requirements definition,
installation, consulting, training and customer support. The Company is
headquartered in Santa Clara, California, with sales offices nationwide.
2.Summary of Significant Accounting Policies:
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION:
Revenues consist of license revenues and service revenues. License
revenues are recognized upon execution of a license agreement and delivery
of software if there are no significant post-delivery vendor obligations
and if collection of the receivable is deemed probable. If significant
post-delivery obligations exist or if a product is subject to customer
acceptance, revenues are deferred until no significant obligations remain
or acceptance has occurred. Upon recognition of license revenues, the
Company accrues for the cost of warranty and insignificant vendor
obligations. Revenues from services consist of fees from consulting
services, including implementation and customization of licensed software,
training and maintenance support. Consulting and training revenues are
generally recognized as services are performed, except for revenues from
certain fixed price contracts or milestone deliverables, which are
recognized on a percentage-of-completion basis or upon milestone delivery.
Maintenance support revenues are recognized ratably over the term of the
support period, which is typically one year.
ENGINEERING AND SUPPORT:
Costs related to the conceptual formulation and design of software
products are charged to operations as incurred. Software development costs
are capitalized beginning when a product's technological feasibility has
been established and ending when a product is available for general release
to customers. The Company has not capitalized any software development
costs since such costs have not been significant.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the time of purchase to be
cash equivalents.
F-7
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable
and other accrued liabilities approximates fair value due to their short
maturities. Based on borrowing rates currently available to the Company for
loans with similar terms, the carrying value of its notes payable, capital
lease obligations and borrowings under the Company's line of credit
approximates fair value.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is provided on a straight-line basis over
the estimated useful lives of the assets which is generally three years.
Amortization of equipment under capital leases is computed using the
straight-line method over the shorter of the remaining lease term or the
estimated useful life of the related asset.
STOCK BASED COMPENSATION:
The Company accounts for stock based compensation using the intrinsic
value method prescribed by APB Opinion No. 25, "Accounting for Stock Issued
to Employees." Accordingly, compensation cost for stock options is measured
as the excess, if any, of the quoted market price of the Company's stock at
the date of the grant over the amount an employee must pay to acquire the
stock. The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
NET INCOME (LOSS) PER SHARE:
Net income (loss) per share, on a historical basis, is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Dilutive common equivalent shares consist of
mandatorily redeemable convertible preferred stock and common stock
issuable upon exercise of stock options (using the treasury stock method).
Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletins, common and common equivalent shares issued at prices below the
public offering price during the 12 months immediately preceding the
offering date have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method and
the anticipated initial public offering price). The 1995 pro forma net loss
per share presentation assumes the common shares issuable upon conversion
of the outstanding convertible preferred stock have been outstanding during
such period.
INCOME TAXES:
The Company accounts for income taxes under the liability method. Under
the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. The Company
is required to adjust its deferred tax liabilities in the period when tax
rates or the provisions of the income tax laws change. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
RECENT PRONOUNCEMENTS:
During February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" (SFAS 128), which specifies the
computation, presentation and disclosure
F-8
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
requirements for Earnings Per Share. SFAS 128 will become effective for the
Company's 1997 fiscal year. The impact of adopting SFAS 128 on the
Company's financial statements has not yet been determined.
3.Business Risks and Credit Concentration
A majority of the Company's revenues have been attributed to SalesTrak,
which is typically the first of the Company's software products to be
deployed with the greatest number of users and which often serves as a
foundation for other applications. Any factor adversely affecting the
pricing of or demand for the SalesTrak product could have a material
adverse affect on the Company's business, financial condition or results of
operations.
The Company incorporates into its products certain software and other
technologies licensed to it by third-party developers. In the event that
products licensed from the third-party vendors should fail to address the
requirements of the Company's software products, the Company would be
required to find alternative software products or technologies of equal
performance or functionality. The absence of or any significant delay in
the replacement of that functionality could have a material adverse affect
on the Company's business, financial condition, or results of operations.
As of December 31, 1996 and 1995, the Company's cash and cash equivalents
were deposited with principally three financial institutions in the form of
demand deposit, commercial paper and money market accounts.
The Company markets and sells its products to a broad geographic and
demographic base of customers and generally does not require collateral. At
December 31, 1996, one customer accounted for 10% of accounts receivable.
At December 31, 1995, two customers accounted for 16.9% and 12.5% of
accounts receivable.
4.Property and Equipment
Property and equipment, consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Computer equipment......................................... $ 5,242 $ 2,750
Furniture and fixtures..................................... 291 219
Leasehold improvements..................................... 51 32
------- -------
5,584 3,001
Less accumulated depreciation and amortization............. (2,685) (1,442)
------- -------
$ 2,899 $ 1,559
======= =======
</TABLE>
At December 31, 1996 and 1995, computer equipment in the amount of
$2,385,000 and $1,114,000, respectively, with $1,484,000 and $687,000,
respectively, of accumulated depreciation were capitalized under equipment
lease arrangements. These assets are pledged as collateral under the lease
arrangements.
5.Notes Payable, Capital Lease Obligations and Line of Credit:
NOTES PAYABLE:
The Company has outstanding a note payable with a leasing company which
bears interest at 10% and expires on February 15, 1998, at which time the
remaining balance is due. The note is collateralized by an irrevocable
letter of credit. At December 31, 1996 and 1995, $42,000 and $75,000,
respectively, were outstanding under this note.
F-9
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In addition, the Company has outstanding two notes payable which bear
interest at 15% and are due on March 15, 1998 and July 16, 1997,
respectively. At December 31, 1996 and 1995, $181,000 and $263,000,
respectively, were outstanding under these notes.
The following table summarizes the scheduled maturities of notes payable
(in thousands):
<TABLE>
<S> <C>
1997.................................................................. $ 205
1998.................................................................. 38
-----
243
Less amount representing interest..................................... 20
-----
Present value of future minimum payments.............................. 223
Less current portion.................................................. (186)
-----
Long term portion of notes payable.................................... $ 37
=====
CAPITAL LEASE OBLIGATIONS:
</TABLE>
The Company leases equipment under capital lease agreements. Future
minimum lease payments on these capital lease obligations are as follows
(in thousands):
<TABLE>
<S> <C>
1997.................................................................. $ 535
1998.................................................................. 363
1999.................................................................. 82
-----
Minimum lease payments................................................ 980
Less amount representing interest..................................... (102)
-----
Present value of minimum lease payments............................... 878
Less current portion.................................................. (464)
-----
Long-term portion of capital leases................................... $ 414
=====
</TABLE>
During fiscal year 1996 and 1995, the Company sold certain equipment at
cost less accumulated depreciation of $961,000 and $132,000, respectively,
and leased back such equipment. No gain or loss was recognized on the sale.
LINE OF CREDIT:
At December 31, 1996, the Company had a line of credit agreement with a
bank which provides the Company the ability to borrow a maximum of $3.0
million. The line of credit which is collateralized by the assets of the
Company matures on July 14, 1997 and requires the Company to maintain
certain financial covenants, including among others, specified levels of
net worth, annual profitability and financial ratios. The line of credit
agreement also contains a restrictive covenant which limits the Company's
ability to pay cash dividends or make stock repurchases without the bank's
consent. Borrowings under the line of credit bear interest at a rate equal
to one percent above the lender's prime rate. At December 31, 1996, the
Company did not have any outstanding borrowings under the line of credit.
In addition, the Company entered into a Loan Modification Agreement in
March 1997. See Note 12 of Notes to Financial Statements.
6.Commitments and Contingencies:
OPERATING LEASES:
The Company leases its facilities under noncancelable operating leases
and subleases which expire in 1997, 1998 and 1999.
F-10
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future annual minimum lease payments under the lease agreements at
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997.................................................................. $380
1998.................................................................. 285
1999.................................................................. 202
----
$867
====
</TABLE>
Rent expense for 1996, 1995 and 1994, amounted to $416,000, $237,000 and
$315,000, respectively.
In January 1997, the Company entered into a lease agreement commencing on
June 1, 1997 and terminating on February 28, 2003 for a 38,288 square foot
facility. Future minimum lease payments under the lease agreement are
$437,000, $1.0 million, $1.1 million, $1.1 million, $1.1 million and $1.5
million in fiscal 1997, 1998, 1999, 2000, 2001 and thereafter,
respectively. The Company expects to move its principal administrative,
sales, marketing and support functions to the new headquarters location in
July 1997.
CONTINGENCIES:
The Company is engaged in certain legal and administrative proceedings
incidental to its normal business activities. While it is not possible to
determine the ultimate outcome of these actions at this time, management
believes that any liabilities resulting from such proceedings, or claims
which are pending or known to be threatened, will not have a material
adverse effect on the Company's financial position or results of
operations.
7.Mandatorily Redeemable Convertible Preferred Stock:
In September 1996, the mandatory redemption provisions related to
convertible preferred stock were eliminated. In connection with the
Company's initial public offering (Note 8), all outstanding convertible
preferred stock was converted into shares of common stock based on the
applicable conversion rate.
8.Stockholders' Equity (Deficit):
INITIAL PUBLIC OFFERING AND REINCORPORATION:
The Company reincorporated from California into Delaware effective in
October 1996. In connection with the reincorporation, the Company's
outstanding common stock was exchanged in the ratio of four shares of the
California corporation common stock for one share of the Delaware
corporation common stock. All references to number of shares and to per
share information in the financial statements have been adjusted to reflect
the exchange ratio on a retroactive basis.
In November 1996, the Company issued 2,897,500 shares of its common stock
in an initial public offering in which an additional 150,000 shares of
common stock were sold by existing stockholders.
COMMON STOCK:
At December 31, 1996, 207 shares of common stock issued under the
Company's 1992 Restricted Stock Purchase Plan were subject to repurchase by
the Company.
F-11
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
STOCK OPTION PLANS:
1995 STOCK OPTION PLAN
The Board of Directors has reserved 2,777,590 shares of common stock as
of December 31, 1996 under its 1995 Stock Option Plan (the "1995 Plan") for
issuance to employees, consultants and directors of the Company.
The 1995 Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options
to employees (including officers and employee directors) and consultants of
the Company. The 1995 Plan is administered by the Board of Directors or by
a committee appointed by the Board which identifies optionees and
determines the terms of options granted, including the exercise price,
number of shares subject to the option and the exercisability thereof.
The terms of options granted under the 1995 Plan generally may not exceed
ten years. The term of all incentive stock options granted to an optionee
who, at the time of grant, owns stock representing more than 10% of the
voting power of all classes of stock of the Company or a parent or
subsidiary of the Company (a "Ten Percent Stockholder"), may not exceed
five years, however. Generally, options granted under the 1995 Plan vest
starting one year after the date of grant, with 25% of the shares subject
to the option vesting at that time and an additional 1/48th of such shares
vesting each month thereafter. Holders of options granted under the 1995
Plan prior to October 29, 1996 may exercise their options prior to complete
vesting of shares, subject to such holder's entering a restricted stock
purchase agreement granting the Company an option to repurchase, in the
event of a termination of the optionee's employment or consulting
relationship, any unvested shares at a price per share equal to the
original exercise price per share for the option. The 1995 Plan was amended
in October 1996 to eliminate the exercise of unvested options going
forward. The exercise price of incentive stock options granted under the
1995 Plan must be at least equal to the fair market value of the shares on
the date of grant. The exercise price of nonstatutory stock options granted
under the 1995 Plan is determined by the Board of Directors. The exercise
price of any incentive stock option granted to a Ten Percent Stockholder
must equal at least 110% of the fair market value of the Common Stock on
the date of grant. To the extent incentive stock options granted to a
participant, when aggregated with all other incentive stock options granted
to such participant, have an aggregate fair market value in excess of
$100,000 first becoming exercisable in any calendar year, such options
would be treated as nonstatutory stock options.
1996 DIRECTOR OPTION PLAN
In September 1996, the stockholders approved the 1996 Director Option
Plan (the "Director Plan"). A total of 150,000 shares of common stock has
been reserved for issuance under the Director Plan. The option grants under
the Director Plan are automatic and non-discretionary, and the exercise
price of the option is 100% of the fair market value of the common stock on
the grant date. The Director Plan provides for the automatic grant of
options to purchase 18,750 shares of common stock to each non-employee
director of the Company (an "Outside Director") at the first meeting of the
Board of Directors following the annual meeting of stockholders in each
year beginning with the 1997 Annual Meeting of Stockholders, if on such
date, such Outside Director has served on the Board of Directors for at
least six months. The term of such options is ten years. Options granted to
Outside Directors become exercisable at a rate of 1/48th of the shares
subject to such additional options on the monthly anniversary of the date
of grant, subject to the Outside Director's continuous service on the Board
of Directors. The Director Plan will terminate in 2006 unless sooner
terminated by the Board of Directors.
F-12
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Activity under the 1995 Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ---------------------------------------
AVAILABLE NUMBER OF EXERCISE AGGREGATE
FOR GRANT SHARES PRICE PRICE
---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Shares authorized at
inception of
1995 Stock Plan........ 1,208,921
Options granted....... (1,242,782) 1,242,782 $0.12 - $0.32 $ 166,650
Options exercised..... (317,954) $0.12 (38,154)
Options canceled...... 97,441 (97,441) $0.12 (11,693)
---------- ---------- -----------
Balances, December 31,
1995................... 63,580 827,387 $0.12 - $0.32 116,803
Increase in shares
authorized........... 3,110,775
Common stock granted.. (1,149,168) 1,149,168 $0.32 - $35.375 5,938,690
Options exercised..... (1,227,871) $0.12 - $9.00 (1,120,742)
Options cancelled..... 161,878 (161,878) $0.12 - $6.00 (176,364)
Repurchased unvested
shares............... 3,719
---------- ---------- -----------
Balances, December 31,
1996................... 2,190,784 586,806 $0.12 - $35.375 $ 4,758,387
========== ========== ===========
</TABLE>
As of December 31, 1996, 50,531 outstanding options upon exercise would
not be subject to the Company's right of repurchase. In addition, as of
December 31, 1996, 767,810 shares exercised under the Plan are subject to
repurchase.
Had compensation cost for the 1995 Plan been determined based on the fair
value at the grant date for awards in 1996 and 1995 consistent with the
provisions of SFAS No. 123, the Company's net income (loss) and net income
(loss) per share for the years ended December 31, 1996 and 1995 would have
been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Net income (loss)--as reported............................. $ 279 $(4,452)
====== =======
Net loss--pro forma........................................ $ (38) $(4,466)
====== =======
Net income (loss) per share--as reported................... $(0.03) $ (1.44)
====== =======
Net loss per share--pro forma.............................. $(0.01) $ (1.44)
====== =======
</TABLE>
F-13
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes Option pricing model, with the following weighted
average assumptions by subgroup:
<TABLE>
<CAPTION>
GROUP GROUP GROUP
A B C
----- ---------- -----
<S> <C> <C> <C>
Risk-free interest rate............................ 5.76% 5.36%-6.36% 5.71%
Expected life...................................... 2.50 2.75 3.25
Expected dividends................................. 0 0 0
Volatility......................................... 0% 0%-70.1% 70.1%
</TABLE>
The weighted average expected life was calculated based on the vesting
period and the exercise behavior of each subgroup. Group A represents
higher paid employees who exercise prior to the vesting period to take
advantage of tax laws. Group B represents lower paid employees who have
held their stock options, but who are expected to exercise subsequent to
the initial public offering and prior to vesting years two through four.
Group C represents employees who were granted options subsequent to the
initial public offering. The risk-free interest rate was calculated in
accordance with the grant date and expected life calculated for each
subgroup. Volatility was set at zero until the Company's initial filing of
a registration statement at which time volatility was calculated based on
the volatility of selected peers of the Company.
The options outstanding and currently exercisable by exercise price at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPTIONS CURRENTLY
OPTIONS OUTSTANDING EXERCISABLE
-------------------------------- --------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.12-$ 0.12......... 38,750 8.46 $ 0.12 38,015 $ 0.12
$ 0.32-$ 0.32......... 84,119 9.00 $ 0.32 84,119 $ 0.32
$ 1.20-$ 1.20......... 33,750 9.13 $ 1.20 33,750 $ 1.20
$ 6.00-$ 9.00......... 361,138 9.59 $ 6.98 361,138 $ 6.98
$15.00-$16.00......... 13,625 9.82 $15.15 13,625 $15.15
$35.38-$35.38......... 55,424 9.92 $35.38 0 $ 0.00
------- ---- ------ ------- ------
$ 0.12-$35.38......... 586,806 9.44 $ 8.11 530,647 $ 5.27
</TABLE>
1996 EMPLOYEE STOCK PURCHASE PLAN:
In October 1996, the stockholders approved the 1996 Employee Stock
Purchase Plan (the "Purchase Plan"). A total of 300,000 shares are reserved
for issuance under the Purchase Plan. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions, subject to
certain limitations. The price at which stock is purchased under the
Purchase Plan is equal to 85% of the fair market value of the common stock
on the first day of the applicable offering period or the last day of the
applicable offering period, whichever is lower.
9.Employee Benefit Plan:
The Company has a 401(k) Profit Sharing Plan (the Plan), which covers
substantially all employees. Each eligible employee may elect to contribute
to the Plan, through payroll deductions up to 20% of their compensation,
subject to current statutory limits. The Company, at the discretion of the
Board of Directors, may make matching contributions to the Plan, but has
not done so during the years ended December 31, 1996 or 1995.
F-14
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10.Income Taxes:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets are presented below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Depreciation and accrued liabilities....................... $ 1,172 $ 323
Capitalized research and development costs................. 487 1,718
Net operating loss carryforward............................ 3,132 3,024
Research and development credit carryforward............... 522 366
Valuation allowance........................................ (5,313) (5,431)
------- -------
Net deferred tax asset..................................... $ -- $ --
======= =======
</TABLE>
The Company has established a valuation allowance against its deferred
tax assets due to the uncertainty surrounding the realization of such
assets. Management evaluates on a quarterly basis the recoverability of the
deferred tax assets and the level of the valuation allowance. At such time
as it is determined that it is more likely than not that deferred tax
assets are realizable the valuation allowance will be reduced.
The Company's effective tax rate differs from the statutory federal
income tax rate as shown in the following schedule:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Income tax (benefit) provision at statutory
rate...................................... 34 % (34)% (34)%
Net operating loss not benefited........... 34 34
Net operating loss utilized................ (34)%
Alternative minimum tax.................... 8.2 % -- --
------- ------- -------
Effective tax rate......................... 8.2 % -- % -- %
======= ======= =======
</TABLE>
As of December 31, 1996, the Company had approximately $9.9 million and
$4.0 million of net operating loss carryforwards for federal and state
purposes, respectively, and $270,000 and $220,000 of research and
development credits for federal and state purposes, respectively. These
federal and state carryforwards and research and development credits expire
in the years 2007 through 2010, and 1997 through 2000, respectively.
Utilization of the net operating losses and credits is subject to an annual
limitation of $950,000 due to ownership change.
11.Major Customers:
No single customer accounted for 10% or more of the Company's revenues in
fiscal year 1996 and 1994. One customer accounted for 11% of revenues in
fiscal 1995.
12.Subsequent Events:
In March 1997, the Company signed a share purchase agreement (the
"Agreement") with Aurum Software U.K. Limited, a corporation organized
under the laws of England, to acquire all the outstanding capital stock of
Aurum Software U.K. Limited from such company's existing shareholders.
F-15
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Prior to entering into the Agreement, Aurum Software U.K. has acted as a
distributor of the Company's software products in the United Kingdom and
Europe and will continue to do so subsequent to the purchase. The purchase
will be accounted for under the purchase method of accounting.
In addition, the Company entered into a Loan Modification Agreement in
March 1997 with its bank relating to its $3.0 million line of credit which,
in addition to other modifications related to financial covenants and other
financial reporting requirements, reduced the applicable interest rate to
the bank's prime rate.
F-16
<PAGE>
AURUM SOFTWARE, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
BEGINNING OF CHARGES TO BALANCE END
PERIOD EXPENSES DEDUCTIONS OTHER (1) OF PERIOD
------------ ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1996
Allowance for doubtful
accounts............... $340 $ $ 53 $30 $317
Year ended December 31,
1995
Allowance for doubtful
accounts............... $319 $125 $104 $ $340
Year ended December 31,
1994...................
Allowance for doubtful
accounts............... $250 $ 87 18 $ $319
</TABLE>
- --------
(1) Represents collection of accounts previously written off
S-1
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT ON SCHEDULE
Our report on the financial statements of Aurum Software, Inc. is included
on page F-2 of this Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule
listed in the index on page S-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
San Jose, California
January 28, 1997
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT TITLE PAGE
----------- ------------- ------------
<C> <S> <C>
3.1 (a) Amended and Restated Certificate of Incorporation
filed with the Secretary of State of Delaware on
November 1, 1996.
3.2 (b) Bylaws of the Registrant, as amended to date.
4.1 (b) Specimen of Common Stock Certificate.
10.1 (b) Form of Indemnification Agreement between the
Registrant and each of its officers and directors.
10.2 (a) 1995 Stock Plan and form of Stock Option Agreement
thereunder.
10.3 (b) 1996 Director Option Plan and form of Director
Stock Option Agreement thereunder.
10.4 (b) 1996 Employee Stock Purchase Plan and forms of
agreement thereunder.
10.5 (b) Lease dated March 5, 1996 between the Registrant
and Cooperage-Rose Properties II.
10.6 (b) Letter agreement dated December 22, 1994 between
the Registrant and Mary E. Coleman, as amended.
10.7 (b) Letter Agreement dated July 8, 1996 between the
Registrant and Christopher L. Dier.
10.8 (c) OEM Software License Agreement, amended as of April
3, 1996, between the Registrant and Gupta
Corporation.
10.9 (b) Line of Credit Agreement dated July 15, 1996,
modifying the Business Loan Agreement dated July
13, 1993, between the Registrant and Silicon
Valley Bank.
10.10 (a) Loan Modification Agreement dated March 3, 1997 by
and between the Registrant and Silicon Valley
Bank.
10.11 (b) Loan Modification Agreement dated September 25,
1997 by and between Registrant and Silicon Valley
Bank.
10.12 (b) Vertical Application Reseller Agreement, dated as
of March 22, 1996, between the Registrant and
Business Objects, Inc.
10.13 (b) Software Development License and Distribution
Agreement, dated as of June 3, 1996, between the
Registrant and First Floor Software, Inc.
10.14 (a) Lease dated September 30, 1996 between the
Registrant and Orbitek Engineering, Inc.
10.15 (a) Lease dated June 11, 1997 between the Registrant
and Mentor Graphics, Inc.
11.1 (a) Calculation of pro forma net loss per share.
22.1 (a) Subsidiaries of the Registrant.
27.1 (a) Financial Data Schedule.
</TABLE>
- --------
(a)Filed herewith.
(b) Incorporated by reference to the exhibit bearing the same number filed with
the Registrant's Registration Statement on Form SB-2 (Registration No. 333-
11947), which the Securities and Exchange Commission declared effective on
October 28, 1996.
(c) Incorporated by reference to the exhibit bearing the same number filed with
the Registrant's Registration Statement on Form SB-2 (Registration No. 33-
11947), which the Securities and Exchange Commission declared effective on
October 28, 1996. The Registrant has received confidential treatment with
respect to certain portions of this exhibit. Such portions have been
omitted from this exhibit and have been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF AURUM SOFTWARE, INC.
Aurum Software, Inc., a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Aurum Software, Inc. The corporation
was originally incorporated under the same name and the original Certificate of
Incorporation of the corporation was filed with the Secretary of State of the
State of Delaware on July 31, 1996.
B. This Certificate of Incorporation has been duly adopted in accordance
with the provisions of the General Corporation Law of the State of Delaware by
the Board of Directors and the Stockholders of the corporation.
C. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Certificate of Incorporation restates and integrates and
further amends the provisions of the Certificate of Incorporation of this
corporation.
D. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
Article I.
The name of the corporation is Aurum Software, Inc. (the "Company").
Article II.
The address of the Company's registered office in the State of Delaware is
1209 Orange Street, City of Wilmington, County of New Castle, 19801. The name
of its registered agent at such address is The Corporation Trust Company.
<PAGE>
Article III.
The purpose of the Company is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
Article IV.
1. Authorized Capital. The Company is authorized to issue two classes of
------------------
stock, designated "Common Stock" and "Preferred Stock," respectively. The total
number of shares of Common Stock which the Company has the authority to issue is
25,000,000, $.001 par value, and the total number of shares of Preferred Stock
the Company has the authority to issue is 5,000,000, $.001 par value. The
Preferred Stock may be issued from time to time in one or more series pursuant
to a resolution or resolutions providing for such issue duly adopted by the
Board of Directors (authority to do so being hereby expressly vested in the
Board). The Board of Directors is further authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and to fix the number of shares of any
series of Preferred Stock and the designation of any such series of Preferred
Stock. The Board of Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, may increase or decrease (but not below the
number of shares in any such series then outstanding), the number of shares of
any series subsequent to the issue of shares of that series.
Article V.
The Company is to have perpetual existence.
Article VI.
Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins or
unless the Bylaws of the Company shall so provide.
Article VII.
The number of directors which constitute the whole Board of Directors of
the Company shall be designated in the Bylaws of the Company.
Article VIII.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Company.
-2-
<PAGE>
Article IX.
1. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.
2. The Company shall indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was a director, officer or employee of the
Company or any predecessor of the Company, or serves or served at any other
enterprise as a director, officer or employee at the request of the Company or
any predecessor to the Company.
3. Neither any amendment nor repeal of this Article IX, nor the adoption
of any provision of the Company's Certificate of Incorporation inconsistent with
this Article IX, shall eliminate or reduce the effect of this Article IX, in
respect of any matter occurring, or any action or proceeding accruing or arising
or that, but for this Article IX, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
Article X.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Company may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Company.
Article XI.
Vacancies created by the resignation of one or more members of the Board
of Directors and newly created directorships, created in accordance with the
Bylaws of this Company, may be filled by the vote of a majority, although less
than a quorum, of the directors then in office, or by a sole remaining
director.
Article XII.
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided
in the Bylaws of the Company.
Article XIII.
Stockholders shall be entitled to cumulative voting rights in the
election of directors as set forth in this Article XIII and the Bylaws of the
Company, but only until cumulative voting rights are not required under
Section 2115 of the California Corporations Code. Subject to such limitation,
at all
-3-
<PAGE>
elections of directors of the Company, each holder of stock or of any class or
classes or of a series or series thereof shall be entitled to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) such stockholder would be entitled to cast for the election
of directors with respect to such stockholder's shares of stock multiplied by
the number of directors to be elected, and such stockholder may cast all of such
votes for a single director or may distribute them among the number of directors
to be voted for, or for any two or more of them as such stockholder may see fit.
At such time as cumulative voting rights are not required under Section 2115 of
the California Corporations Code, this Article XIV shall no longer be effective
and may be deleted herefrom upon any restatement of this Certificate of
Incorporation.
Article XIV.
The Company 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, and all rights conferred upon stockholders
herein are granted subject to this reservation.
[Remainder of Page Intentionally Left Blank]
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Incorporation to be signed by Mary E. Coleman, its Chief
Executive Officer, effective as of November 1, 1996.
AURUM SOFTWARE, INC.
By: /s/ Mary E. Coleman
-------------------
Mary E. Coleman
President and Chief Executive Officer
-5-
<PAGE>
EXHIBIT 10.2
AURUM SOFTWARE, INC.
AMENDED 1995 STOCK PLAN
(as amended September 11, 1996)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries, and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an Option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder. Stock Purchase Rights may
also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board of
---------
Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Aurum Software, Inc., a California corporation.
-------
(g) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services and any Director of the Company, whether
compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company or any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days unless reemployment upon expiration of such leave is guaranteed by
statute or contract, including Company policies. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
on the 91st day of such leave, any Incentive Stock Option held by the Optionee
shall cease to be treated as an Incentive Stock Option and shall be treated for
tax purposes as a Nonstatutory Stock Option.
<PAGE>
(i) "Director" means a member of the Board of Directors of the
--------
Company.
(j) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock, determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
National Market of the Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination and reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq Stock Market
Out not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(r) "Optionee" means an Employee or Consultant who receives an Option
--------
or Stock Purchase Right.
<PAGE>
(s) "Parent". means a "parent corporation," whether now or hereafter
------
existing as defined in Section 424(e) of the Code.
(t) "Plan" means this 1995 Stock Plan.
----
(u) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 below.
(w) "Stock Purchase Right" means a right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(x) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 4,319,695 Shares* (after adjustment for the one-for-
four reverse split of the Common Stock effected in September 1996). The Shares
may be authorized but unissued or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares that were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, and the original purchaser of such Shares did
not receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a Committee appointed by the Board.
* Reflects all shares reserved under the Plan since its adoption.
<PAGE>
(b) Plan Procedure After the Date, if any, upon which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Multiple Administrative Bodies. If permitted by Securities
------------------------------
and Exchange Commission Rule 16b-3 promulgated under the Exchange Act ("Rule
16b-3"), the Plan may be administered by different committees appointed by the
Board of Directors with respect to Directors, Officers, and Employees.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
----------
hereunder as exempt under Rule 16b-3, the Plan shall be administered by the
Board or a committee of two or more "non-employee directors" within the meaning
of Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
--------------------
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy the legal requirements relating to the administration
of stock option plans, of applicable federal and state corporate and securities
laws, of the Code, and of any applicable stock exchange.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each such
award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
<PAGE>
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights;
(x) to provide for the early exercise of Options for the
purchase of unvested Shares, subject to such terms and conditions as the
Administrator may determine; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options or Stock Purchase Rights.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's Incentive Stock Options granted by the
Company or any Parent or Subsidiary, that become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted.
The Fair Market Value of the Shares shall be determined as of the time the
Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed
<PAGE>
by a corporation having a class of common equity securities required to be
registered under Section 12 of the Exchange Act, the following limitations
shall apply to grants of Options and Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the Company,
Options and Stock Purchase Rights to purchase more than 1,000,000 Shares (after
adjustment for the one-for-four reverse split of the Common Stock effected in
September 1996).
(ii) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 12.
(iii) If an Option or Stock Purchase Right is canceled in the same
fiscal year of the Company in which it was granted (other than in connection
with a transaction described in Section 12), the canceled Option shall be
counted against the limit set forth in Section 5(d)(i). For this purpose, if
the exercise price of an Option is reduced, such reduction will be treated as a
cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
---------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.
(2) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
<PAGE>
(ii) In the case of a Nonstatutory Stock Option
(1) granted to a person who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(2) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of sur render and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider whether acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote, receive dividends or any other rights
as a shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 12
hereof.
<PAGE>
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), such
Optionee may, but only within such period of time as is determined by the
Administrator, of at least thirty (30) days, with such determination in the case
of an Incentive Stock Option not exceeding three (3) months after the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of such termination, or if the Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent otherwise entitled to exercise it at the date of such termination.
If such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the day three months and one day following such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of termination,
or if the Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Optionee was entitled to exercise the Option on the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after the Optionee's death,
the Optionee's estate or a person who acquires the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
<PAGE>
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, Options and Stock Purchase Rights may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions, and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator makes the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator. Shares purchased
pursuant to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
<PAGE>
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclas sification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option or Stock Purchase Right
shall terminate immediately prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation or the sale of all or substantially all of the assets of the
Company, each outstanding Option or Stock Purchase Right shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation. In the event the
successor corporation refuses to assume or substitute for the Option, the Board
shall have the discretion either (i) to permit each Optionee to exercise the
Option as to all of the Optioned Stock, including Shares as to which it would
not otherwise be exercisable or (ii) to terminate the Option with respect to
unvested Shares. If an Option is exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the Optionee that the Option shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Option shall terminate upon
the expiration of such period. For the purposes of this paragraph, the Option
or Stock Purchase Right shall be considered assumed if, following the merger
or asset sale, the Option or Stock Purchase Right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger, the consideration
(whether stock, cash, or other securities or property) received in the merger
or asset sale by holders of Common Stock for each Share held on the effective
date of the transaction (and if the holders are offered a choice of
consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares). If such consideration received in the merger is
not solely common stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option
<PAGE>
or Stock Purchase Right, to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or asset sale.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
<PAGE>
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
19. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
<PAGE>
AURUM SOFTWARE, INC.
1995 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Aurum Software,
Inc. 1995 Stock Plan (the "Plan") shall have the same defined meanings in this
Stock Option Agreement.
I. AGREEMENT
---------
1. Grant of Option. Aurum Software, Inc., a California corporation (the
---------------
"Company"), hereby grants to the Optionee (the "Optionee") named in the Notice
of Stock Option Grant (the "Notice of Grant"), an option (the "Option") to
purchase the total number of shares of Common Stock (the "Shares") set forth in
the Notice of Grant, at the exercise price per share set forth in the Notice of
Grant (the "Exercise Price") subject to the terms, definitions and provisions of
the Plan, which is incorporated herein by reference. Subject to Section 14(b)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an ISO as defined in Section
422 of the Code. However, if this Option is intended to be an ISO, to the
extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be
treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option. This Option shall be exercisable during its term
------------------
in accordance with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) Subject to subsections 2(i)(b) through 2(i)(e) below, this
Option shall be exercisable cumulatively according to the vesting schedule set
out in the Notice of Grant. For purposes of this Stock Option Agreement,
Shares subject to the Option shall vest based on the Optionee's continued
employment or consultancy with the Company.
(b) This Option may not be exercised for a fraction of a Share.
(c) In the event of Optionee's death, disability or other
termination of the employment or consulting relationship, the exercisability
of the Option is governed by the applicable provisions of the Plan and this
Option Agreement.
<PAGE>
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
---------
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements with respect to
such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the aggregate
Exercise Price as to all exercised Shares. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange or market
quotation service on which the Shares may then be listed. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) to the extent permitted by the Administrator, delivery of a
properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the Exercise Price; or
(iv) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price for the
Shares being exercised.
4. Termination of Relationship. In the event an Optionee's Continuous
---------------------------
Status as an Employee or Consultant terminates, Optionee may, to the extent
the Option was vested at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the
Notice of Grant. To the extent that Optionee was not vested in this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified therein, the Option shall terminate.
<PAGE>
5. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
6. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as ISOs and Options
granted to more than ten percent (10%) stockholders shall apply to this
Option.
7. Tax Consequences. Set forth below is a brief summary as of the date of
----------------
this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability or state income tax liability upon
the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the
year of exercise.
(ii) Exercise of ISO Following Disability. If the Optionee's
------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO
to be qualified as an ISO.
(iii) Exercise of NSO. There may be a regular federal income tax
---------------
liability and state income tax liability upon the exercise of an NSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an Employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise. If the Optionee is subject to Section 16 of the Securities
Act of 1934, as amended, the date of income recognition may be deferred for up
to six months.
(iv) Disposition of Shares. In the case of an NSO, if Shares are
---------------------
held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal and state income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the
-3-
<PAGE>
Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of the
Shares will also be treated as long-term capital gain for federal and state
income tax purposes. If Shares purchased under an ISO are disposed of within
such one-year period or within two years after the Date of Grant, any gain
realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the difference between the Exercise
Price and the lesser of (1) the Fair Market Value of the Shares on the date of
exercise, or (2) the sale price of the Shares.
(v) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
8. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by California law as applied to agreements
between California residents entered to be performed entirely within California.
-4-
<PAGE>
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: AURUM SOFTWARE, INC.
__________________________________ By:______________________________
Signature
__________________________________ Title:_____________________________
Print Name
Residence Address_________________
__________________________________
__________________________________
[SIGNATURE PAGE TO AURUM SOFTWARE, INC. 1995 STOCK PLAN
OPTION AGREEMENT]
-5-
<PAGE>
EXHIBIT A
---------
1995 STOCK PLAN
EXERCISE NOTICE
Aurum Software, Inc.
3385 Scott Boulevard
Santa Clara, CA 95054
1. Exercise of Option. Effective as of today, ___________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Aurum Software, Inc. (the
"Company") under and pursuant to the Aurum Software, Inc. 1995 Stock Plan, as
amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated _________, 19___ (the "Option Agreement"). The purchase price
for the Shares shall be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
as soon as practicable after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
5. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator, which shall review such
<PAGE>
dispute at its next regular meeting. The resolution of such a dispute by the
Administrator shall be final and binding on the Company and on Optionee.
7. Entire Agreement; Governing Law. The Plan and Notice of Grant/Option
-------------------------------
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Option Agreement, and the Restricted Stock Purchase Agreement (if applicable)
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and the
Optionee. This Agreement is governed by California law as applied to agreements
between California residents entered and to be performed entirely within
California.
Submitted by: Accepted by:
OPTIONEE: AURUM SOFTWARE, INC.
______________________________ By:________________________________
(Signature )
______________________________ Title:_____________________________
(Print Name)
Address:______________________
- -------
______________________________
______________________________
[SIGNATURE PAGE TO EXERCISE NOTICE]
<PAGE>
Exhibit 10.10
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 3, 1997, by
and between Aurum Software, Inc. (the "Borrower") whose address is 3385 Scott
Boulevard, Santa Clara, CA 95054 and Silicon Valley Bank, (the "Lender"), whose
address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to,
among other documents, a Promissory Note, dated July 13,1993, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the
"Note"), as amended and a Promissory Note, dated July 15,1996, in the original
principal amount of One Million Two Hundred Fifty Thousand and 00/100 Dollars
($1,250,000.00) (the "Term Note"), as amended. The Note has been modified
pursuant to, among other documents, a Loan Modification Agreements, dated
September 25,1996, pursuant to which, among other things, the principal amount
of the Note was increased to Three Million and 00/100 Dollars ($3,000,000.00).
The Note and the Term Note, together with other promissory notes from Borrower
to Lender, are governed by the terms of a Business Loan Agreement, dated July
13,1993, between Borrower and Lender, as such agreement may be amended from time
to time (the "Loan Agreement"). Defined terms used but not otherwise defined
herein shall have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a
-------------------------
Commercial Security Agreement, dated July 8,1992, as amended, and a Collateral
Assignment, Patent Mortgage and Security Agreement, dated April 11, 1994.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Note.
-----------------------
1. The principal amount of the Note is Three Million and 00/100
Dollars ($3,000,000.00) (the "Committed Line"). For purposes of
determining availability, the Cash Management and Letter of
Credit Sublimits shall be reserved under the Committed Line.
2. The interest rate to be applied to the unpaid principal balance
of the Note is hereby decreased, effective as of the date hereof,
to a rate equal to Lender's current Index (as defined in the
Note).
B. Modification(s) to the Term Note.
--------------------------------
1. The Term Note is hereby cancelled. Accordingly, no further
advances shall be allowed thereunder.
C. Modification(s) to Loan Agreement.
---------------------------------
1. The paragraph entitled "Borrowing Base Formula" is hereby deleted
in its entirety.
1
<PAGE>
2. The paragraph entitled "Financial Covenants" is hereby amended to
read, in its entirety, as follows:
Borrower shall maintain, on a quarterly basis, a minimum quick
ratio of 2.00 to 1.00; a minimum tangible net worth of
$38,000,000.00; and minimum quarterly net income of $1.00;
provided however, Borrower may incur one quarterly loss, provided
(i) such loss shall not exceed $2,000,000.00 and (ii) provided
that Borrower achieves annual profitability.
For purposes of calculation, deferred maintenance revenue and
restricted cash shall be excluded from the quick ratio covenant.
3. The paragraph entitled "Accounts Receivable and Accounts Payayble
Agings" is hereby amended to read, in its entirety, as follows:
Accounts Receivable Audits. Lender shall conduct an audit of
Borrower's accounts receivable books and records within forty
five (45) days after Borrower's initial advance under the Note.
Thereafter, such audits shall be performed on an annual basis.
Borrower's deposit account will be debited for the audit expense
and a notification will be mailed to Borrower.
4. The paragraph entitled "Financial Statements" is hereby amended
to read, in its entirety, as follows:
Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank: (a) as soon as available, but in any event
within one hundred twenty (120) days after the end of Borrower's
fiscal year, audited consolidated financial statements of
Borrower prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial statements
of an independent certified public accounting firm reasonably
acceptable to Bank; (b) within five (5) days of filing, copies of
all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any holders
of subordinated debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission; and (c) just
prior to borrowing and at such times as there are outstandings
under the Note, within forth five (45) days after the last day of
each quarter, Borrower shall deliver to Bank a compliance
certificate.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
------------------
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
-----------------------
signing below) agrees that, as of this date, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
2
<PAGE>
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness,
Lender is relying upon Borrower's representations, warranties, and agreements,
as set forth in the Existing Loan Documents. Except as expressly modified
pursuant to this Loan Modification Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute
a satisfaction of the Indebtedness. It is the intention of Lender and Borrower
to retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this Paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
AURUM SOFTWARE, INC. SILICON VALLEY BANK
By: /s/ Chris I. Dier By: /s/ Michael Devery
--------------------------- ----------------------------------
Name: Chris I. Dier Name: Michael Devery
------------------------- --------------------------------
Title: CFO Title: Vice President
------------------------ -------------------------------
3
<PAGE>
COMPLIANCE CERTIFICATE
To: SILICON VALLEY BANK From: AURUM SOFTWARE, INC.
Credit Department
3003 Tasman Drive
Santa Clara, CA 95054
The undersigned authorized Officer of Aurum Software, Inc. ("Borrower"), hereby
certifies that in accordance with the terms and conditions of the Business Loan
Agreement, as modified from time to time, the Borrower is in complete compliance
for the period ending _____________________ of all required conditions and terms
except as noted below. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistent from one period to the next except as explained in an accompanying
letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies" column.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
- ------------------ -------- --------
<S> <C> <C>
8K, 10K and 10Q Reports Within 5 days of filing with the SEC YES/NO
Annual (CPA Audited) FYE within 120 days YES/NO
Compliance Certificate Quarterly within 45 days* YES/NO
* when borrowing or prior to initial advance
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- ------------------ -------- ------ --------
TO BE TESTED QUARTERLY, UNLESS OTHERWISE NOTED:
Minimum Quick Ratio/1/ 2.00:1.00 :1.00 YES/NO
------
Minimum TNW $38,000,000.00 $___________ YES/NO
Profitability Quarterly and Annual $___________ YES/NO
With allowance for one quarterly loss not to exceed $2,000,000.00
Annual basis beginning FYE 1997.
</TABLE>
/1/ Excluding deferred maintenance revenue and restricted cash excluded from
calculation.
Comments Regarding Financial Covenants:
=====================================
BANK USE ONLY
Received By: ___________________
Date: _______________
Reviewed By: ___________________
Compliance Status: YES/NO
=====================================
Very truly yours,
AURUM SOFTWARE, INC.
By:
--------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
<PAGE>
[SILICON VALLEY BANK LETTERHEAD]
March 4, 1997
Chris Dier
Chief Financial Officer
Aurum Software
3385 Scott Boulevard
Santa Clara, CA 95054
Dear Chris:
Enclosed please find the original Loan Modification Agreement along with the
revised Compliance Certificate to be signed and executed by you. The Loan
Modification Agreement states the changes in the credit facility we had mutually
agreed upon.
Please review the above and feel free to call me or Mike should you have any
questions with these documents. Thank you for giving us this opportunity and we
look forward to continuing our support for Aurum Software, Inc..
Sincerely,
SILICON VALLEY BANK
/S/ Sunita R. Patel
Sunita R. Patel
Assistant Vice President
cc file
<PAGE>
EXHIBIT 10.14
[LOGO OF CORNISH & CAREY COMMERCIAL]
===============================================================================
SUBLEASE
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
SUBLANDLORD: Orbitek Engineering, Inc. SUBJECT PROPERTY: 2230 Martin Avenue
Santa Clara, California
SUBTENANT: Aurum Software, Inc. DATE: September 30, 1996
</TABLE>
1. PARTIES:
This Sublease is made and entered into as of September 30,1996, by and between
Orbitek Engineering, Inc. ("Sublandlord"), and Aurum Software, Inc.
("Subtenant"), under the Master Lease dated November 4, 1994 and Amendment to
Lease dated July 17, 1995, between McLellan Estate Company, Inc., as "Lessor"
and Sublandlord under this Sublease as "Lessee." A copy of the Master Lease is
attached hereto as Attachment I and incorporated herein by this reference.
2. PROVISIONS CONSTITUTING SUBLEASE:
2.1 This Sublease is subject to all of the terms and conditions of the Master
Lease. Subtenant hereby assumes and agrees to perform all of the obligations
of "Lessee" under the Master Lease to the extent said obligations apply to
the Subleased Premises and Subtenant's use of the Common Areas, except as
specifically set forth herein. Sublandlord hereby agrees to cause Lessor
under the Master Lease to perform all of the obligations of Lessor thereunder
to the extent said obligations apply to the Subleased Premises and
Subtenant's use of the Common Areas. Subtenant shall not commit or permit to
be committed on the Subleased Premises or on any other portion of the Project
any act or omission which violates any term or condition of the Master Lease.
Except to the extent waived or consented to in writing by the other party or
parties hereto who are affected thereby, neither of the parties hereto will,
by renegotiation of the Master Lease, assignment, subletting, default or any
other voluntary action, avoid or seek to avoid the observance or performance
of the terms to be observed or performed hereunder by such party, but will at
all times in good faith assist in carrying out all the terms of this Sublease
and in taking all such action as may be necessary or appropriate to protect
the rights of the other party or parties hereto who are affected thereby
against impairment. Nothing contained in this Section 2.1 or elsewhere in
this Sublease shall prevent or prohibit Sublandlord (a) from exercising its
right to terminate the Master Lease pursuant to the terms thereof or (b) from
assigning its interest in this Sublease or subletting the Premises to any
other third party.
2.2 With respect to all of the provisions of the Master Lease incorporated
into this Sublease, wherever the word "Premises" is used in the Master Lease,
for purposes of this Sublease, the word "Subleased Premises" shall be
substituted; wherever in the Master Lease the word "Lessee" appears, for the
purposes of this Sublease, the word "Subtenant" shall be substituted;
wherever in the Master Lease the word "Lessor" appears, for the purposes of
this Sublease, the word "Sublandlord" shall be substituted.
<PAGE>
[Logo of Cornish & Carey Commercial]
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Sublease
===============================================================================
All of the terms and conditions contained in the Master Lease are
incorporated herein, except as specifically provided below, and the terms and
conditions specifically set forth in this Sublease, shall constitute the
complete terms and conditions of this Sublease, except the following
paragraphs of the Master Lease which shall solely be the obligation of
Sublandlord: 1.1, 1.2, 1.3, 1.4, 1.5, 1.6, 1.7, 1.10, 1.11, 7.1, 8.3(a),
8.3(b), 8.3(c), 10.1(a), 10.1(b), 11, 15.1, 15.2, 15.3, 23.1, 23.2,
37.1,37.2,39.1,39.2, 39.3, 39.4, Memorandum of Lease, Amendment to Lease,
Exhibit "B" (Master Lease).
3. SUBLEASED PREMISES AND RENT:
3.1 Subleased Premises:
Sublandlord leases to Subtenant and Subtenant leases from Sublandlord the
Subleased Premises upon all of the terms, covenants and conditions contained
in this Sublease. The Subleased Premises consist of approximately ten
thousand two hundred twenty-five (10,2252+) of a larger facility, located at
-
2230 Martin Road, Santa Clara, and as shown in Exhibit "A" attached hereto.
3.2 Rent:
Subtenant shall pay to Sublandlord as Rent for the Subleased Premises the sum
of Seventeen Thousand Eight Hundred Ninety-Four and 00/100 Dollars
($17,894.00) per month, without deductions, offset, prior notice or demand
upon execution of the Sublease Agreement. Rent shall be payable by Subtenant
to Sublandlord in consecutive monthly installments on or before the first day
of each calendar month during the Sublease Term. If the Sublease commencement
date or the termination date of the Sublease occurs on a date other than the
first day or the last day, respectively, of a calendar month, then the Rent
for such partial month shall be prorated and the prorated Rent shall be
payable on the Sublease commencement date or on the first day of the calendar
month in which the Sublease termination date occurs, respectively. This is a
modified full service rent. Sublandlord shall be responsible for real
property taxes, property insurance, utilities (subject to the provisions in
Paragraph 9 below concerning HVAC) and general operating expenses. All
personal property insurance of Subtenant shall be the sole responsibility of
the Subtenant. Sublandlord shall not be responsible for providing janitorial
service for the subleased premises, however, Sublandlord shall be responsible
for maintaining the common areas. Subtenant shall be responsible for their
prorata share of the operating expense increase beginning January 1,1998 as
described in Exhibit "B". Subtenant shall have the right to review any
increase in operating expenses and all related documents.
3.3 Security Deposit:
In addition to the Rent specified above, Subtenant shall pay to Sublandlord
an equivalent of one month's rent as a non-interest bearing Security Deposit
upon execution of the Sublease Agreement. In the event Subtenant has
performed all of the terms and conditions of this Sublease during the term
hereof, Sublandlord shall return to Subtenant, within ten days after
Subtenant has vacated the Subleased Premises, the Security Deposit less any
sums due and owing to Sublandlord.
<PAGE>
[Logo of Cornish & Carey Commercial]
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SUBLEASE
===============================================================================
4. RIGHTS OF ACCESS AND USE:
4.1 Use:
Subtenant shall use the Subleased Premises only for those purposes permitted
in the Master Lease, unless Sublandlord and Master Landlord consent in
writing to other uses prior to the commencement thereof.
4.2 Furniture:
Subtenant shall have the right to use Sublandlord's furniture during the
Sublease term as described in Exhibit "C". Subtenant shall be responsible for
maintaining the furniture during the Sublease and shall return the furniture
in good working condition, normal wear and tear excepted.
5. SUBLEASE TERM:
5.1 Sublease Term:
The Sublease Term shall be for the period commencing on October 15, 1996, and
continuing through November 30, 1999. In no event shall the Sublease Term
extend beyond the Term of the Master Lease.
5.2 Inability to Deliver Possession:
In the event Sublandlord is unable to deliver possession of the Subleased
Premises at the commencement of the term, Sublandlord shall not be liable for
any damage caused thereby, nor shall this Sublease be void or voidable but
Subtenant shall not be liable for Rent until such time as Sublandlord offers
to deliver possession of the Subleased Premises to Subtenant, but the term
hereof shall not be extended by such delay. If Subtenant, with Sublandlord's
consent, takes possession prior to commencement of the term, Subtenant shall
do so subject to all the covenants and conditions hereof and shall pay Rent
for the period ending with the commencement of the term at the same rental as
that prescribed for the first month of the term prorated at the rate of
1/30th thereof per day. In the event Sublandlord has been unable to deliver
possession of the Subleased Premises within 30 days from the commencement
date, Subtenant, at Subtenant's option, may terminate this Sublease.
6. RIGHT TO TERMINATE:
If Sublandlord fails to observe, comply with or perform any terms, covenants,
conditions or rules applicable to the Sublease Agreement or Master Agreement,
Subtenant shall have the right to terminate this Sublease Agreement under the
conditions stated in paragraph 13. Default; Breech; Remedies of the Master
Lease.
7. NOTICES:
All notices, demands, consents and approvals which may or are required to be
given by either party to the other hereunder shall be given in the manner
provided in the Master Lease, at the addresses shown on the signature page
hereof. Sublandlord shall notify Subtenant of any Event of Default under the
Master Lease, or of any other event of which Sublandlord has actual knowledge
which will impair Subtenant's ability to conduct its normal business at the
Subleased Premises, as soon as reasonably practicable following Sublandlord's
receipt of notice from the Landlord of an Event of Default or actual knowledge
of such
<PAGE>
[Logo of Cornish & Carey Commercial]
===============================================================================
SUBLEASE
===============================================================================
impairment. If Sublandlord elects to terminate the Master Lease, Sublandlord
shall so notify Subtenant by giving at least 30 days notice prior to the
effective date of such termination.
8. BROKER FEE:
Upon execution of the Sublease, Sublandlord shall pay Cornish & Carey
Commercial, a licensed real estate broker, a fee equal to six percent (6%) of
the total rental value.
9. COMPLIANCE WITH NONDISCRIMINATION REGULATIONS:
It is understood that it is illegal for Sublandlord to refuse to display or
sublease the Subleased Premises, or to assign, surrender or sell the Master
Lease, to any person because of race, color, religion, national origin, sex,
sexual orientation, marital status or disability.
10. HVAC HOURS:
Sublandlord shall provide HVAC Monday through Friday from 7:00 a.m. to 7:00 p.m.
After hour HVAC will be $20.00 per hour.
11. EARLY OCCUPANCY:
Subtenant shall have the right to occupy the premises as soon as the Sublease
Agreement and Consent Agreement are fully executed with all terms and conditions
of the Sublease Agreement to be in full force and effect except rent, which is
to commence October 15, 1996.
12. TOXIC CONTAMINATION DISCLOSURE:
Sublandlord and Subtenant each acknowledge that they have been advised that
numerous federal, state, and/or local laws, ordinances and regulations ("Laws")
affect the existence and removal, storage, disposal, leakage of and
contamination by materials designated as hazardous or toxic ("Toxics"). Many
materials, some utilized in everyday business activities and property
maintenance, are designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by landowners,
future landowners or former landowners without regard to whether the party
required to pay for "clean up" caused the contamination, owned the property at
the time the contamination occurred or even knew about the contamination. Some
items, such as asbestos or PCBs, which were legal when installed, now are
classified as Toxics, and are subject to removal requirements. Civil lawsuits
for damages resulting from Toxics may be filed by third parties in certain
circumstances.
Sublandlord and Subtenant each acknowledge that Broker has no specific expertise
with respect to environmental assessment or physical condition of the Subleased
Premises, including, but not limited to, matters relating to: (i) problems which
may be posed by the presence or disposal of hazardous or toxic substances on or
from the Subleased Premises, (ii) problems which may be posed by the Subleased
Premises being within the Special Studies Zone as designated under the Alquist-
Priolo Special Studies Zone Act (Earthquake Zones), Section 2621-2630, inclusive
of California Public Resources Code, and (iii) problems
<PAGE>
[Logo of Cornish & Carey Commercial]
===============================================================================
Sublease
===============================================================================
which may be posed by the Subleased Premises being within a HUD Flood Zone as
set forth in the U.S. Department of Housing and Urban Development "Special Flood
Zone Area Maps," as applicable.
Sublandlord and Subtenant each acknowledge that Broker has not made an
independent investigation or determination of the physical or environmental
condition of the Subleased Premises, including, but not limited to, the
existence or nonexistence of any underground tanks, sumps, piping, toxic or
hazardous substances on the Subleased Premises. Subtenant agrees that it will
rely solely upon its own investigation and/or the investigation of professionals
retained by it or Sublandlord, and neither Sublandlord nor Subtenant shall rely
upon Broker to determine the physical and environmental condition of the
Subleased Premises or to determine whether, to what extent or in what manner,
such condition must be disclosed to potential sublessees, assignees, purchasers
or other interested parties.
13. RENT ABATEMENT AND DAMAGES TO PERSONAL PROPERTY:
In the event Sublandlord, pursuant to the terms of the Master Lease, is entitled
to and receives rent abatement, then to the extent such rent abatement affects
the subleased premises, Subtenant shall be entitled to rent abatement in an
amount that the net rentable area of the subleased premises bears to the total
net rentable area of the Master Lease, and only to the extent any such abatement
applies to the sublease term. In addition, any amounts paid or credited to
Sublandlord under the terms of the Master Lease for damage to personal property
shall be credited to Subtenant, subject to the same limitations set forth above.
14. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT:
The Americans With Disabilities Act (ADA) requires both the owner of real estate
and the tenant of real estate to comply with its provisions.
In part, the Act requires owners and tenants of public accommodations to remove
physical barriers to access and provide auxiliary aids or services for persons
with hearing, vision or speech impairment.
The ADA does not specify responsibility for compliance as between Landlord and
Tenant or as between Seller and Buyer. Compliance and the allocation of
responsibility for cost for compliance must be negotiated between the parties.
Cornish & Carey Commercial makes no representation or warranty with respect to
compliance or noncompliance of the facility or any contemplated use with ADA
requirements. We recommend that you consult your attorney to determine if this
act applies to you and if so the requirements that must be met. The
applicability of the Act is a legal issue and we cannot give you legal advice on
such matters.
<PAGE>
[Logo of Cornish & Carey Commercial]
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SUBLEASE
===============================================================================
SUBLANDLORD: ORBITEK ENGINEERING, INC. 2220 Martin Avenue
Santa Clara, CA 95050
By: ___________________________________ Date: ____________________________
SUBTENANT: AURUM SOFTWARE, INC. 3385 Scott Boulevard
Santa Clara, CA 95054
By: /s/ Chris T. Dier Date: 10/3/96
----------------------------------- ----------------------------
NOTICE TO SUBLANDLORD AND SUBTENANT: CORNISH & CAREY COMMERCIAL, IS NOT
AUTHORIZED TO GIVE LEGAL OR TAX ADVICE; NOTHING CONTAINED IN THIS SUBLEASE OR
ANY DISCUSSIONS BETWEEN CORNISH & CAREY AND SUBLANDLORD AND SUBTENANT SHALL BE
DEEMED TO BE A REPRESENTATION OR RECOMMENDATION BY CORNISH & CAREY COMMERCIAL,
OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS
DOCUMENT OR ANY TRANSACTION RELATING THERETO. ALL PARTIES ARE ENCOURAGED TO
CONSULT WITH THEIR INDEPENDENT FINANCIAL CONSULTANTS AND/OR ATTORNEYS REGARDING
THE TRANSACTION CONTEMPLATED BY THIS PROPOSAL.
Attachment I Master Lease
MASTER LANDLORD CONSENT
The undersigned, Lessor under the Master Lease attached as Attachment I, hereby
consents to the subletting of the Subleased Premises described herein on the
terms and conditions contained in this Sublease. This Consent shall apply only
to this Sublease and shall not be deemed to be a consent to any other Sublease.
Landlord: MCLELLAN ESTATE COMPANY, INC.
By: /S/ Laureston H. McClellan Date:
___________________________________ ____________________________
<PAGE>
EXHIBIT A
FLOOR PLAN
2230 MARTIN AVENUE
<PAGE>
EXHIBIT B
* OPERATING EXPENSE INCREASE. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined, of
the amount by which all Operating Expenses, as hereinafter defined, for each
Comparison Year exceeds the amount of all Operating Expenses for the Base Year,
such excess being hereinafter referred to as the "Operating Expense Increase,"
in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of the
Premises by the total approximate square footage of the rentable space contained
in the Office Building Project. It is understood and agreed that the square
footage figures set forth in the Basic Lease Provisions are approximations which
Lessor and Lessee agree are reasonable and shall not be subject to revision
except in connection with an actual change in the size of the Premises or a
change in the space available for lease in the Office Building Project.
(b) "Base Year" is defined as the calendar year in which the Lease term
commences.
(c) "Comparison Year" is defined as each calendar year during the term of
this Lease subsequent to the Base Year; provided, however, Lessee shall have no
obligation to pay a share of the Operating Expense Increase applicable to the
first twelve (12) months of the Lease Term (other than such as are mandated by a
governmental authority, as to which government mandated expenses Lessee shall
pay Lessee's Share, notwithstanding they occur during the first twelve (12)
months). Lessee's Share of the Operating Expense Increase for the first and last
Comparison Years of the Lease Term shall be prorated according to that portion
of such Comparison Year as to which Lessee is responsible for a share of such
increase.
(d) "Operating Expenses" is defined, for purposes of this Lease, to include
all costs, if any, incurred by Lessor in the exercise of its reasonable
discretion, for:
(i) The operation, repair, maintenance, and replacement, in neat, clean,
safe, good order and condition, of the Office Building Project, including but
not limited to, the following:
(aa) The Common Areas, including their surfaces, coverings, decorative
items, carpet, drapes and window coverings, and including parking areas, loading
and unloading areas, trash areas, roadways, sidewalks, walkways, stairways,
parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,
Common Area lighting facilities, building exteriors and roofs, fences and gates;
(bb) All heating, air conditioning, plumbing, electrical systems, life
safety equipment, telecommunication and other equipment used in common by, or
for the benefit of, lessees or occupants of the Office Building Project,
including elevators and escalators, tenant directories, fire detection systems
including sprinkler system maintenance and repair.
(ii) Trash disposal, janitorial and security services;
(iii) Any other service to be provided by Lessor that is elsewhere in
this Lease stated to be an "Operating Expense",
(iv) The cost of the premiums for the liability and property insurance
policies to be maintained by Lessor under paragraph 8 hereof;
(v) The amount of the real property taxes to be paid by Lessor under
paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity, and other publicly
mandated services to the Office Building Project;
(vii) Labor, salaries and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or cleaning the Office
Building Project and accounting and a management fee attributable to the
operation of the Office Building Project;
(viii) Replacing and/or adding improvements mandated by any governmental
agency and any repairs or removals necessitated thereby amortized over its
useful life according to Federal income tax regulations or guidelines for
depreciation thereof (including interest on the unamortized balance as is then
reasonable in the judgment of Lessor's accountants);
(ix) Replacements of equipment or improvements that have a useful life for
depreciation purposes according to Federal income tax guidelines of five (5)
years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of replacements of
equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.
(f) Operating Expenses shall not include any expenses paid by any lessee
directly to third parties, or as to which Lessor is otherwise reimbursed by any
third party, other tenant, or by insurance proceeds.
(g) Lessee's Share of Operating Expense Increase shall be payable by Lessee
within ten (10) days after a reasonably detailed statement of actual expenses is
presented to Lessee by Lessor. At Lessor's option, however, an amount may be
estimated by Lessor from time to time in advance of Lessee's Share of the
Operating Expense Increase for any Comparison Year, and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each Comparison
Year of the Lease term, on the same day as the Base Rent is due hereunder. In
the event that Lessee pays Lessor's estimate of Lessee's Share of Operating
Expense Increase as aforesaid, Lessor shall deliver to Lessee within sixty (60)
days after the expiration of each Comparison Year a reasonably detailed
statement showing Lessee's Share of the actual Operating Expense Increase
incurred during such year. If Lessee's payments under this paragraph 4.2(g)
during said Comparison Year exceed Lessee's Share as indicated on said
statement, Lessee shall be entitled to credit the amount of such overpayment
against Lessee's Share of Operating Expense Increase next falling due. If
Lessee's payments under this paragraph during said Comparison Year were less
than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor
the amount of the deficiency within ten (10) days after delivery by Lessor to
Lessee of said statement. Lessor and Lessee shall forthwith adjust between them
by cash payment any balance determined to exist with respect to that portion of
the last Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.
With respect to the paragraph (Operating Expense Increase) above, where the
words Lessee, Lessor, and Lease appear, substitute the words Subtenant,
Sublandlord, and Sublease respectively.
<PAGE>
EXHIBIT C
Furniture List as Exhibit to Sublease Contract
- ----------------------------------------------
There are 36 workstations in total
<TABLE>
<CAPTION>
Gray Workstations
- -----------------
Qty Item Size
- --------------------------------------------
<C> <S> <C>
1 Corner Unit 48x48
20 Corner Unit 42x42
3 Desk with Pedestal 85x24
1 Desk with Pedestal 47x24
6 Desk with Pedestal 65x24
2 Desk with Pedestal 70x24
2 Desk with Pedestal 69x24
1 Desk with Pedestal 72x24
1 Desk with Pedestal 74x24
2 Desk with Pedestal 56x24
4 Desk with Pedestal 48x24
1 Desk with Pedestal 42x30
1 Desk with Pedestal 48x30
1 Desk with Pedestal 92x24
1 Desk, no Pedestal 24x24
10 Open Shelf 12x30x29H
1 Open Shelf 12x31x72H
6 Open Shelf 12x36x29H
1 Open Shelf 12x29x29H
4 Open Shelf 12x32x29H
2 Tables 24"dia
<CAPTION>
Hallways
- --------
<C> <S> <C>
1 Water Fountain
1 Shelf Unit 88x24x36H
<CAPTION>
Conference Room
- ---------------
<C> <S> <C>
1 Glass Table 48x96
10 Gray Chairs
<CAPTION>
Partitions
- ----------
Qty Item Size
- --------------------------------------------
<C> <S> <C>
37 Partitions 48x65H
7 Partitions 36x43H
S Partitions 24x65H
12 Worksurface w/Ped. 48x24
2 Worksurface no/Ped. 48x24
10 Corner Units 48x48
20 Open Shelf 48x12
3 File Cabinets 15x29x40H
<CAPTION>
White Workstations
- ------------------
Qty Item Size
- --------------------------------------------
<C> <S> <C>
1 Corner Unit 48x48
1 Corner Unit 45x45
1 Desk with Pedestal 60x30
3 Desk, no Pedestal 48x30
4 Open Shelf 30x12x29H
4 Open Shelf 36x12x29H
1 Open Shelf 36x19x29H
<CAPTION>
Built-Ins
- ---------
<C> <S> <C>
1 Open Shelf 21 ft x l8"
1 Closed Storage 9.75ft x 18"
<CAPTION>
Chairs
- ------
<C> <S>
13 Black Conference
14 Gray Swivel
27 Teal Classroom
Cafeteria
- ---------
<C> <S> <C>
1 Refrigerator
1 Square Table 36x36
3 Round Table 24" dia
14 White Chairs
1 White Table w/Umbrella
<CAPTION>
13 Waste Baskets
- ----------------
</TABLE>
<PAGE>
LEASE AGREEMENT
1. Basic Provisions ("Basic Provisions")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
November 4th, 1994, is made by and between MCLELLAN ESTATE COMPANY, INC., a
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California corporation, ("LESSOR") and ORBITEK ENGINEERING, INC., a California
corporation, ("LESSEE"), (collectively the "PARTIES" or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease and commonly
known by the street address of 2220 Martin Avenue, Santa Clara, located in the
County of Santa Clara, State of California, and generally described as a
thirteen thousand four hundred (13,400) square foot portion of the larger
industrial building at the above address ("PREMISES") (See Exhibit "A", attached
hereto). (See Paragraph 2 for further provisions.)
1.3 TERM: The term of this Lease shall be for five (5) years and twenty-
three (23) days ("ORIGINAL TERM"), commencing on the seventh (7th) day of
November, 1994 ("COMMENCEMENT DATE") and ending on the thirtieth (30th) day of
November, 1999 ("EXPIRATION DATE").
1.4 EARLY POSSESSION: ("EARLY POSSESSION DATE"). (See Paragraphs 3.2
and 3.3 for further provisions.)
The rent for the period November 7, 1994 to November 30, 1994 shall be
paid by the present Lessee, Praxair, Inc.
1.5 BASE RENT: The total Base Rent payable for the period commencing
December 1, 1994 and ending December 31, 1994, shall be the sum of Nine Thousand
Three Hundred Eighty Dollars ($9,380); said sum shall be payable as follows:
Upon execution of this Lease, Lessee shall pay to Lessor the sum of Nine
Thousand Three Hundred Eighty Dollars ($9,380); said sum representing the first
month's rent, in addition to the Security Deposit set forth in Paragraph 1.7.
1.6 BASE RENT ADJUSTMENT: The Base Rent shall be adjusted as follows:
The total rent payable for the period commencing January 1, 1995 and
ending November 30, 1995 shall be the sum of One Hundred Nine Thousand Seventy-
Six Dollars ($109,076); said sum shall be payable as follows:
Commencing January 1, 1995 and continuing each and every month
thereafter through November 30, 1995, the rent payable by Lessee shall be the
sum of Nine Thousand Nine Hundred Sixteen Dollars ($9,916).
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The total rent payable for the period commencing December 1, 1995 and
ending November 30, 1999 shall be the sum of Four Hundred Eighty-Eight Thousand
Eight Hundred Thirty-Two Dollars ($488,832); said sum shall be payable as
follows:
Commencing December 1, 1995 and continuing each and every month
thereafter through November 30, 1999, the rent payable by Lessee shall be the
sum of Ten Thousand One Hundred Eighty-Four Dollars ($l0,184).
1.7 SECURITY DEPOSIT: Upon execution of this Lease, Lessee shall pay to
Lessor the sum of Nine Thousand Seven Hundred Twenty-eight Dollars ($9,728.00);
said sum representing a Security Deposit ("SECURITY DEPOSIT"). (See Paragraph 5
for further provisions.)
1.8 PERMITTED USE: General office and industrial use, and other related
legal uses. (See Paragraph 6 for further provisions.)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties: Collier & Parrish International
is acting in a dual capacity representing both Lessor and Lessee.
1.11 IMPROVEMENTS. Lessor shall, at Lessor's expense, construct certain
improvements to the leased Premises as described on the attached Exhibits B, C
and D; said improvements shall be completed on or prior to December 1, 1994 and
shall be subject to Lessee's execution of this Lease and the City of Santa Clara
Building and Fire Departments' approval of said improvements. The costs of the
improvements set forth in Exhibits B, C and D shall be amortized into the base
monthly rent over the term of the Lease at a rate of return of Ten Percent
(10%); said amount shall be along with and in addition to the base monthly rent
set forth hereinabove. Lessee shall have the option to have its contractor bid
out and construct said improvements, which contractor shall be subject to the
approval of Lessor; Lessor's approval shall not be unreasonably withheld.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based
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thereon is not subject to revision whether or not the actual square footage is
more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, electrical system including lighting, air
conditioning, heating, and loading doors, if any, in the Premises, other than
those constructed by Lessee, shall be in good operating condition on the
Commencement Date. In addition, Lessor warrants the roof to be structurally
sound and free from leaks. If a noncompliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such noncompliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice of a non-
compliance with this warranty within thirty (30) days after the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. Notwithstanding anything to the contrary
contained in this paragraph, Lessor warrants for the first twelve (12) months of
the term of this Lease that the heating and air conditioning unit is in good
working order and that the roof is structurally sound and free from leaks.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or
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warranties with respect to the said matters other than as set forth in this
lease.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms to this
Lease, however, (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect nor
advance the Expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within thirty (30) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does not terminate this Lease, as aforesaid, the period
free of the obligation to pay Base Rent, if any, that Lessee would otherwise
have enjoyed shall run from the date of delivery of possession and continue for
a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions of
Lessee.
4. RENT
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent
or charges, as the same may be adjusted from time to time, to be received by
Lessor in lawful money of the United States, without offset or deduction, on or
before the day on which it is due under the terms of this Lease. Base Rent and
all other rent and charges for any period during the term hereof
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which is for less than one (1) full calendar month shall be prorated based upon
the actual number of days of the calendar month involved. Payment of Base Rent
and other charges shall be made to Lessor at its address stated herein or to
such other persons or at such other addresses as Lessor may from time to time
designate in writing to Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit set forth in Paragraph 1.7 as security for Lessee's faithful
performance of Lessee's obligations under this Lease, if Lessee fails to pay
Base Rent or other rent or charges due hereunder, or otherwise Defaults under
this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain all
or any portion of said Security Deposit for the payment of any amount due Lessor
or to reimburse or compensate Lessor for any liability, cost, expense, loss or
damage (including attorneys' fees) which Lessor may suffer or incur by reason
thereof. If Lessor uses or applies all or any portion of said Security Deposit,
Lessee shall within ten (10) days after written request therefor deposit moneys
with Lessor sufficient to restore said Security Deposit to the full amount
required by this Lease. Lessor shall not be required to keep all or any part of
the Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any moneys to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
purposes set forth in Paragraph 1.8, or any other use which is comparable
thereto and for no other purpose. Lessee shall not use or permit the use of the
Premises in a manner that creates waste or a nuisance, or that disturbs owners
and/or occupants of, or causes damage to, neighboring Premises or properties.
6.2 HAZARDOUS SUBSTANCES
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liability of Lessor to any governmental agency
or third
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party under any applicable statute or common law theory. Hazardous Substance
shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude
oil or any products, byproducts or fractions thereof. Lessee shall not engage in
any activity in, on or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express prior written
consent of Lessor and compliance in a timely manner (at Lessee's sole cost and
expense) with all Applicable Law (as defined in Paragraph 6.3). "REPORTABLE USE"
shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or disposal
of a Hazardous Substance that requires a permit from or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority. Reportable Use shall also include Lessee's being
responsible for the presence in, on or about the Premises of a Hazardous
Substance with respect to which any Applicable Law requires that a notice be
given to persons entering or occupying the Premises or neighboring properties.
In addition, the term "HAZARDOUS SUBSTANCE" shall mean any substance or material
which has been determined to be capable of posing a risk of injury to health,
safety or property including, but not limited to, all of those materials and
substances now or at any later time designated or defined as "hazardous" or
"toxic" by: (aa) the Environmental Protection Agency, the California Water
Quality Control Board, the Department of Labor, the California Department of
Industrial Relations, the Department of Transportation, the Department of
Agriculture, the Consumer Product Safety Commission, the Department of Health
and Human Services, the Food and Drug Agency, or any other governmental agency
now or hereafter authorized to regulate materials and substances in the
environment; or by (bb) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. 9601, et seq., as amended; the Hazardous
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Materials Transportation Act; 49 U.S.C. Section 1801, et seq., as amended; the
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Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as
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amended; the Hazardous Waste Control Law, California Health & Safety Code
Section 25100, et seq., as amended; Sections 66680 through 66685 of Title 22 of
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the California Administration Code, Division 4, Chapter 30, as amended; and in
the regulations adopted and publications promulgated pursuant to said laws.
Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but
in compliance with all Applicable Law, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of Lessee's
business permitted on the Premises, so long as such use is not a Reportable Use
and does not expose the Premises or neighboring properties to any meaningful
risk of contamination or damage or expose Lessor to any liability therefor. In
addition, Lessor may (but without any obligation to do so) condition its consent
to the use or presence of any Hazardous Substance, activity or storage tank by
Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage,
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contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance, or a condition involving or resulting from
same, has come to be located in, on, under or about the Premises, other than as
previously consented to by Lessor, Lessee shall immediately give written notice
of such fact to Lessor. Lessee shall also immediately give Lessor a copy of any
statement, report, notice, registration, application, permit, business plan,
license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, concerning the presence, spill, release, discharge of, or exposure to,
any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be limited to, the effects of any contamination or bodily injury to person,
or damage to real or personal property or the environment created or suffered by
Lessee, any reduction in the fair market value or fair rental value of the
Premises, and the cost of investigation (including consultant's and attorney's
fees and testing), removal, remediation, restoration and/or abatement thereof,
or of any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances or storage
tanks, unless specifically so agreed by Lessor in writing at the time of such
agreement. The appearance of any Hazardous Substance in or about the Premises
shall be deemed an event of default and shall not be deemed an event of damage
or destruction which Lessor may be required to repair. Lessee shall not suffer
any lien to be recorded against the Premises as a consequence of a Hazardous
Substance in or about the Premises. Lessor represents that, to the best of
Lessor's knowledge, there are no Hazardous Substances on the demised premises.
Lessor shall indemnify Lessee against any Hazardous Substances that are
determined to have existed prior to the commencement date of this lease.
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6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee shall, at Lessee's sole cost and expense, fully, diligently and in
a timely manner, comply with all "APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined
in Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in
the case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
6.5 MATERIAL'S AFFECT ON ASSIGNMENT AND SUBLETTING. It shall not be
unreasonable for Lessor to withhold its consent to any proposed assignment or
subletting if the proposed assignee or sublessee has been required by any prior
lessor, lender or governmental authority to "clean up" Hazardous Substances.
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6.6 SURRENDER. Lessee shall surrender the Premises to Lessor upon the
expiration or earlier termination of the Lease free of any Hazardous Substances
caused by or brought upon the Premises by Lessee. If Lessee fails to so
surrender the Premises, Lessee shall indemnify and hold Lessor harmless from all
damages resulting from Lessee's failure to surrender the Premises as required by
this paragraph, including, without limitation, any claims or damages in
connection with the condition of the Premises including, without limitation,
damages occasioned by the inability to relet the Premises or a reduction in the
fair market and/or rental value of the Premises by reason of the existence of
any Hazardous Substance in or around the Premises.
(a) At the conclusion of this agreement, Lessee shall at its sole cost,
furnish to Lessor such certificate of compliance with local, state or federal
"toxics laws" as may be required for occupancy of the Premises by a new Lessee.
(b) Notwithstanding any provision to the contrary in this Lease, if any
action is required to be taken by a governmental authority to clean up, monitor
or remove a Hazardous Substance from the Premises introduced by Lessee and such
action is not completed prior to the expiration or earlier termination of the
Lease, then Lessor shall be entitled to recover all lost rent at the current
lease rate until the Premises are available for reletting.
6.7 USE PROHIBITED. Lessee shall not commit, or suffer to be committed,
any waste upon the said Premises, or any nuisance, or other act or thing which
may disturb the quiet enjoyment of any tenant in or around the buildings in
which the Premises may be located, or allow any sale by auction upon the
Premises, or allow the Premises to be used for any improper, immoral, unlawful
or objectionable purpose, or place any loads upon the floor, walls, or ceiling
which endanger the structure, or place any harmful liquids in the drainage
system of the building. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the Premises outside of the building
proper. No materials, supplies, equipment, finished products, or semi-finished
products, raw materials, or other articles of any nature shall be stored upon or
permitted to remain on any portion of the Premises outside of the building
proper.
7. MAINTENANCE; REPAIR; UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's warranty as to
condition), 2.3 (Lessor's warranty as to compliance with covenants, etc.), 7.2
(Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times,
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keep the Premises and every part thereof in good order, condition and
repair (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of such portion of the Premises), including,
without limiting the generality of the foregoing, all equipment or facilities
serving the Premises, such as plumbing, heating, air conditioning, ventilating,
electrical, lighting facilities, boilers, fired or unfired pressure vessels,
including smoke detection systems and equipment, fire hydrants, fixtures,
interior walls, ceilings, floors, windows, doors, plate glass, skylights, signs
located in, on, about, or adjacent to the Premises. Lessee shall not cause or
permit any Hazardous Substance to be spilled or released in, on, under or about
the Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of, the Premises, the elements surrounding same, or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance and/or storage tank brought
onto the Premises by or for Lessee or under its control. Lessee, in keeping the
Premises in good order, condition and repair shall exercise and perform good
maintenance practices. Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, and (ii) smoke detection devices.
(c) Lessor shall procure and maintain contracts for maintaining (i)
landscaping, irrigation and drainage systems, (ii) asphalt, parking lot,
retaining walls and fencing, (iii) fire alarm system, (iv) fire sprinklers
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire sprinklers, and (v) toilets; Lessee shall be responsible for its
prorata share of the costs of maintaining the items set forth in this Paragraph
7.1(c). Lessee may, from time to time, request Lessor provide Lessee with
documentation in support of said costs.
7.2 LESSOR'S OBLIGATIONS. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation
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of the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, other than the
foundation, exterior walls, roof structure and roofing, all other obligations to
repair and maintain are intended to be that of the Lessee under Paragraph 7.1
hereof. It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the
Premises. Lessee and Lessor expressly waive the benefit of any statute now or
hereafter in effect to the extent it is inconsistent with the terms of this
Lease with respect to, or which affords Lessee the right to make repairs at the
expense of Lessor or to terminate this Lease by reason of, any needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS" is
used in this Lease to refer to all carpeting, window coverings, air lines, power
panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about the Premises. The
term "TRADE FIXTURES" shall mean Lessee's machinery and equipment that can be
removed without doing material damage to the Premises. The term "ALTERATIONS"
shall mean any modification of the improvements on the Premises from that which
are provided by Lessor under the terms of this Lease, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "LESSEE
OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as Alterations
and/or Utility Installations made by Lessee that are not yet owned by Lessor as
defined in Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior written
consent. Lessee may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof, as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or
any existing walls, and the cumulative cost thereof during the term of this
Lease as extended does not exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with proposed detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities, (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon, and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease
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shall be done in a good and workmanlike manner, with good and sufficient
materials, and in compliance with all Applicable Law. Lessee shall promptly upon
completion thereof furnish Lessor with as-built plans and specifications
therefor. Lessor may (but without obligation to do so) condition its consent to
any requested Alteration or Utility Installation that costs $10,000 or more upon
Lessee's providing Lessor with a lien and completion bond in an amount equal to
one and one-half times the estimated cost of such Alteration or Utility
Installation and/or upon Lessee's posting an additional Security Deposit with
Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense defend and protect itself, Lessor
and the Premises against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor
a surety bond satisfactory to Lessor in an amount equal to one and one-half
times the amount of such contested lien claim or demand, indemnifying Lessor
against liability for the same, as required by law for the holding of the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorney's fees and costs in participating in
such action if Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require that
any or all Lessee Owned Alterations or Utility Installations be removed by the
expiration or earlier termination
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of this Lease, notwithstanding their installation may have been consented to by
Lessor. Lessor may require the removal at any time of all or any part of any
Lessee Owned Alterations or Utility Installations made without the required
consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, with all
of the improvements, parts and surfaces thereof clean and free of debris and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "ORDINARY WEAR AND TEAR" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee
is the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per claim. Premiums of policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due. If the
Premises is a part of a larger building, Lessee's liability for payment of the
applicable insurance premiums shall be prorated so as to reflect its
proportionate share of the premiums attributable to the leased Premises.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during the
term to this Lease a Commercial General Liability policy of insurance protecting
Lessee and Lessor (as an additional insured) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-
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Managers or Lessors of Premises" Endorsement and contain the "Amendment of the
Pollution Exclusion" for damage caused by heat, smoke or fumes from a hostile
fire. The policy shall not contain any intra-insured exclusions as between
insured persons or organizations, but shall include coverage for liability
assumed under this Lease as an "insured contract" for the performance of
Lessee's indemnity obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Lessee shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contributory with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only.
(b) CARRIED BY LESSOR. In the event Lessor is the Insuring Party, Lessor
shall also maintain liability insurance described in Paragraph 8.2(a), above, in
addition to, and not in lieu of, the insurance required to be maintained by
Lessee, Lessee shall not be named as an additional insured therein.
8.3 PROPERTY INSURANCE: BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and keep
in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trust or ground leases on the Premises ("LENDER(S)"), insuring loss or damage
to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the insuring Party, however, Lessee owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed One Thousand Dollars
($1,000)
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per occurrence, and Lessee shall be liable for such deductible amount in the
event of an Insured loss, as defined in Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and Lender(s), insuring the loss of the full
rental and other charges payable by Lessee to Lessor under this Lease for one
(1) year (including all real estate taxes, insurance costs, and any scheduled
rental increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger building, or
if the Premises are part of a group of buildings owned by Lessor which are
adjacent to the Premises, the Lessee shall pay for any increase in the premiums
for the property insurance of such building or buildings if said increase is
caused by Lessee's acts, omissions, use or occupancy of the Premises.
(d) LEASEHOLD IMPROVEMENTS. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed One Thousand
Dollars ($1000.00) per occurrence. The proceeds from any such insurance shall be
used by Lessee for the replacement of personal property or the restoration of
Lessee Owned Alterations and Utility Installations. Lessee shall be the Insuring
Party with respect to the insurance required by this Paragraph 8.4 and shall
provide Lessor with written evidence that such insurance is in force.
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8.5 WORKERS' COMPENSATION INSURANCE. In addition to the insurance
requirement of Paragraph 8 of this Lease, Lessee shall maintain a policy or
policies of Workers' Compensation Insurance and any other employee benefit
insurance sufficient to comply with all laws.
8.6 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+. V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand. If the
insuring Party shall fail to procure and maintain the insurance required to be
carried by the Insuring Party under this Paragraph 8, the other Party may, but
shall not be required to, procure and maintain the same, but at Lessee's
expense.
8.7 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.8 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground Lessor, partners and
Lenders, from and against any and all claims, loss or rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees;
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under
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this Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment, and whether well founded or not. In case any action or proceeding be
brought against Lessor by reason of any of the foregoing matters, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be so
indemnified.
8.9 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from tire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other Lessee of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "INSURED LOSS" shall mean Damage or Destruction to improvements on
the Premises, other than Lessee Owned Alterations and Utility Installations,
which was caused by an event required to be covered by the insurance described
in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits
involved.
(b) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(c) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by a
Hazardous Substance as defined in Paragraph 6,2(a), in, on, or under the
Premises.
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9.2 INSURED LOSS. In the event a Partial Damage or Destruction occurs
to the Premises during the term of this Lease, which Damage or Destruction is an
Insured Loss, then Lessor shall, at Lessor's expense repair such damage (but not
Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations)
as soon as reasonably possible, but in no event later than six months from the
date of damage, and this Lease shall continue in full force and effect;
provided, however, that Lessee shall, at Lessor's election, make the repair of
any Damage or Destruction, the total cost to repair of which is Ten Thousand
Dollars ($10,000) or less, and, in such an event, Lessor shall make the
insurance proceeds available to Lessee on a reasonable basis for that purpose.
If the repairs have not been completed within six months from the date of damage
subject to the provisions of Paragraph 9.10, Lessee shall have the option to
terminate this Lease. Notwithstanding the foregoing, if the required insurance
was not in force or the insurance proceeds are not sufficient to affect such
repairs, the insuring party shall promptly contribute the shortage in proceeds
(except as to the deductible which is Lessee's responsibility) as and when
required to complete said repairs. In the event, however, the shortage in
proceeds was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice of
such shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, the party responsible for
making the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If in
such case Lessor does not so elect, then this Lease shall terminate sixty (60)
days following the occurrence of the Damage or Destruction. Unless otherwise
agreed, Lessee shall in no event have any right to reimbursement from Lessor for
any funds contributed by Lessee to repair any such Damage or Destruction.
Partial Damage to the Premises due to flood or earthquake shall be subject to
Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be some
insurance coverage, but the net proceeds of any such insurance shall be made
available for the repairs if made by either Party. Notwithstanding anything to
the contrary contained in this Paragraph 9.2, if the required insurance was not
in force or the insurance proceeds are not sufficient to affect repairs and the
Damage or Destruction was caused by a negligent or willful act of Lessor, Lessor
shall make the repairs at Lessor's expense.
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9.3 UNINSURED LOSS. In the event a Partial Damage or Destruction occurs
to the Premises during the term of this Lease, which Damage or Destruction is
not an Insured Loss, unless caused by a negligent or wilful act of Lessee (in
which event Lessee shall make the repairs at Lessee's expense and this Lease
shall continue in full force and effect, but subject to Lessor's rights under
Paragraph 13), Lessor may at Lessor's option, either: (i) repair such damage as
soon as reasonably possible, but in no event later than six (6) months from the
date of damage, subject to the provisions of Paragraph 9.10, at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following Lessee's
said commitment. In such event this Lease shall continue in full force and
effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible, but in no event later than six months (6) from the date of damage, and
the required funds are available. If Lessee does not give such notice and
provide the funds or assurance thereof within the times specified above, this
Lease shall terminate as of the date specified in Lessor's notice of
termination. Notwithstanding anything to the contrary contained in this
Paragraph 9.3, if the damage or destruction was caused by a negligent or wilful
act of Lessor, Lessor shall make any such repairs at Lessor's expense.
9.4 TOTAL DESTRUCTION. Subject to the provisions of Paragraphs 9.5 and
9.6, if at any time during the term of this Lease the Premises are totally
destroyed (including any destruction required by an authorized public
authority), Lessor may, at Lessor's option, either (i) repair such Damage or
Destruction, but not Lessee's fixtures, equipment or tenant improvements, as
soon as reasonably possible, but in no event later than six (6) months from the
date of Damage or Destruction subject to the provisions of Paragraph 9.10, at
Lessor's expense, and this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall be cancelled and terminated as of the date
of the occurrence of such damage. In the event, however, that the Damage or
Destruction was caused by Lessee, Lessor shall have the right to recover
Lessor's damages from Lessee except as released and waived in Paragraph 8.6.
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9.5 DAMAGE NEAR END OF TERM.
(a) Notwithstanding Paragraph 9.2, in the event substantial Damage or
Destruction occurs to the Premises during the last six (6) months of the term of
this Lease, whether or not an Insured Loss, and Lessee has not exercised the
option to extend this Lease granted herein, Lessor or Lessee may, at their
option, terminate this Lease as of the date of occurrence of such damage
(b) Notwithstanding Paragraph 9.4, in the event Lessee has exercised the
option to extend or renew this Lease, Lessor shall, at Lessor's expense, repair
such damage, but not Lessee's fixtures, equipment or tenant improvements,
promptly, and this Lease shall continue in full force and effect. The repairs
of any such Damage or Destruction shall be governed by and in accordance with
the provisions set forth in Paragraphs 9.2 and 9.3 hereinabove.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial Damage-
Insured) and in the event Lessee has not elected to terminate this Lease as a
result of Lessor's failure to repair the damage within the time frame set forth
in Paragraph 9.2, whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Premises under
the provisions of this Paragraph 9 and shall not commence, in a substantial and
meaningful way, the repair or restoration of the Premises promptly within sixty
(60) days, subject to the provision of Paragraph 9.10, after such obligation
shall accrue, Lessee may, at any time prior to the commencement of such repair
or restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice of Lessee's election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice. If Lessee gives
such notice to Lessor and such Lenders and such repair or restoration is not
commenced within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after receipt of such notice, this Lease shall continue in full
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force and effect. "COMMENCE" as used in this Paragraph shall mean the beginning
of the actual work on the Premises.
9.7 HAZARDOUS SUBSTANCE CONDITION. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly base
rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance Condition
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period not to exceed twelve (12) months.*
9.8 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 LESSOR'S OBLIGATIONS, WAIVER OF STATUTES. If Lessor elects or is
required hereunder to repair, reconstruct or to restore the Premises after any
Damage or Destruction thereto, Lessee shall, as an added expense, as soon as
reasonably practicable, replace or fully repair, reconstruct or restore its
improvements, betterments, fixtures, exterior signs, merchandise
* Lessor shall indemnify and hold lessee harmless for any and all damages that
lessee may suffer as a result of any hazardous substance discovered on the
premises and attributed to a prior occupant of the premises
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and property. Lessor and Lessee agree that the terms of this Lease shall govern
the effect of any damage to or destruction of the Premises with respect to the
termination of this Lease and hereby waive the provisions of any present or
future statute to the extent inconsistent herewith.
9.10 UNAVOIDABLE DELAYS. Any prevention, delay caused by fault or neglect
of Lessee, stoppage due to strikes, lockout, sabotage, labor disputes, acts of
God, power failures, fire or other casualty, freight embargos, rainy or stormy
weather, inability to obtain materials, supplies or fuels or reasonable
substitutes therefore, governmental restrictions, governmental regulations,
governmental controls, an enemy or hostile governmental actions, war or war-like
operations, civil commotion and other causes beyond the reasonable control of
the Lessor shall excuse performance by Lessor of any of Lessor's obligation
under this Lease for a period equal to any such delay, prevention or stoppage.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor, upon demand.
(b) ADVANCE PAYMENT. In order to insure payment when due and before
delinquency of any or all Real Property Taxes, Lessor reserves the right, at
Lessor's option, to estimate the current Real Property Taxes applicable to the
Premises, and to require such current year's Real Property Taxes to be paid in
advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be that
equal monthly amount which, over the number of months remaining before the month
in which the applicable tax installment would become delinquent (and without
interest thereon), would provide a fund large enough to fully discharge before
delinquency the estimated installment of taxes to be paid. When the actual
amount of the applicable tax bill is known, the amount of such equal monthly
advance payment shall be adjusted as required to
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provide the fund needed to pay the applicable taxes before delinquency. If the
amounts paid to Lessor by Lessee under the provisions of this Paragraph are
insufficient to discharge the obligations of Lessee to pay such Real Property
Taxes as the same become due, Lessee shall pay to Lessor, upon Lessor's demand,
such additional sums as are necessary to pay such obligations. All moneys paid
to Lessor under this Paragraph may be intermingled with other moneys of Lessor
and shall not bear interest. In the event of a Breach by Lessee in the
performance of the obligations of Lessee under this Lease, then any balance of
funds paid to Lessor under the provisions of this Paragraph may, subject to
proration as provided in Paragraph 10.1(a), at the option of Lessor, be treated
as an additional Security Deposit under Paragraph 5.
10.2 DEFINITION OF "REAL PROPERTY TAXES". As used herein, the term
"REAL PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "REAL PROPERTY TAXES" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in Applicable Law taking
effect during the term of this Lease, including but not limited to, a change in
the ownership of the Premises or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee
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shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other Premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or
in the Premises without Lessor's prior written consent given under and subject
to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%), of
such Net Worth of Lessee as it was represented to Lessor at the time of the
execution by Lessor of this Lease or at the time of this most recent assignment
to which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, at whichever time said
Net Worth of Lessee was or is greater, shall be considered an assignment of this
Lease by Lessee to which Lessor may reasonably withhold its consent. "NET WORTH
OF LESSEE" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a noncurable Breach, Lessor
shall have the right to either: (i) terminate this Lease,
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or (ii) upon thirty(30) days written notice ("Lessor's Notice"), increase the
monthly Base Rent to fair market rental value or one hundred ten percent (110%)
of the Base Rent then in effect, whichever is greater. Pending determination of
the new fair market rental value, if disputed by Lessee, Lessee shall pay the
amount set forth in Lessor's Notice, with any overpayment credited against the
next installment(s) of Base Rent coming due, and any underpayment for the period
retroactively to the effective date of the adjustment being due and payable
immediately upon the determination thereof. Any fixed rental adjustments
scheduled during the remainder of the Lease term shall be increased in the same
ratio as the new market rental bears to the Base Rent in effect immediately
prior to the market value adjustment.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not: (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent, and such
action shall not relieve such persons from liability under this Lease or
sublease.
(d) In the event of any Default or Breach of Lessee's obligations under
this Lease, Lessor may proceed directly against Lessee, any Guarantors or any
one else responsible for the performance of the Lessee's obligations under this
Lease, including the sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
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(e) Each request for consent to any assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to, the intended use and/or
required modification of the Premises, if any.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.1(c) shall
give Lessor the right (but not the obligation) to require that the Security
Deposit be increased to an amount equal to two (2) times the then monthly Base
Rent, and Lessor may make the actual receipt by Lessor of the amount required to
establish such Security Deposit a condition to Lessor's consent to such
transaction.
(h) Lessor, as a condition to giving its consent to any assignment, or
subletting, may require that the amount and adjustment structure of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment structure for property similar to the Premises as then constituted.
12.3 FACTORS DETERMINING LESSOR'S CONSENT. Lessor and Lessee agree that
any one of the following factors, or any other reasonable factor, will be
reasonable grounds for deciding Lessee's request to assign or sublet the
Premises:
(a) Financial strength of the proposed sublessee/assignee;
(b) Business reputation of the proposed sublessee/ assignee;
(c) Use of the Premises by the proposed sublessee/ assignee must be
identical to the use permitted by this Lease;
(d) Use of the Premises by the proposed sublessee/assignee will not
violate or create any potential violation of any laws;
(e) Use of the Premises will not violate any other agreements effecting
the Premises, the Lessor or the other lessees.
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12.4 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, collect the rents accruing
under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor, nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
SubLessee shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor. Any additional rent received by Lessee from its sublessee
in excess of the rent payable by Lessee to Lessor shall be divided equally
between Lessor and Lessee.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior Defaults
or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default to the
sublessee, who shall have the right to
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cure the Default of Lessee within the grace period, if any, specified in such
notice. The sublessee shall have a right of reimbursement and offset from and
against Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "DEFAULT" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "BREACH"
is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, and shall entitle Lessor to pursue the remedies set forth in Paragraphs
13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy same,
or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure by
Lessee to make any payment of Base Rent or any other monetary payment required
to be made by Lessee hereunder, whether to Lessor or to a third party, as and
when due, the failure by Lessee to provide Lessor with reasonable evidence of
insurance or surety bond required under this Lease, or the failure of Lessee to
fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of three (3) days following
written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure by
Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7,1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraph 37, (vii) the execution of any document requested under
Paragraph 43 (Reservations), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this Lease,
where any such failure continues for a period of ten (10) days following written
notice by or on behalf of Lessor to Lessee.
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(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U. S. C. Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee interest in this Lease, where possession is
not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(f) The discovery by Lessor that any financial statement given to Lessor
by Lessee or any Guarantor of Lessee's obligations hereunder was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor, (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a guarantor's refusal to honor the guaranty, or (v) a
guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the guarantors that existed at the time of execution of this Lease.
(h) Recurring or habitual late payment of rent or other curable defaults
or breaches by Lessee are damaging and detrimental to Lessor, both as a matter
of administration of the Premises and as a matter of economics. Therefore, if
during any period of twelve (12) consecutive calendar months, three or more
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separate defaults occur (whether curable defaults or not) for which Lessor
issues a "habitual default notice" (as hereinafter defined) to Lessee, Lessee
shall be deemed to be in default of this Lease and such default shall not be
curable (a "non-curable default"). Lessor shall have and may exercise all of the
rights and remedies available to Lessor by law and as specified in this Lease
with regard to any such non-curable default. If the provisions of California
Code of Civil Procedure Section 1161 as amended do not apply to, or are not
available for, a non-curable default, Lessor may nevertheless exercise any of
the rights and remedies otherwise available to Lessor. For the purposes hereof,
a "HABITUAL DEFAULT NOTICE" shall mean and include any written notice, letter or
communication from Lessor to Lessee which reasonably notifies or draws Lessee's
attention to the fact that Lessee is then in default under, or in breach of,
this Lease and that said default is considered by Lessor to be one which
constitutes a portion of a non-curable default.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease and the term hereof shall terminate and Lessee
shall immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee pursuant to Civil Code Section
1951.2 as amended: (i) the worth at the time of the award of the unpaid rent
which had been earned at the time of termination; (ii) the worth at the time of
award of the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
the Lessee proves could have been reasonably avoided; (iii) the worth at the
time of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the Lessee
proves could be reasonably avoided; and (iv) any other amount necessary to
compensate Lessor for all the detriment proximately caused by the Lessee's
failure to perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including but not limited
to the cost
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of recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and that portion of the leasing commission paid by Lessor applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the prior sentence shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent. Efforts by Lessor to mitigate
damages caused by Lessee's Default or Breach of this Lease shall not waive
Lessor's right to recover damages under this Paragraph. If termination of this
Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding the unpaid rent and damages
as are recoverable therein, or Lessor may reserve therein the right to recover
all or any part thereof in a separate suit for such rent and/or damages. If a
notice and grace period required under subparagraphs 13.1 (b), (c) or (d) was
not previously given, a notice to pay rent or quit, or to perform or quit, as
the case may be, given to Lessee under any statute authorizing the forfeiture of
Leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1 (b), (c) or (d). If such
case, the applicable grace period under subparagraphs 13.1 (b), (c) or ((d) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease shall not constitute a termination
of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
(e) In the event any personal property of Lessee remains at the Premises
after Lessee has vacated, it shall be dealt with
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in accordance with the statutory procedures established in California Civil
Code, Sections 1980 et seq. or any subsequent procedures established by law to
deal with the disposition of personal property of Lessee remaining on the
Premises after Lessee has vacated.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS", shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
"lNDUCEMENT PROVISION" shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%) of
such overdue amount. The parties hereby agree that such late charge represents
a fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) consecutive installments of Base Rent,
then notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
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13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground Lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION.
14.1 If the Premises or any portion thereof are taken under the power
of eminent domain or sold under the threat of the exercise of said power (all of
which are herein called "CONDEMNATION"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of the floor area of the
Premises, or more than twenty-five percent (25%) of the land area not occupied
by any building, is taken by condemnation, Lessee may, at Lessee's option, to be
exercised in writing within ten (10) days after Lessor shall have given Lessee
written notice of such taking (or in the absence of such notice, within ten (10)
days after the condemning authority shall have taken possession) terminate this
Lease as of the date the condemning authority takes such possession. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the Base Rent shall be reduced in the same proportion as the
rentable floor area of the Premises taken bears to the total rentable floor area
of the building located on the Premises. No reduction of Base Rent shall occur
if the only portion of the Premises taken is land on which there is no building.
Any award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above the legal and other expenses
incurred by Lessor in the condemnation matter, repair any damage to the Premises
caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority, Lessee shall be
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responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
14.2 If (i) any action or proceeding is commenced for such taking of
the Premises or any part thereof, or if Lessor is advised in writing by any
entity or body having the right or power of condemnation of its intention to
condemn the Premises or any portion thereof, or (ii) any of the foregoing events
occur with respect to the taking of any space in the building of which the
Premises are a part not Leased hereby, or if any such spaces taken or conveyed
in lieu of such taking and Lessor shall decide to discontinue the use and
operation of the building of which the Premises are a part, or decide to
demolish, alter or rebuild the building of which the Premises are a part, then
in any such event Lessor may at Lessor's option, terminate this Lease by giving
Lessee written notice thereof within thirty (30) days of any such events
occurring, which termination shall take place sixty (60) days following such
notice or on the date on which title to the Premises shall vest in the
condemnor.
15. BROKER'S FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers.
15.3 In the event of termination because of a breach of this Lease,
Lessee shall pay to Lessor that portion of the leasing commission paid by Lessor
applicable to the unexpired term of this Lease.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days
after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
Lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such Lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such
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financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within thirty (30) days
following the date on which it was due, shall bear interest from the thirty-
first (31st) day after it was due at the rate of twelve percent (12%) per annum,
but not exceeding the maximum rate allowed by law, in addition to the late
charge provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises, Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by
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messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 23. The addresses noted adjacent to a Party's
signature on this Lease shall be that Party's address for delivery or mailing of
notice purposes. Either Party may by written notice to the other specify a
different address for notice purposes, except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for
the purpose of mailing or delivering notices to Lessee. A copy of all notices
required or permitted to be given to Lessor hereunder shall be concurrently
transmitted to such party or parties at such addresses as Lessor may from time
to time hereafter designate by written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
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25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the state in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the court
in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other Party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (i)
be liable for any act or omission of any prior Lessor or with
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respect to events occurring prior to acquisition of ownership, (ii) be subject
to any offsets or defenses which Lessee might have against any prior Lessor, or
(iii) be bound by prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-disturbance
agreement as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in the
same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term "Prevailing Party" shall
include, without limitation, a Party or Broker who substantially obtains or
defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be' entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such Alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease"
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signs. All such activities of Lessor shall be without abatement of rent or
liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that Lessee
may, with Lessor's prior written consent, install (but not on the roof) such
signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
applicable governmental codes and the provisions of Paragraph 7 (Maintenance,
Repairs, Utility Installations, Trade Fixtures and Alterations). Unless
otherwise expressly agreed herein, Lessor reserves all rights to the use of the
roof and the right to install, and all revenues from the installation of, such
advertising signs on the Premises, including the roof, as do not unreasonably
interfere with the conduct of Lessee's business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (AUCTIONS) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
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reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease, the form of the
guaranty to be executed by each such Guarantor shall be similar to the form most
recently published by the American Industrial Real Estate Association, and each
said Guarantor shall have the same obligations as Lessee under this Lease,
including but not limited to the obligation to provide the Tenancy Statement and
information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if
any such Guarantor fails or refuses, upon reasonable request by Lessor to give:
(a) evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing or,
Guarantor's behalf to obligate such Guarantor on said guaranty, and including in
the case of a corporate Guarantor a certified copy of a resolution of its board
of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "Option" means
the right of first refusal to lease other property of Lessor or the right of
first offer to lease other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. The Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
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39.3 EFFECT OF DEFAULT ON OPTION.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of Default under Paragraph 13.1, whether or not the Defaults
are cured, during the twelve (12) month period immediately preceding the
exercise of the Option.
(b) The period of time within which an Option may be exercised shall not
be extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three or more notices of Default under Paragraph 13.1 during any twelve
month period, whether or not the Defaults are cured, or (iii) if Lessee commits
a Breach of this Lease.
39.4 OPTION TO LEASE ADDITIONAL ADJOINING PROPERTY OF LESSOR. Lessee is
given an option to lease additional adjacent expansion space from Lessor on all
of the provisions contained in this Lease except for rent for the five (5) year
------ --- ----
period of this Lease. Lessor shall notify Lessee of Lessor's intention to lease
additional adjacent space and the rent, and/or of a proposal of a third party to
lease said space that is acceptable to Lessor. If Lessee, within ten (10) days
after receipt of Lessor's notice, indicates in writing its agreement to lease
the adjacent expansion space, the expansion space shall be included within the
premises and leased to Lessee pursuant to the provisions of this Lease. However,
the rent payable under the Lease shall be the amount set forth in Lessor's
notice for the expansion space in addition to the amount payable under the
Lease. The parties shall immediately execute an amendment to this Lease stating
the addition of the expansion to the premises.
If Lessee does not indicate within ten (10) days its agreement to lease
the adjacent expansion space, Lessor shall thereafter have the right to lease
the adjacent expansion space or part of it to a third party at the rent stated
in the notice.
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40. MULTIPLE BUILDINGS. If the Premises are part of a group of
buildings controlled by Lessor, Lessee agrees that it will abide by, keep and
observe all reasonable rules and regulations which Lessor may make from time to
time for the management, safety, care, and cleanliness of the grounds, the
parking and unloading of vehicles and the preservation of good order, as well as
for the convenience of other occupants or lessees of such other buildings and
their invitees, and that Lessee will pay its fair share of common expenses
incurred in connection therewith.
41. COMMON AREA.
(a) DEFINITION. Lessee acknowledges that the demised premises are part
of a larger building owned by Lessor and that Lessor leases the adjoining space
to a separate and distinct tenant. The term "COMMON AREA" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the building of which the Leased Premises are a part that are provided and
designated by the Lessor from time to time for the general non-exclusive use of
Lessor, Lessee and other lessees of the building and their respective employees,
suppliers, shippers, customers and invitees, including parking areas, loading
and unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscape areas.
(b) LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for the benefit of
Lessee and its employees, suppliers, shippers, customers and invitees, during
the Term of this Lease, the non-exclusive right to use, in common with others
entitled to such use, the Common Areas as they exist from time to time, subject
to any rights, powers, and privileges reserved by Lessor under the terms hereof
or under the terms of any rules and regulations or restrictions governing the
use of the Common Area. Under no circumstances shall the right herein granted
to use the Common Areas be deemed to include the right to store any property,
temporarily or permanently, in the Common Areas. Any such storage shall be
permitted only by the prior written consent of Lessor or Lessor's designated
agent, which consent may be revoked at any time. In the event that any
unauthorized storage shall occur, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which costs shall be
immediately payable upon demand by Lessor.
(c) COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable rules and regulations with respect thereto.
Lessee agrees to abide by and conform to all such rules and regulations, and to
cause its employees, suppliers, shippers, customers, and invitees to so abide
and conform. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees of the Common Areas.
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(d) COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time: (i) To make changes to the Common Areas,
including, without limitation, changes in the location, size, shape and number
of driveways, entrances, parking spaces, parking area, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas and walkways;
(ii) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available; (iii) To
designate other land outside the boundaries of the Common Areas to be a part of
the Common Areas; (iv) To add additional buildings and improvements to the
Common Areas; (v) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the existing buildings, or any portion
thereof; (vi) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas as Lessor may, in the exercise of
sound business judgment, deem to be appropriate; (vii) Lessor reserves the
right to use the air space above the Common Areas for construction of
improvements or for any other purpose so long as such use does not unreasonably
interfere with the non-exclusive right to use the surface of the Common Areas
granted to Lessee by this Lease. In exercising any such rights regarding the
Common Area as set forth hereinabove, Lessor shall make a reasonable effort to
minimize any disruption to Lessee's business.
(e) PARKING. The parking spaces allocated to the demised Premises,
are delineated in Exhibit "E", attached hereto and incorporated by reference
herein. Lessee shall take all necessary measures to avoid utilizing, during
normal business hours, visitor and executive parking for all other tenants
occupying the Premises located within the Martin Business Center.
42. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
43. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
44. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to
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make payment "under protest" and such payment shall not be regarded as a
voluntary payment and there shall survive the right on the part of said Party to
institute suit for recovery of such sum. If it shall be adjudged that there was
no legal obligation on the part of said Party to pay such sum or any part
thereof, said Party shall be entitled to recover such sum or so much thereof as
it was not legally required to pay under the provisions of this Lease.
45. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
46. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
47. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
48. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
49. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF Lessor AND Lessee WITH RESPECT TO THE
PREMISES.
44
<PAGE>
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Santa Clara, CA Executed at Santa Clara, CA
--------------------- ---------------------
on November 4, 1994 on November 4th, 1994
------------------------------ ------------------------------
LESSOR: LESSEE:
MCLELLAN ESTATE COMPANY, INC., ORBITEK ENGINEERING, INC.,
a California Corporation a California Corporation
By: /s/ Laureston H. McLellan By:
----------------------------- -------------------------------
Laureston H. McLellan
President
707 Old County Road Address: 2220 Martin Ave.
Belmont, California 94002 Santa Clara, CA 95050
Tel. No.: (415) 592-5650 Tel. No.: (____) _________________
--- --------
Fax No.: (415) 592-5774 Fax No.: (____) _________________
--- --------
<PAGE>
MEMORANDUM OF LEASE
McLELLAN ESTATE COMPANY, Inc., a California corporation, hereby leases
to ORBITEK ENGINEERING, INC., a California corporation, for the term beginning
the first (1st) day of November, 1994 and continuing for a period of five (5)
years, ending on the thirty-first (31st) day of October, 1999, the following
property:
13,400 square feet of the larger industrial building located at
2220 Martin Avenue in the City of Santa Clara, County of Santa
Clara, State of California.
The provisions set forth in a written Lease Agreement between the
parties dated the 4th day of November, 1994, are hereby incorporated in this
--- --------
memorandum.
Executed this 4th day of November, 1994, at Santa Clara, California.
--- -------- -----------
LESSOR: LESSEE:
McLELLAN ESTATE COMPANY, INC., ORBITEK ENGINEERING, INC.,
a California Corporation a California Corporation
By: /s/ Laureston H. McLellan By:
----------------------------- -------------------------------
Laureston H. McLellan
President
707 Old County Road Address: 2220 Martin Ave.
Belmont, California 94002 Santa Clara, CA 95050
<PAGE>
EXHIBIT A
Building Layout.
<PAGE>
AMENDMENT TO LEASE
This Amendment to Lease is made and entered into as of July 17, 1995 by and
between McLELLAN ESTATE CO. ("LESSOR") and ORBITEK ENGINEERING, INC. ("LESSEE").
RECITALS
A. Lessor and Lessee have previously entered into that certain Lease
agreement dated November 4, 1994 and amended November 23, 1994 for a portion of
an industrial building located at 2210-2220 Martin Avenue, Santa Clara,
California.
B. Lessor and Lessee desire to amend the lease and the amendment dated
November 23, 1994 to reflect their agreement with respect to the Base Rent and
square footage of the leased space for the balance of the lease term.
NOW THEREFORE, in consideration of the mutual covenants and conditions contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The leased premises shall consist of 32,806 (plus or minus) square feet.
This is a result of absorbing 18,166 square feet from CMX Corporation at 2230
Martin Avenue.
2. The monthly rent for August 1995 shall be TWENTY-TWO THOUSAND FOUR
HUNDRED SIXTY ($22,460.00) DOLLARS based on the current paid along with the rent
for the space absorbed from CMX. The rent for August 1995 and each month
thereafter shall be $22,460.00 through October 31, 1997. Effective November 1,
1997 and through November 30, 1999, the monthly rent shall increase to TWENTY-
SIX THOUSAND NINE HUNDRED TWENTY-SIX ($26,926.00) DOLLARS.
4. Except as modified herein, the lease and each of its terms and
conditions shall remain in full force and effect.
Lessor:
McLELLAN ESTATE CO.
By: /s/ Laureston H. McLellan
--------------------------
Date: 7/20/95
------------------------
<PAGE>
Lessee:
ORBITEK ENGINEERING, INC.
By: /s/ J. Lynn Elliott
------------------------
Date: 7-20-95
----------------------
<PAGE>
EXHIBIT B
Floor Plan
<PAGE>
EXHIBIT 10.15
SUBLEASE
Effective as of June 11, 1997 Mentor Graphics Corporation, 8005 SW Boeckman
Road, Wilsonville, Oregon 97070-7777 an Oregon corporation, on behalf of its
wholly-owned subsidiary, Microtec Research, Inc., (Sublessor), and Aurum
Software Inc. (Sublessee) agree that subject to the terms and conditions set
forth below, Sublessee shall sublease from Sublessor a portion of those premises
in Santa Clara, California described as Suite 1300 and Suite 500, 2350 Mission
College Boulevard (Premises) consisting of approximately 38,288 rentable square
feet. The Premises are more particularly shown in Exhibit A.
1 TERM: The term of this Sublease shall commence on June 1, 1997 or upon
Sublessor's vacating the Premises whichever occurs later, and terminate on
February 28, 2003, unless otherwise terminated.
2. COMPLIANCE WITH MASTER LEASE: Except as otherwise specifically set forth in
this Sublease, Sublessee shall comply with all of the provisions of the
lease (Master Lease) between Sublessor and Maskatiya, Suri & Co., Inc.
(Lessor), dated June 23, 1988, as amended and supplemented. The Master Lease
is attached as Exhibit B and incorporated by this reference. Sublessee shall
avoid any acts or failures to act which, if attributed to Sublessor, would
cause a default under the Master Lease. To the extent the Master Lease
requires Sublessor to obtain Lessor's consent or approval to an action which
Sublessee proposes, Sublessee shall obtain Lessor's and Sublessor's prior
consent or approval. Sublessor will not unreasonably withhold consent and
will act in good faith in considering Sublessee's requests. Sublessor will
reasonably cooperate with Sublessee in requests to obtain Lessor's consent.
3. RENT: Commencing August 1, 1997, Sublessee shall pay to Sublessor in advance
on or before the first day of each month monthly base rent as follows:
<TABLE>
<S> <C>
August, 1997 through and including month 24: $87,396.52 ($2.281/ square foot)
Months 25 through and including month 48: $91,225.32 ($2.38/ square foot)
Months 49 through and including month 69: $95,054.12 ($2.48/ square foot)
</TABLE>
Sublessee shall pay as additional rent over base year (1997) its portion of
the increases in operating expenses of the property as defined in the Master
Lease and as identified by the Lessor.
4. FIRST MONTH'S RENT AND SECURITY DEPOSIT: Upon Sublease execution, Sublessee
shall pay to Sublessor the first month's rent and a security deposit
equivalent to the last month's full rent.
5. USE: The Premises may be used by Sublessee for general office use and
activities incidental to Sublessee's operation of the Premises, and in
conformity to the municipal zoning requirements of the City of Santa Clara.
6. ALTERATIONS: Except as otherwise provided herein, Sublessee accepts the
Premises in its present condition. Sublessee may, at its own expense, make
any alterations or improvements (Alterations), in and to the Premises which
Sublessee may deem necessary or
<PAGE>
suitable. Such Alterations shall be made in a good and workmanlike manner,
without impairing the structural soundness of the Premises. All Alterations
shall be made at Sublessee's sole cost and only after obtaining the prior
written consent of Sublessor and Lessor. Sublessor reserves the right to
require the removal of any Alterations which are installed by Sublessee, at
Sublessee's sole cost and expense upon expiration of the Sublease. Sublessor
shall clean the Premises prior to commencement.
In addition, Sublessor shall leave the Premises in broom clean condition and
provide an Alterations allowance of Seventy Six Thousand Five Hundred Seventy
Six and no/l00ths Dollars ($76,576.00). Payable on completion of Alterations
in the Premises.
MAINTENANCE AND REPAIRS: Sublessee shall be responsible for all maintenance
and repairs chargeable to Sublessor under the terms of the Master Lease.
8. INSURANCE:
(a) Sublessee shall carry fire and commercial liability insurance to protect
against loss by reason of injury to persons and damage to property
directly or indirectly arising out of Sublessee's occupancy of the
Premises. A certificate of such insurance shall be furnished to
Sublessor. The certificate shall name Sublessor as additional insured
and shall provide that the insurer shall provide Sublessor with 30 days
written notice of any cancellation or reduction of insurance coverage.
The limits of liability for all requirements contained herein shall be
not less than $1,000,000 single limit.
(b) Sublessor shall have no responsibility for the contents of the Premises,
including Sublessee's personal property, and shall have no
responsibility to provide insurance for said contents. Both Sublessee
and Sublessor waive the right to subrogation in the event of a loss
which occurs during the term of this Sublease.
9. INDEMNIFICATION: Sublessee assumes all risk in connection with its use of
the Premises and shall indemnify Sublessor for costs, damages, loss,
liability or expense actually incurred, including attorney's fees, damages
for injury to or death of persons and loss of or damage to property directly
caused by Sublessee's use or occupancy of the Premises.
10. ASSIGNMENT: This Sublease shall not be assigned or transferred without the
prior written consent of Sublessor. Any assignment or transfer in
contradiction of this paragraph shall be void.
11. DEFAULT AND TERMINATION: If Sublessee defaults in its obligations under this
Sublease, and such default continues for a period of ten days after written
notice has been delivered Sublessee, Sublessor may, at its option, terminate
this Sublease. If the default cannot be remedied within ten days by use of
reasonable diligence by Sublessee, additional time shall be granted by
Sublessor. Upon termination of this Sublease due to default by Sublessee,
Sublessee shall immediately surrender the Premises to Sublessor, in good
order and condition, reasonable wear and tear excepted. Any unpaid rent or
other sums due Sublessor shall draw interest at the rate of 18% per annum
from the date due until paid. Sublessor may terminate this Sublease at any
time and for any reason upon 30 days prior written notice to Sublessee.
<PAGE>
12. NOTICE: Notice under this Sublease shall be given by United States Mail
addressed to Sublessor at 8005 SW Boeckman Road, Wilsonville, Oregon 97077,
Attention: General Counsel and to Sublessee at 2350 Mission College
Boulevard, Suite 1300.
13. CONSENT BY LESSOR: The written consent of Lessor to this Sublease, in
compliance with the terms of the Master Lease, is set forth below.
14. PRIOR AGREEMENTS: This Sublease shall, when executed by the parties,
supersede and replace all prior agreements between the parties regarding the
occupancy and use of the Premises.
15. SIGNAGE: Sublessee shall have signage rights as allowed by the Master
Lessor, Sublessor and the City of Santa Clara.
* ATTACHMENT A
AGREED & ACCEPTED:
"Sublessor" Mentor Graphics Corporation "Sublessee" Aurum Software Inc.
on behalf of its wholly-owned
subsidiary,
Microtec Research, Inc.
By: /s/ James W. Pond By: /s/ Chris L. Dier
------------------------------- -----------------------------
Name: JAMES W. POND Name: CHRIS L. DIER
----------------------------- ---------------------------
Its: Director of Facilities Its: CFO
------------------------------ ----------------------------
Date: 1/21/97 Date: 1/14/97
----------------------------- ---------------------------
"Lessor" Maskatiya, Suri & Co., Inc.
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
Date:
-----------------------------
<PAGE>
SUBLEASE
Attachment A
1. Sublessor agrees that at the Commencement Date the electrical, HVAC, plumbing
and other Systems serving the Premises shall be provided in good working
condition.
2. Sublessor acknowledges that it has the authority to offer the Premises on the
terms and conditions as stated in the Sublease.
3. As specified in paragraph 59.3 of the original Microtec lease for Regency
Towers, Rent includes Project Operating Expenses. Sublessee agrees it is
responsible for paying any increases in Project Operating Expenses over the
base year of 1997.
CD
- ----
JWP
- ----
<PAGE>
EXHIBIT A
MICROTEC RESEARCH
13TH FLOOR
5/22/96
[FLOOR PLAN]
<PAGE>
EXHIBIT A
MICROTEC RESEARCH
5TH FLOOR
5/22/96
[FLOOR PLAN]
<PAGE>
REGENCY PLAZA
OFFICE BUILDING LEASE
TENANT: Microtec Research, Incorporated a California Corporation
-------------------------------------------------------------------
FLOOR: Fifth Floor
-------------------------------------------------------------------
SUITE: 500
-------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
OFFICE BUILDING LEASE
REGENCY PLAZA
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1 LEASE OF PREMISES.................................... 1
Article 2 DEFINITIONS.......................................... 1
Article 3 EXHIBITS AND ADDENDA................................. 2
Article 4 DELIVERY OF POSSESSION............................... 2
Article 5 RENT................................................. 2
Article 6 INTEREST AND LATE CHARGES............................ 4
Article 7 SECURITY DEPOSIT..................................... 4
Article 8 TENANT'S USE OF THE PREMISES......................... 4
Article 9 SERVICES AND UTILITIES............................... 5
Article 10 CONDITION OF THE PREMISES............................ 5
Article 11 CONSTRUCTION, REPAIRS AND MAINTENANCE................ 5
Article 12 ALTERATIONS AND ADDITIONS............................ 6
Article 13 LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY............ 6
Article 14 RULES AND REGULATIONS................................ 6
Article 15 CERTAIN RIGHTS RESERVED BY LANDLORD.................. 7
Article 16 ASSIGNMENT AND SUBLETTING............................ 7
Article 17 HOLDING OVER......................................... 7
Article 18 SURRENDER OF PREMISES................................ 8
Article 19 DESTRUCTION OR DAMAGE................................ 8
Article 20 EMINENT DOMAIN....................................... 8
Article 21 INDEMNIFICATION...................................... 8
Article 22 TENANT'S INSURANCE................................... 9
Article 23 WAIVER OF SUBROGATION................................ 9
Article 24 SUBORDINATION AND ATTORNMENT......................... 9
Article 25 TENANT ESTOPPEL CERTIFICATES......................... 9
Article 26 TRANSFER OF LANDLORD'S INTEREST...................... 10
Article 27 DEFAULT.............................................. 10
Article 28 BROKERAGE FEES....................................... 11
Article 29 NOTICES.............................................. 11
Article 30 GOVERNMENT ENERGY OR UTILITY CONTROLS................ 11
Article 31 RELOCATION OF PREMISES............................... 11
Article 32 QUIET ENJOYMENT...................................... 12
Article 33 OBSERVANCE OF LAW.................................... 12
Article 34 FORCE MAJEURE........................................ 12
Article 35 CURING TENANT'S DEFAULTS............................. 12
Article 36 SIGN CONTROL......................................... 12
Article 37 MISCELLANEOUS........................................ 12
</TABLE>
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
<PAGE>
OFFICE BUILDING LEASE
R E G E N C Y P L A Z A
This Lease between MASKATIYA, SURI & CO., INC., A California Corporation,
("Landlord") and Microtec Research, Incorporated, a California Corporation
("Tenant"), is dated June 23, 1988.
1. LEASE OF PREMISES.
In consideration of the Rent (as defined at Section 5.4) and the provisions of
this Lease, Landlord leases to Tenant and Tenant leases from Landlord the
Premises shown by diagonal lines on the floor plan attached hereto as Exhibit
"A" and further described at Section 21. The premises are located within the
Building and Project described in Section 2m. Tenant shall have the
non-exclusive right (unless otherwise provided herein) in common with Landlord,
other tenants, subtenants and invitees, to use of the Common Areas (as defined
at Section 2e).
2. DEFINITIONS
As used in this Lease, the following terms shall have the following meanings:
a. Base Rent: $ four hundred fifty nine thousand four hundred fifty six dollars
($459,456.00) per year.
b. Base Year: The calendar year of 1988.
c. Broker(s) and Sales Agent(s): Listing: A. Whelan, A. Adrian, P. McGuigan
Leasing: S. Moulds, R. Cohan
d. Commencement Date: October 1, 1988 or sooner for a term of 60 months. In any
event, Landlord will give Tenant Thirty (30) days written
notice.
e. Common Areas: the building lobbies, common corridors and hallways,
restrooms, garage and parking areas, stairways, elevators and other
generally understood public or common areas. Landlord shall have the right
to regulate or restrict the use of the Common Areas.
f. Expense Stop: (fill in if applicable): $5.00 per square feet per year.
Expenses shall be fixed for the first two years and there will be an 8% cap
on the increase in operating expenses for yrs 3, 4 & 5.
g. Expiration Date: September 30, 1993, unless otherwise sooner terminated in
accordance with the provisions of this Lease.
h. Index (Section 5.2); United States Department of Labor, Bureau of Labor
Statistics Consumer Price Index for All Urban Consumers, San Francisco,
Oakland Average, Subgroup "All items" (1967 = 100).
i. Landlord's Mailing Address: 2350 Mission College Blvd., Ste. 1050, Santa
Clara, California.
Tenant's Mailing Address: 2350 Mission College Blvd., Ste. 500, Santa Clara,
California.
j. Monthly Installments of Base Rent: $ Thirty Eight Thousand Two Hundred Eighty
Eight ($38,288.00) per month.
k. Parking: Tenant shall be permitted, upon payment of the then prevailing
monthly rate (as set by Landlord from time to time) to park 77 cars on a non-
exclusive basis in the area(s) designated by Landlord for parking. Tenant
shall abide by any and all parking regulations and rules established from
time to time by Landlord or Landlord's parking operator. Landlord reserves
the right to separately charge Tenant's guests and visitors for parking.
Tenant will receive their share of covered parking when the Plaza is
completed and conditions for parking allocation are determined.
l. Premises: that portion of the Building containing approximately 19,144 square
feet of Rentable Area, shown by diagonal lines on Exhibit "A", located on the
fifth floor of the Building and known as Suite 500.
m. Project: the building of which the Premises are a part (the "Building") and
any other improvements on the real property (the "Property") located at 2350
Mission College Boulevard, Santa Clara, California, and further described at
Exhibit "B". The Project is known as REGENCY PLAZA.
n. Rentable Area: as to both the Premises and the Project, the respective
measurements of the floor area may from time to time be subject to lease by
Tenant and all tenants of the Project, respectively, as determined by
Landlord and applied on a consistent basis throughout the Project.
o. Security Deposits (Article 7): $ Thirty Eight Thousand Two Hundred Eighty
Eight Dollars ($38,288.00)
MASKATIYA, SURI & CO., INC. RGK
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS ---
(1) Initials
<PAGE>
REGENCY PLAZA
p. State: the State of California.
q. Tenant's First Adjustment Date (Section 5.2): the first day of the calendar
month following the Commencement Date plus N/A months.
---------
r. Tenant's Proportionate Share: 8.2 %. Such share is a fraction. the numerator
-------
of which is the Rentable Area of the Premises, and the denominator of which
is the Rentable Area of the Project, as determined by Landlord from time to
time. The Project consist of one building(s) containing a total Rentable Area
of 231.000 square feet.
s. Tenant's Use Clause (Article 8): office or other related legal uses.
--------------------------------------------
----------------------------------------------------------------------------
t. Term: the period commencing on the Commencement Date and expiring at midnight
on the Expiration Date.
3. EXHIBITS AND ADDENDA.
The exhibits and addenda listed below (unless lined out) are incorporated by
reference in this Lease:
a. Exhibit "A" - Floor Plan showing the Premises.
b. Exhibit "B" - Site Plan of the Project.
c. Exhibit "C" - Building Standard Work Letter.
d. Exhibit "D" - Rules and Regulations.
e. Exhibit "E" - Schedule of Base Year Operating Expenses.
f. Addenda:
Includes paragraphs 1-10, and, subordination, non-disturbance and attornment
agreement.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
4. DELIVERY OF POSSESSION.
If for any reason Landlord does not deliver possession of the Premises to Tenant
on the Commencement Date, Landlord shall not be subject to any liability for
such failure, the Expiration Date shall not change and the validity of this
Lease shall not be impaired, but Rent shall be abated until delivery of
possession. "Delivery of possession" shall be deemed to occur on the date
Landlord completes Landlord's Work as defined in Exhibit "C." If Landlord
permits Tenant to enter into possession of the Premises before the Commencement
Date, such possession shall be subject to the provisions of this Lease,
including, without limitation, the payment of Rent. If T.I.'s are not
substantially complete within sixty (60) days of the commencement date set forth
in paragraph 2d, Tenant shall have the right to terminate this lease and have no
obligation thereafter.
5. RENT.
5.1. Payment of Base Rent. Tenant agrees to pay the Base Rent for the Premises.
Monthly Installments of Base Rent shall be payable in advance on the first day
of each calendar month of the Term. If the Term begins (or ends) on other than
the first (or last) day of a calendar month, the Base Rent for the partial
month shall be prorated on a per diem basis on the basis of a 30 day month
(except February, which may be 28 or 29 days). Tenant shall pay Landlord the
first monthly installment of Base Rent when Tenant executes the Lease which
represents the 19th month of the Term of the Lease.
5.3 Project Operating Costs.
a. In order that the Rent payable during the Term reflect any increase in
Project Operating Costs, Tenant agrees to pay to Landlord as Rent, Tenant's
Proportionate Share of all increases in costs, expenses and obligations
attributable to the Project and its operation, all as provided below.
b. If, during any calendar year during the Term, Project Operating Costs
exceed the Project Operating Costs for the Base Year, Tenant shall pay to
Landlord, in addition to the Base Rent and all other payments due under this
Lease, an amount equal to Tenant's Proportionate Share of such excess Project
Operating Costs in accordance with the provisions of this Section 5.3b.
(1) The term "Project Operating Costs" shall include all those items
described in the following subparagraphs (a) and (b).
(a) All taxes, assessments, water and sewer charges and other similar
governmental charges levied on or attributable to the Building or Project
or their operation, including without limitation (i) real property taxes
or assessments levied or assessed against the Building or Project, (ii)
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
(2)
<PAGE>
REGENCY PLAZA
assessments or charges levied or assessed against the Building or Project by
any redevelopment agency, and (iii) any tax measured by gross rentals received
from the leasing of the Premises, Building or Project, excluding any net
income, franchise, capital stock, estate or inheritance taxes imposed by the
State or federal government or their agencies, branches or departments;
provided that if at any time during the Term any governmental entity levies,
assesses or imposes on Landlord any (1) general or special, ad valorem or
specific, excise, capital levy or other tax, assessment, levy or charge
directly on the Rent received under this Lease or on the rent received under
any other teases of space in the Building or Project, or (2) any license fee,
excise or franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rent, or (3) any transfer, transaction, or similar
tax, assessment, levy or charge based directly or indirectly upon the
transaction represented by this Lease or such other leases, or (4) any
occupancy, use, per capita or other tax, assessment, levy or charge based
directly or indirectly upon the use or occupancy of the Premises or other
premises within the Building or Project, then any such taxes, assessments,
levies and charges shall be deemed to be included in the term Project
Operating Costs. If at any time during the Term the assessed valuation of, or
taxes on, the Project are not based on a completed Project having at least
eighty-five percent (85%) of the Rentable Area occupied, then the "taxes"
component of Project Operating Costs shall be adjusted by Landlord to
reasonably approximate the taxes which would have been payable if the Project
were completed and at least eighty-five percent (85%) occupied.
(b) Operating costs incurred by Landlord in Maintaining and operating the
Building and Project, including without limitation the following: costs of (1)
utilities; (2) supplies; (3) insurance (including public liability, property
damage, earthquake, and fire and extended coverage insurance) for the full
replacement cost of the Building and Project as required by Landlord or its
lenders for the Project; (4) services of independent contractors; (5)
compensation (including employment taxes and fringe benefits) of all persons
who perform duties connected with the operation, maintenance, repair or
overhaul of the Building or Project, and equipment, improvements and
facilities located within the Project, including without limitation engineers,
janitors, painters, floor waxers, window washers, security and parking
personnel and gardeners (but excluding persons performing services not
uniformly available to or performed for substantially all Building or Project
tenants); (6) operation and maintenance of a room for delivery and
distribution of mail to tenants of the Building or Project as required by the
U.S. Postal Service (including, without limitation, an amount equal to the
fair market rental value of the mail room premises); (7) management of the
Building or Project, whether managed by Landlord or an independent contractor
(including, without limitation, an amount equal to the fair market value of
any on-site manager's office); (8) rental expenses for (or a reasonable
depreciation allowance on) personal property used in the maintenance,
operation or repair of the Building or Project; (9) costs, expenditures or
charges (whether capitalized or not) required by any governmental or quasi-
governmental authority; (10) increases over the Base Year in the interest
payable by Landlord under the promissory note (if any) evidencing the
financing then in place on the Building or Project; (11) increases over the
Base Year in any ground rent for the Property payable by Landlord; (12)
amortization of capital expenses (including financing costs) (i) required by a
governmental entity for energy conservation or life safety purposes, or (ii)
made by Landlord to reduce Project Operating Costs; and (13) any other costs
or expenses incurred by Landlord under this Lease and not otherwise reimbursed
by tenants of the Project. If at any time during the Term, less than eighty-
five percent (85%) of the Rentable Area of the Project is occupied, the
"operating costs" component of Project Operating Costs shall be adjusted by
Landlord to reasonably approximate the operating costs which would have been
incurred if the Project had been at least eighty-five percent (85%) occupied.
(2) Tenant's Proportionate Share of Project Operating Costs 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 Proportionate Share of the Project Operating Costs
incurred by Landlord in the Comparison Year which exceeds the total amount of
Project Operating Costs 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 Proportionate 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
Proportionate 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 Proportionate Share of the Excess
Expenses for the preceding Comparison Year. If Tenant's Proportionate 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 ten (10) days of the
receipt of the statement. If such total exceeds Tenant's Proportionate 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 5.3 shall survive the Expiration Date.
(d) Tenant's Proportionate 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 Project
Operating Costs by more than five percent (5%).
(f) If this Lease sets forth an Expense Stop at Section 2f, then during the
Term Tenant shall be liable for Tenant's Proportionate Share of any actual
Project Operating Costs which exceed the amount of the Expense Stop. Tenant
shall make current payments of such excess costs during the Term in the same
manner as is provided for payment of Excess Expenses under the applicable
provisions of Section 5.3b(2)(b) and (c) above.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
(3)
<PAGE>
REGENCY PLAZA
9. SERVICES AND UTILITIES.
Provided that Tenant is not in default hereunder, Landlord agrees to furnish to
the Premises during generally recognized business days, and during hours
determined by Landlord in its sole discretion, and subject to the Rules and
Regulations of the Building or Project, electricity for normal desktop office
equipment and normal copying equipment, and heating, ventilation and air
conditioning ("HVAC") as required in Landlord's judgment for the comfortable use
and occupancy of the Premises. Landlord shall also maintain and keep lighted the
common stairs, common entries and restrooms in the Building. Landlord shall not
be in default hereunder or be liable for any damages directly or indirectly
resulting from, nor shall the Rent be abated by reason of (i) the installation,
use or interruption of use of any equipment in connection with the furnishing of
any of the foregoing services, (ii) failure to furnish or delay in furnishing
any such services where such failure or delay is caused by accident or any
condition or event beyond the reasonable control of Landlord, or by the making
of necessary repairs or improvements to the Premises, Building or Project, or
(iii) the limitation, curtailment or rationing of, or restrictions on, use of
water, electricity, gas or any other form of energy serving the Premises,
Building or Project. Landlord shall not be liable under any circumstances for a
loss of or injury to property or business, however occurring, through or in
connection with or incidental to failure to furnish any such services. If Tenant
uses heat generating machines or equipment in the Premises which affect the
temperature otherwise maintained by the HVAC system, Landlord reserves the right
to install supplementary air conditioning units in the Premises and the cost
thereof, including the cost of installation, operation and maintenance thereof,
shall be paid by Tenant to Landlord upon demand by Landlord. *See addendum
paragraph 8 services and utilities.
Nothing contained in this Article shall restrict Landlord's right to require at
any time separate metering of utilities furnished to the Premises. In the event
utilities are separately metered, Tenant shall pay promptly upon demand for all
utilities consumed at utility rates charged by the local public utility plus any
additional expense incurred by Landlord in keeping account of the utilities so
consumed. Tenant shall be responsible for the maintenance and repair of any such
meters at its sole cost.
Landlord shall furnish elevator service, lighting replacement for building
standard lights, restroom supplies, window washing and janitor services in a
manner that such services are customarily furnished to comparable office
buildings in the area.
10. CONDITION OF THE PREMISES.
Tenants taking possession of the Premises shall be deemed conclusive evidence
that as of the date of taking possession the Premises are in good order and
satisfactory condition, except for such matters as to which Tenant gave Landlord
notice on or before the Commencement Date. No promise of Landlord to alter,
remodel, repair or improve the Premises, the Building or the Project and no
representation, express or implied, respecting any matter or thing relating to
the Premises, Building, Project or this Lease (including, without limitation,
the condition of the Premises, the Building or the Project) have been made to
Tenant by Landlord or its Broker or Sales Agent, other than as may be contained
herein or in a separate exhibit or addendum signed by Landlord and Tenant.
11. CONSTRUCTLON, REPAIRS AND MAINTENANCE.
a. Landlord's Obligations. Landlord shall perform Landlord's Work to the
Premises as described in Exhibit "C". Landlord shall maintain in good order,
condition and repair the Building and all portions of the Premises not the
obligation of Tenant or of any other tenant in the Building.
b. Tenant's Obligations.
(1) Tenant shall perform Tenant's Work to the Premises as described in
Exhibit "C."
(2) Tenant at Tenant's sole expense shall, except for services furnished
by Landlord pursuant to Article 9 hereof, maintain the Premises in
good order, condition and repair, including the interior surfaces of
the ceilings, walls and floors, all doors, all interior windows, all
plumbing, pipes and fixtures, electrical wiring, switches and
fixtures, Building Standard furnishings and special items and
equipment installed by or at the expense of Tenant.
(3) Tenant shall be responsible for all repairs and alterations in and to
the Premises, Building and Protect and the facilities and systems
thereof, the need for which arises out of (i) Tenant's use or
occupancy of the Premises, (ii) the installation, removal, use or
operation of Tenant's Property (as defined in Article 13) in the
Premises, (iii) the moving of Tenant's Property into or out of the
Building, or (iv) the act, omission, misuse or negligence of Tenant,
its agents, contractors, employees or invitees.
(4) If Tenant fails to maintain the Premises in good order, condition and
repair, Landlord shall give Tenant notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant fails to
promptly commence such work and diligently prosecute it to
completion, then Landlord shall have the right to do such acts and
expend such funds at the expense of Tenant as are reasonably required
to perform such work. Any amount so expended by Landlord shall be
paid by Tenant promptly after demand with interest at the prime
commercial rate then being charged by Bank of America NT & SA plus
six percent (6%) per annum, from the date of such work, but not to
exceed the maximum rate then allowed by law. Landlord shall have no
liability to Tenant for any damage, inconvenience, or interference
with the use of the Premises by Tenant as a result of performing any
such work.
MASKATIYA, SURI & CO., INC. RGK
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS ---
Initials
(5)
<PAGE>
REGENCY PLAZA
15. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord reserves the following rights, exercisable without liability to
Tenant for (a) damage or injury to property, person or business, (b)
causing an actual or constructive eviction from the Premises, or (c)
disturbing Tenant's use or possession of the Premises:
a. To name the Building and Project and to change the name or street
address of the Building or Project;
b. To install and maintain all signs on the exterior and interior of the
Building and Project;
c. To have pass keys to the Premises and all doors within the Premises,
excluding Tenant's vaults and safes,
d. At any time during the Term, and on reasonable prior notice to
Tenant, to inspect the Premises, and to show the Premises to any
prospective purchaser or mortgagee of the Project, or to any assignee of
any mortgage on the Project, or to others having an interest in the
Project or Landlord, and during the last six months of the Term, to show
the Premises to prospective tenants thereof; and
e. To enter the Premises for the purpose of making inspections, repairs,
alterations, additions or improvements to the Premises or the Building
(including, without limitation, checking, calibrating, adjusting or
balancing controls and other parts of the HVAC system), and to take all
steps as may be necessary or desirable for the safety, protection,
maintenance or preservation of the Premises or the Building or Landlord's
interest therein, or as may be necessary or desirable for the operation or
improvement of the Building or in order to comply with laws, orders or
requirements of governmental or other authority. Landlord agrees to use
its best efforts (except in an emergency) to minimize interference with
Tenant's business in the Premises in the course of any such entry.
16. ASSIGNMENT AND SUBLETTING.
No assignment of this Lease or sublease of all or any part of the Premises
shall be permitted, except as provided in this Article 16.
a. Tenant shall not, without the prior written consent of Landlord, assign
or hypothecate this Lease or any interest herein or sublet the Premises or
any part thereof, or permit the use of the Premises by any party other than
Tenant. Any of the foregoing acts without such consent shall be void and
shall, at the option of Landlord, terminate this Lease. This Lease shall
not, nor shall any interest of Tenant herein, be assignable by operation of
law without the written consent of Landlord.
b. If at any time or from time to time during the Term Tenant desires to
assign this Lease or sublet all or any part of the Premises, Tenant shall
give notice to Landlord setting forth the terms and provisions of the
proposed assignment or sublease, and the identity of the proposed assignee
or subtenant. Tenant shall promptly supply Landlord with such information
concerning the business background and financial condition of such proposed
assignee or subtenant as Landlord may reasonably request. Landlord shall
have the option, exercisable by notice given to Tenant within twenty (20)
days after Tenant's notice is given, either to sublet such space from
Tenant at the rental and on the other terms set forth in this Lease for the
term set forth in Tenant's notice, or, in the case of an assignment, to
terminate this Lease. If Landlord does not exercise such option. Tenant may
assign the Lease or sublet such space to such proposed assignee or
subtenant on the following further conditions:
(1) Landlord shall have the right to approve such proposed assignee or
subtenant, which approval shall not be unreasonably withheld;
(2) The assignment or sublease shall be on the same terms set forth in the
notice given to Landlord;
(3) No assignment or sublease shall be valid and no assignee or sublessee
shall take possession of the Premises until an executed counterpart of
such assignment or sublease has been delivered to Landlord;
(4) No assignee or sublessee shall have a further right to assign or
sublet except on the terms herein contained; and
(5) Any sums or other economic consideration received by Tenant as a
result of such assignment or subletting, however denominated under the
assignment or sublease, which exceed, in the aggregate, (i) the total
sums which Tenant is obligated to pay Landlord under this Lease
(prorated to reflect obligations allocable to any portion of the
Premises subleased), plus (ii) any real estate brokerage commissions
or fees payable in connection with such assignment or subletting,
shall be paid to Landlord as additional rent under this Lease without
affecting or reducing any other obligations of Tenant hereunder. (See
Addendum 10)
c. Notwithstanding the provisions of paragraphs a and b above, Tenant may
assign this Lease or sublet the Premises or any portion thereof, without
Landlord's consent and without extending any recapture or termination
option to Landlord, to any corporation which controls, is controlled by or
is under common control with Tenant, or to any corporation resulting from a
merger or consolidation with Tenant, or to any person or entity which
acquires all the assets of Tenant's business as a going concern, provided
that (i) the assignee or sublessee assumes, in full, the obligations of
Tenant under this Lease, (ii) Tenant remains fully liable under this Lease,
and (iii) the use of the Premises under Article 8 remains unchanged.
d. No subletting or assignment shall release Tenant of Tenant's obligations
under this Lease or alter the primary liability of Tenant to pay the Rent
and to perform all other obligations to be performed by Tenant hereunder.
The acceptance of Rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by an assignee or
subtenant of Tenant or any successor of Tenant in the performance of any of
the terms hereof, Landlord may proceed directly against Tenant without the
necessity of exhausting remedies against such assignee, subtenant or
successor. Landlord may consent to subsequent assignments of the Lease or
sublettings or amendments or modifications to the Lease with assignees of
Tenant, without notifying Tenant, or any successor of Tenant, and without
obtaining its or their consent thereto and any such actions shall not
relieve Tenant of liability under this Lease.
e. If Tenant assigns the Lease or sublets the Premises or requests the
consent of Landlord to any assignment or subletting or if Tenant requests
the consent of Landlord for any act that Tenant proposes to do, then Tenant
shall, upon demand, pay Landlord an administrative fee of Two thousand and
No/100ths Dollars ($500.00) - On Assignments only. plus any attorneys' fees
reasonably incurred by Landlord in connection with such act or request.
17. HOLDING OVER.
If after expiration of the Term, Tenant remains in possession of the Premises
with Landlord's permission (express or implied), Tenant shall become a tenant
from month to month only, upon all the provisions of this Lease (except as to
term and Base Rent), but the "Monthly Installments of Base Rent" payable by
Tenant shall be increased to one hundred fifty percent (125%) of the Monthly
Installments of Base Rent payable by Tenant at the expiration of the Term. Such
monthly rent shall be payable in advance on or before the first day of each
month. If either party desires to terminate such month to month tenancy, it
shall give the other party not less than thirty (30) days advance written
notice of the date of termination.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
(7)
<PAGE>
b. Landlord shall not be liable for injury or damage which may be sustained
by the person or property of Tenant, its employees, invitees or customers,
or any other person in or about the Premises, caused by or resulting from
fire, steam, electricity, gas, water or rain which may leak or flow from or
into any part of the Premises, or from the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, whether such damage or injury results
from conditions arising upon the Premises or upon other portions of the
Building or Project or from other sources. Landlord shall not be liable for
any damages arising from any act or omission of any other tenant of the
Building or Project.
22. TENANT'S INSURANCE.
a. All insurance required to be carried by Tenant hereunder shall be issued
by responsible insurance companies acceptable to Landlord and Landlord's
lender and qualified to do business in the State. Each policy shall name
Landlord, and at Landlord's request any mortgagee of Landlord, as an
additional insured, as their respective interests may appear. Each policy
shall contain (i) a cross-liability endorsement, (ii) a provision that such
policy and the coverage evidenced thereby shall be primary and non-
contributing with respect to any policies carried by Landlord and that any
coverage carried by Landlord shall be excess insurance, and (iii) a waiver
by the insurer of any right of subrogation against Landlord, its agents,
employees and representatives, which arises or might arise by reason of any
payment under such policy or by reason of any act or omission of Landlord,
its agents, employees or representatives. A copy of each paid up policy
(authenticated by the insurer) or certificate of the insurer evidencing the
existence and amount of each insurance policy required hereunder shall be
delivered to Landlord before the date Tenant is first given the right of
possession of the Premises, and thereafter, within thirty (30) days after
any demand by Landlord therefor. Landlord may, at any time and from time to
time, inspect and/or copy any insurance policies required to be maintained
by Tenant hereunder. No such policy shall be cancellable except after
twenty (20) days written notice to Landlord and Landlord's lender. Tenant
shall furnish Landlord with renewals or "binders" of any such policy at
least ten (10) days prior to the expiration thereof. Tenant agrees that if
Tenant does not take out and maintain such insurance Landlord may (but
shall not be required to) procure said insurance on Tenant's behalf and
charge the Tenant the premiums together with a twenty-five percent (25%)
handling charge, payable upon demand. Tenant shall have the right to
provide such insurance coverage pursuant to blanket policies obtained by
the Tenant, provided such blanket policies expressly afford coverage to the
Premises, Landlord, Landlord's mortgagee and Tenant as required by this
Lease.
b. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall procure,
pay for and maintain in effect policies of casualty insurance covering (i)
all Leasehold Improvements (including any alterations, additions or
improvements as may be made by Tenant pursuant to the provisions of Article
12 hereof), and (ii) trade fixtures, merchandise and other personal
property from time to time in, on or about the Premises, in an amount not
less than one hundred percent (100%) of their actual replacement cost from
time to time, providing protection against any peril included with the
classification "Fire and Extended Coverage" together with insurance against
sprinkler damage, vandalism and malicious mischief. The proceeds of such
insurance shall be used for the repair or replacement of the property so
insured. Upon termination of this Lease following a casualty as set forth
herein, the proceeds under (i) shall be paid to Landlord, and the proceeds
under (ii) above shall be paid to Tenant.
c. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall procure,
pay for and maintain in effect workers' compensation insurance as required
by law and comprehensive public liability and property damage insurance
with respect to the construction of improvements on the Premises, the use,
operation or condition of the Premises and the operations of Tenant in, on
or about the Premises, providing personal injury and broad form property
damage coverage for not less than One Million Dollars ($1,000,000.00)
combined single limit for bodily injury, death and property damage
liability.
d. Not less than every three (3) years during the Term, Landlord and Tenant
shall mutually agree to increases in all of Tenant's insurance policy
limits for all insurance to be carried by Tenant as set forth in this
Article. In the event Landlord and Tenant cannot mutually agree upon the
amounts of said increases, then Tenant agrees that all insurance policy
limits as set forth in this Article shall be adjusted for increases in the
cost of living in the same manner as is set forth in Section 5.2 hereof for
the adjustment of the Base Rent.
23. WAIVER OF SUBROGATION.
Landlord and Tenant each hereby waive all rights of recovery against the other
and against the officers, employees, agents and representatives of the other, on
account of loss by or damage to the waiving party or its property or the
property of others under its control, to the extent that such loss or damage is
insured against under any fire and extended coverage insurance policy which
either may have in force at the time of the loss or damage. Tenant shall, upon
obtaining the policies of insurance required under this Lease, give notice to
its insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.
24. SUBORDINATION AND ATTORNMENT.
Upon written request of Landlord, or any mortgagee or deed of trust beneficiary
of Landlord, or ground lessor of Landlord, Tenant shall, in writing, subordinate
its rights under this Lease to the lien of any and all mortgage or deeds of
trust, or to the interest of any lease in which Landlord is lessee, and to all
advances made or hereafter to be made thereunder. Tenant hereby appoints
Landlord, his successor-in-interest, agents or representatives as its power-of-
attorney to execute any and all documents to reflect such subordination, it
being agreed that this power-of-attorney is irrevocable and coupled with an
interest. The holder of any security interest may, upon written notice to
Tenant, elect to have this Lease prior to its security interest regardless of
the time of the granting or recording of such security interest.
In the event of any foreclosure sale, transfer in lieu of foreclosure or
termination of the lease in which Landlord is lessee, Tenant shall attorn to the
purchaser, transferee or lessor as the case may be, and recognize that party as
Landlord under this Lease, provided such party acquires and accepts the Premises
subject to this Lease.
25. TENANT ESTOPPEL CERTIFICATES.
Within ten (10) days after written request from Landlord, Tenant shall execute
and deliver to Landlord or Landlord's designee, a written statement certifying
(a) that this Lease is unmodified and in full force and effect, or is in full
force and effect as modified and stating the modifications; (b) the amount of
Base Rent and the date to which Base Rent and additional rent have been paid in
advance; (c) the amount of any security deposited with
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
(9)
<PAGE>
Landlord; and (d) that Landlord is not in default hereunder or, if Landlord is
claimed to be in default, stating the nature of any claimed default. Any such
statement may be relied upon by a purchaser, assignee or lender. Tenant's
failure to execute and deliver such statement within the time required shall at
Landlord's election be a default under this Lease and shall also be conclusive
upon Tenant that: (1) this Lease is in full force and effect and has not been
modified except as represented by Landlord; (2) there are no uncured defaults in
Landlord's performance and that Tenant has no right of offset, counterclaim or
deduction against Rent; and (3) not more than one month's Rent has been paid in
advance.
26. TRANSFER OF LANDLORD'S INTEREST.
In the event of any sale or transfer by Landlord of the Premises, Building or
Project, and assignment of this Lease by Landlord, Landlord shall be and is
hereby entirely freed and relieved of any and all liability and obligations
contained in or derived from this Lease arising out of any act, occurrence or
omission relating to the Premises, Building, Project or Lease occurring after
the consummation of such sale or transfer, providing the purchaser shall
expressly assume all of the covenants and obligations of Landlord under this
Lease. If any security deposit or prepaid Rent has been paid by Tenant, Landlord
may transfer the security deposit or prepaid Rent to Landlord's successor and
upon such transfer, Landlord shall be relieved of any and all further liability
with respect thereto.
27. DEFAULT.
27.1 Tenant's Default. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant.
a. If Tenant abandons or vacates the Premises; or
b. If Tenant fails to pay any Rent or any other charges required to bepaid
by Tenant under this Lease and such failure continues for fifteen (15)
days after payment is due and payable; or
c. If Tenant fails to promptly and fully perform any other covenant.
condition or agreement contained in this Lease and such failure continues
for thirty (30) days after written notice thereof from Landlord to Tenant;
or
d. If a writ of attachment or execution is levied on this Lease or on any
of Tenant's Property; or
e. If Tenant makes a general assignment for the benefit of creditors, or
provides for an arrangement, composition, extension or adjustment with its
creditors; or
f. If Tenant files a voluntary petition for relief or if a petition
against Tenant in a proceeding under the federal bankruptcy laws or other
insolvency laws is filed and not withdrawn or dismissed within forty-five
(45) days thereafter, or if under the provisions of any law providing for
reorganization or winding up of corporations, any court of competent
jurisdiction assumes jurisdiction, custody or control of Tenant or any
substantial part of its property and such jurisdiction, custody or control
remains in force unrelinquished, unstayed or unterminated for a period of
forty-five (45) days; or
g. If in any proceeding or action in which Tenant is a party, a trustee,
receiver, agent or custodian is appointed to take charge of the Premises or
Tenant's Property (or has the authority to do so) for the purpose of
enforcing a lien against the Premises or Tenant's Property; or
h. If Tenant is a partnership or consists of more than one (1) person or
entity, if any partner of the partnership or other person or entity is
involved in any of the acts or events described in subparagraphs d through
g above.
i. The discovery by Landlord of any material misrepresentation or
misstatement of any fact by Tenant.
27.2 Remedies. In the event of Tenant's default hereunder, then in addition to
any other rights or remedies Landlord may have under any law, Landlord shall
have the right, at Landlord's option, without further notice or demand of any
kind to do the following:
a. Terminate this Lease and Tenant's right to possession of the Premises
and reenter the Premises and take possession thereof, and Tenant shall have
no further claim to the Premises or under this Lease; or
b. Continue this Lease in effect, reenter and occupy the Premises for the
account of Tenant, and collect any unpaid Rent or other charges which have
or thereafter become due and payable; or
c. Reenter the Premises under the provisions of subparagraph b, and
thereafter elect to terminate this Lease and Tenant's right to possession
of the Premises.
If Landlord reenters the Premises under the provisions of subparagraphs b or c
above, Landlord shall not be deemed to have terminated this Lease or the
obligation of Tenant to pay any Rent or other charges thereafter accruing,
unless Landlord notifies Tenant in writing of Landlord's election to terminate
this Lease. In the event of any reentry or retaking of possession by Landlord,
Landlord shall have the right, but not the obligation, to remove all or any part
of Tenant's Property in the Premises and to place such property in storage at a
public warehouse at the expense and risk of Tenant. If Landlord elects to relet
the Premises for the account of Tenant, the rent received by Landlord from such
reletting shall be applied as follows: first, to the payment of any indebtedness
other than Rent due hereunder from Tenant to Landlord; second, to the payment of
any costs of such reletting; third, to the payment of the cost of any
alterations or repairs to the Premises; fourth to the payment of Rent due and
unpaid hereunder; and the balance, if any, shall be held by Landlord and applied
in payment of future Rent as it becomes due. If that portion of rent received
from the reletting which is applied against the Rent due hereunder is less than
the amount of the Rent due, Tenant shall pay the deficiency to Landlord promptly
upon demand by Landlord. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as determined, any costs and expenses
incurred by Landlord in connection with such reletting or in making alterations
and repairs to the Premises, which are not covered by the rent received from the
reletting.
In the event of a Tenant default, Tenant, additionally and specifically waives
all its rights to any form of automatic court ordered stay from eviction or stay
from paying obligations as and when due, Tenant shall forthwith, upon demand of
Landlord, deliver vacant possession of the premises without any claim for prior
notice, claim for any due legal process or any other reason or claim however
founded.
In addition to any other right Landlord may have, Landlord may immediately seize
to possess any and all personal property of Tenant as additional security for
payment of obligations pursuant to this Lease. Landlord shall have the further
right to sell all such possessed property for the best price then available, and
apply all such proceeds, first to pay costs and expenses arising from the
default, then to pay obligations due and payable pursuant to this Lease, and
then any remaining excess shall be paid to Tenant.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
(10)
<PAGE>
Should Landlord elect to terminate this Lease under the provisions of
subparagraph a or c above, Landlord may recover as damages from Tenant the
following:
1. Past Rent. The worth at the time of the award of any unpaid Rent which
had been earned at the time of termination; plus
2. Rent Prior to Award. The worth at the time of the 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. Rent After Award. The worth at the time of the award of the amount by
which the unpaid Rent for the balance of the Term after the time of
award exceeds the amount of the rental loss that Tenant proves could be
reasonably avoided; plus
4. Proximately Caused Damages. Any other amount necessary to compensate
Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including, but
not limited to, any costs or expenses (including attorneys' fees),
incurred by Landlord in (a) retaking possession of the Premises, (b)
maintaining the Premises after Tenant's default, (c) preparing the
Premises for reletting to a new tenant, including any repairs or
alterations, and (d) reletting the Premises including brokers'
commissions.
5. Acceleration of Future Rent. Landlord shall have the right to
accelerate all future rental payments and other charges payable by
Tenant, in the event of a default by Tenant. The aggregate sum of all
such future rents and charges shall become immediately due and payable,
upon the occurrence of any event of default.
6. If this Lease contains provision for any free rent periods or other
rental concession, then all such free rent and rental concessions shall
be immediately revoked without any notice, if Tenant defaults on this
Lease. Additionally, should Tenant continue in possession of the
Premises following a default, the amount of the rent payable thereafter
shall be set by Landlord, but shall in no event be less than one
hundred fifty percent (150%) of the then asking rent for space in the
project, as this asking rent is set by Landlord from time to time.*
"The worth at the time of the award" as used in subparagraphs 1 and 2 above, is
to be computed by allowing interest at the rate of ten percent (l0%) per annum.
"The worth at the time of the award" as used in subparagraph 3 above, is to be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank situated nearest to the Premises at the time of the award plus one percent
(1%).
The waiver by Landlord of any breach of any term, covenant or condition of this
Lease shall not be deemed a waiver of such term, covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition.
Acceptance of Rent by Landlord subsequent to any breach hereof shall not be
deemed a waiver of any preceding breach other than the failure to pay the
particular Rent so accepted, regardless of Landlord's knowledge of any breach at
the time of such acceptance of Rent. Landlord shall not be deemed to have waived
any term, covenant or condition unless Landlord gives Tenant written notice of
such waiver.
27.3 Landlord's Default. If Landlord fails to perform any covenant, condition or
agreement contained in this Lease within thirty (30) days after receipt of
written notice from Tenant specifying such default, or if such default cannot
reasonably be cured within thirty (30) days, if Landlord fails to commence to
cure within that thirty (30) day period, then Landlord shall be liable to Tenant
for any damages sustained by Tenant as a result of Landlord's breach provided,
however, it is expressly understood and agreed that if Tenant obtains a money
judgment against Landlord resulting from any default or other claim arising
under this Lease, that judgment shall be satisfied only out of the rents,
issues, profits, and other income actually received on account of Landlord's
right, title and interest in the Premises, Building or Project, and no other
real, personal or mixed property of Landlord (or of any of the partners which
comprise Landlord, if any) wherever situated, shall be subject to levy to
satisfy such judgment. If, after notice to Landlord of default Landlord (or any
first mortgagee or first deed of trust beneficiary of Landlord) fails to cure
the default as provided herein, then Tenant shall have the right to cure that
default at Landlord's expense. Tenant shall not have the right to terminate this
Lease or to withhold, reduce or offset any amount against any payments of Rent
or any other charges due and payable under this Lease except as otherwise
specifically provided herein.
28. BROKERAGE FEES.
Tenant warrants and represents that it has not dealt with any real estate broker
or agent in connection with this Lease or its negotiation except Broker and
Sales Agent. Tenant shall indemnify and hold Landlord harmless from any cost,
expense or liability (including costs of suit and reasonable attorneys' fees)
for any compensation, commission or fees claimed by any other real estate broker
or agent in connection with this Lease or its negotiation by reason of any act
of Tenant.
29. NOTICES.
All notices, approvals and demands permitted or required to be given under this
Lease shall be in writing and deemed duly served or given if personally
delivered or sent by certified or registered U.S. mail, postage prepaid and
addressed as follows; (a) if to Landlord, to Landlord's Mailing Address and to
the Building manager, and (b) if to Tenant, to Tenant's Mailing Address;
provided, however, notices to Tenant shall be deemed duly served or given if
delivered or mailed to Tenant at the Premises. Landlord and Tenant may from time
to time by notice to the other designate another place for receipt of future
notices.
30. GOVERNMENT ENERGY OR UTILITY CONTROLS.
In the event of imposition of federal, state or local government controls,
rules, regulations, or restrictions on the use or consumption of energy or other
utilities during the Term, both Landlord and Tenant shall be bound thereby. In
the event of a difference in interpretation by Landlord and Tenant of any such
controls, the interpretation of Landlord shall prevail, and Landlord shall have
the right to enforce compliance therewith, including the right of entry into the
Premises to effect compliance.
*Landlord shall give Tenant written notice of default and Tenant shall have
thirty (30) days to cure said default.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
(11)
<PAGE>
[LETTERHEAD OF MASKATIYA, SURI & CO., INC.]
[REGENCY PLAZA]
31. RELOCATION OF PREMISES.
Landlord shall have the right, with mutual consent of the tenant to relocate the
Premises to another part of the Building in accordance with the following:
a. The new premises shall be substantially the same in size, dimensions,
configuration, decor and nature as the Premises described in this Lease,
and if the relocation occurs after the Commencement Date, shall be placed
in that condition by landlord at its cost.
b. Landlord shall give Tenant at least thirty (30) days written notice of
Landlord's intention to relocate the Premises.
c. As nearly as practicable, the physical relocation of the Premises shall
take place on a weekend and shall be completed before the following Monday.
If the physical relocation has not been completed in that time, Base Rent
shall abate in full from the time the physical relocation commences to the
time it is completed. Upon completion of such relocation, the new premises
shall become the "Premises" under this Lease.
d. All reasonable costs incurred by Tenant as a result of the relocation
shall be paid by Landlord.
e. If the new premises are smaller than the Premises as it existed before
the relocation, Base Rent shall be reduced proportionately.
f. The parties hereto shall immediately execute an amendment to this Lease
setting forth the relocation of the Premises and the reduction of Base
Rent, if any.
32. QUIET ENJOYMENT.
Tenant, upon paying the Rent and performing all of its obligations under this
Lease, shall peaceably and quietly enjoy the Premises, subject to the terms of
this Lease and to any mortgage, lease, or other agreement to which this Lease
may be subordinate.
33. OBSERVANCE OF LAW.
Tenant shall not use the Premises or permit anything to be done in or about the
Premises which will in any way conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated. Tenant shall, at its sole cost and expense, promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force, and with the
requirements of any board of fire insurance underwriters or other similar bodies
now or hereafter constituted, relating to, or affecting the condition, use or
occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant,
whether Landlord is a party thereto or not, that Tenant has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between Landlord and Tenant.
34. FORCE MAJEURE.
Any prevention, delay or stoppage of work to be performed by Landlord or Tenant
which is due to strikes, labor disputes, inability to obtain labor, materials,
equipment or reasonable substitutes therefor, acts of God, governmental
restrictions or regulations or controls, judicial orders, enemy or hostile
government actions, civil commotion, fire or other casualty, or other causes
beyond the reasonable control of the party obligated to perform hereunder, shall
excuse performance of the work by that party for a period equal to the duration
of that prevention, delay or stoppage. Nothing in this Article 34 shall excuse
or delay Tenant's obligation to pay Rent or other charges under this Lease.
35. CURING TENANT'S DEFAULTS.
If Tenant defaults in the performance of any of its obligations under this
Lease, Landlord may (but shall not be obligated to) without waiving such
default, perform the same for the account and at the expense of Tenant. Tenant
shall pay Landlord all costs of such performance promptly upon receipt of a bill
therefor.
36. SIGN CONTROL.
Tenant shall not affix, paint, erect or inscribe any sign, projection, awning,
signal or advertisement of any kind to any part of the Premises, Building or
Project, including without limitation, the inside or outside of windows or
doors, without the written consent of Landlord. Landlord shall have the right to
remove any signs or other matter, installed without Landlord's permission,
without being liable to Tenant by reason of such removal, and to charge the cost
of removal to Tenant as additional rent hereunder, payable within ten (10) days
of written demand by Landlord.
37. MISCELLANEOUS.
a. Accord and Satisfaction; Allocation of Payments. No payment by Tenant or
receipt by Landlord of a lesser amount than the Rent provided for in this Lease
shall be deemed to be other than on account of the earliest due Rent, nor shall
any endorsement or statement on any check or letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of the Rent or pursue any other remedy provided for in this Lease. In
connection with the foregoing, Landlord shall have the absolute right in its
sole discretion to apply any payment received from Tenant to any account or
other payment of Tenant then not current and due or delinquent.
b. Addenda. If any provision contained in an addendum to this Lease is
inconsistent with any other provision herein, the provision contained in the
addendum shall control, unless otherwise provided in the addendum.
c. Attorneys' Fees. If any action or proceeding is brought by either party
against the other pertaining to or arising out of this Lease, the finally
prevailing party shall be entitled to recover all costs and expenses, including
reasonable attorneys' fee, incurred on account of such action or proceeding.
d. Captions, Articles and Section Numbers. The captions appearing within the
body of this Lease have been inserted as a matter of convenience and for
reference only and in no way define, limit or enlarge the scope or meaning of
this Lease. All references to Article and Section numbers refer to Articles and
Sections in this Lease.
e. Changes Requested by Lender, Neither Landlord or Tenant shall unreasonably
withhold its consent to changes or amendments to this Lease requested by the
lender on Landlord's interest, so long as these changes do not alter the basic
business terms of this Lease or otherwise materially diminish any rights or
materially increase any obligations of the party from whom consent to such
change or amendment is requested.
(12)
<PAGE>
[LETTERHEAD OF MASKATIYA, SURI & CO., INC.]
REGENCY PLAZA
f. Choice of Law. This Lease shall be construed and enforced in accordance with
the laws of the State.
g. Consent. Notwithstanding anything contained in this Lease to the contrary,
Tenant shall have no claim, and hereby waives the right to any claim against
Landlord for money damages by reason of any refusal, withholding or delaying by
Landlord of any consent, approval or statement of satisfaction, and in such
event, Tenant's only remedies therefor shall be an action for specific
performance, injunction or declaratory judgment to enforce any right to such
consent, etc.
h. Corporate Authority. If Tenant is a corporation, each individual signing this
Lease on behalf of Tenant represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of the corporation, and that this Lease
is binding on Tenant in accordance with its terms. Tenant shall, at Landlord's
request, deliver a certified copy of a resolution of its board of directors
authorizing such execution.
i. Counterparts. This Lease may be executed in multiple counterparts, all of
which shall constitute one and the same Lease.
j. Execution of Lease; No Option. The submission of this Lease to Tenant shall
be for examination purposes only, and does not and shall not constitute a
reservation of or option for Tenant to lease, or otherwise create any interest
of Tenant in the Premises or any other premises within the Building or Project.
Execution of this Lease by Tenant and its return to Landlord shall not be
binding on Landlord notwithstanding any time interval, until Landlord has in
fact signed and delivered this Lease to Tenant.
k. Furnishing of Financial Statements; Tenant's Representations. In order to
induce Landlord to enter into this Lease Tenant agrees that it shall promptly
furnish Landlord, from time to time, upon Landlord's written request, including
but not limited to, financial statements prepared in accordance with generally
accepted accounting principles, including all required financial disclosures
reflecting Tenant's current financial condition. Tenant represents and warrants
that all financial statements, records and information furnished by Tenant to
Landlord in connection with this Lease are true, correct and complete in all
respects.
l. Further Assurances. The parties agree to promptly sign all documents
reasonably requested to give effect to the provisions of this Lease.
m. Mortgagee Protection. Tenant agrees to send by certified or registered mail
to any mortgagee or deed of trust beneficiary of Landlord whose address has been
furnished to Tenant, a copy of any notice of default served by Tenant on
Landlord. If Landlord fails to cure such default within the time provided for in
this Lease, such mortgagee or beneficiary shall have an additional thirty (30)
days to cure such default; provided that if such default cannot reasonably be
cured within thirty (30) day period, then such mortgagee or beneficiary shall
have such additional time to cure the default as is reasonably necessary under
the circumstances.
n. Prior Agreements; Amendments. This Lease contains all of the agreements of
the parties with respect to any matter covered or mentioned in this 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 or their respective
successors in interest.
o. Recording. Tenant shall not record this Lease without the prior written
consent of Landlord. Tenant, upon the request of Landlord, shall execute and
acknowledge a "short form" memorandum of this Lease for recording purposes.
p. Severability. A final determination by a court of competent jurisdiction
that any provision of this Lease is invalid shall not affect the validity of any
other provision, and any provision so determined to be invalid shall, to the
extent possible, be construed to accomplish its intended effect.
q. Successors and Assigns. This Lease shall apply to and bind the heirs,
personal representatives, and permitted successors and assigns of the parties.
r. Time of the Essence. Time is of the essence of this Lease.
s. Waiver. No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant shall impair such right or remedy or be
construed as a waiver of such default.
t. All of Tenant's representations shall survive the execution of the Lease
Agreement, and shall be considered as though currently made.
The receipt and acceptance by Landlord of delinquent Rent shall not constitute a
waiver of any other default; it shall constitute only a waiver of timely payment
for the particular Rent payment involved.
No act or conduct of Landlord, including, without limitation, the acceptance of
keys to the Premises, shall constitute an acceptance of the surrender of the
Premises by Tenant before the expiration of the Term. Only a written notice from
Landlord to Tenant shall constitute acceptance of the surrender of the Premises
and accomplish a termination of the Lease.
Landlord's consent to or approval 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 act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of the
Lease.
The parties hereto have executed this Lease as of the date set forth on page 1.
MASKATIYA, SURI & CO., INC. MICROTEC RESEARCH INC.
- --------------------------------------- ---------------------------------
By: /s/ Sunil Suri By: /s/ Robert Kirk
Its: Vice President Its: President
----------------------------------- -----------------------------
----------------------------------- -----------------------------
----------------------------------- -----------------------------
Landlord Tenant
(13)
<PAGE>
REGENCY PLAZA
BUILDING STANDARD IMPROVEMENTS
1. Partitions
Ceiling height partitions consisting of 2 1/2" metal studs at 24" O.C. with
5/8" gypsum board each side, taped and sanded smooth to receive paint.
Maximum: One (1) lineal foot per fifteen (15) square feet of useable area.
Included in this allowance are: demising walls, corridor walls,
boxing of columns and window heads and sills.
2. Doors and Frames
3'-0" x full height solid core doors In metal frames, Building Standard
cherry finish.
Interior Doors: Two (2) pair butt hinges, door stop, ASSA Latchset,
-------------- lever handle, Building Standard finish.
Single Entry Doors: Two (2) pair butt hinges, door stop, surface mounted
------------------ closer, SCHLAGE Lockset, lever handle, Building
Standard finish.
Maximum: One (1) Interior Door, frame and hardware per three hundred
(300) square feet of useable area.
One (1) Entry Door per Tenant per floor, or as required by Code.
3. Ceiling
Suspended acoustical ceiling at 8'-6" above floor, with 2' x 4' ARMSTRONG
"Second Look II" regular lay-in ceiling tiles throughout Tenant's space.
4. Lighting
Recessed 2' x 4' parabolic fluorescent fixtures with two (2) energy-saving
lamps. Elevator lobbies and common toilet facilities will have lighting
selected by Landlord.
Maximum: Not to exceed one (1) fixture per eighty (80) square feet of
useable area.
5. Light Switches
Building Standard toggle switch and plastic cover plate at standard
height.
Maximum: One (1) double pair per two hundred fifty (250) square feet of
useable area.
6. Electrical Outlets
Building Standard wall-mounted duplex electrical outlet with plastic cover
plate at standard height.
Maximum: One (1) outlet per one hundred fifty (150) square feet of
useable area.
There shall be two (2) duplex outlets per office and outlets as mutually
agreed to in other rooms.
<PAGE>
7. Telephone Outlets
Wall-mounted telephone outlet.
Maximum: One (1) outlet per two hundred (200) square feet of useable
area.
8. Floor Covering and Base
Building Standard tufted cut pile, 37 oz. Anso IV nylon fiber, glue
direct, or; resilient flooring in color selected by Tenant from Landlord's
standard colors, throughout Tenant's space. Resilient base, 2 1/2" carpet
type, in color selected by Tenant from Landlord's standard colors.
9. Paint
Stipple primer and one (1) coat satin finish latex enamel paint in colors
selected by Tenant from Building Standard selection. Not more than two (2)
colors in any single room or office, and not more than one (1) color per
wall.
10. Window Covering
Building Standard 1" aluminum mini-blinds, with tilt wand, on all exterior
windows. No deletions or substitutions allowed.
11. Fire Protection System
A fire protection system including fire alarms, annunciators, smoke
detectors and sprinklers, located in a Building Standard pattern to
conform with applicable codes. Any alterations or additions to said
system, required to accommodate Tenant Improvements, shall be at the
Tenant's sole expense.
12. Lighted Exit Lights
One (1) exit light per three thousand (3,000) square feet of useable area.
13. HVAC (Heating, Ventilating and Air Conditioning)
A complete year-round HVAC system engineered to handle normal office
useage, with ducted supply air through ceiling diffusers, zoned and
located in a Building Standard pattern. Return air through exhaust vents.
Any alterations or additions to said system, required to accommodate
Tenant Improvements, shall be at Tenant's sole expense.
14. Tenant Signage
One (1) Building Standard Tenant identification sign at Tenant's entry
door and inclusion in Building Lobby Directory.
*NOTE: IF THE MAXIMUM ALLOWANCE QUANTITIES SET FORTH ABOVE ARE USED IN EVERY
CATEGORY, THE BUILDOUT MAY EXCEED THE STANDARD BUILDOUT ALLOWANCE.
<PAGE>
EXHIBIT D
[LETTERHEAD OF MASKATIYA, SURI & CO., INC]
REGENCY PLAZA
RULES AND REGULATIONS
The following Rules and Regulations are a material part of the lease obligation,
and shall be faithfully performed by Tenant, it's employees, agents and
representatives. Serious penalties may be assessed against Tenant if these Rules
are not followed.
1. No sign, placard. picture. advertisement, name or notice shall be inscribed,
displayed or printed or affixed on or to any part of the outside or inside of
the Building without the written consent of Landlord first had and obtained and
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of Tenant.
All approved signs or lettering on doors shall be printed, painted, affixed or
inscribed at the expense of Tenant by a person approved by Landlord. Tenant
shall not place anything or allow anything to be placed near the glass of any
window, door, partition or wall which may appear unsightly from outside the
Premises; provided, however; that Landlord may furnish and install a Building
standard window covering at all exterior windows. Tenant shall not without prior
written consent of Landlord cause or otherwise sunscreen any window.
2. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by any of the Tenants or used by them for any purpose
other than for ingress and egress from their respective Premises.
3. The toilet rooms, 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 and 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.
4. Tenant shall not overload the floor of the Premises or in any way deface the
Premises or any part thereof.
5. No furniture, freight or equipment of any kind shall be brought into the
building without the prior notice to Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building and
also the times and manner or moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Landlord, stand on
supports of such thickness as is necessary to properly distribute the weight.
Landlord shall not be responsible for loss of or damage to any such safe or
property from any cause and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
Tenant.
6. Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building.
7. No cooking shall be done or permitted by any Tenant on the Premises, nor
shall the Premises be used for the storage of merchandise. for washing clothes,
for lodging, or for any improper, objectionable or immoral purposes. No cooking
other than microwave cooking.
8. Tenant shall not use or keep in the Premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material, or use any method of
heating or air conditioning other than that supplied by Landlord.
9. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Landlord. The location of telephone, call
boxes and other office equipment affixed to the Premises shall be subject to the
approval of Landlord.
10. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 PM. and 8:00 A.M. the following day, access to the Building, or to
the halls, corridors, elevators or stairways in the Building or to the Premises
may be refused unless the person seeking access is known to the person or
employee of the Building in charge or has a pass or is properly identified. The
Landlord shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In case of invasion,
mob, riot, public excitement, or other commotion, the Landlord reserves the
right to prevent access to the Building during the continuance of the same by
closing of the doors or otherwise, for the safety of the Tenants and protection
of property in the Building and the Premises.
11. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
12. No vending machines or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Landlord.
13. Landlord shall have the right, exerciseable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the Premises are a part.
(1)
<PAGE>
[LETTERHEAD OF MASKATIYA, SURI & CO., INC.]
REGENCY PLAZA
14. Tenant shall not disturb, solicit, or canvass any occupant of the Building
and shall cooperate to prevent same.
15. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
16. Landlord shall have the right to control and operate the public portions of
the Building, and the public facilities, and heating and air conditioning, as
well as facilities furnished for the common use of the tenants, in such manner
as it deems best for the benefit of the tenants generally.
17. All entrance doors in the Premises shall be left locked when the Premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress from the Premises.
18. Tenant, it's employees, agents and representatives, shall be allowed to
park in areas designated as surface parking (1) one automobile for each 300
square feet of leased area free of charge, unless this service is discontinued
by Landlord, Landlord may impose a parking charge for each additional automobile
parked by Tenant, it's employees, agents and representatives. Automobiles
illegally parked shall be towed by Landlord, at the sole expense of Tenant.
19. Landlord shall provide all utilities (including but not limited to HVAC,
power, water, janitorial) during normal business hours from 7:00 A.M. to 6:00
P.M., weekday, excluding legal holidays. Tenant shall pay for the use of any
utilities during hours or days other than those set forth above. Charges for
these utilities shall be based directly on usage, and at rates set by Landlord
from time to time. Tenant shall pay all such charges monthly, in addition to the
monthly base rent. See Addendum #8.
20. All deliveries to the Premise of tenants, that require use of trolleys,
carts, and can potentially disturb the free movement of people, can only be made
after normal business hours, as set forth above in Article 19, or as set by
Landlord. Wherever possible Tenant shall direct and use the freight elevator as
marked for deliveries. All deliveries have to be accessed from the delivery
entrance, and no deliveries will be permitted from the main entrances.
21. Tenant shall at the end of each weekday, deposit in an area within the
tenant's suite as designated by Tenant in writing to Landlord all cardboard
boxes and other heavy trash for removal by the janitors. Landlord shall provide
services for removal of all normally generated trash by office use. Landlord may
assess additional charges to Tenant, which charges must be paid monthly, for
removal of any trash other than normally generated office related trash.
Landlord's judgment in determining the nature and identity of such trash shall
be final.
Tenant shall not deposit or leave any trash outside Tenant's suite, in a public
corridor. If Landlord is required to remove any such trash, Landlord shall
assess additional charges to Tenant.
In addition to the trash in the special designated area as set forth above, the
Janitors will remove only trash clearly deposited in wastebaskets.
22. Tenant, its employees, agents and representatives shall not deposit any
coffee grinds, tea bags or the like in any public washroom. To the extent
possible all such waste shall be deposited in a properly lined, waterproof
wastebasket.
23. If spots are created on the carpeting, floor covering, drapes etc.,
Landlord shall immediately cause these spots to be removed by dry cleaning or
whatever process required. Tenant shall pay for the cost of any such spot
removal.
24. Tenant shall not alter or install any new locks on any doors or windows
without first obtaining Landlord's written consent. Tenant shall, if permitted
by Landlord to install any special lock, provide Landlord with at least three
(3) keys for any such lock.
25. Tenant shall maintain a list of all employees with keys and access to the
building and Tenants suite. This list shall be updated no less than monthly, and
be provided to Landlord on the first day of each month.
26. Landlord may change, modify or add any rule and regulation. To the extent
possible, Landlord shall provide all Tenants with written notice of any such
change. Landlord's failure to so provide a notice can not be used by Tenant as
an excuse for non-observance of any rule or regulation.
27. If Landlord provides a security station within the building, Tenant shall
observe all check-in and check-out procedures as set by the Chief Security
Officer, for the Premises.
(2)
<PAGE>
MASKATIYA, SURI & CO. INC.
23-Feb-88
REGENCY PLAZA ONE
SCHEDULE OF BASE YEAR OPERATING EXPENSES (1987 )
<TABLE>
<CAPTION>
TOTAL COST/SF % OF TOTAL PROJECTED COST/SF
1987 @FULL OCC
1987
<S> <C> <C> <C> <C> <C>
CATEGORY:
1 INSURANCE $23,709 $0.10 2.64% $ 28,000 $0.12
2 PGE 169,970 0.74 18.92% 305,000 1.32
3 TELEPHONE 9,000 0.04 1.00% 9,000 0.04
4 TRASH 7,571 0.03 0.84% 7,571 0.03
5 HVAC MAIN 18,256 0.08 2.03% 19,200 0.08
6 JANITOR 76,970 0.33 8.57% 180,180 0.78
7 GARDNER 26,517 0.11 2.95% 26,517 0.11
8 PLANT RENTAL 4,658 0.02 0.52% 5,400 0.02
9 SECURITY 43,198 0.19 4.81% 43,198 0.19
10 WINDOW CLEAN 4,500 0.02 0.50% 4,500 0.02
11 ELEVATOR 18,164 0.08 2.02% 24,000 0.10
12 SALARIES 76,815 0.33 8.55% 76,815 0.33
13 PRINTING 1,927 0.01 0.21% 3,000 0.01
14 OFF SUPPLIES 15,771 0.07 1.76% 15,771 0.07
15 MAINT SUPPLIES 11,291 0.05 1.26% 15,000 0.06
16 PROPERTY TAX 284,113 1.23 31.63% 284,113 1.23
17 MISC 4,951 0.02 0.55% 4,951 0.02
18 PROF FEES 15,496 0.07 1.73% 15,496 0.07
19 LIFE SAFETY 12,809 0.06 1.43% 12,809 0.06
20 REPAIRS 5,288 0.02 0.59% 5,288 0.02
21 RENT 42,000 0.18 4.68% 42,000 0.18
22 CLUB MGR 25,200 0.11 2.81% 25,200 0.11
TOTAL $898,173 $3.89 100.00% $1,153,009 $4.99
</TABLE>
<PAGE>
THIS IS AN ADDENDUM TO AND PART OF THAT LEASE DATED JUNE 23, 1988 BY AND
BETWEEN MASKATIYA, SURI & COMPANY, INC., AS "LANDLORD", AND MICROTEC
RESEARCH, AS "TENANT", AND IS BEING ENTERED INTO AS AN ADDITIONAL
CONSIDERATION FOR THIS LEASE AND IS AS FOLLOWS:
1. Base Rent: See 2a and 2j of the Lease.
----------
Months 01-18: Shall be rent free including operating expenses ("rent
------------
concession" term).
Months 19-60: Shall be Thirty Eight Thousand Two Hundred Eighty Eight
------------
Dollars ($38,288.00) per month.
Landlord reserves the right to reschedule the rental structure, without
changing the effective rent. In no event shall the base rent be
increased. Landlord will give Tenant ninety (90) days prior notice of
any such change.
2. Option to Extend: Tenant is given one (1) five (5) year option to
-----------------
extend the term under all the provisions contained in this Lease. Rental
rate will be increased based on the increased San Francisco-Oakland All
Urban Consumers Price Index using 1988 as the base year. In no event
shall such increase exceed a simple non-cumulative increase of five
percent (5%) per year (i.e. 25%) on the base rental rate of $2.00 a
square foot.
("Extended term") following expiration of the initial term, shall be
invoked by giving notice of exercise of the option ("option notice") to
Landlord at least one hundred eighty (180) days before the expiration of
the term. Provided that, if Tenant is in default on the date of giving
the option notice, the option notice shall be totally ineffective, or
if Tenant is in default on the date the extended term is to commence,
the extended term shall not commence and this Lease shall expire at the
end of the initial term.
3. Option and Continuing Interest: For one six (6) month period
-------------------------------
commencing upon occupancy of the fifth floor Tenant shall have the right
to lease five thousand three hundred seventy three (5,373) square feet
on the fourth floor (per Exhibit E) under the same terms and conditions
of said Lease. Additional leased premises will be co-terminous with this
lease (but in no event for less than three (3) years). The load factor
on this multi-tenant floor is fourteen percent (14%). Tenant Improvement
allowance to be a maximum of Twenty Five Dollars ($25.00) per usable
square foot. The free rent period on the optioned space shall be
coterminous with the free rent of the initially leased space.
On month seven (7) of the Lease, the Option to Extend shall convert to a
First Right of Refusal with the following provisions.
Area to include the original five thousand three hundred seventy
three (5,373) square feet or any portion of that same five thousand
three hundred seventy three (5,373) square feet that remains on the
fourth (4th) floor. (Exhibit E)
If Landlord receives a bona fide offer from a third party with
respect to such additional space, Landlord shall notify Tenant of
the terms under which Landlord would be willing to lease such
additional space.
<PAGE>
Tenant shall have three (3) working days from the date of
receipt of such notice within which to accept or reject the
offer in writing. Should Tenant fail to respond in writing, said
offer shall be deemed rejected. In the event such lease to a
third party is not consummated as contemplated by such bona fide
offer, any new determination by Landlord to Lease shall be
considered a new transaction and the provisions of this
Paragraph shall be applicable.
4. Meeting space: Landlord will provide Tenant with the use of 1,200
-------------
plus or minus square feet of space within Regency Plaza for Tenant's
monthly employee assembly. Tenant will make reservations for the use
of this space not less than ten (10) working days prior to proposed
use.
5. Existing Rent Obligation: In order to accommodate an occupancy date
------------------------
of October 1, 1988 (or substantial completion date as appropriate),
Landlord will reimburse Tenant for the payment of all lease payments
and triple net (NNN) fees associated with their present tenancy. In
no event will Landlord's obligation exceed Nineteen Thousand Seven
Hundred Seventy Three Dollars ($19,773.00) per month. These
reimbursements shall commence upon occupancy at Regency Plaza and
partial months shall be pro rated appropriately. Landlord will
reimburse Tenant monthly upon written evidence that the Tenant has
paid the rental charges for its tenancy at 3930 Freedom Circle in
Santa Clara. Payments to be made within five (5) working days after
receipt of said invoice. Payments shall terminate February 1, 1989.
6. Tenant Improvements: Landlord will provide turnkey improvements as
-------------------
per the attached floor plan, Exhibit "A" and Exhibit "B" Building
Standard Work letter.
7. Office Wiring: Landlord will provide telecommunications service to
-------------
include ethernet cabling and drops, serial terminal drops and
telephone drops. This telecommunication system is based upon the
needs set forth in the attached Exhibit C and relates only to the
wiring on the fifth floor. All such wiring needed by the attached
Exhibit C shall be completed prior to Tenant's occupancy. Landlord's
obligation for said wiring shall then cease. Cost of said wiring is
not to exceed Thirty Five Thousand Dollars ($35,000.00). The Tenant
agrees that this service will be provided by Introlink. Landlord will
have the right to use Tenant's existing equipment as necessary (the
down time for tenant is to be mutually agreed upon). In the event the
cost of this wiring is less than Thirty Five Thousand Dollars
($35,000.00) any savings up to Ten Thousand Dollars ($10,000.00) will
be applied to the Tenant's moving expenses. In the event the cost of
wiring exceeds Thirty Five Thousand Dollars ($35,000.00) all
additional costs will be paid by Tenant. Whenever available
warranties will be granted to the Tenant with respect to the
foregoing paragraph.
8. SERVICES AND UTILITIES
----------------------
It is understood that power and HVAC will be provided on a 24 hour
basis to certain designated areas within the premises.
9. ALTERATIONS AND ADDITIONS
-------------------------
Notwithstanding the foregoing, Tenant shall obtain a comprehensive
bid from a contractor acceptable to Landlord for any such additions
and alterations.
Landlord shall have the right, but not the obligations, to complete
such additions and alterations for the same cost as the first
acceptable bid.
<PAGE>
THIS AMENDMENT is executed at Santa Clara, California
------------------------------------------
_______________________________________________________ this 19th day of
-----------
June, 1989, by and between Microtec Research, Incorporated, A California
- ---- ---- --------------------------------------------
Corporation ("Lessee") and Maskatiya, Suri & Company, Incorporated, A California
- ---------------------- -----------------------------------------------------
Corporation By: Regency Plaza Office Building One, Incorporated, A Delaware
- ---------------------------------------------------------------------------
Corporation
- -----------
("Lessor"), for the premises located at 2350 Mission College Boulevard, Suite
-------------------------------------
#500, Santa Clara, California 95054 ("Premises").
- -----------------------------------
Lessor and Lessee, being parties to that Lease dated June 23, 1988 hereby
------- --
express their mutual desire and intent to amend Lessee's tern of lease as
follows:
AMENDMENT
- ---------
In the above referenced Lease, Lessee's lease tern commenced on October 1, 1988
--
and ended on September 30, 1993. Lessee's revised lease term shall
------------ --
commence on November 1, 1988 and end on October 31, 1993.
---------- ---- ---------- ----
INCORPORATION
- -------------
Except as modified herein, all other terms and conditions of the Lease between
the parties above described shall continue in full force and effect.
LESSOR: LESSEE:
MASKATIYA, SURI, & COMPANY MICROTEC RESEARCH, INCORPORATED
INCORPORATED, A DELAWARE A CALIFORNIA CORPORATION
CORPORATION; BY: REGENCY
PLAZA OFFICE BUILDING ONE,
INCORPORATED, A DELAWARE
CORPORATION
BY /s/ Thomas A. Jahad BY /s/ Robert G. Kirk
---------------------------- ---------------------------
(Authorized Signature) (Authorized Signature)
Vice-President Robert G. Kirk, President
---------------------------- ---------------------------
(Title) (Title)
7/14/89
---------------------------- ---------------------------
(Execution Date) (Execution Date)
BY BY
---------------------------- ---------------------------
(Authorized Signature) (Authorized Signature)
---------------------------- ---------------------------
(Title) (Title)
<PAGE>
POSSESSION LETTER
-----------------
Tenant Name: Microtec Research
Suite Number: 500
Dated: November 2, 1988
We, the undersigned, have accepted the Premises as complete, and ready for
occupancy, pursuant to our Lease Agreement with Maskatiya, Suri & Co., Inc.
"Landlord" (except for punch list items which Landlord shall complete).
We understand that rent commences as of occupancy, December 3, 1987.
We have received the following:
70 Sets of suite keys.
----
35 XCI access cards for 24 hour building access.
----
Punch list (attached).
We understand that the keys and magnetic cards are Landlords property, and are
to be returned upon Landlords reasonable demand or upon termination of
occupancy. We agree to advise Landlord of any additional copies made of the
above sets, and to keep a record of each such user.
Signed:
-----------------------
Dated:
-----------------------
Please Print
Name:
-----------------------
Title:
-----------------------
<PAGE>
REGENCY PLAZA
OFFICE BUILDING LEASE
This Lease is made between REGENCY PLAZA INTERNATIONAL, INC., a Delaware
---------------------------------
Corporation, ("Landlord"), and MICROTEC RESEARCH INC., a California
------------------------------------
Corporation,("Tenant") and is dated as of April 5, 1991.
- ---------------------
1. LEASE OF PREMISES.
In consideration of the Rent (as defined at Section 5.4) and the provisions of
this Lease, Landlord leases to Tenant and Tenant leases from Landlord the
Premises shown by diagonal or outlines on the floor plans attached hereto as
Exhibits "A", and "A-1", and further described at Section 2(i). The premises
are located within the Building and Project described in Section 2(m). Tenant
shall have the non-exclusive right (unless otherwise provided herein) in common
with Landlord, other tenants, subtenants and invitees, to use of the Common
Areas, as defined at Section 2(e).
2. DEFINITIONS.
As used in this Lease, the following terms shall have the following amounts or
meanings:
a. Base Rent: $30,000 per annum, (Thirty thousand dollars only).
b. Base Year: 1990.
c. Broker(s) and Sales Agent(s): None.
d. Commencement Date: June 1, 1991,
e. Common Areas: The Building's lobbies, common corridors and hallways,
restrooms, garage and parking areas, stairways, elevators and other generally
understood public or common areas. Landlord shall have the right to regulate or
restrict the use of the Common Areas.
f. Expense Stop: None.
g. Expiration Date: May 31, 1996, unless otherwise sooner terminated in
------------
accordance with the provisions of this Lease.
h. Index (Section 5.2): United States Department of Labor, Bureau of Labor
Statistics Consumer Price Index for All Urban Consumers, San Francisco Bay Area
Average, Subgroup "All Items". (1967=100).
i. Landlord's Mailing Address: 2350 Mission College Boulevard, Suite 1050,
Santa Clara, CA, 95054; (408)982-3800.
Tenant's Mailing Address: 2350 Mission College Boulevard, Suite 500,
Santa Clara, CA 95054.
j. Monthly Installments of Base Rent: $2,500 (Two Thousand Five Hundred Dollars
Only).
k. Parking: Tenant shall be permitted, upon payment of the then prevailing
monthly rate (as set by Landlord from time to time) to park Four (4) cars on a
non-exclusive basis in the area(s) designated by Landlord for parking. Tenant
shall abide by any and all parking regulations and rules established from time
to time by Landlord or Landlord's parking operator. Landlord reserves the right
to separately charge Tenant's guests and visitors for parking.
l. Premises: That portion of the Building containing approximately 1,313 square
------------
feet of Rentable Area, as set forth in Exhibit "A", located on the Second Floor
- ---- ------------
of the Building and known as Suite #275.
----------
m. Project: The Building of which the Premises are a part (the "Building"), the
Land on which the Building is situated and any other improvements on the real
property (the "Property") located at 2350 Mission College Boulevard, Santa
Clara, California, and further described at Exhibit "B". The Project is known as
REGENCY PLAZA ONE.
n. Rentable Area: The measurements of floor area as may, from time to time, be
subject to lease by Tenant and all tenants of the Project, respectively, as
determined by Landlord and applied on a consistent basis throughout the Project.
o. Security Deposit (Article 7): $2,500 (Two Thousand Five Hundred Dollars
Only).
p. State: The State of California.
q. Tenant's First Adjustment Date (Section 5.2): The first day of the Thirty-
first (31) month of the Lease Term, and each anniversary of the commencement
date of the lease thereafter.
r. Tenant's Proportionate Share: 0.5%, Such share is a fraction, the numerator
of which is the Rentable Area of the Premises, and the denominator of which is
the Rentable Area of the Project, as determined by Landlord from time to time.
The Project consists of one Building containing a total Rentable Area of
approximately 224,000 square feet. Landlord reserves the right to change the net
rentable area without notice to Tenant and Landlord's figures shall be binding.
s. Tenant's Use Clause (Article 8): General office use.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(1)
<PAGE>
t. Term: The period commencing on the Commencement Date and expiring at
midnight on the Expiration Date: Five (5) Years.
3. EXHIBITS AND ADDENDA.
The exhibits and addenda listed below are incorporated by reference in this
Lease:
a. Exhibit "A" - Floor Plans showing the Premises.
b. Exhibit "B" - Site Plan of the Project.
c. Exhibit "C" - Building Standard Work Letter.
d. Exhibit "D" - Rules and Regulations.
4. DELIVERY OF POSSESSION.
"Delivery of Possession" shall be the day which is the earlier of; (i) the date
on which Landlord substantially completes its work as set forth in Exhibit "C"
or, (ii) the date on which the tenant commences its business from the premises.
If for any reason Landlord does not deliver possession of the Premises to Tenant
on the Commencement Date, Landlord shall not be subject to any liability for
such failure. The Expiration Date shall be extended day for day to reflect the
delay in commencement and the validity of this Lease shall not be impaired, but
Rent shall be abated until delivery of possession. If Landlord permits Tenant to
enter into possession of the Premises before the Commencement Date, such
possession shall be subject to the provisions of this Lease, including, without
limitation, the payment of Rent.
5. RENT.
5.1 Payment of Base Rent.
Tenant agrees to pay the Base Rent for the Premises. Monthly Installments of
Base Rent shall be payable in advance on the first day of each calendar month of
the Term. If the Term begins (or ends) on other than the first (or last) day of
a calendar month, the Base Rent for the partial month shall be prorated on a
per diem basis on the basis of a 30 day month (except February, which may be 28
or 29 days). Tenant shall pay Landlord the first Monthly Installment of Base
Rent when Tenant executes this Lease.
5.2 Adjusted Base Rent.
a. The amount of Base Rent (and the corresponding Monthly Installments of Base
Rent) payable hereunder shall be adjusted annually (the "Adjustment Date"),
commencing on Tenant's First Adjustment Date and on the anniversary date of the
commencement of the lease thereafter. Adjustments, if any, shall be based upon
increases (if any) in the Index. The Index in publication three (3) months
before the Commencement Date shall be the "Base Index." On each Adjustment Date,
the Base Rent shall be increased by a percentage equal to the percentage
increase, if any, in the Index in publication three (3) months before the
Adjustment Date (the "Comparison Index") over the Base Index ("Adjusted Base
Rent"). In the event the Comparison Index in any year is less than the
Comparison Index (or Base Index, as the case may be) for the preceding year, the
Base Rent shall remain the amount of Base Rent payable during that preceding
year. When the adjusted Base Rent payable as of each Adjustment Date is
determined, Landlord shall give Tenant written notice of such adjusted Base Rent
and the manner in which it was computed. The adjusted Base Rent shall thereafter
be the "Base Rent" for all purposes under this Lease.
b. If at any Adjustment Date the Index no longer exists in the form described in
this Lease, Landlord may substitute any substantially equivalent official index
published by the Bureau of Labor Statistics or its successor. landlord shall use
any appropriate conversion factors to accomplish such substitution. The
substitute index shall than become the "Index" hereunder.
5.3 Project Operating Costs.
a. In order that the Rent (as further defined in Section 5.4) payable during the
term, reflect any increase in Project Operating Costs, Tenant agrees to pay to
Landlord as Rent, Tenant's Proportionate Share of all increases in costs,
expenses and obligations attributable to the Project and its operation, as
provided below.
b. If, during any calendar year during the Term, Project Operating Costs exceed
the Project Operating Costs for the Base Year, [or the Expense Stop, if one is
provided in Section 2 (f)], Tenant shall pay to Landlord, in addition to the
Base Rent and all other payments due under this Lease, an amount equal to
Tenant's Proportionate Share of such excess Project Operating Costs in
accordance with the provisions of this Section.
(1) The term "Project Operating Costs" shall include all those items described
in the following subparagraphs (a) and (b).
(a) Taxes: All taxes, assessments, water and sewer charges and other
similar governmental charges levied on or attributable to the Building or
Project or their operation, including without limitation; (i) real property
taxes or assessments levied or assessed against the Building or Project, (ii)
assessments or charges levied or assessed against the Building or Project by any
redevelopment agency, and (iii) any tax measured by gross rentals received from
the leasing of the Premises, Building or Project, excluding any net income,
franchise, capital stock, estate or inheritance taxes imposed by the State or
Federal Government or their agencies, branches or departments; provided that if
any time during the Term any governmental entity levies, assesses or imposes on
Landlord any: (1) general or special, ad valorem or specific, excise, capital
levy or other tax, assessment, levy or charge directly on the Rent received
under this Lease or on the rent received under any other leases of space in the
Building or Project; or (2) any license fee, excise or franchise tax,
assessment, levy or charge measured by or based, in whole or in part, upon such
rent; or (3) any transfer, transaction, or similar tax, assessment, levy or
charge based directly or indirectly upon the transaction represented by this
Lease or such other leases; or (4) any occupancy, use, per capita or other tax,
assessment, levy or charge based directly or indirectly upon the use or
occupancy of the Premises or other premises within the Building or Project, then
any such taxes, assessments, levies and charges shall be deemed to be included
in the term Project Operating Costs. If at any time during the Term the assessed
valuation of, or taxes on, the Project are not based on a completed Project
having at least eighty-five percent (85%) of the Rentable Area occupied, then
the "taxes" component of Project Operating Costs shall be adjusted by
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(2)
<PAGE>
<PAGE>
9. SERVICES AND UTILITIES.
Provided that Tenant is not in default hereunder, Landlord agrees to furnish to
the Premises, during generally recognized business days and during hours
determined by Landlord, in its sole discretion, and subject to the Rules and
Regulations of the Building or Project electricity for normal desk top office
equipment and normal copying equipment, and heating, ventilation and air
conditioning ("HVAC") as required in Landlord's judgment for the comfortable use
and occupancy of the Premises. If Tenant desires HVAC at any other time,
Landlord shall use reasonable efforts to furnish such services upon reasonable
notice from Tenant and Tenant shall pay Landlord's charges therefore on demand.
Landlord shall also maintain and keep lighted the common stars, common entries
and restrooms in the Building. Landlord shall not be in default hereunder or be
liable for any damages directly or indirectly resulting from, nor shall the Rent
be abated by reason of: (i) the installation, use or interruption of use of any
equipment in connection with the furnishing of any of the foregoing services;
(ii) failure to furnish or delay in furnishing any such services where such
failure or delay is caused by accident or any condition or event beyond the
reasonable control of Landlord, or by the making of necessary repairs or
improvements to the Premises, Building or Project; or (iii) the "limitation,
curtailment or rationing of, or restrictions on, use of water, electricity, gas
or any other form of energy serving the Premises, Building or Project. Landlord
shall not be liable under any circumstances for a loss of or injury to property
or business, however occurring, through or in connection with or incidental to,
failure to furnish any such services. If Tenant uses heat generating machines or
equipment in the Premises which affect the temperature otherwise maintained by
the HVAC system, Landlord reserves the right to install supplementary air
conditioning units in the Premises and the cost thereof, including the cost of
installation, operation and maintenance thereof, shall be paid by Tenant to
Landlord upon demand by Landlord.
Tenant shall not, without the written consent of Landlord, use any apparatus or
device in the Premises, including without limitation, machines using in excess
of 120 volts, which consumes more electricity than is usually furnished or
supplied for the use of premises as general office space, as determined by
Landlord. Tenant shall not connect any apparatus with electric current except
through existing electrical outlets in the Premises. Tenant shall not consume
water or electric current in excess of that usually furnished or supplied for
the premises as general office space (as determined by Landlord), without first
procuring the written consent of Landlord, which Landlord may refuse, and in the
event of consent, Landlord may have installed a water meter or electrical
current meter in the Premises to measure the amount of water or electric current
consumed. The cost of any such meter and of its installation, maintenance and
repair shall be paid for by the Tenant and Tenant agrees to pay to Landlord
promptly upon demand for all such water and electric current consumed as shown
by said meters, at the rates charged for such services by the local public
utility plus any additional expense incurred in keeping account of water and
electric current so consumed. If a separate meter is not installed, the excess
cost for such water and electric current shall be established by an estimate
made by a utility company or electrical engineer hired by Landlord at Tenant's
expense.
Nothing contained in this Article shall restrict Landlord's right to require at
any time separate metering of utilities furnished to the Premises. In the event
utilities are separately metered, Tenant shall pay promptly upon demand for
all utilities consumed at utility rates charged by the local public utility plus
any additional expenses incurred by Landlord in keeping account of the utilities
so consumed. Tenant shall be responsible for the cost of maintenance and repair
of any such meters at its sole cost.
Landlord shall furnish elevator service, lighting replacement for building
standard lights, restroom supplies, window washing and janitor services in a
manner that such services are customarily furnished to comparable office
buildings in the area.
10. CONDITION OF THE PREMISES.
Tenants taking possession of the Premises shall be deemed conclusive evidence
that as of the date of taking possession the Premises are in good order and
satisfactory condition, except for such matters as to which Tenant gave Landlord
notice on or before the Commencement Date. No promise of Landlord to alter,
remodel, repair or improve the Premises, the Building or the Project and no
representation, express or implied, respecting any matter or thing relating to
the Premises, Building, Project or this Lease (including, without limitation,
the condition of the Premises, the Building or the Project) have been made to
Tenant by Landlord or its Broker Agent, other than as may be contained herein or
in a separate exhibit or addendum signed by Landlord and Tenant.
11. CONSTRUCTION, REPAIRS AND MAINTENANCE
a. Landlord's Obligations:
Landlord shall maintain in good order, condition and repair the Building
and all portions of the Premises not the obligation of Tenant or of any other
tenant in the Building.
b. Tenant's Obligations:
(1) Tenant at Tenant's sole expense shall, except for services furnished
by Landlord pursuant to Article 9 hereof, maintain the Premises in good order,
condition and repair, including the interior surfaces of the ceilings, walls and
floors, all doors, all interior equipment, all plumbing, pipes and fixtures,
electrical wiring, switches and fixtures, Building Standard furnishings and
special items and equipment installed by or at the expense of Tenant or Landlord
(2) Tenant shall be responsible for all repairs and alterations in and to
the Premises, Building and Project and the facility and systems thereof, the
need for which arises out of; (i) Tenant's use or occupancy of the Premises;
(ii) the installation, removal, and or operation of Tenant's Property (as
defined in Article 13) in the Premises; (iii) the moving of Tenant's Property
into or out of the Building; or (iv) the act, omission, misuse or negligence of
Tenant, its agents, contractors, employees or invitees.
(3) If Tenant fails to maintain the Premises in good order, condition and
repair, Landlord shall give Tenant notice to do such acts as are reasonably
required to so maintain the Premises, If Tenant fails to promptly commence such
work and diligently prosecute it to completion, then Landlord shall have the
right to do such acts and expend such funds at the expense of Tenant as are
reasonably required to perform such work. Any amount so expended by Landlord
shall be paid by Tenant promptly after demand with interest at the prime
commercial rate then being charged by Bank of America NT & SA, (or such other
Bank as may be comparable in Landlord's opinion) plus six percent (6%) per
annum, but not to exceed the maximum rate then allowable by law, from the date
of commencement of such work till
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(4)
<PAGE>
paid for by Tenant Landlord shall have no liability to Tenant for any damage,
inconvenience, or interference with the use of the Premises by Tenant as a
result of performing any such work.
c. Compliance with Law:
Landlord and Tenant shall each do all acts required to comply with all
applicable laws, ordinance, and rules of any public authority relating to their
respective maintenance obligations as set forth herein.
d. Waiver by Tenant
Tenant expressly waives the benefits of any statute now or hereafter in effect
which would otherwise afford the Tenant the right to make repairs at Landlord's
expense or to terminate this Lease because of Landlord's failure to keep the
Premises in good order, condition and repair.
e. Load and Equipment Limits:
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, (as of the date of
this Lease, the maximum permitted load is eighty (80) pounds per square foot,
but this is subject to change by Landlord without notice), as determined by
Landlord or Landlord's structural engineer. The cost of any such determination
made by Landlord's structural engineer shall be paid for by Tenant upon demand.
Tenant shall not install business machines or mechanical equipment which cause
noise or vibration to such a degree as to be objectionable to Landlord or other
Building tenants.
f. Except as otherwise expressly provided in this Lease, Landlord shall have no
liability to Tenant nor shall Tenant's obligations under this Lease be reduced
or abated in any manner whatsoever by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord's making any repairs or
changes which Landlord is required to make or be permitted by this Lease or by
any other tenant's lease or required by law to make in or to any portion of the
Project, Building or the Premises. Landlord shall nevertheless use reasonable
efforts to minimize any interference with Tenant's business in the Premises.
g. Tenant shall give Landlord prompt notice of any damage to or defective
condition in any part or appurtenance of the Building's mechanical, electrical,
plumbing, HVAC or other systems serving, located in, or passing through the
Premises.
h. Upon the expiration or earlier termination of this Lease, Tenant shall
return the Premises to Landlord, clean and in the same condition as on the date
Tenant took possession, except for normal wear and tear. Any damage to the
Premises, including any structural damage, resulting from Tenant's use or from
the removal of Tenant's fixtures, furnishings and equipment pursuant to Section
13(b) shall be repaired by Tenant at Tenant's expense. If tenant fails to remove
or repair the premises to a reasonable state as may be directed by Landlord,
Landlord may make all necessary repairs (but is not obligated to) for and on
account of Tenant. Tenant shall, within ten (10) days alter a notice has been
delivered to Tenant, pay all such costs, including a charge for interest as
determined by Landlord and Landlord's fee for all such work. If Tenant fails to
pay these costs, then, in addition to other rights and remedies available to
Landlord at law or in equity resulting from such non payment, Landlord may
deduct all such costs from any Security Deposit provided to Landlord.
12. ALTERATIONS AND ADDITIONS
a. Tenant shall not make any additions, alterations or improvements to the
Premises without obtaining the prior written consent of Landlord. Landlord's
consent may be conditioned on Tenant's removing any such additions, alterations
or improvements upon the expiration of the Term and restoring the Premises to
the same condition as on the date Tenant took possession. All work with respect
to any addition, alteration or improvement shall be done in a good and
workmanlike manner by properly qualified and licensed personnel approved by
Landlord, and such work shall be diligently prosecuted to completion. Landlord
may, at Landlord's option, require that any such work be performed by Landlord
or Landlord's designated contractor, in which case, the cost of such work shall
be paid for before commencement of the work. In addition to the foregoing,
Tenant shall pay to Landlord, a supervision and administrative fee of fifteen
percent (15%) of the cost of the work. If Landlord allows Tenant's contractor to
do such alterations, Tenant shall provide any and all documents required by
Landlord to review and approve in its sole and absolute discretion. Tenant's
contractor shall observe all rules and regulations as set forth by Landlord,
including but not limited to Landlord's rules for construction contractors.
b. Tenant shall pay the costs of any work done on the Premises pursuant to
Section 12 (a), and shall keep the Premises, Building and Project free and clear
of liens of any kind. Tenant shall indemnity, defend against and keep Landlord
free and harmless from all liability, loss, damage, costs, attorneys' fees and
any other expense incurred on account of claims by any person performing work or
furnishing materials or supplies for Tenant or any person claiming under Tenant.
Tenant shall keep Tenant's leasehold interest, and any additions or improvements
which are or become the property of Landlord under this Lease, free and clear of
all attachment or judgment liens. Before the actual commencement of any work for
which a claim or lien may be filed, Tenant shall give Landlord notice of the
intended commencement date sufficient time, before that date, to enable Landlord
to post notices of non-responsibility or any other notices which Landlord deems
necessary for the proper protection of Landlord's interest in the Premises,
Building or the Project, and Landlord shall have the right to enter the Premises
and post such notices at any reasonable time.
c. Landlord may require, at Landlord's sole option, that Tenant provide to
Landlord, at Tenant's expense, a lien and completion bond in an amount equal to
at least one and one-half (1 1/2) times the total estimated cost of any
additions, alterations or improvements to be made in or to the Premises, to
protect Landlord against any liability for mechanic's and materialmen's liens
and to insure timely completion of the work. Nothing contained in this Section
12(c) shall relieve Tenant of its obligation under Section 12(b) to keep the
Premises, Building and Project free of all liens.
d. Unless their removal is required by Landlord as provided in Section 12(a),
all additions, alterations and improvements made to the Premises shall become
the property of Landlord and be surrendered with the Premises upon the
expiration of the Term; provided, however, Tenant's equipment, machinery and
trade fixtures which can be removed without damage to the Premises shall remain
the property of Tenant and may be removed, subject to the provisions of Section
13(b).
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(6)
<PAGE>
13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY.
a. All fixtures, equipment, improvements and appurtenances attached to or built
into the Premises at the commencement of or during the Term, whether or not by
or at the expense of Tenant ("Leasehold Improvements"), shall be and remain a
part of the Premises, shall be the property of Landlord and shall not be removed
by Tenant, except as expressly provided in Section 13(b).
b. All movable partitions, business and trade fixtures, machinery and
equipment, communications equipment and office equipment located in the premises
and acquired by the tenant, without expense to Landlord, which can be removed
without structural damage to the Building, and all furniture, furnishings and
other articles of movable personal properly owned by Tenant and located in the
Premises (collectively "Tenant's Property') shall be and shall remain the
property of Tenant and may be removed by Tenant at any time during the Term;
provided that if any of Tenant's Property is removed, Tenant shall promptly
repair any damage to the Premises or to the Building resulting from such
removal.
14. RULES AND REGULATIONS.
Tenant agrees to comply with (and cause its agents, contractors, employees and
invitees to comply with) the rules and regulations attached hereto as Exhibit
"D" and with such reasonable modifications thereof and additions thereto as
Landlord may from time to time make. Landlord shall not be responsible for any
violation of said rules and regulations by other tenants or occupants of the
Building or Project.
15. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord reserves the following rights, exercisable without liability to Tenant
for, (a) damage or injury to property, person or business; (b) causing an actual
or constructive eviction from the Premises; or (c) disturbing Tenant's use or
possession of the Premises:
a. To name the Building and Project and to change the name or street address of
the Building or Project;
b. To install and maintain all signs on the exterior and interior of the
Building and Project;
c. To have pass keys to the Premises and all doors within the Premises,
excluding Tenant's vaults and safes;
d. At any time during the Term, and to the extent possible on reasonable prior
notice to Tenant, to inspect the Premises, and to show the Premises to any
prospective purchaser or mortgagee of the Project, or to any assignee of any
mortgage on the Project, or to others having an interest in the Project or
Landlord, and during the last six months of the Term, to show the Premises to
prospective tenants thereof; and
e. To enter the Premises for the purpose of making inspections, repairs,
alterations, additions or improvements to the Premises or the Building
(including, without limitation, checking, calibrating, adjusting or balancing
controls and other parts of the HVAC system), and to take all steps as may be
necessary or desirable for the safety, protection, maintenance or preservation
of the Premises or the Building or Landlord's interest therein, or as may be
necessary or desirable for the operation or improvement of the Building or in
order to comply with laws, orders or requirements of governmental or other
authority. Landlord agrees to use its best efforts (except in an emergency) to
minimize interference with Tenant's business in the Premises in the course of
any such entry.
16. ASSIGNMENT AND SUBLETTING.
a. Tenant shall not, without the prior written consent of Landlord, assign or
hypothecate this Lease or any interest herein or sublet the Premises or any part
thereof, or permit the use of the Premises by any party other than Tenant. Any
of the foregoing acts without such consent shall be void and shall, at the
option of Landlord, terminate this Lease. This Lease shall not, nor shall any
interest of Tenant herein, be assignable by operation of law without the written
consent of Landlord.
b. No subletting or assignment shall release Tenant of Tenant's obligations
under this Lease or alter the primary liability of Tenant to pay the Rent and to
perform all other obligations to be performed by Tenant hereunder. The
acceptance of Rent by Landlord from any other person shall not be deemed to be a
waiver by Landlord of any provision hereof. Consent to one assignment or
subletting shall not be deemed consent to any subsequent assignment or
subletting. In the event of default by an assignee or subtenant of Tenant or any
successor of Tenant in the performance of any of the terms hereof, Landlord may
proceed directly against Tenant without the necessity of exhausting remedies
against such assignee, subtenant or successor. Landlord may consent to
subsequent assignments of the Lease or subletting or amendments or modifications
to the Lease with assignees of Tenant, without notifying Tenant, or any
successor of Tenant, and without obtaining its or their consent thereto and any
such actions shall not relieve Tenant of liability under this Lease.
c. If Tenant assigns the Lease or sublets the Premises or requests the consent
of Landlord to any assignment or subletting or if Tenant requests the consent of
Landlord for any act that Tenant proposes to do, then Tenant shall, upon demand,
pay Landlord an administrative fee of two thousand and NO/100 ($2,000.00) plus
any attorney's fees reasonably incurred by Landlord in connection with such act
or request.
d. Notwithstanding the provisions of Paragraphs (a) and (b) above, Tenant may
assign this Lease or sublet the Premises or any portion thereof, without
Landlord's consent and without extending any recapture or termination option to
Landlord, to any corporation which controls, is controlled by or is under common
control with Tenant, or to any corporation resulting from a merger or
consolidation with Tenant, or to any person or entity which acquires all the
assets of Tenant's business as a going concern, provided that: (i) the assignee
or sublessee assumes, in full, the obligations of Tenant under this Lease; (ii)
Tenant remains fully liable under this Lease; and (iii) the use of the Premises
under Article 8 remains unchanged.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(7)
<PAGE>
17. HOLDING OVER.
If after expiration of the Term, Tenant remains in possession of the premises
with Landlord's permission (express or implied), Tenant shall become a tenant
from month to month only, upon all the provisions of this Lease (except as to
Term and Base Monthly Rent), but the Monthly Installments of Base Rent" payable
by Tenant shall be increased to one hundred fifty percent (150%) of the Monthly
Installments of Base Rent payable by Tenant at the expiration of the Term. Such
monthly rent shall be payable in advance on or before the first day of each
month. If either party desires to terminate such month to month tenancy, it
shall give the other party not less than thirty (30) days advance written notice
of the date of termination.
18. SURRENDER OF PREMISES.
a. Tenant shall peaceably surrender the Premises to Landlord on the Expiration
Date, in broom-clean condition and in as good condition as when Tenant took
possession, except for; (i) reasonable wear and tear; (ii) loss by fire or other
casualty; and (iii) loss by condemnation. Tenant shall, on Landlord's request,
remove Tenant's Property on or before the Expiration Date and promptly repair
all damage to the Premises or Building caused by such removal.
b. If Tenant abandons or surrenders the Premises, or is dispossessed by process
of law or otherwise, any of Tenant's Property left on the Premises shall be
deemed to be abandoned, and, at Landlord's option, title shall pass to Landlord
under this Lease as by a bill of sale. If Landlord elects to remove all or any
part of such Tenant's Property, the cost of removal, including repairing any
damage to the Premises or Building caused by such removal, shall be paid by
Tenant. On the Expiration Date Tenant shall surrender all keys to the Premises.
19. DESTRUCTION OR DAMAGE.
a. If the Premises or the portion of the Building necessary for Tenant's
occupancy is damaged by fire, earthquake, act of God, the elements or other
casualty, Landlord shall, subject to the provisions of this Article, promptly
repair the damage, if such repairs can, in Landlord's opinion, be completed
within ninety (90) days. If Landlord determines that repairs can be completed
within ninety (90) days, this Lease shall remain in full force and effect,
except that if such damage is not the result of the negligence or willful
misconduct of Tenant or Tenant's agents, employees, contractors, licensees or
invitees, the Base Rent shall be abated to the extent Tenant's use of the
Premises is impaired, commencing with the date of damage and continuing until
completion of the repairs required of Landlord under Section 19(d).
b. If in Landlord's opinion, such repairs to the Premises or portion of the
Building necessary for Tenant's occupancy cannot be completed within ninety (90)
days. Landlord may eject, upon notice to Tenant, given within thirty (30) days
after the date of such fire or other casualty, to repair such damage, in which
event this Lease shall continue in full force and effect, but the Base Rent
shall be partially abated as provided in Section 19(a). If Landlord does not so
elect to make such repairs, this Lease shall terminate as of the date of such
fire or other casualty.
c. If any other portion of the Building or Project is totally destroyed or
damaged to the extent that in Landlord's opinion repair thereof cannot be
completed within ninety (90) days. Landlord may elect upon notice to Tenant
given within thirty (30) days after the date of such fire or other casualty, to
repair such damage, in which event this Lease shall continue in full force and
effect, but the Base Rent shall be partially abated as provided in Section
19(a). If Landlord does not elect to make such repairs, this Lease shall
terminate as of the date of such fire or other casualty.
d. If the Premises are to be repaired under this Article, Landlord shall repair
at its cost any injury or damage to the Building and Building Standard Work in
the Premises. Tenant shall be responsible at its sole cost and expense for the
repair, restoration and replacement of any other Leasehold Improvements and
Tenant's Property. Landlord shall not be liable for any loss of business,
inconvenience or annoyance arising from any repair or restoration of any portion
of the Premises, Building or Project as a result of any damage from fire or
other casualty.
e. This Lease shall be considered an express agreement governing any case of
damage to or destruction of the Premises, Building or Project by fire or other
casualty, and any present or future law which purports to govern the rights of
Landlord and Tenant in such circumstances in the absence of express agreement,
shall have no application.
20. EMINENT DOMAIN.
a. If the whole of the Building or Premises is lawfully taken by condemnation
or in any other manner, for any public or quasi-public purpose, this Lease shall
terminate as of the date of such taking, and Rent shall be prorated to such
date. If less than the whole of the Building or Premises is so taken, this Lease
shall be unaffected by such taking, provided that: (i) Tenant shall have the
right to terminate this Lease by notice to Landlord given within ninety (90)
days after the date of such taking if twenty percent (20%) or more of the
Premises is taken and the remaining area of the Premises is not reasonably
sufficient for Tenant to continue operation of its business; and (ii) Landlord
shall have the right to terminate this Lease by notice to Tenant given within
ninety (90) days after the date of such taking. If either Landlord or Tenant so
elects to terminate this Lease, the Lease shall terminate on the thirtieth
(30th) day after either such notice. The Rent shall be prorated to the date of
termination. If this Lease continues in force upon such partial taking, the Base
Rent and Tenant's Proportionate Share shall be equitably adjusted according to
the remaining Rentable Area of the Premises and Project.
b. In the event of any taking, partial or whole, all of the proceeds of any
award, judgment or settlement payable by the condemning authority shall be the
exclusive property of Landlord, and Tenant hereby assigns to Landlord all of its
right, title and interest in any award, judgment or settlement from the
condemning authority. Tenant, however, shall have the right, to the extent that
Landlord's award is not reduced or prejudiced, to claim from the condemning
authority (but not from Landlord) such compensation as may be recoverable by
Tenant in its own right for relocation expenses and damage to Tenant's personal
property.
c. In the event of a partial taking of the Premises which does not result in a
termination of this Lease. Landlord shall restore the remaining portion of the
Premises as nearly as practicable to its condition prior to the condemnation or
taking, but only to the extent of Building Standard Work. Tenant shall be
responsible at its sole cost and expense for the repair, restoration and
replacement of any other Leasehold Improvements and Tenant's Property.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(8)
<PAGE>
21. INDEMNIFICATION.
a. Tenant shall indemnify and hold Landlord harmless against and from liability
and claims of any kind for loss or damage to property. Tenant or any other
person, or for any injury to or death of any person, arising out of: (1)
Tenant's use and occupancy of the Premises any work, activity or other things
allowed or suffered by Tenant to be done in, on or about the Premises; (2) any
breach or default by Tenant of any of Tenant's obligations under this Lease; or
(3) any negligent or otherwise tortuous act or omission of Tenant, its agents,
employees, invitees or contractors. Tenant shall, at Tenant's expense, and by
counsel satisfactory to Landlord, defend Landlord in any action or proceeding
arising from any such claim and shall indemnify Landlord against all costs,
attorneys' fees, expert witness fees and any other expenses incurred in such
action or proceeding. As a material part of the consideration for Landlord's
execution of this Lease, Tenant hereby assumes all risk of damage or injury to
any person or property in, on or about the Premises from any cause.
b. Landlord shall not be liable for injury or damage which may be sustained by
the person or property of Tenant, its employees, invitees or customers, or any
other person in or about the Premises, caused by or resulting from fire, steam,
electricity, gas, water or rain which may leak or flow from or into any part of
the Premises, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, water appliances, plumbing, air conditioning or lighting
fixtures, whether such damage or injury results from conditions arising upon the
Premises or upon other portions of the Building or Project or from other
sources. Landlord shall not be liable for any damages arising from any act or
omission of any other tenant of the Building or Project.
22. TENANT'S INSURANCE.
a. All insurance required to be carried by Tenant hereunder shall be issued by
responsible insurance companies acceptable to Landlord and Landlord's lender and
qualified to do business in the State. Each policy shall name Landlord, and at
Landlord's request, mortgagee of Landlord, as an additional insured, as their
respective interests may appear. Each policy shall contain: (i) a cross
liability endorsement; (ii) a provision that such policy and the coverage
evidenced thereby shall be primary and non-contributing with respect to any
policies carried by Landlord and that any coverage carried by Landlord shall be
excess insurance; and (iii) a waiver by the insurer or any right of subrogation
against Landlord, its agents, employees and representatives, which arises or
might arise by reason of any payment under such policy or by reason of any act
or omission of Landlord, its agents, employees or representatives. A copy of
each paid up policy (authenticated by the insurer) or certificate of the insurer
evidencing the existence and amount of each insurance policy required hereunder
shall be delivered to Landlord before the date Tenant is first given the right
of possession of the Premises, and thereafter within thirty (30) days after any
demand by Landlord therefore. Landlord may, at any time, and from time to time,
inspect and/or copy any insurance policies required to be maintained by Tenant
hereunder. No such policy shall be cancelable except after twenty (20) days
written notice to Landlord and Landlord's lender. Tenant shall furnish Landlord
with renewals or "binders" of any such policy at least ten (10) days prior to
the expiration thereof. Tenant agrees that if Tenant does not take out and
maintain such insurance, Landlord may (but shall not be required to) procure
said insurance on Tenant's behalf and charge the Tenant the premiums together
with a twenty-five percent (25%) handling charge, payable upon demand. Tenant
shall have the right to provide such insurance coverage pursuant to blanket
policies obtained by the Tenant, provided such blanket policies expressly afford
coverage to the Premises, Landlord, Landlord's mortgagee and Tenant as required
by this Lease.
b. Beginning on the date Tenant is given access to the Premises for any purpose
and continuing until expiration of the Term. Tenant shall procure, pay for and
maintain in effect policies of casualty insurance including but not limited to,
covering: (i) all Leasehold Improvement (including but not limited to any and
all alterations, additions or improvements as may be made by Landlord or by
Tenant pursuant to the provisions of Article 12 hereof); and (ii) trade
fixtures, merchandise and other personal property from time to time in, on or
about the Premises, in an amount not less than one hundred percent (100%) of
their actual replacement cost from time to time, providing protection against
any peril included with the classification "Fire and Extended Coverage" together
with insurance against sprinkler damage, vandalism and malicious mischief. The
proceeds of such insurance shall be used for the repair or replacement of the
property so insured. If this Lease is terminated, following a casualty or event
described in this Lease, the proceeds under (i) above, shall be paid to
Landlord, and the proceeds under (ii) above, shall be paid to Tenant.
c. Beginning on the date Tenant is given access to the Premises for any purpose
and continuing until expiration of the Term, Tenant shall procure, pay for and
maintain in effect workers' compensation insurance as required by law and
comprehensive public liability and property damage insurance with respect to the
construction of improvements on the Premises, the use, operation or condition of
the Premises and the operations of Tenant in, on or about the Premises,
providing personal injury and broad form property damage coverage for not less
than One Million Dollars ($1,000,000.00) combined single limit for bodily
injury, death and property damage liability.
d. Not less than every three (3) years during the Term, Landlord and Tenant
shall mutually agree to increases in all of Tenant's insurance policy limits for
all insurance to be carried by Tenant as set forth in this Article. In the event
Landlord and Tenant cannot mutually agree upon the amounts of said increases,
then Tenant agrees that all insurance policy limits as set forth in this Article
shall be adjusted for increases in the cost of living in the same manner as is
set forth in Section 5.2 hereof for the adjustment of the Base Rent.
For purpose of this article, if the Base Rent does not adjust to reflect any
increase in the CPI as set forth in section 5.2, the index shall nevertheless be
used to increase the amounts of insurance coverage.
23. WAIVER OF SUBROGATION.
Landlord and Tenant each hereby waive all rights of recovery against the other
and against the officers, employees, agents and representatives of the other, on
account of loss by or damage to the waiving party or its property or the
property of others under its control, to the extent that such loss or damage is
insured against under any fire and extended coverage insurance policy which
either may have in force at the time of the loss or damage. Tenant shall, upon
obtaining the policies of insurance required under this Lease, give noticed to
its insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(9)
<PAGE>
24. SUBORDINATION AND ATTORNMENT.
This Lease and any estate created by it in favor of Tenant, shall always be
subordinate to any mortgage or its lien, unless not required by Landlord.
Upon written request of Landlord, or any mortgagee or deed of trust beneficiary
of Landlord, or ground lessor of Landlord, Tenant shall, within 5 days following
the receipt of such request, execute in writing, any and all documents which
subordinate its rights under this Lease to the lien of any and all mortgage or
deeds of trust, or to the interest of any lease in which Landlord is lessee, and
to all advances made or hereafter to be made thereunder. Tenant hereby appoints
Landlord, his successor-in-interest, agents or representatives as its
power-of-attorney to execute any and all documents to reflect such
subordination, it being agreed that this power-of-attorney is irrevocable and
coupled with an interest. The holder of any security interest may, upon written
notice to Tenant, elect to have this Lease prior to its security interest
regardless of the time of the granting or recording of such security interest.
Tenant's failure to timely execute these documents shall at Landlords option
constitute a breach of this Lease, and Tenant shall be liable to Landlord (in
addition to all remedies available to Landlord by Law or in equity and as
prescribed in this Lease), for all direct and proximate damages caused to
Landlord by Tenant's failure.
In the event of any foreclosure sale, transfer in lieu of foreclosure or
termination of the Lease in which Landlord is lessee, Tenant shall attorn to the
purchaser, transferee or lessor as the case may be, and recognize that party as
Landlord under this Lease.
25. TENANT ESTOPPEL CERTIFICATES.
Within five (5) days after written request from Landlord, Tenant shall execute
and deliver to Landlord or Landlord's designee, a written statement including
but not limited to, certifying: (a) that this Lease is unmodified and in full
force and effect, or is in full force and effect as modified and stating the
modifications; (b) the amount of Base Rent and the date to which Base Rent and
additional rent have been paid in advance; (c) the amount of any security
deposited with Landlord; and (d) that Landlord is not in default hereunder or,
if Landlord is claimed to be in default, stating the nature of any claimed
default. Any such statement may be relied upon by a purchaser, assignee or
lender.
Tenant's failure to execute and deliver such statement within the time required
shall at Landlord's option, constitute a breach of this Lease (and Tenant shall
be liable to Landlord for all direct and proximate damages caused Landlord by
Tenant's breach) and shall also be conclusive upon Tenant that: (a) this Lease
is in full force and effect and has not been modified except as represented by
Landlord; (b) there are no uncured defaults in Landlord's performance and that
Tenant has no right of offset, counter-claim or deduction against Rent; and (3)
not more than one month's Rent has been paid in advance.
26. TRANSFER OF LANDLORD'S INTEREST.
In the event of any sale or transfer by Landlord of the Premises, Building or
Project, and assignment of this Lease by Landlord, Landlord shall be and is
hereby entirely freed and relieved of any and all liability and obligations
contained in or derived from this Lease arising out of any act, occurrence or
omission relating to the Premises, Building, Project or Lease occurring after
the consummation of such sale or transfer, providing the purchaser shall
expressly assume all of the covenants and obligations of Landlord under this
Lease. If any security deposit or prepaid Rent has been paid by Tenant, Landlord
may transfer the security deposit or prepaid Rent to Landlord's successor and
upon such transfer, Landlord shall be relieved of any and all further liability
with respect thereto.
27. DEFAULT.
27.1 Tenant's Default. The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Tenant:
a. If Tenant abandons or vacates the Premises; or
b If Tenant fails to pay any Rent or any other charges required to be paid by
Tenant under this Lease and such failure continues for five (5) days after such
payment is due and payable; or
c. If Tenant fails to promptly and fully perform any other covenant, condition
or agreement contained in this Lease and such failure continues for thirty (30)
days after written notice thereof from Landlord to Tenant, unless the Lease
provides for fewer days, in which case the expressed number of days shall
govern; or
d. If a writ of attachment or execution is levied on this Lease or on any of
Tenant's property, or
e. If Tenant makes a general assignment for the benefit of its creditors, or
provides for an arrangement, composition, extension or adjustment with its
creditors; or
f. If Tenant files a voluntary petition for relief or if a petition against
Tenant, is filed involuntarily, in a proceeding under the federal bankruptcy
laws or other insolvency laws, or if a petition is filed under the provisions
of any law providing for reorganization or winding up of corporations, and this
filing is not withdrawn or dismissed within forty-five (45) days thereafter, or
if any court of competent jurisdiction assumes jurisdiction, custody or control
of Tenant or a substantial part of its properly, and such jurisdiction, custody
or control remains in force unrelinquishied, unstayed or unterminated for a
period of forty-five (45) days; or
g. If in any proceeding or action in which Tenant is a party, a trustee,
receiver, agent or custodian is appointed to take charge of the Premises or
Tenant's property (or has the authority to do so) for the purpose of enforcing a
lien against the Premises or Tenant's Property; or
h. If Tenant is a partnership or consists of more than one (1) person or
entity, and any partner of the partnership, or other person or entity is
involved in any of the acts or events described in subparagraphs (d) through (g)
above; or
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(10)
<PAGE>
i. There occurs a significant adverse change in the financial position of
Tenant; or
j. The discovery by Landlord of any material misrepresentation or misstatement
of any fact by Tenant.
27.2 Remedies. In the event of Tenant's default resulting from an event
described above, then in addition to any other rights or remedies Landlord may
have under any law, Landlord shall have the right, at Landlord's option, without
further notice or demand of any kind to do the following:
a. Terminate this Lease and Tenant's right to possession of the Premises and
reenter the Premises and take possession thereof, and Tenant shall have no
further claim to the Premises or under this Lease; or
b. Continue this Lease in effect, reenter and occupy the Premises for the
account of Tenant, and collect any unpaid Rent or other charges which have or
thereafter become due and payable; or
c. Reenter the Premises under the provisions of subparagraph (b), and
thereafter elect to terminate this Lease and Tenant's right to possession of the
Premises.
If Landlord reenters the Premises under the provisions of subparagraphs (b) or
(c) above, Landlord shall not be deemed to have terminated this Lease or the
obligation of Tenant to pay any Rent or other charges thereafter accruing,
unless Landlord notifies Tenant in writing of Landlord's election to terminate
this Lease. In the event of any reentry or retaking of possession by Landlord,
Landlord shall have the right, but not the obligation, to remove all or any part
of Tenant's Property in the Premises and to place such property in storage at a
public warehouse at the expense and risk of Tenant If Landlord elects to relet
the Premises for the account of Tenant, the rent received by Landlord from such
reletting shall be applied as follows: first, to the payment of any indebtedness
other than Rent due hereunder from Tenant to Landlord; second, to the payment of
any costs of such reletting; third, to the payment of the cost of any
alterations or repairs to the Premises; fourth to the payment of Rent due and
unpaid hereunder; and the balance, if any, shall be held by Landlord and applied
in payment of future Rent as it becomes due. If that portion of rent received
from the reletting which is applied against the Rent due hereunder is less than
the amount of the Rent due, Tenant shall pay the deficiency to Landlord promptly
upon demand by Landlord. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as determined, any costs and expenses
incurred by Landlord in connection with such reletting or in making alterations
and repairs to the Premises, which are not covered by the rent received from the
reletting.
In the event of a Tenant default, Tenant, additionally and specifically waives
all its rights to any form of automatic court ordered stay from eviction or stay
from paying obligations as and when due. Tenant shall forthwith, upon demand of
Landlord, deliver vacant possession of the premises without any claim for prior
notice, claim for any due legal process of any other reason or claim however
founded.
In addition to any other right Landlord may have, Landlord may immediately seize
to possess any and all personal property of Tenant as additional security for
payment of obligations pursuant to this Lease. Landlord shall have the further
right to sell all such possessed property for the best price then available, and
apply all such proceeds, first to pay costs and expenses arising from the
default, then to pay obligations due and payable pursuant to this Lease, and
then any remaining excess shall be paid to Tenant.
Should Landlord elect to terminate this Lease under the provisions of
subparagraph (a) or (c) above, Landlord may recover as damages from Tenant the
following:
1. Past Rent. The worth at the time of the award of any unpaid Rent which had
been earned at the time of termination; plus
2. Rent Prior to Award. The worth at the time of the 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. Rent After Award. The worth at the time of the award of the amount by which
the unpaid Rent for the balance of the Term after the time of award exceeds the
amount of the rental loss that Tenant proves could be reasonably avoided; plus
4. Proximately Caused Damages. Any other amount necessary to compensate
Landlord for all detriment proximately caused by Tenant's failure to perform its
obligations under, this Lease or which in the ordinary course of things would be
likely to result therefrom including, but not limited to, any costs or expenses
(including attorneys' fees), incurred by Landlord in: (a) retaking possession of
the Premises; (b) maintaining the Premises after Tenant's default; (c) preparing
the Premises for reletting to a new tenant, including any repairs or
alterations; and (d) reletting the Premises, including brokers' commissions.
"The worth at the time of the award" as used in subparagraphs 1 and 2 above, is
to be computed by allowing interest at the higher of eighteen-percent (18%) per
annum or the maximum rate permitted by Law. "The worth at the time of the award"
as used in subparagraph 3 above, is to be computed by discounting the amount at
the discount rate of the Federal Reserve Bank situated nearest to the Premises
at the time of the award plus one percent (1%).
The waiver by Landlord of any breach of any term, covenant or condition of this
Lease, shall not be deemed a waiver of such term, covenant or condition or of
any subsequent breach of the same or any other term, covenant or condition.
Acceptance of Rent by Landlord subsequent to any breach hereof shall not be
deemed a waiver of any preceding breach other than the failure to pay the
particular Rent so accepted, regardless of Landlord's knowledge of any breach at
the time of such acceptance of Rent. Landlord shall not be deemed to have waived
any term, covenant or condition unless Landlord gives Tenant written notice of
such waiver.
In addition to the foregoing damages, Landlord shall have the right to
accelerate all future rental payments and other charges payable by Tenant. The
aggregate sum of all such future rents and charges shall become immediately due
and payable.
27.3 Landlords Default. If Landlord fails to perform any covenant, condition or
agreement contained in this Lease within thirty (30) days after receipt of
written notice from Tenant specifying such default, or if such default cannot
reasonably be cured within thirty (30) days, if Landlord fails to commence to
cure within that thirty (30) day period, then Landlord shall be liable to Tenant
for any damages sus-
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(11)
<PAGE>
[LETTERHEAD OF MASKATIYA, SURI & CO., INC.]
REGENCY PLAZA
tained by Tenant as a result of Landlord's breach provided however, it is
expressly understood and agreed that if Tenant obtains a money judgment against
Landlord resulting from any default or other claim arising under this Lease,
that judgment shall be satisfied only out of the rents, issues, profits, and
other income actually received on account of Landlord's right, title and
interest in the Premises, Building or Project, and no other real, personal or
mixed property of Landlord (or of any of the partners which comprise Landlord,
if any) wherever situated, shall be subject to levy to satisfy such judgment.
If, after notice to Landlord of default, Landlord (or any first mortgagee or
first deed of trust beneficiary of Landlord) fails to cure the default as
provided herein, then Tenant shall have the right to cure that default at
Landlord's expense. Tenant shall not have the right to terminate this Lease or
to withhold, reduce or offset any amount against any payments of Rent or any
other charges due and payable under this Lease except as otherwise specifically
provided herein.
28. BROKERAGE FEES.
Tenant warrants and represents that it has not dealt with any real estate broker
or agent in connection with this Lease or its negotiation except Broker and
Sales Agent as set forth in this Lease. Tenant shall indemnify and hold Landlord
harmless from any cost, expense or liability (including costs of suit and
reasonable attorneys' fees) for any compensation, commission or fees claimed by
any other real estate broker or agent in connection with this Lease or its
negotiation by reason of any act of Tenant
29. NOTICES.
All notices, approvals and demands permitted or required to be given under this
Lease shall be in writing and deemed duly served or given if personally
delivered or sent by certified or registered U.S. mail, postage prepaid and
addressed as follows: (a) if to Landlord, the Landlord's Mailing Address and to
the Building manager, and (b) if to Tenant, to Tenant's Mailing Address;
provided, however, notices to Tenant shall be deemed duly served or given if
delivered or mailed to Tenant at the Premises. Landlord and Tenant may from time
to time by notice to the other designate another place for receipt of future
notices.
30. GOVERNMENT ENERGY OR UTILITY CONTROLS.
In the event of imposition of federal, state or local government controls,
rules, regulations, or restrictions on the use or consumption of energy or other
utilities during the Term, both Landlord and Tenant shall be bound thereby. In
the event of a difference in interpretation by Landlord and Tenant of any such
controls, the interpretation of Landlord shall prevail, and Landlord shall have
the right to enforce compliance therewith, including the right of entry into the
Premises to effect compliance.
31. RELOCATION OF PREMISES.
Landlord shall have the right to relocate the Premises to another part of the
Building in accordance with the following:
a. The new premises shall be substantially the same in size, dimensions,
configuration, decor and nature as the Premises described in this Lease, and if
the relocation occurs after the Commencement Date, shall be placed in that
condition by Landlord at its cost.
b. Landlord shall give Tenant at least thirty (30) days written notice of
Landlord's intention to relocate the Premises.
c. As nearly as practicable, the physical relocation of the Premises shall take
place on a weekend and shall be completed before the following Monday. If the
physical relocation has not been completed in that time, Base Rent shall abate
in full, from the time the physical relocation commences to the time it is
completed. Upon completion of such relocation, the new premises shall become the
"Premises" under this Lease.
d. All reasonable costs incurred by Tenant as a result of the relocation shall
be paid by Landlord.
e. If the new premises are smaller than the Premises as it existed before the
relocation, Base Rent shall be reduced proportionately.
f. The parties hereto shall immediately execute an amendment to this Lease
setting forth the relocation of the Premises and the reduction of Base Rent, if
any.
32. QUIET ENJOYMENT.
Tenant, upon paying the Rent and performing all of its obligations under this
Lease, shall peaceably and quietly enjoy the Premises, subject to the terms of
this Lease and to any mortgage, lease, or other agreement to which this Lease
may be subordinate.
33. OBSERVANCE OF LAW.
Tenant shall not use the Premises, or permit anything to be done in or about the
Premises, which will in any way conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated. Tenant shall, at its sole cost and expense, promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force, and with the
requirements of any board of fire insurance underwriters or other similar bodies
now or hereafter constituted, relating to, or affecting the condition, use or
occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant
whether Landlord is a party thereto or not, that Tenant has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between Landlord and Tenant.
34. FORCE MAJEURE.
Any prevention, delay or stoppage of work to be performed by Landlord or Tenant
which is due to strikes, labor disputes, inability to obtain labor, materials,
equipment or reasonable substitutes therefor, acts of God, governmental
restrictions or regulations or controls, judicial orders, enemy or hostile
government actions, civil commotion, fire or other casualty, or other causes
beyond the reasonable control of the party obligated to perform hereunder, shall
excuse performance of the work by that party for a period equal to the duration
of that preven-
(12)
<PAGE>
tion, delay or stoppage. Nothing in this Article 34 shall excuse or delay
Tenant's obligation to pay Rent or other charges under this Lease.
35. CURING TENANT'S DEFAULTS.
If Tenant defaults in the performance of any of its obligations under this
Lease, Landlord may (but shall not be obligated to) without waiving such
default, perform the same for the account and at the expense of Tenant. Tenant
shall pay Landlord all costs of such performance promptly upon receipt of a bill
therefor.
36. SIGN CONTROL.
Tenant shall not affix, paint, erect or inscribe any sign, projection, awning,
signal or advertisement of any kind to any part of the Premises, Building or
Project, including without limitation, the inside or outside of windows or
doors, without the written consent of Landlord. Landlord shall have the right
to remove any signs or other matter, installed without Landlord's permission,
without being liable to Tenant by reason of such removal, and to charge the cost
of removal to Tenant as additional rent hereunder, payable within ten (10) days
of written demand by Landlord.
37. MISCELLANEOUS.
a. Accord and Satisfaction, Allocation of Payments. No payment by Tenant or
receipt by Landlord of a lesser amount than the Rent provided for in this Lease
shall be deemed to be other than on account of the earliest due Rent, nor shall
any endorsement or statement on any check or letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of the Rent or pursue any other remedy provided for in this Lease. In
connection with the foregoing, Landlord shall have the absolute right in its
sole discretion to apply any payment received from Tenant to any account or
other payment of Tenant then not current and due or delinquent.
b. Addenda. If any provision contained in an addendum to this Lease is
inconsistent with any other provision herein, the provision contained in the
addendum shall control, unless otherwise provided in the addendum.
c. Attorneys' Fees. If any action or proceeding is brought by either party
against the other pertaining to, or arising out of, this Lease, and whether or
not the action is finally prosecuted, the prevailing party shall be entitled to
recover all costs and expenses, including reasonable attorneys' fees incurred on
account of such action or proceeding.
d. Captions, Articles and Section Numbers. The captions appearing within the
body of this Lease have been inserted as a matter of convenience and for
reference only and in no way define, limit or enlarge the scope or meaning of
this Lease. All references to Article and Section numbers refer to Articles and
Sections in this Lease.
e. Changes Requested by Lender. At any time during the Lease Term, Tenant shall
not unreasonably withhold its consent to changes or amendments to this Lease
requested by the lender on Landlord's interest so long as these changes do not
alter the basic economic terms of this Lease or otherwise materially diminish
any rights or materially increase any obligations of the Tenant. Landlord's
determination of materiality shall be binding.
f. Choice of Law. This Lease shall be construed and enforced in accordance with
the laws of the State.
g. Consent. Notwithstanding anything contained in this Lease to the contrary,
Tenant shall have no claim, and hereby waives the right to any claim against
Landlord for money damages by reason of any refusal, withholding or delaying by
Landlord of any consent, approval or statement of satisfaction, and in such
event, Tenant's only remedies therefor shall be an action for specific
performance, injunction or declaratory judgment to enforce any right to such
consent, etc.
h. Corporate Authority. If Tenant is a corporation, each individual signing
this Lease on behalf of Tenant represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of the corporation, and
that this Lease is binding on Tenant in accordance with its terms. Tenant
shall, at Landlord's request, deliver a certified copy of a resolution of its
board of directors authorizing such execution.
i. Counterparts. This Lease may be executed in multiple counterparts, all of
which shall constitute one and the same Lease.
j. Execution of Lease; No Option. The submission of this Lease to Tenant shall
be for examination purposes only, and does not and shall not constitute a
reservation of or option for Tenant to lease, or otherwise create any interest
of Tenant in the Premises or any other premises within the Building or Project.
Execution of this Lease by Tenant and its return to Landlord shall not be
binding on Landlord notwithstanding any time interval, until Landlord has in
fact signed and delivered this Lease to Tenant.
k. Furnishing of Financial Statements; Tenant's Representations. In order to
induce Landlord to enter into this Lease, Tenant agrees that it shall promptly
furnish Landlord, from time to time, upon Landlord's written request, including
but not limited to, financial statements prepared in accordance with generally
accepted accounting principles, including all required financial disclosures
reflecting Tenant's current financial condition. Tenant represents and warrants
that all financial statements, records and information furnished by Tenant to
Landlord in connection with this Lease are true, correct and complete in all
respects.
l. Further Assurances. The parties agree to promptly sign all documents
reasonably requested to give effect to the provisions of this Lease.
m. Mortgage Protection. Tenant agrees to send by certified or registered mail
to any mortgagee or deed of trust beneficiary of Landlord whose address has been
furnished to Tenant, a copy of any notice of default served by Tenant on
Landlord. If Landlord fails to cure such default within the time provided for
in this Lease, such mortgagee or beneficiary shall have an additional thirty
(30) days to cure such default; provided that if such default cannot reasonably
be cured within thirty (30) day period, then such mortgagee or beneficiary shall
have such additional time to cure the default as is reasonably and necessary
under the circumstances.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS - REAL ESTATE DEVELOPERS
(13)
<PAGE>
R E G E N C Y P L A Z A
n. Prior Agreements; Amendments. This Lease contains all of the agreements of
the parties with respect to any matter covered or mentioned in this 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 or their respective
successors in interest.
o. Recording. Tenant shall not record this Lease without the prior written
consent of Landlord. Tenant, upon the request of Landlord, shall execute and
acknowledge a "short form" memorandum of this Lease for recording purposes, if
Landlord so desires.
p. Severability. A final determination by a court of competent jurisdiction
that any provision of this Lease is invalid shall not affect the validity of any
other provision, and any provision so determined to be invalid shall, to the
extent possible, be construed to accomplish its intended effect.
q. Successors and assigns. This Lease shall apply to and bind the heirs,
personal representatives, and permitted successors and assigns of the parties.
r. Time of the Essence. Time is of the essence of this Lease.
s. Waiver. No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant shall impair such right or remedy or be
construed as a waiver of such default. The receipt and acceptance by Landlord of
delinquent Rent shall not constitute a waiver of any other default: it shall
constitute only a waiver of timely payment for the particular Rent payment
involved. Any waiver by Landlord of any default must be in writing and shall not
be a waiver of any other default concerning the same or any other provision of
the Lease. This provision can only be waived if the parties execute a written
document specifically identifying this section being waived.
t. Tenants Representations. All of Tenant's representations shall survive the
execution of the Lease Agreement, and shall be considered as though currently
made.
u. Surrender of premises. No act or conduct of Landlord, including, without
limitation, the acceptance of keys to the Premises, shall constitute an
acceptance of the surrender of the Premises by Tenant before the expiration of
the Term. Only a written notice from Landlord to Tenant shall constitute
acceptance of the surrender of the Premises and accomplish a termination of the
Lease.
v. Landlords Consent. Landlord's consent to or approval 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 act by Tenant.
38. OPTION TO EXTEND TERM.
Provided tenant is not in default at the time of exercising this option, and has
not been in default at any other time during the lease term, it is granted an
option to extent the term of this lease for one (1), five (5) year term, by
giving written notice to Landlord. This notice must be in writing, and be
delivered to Landlord no later than six (6) months prior to the expiry of the
primary term. This option once exercised can not be revoked by tenant. The
rental rate for the extended term shall be less the fair market value for these
premises as determined by Landlord, but not less than the rent last paid under
the primary term. Landlord reserves the right to alter any of the other terms
and conditions of this lease, as they may relate to the extended term. Tenant
agrees to promptly execute any documents as required by Landlord relating to
this extended item.
The parties hereto have executed this Lease as of the date set forth on page 1.
SIGNATURES:
"Landlord"
REGENCY PLAZA INTERNATIONAL, INC.
/s/ SUNIL SURI
- -----------------------------
By: MR. SUNIL SURI
Its: VICE PRESIDENT
Dated: 12 April , 1991
------------
"Tenant"
MICROTEC RESEARCH INC., a California corporation
/s/ KEN LONCHAR
- -----------------------------
By: MR. KEN LONCHAR
Its: VICE PRESIDENT
Dated: 12 April , 1991
------------
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS -- REAL ESTATE DEVELOPERS
(14)
<PAGE>
[DIAGRAM]
"REGENCY PLAZA, SECOND FLOOR, SUITE 275 FOOR PLAN"
<PAGE>
EXHIBIT A
[DIAGRAM]
"REGENCY PLAZA, SECOND FLOOR, SUITE 275 FLOOR PLAN"
<PAGE>
[DIAGRAM]
"MICROTEC TRAINING ROOM FLOOR PLAN"
<PAGE>
[DIAGRAM]
"REGENCY PLAZA SITE PLAN" PHASE ONE
<PAGE>
EXHIBIT A
COMPUTER WORKSTATIONS &
RELATED EQUIPMENT
<TABLE>
<CAPTION>
SPARCstations - 11 IPC's
<S> <C> <C>
MRI# Serial #
--------------------------------------------------
TTCO 041CN0354
TTC1 039CN0094
TTC2 037CN0114
TTC3 037CN0449
TTC4 041CN0278
TTC5 037CN0113
TTC6 025CN0518
TTC7 036CN0392
TTC8 023CN0467
TTC9 023CN0023
TTC10 038CN0295
LASER 3 AGFA P34OOPS
Other:
1 Overhead Projector 20 Stackable Chairs
1 Overhead Projector Stand 1 Desk
1 Podium 1 Whiteboard
2 Telephones 1 Small Refrigerator
21 Office Chairs 1 Coffee Table
10 Computer Tables 1 Bookcase with Books
1 Water Cooler 1 Flip Chart
1 Coffee Machine (2 pots) 1 Printer Stand
5 Folding Lunch Tables 11 Manual Sets
</TABLE>
<PAGE>
REGENCY PLAZA
EXHIBIT "C"
TENANT IMPROVEMENTS
- -------------------
Landlord shall improve the space, using Building Standard finishes and
allowances in accordance with the attached Space Plan. Landlord shall pay the
cost of these improvements, limited to a maximum of $20.00 per usable square
foot, ("Landlord allowance for TI's"). Costs for improvements in excess of this
allowance shall be paid by tenant in advance.
<PAGE>
REGENCY PLAZA EXHIBIT C
BUILDING STANDARD IMPROVEMENTS
1. Partitions
Ceiling height partitions consisting of 2 1/2" metal studs at 24" O.C. with
5/8" gypsum board each side, taped and sanded smooth to receive paint.
Maximum: One (1) lineal foot per fifteen (15) square feet of useable area.
Included in this allowance are: demising walls, corridor walls,
boxing of columns and window heads and sills.
2. Doors and Frames
3'-0" x full height solid core doors in metal frames, Building Standard
cherry finish.
Interior Doors: Two (2) pair butt hinges, door stop, ASSA Latchset,
-------------- lever handle, Building Standard finish.
Single Entry Doors: Two (2) pair butt hinges, door stop, surface mounted
------------------ closer, SCHLAGE Lockset, lever handle, Building Standard
finish.
Maximum: One (1) Interior Door, frame and hardware per three hundred (300)
square feet of useable area.
One (1) Entry Door per Tenant per floor, or as required by Code.
3. Ceiling
Suspended acoustical ceiling at 8'-6" above floor, with 2' x 4' ARMSTRONG
"Second Look II" regular lay-in ceiling tiles throughout Tenant's space.
4. Lighting
Recessed 2' x 4' parabolic fluorescent fixtures with two (2) energy-saving
lamps. Elevator lobbies and common toilet facilities will have lighting
selected by Landlord.
Maximum: Not to exceed one (1) fixture per eighty (80) square feet of
useable area.
5. Light Switches
Building Standard toggle switch and plastic cover plate at standard height.
Maximum: One (1) double pair per two hundred fifty (250) square feet of
useable area.
6. Electrical Outlets
Building Standard wall-mounted duplex electrical outlet with plastic cover
plate at standard height.
Maximum: One (1) outlet per one hundred fifty (150) square feet of
useable area.
<PAGE>
7. Telephone Outlets
Wall-mounted telephone outlet.
Maximum: One (1) outlet per two hundred (200) square feet of useable
area.
8. Floor Covering and Base
Building Standard tufted cut pile, 37 oz. Anso IV nylon fiber, glue direct,
or; resilient flooring in color selected by Tenant from Landlord's standard
colors, throughout Tenant's space. Resilient base, 2 1/2" carpet type, in
color selected by Tenant from Landlord's standard colors.
9. Paint
Stipple primer and one (1) coat satin finish latex enamel paint in colors
selected by Tenant from Building Standard selection. Not more than two (2)
colors in any single room or office, and not more than one (1) color per
wall.
10. Window Covering
Building Standard 1" aluminum mini-blinds, with tilt wand, on all exterior
windows. No deletions or substitutions allowed.
11. Fire Protection System
A fire protection system including fire alarms, annunciators, smoke
detectors and sprinklers, located in a Building Standard pattern to conform
with applicable codes. Any alterations or additions to said system,
required to accommodate Tenant improvements, shall be at the Tenant's sole
expense.
12. Lighted Exit Lights
One (1) exit light per three thousand (3,000) square feet of useable area.
13. HVAC (Heating, Ventilating and Air Conditioning)
A complete year-round HVAC system engineered to handle normal office usage,
with ducted supply air through ceiling diffusers, zoned and located in a
Building Standard pattern. Return air through exhaust vents. Any
alterations or additions to said system, required to accommodate Tenant
improvements, shall be at Tenant's sole expense.
14. Tenant Signage
One (1) Building Standard Tenant identification sign at Tenant's entry door
and inclusion in Building Lobby Directory.
*NOTE: IF THE MAXIMUM ALLOWANCE QUANTITIES SET FORTH ABOVE ARE USED IN EVERY
CATEGORY, THE BUILDOUT MAY EXCEED THE STANDARD BUILDOUT ALLOWANCE.
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
The following Rules and Regulations are a material part of the lease obligation,
and shall be faithfully performed by Tenant, its employees, agents and
representatives. Serious penalties may be assessed against Tenant if these Rules
are not followed.
1. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed or printed or affixed on or to any part of the outside or inside of
the Building without the written consent of Landlord first had and obtained and
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of Tenant.
All approved signs or lettering on doors shall be printed, painted, affixed or
inscribed at the expense of Tenant by a person approved by Landlord. Tenant
shall not place anything or allow anything to be placed near the glass of any
window, door, partition or wall which may appear unsightly from outside the
Premises; provided, however, that Landlord may furnish and install a Building
standard window covering at all exterior windows. Tenant shall not without prior
written consent of Landlord cause or otherwise sunscreen any window.
2. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by any of the Tenants or used by them for any purpose
other than for ingress and egress from their respective Premises.
3. The toilet rooms: 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 and 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.
4. Tenant shall not overload the floor of the Premises or in any way deface the
Premises or any part thereof.
5. No furniture, freight or equipment of any kind shall be brought into the
Building without the prior notice to Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building and
also the times and manner or moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Landlord, stand on
supports of such thickness as is necessary to properly distribute the weight.
Landlord shall not be responsible for loss of or damage to any such safe or
property from any cause and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
Tenant.
6. Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building.
7. No cooking shall be done or permitted by any Tenant on the Premises, nor
shall the Premises be used for the storage of merchandise, for washing clothes,
for lodging, or for any improper, objectionable or immoral purposes.
8. Tenant shall not use or keep in the Premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material, or use any method of
heating or air conditioning other than that supplied by Landlord.
9. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Landlord. The location of telephone, call
boxes and other office equipment affixed to the Premises shall be subject to the
approval of Landlord.
10. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 P.M. and 8:00 A.M. the following day, access to the Building, or
to the halls, corridors, elevators or stairways in the Building or to the
Premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge or has a pass or is properly identified.
The Landlord shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Landlord
reserves the right to prevent access to the Building during the continuance of
the same by closing of the doors or otherwise, for the safety of the Tenants and
protection of property in the Building and the Premises.
11. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
12. No vending machines or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Landlord.
13. Landlord shall have the right, exerciseable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the Premises are a part.
MASKATIYA, SURI & CO., INC.
INVESTMENT BANKERS . REAL ESTATE DEVELOPERS
(18)
<PAGE>
[LETTERHEAD OF MASKTAIYA, SURI & CO., INC.]
REGENCY PLAZA
14. Tenant shall not disturb, solicit, or canvass any occupant of the Building
and shall cooperate to prevent same.
15. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
16. Landlord shall have the right to control and operate the public portions of
the Building, and the public facilities, and heating and air conditioning, as
well as facilities furnished for the common use of the tenants, in such manner
as it deems best for the benefit of the tenants generally.
17. All entrance doors in the Premises shall be left locked when the Premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress from the Premises.
18. Tenant, it's employees, agents and representatives, shall be allowed to
park in areas designated as surface parking (1) one automobile for each 300
square feet of leased area free of charge. unless this service is discontinued
by Landlord. Landlord may impose a parking charge for each additional automobile
parked by Tenant, it's employees, agents and representatives. Automobiles
illegally parked shall be towed by Landlord, at the sole expense of Tenant.
19. Landlord shall provide all utilities (including but not limited to HVAC,
power, water, janitorial) during normal business hours from 7:00 A.M. to 6:00
P.M., weekday, excluding legal holidays. Tenant shall pay for the use of any
utilities during hours or days other than those set forth above. Charges for
these utilities shall be based directly on usage, and at rates set by Landlord
from time to time. Tenant shall pay all such charges monthly, in addition to the
monthly base rent. See Addendum #8.
20. All deliveries to the Premise of tenants, that require use of trolleys,
carts, and can potentially disturb the free movement of people, can only be made
after normal business hours, as set forth above in Article 19, or as set by
Landlord. Wherever possible Tenant shall direct and use the freight elevator as
marked for deliveries. All deliveries have to be accessed from the delivery
entrance, and no deliveries will be permitted from the main entrances.
21. Tenant shall at the end of each weekday, deposit in an area within the
tenant's suite as designated by Tenant in writing to Landlord all cardboard
boxes and other heavy trash for removal by the janitors. Landlord shall provide
services for removal of all normally generated trash by office use. Landlord may
assess additional charges to Tenant, which charges must be paid monthly, for
removal of any trash other than normally generated office related trash.
Landlord's judgment in determining the nature and identity of such trash shall
be final.
Tenant shall not deposit or leave any trash outside Tenant's suite, in a public
corridor. If Landlord is required to remove any such trash, Landlord shall
assess additional charges to Tenant.
In addition to the trash in the special designated area as set forth above, the
Janitors will remove only trash clearly deposited in wastebaskets.
22. Tenant, its employees, agents and representatives shall not deposit any
coffee grinds, tea bags or the like in any public washroom. To the extent
possible all such waste shall be deposited in a properly lined, waterproof
wastebasket.
23. If spots are created on the carpeting, floor covering, drapes etc.,
Landlord shall immediately cause these spots to be removed by dry cleaning or
whatever process required. Tenant shall pay for the cost of any such spot
removal.
24. Tenant shall not alter or install any new locks on any doors or windows
without first obtaining Landlord's written consent. Tenant shall, if permitted
by Landlord to install any special lock, provide Landlord with at least three
(3) keys for any such lock.
25. Tenant shall maintain a list of all employees with keys and access to the
building and Tenants suite. This list shall be updated no less than monthly, and
be provided to Landlord on the first day of each month.
26. Landlord may change, modify or add any rule and regulation. To the extent
possible, Landlord shall provide all Tenants with written notice of any such
change. Landlords failure to so provide a notice can not be used by Tenant as an
excuse for non-observance of any rule or regulation.
27. If Landlord provides a security station within the building, Tenant shall
observe all check-in and check-out procedures as set by the Chief Security
Officer, for the Premises.
(2)
<PAGE>
Microtec Research Inc., Addendum to Office Lease
Regency Plaza One
October 5, 1992
ADDENDUM TO OFFICE LEASE
------------------------
This agreement is made this 5th day of October, 1992 by and between REGENCY
PLAZA INTERNATIONAL INC., a Delaware Corporation, hereinafter referred to as
"Landlord" and MICROTEC RESEARCH INC., a California Corporation, hereinafter
referred to as "Tenant":
RECITALS
Whereas the parties have previously executed several leases for premises located
at 2350 Mission College Boulevard, Santa Clara, California, including addendums
thereto, and relating to Suites commonly known as Suite 500 (Fifth Floor, 19,144
rentable square feet), Suite 1150 (Eleventh Floor, 4,755 rentable square feet)
and Suite 470 (Fourth Floor, 3,512 rentable square feet);
Whereas these leases expire on October 31, 1993;
Whereas, Microtec intends to surrender the premises located on the 4th floor
(Suite 470) and Eleventh Floor (Suite 1150), concurrently with the leasing of
additional space located on the top floor of the Regency Plaza One Building, an
area of approximately 19,144 rentable square feet;
THE AGREEMENT
-------------
Now in consideration of the Rents and mutual promises, covenants and conditions
the parties agree as follows;
The parties agree to renew and extend the lease for approximately 19,144
rentable square feet located on the Fifth (5th) floor commonly known as Suite
500 (the entire floor) and lease an additional, approximately 19,144 rentable
square feet on the top floor, commonly known as Suite 1300 (the entire floor) on
the following general terms and conditions;
1. Lease Term: Ten (10) Years from commencement date.
----- ----
2. Base Monthly Rent: Tenant agrees to pay a base monthly rent of SIXTY
---- ------- ----
SEVEN THOUSAND AND FIVE DOLLARS ($67,005 per month) for the first Five (5) Years
of the Lease Term and SEVENTY THOUSAND EIGHT HUNDRED AND THIRTY FIVE DOLLARS
($70,835 per month) for the next Five (5) Years.
1
<PAGE>
Microtec Research Inc.,
Addendum to Office Lease
Regency Plaza One
October 5, 1992
3. Tenant Improvements: Landlord, at its cost, agrees to modify the premises
------ ------------
on the Top Floor in accordance with the space plan submitted by Tenant,
receipt of which is hereby acknowledged by Landlord. The space plan is
hereby incorporated in this agreement as if set forth as an exhibit to this
agreement. All improvements/modifications shall be made consistent with the
applicable Building Standards for Regency Plaza One.
4. Lease Commencement: This lease shall commence no sooner than one week
----- ------------
after the substantial completion of the Tenant Improvements for the Top Floor,
and when these premises have been tendered for possession to Tenant. When
these premises are ready for possession by Tenant, Landlord shall
establish the commencement date for the subject lease and specify the expiration
date.
5. Lease Termination for Suite 470 and 1150: Concurrently with the delivery
----- ----------- --- ----- --- --- ----
of the premises on the Top Floor, Landlord agrees to terminate the leases for
Suite 470 and Suite 1150.
6. Lease Termination for Suite 450: Whereas, Tenant has entered into a
----- ----------- --- ----- ---
sublease for Suite 450, which Lease agreement expires on June 30, 1993.
Concurrently with the commencement of this Lease, Landlord agrees to waive
one half of the Base Monthly Rent then due under the Lease for this Suite.
By way of example if Commencement of this Lease is on January 1, 1993, then
rent for the last 3 months will be waived.
7. Tenants Proportionate Share: Tenant's proportionate share relating to this
------- ------------- -----
new lease shall be 17.1%.
8. Operating Expenses Pass Through: Landlord agrees to waive any Pass Through
--------- -------- ---- -------
of increases in operating expenses for Calendar Year 1993. In addition, the
annual Pass Through for the remaining Years of this Lease shall be limited to
a maximum of **5% of the increase in operating expenses on a year to year
basis (**barring any singular extraordinary, uncontrollable increase in
expenses imposed by an outside taxing agency, which would cause the cap to
revert to 8%). The new Expense Stop for the Lease shall be set to $7.75.
2
<PAGE>
9. Other Terms and Conditions: All other terms and conditions
----- ----- --- ----------
contained in the Base Lease for Suite 500 shall be applicable for this new
lease.
AGREED AS ABOVE
TENANT: LANDLORD:
MICROTEC RESEARCH INC., REGENCY PLAZA INTERNATIONAL INC.,
BY: /s/ JERRY KIRK BY: /s/ Kareem Maskatiya
-------------------------------- ----------------------------------
ITS: PRESIDENT ITS: PRESIDENT
3
<PAGE>
ADDENDUM TO OFFICE LEASE
------------------------
This addendum is made the 2nd day of March, 1993 by and between REGENCY PLAZA
INTERNATIONAL INC., a Delaware Corporation, hereinafter referred to as
"Landlord" and MICROTEC RESEARCH INC., a California Corporation, hereinafter
referred to as "Tenant":
THE AGREEMENT
- -------------
Pursuant to the Addendum to lease dated October 5, 1992, Tenant had intended to
surrender the premises located in the eleventh floor concurrently with the
leasing of the additional space on the top floor. Tenant will not surrender the
premises but will continue to lease under the following general terms and
conditions;
1. Premises:
---------
In additional to Suite 500, 19,144 rentable square feet and Suite 1300,
19,144 rentable square feet, Tenant will continue to lease Suite 1150, 4,755
rentable square feet.
2. Lease Term:
-----------
Ten years from commencement date.
3. Base Monthly Rent:
------------------
Tenant agrees to pay a base monthly rent for Suite 1150 as per the following
schedule:
Year One: 2/18/93 - $4,160.63 per month
2/17/94 - $4,160.63 per month
Years Two through Five: $8,321.25 per month
Years Six through Ten $8,797.02 per month
4. Tenant Improvements:
--------------------
Tenant agrees to accept Suite 1150 in as-is condition.
5. Commencement and Termination:
-----------------------------
Lease Commencement, as per possession letter, is February 18, 1993 and
termination is February 17, 2003.
6. Tenant's Proportionate Share:
-----------------------------
Tenant's proportionate share, relating to the new total rentable square
footage of 43,043, shall be 19.2%
7. Other Terms and Conditions:
---------------------------
All other terms and conditions contained in the Base Lease for Suite 500 and
subsequent Addendum's shall be applicable for this Addendum and all leased
space.
AGREED AS ABOVE:
TENANT: LANDLORD:
MICROTEC RESEARCH INC., REGENCY PLAZA INTERNATIONAL INC.,
BY: /s/ JERRY KIRK BY:
-------------------------------- ----------------------------------
ITS: PRESIDENT ITS: PRESIDENT
3
<PAGE>
AMENDMENT TO LEASE
This agreement hereinafter referred to as "Amendment" to Lease, dated for
reference purposes only as June 10, 1994, between REGENCY PLAZA INTERNATIONAL,
INC., a Delaware Corporation, ("Landlord") and MICROTEC RESEARCH INC., a
California Corporation ("Tenant"), who agree as follows:
RECITALS
WHEREAS, the parties have previously executed a lease for Premises located
at 2350 Mission College Boulevard, Santa Clara, California, including addendum's
thereto, and relating to Suites commonly known as Suite 500, Suite 1150, Suite
1300 and Suite 275 collectively the ("Lease");
WHEREAS, Tenant intends to surrender the Premises located on the Eleventh
Floor commonly known as Suite 1150 consisting of approximately 4,755 r.s.f, and
lease additional space located on the Twelfth Floor, of the Regency Plaza One
Building, consisting of approximately 19,144 rentable square feet;
WHEREAS, Tenant and Landlord wish to extend the lease term for Suite 275.
NOW THEREFORE, in consideration of the Rents and mutual promises, covenants
and conditions the parties agree as follows:
The parties agree to lease the entire Twelfth floor consisting of approximately
19,144 rentable square feet, commonly known as "Suite 1200" on the following
terms and conditions:
1. Lease term. The term for Suite 1200 and 275 shall be for five (5) years
from the Commencement Date.
2. Base Monthly Rent. The monthly Base Rent for Suite 1200 shall be $34,416.00
per month during the initial lease term. The monthly Base Rent for Suite 1200
shall not be subject to any rent escalation. The monthly Base Rent for Suite 275
is currently $2,500.00 and subject to an annual adjustment on May 29, 1994,
(retroactive) and May 29, 1995. Thereafter, the monthly Base Rent shall remain
unchanged during the balance of the initial term. Effective November 1, 1998,
the monthly Base Rent for Suite 500 and 1300 shall increase to $70,835 ($1.85
per r.s.f)
3. Lease Commencement. The term for Suite 1200 and Suite 275 shall commence on
July 1, 1994.
4. Lease Termination Suite 1150. Landlord agrees to terminate the Lease for
Suite 1150 effective June 30, 1994, however, Landlord shall allow Tenant to
occupy the space through July 14, 1994, at no additional change.
<PAGE>
5. Operating Expenses Pass Through. The Base Year calculations for Suite 1200
shall be 1994. The annual Pass Through shall be limited to a maximum of **five
percent (5%) of the increase in operating expense on year to year basis
(**barring any singularly extraordinary, uncontrollable increase in expenses
imposed by an outside taxing agency, which would cause the cap to revert to 8%).
The new Expense Stop for Suite 1200 shall be set to $7.75.
6. As a clarification to the Lease, the following is a list of each Suite the
approximate square footage of rentable area, the revised expiration dates of the
term the monthly Base Rent and the percentage share of Operating Expenses:
<TABLE>
<CAPTION>
Suite Square Footage Expiration Date Base Rent Percentage Share
- ----- -------------- --------------- ---------- -----------------
<S> <C> <C> <C> <C>
275 1,313 06/30/99 $ 2,500.00 1%
500 19,144 02/28/03 $33,502.50 9%
1200 19,144 06/30/99 $34,416.00 9%
1300 19,144 02/28/03 $33,502.50 9%
</TABLE>
7. Condition of Premises. Suite 1200 shall be delivered to Tenant on an "as is"
basis, except for the changes listed on Exhibit "A" attached hereto and made a
part hereof ("Tenant Improvements"). Suite 500 is currently occupied by Tenant
and as part of this Amendment, Landlord shall also construct the improvements as
noted on Exhibit "A". The cost of the Tenant Improvements shall be at Landlord's
sole cost and expense. Tenant acknowledges that Suite 1200 is suitable for
Tenant's intended use. Tenant is currently occupying Suite 275 and shall
continue to occupy on an "as is" basis.
8. Broker. Landlord and Tenant each warrant to the other that it has had no
dealing with any real estate broker or agent in connection with the negotiation
of this Amendment and that it knows of no real estate broker who is entitled to
or can claim commission in connection with this Amendment.
9. Effectiveness of Lease. Except as set forth in this Amendment all the
provisions of the Lease shall remain unchanged and in full force and effect.
Agreed to and accepted this 15 day of June, 1994.
-- ---- ----
REGENCY PLAZA INTERNATIONAL, INC. MICROTEC RESEARCH INC.
BY: /s/ Sunil Suri BY: /s/ Jerry Kirk
---------------------------------- -----------------------------------
Sunil Suri, Vice President
<PAGE>
EXHIBIT "A"
The following is a list of Tenant Improvements to be completed within Suite 500
and 1200 as part of this Amendment:
Suite 500 -
- -----------
Demolish walls, electrical and restore related HVAC in Room 591.
Suite 1200 -
- ------------
Carpet
- ------
Install like quality carpet over VCT in large TTC room to match existing carpet.
Electrical
- ----------
Add seven (7) 110 V electrical circuits.
HVAC
- ----
1. Shut down and isolate two (2) existing chilled water air handlers
2. Add one (1) new VAV zone with hot water reheat
3. Add two (2) new cooling only VAV zones
4. Connect to and utilize existing distribution
5. Controls
6. Air balance
<PAGE>
10. 16. ASSIGNMENT AND SUBLETTING
--- -----------------------------
In the event of a Sublease the Landlord shall receive the
Two Dollars ($2.00) per square foot base rent which Tenant
is obligated to pay, and fifty percent (50%) of any sums in
excess of the Two Dollars ($2.00) per square foot,
less marketing expenses.
LANDLORD: TENANT:
MASKATIYA, SURI CO., INC. MICROTEC RESEARCH
/s/ Sunil Suri /s/ Robert Kirk, President
----------------------------- --------------------------
Date: Date: 7/1/88
----------------------- -----------------------
<PAGE>
EXHIBIT B
[DIAGRAM]
"EXHIBIT B REGENCY PLAZA SITE PLAN, PHASE THREE"
<PAGE>
EXHIBIT 11.1
AURUM SOFTWARE, INC.
COMPUTATION OF NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
------------------------
1994 1995 1996
------- ------- ------
<S> <C> <C> <C>
HISTORICAL:
Net loss.............................................. $(4,388) $(4,452) $ 279
======= ======= ======
Weighted average common shares outstanding............ 855 1,937 4,292
Common stock equivalents relating to options and
preferred stock...................................... 4,790
Common stock and common stock options issued during
the
12-month period prior to the initial public offering
in accordance
with Staff Accounting Bulletin No. 83 (using the
treasury stock method)............................... 1,155 1,155 866
------- ------- ------
2,010 3,092 9,948
======= ======= ======
Net loss per share(1)................................. $ (2.18) $ (1.44) $ 0.03
======= ======= ======
PRO FORMA:
Net loss.............................................. $(4,452)
=======
Historical weighted average shares outstanding........ 3,092
Effect of assumed conversion of preferred stock....... 3,620
-------
6,712
=======
Pro forma net loss per share(1)....................... $ (0.66)
=======
</TABLE>
- --------
(1) Primary and fully diluted loss per share are the same for all periods
presented.
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF AURUM SOFTWARE, INC.
Aurum Software U.K. Limited (a corporation organized under
the laws of England in March, 1997)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 38,955 2,795
<SECURITIES> 0 0
<RECEIVABLES> 13,329 4,702
<ALLOWANCES> (317) (340)
<INVENTORY> 0 0
<CURRENT-ASSETS> 53,177 7,935
<PP&E> 5,584 3,001
<DEPRECIATION> (2,685) (1,442)
<TOTAL-ASSETS> 56,281 9,795
<CURRENT-LIABILITIES> 8,821 5,730
<BONDS> 0 0
0 17,356
0 0
<COMMON> 12 236
<OTHER-SE> 46,997 (13,764)
<TOTAL-LIABILITY-AND-EQUITY> 47,009 (13,528)
<SALES> 27,584 10,475
<TOTAL-REVENUES> 27,584 10,475
<CGS> (10,962) (4,898)
<TOTAL-COSTS> (16,540) (9,935)
<OTHER-EXPENSES> 435 63
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (213) (157)
<INCOME-PRETAX> 304 (4,452)
<INCOME-TAX> (25) 0
<INCOME-CONTINUING> 279 (4,452)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 279 (4,452)
<EPS-PRIMARY> 0.03 (1.44)
<EPS-DILUTED> 0.03 (1.44)
</TABLE>
