UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period 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: 0-25612
STARBASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0567363
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
18872 MacArthur Boulevard
Irvine, California 92612
(Address of principal executive offices) (Zip code)
(714) 442-4400
(Registrant's telephone number, including area code)
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) been subject to such filing requirements
for the past 90 days. Yes |X| No |_|
Number of shares outstanding as of January 31, 1997:
Common Stock: 13,280,569
Series C Preferred Stock: 25,000
Transitional Small Business Disclosure Format: Yes |_| No |X|
<PAGE>
STARBASE CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets at December 31, 1996 (Unaudited)
and March 31, 1996 3
Statements of Operations (Unaudited) for the three
and nine month periods ended December 31, 1996 and 1995 4
Statements of Cash Flows (Unaudited) for the nine month
periods ended December 31, 1996 and 1995 5
Notes to Financial Statements (Unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I
ITEM 1
FINANCIAL STATEMENTS
STARBASE CORPORATION
(a development stage company)
BALANCE SHEETS
(in thousands, except number of shares and par values)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,349 $ 1,252
Accounts receivable, net of allowances of $23 and $44 187 3
Notes and other receivables 112 10
Prepaid expenses and deferred charges 152 137
Inventories 36 14
--------------- ---------------
Total current assets 4,836 1,416
Property and equipment, net 523 660
Note receivable from officer 76 76
Other non-current assets 6 21
--------------- ---------------
Total assets $ 5,441 $ 2,173
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 708 $ 1,375
Due to director - 280
Other current liabilities 1 111
Current portion of notes payable - 186
--------------- ---------------
Total current liabilities 709 1,952
Long-term debt - 153
--------------- ---------------
Total liabilities 709 2,105
Shareholders' equity:
Preferred stock, $.01 par value; $150 (December 31, 1996) and $4,456
(March 31, 1996) liquidation value; authorized 10,000,000; issued
and outstanding 50,000 (December 31, 1996) and 2,227,946 (March 31, 1 22
1996)
Common stock, $.01 par value; authorized 50,000,000; issued 13,219,758
(December 31, 1996) and 7,841,812 (March 31, 1996);
outstanding, 13,219,758 (December 31, 1996) and 7,835,551 (March 132 78
31, 1996)
Common stock pending authorization 27 27
Additional paid-in capital 26,661 18,185
Treasury stock, -0- shares December 31, 1996; 6,261 common shares - (21)
March 31, 1996
Deficit accumulated during development stage (22,089) (18,223)
--------------- ---------------
Total shareholders' equity 4,732 68
--------------- ---------------
Total liabilities and shareholders' equity $ 5,441 $ 2,173
=============== ===============
The accompanying notes are an integral part of the financial statements
</TABLE>
3
<PAGE>
STARBASE CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Sept. 6, 1991
through
Three months ended Nine months ended December 31,
December 31, December 31, 1996
-------------------------- --------------------------
1996 1995 1996 1995 (cumulative)
------------
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Consulting services $ - $ 2 $ - $ 500 $ 4,430
Consulting services-related party - - - - 281
Products, licenses and other 385 13 766 228 2,427
------------ ------------ ------------ ------------ ------------
Total revenues 385 15 766 728 7,138
Cost of Sales:
Consulting services - - - 625 4,716
Consulting services-related party - - - - 289
Products, licenses and other 24 4 52 77 383
------------ ------------ ------------ ------------ ------------
Total cost of sales 24 4 52 702 5,388
------------ ------------ ------------ ------------ ------------
Gross margin 361 11 714 26 1,750
Operating Expenses:
Research and development 393 477 1,080 1,973 8,515
Selling, general and administrative 1,286 579 3,641 2,590 15,629
------------ ------------ ------------ ------------ ------------
Total operating expenses 1,679 1,056 4,721 4,563 24,144
------------ ------------ ------------ ------------ ------------
Operating loss (1,318) (1,045) (4,007) (4,537) (22,394)
Interest, other income and 52 (2) 165 (74) 337
(expense), net ------------ ------------ ------------ ------------ ------------
Loss before income taxes (1,266) (1,047) (3,842) (4,611) (22,057)
Provision for income taxes 2 - 3 1 11
------------ ------------ ------------ ------------ ------------
Net loss $ (1,268) $ (1,047) $ (3,845) $ (4,612) $(22,068)
============ ============ ============ ============ ============
Per share data:
Loss per common share $ (0.10) $ (0.13) $ (0.32) $ (0.65)
============ ============ ============ ============
Weighted average number of
common shares outstanding 13,210 7,823 12,053 7,045
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
</TABLE>
4
<PAGE>
STARBASE CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Sept. 6, 1991
through
Nine months ended December 31,
December 31, 1996
-------------------------------
1996 1995 (cumulative)
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (3,845) $ (4,612) $ (22,068)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 177 196 745
Provision for doubtful accounts and sales returns 54 (35) 184
Loss on disposition of property, equipment and capital lease 16 56 90
Write-down of assets - 45 50
Gain on debt restructuring - - (138)
Recognition of deferred income (108) - (343)
Other adjustments - - 75
Common stock to be issued for professional services 27 - 27
Changes in assets and liabilities, excluding
the effect of non-cash transactions:
Accounts receivable (239) 727 (371)
Notes and other receivables (102) 1 (183)
Inventories (22) 25 (36)
Prepaid expenses and deferred charges (15) 27 (166)
Other assets 11 (131) (30)
Accounts payable and accrued liabilities (908) 620 1,197
--------------- --------------- ---------------
Net cash used by operations (4,954) (3,081) (20,967)
Cash Flows from Investing Activities:
Proceeds from disposition of property and equipment 1 - 5
Capital expenditures (53) (22) (1,298)
--------------- --------------- ---------------
Net cash used by investing activities (52) (22) (1,293)
Cash Flows from Financing Activities:
Proceeds from reverse acquisition - - 1,402
Proceeds from sale of preferred stock 1,021 - 7,294
Proceeds from preferred stock subscriptions 3,201 -
Proceeds from issuance of common stock:
From stock purchase plan - - 10
From public offering - - 4,063
From private placements 6,300 304 10,698
From exercise of options 282 102 548
From exercise of warrants 1,630 - 2,654
Proceeds from convertible subordinated notes - - 381
Proceeds from promissory notes - 1,083 1,083
Payments on promissory notes (111) (75) (274)
Borrowings on line of credit - - 664
Payments on line of credit - (664) (664)
Payment of financing related costs (1,019) - (1,424)
Payments on capitalized lease obligations - (8) (40)
Loans from officers/directors - 285 365
Repayment of loans from officers/directors - (75) (75)
Repayment of (disbursement of) loan to officer - 55 (76)
--------------- --------------- ---------------
Net cash provided by financing activities 8,103 4,208 26,609
--------------- --------------- ---------------
Net increase (decrease) in cash 3,097 1,105 4,349
Cash and cash equivalents, beginning of period 1,252 1,972 -
--------------- --------------- ---------------
Cash and cash equivalents, end of period $ 4,349 $ 3,077 $ 4,349
=============== =============== ===============
The accompanying notes are an integral part of the financial statements
</TABLE>
5
<PAGE>
STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS
StarBase Corporation (the "Company"), a Delaware corporation, develops, markets
and supports team-oriented product development software that addresses the
evolving needs of personal computer users involved in projects requiring
substantial collaboration. StarBase was founded in 1991 to address the inability
of software development projects to deliver software products on time and within
budget, initially through the improvement of individual programmer productivity
tools. The Company was reorganized in fiscal 1996 to focus entirely on the
development and marketing of software designed to increase team productivity,
rather than individual programmer productivity. In line with the reorganization,
the Consulting Division was discontinued.
2. BASIS OF PRESENTATION
The unaudited interim financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have not been presented. The accompanying unaudited financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the StarBase Corporation report to the Securities and Exchange
Commission on Form 10-K, as amended, for the year ended March 31, 1996.
The interim financial statements reflect all normal recurring adjustments which
are, in the opinion of management, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows for the
period presented. Certain prior period balances have been reclassified to
conform to current period classifications. The results of operations for the
nine months ended December 31, 1996 are not necessarily indicative of the
operating results for a full year.
EARNINGS PER COMMON SHARE
Earnings per common share are calculated by dividing the net loss by the
weighted average shares of common stock outstanding. Common stock equivalents
are considered anti-dilutive and are excluded from this calculation.
6
<PAGE>
STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
(In thousands)
December 31, March 31,
1996 1996
------------- -----------
Accounts receivable
Trade accounts receivable $ 210 $ 47
Less allowance for doubtful accounts (23) (44)
------------- -----------
$ 187 $ 3
=============== ===========
Property and equipment
Computer hardware $ 884 $ 869
Furniture and fixtures 130 125
Computer software 126 115
Leasehold improvements 29 41
--------------- -----------
1,169 1,150
Less accumulated depreciation and
amortization (646) (490)
---------------- -----------
$ 523 $ 660
================ ===========
Accounts payable and accrued
liabilities
Trade accounts payable $ 225 $ 910
Accrued professional fees 184 135
Accrued wages and bonuses 96 70
Other accrued expenses 203 260
--------------- -----------
$ 708 $ 1,375
=============== ===========
4. EQUITY TRANSACTIONS
PRIVATE PLACEMENTS
The Company has authorized 50,000,000 shares of common stock and 10,000,000
shares of preferred stock with a par value of $0.01 per share. Of the preferred
stock, 2,500,000 shares have been designated as Series B Preferred Stock, of
which no shares are issued and outstanding at December 31, 1996, and 366,666
shares have been designated as Series C Preferred Stock, of which 50,000 shares
are outstanding at December 31, 1996.
On May 13, 1996, a private placement of common stock was completed. In this
private placement, 2,099,832 Units were issued, each Unit consisting of one
share of common stock and one non-transferable warrant to purchase one share of
common stock. The warrants are exercisable at $2.00 per share through January
31, 1997 and thereafter exercisable at $2.50 per share through January 31, 1998,
after which date the warrants expire. In addition, warrants to purchase 120,000
shares of the Company's common stock were issued as a placement agent fee.
As a result of the May 13, 1996 private placement of common stock, the 2,227,946
shares of the Company's Series B Preferred Stock, issued in a fiscal 1996
private placement, automatically converted into 2,227,946 shares of the
Company's common stock.
7
<PAGE>
STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
During June 1996, the private placement of Series C Preferred Stock was
completed. In this private placement, 365,496 Units were issued, each Unit
consisting of one share of Series C Preferred Stock and one non-transferable
warrant to purchase one share of common stock. The warrants are exercisable at
$2.00 per share through January 31, 1997 and thereafter exercisable at $2.50 per
share through January 31, 1998, after which date the warrants expire. The Series
C Preferred Stock is not redeemable and has a liquidation preference of $3.00
per share. The holders of Series C Preferred Stock are not entitled to receive
any dividends nor, except as provided by law, vote upon any matter relating to
the business or affairs of the Company or for any other purpose. Each share of
Series C Preferred Stock is convertible, at the option of the holder, at any
time into the Company's common stock, of which the conversion rate will be
determined by dividing $3.00 by the Conversion Price. The Conversion Price shall
be the lesser of (a) $3.00 per share or (b) 80% of the average closing bid price
of the common stock as reported by Bloomberg, L.P. for shares traded in the
United States for the five consecutive trading days preceding the conversion
date. At December 31, 1996, 315,496 shares of Series C Preferred Stock had been
converted into 382,609 shares of common stock.
CONVERSION OF NOTE PAYABLE
A promissory note payable with a face value of $75,000 was converted into Series
C Preferred Stock at a price of $3.00 per Unit. Long-term notes payable to two
directors and one director with face values totaling $80K and $73K,
respectively, were converted to common stock at a price of $3.18 and $2.19 per
share, respectively.
COMMON STOCK PENDING AUTHORIZATION
Common stock pending authorization represents common shares to be issued in
payment for consulting fees to an independent consultant.
TREASURY SHARES
On November 8, 1996, the Company retired 6,261 shares of common stock held in
treasury.
WARRANTS
Warrant activity for the nine month period ended December 31, 1996 is as
follows:
Warrant Price
Shares Per Share
------------------- ----------------
Outstanding at March 31, 1996 2,949,595
Issued in connection with stock offerings 2,580,328 $2.00
Exercised (441,383) $2.00-$5.67
Expired (5,006) $5.67
-------------------
Outstanding at December 31, 1996 5,083,534
===================
8
<PAGE>
STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. SUPPLEMENTAL CASH FLOW INFORMATION
Nine months
ended December 31,
----------------------
(In thousands) 1996 1995
--------- ---------
Interest paid $ 20 $ 28
Income taxes paid 1 1
Non-cash investing and financing transactions:
Conversion of Series A Preferred Stock to
common stock - 2,710
Conversion of Series B Preferred Stock to
common stock (Note 4) 22 -
Conversion of Series C Preferred Stock to
common stock (Note 4) 3 -
Conversion of promissory notes to Series C Preferred
Stock (Note 4) 75 -
Conversion of notes payable to equity (Note 4) 153 745
Common Stock issued for non-cash consideration 28 -
Conversion of loans from officers to equity - 137
Treasury stock retired, 6,261 common shares (Note 4) 21 -
Common stock issued as finder's fees - 39
6. COMMITMENTS AND CONTINGENCIES
There have been no other significant subsequent developments relating to the
commitments and contingencies reported on the Company's most recent Form 10-K,
as amended.
9
<PAGE>
PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements within the meaning
of Sections 21E and 27A of the Securities Exchange Act of 1934. These forward
looking statements are subject to risks and uncertainties. There are several
important factors that could cause actual results to differ materially from
those anticipated by the forward-looking statements contained in the following
discussion. Such factors include, but are not limited to, the growth rates of
certain market segments, the positioning of the Company's products in those
segments, price pressures and the rapidly changing competitive environment in
the software industry, the Company's ability to manage its business in its
evolution from a development stage company, and the Company's ability to
establish strategic alliances. Additional information on these and other risk
factors which could affect the Company's financial results is included in the
Company's Annual Report for the fiscal year ended March 31, 1996 on Form 10-K,
as amended, on file with the Securities and Exchange Commission.
REVENUES
In the spring of 1995 the management of StarBase made the decision to focus the
Company's business on the development and marketing of software designed to
increase team productivity, rather than individual programmer productivity. The
Company was reorganized in fiscal 1996 to reflect this change in product and
market focus and, in line with the reorganization, the 26 person Consulting
Division was discontinued. Thus, consulting services revenue for the quarter and
nine month period ended December 31, 1996 decreased to nil compared to $2,000
for the quarter and $500,000 for the nine months of the previous year. Revenue
from products and licenses for the quarter and nine months was $385,000 and
$766,000 compared to $13,000 and $228,000 for the same periods of the previous
year. Revenue from products and licenses for the quarter and nine months ended
December 31, 1996 consisted primarily of license fee income and sales of the
StarTeam and Versions products.
Product revenue to date has been limited by a number of factors, including the
introductory cycle for new software development tools such as StarTeam. StarTeam
1.0 was introduced in January 1996, followed by StarTeam 2.0 in late August of
1996. Sufficient working capital was not available to support a major StarTeam
1.0 marketing and sales program. The StarTeam 1.0 marketing strategy was
therefore to sell the product to strategic customers, who, with a successful
initial experience, had the potential to generate significant additional
business. In June 1996, sufficient working capital was raised through a private
placement to support a major marketing and sales program for StarTeam 2.0.
Commercial shipments of StarTeam 2.0 began in the final week of August. In
addition, Versions 2.0 sales commenced during the final week of December 1996.
StarTeam is a new software product line whose target market consists of
technical software professionals (developers). Marketing to technical
professionals is an educational process. In the typical sales cycle, the product
is purchased as a pilot test program, installed and evaluated on a small scale
(3-10 seats), and, if the evaluation is satisfactory, implemented on a larger
project which may involve 10 to 25 developers. Successful implementation in the
project may lead to broader acceptance within the organization. The time span
from an initial test order to implementation throughout the customer's
organization varies depending on the organization and the level of
standardization within the individual company, but in very large companies, may
take 6 months to a year.
Since mid-May of 1996, when additional working capital became available, the
Company has been focused on strengthening its sales and marketing effort. Due to
the technical nature of the product line, the Company determined that its
primary sales effort would be through direct tele-sales as well as targeted
programs toward original equipment manufacturers (OEM) and large accounts. Prior
to the availability of additional working capital in May 1996, several key
positions in sales and marketing were not filled. As of December 31, 1996 the
Company has filled the open sales and marketing positions.
10
<PAGE>
COST OF SERVICES AND PRODUCTS
There was no consulting service revenue or cost of service revenue during the
quarter and for the nine months ended December 31, 1996 due to the
discontinuation of the Company's Consulting Division. The negative gross margin
resulting from services for the quarter ended December 31, 1995 reflects
decreased consulting staff utilization as the Company reduced the scope of its
consulting operations.
Cost of products consists primarily of manufacturing and related costs such as
media, documentation, product assembly and third party royalties. The Company
currently outsources manufacturing for all software products. The decrease in
cost of products as a percentage of product revenues is primarily the result of
increased license and maintenance revenue for which no related costs were
incurred.
OPERATING EXPENSES
Compared to the same quarter in the prior year, operating expenses increased
approximately $623,000, 59%, due to a significant increase in sales and
marketing expenditures offset by a decrease in research and development
expenses. During the quarter ended December 31, 1995, the company experienced a
severe cash shortage which resulted in a dramatic cut-back in operating
expenses, including substantial personnel reductions. For the comparable quarter
in the current year, as additional working capital became available and, coupled
with the completion and introduction of StarTeam 2.0 into the market, additional
operating expenses were incurred. The increase in sales and marketing expenses
for the quarter is due to increased promotional activities as well as increased
headcount. Research and development expenses decreased due to headcount
reductions during the quarter ended December 31, 1995. At December 31, 1996, the
Company had 40 full-time employees, 14 in sales and marketing, 7 in general and
administrative, and 19 in research and development. During 1995 the Company
embarked on a dramatic headcount reduction, moving from an employee base of
approximately 90 persons to where, as of December 31, 1995, the Company had 28
full-time employees, 5 in sales and marketing, 7 in general and administrative,
and 16 in research and development.
RESEARCH AND DEVELOPMENT EXPENSES. While StarBase continues to make significant
investments in research and development intended to bring its products to market
and to support existing products, overall research and development expenses have
been reduced. The Company has not capitalized any software development costs
since inception. For the current quarter research and development expenses were
reduced by $84,000, approximately 18% of total research and development expenses
for the same quarter in the prior year. For the nine month period, research and
development expenses decreased $893,000 over the same period in the prior year.
The primary cause for the decrease is the reduction in headcount which resulted
in a reduction of compensation expense of approximately $675,000, reflecting the
Company's shift to the development of software designed to increase team
productivity. In addition, the Company's research and development resources
have also been re-allocated between on-going projects as well as conceptual,
future-business projects.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the quarter and nine months ended December 31, 1996
compared to the same periods of 1995 increased $707,000 and $1,051,000,
respectively. For the nine month period the greatest increase occurred in sales
and marketing, approximately $714,000. Of this amount approximately $80,000 was
due to headcount, with the remainder due to marketing programs such as media
space, trade shows, direct mail and promotional materials. The quarterly
increase was due to similar items.
INTEREST, OTHER INCOME AND (EXPENSE), NET
Interest and other income and (expense), net consisted primarily of interest
income generated by placing available funds in short-term US Treasury Bills. For
the comparative periods in the prior year, the amounts consisted of interest
expense payable on the credit line and promissory notes.
INCOME TAXES
The Company has incurred minimal income taxes due to its cumulative losses. The
provision for income taxes for the quarter represented minimum state franchise
taxes.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents on hand totaled $4.3 million at December 31, 1996 and
$1.3 million at March 31, 1996. During the nine months ended December 31, 1996
the Company generated $8.1 million (net) in cash from financing activities,
including $8.2 million (net) from the sale of additional equity. The Company
completed a private placement of preferred stock for proceeds of approximately
$1.0 million, a private placement of common stock for approximately $6.3
million, exercise of options for $0.3 million, and exercise of warrants for $1.6
million. Offsetting the proceeds from financings, the Company made payments on
financing related costs of $1.0 million and on promissory notes of approximately
$0.1 million.
During the past nine months, the Company used $5.0 million for operations, an
increase of approximately $1.9 million over the amount used by operations in the
same nine month period of the prior year. The increase in cash used for
operations was primarily due to the substantial pay down of accounts payable
compared to the same period in the prior year when accounts payable were allowed
to cumulate due a cash shortage. Capital expenditures were approximately $53,000
for the nine months ended December 31, 1996.
The Company believes that proceeds from the sale of equity securities since
March 31, 1996 and the cash balance at December 31, 1996 will at least be
sufficient to allow the Company to conduct its operations through August 1997.
Continuing operations thereafter will depend on increased cash flow from
operations or the Company's ability to raise additional funds through equity,
including conversion of warrants; debt; or other financing. There can be no
assurance, however, that such funds will be available.
12
<PAGE>
PART II
ITEM 5
OTHER INFORMATION
On November 4, 1996, a registration statement on Form S-3 filed by the Company
was declared effective by the Securities and Exchange Commission. The
registration statement covered 9,853,295 shares of common stock of the Company
(including 3,800,945 shares issuable under outstanding warrants held by the
investors) which were issued to investors in eligible private placements. Other
than proceeds represented by the exercise price of the warrants if exercised by
the investors, the Company will not receive any of the proceeds from the sale of
the shares of common stock by the investors.
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
Exhibit Ref./
Number Description Of Document Page
- ------------ ---------------------------------------------------------------------------------------- ----------
<S> <C> <C>
1.1 Underwriting Agreement between the Company and Dabney/ Resnick, Inc. (F)
3.1 Amended and Restated Certificate of Incorporation of the Company. (B)
3.2 Amended and Restated Bylaws of the Company. (A)
3.3 Certificate of Designation, Series C Preferred Stock. (F)
3.4 Certificate of Amendment of Certificate of Designation, Series C Preferred Stock. (F)
4.1 Investor's Rights Agreement date September 16, 1994 among the Company and certain
investors. (B)
4.2 Registration Rights Agreement dated December 15, 1994. (B)
4.3 Registration Rights Agreement dated December 1995. (E)
4.4 Registration Rights Agreement dated May 1996. (D)
4.5 Registration Rights Agreement dated June 1996. (F)
10.1 Form of Indemnity Agreement for Directors. (A)
10.2 Form of Indemnity Agreement for Officers. (A)
10.3 Performance Share Escrow Agreement, as amended, among the Company, Montreal Trust
Company of Canada as Escrow Agent, and certain of the Company's stockholders. (A)
10.4 Sublease dated December 2, 1993 between McDonnell Douglas Travel Company and StarBase
Corporation, for the Company's Irvine, California facilities. (B)
10.5 1996 Stock Option Plan, as amended. (*) (G)
10.6 Form of Restricted Stock Issuance Agreement. (A)
10.7 Form of Restricted Stock Purchase Agreement. (A)
10.8 Forms of Common Stock Subscription Agreements and Warrants used from time to time
between the Company and certain of its stockholders in connection with certain equity
financings, together with a list of equity investors. (A)
10.9 Forms of Common Stock Subscription Agreement and Warrants used in November 1994
Private Placement. (B)
10.10 Forms of Common Stock Subscription Agreement and Warrants used in March 1995 Private
Placement. (C)
10.11 Regional Prototype Defined Contribution Plan and Trust of the Company. (*) (A)
10.12 Fiscal Agency Agreement between the Company and Canaccord Capital Corporation. (B)
10.13 Form of Agents' Warrant. (B)
10.14 Silicon Valley Bank Warrant dated December 15, 1994. (B)
10.15 Secured Promissory Note dated July 1, 1995 from William R. Stow III. (E)
10.16 Forms of Preferred Stock Subscription Agreements and Warrants used in January 1996
Private Placement, together with a list of equity investors. (E)
13
<PAGE>
10.17 Amendment No. 1 to the Sublease dated December 1, 1994 between McDonnell Douglas
Travel Company and StarBase Corporation, for the Company's Irvine, California
facilities. (E)
10.18 Amendment No. 2 to the Sublease dated September 1, 1995 between McDonnell Douglas
Travel Company and StarBase Corporation, for the Company's Irvine, California
facilities. (E)
10.19 Forms of Common Stock Subscription Agreement and Warrants used in July 1995 Private
Placement, together with a list of equity investors. (E)
10.20 Form of Warrant used in the May 13, 1996 Private Placement. (D)
10.21 Form of Subscription Agreement used in the May 13, 1996 Private Placement. (D)
10.22 Form of Preferred Stock Subscription Agreement and Warrant used in the June 1996
Private Placement, together with a list of equity investors and placement agent. (F)
10.23 Lease dated November 22, 1996 between The Provider Fund and StarBase Corporation, for 16
the Company's Irvine, California facilities.
27 Financial data schedule
- -------------------------
<FN>
(A) Incorporated herein by reference to the Company's Registration
Statement on Form SB-2 (file number 33-68228) filed with the
Commission on November 2, 1993.
(B) Incorporated herein by reference to the Company's Registration
Statement on Form 10 (file number 0-25612) filed with the
Commission on February 23, 1995.
(C) Incorporated herein by reference to the Company's Form 10-K (file
number 0-25612) filed with the Commission on July 14, 1995.
(D) Incorporated herein by reference to the Company's Form 8-K (file
number 0-25612) filed with the Commission on May 16, 1996.
(E) Incorporated herein by reference to the Company's Form 10-K, as
amended, (file number 0-25612) filed with the Commission on July
1, 1996.
(F) Incorporated herein by reference to the Company's Form 10-QSB
(file number 0-25612) filed with the Commission on August 14,
1996.
(G) Incorporated herein by reference to the Company's Definitive
Proxy Statement (file number 0-25612) filed with the Commission
on July 29, 1996.
* Denotes a management contract or compensatory plan or arrangement.
</FN>
</TABLE>
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARBASE CORPORATION
(Registrant)
February 7, 1997 /s/ Donald R. Farrow
- --------------------- -------------------------
Date Donald R. Farrow
President
15
<PAGE>
EXHIBIT 10.23
LEASE SUMMARY
Prepared For StarBase Corporation
Date: October 22, 1996
Building: 18872 MacArthur Blvd.
Irvine, CA 92612
Tenant: StarBase Corporation
Premises: Approximately 12,280 rentable square feet located at 18872
MacArthur Blvd. Street, Suite 300, Irvine, California 92612.
Term: Twelve (12) months.
Lease
Commencement: February 15, 1997
Security
Deposit: Landlord require a security deposit in the amount of $15,964.00
Primary Term Rent: Months Rate/s.f. Amount
--------------- --------- ----------
2/15/97 - 2/14/98 1.30 $15,964.00
*Option Year = 2/15/98 - 2/14/99 1.35 $16,578.00
*Option Year = 2/15/99 - 2/14/00 1.40 $17,192.00
*Options must be exercised 90 days prior to lease
expiration. 90 days prior to lease expiration,
Landlord reserves the right to show suite to
prospective tenants.
Tenant
Improvements: Landlord to provide tenant improvements to reception area based
on mutually agreed upon space plan. (See schedule H)
Parking: Tenant will be granted 44 parking spaces.
Operating
Expenses: 1997 Base Year
Proportionate
Share: 12,280 SF +46,621S.F. =26%
<PAGE>
OFFER TO LEASE
To: The Provider Fund
1. The undersigned offeror, having inspected the premises or plans thereto
offers to lease the premises as outlined in Schedules "A" and "B" and under the
terms and conditions as set forth in the Lease attached hereto and forming a
part hereof and initialed by the parties.
2. Cash/Check for $15,964.00 payable to The Provider Fund pending completion or
other termination of this agreement, it is attached hereto to apply as a deposit
on Basic Rent and/or as security deposit which will be returned if this Offer is
not accepted.
3. The Lease shall be drawn by you in accordance with the attached Lease and
shall be executed by both parties forthwith.
4. It is further understood that all representations made by The Provider Fund
or any of its representatives, are set out in this agreement.
5. This Offer shall be irrevocable until November 30, 1996, after which time if
not accepted, this Offer shall be null and void.
DATED this 22nd day of November, 1996
Tenant
/s/ Robert W. Leimena, CFO
-------------------------------------------
Signature Title
(Note: If a corporation, give title of signing officer and affix seal.)
The Provider Fund hereby accepts the above Offer.
DATED this 22nd day of November, 1996.
The Provider Fund
/s/ Debra Wodarck, Director Of Operations
--------------------------------------------------------
Signature Title
<PAGE>
INDEX
Page
1. LEASED PREMISES 1
2. TERM
(a) Term 1
(b) Delay in Occupancy 1
(c) Overholding 2
3. RENT
(a) Basic Rent 2
(b) Additional Rent 2
(i) Taxes 2
(ii) Operating Costs 2
(c) Payment- Additional Rent 2
(d) Accrual of Rent 3
(e) Recovery of Rent 3
(f) Limitations 3
4. SECURITY DEPOSIT 3
5. GENERAL COVENANTS
(a) Landlord's Covenant 3
(b) Tenant's Covenant 3
6. USE AND OCCUPANCY
(a) Use 3
(b) Waste, Nuisance, etc 4
(c) Insurance Risks 4
(d) Compliance with Law 4
(e) Environmental Compliance 4
(f) Rules and Regulations 4
7. ASSIGNMENT AND SUBLETTING
(a) No Assignment Without Consent 4
(b) Assignment or Subletting Procedures 5
(c) Assumption of Obligations 5
(d) Tenant's Continuing Obligations 5
8. REPAIR AND DAMAGE
(a) Landlord's Repairs to Building and Property 5
(b) Landlord's Repairs to the Leased Premises 6
(c) Tenant's Repairs 6
(d) Indemnification 6
(e) Damage and Destruction 6
9. INSURANCE AND LIABILITY
(a) Landlord's Insurance 7
(b) Tenant's Insurance 7
(c) Limitation of Landlord's Liability 8
(d) Indemnity of Landlord 8
(e) Definition of "Insured Damage" 8
10. EVENTS OF DEFAULT AND REMEDIES
(a) Events of Default and Remedies 9
(b) Payment of Rent, etc. on Termination 9
(c) Tenant to pay on demand 10
i
<PAGE>
ADDITIONAL PROVISIONS
11. Relocation of Leased Premises 10
12. Subordination and Attornment 11
13. Certificates 11
14. Inspection of and Access to the Leased Premises 11
15. Delay 11
16. Waiver 12
17. Sale, Demolition and Renovation 12
18. Public Taking 12
19. Registration of Lease 13
20. Entire Lease Agreement 13
21. Notices 13
22. Interpretation 13
23. Extent of Lease Obligations 14
24. Use and Occupancy Prior to Term 14
25. Schedules 14
Definitions of Principal Terms Paragraph Page
Additional Rent 3(b) 2
Additional Services 3(b) D-1
Basic Rent 3(a) 2
Building 1 1
Fiscal Period 3(c) 2
Insured Damage 9(e) 9
Landlord 1
Landlord's Taxes 2(a) C-1
Leased Premises 1 1
Leasehold Improvements 1 F-1
Landlord's Work 2 F-1
Operating Costs 5 D-2
Property 1 1
Public Taking 18 14
Rent 3(d) 14
Tenant 1
Tenant's Proportionate Share 2(d) C-2
Tenant's Proportionate Share 7 D-3
Tenant's Taxes 2(c) C-2
Term 2(a) 1
ii
<PAGE>
THIS AGREEMENT made this 17th day of October, 1996
BETWEEN:
The Provider Fund,
a California Limited Partnership having the
offices of its General Partner,
COLTON CAPITAL CORPORATION
having an office at 2302 Martin St. Suite 450
in the City of Irvine
County of Orange
(Hereinafter called the "Landlord") OF THE FIRST PART,
.... and ....
StarBase Corporation.
having an office at 18872 MacArthur Blvd. Street, Suite 300
in the City of Irvine
County of Orange
(Hereinafter called the "Tenant") OF THE SECOND PART,
In consideration of the rents, covenants and agreements hereinafter contained,
the Landlord and Tenant hereby agree as follows:
1. LEASED PREMISES
Leased
Premises The Landlord does demise and lease to the Tenant the premises
(the "Leased Premises") located in a building (the
"Building") having a municipal address of 18872 MacArthur Blvd.
Street, Suite 300, in the City of Irvine, County of Orange, State
of California and known as 18872 MacArthur Blvd. Street (the
Leased Premises, the Building, together with the lands described
in Schedule "A" attached and present and future improvements,
additions and changes thereto being herein called (the
"Property"), the Leased Premises consisting of approximately
12,280 rentable square feet on the third (3rd) floor(s) as
outlined in red on the plan or plans marked Schedule(s) "B"
attached hereto, excluding the exterior surfaces of the exterior
walls of the Leased Premises.
2. TERM
Term (a)TO HAVE AND TO HOLD the Leased Premises for and during the term
of Twelve (12) months (the "Term") to be computed from the 15th
day of February 1997, and to be fully complete and ended on the
14th day of February 1998, unless otherwise terminated.
Delay in
Occupancy (b) If the Leased Premises or any part thereof are not ready for
occupancy on the date of commencement of the Term, no part of
the "Rent" (as hereinafter defined) or only a proportionate part
thereof, in the event that the tenant shall occupy a part of the
Leased Premises, shall be payable for the period prior to the
date when the entire Leased Premises are ready for occupancy and
the full Rent shall accrue only after such last mentioned date
The Tenant agrees to accept any such abatement of Rent in full
settlement of all claims which the Tenant might otherwise have by
reason of the Leased Premises not being ready for occupancy on the
date of commencement of the Term, provided that when the Landlord
has completed construction of such part of the Leased Premises as
it is obliged hereunder to construct, the Tenant shall not be
entitled to any abatement of Rent for any delay in occupancy due
to the Tenant's failure or delay to provide plans or to complete
any special installations or other work required for its purposes
or due to any other reason, nor shall the Tenant beentitled to
any abatement of Rent for any delay in occupancy if the Landlord
hasbeen unable to complete construction of the Leased Premises by
reason of such
1
<PAGE>
failure or delay by the Tenant. A certificate of the Landlord as
to the date the Leased Premises were ready for occupancy and such
construction as the Landlord is obligated to complete is
substantially completed, or as to the date upon which the same
would have been ready for occupancy and completed respectively
but for the failure or delay of the Tenant, shall be conclusive
and binding on the Tenant and Rent in full shall accrue and become
payable from the date set out in the said certificate. Not
withstanding any delay in occupancy, the expiration date of
this Lease shall remain unchanged.
Overholding (c) If, at the expiration of the Term or sooner
termination hereof, the Tenant shall remain in possession without
any further written agreement or in circumstances where a tenancy
would thereby be created by implication of law or otherwise, a
tenancy from year to year shall not be created by implication of
law or otherwise, but the Tenant shall be deemed to be a monthly
tenant only, at double "Basic Rent" (as hereinafter defined)
payable monthly in advance plus "Additional Rent" (as hereinafter
defined) and otherwise upon and sufject to the same terms and
conditions as herein contained, excepting provisions for renewal
(if any) and leasehold improvement allowance (if any), contained
herein, and nothing,including the acceptance of any Rent by the
Landlord, for periods other than monthly periods, shall extend thi
Lease to the contrary except an agreement in writing between the
Landlord and the Tenant and the Tenant hereby authorizes the
Landlord to apply any monies received from the Tenant in payment
of such monthly Rent.
3. RENT
Basic Rent (a) See Schedule "G".
Additional
Rent (b) The Tenant shall, without deduction or right of offset pay
to the Landlord yearly and every year during the Term as
additional rental (hereinafter called "Additional Rent")
(i) the amounts of any Taxes payable by
the Tenant to the Landlord pursuant to the
provisions of Schedule "C" attached hereto;
and
(ii) the amounts required to be paid to the
Landlord pursuant to the provisions of
Schedule "D" attached hereto.
Payment (C)additional rent shall be paid and adjusted with reference
to a fiscal period of twelve calendar months "fiscal period"),
which shall be a calendar year unless the landlord shall from
time to time have selected a Fiscal Period which is not a
calendar year by written notice to the Tenant. The Landlord shall
advise the Tenant in writing of its estimate of the Additional
Rent to be payable by the Tenant during the Fiscal Period (or
broken portion of the Fiscal Period, as the case may be, if
applicable at the commencement or end of the Term or because of a
change in Fiscal Period) which commenced upon the commencement
date of the Term and for each succeeding Fiscal Period or broken
portion thereof which commences during the Term. Such estimate
shall, in every case, be a reasonable estimate and, if requested
by the Tenant, shall be accompanied by reasonable particulars of
the manner in which it was calculated. The Additional Rent
payable by the Tenant shall be paid in equal monthly installments
in advance at the same time as payment of Basic Rent is due
hereunder based on the Landlord's estimate as aforesaid. From
time to time, the Landlord may re-estimate, on a reasonable
basis, the amount of Additional Rent for any Fiscal Period or
broken portion thereof, in which case the Landlord shall advise
the Tenant in writing of such re-estimate and fix new equal
monthly installments for the remaining balance of such Fiscal
Period or broken portion thereof. After the end of each such
Fiscal Period or broken portion thereof the Landlord shall submit
to the Tenant failure or delay by the Tenant. A certificate of
the Landlord as to the date the Leased Premises were ready for
occupancy and such construction as the Landlord is obliged to
complete is substantially completed, or as to the date upon which
the same would have been ready for occupancy and completed
respectively but for the failure or delay of the Tenant, shall be
conclusive and binding on the Tenant and Rent in full shall
accrue and become payable from the date set out in the said
certificate. Not withstanding any delay in occupancy, the
expiration date of this Lease shall remain unchanged.
2
<PAGE>
Accrual of (d) Basic Rent and Additional Rent (herein
Rent collectively called "Rent") shall be considered as accruing from
day to day, and Rent for an irregular period of less than one
year or less than one calendar month shall be apportioned and
adjusted by the Landlord for the Fiscal Periods of the Landlord
in which the tenancy created hereby commences and expires. Where
the calculation of Additional Rent for a period cannot be made
until after the termination of this Lease, the obligation of the
Tenant to pay Additional Rent shall survive the termination
hereof and Additional Rent for such period shall be payable by
the Tenant upon demand by the Landlord. If the Term commences or
expires on any day other than the first or the last day of a
month, Rent for such fraction of a month shall be apportioned and
adjusted as aforesaid and paid by the Tenant on the commencement
date of the Term.
Recovery of (e) Rent and any other amounts required to be paid by
Rent the Tenant to the Landlord under this Lease shall be deemed to be
and be treated as rent and payable and recoverable as rent, and
the Landlord shall have all rights against the Tenant for default
in any payment of rent and other amounts as in the case of
arrears in rent.
Limitations (f) The information set out in statements, documents or
other writings setting out the amount of Additional Rent
submitted to the Tenant under or pursuant to this Lease shall be
binding on the Tenant and deemed to be accepted by it and shall
not be subject to amendment for any reason unless the Tenant
gives written notice to the Landlord within sixty (60) days of
the Landlord's submission of such statement, document or other
writing identifying the statement, document, or writing and
setting out in reasonable detail the reason why such statement,
document, or writing should not be binding on the Tenant.
4. SECURITY DEPOSIT
Security The Landlord shall recognize the tenant's security Deposit
Deposit deposit upon execution of this Lease by the Tenant for the sum of
Fifteen thousand nine hundred sixty four dollars and 00/100
($15,964.00) as a deposit to the Landlord to stand as security
for the payment by the Tenant of any and all present and future
debts and liabilities of the Tenant to the Landlord and for the
performance by the Tenant of all of its obligations arising under
or in connection with this Lease (the "Debts, Liabilities and
Obligations"). The Landlord shall not be required to keep the
deposit separate from its general funds. In the event of the
Landlord disposing of its interest in this Lease, the Landlord
shall credit the deposit to its successor and thereupon shall
have no liability to the Tenant to repay the security deposit to
the Tenant. Subject to the foregoing and to the Tenant not being
in default under this Lease, the Landlord shall repay the
security deposit to the Tenant without interest at the end of the
Term or sooner termination of the Lease provided that all Debts,
Liabilities and Obligations of the Tenant to the Landlord are
paid and performed in full, failing which the Landlord may on
notice to the Tenant elect to retain the security deposit and to
apply it in reduction of the Debts, Liabilities and Obligations
and the Tenant shall remain fully liable to the Landlord for
payment and performance of the remaining Debts, Liabilities and
Obligation.
5. GENERAL COVENANTS
Landlord's
Covenant (a) The Landlord covenants with the Tenant:
(i) for quiet enjoyment; and
(ii) to observe and perform all the covenants and
obligations of the Landlord herein.
Tenant's
Covenant (a) The Tenant covenants with the Landlord:
(i) to pay Rent; and
(ii) to observe and perform all the covenants and
obligations of the Tenant herein.
6. USE AND OCCUPANCY
Use The Tenant covenants with the Landlord:
(a) not to use the Leased Premises for any purpose other
than an office for the conduct of the Tenant's business which is
general office use.
3
<PAGE>
Waste, (b) not to commit, or permit, any waste, injury
Nuisance, or damage to the Property including the Leasehold Improvements
Etc. and any trade fixture therein, any loading of the floors thereof
in excess of the maximum degree of loading as determined by the
Landlord acting reasonably, any nuisance therein or any use or
manner of use causing annoyance to the other tenants and
occupants of the Property or to the Landlord;
Insurance (c) not to do, omit or permit to be done or omitted to
Risks be done upon the Property anything which would cause to be
increased the Landlord's cost of insurance or the costs of
insurance of another tenant of the Property against perils as to
which the Landlord or such other tenant has insured or which
shall cause any policy of insurance on the Property to be subject
to cancellation;
Compliance (d) to comply at its own expense with all
With Law governmental laws, regulations and requirements pertaining to the
occupation and use of the Leased Premises, the condition of the
Leasehold Improvements, trade fixtures, furniture and equipment
installed by or on behalf of the Tenant therein and the making by
the Tenant of any repairs, changes or improvements therein;
Environmental (e) (i) to conduct and maintain its business Compliances and
operations at the Leased Premises so as to comply in all
respects with common law and with all present and future
applicable federal, provincial/state, local, municipal,
governmental or quasi-governmental laws, by-laws, rules,
regulations, licenses, orders, guidelines, directives,
permits, decisions or requirements, concerning occupational
or public health and safety or the environment and any
order, injunction, judgement, declaration, notice or demand
issued thereunder, ("Environmental Laws").
(ii)not to permit or suffer any substance which is hazardous
or is prohibited. restricted, regulated or controlled under
any Environmental Law to be present at, on or in the Leased
Premises, unless it has received the prior written consent
of the Landlord which consent may be arbitrarily withheld.
Rules &
Regulations (f) to observe and perform, and to cause its employees, invitees
and others over Tenant can be reasonably expected to exercise
control to observe and perform, the Rules and Regulations
contained in Schedule "E" hereto, and such further and other
reasonable rules and regulations and amendments and additions
therein as may hereafter be made by the Landlord and notified in
writing to the Tenant, except that no change or addition may be
made that is inconsistent with this Lease unless as may be
required by governmental regulation or unless the Tenant consents
thereto. The imposition of such Rules and Regulations shall not
create or imply any obligation of the Landlord to enforce them or
create any liability of the Landlord for their non-enforcement or
otherwise.
7. ASSIGNMENT AND SUBLETTING
No Assignment
or Subletting (a) The Tenant covenants that it will not assign this
Lease or sub-let the Leased Premises in whole or in part without
the prior written consent of the Landlord, which consent the
Landlord covenants not to withhold unreasonably (i) and to any
assignee or sub-lessee who is in a satisfactory financial
condition, agrees to use the Leased Premises for those purposes
permitted hereunder, and is otherwise satisfactory to the
Landlord, and (ii) as to any portion of the Leased Premises which,
in the Landlord's sole judgement, is a proper and rational
division of the Leased Premises, subject to the Landlord's right
of termination arising under this paragraph. Without limitation,
the Tenant shall, for the purpose of this paragraph, be considered
to assign or sub-let in any case where it permits the Leased
Premises or any portion thereof to be, or the Leased Premises or
any portion thereof are, occupied by persons other than the
Tenant, its employees and others engaged in carrying on the
business of the Tenant, whether pursuant to assignment,
sub-letting, license or other right- or where any of the foregoing
occurs by operation of law.
4
<PAGE>
Assignment or
Subletting
Procedures (b) The Tenant shall not assign this Lease or sub-let the
unless: whole or an part of the Leased Premises
(i) it shall have received or procured a bona fide written
offer to take an assignment or sub-lease which is consistent
with this Lease, and the acceptance of which would not
breach any provisions of this Lease if this paragraph is
complied with and which the Tenant has determined to accept
subject to this paragraph complied with, and
(ii) it shall have first requested and obtained the consent
in writing of the Landlord thereto. Any request for consent
shall be in writing and accompanied by a copy of the offer
certified by the Tenant to be true and complete, and the
Tenant shall furnish to the Landlord all information
available to the Tenant and requested by the Landlord as to
the responsibility, financial standing and business of the
proposed assignee or sub-tenant. Notwithstanding the
provisions of sub-paragraph (a), within twenty (20) days
after the receipt by the Landlord of such request for
consent and of all information which the Landlord shall have
requested hereunder, the Landlord shall have the right upon
written notice of termination submitted to the Tenant, if
the request is to assign this Lease or sub-let the whole of
the Leased Premises, to cancel and terminate this Lease, or
if the request is to sub-let a part of Leased Premises only,
to cancel and terminate this Lease with respect to such
part, in each case as of a termination date to be stipulated
in the notice of termination which shall not be less than
sixty (60) days or more than ninety (90) days following the
giving of such notice. In such event the Tenant shall
surrender the whole or part, as the case may be, of the
Leased Premises in accordance with such notice of
termination and Basic Rent and Additional Rent shall be
apportioned and paid to the date of surrender and, if a part
only of the Leased Premises is surrendered, Basic Rent and
Additional Rent shall, after the date of surrender, abate
proportionally. If such consent shall be given the Tenant
shall assign or sub-let, as the case may be, only upon the
terms set out in the offer submitted to the Landlord as
aforesaid and not otherwise.
Assumption (c) No assignment or sub-letting of this Lease
of shall be effective unless the assignee or sublessee shall execute
Obligations an assumption agreement on the Landlord's form, assuming all the
obligations of the Tenant hereunder, and shall pay to the Landlord
its reasonable fee for processing the assignment or subletting.
Tenants
Continuing
Obligations (d) The Tenant agrees that any consent to an assignment
Lease or sub-letting of this Lease or Leased Premises, shall not thereby
release the Tenant of its obligations hereunder.
8. REPAIR & DAMAGE
Landlord's Repairs
to Building &
Property (a) The Landlord covenants with the Tenant to keep in a good and
state reasonable state of repair and decoration:
(i) those portions of the Property consisting of the
entrance, lobbies, stairways, corridors, landscaped areas,
parking areas, and other facilities from time to time
provided for use in common by the Tenant and other tenants
of the Building or Property, and the exterior portions
(including foundations and roofs) of all buildings and
structures from time to time forming part of the Property
and affecting its general appearance;
(ii) the Building (other than the Leased Premises and
premises of other tenants) including the systems for
interior climate control, the elevators and escalators (if
any), entrances, lobbies, stairways corridors and washrooms
from time to time provided for use in common by the Tenant
and other tenants of the Building or
5
<PAGE>
Property and the systems provided for use in common by the
Tenant and other tenants of the Building or Property and the
systems as provided for bringing utilities to the Leased
Premises.
(b) The Landlord covenants with the Tenant to repair, so far as
reasonably feasible, and as expeditiously as reasonably feasible,
defects in standard demising walls or in structural elements,
exterior walls of the Building, suspended ceiling, electrical and
mechanical installation standard to the building installed by the
Landlord in the Leased Premises (if and to the extent that such
defects are sufficient to impair the Tenants use of the Leased
Premises while using them in a manner consistent with this Lease)
and "Insured Damage" (as herein defined). The Landlord shall in no
event be required to make repairs to Leasehold Improvements made
by the Tenant, or by the Landlord on behalf of the Tenant or
another tenant or to make repairs to wear and tear within the
Leased Premises.
Tenant's (c) The Tenant covenants with the Landlord to repair,
Repairs maintain and keep at the Tenants own costs, except insofar as the
obligation to repair rests upon the Landlord pursuant to this
paragraph, the Leased Premises, including Leasehold Improvements
in good and substantial repair, reasonable wear and tear excepted,
provided that this obligation shall not extend to structural
elements or to exterior glass or to repairs which the Landlord
would be required to make under this paragraph but for the
exclusion therefrom of defects not sufficient to impair the
Tenants use of the Leased Premises while using them in a manner
consistent with this Lease. The Landlord may enter the Leased
Premises at all reasonable times and view the condition thereof
and the Tenant covenants with the Landlord to repair, maintain and
keep the Leased Premises in good and substantial repair according
to notice in writing, reasonable wear and tear excepted. If the
Tenant shall fail to repair as aforesaid after reasonable notice
to do so, the Landlord may effect the repairs and the Tenant shall
pay the reasonable cost thereof to the Landlord on demand. The
Tenant covenants with the Landlord that the Tenant will at the
expiration of the Term or sooner termination thereof peaceably
surrender the Leased Premises and appurtenances in good and
substantial repair and condition, reasonable wear and tear
excepted.
Indemnification
(d) If any part of the Property becomes out of repair, damaged
or destroyed through the negligence of, or misuse by, the Tenant
or its employees, agents, invitees or others under its control,
the Tenant shall pay the Landlord on demand the expense of repairs
or replacements, including the Landlord's reasonable
administration charge thereof, necessitated by such negligence or
misuse.
Damage &
Destruction (e) It is agreed between the Landlord and the Tenant that:
(i) In the event of damage to the Property or to any part
thereof, if the damage is such that the Leased Premises or
any substantial part thereof is rendered not reasonably
capable of use and occupancy by the Tenant for the purposes
of its business for any period of time in excess of ten (10)
days, then (ii) (1) unless the damage was caused by the
fault or negligence of the Tenant or its employees, agents,
invitees or others under its control, from the date of
occurrence of the damage and until the Leased Premises are
again reasonably capable for use and occupancy as aforesaid,
the Rent payable pursuant to this Lease shall abate from
time to time in proportion to the part or parts of the
Leased Premises not reasonably capable of such use and
occupancy, and (2) unless this Lease is terminated as
hereinafter provided, the Landlord or the Tenant as the case
may be (according to the nature of the damage and their
respective obligations to repair as provided in
subparagraphs (a), (b) and (c) of this paragraph) shall
repair such damage with all reasonable diligence, but to the
extent that any part of the Leased Premises is not
reasonably capable of such use and occupancy by reason of
damage which the Tenant is obligated to repair hereunder,
any abatement of Rent to which the Tenant would otherwise be
entitled hereunder shall not extend later than the time by
which, in the reasonable opinion of the Landlord, repairs by
the Tenant ought to have been completed with reasonable
diligence, and
6
<PAGE>
(iii) if the Leased Premises are substantially damaged or
destroyed by any cause and if in the reasonable opinion of
the Landlord given in writing within thirty (30) days of the
occurrence the damage cannot reasonably be repaired within
one hundred and eighty (180) days after the occurrence
thereof, then the Lease shall terminate, in which event
neither the Landlord nor the Tenant shall be bound to repair
as provided in sub-paragraphs (a), (b) and (c) of this
paragraph, and the Tenant shall instead deliver up
possession of the Leased Premises to the Landlord with
reasonable expedition and Rent shall be apportioned and paid
to the date of the occurrence; and (iv) if premises, whether
of the Tenant, or other tenants of the Property comprising
in the aggregate half or more of the total number of square
feet of rentable office area in the Property on half or more
of the total number of square feet of rentable office area
in the Building (as determined by the Landlord) or portions
of the Property which affect access of services essential
thereto, are substantially damaged or destroyed by any cause
and if in the reasonable opinion of the Landlord the damage
cannot reasonably be repaired within one hundred and eighty
(180) days after the occurrence thereof, then the Landlord
may, by written notice to the Tenant given within thirty
(30) days after the occurrence of such damage or
destruction, terminate this Lease, in which event neither
the Landlord nor the Tenant shall be bound to repair as
provided in sub-paragraphs (a), (b) and (c) of this
paragraph, and the Tenant shall instead deliver up
possession of the Leased Premises to the Landlord with
reasonable expedition but in any event within sixty (60)
days after deliver of such notice of termination, and Rent
shall be apportioned and paid to the date upon which
possession is so delivered up (but subject to any abatement
to which the Tenant may be entitled under sub-paragraph (e)
(i) of this paragraph).
9. INSURANCE AND LIABILITY
Landlord's
Insurance (a) The Landlord shall take out and keep in force during the Term
insurance with respect to the Property including the "Leasehold
Improvements" (as hereinafter defined) in the Leased Premises. The
insurance to be maintained by the Landlord shall be in respect of
perils and to amounts and on terms and conditions which from time
to time are insurable at a reasonable premium and which are
normally insured by reasonable prudent buyers of properties
similar to the Property, all as from time to time determined at
reasonable intervals by insurance advisors selected by the
Landlord, and whose opinion shall be conclusive. Unless and until
the insurance advisors shall state that any such perils are not
customarily insured against by owners of properties similar to the
Property, the perils to be insured against by the Landlord shall
include, without limitation, public liability, boilers and
machinery, fire and extended perils and may include, at the option
of the Landlord, losses suffered by the Landlord in its capacity
as Landlord through business interruption. The insurance to be
maintained by the Landlord shall contain a waiver by the insurer
of any rights of subrogation or indemnity or any other claim over
which the insurer might otherwise be entitled against the Tenant
or the agents or employees of the Tenant.
Tenant's (b) The Tenant shall take out and keep in force during theTerm:
Insurance (i) comprehensive general commercial liability insurance all
on an occurrence basis with respect to the business carried
on in or from the Leased Premises and the Tenant's use and
occupancy of the Leased Premises and of any other part of
the Property, with coverage for any one occurrence or claim
of not less than One Million Dollars ($1,000,000) or such
other amount as the Landlord may reasonably require upon not
less than one (1) month notice at any time during the Term,
which insurance shall include the Landlord as an additional
insured and shall protect the Landlord in respect of claims
by the Tenant as if the Landlord were separately insured;
(ii) insurance in respect of fire and such other perils as
are from time to time in the usual extended coverage
endorsement covering the Leasehold Improvements, trade
fixtures, and the furniture and equipment in the Leased
Premises for not less than 80% of the full replacement cost
thereof,
(iii) insurance against such other perils and in such
amounts as the Landlord may
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from time to time reasonably require upon not less than
ninety (90) days written notice, such requirement to be made
on the basis that the required insurance is customary at the
time for prudent tenants of properties similar to the
Property. All insurance required to be maintained by the
Tenant shall be on terms and with insurers satisfactory to
the Landlord. Each policy shall contain a waiver by the
insurer of any rights of subrogation or indemnity or any
other claim over to which the insurer might otherwise be
entitled against the Landlord or the agents or employees of
the Landlord, and shall also contain an undertaking by the
insurer that no material change adverse to the Landlord or
the Tenant will be made, and the policy will not lapse to be
canceled, except after not less than thirty (30) days'
written notice to the Landlord of the intended change, lapse
or cancellation. The Tenant shall furnish to the Landlord,
if and whenever requested by it, certificates or other
evidence acceptable to the Landlord as to the insurance from
time to time effected by the Tenant and if renewal or
continuation in force, together with evidence as to the
method of determination of full replacement cost of the
Tenants Leasehold Improvements, trade fixtures, furniture
and equipment, and if the Landlord reasonably concludes that
the full replacement cost has been underestimated, the
Tenant shall forthwith arrange for any consequent increase
in coverage required under sub-paragraph (b). If the Tenant
shall fail to take out, renew and keep in force such
insurance, or if the evidences submitted to the Landlord are
unacceptable to the Landlord (or no such evidences are
submitted within a reasonable period after request therefor
by the Landlord), then the Landlord may give to the Tenant
written notice requiring compliance with this subparagraph
and specifying the respects in which the Tenant is not then
in compliance with this sub-paragraph. If the Tenant does
not within forty-eight (48) hours provide appropriate
evidence of compliance with this sub-paragraph, the Landlord
may (but shall not be obligated to) obtain some or all of
the additional coverage or other insurance which the Tenant
shall have failed to obtain, without prejudice to any other
rights of the Landlord under this Lease or otherwise, and
the Tenant shall pay all premiums and other reasonable
expenses incurred by the Landlord to the Landlord on demand.
Limitation of
Landlord's
Liability (c) The Tenant agrees that the Landlord shall not be liable for
any bodily injury or death of, or loss or damage to any property
belonging to, the Tenant or its employees, invitees or licensees
or any other person in, on or about the Property unless resulting
from the actual willful misconduct or gross negligence of the
Landlord or its own employees. In no event shall the Landlord be
liable for any damage which is caused by steam, water, rain or
snow or other thing which may leak into, issue or flow from any
part of the Property or from the pipes or plumbing works,
including the sprinkler system (if any) therein or from any other
place or for any damage caused by or attributable to the condition
or arrangement of any electric or other wiring or of sprinkler
heads (if any) or for any damage caused by anything done or
omitted by any other tenant.
Indemnity of
Landlord (d) Except with respect to claims or liabilities in respect of any
damage which is Insured Damage to the extent of the cost of
repairing such Insured Damage, each party agrees to indemnify and
save harmless the other party in respect of:
(i) all claims for bodily injury or death, property damage
or other loss or damage arising from the conduct of any work
or any act or omission of the other party or any assignee,
sub-tenant, agent, employee, contractor, invitee or licensee
of the other party and in respect of all costs, expenses and
liabilities incurred by the other party in connection with
or arising out of all such claims, including the expenses of
any action or proceeding pertaining thereto; and (ii) any
loss, cost, (including, without limitation, lawyers' fees
and disbursements), expense or damage suffered by the other
party arising from any breach by the other party of any of
its covenants and obligations under this Lease.
Definition of
"Insured
Damaged" (e) For purpose of this Lease, "Insured Damage" means that part of
any damage occurring to the Property of which the entire cost of
repair (or the entire cost of repair other than a deductible
amount properly collectable by the Landlord as part of the
Additional Rent) is actually recovered
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by the Landlord under a policy or policies of insurance from time
to time effected by the Landlord pursuant to sub-paragraph (a).
Where an applicable policy of insurance contains an exclusion for
damages recoverable from a third party, claims as to which the
exclusion applies shall be considered to constitute Insured Damage
only if the Landlord successfully recovers from the third party.
10. EVENTS OF DEFAULT AND REMEDIES
Events of
Default &
Remedies (a) In the event of the happening of any one of the following
events:
(i) the Tenant shall have failed to pay an installment of
Basic Rent or of Additional Rent or any other amount payable
hereunder when due, and such failure shall be continuing for
a period of more than ten (10) days after the date such
installment or amount was due; (ii) there shall be a default
of or with any condition, covenant, agreement or other
obligation on the part of the Tenant to be kept, observed or
performed hereunder (other than a condition, covenant,
agreement or other obligation to pay Basic Rent, Additional
Rent or any other amount of money) and such default shall be
continuing for a period of more than fifteen (15) days after
written notice by the Landlord to the Tenant specifying the
default and requiring that it discontinue; (iii) if any
policy of insurance upon the Property or any part thereof
from time to time effected by the Landlord shall be canceled
or about to be canceled by the insurer by reason of the use
or occupation of the Leased Premises by the Tenant or any
assignee, sub-tenant or licensee of the Tenant or anyone
permitted by the Tenant to be upon the Leased Premises and
the Tenant after receipt of notice in writing from the
Landlord shall have failed to take such immediate steps in
respect of such use or occupation as shall enable the
Landlord to reinstate or avoid cancellation (as the case may
be) of such policy of insurance, (iv) the Leased Premises
shall, without the prior written consent of the Landlord, be
used by any other persons than the Tenant or its permitted
assigns or sub-tenants or for any purpose other than that
for which they were leased or occupied or by an persons
whose occupancy is prohibited by this Lease, (v) the Leased
Premises shall be vacated or abandoned, or remain unoccupied
without the prior written consent of the Landlord for
fifteen (15) consecutive days or more while capable of being
occupied, (vi) the balance of the Term of this Lease shall
at anytime be seized m execution or attachment, or (vii) the
Tenant shall make any assignment for the benefit of
creditors or become bankrupt or insolvent or take the
benefit of any statute for bankrupt or insolvent debtors or,
if a corporation, shall take any steps or suffer any order
to be made for its winding-up or other termination of its
corporate existence; or a trustee, receiver or
receiver-manager or agent or other like person shall be
appointed of any of the assets of the Tenant.
(b) The Landlord shall have the following rights and remedies all
of which are cumulative and not alternative and not to the
exclusion of any other or additional rights and remedies in law or
equity available to the Landlord by statute or otherwise.
(i) to remedy or attempt to remedy any default of the
Tenant, and in doing so to make any payments due or alleged
to be due by the Tenant to third parties and to enter upon
the Leased Premises to do any work or other thing therein,
and in such event all reasonable expenses of the Landlord in
remedying or attempting to remedy such default shall be
payable by the Tenant to the Landlord on demand;
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(ii) with respect to unpaid overdue rent, to the payment by
the Tenant of theRent and of interest (which said interest
shall be deemed included herein in the term "Rent") thereon
at a rate equal to ten percent (10%) of the total unpaid
amount each month until paid in full; (iii) to terminate
this Lease forthwith with thirty (30) days written notice to
Tenant. In the event that Landlord shall elect to terminate
this Lease then Landlord may recover from Tenant:
(1) the worth at the time of award of any unpaid
rent which had been earned at the time of such
termination; plus
(2) the worth at the time of award of the amount
by which the unpaid rent which would have been
earned after termination until the time of award
exceeds the amount of such rental loss that tenant
proves could have been reasonably avoided; plus
(3) the worth at the time of award of the amount
by which the unpaid rent for the balance of the
term after the time of award exceeds the amount of
such rental loss that Tenant proves could be
reasonably avoided; plus (4) any other amount
necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure
to perform the Tenant obligations under this Lease
or which in the ordinary course of things would be
likely to result therefrom. As used in
sub-paragraphs 10(c(i) and (ii) above, the "worth
at the time of award" is computed by allowing
interest at the maximum rate permitted by law per
annum. As used in sub-paragraph 10(c)(iii) above,
the "worth at the time of award" is computed by
discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).
(iv) to maintain Tenant's rights to possession and continue
said Lease in full force and effect, whether or not Tenant
shall have abandoned the Leased Premises. In such event,
Landlord shall be entitled to enforce all of its rights and
remedies under this Lease, including the right to recover
Rent as it becomes due under the terms of the Lease.
(c) The Tenant shall pay to the Landlord on demand all costs and
expenses, including actual lawyers' fees and costs incurred by the
Landlord in enforcing any of the obligations of the Tenant under
this Lease.
ADDITIONAL PROVISIONS
Relocation of
Leased
Premises 11. Eliminated in its entirety.
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Subordination &
Attornment 12. This Lease and all rights of the Tenant hereunder are subject
and subordinate to all underlying leases and charges, or mortgages
now or hereafter existing (including charges, and mortgages by way
of debenture, note, bond, deeds of trust and mortgage and all
instruments supplemental thereto) which may now or hereafter
affect the Property or any part thereof and to all renewal,
modifications, considerations, replacements and extensions thereof
provided the lessor, chargee, mortgagee, or trustee agrees to
accept this Lease if not in default; and in recognition of the
foregoing the Tenant agrees that it will, whenever requested,
attorn to such lessor, chargee, mortgagee as a tenant upon all the
terms of this Lease. The Tenant agrees to execute promptly
whenever requested by the Landlord or by the holder of any such
lease, charge, or mortgage an instrument of subordination or
attornment, as the case may be as may be required of it.
Certificates 13. The Tenant agrees that it shall promptly whenever requested by
the Landlord from time to time execute and deliver to the
Landlord, and if required by the Landlord, to any lessor, chargee
or mortgagee (including any trustee) or other person designated by
the Landlord, an acknowledgement in writing as to the then status
of this Lease, including as to whether it is in full force and
effect, is modified or unmodified, confirming the Basic Rent and
Additional Rent payable hereunder and the state of accounts
between Landlord and the Tenant, the existence or non-existence of
defaults, and any other matters pertaining to this Lease as to
which the Landlord shall request an acknowledgement.
Inspection of
& Access to
Leased
Premises 14. The Landlord shall be permitted at any time, and from
time to time, to enter and to have its authorized agents,
employees and contractors enter the Leased Premises for the
purposes of inspection, window cleaning, maintenance, providing
janitor service, making repairs, alterations or improvements to
the Leased Premises or the Property, or to have access to
utilities and services (including all ducts and access panels (if
any), which the Tenant agrees not to obstruct) and the Tenant
shall provide free and unhampered access for the purpose, and
shall not be entitled to compensation for any inconvenience,
nuisance or discomfort caused thereby. The Landlord and its
authorized agents and employees shall be permitted entry to the
Leased Premises for the purpose of exhibiting them to prospective
tenants. The Landlord in exercising its rights under this
paragraph shall do so to the extent reasonably necessary so as to
minimize interference with the Tenant's use and enjoyment of the
Leased Premises provided that in an emergency the Landlord or
persons authorized by it may enter the Leased Premises without
regard to minimizing interference.
Delay 15. Except as herein otherwise expressly provided, if and whenever
and to the extent that either the Landlord or the Tenant shall be
prevented, delayed or restricted in the fulfillment of any
obligation
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hereunder in respect of the supply or provision of any service or
utility, the making of any repair, the doing of any work or any
other thing (other than the payment of monies required to be paid
by the Tenant to the Landlord hereunder) by reason of:
(a) strikes or work stoppages;
(b) being unable to obtain any material, service, utility or
labor required to fulfill such obligation;
(c) any statute, law or regulation of, or inability to
obtain any permission from any government authority having
lawful jurisdiction preventing, delaying or restricting such
fulfillment;
(d) other unavoidable occurrence,
(e) the time for fulfillment of such obligation shall be
extended during the period in which such circumstance
operates to prevent, delay or restrict the fulfillment
thereof, and the other party to this Lease shall not be
entitled to compensation for any inconvenience, nuisance or
discomfort thereby occasion; provided that nevertheless the
Landlord will use its best efforts to maintain services
essential to the use and enjoyment of the Leased Premises
and provided further that if the Landlord shall be
prevented, delayed or restricted in the fulfillment of any
such lease of any such obligation hereunder by reason of any
of the circumstances set out in sub-paragraph (c) of this
paragraph 15 and to fulfill such obligation could not, in
the reasonable opinion of the Landlord, be completed without
substantial additions to or renovations of the Property, the
Landlord may on sixty (60) days' written notice to the
Tenant terminate this Lease.
Waiver 16. If either the Landlord or the Tenant shall overlook, excuse,
condone or suffer any default, breach, non-observance, improper
compliance or non-compliance by the other of any obligation
hereunder, this shall not operate as a waiver of such obligation
in respect of any continuing or subsequent default, breach, or
non-observance, and no such waiver shall be implied but shall only
be effective if expressed in writing.
Sale,
Demolition &
Renovation 17.
(a) The term "Landlord" as used in this Lease, means only
the owner for the time being of the Property, so that in the
event of any sale or sales or transfer or transfers of the
Property, or the making of any lease or leases thereof, or
the sale or sales or the transfer or transfers or the
assignment or assignments of any such lease or leases,
previous landlords shall be and hereby are relieved of all
covenants and obligations of Landlord hereunder. It shall be
deemed and construed without further agreement between the
parties, or their successors in interest, or between the
parties and the transferee or acquirer, at any such sale,
transfer or assignment, or lessee on the making of any such
lease, that the transferee, acquirer or lessee has assumed
and agreed to carry out any and all of the covenants and
obligations of Landlord hereunder to Landlord's exoneration,
and Tenant shall thereafter be bound to and shall attorn to
such transferee, acquirer or lessee, as the case may be, as
Landlord under this Lease;
(b)Notwithstanding anything contained in this Lease to the
contrary, in the event the Landlord intends to demolish or
to renovate substantially all the Building, then the
Landlord, upon giving the Tenant one hundred and eighty
(180) days' written notice, shall have the right to
terminate this Lease and this Lease shall thereupon expire
on the expiration of one hundred and eighty (180) days from
the date of the giving of such notice without compensation
of any kind to the Tenant.
Public
Taking 18. The Landlord and Tenant shall co-operate, each with the other,
in respect of any Public Taking of the Leased Premises or any part
thereof so that the Tenant may receive the maximum award to which
it is entitled in law for relocation costs and business
interruption and so that the Landlord may receive the maximum
award for all other compensation arising from or relating to such
Public Taking (including all compensation for the value of the
Tenant's leasehold interest subject to the Public Taking) which
shall be the property of the Landlord. and the Tenant's rights to
such compensation are hereby assigned to the
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Landlord. If the whole or any part of the Leased Premises is
Publicly Taken, as between the parties hereto, their respective
rights and obligations under this Lease shall continue until the
day on which the Public Taking authority takes possession
therefore. If the whole or any part of the Leased Premises is
Publicly Taken, the Landlord shall have the option, to be
exercised by written notice to the Tenant, to terminate this Lease
and such termination shall be effective on the day the Public
Taking authority takes possession of the whole or the portion of
the Property Publicly Taken. Rent and all other payments shall be
adjusted as of the date of such termination and the Tenant shall,
on the date of such Public taking, vacate the Leased Premises and
surrender the same to the Landlord, with the Landlord having the
right to re-enter and re-possess the Lease Premises discharged of
this Lease and to remove all persons therefrom. In this paragraph,
the words "Public Taking" shall include expropriation and
condemnation and shall include a sale by the Landlord to any
authority with powers of expropriation, condemnation or taking, in
lieu of or under threat of expropriation or taking and "Publicly
Taken" shall have a corresponding meaning.
Registration
of Lease 19. The Tenant agrees with the Landlord not to register this
Lease in any recording office and not to register notice of this
Lease in any form without the prior written consent of the
Landlord. If such consent is provided such notice of Lease or
caveat shall be in such form as the Landlord shall have approved
and upon payment of the Landlord's reasonable fee for same and all
applicable transfer or recording taxes or charges. The Tenant
shall remove and discharge at Tenant's expense registration of
such a notice or caveat at the expiration or earlier termination
of the Term, and in the event of Tenant's failure to so remove or
discharge such notice or caveat after ten (10) days' written
notice by Landlord to Tenant, the Landlord may in the name and on
behalf of the Tenant execute a discharge of such a notice or
caveat in order to remove and discharge such notice of caveat and
for the purpose thereof the Tenant hereby irrevocably constitutes
and appoints any officer of the Landlord the true and lawful
attorney of the Tenant.
Entire Lease
Agreement
20. The Tenant acknowledges that there are no covenants,
representation, warranties, agreements or conditions express
or implied, collateral, or otherwise forming part of or in any
way affecting or relating to this Lease save as expressly set
out in this Lease and Schedules attached hereto and that this
Lease and such Schedules constitute the entire agreement
between the Landlord and the Tenant and may not be modified
except as herein explicitly provided or except by agreement in
writing executed by the Landlord and the Tenant.
Notices 21. Any notice, advice, document or writing required or
contemplated by any provision hereof shall be given in writing and
if to the Landlord, either delivered personally to an officer of
the Landlord or mailed by prepaid mail addressed to the Landlord
at the said local office address of the Landlord shown above, and
if to the Tenant, either delivered personally to the Tenant (or to
an officer of the Tenant, if a corporation) or mailed by prepaid
mail addressed to the Tenant at the Leased Premises, or if an
address of the Tenant is shown in the description of the Tenant
above, to such address. Every such notice, advise, document or
writing shall be deemed to have been given when delivered
personally, or if mailed as aforesaid, upon the fifth day after
being mailed. The Landlord may from time to time by notice in
writing to the Tenant designate another address as the address to
which notices are to be mailed to it, or specify with greater
particularity the address and persons to which such notices are to
be mailed and may require that copies of notices be sent to an
agent designated by it. The Tenant may, if an address of the
Tenant is shown in the description of the Tenant above, from time
to time by notice in writing to the Landlord, designate another
address as the address to which notices are to be mailed to it, or
specify with greater particularity the address to which such
notices are to be mailed.
Interpretation
22. In this Agreement "herein," "hereof," "hereby," "hereunder,"
"hereto," "hereinafter" and similar expressions refer to this
Lease and not to any particular paragraph, clause or other portion
thereof, unless there is something in the subject matter or
context inconsistent therewith; and the parties agree that all of
the provisions of this Lease are to be construed as covenants and
agreements as though words importing such covenants and agreements
were used in each separate paragraph hereof, and that should any
provision or provisions of this Lease be illegal or not
enforceable it or they shall be considered separate and severable
from the Lease and its remaining provisions shall remain in force
and be binding upon the parties hereto as though the said
provision or provisions had never been included, and further, that
the captions appearing for the provisions 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
or any provision hereof.
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Extent of
Lease
Obligation 23. This Agreement and everything herein contained shall inure to
the benefit of and be binding the receptive heirs, executors,
administrators, successors, assigns and other legal
representatives, as the case may be, of each and every of the
parties hereto, subject to the granting of consent by the Landlord
to any assignment or sublease, and every reference herein to any
party hereto shall include the heirs, executors, administrators,
successors, assigns and other legal representatives of such party,
and where there is more than one tenant or there is a male or
female party the provision hereof shall be read with all
grammatical changes thereby rendered necessary and all covenants
shall be deemed joint and several.
Prior Use &
Occupancy Prior
to Term 24. If the Tenant shall for any reason use or occupy the
Leased Premises in any way prior to the commencement of the Term
without there being an existing lease between the Landlord and
Tenant under which the Tenant has occupied the Leased Premises,
then during such prior use or occupancy, the Tenant shall be a
Tenant of the Landlord and shall be subject to the same covenants
and agreements in this Lease mutatis mutandis.
Schedules 25. The provisions of the following Schedules attached hereto
shall form part of this Lease as if the same were embodied herein:
Schedule "A" - Legal Description of Lands
Schedule "B" - Outline of Leased Premises
Schedule "C" - Taxes payable by Landlord and Tenant
Schedule "D" - Services and Costs
Schedule "E" - Rules and Regulations
Schedule "F" - Leasehold Improvements
Schedule "G" - Basic Rent
Schedule "H" - Space Plan
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
LANDLORD: TENANT
The Provider Fund StarBase Corporation
.
By Signature: /s/ Debra Wodarck By Signature: /s/ Robert W. Leimena
----------------- ---------------------
Title: Director of Operations Title: Chief Financial Officer
<PAGE>
SCHEDULE "A"
(Legal Description of Property)
THE LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE, CITY OF IRVINE
AND DESCRIBED AS FOLLOWS:
PARCEL 1 AS SHOWN ON MAP 78-0144 THEREOF FILED IN BOOK 116, PAGE 9 OF PARCEL
MAPS, RECORDS OF SAID ORANGE COUNTY, CALIFORNIA.
<PAGE>
SCHEDULE "B"
(Floor Plan)
<PAGE>
SCHEDULE "C"
Taxes Payable by Landlord and Tenant
1.
Tenant's Taxes
(a) The Tenant covenants to pay all Tenant's Taxes, as and
when the same becomes due and payable. Where any Tenant's
Taxes are payable by the Landlord to the relevant taxing
authorities, the Tenant covenants to pay the amount thereof to
the Landlord.
(b) The Tenant covenants to pay the Landlord the Tenant's
Proportionate Share of the excess of the amount of the
Landlord's Taxes in each Fiscal Period over the Landlord's
Taxes in the "Base Year" (as hereinafter defined).
(c) The Tenant covenants to pay to the Landlord the Tenant's
Proportionate Share of the costs and expenses (including
legal and other professional fees and interest and
penalties on deferred payments) incurred in good faith by
the Landlord in contesting, resisting or appealing any of
the Taxes.
Landlord's Taxes
(d) The Landlord covenants to pay all Landlord's Taxes subject
to the account of Landlord's Taxes required to be made by the
Tenant elsewhere in this Lease. The Landlord may appeal any
official assessment or the amount of any Taxes or other taxes
based on such assessment and relating to the Property. In
connection with any such appeal, the Landlord may defer
payment of any Taxes or other taxes, as the case may be,
payable by it to the extent permitted by law, and the Tenant
shall co-operate with the Landlord and provide the Landlord
with all relevant information reasonably required by the
Landlord in connection with any such appeal.
Separate Allocation
(e) In the event that the Landlord is unable to obtain from
the taxing authorities any separate allocation of Landlord's
Taxes, Tenant's Taxes or assessment as required by the
Landlord to make calculations of Additional Rent under this
Lease, such allocation shall be made by the Landlord acting
reasonably and shall be conclusive.
Information
(f) Whenever requested by the Landlord, the Tenant shall
deliver to it receipts for payment of all the Tenant's Taxes
and furnish such other information in connection therewith as
the Landlord may reasonably require.
Tax Adjustment
(g) If the Building has not been taxed as a completed and
fully occupied building for and Fiscal Period, the Landlord's
Taxes will be determined by the Landlord as if the Building
had been taxed as a completed and fully occupied building for
any such Fiscal Period.
Definition
2. In this Lease:
(a) "Landlord Taxes" shall mean the aggregate of all Taxes
attributed to the Property, the Rent or the Landlord in
respect thereof and including, without limitation, any amounts
imposed, assessed, levied or charged in substitution for or in
lieu of any such Taxes, but excluding such taxes as capital
gains taxes, corporate income, profit or excess profit taxes
to the extent such taxes are not levied in lieu of any of the
foregoing against the Property or the Landlord in respect
thereof.
(b) "Taxes" shall mean all taxes, rates, duties, levies, fees,
charges, local improvement rates, capital taxes, rental taxes
and assessments whatsoever including fees, rents, and levies
for air rights and encroachments on or over municipal property
imposed, assessed, levied or charged by any school, municipal,
regional, state, provincial, federal, parliamentary, or other
body, corporation, authority, agency or commission provided
that any such local improvement rates, assessed and paid prior
to or in the Base Year shall be excluded from the Base Year
and any year during the Term and
C - 1
<PAGE>
provided further that "Taxes" shall not include any special
utility, levies, fees or charges imposed, assessed, levied or
charged which are directly associated with initial
construction of the Property.
(c) "Tenant's Taxes" shall mean the aggregate of:
(i) all Taxes (whether imposed upon the
Landlord or the Tenant) attributable to
the personal property, trade fixtures,
business, income, occupancy, or sales of
the Tenant or any other occupant of the
Leased Premises, and to any Leasehold
Improvements or fixtures installed by or
on behalf of the Tenant within the
Leased Premises, and to the use by the
Tenant of any of the Property; and
(ii) the amount by which Taxes (whether
imposed upon the Landlord or the Tenant)
are increased above the Taxes which
would have otherwise been payable as a
result of the Leased Premises or the
Tenant or any other occupant of the
Leased Premises being taxed or assessed
in support of separate schools.
(d) "Tenant's Proportionate Share" shall mean 26% subject to
adjustment as determined solely by the Landlord and notified
to the Tenant in writing for physical increases or decreases
in the total rentable area of the Property provided that total
rentable area of the Property and the rentable area of the
Leased Premises shall exclude areas designated (whether or not
rented) for parking and for storage.
(e) Base Year" as used in this schedule shall mean calendar
year 1997.
C-2
<PAGE>
SCHEDULE "D"
Services and Costs
1. The Landlord covenants with the Tenant:
Interior Climate
Control (a) To maintain in the Leased Premises conditions of
reasonable temperature and comfort in accordance with good
standards applicable to normal occupancy of premises for
office purposes subject to governmental regulations during
hours to be determined by the Landlord (but to be at least
the hours from 8:00 a.m. to 6:00 p.m. from Monday to Friday
inclusive with the exception of holidays, Saturdays and
Sundays), such conditions to be maintained by means of a
system for heating and cooling, filtering and circulating
air; the Landlord shall have no responsibility for any
inadequacy of performance of the said system if the
occupancy of the Leased Premises or the electrical power or
other energy consumed on the Leased Premises for all
purposes exceeds reasonable amounts as determined by the
Landlord or the Tenant installs partitions or other
installations in locations which interfere with the proper
operations of the system of interior climate control or if
the window covering on exterior windows is not kept fully
closed;
Janitor Service (b) To provide janitor and cleaning services to the
Leased Premises and to common areas of the Building
consisting of reasonable services in accordance with the
standards of similar office buildings;
Elevators,
Lobbies, Etc. (c) To keep available the following facilities for use
by the Tenant and its employees and its employees and
invitees in common with other persons entitled thereto:
(i) passengers and freight elevator service to each
floor upon which the Leased Premises are located
provided such service is installed in the Building
and provided that the Landlord may prescribe the
hours during which and the procedures under which
freight elevator service shall be available and may
limit the number of elevators providing service
outside normal business hours;
(ii) common entrances, lobbies, stairways and
corridors giving access to the Building and the
Leased Premises, including such other areas from time
to time which may be provided by the Landlord for
common use and enjoyment within the Property;
(iii) the washrooms as the Landlord may assign from
time to time which are standard to the Building,
provided that the Landlord and the Tenant
acknowledges that where an entire floor is leased to
the Tenant or some other tenant the Tenant or such
other tenant, as the case may be, may exclude others
from the washroom thereon.
Electricity
2. (a) The Landlord covenants with the Tenant to furnish
electricity to the Leased Premises (except Leased Premises
which have separate meters) for normal office use for
lighting and for office equipment capable of operating from
the circuits available to the Leased Premises and standard
to the Building.
(b) The amount of electricity consumed on the Leased
Premises in excess of electricity required by the Tenant for
normal office use shall be as determined by the Landlord
acting reasonable or by a metering device installed by the
Tenant at the Tenant's expense. The
(c) In calculating electricity costs for any Fiscal Period,
if less than one hundred percent (100%) of Building is
occupied by tenants, then the amount of such electricity
costs shall be deemed for the purpose of this Schedule to be
increased to an amount equal to the like electricity
D - 1
<PAGE>
costs which normally would be expected by the Landlord to
have been incurred had such occupancy been one hundred
percent (100%) during such entire period.
3. The Landlord shall maintain and keep in repair the facilities
required for the provision of the interior climate control,
elevator (if installed in the Building), and other services
referred to in sub-paragraph (a) and (c) of paragraph I and
sub-paragraph (a) of paragraph 2 of this Schedule in accordance
with the standards of office buildings similar to the Building but
reserves the right to stop the use of any of these facilities and
the supply of the corresponding services when necessary by reason
of accident or breakdown or during the making of repairs,
alterations or improvements, in the reasonable judgment of the
Landlord necessary or desirable to be made, until the repairs,
alterations or improvements shall have been completed to the
satisfaction of the Landlord.
Additional
Services 4. (a) The Landlord may (but shall not be obliged) on
request of the Tenant supply services or materials to the Leased
Premises and the Property which are not provided for under this
Lease and which are used by the Tenant (the "Additional Services")
including, without limitation.
(i) replacement of tubes and ballasts;
(ii) carpet shampooing
(iii) drapery cleaning;
(iv) locksmithing;
(v) removal of bulk garbage;
(vi) picture hanging; and
(vii) special security arrangement.
(b) When Additional Services are supplied or furnished by the
Landlord, accounts therefor shall be rendered by the Landlord
and shall be payable by the Tenant to the Landlord on demand.
In the event the Landlord shall elect not to supply or furnish
Additional Services, only persons with prior written approval
by the Landlord ( which approval shall not be unreasonably
withheld) shall be permitted by Landlord or the Tenant to
supply or furnish Additional Services to the Rent and the
supplying and furnishing shall be subject to the reasonable
rules fixed by the Landlord with which the Tenant undertakes
to cause compliance and to comply.
Operating Charges
Payable 5. (a) The Tenant covenants to pay to the Landlord the
Tenant's Proportionate Share of the excess of the amount of
the Operating Costs in each Fiscal Period over the Operating
Costs in the "Base Year" (as hereinafter defined).
(b) In this Lease "Operating Costs" shall mean all costs
incurred in which will be incurred by the Landlord in the
maintenance, operation, administration and management of the
Property including without limitation:
(i) cost of heating, ventilating and
air-conditioning;
(ii) cost of water and sewer charges;
(iii) cost of insurance carried by the
Landlord pursuant to paragraph 9(a) of
this Lease and cost of any deductible
amount paid by the Landlord in connection
with each claim made by the Landlord under
such insurance;
(iv) costs of building office expenses, including
telephone, rent, stationery and supplies;
(v) cost of fuel;
D-2
<PAGE>
(vi) costs of all elevator and escalator (if
installed in the Building) maintenance
and operation;
(vii) costs of operating staff, management staff
and other administrative personnel, including
salaries, wages, and fringe benefits;
(viii) cost of providing security;
(ix) cost of providing janitorial services, windo
cleaning, garbage and snow removal and pest
control;
(x) cost of supplies and materials;
(xi) cost of decoration of common area;
(xii) cost of landscaping;
(xiii cost of maintenance and operation of the
parking areas;
(xiv) cost of consulting, and professional fees
including expenses;
(xv) cost of replacements, additions and
modifications unless otherwise included under
paragraph 6, and cost of repair;
(c) In this Lease there shall be excluded from Operating
Costs the following:
(i) interest of debt and capital retirement of
debt;
(ii) such of the Operating Costs as are recovered
from insurance proceeds; and
(iii) costs as determined by the Landlord of
acquiring tenants for the Property.
6. The Tenant covenants to pay to the Landlord the Tenant's
Proportionate Share of the costs in respect of each Major
Expenditure (as hereinafter defined) as amortized over the period
of the Landlord's reasonable estimate of the economic life of the
Major Expenditure, but not to exceed fifteen (15) years, using
equal monthly installments of principal and interest at ten
percent (10%) per annum compounded semi-annually. For the purposes
hereof, "Major Expenditure" shall mean any expenditure incurred
after the date of substantial completion of the Building for
replacement of machinery, equipment, building elements, systems or
facilities forming a part of or used in connection with the
Property or for modifications, upgrades or additions to the
Property or facilities used in connection therewith, provided
that, in each case, such expenditures is more than ten percent
(10%) of the total Operating Costs of the immediately preceding
Fiscal Period.
7. In calculating Operating Costs for any Fiscal Period including
the Base Year, if less than one hundred percent (100%) of Building
is occupied by tenants, then the amount of such Operating Costs
shall be deemed for the purposes of this Schedule to be increased
to an amount equal to the like Operating Costs which normally
would be expected by the Landlord to have been incurred had such
occupancy been one hundred percent (100%) during such entire
period.
8. In this Lease:
(i) "Tenant's Proportionate Share" shall mean 26%
subject to adjustment as determined solely by the
Landlord and notified to the Tenant in writing for
physical increases or decreases in the total rentable
area of the Property provided that total rentable
area of the Property and the rentable area of the
Leased Premises shall exclude areas designated
(whether or not rented) for parking and for storage.
(ii) "Base Year" shall mean the calendar year 1997.
D-3
<PAGE>
SCHEDULE "E"
Rules and Regulations
1. The sidewalks, entry passages, elevators (if installed in the
Building) and common stairways shall not be obstructed by the Tenant or
used for any other purpose than for ingress and egress to and from the
Leased Premises. The Tenant will not place or allow to be placed in the
Building corridors or public stairways any waste paper, dust, garbage,
refuse or anything whatever.
2. The washroom plumbing fixtures and other water apparatus shall not
be used for any purpose other than those for which they were
constructed, and no sweepings, rubbish, rags, ashes or other substances
shall be thrown therein. The expense of any damage resulting by misuse
by the Tenant shall be borne by the Tenant.
3. The Tenant shall permit window cleaners to clean the windows of the
Leased Premises during normal business hours.
4. No birds or animals shall be kept in or about the Property nor shall
the Tenant operate or permit to be operated any musical or
sound-producing instruments or devise or make or permit any improper
noise inside or outside the Leased Premises which may be heard outside
such Leased Premises.
5. No one shall use the Leased Premises for residential purposes, or
for the storage of personal effects or articles other than those
required for business purposes.
6. All persons entering and leaving the Building at any time other than
during normal business hours shall register in the books which may be
kept by the landlord at or near the night entrance and the Landlord
will have the right to prevent any person from entering or leaving the
Building or the Property unless provided with a key to the premises to
which such person seeks entrance and a pass in a form to be approved by
the Landlord. Any persons found in the Building at such times without
such keys and passes will be subject to surveillance of the employees
and agents of the Landlord.
7. No dangerous or explosive materials shall be kept or permitted to be
kept in the Leased Premises.
8. The Tenant shall not and shall not permit any cooking in the Leased
Premises. The Tenant shall not install or permit the installation or
use of any machine dispensing goods for sale in the Leased Premises
without the prior written approval of the Landlord. Only persons
authorized by the Landlord shall be permitted to deliver or to use the
elevators (if installed in the Building) for the purpose of delivering
food or beverages to the Leased Premises.
9. The Tenant shall not bring in or take out, position, construct,
install or move any safe, business machine or other heavy equipment
without first obtaining the prior written consent of the Landlord. In
giving such consent, the Landlord shall have the right, in its sole
discretion, to prescribe the weight permitted and the position thereof,
and the use and design of planks, skids or platforms to distribute the
weight thereof. All damage done to the Building by moving or using any
such heavy equipment or other office equipment or furniture shall be
repaired at the expense of the Tenant. The moving of all heavy
equipment or other office equipment or furniture shall occur only at
times consented to by the Landlord and the persons employed to move the
same in and out of the Building must be acceptable to the Landlord.
Safes and other heavy office equipment will be moved through the halls
and corridors only upon steel bearing plates. No freight or bulky
matter of any description will be received into the Building or carried
in the elevators (if installed in the Building) except during hours
approved by the Landlord.
10. The Tenant shall give the Landlord prompt notice of any accident to
or any defect in the plumbing, heating, air-conditioning, ventilating,
mechanical or electrical apparatus or any other part of the Building.
11. The parking of automobiles shall be subject to the charges and
reasonable regulations of the Landlord. The Landlord shall not be
responsible for damage to or theft of any car, its accessories or
contents whether the same be the result of negligence or otherwise.
12. The Tenant shall not mark, drill into or in any way deface the
walls, ceilings, partitions, floors or other parts of the Leased
Premises and the Building.
E-1
<PAGE>
13. Except with the prior written consent of the Landlord, no tenant
shall use or engage any person or persons other than the janitor or
janitorial contractor of 'the Landlord for the purpose of any cleaning
of the Leased Premises.
14. If the Tenant desires any electrical or communications wiring, the
Landlord reserves the right to direct qualified persons as to where and
how the wires are to be introduced, and without such directions no
borings or cutting for wires shall take place. No other wires or pipes
of any kind shall be introduced without the prior consent of the
Landlord.
15. The Tenant shall not place or cause to be placed any additional
locks upon doors of the Leased Premises without the approval of the
Landlord and subject to any conditions imposed by the Landlord.
Additional keys may be obtained from the Landlord at the cost of the
Tenant.
16. The Tenant shall be entitled to have its name shown upon the
directory board of the building and at one of the entrance doors to the
Leased Premises, all at the Tenant's expense, but the Landlord shall in
its sole discretion design the style of such identification and
allocate the space on the directory board for the Tenant.
17. The Tenant shall keep the sun drapes (if any) in a closed position
at all times. The Tenant shall not interfere with or obstruct any
perimeter heating, air-conditioning or ventilating units.
18. The Tenant shall not conduct, and shall not permit any, canvassing
in the Building.
19. The Tenant shall take care of the rugs and drapes (if any) in the
Leased Premises and shall arrange for the carrying-out of regular spot
cleaning and shampooing of carpets and dry cleaning of drapes in a
manner acceptable to the Landlord.
20. The Tenant shall permit the periodic closing of lanes, driveways
and passages for the purposes of preserving the Landlord's rights over
such lanes, driveways and passages.
21. The Tenant shall not place or permit to be placed any sign,
advertisement, notice or other display on any part of the exterior of
the Leased Premises or elsewhere if such sign, advertisement, notice or
other display is visible from outside the Leased Premises without the
prior written consent of the Landlord which may be arbitrarily
withheld. The Tenant, upon request of the Landlord, shall immediately
remove any sign, advertisement, notice or other display which the
Tenant has placed or permitted to be placed which, in the opinion of
the Landlord, is objectionable, and if the Tenant shall fail to do so,
the Landlord may remove the same at the expense of the Tenant.
22. The Landlord shall have the right to make such other and further
reasonable rules and regulations and to alter the same as in its
judgement from time to time be needful for the safety, care,
cleanliness and appearance of the Leased Premises and the Building and
for the preservation of good order therein, and the same shall be kept
and observed by the tenants, their employees and servants. The Landlord
also has the right to suspect or cancel any or all of these rules and
regulations herein set out.
E-2
<PAGE>
SCHEDULE "F"
Leasehold Improvements
Definition of
Leasehold
Improvements
1. For the purposes of this Lease, the Term "Leasehold
Improvements" includes, without limitation, all fixtures,
improvements, installations, alterations and additions from time
to time made, erected or installed by or on behalf of the Tenant,
or any previous occupant of the Leased Premises in the Leased
Premises and by or on behalf of other tenants in other premises in
the Building (including the Landlord if an occupant of the
Building), including all partitions, doors and hardware however
affixed, and whether or not movable, all mechanical, electrical
and utility installations and all carpeting and drapes with the
exception only of furniture and equipment not of the nature of
fixtures.
Installation of
Improvements &
Fixtures 2. The Landlord shall include in the Leased Premises the
"Landlord's Work" (as hereinafterdefined. The Tenant shall not
make, erect, install or alter any Leasehold Improvements in the
Leased Premises without having requested and obtained the
Landlord's prior written approval. The Landlord's approval shall
not, if given, under any circumstances, be construed as a consent
to the Landlord having its estate charges with the cost of work.
The Landlord shall not unreasonably withhold its approval to any
such request, but failure to comply with Landlord's reasonable
requirements from time to time for the Building shall be
considered sufficient reason for refusal. In making, erecting,
installing or altering any Leasehold Improvements the Tenant shall
not, without the prior written approval of the Landlord, alter or
interfere with any installations which have been made .by the
Landlord or others and in no event shall alter or interfere with
window coverings (if any) or other light control devices (if any)
installed in the Building. The Tenant's request for any approval
hereunder shall be in writing and accompanied by an adequate
description of the contemplated work and, where appropriate,
working drawings and specifications thereof. If the Tenant
requires from the Landlord drawings or specifications of the
Building in connection with Leasehold Improvements, the Tenant
shall pay the cost thereof to the Landlord on demand. Any
reasonable costs and expenses incurred by the Landlord in
connection with the Tenant's Leasehold Improvements shall be paid
by the Tenant to the Landlord on demand. All work to be performed
in the Leased Premises shall be performed by competent contractors
and sub-contractors of whom the Landlord shall have approved in
writing prior to commencement of any work, such approval not to be
unreasonably withheld (except that the Landlord may require that
the Landlord's contractors and sub-contractors be engaged for any
mechanical or electrical work) and by workmen who have labor union
affiliations that are compatible with these affiliations (if any)
or workmen employed by the Landlord and its contractors and
sub-contractors. All such work including the delivery, storage and
removal of materials shall be subject to reasonable supervision of
the Landlord, shall be performed in accordance with any reasonable
conditions or regulations imposed by the Landlord including,
without limitation, payment on demand of a reasonable fee of the
Landlord for such supervision, and shall be completed in good and
workmanlike manner in accordance with the description of the work
approved by the Landlord and in accordance with all laws,
regulations and by-laws of all regulatory authorities. Copies of
required building permits or authorizations shall be obtained by
the Tenant at its expense and copies shall be provided to the
Landlord. No locks shall be installed on the entrance doors or in
any doors in the Leased Premises that are not keyed to the
Building master key system.
Liens &
Encumbrances on
Improvements &
Fixtures 3. In connection with the making, erection, installation or
alteration of Improvements and all otherwork or installations made
by or for the Tenant in the Leased Premises the Tenant shall
comply with all the provisions of the mechanics' lien and other
similar statutes from time to time applicable thereto (including
any provision requiring or enabling the retention by way of
holdback of portions of any sums payable) and, except as to any
such holdback, shall promptly pay all accounts relating thereto.
The Tenant will not create any mortgage, conventional sale
agreement or the encumbrance in respect of its Leasehold
Improvements or, without the written consent of the Landlord, with
respect to its trade fixtures nor shall the Tenant take any action
as a consequence of which any such mortgage, conditional sale
agreement or other encumbrance would attach to the Property or any
part thereof. If and whenever any mechanics' or other lien for
work, labor, services or materials supplied to or for the Tenant
or for the cost of which the Tenant may be in any way liable or
claims therefore shall arise or be filed
F-1
<PAGE>
or any such mortgage, conditional sale agreement or other
encumbrance shall attach, the Tenant shall within twenty (20) days
after submission by the Landlord of notice thereof procure the
discharge thereof, including any certification of action
registered in respect of any lien, by payment of giving security
or in such other manner as may be required or permitted by law,
and failing which the Landlord may avail itself of any of its
remedies hereunder for default to the Tenant and may make any
payments or take steps or proceedings required to procure the
discharge of any such liens.
F-2
<PAGE>
SCHEDULE "G"
Basic Rent
Months Rate/s.f. Amount
------- --------- ----------
2/15/97-2/14/98 1.30 $15,964.00
<PAGE>
SCHEDULE "H"
Tenant Improvements
(Map of Tenant Improvements)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STARBASE
CORPORATION'S QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 4349
<SECURITIES> 0
<RECEIVABLES> 210
<ALLOWANCES> 23
<INVENTORY> 36
<CURRENT-ASSETS> 4836
<PP&E> 1169
<DEPRECIATION> 646
<TOTAL-ASSETS> 5441
<CURRENT-LIABILITIES> 709
<BONDS> 0
0
1
<COMMON> 159
<OTHER-SE> 4572
<TOTAL-LIABILITY-AND-EQUITY> 5441
<SALES> 413
<TOTAL-REVENUES> 766
<CGS> 52
<TOTAL-COSTS> 52
<OTHER-EXPENSES> 4721
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> (3842)
<INCOME-TAX> 3
<INCOME-CONTINUING> (3845)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3845)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
