United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended June 30, 1997.
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 0-24030
THE PANDA PROJECT, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0323354
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 YAMATO ROAD
BOCA RATON, FLORIDA 33431
(Address of principal executive offices)
(561) 994-2300
(Registrant's telephone number)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No .
----- -----
Applicable Only to Issuers Involved In Bankruptcy
Proceedings During The Preceding Five Years
Indicate by check mark whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes No .
---- ----
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value -- 12,168,026 shares as of July 31, 1997
THE PANDA PROJECT, INC.
Index
Page
Part I - Financial Information
Item 1 - Financial Statements (unaudited)
Condensed Balance Sheets - June 30, 1997 and March 31, 1997 3
Condensed Statements of Operations - Three months ended
June 30, 1997 and June 30, 1996 4
Condensed Statements of Cash Flows - Three months ended
June 30, 1997 and June 30, 1996 5
Notes to Condensed Financial Statements - June 30, 1997 6-7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II - Other Information
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
<PAGE>
Page 3
The Panda Project, Inc.
Condensed Balance Sheets
June 30, March 31,
1997 1997
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,919,773 $ 3,243,505
Accounts receivable-trade (net of allowance of
$110,962 at June 30, 1997 and March 31, 1997) 166,160 165,093
Inventory 1,054,993 822,309
Other receivables 567,484 18,905
Prepaid expenses and other current assets 191,210 98,963
------------ ------------
Total current assets 6,899,620 4,348,775
------------ ------------
Property and equipment, net 2,531,715 2,823,798
Restricted cash 150,000 150,000
Other assets 14,130 14,747
Deferred issuance costs, net 193,729 -
------------ ------------
Total assets $ 9,789,194 $ 7,337,320
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 993,364 $ 852,388
Accrued compensation and employee benefits 68,964 60,934
Accrued expenses and other current liabilities 1,763,081 1,611,123
------------ ------------
Total current liabilities 2,825,409 2,524,445
Subordinated convertible debentures 1,605,000 -
Stockholders' Equity:
Common Stock, $.01 par value, 50,000,000
shares authorized 11,431,314 shares at June 30,
1997 and 10,124,643 shares at March 31, 1997
issued and outstanding 114,314 101,247
Additional paid-in capital 61,822,817 58,627,529
Accumulated deficit (56,578,346) (53,915,901)
------------ ------------
Total stockholders' equity 5,358,785 4,812,875
------------ ------------
Total liabilities and stockholders' equity $ 9,789,194 $ 7,337,320
============ ============
The Balance Sheet at March 31, 1997 has been derived from the audited
financial statements of the Company at that date.
See Notes to Condensed Financial Statements.
<PAGE>
Page 4
The Panda Project, Inc.
Condensed Statements of Operations (Unaudited)
Three Months Ended
June 30,
1997 1996
Revenues:
Product sales $ 308,530 $ 596,569
Contract research and development revenues 394,254 -
Less returns and allowances - (163,457)
------------ ------------
Net revenues $ 702,784 $ 433,112
Costs and expenses:
Cost of sales 343,820 790,106
Research and development 1,152,240 1,537,068
Selling, general and administrative 1,946,383 4,552,836
Costs associated with asset impairments - 1,471,026
------------ ------------
Total costs and expenses 3,442,443 8,351,036
------------ ------------
Operating loss (2,739,659) (7,917,924)
Interest income 77,214 122,004
Other income - 7,807
------------ ------------
Net loss $ (2,662,445) $ (7,788,113)
============ ============
Net loss per common share $ (.26) $ (.88)
============ ============
Weighted average number of
shares of common stock and
common stock equivalents
outstanding 10,339,127 8,810,664
============ ============
See Notes to Condensed Financial Statements.
<PAGE>
Page 5
The Panda Project, Inc.
Condensed Statements of Cash Flows (Unaudited)
Three Months Ended
June 30,
1997 1996
Net cash used by operating activities $ (3,050,237) $ (6,494,796)
Cash flows from investing activities:
Additions to property and equipment (73,495) (227,328)
------------ ------------
Net cash used by investing activities (73,495) (227,328)
Cash flows from financing activities:
Proceeds from issuance of debentures 4,800,000 -
Proceeds from issuance of stock - 2,877,247
------------ ------------
Net cash provided by financing activities 4,800,000 2,877,247
------------ ------------
Net increase (decrease) in cash and cash
equivalents 1,676,268 (3,844,877)
Cash and cash equivalents at beginning
of period 3,243,505 10,731,540
------------ ------------
Cash and cash equivalents at end of period $ 4,919,773 $ 6,886,663
============ ============
During the quarter ended June 30, 1997, $3,195,000 of the Company's 4%
subordinated convertible debentures were converted into 1,275,753 shares of
the Company's common stock.
See Notes to Condensed Financial Statements.
<PAGE>
Page 6
The Panda Project, Inc.
Notes to Condensed Financial Statements (Unaudited)
June 30, 1997
1. Basis of Presentation
The accompanying condensed financial statements of The Panda Project, Inc.
("the Company") have been prepared in accordance with generally accepted
accounting principles on a basis consistent in all material respects with
those applied in the Annual Report on Form 10-K for the year ended March
31, 1997. The interim financial information is unaudited, but reflects all
normal and recurring adjustments which are, in the opinion of management,
necessary to provide a fair statement of results of operations for the
interim periods presented. The interim financial statements should be read
in connection with the financial statements in the Company's Annual Report
on Form 10-K for the year ended March 31, 1997.
2. Inventory
June 30, 1997 March 31, 1997
---------------------------------------
Raw materials $ 568,441 $ 434,569
Work in process 150,611 43,341
Finished goods 335,941 344,399
---------------------------------------
$1,054,993 $ 822,309
=======================================
Inventory is valued at net realizable value, which is net of obsolescence
reserves of approximately $250,000 at June 30, 1997 and March 31, 1997,
respectively.
3. Subordinated Convertible Debentures
During April 1997, the Company completed a private placement of $4.8
million of 4% subordinated convertible debentures. The debentures are due
two years from the date of issuance and are convertible into shares of
common stock at the lower of $5.625 per share or 82% of the average closing
bid price of the Company's common stock for the five consecutive trading
days immediately preceding the date of conversion. Through June 30, 1997,
$3,195,000 of such debentures had been converted into an aggregate of
1,275,753 shares of the Company's common stock. During July 1997, the
remaining $1,605,000 of debentures were converted into an aggregate of
721,072 shares of the Company's common stock.
In connection with the transaction, the Company paid placement fees of
$384,000 of which $192,000 was paid in cash and the balance by issuance of
30,918 shares ("Placement Shares") of the Company's common stock. In
addition to the placement fees, the Company issued warrants to two parties
to purchase 70,096 shares of the Company's common stock. Warrants to
purchase 42,667 shares and 27,429 shares are exercisable through April 2002
at an exercise price of $6.75 and $7.00 per share, respectively. These
warrants have been valued at approximately $163,000 as required by
Financial Accounting Standard No. 123, Accounting for Stock-Based
<PAGE>
Page 7
Compensation, and have initially been reflected as deferred issuance costs
in the accompany balance sheet. However, upon conversion of the related
debentures, the pro rata portion of the deferred issuance costs are charged
to Additional Paid-in Capital. In addition, the Company has agreed to file
and has filed a registration statement with the Securities and Exchange
Commission to effect the registration of the Placement Shares. The Company
has also agreed to effect the registration of the shares issuable upon
conversion of the debentures in the event of certain amendments to certain
securities regulations and has granted certain piggyback registration
rights to the holders of the warrants.
4. Commitments and Contingent Matters
During June 1997, the Company entered into a five year lease for a 48,800
square foot facility in Hayward, California, which requires monthly
payments of $18,544 during the first year increasing to $24,400 in the
fifth year. In addition, the lease requires the Company to pay real estate
taxes, insurance and maintenance related to the facility, and for the
Company to issue an irrevocable letter of credit in the amount of $110,000
as security.
There are various legal proceedings and claims pending against the Company,
including disputes with a former director of the Company and former
employees. While it is not possible to determine the ultimate outcome of
these matters, it is the opinion of management, based on advice from
counsel, that the resolution of such matters will not have an aggregate
material adverse effect on the Company's financial position.
5. Subsequent Events
In July, 1997, the Company entered into a licensing agreement with LG Cable
& Machinery Ltd. ("LG") whereby LG was granted a license, for a term that
continues until the expiration of the last to expire of the patents covered
by the agreement, with respect to a semiconductor package product owned by
the Company. The license granted to LG is non-exclusive except for certain
limited exclusive manufacturing rights with respect to specified Asian
countries. In connection with this agreement, the Company is entitled to a
non-refundable license fee of $250,000 that became immediately vested upon
signing the agreement and is payable within 45 days after execution of the
agreement. In addition, the Company is entitled to receive royalties on
sales of the semiconductor package products by LG or its affiliates.
During August, the Company entered into an agreement to sublet its facility
in San Jose, California, to a third party. The sublease agreement
continues through the end of the term of the Company's lease agreement and
requires monthly payments from the tenant of approximately $5,000.
<PAGE>
Page 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company was incorporated in April 1992 to design, develop, and license
products incorporating the Company's proprietary semiconductor packaging
and interconnect technology (the "Technology Products") and to develop,
manufacture and market a line of powerful, modular computers (the
"Archistrat Computers"). The Company's fiscal year ends March 31.
This Report on Form 10-Q contains forward-looking statements. For this
purpose any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. These factors, include, without limitation,
delays in product development, potential claims and possible litigation
relating to the ownership of intellectual property, competitive pressures,
manufacturing risks, general economic conditions and the risk factors
detailed from time to time in the Company's periodic reports and
registration statements filed with the Securities and Exchange Commission.
Results of Operations - First Quarter of 1997 Compared to First Quarter of
1996
For the quarter ended June 30, 1997 (the "first quarter of fiscal 1998"),
the Company recognized revenue related to its agreement with the Defense
Advanced Research Projects Agency, which commenced in October 1996, of
$394,254. The Company recognizes revenue and is entitled to receive
payments based on the achievement of specific milestones set forth in the
agreement.
Net revenues from the sale of Archistrat Computers amounted to $308,530
during the quarter ended June 30, 1997 compared to revenues of $433,112
during the quarter ended June 30, 1996 (the "first quarter of fiscal
1997"). The Company will continue to actively market and sell the
workstation configuration of the Archistrat computer, primarily through its
own sales force, for animation, video, and high performance CAD/CAM
applications. In addition, the Company expects to begin offering a new
lower cost version workstation using the Company's proprietary architecture
and technology in a basic chassis, as well as Archistrat subsystems to
OEM's for their own production.
Research and development (R&D) expenses decreased to approximately $1.15
million for the first quarter of fiscal 1998 as compared to $1.54 million
for the first quarter of fiscal 1997. The reduction in R&D spending is
reflective of the Company's progress in moving from a development stage
enterprise to one seeking to commercialize its core technologies. The
Company believes that its level of R&D spending is appropriate to support
current operations and to continue to maintain efforts to enhance
<PAGE>
Page 9
development of VSPA, Compass Connectors, Compass PGA, and the Archistrat
Computers and related technologies. During the quarter ended June 30, 1997,
research and development activities included continued testing and
qualification of VSPA as well as the design and development of high-speed
manufacturing equipment for VSPA, and the development of new processor
boards for the Company's Archistrat Computers utilizing DEC's Alpha
microprocessor.
Selling, general and administrative (SG&A) expenses for the first quarter
of fiscal 1998 decreased approximately $2.6 million or 57% to $1.9 million
as compared to $4.6 million for the first quarter of fiscal 1997. The net
decrease in SG&A expenses is due principally to the streamlining of
operations, including a $1.6 million or 59% decrease in employee
compensation, benefits and related expenses, a decrease of approximately
$323,000 in selling and marketing expenses, as well as reductions in
professional fees, travel costs, rent and insurance. Management will
continue to evaluate and adjust its cost controls and expects the Company's
spending level to remain relatively stable over the next few quarters,
however, there can be no assurance that fluctuations in the Company's cost
structure will not occur due to the dynamic nature of the Company's
business and stage of development.
As of June 30, 1997, the Company has reduced its number of full-time
employees to approximately 50 as compared with 140 at June 30, 1996. The
Company anticipates that this number may increase in the event of expected
growth in sales over the remainder of the fiscal year, principally in the
areas of manufacturing, sales and marketing.
During the quarter ended June 30, 1996, the Company determined that, due to
various events and changes in circumstances (including efforts to
streamline operations and to increase the use of strategic alliances to
manufacture and market the Company's products), certain long-lived assets
were impaired. As a result, in the first quarter of fiscal 1997, the
Company recorded a charge of approximately $1.5 million.
Interest and other income for the first quarter of fiscal 1998 decreased to
approximately $77,000 from $130,000 for the first quarter of fiscal 1997 as
a result of a net decrease in cash and cash equivalents.
The Company anticipates that it will be dependent on third parties for the
manufacture and/or assembly of printed circuit boards, frame, exterior,
base fabrication and other subassemblies, as well as for the supply of
various of the components, incorporated into the Archistrat Computers, and
for performing the final assembly configuration, certain quality control
testing and delivery of such computers. The Company has identified certain
potential manufacturers and suppliers for its subassembly and component
needs, however, the Company has not yet entered into any additional
manufacturing or supply arrangements. The Company believes it will be able
to negotiate satisfactory manufacturing and supply contracts; however, the
failure to do so could have a material adverse effect on the Company. Even
if the Company were able to enter into suitable manufacturing arrangements
for necessary subassemblies, there can be no assurance that such
manufacturers will dedicate sufficient production capacity to satisfy the
<PAGE>
Page 10
Company's requirements within scheduled delivery times or at all.
Liquidity and Capital Resources
During April 1997, the Company completed a private placement of $4.8
million of 4% subordinated convertible debentures and received net proceeds
of approximately $4.5 million. The debentures are convertible into shares
of common stock at the lower of $5.625 per share or 82% of the average
closing bid price of the Company's common stock for the five consecutive
trading days immediately preceding the date of conversion. During June and
July 1997, all of the debentures were converted into an aggregate of
1,996,825 shares of the Company's common stock.
The Company's capital requirements in connection with its operations and
development activities have been and may continue to be significant.
During the remainder of fiscal year 1998, the Company expects to continue
its development efforts related to certain of its Technology Products,
complete the construction of several high-speed production machines for its
VSPA product which are expected to be sold to licensees of VSPA and/or
utilized within the Company to manufacture product for direct sales, and
continue to transition its current modular workstations and server products
into higher volume production.
The Company previously announced its agreement to enter into a joint
venture with Taiwanese partners to manufacture and sell VSPA in that
region. It is anticipated that the joint venture will be operational by
the first calendar quarter of 1998 and will be selling VSPA units produced
with manufacturing equipment developed and constructed by the Company. The
Company will own a majority stake in the joint venture. The Company's
initial investment will be a noncash contribution in the form of a license
agreement between the Company and the joint venture and VSPA manufacturing
equipment.
The Company anticipates, based on its discussions with certain customers,
that it will commence the production and shipment of modest quantities of
VSPA semiconductor packages during the third quarter of fiscal 1998. The
Company anticipates that it will realize royalty revenue as early as the
second quarter of fiscal year 1998 related to its Technology Products from
the arrangements announced during the past year, including, but not limited
to, license agreements with LG Cable & Machinery. The Company also expects
to continue to earn revenues related to the cooperative development
agreement entered into with the U.S. Government during fiscal year 1997.
Further, the Company may enter into additional licensing agreements during
fiscal year 1998 that will generate licensing fees for the Company.
However, there can be no assurance that revenues from any or all of these
sources will in fact be realized on the timetable anticipated by the
Company or that the Company will become profitable in the foreseeable
future.
The Company has been dependent upon the proceeds of sales of its securities
to fund its activities since inception. The Company expects that licensing
and royalty revenue related to its Technology Products, sales of VSPA
directly to customers and through the Taiwanese joint venture, increased
<PAGE>
Page 11
shipments of Archistrat Computers and the related revenue, and revenue
associated with the cooperative development agreement, noted above will
provide additional resources to at least partially fund its activities
during fiscal year 1998.
During fiscal year 1997, the Company successfully implemented a cost
reduction plan and was able to significantly decrease the amount of average
monthly cash consumption. Cash flows used by operating activities
decreased $3.4 million from $6.5 million during the first quarter of fiscal
year 1997 to $3.1 million during the first quarter of fiscal year 1998.
The Company will continue to focus on cost controls during fiscal year 1998
and will take further cost reduction actions as deemed necessary. However,
there can be no assurances that such efforts will be successful or that
such plans will result in adequate cost reductions.
The Company is dependent upon the success of the efforts discussed above to
expand its marketing activities in order to obtain additional orders for
its Technology Products and Archistrat Computers, to continue efforts that
may lead to the commercialization of additional products and technologies
and to finance other working capital requirements. The Company may need to
seek additional sources of funding during fiscal year 1998 in order to
achieve its goals.
<PAGE>
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Part II - Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
The Company issued a warrant to Jefferies & Company, Inc. in
connection with the completion of a private placement of
subordinated convertible debentures dated April 14, 1997,
exercisable during the period beginning April 2, 1997 and ending
April 2, 2002 to purchase 27,429 shares of common stock of the
Company at an exercise price of $7.00 per share. The warrant was
issued pursuant to an exemption from registration under Section 4
(2) of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) See the Exhibit Index included immediately preceding the Exhibits
to this report, which is incorporated herein by reference.
(b) Reports on Form 8-K:
A current report on Form 8-K dated April 14, 1997 was filed on
April 21, 1997 reporting the sale of equity securities pursuant to
Regulation S, an event reported under Item 9.
<PAGE>
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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.
THE PANDA PROJECT, INC.
Date: August 14, 1997
By: /s/ C. DARYL HOLLIS
------------------------------
C. Daryl Hollis, Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial and Accounting
Officer)
<PAGE>
Page 14
EXHIBIT INDEX
Exhibit Description of Exhibit
- ------- ----------------------
10.1 * License Agreement, executed as of July 15,
1997, between the Company and LG Cable &
Machinery Ltd.
10.2 Standard Industrial Lease Agreement, dated
as of July 16, 1997, between the Company and
IBG Huntwood Associates.
27 Financial Data Schedule
- -----------------
* Confidential treatment requested.
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 4,919,773
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,054,993
<CURRENT-ASSETS> 6,899,620
<PP&E> 5,037,251
<DEPRECIATION> 2,505,536
<TOTAL-ASSETS> 9,789,194
<CURRENT-LIABILITIES> 2,825,409
<BONDS> 0
0
0
<COMMON> 114,314
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,789,194
<SALES> 308,530
<TOTAL-REVENUES> 702,784
<CGS> 343,820
<TOTAL-COSTS> 343,820
<OTHER-EXPENSES> 3,098,623
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,075
<INCOME-PRETAX> (2,662,445)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,662,445)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,662,445)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
Page 1
EXHIBIT 10.1
CONFIDENTIAL MATERIALS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
LICENSE AGREEMENT
This License Agreement is made and entered into as of June , 1997,
by and between THE PANDA PROJECT INC. ("PANDA" or "Licensor"), a
corporation existing under the laws of Florida, which has its principal
office at 901 Yamato Road, Boca Raton, Florida, and LG CABLE & MACHINERY
LTD. ("LGC" or "Licensee"), a corporation which has its principal office at
555, Hogye-dong, Dong an-gu, Anyang-shi, Kyungki-do 430-080, Korea.
WHEREAS, Licensor possesses certain valuable intellectual and
industrial property rights; and
WHEREAS, Licensor is willing to grant, and Licensee desires to
acquire the right to use such rights on a worldwide basis in accordance
with the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual promises,
terms and conditions of this License Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
I. DEFINITIONS
-----------
A. "Licensed Product" shall mean a semiconductor package as
described in the patent applications identified in Appendix A of this
License Agreement, and any improvements, modifications, and derivations
thereof and know-how related thereto owned, developed, or acquired (except
in a grant back from another PANDA licensee) by PANDA, and which PANDA has
the right to license during the term of this License Agreement.
B. "Licensed Process" shall mean any process or method pertaining to
the use, manufacture, or testing of Licensed Product and all know-how
related thereto developed and supplied by Panda and/or its affiliates.
C. "Licensed Product Sold" or "Sale" of a Licensed Product shall
mean the sale, lease, or other transfer of a Licensed Product or a product
incorporating a Licensed Product to a third party by LGC; or the internal
use of a Licensed Product by LGC or an LGC Affiliate. A product shall be
considered sold at the time of invoicing or shipment, whichever is earlier,
or if there is no such invoicing or shipment, in the case of internal use,
at the time of such use.
D. "Patent Rights" shall mean any United States or foreign patent
applications or patents owned, controlled, or acquired by PANDA in whole or
in part, during the term of this License Agreement, relating to Licensed
Product or Licensed Process, and which PANDA has the right to license,
which disclose and claim Licensed Process or Licensed Product, and to any
reissues, reexaminations, divisions, continuations, and
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Page 2
continuations-in-part. Such "Patent Rights" shall not include licenses or
sublicenses related to Licensed Products or Licensed Process granted at any
time to PANDA by its other licensees.
E. "Proprietary Information" shall mean all information or trade
secrets of any description relating to Licensed Product or Licensed Process
developed by, owned, or controlled by PANDA at any time prior to the
termination or expiration of this License Agreement, including, but not
limited to, the development, selling, marketing, use, properties,
structures, compositions, manufacture or quality control of Licensed
Product or Licensed Process, and including, but not limited in form, to
samples, prototypes, data books, manufacturing instructions, drawings,
formulae, and customer lists. Proprietary Information does not include:
(i) information which was known by LGC prior to receipt from PANDA; (ii)
information lawfully disclosed to LGC by a third party which did not derive
the information from PANDA; and (iii) information which is or becomes a
matter of public knowledge or part of the public domain other than through
a breach of this License Agreement.
F. "LGC Affiliate" shall mean any corporation, firm, partnership,
proprietorship, or other form of business organization over which control
is exercised by LGC, and any corporation, firm, partnership,
proprietorship, or other form of business organization in which LGC has at
least a fifty-one percent (51%) ownership interest, or the maximum
ownership interest LGC is permitted to have in the country where such
business organization exists, and any entity under common control with LGC.
G. "PANDA Affiliate" shall mean any corporation, firm, partnership,
proprietorship, or other form of business organization over which control
is exercised by PANDA, and any corporation, firm, partnership,
proprietorship, or other form of business organization in which PANDA has
at least a fifty-one percent (51%) ownership interest, or the maximum
ownership interest PANDA is permitted to have in the country where such
business organization exists, and any entity under common control with
PANDA.
H. "Effective Date" shall mean the later of the date of signature of
this License Agreement by authorized representatives of PANDA and LGC.
II. GRANT OF LICENSES
-----------------
Subject to the terms of this License Agreement, PANDA agrees to grant
and does grant to LGC a non-exclusive, worldwide license during the term of
this License Agreement to make, have made for it, import, use, sell, offer
for sale, or otherwise dispose of Licensed Product and to use and have used
the Licensed Process under Patent Rights and Proprietary Information;
provided, that no license is granted hereunder for LGC to make, have made
for it, use, sell or otherwise dispose of Licensed Products or to use or
have used the Licensed Process in the development, manufacture and sale or
other distribution of switches incorporating Fast Ethernet technology.
Such license does not include the right to grant sublicenses or assign this
license, except that PANDA agrees that LGC shall have the right to grant a
<PAGE>
Page 3
sublicense to LG Semicon Co., Ltd. ("LGS") provided that: (i) the terms of
the sublicense to LGS shall be consistent with the terms of the license set
forth in this License Agreement; (ii) the royalties payable in accordance
with the terms of the sublicense granted by LGC to LGS shall be at least
equal to those set forth in Appendix C of this License Agreement; and (iii)
LGC shall be responsible for the payment to PANDA of the royalties payable
in accordance with the terms of the sublicense. The grant of the above
license or any part thereof to LGS pursuant to this Section II shall not
release LGC from any of its obligations under this License Agreement.
PANDA agrees not to grant any additional licenses to make or to have
made the Licensed Product within Korea for two years and six months from
the effective date of this License Agreement.
III. CONFIDENTIALITY CLAUSE BY LGC
-----------------------------
A. Except as may be required by law or by a governmental agency, LGC
agrees that it will not, directly or indirectly, disseminate, disclose or
otherwise make available to any third party, or reverse engineer, any
Proprietary Information and will use the same degree of care to prevent
disclosure thereof that LGC uses to protect its own proprietary and
confidential information, but in any event no less than a reasonable level
of care. LGC agrees to obligate LGC Affiliates to abide by this
confidentiality obligation. Employees of LGC or LGC Affiliates shall be
provided access to Proprietary Information by LGC only on a "need to know"
basis and shall be advised by LGC of the confidential nature thereof, and
shall be bound by written agreement to protect the confidentiality of such
information. The provisions hereof shall survive expiration or termination
of this License Agreement for a period of seven (7) years.
B. LGC and LGC Affiliates are authorized to disclose to their
distributors and customers only such Proprietary Information received from
PANDA concerning the Licensed Process and Licensed Product as is reasonably
necessary to enable Licensed Product to be sold, leased, placed or used,
and LGC and LGC Affiliates are authorized to disclose to their respective
contractors and suppliers only such Proprietary Information received from
PANDA as is reasonably necessary to enable LGC or LGC Affiliates to make or
have made the Licensed Product.
LGC shall have the obligation to bind by written agreement any such
distributor, customer, contractor, or supplier receiving Proprietary
Information to protect the confidentiality of such information.
IV. ROYALTY CLAUSE
--------------
A. The Licenses granted under Section II, above, shall be subject to
a Royalty as provided for in Appendix C to this License Agreement for
Licensed Product Sold by LGC or a LGC Affiliate, or for any internal use of
the Licensed Product by LGC or an LGC Affiliate.
<PAGE>
Page 4
B. The Royalties provided herein are in consideration of the trade
secrets, know-how, Patent Rights, and Proprietary Information provided by
PANDA hereunder, and the ability of LGC to achieve a significant
competitive advantage by its early entry into the marketplace due to its
access to such intellectual property rights.
C. In addition to the Royalty provided above, LGC shall pay PANDA a
one time, non-refundable license fee of U.S. $250,000.00 within forty-five
(45) days of the Effective Date of the Agreement. The consideration for
such license fee shall include the license of the Technology and technical
information related to the Technology.
V. PAYMENTS, RECORDS AND REPORTS
-----------------------------
A. Within thirty (30) days after the end of each calendar quarter in
which Royalties are earned or otherwise become due under this License
Agreement, LGC shall furnish PANDA with a written report setting forth the
computation of the Royalties payable during the preceding calendar quarter,
and shall make such payment. Royalties shall be paid to PANDA in U.S.
dollars. In case a conversion from one currency to another is involved in
determining an earned Royalty Payment, the exchange rate shall be the
exchange rate in effect at the Chase Manhattan Bank in New York City on the
last day of the applicable Calendar Quarter. Late payments shall bear
interest at the rate of prime plus two percent, as in effect at the Chase
Manhattan Bank in New York City at the time such payments originally become
due.
B. LGC shall keep and maintain complete and accurate records in
sufficient detail to enable Royalties payable to PANDA hereunder to be
determined (including records on all conversion of currency under Paragraph
A above), and it shall permit such records to be inspected once per year
upon written notice by PANDA during reasonable business hours by a
certified public accountant or firm of certified public accountants
reasonably acceptable to LGC and appointed by PANDA for this purpose;
provided, however, that LGC shall have the right to destroy or discard such
records in accordance with LGC's record retention policy, provided that
such records shall be kept for a minimum of five (5) years after the end of
the Calendar Quarter to which they apply. PANDA shall bear the cost and
expense of such investigation by accountants, unless the accountants
determine that LGC's determination of the Royalties due and owing to PANDA
was incorrect (in LGC's favor) in an amount exceeding four percent (4%) of
the amount calculated by LGC, in which case LGC shall bear such cost and
expense.
VI. GRANTBACK OF LICENSE
--------------------
LGC grants to PANDA a perpetual license under information and
inventions, whether patentable or not, related to improvements,
modifications, and derivatives of Licensed Products or Licensed Process
originated or invented during the term of this License Agreement by
employees, agents, contractors, or suppliers of LGC having access to
<PAGE>
Page 5
Licensed Product, Licensed Process, or Proprietary Information. Such
license to PANDA shall be non-exclusive, irrevocable, perpetual,
world-wide, and royalty free to make, have made, use, import, sell, offer
for sale, and otherwise transfer products covered by such information and
inventions. PANDA may not sublicense or assign this right, other than to a
PANDA Affiliate, or as part of an acquisition of PANDA or sale of PANDA
assets.
VII. JOINT PUBLIC ANNOUNCEMENT
-------------------------
Upon the signing of this License Agreement by authorized
representatives of LGC and PANDA, a joint press release in a form mutually
agreed will be issued announcing the execution of this License Agreement.
VIII. USE OF PANDA'S TRADEMARKS
-------------------------
A. Use of Trademarks.
-----------------
Licensee may use (in the manner agreed to by Licensor and Licensee
from time to time during the term of this Agreement) the trademark VSPA or
other similar marks (the "Trademarks") in connection with the sale,
distribution, marketing and promotion of the Licensed Products. Licensee
shall not pay Licensor any additional fee for such use. Licensee may not
use third party trademarks, tradenames, service marks and commercial
symbols in connection with the sale, distribution, marketing and promotion
of the Licensed Products, but Licensee may adopt and use its own
trademarks, tradenames, service marks and commercial symbols in connection
therewith. Licensee shall give Licensor thirty (30) days prior written
notice before using any Trademarks for the first time in a particular
jurisdiction outside the United States. At Licensor's request and expense,
Licensee shall execute a registered user agreement and any other documents
that Licensor may reasonably request in order to establish or confirm
Licensor's right, title and interest with respect to the Trademarks.
B. Quality Control
---------------
Licensee shall apply the Trademarks only to Licensed Products that
have been manufactured in accordance with those specific quality control
standards that Licensor may from time to time promulgate and communicate to
Licensee with respect to such Licensed Products sold under the Trademarks;
provided, however, that those standards shall be no higher than the
standards by which Licensor manufactures such Licensed Products itself.
Additionally, Licensee shall use the Trademarks in compliance with
all relevant laws and regulations and submit samples of Licensed Products
sold under the Trademarks, upon the request of Licensor, so as to enable
Licensor to inspect such samples and confirm that Licensee is in compliance
with its obligations under this Section. Licensor shall in no case delay
<PAGE>
Page 6
approval or rejection by more than thirty (30) days from the time of
submittal by LGC.
Licensee shall not modify any of the Trademarks in any way and not
use any of the Trademarks on any goods or services other than the Licensed
Products.
If Licensee fails to use the Trademarks in compliance with this
Section, such failure shall be deemed to be a material breach of one of the
Licensee's obligations under this Agreement, for the purposes of possible
termination of this Agreement.
IX. ASSEMBLY EQUIPMENT
------------------
LGC and PANDA shall each use its best efforts to design and develop
the Assembly Equipment to make the VSPA packages and LGC shall have the
option to purchase such Assembly Equipment from PANDA. If LGC chooses to
exercise its option to purchase such Assembly Equipment from PANDA, a
separate standard purchase and sales agreement for each item of Assembly
Equipment shall be executed by the parties, at prices to be determined
through negotiation.
X. MOLDS, PLASTIC FRAMES AND PINS
------------------------------
LGC will have the option to make the molds, plastic frames, covers
and pins, and PANDA will transfer representative component drawings for a
264 pin VSPA package for such manufacture if requested to do so, at cost.
Alternatively, PANDA will supply molds, plastic frames, covers and pins
pursuant to a standard purchase and sale agreement to be executed by the
parties, at prices to be determined by negotiation.
XI. TRAINING OF LGC PERSONNEL
-------------------------
LGC shall be entitled to send up to two (2) employees to Boca Raton
for a total of up to forty (40) hours of training with respect to Licensed
Product, Licensed Process, and Proprietary Information. Training in excess
of this amount shall be billed to LGC by PANDA at $150/hour. LGC shall be
responsible for all expenses and liabilities of such employees.
XII. PURCHASE OF LICENSED PRODUCT BY PANDA
-------------------------------------
LGC agrees to accept purchase orders from PANDA for Licensed Product
during the term of this License Agreement on a most favored customer basis
and to sell Licensed Product to PANDA at an agreed upon price. No
royalties shall be payable to PANDA on such sales of Licensed Product.
<PAGE>
Page 7
XIII. TRANSFER OF PROPRIETARY INFORMATION
-----------------------------------
Within fifteen (15) days of execution of this Agreement, PANDA shall
provide two (2) copies of the materials identified in Appendix B.
XIV. ASSIGNMENT BY PANDA
-------------------
PANDA may assign any of its rights, including rights to payments of
earned Royalties, to any corporation or other entity which is an Affiliate
of PANDA.
XV. TERM AND TERMINATION
--------------------
A. This License Agreement shall become effective as of the Effective
Date and, unless otherwise terminated as provided herein, shall continue in
full force and effect until the last to expire of the Licensed Patents.
Thereafter, LGC may acquire a license to know-how and trade secrets covered
herein at a reduced royalty rate to be agreed upon between LGC and PANDA.
B. Termination for Cause. After the occurrence of any of the
following events, this License Agreement may be terminated by either Party
(the "Terminating Party") by giving written notice of Termination to the
other Party, such Termination being immediately effective upon the giving
of such Notice of Termination:
(a) A material breach or default as to any obligation hereunder
by the other Party and the failure of the other Party to promptly pursue
(within thirty (30) days after receiving written notice thereof from the
Terminating Party) a reasonable remedy designed to cure (in the reasonable
judgment of the Terminating Party) such material breach or default; or
(b) The filing of a petition in bankruptcy, insolvency or
reorganization against or by the other Party, which petition shall not have
been dismissed within ninety (90) days of filing thereof, or the other
Party becoming subject to a composition for Creditors, whether by law or
agreement, or the other Party going into receivership or otherwise become
insolvent; or
C. LGC shall have the right to terminate this License Agreement at
any time with or without cause upon six (6) months prior written notice to
PANDA. Termination of this License Agreement by LGC shall not alter or
affect the rights or obligations of either party arising prior to such
termination, nor shall termination pursuant to this Section relieve LGC of
its payment obligations hereunder. Any termination by LGC as provided in
this Paragraph shall not prejudice the right of PANDA to recover any earned
Royalty, or other sums owned or accrued at the time of such termination nor
prejudice the right of PANDA to maintain an action against LGC for
infringement of its patent or other intellectual property rights.
<PAGE>
Page 8
D. The parties agree that upon termination or expiration of this
License Agreement, Licensee shall immediately cease: (i) any use or
practice of the Licensed Product or the Licensed Process; and (ii), except
as provided in Section F below, any making, use, or sale of the Licensed
Product, including internal use within LGC or LGC Affiliates. Upon
termination or expiration of this License Agreement, LGC shall, at its own
expense, return to PANDA all Proprietary Information as soon as practicable
after the date of termination or expiration, including, but not limited to,
the materials identified in Appendix B, original documents, drawings,
computer diskettes, models, samples, notes, reports, notebooks, letters,
manuals, prints, memoranda and any copies thereof, which have been received
by LGC. All Proprietary Information and Patent Rights shall remain the
exclusive property of PANDA during the term of this License Agreement and
thereafter.
E. Upon termination or expiration of this License Agreement, nothing
shall be construed to release License from its obligations to pay Licensor
any and all royalties, license fees or other amounts accrued but unpaid
hereunder prior to the date of such termination or expiration.
F. After termination or expiration of this License Agreement for any
reason by either party, LGC may sell all Licensed Product which it has on
hand upon the date of termination or expiration provided, however, that the
sales shall be completed not later than six (6) months from the date of the
termination or expiration and that the termination or expiration shall not
relieve LGC from making the full earned Royalty payments herein provided on
all Licensed Product by it either before or after the date of the
termination or expiration.
XVI. INFRINGEMENT
------------
In the event Licensee shall learn of a possible infringement of any
patent included in the Patent Rights, Licensee shall promptly call
Licensor's attention thereto in writing and shall provide Licensor with
evidence of the infringement. Both parties shall use their best efforts in
cooperation with each other to terminate the infringement without
litigation. If the efforts of the parties are not successful in abating
the infringement within ninety (90) days after the infringer has been
formally notified by Licensor of the infringement, Licensor shall have the
right to: (a) commence suit on its own account; and (b) join Licensee in
such suit; and Licensor shall give timely notice in writing to Licensee of
its election. Any proceeds of such suit shall be the property of Licensor.
XVII. PATENT MARKING
--------------
Licensee agrees to mark all Licensed Products made, used, or sold
under the terms of this License Agreement, or their container with the
numbers of applicable patents of PANDA or other appropriate marking in
accordance with the patent marking laws of the country in which the
Licensed Product is manufactured, used, or sold.
<PAGE>
Page 9
XVIII. WAIVER OF DEFAULT
-----------------
A waiver, express or implied, by either of the parties hereto of any
right hereunder or of any default, breach, or other failure to perform by
the other party hereto, shall not constitute or be deemed a future waiver
of that or any other right hereunder or of any default, breach or any other
failure to perform thereafter by such other party. All waivers to be
effective must be in writing and signed by the waiving party.
XIX. GOVERNING LAW
-------------
This License Agreement shall be governed, interpreted and construed
in accordance with the laws of the State of Florida, USA, excluding its
conflict of law principles.
XX. NO RIGHTS BY IMPLICATION
------------------------
No rights or licenses with respect to Licensed Product or Licensed
Process are granted or deemed granted hereunder or in connection herewith,
other than those rights or expressly granted in this License Agreement.
XXI. DEFENSIVE LITIGATION
--------------------
Licensee shall defend and indemnify Licensor from and against any
damages, liabilities, costs, and expenses, including reasonable attorney's
fees and Court costs, either: (i) arising out of the manufacture, use,
sale, or other transfer of Licensed Product by Licensee or its customers;
or (ii) arising out of improvements, modifications, or derivatives of
Licensed Product introduced by Licensee or its customers; or (iii) arising
out of injuries or damages caused by Licensed Product; provided that,
Licensee shall have no liability under this indemnity with respect to any
claim, which alleges that the Patent Rights infringe any rights of a third
party.
XXII. DISPUTE RESOLUTION
------------------
A. Any dispute, controversy, or claim arising out of or relating to
this License Agreement, or to a breach thereof, including its
interpretation, performance, or termination shall be submitted to and
finally resolved by arbitration. The arbitration shall be conducted in the
English language in accordance with the rules of conciliation and
arbitration of the International Chamber of Commerce in effect on the date
hereof. Any such arbitration shall take place in the State of Florida,
United States of America. The decision of the arbitrators shall be final
and binding upon the parties hereof, and the expense of the arbitration
(including without limitation the award of attorney's fees to the
prevailing party) shall be paid as the arbitrators determine.
<PAGE>
Page 10
B. Notwithstanding anything contained in this Section, each party
shall have the right to institute judicial proceedings against the other
party or anyone acting by, through or under such other party in order to
enforce the instituting party's rights hereunder through reformation of
contact, specific performance, temporary restraining order, preliminary
injunction, final injunction, or similar equitable relief.
XXIII. NOTICES
-------
Each notice required or permitted to be sent under this License
Agreement shall be given by Federal Express or comparable express delivery
service to Licensor and to Licensee at the address indicated below:
For Licensor: The Panda Project, Inc.
901 Yamato Road
Boca Raton, Florida 33431-4413
Attention: Stanford W. Crane, Jr.
For Licensee: LG Cable & Machinery Ltd.
555, Hogye-dong, Dong an-gu
Anyang-shi, Kyungki-do 430-080
Korea
Either party may change its address for purposes of this License Agreement
by giving the other party written notice of its new address.
XXIV. ENTIRE UNDERSTANDING
--------------------
This License Agreement embodies the entire understanding between the
parties relating to the subject matter hereof, whether written or oral, and
there are no prior representations, warranties, or agreements that relate
to Licensed Product, Licensed Process, Proprietary Information, and Patent
Rights.
XXV. INVALIDITY
----------
If any provision of this License Agreement is declared invalid or
unenforceable by an arbitration panel or by a court having competent
jurisdiction, it is mutually agreed that this License Agreement shall
endure except for the part declared invalid or unenforceable. The parties
shall consult and use their best efforts to agree upon a valid and
enforceable provision, which shall be a reasonable substitute for such
invalid or unenforceable provision, in light of the intent of this License
Agreement.
XXVI. AMENDMENTS
----------
<PAGE>
Page 11
Any amendment or modification of any provision of this License
Agreement must be in writing, dated and signed by both LGC and PANDA.
XXVII. SURVIVABILITY
-------------
The following provisions, as well as any other provisions whose
survivability is reasonably intended by the terms of this Agreement, shall
survive after the termination or expiration of this Agreement: III, IV, V,
VI, XIV, XVI, XIX, XXI, XXII and XXX.
XXVIII. RESPONSIBILITY FOR TAXES
------------------------
If Licensee is required to withhold taxes from any amount payable by
Licensee hereunder, then Licensee shall pay to Licensor an additional
amount as may be necessary so that Licensor will receive, after deduction
of the withheld tax, the amount that Licensor would have received in the
absence of the withholding tax.
XXIX. COUNTERPARTS
------------
This License Agreement may be executed in any number of English
language counterparts and each such counterpart shall be deemed to be an
original.
XXX. BINDING EFFECT
--------------
This License Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their successors, assigns, estates,
beneficiaries, representatives, and heirs.
XXXI. WARRANTY AND DISCLAIMER
-----------------------
A. Each party represents and warrants that it has full corporate
power and authority to enter into and perform this Agreement. This
Agreement has been duly authorized and duly executed and delivered by
Licensor and Licensee, and it is valid, binding and enforceable against
each party in accordance with its terms.
B. EXCEPT AS SET FORTH IN THIS SECTION, THE PARTIES ACKNOWLEDGE AND
AGREE THAT THERE ARE NO WARRANTIES, COVENANTS, REPRESENTATIONS, OR
AGREEMENTS BY PANDA AS TO MARKETABILITY, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OTHER ATTRIBUTES, TITLE, AND NON-INFRINGEMENT WHETHER
EXPRESS OR IMPLIED (IN LAW OR IN FACT), ORAL OR WRITTEN.
<PAGE>
Page 12
XXXII. COMPLIANCE WITH LAW
-------------------
PANDA agrees to comply with the laws and regulations of the United
States government, and LGC agrees to comply with the laws and regulations
of the Korean government, and the United States government, as may be
applicable to LGC in connection with the exportation of products or
technical data.
XXXIII.
In the event that the Korean government requires that it review this
Agreement, such review will be the responsibility of LGC, and if any
changes or modifications are made in this Agreement as required by the
Korean government, PANDA will have the right to terminate this Agreement;
provided however, if any such changes or modifications are made or required
after the execution of this Agreement or the commencement of the license,
such termination will not relieve LGC from its obligation to pay the full
license fee required under Paragraph IV C and any accrued Royalty Payments
required under Paragraph IV.
IN WITNESS WHEREOF, PANDA and LGC have signed this License
Agreement.
THE PANDA PROJECT, INC.
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
Date:
---------------------------
LG CABLE & MACHINERY LTD.
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
Date:
---------------------------
<PAGE>
Page 13
CONFIDENTIAL MATERIALS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
APPENDIX A
----------
Status Report of VSPA Patent Applications
-----------------------------------------
U.S. Applications
- -----------------
1. U.S. Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
2. U.S. Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
3. U.S. Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
4. U.S. Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
5. U.S. Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
<PAGE>
Page 14
CONFIDENTIAL MATERIALS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Foreign Patent and Applications
- -------------------------------
6. Taiwanese Patent No. 70517
Subject: Spider Pack (VSPA)
Title: "Prefabricated Semiconductor Chip Carrier@
Filed: March 16, 1994
Appl. No. 83102269
ISSUED: March 11, 1995
7. PCT Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
8. PCT Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
9. PCT Application Ser. **********
Subject: *****************
Title: ***********************
Filed: *************
10. PCT Application Ser. No. **********
Subject: *****************
Title: ***********************
Filed: *************
<PAGE>
Page 15
APPENDIX B
----------
Identification of Proprietary Information transferred to LGC.
(1) Design drawings for the VSPA 264 pin package (latest revision as of
date of signed agreement)
(a) assembly: Dwg. # 210800003
(b) pins (3 separate parts numbers): Dwg. #s 210500004, 210500005,
210500006
(c) frame subassembly: Dwg. #211600001
(d) plastic housing: Dwg. #210200002
(e) die attach plate: Dwg. #210900005
(f) plating specification: Dwg. #211500003
(2) Materials list qualified for use for device assembly.
(3) Existing process specifications for relative assembly processes
(incomplete at this time).
(a) die attach
(b) wirebonding
(c) encapsulation
(d) PCB assembly
(4) JEDEC registration documentation
(5) Pertinent reports and information relative to VSPA performance
evaluations, (electrical and thermal), materials evaluations, and
qualification testing.
(6) Existing design for a test socket for VSPA 264 pin package
(a) sample test socket for VSPA 264 pin package
Panda will keep LGC informed of the availability of design information
relating to higher density configurations of the Licensed Products and if
LGC requests the design information it will be provided on a compensation
basis agreed to by LGC and PANDA at the time of LGC's request.
<PAGE>
Page 16
CONFIDENTIAL MATERIALS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
APPENDIX C
----------
Royalty Schedule
Number of I/O per package Royalty per I/O
------------------------- ---------------
******** ********
******** ********
******** ********
******** ********
******** ********
(regardless of I/Os)
When LGC has accrued an aggregate payment related to PQFP-B (VSPA)
********** to Panda at any time starting from the effective date of this
License Agreement, where the aggregate payment related to PQFP-B includes
the license fee, royalties, equipment purchases from Panda, raw material
purchases from Panda, and investment in Panda including any stock
purchases, the royalty schedule changes to the following:
Number of I/O per package Royalty per I/O
------------------------- ---------------
******** ********
******** ********
******** ********
******** ********
******** ********
(regardless of I/Os)
Licensor agrees that if during the term of this Agreement Licensor enters
into an agreement with a third party the provisions of which are
substantially identical to this Agreement but which provides for royalties
lower than those shown above, Licensee shall pay royalties to Licensor
thereafter based on such lower royalty rate.
EXHIBIT 10.2
STANDARD INDUSTRIAL LEASE
Dated (for reference) as of: June 17, 1997
1. Defined Terms.
-------------
Each reference in this Lease to any of the following terms shall include
the data for such term as stated below with any additional terms used in
this Lease to have the meaning and definition given hereafter:
Tenant: The Panda Project, Inc. Landlord:IBG HUNTWOOD ASSOCIATES
a Florida corporation a California general partnership
Tenant's Landlord's
Address: 901 Yamato Road Address: c/o Warehouse
Boca Raton, FL 33431-4425 Properties, Inc.
1400 Fashion Island Blvd.,
#1000
San Mateo, CA 94404
Description of the Premises:
Street Address: 1455 Crocker Ave., Hayward, CA 94544
Floor Area of Improvements: Approximately 48,800 sq. ft., (see attached
Exhibit "A")
Term: Five (5) years. Scheduled Term Commencement Date: July 16, 1997
Rent: $18,544.00/per month for the first 12 months of the Term, see
Paragraph 43 thereafter
Taxes, Insurance, and Maintenance Reserve Deposit: $2,930 per month
Security Deposit: $110,000 Irrevocable Letter of Credit in form attached
as Exhibit "C", see Paragraph 5.2.
Insurance Amounts: Guarantor: N/A
Bodily Injury per Person: $3,000,000.00
Bodily Injury per Occurrence: $3,000,000.00
Property Damage: $3,000,000.00
Landlord's Construction Representative: Michael Schonenberg
Tenant's Construction Representative: Babar Hamirani
Uses: Storage, assembly, integration and distribution of computer related
products and related office uses.
Tenant's Share of: Real Property Taxes 44.36%, Insurance Expenses 44.36%,
Maintenance Expenses 44.36%
2. Preamble.
--------
Landlord hereby leases to Tenant, and Tenant hereby leases and accepts from
Landlord, that certain real property described in Paragraph 1 (the
"Premises") for the Term and upon the covenants and conditions hereinafter
specified. Any statement of square footage set forth in this Lease is an
approximation which Landlord and Tenant agree is reasonable and the rental
is not subject to revision whether or not the actual square footage is more
or less. The Security Deposit and first month's Rent are due at execution
of the Lease by Tenant.
3. Construction and Commencement.
-----------------------------
3.1 Plans. (Omitted clause - not part of lease agreement)
3.2 Construction. (Omitted clause - not part of lease agreement)
3.3 Changes in Plans. (Omitted clause - not part of lease agreement)
3.4 Commencement. The Term of this Lease shall commence upon the
Scheduled Term Commencement Date, (Omitted clause - not part of lease
agreement)
4. Rent; Net Lease.
---------------
Tenant agrees to pay Landlord at Landlord's address, or at such other place
designated by Landlord by written notice to Tenant, the Rent, in lawful
money of the United States, in advance, without demand, off-set or
deduction, on the first day of each calendar month of the Term hereof. In
the event the Term commences or the date of expiration of this Lease occurs
other than on the first day or the last day of a calendar month, the Rent
for such month shall be prorated. This Lease is what is commonly called a
"net lease"; it being understood that Landlord shall receive the Rent free
and clear of any and all impositions, taxes, liens, charges or expenses of
any nature or kind whatsoever in connection with the ownership and
operation of the Premises. If Rent is not received as provided above and on
or before the fifth day of each calendar month, a 6% late charge shall be
payable by Tenant as provided in Paragraph 13.4 to compensate Landlord for
expense incurred by Landlord for record keeping and collection. In the
event that a late charge is payable, whether or not collected, three times
in any twelve month period, then Rent shall automatically become due and
payable quarterly in advance for the next twelve month period.
5. Deposits.
--------
5.1 Taxes, Insurance and Maintenance Reserve. Tenant shall deposit with
Landlord each month the amount set forth in Paragraph 1 as a reserve to be
used to pay real property taxes, maintenance expenses, management expenses,
and insurance expenses on the Premises which are payable by Tenant under
the terms of this Lease. Tenant's expense obligations shall include a 10%
management fee on Tenant expenses collected by Landlord. At least once
annually Landlord shall provide Tenant with a written reconciliation of
expenses. Within sixty (60) days after Landlord provides Tenant with such
written reconciliation, Tenant may deliver written notice to Landlord
stating that Tenant desires to audit Landlord's determination of such
expenses. If Tenant gives such notice timely requesting the right to
conduct such audit, Landlord shall make available to Tenant for inspection
or auditing during normal business hours, at Landlord's address, all books
and records with respect to such expenses. If the dispute shall be
resolved in Tenant's favor, Landlord shall within thirty (30) days credit
or pay to Tenant the amount of Tenant's overpayment. If the amounts
deposited with Landlord by Tenant under the provisions of this Paragraph
are insufficient to discharge the obligations of Tenant, Tenant shall
deposit with Landlord, upon Landlord's demand, the additional sums
necessary to fully satisfy such obligations. If Tenant's deposits are in
excess of the expenses, the excess shall be credited to the next month's
rent. All monies deposited with Landlord under this Paragraph may be
intermingled with other monies of Landlord and shall not bear interest.
Landlord shall be responsible for paying all taxes, insurance, maintenance
and management expenses from the reserves maintained pursuant to this
Paragraph 5.1, it being understood that Landlord shall be liable for any
damages, fees, penalties or interest incurred by Landlord or Tenant and
resulting from Landlord's failure to timely make such payments.
5.2 Security Deposit. Tenant has deposited with Landlord the Security
Deposit set forth in Paragraph 1 above as security for Tenant's faithful
performance of Tenant's obligations hereunder. If Tenant fails to pay Rent
or other charges due hereunder, or otherwise defaults with respect to any
provision of this Lease, Landlord may use, apply or retain all or any
portion of said deposit for the payment of any Rent or other charge in
default, or for the payment of any other sum to which Landlord may become
obligated by reason of Tenant's default, or to compensate Landlord for any
loss or damage which Landlord may suffer thereby. If Landlord so uses or
applies all or any portion of said deposit, Tenant shall, within ten (10)
days after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore said deposit to the full amount stated in Paragraph
1, and Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep said deposit separate from its
general accounts. If Tenant performs all of Tenant's obligations hereunder,
said deposit, or so much thereof as has not theretofore been applied by
Landlord, shall be returned, to Tenant (or, at Landlord's option, to the
last assignee, if any, of Tenant's interest hereunder) at the expiration of
the Term hereof, and after Tenant has vacated the Premises. No trust
relationship is created herein between Landlord and Tenant with respect to
said Security Deposit. In the event Tenant maintains an audited net worth
in excess of $2,000,000 as of the normal date on which Tenant's outside
auditors examine Tenant's financial statements, the amount of the Security
deposit shall be reduced to $80,000 as of July 15, 1998, to $60,000 as of
July 15, 1999, to $30,000 as of July 15, 2000 and to $20,000 as of July 15,
2001. The irrevocable letter of credit may have an initial term of one
year. Beginning on July 15, 1998 and continuing through the term of the
Lease, Tenant may, at its option, deposit cash with the Landlord or provide
an irrevocable letter of credit in fulfillment of the requirement for a
Security Deposit.
6. Use.
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6.1 Use. The Premises shall be used and occupied only for the uses
stated in Paragraph 1.
6.2 Compliance with Law: Prior Restriction. Tenant shall, at Tenant's
sole expense, comply promptly and continuously with all applicable
statutes, ordinances, rules, regulations, orders, restrictions of record,
and requirements in effect during the Term, or any part of the Term hereof,
regulating the Use of the Premises. Tenant shall not use or permit the use
of the Premises in any manner that will tend to create waste or a nuisance.
Outside storage shall not be allowed under any circumstances unless it is
in full compliance with all City regulations.
6.3 Condition of Premises. Tenant hereby accepts the Premises in their
condition existing as of the date of the execution hereof, and subject to
all applicable zoning, municipal, county and state laws, ordinances and
regulations and any covenants or restrictions of record governing and
regulating the use of the Premises, and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached hereto.
Tenant shall be solely responsible for any costs of, or liabilities
resulting from failure to comply with, ADA or related requirements or
regulations. Tenant acknowledges that neither Landlord nor Landlord's
agents has made any representation or warranty as to the suitability of the
Premises for the conduct of Tenant's business, and that Tenant has made
such legal and factual inquiries with respect thereto as it deems
appropriate and has relied solely thereon.
6.4 Hazardous Materials. Tenant shall not cause any hazardous wastes,
chemicals or materials (collectively "Hazardous Materials") to be used,
generated, stored or disposed of on or about the Premises except in the
ordinary course of Tenant's business, and then only in compliance with all
Hazardous Materials Laws. Hazardous Materials means those substances
described in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the
Resource Conservation and Recovery Act, as amended 42 U.S.C. Section 6901
et seq., any applicable state or local laws and the regulations adopted
under these acts (collectively, "Hazardous Materials Laws"). Tenant shall
be liable to Landlord for any and all damages caused by Tenant's breach of
the foregoing covenants. Landlord shall not be liable for any claims,
damages or losses due to the effects of Hazardous Materials on the Premises
that is caused by owners, tenants, licensees, and invitees of other
properties or is not directly caused by Landlord. Tenant shall indemnify,
defend by counsel acceptable to Landlord and hold Landlord harmless from
and against any claims, damages or liabilities arising out of a breach of
any provision of this Paragraph 6.4. Landlord and Tenant each agree to
promptly notify the other party of, and provide copies of, any
communication received from any governmental entity concerning Hazardous
Materials or the violation of Hazardous Materials Laws that relate to the
Premises. If Landlord requires testing to ascertain whether there has been
any violation of Hazardous Materials Laws on the Premises, then upon prior
written notice to Tenant, Landlord, may require any such testing that is
then customarily used for that purpose. The cost of such testing shall be
an expense of Landlord if Tenant has not violated any Hazardous Material
Laws. In the event that Tenant has violated any Hazardous Material Laws,
then the cost of testing, together with all other costs for remediation or
any other related liability, shall be borne by Tenant. Tenant acknowledges
that, due to the nature of many industrial uses, exposure to hazardous
materials (including noxious gases and liquids) from surrounding neighbors
and properties may occur. Tenant agrees that Landlord shall not be held
liable in any way for any such exposure. Further, to the extent that
Landlord is required by the City, or any other entity with jurisdiction, to
implement actions to protect the Premises from the aforementioned
exposure(s), then Tenant shall participate to the fullest extent reasonably
possible in implementing the protective actions required by the City, or
other authority. The cost of installation and maintenance of any
protective actions or systems shall be a maintenance expense and shall be
reimbursable by Tenant to Landlord as provided in Paragraph 5.1 hereof.
The covenants contained herein shall survive the expiration or earlier
termination of the Lease.
7. Maintenance, Repairs and Alterations.
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7.1 Tenant's Obligations. Tenant shall keep in good order, condition
and repair the Premises and every part thereof (structural and
nonstructural), including the walls, floor, roof, all adjacent sidewalks,
landscaping, driveways, parking lots, fences located in the areas which are
adjacent to and included in the Premises. At the reasonable cost and
expense of Tenant, the landscaping shall be maintained by a professional
gardener and the exterior of the building shall be repainted (with color
and paint scheme to be approved by Landlord) at least once every four (4)
years. Notwithstanding the foregoing, Tenant shall be responsible only for
Tenant's Share of any building expenses required pursuant to this
Paragraph. All costs incurred pursuant to this Paragraph 7.1 shall be paid
pursuant to Paragraph 5.1 hereof.
7.2 Surrender. On the last day of the Term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in the same
condition as when received, clean and free of debris. Tenant shall repair
any damage to the Premises occasioned by the removal of Tenant's trade
fixtures, furnishings and equipment. Tenant shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing on the Premises in good
operating condition.
7.3 Landlord Rights. If Tenant fails to perform Tenant's obligations
under this Paragraph 7, or under any other paragraph of this Lease,
Landlord may, at its option (but shall not be required to), enter upon the
Premises, after ten (10) days' prior written notice to Tenant (except in
the case of an emergency, in which case no notice shall be required),
perform such obligations on Tenant's behalf and put the same in good order,
condition and repair, and the cost thereof shall become due and payable as
additional Rent to Landlord together with Tenant's next Rent payment.
7.4 Landlord's Obligations. Except for the obligations of Landlord
under Paragraph 9 and 14, it is intended by the parties hereto that
Landlord shall have no obligation, in any manner whatsoever, to repair and
maintain the Premises nor the building located thereon nor the equipment
therein, whether structural or non-structural, all of which obligations are
intended to be that of the Tenant. Tenant hereby waives the provisions of
California Civil Code Section 1941 and 1942 or any related or successor
provision of law which would otherwise afford Tenant the right to make
repairs at Landlord's expense, or to terminate this Lease because of
Landlord's failure to keep the Premises in good order, condition and
repair.
7.5 Alterations and Additions.
(a) Tenant shall not, without Landlord's prior written consent, make
any alterations, improvements, additions or Utility Installations in, on or
about the Premises, except for non-structural alterations not exceeding Ten
Thousand Dollars ($10,000.00) in cumulative costs, during the Term of this
Lease. As used in this Paragraph 7.5, the term "Utility Installations"
shall include carpeting, window coverings, air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing, and fencing. Tenant shall not, without Landlord's
prior written consent, make any roof penetrations. Landlord shall have the
right and sole discretion to approve the location and form of any roof
penetrations. Landlord may require that Tenant remove any or all of said
alterations, improvements, additions or Utility Installations at the
expiration of the Term, and restore the Premises to their prior condition.
Landlord may require Tenant to provide Landlord with, at Tenant's sole cost
and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Landlord
against any liability for mechanic's and materialmen's liens and to insure
completion of work. In the event a mechanic's or materialmen's lien is
filed against the Premises, or the Property of which the Premises are a
part, Tenant shall be required to immediately provide a bond to remove the
lien from title. Failure to immediately remove any type of mechanic's or
materialmen's lien from the Premises shall be a material default of this
Lease. Should Tenant make any alterations, improvements, additions or
Utility Installations without the prior approval of Landlord, Landlord may
require that Tenant immediately remove any or all of the same.
(b) Any alterations, improvements, additions or Utility Installations
in, or about the Premises, that Tenant shall desire to make, and which
require the consent of the Landlord, shall be presented to Landlord in
written form, with proposed detailed plans. If Landlord shall give its
consent, the consent shall be deemed conditioned upon Tenant acquiring a
permit to do so from appropriate governmental agencies, the furnishing of a
copy thereof to Landlord prior to the commencement of the work and the
compliance by Tenant with all conditions of said permit in a prompt and
expeditious manner.
(c) Tenant shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Tenant at or for use
in the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Tenant
shall give Landlord not less than ten (10) days' notice prior to the
commencement of any work in or on the Premises, and Landlord shall have the
right to post notices of non-responsibility in or on the Premises as
provided by law.
(d) Unless Landlord requires their removal, as set forth in Paragraph
7.5(a), all alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of
Tenant), which may be made on the Premises, shall become the property of
Landlord and remain upon and be surrendered with the Premises at the
expiration of the Term. Notwithstanding the provisions of this Paragraph
7.5(d),Tenant's machinery and equipment, other than that which is affixed
to the Premises so that it cannot be removed without material damage to the
Premises, shall remain the property of Tenant and may be removed by Tenant
subject to the provisions of Paragraph 7.2.
7.6 Common Area Maintenance. Landlord, at Landlord's option, may
arrange for any portion of the exterior or common area maintenance and
repair. Tenant shall be responsible only for Tenant's Share of such costs.
All costs incurred pursuant to this Paragraph 7.6 shall be paid pursuant to
Paragraph 5.1 hereof.
8. Insurance, Indemnity.
--------------------
8.1 Coverage. The following insurance and any additional insurance
coverage that may be required by law, or holders of mortgages or deeds of
trust, shall be carried protecting Landlord and the holders of any
mortgages or deeds of trust covering the Premises. Any insurance polices
provided by Tenant shall provide that such policies are primary and
non-contributing with any insurance carried by the Landlord.
(a) Insurance covering loss or damage to the Premises in the amount of
the full replacement value thereof, as the same may exist from time to
time, but in no event less than the total amount required by lenders having
liens on the Premises, against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
and special extended perils ("all risk" as such term is used in the
insurance industry). Said insurance shall provide for payment of loss
thereunder to Landlord or to the holders of mortgages or deeds of trust on
the Premises. A stipulated value or agreed amount endorsement deleting the
co-insurance provision of the policy shall be procured with said insurance.
If such insurance coverage has a deductible clause, the deductible amount
shall not exceed $5,000 per occurrence, and Tenant shall be liable for such
deductible amount.
(b) Comprehensive general liability (Landlord's risk only including
without limitation bodily injury, personal injury and property damage
insurance) in the amount of six (6) million dollars or such higher limits
as Landlord may reasonably require.
(c) Insurance against abatement or loss of rent in case of fire or
other casualty in an amount equal to the Rent, Real Property Taxes, and
insurance premium payments to be made by Tenant during one (1) year; and
(d) Commercial general liability insurance (including without
limitation bodily injury, personal injury and property damage), with limits
at least as high as the amounts respectively stated in Paragraph 1 or such
higher limits as Landlord may reasonably require. If insurance with a
general aggregate limit is used, the general aggregate limit shall apply
separately to the Premises.
8.2 Payment of Premiums. Tenant shall obtain the insurance policy
called for in Paragraph 8.1 (d). Landlord shall obtain the insurance
policies called for in Paragraphs 8.1 (a), (b), and (c) and Tenant shall be
responsible only for Tenant's Share of such costs . All costs incurred
pursuant to this Paragraph 8.2 shall be paid pursuant to Paragraph 5.1
hereof. Tenant shall pay the cost thereof upon demand as additional rent.
If Tenant fails to maintain insurance which Tenant has undertaken to
provide, Tenant shall pay for any loss or cost resulting from said failure.
8.3 Insurance Policies. Insurance required hereunder shall be with
companies holding a Best's Insurance Guide "General Policyholder's Rating"
of at least "A" and a " Financial Size Category" rating of at least Class
VII. Insurance policies shall not be cancelable or subject to reduction in
coverage or other modification except after thirty (30) days' prior written
notice to Landlord. The insuring party shall deposit with such mortgage
holders as Landlord may require, policies, duplicates or certificates as
such holders may require, and shall in all cases furnish the other party
with policies, duplicates and certificates. Tenant shall not violate or
permit to be violated any of the conditions or provisions of any policy
provided for in Paragraph 8. 1, and Tenant shall so perform and satisfy the
requirements of the companies writing such policies so that at all times
companies of good standing reasonably satisfactory to Landlord shall be
willing to write and/or continue such insurance.
8.4 Waiver of Subrogation. Tenant and Landlord each hereby release and
relieve the other, and waive their entire right of recovery against the
other for loss or damage arising out of or incident to the perils insured
against hereunder, which perils occur in, on or about the Premises, whether
due to the negligence of Tenant or Landlord or their agents, employees,
contractors and/or invitees. Tenant and Landlord shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
8.5 Indemnity. Tenant shall indemnify and hold harmless Landlord from
and against any and all claims arising from Tenant's use of the Premises,
or from the conduct of Tenant's business or from any activity, work or
things done, permitted or suffered by Tenant in or about the Premises or
elsewhere, and shall further indemnify and hold harmless Landlord from and
against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any negligence of Tenant, or any of
Tenant's agents, contractors, or employees, and from and against all costs,
attorneys' fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon; and in case any
action or proceeding be brought against Landlord by reason of any such
claim, Tenant, upon notice from Landlord, shall defend the same at Tenant's
expense by counsel satisfactory to Landlord. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises arising from
any cause, and Tenant hereby waives all claims in respect thereof against
Landlord.
8.6 Exemption of Landlord from Liability. Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom, or for damage to the goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers, or any other
person in or about the Premises; nor shall Landlord be liable to the
person of Tenant, Tenant's employees, agents or contractors whether such
damage or injury is caused by or results from fire, steam, electricity,
gas, water or rain, or from the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air-conditioning
or lighting fixtures, or from any other cause, whether such damage or
injury results from conditions arising upon the Premises or upon other
portions of the building of which the Premises are a part, or from other
sources or places, regardless of whether the cause of such damage or injury
or the means of repairing same is inaccessible to Tenant. Landlord shall
not be liable for any damages arising from any act or neglect of any other
tenant, if any, of the building or complex in which the Premises are
located.
9. Damage or Destruction.
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9.1 Partial Damage--Insured. Subject to the provisions of Paragraphs
9.3 and 9.4, if the Premises are damaged and such damage was caused by a
casualty covered under an insurance policy, Landlord shall, or at
Landlord's option, Tenant shall repair such damage to Landlord's
satisfaction as soon as reasonably possible and this Lease shall continue
in full force and effect. If the insurance proceeds received by Landlord
are not sufficient to effect such repair, and Landlord elects to repair,
Tenant shall pay to Landlord upon demand any costs incurred by Landlord not
fully covered by insurance proceeds. If Tenant repairs the damage, Landlord
shall reimburse Tenant for the costs of repair to the extent of insurance
proceeds received by Landlord.
9.2 Partial Damage--Uninsured. Subject to the provisions of Paragraphs
9.3 and 9.4, if at any time during the Term hereof the Premises are
damaged, except by a negligent or willful act of Tenant (in which event
Tenant shall make the repairs at its expense), and such damage was caused
by a casualty not covered under an insurance policy required to be
maintained pursuant to Paragraph 8.1, Landlord may, at Landlord's option,
either (a) repair such damage as soon as reasonably possible at Landlord's
expense, in which event this Lease shall continue in full force and effect,
or (b) give written notice to Tenant, within thirty (30) days after the
date of the occurrence of such damage, of Landlord's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage.
In the event Landlord elects to give such notice of Landlord's intention to
cancel and terminate this Lease, Tenant shall have the right within ten
(10) days after the receipt of such notice to give written notice to
Landlord of Tenant's intention to repair such damage at Tenant's expense,
without reimbursement from Landlord, in which event this Lease shall
continue in full force and effect, and Tenant shall proceed to make such
repairs as soon as reasonably possible. If Tenant does not give such notice
within such ten (10) day period, this Lease shall be canceled and
terminated as of the date of the occurrence of such damage.
9.3 Total Destruction. If at any time during the Term of this Lease
there is damage, whether or not an insured loss (including destruction
required by any authorized public authority), to the building of which the
Premises are a part to the extent that the cost of repair exceeds fifty
percent (50%) of the then replacement cost of such building as a whole,
then this Lease shall automatically terminate as of the date of such
destruction. In the event, however, that the damage or destruction was
caused by Tenant's gross negligence or willful misconduct, Landlord shall
have the right to recover Landlord's damages from Tenant.
9.4 Damage Near End of Term. If the Premises are damaged during the
last year of the Term of this Lease, Landlord may, at Landlord's option,
cancel and terminate this Lease as of the date of occurrence of such damage
by giving written notice to Tenant of Landlord's election to do so within
thirty (30) days after the date of occurrence of such damage.
9.5 Abatement of Rent. In the event of damage described in Paragraphs
9.1 or 9.2, and Landlord or Tenant repairs or restores the Premises, Rent
for the period during which such damage, repair or restoration continues
shall be abated in proportion to the degree to which Tenant's use of the
Premises is impaired, but only to the extent of any proceeds received by
Landlord from rental abatement insurance described in Paragraph 8. 1.
Except for the abatement of Rent, if any, Tenant shall have no claim
against Landlord for any damage suffered by reason of any such damage,
destruction, repair or restoration.
9.6 Waiver. Tenant and Landlord hereby waive the provisions of
California Civil Code Paragraphs 1932 (2) and 1933 (4) or any related or
successor provision of law which relate to termination of leases when the
thing leased is destroyed and agree that such event shall be governed by
the terms of this Lease.
10. Real Property Taxes.
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10.1 Payment of Taxes. Landlord shall pay and Tenant shall reimburse
Landlord the real property tax, as defined in Paragraph 10.2, applicable to
the Premises during the Term of this Lease. All costs incurred pursuant to
this Paragraph 10.1 shall be paid pursuant to Paragraph 5.1 hereof. If
deposits collected for real property taxes as provided in Paragraph 5.1 are
not sufficient to discharge Tenant's obligations, payment of the balance
shall be made at least ten (10) days prior to the delinquency date by
depositing the balance with Landlord. If any such taxes paid by Tenant
shall cover any period of time after the expiration of the Term hereof,
Tenant's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year during which this Lease shall be
in effect, and Landlord shall reimburse Tenant to the extent required
within thirty (30) days following expiration of the Term. If Tenant shall
fail to pay any such taxes, Landlord shall have the right to pay the same,
in which case Tenant shall repay such amount to Landlord with Tenant's next
Rent installment, together with interest at the maximum rate then allowable
by law.
10.2 Definition of "Real Property Tax". As used herein, the term Real
Property Tax shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed on the Premises by
any authority having the direct or indirect power to tax, including any
city, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against
any legal or equitable interest of Landlord in the Premises, or in the real
property of which the Premises are a part, as against Landlord's right to
rent or other income therefrom, and as against Landlord's business of
leasing the Premises. Real Property Tax shall also include any tax, fee,
levy, assessment or charge (i) in substitution of, partially or totally,
any tax, fee, levy, assessment or charge hereinabove included within the
definition of Real Property Tax or (ii) the nature of which was
hereinbefore included within the definition of Real Property Tax.
10.3 Joint Assessment. If the Premises are not separately assessed,
Tenant's liability shall be an equitable proportion of the Real Property
Taxes for all of the land and improvements included within the tax parcel
assessed, such proportion to be determined by Landlord from the respective
valuations assigned in the assessor's work sheets or such other information
as may be reasonably available. Landlord's reasonable determination
thereof, in good faith, shall be conclusive.
10.4 Personal Property Taxes. Tenant shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all personal property of Tenant contained in the Premises or
elsewhere. When possible, Tenant shall cause said trade fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Landlord.
11. Utilities.
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Tenant shall pay for heat, water, gas, electricity, and any other
utilities and services supplied to the Premises, together with taxes
thereon. Tenant shall be responsible for any installation or hook-up
charge. Landlord shall not be liable to Tenant for interruption in or
curtailment of any utility service, nor shall any such interruption in or
curtailment constitute a constructive eviction or grounds for rental
abatement. If any such services are not separately metered to Tenant,
Tenant shall pay a reasonable proportion, to be determined by Landlord, of
all charges jointly metered with other premises.
12. Assignment and Subletting.
-------------------------
12.1 Landlord's Consent Required. Tenant shall not voluntarily or by
operation of law assign, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the
Premises without Landlord's prior written consent. Landlord shall not
unreasonably withhold its consent to an assignment or sublet, provided the
proposed assignee or subtenant is reasonably satisfactory to Landlord as to
credit and will occupy and use the Premises for the same purposes specified
in Paragraph 1. Any attempted assignment, transfer, mortgage, encumbrance
or subletting without such consent shall constitute a breach of this Lease
and be voidable at Landlord's election. Tenant shall pay to Landlord one
thousand dollars ($1000) as compensation for expenses in connection with
any request by Tenant for Landlord's consent.
12.2 No Release of Tenant. Regardless of Landlord's consent, no
subletting or assignment shall release Tenant of Tenant's obligation, or
alter the primary liability of Tenant to pay the Rent and to perform all
other obligations to be performed by Tenant hereunder. The acceptance of
Rent by Landlord from any other person shall not be deemed to be a waiver
by Landlord of any provision hereof. Consent to one assignment or
subletting shall not be deemed consent to any subsequent assignment or
subletting.
12.3 Recapture of Premises. In connection with any proposed assignment
or sublease, Tenant shall submit to Landlord in writing (a) the name of the
proposed assignee or subtenant, (b) such information as to its financial
responsibility and standing as Landlord may reasonably require, and (c) all
of the terms and conditions upon which the proposed assignment or
subletting is to be made. Landlord shall have an option to cancel and
terminate this Lease with respect to all, or such portion, of the Premises
which is to be assigned or sublet. Landlord may exercise said option in
writing within thirty (30) days after its receipt from Tenant of such
request to assign or sublease the Premises. If Landlord shall exercise its
option, Tenant shall surrender possession of the entire Premises, or the
portion thereof which is the subject of the option. If this Lease is
canceled as to a portion of the Premises only, the Rent after the date of
cancellation shall be reduced in the proportion that the floor area of the
canceled portion bears to the total floor area of the Premises.
12.4 Excess Sublease Rental. If, on account of or in connection with
any assignment or sublease, Tenant receives rent or other consideration in
excess of the Rent called for hereunder, or in the case of the sublease of
a portion of the Premises, in excess of the pro rata Rent based on the
floor area of such portion, after appropriate adjustments to assure all
other payments called for hereunder are appropriately taken into account,
Tenant shall pay to Landlord fifty percent (50%) of the excess of such
payment of rent or other consideration received by Tenant promptly after
its receipt, after deducting reasonable expenses incurred in connection
therewith, including attorney's fees, brokerage commissions and the cost of
any improvements to be paid for by Tenant.
13. Defaults; Remedies.
------------------
13.1 Defaults. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by
Tenant:
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant to make any payment of Rent or any other
payment required to be made by Tenant hereunder, as and when due, where
such failure shall continue for a period of three (3) days after written
notice thereof from Landlord to Tenant.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by
Tenant, other than described in Paragraph 13.1 (b), where such failure
shall continue for a period of thirty (30) days after written notice
thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's default is such that more than thirty (30) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Tenant of any general arrangement or assignment
for the benefit of creditors; (ii) the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Tenant, the same is dismissed
within sixty (60) days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within thirty (30) days.
(e) The discovery by Landlord that any financial statement given to
Landlord by Tenant, any assignee of Tenant, any subtenant of Tenant, any
successor in interest or any guarantor of Tenant's obligations hereunder
was materially false.
13.2 Remedies. In the event of any material default or breach by
Tenant, Landlord may at any time thereafter, with or without notice or
demand, and without limiting Landlord in the exercise of any right or
remedy which Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Premises, in which
case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event, Landlord shall be
entitled to recover from Tenant all damages incurred by Landlord by reason
of Tenant's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and
any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount which the unpaid Rent
for the balance of the Term after the time of such award exceeds the amount
of such rental loss for the same period that Tenant proves could be
reasonably avoided; and that portion of the leasing commission paid by
Landlord applicable to the unexpired Term of this Lease. Unpaid
installments of Rent or other sums shall bear interest from the date due at
the maximum rate then allowable by law.
(b) Maintain Tenant's right to possession in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to
recover the Rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the State of California.
13.3 Default by Landlord. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within thirty
(30) days after written notice by Tenant to Landlord, and to the holder of
any mortgage or deed of trust covering the Premises whose name and address
shall have theretofore been furnished to Tenant in writing, specifying
wherein Landlord has failed to perform such obligations; provided however,
that if the nature of Landlord's obligation is such that more than thirty
(30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within 10 days of written notice
of default and thereafter diligently prosecutes the same to completion.
13.4 Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, and late charges which may
be imposed on Landlord by the terms of any mortgage or trust deed covering
the Premises. Accordingly, if any installment of Rent or any other sum due
from Tenant shall not be received by Landlord or Landlord's designee within
five (5) days after such amount shall be due, then, without any requirement
for notice to Tenant, Tenant shall pay to Landlord a late charge equal to
six percent (6%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of such late
charge by Landlord shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder.
14. Condemnation.
------------
If the Premises or any portion thereof are taken under the power of
eminent domain, or sold under the threat of the exercise of said power (all
of which are herein called "Condemnation''), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the
floor area of the building or the Premises, or more than twenty-five
percent (25%) of the land area of the Premises which is not occupied by any
building, is taken by Condemnation; then Tenant may, at Tenant's option to
be exercised in writing only within ten (10) days after Landlord shall have
given Tenant written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have
taken possession), terminate this Lease as of the date the condemning
authority takes such possession. If Tenant does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Premises remaining, except that the Rent
shall be reduced in the proportion that the floor area taken bears to the
total floor area of the building situated on the Premises. No reduction in
Rent shall occur if the only area taken is that which does not have a
building located thereon. Any award for the taking of all or any part of
the Premises under the power of eminent domain, or any payment made under
threat of the exercise of such power, shall be the property of Landlord,
whether such award shall be made as compensation for diminution in value of
the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Tenant shall be entitled to any award for loss or
damage to Tenant's trade fixtures and removable personal property. In the
event that this Lease is not terminated by reason of such Condemnation,
Landlord shall, to the extent of severance damages received by Landlord in
connection with such Condemnation, repair any damage to the Premises caused
by such Condemnation, except to the extent that Tenant has been reimbursed
therefor by the condemning authority. Tenant shall pay any amount in excess
of such severance damages required to complete such repair.
15. Examination of Lease.
--------------------
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of, or option to, lease. This instrument
is not effective as a lease or otherwise until execution and delivery by
Landlord and Tenant.
16. Estoppel Certificate.
--------------------
(a) Tenant shall, at any time during the Term, upon ten (10) days prior
written notice from Landlord, execute, acknowledge and deliver to Landlord
a statement in writing in the form attached hereto as Exhibit "B" (i)
certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification, and certifying that
this Lease, as so modified, is in full force and effect) and the date to
which the Rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if
any are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises.
(b) At Landlord's option, Tenant's failure to deliver such statement,
within ten (10) days of receipt of written notice, shall be a material
breach of this Lease or shall be conclusive upon Tenant (i) that this Lease
is in full force and effect, without modification except as may be
represented by Landlord, (ii) that there are no uncured defaults in
Landlord's performance, and (iii) that not more than one month's Rent has
been paid in advance.
(c) If Landlord desires to finance, refinance or sell the Premises, or
any part thereof, Tenant hereby agrees, upon ten (10) days prior written
notice, to deliver to Landlord such financial statements of Tenant as may
be reasonably required by a lender or purchaser. Such statement shall
include the past three years' financial statements of Tenant. All such
financial statements shall be received by Landlord in confidence and shall
be used only for the purposes herein set forth.
17. Landlord's Liability.
--------------------
Whenever Landlord conveys its interest in the Premises, Landlord shall
be automatically released from all liability as respects the further
performance of covenants on the part of Landlord herein contained provided
the assignee executes an assumption agreement agreeing to assume all of
Landlord's obligations with respect to this Lease. If requested, Tenant
shall execute a form of release and such other documentation as may be
required to further effect these provisions. Tenant agrees to look solely
to Landlord's estate and interest in the Premises for the satisfaction of
any liability, duty or obligation of Landlord in respect to this Lease, or
the relationship of Landlord and Tenant hereunder, and no other assets of
Landlord shall be subject to any liability therefor. Tenant agrees it will
not seek, and hereby waives, any recourse against the individual partners,
directors, officers, employees or shareholders of Landlord, or any of their
personal assets, for such satisfaction.
18. Severability.
------------
The invalidity of any provision of this Lease as determined by a court
of competent jurisdiction shall in no way affect the validity of any other
provision hereof.
19. Interest On Past-Due Obligations.
--------------------------------
Except as expressly herein provided, any amount due to Landlord not
paid when due, shall bear interest at the maximum rate then allowable by
law from the date due. Payment of such interest shall not excuse or cure
any default by Tenant under this Lease.
20. Time of Essence.
---------------
Time is of the essence in this Lease and every provision thereof.
21. Additional Rent.
---------------
Any monetary obligations of Tenant to Landlord under the terms of this
Lease shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments.
---------------------------------------------
This Lease contains all agreements of the parties with respect to any
matter mentioned herein. No prior agreement or understanding pertaining to
any such matter shall be effective. This Lease may be modified in writing
only, signed by the parties in interest at the time of the modification.
23. Notices.
-------
Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal service or by certified mail, return
receipt requested. Notice by certified mail shall be deemed served on the
date of delivery as shown on the postal receipt. Either party may, by
notice to the other, specify a different address for notice purposes,
except that, upon Tenant's taking possession of the Premises, the Premises
shall constitute Tenant's address for notice purposes. A copy of all
notices to be given to Landlord hereunder shall be concurrently transmitted
by Tenant to such party or parties at such addresses as Landlord may
hereafter designate by notice to Tenant.
24. Waivers.
-------
No waiver by Landlord of any provision hereof shall be deemed a waiver
of any other provision hereof or of any subsequent breach by Tenant of the
same or any other provision. Landlord's consent to or approval of any act
shall not be deemed to render unnecessary the obtaining of Landlord's
consent to or approval of any subsequent act by Tenant. The acceptance of
Rent hereunder by Landlord shall not be a waiver of any preceding breach by
Tenant or of any provision hereof, other than the failure of Tenant to pay
the particular Rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such Rent. Partial or
incomplete payments accepted by Landlord shall not be a waiver or
considered an accord and satisfaction of any amounts due.
25. Captions.
--------
Paragraph captions are not a part hereof.
26. Holding Over.
------------
If Tenant remains in possession of the Premises or any part thereof
after the expiration of the Term without the express written consent of
Landlord, such occupancy shall be a tenancy from month to month at a rental
equal to the Rent during the last month of the Term increased by one
hundred percent (100%) and upon all the terms hereof applicable to a
month-to-month tenancy
27. Cumulative Remedies.
-------------------
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in
equity.
28. Covenants and Conditions.
------------------------
Each provision of this Lease performable by any party shall be deemed
both a covenant and a condition.
29. Binding Effect; Choice of Law.
-----------------------------
Subject to the provisions of Paragraphs 12 and 17, this Lease shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns and legal representatives. This Lease shall
be governed by the laws of the State of California and any litigation
between Landlord and Tenant shall be initiated in the county in which the
Premises are located.
30. Subordination.
-------------
(a) This Lease, at Landlord's option, shall be subordinate to any
mortgage, deed of trust or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part,
and to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions
thereof. Landlord's election to subordinate this Lease shall not be
effective unless the mortgagee or trustee shall execute with Tenant a
non-disturbance agreement recognizing that Tenant's right to quiet
possession of the Premises shall not be disturbed, if Tenant is not in
default, and so long as Tenant shall pay the Rent and observe and perform
all the provisions of this Lease. If any mortgagee or trustee shall elect
to have this Lease prior to the lien of its mortgage or deed of trust, and
shall give written notice thereof to Tenant, this Lease shall be deemed
prior to such mortgage or deed of trust, whether this Lease is dated prior
or subsequent to the date of said mortgage or deed of trust or the date of
recording thereof.
(b) Tenant agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Tenant's
failure to execute such documents within ten (10) days after written demand
shall constitute a default by Tenant hereunder, or at Landlord's option,
Landlord shall execute such documents on behalf of Tenant as Tenant's
attorney-in-fact. Tenant does hereby make, constitute and irrevocably
appoint Landlord as Tenant's attorney-in-fact and in Tenant's name, place
and stead to execute such documents.
31. AS IS.
-----
Except for the express representations and warranties of Landlord
contained herein, Tenant is leasing the Premises "AS IS" without any
warranty of Landlord, express or implied, as to the nature or condition of,
or title to the Premises, or its fitness for Tenant's intended use of same.
Tenant is relying solely upon its own independent inspection, investigation
and analysis of the Premises as it deems necessary or appropriate in so
leasing the Premises from Landlord (including, without limitation, any and
all matters concerning the condition, use or suitability of the Premises).
Tenant is not relying in any way upon any representations, statements,
agreements, warranties, studies, plans, reports, descriptions, guidelines
or other information or material furnished by Landlord or its
representatives, whether oral or written, express or implied, of any nature
whatsoever regarding any of the foregoing matters.
32. Landlord's Access.
-----------------
Landlord and Landlord's agents shall have the right to enter the
Premises upon reasonable notice and at reasonable times for the purpose of
inspecting the same, showing the same to prospective purchasers, lenders,
or tenants, and making such tests, alterations, repairs, improvements or
additions to the Premises, or to the building of which they are a part, as
Landlord may deem necessary or desirable. Landlord may, at any time during
the last one hundred eighty (180) days of the Term hereof, place on or
about the Premises any ordinary "For Sale" or "For Lease" signs, all
without rebate of Rent or liability to Tenant.
33. Auctions.
--------
Tenant shall not conduct any auction without Landlord's prior written
consent.
34. Signs.
-----
Any sign placed on the Premises shall contain only Tenant's name or the
name of any affiliate of Tenant actually occupying the Premises, but no
advertising matter. No such sign shall be erected until Tenant has obtained
Landlord's written approval, of the location, materials, size, design, and
content thereof and any necessary permit therefor. Tenant shall remove any
such sign upon termination and return the Premises to their condition prior
to the placement of said sign.
35. Merger.
------
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, or a termination by Landlord, shall not work a merger
and shall, at the option of the Landlord, terminate all or any existing
subtenancies or may, at the option of Landlord, operate as an assignment to
Landlord of any or all of such tenancies.
36. Easements, Boundary Changes.
---------------------------
Landlord reserves to itself the right, from time to time, to grant such
easements, rights, dedications and enact boundary and common area
configuration adjustments that Landlord deems necessary or desirable and to
cause the recordation of parcel maps and restrictions, so long as they do
not unreasonably interfere with the use of the Premises by Tenant. Tenant
shall sign any of the aforementioned documents upon request of Landlord and
failure to do so shall constitute a breach of this Lease by Tenant.
37. Quiet Possession.
----------------
Upon Tenant's paying the Rent, additional rent and other sums provided
hereunder and observing and performing all of the covenants, conditions and
provisions on Tenant's part to be observed and performed hereunder, Tenant
shall have quiet possession of the Premises for the entire Term hereof,
subject to the provisions of this Lease.
38. Guarantor.
---------
It shall constitute a Default of the Tenant under this Lease if any
Guarantor fails or refuses, upon reasonable request by Landlord to give:
a) evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and
including in the case of a corporate Guarantor, a certified copy of a
resolution of its board of directors authorizing the making of such
guaranty, together with a certificate of incumbency showing the signature
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Landlord
or (c) written confirmation that the guaranty is still in effect.
39. Landlord's Lien.
---------------
As security for Tenant's payment of rent, damages and all other
payments required to be made pursuant to this Lease, Tenant hereby grants
Landlord a lien upon all property of Tenant now, or subsequently located
upon the Premises. If Tenant abandons or vacates any substantial portion
of the Premises, or is in default in the payment of any rental, damage or
other payments required to be made pursuant to this Lease, Landlord may
enter upon the Premises, by force if necessary, and take possession of any
or all of the personal property, and may sell all or any part of the
personal property at a public or private sale, in one successive sales,
with or without notice, to the highest bidder for cash, and, on behalf of
Tenant, sell and convey all or part of the personal property to the highest
bidder, delivering to the highest bidder all of Tenant's title and interest
in the personal property sold. The proceeds of the sale of the personal
property shall be applied by Landlord toward the cost of the sale and then
toward the payment of all sums then due by Tenant to Landlord pursuant to
the terms of this Lease.
40. Uniform Commercial Code.
-----------------------
To the extent, if any, this Lease grants Landlord any lien or lien
rights greater than provided by the laws pertaining to "Landlord Liens,"
this Lease is intended as, and constitutes a security agreement within the
meaning of the Uniform Commercial Code of the state in which the Premises
are located, and, Landlord, in addition to the rights prescribed in this
Lease, shall have all of the rights, titles, liens and interests in and to
Tenant's property now or hereafter located, upon the Premises which are
granted a secured party, as that term is defined, under the Uniform
Commercial Code of the state in which the Premises are located, to secure
the payment to Landlord of the various amounts required to be paid by
Landlord pursuant to the terms of this Lease. Tenant will, on request,
execute and deliver to Landlord a financing statement for the purpose of
protecting Landlord's security interest under this Lease, or Landlord may
file this Lease or Memorandum of Lease as a security agreement.
41. Rent Increases.
--------------
The Rent as called for in Paragraph 1 shall commence at $18,544.00 per
month. The Rent shall be increased every 12 months during the Term of the
Lease by the following schedule:
July 16, 1997 to July 15, 1998 $18,544 per month
July 16, 1998 to July 15, 1999 $20,008 per month
July 16, 1999 to July 15, 2000 $21,472 per month
July 16, 2000 to July 15, 2001 $22,936 per month
July 16, 2001 to July 15, 2002 $24,400 per month
42. Tenant Improvement Allowance.
----------------------------
(a) Landlord shall provide a tenant improvement allowance (the
"Improvement Allowance") in the amount of Forty-eight Thousand Eight
hundred and no/l00 Dollars ($48,800.00) for all costs (including design,
permits and construction costs) associated with Tenant's proposed general
purpose office improvements to the Premises. Tenant's proposed
improvements shall be submitted to Landlord for approval prior to
commencement of construction which approval shall not be unreasonably
withheld or delayed. In the event that Tenant's improvements cost more
than the Improvement Allowance, Tenant shall pay all additional costs.
(b) Advances of the Improvement Allowance shall not be made more than
once each month and within thirty (30) days upon which an advance is
requested provided Tenant has supplied Landlord with all materials and
information required below. The amount of each request by Tenant shall
represent the cost of that portion of the tenant improvements completed as
of the date of such request, the cost of all equipment, fixtures and
furnishings which shall be incorporated into the tenant improvements
provided such materials are suitably stored, secured and insured and other
third party design fees and city fees incurred by Tenant and related to the
construction of the tenant improvements.
As a condition to Tenant's right to receive any of the proceeds of the
Improvement Allowance, Tenant shall have furnished to Landlord:
i) a copy of the application for payment issued by the Tenant's
contractor ("Contractor"), together with Tenant's certification
that all of the tenant improvements or any portion thereof covered
by a given application for payment have been completed by the
Contractor and have not been the subject of prior applications for
payment; and
ii) receipted bills paid by Tenant to the Contractor for the
tenant improvements covered by the prior application for payment
and appropriate lien waivers from the Contractor and all
subcontractors waiving any and all lien rights which any of them
may have or acquire for work or material supplied for the tenant
improvements.
The advances from the Improvements Allowance may be paid by check made
out jointly to Tenant and the Contractor and/or subcontractors (as
applicable).
43. Early Entry.
-----------
With the prior written consent of Landlord, Tenant shall have the right
within fifteen (15) days prior to the Scheduled Term Commencement Date, at
its sole risk, cost and expense, to enter upon and install racks and
improvements in the Premises, and the same will not cause Rent to commence;
provided that (a) Tenant shall have paid for and provided evidence to
Landlord of all insurance required under the Lease having been secured;
(b) Tenant shall pay utility charges and other costs and expenses incurred
by Landlord which would not have been incurred except for such early entry
by Tenant, and (c) Tenant does hereby indemnify Landlord from any costs or
liabilities that may be incurred due to Tenant's early entry. Tenant shall
not use the Premises for the storage of inventory or otherwise commence the
operation of business without the express prior written consent of Landlord
which consent shall not be unreasonably withheld or delayed. If an event
of default under the Lease occurs during the period between the date of
occupancy and the date Rent is to begin ("Early Occupancy Period"), then,
on the occurrence of such event of default, Tenant shall then be
responsible for Rent due and payable from Tenant to Landlord. By entry,
Tenant accepts Premises as being in good order, condition and repair in
accordance with the provisions of the Lease. It is further understood that
any improvement of the Premises by the Tenant without written consent of
Landlord is hereby prohibited unless otherwise permitted under the terms of
the Lease.
44. REIT Provision.
--------------
Notwithstanding anything that may be contained in this Lease to the
contrary, no provision in this Lease shall be interpreted so as to have the
effect of providing for payment of Rent, or any increment thereof, based in
whole or in part on the income, net revenues, net income, or profits
derived by the Tenant from the Premises, but may, if applicable, be
construed to provide for Rent, or any increment thereof, based in part on a
fixed percentage of gross receipts or sales or otherwise included in the
term "rents from real Property" as such term is defined in Section 856(d)
of the Internal Revenue Code. Further, no assignment of this Lease, or
sublet under this Lease, will be approved if the effect thereof shall
result in payment to the Landlord of rental based in whole or in part on
the income, net revenues, net income or profits derived by the Tenant,
Tenant's assignee or Tenant's sublessee from the Premises, but may, if
applicable, result in payment to the Landlord of rental based in part on a
fixed percentage of gross receipts or sales or otherwise included in the
term "rents from real property" as such term is defined in Section 856(d)
of the Internal Revenue Code. All documents relating to any permitted
assignment or sublet shall refer to this restriction.
45. Condition on Delivery.
---------------------
Landlord shall deliver the Premises to Tenant clean and free of debris
on the Scheduled Term Commencement Date or such earlier date as agreed upon
by Tenant and Landlord, and Landlord warrants and represents to the Tenant
that the existing electrical, plumbing and mechanical systems in the
Premises shall be in good operating condition as of the Scheduled Term
Commencement Date.
46. No Recording of Lease.
---------------------
Other than as otherwise provided in Paragraph 40 hereof, the parties
agree that this Lease shall not be recorded by either party.
47. Security Measures.
-----------------
Tenant hereby acknowledges that the rental payable to Landlord
hereunder does not include the cost of guard service or other security
measures, and that Landlord shall have no obligation whatsoever to provide
same. Tenant assumes all responsibility for the protection of the
Premises, Tenant, its agents and invitees and their property from the acts
of third parties.
48. Authority.
---------
If Tenant is a corporation, trust or partnership, each individual
executing this Lease on behalf of such entity represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
entity. If Tenant is a corporation, trust or partnership, Tenant shall,
within thirty (30) days after execution of this Lease, deliver evidence of
such authority satisfactory to Landlord.
49. Disclaimers On Authorship.
-------------------------
Landlord and Tenant have contributed to the final form of this Lease.
Therefore, neither Landlord or Tenant should be considered to be the author
of this Lease should authorship affect the interpretation of this Lease by
any tribunal.
50. Amendments.
----------
This lease may be modified only in writing, signed by the Landlord and
Tenant at the time of the modification. The parties shall amend this Lease
from time to time to reflect any adjustments that are made to the Rent or
other rent payable under this Lease. As long as they do not materially
change Tenant's obligations hereunder, Tenant agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
51. Legal Fees.
----------
In the event of the bringing of any action or suit by a party hereto
against another party hereunder by reason of any breach of any of the
covenants or agreements or any inaccuracies in any of the representations
and warranties on the part of the other party arising out of this
Agreement, then in that event, the prevailing party in such action or
dispute, whether by final judgment, or out of court settlement shall be
entitled to have and recover of and from the other party all costs and
expenses of suit, including actual attorneys' fees.
52. Counterparts.
------------
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which, together, shall constitute
one and the same instrument.
53. Applicable Law.
--------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California and venue in Alameda County.
54. Fees and Other Expenses.
-----------------------
Except as otherwise provided herein, each of the parties shall pay its
own fees and expenses in connection with this Agreement.
55. Successors and Assigns.
----------------------
This Agreement shall be binding upon and shall inure to the benefit of
the successors and assigns of the parties hereto.
56. Entire Agreement.
----------------
This Agreement supersedes any prior agreements, negotiations and
communications, oral or written, and contains the entire agreement between
Buyer and Seller as to the subject matter hereof. No subsequent agreement,
representation, or promise made by either party hereto, or by or to an
employee, officer, agent or representative of either party shall be of any
effect unless it is in writing and executed by the party to be bound
thereby.
The Parties hereto have executed this Lease on the dates above their
respective signatures.
"Landlord" "Tenant"
Dated: Dated:
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IBG HUNTWOOD ASSOCIATES THE PANDA PROJECT, INC.
a California general partnership a Florida Corporation
By: EastGroup Properties, General Partner
By: By:
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Tenant's signature is required to be notarized
State of )
County of )
On this day of 19 , before me,
the undersigned Notary Public, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
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Exhibit "B"
TENANT ESTOPPEL CERTIFICATE
(on company letterhead)
DATE:
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To Landlord or Lender as appropriate
RE: Tenancy at
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Gentlemen:
The undersigned, as Lessee/Tenant, hereby confirms and represents to you
the following:
1. That it has accepted possession of the Premises demised pursuant to
the terms of the aforesaid Lease.
2. That the building(s), improvements and space required to be furnished
according to the aforesaid Lease have been satisfactorily completed in
all respects.
3. That the Lessor/Landlord has fulfilled all of its duties of an
inducement nature, and is not in default in any manner in the
performance of any of the terms, covenants or provisions of said
Lease.
4. That the aforesaid Lease has not been modified, altered or amended
except by agreement dated .
5. That there are no offsets or credits against rentals, nor have rentals
been prepaid, except as provided by the Lease terms.
6. That said rentals commence to accrue on the day of
, 19 . The primary Lease term expires on , .
The fixed monthly rental is $ .
7. That we have no notice of an assignment, hypothecation or pledge of
rents or the Lease other than to .
8. We certify that the attached Lease is a true and complete copy of the
Lease and has not been modified, altered and/or amended except as
described in this document.
The above statements are made upon the understanding that the recipient of
this Certificate will rely on them and that these statements are true to
the best of our knowledge and belief.
Sincerely,
By:
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(sign in blue ink)
Officer's Name:
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Officer's Title:
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Estoppel Certificate must be notarized
State of )
County of )
On this day of 19 , before me,
the undersigned Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed
to the within instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
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Initials
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