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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 000-25120
SECURITY DYNAMICS TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 04-2916506
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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20 CROSBY DRIVE
BEDFORD, MA 01730
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 687-7000
------------------------
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 [ ]
As of April 30, 1998, there were 40,880,844 shares of the Registrant's
Common Stock, $.01 par value per share, outstanding.
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SECURITY DYNAMICS TECHNOLOGIES, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1998
TABLE OF CONTENTS
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997....................................... 3
Condensed Consolidated Statements of Income for the three
months ended March 31, 1998 and 1997........................ 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997.................. 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 17
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................... 17
Item 6. Exhibits and Reports on Form 8-K............................ 17
Signature................................................... 18
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PART I. FINANCIAL INFORMATION
SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ITEM 1. FINANCIAL STATEMENTS
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MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(UNAUDITED)
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ASSETS
Current assets:
Cash and equivalents...................................... $ 45,667 $ 96,595
Marketable securities..................................... 119,476 68,064
Accounts receivable (less allowance for doubtful accounts
of $882 in 1998 and $742 in 1997)...................... 25,215 27,551
Inventory................................................. 4,914 3,035
Prepaid expenses and other................................ 6,183 9,338
Prepaid income taxes...................................... -- 2,562
Deferred taxes............................................ 1,238 1,426
-------- --------
Total current assets.............................. 202,693 208,571
-------- --------
Property and equipment -- net............................... 19,295 17,515
-------- --------
Other assets:
Investments............................................... 6,155 3,699
Purchased technology and capitalized software costs,
net.................................................... 60 86
Deferred taxes............................................ 3,371 3,371
Other..................................................... 985 733
-------- --------
Total other assets................................ 10,571 7,889
-------- --------
Total....................................................... $232,559 $233,975
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 7,355 $ 11,137
Accrued payroll and related benefits...................... 2,233 5,254
Accrued expenses and other................................ 6,575 4,071
Income taxes payable...................................... 672 159
Deferred revenue.......................................... 7,529 9,602
-------- --------
Total current liabilities......................... 24,364 30,223
-------- --------
Minority interests........................................ 2,851 3,099
-------- --------
Commitments and contingencies: (notes 4 and 7)
Stockholders' equity:
Common stock, $.01 par value; authorized 80,000,000
shares; issued, 40,857,118 and 35,800,782 shares in
1998 and 1997; outstanding, 40,856,609 and 35,800,486
shares in 1998 and 1997................................ 409 405
Additional paid-in capital................................ 168,131 165,751
Retained earnings......................................... 37,851 35,284
Deferred stock compensation............................... (101) (116)
Treasury stock, common, at cost, 509 and 296 shares in
1998 and 1997.......................................... -- --
Accumulated other comprehensive income.................... (946) (671)
-------- --------
Total stockholders' equity........................ 205,344 200,653
-------- --------
Total....................................................... $232,559 $233,975
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
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Revenue..................................................... $40,246 $29,319
Cost of revenue............................................. 8,616 6,456
------- -------
Gross profit................................................ 31,630 22,863
------- -------
Costs and expenses:
Research and development.................................. 7,113 3,948
Purchased research and development........................ 210 --
Marketing and selling..................................... 13,480 8,869
General and administrative................................ 4,719 3,589
Merger and integration.................................... 2,600 --
------- -------
Total............................................. 28,122 16,406
------- -------
Income from operations...................................... 3,508 6,457
Interest income and other................................... 2,410 1,275
------- -------
Income before provision for income taxes.................... 5,918 7,732
Provision for income taxes.................................. 3,202 2,863
Minority interests.......................................... 248 --
------- -------
Net income.................................................. $ 2,964 $ 4,869
======= =======
Basic earnings per share
Per share amount.......................................... $ .07 $ .13
======= =======
Weighted average shares................................... 40,665 38,480
======= =======
Diluted earnings per share
Per share amount.......................................... $ .07 $ .12
======= =======
Weighted average shares................................... 40,665 38,480
Effect of dilutive options................................ 1,486 1,603
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Adjusted weighted average shares............................ 42,151 40,083
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
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SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
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THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
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Cash flows from operating activities:
Net income................................................ 2,964 4,869
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Deferred taxes......................................... 189 (141)
Purchased research and development..................... 210 --
Depreciation and amortization.......................... 1,594 632
Stock compensation..................................... 295 17
Minority interests..................................... (248) --
Increase (decrease) in cash from changes in:
Accounts receivable.................................. 356 1,332
Inventory............................................ (1,880) (193)
Prepaid expenses and other........................... 3,048 (1,130)
Accounts payable..................................... (4,070) (1,871)
Accrued payroll and related benefits................. (3,018) (885)
Accrued expenses and other........................... 2,713 (1,409)
Prepaid and income taxes payable..................... 3,068 19
Deferred revenue..................................... (2,387) (359)
-------- --------
Net cash provided by (used for) operating
activities...................................... 2,834 881
-------- --------
Cash flows from investing activities:
Purchases of marketable securities........................ (95,056) (22,351)
Proceeds from sale and maturities of marketable
securities............................................. 43,331 27,019
Purchases of property and equipment....................... (3,346) (1,600)
Investments and other..................................... (709) 313
-------- --------
Net cash provided by (used for) investing
activities...................................... (55,780) 3,381
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options................... 2,104 2,108
Minority interest......................................... -- 492
-------- --------
Net cash provided by financing activities......... 2,104 2,600
-------- --------
Effects of exchange rate changes on cash and equivalents.... (86) (1,146)
-------- --------
Net increase (decrease) in cash and equivalents........... (50,928) 5,716
Cash and equivalents, beginning of period................... 96,595 11,688
-------- --------
Cash and equivalents, end of period......................... $ 45,667 $ 17,404
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Security Dynamics Technologies, Inc. (the "Company") and
its wholly owned subsidiaries and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission regarding interim
financial reporting. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the audited
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, as amended.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements, and include all adjustments,
consisting only of normal recurring adjustments, necessary for fair presentation
of the results of the interim periods presented. The operating results for the
interim periods presented are not necessarily indicative of the results expected
for the full year.
On July 15, 1997, the Company completed an acquisition of DynaSoft AB,
("DynaSoft") (the "DynaSoft Acquisition"). On March 26, 1998, the Company
completed an acquisition of Intrusion Detection Inc. ("IDI") (the "IDI
Acquisition"). The DynaSoft Acquisition and the IDI Acquisition have been
accounted for as poolings of interests and therefore the consolidated financial
statements for all periods prior to the respective acquisitions have been
restated to include the accounts and operations of DynaSoft and IDI with those
of the Company.
2. EARNINGS PER COMMON SHARE
In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per
Share." The Company changed the method used to compute earnings per share and
restated all prior periods in accordance with SFAS No. 128. SFAS No. 128
supersedes Accounting Principles Board Opinion No. 15 and is intended to
simplify the computation of earnings per share and to make the U.S. computations
more comparable with international computations by requiring the presentation of
basic and fully diluted earnings per share. The Company's only dilutive stock
equivalents are stock options.
3. INCOME TAXES
The Company provides for income taxes at the end of each interim period
based on the estimated effective tax rate for the full year. Cumulative
adjustments to the tax provision are recorded in the interim period in which a
change in the estimated annual effective rate is determined.
Cash payments for income taxes were approximately $127 and $3,321 for the
three months ended March 31, 1998 and 1997, respectively.
4. CONTINGENCIES
From time to time the Company is named as a defendant in legal actions
arising from its normal business activities. The Company carries insurance
against liability for certain types of risks. Although the amount of liability
that could result from any litigation cannot be predicted, in the opinion of
management, the Company's potential liability on all known claims would not have
a material adverse effect on the consolidated financial position or results of
operations of the Company.
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SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INVESTMENTS
VERISIGN
In January 1998, VeriSign, Inc. ("VeriSign") had an initial public offering
of 3 million shares of its common stock. The VeriSign series A and B convertible
preferred stock held by the Company converted to common stock in connection with
the offering. The offering diluted the Company's ownership to approximately 22%
but increased the value of the Company's equity in VeriSign.
As a result of VeriSign's initial public offering, in accordance with the
equity method of accounting, the Company will recognize an increase in the
amount of its investment in VeriSign, representing its proportionate share of
VeriSign's equity as of December 31, 1997, after considering VeriSign's net
proceeds from the offering. The increase in the investment will be recorded with
a corresponding increase to additional paid in capital, net of deferred income
taxes payable. On April 23, 1998, VeriSign announced it had incurred a net loss
of $5.2 million for the first quarter of 1998 and at March 31, 1998 had total
assets and liabilities of $63.9 million and $12.7 million, respectively. The
Company will record the increase in its investment (approximately $12 million)
and its proportionate share of VeriSign's first quarter net loss (approximately
$1 million) in the second quarter of 1998 as the Company recognizes its
proportionate interest in VeriSign's operating results one quarter in arrears.
VPNET
In December 1996, the Company purchased 250,000 shares of Series B
Preferred Stock of VPNet Technologies, Inc. ("VPNet") of San Jose, California,
for an aggregate purchase price of $1.5 million. VPNet was organized to develop
and market products and technologies for implementing high-performance virtual
private networks. In January 1998, the Company purchased $120,000 of VPNet 8%
convertible debt. The debt is convertible into preferred stock which is
convertible into common stock. The Company also received a warrant to purchase
VPNet Common Stock. The Company's investment in VPNet represents a minority
interest of less than 10% of VPNet's capitalization.
TRINTECH
On March 31, 1998 the Company purchased, in a non-cash transaction, 482,756
ordinary shares of Trintech Group ("Trintech") for $2.0 million. Trintech Group
is an Irish development company organized to develop and market software
products designed to enable secure payment in the electronic marketplace. The
Company's investment represents a minority interest of less than 5% of
Trintech's capitalization. The Company has also agreed to purchase up to $3.0
million of Trintech's Series A Convertible Preferred Shares at such time as
Trintech completes a private placement of such securities.
NCIPHER
In October 1997, the Company purchased 175,285 Ordinary Shares of nCipher
Corporation Limited ("nCipher") for an aggregated purchase price of $512,000.
nCipher is located in the United Kingdom and develops products designed to
accelerate cryptographic processes in Internet security, electronic commerce and
other applications. In January 1998, the Company purchased 93,896 Ordinary
Shares of nCipher for an aggregate purchase price of $336,418. The Company's
investment in nCipher represents a minority interest of less than 5% of
nCipher's capitalization.
6. ACQUISITIONS
In connection with the IDI Acquisition, the Company issued approximately
784,000 shares of common stock in exchange for all of IDI's outstanding common
stock. IDI develops and markets intrusion detection software. Merger and
integration expenses incurred in connection with the IDI acquisition were
approximately $2.6 million. No adjustments were required to conform accounting
policies of the Company and IDI.
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SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue and net income (loss) for each of the previously separate companies
for the periods prior to the IDI Acquisition follow:
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THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
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1998 1997 1997
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REVENUE
Security Dynamics(a)............................. $39,346 $28,419 $135,930
IDI.............................................. 900 900 4,700
------- ------- --------
Total.................................... $40,246 $29,319 $140,630
======= ======= ========
NET INCOME (LOSS)
Security Dynamics(a)............................. $ 3,101 $ 4,561 $ 16,368
IDI.............................................. (137) 308 680
------- ------- --------
Total.................................... $ 2,964 $ 4,869 $ 17,048
======= ======= ========
</TABLE>
- ---------------
(a) Includes revenues and net income of DynaSoft.
7. COMMITMENTS
Effective April 1, 1998, the Company amended its agreement with Progress
Software Corporation ("Progress Software") for the right to use certain of its
software to enhance the functionality of the Company's ACE/Server software. In
order to obtain favorable pricing, the Company agreed to prepay $6.0 million in
installments over the remaining three quarters of 1998. The prepaid royalty will
be recorded as a component of cost of sales as the related products are sold.
8. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The
following is presented in accordance with this statement:
For the three months ended March 31, 1998 and 1997, comprehensive income
is:
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THREE MONTHS ENDED
MARCH 31,
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1998 1997
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Net income.................................................. $2,964 $4,869
Other comprehensive income, net of tax:
Unrealized holding (loss) gain on securities arising
during period.......................................... (102) (1,298)
Foreign currency translation adjustments.................. (173) (239)
------ ------
Comprehensive income........................................ $2,689 $3,332
</TABLE>
Accumulated other comprehensive income consists of the following:
<TABLE>
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FOREIGN UNREALIZED ACCUMULATED
CURRENCY HOLDING (LOSS) OTHER
TRANSLATION GAIN ON COMPREHENSIVE
ADJUSTMENTS SECURITIES INCOME
----------- -------------- -------------
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Balance, December 31, 1997.................. $(750) $ 79 $(671)
Current period change....................... (173) (102) (275)
----- ----- -----
Balance, March 31, 1998..................... $(923) $ (23) $(946)
===== ===== =====
</TABLE>
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SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-2, "Software Revenue
Recognition", which supersedes SOP No. 91-1. The Company adopted SOP No. 97-2
prospectively on January 1, 1998. SOP No. 97-2 generally requires revenue earned
on software arrangements involving multiple elements to be allocated to each
element based on the relative fair values of the elements. In March 1998, the
AICPA postponed the adoption date of certain provisions of SOP No. 97-2. The
adoption of SOP No. 97-2 did not have a material effect on the Company's
revenues and operating results for the three months ended March 31, 1998.
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). The Company will be required
to adopt the provisions of this statement in its annual financial statements for
fiscal 1998. SFAS 131 establishes new standards for reporting information about
operating segments. The Company believes the segment information required to be
disclosed under SFAS 131 will be more comprehensive than previously provided,
including expanded disclosure of income statement and balance sheet items for
each reportable operating segment. The Company has not yet completed its
analysis of the operating segments on which it will report.
10. 1994 STOCK OPTION PLAN
On January 22, 1998 and March 8, 1998, the Board of Directors adopted, and
on April 30, 1998 the stockholders approved, an amendment and restatement of the
1994 Stock Option Plan, as amended increasing the number of shares of Common
Stock authorized for issuance thereunder from 6,570,000 to 9,570,000 shares in
the aggregate.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. 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 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, those set forth below under the caption
"Certain Factors That May Affect Future Results."
The IDI Acquisition was completed on March 26, 1998 and has been accounted
for as a pooling of interests. Accordingly, the results of operations for all
periods discussed below have been restated to include the financial results of
IDI. See Notes 1 and 6 of Notes to Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth income and expense items as a percentage of
total revenue, and the percentage change in dollar amounts of such items, for
the three months ended March 31, 1998 and 1997.
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PERCENTAGE OF
TOTAL PERIOD-TO-PERIOD
REVENUE CHANGE
-------------- ----------------
THREE MONTHS ENDED MARCH 31,
----------------------------------
1998 1997
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Revenue..................................................... 100.0% 100.0% 37.3%
Cost of revenue............................................. 21.4 22.0 33.5
----- ----- -----
Gross profit................................................ 78.6 78.0 38.3
----- ----- -----
Costs and expenses:
Research and development.................................. 17.7 13.5 80.2
Purchased research and development........................ .5 -- 100.0
Marketing and selling..................................... 33.5 30.3 52.0
General and administrative................................ 11.7 12.2 31.5
Merger and integration.................................... 6.5 -- 100.0
----- ----- -----
Total............................................. 69.9 56.0 71.4
----- ----- -----
Income from operations...................................... 8.7 22.0 (45.7)
Interest income and other................................... 6.0 4.3 89.0
----- ----- -----
Income before provision for income taxes.................... 14.7 26.3 (23.5)
Provision for income taxes.................................. 8.0 9.7 11.8
Minority interests.......................................... .6 -- 100.0
----- ----- -----
Net income.................................................. 7.3% 16.6% (39.1)%
===== ===== =====
</TABLE>
REVENUE
The Company's revenue is derived principally from the sales of SecurID
tokens; licensing of ACE/Server, BoKS and SecurPC software; licensing of BSAFE,
TIPEM, S/PAY and S/MAIL encryption engines; licensing of patents; licensing of
Kane Security Analyst and Kane Security Monitor Software and revenues from
maintenance and professional services.
Total revenue increased 37.3% in the first quarter of 1998 to $40,246 from
$29,319 in the first quarter of 1997. This increase in revenue reflected
increases in unit sales of all of the Company's products, except
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ACM/400 and ACM/1600 hardware products. Approximately 60% of the increase in
revenue was attributable to increased sales of SecurID tokens. Approximately 15%
of the increase in revenue was attributable to increased sales of encryption
engine licenses and patent licensing. Approximately 19% of the increase in
revenue was attributable to increased sales of ACE/Server and ACM software
products. The balance of the increase in revenue resulted from increased
maintenance revenue offset by decreased hardware revenue. The Company believes
that the overall increase in sales was attributable in part to growth of the
information security market, with the increased use of the Internet and
corporate intranets and extranets continuing to play significant roles in
developing new opportunities for the Company.
International revenue (excluding Canada) increased 76.3% in the first
quarter of 1998 to $10.4 from $5.9 in the first quarter of 1997 and accounted
for 25.9% and 20.1% of total revenue in the first quarters of 1998 and 1997,
respectively. This increase in international revenue was primarily attributable
to the continuing expansion of the Company's international direct sales force
and increased market penetration of the Company's products in foreign markets.
COST OF REVENUE AND GROSS PROFIT
The Company's cost of revenue consists primarily of costs associated with
the manufacture and delivery of SecurID tokens and hardware products. The
Company's utilizes assembly contractors for most manufacturing. Cost of revenue
also includes royalty fees incurred on the sale of ACE/Server software, royalty
fees payable on the licensing of patent technology and royalties payable under
certain OEM agreements. Cost of revenue includes customer support costs and
production costs, which include labor costs associated with the programming of
SecurID tokens, inspection and quality control functions and shipping costs.
The Company's gross profit increased 38.3% in the first quarter of 1998 to
$31,630, or 78.6% of revenue, from $22,863, or 78.0% of revenue, in the first
quarter of 1997. Approximately 58% of the increase in gross profit was
attributable to increased unit sales of SecurID tokens. Approximately 18% of the
increase in gross profit was attributable to increased licensing sales of
encryption engine technology and patent licensing. Approximately 22% of the
increase in gross profit was attributable to increased licensing sales of
ACE/Server software. In addition, gross profit increased due to increased
maintenance revenues. Gross profit as a percentage of revenue in the first
quarter of 1998 was relatively stable compared to the first quarter of 1997.
In the future, gross profit may be affected by several factors, including
changes in product mix and distribution channels, price reductions (resulting
from volume discounts or otherwise), competition, increases in the cost of
revenue (including increases in material costs associated with the manufacture
of SecurID tokens and hardware products and any software license fees or
royalties payable by the Company) and other factors.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of personnel costs as
well as fees for development services provided by consultants.
Research and development expenses increased 80.2% in the first quarter of
1998 to $7,113 from $3,948 in the first quarter of 1997, and increased as a
percentage of revenue to 17.7% from 13.5% primarily due to increased payroll
costs associated with the employment of additional staff.
MARKETING AND SELLING
Marketing and selling expenses consist primarily of salaries, commissions
and travel expenses of direct sales and marketing personnel and marketing
program expenses.
Marketing and selling expenses increased 52.0% in the first quarter of 1998
to $13,480 from $8,869 in the first quarter of 1997, and increased as a
percentage of revenue to 33.5% from 30.3%. Approximately 57% of the increase in
marketing and selling expenses was attributable to increased payroll costs
associated with the employment of additional staff. Approximately 43% of the
increase in marketing and selling expenses resulted from increased travel
expenses and marketing program expenses. Commission expense remained relatively
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stable for the first quarter of 1998 compared to the first quarter of 1997
primarily because the Company modified its commission plans in 1998.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of personnel costs
for administration, finance, human resources, general management and legal and
accounting fees.
General and administrative expenses increased 31.5% in the first quarter of
1998 to $4,719, or 11.7% of revenue, from $3,589, or 12.2% of revenue, in the
first quarter of 1997. The increase in general and administrative expenses was
primarily due to increased payroll costs associated with the employment of
additional staff.
MERGER AND INTEGRATION EXPENSES
Merger and integration expenses, consisting of legal, accounting,
investment banking and other expenses, incurred in connection with the IDI
Acquisition were $2.6 million in the first quarter of 1998.
INTEREST INCOME AND OTHER
Interest income and other consists primarily of interest earned on the
Company's cash balances and marketable securities.
Interest income increased 89.0% in the first quarter of 1998 to $2,410 from
$1,275 in the first quarter of 1997 due to interest earned on higher cash and
marketable securities balances.
PROVISION FOR INCOME TAXES
The provision for income taxes increased to $3,202 during the first quarter
of 1998 from $2,863 in the first quarter of 1997. This increase was primarily
the result of non-deductible merger and integration expenses incurred in
connection with the IDI Acquisition.
The Company's effective tax rate was 54.1% for the first quarter of 1998
compared to 37.0% for the first quarter of 1997. The effective tax rate increase
was due to non-deductible merger and integration expenses, partially offset by
benefits resulting from the Company's foreign tax strategy.
MINORITY INTERESTS
Minority interests in the consolidated net income was $248 during the three
months ended March 31, 1998. An aggregate of 26% of RSA's Japanese subsidiary is
owned by minority interest stockholders.
NET INCOME
As a result of the above factors, net income in the first quarter of 1998
decreased to $2,964, or 7.3% of revenue, from $4,869, or 16.6% of revenue, in
the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
At March 31, 1998, the Company had cash, cash equivalents and marketable
securities of $165.1 million and working capital of $178.3 million. The Company
has historically funded its operations primarily from cash generated from its
operating activities. During the first quarter of 1998 the Company used the cash
provided by operations principally for working capital needs and to finance
certain costs in connection with the IDI Acquisition. The Company believes that
working capital will be sufficient to meet its anticipated cash requirements
through at least 1999.
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<PAGE> 13
Mergers and Acquisitions
On July 26, 1996, a wholly owned subsidiary of the Company acquired RSA
(the "RSA Merger"). The RSA Merger costs were approximately $6.1 million. On
July 15, 1997, the Company acquired approximately 95% of the outstanding shares
and certain of the outstanding options to acquire shares of DynaSoft in exchange
for approximately 2.7 million shares of the Company's Common Stock. The Company
also paid approximately $6.0 million in cash to certain of stockholders of
DynaSoft in exchange for the remaining outstanding shares and options. The
DynaSoft Acquisition costs were approximately $5.7 million, which included
integration costs, primarily severance, of $0.3 million. The RSA Merger and
DynaSoft Acquisition were accounted for as poolings of interests.
On March 26, 1998, a wholly owned subsidiary of the Company acquired IDI.
The acquisition was accounted for as a pooling of interests merger. The Company
issued approximately 784,000 shares of Common Stock of the Company in exchange
for all of IDI's outstanding common stock. The IDI Acquisition costs were
approximately $2.6 million. See Note 6 of Notes to the Company's Consolidated
Financial Statements.
The Company intends to seek acquisitions of businesses, products and
technologies that are complementary to those of the Company. The Company is
continuing to identify and prioritize additional security technologies which it
may wish to develop, either internally or through the licensing or acquisition
of products from third parties. While the Company engages from time to time in
discussions with respect to potential acquisitions, there can be no assurances
that any such acquisitions will be made or that the Company will be able to
successfully integrate any acquired business. In order to finance such
acquisitions, it may be necessary for the Company to raise additional funds
through public or private financings. Any equity or debt financings, if
available at all, may be on terms which are not favorable to the Company and, in
the case of equity financings, may result in dilution to the Company's
stockholders.
Sales of Common Stock
In October 1997, the Company sold 1,626,000 shares of Common Stock in a
follow-on public offering, which generated $61.1 million of net cash proceeds to
the Company.
The Company generated $2.4 million of cash from employees exercising of
stock options during the first quarter of 1998.
Strategic Investments
During 1995, RSA granted certain rights and privileges in certain
technology to VeriSign in connection with VeriSign's incorporation and received
4,000,000 shares of VeriSign common stock. On April 17, 1995 and February 20,
1996, the Company purchased 425,000 shares of Series A and 72,091 shares of
Series B Convertible Preferred Stock, respectively, of VeriSign for an aggregate
purchase price of $687,000. VeriSign was organized to provide digital
certificates and related services that use public-key cryptography to ensure
essential privacy and authentication features. VeriSign introduced its first
products and services in June 1995; as such, it has a limited operating history
and through December 31, 1997 has incurred significant net losses in each year
since its inception. There can be no assurance that VeriSign will achieve
profitability in the foreseeable future. The Company's voting interest in
VeriSign was approximately 27% and 26% at December 31, 1996 and 1997,
respectively. The Company uses the equity method to account for its investment
in VeriSign. In January 1998, VeriSign has an initial public offering which
diluted the Company's ownership to approximately 22% but increased the Company's
equity in VeriSign.
As a result of VeriSign's initial public offering, in accordance with the
equity method of accounting, the Company will recognize an increase in the
amount of its investment in VeriSign, representing its proportionate share of
VeriSign's equity as of December 31, 1997, after considering VeriSign's net
proceeds from the offering. The increase in the investment will be recorded with
a corresponding increase to additional paid in capital, net of deferred income
taxes payable. On April 23, 1998, VeriSign announced it had incurred a net loss
of $5.2 million for the first quarter of 1998 and at March 31, 1998 had total
assets and liabilities of $63.9 million and $12.7 million, respectively. The
Company will record the increase in its investment (approxi-
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<PAGE> 14
mately $12 million) and its proportionate share of VeriSign's first quarter net
loss (approximately $1 million) in the second quarter of 1998 as the Company
recognizes its proportionate interest in VeriSign's operating results one
quarter in arrears.
In December 1996, the Company purchased 250,000 shares of Series B
Preferred Stock of VPNet Technologies, Inc. ("VPNet") of San Jose, California,
for an aggregate purchase price of $1.5 million. VPNet was organized to develop
and market products and technologies for implementing high-performance virtual
private networks. In January 1998, the Company purchased $120,000 of VPNet 8%
convertible debt. The debt is convertible into preferred stock which is
convertible into common stock. The Company also received a warrant to purchase
VPNet common stock. The Company's investment in VPNet represents a minority
interest of less than 10% of VPNet's capitalization.
On March 31, 1998 the Company purchased, in a non-cash transaction, 482,756
ordinary shares of Trintech Group ("Trintech") for $2.0 million. Trintech Group
is an Irish development company organized to develop and market software
products designed to enable secure payment in the electronic marketplace. The
Company's investment represents a minority interest of less than 5% of
Trintech's capitalization. The Company has also agreed to purchase up to $3.0
million of Trintech's Series A Convertible Preferred Shares at such time as
Trintech completes a private placement of such securities.
In October 1997, the Company purchased 175,285 Ordinary Shares of nCipher
Corporation Limited ("nCipher") for an aggregated purchase price of $512,000.
nCipher is located in the United Kingdom and develops products designed to
accelerate cryptographic processes in Internet security, electronic commerce and
other applications. In January 1998, the Company purchased 93,896 Ordinary
Shares of nCipher for an aggregate purchase price of $336,418. The Company's
investment in nCipher represents a minority interest of less than 5% of
nCipher's capitalization.
Capital Expenditures
The Company's capital expenditures during the first quarter of 1998 were
$3.3 million and were for additional leasehold improvements, office furniture
and equipment, as well as computer equipment for product development, testing
and support to accommodate the Company's continued growth. During the fourth
quarter of 1997, the Company commenced implementation of an information system
which is designed to better meet the Company's growing world-wide information
and business process needs. The Company expects the system, which is represented
by the manufacturer to be Year 2000 compliant, to be operational in 1998 and
estimates the total cost at approximately $5.0 million, of which approximately
$3.5 million will be spent in 1998 ($219,000 was spent in the first quarter of
1998).
Leasing Expenditures
In March 1998, the Company entered into an amendment to its noncancelable
operating lease for facilities in Bedford, Massachusetts. The facilities leased
under the amended agreement provide for approximately 183,000 square feet of
office space, and the annual base rent is approximately $2.6 million per year
through February 2008.
In August and December 1997, the Company entered into two noncancelable
ten-year leases expiring in 2008 for RSA offices in Redwood City, California.
The first facility consists of approximately 27,000 square feet of office space,
and the annual base rent is approximately $1.0 million. The Company plans to
occupy the second facility in June 1998. The second facility consists of
approximately 31,000 square feet of office space, and the annual base rent is
approximately $912,000 and annual operating expenses of approximately $245,000.
Both leases have rent escalation provisions covering years two through ten based
on the Consumer Price Index.
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<PAGE> 15
Royalty Arrangements and Purchased Research and Development
Effective April 1, 1998, the Company amended its agreement with Progress
Software for the right to use certain of its software to enhance the
functionality of the Company's ACE/Server software. In order to obtain favorable
pricing, the Company agreed to prepay $6.0 million in installments over the
remaining three quarters of 1998. The prepaid royalty will be recorded as a
component of cost of sales as products are sold.
The Company expended approximately $210,000 for purchased research and
development technology during the first quarter of 1998.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, software and computer systems may need to be
upgraded or replaced in order to comply with such "Year 2000" requirements.
Although the Company believes that its products and systems are Year 2000
compliant, the Company utilizes third-party equipment and software that may not
be Year 2000 compliant. Failure of such third-party equipment or software to
operate properly with regard to the year 2000 and thereafter could require the
Company to incur unanticipated expenses to remedy any problems, which could have
a material adverse effect on the Company's business, operating results and
financial condition.
Furthermore, the purchasing patterns of customers or potential customers
may be affected by Year 2000 issues as companies expend significant resources to
correct their current systems for Year 2000 compliance. These expenditures may
result in reduced funds available to implement the infrastructure needed to
conduct trusted and secure communications and commerce over information networks
or to purchase products and services such as those offered by the Company, which
could have a material adverse effect on the Company's business, operating
results and financial condition.
The Company has formed a Year 2000 task force. The task force consists of
employees with expertise in areas the Company believes could be affected if not
Year 2000 compliant. The task force has established a Year 2000 compliance plan.
The scope of the plan is to (i) identify the third-party equipment, software,
vendors, systems and suppliers used by the Company which are not Year 2000
compliant, (ii) replace non-compliant third party equipment and software with
compliant equipment and software and find alternatives to non-compliant vendors,
systems and suppliers, and (iii) work with Company customers to overcome
questions and concerns they may have about the impact of Year 2000 compliance on
the Company and its products. The task force has almost completed the
identification phase of the project and anticipates completion of the
replacement phase of the project in 1998. Except for the previously described
worldwide business and information system, the Company does not believe the
identification and replacement of third party equipment and software will have a
material cost to the Company.
Recent Accounting Pronouncements
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-2, "Software Revenue
Recognition", which supersedes SOP No. 91-1. The Company adopted SOP No. 97-2
prospectively on January 1, 1998. SOP No. 97-2 generally requires revenue earned
on software arrangements involving multiple elements to be allocated to each
element based on the relative fair values of the elements. In March 1998, the
AICPA postponed the adoption date of certain provisions of SOP No. 97-2. The
adoption of SOP No. 97-2 did not have a material effect on the Company's
revenues and operating results for the three months ended March 31, 1998.
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131,"). The Company will be required
to adopt the provisions of this statement in its annual financial statements for
fiscal 1998. SFAS 131 establishes new standards for reporting information about
operating segments. The Company believes the segment information required to be
disclosed under SFAS 131 will be more
15
<PAGE> 16
comprehensive than previously provided, including expanded disclosure of income
statement and balance sheet items for each reportable operating segment. The
Company has not yet completed its analysis of the operating segments on which it
will report.
Certain Factors That May Affect Future Results
This Quarterly Report on Form 10-Q contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. 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. The following important
factors, among others, could cause actual results to differ materially from
those indicated by forward-looking statements made in this report and presented
elsewhere by management from time to time. Such forward-looking statements
represent management's current expectations and are inherently uncertain.
Investors are warned that actual results may differ from management's
expectations.
A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, general economic conditions,
the Company's continued ability to develop and introduce products, the
introduction of new products by competitors, pricing practices of competitors,
expansion of the Company's sales distribution capability, the cost and
availability of components and the Company's ability to control costs.
The Company's success is dependent in part on its ability to complete its
integration of the operations of IDI, DynaSoft and RSA in an efficient and
effective manner. The successful combination of the Company, IDI, DynaSoft and
RSA in a rapidly changing high technology industry may be more difficult to
accomplish than in other industries. The combination of these companies and any
future acquisitions will require, among other things, integration of the
companies' respective product offerings and coordination of their sales and
marketing and research and development efforts. There can be no assurance that
such integration will be accomplished smoothly or successfully. The difficulties
of such integration may be increased by the necessity of coordinating
geographically separated organizations. The integration of certain operations
will require the dedication of management resources which may temporarily
distant attention from the day-to-day business of the combined company. The
inability of management to successfully integrate the operations of these
companies could have a material adverse effect on the business and results of
operations of the Company.
The Company's success is also dependent on the success of its SecurSight
strategy, which is a family of enterprise security solutions being developed by
the Company that would enable organizations to support and manage the growing
use of public and private keys, digital signatures and digital certificates for
assuring confidentiality and privacy on an enterprise-wide scale. The success of
SecurSight is dependent on a number of factors, including without limitation
delays in product development, undetected software errors or bugs, competitive
pressures, technical difficulties, market acceptance of new technologies,
including without limitation the use and implementation of various certificate
management and key management technologies, changes in customer requirements and
government regulations, delays in developing strategic partnerships and general
economic conditions.
The Company's success is highly dependent on its ability to enhance its
existing products and to develop and introduce new products in a timely manner.
If the Company were to fail to introduce new products on a timely basis, the
Company's operating results could be adversely affected. To date, substantially
all of the Company's revenues have been attributable to sales of its enterprise
network and data security products, the licensing of encryption engines and the
provision of related services, and existing and new versions of such products
are expected to continue to represent a high percentage of the Company's revenue
for the foreseeable future. As a result, any factor adversely affecting sales of
these products and services could have a material adverse effect on the
Company's financial condition and results of operations.
Certain components of the Company's products are currently purchased from a
single or limited sources and any interruption in the supply of such components
could adversely affect the Company's operating results.
16
<PAGE> 17
The Company's quarterly operating results may vary significantly depending
on a number of factors, including the timing of the introduction or enhancement
of products by the Company or its competitors, the sizes, timing and shipment of
individual orders, market acceptance of new products, changes in the Company's
operating expenses, personnel changes, mix of products sold, changes in product
pricing, development of the Company's direct and indirect distribution channels
and general economic conditions.
International sales have represented a significant portion of the Company's
sales. The international business and financial performance of the Company may
be affected by fluctuations in foreign exchange rates, difficulties in managing
accounts receivable, tariff regulations and difficulties in obtaining export
licenses.
All of the Company's products are subject to export controls under U.S. law
and applicable foreign government restrictions, including without limitation
restrictions on the export of encryption technology. The Company believes it has
obtained necessary export approvals for the export of the products it currently
exports. There can be no assurance, however, that the list of products and
countries for which export approval is required, and the regulatory policies
with respect thereto, will not be revised from time to time, or that the Company
will be able to obtain necessary regulatory approvals for the export of future
products. The inability of the Company to obtain required approvals under these
regulations could adversely affect the ability of the Company to make
international sales. In addition, the Company may be at a disadvantage in
competing for international sales compared to companies located outside the
United States that are not subject to such restrictions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 26, 1998, the Company acquired all of the outstanding capital
stock of IDI pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of March 26, 1998, by and among the Company, IDI, Apple
Acquisition Corp., a wholly owned subsidiary of the Company, and Robert Kane and
Lillian Kane (the "IDI Stockholders"). Pursuant to the Merger Agreement, the
Company issued 784,342 shares of its Common Stock (the "Shares") to the IDI
Stockholders in exchange for all of the outstanding capital stock of IDI. The
Shares were issued and sold in reliance on Section 4(2) of the Securities Act of
1933, as amended, as a sale by the Company not involving a public offering. No
underwriters were involved with such issuance and sale of Common Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
The Exhibits listed in the Exhibit Index immediately preceding such
Exhibits are filed as part of or are included in this Quarterly Report on Form
10-Q.
B) REPORTS ON FORM 8-K:
On March 27, 1998, the Company filed a Current Report on Form 8-K, dated
March 26, 1998, announcing under Item 5 (Other Events) that the Company had
acquired IDI. No financial statements were required to be filed with such
report.
17
<PAGE> 18
SIGNATURE
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.
SECURITY DYNAMICS TECHNOLOGIES, INC.
/s/ MARIAN G. O'LEARY
---------------------------------------
Marian G. O'Leary
Senior Vice President,
Finance, Chief Financial Officer and
Treasurer
Dated: May 15, 1998
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- ---- -----------
<C> <S>
2.1 Agreement and Plan of Merger by and among the Registrant,
Intrusion Detection Inc., Apple Acquisition Corp., Robert
Kane and Lillian Kane, dated March 26, 1998 is incorporated
herein by reference to Exhibit 2.1 to the Registrant's
Current Report on Form 8-K, dated March 26, 1998 (File No.
000-25120) (the "Form 8-K").
10.1 Registration Rights Agreement by and among the Registrant,
Robert Kane and Lillian Kane, dated March 26, 1998 is
incorporated herein by reference to Exhibit 10.1 to the Form
8-K.
10.2 1994 Stock Option Plan, as amended -- 1998 Restatement is
incorporated herein by reference to Annex A to the
Registrant's Definitive Schedule 14A filed April 1, 1998
(File No. 000-25120).
10.3 Amendment No. 4 to 1994 Stock Option Plan, as amended.
10.4 1998 Deferred Compensation Plan.
10.5 Second Amendment to Lease, dated as of April 8, 1998, by and
between the Registrant and EOP -- Crosby Corporate Center,
L.L.C.
10.6 Rider to Indenture of Lease, dated as of March 11, 1996
between the Registrant and Beacon Properties, L.P.
10.7 Lease Agreement, dated as of August 15, 1997, by and between
the Registrant and Peninsula Office Park Associates, L.P.
10.8 Lease Agreement, dated as of December 19, 1997, by and
between the Registrant and Peninsula Office Park Associates,
L.P.
11 Computation of Income Per Common and Common Equivalent
Share.
27 Financial Data Schedule.
</TABLE>
19
<PAGE> 1
EXHIBIT 10.3
SECURITY DYNAMICS TECHNOLOGIES, INC.
AMENDMENT NO. 4
TO
1994 STOCK OPTION PLAN
The 1994 Stock Option Plan (the "Plan") of Security Dynamics
Technologies, Inc. is hereby amended as follows (capitalized terms used herein
and not defined herein shall have the respective meaning ascribed to such terms
in the Plan):
A new Section 8A shall be inserted after Section 8 to read in its
entirety as follows:
"8A. DEFERRAL.
An optionee who is a participant in a deferred compensation plan
established by the Company may elect, with the permission of the Board
of Directors and in accordance with rules established by the Board of
Directors, to defer the receipt of any shares of Common Stock issuable
upon the exercise of an option provided that such election is
irrevocable and made at least that number of days prior to the exercise
of the option which shall be determined by the Board of Directors. The
optionee's account under such deferred compensation plan shall be
credited with a number of stock units equal to the number of shares so
deferred."
Except as aforesaid, the Plan shall remain in full force and effect.
Adopted by the Board of Directors on January 22, 1998
<PAGE> 1
EXHIBIT 10.4
SECURITY DYNAMICS TECHNOLOGIES, INC.
1998 DEFERRED COMPENSATION PLAN
<PAGE> 2
TABLE OF CONTENTS
Page
Purpose...................................................................... 1
ARTICLE 1 - Definitions...................................................... 1
ARTICLE 2 - Selection, Enrollment, Eligibility............................... 7
2.1 Selection by Committee........................................... 7
2.2 Enrollment Requirements.......................................... 7
2.3 Eligibility; Commencement of Participation....................... 8
2.4 Termination of Participation and/or Deferrals.................... 8
ARTICLE 3 - Deferral Commitments/Crediting/Taxes............................. 8
3.1 Minimum Deferrals................................................ 8
3.2 Maximum Deferral................................................. 9
3.3 Election to Defer; Effect of Election Form....................... 9
3.4 Withholding of Annual Deferral Amounts........................... 9
3.5 Investment of Trust Assets....................................... 10
3.6 Vesting.......................................................... 10
3.7 Crediting/Debiting of Account Balances........................... 10
3.8 FICA and Other Taxes............................................. 12
3.9 Distributions.................................................... 13
3.10 Employer Deferral................................................ 13
3.11 Deferrals From Other Plans....................................... 13
ARTICLE 4 - Short-Term Payout; Unforeseeable Financial Emergencies;
Withdrawal Election.............................................. 14
4.1 Short-Term Payout................................................ 14
4.2 Other Benefits Take Precedence Over Short-Term................... 14
4.3 Withdrawal Payout/Suspensions for Unforeseeable Financial
Emergencies...................................................... 14
4.4 Withdrawal Election.............................................. 15
ARTICLE 5 - Retirement Benefit............................................... 15
5.1 Retirement Benefit............................................... 15
5.2 Payment of Retirement Benefit.................................... 15
5.3 Death Prior to Completion of Retirement Benefit.................. 16
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<PAGE> 3
ARTICLE 6 - Pre-Retirement Survivor Benefit.................................. 16
6.1 Pre-Retirement Survivor Benefit.................................. 16
6.2 Payment of Pre-Retirement Survivor Benefit....................... 16
ARTICLE 7 - Termination Benefit.............................................. 16
7.1 Termination Benefit.............................................. 16
7.2 Payment of Termination Benefit................................... 16
ARTICLE 8 - Disability Waiver and Benefit.................................... 17
8.1 Disability Waiver................................................ 17
8.2 Continued Eligibility; Disability Benefit........................ 17
ARTICLE 9 - Beneficiary Designation.......................................... 18
9.1 Beneficiary...................................................... 18
9.2 Beneficiary Designation; Change.................................. 18
9.3 Acknowledgment................................................... 18
9.4 No Beneficiary Designation....................................... 18
9.5 Doubt as to Beneficiary.......................................... 18
9.6 Discharge of Obligations......................................... 19
ARTICLE 10 - Leave of Absence................................................ 19
10.1 Paid Leave of Absence............................................ 19
10.2 Unpaid Leave of Absence.......................................... 19
ARTICLE 11 - Termination, Amendment or Modification.......................... 19
11.1 Termination...................................................... 19
11.2 Amendment........................................................ 20
11.3 Plan Agreement................................................... 21
11.4 Effect of Payment................................................ 21
ARTICLE 12 - Administration.................................................. 21
12.1 Committee Duties................................................. 21
12.2 Agents........................................................... 21
12.3 Binding Effect of Decisions...................................... 21
12.4 Indemnity of Committee........................................... 22
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<PAGE> 4
12.5 Employer Information............................................. 22
12.6 Multiple Committees.............................................. 22
ARTICLE 13 - Other Benefits and Agreements................................... 22
13.1 Coordination with Other Benefits................................. 22
ARTICLE 14 - Claims Procedures............................................... 22
14.1 Presentation of Claim............................................ 22
14.2 Notification of Decision......................................... 23
14.3 Review of a Denied Claim......................................... 23
14.4 Decision on Review............................................... 23
14.5 Legal Action..................................................... 24
ARTICLE 15 - Trust........................................................... 24
15.1 Establishment of the Trust....................................... 24
15.2 Interrelationship of the Plan and the Trust...................... 24
15.3 Distributions From the Trust..................................... 24
ARTICLE 16 - Miscellaneous................................................... 25
16.1 Status of Plan................................................... 25
16.2 Unsecured General Creditor....................................... 25
16.3 Employer's Liability............................................. 25
16.4 Nonassignability................................................. 25
16.5 Not a Contract of Employment..................................... 25
16.6 Furnishing Information........................................... 26
16.7 Terms............................................................ 26
16.8 Captions......................................................... 26
16.9 Governing Law.................................................... 26
16.10 Notice........................................................... 26
16.11 Successors....................................................... 27
16.12 Validity......................................................... 27
16.13 Incompetent...................................................... 27
16.14 Distribution in the Event of Taxation............................ 27
16.15 Insurance........................................................ 28
16.16 Legal Fees To Enforce Rights After Change in Control............. 28
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<PAGE> 5
Security Dynamics Technologies, Inc.
1998 DEFERRED COMPENSATION PLAN
Effective January 22, 1998
PURPOSE
The purpose of this Plan is to provide specified benefits to a select
group of management and highly compensated Employees who contribute materially
to the continued growth, development and future business success of Security
Dynamics Technologies, Inc., a Delaware corporation, and its subsidiaries, if
any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and
for purposes of Title I of ERISA.
ARTICLE 1
DEFINITIONS
For purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" shall mean, with respect to a Participant, a
credit on the records of the Employer equal to the Deferral
Account balance. The Account Balance, and each other specified
account balance, shall be a bookkeeping entry only and shall be
utilized solely as a device for the measurement and
determination of the amounts to be paid to a Participant, or his
or her designated Beneficiary, pursuant to this Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base
Annual Salary relating to services performed during any calendar
year, whether or not paid in such calendar year or included on
the Federal Income Tax Form W-2 for such calendar year, payable
to a Participant as an Employee under any Employer's annual
bonus and cash incentive plans.
1.3 "Annual Deferral Amount" shall mean that portion of a
Participant's Base Annual Salary and Annual Bonus that a
Participant elects to have deferred, and is deferred, in
accordance with Article 3, for any one Plan Year. In the event
of a Participant's Retirement, Disability (if deferrals cease in
accordance with Section 8.1), death or a Termination of
Employment prior to the end of a Plan Year, such year's Annual
Deferral Amount shall be the actual amount withheld prior to
such event.
<PAGE> 6
1.4 "Base Annual Salary" shall mean the annual cash compensation
relating to services performed during any calendar year, whether
or not paid in such calendar year or included on the Federal
Income Tax Form W-2 for such calendar year, excluding bonuses of
every type, commissions, overtime, fringe benefits, stock
options, relocation expenses, incentive payments, non-monetary
awards, directors fees and other fees, automobile and other
allowances paid to a Participant for employment services
rendered (whether or not such allowances are included in the
Employee's gross income). Base Annual Salary shall be calculated
before reduction for compensation voluntarily deferred or
contributed by the Participant pursuant to all qualified or
non-qualified plans of any Employer and shall be calculated to
include amounts not otherwise included in the Participant's
gross income under Code Sections 125, 402(e)(3), 402(h), or
403(b) pursuant to plans established by any Employer; provided,
however, that all such amounts will be included in compensation
only to the extent that, had there been no such plan, the amount
would have been payable in cash to the Employee.
1.5 "Annual Installment Method" shall be an annual installment
payment over the number of years selected by the Participant in
accordance with this Plan, calculated as follows: The Account
Balance of the Participant shall be calculated as of the close
of business three business days prior to the last business day
of the year. The annual installment shall be calculated by
multiplying this balance by a fraction, the numerator of which
is one, and the denominator of which is the remaining number of
annual payments due the Participant. By way of example, if the
Participant elects a 10 year Annual Installment Method, the
first payment shall be 1/10 of the Account Balance, calculated
as described in this definition. The following year, the payment
shall be 1/9 of the Account Balance, calculated as described in
this definition. Each annual installment shall be paid on or as
soon as practicable after the last business day of the
applicable year.
1.6 "Beneficiary" shall mean one or more persons, trusts, estates or
other entities, designated in accordance with Article 9, that
are entitled to receive benefits under this Plan upon the death
of a Participant.
1.7 "Beneficiary Designation Form" shall mean the form established
from time to time by the Committee that a Participant completes,
signs and returns to the Committee to designate one or more
Beneficiaries.
1.8 "Board" shall mean the Board of Directors of the Company.
1.9 "Change in Control" shall mean the first to occur of any of the
following events:
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(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934 (as amended, the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of either (i) the then-outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); PROVIDED,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i) and (ii) of
subsection (c) of this Section 1.9; or
(b) individuals who, as of the date hereof, constitute the members of
the Board (the "Incumbent Directors") ceasing for any reason to
constitute at least a majority of the Board; PROVIDED, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the Incumbent Directors
then in office shall be deemed to be an Incumbent Director (except that
this proviso shall not apply to any individual whose initial election
as a director occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board); or
(c) the consummation of a reorganization, merger or consolidation
involving the Company or a sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), unless, immediately following such Business Combination,
each of the following three conditions is satisfied: (i) all or
substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors, respectively,
of the resulting or acquiring corporation in such Business Combination
(which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of the
Company's assets
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<PAGE> 8
either directly or through one or more subsidiaries) (such resulting or
acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
respectively, (ii) no Person (excluding the Acquiring Corporation or
any employee benefit plan (or related trust) maintained or sponsored by
the Company or the Acquiring Corporation) beneficially owns, directly
or indirectly, 30% or more of the then outstanding shares of common
stock of the Acquiring Corporation, or of the combined voting power of
the then-outstanding voting securities of such corporation (except to
the extent that such ownership existed prior to the Business
Combination) and (iii) a majority of the members of the board of
directors of the Acquiring Corporation were Incumbent Directors at the
time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.10 "Claimant" shall have the meaning set forth in Section 14.1.
1.11 "Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time.
1.12 "Committee" shall mean the committee described in Article 12.
1.13 "Company" shall mean Security Dynamics Technologies, Inc., a
Delaware corporation, and any successor to all or substantially
all of the Company's assets or business.
1.14 "Deduction Limitation" shall mean the following described
limitation on a benefit that may otherwise be distributable
pursuant to the provisions of this Plan. Except as otherwise
provided, this limitation shall be applied to all distributions
that are "subject to the Deduction Limitation" under this Plan.
If an Employer determines in good faith prior to a Change in
Control that there is a reasonable likelihood that any
compensation paid to a Participant for a taxable year of the
Employer would not be deductible by the Employer solely by
reason of the limitation under Code Section 162(m), then to the
extent deemed necessary by the Employer to ensure that the
entire amount of any distribution to the Participant pursuant to
this Plan prior to the Change in Control is deductible, the
Employer may defer all or any portion of a distribution under
this Plan. Any amounts deferred pursuant to this limitation
shall continue to be
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credited/debited with additional amounts in accordance with Section 3.7
below. The amounts so deferred and amounts credited thereon shall be
distributed to the Participant or his or her Beneficiary (in the event
of the Participant's death) at the earliest possible date, as
determined by the Employer in good faith, on which the deductibility of
compensation paid or payable to the Participant for the taxable year of
the Employer during which the distribution is made will not be limited
by Section 162(m), or if earlier, the effective date of a Change in
Control. Notwithstanding anything to the contrary in this Plan, the
Deduction Limitation shall not apply to any distributions made after a
Change in Control, distributions made pursuant to Section 4.3 or
distributions made pursuant to Section 4.4.
1.15 "Deferral Account" shall mean (i) the sum of all of a
Participant's Annual Deferral Amounts, plus (ii) amounts
credited in accordance with all the applicable crediting
provisions of this Plan that relate to the Participant's
Deferral Account, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that
relate to his or her Deferral Account.
1.16 "Disability" shall mean a period of disability during which a
Participant qualifies for disability benefits under the
Participant's Employer's long-term disability plan, or, if a
Participant does not participate in such a plan, a period of
disability during which the Participant would have qualified for
permanent disability benefits under such a plan had the
Participant been a participant in such a plan, as determined in
the sole discretion of the Committee. If the Participant's
Employer does not sponsor such a plan, or discontinues to
sponsor such a plan, Disability shall be determined by the
Committee in its sole discretion.
1.17 "Disability Benefit" shall mean the benefit set forth in
Article 8.
1.18 "Election Form" shall mean the form established from time to
time by the Committee that a Participant completes, signs and
returns to the Committee to make an election under the Plan.
1.19 "Employee" shall mean a person who is an employee of any
Employer.
1.20 "Employer(s)" shall mean the Company and/or any of its
subsidiaries (now in existence or hereafter formed or acquired)
that have been selected by the Board or any authorized committee
thereof to participate in the Plan and have adopted the Plan as
a sponsor.
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<PAGE> 10
1.21 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as it may be amended from time to time.
1.22 "Participant" shall mean any Employee (i) who is selected to
participate in the Plan, (ii) who elects to participate in the
Plan, (iii) who signs a Plan Agreement, an Election Form and a
Beneficiary Designation Form, (iv) whose signed Plan Agreement,
Election Form and Beneficiary Designation Form are accepted by
the Committee, (v) who commences participation in the Plan, and
(vi) whose Plan Agreement has not terminated. A spouse or former
spouse of a Participant shall not be treated as a Participant in
the Plan or have an account balance under the Plan, even if he
or she has an interest in the Participant's benefits under the
Plan as a result of applicable law or property settlements
resulting from legal separation or divorce.
1.23 "Plan" shall mean the Company's Deferred Compensation Plan,
which shall be evidenced by this instrument and by each Plan
Agreement, as they may be amended from time to time.
1.24 "Plan Agreement" shall mean a written agreement, as amended from
time to time, which is entered into by and between an Employer
and a Participant. Each Plan Agreement executed by a Participant
and the Participant's Employer shall provide for the entire
benefit to which such Participant is entitled under the Plan;
should there be more than one Plan Agreement, the Plan Agreement
bearing the latest date of acceptance by the Employer shall
supersede all previous Plan Agreements in their entirety and
shall govern such entitlement. The terms of any Plan Agreement
may be different for any Participant, and any Plan Agreement may
provide additional benefits not set forth in the Plan or limit
the benefits otherwise provided under the Plan; provided,
however, that any such additional benefits or benefit
limitations must be agreed to by both the Employer and the
Participant.
1.25 "Plan Year" shall mean a period beginning on January 1 of each
calendar year and continuing through December 31 of such
calendar year.
1.26 "Pre-Retirement Survivor Benefit" shall mean the benefit set
forth in Article 6 for purposes of this Plan only.
1.27 "Retirement", "Retire(s)" or "Retired" shall mean, with respect
to an Employee, severance from employment from all Employers for
any reason other than a leave of absence, death or Disability on
or after the earlier of the attainment of (a) age sixty-five
(65) or (b) age fifty-five (55) with ten
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(10) Years of Service. The definition in this Section 1.27 shall
not have any effect on any other plan maintained by the
Employer.
1.28 "Retirement Benefit" shall mean the benefit set forth in
Article 5.
1.29 "Short-Term Payout" shall mean the payout set forth in
Section 4.1.
1.30 "Termination Benefit" shall mean the benefit set forth in
Article 7.
1.31 "Termination of Employment" shall mean the severing of
employment with all Employers, voluntarily or involuntarily, for
any reason other than Retirement, Disability, death or an
authorized leave of absence.
1.32 "Trust" shall mean one or more trusts established pursuant to
one or more trust agreements between the Company and the trustee
named therein, as amended from time to time.
1.33 "Unforeseeable Financial Emergency" shall mean an unanticipated
emergency that is caused by an event beyond the control of the
Participant that would result in severe financial hardship to
the Participant resulting from (i) a sudden and unexpected
illness or accident of the Participant or a dependent of the
Participant, (ii) a loss of the Participant's property due to
casualty, or (iii) such other extraordinary and unforeseeable
circumstances arising as a result of events beyond the control
of the Participant, all as determined in the sole discretion of
the Committee.
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be
limited to a select group of management and highly compensated
Employees of the Employers, as determined by the Committee in
its sole discretion. From that group, the Committee shall
select, in its sole discretion, Employees to participate in the
Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each
selected Employee shall complete, execute and return to the
Committee a Plan Agreement, an Election Form and a Beneficiary
Designation Form, all within 30 days after he or she is selected
to participate in the Plan. In addition, the Committee shall
establish from time to time such other enrollment requirements
as it determines in its sole discretion are necessary.
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<PAGE> 12
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee
selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the
Committee, including returning all required documents to the
Committee within the specified time period, that Employee shall
commence participation in the Plan on the first day of the month
following the month in which the Employee completes all
enrollment requirements. If an Employee fails to meet all such
requirements within the period required, in accordance with
Section 2.2, that Employee shall not be eligible to participate
in the Plan until the first day of the Plan Year following the
delivery to and acceptance by the Committee of the required
documents.
2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee
determines in good faith that a Participant no longer qualifies
as a member of a select group of management or highly
compensated employees, as membership in such group is determined
in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, the Committee shall have the right, in its sole
discretion, to (i) terminate any deferral election the
Participant has made for the remainder of the Plan Year in which
the Participant's membership status changes, (ii) prevent the
Participant from making future deferral elections and/or (iii)
immediately distribute the Participant's then Account Balance as
a Termination Benefit and terminate the Participant's
participation in the Plan.
ARTICLE 3
DEFERRAL COMMITMENTS/CREDITING/TAXES
3.1 MINIMUM DEFERRALS.
(a) BASE ANNUAL SALARY AND ANNUAL BONUS. For each Plan Year, a
Participant may elect to defer, as his or her Annual
Deferral Amount, part or all of the Participant's Base
Annual Salary and/or Annual Bonus in the following minimum
amounts for each deferral elected:
Minimum
Deferral Amount
-------- -------
Base Annual Salary $10,000
Annual Bonus $10,000
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If an election is made for less than stated minimum
amounts, or if no election is made, the amount deferred
shall be zero.
3.2 MAXIMUM DEFERRAL
(a) BASE ANNUAL SALARY AND ANNUAL BONUS. For each Plan Year, a
Participant may elect to defer, as his or her Annual
Deferral Amount, part or all of the Participant's Base
Annual Salary and/or Annual Bonus up to the following
maximum percentages for each deferral elected:
Minimum
Deferral Amount
-------- -------
Base Annual Salary 75%
Annual Bonus 100%
Notwithstanding the foregoing, if a Participant first
becomes a Participant after the first day of a Plan Year,
or in the case of the first Plan Year of the Plan itself,
the amount of the Base Annual Salary and/or Annual Bonus
which may be deferred shall be limited to the amount of
compensation not yet earned by the Participant as of the
date the Participant submits a Plan Agreement and Election
Form to the Committee for acceptance.
An election to defer Base Annual Salary and/or Annual Bonus
may be expressed as an election to defer (i) a specific
percentage, (ii) a specific dollar amount or (iii) the
excess over a specified dollar amount.
3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM. For each Plan Year
other than the Plan Year beginning in 1998, an irrevocable
deferral election for that Plan Year, and such other elections
as the Committee deems necessary or desirable under the Plan,
shall be made by timely delivering to the Committee, in
accordance with its rules and procedures, before the end of the
Plan Year preceding the Plan Year for which the election is
made, a new Election Form; provided, however, that elections to
defer bonuses payable with respect to a Plan Year shall be made
no later than September 30 of such Plan Year. Deferral elections
of Base Annual Salary for the 1998 Plan Year must be made no
later than thirty days after the Plan is announced to
Participants. If no such Election Form is timely delivered for a
Plan Year, the Annual Deferral Amount shall be zero for that
Plan Year.
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3.4 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the
Base Annual Salary portion of the Annual Deferral Amount shall
be withheld from each regularly scheduled Base Annual Salary
payroll in equal amounts, as adjusted from time to time for
increases and decreases in Base Annual Salary. The Annual Bonus
portion of the Annual Deferral Amount shall be withheld at the
time the Annual Bonus is or otherwise would be paid to the
Participant, whether or not this occurs during the Plan Year
itself. No withholding shall be permitted within twelve months
after the Participant has received a hardship distribution from
the Security Dynamics Technologies, Inc. 401(k) Plan.
3.5 INVESTMENT OF TRUST ASSETS. The Trustee of the Trust shall be
authorized, upon written instructions received from the
Committee or investment manager appointed by the Committee, to
invest and reinvest the assets of the Trust in accordance with
the applicable Trust Agreement, including the disposition of
stock and reinvestment of the proceeds in one or more investment
vehicles designated by the Committee.
3.6 VESTING. A Participant shall at all times be 100% vested in his
or her Deferral Account.
3.7 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and
subject to, the rules and procedures that are established from
time to time by the Committee, in its sole discretion, amounts
shall be credited or debited to a Participant's Account Balance
in accordance with the following rules:
(a) ELECTION OF MEASUREMENT FUNDS. A Participant, in connection
with his or her initial deferral election in accordance
with Section 3.2(a) above, shall elect, on the Election
Form, one or more Measurement Fund(s) (as described in
Section 3.7(c) below) to be used to determine the
additional amounts to be credited to his or her Account
Balance for the first calendar quarter or portion thereof
in which the Participant commences participation in the
Plan and continuing thereafter for each subsequent calendar
quarter in which the Participant participates in the Plan,
unless changed in accordance with the next sentence.
Commencing with the first calendar quarter that follows the
Participant's commencement of participation in the Plan and
continuing thereafter for each subsequent calendar quarter
in which the Participant participates in the Plan, no later
than the next to last business day of the calendar quarter,
the Participant may (but is
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not required to) elect, by submitting an Election Form to
the Committee that is accepted by the Committee, to add or
delete one or more Measurement Fund(s) to be used to
determine the additional amounts to be credited to his or
her Account Balance, or to change the portion of his or her
Account Balance allocated to each previously or newly
elected Measurement Fund. If an election is made in
accordance with the previous sentence, it shall apply to
the next calendar quarter and continue thereafter for each
subsequent calendar quarter in which the Participant
participates in the Plan, unless changed in accordance with
the previous sentence. The Committee may permit changes to
be made more frequently than quarterly and may permit
changes to be made telephonically, in either case, pursuant
to such procedures as the Committee may adopt from time to
time.
(b) PROPORTIONATE ALLOCATION. In making any election described
in Section 3.7(a) above, the Participant shall specify on
the Election Form, in increments of one percentage point
(1%), the percentage of his or her Account Balance to be
allocated to a Measurement Fund (as if the Participant was
making an investment in that Measurement Fund with that
portion of his or her Account Balance).
(c) MEASUREMENT FUNDS. The Participant may elect one or more of
the following measurement funds set forth on Schedule A. As
necessary, the Committee may, in its sole discretion,
discontinue, substitute or add a Measurement Fund. Each
such action will take effect as of the first day of the
calendar quarter that follows by thirty (30) days the day
on which the Committee gives Participants advance written
notice of such change.
(d) CREDITING OR DEBITING METHOD. Subject to charges for
administrative expenses as provided in Section 3.7(f), the
performance of each elected Measurement Fund (either
positive or negative) will be determined by the Committee,
in its sole discretion, based on the performance of the
Measurement Funds themselves. A Participant's Account
Balance shall be credited or debited on a daily basis based
on the performance of each Measurement Fund selected by the
Participant, as determined by the Committee in its sole
discretion, as though (i) a Participant's Account Balance
were invested in the Measurement Fund(s) selected by the
Participant, in the percentages applicable to such calendar
quarter, as of the close of business on the first business
day of such calendar quarter, at the closing price on such
date;
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(ii) the portion of the Annual Deferral Amount that was
actually deferred during any calendar quarter were invested
in the Measurement Fund(s) selected by the Participant, in
the percentages applicable to such calendar quarter, no
later than the close of business on the third business day
after the day on which such amounts are actually deferred
from the Participant's Base Annual Salary through
reductions in his or her payroll, at the closing price on
such date; and (iii) any distribution made to a Participant
that decreases such Participant's Account Balance ceased
being invested in the Measurement Fund(s), in the
percentages applicable to such calendar quarter, no earlier
than three business days prior to the distribution, at the
closing price on such date. If no Measurement Funds hav
been designated, all Accounts will be credited with
interest at the Prime Rate as published in the Wall Street
Journal plus one percent, compounded quarterly.
(e) NO ACTUAL INVESTMENT. Notwithstanding any other provision
of this Plan that may be interpreted to the contrary, the
Measurement Funds are to be used for measurement purposes
only, and a Participant's election of any such Measurement
Fund, the allocation to his or her Account Balance thereto,
the calculation of additional amounts and the crediting or
debiting of such amounts to a Participant's Account Balance
shall not be considered or construed in any manner as an
actual investment of his or her Account Balance in any such
Measurement Fund. In the event that the Company or the
Trustee (as that term is defined in the Trust), in its own
discretion, decides to invest funds in any or all of the
Measurement Funds, no Participant shall have any rights in
or to such investments themselves. Without limiting the
foregoing, a Participant's Account Balance shall at all
times be a bookkeeping entry only and shall not represent
any investment made on his or her behalf by the Company or
the Trust.
3.8 FICA AND OTHER TAXES. For each Plan Year in which an Annual
Deferral Amount is being withheld from a Participant, the
Participant's Employer(s) shall withhold from that portion of
the Participant's Base Annual Salary and Bonus that is not being
deferred, in a manner determined by the Employer(s), the
Participant's share of FICA and other employment taxes on such
Annual Deferral Amount. If necessary, the Committee may reduce
the Annual Deferral Amount in order to comply with this Section
3.8.
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3.9 DISTRIBUTIONS. The Participant's Employer(s), or the trustee of
the Trust, shall withhold from any payments made to a
Participant under this Plan all federal, state and local income,
employment and other taxes required to be withheld by the
Employer(s), or the trustee of the Trust, in connection with
such payments, in amounts and in a manner to be determined in
the sole discretion of the Employer(s) and the trustee of the
Trust.
3.10 EMPLOYER DEFERRAL. If an Employer determines in good faith prior
to a Change in Control that there is a reasonable likelihood
that any compensation paid to a Participant for a taxable year
would not be deductible by the Employer solely by reason of the
limitation under Code Section 162(m), then to the extent deemed
necessary by the Employer to ensure that all of the compensation
payable to the Participant prior to the Change in Control is
deductible, the Employer may reduce the Participant's Base
Annual Salary and/or Annual Bonus and treat the amount of such
reduction as an amount deferred by the Participant. The amount
so deferred and amounts credited thereon shall be distributed to
the Participant (or his or her Beneficiary in the event of the
Participant's death) at the earliest possible date, as
determined by the Employer in good faith, on which the
deductibility of compensation paid or payable to the Participant
for the taxable year of the Employer during which the
distribution is made will not be limited by Section 162(m), or
if earlier, the effective date of a Change in Control. No
deferrals may be made under this Section 3.10 after the
effective date of a Change in Control. For purposes of this
Section 3.10 only, the term "Participant" shall mean any
Employee who has been selected to participate in the Plan.
3.11 DEFERRALS FROM OTHER PLANS. The Plan may accept the transfer of
amounts or assets defined by a Participant under any other
deferral arrangement provided by the Company, including without
limitation any shares of common stock of the Employer which but
for such deferral would (i) be issued to the Participant upon
the exercise of a stock option granted by the Company or (ii) be
vested and nonforfeitable in the case of restricted stock issued
to the Participant. Any amounts representing shares of Company
common stock shall be accounted for on a share by share basis
and shall, when distributed, be distributed in the form of
common stock of the Company.
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ARTICLE 4
SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES;
WITHDRAWAL ELECTION
4.1 SHORT-TERM PAYOUT. In connection with each election to defer an
Annual Deferral Amount, a Participant may irrevocably elect to
receive a future "Short-Term Payout" from the Plan with respect
to such Annual Deferral Amount. Subject to the Deduction
Limitation, the Short-Term Payout shall be a lump sum payment in
an amount that is equal to the Annual Deferral Amount plus
amounts credited or debited in the manner provided in Section
3.7 above on that amount, determined at the time that the
Short-Term Payout becomes payable (rather than the date of a
Termination of Employment). Subject to the Deduction Limitation
and the other terms and conditions of this Plan, each Short-Term
Payout elected shall be paid out during a period beginning 1 day
and ending 60 days after the last day of any Plan Year
designated by the Participant that is at least three Plan Years
after the Plan Year in which the Annual Deferral Amount is
actually deferred. By way of example, if a three year Short-Term
Payout is elected for Annual Deferral Amounts that are deferred
in the Plan Year commencing January 1, 1998, the three year
Short-Term Payout would become payable during a 60 day period
commencing January 1, 2002.
4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM. Should an event
occur that triggers a benefit under Article 5, 6, 7 or 8, any
Annual Deferral Amount, plus amounts credited or debited
thereon, that is subject to a Short-Term Payout election under
Section 4.1 shall not be paid in accordance with Section 4.1 but
shall instead be paid in accordance with the other applicable
Article.
4.3 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL
EMERGENCIES. If the Participant experiences an Unforeseeable
Financial Emergency, the Participant may petition the Committee
to (i) suspend any deferrals required to be made by a
Participant and/or (ii) receive a partial or full payout from
the Plan. The payout shall not exceed the lesser of the
Participant's Account Balance, calculated as if such Participant
were receiving a Termination Benefit, or the amount reasonably
needed to satisfy the Unforeseeable Financial Emergency as
determined by the Committee. If, subject to the sole discretion
of the Committee, the petition for a suspension and/or payout is
approved, suspension shall take effect upon the date of approval
and any payout shall be made within 60 days of the date of
approval. The payment of any amount under this Section 4.3 shall
not be subject to the Deduction Limitation or any withdrawal
penalty.
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4.4 WITHDRAWAL ELECTION. A Participant (or, after a Participant's
death, his or her Beneficiary) may elect, at any time, to
withdraw all of his or her Account Balance, calculated as if
there had occurred a Termination of Employment as of the day of
the election, less a withdrawal penalty equal to 10% of such
amount (the net amount shall be referred to as the "Withdrawal
Amount"). This election can be made at any time, before or after
Retirement, Disability, death or Termination of Employment, and
whether or not the Participant (or Beneficiary) is in the
process of being paid pursuant to an installment payment
schedule. If made before Retirement, Disability or death, a
Participant's Withdrawal Amount shall be his or her Account
Balance calculated as if there had occurred a Termination of
Employment as of the day of the election. No partial withdrawals
of the Withdrawal Amount shall be allowed. The Participant (or
his or her Beneficiary) shall make this election by giving the
Committee advance written notice of the election in a form
determined from time to time by the Committee. The Participant
(or his or her Beneficiary) shall be paid the Withdrawal Amount
within 60 days of his or her election. Once the Withdrawal
Amount is paid, the Participant's participation in the Plan
shall terminate and the Participant shall not be eligible to
participate in the Plan until the next enrollment period which
is at least 12 months after the date of withdrawal. The payment
of this Withdrawal Amount shall not be subject to the Deduction
Limitation.
ARTICLE 5
RETIREMENT BENEFIT
5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a
Participant who Retires shall receive, as a Retirement Benefit,
his or her Account Balance.
5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with
his or her commencement of participation in the Plan, shall
elect on an Election Form to receive the Retirement Benefit in a
lump sum or pursuant to an Annual Installment Method of 5, 10 or
15 years. The Participant may annually change his or her
election to an allowable alternative payout period by submitting
a new Election Form to the Committee, provided that any such
Election Form is submitted at least one year prior to the
Participant's Retirement and is accepted by the Committee in its
sole discretion. The Election Form most recently accepted by the
Committee shall govern the payout of the Retirement Benefit. If
a Participant does not make any election with respect to the
payment of the Retirement Benefit, then such benefit shall be
payable in a lump sum. The lump sum payment shall be made, or
installment payments shall commence, no later than
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60 days after the date the Participant Retires. Any payment made
shall be subject to the Deduction Limitation.
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a
Participant dies after Retirement but before the Retirement
Benefit is paid in full, the Participant's unpaid Retirement
Benefit payments shall continue and shall be paid to the
Participant's Beneficiary (a) over the remaining number of
months and in the same amounts as that benefit would have been
paid to the Participant had the Participant survived, or (b) in
a lump sum, if requested by the Beneficiary and allowed in the
sole discretion of the Committee, that is equal to the
Participant's unpaid remaining Account Balance.
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction
Limitation, the Participant's Beneficiary shall receive a
Pre-Retirement Survivor Benefit equal to the Participant's
Account Balance if the Participant dies before he or she
Retires, experiences a Termination of Employment or suffers a
Disability.
6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. Payment of the Pre-
Retirement Survivor Benefit shall be made in a lump sum. The
lump sum payment shall be made no later than 60 days after the
date the Committee is provided with proof that is satisfactory
to the Committee of the Participant's death. Any payment made
shall be subject to the Deduction Limitation.
ARTICLE 7
TERMINATION BENEFIT
7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the
Participant shall receive a Termination Benefit, which shall be
equal to the Participant's Account Balance, if a Participant
experiences a Termination of Employment prior to his or her
Retirement, death or Disability.
7.2 PAYMENT OF TERMINATION BENEFIT. Payment of the Participant's
Termination Benefit shall be made in a lump sum. The lump sum
payment shall be made no later than 60 days after the date of
the Participant's Termination of Employment. Any payment made
shall be subject to the Deduction Limitation.
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ARTICLE 8
DISABILITY WAIVER AND BENEFIT
8.1 DISABILITY WAIVER.
(a) WAIVER OF DEFERRAL. A Participant who is determined by the
Committee to be suffering from a Disability shall be
excused from fulfilling that portion of the Annual Deferral
Amount commitment that would otherwise have been withheld
from a Participant's Base Annual Salary and Annual Bonus
for the Plan Year during which the Participant first
suffers a Disability. During the period of Disability, the
Participant shall not be allowed to make any additional
deferral elections, but will continue to be considered a
Participant for all other purposes of this Plan.
(b) RETURN TO WORK. If a Participant returns to employment with
an Employer after a Disability ceases, the Participant may
elect to defer an Annual Deferral Amount for the Plan Year
following his or her return to employment or service and
for every Plan Year thereafter while a Participant in the
Plan; provided such deferral elections are otherwise
allowed and an Election Form is delivered to and accepted
by the Committee for each such election in accordance with
Section 3.3 above.
8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT. A Participant
suffering a Disability shall, for benefit purposes under this
Plan, continue to be considered to be employed and shall be
eligible for the benefits provided for in Articles 4, 5, 6 or 7
in accordance with the provisions of those Articles.
Notwithstanding the foregoing, the Committee shall have the
right to, in its sole and absolute discretion and for purposes
of this Plan only, and must in the case of a Participant who is
otherwise eligible to Retire, deem the Participant to have
experienced a Termination of Employment, or in the case of a
Participant who is eligible to Retire, to have Retired, at any
time (or in the case of a Participant who is eligible to Retire,
as soon as practicable) after such Participant is determined to
be suffering a Disability, in which case the Participant shall
receive a Disability Benefit equal to his or her Account Balance
at the time of the Committee's determination; provided, however,
that should the Participant otherwise have been eligible to
Retire, he or she shall be paid in accordance with Article 5.
Any payment made shall be subject to the Deduction Limitation.
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ARTICLE 9
BENEFICIARY DESIGNATION
9.1 BENEFICIARY. Each Participant shall have the right, at any time,
to designate his or her Beneficiary(ies) (both primary as well
as contingent) to receive any benefits payable under the Plan to
a beneficiary upon the death of a Participant. The Beneficiary
designated under this Plan may be the same as or different from
the Beneficiary designation under any other plan of an Employer
in which the Participant participates.
9.2 BENEFICIARY DESIGNATION; CHANGE. A Participant shall designate
his or her Beneficiary by completing and signing the Beneficiary
Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with
the terms of the Beneficiary Designation Form and the
Committee's rules and procedures, as in effect from time to
time. Upon the acceptance by the Committee of a new Beneficiary
Designation Form, all Beneficiary designations previously filed
shall be canceled. The Committee shall be entitled to rely on
the last Beneficiary Designation Form filed by the Participant
and accepted by the Committee prior to his or her death.
9.3 ACKNOWLEDGMENT. No designation or change in designation of a
Beneficiary shall be effective until received in writing and
acknowledged in writing by the Committee or its designated
agent.
9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate
a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above, or
if all designated Beneficiaries predecease the Participant or
die prior to complete distribution of the Participant's
benefits, then the Participant's designated Beneficiary shall be
deemed to be his or her surviving spouse. If the Participant has
no surviving spouse, the benefits remaining under the Plan to be
paid to a Beneficiary shall be payable to the then living issue
of the Participant per stirpes and, if there is no such issue,
to the executor or personal representative of the Participant's
estate.
9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to
the proper Beneficiary to receive payments pursuant to this
Plan, the Committee shall have the right, exercisable in its
discretion, to cause the Participant's Employer to withhold such
payments until this matter is resolved to the Committee's
satisfaction.
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9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan
to a Beneficiary shall fully and completely discharge all
Employers and the Committee from all further obligations under
this Plan with respect to the Participant, and that
Participant's Plan Agreement shall terminate upon such full
payment of benefits.
ARTICLE 10
LEAVE OF ABSENCE
10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take a paid leave of
absence from the employment of the Employer, the Participant
shall continue to be considered employed by the Employer and the
Annual Deferral Amount shall continue to be withheld during such
paid leave of absence in accordance with Section 3.4.
10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of
absence from the employment of the Employer, the Participant
shall continue to be considered employed by the Employer and the
Participant shall be excused from making deferrals until the
earlier of the date the leave of absence expires or the
Participant returns to a paid employment status. Upon such
expiration or return, deferrals shall resume for the remaining
portion of the Plan Year in which the expiration or return
occurs, based on the deferral election, if any, made for that
Plan Year. If no election was made for that Plan Year, no
deferral shall be withheld.
ARTICLE 11
TERMINATION, AMENDMENT OR MODIFICATION
11.1 TERMINATION. Although each Employer anticipates that it will
continue the Plan for an indefinite period of time, there is no
guarantee that any Employer will continue the Plan or will not
terminate the Plan at any time in the future. Accordingly, each
Employer reserves the right to discontinue its sponsorship of
the Plan and/or to terminate the Plan at any time with respect
to any or all of its participating Employees, by action of its
board of directors or any duly authorized committee thereof.
Notwithstanding any provision of this Plan to the contrary, the
Plan shall terminate automatically upon the occurrence of a
Change in Control without the necessity of any action by any
Employer. Upon the termination of the Plan
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<PAGE> 24
with respect to any Employer, the Plan Agreements of the
affected Participants who are employed by that Employer shall
terminate and their Account Balances, determined as if they had
experienced a Termination of Employment on the date of Plan
termination, or if Plan termination occurs after the date upon
which a Participant was eligible to Retire, then with respect to
that Participant as if he or she had Retired on the date of Plan
termination, shall be paid to the Participants as follows: Prior
to a Change in Control, if the Plan is terminated with respect
to all of its Participants, an Employer shall have the right, in
its sole discretion, and notwithstanding any elections made by
the Participant, to pay such benefits in a lump sum or pursuant
to an Annual Installment Method of up to 15 years, with amounts
credited and debited during the installment period as provided
herein. If the Plan is terminated with respect to less than all
of its Participants, an Employer shall be required to pay such
benefits in a lump sum. After a Change in Control, the Employer
shall be required to pay such benefits in a lump sum. The
termination of the Plan shall not adversely affect any
Participant or Beneficiary who has become entitled to the
payment of any benefits under the Plan as of the date of
termination; provided, however, that the Employer shall have the
right to accelerate installment payments without a premium or
prepayment penalty by paying the Account Balance in a lump sum
or pursuant to an Annual Installment Method using fewer years
(provided that the present value of all payments that will have
been received by a Participant at any given point of time under
the different payment schedule shall equal or exceed the present
value of all payments that would have been received at that
point in time under the original payment schedule).
11.2 AMENDMENT. Any Employer may, at any time, amend or modify the
Plan in whole or in part with respect to that Employer by the
action of its board of directors or any duly authorized
committee thereof; provided, however, that no amendment or
modification shall be effective to decrease or restrict the
value of a Participant's Account Balance in existence at the
time the amendment or modification is made, calculated as if the
Participant had experienced a Termination of Employment as of
the effective date of the amendment or modification or, if the
amendment or modification occurs after the date upon which the
Participant was eligible to Retire, the Participant had Retired
as of the effective date of the amendment or modification. The
amendment or modification of the Plan shall not affect any
Participant or Beneficiary who has become entitled to the
payment of benefits under the Plan as of the date of the
amendment or modification; provided, however, that the Employer
shall have the right to accelerate installment payments by
paying the Account Balance in a lump sum or pursuant to an
Annual Installment Method using fewer years (provided that the
present value of all payments that will have been received by a
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Participant at any given point of time under the different
payment schedule shall equal or exceed the present value of all
payments that would have been received at that point in time
under the original payment schedule).
11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2
above, if a Participant's Plan Agreement contains benefits or
limitations that are not in this Plan document, the Employer may
only amend or terminate such provisions with the consent of the
Participant.
11.4 EFFECT OF PAYMENT. The full payment of the applicable benefit
under Articles 4, 5, 6, 7 or 8 of the Plan shall completely
discharge all obligations to a Participant and his or her
designated Beneficiaries under this Plan and the Participant's
Plan Agreement shall terminate.
ARTICLE 12
ADMINISTRATION
12.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee
which shall consist of the Compensation Committee of the Board,
or such other committee as the Board shall appoint. Members of
the Committee may be Participants under this Plan. The Committee
shall also have the complete discretion and authority to (i)
make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and (ii) decide
or resolve any and all questions including interpretations of
this Plan, as may arise in connection with the Plan. Any
individual serving on the Committee who is a Participant shall
not vote or act on any matter relating solely to himself or
herself. When making a determination or calculation, the
Committee shall be entitled to rely on information furnished by
a Participant or the Company.
12.2 AGENTS. In the administration of this Plan, the Committee may,
from time to time, employ agents and delegate to them such
administrative duties as it sees fit (including acting through a
duly appointed representative) and may from time to time consult
with counsel who may be counsel to any Employer.
12.3 BINDING EFFECT OF DECISIONS. The decision or action of the
Committee with respect to any question arising out of or in
connection with the administration, interpretation and
application of the Plan and the rules and regulations
promulgated hereunder shall be final and conclusive and binding
upon all persons having any interest in the Plan.
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12.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold
harmless the members of the Committee, and any Employee to whom
the duties of the Committee may be delegated, against any and
all claims, losses, damages, expenses or liabilities arising
from any action or failure to act with respect to this Plan,
except in the case of willful misconduct by the Committee or any
of its members or any such Employee.
12.5 EMPLOYER INFORMATION. To enable the Committee to perform its
functions, each Employer shall supply full and timely
information to the Committee on all matters relating to the
compensation of its Participants, the date and circumstances of
the Retirement, Disability, death or Termination of Employment
of its Participants, and such other pertinent information as the
Committee may reasonably require.
12.6 MULTIPLE COMMITTEES. The Board may divide the duties of the
Committee among more than one Committee. If more than one
Committee is established, the Board shall designate the scope of
authority of each such Committee. Each such Committee shall have
all the powers and privileges set forth above subject only to
any limitations on the scope of its authority imposed by the
Board.
ARTICLE 13
OTHER BENEFITS AND AGREEMENTS
13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a
Participant and such Participant's Beneficiary under the Plan
are in addition to any other benefits available to such
Participant under any other plan or program for employees of the
Participant's Employer. The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except
as may otherwise be expressly provided.
ARTICLE 14
CLAIMS PROCEDURES
14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a
deceased Participant (such Participant or Beneficiary being
referred to below as a "Claimant") may deliver to the Committee
a written claim for a determination with respect to the amounts
distributable to such Claimant from the Plan. If such a claim
relates to the contents of a notice received by the Claimant,
the claim must be made within 60 days after such notice was
received by the Claimant. All other claims must be made within
180 days of the date on which the event that caused the claim to
arise
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occurred. The claim must state with particularity the
determination desired by the Claimant.
14.2 NOTIFICATION OF DECISION. The Committee shall consider a
Claimant's claim within a reasonable time, and shall notify the
Claimant in writing:
(a) that the Claimant's requested determination has been made,
and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in
whole or in part, to the Claimant's requested
determination, in which case such notice must also be set
forth in a manner calculated to be understood by the
Claimant:
1. the specific reason(s) for the denial of the claim, or
any part thereof;
2. specific reference(s) to pertinent provisions of the
Plan upon which such denial was based;
3. a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is
necessary; and
4. an explanation of the claim review procedure set forth
in Section 14.3 below.
14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a
notice from the Committee that a claim has been denied, in whole
or in part, a Claimant (or the Claimant's duly authorized
representative) may file with the Committee a written request
for a review of the denial of the claim. Thereafter, but not
later than 30 days after the review procedure began, the
Claimant (or the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
14.4 DECISION ON REVIEW. The Committee shall render its decision on
review promptly, and not later than 60 days after the filing of
a written request for
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review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such
date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:
A. specific reasons for the decision;
B. specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
C. such other matters as the Committee deems relevant.
14.5 LEGAL ACTION. A Claimant's compliance with the foregoing
provisions of this Article 14 is a mandatory prerequisite to a
Claimant's right to commence any legal action with respect to
any claim for benefits under this Plan.
ARTICLE 15
TRUST
15.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the
Trust, and each Employer shall at least annually transfer over
to the Trust such assets as the Employer determines, in its sole
discretion, are necessary to provide, on a present value basis,
for its respective future liabilities created with respect to
the Annual Deferral Amounts for such Employer's Participants for
all periods prior to the transfer, as well as any debits and
credits to the Participants' Account Balances for all periods
prior to the transfer, taking into consideration the value of
the assets in the trust at the time of the transfer.
15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of
the Plan and the Plan Agreement shall govern the rights of a
Participant to receive distributions pursuant to the Plan. The
provisions of the Trust shall govern the rights of the
Employers, Participants and the creditors of the Employers to
the assets transferred to the Trust. Each Employer shall at all
times remain liable to carry out its obligations under the Plan.
15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under
the Plan may be satisfied with Trust assets distributed pursuant
to the terms of the Trust, and any such distribution shall
reduce the Employer's obligations under this Plan.
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ARTICLE 16
MISCELLANEOUS
16.1 STATUS OF PLAN. The Plan is intended to be a plan that is not
qualified within the meaning of Code Section 401(a) and that "is
unfunded and is maintained by an employer primarily for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees" within the meaning
of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan
shall be administered and interpreted to the extent possible in
a manner consistent with that intent.
16.2 UNSECURED GENERAL CREDITOR. Participants and their
Beneficiaries, heirs, successors and assigns shall have no legal
or equitable rights, interests or claims in any property or
assets of an Employer. For purposes of the payment of benefits
under this Plan, any and all of an Employer's assets shall be,
and remain, the general, unpledged unrestricted assets of the
Employer. An Employer's obligation under the Plan shall be
merely that of an unfunded and unsecured promise to pay money in
the future.
16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan
Agreement, as entered into between the Employer and a
Participant. An Employer shall have no obligation to a
Participant under the Plan except as expressly provided in the
Plan and his or her Plan Agreement.
16.4 NONASSIGNABILITY. Neither a Participant nor any other person
shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer,
hypothecate, alienate or convey in advance of actual receipt,
the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are expressly declared to be,
unassignable and non-transferable. No part of the amounts
payable shall, prior to actual payment, be subject to seizure,
attachment, garnishment or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, be transferable by operation of
law in the event of a Participant's or any other person's
bankruptcy or insolvency or be transferable to a spouse as a
result of a property settlement or otherwise.
16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this
Plan shall not be deemed to constitute a contract of employment
between any Employer and the Participant. Such employment is
hereby acknowledged to be an "at will" employment relationship
that can be terminated at any time for any reason, or no reason,
with or without cause, and with or
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without notice, unless otherwise expressly provided in a written
employment agreement. Nothing in this Plan shall be deemed to
give a Participant the right to be retained in the service of
any Employer or to interfere with the right of any Employer to
discipline or discharge the Participant at any time.
16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary
will cooperate with the Committee by furnishing any and all
information requested by the Committee and take such other
actions as may be requested in order to facilitate the
administration of the Plan and the payments of benefits
hereunder.
16.7 TERMS. Whenever any words are used herein in the masculine, they
shall be construed as though they were in the feminine in all
cases where they would so apply; and whenever any words are used
herein in the singular or in the plural, they shall be construed
as though they were used in the plural or the singular, as the
case may be, in all cases where they would so apply.
16.8 CAPTIONS. The captions of the articles, sections and paragraphs
of this Plan are for convenience only and shall not control or
affect the meaning or construction of any of its provisions.
16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan
shall be construed and interpreted according to the internal
laws of the Commonwealth of Massachusetts without regard to its
conflicts of laws principles.
16.10 NOTICE. Any notice or filing required or permitted to be given
to the Committee under this Plan shall be sufficient if in
writing and hand- delivered, or sent by registered or certified
mail, to the address below:
Deferred Compensation Committee
Security Dynamics Technologies, Inc.
20 Crosby Drive
Bedford, MA 01730
Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing
and hand-delivered, or sent by mail, to the last known address
of the Participant.
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16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to
the benefit of the Participant's Employer and its successors and
assigns and the Participant and the Participant's designated
Beneficiaries.
16.12 VALIDITY. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be
construed and enforced as if such illegal or invalid provision
had never been inserted herein.
16.13 INCOMPETENT. If the Committee determines in its discretion that
a benefit under this Plan is to be paid to a minor, a person
declared incompetent or to a person incapable of handling the
disposition of that person's property, the Committee may direct
payment of such benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or
incapable person. The Committee may require proof of minority,
incompetence, incapacity or guardianship, as it may deem
appropriate prior to distribution of the benefit. Any payment of
a benefit shall be a payment for the account of the Participant
and the Participant's Beneficiary, as the case may be, and shall
be a complete discharge of any liability under the Plan for such
payment amount.
16.14 DISTRIBUTION IN THE EVENT OF TAXATION.
(a) IN GENERAL. If, for any reason, all or any portion of a
Participant's benefits under this Plan becomes taxable to
the Participant prior to receipt, a Participant may
petition the Committee before a Change in Control, or the
trustee of the Trust after a Change in Control, for a
distribution of that portion of his or her benefit that has
become taxable. Upon the grant of such a petition, which
grant shall not be unreasonably withheld (and, after a
Change in Control, shall be granted), a Participant's
Employer shall distribute to the Participant immediately
available funds in an amount equal to the taxable portion
of his or her benefit (which amount shall not exceed a
Participant's unpaid Account Balance under the Plan). If
the petition is granted, the tax liability distribution
shall be made within 90 days of the date when the
Participant's petition is granted. Such a distribution
shall affect and reduce the benefits to be paid under this
Plan.
(b) TRUST. If the Trust terminates in accordance with its terms
and benefits are distributed from the Trust to a
Participant in accordance with that Section, the
Participant's benefits under this Plan shall be reduced to
the extent of such distributions.
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<PAGE> 32
16.15 INSURANCE. The Employers, on their own behalf or on behalf of
the trustee of the Trust, in their sole discretion, may apply
for and procure insurance on the life of the Participant, in
such amounts and in such forms as the Trust may choose. The
Employers or the trustee of the Trust, as the case may be, shall
be the sole owner and beneficiary of any such insurance. The
Participant shall have no interest whatsoever in any such policy
or policies, and at the request of the Employers shall submit to
medical examinations and supply such information and execute
such documents as may be required by the insurance company or
companies to whom the Employers have applied for insurance.
16.16 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The
Company and each Employer is aware that upon the occurrence of a
Change in Control, the Board or the board of directors of a
Participant's Employer (which might then be composed of new
members) or a shareholder of the Company or the Participant's
Employer, or of any successor corporation, might then cause or
attempt to cause the Company, the Participant's Employer or such
successor to refuse to comply with its obligations under the
Plan and might cause or attempt to cause the Company or the
Participant's Employer to institute, or may institute,
litigation seeking to deny Participants the benefits intended
under the Plan. In these circumstances, the purpose of the Plan
could be frustrated. Accordingly, if, following a Change in
Control, it should appear to any Participant that the Company,
the Participant's Employer or any successor corporation has
failed to comply with any of its obligations under the Plan or
any agreement thereunder, or if the Company, such Employer or
any other person takes any action to declare the Plan void or
unenforceable or institutes any litigation or other legal action
designed to deny, diminish or to recover from any Participant
the benefits intended to be provided, then the Company and the
Participant's Employer irrevocably authorize such Participant to
retain counsel of his or her choice at the expense of the
Company and the Participant's Employer (who shall be jointly and
severally liable) to represent such Participant in connection
with the initiation or defense of any litigation or other legal
action, whether by or against the Company, the Participant's
Employer or any director, officer, shareholder or other person
affiliated with the Company, the Participant's Employer or any
successor thereto in any jurisdiction. The Company may recover
any legal fees paid if a court of competent jurisdiction finds
that the retention of counsel by the Participant was frivolous.
If the Participant prevails to any extent, the retention of
counsel shall be conclusively determined not to be frivolous.
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<PAGE> 1
Crosby Corporate Center
Bedford, Massachusetts
("Park")
SECOND AMENDMENT TO LEASE
Date: April 8, 1998
LANDLORD: EOP-Crosby Corporate Center, L.L.C.
TENANT: Security Dynamics Technologies, Inc.
LEASE
EXECUTION
DATE: March 11, 1996
EXISTING
PREMISES: The entirety 20 Crosby Drive (Building No. 1), as
more particularly described in the Lease, and the
entirety of 24 Crosby Drive (Building No. 3)
RENT COMMENCEMENT DATE IN RESPECT OF EXISTING PREMISES:
August 1, 1996
TERMINATION DATE IN RESPECT OF ALL PREMISES:
June 30, 2009
PREVIOUS
LEASE
AMENDMENTS: First Amendment dated May 10, 1997
SECOND AMENDMENT ADDITIONAL PREMISES:
The entirety of Building No. 9 in the Park,
substantially as shown on Lease Plan, Exhibit 2,
Second Amendment, Sheets 1 and 2. The Second
Amendment Additional Premises contain 77,666 square
feet of Total Rentable Area and are located in Phase
II of the Park.
WHEREAS, the parties desire to confirm the Rent Commencement Dates
with respect to each floor of the First Amendment Additional Premises;
WHEREAS, Tenant desires to lease the Second Amendment Additional
Premises;
WHEREAS, Landlord is willing to lease the Second Amendment Additional
Premises to Tenant on the terms and conditions hereinafter set forth;
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WHEREAS, the parties desire to extend the term of the Lease with
respect to the Existing Premises so that the term of the Lease with respect to
all of the premises demised to Tenant will be conterminous;
NOW THEREFORE, the above-referenced lease ("the Lease") is hereby
amended as follows:
1. RENT COMMENCEMENT DATES IN RESPECT OF THE FIRST AMENDMENT ADDITIONAL
PREMISES
The parties hereby confirm and agree that the Rent Commencement Dates
in respect of the First Amendment Additional Premises shall be as follows:
First Floor: August 4, 1997
Second Floor: January 5, 1998
2. DEMISE OF SECOND AMENDMENT ADDITIONAL PREMISES
Landlord hereby demises and leases to Tenant, and Tenant hereby hires
and takes from Landlord, the Second Amendment Additional Premises. Said demise
of the Second Amendment Additional Premises shall be upon the terms set forth on
Exhibit 1, Second Amendment Version, Sheets 1, 2, 3, 4, 5, 6, and 7 dated April
8, 1998, and upon all of the terms and conditions of the Lease to the extent not
inconsistent with said Exhibit 1 and the provisions of this Second Amendment.
Wherever the term "Building" is used in the Lease in connection with the Second
Amendment Additional Premises, such term shall be deemed to refer to Building
No. 9.
3. TERM COMMENCEMENT DATE IN RESPECT OF SECOND AMENDMENT ADDITIONAL
PREMISES
The Term Commencement Date in respect of the Second Amendment
Additional Premises shall be defined as the earlier of: (x) the date that
Landlord's Second Amendment Work, as defined in Paragraph 5 of this Second
Amendment, is deemed to be substantially completed, as defined in Section 5(E)
of this Second Amendment and Landlord has delivered Base Building Certificate of
Occupancy for the Second Amendment Additional Premises, or (y) the date that the
Tenant commences to perform Tenant's Second Amendment Work, as defined in
Paragraph 5 of this Second Amendment. Section 3.1 of the Lease shall have no
application to the Second Amendment Additional Premises.
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4. RENT COMMENCEMENT DATES IN RESPECT OF THE SECOND AMENDMENT ADDITIONAL
PREMISES
A. Initial Rent Commencement Date:
Subject to the provisions of this Paragraph 4, Tenant shall have a
construction period which shall end as of the date ("Initial Rent Commencement
Date") which is the earlier to occur of: (i) the first day that the More Than
One-Half Occupancy Condition, as hereinafter defined occurs, or (ii) the later
of: (x) January 1, 1999 or (y) the date one hundred twenty (120) days after the
Term Commencement Date in respect of the Second Amendment Additional Premises
before Tenant's obligation to pay Yearly Rent and other charges due under the
Lease with respect to one-half of the Second Amendment Additional Premises
commences to accrue (i.e. the amount of Yearly Rent and other charges payable by
Tenant with respect to the Second Amendment Additional Premises commencing as of
the Initial Rent Commencement Date shall be based upon one-half of the amount of
Yearly Rent and other charges which would have been payable had the Full Rent
Commencement Date occurred).
B. Full Rent Commencement Date:
Subject to the provisions of this Paragraph 4, with respect to the
balance of the Second Amendment Additional Premises, Tenant shall have a
construction period which shall end as of the date ("Full Rent Commencement
Date") which is the earlier to occur of: (i) the first day that the Full
Occupancy Condition, as hereinafter defined, occurs, or (ii) the later of: (x)
the Outside Full Rent Commencement Date, as defined herein, or (y) the date one
hundred twenty (120) days after the Term Commencement Date with respect to the
Second Amendment Additional Premises before Tenant's obligation to pay Yearly
Rent and other charges due under the Lease shall commence to accrue (i.e.
Tenant's obligation to pay one hundred (100%) percent of the Yearly Rent and
other charges payable with respect to the Second Amendment Additional Premises
shall commence to accrue as of the Full Rent Commencement Date).
C. Outside Full Rent Commencement Date
The "Outside Full Rent Commencement Date" shall be defined as July 1,
1999, except that: (i) if the Initial Rent Commencement Date occurs prior to
December 1, 1998, then the Full Rent Commencement Date shall be August 1, 1999,
and (ii) if the Full Rent Commencement Date occurs during the month of December
in 1998, then the Initial Rent Commencement Date shall be the same number of
days after July 1, 1999 that the Initial Rent Commencement Date is before
January 1, 1999. By way of example, if the Initial Rent Commencement Date is
December 31, 1998 (i.e., one day before January 1, 1999), then the Outside Full
Rent Commencement Date shall be July 2, 1999 (i.e., one day after July 1, 1999).
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<PAGE> 4
D. Definition of Occupancy:
For the purposes of determining Tenant's rental obligations on early
occupancy obligations, the term "occupancy" shall be defined as use of the
premises for the uses permitted under the Lease, but neither the performance of
Tenant's Second Amendment Work and installation of Tenant's furniture, fixtures
or equipment shall be considered to be "occupancy".
E. Occupancy Conditions:
(1) If, as of any date, Tenant occupies any portion of the Second
Amendment Additional Premises equal to fifty (50%) percent or less,
then such occupancy shall be defined as the "One Half Occupancy
Condition".
(2) Tenant's occupancy of greater than fifty percent (50%), but
less than seventy-five percent (75%) of the Total Rentable Area of the
Second Amendment Additional Premises shall be defined as the "More Than
One-Half Occupancy Condition".
(3) If, as of any date, Tenant occupies exactly seventy-five
percent (75%) of the Total Rentable Area of the Second Amendment
Additional Premises, such occupancy shall be defined as the
"Three-Quarter Occupancy Condition".
(4) If, as of any date, Tenant occupies greater than seventy-five
(75%) percent of the Total Rentable Area of the Second Amendment
Additional Premises, Tenant shall be considered as having occupied the
entirety of the Second Amendment Additional Premises and such occupancy
shall be defined as the "Full Occupancy Condition".
F. Effect of the One Half Occupancy Condition Occurring Prior to
the Initial Rent Commencement Date:
If the One Half Occupancy Condition occurs prior to the Initial Rent
Commencement Date, then, subject to the provisions of this Paragraph 4, Tenant
shall pay, in respect of the period commencing as of the date that the One Half
Occupancy Condition first occurs and continuing until the Initial Rent
Commencement Date, and in lieu of Yearly Rent and Tenant's obligation to pay Tax
Excess and Operating Expense Excess in respect of such time period, an early
occupancy charge equal Forty-Six Thousand Nine Hundred Twenty-Three Dollars
($46,923.00) per month. Said early occupancy charge is based upon the estimated
amount of Tax and Operating Costs which would have been included in the Yearly
Rent in respect of one-half of the Second Amendment Additional Premises had the
term of the Lease commenced as of the date that the One Half Occupancy Condition
first occurs. Thereafter, Tenant shall pay rent in accordance with the First and
Second Rent Commencement Date schedules. Said occupancy charge shall be
pro-rated in respect of any partial calendar month during this
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<PAGE> 5
time period and shall be payable at the same time and in the same manner that
Yearly Rent is payable under the Lease.
G. Effect of Occurrence of Three-Quarter Occupancy Condition:
If the Three-Quarter Occupancy Condition occurs at any time prior to
the Full Rent Commencement Date, then, notwithstanding anything to the contrary
herein contained, with respect to the period commencing as of the date that the
Three-Quarter Occupancy Condition first occurs and continuing until the Full
Rent Commencement Date, Tenant shall pay Yearly Rent and other charges payable
under the Lease with respect to seventy-five (75%) percent of the Total Rentable
Area of the Second Amendment Additional Premises (i.e. the amount of Yearly Rent
and other charges payable with respect to the Second Amendment Additional
Premises for the period commencing as of the date that the Three-Quarter
Occupancy Condition first occurs and ending as of the First Rent Commencement
Date shall be equal to seventy-five (75%) percent of the Yearly Rent and other
charges which would have been payable with respect to the Second Amendment
Additional Premises had the Full Rent Commencement Date occurred as of the date
that the Three-Quarter Occupancy Condition first occurred).
5. LANDLORD'S WORK: DELIVERY OF THE BASE BUILDING
A. Except as set forth in this Paragraph 5, Tenant shall take the
Second Amendment Additional Premises "as-is", without any representation or
warranty by Landlord as to the condition of the Second Amendment Additional
Premises or the Park.
B. Landlord agrees to assign to Tenant any warranty or warranties
it obtains from its contractor to the extent the warranty or warranties pertain
to any portion of the Second Amendment Additional Premises which is required to
be maintained by Tenant. Article 4.8 of the Lease shall not limit any such
warranties. To the extent such warranty or warranties are not assignable,
Landlord agrees to cooperate with Tenant in the enforcement of the warranty or
warranties at no cost to Landlord.
C. "Landlord's Second Amendment Work" shall mean the work
described in the plans referenced in Exhibit A attached hereto and shall include
the following:
1) Landlord shall provide a four inch (4") underground
conduit connection between Building 3 and Building 9 for the
exclusive use of Tenant for the purpose of telecommunications.
2) Landlord shall construct a pedestrian walkway
connecting Buildings 3 and 9 as shown on the attached plan,
Exhibit A. The walkway will be 5' wide with bituminous or
concrete pavement, railings at the ramps, and associated site
lighting. The entire length of the walkway will be handicapped
accessible.
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<PAGE> 6
Tenant shall have no right to make any changes to Landlord's
Second Amendment Work.
D. Landlord shall, at Landlord's cost, perform Landlord's Second
Amendment Work. Landlord's Second Amendment Work shall be performed under the
same terms and conditions as were applicable to the Base Building Work described
in Article 4 of the Lease except as set forth in this Paragraph 5.
E. Landlord shall, in the manner hereinafter set forth, provide
to Tenant up to Three and 50/100 Dollars ($3.50) per square foot of the Second
Amendment Additional Premises ("Landlord's HVAC Contribution") toward the cost
of installing an heating, air conditioning and ventilation system to serve the
Second Amendment Additional Premises ("Tenant's HVAC Work"). Provided that
Tenant is not in default, beyond the expiration of any applicable grace periods,
of its obligations under the Lease at the time that Tenant submits any
requisition on account of Landlord's HVAC Contribution, Landlord shall pay the
cost of the work shown on each requisition (as hereinafter defined) submitted by
Tenant to Landlord within thirty (30) days of submission thereof by Tenant to
Landlord.
For the purposes hereof, a "requisition" shall mean written
documentation (e.g., invoices from Tenant's contractor), showing in reasonable
detail the costs of Tenant's HVAC Work installed to date. Landlord shall have
the right, upon reasonable advance notice to Tenant, to inspect Tenant's books
and records relating to each requisition in order to verify the amount thereof.
Tenant shall submit requisition(s) no more often than monthly.
Notwithstanding anything to the contrary herein contained:
(i) Landlord shall have no obligation to advance funds on
account of Landlord's HVAC Contribution unless and until Landlord has received
the requisition in question.
(ii) Tenant shall not be entitled to any portion of Landlord's
HVAC Contribution, and Landlord shall have no obligation to pay Landlord's HVAC
Contribution in respect of any requisition submitted more than one year after
the Initial Rent Commencement Date, as defined in Subparagraph A of Paragraph 4
hereof.
(iii) Tenant shall have no right to any unused portion of
Landlord's HVAC Contribution.
F. In lieu of Article 4.2 of the Lease, the following shall apply
to Landlord's Second Amendment Work:
Landlord's Second Amendment Work shall be deemed substantially
complete on the date when the same has been substantially
completed by
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<PAGE> 7
Landlord, except for minor or insubstantial details of
construction, decoration, or mechanical adjustments.
G. The Specified Commencement Date with respect to the Second
Amendment Premises shall be July 1, 1998.
H. The following provisions of the Lease shall have no
applicability to the performance of Landlord's Second Amendment Work or the
Second Amendment Additional Premises:
Article 4.1(b)
Article 4.1(c)
The third sentence of Article 4.4(a) (relating to Tenant's plans for a
handicap toilet)
The twelfth sentence of Article 4.4(a) (relating to Landlord's
obligation to provide revisions of Base Building Plans for
existing toilet rooms and stair finishes)
Article 4.4(b)
Exhibit 4
I. Tenant's Remedies on Late Delivery of Second Amendment
Additional Premises:
(1) Notwithstanding the provisions of Article 4.1(a) of
the Lease, if Landlord's Second Amendment Work has not been
deemed substantially completed as defined in Subparagraph E of
this Paragraph 5, on or before the Second Amendment Completion
Deadline Date (as defined below) for any reason, then on or
after the Second Amendment Completion Deadline Date Tenant
shall have the right to give Landlord a written thirty (30)
days' notice (the "Cancellation Notice") of Tenant's desire to
cancel this Second Amendment (the "Cancellation Right"). If
Landlord's Second Amendment Work is deemed substantially
completed, as aforesaid, on or before the thirtieth (30) day
after Landlord receives such Cancellation Notice, Tenant's
Cancellation Right shall be deemed to be void and of no force
or effect. If Landlord's Second Amendment Work is not deemed
substantially completed, as aforesaid, on or before the
thirtieth (30) day after Landlord receives such Cancellation
Notice, this Second Amendment only, shall be void and shall be
of no further force or effect, and neither party shall have
any further obligations to the other party with respect to the
Second Amendment Additional Premises. For the purposes hereof,
the Second Amendment Completion Deadline Date shall mean the
date ninety (90) days after the Specified Commencement Date
(i.e., October 1, 1998), plus up to an additional period of
time (not to exceed ninety (90) days) equal to the length of
delays in the substantial completion of Landlord's
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<PAGE> 8
Second Amendment Work arising from causes beyond Landlord's
reasonable control as provided in Article 26 of the Lease.
(2) Alternatively, (i) if Tenant does not exercise its
Cancellation Right, and (ii) if the Specified Commencement
Date does not occur on or before the Liquidated Damages Date,
as hereinafter defined, then Tenant shall be entitled to a per
diem rent credit against the Yearly Rent in respect of the
Second Amendment Additional Premises in an amount equal to the
product of (a) $4,681.23, multiplied by (b) the number of days
from the Liquidated Damages Date, to, but not including, the
date the Second Amendment Premises are deemed substantially
completed. The "Liquidated Damages Date" shall be defined as
October 1, 1998, plus up to an additional period of time (not
to exceed an additional ninety (90) days) equal to the length
of the delay in substantially completing the Landlord's Second
Amendment Work, arising from causes beyond Landlord's
reasonable control, as provided in Article 26 of the Lease."
6. TERMINATION DATE; TENANT'S TERMINATION RIGHTS; EXTENSION OF TERM OF
LEASE IN RESPECT OF EXISTING PREMISES
A. The Termination Date in respect of the Second Amendment
Additional Premises shall, subject to the last sentence of Section 3.2 of the
Lease, be the date ("Extended Termination Date") ten (10) years and six (6)
months after the Initial Rent Commencement Date in respect of the Second
Amendment Additional Premises.
B. Subject to Tenant's early termination rights with respect to
the Existing Premises, as set forth in Paragraph 1 of the Rider to the Lease and
in Paragraph 7 of the First Amendment, the term of the Lease in respect of the
Existing Premises is hereby extended for an additional period commencing as of
July 1, 2009 and expiring as of the Extended Termination Date. Said additional
term shall be upon the terms set forth on Revised Exhibit 1, Second Amendment,
dated April 8, 1998, a copy of which is attached hereto and made a part hereof,
and upon all of the terms and conditions of the Lease in effect immediately
preceding the commencement of such additional term to the extent not
inconsistent with said Revised Exhibit 1 or this Amendment.
C. Paragraph 1 of the Rider to the Lease and Paragraph 7 of the
First Amendment shall have no applicability to the Second Amendment Additional
Premises.
7. TENANT'S EXTENSION OPTIONS
A. Since the initial term of the Lease with respect to the
Existing Premises has been extended, pursuant to Paragraph 6 of this Second
Amendment, the parties hereby acknowledge and agree that, if Tenant exercises
its extension option with respect to the Existing Premises, the first Extension
Term shall commence as of day immediately following the Extended Termination
Date.
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<PAGE> 9
B. Tenant's extension option with respect to the Second Amendment
Additional Premises may be exercised independently of Tenant's extension option
with respect to the Existing Premises (i.e. Tenant may extend the term of the
Lease with respect to the Second Amendment Additional Premises without
exercising its right to extend the term of the Lease with respect to the
Existing Premises), and Tenant's extension option with respect to the Existing
Premises may be exercised independently of Tenant's extension option with
respect to the Second Amendment Additional Premises (i.e. Tenant may extend the
term of the Lease with respect to the Existing Premises without exercising its
right to extend the term of the Lease with respect to the Second Amendment
Additional Premises). Tenant's rights as to the manner of exercise of its
extension options for Buildings 1 and 3, as set forth in Paragraph 8 of the
First Amendment, shall not be affected by the provisions of this subparagraph B.
C. The Yearly Rent during the additional term with respect to the
Second Amendment Additional Premises shall be based upon the Fair Market Rental
Value, as defined in Paragraph 3 of the Rider to the Lease, as of the
commencement of the additional term, of the Second Amendment Additional
Premises.
8. DEFINITION OF THE PARK
Tenant acknowledges that the Park has been increased by the
construction of Phase II of the Park by Landlord. Therefore, Exhibit 3 of the
Lease is hereby deleted in its entirety, and Revised Exhibit 3, Second
Amendment, is hereby substituted in its place.
9. TENANT'S TAX PERCENTAGES; TENANT'S PARK OPERATING PERCENTAGE
The parties acknowledge that Phase I and Phase II of the Park are each
assessed, by the Town of Bedford, as separate tax parcels. Therefore,
notwithstanding any provision of the Lease to the contrary:
A. For the purposes of determining the amount of Tax Excess
payable by Tenant in respect of Existing Premises: (i) Taxes shall include only
Taxes applicable to Phase I of the Park and shall exclude Taxes assessed against
Phase II of the Park, (ii) Tenant's Tax Percentage in respect of Building No. 1
shall be equal to 22% (i.e. based upon the ratio of the Total Rentable Area of
Building No. 1 to the Total Rentable Area of all premises in Phase I of the
Park), and (iii) Tenant's Tax Percentage in respect of Building No. 3 shall be
equal to 9.30% (i.e. based upon the ratio of Total Rentable Area in respect of
Building No. 3 to the Total Rentable Area of all premises in Phase I of the
Park).
B. For the purposes of determining the amount of Tax Excess
payable by Tenant in respect of the Second Amendment Additional Premises: (i)
Taxes shall include only Taxes applicable to Phase II of the Park and shall
exclude Taxes assessed against
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<PAGE> 10
Phase I of the Park, (ii) prior to the first Tax Period in which Phase II of the
Park is fully assessed, as hereinafter defined, Tenant's Tax Percentage in
respect of the Second Amendment Additional Premises shall be defined, for any
Tax Period, as the ratio of the assessed value, as hereinafter defined, of the
Second Amendment Additional Premises for such Tax Period, over the assessed
value of all of the buildings in Phase II of the Park for such Tax Period, and
(iii) commencing with the Tax Period in which Phase II of the Park is fully
assessed and continuing thereafter throughout the term of the Lease, Tenant's
Tax Percentage in respect of the Second Amendment Additional Premises shall be
equal to 30.15% (i.e. based upon the ratio of the Total Rentable Area of the
Second Amendment Additional Premises to the Total Rentable Area of all premises
in Phase II of the Park.
C. For the purposes of this Lease: (i) recognizing that, in
Massachusetts, the assessment date for any fiscal tax year is the January 1
immediately preceding the commencement of such fiscal tax year, the phrase "the
first Tax Period in which Phase II of the Park is fully assessed" shall be
defined as the fiscal year which is based upon the January 1 assessment date
which occurs after at least ninety (90%) percent of the Total Rentable Area of
the buildings in Phase II have been occupied by tenants, and (ii) the term
"assessed value" shall be based upon the records of the Tax Assessor of the Town
of Bedford, except that if such records do not provide a separate assessment for
each of the Buildings in Phase II, the term "assessed value" of each building in
Phase II shall be determined by Landlord, in Landlord's reasonable judgment,
based upon an appraisal from a reputable third party appraiser.
D. Reference is made to the fact that, pursuant to Article
9.1(g)(1) of the Lease, certain Park-Wide Operating Costs were intended to be
allocated based upon Tenant's Tax Percentage. In view of addition of the Phase
II of the Park, and the fact that Landlord will not be incurring such Park-Wide
expenses with respect to the buildings in Phase II until such buildings have
been occupied by tenants: (i) the term "Tenant's Park Operating Percentage" is
hereby substituted for the term "Tenant's Tax Percentage" in Article 9.1(g)(1)
of the Lease, (ii) prior to the date that each of the Buildings in Phase II of
the Park is occupied by at least one tenant, "Tenant's Park Operating
Percentage" for each Building at any point in time shall be equal to the ratio
of the Total Rentable Area of such Building to the sum of the Total Rentable
Area of the Buildings in Phase I and the Total Rentable Area of the Buildings in
Phase II then occupied by tenants, and (iii) from and after the date that each
of the Buildings in Phase II is occupied by at least one tenant, "Tenant's Park
Operating Percentage" for each Building shall be equal to the ratio of the Total
Rentable Area of such Building to the Total Rentable Area of all premises in the
Park, to wit:
Building 1 (Initial Premises): 12.46 %
Building 3 (First Amendment Additional Premises): 5.28%
Building 9 (Second Amendment Additional Premises): 13.01%
10. COMMENCEMENT OF TENANT'S OBLIGATIONS TO PAY TAX EXCESS AND OPERATING
EXPENSE EXCESS
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A. Notwithstanding anything to the contrary herein or in the
Lease contained, Tenant's obligation to pay Tax Excess (if any) in respect of
the entirety of the Second Amendment Additional Premises shall commence as of
the Initial Rent Commencement Date in respect of the Second Amendment Additional
Premises.
B. Notwithstanding anything to the contrary herein or in the
Lease contained, Tenant's obligation to pay Operating Expense Excess in respect
of the entirety of the Second Amendment Additional Premises shall commence as of
January 1, 2000.
11. PARKING
A. Tenant shall have the exclusive right, in connection with its
demise of the Second Amendment Additional Premises, to use the parking spaces
located in the area shown as "Tenant's Building No. 9 Exclusive Parking Area" on
Revised Exhibit 3, Second Amendment, Sheet 1. Tenant's right to use Tenant's
Building No. 9 Exclusive Parking Area shall be upon all of the same terms and
conditions as are applicable to Tenant's right to use Tenant's Exclusive Parking
Area, as set forth in Article 2.3 of the Lease.
B. The occupants of the Second Amendment Additional Premises
shall have no right to use any other Parking Areas in the Park other than
Tenant's Building No. 9 Exclusive Parking Area.
C. Tenant's right to use Tenant's Exclusive Parking Area on an
exclusive basis is appurtenant solely to Tenant's demise of the Existing
Premises and Tenant's right to use Tenant's Building No. 9 Exclusive Parking
Area on an exclusive basis is appurtenant solely to Tenant's demise of the
Second Amendment Additional Premises (i.e. from and after the termination of the
term of the Lease in respect of the Tenant's Exclusive Parking Area, Tenant
shall have no further right to use Tenant's Exclusive Parking Area on an
exclusive basis and from and after the termination of the term of the Lease in
respect of Tenant's Building No. 9 Exclusive Parking Area, Tenant shall have no
further right to use Tenant's Exclusive Building No. 9 Parking Area).
D. The last three sentences of Article 2.3 of the Lease shall
have no applicability to the Second Amendment Additional Premises.
12. LANDLORD'S TERMINATION RIGHTS BASED UPON VACANCY
Landlord's termination right under Article 5.4 of the Lease (as
amended by Paragraph 10 of the First Amendment) shall apply to the Existing
Premises independently of the Second Amendment Additional Premises. In addition,
the Vacancy Period, as defined in Article 5.4, applicable with respect to each
of the Buildings shall be three hundred sixty-five (365) consecutive days. In
other words:
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A. If Tenant ceases to use all, or substantially all, of Building
1 for three hundred and sixty-five (365) consecutive days, or all or
substantially all of Building 3 for three hundred sixty-five (365)
days, but Tenant continues to use the Second Amendment Additional
Premises, then Landlord shall have the right to terminate the term of
the Lease in respect of Building 1 or Building 3, as the case may be,
in accordance with Article 5.4 of the Lease or Paragraph 10 of the
First Amendment, as hereby amended, but Landlord shall not have the
right to terminate the term of the Lease with respect to the Second
Amendment Additional Premises.
B. If Tenant ceases to use all, or substantially all, of the
Second Amendment Additional Premises for the three hundred sixty-five
(365) consecutive days, but Tenant continues to use the Existing
Premises, then Landlord shall have the right to terminate the term of
the Lease in respect of the Second Amendment Additional Premises, but
Landlord shall not have the right to terminate the term of the Lease
with respect of the Existing Premises.
13. TERMINATION RIGHTS BASED UPON CASUALTY AND TAKING
In the event of a casualty or a taking which affects only one of the
Buildings which would allow either party to exercise its rights, under either
Article 18 or 20 of the Lease, to terminate the Lease, then, notwithstanding
anything to the contrary herein contained, neither party shall have the right to
terminate the term of the Lease with respect to the Building(s) which is (are)
not affected by such casualty or taking.
14. LETTERS OF CREDIT
A. Revisions to the Provisions Applicable to the Initial Letter
of Credit
(1) The last sentence of Subparagraph C of Paragraph 6 of the
Rider to the Lease is hereby deleted in its entirety and is of no force or
effect.
(2) The following shall be added at the end of Subparagraph D of
Paragraph 6 of the Lease:
"In the event of a termination of the Lease based upon the default of
Tenant under the Lease, or a rejection of the Lease pursuant to the provisions
of the Federal Bankruptcy Code, Landlord shall have the right to draw upon the
Letter of Credit (from time to time, if necessary) to cover the full amount of
damages and other amounts due from Tenant to Landlord under the Lease. Any
amounts so drawn shall, at Landlord's election, be applied first to any unpaid
rent and other charges which were due prior to the filing of the petition for
protection under the Federal Bankruptcy Code."
B. Provisions Relating to the Second Letter of Credit
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(1) Tenant acknowledges that Landlord is unwilling to execute this
Second Amendment unless Tenant provides Landlord with additional security for
Tenant's obligations under the Lease. Therefore, Tenant shall deliver to
Landlord, on the date that Tenant executes and delivers the Second Amendment to
Landlord, an Irrevocable Standby Letter of Credit (the "Second Letter of
Credit") which shall be (1) in the form attached hereto as Exhibit 8, Second
Amendment, (2) issued by a bank reasonably acceptable to Landlord upon which
presentment may be made in Boston, Massachusetts, (3) equal to Seven Hundred
Fifty Thousand and 00/100 Dollars ($750,000.00), (4) for a term of one (1) year,
subject to the provisions of Subparagraph C of this Paragraph 14. The Second
Letter of Credit and any Substitute Second Letter(s) of Credit and Additional
Second Letter(s) of Credit relating to the Second Letter of Credit are referred
to herein collectively and respectively as the "Second Letter of Credit."
(2) The Second Letter of Credit shall be automatically renewable
in accordance with the second to last grammatical paragraph of Exhibit 8, Second
Amendment, provided however, that Tenant shall be required to deliver to
Landlord a new letter of credit satisfying the conditions set forth in
Subparagraph B(1) of this Paragraph 14 ("Substitute Second Letter of Credit") on
or before the date thirty (30) days prior to the expiration of the term of the
Second Letter of Credit then in effect, if the issuer of such Letter of Credit
gives notice of its election not to renew such Letter of Credit for any
additional period pursuant thereto.
(3) In the event that Tenant is in default, beyond the expiration
of any applicable grace periods, of its obligations under the Lease, and if
Landlord desires to draw upon the Second Letter of Credit, then the Landlord
shall notify Tenant of its intention to draw on the Second Letter of Credit.
Landlord may, at its sole election, draw upon the First Letter of Credit, the
Second Letter of Credit, or enforce any other rights or remedies which Landlord
may have against Tenant based upon any default by Tenant under the Lease. If,
within five (5) business days of receiving such notice, Tenant is able to
provide evidence, reasonably satisfactory to Landlord, that Tenant is then in
compliance with the Credit Condition, as hereinafter defined, then Landlord
shall have no right to draw on the Second Letter of Credit at that time. The
provisions of this Subparagraph D shall not, however, prevent Landlord from
subsequently drawing or attempting to draw on the Second Letter of Credit for
the same or later defaults at such time as Tenant is not in compliance with the
Credit Condition. If Tenant does not satisfy the Credit Condition within said
five (5) business day period, Landlord shall have the right to draw down from
the Second Letter of Credit (a) the amount necessary to cure such default, or
(b) if such default cannot reasonably be cured by the expenditure of money, to
exercise all rights and remedies Landlord may have on account of such default,
the amount which, in Landlord's opinion, is necessary to satisfy Tenant's
liability on account thereof. For the purposes hereof, Tenant shall be deemed,
at any time, to be in compliance with the "Credit Condition" if Tenant has
satisfied Landlord, to Landlord's reasonable satisfaction, that Tenant is then
holding, for its own account, greater than $80,000,000.00 in cash or cash
equivalents. In the event of any such draw by the Landlord, Tenant shall, within
fifteen (15) business days of written demand therefor,
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deliver to Landlord an additional Second Letter of Credit satisfying the
foregoing conditions ("Additional Second Letter of Credit"), except that the
amount of such Additional Second Letter of Credit shall be the amount of such
draw. Failure by Tenant timely to deliver to Landlord such Additional Second
Letter of Credit shall be a default not susceptible of cure entitling Landlord
to exercise any and all remedies pursuant to Article 21 of the Lease on account
thereof.
(4) In the event of a termination of the Lease based upon the
default of Tenant under the Lease, or a rejection of the Lease pursuant to the
provisions of the Federal Bankruptcy Code, if Tenant does, not, within five (5)
business days of such termination or rejection, satisfy the Credit Condition,
Landlord shall have the right to draw upon the Second Letter of Credit (from
time to time, if necessary) to cover the full amount of damages and other
amounts due from Tenant to Landlord under the Lease. Any amounts so drawn shall,
at Landlord's election, be applied first to any unpaid rent and other charges
which were due prior to the filing of the petition for protection under the
Federal Bankruptcy Code. The provisions of this Subparagraph (4) shall not,
however, prevent Landlord from subsequently drawing or attempting to draw on the
Second Letter of Credit if at any time thereafter Tenant is not in compliance
with the Credit Condition.
(5) In the event that Tenant fails timely to deliver to Landlord a
Substitute Second Letter of Credit, then Landlord shall have the right, at any
time after such event, without giving any further notice to Tenant, to draw down
the Second Letter of Credit and to hold the proceeds thereof ("Second Security
Proceeds") in a segregated interest bearing bank account in the name of Landlord
which may be withdrawn and applied by Landlord under the same circumstances and
for the same purposes as if the Second Security Proceeds were the Substitute
Second Letter of Credit. If Landlord draws down the Second Letter of Credit
pursuant to this Subparagraph (5), then:
(a) Such draw and Landlord's right to hold the Second
Security Proceeds pursuant to this Subparagraph (5) shall be Landlord's
sole remedy based upon Tenant's failure to timely deliver a Substitute
Second Letter of Credit as required hereunder; and
(b) Upon the expiration or prior termination of the term
of the Lease, Landlord shall return to Tenant any Second Security
Proceeds then being held by Landlord, to the extent that such Second
Security Proceeds exceed any amounts then due from Tenant to Landlord.
(6) To the extent that Landlord has not previously drawn upon the
Second Letter of Credit, or Second Security Proceeds relating to the Second
Letter of Credit (collectively, the "Collateral") held by Landlord, and to the
extent that Tenant is not otherwise in default of its obligations under the
Lease as of the Termination Date, Landlord shall return such Collateral to
Tenant at the expiration of the term of the Lease, as the same may be extended.
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15. SIGNAGE
Subject to obtaining Landlord's prior approval of the particulars
therefor which shall not be unreasonably withheld, and Tenant obtaining all
necessary governmental approvals therefor, Tenant may at its sole cost and
expense install two (2) exterior building signs on the Building of the Second
Amendment Additional Premises. Such signs shall identify Tenant and shall be in
a location approved by Landlord. If Tenant installs such building signs, Tenant
shall maintain the same in good order and repair at all times and shall remove
the same from the Building at the expiration or earlier termination of the term
of the Lease in respect of the Second Amendment Additional Premises. Upon
removal of such signage, Tenant shall, at Tenant's cost, repair any damage to
the Building caused by the installation or removal of such signage.
16. REVISED EXHIBIT 1
Effective as of the Term Commencement Date with respect to the Second
Amendment Additional Premises, Exhibit 1, Sheets 1, 2, 3, and 4, dated March 11,
1996 and Exhibit 1, First Amendment Version, Sheets 1, 2, 3, and 4, dated May
10, 1997 are hereby deleted in their entirety and shall have no further force
and effect, and Exhibit 1, Second Amendment Version, Sheets 1, 2, 3, 4, 5, 6 and
7 dated April 8, 1998, shall be substituted in its place.
17. EXPANSION AREA IN DEC LAND
Paragraph 4 of the Rider to the Lease is hereby deleted in its
entirety.
18. LANDLORD'S REPRESENTATIONS AS TO EXISTING CONDITIONS
Exhibits 7A and 7B, Second Amendment, copies of which are attached
hereto and made a part hereof, are hereby deemed to be a part of Exhibit 7 of
the Lease.
19. SUBLEASING
Article 16(d)(1) of the Lease is hereby deleted in its entirety and
shall be replaced with the following:
Except in connection with Non-Recapture Subleases, as
hereinafter defined, Tenant shall, prior to offering or
advertising any portion of the demised premises for sublease
or an assignment, give Landlord a Recapture Offer, as
hereinafter defined. For the purposes hereof, a "Non-Recapture
Sublease" shall be defined as any sublease of any portion of
the premises which has a term (including, all extension and
renewal options) of less than five (5) years, provided that
the aggregate amount of Total Rentable Area subleased under
Non-Recapture Subleases shall not, at any time, exceed the
lesser of: (x) 77,660 square feet of Total Rentable Area,
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or (y) thirty-six (36%) percent of the Total Rentable Area in
the Park then leased by Tenant from Landlord.
20. OPERATION OF CAFETERIA IN SECOND AMENDMENT ADDITIONAL PREMISES
Tenant shall, subject to the provisions of the Lease and this Paragraph
20, have the right to operate a catering or food facility in the Second
Amendment Premises. All improvements in such facility shall be subject to
Landlord's approval, which shall not be unreasonably withheld. Tenant shall be
required to engage Landlord or a service provider designated by Landlord to
operate a catering or food facility within Building No. 9 on mutually acceptable
terms; however, in the event that Tenant, in its bona fide business judgment,
believes that the quality or service being provided by Landlord is not
acceptable to Tenant, then Tenant shall have the right to engage an operator of
its choice for such catering and food facility.
21. HEATING, VENTILATION AND AIR CONDITIONING SERVICE OVERTIME CHARGES FOR
THE SECOND AMENDMENT ADDITIONAL PREMISES
In lieu of sentences 3 and 4 of Article 8.5(b) of the Lease, the
following shall apply to the Second Amendment Additional Premises:
The parties hereby agree that the initial charge for heating,
ventilation and air conditioning services for the Second Amendment
Additional Premises shall be $15.00 per hour, per roof-top air
conditioning unit serving the Second Amendment Additional Premises.
Said charges shall only be increased in relation to the increase in
actual costs incurred by Landlord in providing such heating,
ventilation and air conditioning services.
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22. LANDLORD'S EXCLUSIVE ROOF RIGHTS
Landlord hereby reserves for itself the exclusive right to use and
occupy the roof of Building 9 (the "Roof"), subject to the following: (i)
Landlord shall provide Tenant at least twenty-four (24) hours advance notice
prior to accessing the Roof except in an emergency, in which case no notice
shall be required, and (ii) Tenant shall have the right to use a portion of the
Roof, as reasonably designated by Landlord, which is sufficient to install at
least one telecommunications device to service Tenant's telecommunication needs,
provided that Tenant obtains Landlord's prior written approval of such device or
devices, and their manner of installation, which approval shall not be
unreasonably withheld or delayed.
23. As hereby amended, the Lease is ratified, confirmed, and approved in
all respects.
EXECUTED UNDER SEAL as of the date first above written.
LANDLORD:
EOP-CROSBY CORPORATE CENTER, L.L.C.
By: EOP Operating Limited Partnership, a Delaware limited
partnership, its sole member
By: Equity Office Properties Trust, a Maryland real
estate investment trust, its managing general partner
By: /s/ Thomas Q. Burke
___________________
Thomas Q. Burke
Vice President
TENANT:
SECURITY DYNAMICS TECHNOLOGIES, INC.
By: /s/ A.W. Coviello, Jr.
______________________
Name: A.W. Coviello, Jr.
____________________
Title: C.O.O.
___________________
Date Signed: 4/2/98
_____________
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<PAGE> 1
RIDER TO LEASE
LANDLORD: BEACON PROPERTIES, L.P.
TENANT: SECURITY DYNAMICS TECHNOLOGIES, INC.
The attached and foregoing Lease is hereby amended and supplemented as
follows.
1. TENANT'S TERMINATION RIGHT
A. Notwithstanding anything to the contrary in the Lease
contained, on the conditions (which conditions Landlord may waive by written
notice to Tenant at any time) that Tenant is not in default, beyond the
expiration of any applicable grace periods, of its covenants or obligations
under the Lease, both as of the time that Tenant gives Tenant's Termination
Notice (defined below) and as of the Effective Termination Date (as defined
below), Tenant shall have the right to terminate the term of this Lease of the
premises (the "Original Premises") initially demised Tenant effective as of the
fifth anniversary of the Rent Commencement Date (the "Effective Termination
Date") by giving Landlord written notice ("Tenant's Termination Notice") of its
election to do so on or before the fourth anniversary of the Term Commencement
Date, and by payment to Landlord concurrently with Tenant's Termination Notice
of the applicable Termination Payment (as defined below). In the event that
Tenant exercises the herein termination option, the Yearly Rent, Operating
Expense Excess, Tax Excess and other charges due under the Lease shall be
apportioned as of the Effective Termination Date, and the term of the Lease in
respect of the Original Premises shall terminate as of the Effective Termination
Date. If Tenant fails timely to give Tenant's Termination Notice or timely to
pay the Termination Payment, Tenant shall have no right to terminate the Lease
pursuant to this Paragraph 1, time being of the essence of this Paragraph 1.
B. For the purposes hereof, the Termination Payment shall mean
the aggregate of the Fixed Rent Amount, plus the Rent Differential Amount, plus
Landlord's Unamortized Transaction Costs (as each is defined below):
(1) The "Fixed Rent Amount" shall mean Five Hundred Fifty-Eight
Thousand One Hundred Ninety-Five and 00/100 ($558,195.00)
Dollars.
(2) The "Rent Differential Amount" shall mean Three Hundred
Sixteen Thousand Three Hundred Ten and 50/100 Dollars
($316,310.50).
(3) "Landlord's Unamortized Transaction Costs" shall mean the
aggregate amount of principal and interest that remains
unamortized as of the Effective Termination Date if Landlord's
Transaction Costs are amortized on a direct reduction basis in
equal monthly installments of principal and interest over the
ten (10) year term of this Lease at an annual rate of
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interest of eleven percent (11%) per annum. For the purposes
of this Subparagraph (3) "Landlord's Transaction Costs" shall
mean the aggregate of all costs and expenses incurred by
Landlord in connection with the negotiation, execution and
implementation of this Lease, including, without limitation,
the following: legal, brokerage, design and engineering and
other professional fees; and Landlord's Architectural
Contribution.
C. Notwithstanding anything to the contrary contained herein, in
the event that on or before the fourth anniversary of the Term Commencement
Date, Tenant exercises its right to lease the Expansion Area pursuant to
Paragraph 4 below, or any RFO Premises pursuant to Paragraph 5 below, or if
Landlord offers in writing to make available for lease to Tenant space in
comparable buildings on Crosby Drive owned by Landlord (it being understood that
Landlord shall have no obligation to do so) and such Expansion Area and/or any
RFO Premises and/or such other space consists of at least 50,000 square feet of
Total Rentable Area in the aggregate and shall be available for lease to Tenant
on or before the fifth anniversary of the Term Commencement Date, then Tenant
shall have no right under this Paragraph 1 to terminate this Lease.
2. LEASE EXTENSION OPTIONS
A. TENANT'S OPTION TO EXTEND THE TERM OF LEASE.
On the conditions, which conditions Landlord may waive, at its
election, by written notice to Tenant at any time, that: (i) Tenant is not in
default, beyond the expiration of any applicable grace periods, of its covenants
and obligations under the Lease, and (ii) both as of the time of option exercise
and as of the commencement of the hereinafter described additional term,
Security Dynamics Technologies, Inc., a Permitted Tenant Successor, and/or an
Affiliate of Tenant are occupying at least seventy percent (70%) of the premises
then demised to Tenant, in the aggregate (i.e., including all portions of the
premises then being subleased by Tenant), Tenant shall have the option to extend
the term of this Lease in respect of all premises then demised to Tenant under
this Lease for one (1) additional five (5) year term (the "Extension Term")
which Extension Term shall commence as of the expiration of the initial term of
this Lease. Notwithstanding the foregoing, if Tenant would otherwise be deemed
to have failed to satisfy the condition set forth in clause (ii) above as the
result of any sublease(s), Tenant shall nevertheless be deemed to have satisfied
such condition so long as the term (including any extension or renewal options)
of each such sublease(s) will expire no later than one (1) year after the
commencement of such additional term. Tenant may exercise such option to extend
by giving Landlord written notice on or before the date twelve (12) months prior
to the expiration date of the initial term of this Lease. Upon the timely giving
of such notice, the term of this Lease shall be deemed extended upon all of the
terms and conditions of this Lease, except that Landlord shall have no
obligation to construct or renovate the Premises and that the Yearly Rent,
Operating Cost Base, and Tax Base during such additional term shall be as
hereinafter set forth. If Tenant fails to
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<PAGE> 3
give timely notice, as aforesaid, Tenant shall have no further right to extend
the term of this Lease, Time being of the essence of this Paragraph 2. If Tenant
has exercised its early termination right pursuant to Paragraph 1 of this Rider,
Tenant shall have no right to extend the term of the Lease in respect of such
premises pursuant to this Paragraph 2.
B. YEARLY RENT
The Yearly Rent during the additional term shall be based upon the
greater of the following: (i) ninety-five percent (95%) of the Fair Market
Rental Value, as defined in Paragraph 3 of this Rider, as of the commencement of
the additional term, of the premises then demised to Tenant, (ii) the sum of
Yearly Rent, Operating Expense Excess and Tax Excess payable by Tenant in
respect of the twelve-(12)- month period immediately preceding the commencement
of the additional term; provided, however, that in no event shall the sum of
Yearly Rent, Operating Expense Excess and Tax Excess payable by Tenant for any
twelve (12) month-period during the additional term be more than the Fair Market
Rental Value, as of the commencement of the additional term, of the premises
then demised to Tenant.
C. NO FURTHER EXTENSION OPTIONS.
Tenant shall have no further option to extend the term of the
Lease other than the one (1) additional five (5) year term herein provided.
D. Notwithstanding the fact that upon Tenant's exercise of the
herein option to extend the term of the Lease such extension shall be
self-executing, as aforesaid, the parties shall promptly execute a lease
amendment reflecting such additional term after Tenant exercises the herein
option, except that the Yearly Rent payable in respect of such additional term,
the Operating Cost Base during such additional term, and the Tax Base during
such additional term, may not be set forth in said amendment. Subsequently,
after such Yearly Rent, Operating Cost Base, and Tax Base are determined, the
parties shall execute a written agreement confirming the same. The execution of
such lease amendment shall not be deemed to waive any of the conditions to
Tenant's exercise of its rights under this Paragraph 2, unless otherwise
specifically provided in such lease amendment.
3. DEFINITION OF FAIR MARKET RENTAL VALUE
For the purpose of this Rider:
A. DEFINITION.
"Fair Market Rental Value" shall be computed as of the date in question
at the then current annual rental charge (i.e., the sum of Yearly Rent plus
escalation and other charges), including provisions for subsequent increases and
other adjustments for leases
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<PAGE> 4
or agreements to lease then currently being negotiated or executed for
comparable space located elsewhere in first-class suburban office research and
development buildings in the greater Burlington, Bedford and Lexington
submarket, including the Park. In determining Fair Market Rental Value, the
following factors, among others, shall be taken into account and given effect:
size, location of premises, lease term, condition of building, and services
provided by the Landlord.
B. ESCALATION BASES.
Notwithstanding anything to the contrary herein contained, the parties
hereby agree that upon the determination of any Fair Market Rental Value,
Landlord shall have the right, exercisable by written notice to Tenant on or
before the time that Landlord gives Tenant its initial designation of Fair
Market Rental Value:
(1) to change Operating Cost Base as stated on Exhibit 1
from the amount stated on Exhibit 1 to an amount
equal to the actual amount of Operating Costs for the
immediately preceding Operating Year, and
(2) to change the Tax Base as stated on Exhibit 1 from
the amount stated on Exhibit 1 to an amount equal to
the actual amount of Taxes for the immediately
preceding fiscal/tax year for which landlord has
actual data.
If Landlord shall exercise such right, the amount of Yearly
Rent payable hereunder shall be commensurately adjusted to reflect such change
on Operating Cost Base and in Tax Base.
C. DISPUTE AS TO FAIR MARKET RENTAL VALUE
Landlord shall initially designate Fair Market Rental Value
and Landlord shall furnish data in support of such designation. If Tenant
disagrees with Landlord's designation of a Fair Market Rental Value, Tenant
shall have the right, by written notice given within thirty (30) days after
Tenant has been notified of Landlord's designation, to submit such Fair Market
Rental Value to arbitration. Fair Market Rental Value shall be submitted to
arbitration as follows: Fair Market Rental Value shall be determined by
impartial arbitrators, one to be chosen by the Landlord, one to be chosen by
Tenant, and a third to be selected, if necessary, as below provided. The
unanimous written decision of the two first chosen, without selection and
participation of a third arbitrator, or otherwise, the written decision of a
majority of three arbitrators chosen and selected as aforesaid, shall be
conclusive and binding upon Landlord and Tenant. Landlord and Tenant shall each
notify the other of its chosen arbitrator with ten (10) days following the call
for arbitration and, unless such two arbitrators shall have reached a unanimous
decision within thirty (30) days after their designation, they shall so notify
the President of the
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<PAGE> 5
Boston Bar Association (or such organization as may succeed to said Boston Bar
Association) and request him to select an impartial third arbitrator, who shall
be an office building owner, a real estate counselor or a broker dealing with
the like types of properties, to determine Fair Market Rental Value as herein
defined. Such third arbitrator and the first two chosen shall, subject to
commercial arbitration rules of the American Arbitration Association, hear the
parties and their evidence and render their decision within thirty (30) days
following the conclusion of such hearing and notify Landlord and Tenant thereof.
Landlord and Tenant shall bear the expense of the third arbitrator (if any)
equally. The fifth (5th) grammatical sentence of Article 29.5 of the Lease is
hereby incorporated by reference in this Subparagraph C. If the dispute between
the parties as to a Fair Market Rental Value has not been resolved before the
commencement of Tenant's obligation to pay rent based upon such Fair Market
Rental Value, then Tenant shall pay Yearly Rent and other charges under the
Lease in respect of the premises in question based upon the Fair Market Rental
Value designated by Landlord until either the agreement of the parties as to the
Fair Market Rental Value, or the decision of the arbitrators, as the case may
be, at which time Tenant shall pay any underpayment of rent and other charges to
Landlord, or Landlord shall refund any overpayment of rent and other charges to
Tenant.
4. EXPANSION AREA IN DEC LAND
A. In the event that, on or before the expiration of the first
thirty (30) months after the Rent Commencement Date (the "Offer Period"),
Landlord acquires the parcels of land (the "DEC Land") adjacent to the Park, as
more particularly described in Exhibit 9 attached hereto and incorporated by
reference as a part hereof, then the following provisions shall apply. On the
conditions (collectively, "Exercise Conditions") (which Exercise Conditions
Landlord may waive, at its election, by written notice to Tenant at any time)
that: (i) Tenant is not in default, beyond the expiration of any applicable
grace periods of its covenants or obligations under the Lease, both as of the
time of option exercise and as of the expiration of the Offer Period, and (ii)
only Security Dynamics Technologies, Inc., a Permitted Tenant Successor, and/or
an Affiliate of Tenant are occupying at least seventy percent (70%) of the
premises then demised to Tenant in the aggregate, and (iii) Tenant has not given
Landlord a Termination Notice under Paragraph 1 above, then during the Offer
Period Landlord will notify Tenant that it has acquired the DEC Land promptly
after the date of acquisition of the DEC Land.
Upon written request ("Tenant's Request") from Tenant within the Offer
Period and subject to the Exercise Conditions, Landlord will negotiate with
Tenant in good faith to attempt to reach mutually acceptable terms under a
written agreement (the "DEC Land Agreement") pursuant to which Landlord will
lease and demise to Tenant, and Tenant shall hire and take from Landlord, an
agreed upon portion of the DEC Land for the development and construction thereon
of a building containing at least 75,000 square feet of Total Rentable Area and
related improvements. The parties estimate that, subject to delays in the
permitting process, Tenant's delays, and other causes beyond Landlord's
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<PAGE> 6
reasonable control, six (6) months is a reasonable period of time to prepare
plans for a building on the DEC Land and twelve (12) months is a reasonable
period of time to construct a building on the DEC Land.
B. Notwithstanding the foregoing, if prior to receipt by Landlord
of Tenant's Requests Landlord decides to construct any building and at such time
there shall be at least one (1) other site on the DEC Land which is available to
Landlord to develop and improve which can accommodate a building (the "Alternate
Building") of at least 75,000 square feet of Total Rentable Area, then Tenant's
right under this Paragraph 4 may, at Landlord's election, apply to the Alternate
Building in lieu of any other building on the DEC Land. In the event the parties
reach agreement as aforesaid, the parties hereby agree promptly to execute the
DEC Land Agreement reflecting the demise of the agreed upon area upon the agreed
upon terms. If Tenant elects to lease the Alternate Building pursuant to this
Paragraph 4, then in no event shall Tenant be required to pay any rent for the
Alternate Building earlier than the expiration of thirty-six (36) months after
the Rent Commencement Date.
C. In the event that for any reason the parties shall not have
executed the DEC Land Agreement prior to the expiration of the Offer Period and
so long as Landlord has sent to Tenant the notice required under Paragraph 4.A
and has negotiated with Tenant in good faith after receipt of Tenant's Request
as required under Paragraph 4.B, then Tenant shall have no further right to
lease all or any portion of the DEC Land pursuant to this Paragraph 4.
5. TENANT'S RIGHT OF FIRST OFFER TO LEASE OTHER PREMISES IN THE PARK AND WITHIN
ONE MILE OF THE PARK
On the conditions (which conditions Landlord may waive, at its
by written notice to Tenant at any time) that (1) Tenant is not in
default, beyond the expiration of any applicable grace periods, of its covenants
or obligations under the Lease, (2) only Security Dynamics Technologies, Inc., a
Permitted Tenant Successor, and/or Affiliates of Tenant (both as defined in
Article 16 of the Lease) are occupying the entirety of the premises then demised
to Tenant, and (3) Tenant has not given Landlord a Termination Notice under
Paragraph 1 above, both at the time that Landlord is required to give Landlord's
Notice, as hereinafter defined, and as of the Term Commencement Date in respect
of the RFO Premises, Tenant shall have the following right to lease the RFO
Premises, as hereinafter defined, when the RFO Premises become available for
lease to Tenant, as hereinafter defined.
A. DEFINITION OF RFO PREMISES
The parties acknowledge that each of Buildings 2, 3, 4 and 5 in the
Park is presently leased, and that the parties intend to give Tenant the right
to lease all or any portion of Buildings 2, 3, 4 and 5 after the tenant(s) of
each Building vacate such
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<PAGE> 7
Building, subject and subordinate, in all respects, to the rights of other
existing tenants in the Park, as set forth on Exhibit 12 attached hereto and
incorporated by reference as a part hereof, and to the right of Landlord to
renew any existing leases, and before Landlord offers any such premises for
lease to other tenants in the Park which do not presently have rights in such
premises, set forth on Exhibit 12 and to the general market place. Therefore,
"RFO Premises" shall be defined as any separately demised area in Building 2, 3,
4 or 5 or on any other land and improvements thereon owned by Landlord and
located within a one (1) mile radius of the Park (the "Other Property") when
such area becomes available for lease to Tenant, as hereinafter defined, during
the initial term of this Lease. For the purposes of this Paragraph 5, an RFO
Premises shall be deemed to be "available for lease to Tenant" if, during the
then current term of this Lease, Landlord, in its bona fide business judgment,
determines that such area will become available for leasing to Tenant (i.e. when
Landlord determines that the then initial tenant of such RFO Premises will
vacate such RFO Premises, and when Landlord intends to offer such area for lease
to anyone other than a tenant in the Park which does not presently (i.e., as of
the Execution Date) have rights in such area) or, with respect to premises in
the Other Property, when Landlord intends to offer such area for lease to anyone
other than a tenant who then occupies any portion of the Other Property. In no
event shall Tenant have any rights under this Paragraph 5 on or after the
earlier of (x) the date that Tenant gives Landlord a notice exercising Tenant's
Termination Right pursuant to Paragraph 1 of this Rider, or (y) the date twelve
(12) months prior to the expiration of the then current term of the Lease (i.e.
Landlord shall have no obligation to give Landlord's Notice, as hereinafter
defined, to Tenant on or after the earlier of (x) the date twelve (12) months
prior to the expiration of the then current term of the Lease or (y) the date
that Tenant gives Landlord a notice exercising Tenant's Termination Right
pursuant to Paragraph 1 of this Rider).
B. EXERCISE OF RIGHT TO LEASE RFO PREMISES
Landlord shall give Tenant written notice ("Landlord's Notice") at the
time that Landlord determines, as aforesaid, that an RFO Premises will become
available for lease to Tenant. Landlord's Notice shall set forth the exact
location of the RFO Premises, Landlord's designation of the Fair Market Rental
Value (as defined in Paragraph 3 of this Rider) applicable to the RFO Premises
and the Specified Commencement Date in respect of the RFO Premises. Tenant shall
have the right, exercisable upon written notice ("Tenant's Exercise Notice")
given to Landlord within twenty (20) days after the receipt of Landlord's
Notice, to lease the RFO Premises. If Tenant fails timely to give Tenant's
Exercise Notice, Tenant shall have no further right to lease such RFO Premises
pursuant to this Paragraph 3, provided however, that Tenant shall have the right
from time to time thereafter throughout the term of the Lease until Tenant's
right to lease the RFO Premises has lapsed, to lease the same RFO Premises when
it again becomes available for lease to Tenant, and any other subsequently
available RFO Premises. Upon the timely giving of such notice, Landlord shall
lease and demise to Tenant and Tenant shall hire and take from Landlord, such
RFO Premises, upon all of the same terms and conditions of the Lease except as
hereinafter set forth.
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C. LEASE PROVISIONS APPLYING TO RFO PREMISES
The leasing to Tenant of any RFO Premises shall be upon all of
the same terms and conditions of the Lease (including, without limitation, the
expiration date of the term of this Lease), except as follows:
(1) TERM COMMENCEMENT DATE
The Term Commencement Date in respect of the RFO Premises
shall be the later of: (x) the Specified Commencement Date in respect of such
RFO Premises as set forth in Landlord's Notice, or (y) the date that Landlord
delivers such RFO Premises to Tenant.
(2) YEARLY RENT
The Yearly Rent rental rate in respect of such RFO Premises
shall be based upon the Fair Market Rental Value, as defined in Paragraph 3 of
this Rider, of such RFO Premises as of the Term Commencement Date in respect of
such RFO Premises. The Rent Commencement Date in respect of such RFO Premises
shall be the Term Commencement Date in respect of such RFO Premises.
(3) ESCALATION
The Operating Cost Base for any RFO Premises shall be equal
to the actual amount of Operating Costs for the applicable Building for the
calendar year immediately preceding the Term Commencement Date in respect of
such RFO Premises. Tenant's Operating Cost Percentage for any RFO Premises shall
be based upon the ratio of the Total Rentable Area of such RFO Premises to the
Total Rentable Area of the applicable Building. The Tax Base for the applicable
Building shall be the actual amount of Taxes on the Park for the fiscal/tax year
immediately preceding the Term Commencement Date in respect of such RFO
Premises, and Tenant's Tax Percentage in respect of such RFO Premises shall be
based upon the ratio of the Total Rentable Area of such RFO Premises to the
Total Rentable Area of the Park.
(4) DEFINITION OF BUILDING
The term "Building" with respect to any RFO Premises shall
mean the Building in which such RFO Premises are located.
(5) CONDITION OF RFO PREMISES
Tenant shall take such RFO Premises "as-is" in its then (i.e.
as of the date of premises delivery) state of construction, finish, and
decoration, without any obligation
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<PAGE> 9
on the part of Landlord to construct or prepare any RFO Premises for Tenant's
occupancy, and Landlord shall have no obligation to provide any funds or
Landlord Contribution to Tenant on account of the RFO Premises, unless otherwise
agreed to by the parties in the determination of the Fair Market Rental Value
applicable to such RFO Premises.
(6) ADDITIONAL LETTER OF CREDIT
If Landlord is required to provide any funds or Landlord
Contribution to Tenant on account of any RFO Premises, Landlord shall have the
right to require, as a condition to the exercise of Tenant's right to lease such
RFO Premises, the delivery of an additional letter of credit, with a Letter of
Credit Amount in the same proportion to the Total Rentable Area of such RFO
Premises as the Letter of Credit Amount provided by Tenant in connection with
the initially demised premises to the Total Rentable Area of the premises.
(7) TERMINATION OPTION
Tenant shall have no right to terminate its lease of the RFO
Premises pursuant to Paragraph 1 hereof.
(8) OTHER INCONSISTENT PROVISIONS
Any other provisions of the Lease that are inconsistent with the demise
of Expansion Area contemplated hereby shall not apply thereto.
D. EXECUTION OF LEASE AMENDMENTS
Notwithstanding the fact that Tenant's exercise of the
above-described option to lease any RFO Premises shall be self-executing, as
aforesaid, the parties hereby agree promptly to execute a lease amendment
reflecting the addition of an RFO Premises, except that the Yearly Rent payable
in respect of such RFO Premises, Operating Costs in the Base Year in respect of
such RFO Premises, and Tax Base may not be as set forth in such amendment. At
the time that such Yearly Rent, Operating Costs in the Base Year, and Tax Base
are determined, the parties shall execute a written agreement confirming the
same. The execution of such lease amendment shall not be deemed to waive any of
the conditions to Tenant's exercise of the herein option to lease the RFO
Premises, unless otherwise specifically provided in such lease amendment.
6. TENANT'S SECURITY
A. Tenant acknowledges that Landlord is unwilling to execute the Lease
unless Tenant provides Landlord with security for Tenant's obligations under the
Lease. Therefore, Tenant shall deliver to Landlord, on the date that Tenant
executes and delivers
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<PAGE> 10
the Lease to Landlord, an Irrevocable Standby Letter of Credit (the "Original
Letter of Credit") which shall be (1) in the form attached hereto as Exhibit 8,
(2) issued by a bank reasonably acceptable to Landlord upon which presentment
may be made in Boston, Massachusetts, (3) equal to the Letter of Credit Amount,
as hereinafter defined, (4) for a term of one (1) year, subject to the
provisions of Subparagraph C of this Paragraph 2. The Original Letter of Credit
and any Replacement Letter(s) of Credit, Substitute Letter(s) of Credit and
Additional Letter(s) of Credit are referred to herein collectively and
respectively as the "Letter of Credit."
B. For the purposes hereof, the "Letter of Credit Amount" shall
be Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00).
C. The Letter of Credit shall be automatically renewable in
accordance with the second to last grammatical paragraph of Exhibit 8; provided
however, that Tenant shall be required to deliver to Landlord a new letter of
credit satisfying the conditions set forth in Subparagraph A of this Paragraph 6
("Substitute Letter of Credit") on or before the date thirty (30) days prior to
the expiration of the term of the Letter of Credit then in effect, if the issuer
of such Letter of Credit gives notice of its election not to renew such Letter
of Credit for any additional period pursuant thereto. Upon written request of
Tenant, Landlord shall deliver to the issuer an instruction authorizing the
issuing bank to reduce the Letter of Credit Amount in accordance with the
schedule set forth herein.
D. In the event that Tenant is in default, beyond the expiration
of any applicable grace periods, of its obligations under this Lease, then the
Landlord shall have the right, at any time after such event, to draw down from
said Letter of Credit (a) the amount necessary to cure such default, or (b) if
such default cannot reasonably be cured by the expenditure of money, to exercise
all rights and remedies Landlord may have on account of such default, the amount
which, in Landlord's opinion, is necessary to satisfy Tenant's liability in
account thereof. In the event of any such draw by the Landlord, Tenant shall,
within fifteen (15) business days of written demand therefor, deliver to
Landlord an additional Letter of Credit satisfying the foregoing conditions
("Additional Letter of Credit"), except that the amount of such Additional
Letter of Credit shall be the amount of such draw. Failure by Tenant timely to
deliver to Landlord such Additional Letter of Credit shall be a default not
susceptible of cure entitling Landlord to exercise any and all remedies pursuant
to Article 21 of the Lease on account thereof.
E. In the event that Tenant fails timely to deliver to Landlord a
Substitute Letter of Credit, then Landlord shall have the right, at any time
after such event, without giving any further notice to Tenant, to draw down the
Letter of Credit and to hold the proceeds thereof ("Security Proceeds") in a
segregated bank account interest bearing in the name of Landlord which may be
withdrawn and applied by Landlord under the same circumstances and for the same
purposes as if the Security Proceeds were a Letter of Credit. If Landlord draws
down the Letter of Credit pursuant to this Subparagraph E, then:
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<PAGE> 11
(1) Such draw and Landlord's right to hold the Security
Proceeds pursuant to this Subparagraph E shall be Landlord's sole
remedy based Tenant's failure to timely deliver a Substitute Letter of
Credit as required hereunder; and
(2) Upon the expiration or prior termination of the term of
the Lease, Landlord shall return to Tenant any Security Proceeds then
being held by Landlord, to the extent that such Security Proceeds
exceed any amounts then due from Tenant to Landlord.
G. To the extent that Landlord has not previously drawn upon any
Letter of Credit, or Security Proceeds (collectively, the "Collateral") held by
Landlord, and to the extent that Tenant is not otherwise in default of its
obligations under the Lease as of the Termination Date, Landlord shall return
such Collateral to Tenant at the expiration of the term of the Lease, as the
same may be extended.
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<PAGE> 12
EXHIBIT 8
BENEFICIARY: ISSUANCE DATE:
________________, 199__
[Landlord's Name]
c/o THE BEACON COMPANIES IRREVOCABLE STANDBY
50 ROWES WHARF LETTER OF CREDIT NO.
BOSTON, MA 02110
ACCOUNTEE/APPLICANT:
MAXIMUM/AGGREGATE
CREDIT AMOUNT:______
_________________ USD ________________
[TENANT NAME]
GENTLEMEN:
We hereby establish our irrevocable letter of credit in your favor for
account of the applicant up to an aggregate amount not to exceed
____________________ US Dollars ($___________) available by your draft(s) drawn
on ourselves at sight accompanied by:
Your statement, signed by a purportedly authorized officer/official
certifying that the Beneficiary is entitled to draw upon this Letter of Credit
(in the amount of the draft submitted herewith) pursuant to Paragraph 6 of the
Rider to the Lease (the "Lease") dated ________________, 1996 by and between
____________________, as Landlord, and _________________, as Tenant.
Draft(s) must indicate name and issuing bank and credit number and must
be presented at this office.
You shall have the right to make partial draws against this Letter of
Credit, from time to time.
Except as otherwise expressly stated herein, this Letter of Credit is
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision) International Chamber of Commerce, Publication No. 500.
This Letter of Credit shall expire at our office on ________________,
199__ (the "Stated Expiration Date"). It is a condition of this Letter of Credit
that the Stated Expiration Date shall be deemed automatically extended without
amendment for
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<PAGE> 13
successive one (1) year period s from such Stated Expiration Date, unless at
least forty-five (45) days prior to such Stated Expiration Date) or any
anniversary thereof) we shall notify you and the Accountee/Applicant in writing
by registered mail (return receipt) that we elect not to consider this Letter of
Credit extended for any such additional one (1) year period. We engage with you
that all drafts drawn under and in compliance with the terms of this letter of
credit will be duly honored on presentation to us.
Very truly yours,
Authorized Signatory
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<PAGE> 1
Exhibit 10.7
LEASE AGREEMENT
between
PENINSULA OFFICE PARK ASSOCIATES, L. P.
as "LANDLORD"
and
SECURITY DYNAMICS TECHNOLOGIES, INC.
as "TENANT"
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. PREMISES..................................................................4
2. TERM; POSSESSION..........................................................4
3. RENT......................................................................5
4. SECURITY DEPOSIT.........................................................11
5. USE AND COMPLIANCE WITH LAWS.............................................11
6. ALTERATIONS..............................................................14
7. MAINTENANCE AND REPAIRS..................................................16
8. TENANT'S TAXES...........................................................18
9. UTILITIES AND SERVICES...................................................18
10. EXCULPATION AND INDEMNIFICATION.........................................21
11. INSURANCE...............................................................21
12. DAMAGE OR DESTRUCTION...................................................24
13. CONDEMNATION............................................................25
14. ASSIGNMENT AND SUBLETTING...............................................27
15. DEFAULT AND REMEDIES....................................................30
16. LATE CHARGE AND INTEREST................................................32
17. WAIVER..................................................................32
18. ENTRY, INSPECTION AND CLOSURE...........................................32
19. SURRENDER AND HOLDING OVER..............................................33
20. ENCUMBRANCES............................................................34
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS..........................35
22. NOTICES.................................................................35
23. ATTORNEYS' FEES.........................................................36
24. QUIET POSSESSION........................................................36
25. SECURITY MEASURES.......................................................36
26. FORCE MAJEURE...........................................................36
27. RULES AND REGULATIONS...................................................37
28. LANDLORD'S LIABILITY....................................................37
29. CONSENTS AND APPROVALS..................................................37
30. BROKERS.................................................................38
31. [INTENTIONALLY DELETED].................................................38
32. ENTIRE AGREEMENT........................................................38
33. MISCELLANEOUS...........................................................38
34. AUTHORITY...............................................................39
</TABLE>
<PAGE> 3
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Additional Rent.................................................8
Alterations....................................................14
Award..........................................................25
Broker.........................................................38
Building........................................................4
Building Architect..............................................4
Building Rules.................................................37
Building Systems...............................................12
Business Days..................................................18
Business Hours.................................................18
Claims.........................................................21
Commencement Date...............................................5
Condemnation...................................................25
Condemnor......................................................25
Construction Rider..............................................4
Controls.......................................................17
Date of Condemnation...........................................26
Encumbrance....................................................34
Environmental Losses...........................................12
Environmental Requirements.....................................12
Event of Default...............................................30
Expiration Date.................................................5
Handled by Tenant..............................................12
Handling by Tenant.............................................12
Hazardous Materials............................................12
HVAC...........................................................12
Interest Rate..................................................32
Land............................................................4
Landlord........................................................4
Laws............................................................6
Modified BOMA Standard..........................................4
Mortgagee......................................................34
Operating Costs.................................................5
Parking Facility................................................4
Peninsula Office Park...........................................4
Permitted Hazardous Materials..................................13
Premises........................................................4
Project.........................................................4
Property........................................................4
Property Manager...............................................22
Proposed Transferee............................................27
Rental Tax.....................................................18
Representatives................................................12
Scheduled Commencement Date.....................................5
Security Deposit...............................................11
Service Failure................................................19
Taxes...........................................................7
Tenant..........................................................4
Tenant's Share..................................................8
Tenant's Taxes.................................................18
Tenant Improvements.............................................4
Term............................................................4
Trade Fixtures.................................................16
Transfer.......................................................27
Transferee.....................................................28
Visitors.......................................................12
</TABLE>
<PAGE> 4
BASIC LEASE INFORMATION
LEASE DATE: For identification purposes only, the date of this
Lease is August 15, 1997
LANDLORD: PENINSULA OFFICE PARK ASSOCIATES, L.P.,
a California limited partnership
TENANT: SECURITY DYNAMICS TECHNOLOGIES, INC.,
a Delaware corporation
PROPERTY: Peninsula Office Park Nine
PROJECT: Peninsula Office Park
BUILDING ADDRESS: 2955 Campus Drive, San Mateo, CA 94403
RENTABLE AREA OF
BUILDING: Approximately 124,194 rentable square feet
PREMISES: Floor: Four
Suite Number: 400
Rentable Area: approximately 31,397 rentable square
feet
TERM: Ten (10) Years
SCHEDULED
COMMENCEMENT DATE: June 1, 1998
EXPIRATION DATE: The day preceding the Tenth (10th) anniversary of the
Commencement Date
BASE RENT: $2.42 per rentable square foot per month (subject to
adjustment pursuant to the provisions of Section 35
below) from the Commencement Date through the day
preceding the second anniversary of the Commencement
Date. Thereafter, Base Rent shall be increased in
accordance with the provisions of Section 35 below.
BASE YEAR: This is a net lease where Tenant is responsible for
Tenant's Share of Additional Rent in accordance with
the applicable provisions of the Lease. Therefore, the
term Base Year is not used in this Lease.
TENANT'S SHARE: 25.3%
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<PAGE> 5
SECURITY DEPOSIT: $30,000.00 (in cash or a letter of credit). Any letter
of credit shall be subject to the provisions of Section
36 below.
LANDLORD'S ADDRESS Peninsula Office Park
FOR PAYMENT OF RENT: File 72882
P.O. Box 61000
San Francisco, CA 94161-2882
BUSINESS HOURS: 8:00 a.m. to 6:00 p.m. Monday - Friday (excluding
Holidays)
LANDLORD'S ADDRESS PENINSULA OFFICE PARK ASSOCIATES, L. P.
FOR NOTICES: c/o William Wilson & Associates
2929 Campus Drive, Suite 145
San Mateo, CA 94403
Attention: Property Management
with a copy to:
PENINSULA OFFICE PARK ASSOCIATES, L. P.
c/o William Wilson & Associates
2929 Campus Drive, Suite 450
San Mateo, CA 94403
Attn: General Counsel
TENANT'S ADDRESS 20 Crosby Drive
FOR NOTICES: Bedford, MA 01730
BROKER(S): Colliers Parrish, Inc.
GUARANTOR(S): (None)
PROPERTY MANAGER: William Wilson & Associates
2929 Campus Drive, Suite 145
San Mateo, CA 94403
ADDITIONAL PROVISIONS: 35. COST OF LIVING ADJUSTMENTS
36. LETTER OF CREDIT
37. PARKING
38. EXTENSION OPTION
39. RIGHT OF FIRST OFFER
40. FITNESS CENTER
41. SIGN ON MONUMENT
42. ROOFTOP EQUIPMENT
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<PAGE> 6
EXHIBITS:
- ---------
Exhibit A - 1: The Premises
Exhibit A - 2: The Building
Exhibit B: Construction Rider
Exhibit C: Building Rules
Exhibit D: Additional Provisions
Exhibit E: Fitness Center Waiver
Exhibit F: Janitorial Specifications
The Basic Lease Information set forth above is part of the Lease. In the
event of any conflict between any provision in the Basic Lease Information and
the Lease, the Lease shall control.
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<PAGE> 7
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information ("LANDLORD"), and the Tenant identified in the Basic Lease
Information ("TENANT"). Landlord and Tenant hereby agree as follows:
1. PREMISES.
1.1 LEASE OF PREMISES. Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, upon the terms and subject to the conditions of
this Lease, the office space identified in the Basic Lease Information as the
Premises (the "PREMISES"), in the Building to be constructed by Landlord at the
address specified in the Basic Lease Information (the "BUILDING"). The
approximate configuration and location of the Premises are shown on EXHIBIT A-1,
and the approximate configuration of the Building will be as shown and described
on EXHIBIT A-2. Landlord and Tenant agree that the rentable area of the Premises
for all purposes under this Lease shall be based on measurement by Gensler and
Associates (the "BUILDING ARCHITECT") based on the final construction drawings
for the Building and a "Modified BOMA Standard" (as hereinafter defined),
subject to Tenant's approval, such approval not to be unreasonably withheld. The
Property identified in the Base Lease Information (the "PROPERTY" ) includes the
Building, the parking facilities serving the Building (the "PARKING FACILITY"),
and the parcel(s) of Land on which the Building and the Parking Facility are
situated (the "LAND"). The Project identified in the Basic Lease Information
(the "PROJECT") includes the Property, together with certain buildings, land and
common area located in a master development commonly known as "PENINSULA OFFICE
PARK".
For the purposes of this Lease, the term "MODIFIED BOMA STANDARD"
means that in determining "rentable area" in the case of a single tenancy floor,
all floor area is measured from the inside surface of the outer glass of the
Building to the inside surface of the opposite outer glass wall of the Building,
excluding only the areas ("service areas") within the outside walls used for
elevator mechanical rooms, building stairs, fire towers, elevator shafts, flues,
vents, stacks, vertical pipe shafts and vertical ducts, but including any such
areas which are for the specific use of a particular tenant such as special
stairs or elevators, plus a prorata allocation of the square footage of the
Building's elevator and main mechanical and electrical rooms and ground floor
lobby. Based on the current plans for the Building, the load factor for the
Premises is 4.72%.
1.2 INITIAL LEASEHOLD IMPROVEMENTS. Landlord's and Tenant's construction
obligations are set forth in the Construction Rider attached as EXHIBIT B (the
"CONSTRUCTION RIDER"). The Construction Rider describes the improvements to be
constructed and installed in the Premises by Tenant (the "TENANT IMPROVEMENTS").
Tenant shall be responsible to pay for the entire cost of Tenant Improvements
pursuant to the provisions of the Construction Rider.
2. TERM; POSSESSION. Landlord shall provide Tenant notice at least thirty (30)
days prior to the date Landlord at the time of giving the notice expects in good
faith to be able to deliver possession of the Premises to Tenant for Tenant to
construct Tenant Improvements. The term of this Lease (the "TERM") shall
commence on the Commencement Date as described below and, unless sooner
terminated, shall expire on the Expiration Date set forth in the Basic Lease
-4-
<PAGE> 8
Information (the "EXPIRATION DATE"). The "COMMENCEMENT DATE" shall be the
earlier of (a) the date on which the Tenant Improvements are Substantially
Completed as provided in the Construction Rider (or, if there is any "Tenant
Delay," as defined in the Construction Rider, the earliest date on which the
Tenant Improvements could have been Substantially Completed had there been no
such Tenant Delay); or (b) the date upon which Tenant, with Landlord's written
permission, actually occupies and conducts business in any portion of the
Premises. The parties anticipate that the Commencement Date will occur on or
about the Scheduled Commencement Date set forth in the Basic Lease Information
(the "SCHEDULED COMMENCEMENT DATE"); provided, however, that Landlord shall not
be liable for any claims, damages or liabilities if the Premises are not ready
for occupancy by the Scheduled Commencement Date, except to the extent
specifically provided in Paragraph 2.2 (g) of the Construction Rider attached
hereto. Paragraph 2.2 of the Construction Rider also provides for rights to
terminate this Lease if the Commencement Date does not occur by certain dates,
all as more specifically described therein.
When the Commencement Date has been established, Landlord and Tenant
shall at the request of either party confirm the Commencement Date and
Expiration Date in writing.
3. RENT.
3.1 BASE RENT. Tenant agrees to pay to Landlord the Base Rent set forth
in the Basic Lease Information, without prior notice or demand, on the first day
of each and every calendar month during the Term, except that Base Rent for any
partial month at the beginning of the Term shall be paid on the Commencement
Date. Base Rent for any partial month at the beginning or end of the Term shall
be prorated based on the actual number of days in the month.
3.2 ADDITIONAL RENT: OPERATING COSTS AND TAXES.
(a) DEFINITIONS.
(1) "OPERATING COSTS" means all costs of managing, operating,
maintaining and repairing the Property, including all costs, expenditures, fees
and charges for: (A) operation, maintenance and repair of the Property
(including maintenance, repair and replacement of glass, the roof covering or
membrane, and landscaping); (B) utilities and services (including recycling
programs and trash removal), and associated supplies and materials (except that,
to the greatest extent reasonably practicable under the circumstances from time
to time during the Term (including applicable Laws and tariffs), Landlord shall
equitably determine and charge each tenant in the Building directly for all
electricity furnished to convenience outlets in the premises leased by the
tenant, and the cost of such electricity shall not be included in Operating
Costs); (C) compensation (including employment taxes and fringe benefits) for
persons who perform duties in connection with the operation, management,
maintenance and repair of the Building, such compensation to be appropriately
allocated for persons who also perform duties unrelated to the Building; (D)
property (including coverage for earthquake and flood if carried by Landlord),
liability, rental income and other insurance relating to the Property, and
expenditures for deductible amounts paid under such insurance (not to exceed
Fifty Thousand and 00/100 Dollars [$50,000.00] in payments for deductible
amounts resulting from perils other than earthquake in any calendar
-5-
<PAGE> 9
year, with expenditures for deductible amounts paid in connection with losses
caused by earthquake amortized over ten (10) years, including interest on the
unamortized balance at the rate paid by Landlord on funds borrowed to finance
capital improvements [or, if Landlord pays for such expenditures out of
Landlord's funds without borrowing, the rate Landlord would have paid to borrow
such funds]); (E) licenses, permits and inspections; (F) complying with the
requirements of any law, statute, ordinance or governmental rule or regulation
or any orders pursuant thereto (collectively "LAWS") either (i) not in effect as
of the Commencement Date or (ii) as any Laws in effect as of the Commencement
Date may be amended, changed, added to, interpreted or re-interpreted by
applicable governmental authority or court decision, or administrative ruling
subsequent to the Commencement Date; (G) amortization of capital improvements
which are either (1) required to comply with Laws either (i) not in effect as of
the Commencement Date or (ii) as any Laws in effect as of the Commencement Date
may be amended, changed, added to, interpreted or re-interpreted by applicable
governmental authority or court decision, or administrative ruling subsequent to
the Commencement Date, or (2) intended to reduce Operating Costs or improve the
utility, efficiency or capacity of any Building System (but only to the extent
of such achieved savings); in either case, with interest on the unamortized
balance at a rate equal to the per annum prime rate in effect at the time of the
expenditure (based on the prime rate published in the Wall Street Journal or the
then substantial equivalent, as reasonably determined by Landlord), plus two
percent (2%) per annum, over such useful life of such improvements; (H) up to
two thousand (2,000) square feet in an office in the Project for the management
of the Property, including expenses of furnishing and equipping such office and
the rental value of any space occupied for such purposes, which management
office costs shall be equitably allocated if the office serves more than one
building; (I) property management fees comparable to fees charged at other first
class office buildings in the Project and in the vicinity of the Property; (J)
accounting, legal and other professional services incurred in connection with
the operation of the Property and the calculation of Operating Costs and Taxes;
(K) a reasonable allowance for depreciation on machinery and equipment used to
maintain the Property and on other personal property owned by Landlord in the
Property (including window coverings and carpeting in common areas); (L)
contesting the validity or applicability of any Laws that may affect the
Property; (M) the Building's share of any shared or common area maintenance fees
and expenses (including costs and expenses of operating, managing, owning and
maintaining the Parking Facility and the common areas of the Project and any
fitness center or conference center in the Project); and (N) any other cost,
expenditure, fee or charge, whether or not hereinbefore described, which in
accordance with generally accepted property management practices would be
considered an expense of managing, operating, maintaining and repairing the
Property. Operating Costs for any calendar year during which average occupancy
of the Building is less than one hundred percent (100%) shall be calculated
based upon the Operating Costs that would have been incurred if the Building had
an average occupancy of one hundred percent (100%) during the entire calendar
year.
Operating Costs shall not include (i) capital improvements (except as
otherwise provided above); (ii) costs of special services rendered to individual
tenants (including Tenant) for which a special charge is made; (iii) interest
and principal payments on loans or indebtedness secured by the Building; (iv)
costs of improvements for Tenant or other tenants of the Building; (v) costs of
services or other benefits of a type which are not available to Tenant but which
are available to other tenants or occupants, and costs for which Landlord is
entitled to be reimbursed by other
-6-
<PAGE> 10
tenants of the Building other than through payment of tenants' shares of
increases in Operating Costs and Taxes; (vi) leasing commissions, attorneys'
fees and other expenses incurred in connection with leasing space in the
Building or enforcing such leases; (vii) depreciation or amortization, other
than as specifically enumerated in the definition of Operating Costs above;
(viii) costs, fines or penalties incurred due to Landlord's violation of any
Law; (ix) repairs or other work occasioned by fire, windstorm or other casualty
or hazard to the extent such cost exceeds the sum of (A) the insurance proceeds
received by Landlord therefor, plus (B) with respect to perils other than
earthquake, Fifty Thousand Dollars ($50,000), and, with respect to losses caused
by earthquake, the greater of (I) five percent (5%) of the replacement cost of
the Building, amortized over ten (10) years, including interest on the
unamortized balance at the rate paid by Landlord on funds borrowed to finance
capital improvements (or, if Landlord pays for such expenditures out of
Landlord's funds without borrowing, the rate Landlord would have paid to borrow
such funds), or (II) Fifty Thousand Dollars ($50,000); (x) advertising,
marketing or promotional expenses, including such expenses incurred in leasing
or procuring new tenants; (xi) repairs or rebuilding necessitated by
condemnation to the extent Landlord receives proceeds from the applicable
condemning authority; (xii) the salaries and benefits of executive officers, if
any, of Landlord; (xiii) those costs in excess of Twenty Thousand and 00/100
Dollars ($20,000.00) per year incurred by Landlord to test, survey, clean up,
contain, abate, remove, or otherwise remedy any spill or discharge of Hazardous
Materials (as defined in Section 5.2 below) within, on, under or about the
Building; (xiv); reserves for repairs, maintenance and/or replacements; (xv)
expenses for repairs, replacements or improvements arising from the initial
construction of the Building to the extent such expenses are reimbursed to
Landlord by reason of warranties from contractors or suppliers; (xvi) costs
relating to maintaining Landlord's existence, either as a corporation,
partnership or other entity, such as trustee's fees, partnership, organization
or administrative expenses, deed recordation expenses, legal and accounting fees
(other than with respect to operations of the Building and the Project); (xvii)
costs incurred due to Landlord's violation of any terms and conditions of this
Lease, or any other lease relating to the Building, (xviii) any compensation
paid to clerks, attendants or other persons in commercial concessions operated
by Landlord; (xix) costs for acquisition of sculpture, paintings or other
objects of art; (xx) title insurance, automobile insurance, key man and other
life insurance, long-term disability insurance and health, accident and sickness
insurance, except only for group plans providing benefits to persons of the
grade of property manager and below employed and engaged in operating and
managing the Project; and (xxii) except as otherwise provided above, any other
expense that under generally accepted accounting principles would not be
considered a normal maintenance or operating expense.
(2) "TAXES" means: all real property taxes and general,
special or district assessments or other governmental impositions, of whatever
kind, nature or origin, imposed on or by reason of the ownership or use of the
Property; governmental charges, fees or assessments for transit or traffic
mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing, police, fire or other
governmental service or purported benefits to the Property; personal property
taxes assessed on the personal property of Landlord used in the operation of the
Property; service payments in lieu of taxes and taxes and assessments of every
kind and nature whatsoever levied or assessed in addition to, in lieu of or in
substitution for existing or additional real or personal property taxes on the
Property or the personal property described above; any increases in the
foregoing caused by changes in assessed valuation,
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tax rate or other factors or circumstances; and the reasonable cost of
contesting by appropriate proceedings the amount or validity of any taxes,
assessments or charges described above, provided that with respect to any Taxes
paid by Tenant to Landlord, if there is any subsequent rebate or reimbursement
of such Taxes, then Tenant's Share of any such rebate or reimbursement of Taxes
received by Landlord shall be credited against Taxes paid by Tenant. Taxes shall
not include any state and federal personal or corporate income taxes measured by
the income of Landlord from all sources (other than taxes on rent at the
Property), as well as any franchise, inheritance, or estate, succession,
transfer, gift tax, or capital levy. To the extent paid by Tenant or other
tenants as "Tenant's Taxes" (as defined in Section 8 - Tenant's Taxes),
"Tenant's Taxes" shall be excluded from Taxes.
(3) "TENANT'S SHARE" means the Rentable Area of the Premises
divided by the total Rentable Area of the Building, as set forth in the Basic
Lease Information. If the Rentable Area of the Building is changed or the
Rentable Area of the Premises is changed (x) for any reason, including
remeasurement by the Building Architect based on a Modified BOMA Standard,
subject to Tenant's approval, such approval not to be unreasonably withheld,
during the first six months following the Commencement Date, or (y) by adding or
deleting space, as opposed to remeasurement, at any time thereafter, Tenant's
Share shall be adjusted accordingly.
(b) ADDITIONAL RENT.
(1) Tenant shall pay Landlord as "ADDITIONAL RENT" for each
calendar year or portion thereof during the Term Tenant's Share of the sum of
(x) Operating Costs, and (y) Taxes, subject to a limitation on the increases
pursuant to the provisions contained in Section 3.2 (c) below.
(2) Prior to the Commencement Date and each calendar year
thereafter, Landlord shall notify Tenant of Landlord's estimate of Operating
Costs, Taxes and Tenant's Additional Rent for the following calendar year.
Commencing on the first day of January of each calendar year and continuing on
the first day of every month thereafter in such year, Tenant shall pay to
Landlord one-twelfth (1/12th) of the reasonably estimated Additional Rent. If
Landlord thereafter estimates that Operating Costs or Taxes for such year will
vary from Landlord's prior estimate, Landlord may, by notice to Tenant, but not
more than two (2) times per calendar year in the event of any increase, revise
the estimate for such year (and Additional Rent shall thereafter be payable
based on the revised estimate).
(3) As soon as reasonably practicable after the end of each
calendar year, Landlord shall furnish Tenant a statement with respect to such
year, showing Operating Costs, Taxes and Additional Rent for the year, and the
total payments made by Tenant with respect thereto. Such annual statement shall
be set forth in reasonable detail. Upon receipt of a written request from Tenant
Landlord shall furnish to Tenant (i) a line-item breakdown of component costs
(together with a written explanation of any component cost which exceeded by
more than the greater of [x] Five Thousand and 00/100 Dollars [$5,000.00], or
[y] five percent [5%] of the estimate, for such component cost), (ii) the method
Landlord used in calculating any gross up of actual Operating Costs, (iii) the
estimated cost savings realized in the subject calendar year by any
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capital improvement the cost of which is included as a portion of Operating
Costs because such capital improvement was intended to and actually did reduce
other Operating Costs, (iv) the method of prorating the wages, salaries and
payroll burden of persons engaged in the management, operation and/or
maintenance of the Project; and (v) an explanation of any proportionate cost
attributable to the Building which represents a proration of costs of the
Project, including the common areas thereof. Unless Tenant raises any objections
to Landlord's statement within one hundred twenty (120) days after receipt of
the same, such statement shall conclusively be deemed correct and Tenant shall
have no right thereafter to dispute such statement or any item therein or the
computation of Additional Rent based thereon for the subject calendar year,
subject to the provisions contained in Subsection (d) below. If Tenant does
object to such statement, then Landlord shall provide Tenant with reasonable
verification of the figures shown on the statement and the parties shall
negotiate in good faith to resolve any disputes. Any objection of Tenant to
Landlord's statement and resolution of any dispute shall not postpone the time
for payment of any amounts due Tenant or Landlord based on Landlord's statement,
nor shall any failure of Landlord to deliver Landlord's statement in a timely
manner relieve Tenant of Tenant's obligation to pay any amounts due Landlord
based on Landlord's statement.
(4) If Tenant's Additional Rent as finally determined for any
calendar year exceeds the total payments made by Tenant on account thereof,
Tenant shall pay Landlord the deficiency within thirty (30) days of Tenant's
receipt of Landlord's statement. If the total payments made by Tenant on account
thereof exceed Tenant's Additional Rent as finally determined for such year,
Tenant's excess payment shall be credited toward the rent next due from Tenant
under this Lease. For any partial calendar year at the beginning or end of the
Term, Additional Rent shall be prorated on the basis of a 365-day year by
computing Tenant's Share of the increases in Operating Costs and Taxes for the
entire year and then prorating such amount for the number of days during such
year included in the Term. Notwithstanding the termination of this Lease,
Landlord shall pay to Tenant or Tenant shall pay to Landlord, as the case may
be, within thirty (30) days after Tenant's receipt of Landlord's final statement
for the calendar year in which this Lease terminates, the difference between
Tenant's Additional Rent for that year, as finally determined by Landlord, and
the total amount previously paid by Tenant on account thereof.
If for any reason Taxes for any year during the Term are reduced, refunded
or otherwise changed, Tenant's Additional Rent shall be credited against the
next installment of Rent accordingly. If Taxes are temporarily reduced as a
result of space in the Building being leased to a tenant that is entitled to an
exemption from property taxes or other taxes, then for purposes of determining
Additional Rent for each year in which Taxes are reduced by any such exemption,
Taxes for such year shall be calculated on the basis of the amount the Taxes for
the year would have been in the absence of the exemption. The obligations of
Landlord to refund any overpayment of Additional Rent and of Tenant to pay any
Additional Rent not previously paid shall survive the expiration of the Term.
(c) LIMITATION ON TENANT'S OBLIGATION TO PAY INCREASES IN ADDITIONAL
RENT.
Notwithstanding any other provision contained herein to the
contrary, Landlord agrees that Tenant's liability for payment of Additional Rent
shall be limited pursuant to the
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following provisions of this Subsection (c). For the purpose of calculating
annual cumulative limitations on increases in Additional Rent (excluding
increases attributable to increases in "Uncontrollable Expenses," as hereinafter
defined) during calendar years subsequent to the first (1st) full calendar year,
the sum of the Operating Costs and the Taxes during first (1st) full calendar
year following the Commencement Date shall be deemed to be the Base Amount.
During the second (2nd) full calendar year following the Commencement Date,
Tenant's obligation to pay Additional Rent (excluding increases attributable to
increases in "Uncontrollable Expenses") shall not exceed an amount equal to the
Base Amount, plus five percent (5%) of the Base Amount (the "Expense CAP"). In
each calendar year subsequent to the second (2nd) full calendar year following
the Commencement Date, Tenant's obligation to pay Tenant's Additional Rent
(excluding increases attributable to increases in "Uncontrollable Expenses")
shall be limited to an amount equal to the previous calendar year's Expense CAP
plus five percent (5%) of such previous calendar year's Expense CAP.
The term "Uncontrollable Expenses" is hereby defined to consist of
(i) all utilities, (ii) all premiums for insurance coverage, including, without
limitation, worker's compensation premiums, (iii) all Taxes, including, without
limitation, sales taxes on personal property and payroll taxes, (iv)
non-recurring maintenance and repairs, (v) costs of complying with governmental
requirements, and (vi) increases in those other Operating Costs, where such
increases in other Operating Costs are outside the reasonable control of
Landlord.
(d) TENANT'S AUDIT RIGHTS.
Tenant, at its expense, shall have the right upon fifteen (15) days
prior written notice to Landlord ( "Tenant's Audit Notice") to be given, if at
all, only within one hundred twenty (120) days after the date Tenant receives
the statement of Additional Rent for any calendar year to audit Landlord's books
and records relating to such statement for such immediately preceding year,
subject to the following terms and conditions: (a) No audit shall be conducted
at any time that there has been any uncured Event of Default by Tenant; (b) any
audit shall be conducted only by a professional firm employed by Tenant on an
hourly or fixed fee basis, and not on a contingency fee basis; and (c) Tenant
shall not audit Landlord's books and records more than one (1) time for any
calendar year. Tenant acknowledges that Tenant's right to inspect Landlord's
books and records with respect to Additional Rent for the preceding calendar
year is for the exclusive purpose of determining whether Landlord has complied
with the terms of the Lease with respect to Additional Rent. Tenant shall have
ninety (90) days after Tenant's Audit Notice to complete Tenant's inspection of
Landlord's books and records concerning Additional Rent at Landlord's accounting
office. During its inspection Tenant agrees to request, in writing, all
pertinent documents relating to the inspection. If in Landlord's possession,
Landlord will provide such documents to Tenant within ten (10) days from
Landlord's receipt of the request and Tenant shall not remove such records from
Landlord's accounting office, but Tenant shall have the right to make copies of
the relevant documents at Tenant's expense. Tenant shall deliver to Landlord a
copy of the results of such audit within fifteen (15) days of its receipt by
Tenant. The nature and content of any audit are strictly confidential. Tenant
shall not disclose, and Tenant shall prevent Tenant's accountant, employees and
agents from disclosing, the information obtained from the audit to any other
person or entity, including, without limitation,
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any other tenant in the Building, or any agent, employee, officer, shareholder,
partner, accountant or attorney of such tenant in the Building. A breach of this
confidentiality agreement shall constitute an Event of Default under this Lease.
No assignee shall conduct an audit for any period during which such assignee was
not in possession of the Premises.
3.3 PAYMENT OF RENT. All amounts payable or reimbursable by Tenant under
this Lease, including late charges and interest, shall constitute rent and shall
be payable and recoverable as rent in the manner provided in this Lease. All
sums payable to Landlord on demand under the terms of this Lease shall be
payable within ten (10) days after notice from Landlord of the amounts due. All
rent shall be paid without offset, recoupment or deduction in lawful money of
the United States of America to Landlord at Landlord's Address for Payment of
Rent as set forth in the Basic Lease Information, or to such other person or at
such other place as Landlord may from time to time designate.
3.4 SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit
with Landlord the amount specified in the Basic Lease Information as the
Security Deposit, if any (the "SECURITY DEPOSIT"), as security for the
performance of Tenant's obligations under this Lease. The Security Deposit may
be in the form of cash or in the form of a letter of credit. If Tenant deposits
a letter of credit for the $30,000.00 security deposit, such letter of credit
shall be subject to all of the terms and conditions of Section 36 below.
Landlord may (but shall have no obligation to) use the Security Deposit or any
portion thereof to cure any Event of Default under this Lease or to compensate
Landlord for any damage Landlord incurs as a result of Tenant's failure to
perform any of Tenant's obligations hereunder. In such event Tenant shall pay to
Landlord on demand an amount sufficient to replenish the Security Deposit. If
Tenant is not in default at the expiration or termination of this Lease,
Landlord shall return to Tenant the Security Deposit or the balance thereof then
held by Landlord and not applied as provided above. Landlord may commingle the
Security Deposit with Landlord's general and other funds. Landlord shall not be
required to pay interest on the Security Deposit to Tenant.
5. USE AND COMPLIANCE WITH LAWS.
5.1 USE. The Premises shall be used and occupied for general business
office purposes and for no other use or purpose. Tenant shall comply with all
present and future Laws relating to Tenant's use or occupancy of the Premises
(and make any repairs, alterations or improvements as required to comply with
all such Laws), and shall observe the "Building Rules" (as defined in Section 27
- - Rules and Regulations); provided, however, that the foregoing shall not be
interpreted to require Tenant to perform structural or capital work unless due
to Tenant's specific use of the Premises. Tenant shall not do, bring, keep or
sell anything in or about the Premises that is prohibited by, or that will cause
a cancellation of or an increase in the existing premium for, any insurance
policy covering the Property or any part thereof. Tenant shall not permit the
Premises to be occupied or used in any manner that will constitute waste or a
nuisance, or disturb the quiet enjoyment of or otherwise annoy other tenants in
the Building. Without limiting the foregoing, the Premises shall not be used for
educational activities, practice of medicine or any of the healing arts,
providing social services, for any governmental use (including embassy or
consulate use), or for personnel agency, customer service office, studios for
radio, television or other media, travel
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agency or reservation center operations or uses. Tenant shall not, without the
prior consent of Landlord, (i) bring into the Building or the Premises anything
that may cause substantial noise, odor or vibration, overload the floors in the
Premises or the Building or any of the heating, ventilating and air-conditioning
("HVAC"), mechanical, elevator, plumbing, electrical, fire protection, life
safety, security or other systems in the Building ("BUILDING SYSTEMS"), or
jeopardize the structural integrity of the Building or any part thereof; (ii)
connect to the utility systems of the Building any apparatus, machinery or other
equipment other than typical office equipment; or (iii) connect to any
electrical circuit in the Premises any equipment or other load with aggregate
electrical power requirements in excess of 80% of the rated capacity of the
circuit.
5.2 HAZARDOUS MATERIALS.
(a) DEFINITIONS.
(1) "HAZARDOUS MATERIALS" shall mean any substance: (A) that
now or in the future is regulated or governed by, requires investigation or
remediation under, or is defined as a hazardous waste, hazardous substance,
pollutant or contaminant under any governmental statute, code, ordinance,
regulation, rule or order, and any amendment thereto, including the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
ss.9601 ET SEQ., and the Resource Conservation and Recovery Act, 42 U.S.C.
ss.6901 ET SEQ., or (B) that is toxic, explosive, corrosive, flammable,
radioactive, carcinogenic, dangerous or otherwise hazardous, including gasoline,
diesel fuel, petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos,
radon and urea formaldehyde foam insulation.
(2) "ENVIRONMENTAL REQUIREMENTS" shall mean all present and
future Laws, orders, permits, licenses, approvals, authorizations and other
requirements of any kind applicable to Hazardous Materials.
(3) "HANDLED BY TENANT" and "HANDLING BY TENANT" shall mean
and refer to any installation, handling, generation, storage, use, disposal,
discharge, release, abatement, removal, transportation, or any other activity of
any type by Tenant or its agents, employees, contractors, licensees, assignees,
sublessees, transferees or representatives (collectively, "REPRESENTATIVES") or
its guests, customers, invitees, or visitors (collectively, "VISITORS"), at or
about the Premises in connection with or involving Hazardous Materials.
(4) "ENVIRONMENTAL LOSSES" shall mean all costs and expenses
of any kind, damages, including foreseeable and unforeseeable consequential
damages, fines and penalties incurred in connection with any violation of and
compliance with Environmental Requirements and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on
marketability or use of any portion of the Premises or Property.
(b) TENANT'S COVENANTS. No Hazardous Materials shall be Handled by
Tenant at or about the Premises or Property without Landlord's prior written
consent, which consent may be granted, denied, or conditioned upon compliance
with Landlord's requirements, all in Landlord's absolute discretion.
Notwithstanding the foregoing, normal quantities and use of those Hazardous
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Materials customarily used in the conduct of general office activities, such as
copier fluids and cleaning supplies ("PERMITTED HAZARDOUS MATERIALS"), may be
used and stored at the Premises without Landlord's prior written consent,
provided that Tenant's activities at or about the Premises and Property and the
Handling by Tenant of all Hazardous Materials shall comply at all times with all
Environmental Requirements. At the expiration or termination of the Lease,
Tenant shall promptly remove from the Premises and Property all Hazardous
Materials Handled by Tenant at the Premises or the Property. Tenant shall keep
Landlord fully and promptly informed of all Handling by Tenant of Hazardous
Materials other than Permitted Hazardous Materials. Tenant shall be responsible
and liable for the compliance with all of the provisions of this Section by all
of Tenant's Representatives and Visitors, and all of Tenant's obligations under
this Section (including its indemnification obligations under paragraph (e)
below) shall survive the expiration or termination of this Lease.
(c) COMPLIANCE. Tenant shall at Tenant's expense promptly take all
actions required by any governmental agency or entity in connection with or as a
result of the Handling by Tenant of Hazardous Materials at or about the Premises
or Property, including inspection and testing, performing all cleanup, removal
and remediation work required with respect to those Hazardous Materials,
complying with all closure requirements and post-closure monitoring, and filing
all required reports or plans. All of the foregoing work and all Handling by
Tenant of all Hazardous Materials shall be performed in a good, safe and
workmanlike manner by consultants qualified and licensed to undertake such work
and in a manner that will not interfere with any other tenant's quiet enjoyment
of the Property or Landlord's use, operation, leasing and sale of the Property.
Tenant shall deliver to Landlord prior to delivery to any governmental agency,
or promptly after receipt from any such agency, copies of all permits,
manifests, closure or remedial action plans, notices, and all other documents
relating to the Handling by Tenant of Hazardous Materials at or about the
Premises or Property. If any lien attaches to the Premises or the Property in
connection with or as a result of the Handling by Tenant of Hazardous Materials,
and Tenant does not cause the same to be released, by payment, bonding or
otherwise, within ten (10) days after the attachment thereof, Landlord shall
have the right but not the obligation to cause the same to be released and any
sums expended by Landlord (plus Landlord's administrative costs) in connection
therewith shall be payable by Tenant on demand.
(d) LANDLORD'S RIGHTS. Landlord shall have the right, but not the
obligation, to enter the Premises at any reasonable time upon advance notice to
Tenant and accompanied by a representative of Tenant, unless no representative
of Tenant meets Landlord's representative at the scheduled time (provided, in
the event of an emergency Landlord shall have the right to enter the Premises at
any time without notice to Tenant, and without being accompanied by a
representative of Tenant) (i) to confirm Tenant's compliance with the provisions
of this Section 5.2, and (ii) to perform Tenant's obligations under this Section
if Tenant has failed to do so after reasonable notice to Tenant. Landlord shall
also have the right to engage qualified Hazardous Materials consultants to
inspect the Premises and review the Handling by Tenant of Hazardous Materials,
including review of all permits, reports, plans, and other documents regarding
same. Tenant shall pay to Landlord on demand the costs of Landlord's
consultants' fees and all costs incurred by Landlord in performing Tenant's
obligations under this Section. Landlord shall use reasonable efforts to
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minimize any interference with Tenant's business caused by Landlord's entry into
the Premises, but Landlord shall not be responsible for any interference caused
thereby.
(e) TENANT'S INDEMNIFICATION. Tenant agrees to indemnify, defend and
hold harmless Landlord and its partners or members and its or their partners,
members, directors, officers, shareholders, employees and agents from all
Environmental Losses and all other claims, actions, losses, damages,
liabilities, costs and expenses of every kind, including reasonable attorneys',
experts' and consultants' fees and costs, incurred at any time and arising from
or in connection with the Handling by Tenant of Hazardous Materials at or about
the Property or Tenant's failure to comply in full with all Environmental
Requirements with respect to the Premises.
(f) LANDLORD'S RESPONSIBILITIES. Landlord shall not use any of the
Land or Building for any activities involving the use, generation, handling,
release, threatened release, treatment, storage, discharge, disposal or
transportation of any Hazardous Materials, except in such quantity or
concentration that is customarily used, stored or disposed in the ordinary
course of the business so long as such activity duly complies with applicable
Laws and good business practice. If Landlord violates the foregoing covenant
resulting in an Environmental Claim (as hereinafter defined) with respect to the
Premises, then Landlord agrees to (a) notify Tenant immediately of any such
Environmental Claim and (b) clean up any contamination in full compliance with
all applicable Laws. "Environmental Claim" means any claim, demand, action,
cause of action, suit, fine, penalty, expense, liability, criminal liability,
judgment, or governmental investigation relating to remediation or compliance
with requirements of Laws covering Hazardous Materials. The term "Environmental
Claim" also includes any costs incurred in responding to efforts to require
remediation and any claim based upon any asserted or actual breach or violation
of any requirements of any Laws covering Hazardous Materials.
6. ALTERATIONS.
6.1 Tenant shall not make any alterations, improvements or changes to the
Premises (including installation of any security system or telephone or data
communication wiring) ("ALTERATIONS"), without Landlord's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.
Notwithstanding any other provision contained herein, Tenant shall not be
required to obtain Landlord's prior consent for minor, non-structural
Alterations that (a) do not affect any of the Building Systems, (b) are not
visible from the exterior of the Premises, and (c) cost less than Twenty-Five
Thousand Dollars ($25,000), so long as Tenant gives Landlord notice of the
proposed Alterations at least ten (10) days prior to commencing the Alterations
and complies with all of the following provisions (except that Tenant shall not
be required to obtain Landlord's approval of any plans or specifications
therefor). Any such Alterations (whether or not requiring Landlord's prior
approval) shall be completed by Tenant at Tenant's sole cost and expense: (i)
with due diligence, in a good and workmanlike manner, using new materials; (ii)
in compliance with plans and specifications reasonably approved by Landlord;
(iii) in compliance with the construction rules and regulations reasonably
promulgated by Landlord from time to time; (iv) in accordance with all
applicable Laws (including all work, whether structural or non-structural,
inside or outside the Premises, required to comply fully with all
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applicable Laws and necessitated by Tenant's work); and (v) subject to all
conditions which Landlord may in Landlord's discretion reasonably impose. Such
conditions may include requirements for Tenant to: (i) provide payment or
performance bonds or additional insurance (from Tenant or Tenant's contractors,
subcontractors or design professionals) for Alterations costing more than Fifty
Thousand and 00/100 Dollars ($50,000.00), except that a payment or performance
bond shall not be required of Landlord's affiliated contractor, Commercial
Interior Contractors; (ii) use contractors or subcontractors approved by
Landlord in Landlord's reasonable discretion; and (iii) remove prior to or upon
expiration or termination of the Term any Alterations (or portions thereof),
which in Landlord's judgment are not typical office space improvements of a type
and quality commonly installed in the Building and in comparable buildings in
the vicinity, as may be designated by Landlord at the time that Landlord's
consent to such Alteration was given (or, if later, within ten days after
Landlord's receipt of Tenant's notice of the proposed Alteration). If any work
outside the Premises, or any work on or adjustment to any of the Building
Systems, is required in connection with or as a result of Tenant's work, such
work shall be performed at Tenant's expense by contractors designated by
Landlord. Landlord's right to review and approve (or withhold approval of)
Tenant's plans, drawings, specifications, contractor(s) and other aspects of
construction work proposed by Tenant is intended solely to protect Landlord, the
Property and Landlord's interests. No approval or consent by Landlord shall be
deemed or construed to be a representation or warranty by Landlord as to the
adequacy, sufficiency, fitness or suitability thereof or compliance thereof with
applicable Laws or other requirements. Except as otherwise provided in
Landlord's consent, all Alterations shall upon installation become part of the
realty and be the property of Landlord. If Tenant elects to install supplemental
air conditioning equipment, Landlord shall cooperate with Tenant to try to
provide appropriate space in which to locate the equipment, in the plenum above
the finished ceiling in the Premises or in an appropriate mechanical equipment
room in the Building (or on the roof of the Building or at such other location
in or near the Building as may be agreed by Landlord and Tenant), provided that
(i) appropriate space is available for such use by Tenant, (ii) the proposed
installation and equipment won't interfere with any of the Building Systems or
interfere with rights of others in the Building and is otherwise acceptable to
and approved by Landlord as provided above, and (iii) any such installation and
use thereof shall be at Tenant's sole cost and expense.
6.2 Before making any Alterations, Tenant shall submit to Landlord for
Landlord's prior reasonable approval reasonably detailed final plans and
specifications prepared by a licensed architect or engineer, a copy of the
construction contract, including the name of the contractor and all
subcontractors proposed by Tenant to make the Alterations and a copy of the
contractor's license. Tenant shall reimburse Landlord upon demand for any
expenses incurred by Landlord in connection with any Alterations made by Tenant,
including reasonable fees (without additional mark-up by Landlord) charged by
Landlord's contractors or consultants to review plans and specifications
prepared by Tenant and to update the existing as-built plans and specifications
of the Building to reflect the Alterations. Tenant shall obtain all applicable
permits, authorizations and governmental approvals and deliver copies of the
same to Landlord before commencement of any Alterations.
6.3 Tenant shall keep the Premises and the Property free and clear of all
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. If any such lien
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attaches to the Premises or the Property, and Tenant does not cause the same to
be released by payment, bonding or otherwise within ten (10) days after the
attachment thereof, Landlord shall have the right but not the obligation to
cause the same to be released, and any sums expended by Landlord (plus
Landlord's administrative costs) in connection therewith shall be payable by
Tenant on demand with interest thereon from the date of expenditure by Landlord
at the Interest Rate (as defined in Section 16.2 - Interest). Tenant shall give
Landlord at least ten (10) days' notice prior to the commencement of any
Alterations and cooperate with Landlord in posting and maintaining notices of
non-responsibility in connection therewith.
6.4 Subject to the provisions of Section 5 - Use and Compliance with Laws
and the foregoing provisions of this Section, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures ("TRADE FIXTURES") in the Premises, provided that the Trade Fixtures do
not become an integral part of the Premises or the Building. Tenant shall
promptly repair any damage to the Premises or the Building caused by any
installation or removal of such Trade Fixtures.
7. MAINTENANCE AND REPAIRS.
7.1 By taking possession of the Premises Tenant agrees that the Premises
are then in a good and tenantable condition, subject to any latent defects in
construction of the Building or the Premises, provided Tenant has given Landlord
written notice of any such latent defect or defects within one (1) year after
the Commencement Date. During the Term, Tenant at Tenant's expense but under the
direction of Landlord (except that minor cosmetic repairs and maintenance shall
not require direction from Landlord), shall repair and maintain the Premises,
including the interior walls, floor coverings, ceiling (ceiling tiles and grid),
Tenant Improvements, Alterations, fire extinguishers, outlets and fixtures, and
any appliances (including dishwashers, hot water heaters and garbage disposers)
in the Premises, in a first class condition, and keep the Premises in a clean,
safe and orderly condition.
7.2 Landlord shall maintain or cause to be maintained in a first class
condition and repair, the structural portions of the Building, the roof,
foundations, floors and exterior walls and windows of the Building, the Building
Systems, and the public and common areas of the Property, such as elevators,
stairs, corridors and restrooms. Landlord shall be under no obligation to
inspect the Premises. Tenant shall promptly report in writing to Landlord any
defective condition known to Tenant which Landlord is required to repair. As a
material part of the consideration for this Lease, Tenant hereby waives any
benefits of any applicable existing or future Law, including the provisions of
California Civil Code Sections 1932(1), 1941 and 1942, that allows a tenant to
make repairs at its landlord's expense.
7.3 Landlord hereby reserves the right, at any time and from time to time,
without liability to Tenant, and without constituting an eviction, constructive
or otherwise, or entitling Tenant to any abatement of rent or to terminate this
Lease or otherwise releasing Tenant from any of Tenant's obligations under this
Lease:
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(a) To make alterations, additions, repairs, improvements to or in
or to decrease the size of area of, all or any part of the Building, the
fixtures and equipment therein, and the Building Systems (except that Landlord
shall not have any right under this provision materially to reduce the size of
the Premises, or permanently, materially and adversely to affect Tenant's access
to and use of the Premises, except only as may be required to comply with Laws
or as a result of any casualty or Condemnation);
(b) To change the Building's name or street address; provided,
however, that so long as Tenant continues to occupy at least 75% of the Premises
free from sublease, assignment or other Transfer, Landlord shall not change the
name of the Building to the name of a business competitor of Tenant specified on
the list of competitors identified by Tenant in a written notice to Landlord,
which notice may be updated by Tenant not more frequently than once every six
months and shall at no time include more than ten competitors (and if the name
of more than one operating unit, division or subsidiary of any particular
business entity is a competitor Tenant wishes to list, Tenant shall specifically
identify the operating unit, division or subsidiary and each such operating
unit, division or subsidiary shall be counted separately as one of the maximum
of ten competitors to be included on Tenant's list at any one time);
(c) To install and maintain any and all signs on the exterior and
interior of the Building; provided, however, that so long as Tenant continues to
occupy at least 75% of the Premises free from sublease, assignment or other
Transfer, Landlord shall not install on the exterior of the Building
identification signage of a business competitor of Tenant specified on any
current list of competitors delivered by Tenant to Landlord as described in
Section 7.3(b) above (but including the name of a competitor on the proposed
sign monument referred to in Section 41 shall not be prohibited by this
provision);
(d) To reduce, increase, enclose or otherwise change at any time and
from time to time the size, number, location, lay-out and nature of the common
areas (including the Parking Facility) and other tenancies and premises in the
Property and to create additional rentable areas through use or enclosure of
common areas (except that Landlord shall not have any right under this provision
materially to reduce the size of the Premises, or permanently, materially and
adversely to affect Tenant's access to and use of the Premises, except only as
may be required to comply with Laws or as a result of any casualty or
Condemnation); and
(e) If any governmental authority promulgates or revises any Law or
imposes mandatory or voluntary controls or guidelines on Landlord or the
Property relating to the use or conservation of energy or utilities or the
reduction of automobile or other emissions or reduction or management of traffic
or parking on the Property (collectively "CONTROLS"), to comply with such
Controls, whether mandatory or voluntary, or make any alterations to the
Property related thereto.
In connection with any work performed by Landlord pursuant to paragraphs
(a) or (d) of this Section 7.3, Landlord shall use reasonable efforts to
minimize interference with the conduct of Tenant's business in the Premises to
the extent reasonably practicable under the circumstances. Notwithstanding the
foregoing, however, if such work prevents Tenant from reasonably using a
material portion of the Premises, and Tenant in fact ceases to use such portion
of the Premises, for
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an uninterrupted period in excess of five (5) Business Days, Tenant shall be
entitled to an abatement of Base Rent and Additional Rent with respect to the
portion of the Premises that Tenant is so prevented from using and in fact not
using, with the abatement commencing on the sixth (6th) Business Day of the
period and continuing until Tenant is no longer so prevented from using such
portion of the Premises (or any earlier date on which Tenant actually uses such
portion of the Premises for any purpose). Notwithstanding Tenant's entitlement
to rent abatement under the preceding provisions, Tenant shall continue to pay
Tenant's then current rent until such time as Landlord and Tenant agree on the
amount of the rent abatement. If Landlord and Tenant are unable to agree on the
amount of such abatement within ten (10) Business Days of the date they commence
negotiations regarding the abatement, then either party may submit the matter to
binding arbitration pursuant to Sections 1280 ET SEQ. of the California Code of
Civil Procedure.
8. TENANT'S TAXES. "TENANT'S TAXES" shall mean (a) all taxes, assessments,
license fees and other governmental charges or impositions levied or assessed
against or with respect to Tenant's personal property or Trade Fixtures in the
Premises, whether any such imposition is levied directly against Tenant or
levied against Landlord or the Property, (b) all rental, excise, sales or
transaction privilege taxes arising out of this Lease (excluding, however, state
and federal personal or corporate income taxes measured by the income of
Landlord from all sources) imposed by any taxing authority upon Landlord or upon
Landlord's receipt of any rent payable by Tenant pursuant to the terms of this
Lease ("RENTAL TAX"), and (c) any increase in Taxes attributable to inclusion of
a value placed on Tenant's personal property, Trade Fixtures or Alterations.
Tenant shall pay any Rental Tax to Landlord in addition to and at the same time
as Base Rent is payable under this Lease, and shall pay all other Tenant's Taxes
before delinquency (and, at Landlord's request, shall furnish Landlord
satisfactory evidence thereof). If Landlord pays Tenant's Taxes or any portion
thereof, Tenant shall reimburse Landlord upon demand for the amount of such
payment, together with interest at the Interest Rate from the date of Landlord's
payment to the date of Tenant's reimbursement.
9. UTILITIES AND SERVICES.
9.1 DESCRIPTION OF SERVICES. Landlord shall furnish to the Premises
reasonable amounts of electricity, water, and janitorial service. Landlord shall
also provide the Building with normal fluorescent tube replacement, window
washing, elevator service, and common area toilet room supplies. Landlord shall
furnish reasonable amounts of heat, ventilation and air-conditioning during the
Business Hours specified in the Basic Lease Information ("BUSINESS HOURS") on
weekdays except public holidays ("BUSINESS DAYS"). Any additional utilities or
services that Landlord may agree to provide (including lamp or tube replacement
for other than Building Standard lighting fixtures) shall be at Tenant's sole
expense. Insofar as may be reasonably practicable, Landlord shall equitably
determine and charge Tenant directly for the full actual cost of providing
electricity to the Premises. Landlord shall install and use one or more flow
meters, check meters, submeters or other devices to measure Tenant's use of
electricity and Tenant shall pay the full actual cost thereof, determined and
billed to Tenant monthly by Landlord as equitably and accurately as may be
reasonably practicable under the circumstances (including applicable Laws and
tariffs) existing from time to time during the Term. If it is not reasonably
practicable to
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determine and separately charge Tenant for any portion thereof, the cost of such
services not charged directly to Tenant shall be included in Operating Costs.
9.2 PAYMENT FOR ADDITIONAL UTILITIES AND SERVICES.
(a) Upon request by Tenant in accordance with the procedures
established by Landlord from time to time for furnishing HVAC service at times
other than Business Hours on Business Days, Landlord shall furnish such service
to Tenant and Tenant shall pay for such services on an hourly basis at the then
prevailing rate established for the Building by Landlord.
(b) If the temperature otherwise maintained in any portion of the
Premises by the HVAC systems of the Building is affected as a result of (i) any
lights, machines or equipment used by Tenant in the Premises beyond what is
normally used in comparable office space by a typical and reasonable computer
software company at the date of this Lease, or (ii) the occupancy of the
Premises by more than one person per 150 square feet of rentable area, then
Landlord shall have the right to install any machinery or equipment reasonably
necessary to restore the temperature, including modifications to the standard
air-conditioning equipment. The cost of any such equipment and modifications,
including the cost of installation and any additional cost of operation and
maintenance of the same, shall be paid by Tenant to Landlord upon demand.
(c) If Tenant's usage of electricity (if electricity is not charged
directly to Tenant but rather included in Operating Costs as provided above),
water or any other utility service exceeds the Building Standard use of such
utility (which, with respect to electricity, is an amount equal to an average of
4 watts per rentable square foot for general electrical use by Tenant, including
lighting, as described in Schedule 1 to Exhibit B to this Lease, assuming
operation during Business Hours on Business Days), Landlord may determine the
amount of such excess use by any reasonable means (including the installation at
Landlord's request but at Tenant's expense of a separate meter or other
measuring device) and charge Tenant for the cost of such excess usage. In
addition, Landlord may impose a reasonable charge for the use of any additional
or unusual janitorial services required by Tenant because of any unusual Tenant
Improvements or Alterations, the carelessness of Tenant or the nature of
Tenant's business (including hours of operation).
9.3 INTERRUPTION OF SERVICES. In the event of an interruption in, or
failure or inability to provide any of the services or utilities described in
Section 9.1 - "Description of Services" (a "SERVICE FAILURE"), such Service
Failure shall not, regardless of its duration, constitute an eviction of Tenant,
constructive or otherwise, or impose upon Landlord any liability whatsoever,
including, but not limited to, liability for consequential damages or loss of
business by Tenant or, except as provided herein, entitle Tenant to an abatement
of rent or to terminate this Lease.
(a) If any Service Failure not caused by Tenant or its
Representatives prevents Tenant from reasonably using a material portion of the
Premises and Tenant in fact ceases to use such portion of the Premises, Tenant
shall be entitled to an abatement of Base Rent and Additional Rent with respect
to the portion of the Premises that Tenant is prevented from using by reason of
such Service Failure in the following circumstances: (i) if Landlord fails to
commence reasonable efforts to remedy the Service Failure within ten (10)
Business Days following the occurrence of the
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Service Failure, and such failure has persisted and continuously prevented
Tenant from using a material portion of the Premises during that period, the
abatement of rent shall commence on the eleventh Business Day following the
Service Failure and continue until Tenant is no longer so prevented from using
such portion of the Premises; and (ii) if the Service Failure in all events is
not remedied within thirty (30) days following the occurrence of the Service
Failure and Tenant in fact does not use such portion of the Premises for an
uninterrupted period of thirty (30) days or more by reason of such Service
Failure, the abatement of rent shall commence no later than the thirty-first day
following the occurrence of the Service Failure and continue until Tenant is no
longer so prevented from using such portion of the Premises.
(b) If a Service Failure is caused by Tenant or its Representatives,
Landlord shall nonetheless remedy the Service Failure, at the expense of Tenant
(to the extent that Landlord does not receive insurance proceeds indemnifying
Landlord against such expense), pursuant to Landlord's maintenance and repair
obligations under Section 7 - "Maintenance and Repair" or Section 12.1 -
"Landlord's Duty to Repair," as the case may be, but Tenant shall not be
entitled to an abatement of rent or to terminate this Lease as a result of any
such Service Failure.
(c) Notwithstanding Tenant's entitlement to rent abatement under the
preceding provisions, Tenant shall continue to pay Tenant's then current rent
until such time as Landlord and Tenant agree on the amount of the rent
abatement. If Landlord and Tenant are unable to agree on the amount of such
abatement within ten (10) Business Days of the date they commence negotiations
regarding the abatement, then either party may submit the matter to binding
arbitration pursuant to Sections 1280 ET SEQ. of the California Code of Civil
Procedure.
(d) In addition to the foregoing provisions, if there is a Service
Failure not caused by Tenant or its Representatives and such Service Failure
prevents Tenant from conducting its business in the Premises in the manner in
which Tenant intends to conduct such business, and (i) Landlord fails to
commence reasonable efforts to remedy the Service Failure within ninety (90)
days following the occurrence of the Service Failure, or (ii) the Service
Failure in all events is not remedied within one (1) year following its
occurrence and Tenant in fact does not conduct any business in the Premises for
an uninterrupted period of one (1) year or more, Tenant shall have the right to
terminate this Lease by written notice delivered to Landlord within ten (10)
Business Days following the event described in clauses (i) or (ii) above giving
rise to the right to terminate.
(e) Where the cause of a Service Failure is within the control of a
public utility or other public or quasi-public entity outside Landlord's
control, notification to such utility or entity of the Service Failure and
request to remedy the failure shall constitute "reasonable efforts" by Landlord
to remedy the Service Failure.
(f) Tenant hereby waives the provisions of California Civil Code
Section 1932(1) or any other applicable existing or future law, ordinance or
governmental regulation permitting the termination of this Lease due to such
interruption, failure or inability.
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10. EXCULPATION AND INDEMNIFICATION.
10.1 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall indemnify,
protect, defend and hold Tenant harmless from and against any claims, actions,
liabilities, damages, costs or expenses, including reasonable attorneys' fees
and costs incurred in defending against the same ("CLAIMS") asserted by any
third party against Tenant for loss, injury or damage, to the extent such loss,
injury or damage is caused by the willful misconduct or negligent acts or
omissions of Landlord or its authorized representatives.
10.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall indemnify,
protect, defend and hold Landlord harmless from and against Claims arising from
(a) the acts or omissions of Tenant or Tenant's Representatives or Visitors in
or about the Property, or (b) any construction or other work undertaken by
Tenant on the Premises (including any design defects), excluding any work
performed by Landlord or Landlord's contractors or employees, or (c) any loss,
injury or damage, howsoever and by whomsoever caused, to any person or property,
occurring in or about the Premises during the Term, excepting only Claims
described in this clause (c) to the extent they are caused by the willful
misconduct or negligent acts or omissions of Landlord or its authorized
representatives.
10.3 DAMAGE TO TENANT AND TENANT'S PROPERTY. Landlord shall not be liable
to Tenant for any loss, injury or other damage to Tenant or to Tenant's property
in or about the Premises or the Property from any cause (including defects in
the Property or in any equipment in the Property; fire, explosion or other
casualty; bursting, rupture, leakage or overflow of any plumbing or other pipes
or lines, sprinklers, tanks, drains, drinking fountains or washstands in, above,
or about the Premises or the Property; or acts of other tenants in the
Property). Tenant hereby waives all claims against Landlord for any such loss,
injury or damage and the cost and expense of defending against claims relating
thereto, including any loss, injury or damage caused by Landlord's negligence
(active or passive) or willful misconduct. The foregoing provisions of this
Section 10.3 shall not affect Landlord's indemnification of Tenant as provided
in Section 10.1. Notwithstanding any other provision of this Lease to the
contrary, in no event shall Landlord or Tenant be liable to the other party for
any punitive or consequential damages or damages for loss of business by Tenant
or Landlord except for any liability which Tenant might have for holding over in
the Premises beyond the expiration of the Term in accordance with the provisions
of Section 19.2 of this Lease.
10.4 SURVIVAL. The obligations of the parties under this Section 10 shall
survive the expiration or termination of this Lease.
11. INSURANCE.
11.1 TENANT'S INSURANCE.
(a) LIABILITY INSURANCE. Tenant shall maintain in full force
throughout the Term, commercial general liability insurance providing coverage
on an occurrence form basis with limits of not less than Two Million Dollars
($2,000,000.00) each occurrence for bodily injury and property damage combined,
Two Million Dollars ($2,000,000.00) annual general aggregate, and
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Two Million Dollars ($2,000,000.00) products and completed operations annual
aggregate. Tenant's liability insurance policy or policies shall: (i) include
premises and operations liability coverage, products and completed operations
liability coverage, broad form property damage coverage including completed
operations, blanket contractual liability coverage including, to the maximum
extent possible, coverage for the indemnification obligations of Tenant under
this Lease, and personal and advertising injury coverage; (ii) provide that the
insurance company has the duty to defend all insureds under the policy; (iii)
provide that defense costs are paid in addition to and do not deplete any of the
policy limits; (iv) cover liabilities arising out of or incurred in connection
with Tenant's use or occupancy of the Premises or the Property; and (v) extend
coverage to cover liability for the actions of Tenant's Representatives and
Visitors. Each policy of liability insurance required by this Section shall: (i)
contain a cross liability endorsement or separation of insureds clause; (ii)
provide that any waiver of subrogation rights or release prior to a loss does
not void coverage; (iii) provide that it is primary to and not contributing
with, any policy of insurance carried by Landlord covering the same loss; (iv)
provide that any failure to comply with the reporting provisions shall not
affect coverage provided to Landlord, its partners, property managers and
Mortgagees; and (v) name Landlord, its partners, the Property Manager identified
in the Basic Lease Information (the "PROPERTY MANAGER"), and such other parties
in interest as Landlord may from time to time reasonably designate to Tenant in
writing, as additional insureds. Such additional insureds shall be provided at
least the same extent of coverage as is provided to Tenant under such policies.
All endorsements effecting such additional insured status shall be at least as
broad as additional insured endorsement form number CG 20 11 11 85 promulgated
by the Insurance Services Office.
(b) PROPERTY INSURANCE. Tenant shall at all times maintain in effect
with respect to any Alterations and Tenant's Trade Fixtures and personal
property, commercial property insurance providing coverage, on an "all risk" or
"special form" basis, in an amount equal to at least 90% of the full replacement
cost of the covered property. Tenant may carry such insurance under a blanket
policy, provided that such policy provides coverage equivalent to a separate
policy. During the Term, the proceeds from any such policies of insurance shall
be used for the repair or replacement of the Alterations, Trade Fixtures and
personal property so insured. Landlord shall be provided coverage under such
insurance to the extent of its insurable interest and, if requested by Landlord,
both Landlord and Tenant shall sign all documents reasonably necessary or proper
in connection with the settlement of any claim or loss under such insurance.
Landlord will have no obligation to carry insurance on any Alterations or on
Tenant's Trade Fixtures or personal property.
(c) REQUIREMENTS FOR ALL POLICIES. Each policy of insurance required
under this Section 11.1 shall: (i) be in a form, and written by an insurer,
reasonably acceptable to Landlord, (ii) be maintained at Tenant's sole cost and
expense, and (iii) require at least thirty (30) days' written notice to Landlord
prior to any cancellation, nonrenewal or modification of insurance coverage.
Insurance companies issuing such policies shall have rating classifications of
"A" or better and financial size category ratings of "VII" or better according
to the latest edition of the A.M. Best Key Rating Guide. All insurance companies
issuing such policies shall be admitted carriers licensed to do business in the
state where the Property is located. Any deductible amount under such insurance
shall not exceed $5,000. Tenant shall provide to Landlord, upon request,
evidence that the insurance required to be carried by Tenant pursuant to this
Section, including any
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endorsement effecting the additional insured status, is in full force and effect
and that premiums therefor have been paid.
(d) UPDATING COVERAGE. Tenant shall increase the amounts of
insurance as required by any Mortgagee, and, not more frequently than once every
three (3) years, as recommended by Landlord's insurance broker, if, in the
opinion of either of them, the amount of insurance then required under this
Lease is not adequate. Any limits set forth in this Lease on the amount or type
of coverage required by Tenant's insurance shall not limit the liability of
Tenant under this Lease.
(e) CERTIFICATES OF INSURANCE. Prior to occupancy of the Premises by
Tenant, and not less than thirty (30) days prior to expiration of any policy
thereafter, Tenant shall furnish to Landlord a certificate of insurance
reflecting that the insurance required by this Section is in force, accompanied
by an endorsement showing the required additional insureds satisfactory to
Landlord in substance and form. Notwithstanding the requirements of this
paragraph, Tenant shall at Landlord's request provide to Landlord a certified
copy of each insurance policy required to be in force at any time pursuant to
the requirements of this Lease or its Exhibits.
11.2 LANDLORD'S INSURANCE. During the Term, to the extent such coverages
are available at a commercially reasonable cost, Landlord shall maintain in
effect insurance on the Building with responsible insurers, on an "all risk" or
"special form" basis, insuring the Building and the Tenant Improvements in an
amount equal to at least 90% of the replacement cost thereof, excluding land,
foundations, footings and underground installations. Landlord may, but shall not
be obligated to, carry insurance against additional perils and/or in greater
amounts. As of the date of this Lease Landlord carries Workers' Compensation
insurance on any employees of Landlord; an employee dishonesty policy covering,
among other things, the theft of trade secrets; and boiler and machinery
coverage; provided, however, Landlord reserves the right to add to, delete, and
change the limits of such coverage. Landlord shall maintain in full force
throughout the Term, commercial general liability insurance providing coverage
with limits of not less than Two Million Dollars ($2,000,000.00) each occurrence
for bodily injury and property damage combined covering the Property (the cost
of the premiums for which shall be included in Operating Costs).
11.3 MUTUAL WAIVER OF RIGHT OF RECOVERY & WAIVER OF SUBROGATION. Landlord
and Tenant each hereby waive any right of recovery against each other and the
partners, managers, members, shareholders, officers, directors and authorized
representatives of each other for any loss or damage that is covered by any
policy of property insurance maintained by either party (or required by this
Lease to be maintained) with respect to the Premises or the Property or any
operation therein, regardless of cause, including negligence (active or passive)
of the party benefiting from the waiver. If any such policy of insurance
relating to this Lease or to the Premises or the Property does not permit the
foregoing waiver or if the coverage under any such policy would be invalidated
as a result of such waiver, the party maintaining such policy shall obtain from
the insurer under such policy a waiver of all right of recovery by way of
subrogation against either party in connection with any claim, loss or damage
covered by such policy.
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12. DAMAGE OR DESTRUCTION.
12.1 LANDLORD'S DUTY TO REPAIR.
(a) If all or a substantial part of the Premises are rendered
untenantable or inaccessible by damage to all or any part of the Property from
fire or other casualty then, within thirty (30) days following the date of any
such damage, Landlord shall notify Tenant of Landlord's good faith best estimate
of the time required to repair such damage in the manner described herein.
Unless either party is entitled to and elects to terminate this Lease pursuant
to Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate, Landlord shall, at its expense, promptly use reasonable efforts to
repair and restore the Premises and/or the Property, as the case may be, to
substantially their former condition to the extent permitted by then applicable
Laws, using materials and workmanship equal to or better than those originally
incorporated into the Building and the Premises; provided, however, that in no
event shall Landlord have any obligation for repair or restoration: (i) beyond
the extent of the sum of (x) the insurance proceeds received by Landlord for
such repair or restoration plus (y) $50,000, or (ii) for any of Tenant's
personal property, Trade Fixtures or Alterations.
(b) If Landlord is required or elects to repair damage to the
Premises and/or the Property, this Lease shall continue in effect, but Tenant's
Base Rent and Additional Rent shall be abated with regard to any portion of the
Premises that Tenant is prevented from using by reason of such damage or its
repair from the date of the casualty until substantial completion of Landlord's
repair of the affected portion of the Premises as required under this Lease. In
no event shall Landlord be liable to Tenant by reason of any injury to or
interference with Tenant's business or property arising from fire or other
casualty or by reason of any repairs to any part of the Property necessitated by
such casualty.
12.2 LANDLORD'S RIGHT TO TERMINATE. Landlord may elect to terminate this
Lease following damage by fire or other casualty under the following
circumstances:
(a) If, in the reasonable judgment of Landlord, the Premises and the
Property cannot be substantially repaired and restored under applicable Laws
within one (1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate proceeds
are not, for any reason (except for Landlord's failure to maintain the insurance
coverage required to be maintained by Landlord under this Lease), made available
to Landlord from Landlord's insurance policies (and/or from Landlord's funds
made available for such purpose, at Landlord's sole option) to make the required
repairs, and the anticipated cost of repair and restoration will exceed the sum
of (x) the insurance proceeds received by Landlord for such repair or
restoration plus (y) $50,000;
(c) If the Building is damaged or destroyed to the extent that, in
the reasonable judgment of Landlord, the cost to repair and restore the Building
would exceed thirty three percent (33%) of the full replacement cost of the
Building, whether or not the Premises are at all damaged or destroyed; or
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(d) If the fire or other casualty occurs during the last year of the
Term.
If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall give Tenant notice within one
hundred and twenty (120) days after the date of the casualty, specifying whether
Landlord elects to terminate this Lease as provided above; provided, however,
that Landlord shall not elect to terminate this Lease unless Landlord also
exercises whatever rights Landlord has to terminate the leases of all other
tenants in the Building similarly affected by the damage or destruction.
12.3 TENANT'S RIGHT TO TERMINATE. If all or a substantial part of the
Premises are rendered untenantable or inaccessible by damage to all or any part
of the Property from fire or other casualty, and Landlord does not elect to
terminate as provided above, then Tenant may elect to terminate this Lease as
follows:
(a) If Landlord's estimate of the time required to complete
Landlord's repair obligations under this Lease is greater than one (1) year, in
which event Tenant may elect to terminate this Lease by giving Landlord notice
of such election to terminate within thirty (30) days after Landlord's notice to
Tenant pursuant to Section 12.2 - Landlord's Right to Terminate.
(b) Where neither party had the right to terminate this Lease
pursuant to Subsections 12.2(a) and 12.3(a), but Landlord does not substantially
complete its repair work within eighteen (18) months from the date of the
casualty, in which event Tenant may elect to terminate this Lease by giving
Landlord notice of such election to terminate within ten (10) days after such
eighteen (18) month period.
12.4 WAIVER. Landlord and Tenant each hereby waive the provisions of
California Civil Code Sections 1932(2), 1933(4) and any other applicable
existing or future Law permitting the termination of a lease agreement in the
event of damage or destruction under any circumstances other than as provided in
Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate.
13. CONDEMNATION.
13.1 DEFINITIONS.
(a) "AWARD" shall mean all compensation, sums, or anything of value
awarded, paid or received on a total or partial Condemnation.
(b) "CONDEMNATION" shall mean (i) a permanent taking (or a temporary
taking for a period extending beyond the end of the Term) pursuant to the
exercise of the power of condemnation or eminent domain by any public or
quasi-public authority, private corporation or individual having such power
("CONDEMNOR"), whether by legal proceedings or otherwise, or (ii) a voluntary
sale or transfer by Landlord to any such authority, either under threat of
condemnation or while legal proceedings for condemnation are pending.
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(c) "DATE OF CONDEMNATION" shall mean the earlier of the date that
title to the property taken is vested in the Condemnor or the date the Condemnor
has the right to possession of the property being condemned.
13.2 EFFECT ON LEASE.
(a) If the Premises are totally taken by Condemnation, this Lease
shall terminate as of the Date of Condemnation. If a portion but not all of the
Premises is taken by Condemnation, this Lease shall remain in effect; provided,
however, that if the portion of the Premises remaining after the Condemnation
will be unsuitable for Tenant's continued use, then upon notice to Landlord
within thirty (30) days after Landlord notifies Tenant of the Condemnation,
Tenant may terminate this Lease effective as of the Date of Condemnation.
(b) If twenty-five percent (25%) or more of the Land or of the
Parking Facility or of the floor area in the Building is taken by Condemnation,
or if as a result of any Condemnation the Building is no longer reasonably
suitable for use as an office building, whether or not any portion of the
Premises is taken, Landlord may elect to terminate this Lease, effective as of
the Date of Condemnation, by notice to Tenant within thirty (30) days after the
Date of Condemnation.
(c) If all or a portion of the Premises is temporarily taken by a
Condemnor for a period not extending beyond the end of the Term, this Lease
shall remain in full force and effect.
13.3 RESTORATION. If this Lease is not terminated as provided in Section
13.2 - Effect on Lease, Landlord, at its expense, shall diligently proceed to
repair and restore the Premises to substantially its former condition (to the
extent permitted by then applicable Laws) and/or repair and restore the Building
to an architecturally complete office building; provided, however, that
Landlord's obligations to so repair and restore shall be limited to the amount
of any Award received by Landlord and not required to be paid to any Mortgagee
(as defined in Section 20.2 below). In no event shall Landlord have any
obligation to repair or replace any improvements in the Premises beyond the
amount of any Award received by Landlord for such repair or to repair or replace
any of Tenant's personal property, Trade Fixtures, or Alterations.
13.4 ABATEMENT AND REDUCTION OF RENT. If any portion of the Premises is
taken in a Condemnation or is rendered permanently untenantable by repairs
necessitated by the Condemnation, and this Lease is not terminated, the Base
Rent and Additional Rent payable under this Lease shall be proportionally
reduced as of the Date of Condemnation based upon the percentage of Rentable
Area so taken or rendered permanently untenantable. In addition, if this Lease
remains in effect following a Condemnation and Landlord proceeds to repair and
restore the Premises, the Base Rent and Additional Rent payable under this Lease
shall be abated during the period of such repair or restoration to the extent
such repairs prevent Tenant's use of the Premises.
13.5 AWARDS. Any Award made shall be paid to Landlord, and Tenant hereby
assigns to Landlord, and waives all interest in or claim to, any such Award,
including any claim for the value of the unexpired Term; provided, however, that
Tenant shall be entitled to receive, or to prosecute a
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separate claim for, an Award for a temporary taking of the Premises or a portion
thereof by a Condemnor where this Lease is not terminated (to the extent such
Award relates to the unexpired Term), or an Award or portion thereof separately
designated for relocation expenses or the interruption of or damage to Tenant's
business or as compensation for Tenant's personal property, Trade Fixtures or
Alterations.
13.6 WAIVER. Landlord and Tenant each hereby waive the provisions of
California Code of Civil Procedure Section 1265.130 and any other applicable
existing or future Law allowing either party to petition for a termination of
this Lease upon a partial taking of the Premises and/or the Property.
14. ASSIGNMENT AND SUBLETTING.
14.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not assign this Lease or
any interest therein, or sublet or license or permit the use or occupancy of the
Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant's interest under this
Lease (each and all a "TRANSFER"), without the prior written consent of
Landlord, which consent (subject to the other provisions of this Section 14)
shall not be unreasonably withheld, conditioned or delayed. Notwithstanding any
provision in this Lease to the contrary, Tenant shall not mortgage, pledge,
hypothecate or otherwise encumber this Lease or all or any part of Tenant's
interest under this Lease.
14.2 REASONABLE CONSENT.
(a) Prior to any proposed Transfer, Tenant shall submit in writing
to Landlord (i) the name and legal composition of the proposed assignee,
subtenant, user or other transferee (each a "PROPOSED TRANSFEREE"); (ii) the
nature of the business proposed to be carried on in the Premises; (iii) a
current balance sheet, income statements for the last two years and such other
reasonable financial and other information concerning the Proposed Transferee as
Landlord may request; and (iv) a copy of the proposed assignment, sublease or
other agreement governing the proposed Transfer. Within ten (10) Business Days
after Landlord receives all such information it shall notify Tenant whether it
approves or disapproves such Transfer or if it elects to proceed under Section
14.7 - Landlord's Right to Space.
(b) Tenant acknowledges and agrees that, among other circumstances
for which Landlord could reasonably withhold consent to a proposed Transfer, it
shall be reasonable for Landlord to withhold consent where (i) the Proposed
Transferee does not intend itself to occupy the entire portion of the Premises
assigned or sublet, (ii) Landlord reasonably disapproves of the Proposed
Transferee's business operating ability or history, reputation or
creditworthiness or the character of the business to be conducted by the
Proposed Transferee at the Premises, (iii) the Proposed Transferee is a
governmental agency or unit or an existing tenant in the Project, (iv) the
proposed Transfer would violate any "exclusive" rights of any tenants in the
Project, (v) Landlord or Landlord's agent has exchanged proposals with the
Proposed Transferee or the Proposed Transferee's agent concerning leasing of
space in the Project by the Proposed Transferee, at any time within the
preceding six (6) months, or (vi) Landlord otherwise determines that the
proposed
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Transfer would have the effect of decreasing the value of the Building or
increasing the expenses associated with operating, maintaining and repairing the
Property. In no event may Tenant advertise all or any portion of the Premises
for assignment or sublease at a rental less than that being sought by Landlord
for a direct lease (non sublease) of comparable space in the Project.
14.3 EXCESS CONSIDERATION. If Landlord consents to the Transfer, Tenant
shall pay to Landlord as additional rent, within ten (10) days after receipt by
Tenant, fifty percent (50%) of any consideration (less transaction costs and the
unamortized portion of Tenant's Investment, as provided below) paid by any
transferee (the "TRANSFEREE") for the Transfer, including, in the case of a
sublease, the excess of the rent and other consideration payable by the
subtenant over the amount of Base Rent and Additional Rent payable hereunder
applicable to the subleased space. The unamortized portion of "Tenant's
Investment" shall be equivalent to a $0.33 per rentable square foot per month
increase in Base Rent with respect to the space subject to the Transfer, over
the term of the Sublease or, with respect to an Assignment, the balance of the
Term. If consideration for the Transfer is paid in more than one installment,
the transaction costs and unamortized portion of Tenant's Investment shall be
allocated between or among the installments on a pro rata basis (against each
installment in the same proportion as the installment bears to the total
consideration).
14.4 NO RELEASE OF TENANT. No consent by Landlord to any Transfer shall
relieve Tenant of any obligation to be performed by Tenant under this Lease,
whether occurring before or after such consent, assignment, subletting or other
Transfer. Each Transferee shall be jointly and severally liable with Tenant (and
Tenant shall be jointly and severally liable with each Transferee) for the
payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease) and for the performance of all other terms and provisions of this
Lease. The consent by Landlord to any Transfer shall not relieve Tenant or any
such Transferee from the obligation to obtain Landlord's express prior written
consent to any subsequent Transfer by Tenant or any Transferee. The acceptance
of rent by Landlord from any other person (whether or not such person is an
occupant of the Premises) shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any Transfer.
14.5 EXPENSES AND ATTORNEYS' FEES. Tenant shall pay to Landlord on demand
all costs and expenses (including reasonable attorneys' fees not to exceed One
Thousand Five Hundred and 00/100 Dollars [$1,500.00] per transaction) incurred
by Landlord in connection with reviewing or consenting to any proposed Transfer
(including any request for consent to, or any waiver of Landlord's rights in
connection with, any security interest in any of Tenant's property at the
Premises).
14.6 EFFECTIVENESS OF TRANSFER. Prior to the date on which any permitted
Transfer (whether or not requiring Landlord's consent) becomes effective, Tenant
shall deliver to Landlord a counterpart of the fully executed Transfer document
and Landlord's standard form of Consent to Assignment or Consent to Sublease
executed by Tenant and the Transferee in which each of Tenant and the Transferee
confirms its obligations pursuant to this Lease. Failure or refusal of a
Transferee to execute any such instrument shall not release or discharge the
Transferee from liability as provided herein. The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual
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cancellation by Landlord and Tenant, shall not work a merger, and any such
surrender or cancellation shall, at the option of Landlord, either terminate all
or any existing subleases or operate as an assignment to Landlord of any or all
of such subleases.
14.7 LANDLORD'S RIGHT TO SPACE.
(a) Notwithstanding any of the above provisions of this Section to
the contrary, if Tenant notifies Landlord that it desires to enter into a
Transfer (other than a Transfer to an "Affiliate" pursuant to Section 14.9
below), Landlord, in lieu of consenting to such Transfer, may elect (x) in the
case of an assignment or a sublease of the entire Premises, to terminate this
Lease, or (y) in the case of a sublease of less than the entire Premises, to
terminate this Lease as it relates to the space proposed to be subleased by
Tenant. In such event, this Lease will terminate (or the space proposed to be
subleased will be removed from the Premises subject to this Lease and the Base
Rent and Tenant's Share under this Lease shall be proportionately reduced) on
the date the Transfer was proposed to be effective, and Landlord may lease such
space to any party, including the prospective Transferee identified by Tenant.
(b) Notwithstanding any of the above provisions of Section 14.7 (a)
to the contrary, so long as Security Dynamics Technologies, Inc. shall continue
to occupy a portion of the Premises (it being intended that all rights pursuant
to this Section 14.7(b) are and shall be personal to the original Tenant under
this Lease and shall not be transferable or exercisable for the benefit of any
Transferee), and provided Tenant is not in default under this Lease at the time
of the proposal to sublease, Landlord shall have the right to terminate this
Lease (only as to the space proposed to be subleased) pursuant to the provisions
of Section 14.7 (a) only if the space proposed to be subleased by Tenant shall
consist of one entire floor of the Premises, or more.
14.8 ASSIGNMENT OF SUBLEASE RENTS. Tenant hereby absolutely and
irrevocably assigns to Landlord any and all rights to receive rent and other
consideration from any sublease and agrees that Landlord, as assignee or as
attorney-in-fact for Tenant for purposes hereof, or a receiver for Tenant
appointed on Landlord's application may (but shall not be obligated to) collect
such rents and other consideration and apply the same toward Tenant's
obligations to Landlord under this Lease; provided, however, that Landlord
grants to Tenant at all times prior to occurrence of any breach or default by
Tenant a revocable license to collect such rents (which license shall
automatically and without notice be and be deemed to have been revoked and
terminated immediately upon any Event of Default).
14.9 TRANSFER TO AFFILIATE. Notwithstanding the foregoing provisions of
this Section 14 to the contrary, Tenant may assign this Lease or sublet the
Premises or any portion thereof, upon fourteen (14) days prior written notice to
Landlord, without Landlord's consent, to any corporation or other entity which
controls, is controlled by, or is under common control with Tenant, or to any
corporation or other entity resulting from a merger or consolidation with
Tenant, or to any person or entity which acquires substantially all the assets
of Tenant as a going concern (collectively, an "Affiliate"), provided that the
Affiliate assumes in writing all of Tenant's obligations under this Lease, and
provided such transaction is not a subterfuge.
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15. DEFAULT AND REMEDIES.
15.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" by Tenant:
(a) Tenant fails to make any payment of rent when due, or any amount
required to replenish the security deposit as provided in Section 4 above, if
payment in full is not received by Landlord within five (5) days after written
notice that it is due.
(b) [Intentionally deleted].
(c) Tenant fails timely to deliver any subordination document,
estoppel certificate or financial statement requested by Landlord within the
applicable time period specified in Sections 20 and 21 below.
(d) Tenant violates the restrictions on Transfer set forth in
Section 14 - Assignment and Subletting.
(e) Tenant ceases doing business as a going concern; makes an
assignment for the benefit of creditors; is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of a petition)
seeking relief under any under any state or federal bankruptcy or other statute,
law or regulation affecting creditors' rights; all or substantially all of
Tenant's assets are subject to judicial seizure or attachment and are not
released within 30 days, or Tenant consents to or acquiesces in the appointment
of a trustee, receiver or liquidator for Tenant or for all or any substantial
part of Tenant's assets.
(f) Tenant fails, within ninety (90) days after the commencement of
any proceedings against Tenant seeking relief under any state or federal
bankruptcy or other statute, law or regulation affecting creditors' rights, to
have such proceedings dismissed, or Tenant fails, within ninety (90) days after
an appointment, without Tenant's consent or acquiescence, of any trustee,
receiver or liquidator for Tenant or for all or any substantial part of Tenant's
assets, to have such appointment vacated.
(g) Tenant fails to perform or comply with any provision of this
Lease other than those described in (a) through (f) above, and does not fully
cure such failure within fifteen (15) days after notice to Tenant or, if such
failure cannot be cured within such fifteen (15)-day period, Tenant fails within
such fifteen (15)-day period to commence, and thereafter diligently proceed
with, all actions necessary to cure such failure as soon as reasonably possible
but in all events within ninety (90) days of such notice; provided, however,
that if Landlord in Landlord's reasonable judgment determines that such failure
cannot or will not be cured by Tenant within such ninety (90) days, then such
failure shall constitute an Event of Default immediately upon such notice to
Tenant.
(h) Tenant shall be in default, beyond any applicable grace or cure
period, under the terms of any lease by and between Tenant (or any subsidiary,
parent or affiliate) and Landlord
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(or any other entity having William Wilson & Associates, or any entity
controlled, directly or indirectly, by it, as a partner, majority shareholder or
manager).
15.2 REMEDIES. Upon the occurrence of an Event of Default, Landlord shall
have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
(a) Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including re-entry into the Premises, efforts to relet the Premises,
reletting of the Premises for Tenant's account, storage of Tenant's personal
property and Trade Fixtures, acceptance of keys to the Premises from Tenant or
exercise of any other rights and remedies under this Section, shall constitute
an acceptance of Tenant's surrender of the Premises or constitute a termination
of this Lease or of Tenant's right to possession of the Premises. Upon such
termination in writing of Tenant's right to possession of the Premises, as
herein provided, this Lease shall terminate and Landlord shall be entitled to
recover damages from Tenant as provided in California Civil Code Section 1951.2
and any other applicable existing or future Law providing for recovery of
damages for such breach, including the worth at the time of award of the amount
by which the rent which would be payable by Tenant hereunder for the remainder
of the Term after the date of the award of damages, including Additional Rent as
reasonably estimated by Landlord, exceeds the amount of such rental loss as
Tenant proves could have been reasonably avoided, discounted at the discount
rate published by the Federal Reserve Bank of San Francisco for member banks at
the time of the award plus one percent (1%).
(b) Landlord shall have the remedy described in California Civil
Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's
breach and abandonment and recover rent as it becomes due, if Tenant has the
right to sublet or assign, subject only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's expense. If
Landlord pays any sum or incurs any expense in curing the Event of Default,
Tenant shall reimburse Landlord upon demand for the amount of such payment or
expense with interest at the Interest Rate from the date the sum is paid or the
expense is incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all Tenant's property from the Premises, and
such property may be stored by Landlord in a public warehouse or elsewhere at
the sole cost and for the account of Tenant. If Landlord does not elect to store
any or all of Tenant's property left in the Premises, Landlord may consider such
property to be abandoned by Tenant, and Landlord may thereupon dispose of such
property in any manner deemed appropriate by Landlord. Any proceeds realized by
Landlord on the disposal of any such property shall be applied first to offset
all expenses of storage and sale, then credited against Tenant's outstanding
obligations to Landlord under this Lease, and any balance remaining after
satisfaction of all obligations of Tenant under this Lease shall be delivered to
Tenant.
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16. LATE CHARGE AND INTEREST.
16.1 LATE CHARGE. If any payment of rent is not received by Landlord
within five (5) days after written notice from Landlord to Tenant that the
payment is past due, Tenant shall pay to Landlord on demand as a late charge an
additional amount equal to four percent (4%) of the overdue payment; provided,
however, if Landlord has given Tenant written notice two (2) or more times in
any consecutive twelve (12) month period that a payment of rent is past due,
then Tenant shall pay to Landlord on demand commencing with the third (3rd) past
due payment in any twelve (12) month period, and continuing with each past due
payment thereafter in such twelve (12) month period, as a late charge an
additional amount equal to four percent (4%) of the overdue payment without any
requirement of additional notice that such payment is past due. A late charge
shall not be imposed more than once on any particular installment not paid when
due, but imposition of a late charge on any payment not made when due does not
eliminate or supersede late charges imposed on other (prior) payments not made
when due or preclude imposition of a late charge on other installments or
payments not made when due.
16.2 INTEREST. In addition to the late charges referred to above, which
are intended to defray Landlord's costs resulting from late payments, any
payment from Tenant to Landlord not paid when due shall at Landlord's option
bear interest from the date due until paid to Landlord by Tenant at a floating
rate equal to the per annum prime rate published in the Wall Street Journal (or
the then substantial equivalent, as reasonably determined by Landlord), plus two
percent (2%) per annum, or the maximum lawful rate that Landlord may charge to
Tenant under applicable laws, whichever is less (the "INTEREST RATE").
Acceptance of any late charge and/or interest shall not constitute a waiver of
Tenant's default with respect to the overdue sum or prevent Landlord from
exercising any of its other rights and remedies under this Lease.
17. WAIVER. No provisions of this Lease shall be deemed waived by either
Landlord or Tenant unless such waiver is in a writing signed by the other party
hereto. The waiver by either Landlord or Tenant of any breach of any provision
of this Lease shall not be deemed a waiver of such provision or of any
subsequent breach of the same or any other provision of this Lease. No delay or
omission in the exercise of any right or remedy of either Landlord or Tenant
upon any default by the other party hereto shall impair such right or remedy or
be construed as a waiver. Landlord's acceptance of any payments of rent due
under this Lease shall not be deemed a waiver of any default by Tenant under
this Lease (including Tenant's recurrent failure to timely pay rent) other than
Tenant's nonpayment of the accepted sums, and no endorsement or statement on any
check or payment or in any letter or document accompanying any check or payment
shall be deemed an accord and satisfaction. The consent to or approval of any
act by a party hereto requiring the other party's consent or approval shall not
be deemed to waive or render unnecessary the consent to or approval of any
subsequent act by the party hereto seeking consent or approval.
18. ENTRY, INSPECTION AND CLOSURE. Upon reasonable oral or written notice to
Tenant (and without notice in emergencies), Landlord and its authorized
representatives may enter the Premises at all reasonable times and accompanied
by a representative of Tenant, unless no representative of Tenant meets
Landlord's representative at the scheduled time (provided, in the event of an
emergency Landlord shall have the right to enter the Premises at any time
without
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notice to Tenant, and without being accompanied by a representative of Tenant),
to: (a) determine whether the Premises are in good condition, (b) determine
whether Tenant is complying with its obligations under this Lease, (c) perform
any maintenance or repair of the Premises or the Building that Landlord has the
right or obligation to perform, (d) install or repair improvements for other
tenants where access to the Premises is required for such installation or
repair, (e) serve, post or keep posted any notices required or allowed under the
provisions of this Lease, (f) show the Premises to prospective brokers, agents,
buyers, transferees, Mortgagees or tenants, or (g) do any other act or thing
necessary for the safety or preservation of the Premises or the Building. When
reasonably necessary Landlord may temporarily close entrances, doors, corridors,
elevators or other facilities in the Building without liability to Tenant by
reason of such closure. Landlord shall conduct its activities under this Section
in a manner that will minimize inconvenience to Tenant without incurring
additional expense to Landlord. In no event shall Tenant be entitled to an
abatement of rent on account of any entry by Landlord, and Landlord shall not be
liable in any manner for any inconvenience, loss of business or other damage to
Tenant or other persons arising out of Landlord's entry on the Premises in
accordance with this Section. No action by Landlord pursuant to this paragraph
shall constitute an eviction of Tenant, constructive or otherwise, entitle
Tenant to an abatement of rent or to terminate this Lease or otherwise release
Tenant from any of Tenant's obligations under this Lease.
19. SURRENDER AND HOLDING OVER.
19.1 SURRENDER. Upon the expiration or termination of this Lease, Tenant
shall surrender the Premises and all Tenant Improvements and Alterations to
Landlord broom-clean and in their original condition, except for reasonable wear
and tear, damage from casualty or condemnation and any changes resulting from
approved Alterations; provided, however, that prior to the expiration or
termination of this Lease Tenant shall remove all telephone and other cabling
installed in the Building by Tenant and remove from the Premises all Tenant's
personal property and any Trade Fixtures and all Alterations to the extent such
Alterations may be required to be removed pursuant to the provisions Section 6.1
of this Lease, and repair any damage caused by such removal. If such removal is
not completed before the expiration or termination of the Term, Landlord shall
have the right (but no obligation) to remove the same, and Tenant shall pay
Landlord on demand for all costs of removal and storage thereof and for the
rental value of the Premises for the period from the end of the Term through the
end of the time reasonably required for such removal. Landlord shall also have
the right to retain or dispose of all or any portion of such property if Tenant
does not pay all such costs and retrieve the property within ten (10) days after
notice from Landlord (in which event title to all such property described in
Landlord's notice shall be transferred to and vest in Landlord). Tenant waives
all Claims against Landlord for any damage or loss to Tenant resulting from
Landlord's removal, storage, retention, or disposition of any such property.
Upon expiration or termination of this Lease or of Tenant's possession,
whichever is earliest, Tenant shall surrender all keys to the Premises or any
other part of the Building and shall deliver to Landlord all keys for or make
known to Landlord the combination of locks on all safes, cabinets and vaults
that may be located in the Premises. Tenant's obligations under this Section
shall survive the expiration or termination of this Lease.
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19.2 HOLDING OVER. If Tenant (directly or through any Transferee or other
successor-in-interest of Tenant) remains in possession of the Premises after the
expiration or termination of this Lease, Tenant's continued possession shall be
on the basis of a tenancy at the sufferance of Landlord. In such event, Tenant
shall continue to comply with or perform all the terms and obligations of Tenant
under this Lease, except that the monthly Base Rent during Tenant's holding over
shall be twice the Base Rent payable in the last full month prior to the
termination hereof. Acceptance by Landlord of rent after such termination shall
not constitute a renewal of this Lease; and nothing contained in this provision
shall be deemed to waive Landlord's right of re-entry or any other right
hereunder or at law. Tenant shall indemnify, defend and hold Landlord harmless
from and against all Claims arising or resulting directly or indirectly from
Tenant's failure to timely surrender the Premises, including (i) any rent
payable by or any loss, cost, or damages claimed by any prospective tenant of
the Premises, and (ii) Landlord's damages as a result of such prospective tenant
rescinding or refusing to enter into the prospective lease of the Premises by
reason of such failure to timely surrender the Premises.
20. ENCUMBRANCES.
20.1 SUBORDINATION. This Lease is expressly made subject and subordinate
to any mortgage, deed of trust, ground lease, underlying lease or like
encumbrance affecting any part of the Property or any interest of Landlord
therein which is now existing or hereafter executed or recorded ("ENCUMBRANCE");
provided, however, that such subordination shall only be effective, as to future
Encumbrances, if the holder of the Encumbrance agrees that this Lease shall
survive the termination of the Encumbrance by lapse of time, foreclosure or
otherwise so long as Tenant is not in default under this Lease. Provided the
conditions of the preceding sentence are satisfied, Tenant shall execute and
deliver to Landlord, within ten (10) days after written request therefor by
Landlord, any additional documents evidencing the subordination of this Lease
with respect to any such Encumbrance and the nondisturbance agreement of the
holder of any such Encumbrance, and so long as such holder is an "Institutional
Lender", then in a form used by such Institutional Lender for tenants of
comparable financial capability as Tenant, and occupying similar sized space as
Tenant. For the purposes of this Section an "Institutional Lender" is a bank,
insurance company, savings and loan, pension fund, or similar financial
institution regularly making commercial real estate loans secured by income
producing property. If the interest of Landlord in the Property is transferred
pursuant to or in lieu of proceedings for enforcement of any Encumbrance, Tenant
shall immediately and automatically attorn to the new owner, and this Lease
shall continue in full force and effect as a direct lease between the transferee
and Tenant on the terms and conditions set forth in this Lease. Landlord agrees
to use reasonable good faith efforts to obtain, at Tenant's cost and expense,
within 30 days after execution of this Lease, a Subordination, Attornment and
Non-Disturbance Agreement (the "SNDA") from the holder of any Encumbrance
existing at the date of this Lease pursuant to the provisions contained above.
If Landlord does not do so, then Tenant shall have the right to terminate this
Lease, by and upon written notice delivered to Landlord within ten days after
the 30th day following execution of this Lease.
20.2 MORTGAGEE PROTECTION. Tenant agrees to give any holder of any
Encumbrance covering any part of the Property ("MORTGAGEE"), by registered mail,
a copy of any notice of default served upon Landlord, provided that prior to
such notice Tenant has been notified in writing (by
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way of notice of assignment of rents and leases, or otherwise) of the address of
such Mortgagee. If Landlord shall have failed to cure such default within thirty
(30) days from the effective date of such notice of default, then the Mortgagee
shall have an additional thirty (30) days within which to cure such default or
if such default cannot be cured within that time, then such additional time as
may be necessary to cure such default (including the time necessary to foreclose
or otherwise terminate its Encumbrance, if necessary to effect such cure), and
this Lease shall not be terminated so long as such remedies are being diligently
pursued.
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 ESTOPPEL CERTIFICATES. Within twenty (20) days after written request
therefor, Tenant shall execute and deliver to Landlord, in a form provided by or
satisfactory to Landlord, a certificate stating that this Lease is in full force
and effect, describing any amendments or modifications hereto, acknowledging
that this Lease is subordinate or prior, as the case may be, to any Encumbrance
and stating any other information Landlord may reasonably request, including the
Term, the monthly Base Rent, the date to which rent has been paid, the amount of
any security deposit or prepaid rent, whether either party hereto is in default
under the terms of the Lease, and whether Landlord has completed its
construction obligations hereunder (if any). Tenant irrevocably constitutes,
appoints and authorizes Landlord as Tenant's special attorney-in-fact for such
purpose to complete, execute and deliver such certificate if Tenant fails timely
to execute and deliver such certificate as provided above. Any person or entity
purchasing, acquiring an interest in or extending financing with respect to the
Property shall be entitled to rely upon any such certificate. If Tenant fails to
deliver such certificate within ten (10) days after Landlord's second written
request therefor, Tenant shall be liable to Landlord for any damages incurred by
Landlord including any profits or other benefits from any financing of the
Property or any interest therein which are lost or made unavailable as a result,
directly or indirectly, of Tenant's failure or refusal to timely execute or
deliver such estoppel certificate.
21.2 FINANCIAL STATEMENTS. Within ten (10) days after written request
therefor, but not more than once a year, Tenant shall deliver to Landlord a copy
of the financial statements (including at least a year end balance sheet and a
statement of profit and loss) of Tenant (and of each guarantor of Tenant's
obligations under this Lease) for each of the three most recently completed
years, prepared in accordance with generally accepted accounting principles
(and, if such is Tenant's normal practice, audited by an independent certified
public accountant), all then available subsequent interim statements, and such
other financial information as may reasonably be requested by Landlord or
required by any Mortgagee.
22. NOTICES. Any notice, demand, request, consent or approval that either party
desires or is required to give to the other party under this Lease shall be in
writing and shall be served personally, delivered by messenger or courier
service, or sent by U.S. certified mail, return receipt requested, postage
prepaid, addressed to the other party at the party's address for notices set
forth in the Basic Lease Information. Notices shall be deemed to have been given
and be effective on the earlier of (a) receipt (or refusal of delivery or
receipt); or (b) one (1) day after acceptance by the independent service for
delivery, if sent by independent messenger or courier service, or three (3) days
after mailing if sent by mail in accordance with this Section. Either party may
change its
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<PAGE> 39
address for notices hereunder, effective fifteen (15) days after notice to the
other party complying with this Section. If Tenant sublets the Premises, notices
from Landlord shall be effective on the subtenant when given to Tenant pursuant
to this Section.
23. ATTORNEYS' FEES. In the event of any litigation or arbitration regarding any
rights and obligations under this Lease, the prevailing party shall be entitled
to recover reasonable attorneys' fees and court costs in addition to any other
relief which may be granted. The "prevailing party" will be determined by the
court before whom the action was brought based upon the court's assessment of
which party's major arguments or positions taken in the suit or proceeding could
fairly be said to have prevailed over the other party's major arguments or
positions taken on major disputed issues in the court's decision.
24. QUIET POSSESSION. Subject to Tenant's full and timely performance of all of
Tenant's obligations under this Lease and subject to the terms of this Lease,
including Section 20 - Encumbrances, Tenant shall have the quiet possession of
the Premises throughout the Term as against any persons or entities lawfully
claiming by, through or under Landlord.
25. SECURITY MEASURES. Landlord may, but shall be under no obligation to,
implement security measures for the Property, such as the registration or search
of all persons entering or leaving the Building, requiring identification for
access to the Building, evacuation of the Building for cause, suspected cause,
or for drill purposes, the issuance of magnetic pass cards or keys for Building
or elevator access and other actions that Landlord deems necessary or
appropriate to prevent any threat of property loss or damage, bodily injury or
business interruption; provided, however, that such measures shall be
implemented in a way as not to inconvenience tenants of the Building
unreasonably. If Landlord uses an access card system, Landlord may require
Tenant to pay Landlord a deposit for each after-hours Building access card
issued to Tenant. Tenant shall be responsible for any loss, theft or breakage of
any such cards, which must be returned by Tenant to Landlord upon expiration or
earlier termination of the Lease. Landlord may retain the deposit for any card
not so returned. Landlord shall at all times have the right to change, alter or
reduce any such security services or measures. Tenant shall cooperate and comply
with, and cause Tenant's Representatives and Visitors to cooperate and comply
with, such security measures. Landlord, its agents and employees shall have no
liability to Tenant or its Representatives or Visitors for the implementation or
exercise of, or the failure to implement or exercise, any such security measures
or for any resulting disturbance of Tenant's use or enjoyment of the Premises.
Tenant shall have the right, at Tenant's sole cost and expense, and subject to
Landlord's prior written approval in accordance with the provisions of Section
6.1 of this Lease, to install security measures or devices at the Premises.
26. FORCE MAJEURE. If either Landlord or Tenant is delayed, interrupted or
prevented from performing any of its obligations under this Lease (other than,
with respect to Tenant the payment of Base Rent, Additional Rent or any other
charge payable by Tenant to Landlord under this Lease), including Landlord's
obligations under the Construction Rider, and such delay, interruption or
prevention is due to fire, act of God, governmental act or failure to act, labor
dispute, unavailability of materials or any cause outside the reasonable control
of Landlord or Tenant, then the time for performance of the affected obligations
of Landlord or Tenant, as the case may be,
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<PAGE> 40
shall be extended for a period equivalent to the period of such delay,
interruption or prevention. The inability to pay money shall in no event
constitute force majeure.
27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply with the
rules and regulations attached to and made a part of this Lease as EXHIBIT C to
the extent those rules and regulations are not in conflict with the terms of
this Lease, as well as any reasonable rules and regulations hereafter adopted by
Landlord for all tenants of the Building, upon notice to Tenant thereof
(collectively, the "BUILDING RULES"). Landlord shall not be responsible to
Tenant or to any other person for any violation of, or failure to observe, the
Building Rules by any other tenant or other person.
28. LANDLORD'S LIABILITY. The term "Landlord," as used in this Lease, shall mean
only the owner or owners of the Building at the time in question. In the event
of any conveyance of title to the Building, then from and after the date of such
conveyance, the transferor Landlord shall be relieved of all liability with
respect to Landlord's obligations to be performed under this Lease after the
date of such conveyance. Notwithstanding any other term or provision of this
Lease, the liability of Landlord for its obligations under this Lease is limited
solely to Landlord's interest in the Building as the same may from time to time
be encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against Landlord's partners
or members or its or their respective partners, shareholders, members,
directors, officers or managers on account of any of Landlord's obligations or
actions under this Lease.
29. CONSENTS AND APPROVALS.
29.1 DETERMINATION IN GOOD FAITH. Wherever the consent, approval, judgment
or determination of Landlord is required or permitted under this Lease, Landlord
may exercise its good faith business judgment in granting or withholding such
consent or approval or in making such judgment or determination, unless the
specific provision contained in this Lease providing for such consent, approval,
judgment or determination specifies that Landlord's consent or approval is not
to be unreasonably withheld, or that such judgment or determination is to be
reasonable, or otherwise specifies the standards under which Landlord may
withhold its consent. If it is determined that Landlord failed to give its
consent where it was required to do so under this Lease, Tenant shall be
entitled to injunctive relief but shall not to be entitled to monetary damages
or to terminate this Lease for such failure.
29.2 NO LIABILITY IMPOSED ON LANDLORD. The review and/or approval by
Landlord of any item or matter to be reviewed or approved by Landlord under the
terms of this Lease or any Exhibits or Addenda hereto shall not impose upon
Landlord any liability for the accuracy or sufficiency of any such item or
matter or the quality or suitability of such item for its intended use. Any such
review or approval is for the sole purpose of protecting Landlord's interest in
the Property, and no third parties, including Tenant or the Representatives and
Visitors of Tenant or any person or entity claiming by, through or under Tenant,
shall have any rights as a consequence thereof.
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<PAGE> 41
30. BROKERS. Landlord shall pay the fee or commission of the broker or brokers
identified in the Basic Lease Information (the "BROKER") in accordance with
Landlord's separate written agreement with the Broker, if any. Tenant warrants
and represents to Landlord that in the negotiating or making of this Lease
neither Tenant nor anyone acting on Tenant's behalf has dealt with any broker or
finder who might be entitled to a fee or commission for this Lease other than
the Broker. Tenant shall indemnify and hold Landlord harmless from any claim or
claims, including costs, expenses and attorney's fees incurred by Landlord
asserted by any other broker or finder for a fee or commission based upon any
dealings with or statements made by Tenant or Tenant's Representatives.
31. [INTENTIONALLY DELETED].
32. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Addenda
attached hereto, and the documents referred to herein, if any, constitute the
entire agreement between Landlord and Tenant with respect to the leasing of
space by Tenant in the Building, and supersede all prior or contemporaneous
agreements, understandings, proposals and other representations by or between
Landlord and Tenant, whether written or oral, all of which are merged herein.
Neither Landlord nor Landlord's agents have made any representations or
warranties with respect to the Premises, the Building, the Project or this Lease
except as expressly set forth herein, and no rights, easements or licenses shall
be acquired by Tenant by implication or otherwise unless expressly set forth
herein. The submission of this Lease for examination does not constitute an
option for the Premises and this Lease shall become effective as a binding
agreement only upon execution and delivery thereof by Landlord to Tenant.
33. MISCELLANEOUS. This Lease may not be amended or modified except by a writing
signed by Landlord and Tenant. Subject to Section 14 - Assignment and Subletting
and Section 28 - Landlord's Liability, this Lease shall be binding on and shall
inure to the benefit of the parties and their respective successors, assigns and
legal representatives. The determination that any provisions hereof may be void,
invalid, illegal or unenforceable shall not impair any other provisions hereof
and all such other provisions of this Lease shall remain in full force and
effect. The unenforceability, invalidity or illegality of any provision of this
Lease under particular circumstances shall not render unenforceable, invalid or
illegal other provisions of this Lease, or the same provisions under other
circumstances. This Lease shall be construed and interpreted in accordance with
the laws (excluding conflict of laws principles) of the State in which the
Building is located. The provisions of this Lease shall be construed in
accordance with the fair meaning of the language used and shall not be strictly
construed against either party, even if such party drafted the provision in
question. When required by the context of this Lease, the singular includes the
plural. Wherever the term "including" is used in this Lease, it shall be
interpreted as meaning "including, but not limited to" the matter or matters
thereafter enumerated. The captions contained in this Lease are for purposes of
convenience only and are not to be used to interpret or construe this Lease. If
more than one person or entity is identified as Tenant hereunder, the
obligations of each and all of them under this Lease shall be joint and several.
Time is of the essence with respect to this Lease, except as to the conditions
relating to the delivery of possession of the Premises to Tenant.
Neither Landlord nor Tenant shall record this Lease.
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<PAGE> 42
34. AUTHORITY. If Tenant is a corporation, partnership, limited liability
company or other form of business entity, each of the persons executing this
Lease on behalf of Tenant warrants and represents that Tenant is a duly
organized and validly existing entity, that Tenant has full right and authority
to enter into this Lease and that the persons signing on behalf of Tenant are
authorized to do so and have the power to bind Tenant to this Lease. Tenant
shall provide Landlord upon request with evidence reasonably satisfactory to
Landlord confirming the foregoing representations.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of
the date first above written.
TENANT: LANDLORD:
SECURITY DYNAMICS PENINSULA OFFICE PARK ASSOCIATES, L.P.,
TECHNOLOGIES, INC., a California limited partnership
a Delaware corporation
By: Peninsula Office Park Investors, LLC
By: /s/ A. W. Coviello, Jr.
_________________________ a California limited liability company
Name: A. W. Coviello, Jr. Sole General Partner
Title: C.O.O.
_________________
By: Opportunity Capital
Partners III, LLC
By: a California limited
_______________________ liability company
Manager
Name:
__________________
Title:
__________________ By: /s/ William Wilson III
_________________________
William Wilson, Manager
By: /s/ Stephen J. Pilch
_________________________
Stephen J. Pilch, Manager
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<PAGE> 43
EXHIBIT A - 1
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF AUGUST 15, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
THE PREMISES
[FLOOR PLAN SHOWING LOCATION
AND CONFIGURATION OF PREMISES
TO BE INSERTED.]
INITIALS:
Landlord _______
Tenant _______
Exhibit A-1, Page 1
<PAGE> 44
EXHIBIT A-2
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF AUGUST 15, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
THE BUILDING
Four story, steel frame building of approximately 124,800 square feet to be
built on the site of the previously existing restaurant structure. The
mechanical equipment will be located in the basement.
INITIALS:
Landlord _______
Tenant _______
Exhibit A-2, Page 1
<PAGE> 45
EXHIBIT B
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF AUGUST 15, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
CONSTRUCTION RIDER
1. COMPLETION OF BUILDING. Landlord shall proceed with reasonable
diligence to construct and complete the Building and other facilities in the
Property. Landlord shall be responsible for the completion, at its expense, of
the work described as "Base Building Work" in Schedule 1 attached to this
Construction Rider ("Base Building Work").
The Base Building Work shall be deemed to be "Substantially
Complete" when (a) the Building shell, the Building lobby, the entrances,
stairways and access ways for access to the Premises, and the Base Building Work
on the floor or floors on which the Premises are located have been completed
except for finishing details, minor omissions, decorations and mechanical
adjustments of the type normally found on an architectural "punch list"; (b) all
utilities systems serving the Premises, Building life safety support systems,
including fire sprinklers and safety auditory systems, all heating, ventilating
and air conditioning systems serving the Premises, except to the extent such
items may be included in Tenant's "Tenant Improvements" (as defined below) and
Building elevators have been installed and are operating; and (c) the Building
is in such a state of completion that, upon completion of the Tenant
Improvements, the requirements necessary to obtain a certificate of occupancy
for the Premises from applicable governmental authorities have been satisfied
(even though the actual certificate of occupancy may not be issued until some
later date). Landlord's sole obligation with respect to Base Building Work shall
be to perform the work specifically described above and/or described in Schedule
1 attached to this Construction Rider; and all other work required or desired by
Tenant shall be part of Tenant Improvements.
2. TENANT IMPROVEMENTS. Tenant shall construct and install in the
Premises the improvements and fixtures provided for in this Construction Rider
("Tenant Improvements"). Tenant shall enter into a construction contract with
Commercial Interior Contractors ("CIC"), an affiliate of Landlord, to construct
the Tenant Improvements. The construction contract between Tenant and CIC shall
provide that CIC shall commence construction of the Tenant Improvements upon
adequate completion of the Building shell. Landlord expects that CIC can
commence construction of the Tenant Improvements approximately four (4) months
prior to the estimated date that the Base Building Work will be Substantially
Complete. Improvements consisting of the type and amount of work and materials
described on Schedule 2 attached to this Construction
Exhibit B, Page 1
<PAGE> 46
Rider are referred to herein as "Building Standard Tenant Improvements". All
Tenant Improvements in addition to or in substitution for or modification of the
Building Standard Tenant Improvements are referred to herein as "Above-Standard
Tenant Improvements". Tenant shall be responsible to pay for the entire cost of
Tenant Improvements in accordance with the provisions of Paragraph 2.3 of this
Construction Rider.
2.1. PLANS. Tenant will contract with a professional space planner
("Space Planner") selected by Tenant, subject to Landlord's reasonable approval,
to provide interior space planning, programming, construction documentation and
construction administration services. Tenant will consider using the space
planning and architectural services of Gensler and Associates, who have been
retained by Landlord as the architect for the Building ("Building Architect").
Tenant shall cause the Space Planner to prepare a conceptual space plan ("Space
Plan") for the Premises utilizing Building Standard Tenant Improvements. Tenant
shall devote such consultation time with Landlord and the Space Planner, and
shall furnish the Space Planner such information, as may be necessary to
finalize the Space Plan, including but not limited to:
(a) Any requirements of Tenant for Above-Standard Tenant
Improvements.
(b) Special loading and floor requirements, such as the
location of cabinets, safes, file systems or special
equipment.
(c) Openings in the walls or floors.
(d) Special electrical, HVAC, plumbing work or UPS systems.
(e) Location and dimensions of telephone equipment rooms,
and telephone, data and electrical outlets.
(f) Location and type of partitions, including doors and
hardware.
(g) Special cabinet work or other millwork or
millwork-related items.
(h) Variations from standard ceiling heights.
(i) Color selection for painted areas.
(j) Selection of floor coverings and any special wall or
interior window coverings; provided, however, that
Building Standard window coverings shall be used on all
exterior windows.
Exhibit B, Page 2
<PAGE> 47
Tenant shall deliver Tenant's Space Plan to Landlord within forty
five (45) days after the later of (x) the date on which Landlord delivers the
Base Building Plans to Tenant or (y) the date on which Landlord delivers a fully
executed copy of this Lease to Tenant. Within five (5) Business Days after
receipt of Tenant's Space Plan, Landlord shall either (i) approve Tenant's Space
Plan, which approval shall not be unreasonably withheld, or (ii) notify Tenant
in writing of specific requests for changes and corrections as may be necessary
to ensure compatibility with the Base Building and to receive approval from
Landlord. If Landlord has requested changes or corrections, Tenant shall revise
the proposed Space Plan accordingly and deliver Tenant's revised Space Plan to
Landlord within five (5) Business Days after receipt of Landlord's request.
Within three (3) Business Days after receipt of Tenant's revised Space Plan,
Landlord shall either approve the revised Space Plan or specify needed changes
or corrections as described above (and the process shall continue as needed to
obtain Landlord's approval).
Within forty-five (45) days after Landlord's approval of the final
Space Plan, Tenant shall cause Space Planner to prepare and deliver to Landlord
detailed plans and specifications ("Working Drawings and Specifications") in
form and substance sufficient to satisfy all applicable requirements for
issuance of all requisite governmental approvals and permits and sufficient to
permit the construction of the Tenant Improvements by CIC. Within ten (10)
Business Days after receipt of the Working Drawings and Specifications, Landlord
shall either (i) approve the Working Drawings and Specifications, or (ii) notify
Tenant in writing of the changes or corrections needed to ensure compatibility
with the Base Building and to receive approval from Landlord. If Landlord has
requested changes or corrections, Tenant shall revise the Working Drawings and
Specifications accordingly and deliver Tenant's revised to Landlord within five
(5) Business Days after receipt of Landlord's request. Within three (3) Business
Days after receipt of Tenant's revised Working Drawings and Specifications,
Landlord shall either approve the revised Working Drawings and Specifications or
specify needed changes or corrections as described above (and the process shall
continue as needed to obtain Landlord's approval). The revised Working Drawings
and Specifications, as approved by Tenant and Landlord, are hereinafter referred
to as the "Final Working Drawings and Specifications". Notwithstanding any of
the foregoing time periods, Tenant shall take such steps as may be necessary to
assure that the Final Working Drawings and Specifications are submitted to the
City of San Mateo by December 1, 1997 for issuance of permits.
Landlord and Tenant expect and assume that the Tenant Improvements
will be fairly common and typical and of such type and scope that they can
reasonably be expected to be completed within a construction period of twelve
(12) weeks.
Once the Final Working Drawings and Specifications have been
approved by Landlord, Tenant shall make no changes or modifications thereto
without the prior written consent of Landlord. Landlord may withhold consent to
any change or modification to the Final Working Drawings and Specifications if
(x) in Landlord's sole discretion such change or modification would result in
any of the circumstances described in items (ii) or (iii) below, or (y) in
Landlord's reasonable discretion such change or modification would result in any
of the circumstances described in item (i) below. Any change Tenant requests be
made to the Final
Exhibit B, Page 3
<PAGE> 48
Working Drawings and Specifications and approved by Landlord is hereby defined
as "Change Order," and collectively called "Change Orders." The items referenced
above are as follows:
(i) directly or indirectly delay having the Premises (or any portion
thereof) Substantially Complete (provided, however, before consenting to
any such changes, Landlord may require Tenant to acknowledge in writing
the number of days of Tenant Delay that Landlord estimates will result
from having such changes made);
(ii) be of lower quality than the quality of the Building Standard
Improvements; and/or
(iii) require any changes to the Building's shell or core.
All Change Orders shall be signed by Landlord, Tenant, and CIC.
The Building Architect will measure the Premises based on the Final
Working Drawings and Specifications, and Landlord and Tenant will confirm the
exact area of the Premises, including usable area and Rentable Area, in writing
prior to commencement of the Term.
Additional interior decorating services and advice on the furnishing
and decoration of the Premises, such as the selection of fixtures, furnishings,
design of mill work or other Above-Standard Tenant Improvements required by
Tenant, shall be provided by Tenant at its expense, but shall be subject to the
reasonable approval of Landlord.
2.2. CONSTRUCTION.
(a) Upon approval by Landlord of the Final Working Drawings
and Specifications, Tenant shall enter into a construction contract with CIC in
the form attached as Schedule 3 to this Construction Rider, providing for CIC to
construct the Tenant Improvements under a guaranteed maximum price contract at
competitive prices, with a fee not to exceed four percent (4%) of the cost of
the work and a charge for general conditions not to exceed six percent (6%) of
the cost of the work. Prior to CIC starting construction of Tenant Improvements
Tenant shall supply to Landlord, at Tenant's cost, a builder's risk insurance
policy for the full replacement cost of the Tenant Improvements, in which policy
Landlord is named as beneficiary of such policy. Subcontracts will be
competitively bid by CIC. Tenant shall have the right to review and approve
subcontractors' written bids and contractor fees prior to the execution of a
construction agreement with CIC. Tenant may add names to the subcontractor bid
list prior to such subcontracts being put to bid, subject to Landlord's
reasonable right to review and approve subcontractors based on their
qualifications, including quality of work, creditworthiness, and experience.
Tenant shall proceed diligently to cause the Tenant Improvements to be
Substantially Completed on or prior to the Scheduled Commencement Date.
(b) The Tenant Improvements shall be deemed to be
"Substantially Completed" when they have been certified by the Building
Architect to be complete in
Exhibit B, Page 4
<PAGE> 49
accordance with the Final Working Drawings and Specifications except for
finishing details, minor omissions, decorations and mechanical adjustments of
the type normally found on an architectural "punch list," the lack of completion
of such punch list items, and the work of completion of such punch list items,
will not materially interfere with Tenant's ability to conduct Tenant's normal
business operations in the Premises, and the requirements necessary to obtain a
certificate of occupancy for the Premises from applicable governmental
authorities have been satisfied (even though the actual certificate of occupancy
may not be issued until some later date). (The definition of Substantially
Completed shall also define the terms "Substantial Completion" and
"Substantially Complete.")
(c) Tenant may have access to the Premises fifteen (15) days
prior to the estimated date for Substantial Completion (or at such other times
as may be agreed by Landlord and Tenant) for the purposes of installation of
Tenant's computers, cabling, telephone and other equipment; provided, however,
that (i) such access shall not interfere with Landlord's contractor's cost and
timing related to the Substantial Completion of the Building or the Tenant
Improvements, and (ii) prior to such entry of the Premises, Tenant shall provide
evidence reasonably satisfactory to Landlord that insurance, as described in
Section 11.1 - "Tenant's Insurance" of the Lease, including insurance for any
contractor, mover, installer, technician or repair person of Tenant's, naming
Landlord, its partners, the Property Manager, CIC, and such other parties in
interest as Landlord may from time to time reasonably designate to Tenant in
writing, as additional insureds, shall be in effect as of the time of such
entry.
(d) Following Substantial Completion of the Tenant
Improvements and prior to the date Tenant takes possession of the Premises,
Landlord, CIC and Tenant shall inspect the Premises and jointly prepare a "punch
list" of agreed items of construction remaining to be completed. CIC shall
complete the items set forth in the punch list within thirty (30) days
thereafter. Tenant shall cooperate with and accommodate CIC and its workers in
completing the items on the punch list.
(e) Any alterations or improvements to the Premises desired by
Tenant other than the Tenant Improvements shall be made after the commencement
of the term of the Lease and shall be subject to the provisions of Section 6 -
"Alterations" of the Lease.
(f) Notwithstanding any provision in the Lease or in this
Construction Rider to the contrary, if the Commencement Date has not occurred or
been deemed to have occurred by August 1, 1998, and if the delay in the
Commencement Date is caused by Tenant Delays, then (i) Landlord shall have the
right to terminate this Lease upon ten (10) days written notice to Tenant, and
Tenant shall reimburse Landlord, within thirty (30) days after receipt of
notification from Landlord of the amounts due, for any amounts expended by
Landlord for the design, construction and installation of the Tenant
Improvements, or (ii) Landlord may, in lieu of terminating the Lease under the
foregoing provisions, treat such failure of performance as an Event of Default
under the Lease.
Exhibit B, Page 5
<PAGE> 50
(g) Notwithstanding any provision in the Lease or in this
Construction Rider to the contrary, if the Base Building Work has not been
Substantially Completed by November 1, 1998, except to the extent the delay in
Substantial Completion of the Base Building work is caused by (i) delays of the
type described in Section 26 - Force Majeure of the Lease, (ii) delays in
obtaining building permits, (iii) delays caused by the City of San Mateo, and/or
(iv) Tenant Delays, then Tenant shall receive, day for day, one (1) day of free
Base Rent for each day beyond November 1, 1998 until the Base Building Work is
Substantially Completed.
(h) Notwithstanding any provision in the Lease or in this
Construction Rider to the contrary, if the Commencement Date has not occurred or
been deemed to have occurred by March 1, 1999, either party, by written notice
to the other party given within ten (10) Business Days after March 1, 1999, may
terminate this Lease without any liability to the other party; provided,
however, that if the delay in the Commencement Date is caused by delays of the
type described in Section 26 - Force Majeure of the Lease, and if Tenant elects
to terminate as provided above, then Tenant shall reimburse Landlord, within
thirty (30) days after receipt of notification from Landlord of the amounts due,
for any amounts expended or incurred by Landlord for the design, construction
and installation of the Tenant Improvements and for brokerage commissions and
legal fees in connection with the preparation and negotiation of the Lease. If
Tenant fails to perform any of Tenant's obligations under this Construction
Rider within the time periods specified herein, Landlord may, in lieu of
terminating the Lease under the foregoing provisions, treat such failure of
performance as an Event of Default under the Lease.
(i) LANDLORD AND TENANT MEETINGS. Throughout the period of
design, development and construction of the Tenant Improvements Landlord shall
use reasonable good faith efforts to meet weekly (whether in person or by
telephone), at mutually acceptable times, with Tenant and its authorized
representatives to discuss the scheduling and progress of the Tenant
Improvements.
2.3. COST OF TENANT IMPROVEMENTS. Prior to entering into a
construction contract with CIC Tenant shall provide Landlord with a copy of the
Final Cost Estimate based upon the Final Working Drawings and Specifications
approved by Landlord. As a material condition of Landlord entering into this
Lease, Tenant shall contribute at least $25.00 per rentable square foot in the
Premises ("Tenant's Construction Contribution") toward the cost of the
construction and installation of the Tenant Improvements (whether Building
Standard or Above-Standard), and shall also pay all other or additional costs of
the design, construction and installation of the Tenant Improvements. Out of
Tenant's Construction Contribution no more than $2.50 per rentable square foot
in the Premises (the "Planning Contribution") may be used for professional
services, such as space planning or preparation of working drawings and
specifications, except to the extent Tenant's Construction Contribution exceeds
$25.00 per rentable square foot in the Premises. Such Planning Contribution
shall be paid by Tenant directly to the professionals performing such work. At
the same time as Tenant pays the Planning Contribution to the professionals
providing such services Tenant shall send Landlord a copy of the invoices from
such professionals and a copy of Tenant's payment.
Exhibit B, Page 6
<PAGE> 51
2.4. CHANGES. If Tenant requests any change, addition or alteration
in or to any Final Working Drawings and Specifications ("Changes"), Tenant shall
cause the Space Planner to prepare and submit to Landlord additional Plans
implementing such Change. Within five (5) Business Days after receipt of the
proposed Change, Landlord shall either (i) approve the Change or (ii) notify
Tenant in writing of specific requests for modifications as may be necessary to
ensure compatibility with the Base Building and to receive approval from
Landlord. No Changes shall be made without Landlord's approval.
2.5. DELAYS. Tenant shall be responsible for, and shall pay to
Landlord, any and all costs and expenses incurred by Landlord in connection with
any delay in the commencement or completion of any Tenant Improvements and any
increase in the cost of Tenant Improvements caused by (i) Tenant's failure to
submit information to the Space Planner or to submit to Landlord any Space Plan,
Working Drawings and Specifications or cost estimates within the time periods
required herein, specifically including Tenant's failure to cause the Final
Working Drawings and Specifications to be submitted to the City of San Mateo by
December 1, 1997 for issuance of permits, (ii) any delays in obtaining any items
or materials constituting part of the Tenant Improvements requested by Tenant,
(iii) any Changes, or (iv) any other delay requested or caused by Tenant
(collectively, "TENANT DELAYS").
3. DELIVERY OF PREMISES. Upon Substantial Completion of the Base Building
Work and the Tenant Improvements, Landlord shall deliver possession of the
Premises to Tenant. If (a) Landlord has not Substantially Completed the Base
Building Work and (b) CIC has not Substantially completed the Tenant
Improvements and (c) Landlord has not tendered possession of the Premises to
Tenant on or before the Scheduled Commencement Date specified in Section 2
- -"Term; Possession" of the Lease, or (d) if Landlord is unable for any other
reason to deliver possession of the Premises to Tenant on or before such date,
neither Landlord nor its representatives shall be liable to Tenant for any
damage resulting from the delay in completing such construction obligations
and/or delivering possession to Tenant and the Lease shall remain in full force
and effect unless and until it is terminated under the express provisions of
Paragraph 2.2 of this Exhibit B. If any delays in Substantially Completing the
Tenant Improvements are attributable to Tenant Delays, then the Premises shall
be deemed to have been Substantially Completed and delivered to Tenant on the
date on which Landlord could have Substantially Completed the Premises and
tendered the Premises to Tenant but for such Tenant Delays.
4. ACCESS TO PREMISES. Tenant agrees that Landlord shall not be liable in
any way for any injury, loss or damage which may occur to any of Tenant's
property placed upon or installed in the Premises prior to the Commencement
Date, the same being at Tenant's sole risk, and Tenant shall be liable for all
injury, loss or damage to persons or property arising as a result of such entry
of the Premises by Tenant or its Representatives, except that Landlord shall be
liable for injury, loss or damage to such Tenant's property to the extent caused
by Landlord's gross negligence or willful misconduct.
5. OWNERSHIP OF TENANT IMPROVEMENTS. All Tenant Improvements, whether
installed by Landlord or Tenant, shall become a part of the Premises, shall be
the property of Landlord
Exhibit B, Page 7
<PAGE> 52
and, subject to the provisions of the Lease, shall be surrendered by Tenant with
the Premises, without any compensation to Tenant, at the expiration or
termination of the Lease in accordance with the provisions of the Lease.
Notwithstanding any other provisions of this Lease to the contrary, Landlord
agrees that Tenant shall have the right, on or before the expiration or
termination of the Term, to remove from the Premises all, or a portion of, the
following: (a) carpet tiles, (b) movable walls, (c) supplemental air
conditioning units installed by Tenant and which are not part of the Building
Systems, (d) raised flooring, (e) Tenant's trade fixtures, (f) reception desk,
(g) audio visual equipment (including screens, monitors and projectors), (h)
security equipment, (i) demountable millwork which can be removed without damage
to the walls, (j) and furniture. Tenant shall be responsible for repairing any
damage to the walls (including the sheetrock) and to the Base Building Work
arising out of such removal.
6. MISCELLANEOUS.
6.1 NO FEES TO LANDLORD. Except for any fees payable by Tenant to
CIC, Landlord shall receive no other fee for supervision, profit, overhead or
general conditions in connection with the design and construction of Tenant
Improvements, nor shall Tenant be required to pay Landlord, Landlord's architect
or Landlord's engineer for review of Tenant's plans.
6.2 NO MISCELLANEOUS CHARGES. Neither Tenant nor the Contractor (or
any subcontractor) shall be charged for parking (to the extent parking is
available) or for the use of electricity, water, HVAC, security elevators,
and/or hoists during construction of Tenant Improvements or during Tenant's
move-in.
6.3 DELIVERY OF DOCUMENTS TO LANDLORD. Tenant shall: (1) promptly
deliver to Landlord copies of all "Plans and Specifications," "Change Orders, "
"Contract Documents," "Applications" for progress payments and for the final
payment, and the recorded "Notice of Completion" (all as defined under the
Construction Contract); (2) deliver copies of all necessary building permits and
governmental approvals prior to commencement of any work; and (3) upon request
by Landlord from time to time deliver to Landlord evidence of insurance, copies
of shop drawings, warranties, cut sheets, balancing reports, final inspection
sign off, as built drawings and other documents to be delivered to the "Owner"
by CIC pursuant to the provisions of the Construction Contract.
INITIALS:
Landlord _______
Tenant _______
Exhibit B, Page 8
<PAGE> 53
SCHEDULE 1 TO EXHIBIT B
BASE BUILDING WORK
At no cost to Tenant, Landlord shall, supply, furnish, install and finish
the following items in compliance with all applicable laws, regulations and
building codes as needed to obtain all required building permit inspection sign
offs, all at Landlord's sole cost and expense, which shall comprise, and are
hereby defined as, the "Base Building Work":
1 SERVICE CORE.
(a) Stairways in compliance with Building code (including
fire stairs).
(b) Two telephone and electrical room on each floor of the
Premises, with a vertical chase between floors.
(c) Finished men's and women's restrooms on each floor of
the Premises; all applicable laws and codes and finished
with:
(i) Ceramic tile or another finish of comparable
quality on floors in the toilet area and ceramic
tile on wet wall at least to the height of the
toilet partitions with washable vinyl wallcovering
or washable paint on all other walls; carpet in
vestibule area;
(ii) Metal toilet partitions and urinal screens with a
baked enamel finish;
(iii) Stainless steel accessories shall be provided per
code and include double roll toilet paper holders,
recessed paper towel dispensers/receptacles,
liquid soap dispensers, sanitary napkin dispensers
and disposals;
(iv) Counters of a solid surface material.
(v) Other restroom walls and ceilings finished;
(vi) Vanities, accessories, fixtures, lighting and all
mechanical and plumbing services completed.
(vii) General exhaust system for restrooms installed.
Schedule 1 to Exhibit B, Page 1
<PAGE> 54
(d) Other lighting sufficient for first class washrooms.
(e) Janitor's closet with sink.
(i) Access at the core or other convenient and
accessible location to domestic water, drainage
and vent systems with valve taps for water and
capped stubs for vent and waste.
(ii) One drinking fountain per floor, "chilled" water
installed in compliance with code.
2 CORE DOORS.
(a) Paint grade or stain grade core doors finished and
complete with hollow metal frame trim and hardware
locking devices, electric door releases where applicable
and magnetic hold open devices where applicable, for
stairwells, electrical, mechanical, janitorial and
telephone rooms and washrooms all installed, primed,
sanded, dusted, and ready for paint or other Tenant
finish.
3 WALLS AND WINDOWS.
(a) Precast wall system installed and sealed.
(b) Exterior windows installed and sealed.
(c) Insulation where applicable (from slab-to-slab).
(d) Core walls (except all levels below-grade), service core
walls, and elevator lobby walls all installed, clad with
properly rated sheetrock, taped, sanded, patched,
filled, dusted and ready to receive paint or other
Tenant finish.
4 FLOORS
(a) Smooth and level concrete floors with troweled finish
which shall be level at least to the tolerance
consistent with suburban Class A buildings.
(b) Design to support a minimum live load of 80 lbs per
square foot and an additional partition load of 20 lbs
per square foot for a total of 100 lbs per square foot.
Schedule 1 to Exhibit B, Page 2
<PAGE> 55
(c) Smooth, level and ready to receive carpeting, tile,
marble or wood without additional Tenant preparation.
5 HVAC.
(a) Main air distribution system with two risers servicing
each floor of the building. All tenant ducting,
including main loops, at tenant expense.
(b) Two (2) supplemental cooling loops allowing Tenant to
install as necessary supplemental roof-mounted chilled
water cooling units (such tie-in is part of the Tenant
Improvements, not the Base Building Work).
6 ACOUSTICS. Landlord agrees that the Building will be
constructed within Class A suburban office standards.
7 LIGHTING.
(a) Installed and operating in main lobby, all stairwells,
elevators, upper lobby by Tenant, mechanical rooms,
utility rooms, other lighting as required by code.
Lighting in the lobby of Tenant's Premises installed by
Tenant.
(b) Exterior lighting installed as required by design and
code.
8 ELECTRICAL/POWER.
(a) Building equipped substantially per design/build bid
specifications prepared by The Engineering Enterprise.
(b) Three electrical panels (one lighting at 277/480 volt, 3
phase, 4 wire, two power at 120/208 volt, 3 phase, 4
wire) per floor.
(c) A vertical conduit, wire and panel board riser supplying
electric power for service sufficient to operate the
Base Building mechanical system and to supply an average
of approximately 4.0 watts per rentable square foot for
general electrical use by Tenant, including lighting.
Schedule 1 to Exhibit B, Page 3
<PAGE> 56
9 LIFE SAFETY.
(a) Landlord shall install life safety improvements
including life safety panel(s) and controls (the cost of
which will be paid by Landlord and not deducted from the
Tenant Improvement Allowance) to the extent required by
shell and core construction for a temporary certificate
of occupancy for the Building, or, if greater, to the
extent already constructed in the Premises and Building
as of the date hereof.
(b) A sprinkler system (sized for Tenant's occupancy)
installed in compliance with code for floors, including
main loop connected to core and drops in place with
heads installed per code for an unimproved (nonoccupied)
floor.
(c) Fire extinguishers, one per floor, as required by code
for shell and core construction.
(d) Fire horns and exit signs as required by code for shell
and core construction.
(e) Electric door releases and magnetic hold-open devices,
as applicable, installed for all fire doors and electric
door locks or stairwell doors per code requirements.
(f) A/V devices and exit signs as required by code for shell
and core construction and in compliance with ADA.
10 COMMUNICATION SYSTEM.
(a) Access to main telephone service on the first floor or
lower level of the building by approved personnel only.
(b) Sleeves in core telephone rooms for Tenant telephone
access. Tenant to provide conduit and backboard from
telephone rooms to Tenant's suite.
(c) Telephone service cable available to Tenant on each
floor of the Premises.
11 ELEVATORS AND FREIGHT FACILITIES.
(a) At least two (2) passenger elevators servicing Tenant's
floors installed and operational as designed to operate
at 150 FPM.
Schedule 1 to Exhibit B, Page 4
<PAGE> 57
(b) Cabs finished consistent with a first-class suburban
office building.
(c) One passenger elevator to be installed and operational
as a freight elevator (i.e., 3,500 lb. capacity).
12 PARKING. Garage construction complete with all equipment
operational and spaces lined.
13 LANDSCAPING AND IRRIGATION.
(a) Installed per the Base Building Plans.
(b) Automatic sprinklers installed per the Base Building
Plans.
14 LOBBY.
(a) Lobby finish per plans consistent with a first class
suburban office building, including a stone floor and
fabric wall covering.
15 DIRECTORY. Installed with sufficient lines for Tenant's needs
as specified in the Lease.
16 GENERAL.
(a) To the extent there are improvements to the Base
Building in excess of the foregoing, such improvements
will remain as part of the Base Building Work at no cost
to Tenant, and shall be in accordance with the Base
Building Plans.
INITIALS:
Landlord _______
Tenant _______
Schedule 1 to Exhibit B, Page 5
<PAGE> 58
SCHEDULE 2 TO EXHIBIT B
Building Standard
TENANT IMPROVEMENTS
The following Building Standard items shall be of comparable quality to
other buildings in Peninsula Office Park.
1. Doors: Full Height doors with aluminum frames and mortise hardware
2. Floor Covering - Building Standard carpeting of a minimum 36 ounce and
2-1/2" vinyl baseboard, to be provided from a selection of Building
Standard colors and patterns and installed. Vinyl composition tile may be
installed in any area not carpeted.
3. Base: 2 and 1/2 inch rubber base
4. Lighting: 2x4 parabolic with T8 energy efficient lamps with electronic
ballast
5. Ceiling: Tile to be determined.
6. Building Standard thin slat horizontal blinds for all perimeter windows.
7. Painting and Wall Covering - A color chart of Building Standard colors
will be available for Tenant's selection for initial painting throughout
the Premises. Up to 50% of the interior wall surfaces may be covered in a
vinyl wall covering selected by Tenant from the Building Standard
selections.
INITIALS:
Landlord _______
Tenant _______
Schedule 2 to Exhibit B, Page 1
<PAGE> 59
SCHEDULE 3 TO EXHIBIT B
Form of Construction Contract
To Be Entered Into By Tenant and CIC
CONSTRUCTION AGREEMENT
(Guaranteed Maximum Price)
Between
COMMERCIAL INTERIOR CONTRACTORS, as Contractor
and
Security Dynamics Technologies, Inc.
for Leasehold Improvements
at 2955 Campus Dr.,
San Mateo, California
Schedule 3 to Exhibit B
<PAGE> 60
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 - TERM; SCOPE OF WORK; DOCUMENTS OF THE CONTRACT...................1
SECTION 2 - DUTIES OF CONTRACTOR.............................................2
SECTION 3 - DUTIES OF OWNER..................................................4
SECTION 4 - THE CONTRACT SUM.................................................5
SECTION 5 - COMMENCEMENT AND COMPLETION OF THE WORK..........................5
SECTION 6 - COST OF THE WORK.................................................6
SECTION 7 - PAYMENTS BY OWNER................................................8
SECTION 8 - OWNER'S OCCUPANCY BEFORE COMPLETION OF WORK.....................11
SECTION 9 - TITLE TO THE WORK...............................................11
SECTION 10 - CHANGES IN THE WORK............................................12
SECTION 11 - RECORDS, INSPECTION AND AUDIT..................................12
SECTION 12 - TERMINATION BY OWNER...........................................12
SECTION 13 - TERMINATION BY CONTRACTOR......................................13
SECTION 14 - DESTRUCTION OF WORK BY FIRE, ELEMENTS..........................14
SECTION 15 - LIENS..........................................................14
SECTION 16 - INDEMNIFICATION................................................14
SECTION 17 - WARRANTY.......................................................15
SECTION 18 - CONTRACTOR'S LICENSE...........................................16
SECTION 19 - LENDER CURE RIGHTS.............................................16
SECTION 20 - OWNER'S RIGHT TO PERFORM.......................................16
SECTION 21 - SUBCONTRACTS AND SEPARATE CONTRACTS............................17
SECTION 22 - INSURANCE REQUIREMENTS.........................................17
SECTION 23 - LIMITATION ON OWNER'S LIABILITY................................19
SECTION 24 - MISCELLANEOUS PROVISIONS.......................................19
EXHIBIT A - Plans and Specifications (Section 1.1)
EXHIBIT B - Project Order (Recitals)
EXHIBIT C - Application for Payment Form (Section 7.1)
EXHIBIT D - Mechanics' Lien Waiver Forms (Section 7.1)
EXHIBIT E - Construction Rules (Sections 2.4 and 21.1)
</TABLE>
i
Schedule 3 to Exhibit B
<PAGE> 61
TABLE OF DEFINITIONS
--------------------
<TABLE>
<CAPTION>
DEFINITION SECTION
---------- -------
<S> <C>
Aggregate Contractor's Fee Section 4
Aggregate Cost of the Work Section 4
Application Section 7.1
Architect Basic Contract Information
Change Order Section 10.1
Claims Section 16
Completion Date Basic Contract Information
Construction Commencement Date Section 5
Contract Date Basic Contract Information
Contract Documents Section 1.2
Contractor Basic Contract Information
Contractor's Fee Basic Contract Information
Cost of the Work Section 7.2
Expected Completion Date Section 7.2
Final Payment Section 7.2
First Project Basic Contract Information
Hazardous Materials Section 2.13
Indemnitees Section 16
Interest Rate Section 7.3
Notice of Completion Section 7.5
Owner Basic Contract Information
Owner Parties Section 22.1
Owner's Lender Basic Contract Information
Plans and Specifications Section 1.1
Project Recitals
Project Order Recitals
Property Recitals
Punch List Work Section 7.2
Retention Basic Contract Information
State Basic Contract Information
Substantially Complete Section 7.2
Total Completion Section 7.2
Warranty Claims Section 17.2
Work Section 1.1
</TABLE>
ii
Schedule 3 to Exhibit B
<PAGE> 62
BASIC CONTRACT INFORMATION
Contract Date: For identification purposes only, the date of
this Construction Agreement is __________, 1997
Owner and
Owner's Address:
(Include telephone
and facsimile numbers.)
With copy to:
Contractor and Commercial Interior Contractors
Contractor's Address: 2929 Campus Drive, Suite 450
(Include telephone San Mateo, CA 94403
and facsimile numbers.) Telephone (415) 341-5300
Facsimile: (415) 345-7619
With copy to:
William Wilson & Associates
2929 Campus Drive, Suite 450
San Mateo, CA 94403
Attn: General Counsel
Telephone: (415) 341-5003
Facsimile: (415) 345-7619
Contractor's State License
Number: 477459
Owner's Lender and
Owner's Lender's Address:
(Include telephone None
and facsimile numbers.)
[If none, so state.]
Architect a Architects
Address
TBD
Property Address for
Project: 2955 Campus Dr.
San Mateo, CA. 94403
Project Description: Tenant Improvement
Contractor's Fee for
First Project: 4 percent of the Cost of the Work based on the
total amount of the Cost of the Work and General
Conditions not to exceed 6 percent of the total
cost of the contract and subject to the provisions
of Section 4 of the Construction Agreement.
iii
Schedule 3 to Exhibit B
<PAGE> 63
Guaranteed Maximum Price :
Completion Date for First Project: TBD
Retention: Ten Percent (10%) of the Contract Sum.
State: California is the State where all
Projects are located.
The Basic Contract Information set forth above is part of the Construction
Agreement and capitalized terms shall be defined terms therein. In the event of
any conflict between the Basic Contract Information and the Construction
Agreement, the latter shall control.
iv
Schedule 3 to Exhibit B
<PAGE> 64
CONSTRUCTION AGREEMENT
THIS AGREEMENT is entered into effective as of the Contract Date by and
between Contractor and Owner.
RECITALS
Owner is engaging Contractor to construct all of Owner's tenant
improvements for premises owned or leased by Owner in various locations in the
City and County of San Francisco and in the Counties of Marin, San Mateo, Contra
Costa, Sacramento, Santa Clara, Alameda, Monterey, Solano, Napa and Sonoma in
California ("Northern California"). The tenant improvements for each separate
location shall be termed a "PROJECT" herein. The building in which each Project
is located shall be termed the "PROPERTY." This Agreement shall apply to each
Project upon acceptance of the Plans and Specifications (defined in Section 1.1)
for the tenant improvements for each premises, which shall be evidenced by
execution of a Project Order in the form attached hereto as EXHIBIT B for each
succeeding Project by Contractor and Owner. Owner has retained Architect to
prepare the Plans and Specifications for the First Project.
NOW, THEREFORE, Owner and Contractor, for the consideration hereinafter
named, agree as follows:
SECTION 1 - TERM; SCOPE OF WORK; DOCUMENTS OF THE CONTRACT
1.1 Owner agrees to use Contractor to construct all of Owner's tenant
improvements for all premises owned or leased by Owner at locations throughout
Northern California; provided, however, that if Owner is required by its
landlord, for leased premises, or its lender, for owned premises, to obtain bids
for the tenant improvements work, Owner shall include Contractor as one of the
contractors to receive the request for bid proposal and shall select Contractor
if it is the lowest, responsible bidder. This Agreement shall be for an initial
term of one (1) year, ending on December 31, 1998, and thereafter shall be
renewed only upon written agreement of the parties to extend the Agreement;
provided, however, that this Agreement (i) shall remain in effect with respect
to all Projects for which Contractor was engaged, as evidenced by a Project
Order executed by the parties, either prior to or after the termination date of
this Agreement until such Projects are Totally Completed (defined in Section
7.2), and (ii) may be terminated for cause at any time by Owner or Contractor
pursuant to the provisions of Sections 12 and 13, respectively, below.
Notwithstanding all of the provisions in this Agreement regarding the Contractor
performing many projects for Owner throughout Northern California, the parties
agree that such language shall be ignored and that this Agreement shall apply
only to a single Project as the First Project herein.
1.2 In consideration of the payments provided for herein to be made by
Owner, Contractor agrees to furnish all labor, equipment, materials, services,
utilities and facilities and to provide and perform everything else required to
construct and complete the Project (hereinafter the "WORK") in accordance with
all architectural, interior design, structural, mechanical, civil, and
electrical drawings, and any and all specifications, addenda and scope of work
documents prepared by Architect or Contractor which are identified in EXHIBIT A
attached hereto or subsequently incorporated herein by a written Project Order
executed by both Contractor and Owner (collectively, the "PLANS AND
SPECIFICATIONS").
1.3 This Agreement, the Plans and Specifications, whether attached hereto
or adopted by future Project Orders, and future written amendments, addenda and
Change Orders (defined in Section 10.1) executed by Owner and Contractor,
collectively constitute the "CONTRACT DOCUMENTS". If anything in the Plans and
Specifications is inconsistent with this Agreement, this Agreement will govern.
1
Schedule 3 to Exhibit B
<PAGE> 65
1.4 Defined terms in this Agreement shall apply separately with respect to
each separate Project unless the context requires otherwise, so that use of
terms like Plans and Specifications, Change Orders, Contract Documents, Work,
etc., shall apply with respect to each separate Project.
SECTION 2 - DUTIES OF CONTRACTOR
2.1 Contractor accepts the relationship of trust and confidence
established by this Agreement and covenants with Owner to cooperate with
Architect and Owner's representatives and utilize Contractor's skill, efforts
and judgment in furthering the interests of Owner; to furnish efficient project
management and supervision; to use commercially reasonable efforts to furnish at
all times an adequate supply of workers and materials; and to perform the Work
in the most expeditious and economical manner consistent with the interests and
requirements of Owner. The relationship of Contractor to Owner shall be that of
an independent contractor.
2.2 Contractor further agrees to advise and consult with Owner and
Architect with respect to the Work and development of Plans and Specifications,
budgets, cost estimates and schedules and to furnish Owner and Architect with
information concerning costs, availability of materials and equipment, methods
of construction, and other pertinent information which Contractor may possess
and which may be of value to Owner or Architect in determining the final
architectural, interior design, structural, mechanical and electrical design of
the Project. Information so furnished by Contractor shall be suggestive only.
Architect shall have responsibility for the accuracy, completeness, adequacy and
coordination of the Plans and Specifications and the engineering and designs
represented therein; provided, however, that Contractor must thoroughly inspect
the Property and site of the Project and carefully review the Plans and
Specifications and applicable codes, permits and regulations prior to
Contractor's acceptance of the Plans and Specifications and must promptly notify
Owner and Architect in writing of any problems or insufficiencies in the Plans
and Specifications or the site conditions of the Property or Project of which
Contractor has become aware. If during the course of the Work, Contractor
becomes aware of any discrepancies, problems, errors or omissions in the Plans
and Specifications or between those and the physical condition of the Project
site or applicable codes, permits or regulations, Contractor shall promptly
inform Owner and Architect of same. Any work done after such discovery shall be
at Contractor's risk unless specifically authorized by Owner in writing.
2.3 Contractor shall provide a sufficient and competent organization
including project manager, project engineer, project superintendent and
assistants, foremen, engineers and detailers, timekeepers and clerks, cost
accountants, checkers and inspectors, watchmen, and skilled and common laborers,
as the Work may require. Owner shall have the right to approve, or require the
removal of, Contractor's on-site project superintendent and off-site project
manager for the Project, and those persons shall not be replaced without Owner's
consent. Contractor shall supervise the Work, including subcontracted work, and
shall hold or attend job meetings at least weekly; shall prepare the initial
construction schedule and budget prior to commencing construction, which shall
detail the work, phasing and pricing for each trade and wherever possible, unit
pricing of work and materials, all in a form acceptable to Owner; and shall
prepare additional or updated schedules, budgets and reports as often as and in
a form required by Owner. Contractor shall deliver a complete construction
schedule, showing all work to be performed on the Project on a fixed date basis,
to Owner within ten (10) days of Contractor's receipt of the final construction
drawings from Architect.
2.4 Contractor shall provide certain pre-construction services in
connection with the development of the design, scope and final Plans and
Specifications for each Project, including without limitation, (i) consultation
with Owner and Architect on the construction methods and materials to be used
for each Project and to value engineer each Project to the maximum extent
practical; and (ii) preparation of preliminary budgets based on schematic
drawings and outline specifications, which shall be prepared and delivered to
Owner within ten (10) business days of Contractor's receipt of the schematic
drawings from Architect. It is expected that some or all of
2
Schedule 3 to Exhibit B
<PAGE> 66
this preliminary work may be done prior to execution of this Agreement for the
First Project or execution of a Project Order for each succeeding Project.
2.5 Contractor shall provide and maintain sufficient temporary buildings
for the operation of the field organization of Contractor with space for Owner
and/or Architect, and for storage of materials and housing of machinery and
tools, and whatever other temporary construction is required. Contractor shall
maintain its temporary buildings, store its materials and equipment and conduct
all its operations at the Property in a manner that will provide the least
interference with the Property's operations or its tenants, fully complies with
the Construction Rules attached hereto as EXHIBIT E, and permits the Property to
retain as much of its present appearance, ambiance and character as a
first-class office building as possible under the circumstances. Contractor
shall require its employees and all other parties and individuals working on the
Project to park all vehicles only in areas designated by Owner.
2.6 Contractor shall provide adequate and efficient machinery, plant
equipment, tools and supplies. Any equipment and tools not owned by Contractor
shall be obtained from other sources.
2.7 Contractor shall purchase all materials, utilities and services
required for completion of the Work.
2.8 At Owner's written request, Contractor shall secure competitive bids
from at least three (3) qualified subcontractors to perform any portions of the
Project designated in Owner's notice. In addition, Owner's Lender (the term
"OWNER'S LENDER" shall mean the lender providing construction funds to Owner for
the Project), if any, shall, at its option, have the right to approve all
purchase orders and subcontracts. Contractor shall have sole directing authority
over the performance of subcontractors. Contractor shall complete the bid
process, if any, and provide Owner with the final numbers for the Cost of the
Work and Guaranteed Maximum Price for each Project within ten (10) days of
Contractor's receipt of the final construction drawings for the Project from
Architect. It is expected that this pricing of each Project will be done prior
to the execution of this Agreement for the First Project and execution of the
Project Order for each succeeding Project.
2.9 Contractor shall procure and maintain the insurance required by
Section 22.1 below.
2.10 Contractor shall properly account for and pay, all federal, state and
local payroll taxes, and health, welfare, pension, vacation, and other funds as
required by union agreements or otherwise. Contractor shall also pay all sales,
consumer, use and similar taxes required by the Work.
2.11 Contractor shall be responsible, subject to receiving all required
drawings and documents from Architect and Owner, for obtaining all necessary
permits, authorizations, bonds and licenses required by any governmental
authority having jurisdiction over any part of the Work and shall pay all
required fees and costs for same.
2.12 Contractor shall receive, audit, approve and pay out of funds
provided by Owner, subject to the direction of Owner, all payments to the
subcontractors, suppliers and others for work to be performed and materials to
be furnished under this Agreement.
2.13 If requested by Owner prior to the commencement of the Work,
Contractor will provide a performance and payment bond for the amount of the
entire estimated "Cost of the Work" (defined in Section 6) for each Project or
selected subcontracts, at Owner's discretion. Owner shall have the right to
approve the issuer and form of each required bond. Premiums for such bonds shall
be included in the Cost of the Work. Contractor and all subcontractors used by
Contractor on the Project must be bondable.
2.14 Contractor shall not install in the Project or bring into the
Property any (i) asbestos-containing materials, (ii) electrical transformers or
fluorescent light fixtures with ballasts or other equipment containing PCB's, or
(iii) any toxic or hazardous materials of any type, except as specifically
authorized by Owner in writing and
3
Schedule 3 to Exhibit B
<PAGE> 67
required for completion of the Work. All materials which presently or in the
future constitute hazardous, extremely hazardous or toxic materials under the
Resource Conservation and Recovery Act, the California Hazardous Waste Control
Act, the Comprehensive Environmental Response Compensation and Liability Act or
any other similar law or regulation ("HAZARDOUS MATERIALS") and which are used,
stored, treated or disposed of on or from the Project or Property by Contractor
or Contractor's representatives, agents, employees, suppliers or subcontractors,
shall be used, stored, treated and disposed of in accordance with all applicable
laws and regulations. Contractor agrees that all Work for which Hazardous
Materials are used shall be done only by subcontractors properly licensed by all
applicable government authorities to perform such work. Contractor shall
indemnify, protect, defend and hold harmless Owner from all claims, actions,
losses, costs, damages, expenses and liabilities, including attorneys' fees,
incurred or suffered by Owner as a result of any violation by Contractor or
Contractor's representatives, agents, employees, suppliers, or subcontractors of
any of the provisions of this Section. The indemnification obligations under
this Section shall survive completion of the Work and termination of this
Agreement.
2.15 In performing the Work, Contractor shall comply with all applicable
federal, state, and municipal laws, statutes, rules, and regulations, with all
safety rules and regulations, and with any accident prevention program of Owner,
and shall give all notices required thereby. Contractor shall provide and
maintain all notices, warning lights, barricades and safety devices necessary to
prevent injury to any person or property resulting from the Work. Contractor
shall not permit its employees to use any machinery or equipment which they are
not trained for, or for any purpose other than that for which the equipment or
machinery is intended.
2.16 Contractor shall prepare as part of the Work all shop and other
detailed drawings that are required to enable Contractor to perform the Work.
Before submitting shop drawings for review by Architect and Owner, Contractor
shall check the drawings of all subcontractors for conformity with the Plans and
Specifications and other Contract Documents, and Contractor shall see that all
work contiguous with and having bearing on the Work indicated on the shop
drawings is accurately and distinctly illustrated. Contractor shall stamp the
drawings as evidence that such drawings have been checked, approved or
corrected. Such stamp shall constitute Contractor's warranty to Owner and
Architect that (i) Contractor has utilized reasonable efforts to insure that
such drawings are in strict conformity with the Plans and Specifications and
(ii) such submitted shop and other drawings have been coordinated with other
components of the Work. As provided in Section 3.1(b) below, Architect will
review and approve shop drawings and other submissions for general conformance
with the design concept only and such review shall not relieve Contractor and
each subcontractor from the responsibility for adherence to this Agreement
concerning quantity and quality of materials and workmanship, nor shall it
relieve Contractor of the responsibility for dimensions, tolerance and proper
assembly.
SECTION 3 - DUTIES OF OWNER
3.1 Owner shall furnish Contractor with the information necessary for
Contractor to expeditiously perform the Work. Decisions, reviews and approvals
required of Owner shall be performed with reasonable promptness so as not to
delay the Work.
3.2 To the extent applicable and required for completion of the Project,
Owner shall provide Contractor with surveys showing boundaries of the land
comprising the Property, easements and location of underground utilities;
provided, however, Owner does not warrant the accuracy of any information
included on or omitted from the survey.
3.3 Owner agrees to designate its authorized representatives on the
Project with whom Contractor may consult, and to specify in writing the
person(s) whose instructions and decisions shall be binding on Owner.
3.4 Owner shall cause Architect to:
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(a) Produce complete and coordinated Plans and Specifications that
comply with all applicable codes, permits and regulations. Contractor's
acceptance of the Plans and Specifications shall mean that Contractor has
carefully reviewed the Plans and Specifications and informed Owner in
writing of any problems or insufficiencies and of any violations of
applicable codes, permits and regulations in the Plans and Specifications
of which Contractor has become aware.
(b) Review and approve all shop drawings, samples and other
submissions of Contractor and its subcontractors for conformance with the
design concept of the Project and for compliance with the information
contained in the Contract Documents and applicable codes, permits and
regulations.
(c) Interpret the Plans and Specifications and coordinate the design
and engineering of all systems and subsystems to assure that the
architectural, interior design, structural, mechanical, civil and
electrical elements and components conform with the Plans and
Specifications and are coordinated with the applicable components and
elements of the Property.
(d) Assume responsibility for the design and engineering contained
in the Plans and Specifications (including controls, systems, and
automation) and for performance thereof, excluding any design build
subcontractor's work not prepared by Architect and specifically so noted
in the Plans and Specifications.
(e) If requested by Owner, to review and approve Contractor's
applications for progress payments in a timely manner.
(f) If requested by Owner, to certify the substantial and final
completion of the Work, including issuance of punch lists prior to
occupancy of the Project's premises.
3.5 Owner shall obtain all required consents from and shall deliver all
required notices to the owner of the Property or Owner's Lender, as applicable
and necessary for Contractor to have access to the Property and be able to begin
and complete each Project.
SECTION 4 - THE CONTRACT SUM
For each Project, Owner shall pay Contractor in current funds for the
Contractor's performance of the Work, the Contract Sum consisting of the Cost of
the Work, as defined in Section 6, and the Contractor's Fee determined as a
percentage of the Cost of the Work, which percentage is set forth on the Basic
Contract Information for the First Project and the applicable Project Order for
succeeding Projects and which percentage shall, if not separately agreed upon by
the parties, be selected based upon the total Cost of the Work for each Project
The Contract Sum shall not exceed the Guaranteed Maximum Price set forth on the
Basic Contract Information for the First Project or the Guaranteed Maximum Price
set forth in the applicable Project Order for future Projects, which amounts
shall be increased or reduced, as applicable, by changes, additions or
reductions which increase or decrease, respectively, the Cost of the Work as
ordered by Owner under Section 10. In the unlikely event that Owner owes
Contractor additional monies based on the foregoing adjustments, Owner shall pay
such amount within thirty (30) days of receiving Contractor's statement.
SECTION 5 - COMMENCEMENT AND COMPLETION OF THE WORK
Contractor shall commence the Work within five (5) days after all of the
following conditions have been satisfied:
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(a) Receipt by Contractor of a copy of this Agreement, fully
executed by Owner and Contractor.
(b) For each Project other than the first Project, receipt by
Contractor of a copy of the Project Order authorizing the Project, fully
executed by Owner and Contractor.
(c) Receipt by Contractor of fully authorized and completed Plans
and Specifications for the Project.
(d) Receipt by Contractor of all necessary building permits;
provided, however, that Contractor shall apply for these permits within
two (2) business days of its receipt from Architect of the plans and other
documents required for the permit in a form ready for submittal.
(e) Receipt by Owner of evidence (such as certificates of insurance)
that the insurance coverage required by this Agreement is in force.
(f) If payment and performance bonds are required for the Project,
receipt by Owner of fully executed originals of those bonds.
(g) Notice by Owner that the space in the Property is ready for
commencement of the Work and that all required consents from and notices
to the owner of the Property or Owner's Lender have been obtained or
given.
The date the Work is commenced shall be known as the "CONSTRUCTION
COMMENCEMENT DATE," and the Contractor shall thereafter promptly and
continuously execute the Work in a diligent manner. Contractor shall achieve
"Substantial Completion" (defined in Section 7.2) of the entire Work not later
than the Completion Date for the first Project, nor later than the date
specified in the applicable Project Order for each subsequent Project.
SECTION 6 - COST OF THE WORK
6.1 The term "COST OF THE WORK" shall mean costs necessarily incurred by
the Contractor in the proper performance of the Work. Such costs shall be at
rates not higher than the standard paid at the place of the Project, except with
the prior written consent of Owner. The Cost of the Work shall include only the
items set forth in this Section 6.1.
(a) Wages of construction workers directly employed by Contractor to
perform the Work at the site or, with Owner's agreement, at off-site
workshops. Wages or salaries of Contractor's project manager and project
superintendent for the Project and Contractor's other supervisory and
administrative personnel, whether stationed at the Property or otherwise,
for the portion of their time required for the Work. With respect to each
Project, such wages and salaries shall not exceed the rates or amounts
shown in the General Conditions Schedule of Values that is attached as an
Exhibit to the applicable Project Order.
(b) Personnel costs paid or incurred by Contractor for taxes,
insurance, contributions, assessments and benefits required by law or
collective bargaining agreements and, for personnel not covered by such
agreements, customary benefits such as sick leave, medical and health
benefits, holidays, vacations and pensions, provided such costs are based
on wages and salaries permitted as part of the Cost of the Work.
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(c) Payments made by Contractor to subcontractors in accordance with
the requirements of the subcontracts.
(d) Costs, including transportation, of materials and equipment
incorporated or to be incorporated in the completed construction, and
including the costs of materials in excess of those actually installed but
required to provide reasonable allowance for waste and spoilage. Unused
excess materials, if any, shall be handed over to Owner at the completion
of the Work or, at Owner's option, shall be sold by Contractor and amounts
realized, if any, from such sales shall be credited to Owner as a
deduction from the Cost of the Work.
(e) Costs, including transportation, installation, maintenance,
dismantling and removal of materials, supplies, temporary facilities,
machinery, equipment, and hand tools not customarily owned by the
construction workers, which are provided by Contractor at the site and
fully consumed in the performance of the Work; and cost less salvage value
on such items if not fully consumed, whether sold to others or retained by
Contractor. Cost for items previously used by Contractor shall mean fair
market value.
(f) Rental charges for temporary facilities, machinery, equipment,
and hand tools not customarily owned by the construction workers, which
are provided by the Contractor at the site, whether rented from the
Contractor or others, and costs of transportation, installation, minor
repairs and replacements, dismantling and removal thereof. Rates and
quantities of equipment rented shall be subject to Owner's prior approval.
(g) Costs of removal of debris from the site and the final
construction area clean-up.
(h) Costs of telegrams and long-distance telephone calls, postage,
parcel and overnight delivery charges, telephone service at the site and
reasonable petty cash expenses of the site office.
(i) That portion of the reasonable travel and subsistence expenses
of Contractor's personnel incurred while traveling in discharge of duties
connected with the Work.
(j) That portion directly attributable to performance of the Work of
premiums for insurance and payment and performance bonds required by this
Agreement, but excluding the costs of any bonds required pursuant to
Section 15.
(k) Sales, use or similar taxes imposed by a governmental authority
that are related to the Work and for which Contractor is liable.
(l) Fees and assessments for the building permit and for other
permits, licenses and inspections for which Contractor is required by the
Contract Documents to pay.
(m) Fees of testing laboratories for tests required by the Contract
Documents, except those related to defective or nonconforming Work
resulting from the fault or negligence of Contractor or for which
Contractor is not otherwise responsible pursuant to the terms of this
Agreement.
(n) Royalties and license fees paid for the use of a particular
design, process or product required by the Contract Documents, the cost of
defending suits or claims for infringement of patent or other rights
arising from such requirement by the Contract Documents; payments made in
accordance with legal judgments against Contractor resulting from such
suits or claims and payments of settlements made with Owner's consent;
provided, however, that such
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costs of legal defense, judgment and settlements shall not be included in
the calculation of the Contractor's Fee.
(o) Deposits lost for causes other than Contractor's fault or
negligence.
(p) Costs that are incurred by Contractor in taking action to
prevent threatened damage, injury or loss in case of an emergency
affecting the safety of persons and property. Also, all costs incurred in
connection with job safety requirements for the performance of the Work.
(q) Costs of repairing damaged Work (excluding costs of repairing or
correcting Work damaged or improperly executed by construction workers or
improperly or incorrectly performed by subcontractors or suppliers,
including nonconforming Work), provided such damage did not result from
the fault or negligence of Contractor, any subcontractors or suppliers, or
anyone directly or indirectly employed by any of them or for whose acts
any of them may be liable, and only to the extent that the cost of such
repairs is not recoverable by Contractor from others and Contractor is not
compensated therefor by insurance or otherwise.
6.2 All costs not specifically and expressly described in Section 6.1
above shall not be included in the Cost of the Work. By way of example, and
without limitation, the expenses of Contractor's principal office and other
offices, other than the site office, and Contractor's overhead and general
expenses would not be permitted unless specifically included in Section 6.1. In
addition, Contractor's capital expenses, including interest on the Contractor's
capital employed for the Work, would not be included. Finally, except as
provided in Sections 6.1(q), costs related to any warranty Work required of
Contractor pursuant to this Agreement or due to the fault or negligence of
Contractor, any subcontractors or suppliers, or anyone directly or indirectly
employed by any of them or for whose acts any of them may be liable, including
but not limited to, costs for the correction of damaged, defective or
nonconforming Work, disposal and replacement of materials and equipment
incorrectly ordered or supplied, and making good any damage to property not
forming part of the Work, would all not be included in the Cost of the Work.
SECTION 7 - PAYMENTS BY OWNER
7.1 PROGRESS PAYMENTS. Owner agrees to make progress payments to
Contractor on account of the Contract Sum in accordance with the following
procedures:
(a) By no later than the tenth (10th) day of each month, Contractor
shall make application to Owner for the Costs of the Work on the Project
incurred for the preceding month and not previously reimbursed or paid to
Contractor plus the Contractor's Fee applicable to the foregoing amount,
but in all cases not to exceed the Guaranteed Maximum Price for the
applicable Project, as adjusted by approved Change Orders. Contractor
shall use the AIA Document G702 form of Application for Payment, a copy of
which is attached hereto as EXHIBIT C (the "APPLICATION"). The Application
shall include supporting information and documentation as Owner may
reasonably require, including, without limitation, copies of all invoices,
bills and statements for the amounts requested, payroll data showing each
employee's hours, job description, pay rate and amounts paid for the
applicable period, copies of Contractor's checks making payment of all
amounts requested in the Application for third parties, and mechanic's
lien waiver and release forms that conform to the requirements of the
State (in California: Civil Code Section 3262 and sample California forms
are attached as EXHIBIT D to this Agreement) signed by Contractor and all
other parties who have provided labor, services or materials to the
Project for whom payment is being requested, which shall be either
conditional or unconditional waiver and release forms for the amount
requested in the Application for each party and shall include
unconditional waiver and release forms for all amounts previously paid to
that party. All discounts
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and other credits due Owner shall appear in the Application as credits to
the Cost of the Work. Notwithstanding other provisions in this Agreement,
the form of the Application, the support documentation required, the
amount and timing of Retentions for the subcontractors, suppliers and
Contractor, and the lien waivers and releases from Contractor,
subcontractors and suppliers shall be as required by Owner's Lender.
Materials and equipment not yet incorporated into the Work, but delivered
and suitably stored either at the site of the Project or at some other
appropriate location that Owner has approved in writing and so long as the
items are properly segregated and identified as belonging to Owner, shall
be considered completed items of Work for purposes of an Application;
provided, however, that with respect to materials and equipment delivered
and suitably stored other than at the job site, Contractor, upon request,
will furnish Owner bills of sale or other documentation satisfactory to
establish Owner's title to such materials and equipment and otherwise to
protect Owner's interest therein.
(b) Owner shall review Contractor's Applications and shall pay all
undisputed amounts, less the Retention, within thirty (30) days after
Owner's receipt of the completed Application and all required
documentation. An Application shall not be deemed complete until it
includes all the required information and support materials. All
Contractor's payments to subcontractors and suppliers shall also be
subject to the same Retention. Notwithstanding the foregoing provisions
regarding the Retention, Contractor shall be entitled to apply and receive
payment for and to pay to the appropriate party all of the Retention
amount applicable to any subcontractor or supplier who has, as applicable,
completed all of its Work on the Project or delivered all of its materials
to the Project, which Work and materials have been deemed satisfactory and
accepted by Contractor. No interest shall be paid on the Retention. If any
Application or any part thereof is not approved by Owner, Owner shall
provide Contractor with a written statement of the reasons for
non-approval. Owner shall have the right to withhold payment to or for any
party that does not provide an appropriate, signed lien waiver and release
form. Disputed amounts shall be handled in the manner described in Section
7.3. Owner shall have the right, in its sole discretion, to make any or
all payments due to third parties either directly to such parties or by
way of checks made payable jointly to Contractor and such parties. All
undisputed payments due Contractor under this Agreement, excluding the
"Final Payment" (defined below), which are not paid within forty-five (45)
days of the date of the completed Application, shall bear interest from
the date forty-five (45) days after the applicable Application is
submitted to Owner and deemed complete to the payment date at the Interest
Rate (defined in Section 7.3).
7.2 FINAL PAYMENT. Owner agrees to pay Contractor all undisputed portions
of the unpaid balance of the Contract Sum, including the Retention (the "FINAL
PAYMENT"), but in all cases not to exceed the Guaranteed Maximum Price for the
applicable Project, as adjusted by approved Change Orders, within ten (10) days
following the satisfaction of all of the conditions in this Section 7.2,
including the following:
(a) The Work has been "Totally Completed" (defined below) to Owner's
satisfaction and Contractor has fully performed its other obligations
under this Agreement, including the Contractor's obligations to correct
defective or nonconforming Work, if any;
(b) Contractor has submitted a final Application that includes all
of the Costs of the Work and the Contractor's Fee based thereon through
Total Completion of the Project, together with the same supporting
information and documentation as required for other Applications, and
Owner or its accountants have reviewed and approved that Application;
(c) All of the applicable governmental authorities have evidenced
the completion of the Project to their satisfaction, in accordance with
all rules and procedures required by the applicable jurisdiction,
including without limitation, issuing a temporary or permanent certificate
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of occupancy for the tenant space, signing off on the construction
drawings for the Project, or signing the "final inspection" category of
the inspection card;
(d) All warranties and guaranties; cut sheets; product information,
maintenance and operations manuals; as-built plans; air balancing report;
paint brush outs; wall paper samples; all surplus materials that Owner
wants to retain; Material Flush and Test Certificates for all sprinkler
work; Material Safety Data Sheets on products used in the Work; and lists
of contractors and suppliers have been completed, assigned (as applicable)
and delivered to Owner in an indexed project manual; and
(e) At least thirty-five (35) days have elapsed after the date of
recording of the Notice of Completion (defined in Section 7.5), provided
it is properly and timely recorded in accordance with applicable laws, or
if a Notice of Completion has not been properly and timely recorded,
ninety-five (95) days have elapsed after the date that the Project has
been Totally Completed and has been accepted by Owner and no further work
or labor of any kind is being performed on the Project.
The term "TOTAL COMPLETION" shall mean that all of the Work required by
the Plans and Specifications has been completed, including finishing details,
minor omissions, decorations and mechanical adjustments of the type normally
found on an architectural punch list ("PUNCH LIST WORK"). Contractor shall
notify Owner in writing of the date ("EXPECTED COMPLETION DATE") that Contractor
expects that (i) all Work on the Project will be completed, except for Punch
List Work, and (ii) the Project will be fully and finally inspected and approved
as completed pursuant to Section 7.2(c) above. The Project shall be deemed
"Substantially Complete" when the conditions in clauses (i) and (ii) of the
preceding sentence are fulfilled to Owner's reasonable satisfaction. Contractor
shall use its best efforts to notify Owner of the Expected Completion Date at
least ten (10) days prior thereto. Owner and Contractor shall together inspect
the Project on or before the Expected Completion Date and, during that
inspection, the parties shall prepare the list of items that shall constitute
the Punch List Work.
Owner shall review Contractor's Application for the Final Payment and
provide Contractor with a written statement describing any disputed amounts and
the reasons therefor within thirty (30) days of Owner's receipt of the
Application and all required support documentation. Disputed amounts shall be
handled in the manner described in Section 7.3. Contractor shall reimburse Owner
for any overpayments within thirty (30) days of their determination.
7.3 WITHHELD AND DISPUTED PAYMENTS. Notwithstanding the foregoing, Owner
shall be entitled to withhold from payments otherwise due Contractor or other
parties any amounts necessary, in Owner's good faith and reasonable judgment, to
protect Owner from loss on account of (i) Work that has been improperly
performed or damaged and not remedied; (ii) damage to Owner, other contractors
or the Property; (iii) liens, stop notices or claims received by Owner or other
reasonable evidence indicating probable filing of claims or other disputes; (iv)
amounts that may cause the Contract Sum to exceed the Guaranteed Maximum Price,
as adjusted by Change Orders; and (v) material breach of this Agreement by
Contractor. As to all withheld amounts and amounts disputed in an Application,
Owner and Contractor shall act diligently and in good faith to resolve all such
matters and disputes quickly, either through agreement, mediation, arbitration
or otherwise. Upon resolution of the withheld amount or payment dispute, Owner
shall promptly pay to Contractor the agreed or ordered amount, and if such
amount is not paid within thirty (30) days of the date of the agreement or order
with respect to that amount, Owner shall also pay interest on the agreed or
ordered amount at the lower of (i) the highest interest permitted under
applicable law and (ii) the Prime Rate of interest as published in the most
recent Wall Street Journal plus two percent (2%) and adjusted as and when the
Prime Rate changes (the "INTEREST RATE") beginning on the thirty-first day
through the date of payment.
7.4 UNCOMPLETED WORK. Contractor shall complete all Punch List Work within
thirty (30) days of the date that list is agreed upon by the parties to be in
final form. After the Final Payment, Contractor shall be entitled to submit
subsequent Applications for Costs of the Work, and the Contractor's Fee thereon,
that Contractor incurs
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for completing any Punch List Work that was not included on the Application for
the Final Payment, but in each and every case not to exceed the Guaranteed
Maximum Price for the applicable Project, as adjusted by approved Change Orders.
Such Applications and their payment by Owner shall be subject to the same
requirements and handled in the same manner as all other Applications for
progress payments.
7.5 NOTICE OF COMPLETION. No later than ten (10) days following the
earlier of agreement by the parties on the final Punch List Work or any other
date required by applicable laws, Owner shall record among the official records
of the county in which the Property is located a notice that all of the Work of
the Project has been completed ("NOTICE OF COMPLETION"). The Notice of
Completion shall conform to the laws of the State (for California: California
Civil Code Section 3093). Evidence of the filing of the Notice of Completion
shall be submitted to Contractor. If Owner fails to comply with the requirements
of this Section, Owner hereby appoints Contractor as Owner's agent to sign and
record a Notice of Completion on Owner's behalf. This agency is irrevocable and
is an agency coupled with an interest.
7.6 DISCOUNTS, REBATES AND REFUNDS. Cash discounts obtained on payments
made by Contractor shall accrue to Owner if (i) before making the payment,
Contractor included them in an Application and received payment therefor from
Owner, or (ii) Owner has deposited funds with Contractor with which to make
payments; otherwise, cash discounts shall accrue to Contractor. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to Owner, and Contractor shall make provisions so that
they can be secured.
7.7 SAVINGS. In the event that after Total Completion of the Project and
Owner's approval of the Application for Final Payment, the Cost of the Work plus
the Contractor's Fee shall equal a sum that is less than the Guaranteed Maximum
Price, as adjusted by approved Change Orders, the resulting savings shall be
shared by Owner and Contractor as follows: the unused portion of any budgeted
contingency amount shall be returned one hundred percent (100%) to Owner, and
any remaining savings shall be split ninety percent (90%) to Owner and ten
percent (10%) to Contractor. All savings amounts paid to Contractor shall be
treated separately from and not included within the calculation of the
Contractor's Fee and the Aggregate Contractor's Fee as described in Section 4.
SECTION 8 - OWNER'S OCCUPANCY BEFORE COMPLETION OF WORK
Owner shall have the right to occupy any part or parts of the Project, and
to install its own fixtures and equipment thereon, prior to completion of the
Work by Contractor, provided that the Work completed in the part or parts of the
Project to be occupied is conditionally accepted by Owner in a writing that
specifies any claimed deficiencies in the Work completed to that date. Any such
occupancy must be consistent with Contractor's sequence for completing the Work
in the occupied part or parts or in other areas of the Project, and may in no
way interfere with the completion of the Work. Contractor shall make reasonable
efforts to coordinate its Work with any such occupancy occurring prior to
completion of the Work, and shall give reasonable notice to Owner of any damage
or delay likely to arise as a result of such occupancy, but Owner will assume
the risk of any damage to or delay in the Work arising out of such occupancy.
SECTION 9 - TITLE TO THE WORK
The title of all Work completed, and of Work still under construction, and
of all materials purchased under the terms of this Agreement and of Contractor's
shop drawings shall pass to Owner upon receipt of payment therefor by
Contractor, free from all liens, claims, security interests, or encumbrances;
provided, however, that Contractor shall be entitled, without payment of any
fees to Owner, to use descriptions and pictures of all Projects completed by
Contractor for any purposes.
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SECTION 10 - CHANGES IN THE WORK
Owner may, from time to time by written instructions or drawings issued to
Contractor, make changes in the Plans and Specifications, issue additional
written instructions, require additional work or direct the omission of work
previously ordered (individually and collectively, a "CHANGE ORDER"), and the
provisions of this Agreement shall apply to all Change Orders with the same
effect as if they were embodied in the original Plans and Specifications. Owner
and Contractor shall agree in writing on the amount of the change in the Cost of
the Work and the time delay for completion of the Work required by each Change
Order. The Guaranteed Maximum Price for each Project shall be increased or
decreased, as applicable, by an amount equal to the increase or decrease in the
Cost of the Work, as agreed upon by the parties in the applicable Change Order,
plus the applicable Contractor's Fee applied to that amount. Contractor shall
not, and is not authorized to, make any change, deviation, or perform any extra
work in reliance upon any oral request by Owner or any agent or representative
of Owner. Regardless of the circumstances, if any change, deviation, alteration,
or extra work is performed without a Change Order signed by Owner, such change,
deviation, alteration or extra work shall be paid for solely by Contractor. No
increase in the Guaranteed Maximum Price will be allowed for minor adjustments
in finish or design that do not involve or require any additional Cost of the
Work.
SECTION 11 - RECORDS, INSPECTION AND AUDIT
11.1 The Work shall be observed by Owner, Architect or another
representative designated by Owner to determine the progress and quality of the
Work and its compliance with the Plans and Specifications. Owner and Architect,
or their representatives, shall at all reasonable times be afforded access to
the Work for the purpose of inspection.
11.2 Contractor shall keep full and detailed accounts and records in
accordance with generally accepted accounting principles to insure proper
financial management under this Agreement, and in sufficient detail to allow
Owner to fully review same. Contractor shall preserve all such accounts and
records for a period of three (3) years after Final Payment, or longer where
required by applicable laws. Owner or Owner's authorized representative shall
have access to all Contractor's records, books, correspondence, instructions,
drawings, receipts, vouchers, memoranda, and similar documents relating to this
Agreement and the Work during normal business hours.
SECTION 12 - TERMINATION BY OWNER
12.1 If Contractor (i) seeks or is forced to seek protection under any
state or federal bankruptcy or insolvency laws, or (ii) makes a general
assignment for the benefit of its creditors, or (iii) has a receiver appointed
on account of its insolvency, or (iv) persistently or repeatedly refuses or
fails, except in cases for which extension of time is provided, to supply enough
properly skilled workmen or proper materials, or (v) except when authorized by
Section 13.1 below or by Owner or Owner's Lender or caused by a good faith
dispute with Owner, stops performing the Work for five (5) consecutive business
days for reasons within its reasonable control, or (vi) fails to pay any of its
subcontractors or suppliers, provided Owner has provided funds for payment and
Contractor's refusal to pay is not based on a good faith dispute regarding
whether payment is due, or (vii) fails promptly to replace or repair defective
Work or Work not done in conformance with the Plans and Specifications, except
where Contractor has a good faith dispute with Owner regarding the validity or
extent of such defect or nonconformity, or (viii) violates any laws or
regulations applicable to the construction or completion of the Work and fails
to commence cure of such violation promptly after receiving notice thereof and
to complete cure of such violations within a reasonable time, or (ix) otherwise
is guilty of a material breach of this Agreement, then Owner may, after giving
Contractor and its surety, if any, seven (7) days' written notice and
Contractor's failure during such seven-day period to commence an appropriate
cure and thereafter to diligently pursue such cure to completion, terminate the
employment of Contractor and take possession of the site and all materials,
equipment, tools, shop drawings, construction equipment and machinery thereon
owned by Contractor and may finish the Work by whatever method Owner may
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deem expedient. Any such termination shall be without prejudice to Owner's
rights to enforce the terms of any bonds furnished pursuant hereto or to hold
Contractor liable for any damages, consequential or otherwise, suffered by Owner
as a result of such default by Contractor. Upon termination hereunder, Owner may
hold the Retention previously withheld, complete the Work and set off the cost
of completion of the Work and any other damages or costs incurred by Owner
against amounts due Contractor. In addition to termination of this Agreement,
Owner shall have all other rights or remedies available under this Agreement or
at law or in equity.
12.2 In case of such termination, Owner shall pay Contractor (a) the Cost
of the Work incurred as of the date of termination and (b) the amount of
Contractor's Fee earned to date computed on the basis of the lesser of (i) the
Cost of the Work incurred to the date of termination and (ii) the value of the
percentage of the Work completed at the time of termination, excluding the cost
of stored materials, which amounts due Contractor under the foregoing clauses
(a) and (b) shall be reduced by any previous payments made on account of the
foregoing and all damages and additional costs incurred by Owner as a result of
such termination or additional costs required to complete the Work, but in all
cases subject to the Guaranteed Maximum Price for each Project, as adjusted by
approved Change Orders. Owner may also pay to Contractor fair compensation,
either by purchase or rental, at the election of Owner, for any retention or use
of Contractor's equipment that is not otherwise already included in the Cost of
the Work for which Contractor has or will be paid. Any amounts due Contractor
shall not be paid until the Work is completed, and Owner reserves the right to
pay all amounts due to third parties directly to them. In case of such
termination, Owner may, at its sole election, assume and become liable for any
or all obligations or commitments that Contractor may have, in good faith and
non-negligently, undertaken or incurred in connection with the Work. Contractor
shall make sure that all of its contracts with subcontractors or suppliers shall
permit assignment of such obligations to Owner and Owner's Lender. Contractor
shall, as a condition of receiving the payments mentioned in this Section,
execute and deliver such papers as Owner may require for the purpose of fully
vesting in Owner the rights and benefits of Contractor under such obligations or
commitments.
SECTION 13 - TERMINATION BY CONTRACTOR
13.1 If Owner shall fail to make any undisputed payment to Contractor when
due under the provisions of Section 7, Contractor may, at its option exercised
upon ten (10) days' written notice, stop any or all Work upon the Project until
such default has been cured. There shall be no stoppage of the Work for
nonpayment of disputed amounts provided all undisputed amounts have been paid.
Prior to stopping any Work on the Project, Contractor shall give Owner's Lender,
if any, written notice of the nonpayment of the undisputed amount and shall give
Owner's Lender seven (7) days additional time within which it may cure Owner's
default. Contractor shall be entitled to an extension of time for completion
equivalent to the actual time lost by such partial or total stoppage and any
additional costs arising out of such stoppage.
13.2 If the Work should be stopped under an order of any court or other
public authority or by any other act of government for a period of three
consecutive months, through no act or fault of Contractor or anyone engaged,
contracted or employed by Contractor; or if Owner should fail to make any
undisputed payment to Contractor within ten (10) days of its due date as
provided in Section 7; or if Owner or Architect unreasonably delay Contractor in
performing the Work; or if Owner is otherwise guilty of a material breach of
this Agreement, Contractor may, after giving Owner and Owner's Lender, if any,
seven (7) days' written notice and Owner's failure during such seven-day period
to commence an appropriate cure and thereafter to diligently pursue such cure to
completion, terminate this Agreement without prejudice to any other right or
remedy it may have. In case of termination for the reasons stated in this
paragraph, Owner shall pay to Contractor (a) the Cost of the Work for costs
incurred as of the date of termination and (b) the Contractor's Fee earned to
date computed on the basis of the lesser of (i) the Cost of the Work incurred to
the date of termination and (ii) the value of the percentage of the Work
completed at the time of termination, excluding the cost of stored materials,
which amounts due Contractor under the foregoing clauses (a) and (b) shall be
reduced by any previous payments made on account of the foregoing. Contractor
shall also recover from Owner any loss or damage sustained upon the plant or
equipment owned by
13
Schedule 3 to Exhibit B
<PAGE> 77
Contractor. Payments to Contractor under this Section 13.2 shall in no event
cause the Guaranteed Maximum Price for each applicable Project, as adjusted by
approved Change Orders, to be exceeded.
SECTION 14 - DESTRUCTION OF WORK BY FIRE, ELEMENTS
In the event the Work shall be wholly or partially damaged or destroyed by
war, fire, storm, lightning, flood, earthquake, settlement or defective soil,
corrosion, electrolysis, expansion or contraction, cracking or deflection, tidal
wave, surface or subsurface water, mob violence, vandalism or other casualty,
Contractor, upon written instructions from Owner, and provided sufficient
insurance proceeds have been tendered to Owner, shall proceed to replace and/or
repair the Work in accordance with the Plans and Specifications. Such repair
and/or replacement shall be performed under the provisions of this Agreement. In
the event of substantial damage or destruction to any portion of the Work or
Property by any of the above mentioned causes, Owner may, upon giving written
notice to Contractor, elect to terminate this Agreement. Substantial damage or
destruction shall be deemed to have occurred if its repair or restoration would
cost more than twenty-five percent (25%) of the Guaranteed Maximum Price. In
such case, Owner shall pay Contractor for (a) the Cost of the Work for costs
incurred as of the date of termination, and (b) the Contractor's Fee earned to
date computed on the basis of the lesser of (i) the Cost of the Work incurred to
the date of termination and (ii) the value of the percentage of the Work
completed at the time of termination, excluding the cost of stored materials,
which amounts in the foregoing clauses (a) and (b) shall be reduced by any
previous payments made on account of the foregoing, but in all cases subject to
the Guaranteed Maximum Price for each Project, as adjusted by approved Change
orders.
SECTION 15 - LIENS
Contractor agrees to make prompt payment to all subcontractors, suppliers,
workers and other persons or parties performing labor upon or furnishing
materials for the Work, subject only to receipt of timely payment from Owner for
such labor and materials through the progress payments to which Contractor is
then entitled. Contractor agrees to keep the Property free and clear of any and
all liens and claims of such subcontractors, laborers, and suppliers, subject to
Owner's performance of its own payment obligations; and if any such lien shall
be filed at any time during the progress of the Work, Owner may, at its sole
election, either (i) discharge such lien, either by payment or bonding, without
any obligation to ascertain or attempt to ascertain the validity of the claim
upon which the lien is based and offset all costs of the discharge or bond,
including attorneys' fees, against payments otherwise due Contractor hereunder,
or (ii) withhold from payments otherwise due Contractor an amount sufficient to
completely indemnify, defend, protect and hold harmless Owner against such lien
or claim, until the same is discharged or until the Owner is indemnified by bond
or other means reasonably satisfactory to Owner; provided, however, that
Contractor shall have such lien removed from the Property by bonding or
otherwise within ten (10) days after receiving written notice to do so from
Owner or Owner's Lender for the Project. If the costs of discharging or bonding
the lien exceed the payments remaining due Contractor under this Agreement,
Contractor shall promptly reimburse Owner all amounts advanced by Owner to
remove the lien from the Property, including attorneys' fees and interest at the
Interest Rate from the date advanced by Owner to the date repaid.
SECTION 16 - INDEMNIFICATION
To the fullest extent permitted by law, Contractor shall indemnify,
protect, defend and hold harmless all "Owner Parties" (defined in Section 22.1),
and all of their directors, partners, managers, members, officers, agents,
property managers and employees (collectively, with the Owner Parties, the
"Indemnitees") from and against all liability, claims, actions, demands,
damages, losses and expenses, including but not limited to, attorney's fees
(collectively, "CLAIMS"), arising out of or resulting from, in whole or in part,
any act or omission in the performance of the Work or any event, loss, accident,
damage or injury at the Property occurring during performance of the Work, in
each case by Contractor, any subcontractor or supplier, anyone directly or
indirectly employed by any of
14
Schedule 3 to Exhibit B
<PAGE> 78
them or anyone for whose acts any of them may be liable, excepting only such
Claims to the extent they are caused by the negligence or willful misconduct of
one or more of the Indemnitees but only with respect to those Indemnitees. Such
obligation shall not be construed to negate, abridge, or otherwise reduce any
other right or obligation of indemnity which would otherwise exist as to any
party or person described in this Section. In any and all Claims against any
Indemnitees by any employee of Contractor, any subcontractor or supplier, anyone
directly or indirectly employed by any of them or anyone for whose acts any of
them may be liable, the indemnification obligation under this Section shall not
be limited in any way by any limitation on the amount or type of damages,
compensation or benefits payable by or for the Contractor or any subcontractor
or supplier under workers' compensation acts, disability benefit acts, or other
employee benefit acts. The obligations of Contractor under this Section shall
survive termination of this Agreement.
SECTION 17 - WARRANTY
17.1 Contractor warrants that it will exercise due care and diligence in
the construction of the Project to the end that the Work shall be performed in
accordance with the Contract Documents and that all of the Work to be performed
by Contractor pursuant to the Contract Documents shall be of the standard and
quality which prevail among contractors of superior knowledge, experience and
skill engaged to perform similar services for comparable projects throughout the
State and that performance of the Work shall comply with all applicable
governmental laws, regulations, codes, permits and requirements.
17.2 Contractor warrants and guarantees that all materials furnished under
the Contract Documents shall be new and of the highest quality obtainable,
unless otherwise specified in the Plans and Specifications, and that the Work
will be of good quality, free from fault or defect, and in conformance with the
Contract Documents. In furtherance of that guaranty, Contractor agrees to
indemnify, protect, defend and hold harmless Owner against all Claims arising
from or relating to any defect in workmanship or material in the Work or any
non-conformance of the Work with the requirements of the Contract Documents
("WARRANTY CLAIMS"). Upon receipt of written notice from Owner, Contractor
shall, at its own expense and under the terms and conditions of the Contract
Documents, promptly and diligently replace any defective or non-conforming
portions of the Work. Contractor shall also bear all costs and expenses, replace
any materials and perform any labor required to correct or repair any portion of
the Project or Property damaged or destroyed in repairing or correcting any
defective or non-conforming Work. This guaranty requires Contractor to correct
the substandard condition and not merely to pay money damages for breach of the
guaranty. If Contractor fails, after written notice from Owner, to promptly and
diligently comply with its obligations, as required herein, Owner may perform
those obligations, at Contractor's expense, and Contractor shall reimburse Owner
promptly upon demand for all costs or expenses incurred by Owner in connection
with fulfilling Contractor's guaranty, including without limitation, interest on
the amounts expended at the Interest Rate and reasonable attorneys' fees. The
provisions of this Section are in addition and cumulative to other rights and
remedies available to the parties under this Agreement, at law or in equity, and
do not in any manner limit such rights and remedies. The obligations of
Contractor under this Section 17.2, with respect to each Project, shall survive
completion of the Project and termination of this Agreement for a period of one
(1) year following the date of Total Completion of the Project, whether by
Contractor or in the case of termination of this Agreement by Owner pursuant to
Section 12, by Owner or another party, and shall apply with respect to all
Warranty Claims of which Contractor is aware or is given written notice prior to
the expiration of that time period.
17.3 All warranties procured by Contractor from its subcontractors and
suppliers shall be properly executed on a form approved by Owner. Whenever
possible, Contractor shall cause such warranties to be made directly to Owner.
To the extent any of such warranties cannot be assigned to Owner, Contractor
shall, upon written request from Owner, enforce such warranties for Owner's
benefit. Contractor shall provide Owner with originals of all manufacturers' and
other warranties applicable to the Work prior to the Final Payment.
15
Schedule 3 to Exhibit B
<PAGE> 79
SECTION 18 - CONTRACTOR'S LICENSE
18.1 CONTRACTORS ARE REQUIRED BY LAW TO BE LICENSED AND REGULATED BY THE
CONTRACTORS' STATE LICENSE BOARD WHICH HAS JURISDICTION TO INVESTIGATE
complaints AGAINST CONTRACTORS IF A COMPLAINT IS FILED WITHIN THREE YEARS OF THE
DATE OF THE ALLEGED VIOLATION. ANY QUESTIONS CONCERNING A CONTRACTOR MAY BE
REFERRED TO THE REGISTRAR AT:
CONTRACTORS' STATE LICENSE BOARD
P.O. BOX 26000
SACRAMENTO, CALIFORNIA 95827
18.2 Contractor is fully licensed in the State.
SECTION 19 - LENDER CURE RIGHTS
Contractor agrees that Owner may assign its rights under this Agreement to
Owner's Lender, if any, as additional security for the Project financing.
Contractor will, at the request of Owner's Lender, execute a consent to that
assignment agreeing to perform Contractor's obligations under this Agreement for
Owner's Lender when it has succeeded to the position of Owner under the
Agreement pursuant to the terms of the assignment and Owner's Lender has agreed
in writing to perform all of Owner's obligations under this Agreement occurring
from and after the date Owner's Lender succeeds to Owner's rights and
obligations hereunder. Contractor further agrees that, notwithstanding a default
by Owner under the provisions of this Agreement which would give Contractor the
right to suspend performance under or terminate this Agreement, Contractor will
continue to perform its obligations hereunder (on the same terms and conditions
as are set forth herein) for and on account of Owner's Lender, if it: (i) cures
the Owner's default within seven (7) days after notice from Contractor to
Owner's Lender or, if the default is not based upon Owner's failure to pay money
due hereunder, commences to cure any non-monetary default during said seven-day
period and thereafter diligently prosecutes the cure to completion; and (ii)
agrees in writing to perform all of Owner's obligations under this Agreement
accruing from and after the date Owner's Lender succeeds to Owner's rights and
obligations hereunder. Whenever an approval, permission or other action by Owner
is required or permitted under this Agreement or the Contract Documents, such
action may, at the option of Owner and Owner's Lender, be deemed to include and
be conditioned upon the authorization of or joinder in such action by Owner's
Lender. Provided that Owner has notified Contractor of the name and address of
Owner's Lender to whom default notices should be sent, Contractor shall send to
Owner's Lender copies of all default notices delivered to Owner.
SECTION 20 - OWNER'S RIGHT TO PERFORM
Upon Contractor's failure to perform any obligation of Contractor
hereunder, including, without limitation, payment of subcontractors or suppliers
and payment of premiums for any of Contractor's insurance required hereunder,
Owner shall have the right, but not the obligation, to perform such obligations
on behalf of Contractor. Contractor shall immediately reimburse Owner the
reasonable cost of Owner's performing such obligations on Contractor's behalf,
including, without limitation, reimbursement for any amounts that were expended
by Owner, reasonable compensation to Owner for the use of its personnel,
materials and overhead, and Owner's reasonable attorneys' fees, plus interest at
the Interest Rate from the date of expenditure to the date of repayment.
16
Schedule 3 to Exhibit B
<PAGE> 80
SECTION 21 - SUBCONTRACTS AND SEPARATE CONTRACTS
21.1 All portions of the Work that Contractor has not been accustomed to
performing with its own personnel shall be performed by third parties under
subcontracts or other agreements with Contractor. Owner shall have the right to
approve all subcontractors, suppliers and other parties used by Contractor in
connection with the Work, and Contractor shall not engage anyone to whom Owner
has reasonable objection. No subcontracts or other agreements shall be awarded
on the basis of cost plus a fee without Owner's consent. Contractor shall be
responsible to Owner for the acts and omissions of all Contractor's employees
and all subcontractors or suppliers, their agents and employees, and all other
persons performing any of the Work under a contract or other agreement with
Contractor. Contractor's obligations hereunder shall under no circumstances be
reduced or released by execution of any subcontract for performance of the Work
or by Owner's approval of any subcontractors or suppliers or their contracts.
Contractor shall require all such parties to agree to be bound by the terms of
this Agreement as applicable to their portion of the Work. Any warranties,
guarantees, or the like with respect to the Work from any such parties shall be
assigned by Contractor to Owner for the benefit of Owner. All contracts with
third parties shall be assigned to Owner by Contractor upon termination of this
Agreement, subject to any rights of the parties under their contracts.
Contractor will, on a daily basis, direct through its various supervisory
personnel the work of the subcontractors and suppliers in accordance with the
Contract Documents. This supervision shall include, but not be limited to,
scheduling, quality control, proper superintendence of the progress of the Work
and its compliance with the Contract Documents and performance of the Work in
accordance with the Construction Rules attached hereto as EXHIBIT E.
21.2 Should Owner elect to award separate contracts for work on the
Project not covered by this Agreement, Owner shall be responsible to Contractor
to insure that such contractors coordinate and cooperate with Contractor, and
observe Contractor's reasonable rules regarding access to the Work, safety, and
labor relations. All such contractors shall supply and bear the cost of their
own hoisting, utilities, safety requirements, and clean-up.
SECTION 22 - INSURANCE REQUIREMENTS
22.1 Without limiting Contractor's indemnifications of Owner contained in
this Agreement, Contractor shall maintain as a part of the Cost of the Work, and
shall require that each subcontractor maintain at its own expense, at all times
during the Work and for such additional periods as required by this Agreement,
the insurance as described below. This insurance shall not be terminated, be
permitted to expire, be subject to non-renewal, nor be materially altered except
on thirty (30) days prior written notice to Owner. Such insurance shall be
maintained in coverage amounts, with deductible amounts, with insurers, and on
forms acceptable to Owner and Owner's Lender, and, for all policies except
Worker's Compensation Insurance, shall name Owner and Owner's Lender
(collectively, with Owner, the "OWNER PARTIES") as additional insureds, with
coverage provided to such additional insureds as broad as provided to the named
insured. All insurance policies required shall be issued by companies licensed
in the State who hold a current Policyholder Alphabetic Category Rating of not
less than "A-" and Financial Size Category Rating of not less than "VII"
according to the latest edition of Best's Key Rating Guide. Prior to Contractor
commencing the Work, Contractor shall, and shall require each subcontractor to,
furnish Owner with certificates of insurance, on forms acceptable to Owner,
evidencing that insurance policies are in full force and effect that provide the
required coverages and amounts of insurance listed below along with a copy of
the endorsement providing additional insured coverage to the Owner Parties. At
Owner's request, Contractor shall provide Owner with copies of each insurance
policy. Any other insurance carried by any Owner Parties which may be
applicable, shall be deemed to be excess insurance and Contractor's and each
subcontractor's insurance shall contain a provision that it is deemed primary
and non-contributing with any insurance carried by Owner Parties. Each required
insurance policy shall contain a Cross Liability or Separation of Insureds
provision that provides that the insurance applies separately to each insured
against whom a claim is filed and that the policies do not exclude coverage for
claims or suits by one insured against the other. Contractor shall be
responsible for any deductible
17
Schedule 3 to Exhibit B
<PAGE> 81
amounts under the required insurance policies, except to the extent such amounts
may be included as part of the Cost of the Work. Contractor and each
subcontractor shall provide the following insurance:
(a) Workers' Compensation Insurance complying with applicable State
and federal statutes, and Employer's Liability Insurance with limits of
not less than $1,000,000 for bodily injury by accident and $1,000,000 for
bodily injury by disease.
(b) Commercial General Liability Insurance, written on an
"occurrence form" basis, including Products - Completed Operations
Liability, Blanket Contractual Liability Coverage and liabilities arising
out of the actions of Independent Contractors. Such insurance shall
contain minimum limits of liability as follows: not less than $5,000,000
for each of General Aggregate (other than Products - Completed
Operations), Products - Completed Operations Aggregate, Personal and
Advertising Injury, and each occurrence. Such insurance shall contain no
explosion, collapse, or underground hazard exclusions. Such insurance
shall remain in force at least until the expiration of five years after
completion of the Work. All such policies shall contain a provision that
defense costs are paid in addition to and do not deplete any of the policy
limits and a provision that the General Aggregate and Products Completed
Operations Aggregate apply separately to each project for which Contractor
or any subcontractor provides services away from premises owned by or
rented to Contractor or any subcontractor.
(c) Business Auto Coverage with a limit of liability of $5,000,000
for any one accident or loss. Such insurance shall cover liability arising
out of the use of owned, non-owned and hired automobiles.
(d) If Contractor or any subcontractors use owned, chartered, leased
or hired mobile construction equipment, Contractor shall, and shall
require subcontractors to, maintain (or caused to be maintained) an
"equipment floater" of the "all-risk" type, with limits not less than the
full value of such equipment located at the job site and all of
Contractor's and any subcontractor's business personal property, including
tools and equipment, none of which will be insured under the Owner's
Builder's Risk Insurance Policy. Carriers furnishing such insurance shall
be required to waive all rights of subrogation against Owner Parties.
22.2 The Commercial General Liability and Business Auto insurance may be
provided on a continuation of primary and umbrella insurance policies. Any such
umbrella insurance policies shall provide that the coverage "follows form" to
the underlying insurance and that such policy provides equivalent or broader
coverage than that provided by such underlying insurance.
22.3 Contractor hereby waives all rights of recovery against Owner Parties
on account of loss or damage occasioned to Contractor or others under
Contractor's control to the extent such loss or damage is insured against under
any insurance policies which may be in force at the time of the loss or damage
or would have been insured against if Contractor had complied with its
obligations under this Section.
22.4 If Contractor fails to comply with any of the provisions of this
insurance section, Contractor shall, at its own cost, defend, indemnify, protect
and hold harmless the Owner Parties from and against any and all Claims arising
or resulting from the death or injury to any person or damage to any property to
the extent that the Owner Parties would have been protected by any and all
insurance arrangements made by Contractor, or any third party, had Contractor
complied with all of the provisions of this Section.
22.5 Neither Contractor nor any subcontractor shall settle any claims made
under its insurance policies for the Project without first consulting with and
obtaining the consent of Owner. All insurance proceeds paid under any insurance
policies for damage to the Project or Property shall be paid to Owner; provided,
however, that in all
18
Schedule 3 to Exhibit B
<PAGE> 82
cases, payment and use of insurance proceeds shall be done in compliance with
the requirements of Owner's Lender.
22.6 Owner shall carry the Builders' Risk Insurance, which policy shall
contain a waiver of subrogation against Contractor, its directors, partners,
managers, members, officers, employees and agents. Owner shall furnish
Contractor with a certificate of insurance, on a form acceptable to Contractor,
evidencing that the Builders' Risk Insurance policy is in full force and effect
and that the waiver of subrogation has been obtained.
SECTION 23 - LIMITATION ON OWNER'S LIABILITY
Any liability that may arise as a consequence of the execution or
performance of this Agreement by or on behalf of Owner shall only be a liability
of Owner and shall not constitute the personal liability of any of the other
Indemnitees.
SECTION 24 - MISCELLANEOUS PROVISIONS
24.1 ASSIGNMENT. This Agreement is personal to Contractor and may not be
assigned by Contractor, without Owner's prior written consent, and any such
attempted assignment shall be void. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
successors and assigns.
24.2 NOTICE. All notices and any other communications permitted or
required under this Agreement must be in writing and will be effective (i)
immediately upon delivery in person or by facsimile, provided delivery is made
during regular business hours or receipt is acknowledged by a person reasonably
believed by the delivering party to be employed by the recipient, or (ii) 24
hours after deposit with a commercial courier or delivery service for overnight
delivery, provided delivery is made during regular business hours or receipt is
acknowledged by a person reasonably believed by the delivering party to be
employed by the recipient, or (iii) three (3) days after deposit with the United
States Postal Service, certified mail, return receipt requested, postage
prepaid. All notices must be properly addressed and delivered to the parties at
the addresses set forth in the Basic Contract Information, or at such other
addresses as either party may subsequently designate by written notice given in
the manner provided in this paragraph.
24.3 HEADINGS. The headings used herein are for purposes of convenience
only and should not be used in construing the provisions hereof.
24.4 TIME. Time is of the essence for the payment and performance of all
obligations under this Agreement.
24.5 COVENANT OF FURTHER ASSURANCES. The parties hereby agree to execute
such other documents and perform such other acts as may be necessary or
desirable to carry out the purposes of this Agreement.
24.6 ENTIRE AGREEMENT. The Contract Documents represent the entire and
only agreement between the parties and supersedes all other prior and
contemporaneous agreements, whether oral or written, express or implied, with
respect to each Project. The parties acknowledge and agree that they may not and
are not relying on any representation, promise, inducement, or other statement,
whether oral or written and by whomever made, that is not contained expressly
herein.
24.7 MODIFICATIONS. This Agreement may be modified or amended only by a
written instrument signed by an authorized officer of each party. Any oral
modifications or amendments are unenforceable.
19
Schedule 3 to Exhibit B
<PAGE> 83
24.8 PARTIAL INVALIDITY. If any term, covenant or condition of this
Agreement or its application to any person or circumstances shall be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such term or provision to other persons or circumstances shall not be affected,
and each term hereof shall be valid and enforceable to the fullest extent
permitted by law.
24.9 NO WAIVER. No breach of any of the terms or provisions of this
Agreement should be deemed consented to or excused, nor shall the validity of
the performance of any representation, promise or undertaking herein be deemed
waived, nor shall any delay or deviation from the time or manner of any
performance be deemed consented to unless such consent, excuse or waiver shall
be in writing and signed by the party claimed to have consented, excused or
waived. Any such consent, excuse or waiver shall not constitute a consent to,
waiver of, or excuse for any other similar or dissimilar breach, delay or
deviation.
24.10 ATTORNEYS' FEES. In the event of any controversy, claim or action,
whether based on contract, tort or other cause of action, being filed between
the parties respecting or in any way related to this Agreement, the prevailing
party shall be entitled, in addition to all expenses, fees, consultants' and
expert witness fees, costs or damages, to reasonable attorneys' fees, whether or
not such controversy was litigated or prosecuted to judgment, including without
limitation, all such fees, costs and expenses incurred in connection with any
proceedings under the United States Bankruptcy Code involving any party to this
Agreement. The "prevailing party" shall be determined by the court or arbitrator
before whom the action was brought based upon an assessment of which party's
major arguments or positions taken in the suit or proceeding could fairly be
said to have prevailed over the other party's major arguments or positions on
major disputed issues in the court's or arbitrator's decision. Any attorneys'
fees and other costs and expenses incurred by either party in enforcing a
judgment in its favor under this Agreement shall be recoverable separately from
and in addition to any other amount included in such judgment, and such
attorneys' fees' obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged in any such
judgment, which shall be deemed an "actual pecuniary loss" within the meaning of
Bankruptcy Code Section 365(b)(1)(B).
24.11 GOVERNING LAW; FORUM. This Agreement is entered into and shall be
governed by and construed in accordance with the laws of the State. The parties
agree that all suits or actions of any kind brought to interpret or enforce the
terms of, or otherwise arising out of or relating to, this Agreement shall be
filed and litigated in the state or federal courts of San Francisco, California,
and Contractor hereby consents to the personal and subject matter jurisdiction
of said courts.
24.12 INTERPRETATION. All parties have been represented by counsel in the
preparation and negotiation of this Agreement, and this Agreement shall be
construed according to the fair meaning of its language. The rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in interpreting this Agreement.
24.13 COMPLIANCE WITH LAWS. Each party shall comply with all applicable
laws, rules, regulations, orders, consents and permits in the performance of all
of their obligations under this Agreement.
24.14 COUNTERPARTS. This Agreement may be executed in any number of
original counterparts, all of which evidence only one agreement binding on all
parties, even though all parties are not signatory to the same counterpart.
24.15 EXHIBITS. The Basic Contract Information and all Recitals and
Exhibits referred to in this Agreement are incorporated herein by reference and
shall be deemed part of this Agreement.
20
Schedule 3 to Exhibit B
<PAGE> 84
24.16 AUTHORITY. Each of the individuals executing this Agreement on
behalf of a party individually represents and warrants that he or she has been
authorized to do so and has the power to bind the party for whom they are
signing.
24.17 SAFETY CONDITIONS. At the point of commencement of the Work,
Contractor and/or its separate subcontractors shall be fully responsible for the
onsite management, safety supervision and subcontractor supervision/coordination
of all personnel performing the Work.
24.18 LABOR RELATIONS. It is understood and agreed by Contractor that the
construction of the Work by Contractor and/or its separate subcontractors shall
in no way affect existing relationships with organized labor at the Property.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
OWNER: CONTRACTOR:
Security Dynamics Technologies Inc., Commercial Interior Contractors,
a division of William Wilson &
Associates
William Wilson & Associates,
a California corporation
By: By:
------------------------- --------------------------
Name: Name: ED DONNELLY
------------------------- --------------------------
Title: Title: VICE-PRESIDENT
------------------------- --------------------------
21
Schedule 3 to Exhibit B
<PAGE> 85
EXHIBIT A TO CONSTRUCTION AGREEMENT
[List of Plans and Specifications for First Project]
1
Schedule 3 to Exhibit B
<PAGE> 86
EXHIBIT B TO CONSTRUCTION AGREEMENT
PROJECT ORDER FOR NEW PROJECTS
Owner:(Tenant) Security Dynamics Technologies, Inc.
Contractor: Commercial Interior Contractors
Architect: TBD
Property Address: 2955 Campus Dr.
San Mateo, CA.
Project Description:
Contractor's Fee: 4 percent of the Cost of the Work.
--------
Guaranteed Maximum Price: TBD
Completion Date: TBD
List of Plans and To be incorporated upon receipt via Addenda
Specifications: to Contract.
(See exhibit "A" for listing)
Other Terms and Conditions: None
Attach General Conditions See Attached
Schedule of Values:
This Project Order creates a new Project pursuant to the terms of the
Construction Agreement, dated ____________, 1997, between Owner and Contractor.
Except as specifically amended in this Project Order, all terms and conditions
of that Construction Agreement shall apply to this Project, and this Project
Order shall be deemed an amendment to the Construction
Agreement.
OWNER: CONTRACTOR:
Security Dynamics Technologies Inc., Commercial Interior Contractors,
a division of William Wilson &
Associates
By: By:
---------------------------- -----------------------------
Name: Name:
------------------------- --------------------------
Title: Title:
------------------------- --------------------------
1
Schedule 3 to Exhibit B
<PAGE> 87
EXHIBIT C TO CONSTRUCTION AGREEMENT
[Application For Payment Form: Attach AIA Form G702]
1
Schedule 3 to Exhibit B
<PAGE> 88
EXHIBIT D TO CONSTRUCTION AGREEMENT
CONDITIONAL WAIVER AND RELEASE UPON
PROGRESS PAYMENT
Upon receipt by the undersigned of a check from ______________________
(Maker of Check)
in the sum of $ __________________ payable to___________________________________
(Amount of Check) (Payee or Payees of Check)
and when the check has been properly endorsed and has been paid by the bank upon
which it is drawn, this document shall become effective to release any
mechanic's lien, stop notice or bond right the undersigned has on the job of
_________________________ located at____________________________________________
(Owner) (Job Description)
__________________________________________ to the following extent. This release
covers a progress payment for labor, services, equipment or material furnished
to_______________________________________ through ________ only and does not
(Your Customer) (Date)
cover any retentions retained before or after the release date, extras
furnished before the release date for which payment has not been received;
extras or items furnished after the release date. Rights based upon work
performed or items furnished under a written change order which has been fully
executed by the parties prior to the release date are covered by this release
unless specifically reserved by the claimant in this release. This release of
any mechanic's lien, stop notice, or bond right shall not otherwise affect the
contract rights, including rights between parties to the contract based on a
rescission, abandonment, or breach of the contract, or the right of the
undersigned to recover compensation for furnished labor, services, equipment, or
material covered by this release if that furnished labor, services, equipment or
material was not compensated by the progress payment. Before any recipient of
this document relies on it, said party should verify evidence of payment to the
undersigned.
Dated: ________________ _______________________________________
(Company Name)
By: __________________________________
(Title)
1
Schedule 3 to Exhibit B
<PAGE> 89
UNCONDITIONAL WAIVER AND RELEASE UPON
PROGRESS PAYMENT
The undersigned has been paid and has received a progress payment in the
sum of $_______________________ for labor, services, equipment, or material
(Amount of Check)
furnished to______________________ on the job of _______________________ located
(Your Customer) (Owner)
at___________________________________________ and does hereby release any
(Job Description)
mechanic's lien, stop notice or bond right that the undersigned has on the above
referenced job to the following extent. This release covers a progress payment
for labor, services, equipment or materials furnished to_____________________
through __________ only and does not cover any retentions (Your Customer)
(Date)
retained before or after the release date; extras furnished before the release
date for which payment has not been received; extras or items furnished after
the release date. Rights based upon work performed or items furnished under a
written change order which has been fully executed by the parties prior to the
release date are covered by this release unless specifically reserved by the
claimant in this release. This release of any mechanic's lien, stop notice, or
bond right shall not otherwise affect the contract rights, including rights
between parties to the contract based on rescission, abandonment, or breach of
the contract, or the right of the undersigned to recover compensation for
furnished labor, services, equipment, or material covered by this release if
that furnished labor, services, equipment, or material was not compensated by
the progress payment.
Dated: ________________ _______________________________________
(Company Name)
By: __________________________________
(Title)
NOTICE: THIS DOCUMENT WAIVES RIGHTS UNCONDITIONALLY AND STATES THAT YOU HAVE
BEEN PAID FOR GIVING UP THOSE RIGHTS. THIS DOCUMENT IS ENFORCEABLE
AGAINST YOU IF YOU SIGN IT, EVEN IF YOU HAVE NOT BEEN PAID. IF YOU
HAVE NOT BEEN PAID, USE A CONDITIONAL RELEASE FORM.
2
Schedule 3 to Exhibit B
<PAGE> 90
UNCONDITIONAL WAIVER AND RELEASE
UPON
FINAL PAYMENT
The undersigned has been paid in full for all labor, services, equipment
or material furnished to ___________________________ on the job of______________
(Your Customer) (Owner)
___________________________ located at_________________________________________
(Job Description)
and does hereby waive and release any right to a mechanic's lien, stop notice,
or any right against a labor and material bond on the job, except for disputed
claims for extra work in the amount of $_______________.
Dated: _______________
_______________________________________
(Company Name)
By: __________________________________
Name: _________________________________
Title: ________________________________
NOTICE: THIS DOCUMENT WAIVES RIGHTS UNCONDITIONALLY AND STATES THAT YOU HAVE
BEEN PAID FOR GIVING UP THOSE RIGHTS. THIS DOCUMENT IS ENFORCEABLE AGAINST YOU
IF YOU SIGN IT, EVEN IF YOU HAVE NOT BEEN PAID. IF YOU HAVE NOT BEEN PAID, USE A
CONDITIONAL RELEASE FORM.
3
Schedule 3 to Exhibit B
<PAGE> 91
CONDITIONAL WAIVER AND RELEASE
UPON
FINAL PAYMENT
Upon receipt by the undersigned of a check from __________________________ in
(Maker of Check)
the sum of $___________________ payable to _____________________ and when the
(Amount of Check) (Payee(s) of Check)
check has been properly endorsed and has been paid by the bank upon which it is
drawn, this document shall become effective to release any mechanic's lien, stop
notice, or bond right the undersigned has on the job of _____________ located at
(Owner)
________________________________.
(Job Description)
This release covers the final payment to the undersigned for all labor,
services, equipment or material furnished on the job, except for disputed claims
for additional work in the amount of $__________________. Before any recipient
of this document relies on it, the party should verify evidence of payment to
the undersigned.
Dated: _______________
_______________________________________
(Company Name)
By: __________________________________
Name: _________________________________
Title: ________________________________
4
Schedule 3 to Exhibit B
<PAGE> 92
EXHIBIT E TO CONSTRUCTION AGREEMENT
CONSTRUCTION RULES
The Contractor and all subcontractors, suppliers, materialmen, and their
employees and anyone working for or on their behalf, shall be immediately
advised of the following rules and regulations concerning their proper conduct
within the Property. It is the Contractor's responsibility to ensure that its
subcontractors and suppliers read and understand these rules and regulations.
Ignorance of these rules and regulations is not a waiver of liability or
responsibility.
1. No one shall be allowed to endanger the Property, its premises, or its
occupants in any manner whatsoever. In the event that a situation occurs which
threatens the Property or its occupants in any manner, the Contractor,
subcontractor, supplier, etc., must take steps to correct the hazardous
condition. In the event that the Contractor's personnel fail to correct the
hazardous condition, the Owner reserves the right to immediately take steps to
correct the situation at the Contractor's expense.
2. No gasoline operated devises, i.e.: concrete saws, coring machines, welding
machines, etc., shall be permitted within the Property. All work requiring such
devises shall be electrically operated.
3. All gas and oxygen canisters shall be properly chained and supported to
eliminate all potential hazards.
4. All contractors are to use the freight elevator for transportation of
materials and personnel. No materials, equipment, or personnel are permitted to
use the passenger cabs. If for any reason the freight elevator is unavailable,
all contractors are to obtain permission from the manager of the Property prior
to using a passenger elevator. If a contractor or its personnel are found using
the passenger elevators, the elevators will immediately be inspected for damage,
and all damages, whether a result of the contractor's use or not, shall be
corrected at the Contractor's expense.
5. All material deliveries shall be made through the ground floor to the freight
elevator and then transported to the particular floor. Parking of all unloading
and loading vehicles shall be in the marked loading spaces of the parking lot.
Deliveries consisting of bulk materials, or deliveries requiring longer than one
hour, must be scheduled through the manager of the Property. At no time will
material be transported through public areas unless specifically authorized by
such manager.
6. Contractor's personnel shall at all times maintain the highest level of
cleanliness. All construction debris shall be removed on a timely basis and
shall not be allowed to produce a fire or exiting hazard. In the event that the
Contractor fails to keep the Project area free of accumulated waste, the Owner
reserves the right to enter said premises and remove the debris at the
Contractor's expense. In addition, all public areas, such as corridors,
restrooms, janitors' closets, etc., shall be maintained and kept free of
construction debris, dust, etc.
7. Contractors are not permitted to use the restrooms for tool clean-up. Anyone
found using the restroom for cleanup or other similar purposes will be subject
to removal from the Property. If a contractor utilizes the janitorial room, it
must be kept clean at all times. The janitorial room is the only authorized tool
cleanup area on site.
8. All construction trash and debris shall be removed through the freight
elevator in appropriate containers which will assure no leakage of trash or
liquids. No construction debris will be placed in the Property's dumpsters. Each
contractor, subcontractor, or service firm shall be responsible for removing its
trash and debris from the workplace daily. If a dumpster is rented by the
Contractor, Owner must approve where it will be placed. Contractor shall be
responsible for keeping the dumpster covered and preventing debris from flying
out and for keeping the area around the dumpster clean.
Schedule 3 to Exhibit B
<PAGE> 93
9. All work performed in occupied tenant spaces must be cleaned by the
Contractor prior to its leaving the job or at the end of the business day. If
the Owner is required to perform additional cleanup (initial and/or follow-up),
it will be done at the Contractor's expense.
10. Any work involving the building fire alarm system must be cleared through
the manager of the Property prior to the work being started. No adjustments,
corrections, or extensions to the fire alarm system will be made without prior
approval of such manager, or, in his/her absence, the engineer for the Property.
Any part of the fire alarm system removed from service during construction will
be placed back into service at the end of each work day.
11. Contractors are not permitted to enter the fire command center at any time,
unless accompanied by the manager, engineer, or security officer for the
Property.
12. Stairway doors, electrical room doors, telephone room doors, and janitorial
closet doors shall be kept closed at all times on occupied tenant floors.
Contractors found blocking the doors open shall be subject to a $250.00 fine.
13. The Contractor is required to provide and make available a fire extinguisher
within the Project area during construction.
14. Any contractor found guilty of rudeness, use of profanity, or lack of
courtesy to a Property tenant, visitor, or employee will be immediately ejected
from the Property, and will not be allowed to return.
15. Graffiti or vandalism will be not tolerated. Any contractor caught in the
act shall be immediately removed from the Property, and will not be allowed to
return. Any expenses associated with the removal or repair resulting from the
graffiti or vandalism will be at the Contractor's expense.
16. Tobacco chewing or smoking will be not be permitted at the Property.
17. No radios will be permitted on occupied tenant floors, including "Walkman-"
type radios with headsets.
18. Contractors will not be permitted to use restrooms on occupied tenant
floors. Contractors will be instructed by the manager of the Property which
restrooms on unoccupied floors may be used; provided, however, that the
Contractor must keep the restrooms clean and may not use them for cleaning tools
or equipment.
19. No workers will be allowed in the management office for the Property unless
authorized in each instance.
20. All work performed in occupied tenant spaces or public corridors will be
done in a manner designed to produce the least amount of disruption to normal
building operations. Any work involving loud noise or the use of power tools
creating a loud noise is to be reported to the manager of the Property prior to
commencement of the work. Such manager, at his/her sole discretion, will decide
on a case-by-case basis whether the affected work shall take place after hours.
21. The Contractor will be required to provide temporary electrical power within
the Project area for use by its subcontractors. Contractors will not be
permitted to run extension cords through public areas or on occupied tenant
floors.
22. The Contractor shall be responsible for monitoring energy consumption in its
construction area. The Owner will provide normal electrical consumption during
business hours, 7 a.m. through 5 p.m., Monday through Friday. All lights and
equipment must be turned off at the end of the business day. Should the
Contractor continue to leave lights and equipment on during off-hours, the Owner
has the right to bill Contractor for the excess electrical consumption.
Schedule 3 to Exhibit B
<PAGE> 94
23. Contractor's personnel will park in designated areas only. Vehicles parked
in other areas may be towed without notice at the vehicle owners expense.
24. Owner's representatives reserve the right to inspect work, stop work, and/or
have a worker removed from the job at any time during the contract.
25. Contractors shall not block the freight elevator doors open. A door hold
button has been supplied in the freight elevator for temporarily holding the
doors open to off-load tools, equipment, and supplies, but only for that
purpose. It is not to be used to hold the doors open for quick visits to a
floor.
26. The Contractor will be required to furnish the manager of the Property with
a list of subcontractors prior to commencement of the job. This list will
include phone numbers and contacts for each subcontractor.
27. Contractors needing to work on weekends will provide the manager of the
Property with a list of contractors scheduled to work. This list should include
the number of employees, the company, and the estimated hours the contractors
will be working.
28. All contractors working after 5 p.m. and on weekends will be required to
sign in and out at the security guard station.
29. Rubber or polyurethane wheels are required on all material handling
equipment transporting materials across granite, marble or stone surfaces.
30. No tool belts are to be worn outside the work area.
31. Clothing shall be appropriate for the construction trade involved, i.e., no
shorts or sandals that would be unsafe for the employee. Clothing containing
words, symbols or other forms of communication considered offensive or in bad
taste by the manager of the Property shall not be allowed on site. Proper safety
equipment shall be required as determined by the Contractor, i.e., safety
glasses, goggles, respirators, etc.
32. The following general policy shall apply to all work which potentially
affects the environment of any tenant at the Property:
No work shall be performed in the Property that in any way affects the operation
of any tenant and its ability to function in a quiet and peaceful environment,
without the permission of the manager of the Property. Nor shall any work be
performed in early morning hours, the effects of which (such as odors) linger in
the air after 7 a.m. Proper care shall be taken at all times to insure the
safety of all individuals, furnishings, fixtures and equipment. All building
rules and regulations shall be followed at all times. Contractors and
subcontractors must make arrangements to work on all life safety or mechanical
systems at times convenient to all tenants at the Property and the manager of
the Property. Property personnel will be present when repairs are being made to
such systems to insure the integrity of the systems and the adequacy of such
repairs. Emergency work necessary for the protection of building systems, tenant
equipment or personnel shall not be affected by this policy. However, every
effort shall be taken to notify the manager of the Property before such work is
performed.
FAILURE TO COMPLY WITH ANY OF THESE RULES MAY RESULT IN YOUR CONTRACT BEING
CANCELED AND/OR YOUR PEOPLE BEING ASKED TO LEAVE THE JOB SITE.
Schedule 3 to Exhibit B
<PAGE> 95
EXHIBIT C
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF AUGUST 15, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
BUILDING RULES
The following Building Rules are additional provisions of the foregoing
Lease to which they are attached. The capitalized terms used herein have the
same meanings as these terms are given in the Lease.
1. USE OF COMMON AREAS. Tenant will not obstruct the sidewalks, halls,
passages, exits, entrances, elevators or stairways of the Building ("COMMON
AREAS"), and Tenant will not use the Common Areas for any purpose other than
ingress and egress to and from the Premises. The Common Areas, except for the
sidewalks, are not open to the general public and Landlord reserves the right to
control and prevent access to the Common Areas of any person whose presence, in
Landlord's opinion, would be prejudicial to the safety, reputation and interests
of the Building and its tenants.
2. NO ACCESS TO ROOF. Tenant has no right of access to the roof of the
Building and will not install, repair or replace any antenna, aerial, aerial
wires, fan, air-conditioner or other device on the roof of the Building, without
the prior written consent of Landlord. Any such device installed without such
written consent is subject to removal at Tenant's expense without notice at any
time. In any event Tenant will be liable for any damages or repairs incurred or
required as a result of its installation, use, repair, maintenance or removal of
such devices on the roof and agrees to indemnify and hold harmless Landlord from
any liability, loss, damage, cost or expense, including reasonable attorneys'
fees, arising from any activities of Tenant or of Tenant's Representatives on
the roof of the Building.
3. SIGNAGE. No sign, placard, picture, name, advertisement or notice
visible from the exterior of the Premises will be inscribed, painted, affixed or
otherwise displayed by Tenant on or in any part of the Building without the
prior written consent of Landlord. Landlord reserves the right to adopt and
furnish Tenant with general guidelines relating to signs in or on the Building.
All approved signage will be inscribed, painted or affixed at Tenant's expense
by a person approved by Landlord, which approval will not be unreasonably
withheld.
4. PROHIBITED USES. The Premises will not be used for manufacturing, for
the storage of merchandise held for sale to the general public, for lodging or
for the sale of goods to the general public. Tenant will not permit any food
preparation on the Premises except that Tenant
Exhibit C, Page 1
<PAGE> 96
may use Underwriters' Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages so long as such use is in accordance with all
applicable federal, state and city laws, codes, ordinances, rules and
regulations.
5. JANITORIAL SERVICES. Tenant will not employ any person for the purpose
of cleaning the Premises or permit any person to enter the Building for such
purpose other than Landlord's janitorial service, except with Landlord's prior
written consent. Tenant will not necessitate, and will be liable for the cost
of, any undue amount of janitorial labor by reason of Tenant's carelessness in
or indifference to the preservation of good order and cleanliness in the
Premises. Janitorial service will not be furnished to areas in the Premises on
nights when such areas are occupied after 9:30 p.m., unless such service is
extended by written agreement to a later hour in specifically designated areas
of the Premises.
6. KEYS AND LOCKS. Landlord will furnish Tenant, free of charge, two keys
to each door or lock in the Premises. Landlord may make a reasonable charge for
any additional or replacement keys. Tenant will not duplicate any keys, alter
any locks or install any new or additional lock or bolt on any door of its
Premises or on any other part of the Building without the prior written consent
of Landlord and, in any event, Tenant will provide Landlord with a key for any
such lock. On the termination of the Lease, Tenant will deliver to Landlord all
keys to any locks or doors in the Building which have been obtained by Tenant.
7. FREIGHT. Upon not less than twenty-four hours prior notice to Landlord,
which notice may be oral, an elevator will be made available for Tenant's use
for transportation of freight, subject to such scheduling as Landlord in its
discretion deems appropriate. Tenant shall not transport freight in loads
exceeding the weight limitations of such elevator. Landlord reserves the right
to prescribe the weight, size and position of all equipment, materials,
furniture or other property brought into the Building, and no property will be
received in the Building or carried up or down the freight elevator or stairs
except during such hours and along such routes and by such persons as may be
designated by Landlord. Landlord reserves the right to require that heavy
objects will stand on wood strips of such length and thickness as is necessary
to properly distribute the weight. Landlord will not be responsible for loss of
or damage to any such property from any cause, and Tenant will be liable for all
damage or injuries caused by moving or maintaining such property.
8. NUISANCES AND DANGEROUS SUBSTANCES. Tenant will not conduct itself or
permit Tenant's Representatives or Visitors to conduct themselves, in the
Premises or anywhere on or in the Property in a manner which is offensive or
unduly annoying to any other Tenant or Landlord's property managers. Tenant will
not install or operate any phonograph, radio receiver, musical instrument, or
television or other similar device in any part of the Common Areas and shall not
operate any such device installed in the Premises in such manner as to disturb
or annoy other tenants of the Building. Tenant will not use or keep in the
Premises or the Property any kerosene, gasoline or other combustible fluid or
material other than limited quantities thereof reasonably necessary for the
maintenance of office equipment, or, without Landlord's prior written approval,
use any method of heating or air conditioning other than that supplied by
Landlord. Tenant will not use or keep any foul or noxious gas or substance in
the Premises or
Exhibit C, Page 2
<PAGE> 97
permit or suffer the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by reason of noise,
odors or vibrations, or interfere in any way with other tenants or those having
business therein. Tenant will not bring or keep any animals in or about the
Premises or the Property.
9. BUILDING NAME AND ADDRESS. Without Landlord's prior written consent,
Tenant will not use the name of the Building in connection with or in promoting
or advertising Tenant's business except as Tenant's address.
10. BUILDING DIRECTORY. A directory for the Building will be provided for
the display of the name and location of tenants. Landlord reserves the right to
approve any additional names Tenant desires to place in the directory and, if so
approved, Landlord may assess a reasonable charge for adding such additional
names.
11. WINDOW COVERINGS. No curtains, draperies, blinds, shutters, shades,
awnings, screens or other coverings, window ventilators, hangings, decorations
or similar equipment shall be attached to, hung or placed in, or used in or with
any window of the Building without the prior written consent of Landlord, and
Landlord shall have the right to control all lighting within the Premises that
may be visible from the exterior of the Building.
12. FLOOR COVERINGS. Tenant will not lay or otherwise affix linoleum,
tile, carpet or any other floor covering to the floor of the Premises in any
manner except as approved in writing by Landlord. Tenant will be liable for the
cost of repair of any damage resulting from the violation of this rule or the
removal of any floor covering by Tenant or its contractors, employees or
invitees.
13. WIRING AND CABLING INSTALLATIONS. Landlord will direct Tenant's
electricians and other vendors as to where and how data, telephone, and
electrical wires and cables are to be installed. No boring or cutting for wires
or cables will be allowed without the prior written consent of Landlord. The
location of burglar alarms, smoke detectors, telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the written
approval of Landlord.
14. OFFICE CLOSING PROCEDURES. Tenant will see that the doors of the
Premises are closed and locked and that all water faucets, water apparatus and
utilities are shut off before Tenant or its employees leave the Premises, so as
to prevent waste or damage. Tenant will be liable for all damage or injuries
sustained by other tenants or occupants of the Building or Landlord resulting
from Tenant's carelessness in this regard or violation of this rule. Tenant will
keep the doors to the Building corridors closed at all times except for ingress
and egress.
15. PLUMBING FACILITIES. The toilet rooms, toilets, urinals, wash bowls
and other apparatus shall not be used for any purpose other than that for which
they were constructed and no foreign substance of any kind whatsoever shall be
disposed of therein. Tenant will be liable for any breakage, stoppage or damage
resulting from the violation of this rule by Tenant, its employees or invitees.
Exhibit C, Page 3
<PAGE> 98
16. USE OF HAND TRUCKS. Tenant will not use or permit to be used in the
Premises or in the Common Areas any hand trucks, carts or dollies except those
equipped with rubber tires and side guards or such other equipment as Landlord
may approve.
17. REFUSE. Tenant shall store all Tenant's trash and garbage within the
Premises or in other facilities designated By Landlord for such purpose. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in the city in which the Building is located without being in
violation of any law or ordinance governing such disposal. All trash and garbage
removal shall be made in accordance with directions issued from time to time by
Landlord, only through such Common Areas provided for such purposes and at such
times as Landlord may designate. Tenant shall comply with the requirements of
any recycling program adopted by Landlord for the Building.
18. SOLICITING. Canvassing, peddling, soliciting and distribution of
handbills or any other written materials in the Building are prohibited, and
Tenant will cooperate to prevent the same.
19. PARKING. Tenant will use, and cause Tenant's Representatives and
Visitors to use, any parking spaces to which Tenant is entitled under the Lease
in a manner consistent with Landlord's directional signs and markings in the
Parking Facility. Specifically, but without limitation, Tenant will not park, or
permit Tenant's Representatives or Visitors to park, in a manner that impedes
access to and from the Building or the Parking Facility or that violates space
reservations for handicapped drivers registered as such with the California
Department of Motor Vehicles. Landlord may use such reasonable means as may be
necessary to enforce the directional signs and markings in the Parking Facility,
including but not limited to towing services, and Landlord will not be liable
for any damage to vehicles towed as a result of non-compliance with such parking
regulations.
20. FIRE, SECURITY AND SAFETY REGULATIONS. Tenant will comply with all
safety, security, fire protection and evacuation measures and procedures
established by Landlord or any governmental agency.
21. RESPONSIBILITY FOR THEFT. Tenant assumes any and all responsibility
for protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.
22. SALES AND AUCTIONS. Tenant will not conduct or permit to be conducted
any sale by auction in, upon or from the Premises or elsewhere in the Property,
whether said auction be voluntary, involuntary, pursuant to any assignment for
the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.
23. WAIVER OF RULES. Landlord may waive any one or more of these Building
Rules for the benefit of any particular tenant or tenants, but no such waiver by
Landlord will be
Exhibit C, Page 4
<PAGE> 99
construed as a waiver of such Building Rules in favor of any other tenant or
tenants nor prevent Landlord from thereafter enforcing these Building Rules
against any or all of the tenants of the Building.
24. EFFECT ON LEASE. These Building Rules are in addition to, and shall
not be construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Violation of these Building
Rules constitutes a failure to fully perform the provisions of the Lease, as
referred to in Section 15.1 - "Events of Default".
25. NON-DISCRIMINATORY ENFORCEMENT. Subject to the provisions of the Lease
(and the provisions of other leases with respect to other tenants), Landlord
shall use reasonable efforts to enforce these Building Rules in a
non-discriminatory manner, but in no event shall Landlord have any liability for
any failure or refusal to do so (and Tenant's sole and exclusive remedy for any
such failure or refusal shall be injunctive relief preventing Landlord from
enforcing any of the Building Rules against Tenant in a manner that
discriminates against Tenant).
26. ADDITIONAL AND AMENDED RULES. Landlord reserves the right to rescind
or amend these Building Rules and/or adopt any other and reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building and for the preservation of good order
therein.
INITIALS:
Landlord _______
Tenant _______
Exhibit C, Page 5
<PAGE> 100
EXHIBIT D
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF AUGUST 15, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
ADDITIONAL PROVISIONS RIDER
35. COST OF LIVING ADJUSTMENTS.
(a) The monthly Base Rent shall be adjusted effective on the second
anniversary of the Commencement Date and every two years (on the anniversary of
the Commencement Date) thereafter (each an "ADJUSTMENT DATE"), to reflect
increases in the cost of living. The adjustment shall be calculated by
multiplying the average monthly Base Rent for the two year period immediately
preceding the Adjustment Date (the "PRIOR PERIOD") by the percentage increase in
the Consumer Price Index, measured from (i) the last calendar month for which
the Consumer Price Index was published at least one hundred twenty (120) days
immediately before the commencement of the Prior Period to (ii) the same
calendar month immediately prior to the end of the Prior Period; provided,
however, that on each Adjustment Date the monthly Base Rent shall be increased
by a minimum of three percent (3%) per annum, cumulative, from the Commencement
Date or the prior Adjustment Date, as applicable, and by a maximum of six
percent (6%) per annum, cumulative, from the Commencement Date or the prior
Adjustment Date, as applicable. The monthly Base Rent for each twenty-four (24)
month period after the first Adjustment Date shall be the monthly Base Rent for
the Prior Period plus the increase calculated in accordance with the preceding
sentence. In no event shall the monthly Base Rent following any such adjustment
be less than the monthly Base Rent in effect immediately prior to such
adjustment.
(b) The term "CONSUMER PRICE INDEX" means the United States Department of
Labor's Bureau of Labor Statistics' Consumer Price Index, All Urban Consumers,
All Items, San Francisco-Oakland-San Jose, California (1982-84=100), or the
successor of such index.
(c) If the Consumer Price Index is not published by the Bureau of Labor
Statistics or another governmental agency for any month for which an adjustment
in the Consumer Price Index is to be measured, then the foregoing calculations
shall be made using the most closely comparable statistics on the purchasing
power of the consumer dollar as published by a responsible financial authority
selected by Landlord.
Exhibit D, Page 1
<PAGE> 101
(d) If the adjustment provided for in this Section has not been made by
any Adjustment Date, Tenant shall continue to pay monthly Base Rent at the rate
applicable to the Prior Period. Within fifteen (15) days after Tenant receives
Landlord's written notice of the adjusted Base Rent for the then-current
Adjustment Date, Tenant shall pay to Landlord the shortfall between the old Base
Rent, as paid by Tenant to date for the then-current Lease period, and the new
Base Rent payable from the beginning of the then-current Lease period through
the date of Landlord's notice. Thereafter during such Lease period, Tenant shall
pay monthly Base Rent at the new rate set forth in Landlord's notice.
36. LETTER OF CREDIT.
(a) Tenant shall have the right to use a letter of credit as a Security
Deposit pursuant to the provisions of this Section 36. If Tenant elects to
supply to Landlord a letter of credit as the Security Deposit, Tenant shall
deliver to Landlord a clean, unconditional, irrevocable, transferable letter of
credit (the "Letter of Credit") in form, and issued by a financial institution
("Issuer") satisfactory to Landlord. The Letter of Credit shall be in the amount
of $30,000.00, name Landlord as the beneficiary thereunder, and provide that
draws thereunder will be honored upon receipt by Issuer of a written statement
signed by Landlord stating that Landlord is entitled to draw down on the Letter
of Credit. Landlord shall be entitled to draw the entire amount under the Letter
of Credit if either (i) Tenant commits an Event of Default under this Lease,
(ii) Tenant does not deliver to Landlord a replacement letter of credit from
Issuer or another financial institution satisfactory to Landlord in the amount
and form of the initial Letter of Credit no later than one month before the
expiration date of the then existing Letter of Credit, or (iii) upon a proposed
sale or lease of the Building Tenant does not deliver to any the new landlord a
replacement Letter of Credit pursuant to the provisions of (c) below. Any amount
drawn under the Letter of Credit shall be held by Landlord as a security
deposit, subject to the terms of Section 4 of the Lease.
(b) Tenant shall not assign or encumber or attempt to assign or encumber
the Letter of Credit and neither Landlord nor its successors or assigns shall be
bound by any such assignment or encumbrance or attempted assignment or
encumbrance.
(c) If Landlord shall be holding the Letter of Credit as security, then,
in the event of a proposed sale or lease of the Building by Landlord, Tenant
will, upon ten (10) Business Days' notice, at its sole cost and expense, cause
the issuing bank to consent to the assignment or to issue a substitute letter of
credit on identical terms except for the stated beneficiary, from the same
issuing bank or another bank acceptable to Landlord in Landlord's sole
discretion, naming the new landlord as the beneficiary thereof upon delivery by
Landlord of the then outstanding Letter of Credit.
37. PARKING.
(a) TENANT'S PARKING RIGHTS. Landlord shall provide Tenant, on an
unassigned and non-exclusive basis, for use by Tenant and Tenant's
Representatives and Visitors, at the users' sole risk, 3.3 parking spaces in the
Parking Facility for each one thousand (1,000) rentable square
Exhibit D, Page 2
<PAGE> 102
feet of the Premises. The parking spaces to be made available to Tenant
hereunder may contain a reasonable mix of spaces for compact cars and up to ten
percent (10%) of the unassigned spaces may also be designated by Landlord as
Building visitors' parking.
(b) AVAILABILITY OF PARKING SPACES. Landlord shall take reasonable actions
to ensure the availability of the parking spaces leased by Tenant, but Landlord
does not guarantee the availability of those spaces at all times against the
actions of other tenants of the Building and users of the Parking Facility.
Access to the Parking Facility may, at Landlord's option, be regulated by card,
pass, bumper sticker, decal or other appropriate identification issued by
Landlord. Landlord retains the right to revoke the parking privileges of any
user of the Parking Facility who violates the rules and regulations governing
use of the Parking Facility (and Tenant shall be responsible for causing any
employee of Tenant or other person using parking spaces allocated to Tenant to
comply with all parking rules and regulations).
(c) ASSIGNMENT AND SUBLETTING. Notwithstanding any other provision of the
Lease to the contrary, Tenant shall not assign its rights to the parking spaces
or any interest therein, or sublease or otherwise allow the use of all or any
part of the parking spaces to or by any other person other than permitted
subtenants or assignees, except with Landlord's prior written consent, which may
be granted or withheld by Landlord in its sole discretion. In the event of any
separate assignment or sublease of parking space rights that is approved by
Landlord, Landlord shall be entitled to receive, as additional Rent hereunder,
one hundred percent (100%) of any profit received by Tenant in connection with
such assignment or sublease.
(d) CONDEMNATION, DAMAGE OR DESTRUCTION. In the event the Parking Facility
is the subject of a Condemnation, or is damaged or destroyed, and this Lease is
not terminated, and if in such event the available number of parking spaces in
the Parking Facility is permanently reduced, then Tenant's rights to use parking
spaces hereunder may, at the election of Landlord, thereafter be reduced in
proportion to the reduction of the total number of parking spaces in the Parking
Facility, and the Monthly Parking Rental payable hereunder shall be reduced
proportionately. In such event, Landlord reserves the right to reduce the number
of parking spaces to which Tenant is entitled or to relocate some or all of the
parking spaces to which Tenant is entitled to other areas in the Parking
Facility.
38. EXTENSION OPTION.
Provided that Security Dynamics Technologies, Inc. occupies all of the
Premises free from any assignment, sublease or other Transfer, except to
Affiliates, at the time of exercise (it being intended that all rights pursuant
to this provision are and shall be personal to the original Tenant under this
Lease and shall not be transferable or exercisable for the benefit of any
Transferee), and provided Tenant is not in default under either this Lease or
the Lease Agreement dated as of the Lease Date between Tenant and Campus Drive
Investment Company, a California limited partnership ("CDIC"), as Landlord,
pursuant to which Tenant is leasing from CDIC approximately 24,610 square feet
on the first floor of the Building known as 2655 Campus Drive, San Mateo,
California, or any lease between Landlord and Tenant substituted in place
thereof (in either event, the "2655 Campus Drive Lease") at the time of exercise
or at any time
Exhibit D, Page 3
<PAGE> 103
thereafter until the beginning of any such extension of the Term, Tenant shall
have the option (the "EXTENSION OPTION") to extend the Term for one (1)
additional consecutive period of five (5) years (the "EXTENSION PERIOD"), by
giving written notice to Landlord of the exercise of any such Extension Option
at least twelve (12) months, but not more than fifteen (15) months, prior to the
expiration of the initial Term. The exercise of any Extension Option by Tenant
shall be irrevocable and shall cover the entire Premises leased by Tenant
pursuant to this Lease. Upon such exercise, the term of the Lease shall
automatically be extended for the applicable Extension Period without the
execution of any further instrument by the parties; provided that Landlord and
Tenant shall, if requested by either party, execute and acknowledge an
instrument confirming the exercise of the Extension Option. Any Extension Option
shall terminate if not exercised precisely in the manner provided herein. Any
extension of the Term shall be upon all the terms and conditions set forth in
this Lease and all Exhibits thereto, except that: (i) Tenant shall have no
further option to extend the Term of the Lease, other than as specifically set
forth herein; (ii) Landlord shall not be obligated to contribute funds toward
the cost of any remodeling, renovation, alteration or improvement work in the
Premises; and (iii) Base Rent for any such Extension Period shall be the then
Fair Market Base Rental (as defined below) for the Premises for the space and
term involved, which shall be determined as set forth below.
(a) "FAIR MARKET BASE RENTAL" shall mean the "fair market" Base Rent
at the time or times in question for the applicable space, based on the
prevailing rentals then being charged to tenants in the Building and tenants in
other office buildings in the general vicinity of the Building of comparable
size, location, quality and age as the Building for leases with terms equal to
the Extension Period, taking into account the creditworthiness and financial
strength of the tenant, the financial guaranties provided by the tenant (if
any), the value of market concessions (including the value of construction,
renovation, moving and other allowances or rent credits), the desirability,
location in the building, size and quality of the space, tenant finish allowance
and/or tenant improvements, included services, operating expenses and tax and
expense stops or other escalation clauses, and brokerage commissions, for the
space in the Building for which Fair Market Base Rental is being determined and
for comparable space in the buildings which are being used for comparison. Fair
Market Base Rental shall also reflect the then prevailing rental structure for
comparable office buildings in the general vicinity of the Property, so that if,
for example, at the time Fair Market Base Rental is being determined the
prevailing rental structure for comparable space and for comparable lease terms
includes periodic rental adjustments or escalations, Fair Market Base Rental
shall reflect such rental structure.
(b) Landlord and Tenant shall endeavor to agree upon the Fair Market
Base Rental. If they are unable to so agree within thirty (30) days after
receipt by Landlord of Tenant's notice of exercise of the Extension Option,
Landlord and Tenant shall mutually select a licensed real estate broker who has
at least five (5) years experience in leasing office space and is active in the
leasing of office space in the general vicinity of the Property. Landlord shall
submit Landlord's determination of Fair Market Base Rental and Tenant shall
submit Tenant's determination of Fair Market Base Rental to such broker, at such
time or times and in such manner as Landlord and Tenant shall agree (or as
directed by the broker if Landlord and Tenant do not promptly agree). The broker
shall select either Landlord's or Tenant's determination as the Fair Market Base
Rental, and such determination shall be binding on Landlord and Tenant. If
Exhibit D, Page 4
<PAGE> 104
Tenant's determination is selected as the Fair Market Base Rental, then Landlord
shall bear all of the broker's cost and fees. If Landlord's determination is
selected as the Fair Market Base Rental, then Tenant shall bear all of the
broker's cost and fees.
(c) In the event the Fair Market Base Rental for any Extension
Period has not been determined at such time as Tenant is obligated to pay Base
Rent for such Extension Period, Tenant shall pay as Base Rent pending such
determination, the Base Rent in effect for such space immediately prior to the
Extension Period; provided, that upon the determination of the applicable Fair
Market Base Rental, any shortage of Base Rent paid, together with interest at
the rate specified in the Lease, shall be paid to Landlord by Tenant.
(d) In no event shall the Base Rent during any Extension Period be
less than the Base Rent in effect immediately prior to such Extension Period.
(e) The term of this Lease, whether consisting of the Initial Term
alone or the Initial Term as extended by any Extension Period (if any Extension
Option is exercised), is referred to in this Lease as the "Term."
39. RIGHT OF FIRST OFFER.
(a) Provided (x) at least fifteen (15) full calendar months remain in the
Term of this Lease, (y) Security Dynamics Technologies, Inc. has not assigned
this Lease or sublet all of the Premises, except to Affiliates (it being
intended that all rights pursuant to this provision are and shall be personal to
the original Tenant under this Lease and shall not be transferable or
exercisable for the benefit of any Transferee), and (z) Tenant is not in default
beyond any applicable notice and cure period under either this Lease or the 2655
Campus Drive Lease at the time of the exercise of any such right or at any time
thereafter until delivery of possession of the space to Tenant, and subject to
any and all rights of other tenants in the Project with respect to such space
(including renewal and extension rights and rights of first offer, first
negotiation, first refusal or other expansion rights) existing as of the date of
this Lease, Tenant shall have a one-time right of first offer (the "Right of
First Offer") to lease certain space in the Building and in other buildings
currently owned by Landlord and located in the Project, as follows:
(i) In the Building, Suite 100 (first floor, excluding any cafe,
restaurant or other food service space) containing
approximately 30,220 rentable square feet;
(ii) In the Building, Suite 200 (second floor) containing
approximately 30,180 rentable square feet;
(iii) In the Building, Suite 300 (third floor) containing
approximately 31,197 rentable square feet;
(iv) In the building located at 2600 Campus Drive, San Mateo,
California, Suite 100 containing approximately 5,743 rentable
square feet; and
Exhibit D, Page 5
<PAGE> 105
(v) In the building located at 2600 Campus Drive, San Mateo,
California, Suite 175 containing approximately 6,271 rentable
square feet.
(b) Such Right of First Offer may only be exercised with respect to (A)
space which has been previously leased and as to which each then existing
tenant, subtenant or other occupant of the space has elected not to extend or
renew its lease or otherwise to re-lease such space and (B) all of the space
being offered by Landlord. If any space qualifying for such Right of First Offer
becomes available, and Landlord then owns both the Building and the building in
which the space is located, Landlord shall offer to lease such space to Tenant
at the same rent and on the same terms that Landlord intends to offer to other
prospective tenants. Tenant shall have ten (10) Business Days following receipt
of Landlord's offer with respect to any such space within which to notify
Landlord in writing of its intention to lease such space, and such notice, if
given by Tenant, shall constitute an acceptance of Landlord's terms for the
lease of such space. If Tenant exercises such Right of First Offer, the space to
be leased by Tenant shall be leased on the same terms and conditions as are
contained in this Lease (subject to an extension of the Term pursuant to the
provisions of Subsection (d) below of this Section 39), except for the economic
and other terms specifically set forth in Landlord's notice, and the parties
shall execute an amendment to this Lease to include such space in the Premises
and otherwise to provide for the leasing of such space on such terms. If more
than sixty (60) months remain on the Term of this Lease at the commencement date
of any space leased pursuant to this Right of First Offer, then the expiration
date for such space leased pursuant to this Right of First Offer shall be the
expiration of the Term (so that the expiration date of the space leased pursuant
to the Right of First Offer is coterminous with the expiration date of the then
existing Premises). If Tenant fails so to exercise Tenant's Right of First Offer
within such ten (10) Business Day period, Landlord may thereafter lease the
space described in the Right of First Offer to other prospective tenants.
(c) If Tenant does not lease the space described in the Right of First
Offer when the such space described in the Right of First Offer is first offered
to Tenant by Landlord, then this Right of First Offer shall terminate with
respect to the space then offered to Tenant in the applicable Right of First
Offer and Tenant shall have no further rights to lease the space described in
such Right of First Offer; provided, however, the Right of First Offer shall
remain in effect for the remaining space not described in either (i) the Right
of First Offer, or (ii) any previous Right of First Offer.
(d) If as of the commencement date of any space leased by Tenant pursuant
to any Right of First Offer there remains less than sixty (60) full calendar
months in the Term of this Lease, then the Term of this Lease for the entire
Premises shall be extended by that period of time (the "First Offer Extension
Period") to result in a remaining Term of sixty (60) full calendar months (plus
any first partial month) following the commencement date (the "First Offer Space
Commencement Date") of the space leased pursuant to the applicable Right of
First Offer. In such event the Term of the Lease shall be automatically extended
for the First Offer Extension Period without the execution of any further
instrument by the parties; provided that Landlord and Tenant shall, if requested
by the other party, execute and acknowledge an instrument confirming the First
Offer Extension Period. If Tenant leases space pursuant to the Right of First
Offers as
Exhibit D, Page 6
<PAGE> 106
space becomes available and is offered to Tenant at different dates in
accordance with the Right of First Offer contained herein, then the provisions
of this Subsection (d) shall apply to each space leased by Tenant pursuant to
the applicable Right of First Offer. For the purposes of this Subsection 39 (d)
the term "Original Premises" shall mean those Premises leased in accordance with
the provisions of this Lease prior to any expansion of the Premises pursuant to
any Right of First Offer. If the Term of this Lease is extended pursuant to the
provisions of this Subsection 39 (d), then during the First Offer Extension
Period (whether one or more) Base Rent for the Original Premises shall be at
Fair Market Base Rental (as defined in Section 38 of this Lease) without any
contribution by Landlord of funds to remodel, renovate, alter or improve the
Premises; provided, however, in no event shall the Base Rent for the Original
Premises during the First Offer Extension Period be less than the Base Rent in
effect for the Original Premises immediately prior to the First Offer Extension
Period. The Fair Market Base Rental shall determined pursuant to the provisions
of Section 39 of this Lease at least six (6) months prior to the beginning of
the applicable First Offer Extension Period.
40. FITNESS FACILITY. So long as Tenant is not in default under this Lease and
Tenant executes Landlord's standard waiver and indemnification form, attached
hereto as EXHIBIT E, for the Project's fitness center (the "Fitness Facility"),
then Tenant's employees shall be entitled to use the Fitness Facility. The use
of the Fitness Facility shall be subject to the reasonable rules and regulations
(including rules regarding hours of use) established from time to time by
Landlord for the Fitness Facility. There shall be no separate charge to Tenant
or Tenant's authorized users for the use of the Fitness Facility.
41. SIGN ON MONUMENT. Subject to Landlord obtaining a permit from the applicable
governmental authority to construct a monument for signs, and so long as
Security Dynamics Technologies, Inc. has not assigned this Lease or sublet any
of the Premises (it being intended that all rights pursuant to this provision
are and shall be personal to the original Tenant under this Lease and shall not
be transferable or exercisable for the benefit of any Transferee), Security
Dynamics Technologies, Inc. shall have the right to install and maintain in a
first class condition a sign in the proposed sign monument located adjacent to
the Building, for no additional rent, subject to governmental approval of a
separate signage application and subject to review and approval by Landlord, in
Landlord's sole discretion, of the size, design, materials, color, illumination,
and all other aspects of any proposed sign. All costs and expenses of processing
governmental applications, permits, construction, installation and maintenance
of Tenant's sign shall be borne by Tenant.
42. ROOFTOP EQUIPMENT.
(a) SATELLITE DISH. Subject to all other provisions of the Lease, Tenant
shall have the non-exclusive right to install on the roof of the Building and
use during the Term of the Lease in conjunction with the conduct of Tenant's
usual business in the Premises one satellite dish antenna, not more than 36" in
diameter, so long as any such installation is designed, made, operated,
maintained, repaired, replaced as necessary, and removed by Tenant at Tenant's
sole cost and expense and at no cost or expense to Landlord, is not visible from
the ground, does not
Exhibit D, Page 7
<PAGE> 107
interfere with communications by others, does not adversely affect the
structural integrity of the roof, cause any leaks or adversely affect any roof
warranty, and complies at all times with all applicable laws and governmental
regulations and the provisions set forth below.
(b) REQUEST BY TENANT & APPROVAL BY LANDLORD. Tenant has not yet
determined what kind of antenna installation Tenant may wish to make, or even
determined whether Tenant will wish to install an antenna at the Building, but
wishes to provide a mechanism for doing so in the future, as set forth in this
Section 42. At least thirty (30) days prior to making any such installation,
Tenant shall submit detailed plans and specifications, describing all aspects of
Tenant's proposed installation, including detailed specifications and plans
concerning the antenna, all associated equipment, the means of attaching the
antenna and associated equipment to the Building, the connections between the
antenna and the equipment and the Premises, power requirements, cable
specifications, equipment and equipment cabinet dimensions and weights, and such
other particulars and details as Landlord may reasonably request in order to
have sufficient information to understand the installation proposed by Tenant
(collectively, the "Plans"), for review and approval by Landlord and Landlord's
consultants. All aspects of the Plans (including the location of any antenna and
any associated equipment) shall be subject to Landlord's prior written approval.
(c) GRANT OF LICENSE. Subject to Tenant's request and Landlord's approval
of Tenant's plans and specifications and written agreement between Landlord and
Tenant concerning the location of any antenna and any associated equipment,
Landlord hereby grants to Tenant, during the Term of the Lease, for no
additional rent or other charge (other than reimbursement of any out-of-pocket
expenditures incurred in good faith by Landlord in connection therewith and
payment of other costs as provided below), the nonexclusive right to use not
more than 100 square feet of space on the roof of the Building at the location
designated or approved by Landlord (the "LICENSED AREA") for the purpose of
installing, operating, using, maintaining and repairing an electronic satellite
antenna for data communications and associated cabling and equipment as defined
and described in the Plans approved by Landlord (the "EQUIPMENT") and including
the right to use certain core areas of the Building as designated by Landlord
and necessary to connect the Equipment to the Premises. Landlord may designate
the location or locations of all the Equipment in its sole discretion. If Tenant
elects to install the Equipment as provided above, the Licensed Area shall be
included within the term Premises for all purposes under the Lease. Landlord
retains the right to grant similar or additional rights and access to others.
(d) USE; COMPLIANCE WITH LAWS. The Licensed Area may be used by Tenant
only for the installation, operation, use, maintenance, repair, replacement and
removal of the Equipment, all at Tenant's sole risk and expense and in full
compliance with all applicable Laws, which Equipment shall be used only in the
conduct of Tenant's business in the Premises. Tenant's right to use the Licensed
Area is personal to Tenant and may not be separately assigned or sublet, except
in connection with an assignment of the Lease or sublease of the entire Premises
consented to by Landlord.
Exhibit D, Page 8
<PAGE> 108
(e) INTERFERENCE. Tenant's use of the Licensed Area and Equipment shall
not interfere in any manner with Landlord's or any tenant's, occupant's or
licensee's use or activities in the Property and shall not damage or interfere
with any facilities or equipment of any type installed by Landlord or any other
person or entity, including without limitation, the Building Systems and any
satellite dishes, antenna, computer or other devices or systems installed at the
Property at any time prior to Landlord's approval of Tenant's Plans and
Equipment. Landlord shall be entitled to withhold approval until Landlord has
been completely satisfied (as determined by Landlord in Landlord's sole and
absolute discretion) that installation and use of Tenant's Equipment will not
cause any such interference. Tenant agrees, warrants and represents that should
any such interference occur, it shall take whatever steps are required to
correct such interference within two (2) business days after receiving written
notice thereof from Landlord, and that should there occur any material
interference with the ability of Landlord or any tenants, occupants or licensees
of the Property to communicate in any manner (whether by radio, television,
electrical, telephone, computer, microwave or otherwise) that Tenant shall take
whatever steps are required to stop such interference (including stopping the
use of the Equipment) within twenty-four (24) hours after receiving written
notice thereof from Landlord. Tenant's failure to promptly correct any such
interference, as set forth herein, shall constitute an Event of Default and
shall entitle Landlord to correct the cause of the interference, including
turning off the utilities to the Licensed Area, and to charge Tenant with all
costs so incurred. Tenant agrees that Landlord shall not be responsible for
preventing or correcting any interference that may be caused to Tenant's
Equipment or its use and that Tenant shall be fully responsible for coordinating
and cooperating with other tenants, occupants or licensees who have
communications devices at the Property in order to minimize or prevent any
interference by or with Tenant's Equipment and its use (except as Landlord may
otherwise expressly agree to the contrary at the time Landlord approves Tenant's
Plans; for example, based on a particular proposed location for Tenant's
antenna, Landlord may agree not to locate anything that would interfere with
Tenant's antenna between Tenant's antenna and the edge of the roof).
(f) INSTALLATION AND MAINTENANCE OF EQUIPMENT. Tenant agrees that the
Licensed Area will be delivered to it in its AS IS and WHERE IS condition and
that Landlord shall have no obligation to modify or install any improvements in
the Licensed Area. Prior to installing any of the Equipment or constructing any
improvements in the Licensed Area, Tenant shall establish to Landlord's
satisfaction that the requirements of Article 11 (Insurance) of the Lease have
been satisfied. Landlord shall have the right to require reasonable
modifications and impose reasonable conditions on Tenant's Plans; provided,
however, that Landlord shall have the absolute right, in its sole discretion, to
require any changes or impose any conditions on the Plans (including without
limitation the right to require which contractors must be used) to the extent
the Plans affect the structural integrity of the Building (including requiring
use of a nonpenetrating roof mount) or any of the Building Systems, or to
prevent interference with any other communications devices at the Property (or
which Landlord has agreed to install or permit to be installed at the Property)
at the time of Landlord's approval, or to minimize the effect of the Equipment
on the appearance of the Building (including installing screens and other
esthetic improvements). Tenant shall be required, at its own cost, to construct
or install any improvements to the Property required by applicable Laws as a
result of Tenant's Equipment or improvements or the use or operation thereof.
The installation of Tenant's Equipment and
Exhibit D, Page 9
<PAGE> 109
construction of all related or required improvements shall be completed by
Tenant, at its sole cost, and in full compliance with the Plans approved by
Landlord and any conditions imposed by Landlord thereon and the requirements of
Article 6 (Alterations) of the Lease. Tenant shall pay all of Landlord's costs
incurred in the review and supervision of Tenant's efforts. Tenant shall at all
times, and at its sole cost, maintain the Equipment and the Licensed Area in a
good, orderly, sanitary and safe condition and repair and restore any loss or
damage Tenant or any of Tenant's Representatives may cause to the Licensed Area
or roof of the Building. Tenant shall have access to the Licensed Area and other
portions of the Property at all reasonable times and as necessary for Tenant's
installation, operation, use, maintenance, repair, replacement and removal of
the Equipment and other improvements installed by Tenant; provided, however,
that all of such access and activities shall be coordinated with Landlord, after
reasonable prior written notice, and shall be performed in a manner to minimize
any disturbance or interference of Landlord and all tenants and other occupants
of the Property, and to the maximum extent possible, shall be performed during
regular business hours for the Property.
(g) TITLE TO EQUIPMENT AND REMOVAL. Tenant shall at all times remain the
owner of all the Equipment, which shall not be deemed fixtures, notwithstanding
their method of installation or attachment to the Building, and shall pay all
Tenant's Taxes with respect to all the Equipment and related improvements
constructed or installed by Tenant. On or before the Expiration Date or earlier
termination date of the Lease, Tenant shall remove all of the Equipment and all
improvements installed or constructed by Tenant, shall restore the Licensed Area
and Property to the condition they were in upon installation of Tenant's
Equipment, reasonable wear and tear excepted, and shall return the Licensed Area
in broom-clean condition; provided, however, that (i) Landlord shall have the
option to require Tenant to leave at the Property any or all of the improvements
installed or constructed by Tenant, excluding the Equipment; (ii) Landlord shall
have the right, in its sole discretion, to approve Tenant's contractor and all
of Tenant's plans for the removal of the Equipment and improvements and
restoration of the Property; and (iii) if any of the improvements installed or
constructed by Tenant at the Property penetrated the room membrane or otherwise
in any affected the watertight integrity of the Building's roof, then upon
removal of such improvements, Tenant shall provide Landlord with a written
warranty, in a form and from a contractor reasonably acceptable to Landlord,
warranting the watertight integrity of the roof for a period of five years after
removal of such improvements. If Tenant does not remove all of its Equipment and
improvements, as required hereunder, Landlord may, at its sole option, either
retain such items as its own, without any further actions, notice or
compensation to Tenant, or remove and dispose of such items in any manner it
chooses, restore the Property as required hereunder and charge Tenant for all
costs incurred in that effort.
(h) UTILITIES. Tenant shall have the right to draw electricity from the
existing electrical service available at the Building; provided, however, that
Landlord shall have the right to stop such service and availability at any time
that Landlord determines, in its reasonable discretion, that providing
electrical service to Tenant is no longer practicable, interferes with the
provision of electrical service to any other tenants or occupants of the
Property or otherwise overloads or endangers the Building Systems. Tenant shall
pay for all costs of electrical service and other utilities provided to the
Licensed Area, which cost shall be determined and billed by Landlord as
equitably and accurately as may be reasonably practicable under the
circumstances
Exhibit D, Page 10
<PAGE> 110
(including applicable Laws and tariffs); provided, however, that Tenant shall
have the right, at its expense, to install and use check meters and similar
devices to measure its use of electricity or other utilities for the Equipment.
(i) RELOCATION. Landlord shall have the right at any time, upon sixty (60)
days' prior written notice to Tenant, to relocate all or any portion of the
Licensed Area and the Equipment, at Landlord's sole cost and at no cost or
expense to Tenant, provided that the relocation does not interfere with Tenant's
operations or use of the Equipment, except for the period of time required for
such relocation.
(j) INDEMNIFICATION AND WAIVER. In addition to the indemnification of
Landlord set forth in the Lease, Tenant shall indemnify, protect, defend and
hold harmless Landlord from any Claims arising out of or resulting from, in
whole or in part, any loss, injury or damage occurring or caused to any person
or property in or about the Licensed Area or the roof of the Building during the
Term; provided, however, that the foregoing indemnification by Tenant shall not
apply to the extent any such Claims are proven by final judgment to have been
caused by acts or omissions of Landlord that constitute gross negligence or
willful misconduct. This indemnification shall apply and be enforced to the
fullest extent permitted by Law and shall survive termination or expiration of
the Term. Landlord shall not be liable to Tenant, and Tenant hereby waives all
claims it may have against Landlord, for any loss, injury or damage to any
person or property in or about the Licensed Area or the roof of the Building,
including interruption of services and loss of use of the Equipment, from any
cause, without limitation as to type or description and specifically including
acts or omissions constituting the active or sole negligence of Landlord, but
excluding from all of the foregoing the acts or omissions of Landlord that are
proven by final judgment to constitute gross negligence or willful misconduct.
Notwithstanding any other provision of the Lease, in no event shall Landlord be
liable to Tenant for any punitive or consequential damages or damages for loss
of business by Tenant. It is the intent of the foregoing provisions that Tenant
shall look to its own insurance for payment or reimbursement for any such loss,
damage, injury or liability.
INITIALS:
Landlord _______
Tenant _______
Exhibit D, Page 11
<PAGE> 111
EXHIBIT E
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF AUGUST 15, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
TENANT'S WAIVER AND INDEMNIFICATION FOR
USE OF THE PROJECT FITNESS FACILITY
Security Dynamics Technologies, Inc. ("Tenant") hereby agrees that the use of
the fitness center in the building known as 2855 Campus Drive, San Mateo,
California (the "Fitness Facility") by Tenant, and by those persons authorized
by Tenant to use the Fitness Facility within the guidelines established for the
Fitness Facility from time to time for the number and type of such authorized
users (collectively "Tenant's Users"), will be entirely at the risk of Tenant
and Tenant's Users. Tenant further agrees that it shall be responsible, and
waives all claims against Peninsula Office Park Associates, L.P. ("Landlord"),
for all costs, damages or liabilities of whatever nature arising out of the use
of the Fitness Facility by Tenant's Users, and agrees to indemnify, defend and
hold harmless Landlord from all claims, lawsuits, damages, expenses or costs,
including reasonable attorneys' fees, arising from or related to the use of the
Fitness Facility by Tenant's Users; provided, however, that the foregoing waiver
and indemnification shall not apply to any injuries or damages caused by the
negligence or willful misconduct of Landlord or its agents or employees. Tenant
agrees that the use of the Fitness Facility shall be in accordance with the
rules and regulations established from time to time by landlord of the Fitness
Facility.
SECURITY DYNAMICS TECHNOLOGIES, INC.
By:______________________________________
Name:_________________________________
Title:________________________________
Date:_________________________________
INITIALS:
Landlord _______
Tenant _______
Exhibit E, Page 1
<PAGE> 112
EXHIBIT F
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF AUGUST 15, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
JANITORIAL SPECIFICATIONS
Janitorial services provided by Landlord shall include a level of service not
less than the following:
1. NIGHTLY SERVICES (five times per week, except holidays)
a. Vacuum all carpets.
b. Dust mop all VCT floors. Damp mop to remove spills and water stains
as required.
c. Damp mop all tile and hardwood floors.
d. Dust all desks and office furniture.
e. Empty all waste paper baskets and other trash containers; replace
liners as appropriate.
f. Remove all trash from floors to designated trash areas.
g. Clean and polish drinking fountains.
h. Wipe down counter tops in kitchen area, clean sinks.
INITIALS:
Landlord _______
Tenant _______
Exhibit F, Page 1
<PAGE> 1
Exhibit 10.8
LEASE AGREEMENT
between
PENINSULA OFFICE PARK ASSOCIATES, L.P.
as "LANDLORD"
and
SECURITY DYNAMICS TECHNOLOGIES, INC.
as "TENANT"
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. PREMISES.......................................................................................................4
2. TERM; POSSESSION...............................................................................................4
3. RENT ..........................................................................................................5
4. SECURITY DEPOSIT..............................................................................................10
5. USE AND COMPLIANCE WITH LAWS..................................................................................10
6. ALTERATIONS...................................................................................................13
7. MAINTENANCE AND REPAIRS.......................................................................................15
8. TENANT'S TAXES................................................................................................17
9. UTILITIES AND SERVICES........................................................................................17
10. EXCULPATION AND INDEMNIFICATION..............................................................................19
11. INSURANCE....................................................................................................20
12. DAMAGE OR DESTRUCTION........................................................................................22
13. CONDEMNATION.................................................................................................24
14. ASSIGNMENT AND SUBLETTING....................................................................................25
15. DEFAULT AND REMEDIES.........................................................................................28
16. LATE CHARGE AND INTEREST.....................................................................................30
17. WAIVER.......................................................................................................30
18. ENTRY, INSPECTION AND CLOSURE................................................................................31
19. SURRENDER AND HOLDING OVER...................................................................................31
20. ENCUMBRANCES.................................................................................................32
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS...............................................................33
22. NOTICES......................................................................................................34
23. ATTORNEYS' FEES..............................................................................................34
24. QUIET POSSESSION.............................................................................................34
25. SECURITY MEASURES............................................................................................34
26. FORCE MAJEURE................................................................................................35
27. RULES AND REGULATIONS........................................................................................35
28. LANDLORD'S LIABILITY.........................................................................................35
29. CONSENTS AND APPROVALS.......................................................................................35
30. BROKERS......................................................................................................36
31. [INTENTIONALLY DELETED]......................................................................................36
32. ENTIRE AGREEMENT.............................................................................................36
33. MISCELLANEOUS................................................................................................36
34. AUTHORITY....................................................................................................37
</TABLE>
<PAGE> 3
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Additional Rent.....................................8
Alterations........................................13
Award..............................................24
Base Operating Costs................................5
Base Taxes..........................................5
Broker.............................................36
Building............................................4
Building Rules.....................................35
Building Systems...................................11
Business Days......................................17
Business Hours.....................................17
Claims.............................................19
Commencement Date...................................4
Condemnation.......................................24
Condemnor..........................................24
Construction Rider..................................4
Controls...........................................16
Date of Condemnation...............................24
Encumbrance........................................32
Environmental Losses...............................11
Environmental Requirements.........................11
Event of Default...................................28
Expiration Date.....................................4
Handled by Tenant..................................11
Handling by Tenant.................................11
Hazardous Materials................................11
HVAC...............................................11
Interest Rate......................................30
Land................................................4
Landlord............................................4
Laws................................................5
Mortgagee..........................................33
Operating Costs.....................................5
Parking Facility....................................4
Peninsula Office Park...............................4
Permitted Hazardous Materials......................12
Premises............................................4
Project.............................................4
Property............................................4
Property Manager...................................20
Proposed Transferee................................26
Rental Tax.........................................17
Representatives....................................11
Scheduled Commencement Date.........................4
Security Deposit...................................10
Service Failure....................................18
Taxes...............................................7
Tenant..............................................4
Tenant's Share......................................8
Tenant's Taxes.....................................17
Tenant Improvements.................................4
Term................................................4
Trade Fixtures.....................................15
Transfer...........................................25
Transferee.........................................26
Visitors...........................................11
</TABLE>
<PAGE> 4
BASIC LEASE INFORMATION
LEASE DATE: For identification purposes only, the date
of this Lease is December 19, 1997
LANDLORD: PENINSULA OFFICE PARK ASSOCIATES, L.P.
a California limited partnership
TENANT: SECURITY DYNAMICS TECHNOLOGIES, INC.,
a Delaware corporation
PROPERTY: Peninsula Office Park Five
PROJECT: Peninsula Office Park
BUILDING ADDRESS: 2755 Campus Drive, San Mateo, CA 94403
RENTABLE AREA OF BUILDING: Approximately 79,642 rentable square feet
PREMISES: Floor: Third (3rd)
Suite Number: 300
Rentable Area: 26,728 rentable square feet
TERM: Approximately Ten (10) Years
SCHEDULED COMMENCEMENT DATE: March 6, 1998
EXPIRATION DATE: The Term of this Lease shall expire (if not
sooner terminated or extended as
provided in this Lease) on the LATER of (x)
the day preceding the tenth (10th)
anniversary of the Commencement Date or (y)
the "Expiration Date" of that certain Lease
Agreement (the "2955 Campus Drive Lease")
dated as of August 15, 1997, by and between
Peninsula Office Park Associates, L. P., a
California limited partnership (as landlord
therein) and Tenant (as tenant therein) for
approximately 31,397 rentable square feet of
Rentable Area on the fourth floor of a
building being constructed at 2955 Campus
Drive, San Mateo, California 94403 (which
"Expiration Date" shall be the day preceding
the tenth anniversary of the "Commencement
Date" of the 2955 Campus Drive Lease).
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<PAGE> 5
BASE RENT: $3.15 per rentable square foot per month
from the Commencement Date through the
day preceding the first anniversary of the
Commencement Date. Thereafter, Base Rent
shall be increased in accordance with the
provisions of Section 35 below.
BASE YEAR: The calendar year 1998
TENANT'S SHARE: 33.56%
SECURITY DEPOSIT: $20,000.00 (in cash or a letter of
credit). Any letter of credit shall be
subject to the provisions of Section 36
below.
LANDLORD'S ADDRESS Peninsula Office Park
FOR PAYMENT OF RENT: File 72882
P.O. Box 61000
San Francisco, CA 94161-2882
BUSINESS HOURS: 8:00 a.m. to 6:00 p.m. Monday - Friday
(excluding Holidays)
LANDLORD'S ADDRESS PENINSULA OFFICE PARK ASSOCIATES, L.P.
FOR NOTICES: c/o William Wilson & Associates
2929 Campus Drive, Suite 145
San Mateo, CA 94403
Attention: Property Management
with a copy to:
PENINSULA OFFICE PARK ASSOCIATES, L.P.
c/o William Wilson & Associates
2929 Campus Drive, Suite 450
San Mateo, CA 94403
Attn: General Counsel
TENANT'S ADDRESS 20 Crosby Drive
FOR NOTICES: Bedford, MA 01730
BROKER(S): Colliers Parrish, Inc.
GUARANTOR(S): (None)
PROPERTY MANAGER: William Wilson & Associates
2929 Campus Drive, Suite 145
San Mateo, CA 94403
ADDITIONAL PROVISIONS: 35. COST OF LIVING ADJUSTMENTS
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<PAGE> 6
36. LETTER OF CREDIT
37. PARKING
38. EXTENSION OPTION
39. RIGHT OF FIRST OFFER
40. FITNESS CENTER
41. SIGN ON MONUMENT
42. ROOFTOP EQUIPMENT
EXISTING TENANT: TENANT ACKNOWLEDGES AND UNDERSTANDS
THAT THE PREMISES ARE CURRENTLY LEASED TO
ANOTHER TENANT AND OCCUPIED BY A SUBTENANT.
LANDLORD BELIEVES THAT THE EXISTING TENANT
AND SUBTENANT WILL AGREE TO TERMINATE THE
EXISTING LEASE AND TO SURRENDER POSSESSION
OF THE PREMISES BY JANUARY 9, 1998, BUT
LANDLORD DOES NOT REPRESENT, WARRANT OR
GUARANTY TERMINATION OF THE EXISTING LEASE
AND SURRENDER OF POSSESSION BY JANUARY 9,
1998.
TENANT ACKNOWLEDGES AND AGREES THAT
TENANT'S RIGHT TO LEASE THE PREMISES IS
STRICTLY CONDITIONED UPON THE EXISTING
TENANT AND SUBTENANT VACATING THE PREMISES.
IF THE COMMENCEMENT DATE HAS NOT OCCURRED OR
BEEN DEEMED TO HAVE OCCURRED ON OR BEFORE
MARCH 1, 1999, THEN LANDLORD AND TENANT
SHALL EACH HAVE THE RIGHT TO TERMINATE THIS
LEASE BY WRITTEN NOTICE TO THE OTHER PARTY.
EXHIBITS:
- ---------
Exhibit A: The Premises
Exhibit B: Construction Rider
Exhibit C: Building Rules
Exhibit D: Additional Provisions
Exhibit E: Fitness Center Waiver
Exhibit F: Janitorial Specifications
The Basic Lease Information set forth above is part of the Lease. In
the event of any conflict between any provision in the Basic Lease Information
and the Lease, the Lease shall control.
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<PAGE> 7
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information ("LANDLORD"), and the Tenant identified in the Basic Lease
Information ("TENANT"). Landlord and Tenant hereby agree as follows:
1. PREMISES.
1.1 LEASE OF PREMISES. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, upon the terms and subject to the conditions of this
Lease, the office space identified in the Basic Lease Information as the
Premises (the "PREMISES"), in the Building located at the address specified in
the Basic Lease Information (the "BUILDING"). The approximate configuration and
location of the Premises are shown on EXHIBIT A. Landlord and Tenant agree that
the rentable area of the Premises for all purposes under this Lease shall be the
Rentable Area specified in the Basic Lease Information. The Property identified
in the Basic Lease Information (the "PROPERTY") includes the Building, the
parking facilities serving the Building (the "PARKING FACILITY"), and the
parcel(s) of Land on which the Building and the Parking Facility are situated
(the "LAND"). The Project identified in the Basic Lease Information (the
"PROJECT") includes the Property, together with certain buildings, land and
common area located in a master development commonly known as "PENINSULA OFFICE
PARK" .
1.2 INITIAL LEASEHOLD IMPROVEMENTS. Tenant shall take the Premises in
their existing "AS IS" condition (but "broom clean"), without any work to be
done by Landlord in the Premises. Landlord's construction obligations in certain
common areas of the Building are set forth in the Construction Rider attached as
EXHIBIT B (the "CONSTRUCTION RIDER"), which also describes the process by which
Tenant shall construct and install improvements in the Premises (the "TENANT
IMPROVEMENTS").
2. TERM; POSSESSION. The term of this Lease (the "TERM") shall commence on the
Commencement Date as described below and, unless sooner terminated, shall expire
on the Expiration Date set forth in the Basic Lease Information (the "EXPIRATION
DATE"). The "COMMENCEMENT DATE" shall be the earlier of (a) fifty-six (56) days
after the date on which Landlord tenders possession of the Premises to Tenant
(after the Existing Tenant has vacated the Premises), or (b) the date upon which
Tenant, with Landlord's written permission, actually occupies and conducts
business in any portion of the Premises. The parties anticipate that the
Commencement Date will occur on or about the Scheduled Commencement Date set
forth in the Basic Lease Information (the "SCHEDULED COMMENCEMENT DATE");
provided, however, that Landlord shall not be liable for any claims, damages or
liabilities if Landlord does not deliver the Premises fifty-six (56) days prior
to the Scheduled Commencement Date. When the Commencement Date has been
established, Landlord and Tenant shall at the request of either party confirm
the Commencement Date and Expiration Date in writing. It is anticipated that
Landlord will tender possession of the Premises to Tenant to permit Tenant to
commence construction of Tenant Improvements as provided in the Construction
Rider prior to the Commencement Date. The terms, conditions and provisions of
this Lease shall apply during any period between the date on which Landlord
tenders possession of the Premises to Tenant and the Commencement Date as though
such period were included in the Term, except that Tenant shall not be obligated
to pay any
-4-
<PAGE> 8
Base Rent or Additional Rent on account of any such period prior to the
Commencement Date and Landlord shall not be obligated to provide any HVAC or
janitorial services to the Premises during any such period prior to the
Commencement Date.
3. RENT.
3.1 BASE RENT. Tenant agrees to pay to Landlord the Base Rent set forth in
the Basic Lease Information, without prior notice or demand, on the first day of
each and every calendar month during the Term, except that Base Rent for the
first full calendar month in which Base Rent is payable shall be paid upon
Tenant's execution of this Lease and Base Rent for any partial month at the
beginning of the Term shall be paid on the Commencement Date. Base Rent for any
partial month at the beginning or end of the Term shall be prorated based on the
actual number of days in the month.
3.2 ADDITIONAL RENT: INCREASES IN OPERATING COSTS AND TAXES.
(a) DEFINITIONS.
(1) "BASE OPERATING COSTS" means Operating Costs for the
calendar year specified as the Base Year in the Basic Lease Information
(excluding therefrom, however, any Operating Costs of a nature that would not
ordinarily be incurred on an annual, recurring basis).
(2) "BASE TAXES" means Taxes for the calendar year specified as
the Base Year in the Basic Lease Information.
(3) "OPERATING COSTS" means all costs of managing, operating,
maintaining and repairing the Property, including all costs, expenditures, fees
and charges for: (A) operation, maintenance and repair of the Property
(including maintenance, repair and replacement of glass, the roof covering or
membrane, and landscaping); (B) utilities and services (including recycling
programs and trash removal), and associated supplies and materials; (C)
compensation (including employment taxes and fringe benefits) for persons who
perform duties in connection with the operation, management, maintenance and
repair of the Building, such compensation to be appropriately allocated for
persons who also perform duties unrelated to the Building; (D) property
(including coverage for earthquake and flood if carried by Landlord), liability,
rental income and other insurance relating to the Property, and expenditures for
deductible amounts paid under such insurance (not to exceed Fifty Thousand and
00/100 Dollars [$50,000.00] in payments for deductible amounts resulting from
perils other than earthquake in any calendar year, with expenditures for
deductible amounts paid in connection with losses caused by earthquake amortized
over ten (10) years, including interest on the unamortized balance at the rate
paid by Landlord on funds borrowed to finance capital improvements [or, if
Landlord pays for such expenditures out of Landlord's funds without borrowing,
the rate Landlord would have paid to borrow such funds]); (E) licenses, permits
and inspections; (F) complying with the requirements of any law, statute,
ordinance or governmental rule or regulation or any orders pursuant thereto
(collectively "LAWS") either (i) not in effect as of the Commencement Date or
(ii) as any Laws in effect as of the Commencement Date may be amended, changed,
added to, interpreted or re-interpreted by applicable governmental authority or
court decision, or administrative ruling subsequent to the Commencement Date;
(G) amortization of capital improvements which are either (1) required to comply
with Laws either (i) not in effect as of the Commencement Date or (ii) as any
Laws in effect as of the Commencement Date may be amended, changed, added to,
interpreted or re-interpreted by applicable governmental authority or court
decision, or administrative ruling subsequent to the
-5-
<PAGE> 9
Commencement Date, or (2) intended to reduce Operating Costs or improve the
utility, efficiency or capacity of any Building System (but only to the extent
of such achieved savings); in either case, with interest on the unamortized
balance at a rate equal to the per annum prime rate in effect at the time of the
expenditure (based on the prime rate published in the Wall Street Journal or the
then substantial equivalent, as reasonably determined by Landlord), plus two
percent (2%) per annum, over such useful life of such improvements; (H) up to
two thousand (2,000) square feet in an office in the Project for the management
of the Property, including expenses of furnishing and equipping such office and
the rental value of any space occupied for such purposes, which management
office costs shall be equitably allocated if the office serves more than one
building; (I) property management fees comparable to fees charged at other first
class office buildings in the Project and in the vicinity of the Property; (J)
accounting, legal and other professional services incurred in connection with
the operation of the Property and the calculation of Operating Costs and Taxes;
(K) a reasonable allowance for depreciation on machinery and equipment used to
maintain the Property and on other personal property owned by Landlord in the
Property (including window coverings and carpeting in common areas); (L)
contesting the validity or applicability of any Laws that may affect the
Property; (M) the Building's share of any shared or common area maintenance fees
and expenses (including costs and expenses of operating, managing, owning and
maintaining the Parking Facility and the common areas of the Project and any
fitness center or conference center in the Project); and (N) any other cost,
expenditure, fee or charge, whether or not hereinbefore described, which in
accordance with generally accepted property management practices would be
considered an expense of managing, operating, maintaining and repairing the
Property. Operating Costs for any calendar year during which average occupancy
of the Building is less than one hundred percent (100%) shall be calculated
based upon the Operating Costs that would have been incurred if the Building had
an average occupancy of one hundred percent (100%) during the entire calendar
year.
Operating Costs shall not include (i) capital improvements (except as
otherwise provided above); (ii) costs of special services rendered to individual
tenants (including Tenant) for which a special charge is made; (iii) interest
and principal payments on loans or indebtedness secured by the Building; (iv)
costs of improvements for Tenant or other tenants of the Building; (v) costs of
services or other benefits of a type which are not available to Tenant but which
are available to other tenants or occupants, and costs for which Landlord is
entitled to be reimbursed by other tenants of the Building other than through
payment of tenants' shares of increases in Operating Costs and Taxes; (vi)
leasing commissions, attorneys' fees and other expenses incurred in connection
with leasing space in the Building or enforcing such leases; (vii) depreciation
or amortization, other than as specifically enumerated in the definition of
Operating Costs above; (viii) costs, fines or penalties incurred due to
Landlord's violation of any Law; (ix) repairs or other work occasioned by fire,
windstorm or other casualty or hazard to the extent such cost exceeds the sum of
(A) the insurance proceeds received by Landlord therefor, plus (B) with respect
to perils other than earthquake, Fifty Thousand Dollars ($50,000), and, with
respect to losses caused by earthquake, the greater of (I) five percent (5%) of
the replacement cost of the Building, amortized over ten (10) years, including
interest on the unamortized balance at the rate paid by Landlord on funds
borrowed
-6-
<PAGE> 10
to finance capital improvements (or, if Landlord pays for such expenditures out
of Landlord's funds without borrowing, the rate Landlord would have paid to
borrow such funds), or (II) Fifty Thousand Dollars ($50,000); (x) advertising,
marketing or promotional expenses, including such expenses incurred in leasing
or procuring new tenants; (xi) repairs or rebuilding necessitated by
condemnation to the extent Landlord receives proceeds from the applicable
condemning authority; (xii) the salaries and benefits of executive officers, if
any, of Landlord; (xiii) those costs in excess of Twenty Thousand and 00/100
Dollars ($20,000.00) per year incurred by Landlord to test, survey, clean up,
contain, abate, remove, or otherwise remedy any spill or discharge of Hazardous
Materials (as defined in Section 5.2 below) within, on, under or about the
Building; (xiv); reserves for repairs, maintenance and/or replacements; (xv)
expenses for repairs, replacements or improvements arising from the initial
construction of the Building to the extent such expenses are reimbursed to
Landlord by reason of warranties from contractors or suppliers; (xvi) costs
relating to maintaining Landlord's existence, either as a corporation,
partnership or other entity, such as trustee's fees, partnership, organization
or administrative expenses, deed recordation expenses, legal and accounting fees
(other than with respect to operations of the Building and the Project); (xvii)
costs incurred due to Landlord's violation of any terms and conditions of this
Lease, or any other lease relating to the Building, (xviii) any compensation
paid to clerks, attendants or other persons in commercial concessions operated
by Landlord; (xix) costs for acquisition of sculpture, paintings or other
objects of art; (xx) title insurance, automobile insurance, key man and other
life insurance, long-term disability insurance and health, accident and sickness
insurance, except only for group plans providing benefits to persons of the
grade of property manager and below employed and engaged in operating and
managing the Project; and (xxii) except as otherwise provided above, any other
expense that under generally accepted accounting principles would not be
considered a normal maintenance or operating expense.
(4) "TAXES" means: all real property taxes and general, special
or district assessments or other governmental impositions, of whatever kind,
nature or origin, imposed on or by reason of the ownership or use of the
Property; governmental charges, fees or assessments for transit or traffic
mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing, police, fire or other
governmental service or purported benefits to the Property; personal property
taxes assessed on the personal property of Landlord used in the operation of the
Property; service payments in lieu of taxes and taxes and assessments of every
kind and nature whatsoever levied or assessed in addition to, in lieu of or in
substitution for existing or additional real or personal property taxes on the
Property or the personal property described above; any increases in the
foregoing caused by changes in assessed valuation, tax rate or other factors or
circumstances; and the reasonable cost of contesting by appropriate proceedings
the amount or validity of any taxes, assessments or charges described above,
provided that with respect to any Taxes paid by Tenant to Landlord, if there is
any subsequent rebate or reimbursement of such Taxes, then Tenant's Share of any
such rebate or reimbursement of Taxes received by Landlord shall be credited
against Taxes paid by Tenant. Taxes shall not include any state and federal
personal or corporate income taxes measured by the income of Landlord from all
sources (other than taxes on rent at the Property), as well as any franchise,
inheritance, or estate, succession, transfer, gift tax, or capital levy. To the
extent paid by Tenant or other tenants as "Tenant's Taxes" (as defined in
Section 8 - Tenant's Taxes), "Tenant's Taxes" shall be excluded from Taxes.
-7-
<PAGE> 11
(5) "TENANT'S SHARE" means the Rentable Area of the Premises
divided by the total Rentable Area of the Building, as set forth in the Basic
Lease Information. If the Rentable Area of the Building is changed or the
Rentable Area of the Premises is changed, by adding or deleting space, as
opposed to remeasurement, at any time, Tenant's Share shall be adjusted
accordingly.
(b) ADDITIONAL RENT.
(1) Tenant shall pay Landlord as "ADDITIONAL RENT" for each
calendar year or portion thereof during the Term Tenant's Share of the sum of
(x) the amount (if any) by which Operating Costs for such period exceed Base
Operating Costs, and (y) the amount (if any) by which Taxes for such period
exceed Base Taxes.
(2) Prior to the end of the Base Year and each calendar year
thereafter, Landlord shall notify Tenant of Landlord's estimate of Operating
Costs, Taxes and Tenant's Additional Rent for the following calendar year.
Commencing on the first day of January of each calendar year and continuing on
the first day of every month thereafter in such year, Tenant shall pay to
Landlord one-twelfth (1/12th) of the reasonably estimated Additional Rent. If
Landlord thereafter estimates that Operating Costs or Taxes for such year will
vary from Landlord's prior estimate, Landlord may, by notice to Tenant, but not
more than two (2) times per calendar year in the event of any increase, revise
the estimate for such year (and Additional Rent shall thereafter be payable
based on the revised estimate).
(3) As soon as reasonably practicable after the end of the Base
Year and each calendar year thereafter, Landlord shall furnish Tenant a
statement with respect to such year, showing Operating Costs, Taxes and
Additional Rent for the year, and the total payments made by Tenant with respect
thereto. Such annual statement shall be set forth in reasonable detail. Upon
receipt of a written request from Tenant Landlord shall furnish to Tenant (i) a
line-item breakdown of component costs (together with a written explanation of
any component cost which exceeded by more than the greater of [x] Five Thousand
and 00/100 Dollars [$5,000.00], or [y] five percent [5%] of the estimate, for
such component cost), (ii) the method Landlord used in calculating any gross up
of actual Operating Costs, (iii) the estimated cost savings realized in the
subject calendar year by any capital improvement the cost of which is included
as a portion of Operating Costs because such capital improvement was intended to
and actually did reduce other Operating Costs, (iv) the method of prorating the
wages, salaries and payroll burden of persons engaged in the management,
operation and/or maintenance of the Project; and (v) an explanation of any
proportionate cost attributable to the Building which represents a proration of
costs of the Project, including the common areas thereof. Unless Tenant raises
any objections to Landlord's statement within one hundred twenty (120) days
after receipt of the same, such statement shall conclusively be deemed correct
and Tenant shall have no right thereafter to dispute such statement or any item
therein or the computation of Additional Rent based thereon for the subject
calendar year, subject to the provisions contained in Subsection (c) below. If
Tenant does object to such statement, then Landlord shall provide Tenant with
reasonable verification of the figures shown on the statement and the parties
shall negotiate in good faith to resolve any disputes. Any objection of Tenant
to Landlord's statement and resolution of any dispute shall not postpone the
time for payment of any amounts due Tenant or Landlord based on Landlord's
statement, nor shall any failure of Landlord
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to deliver Landlord's statement in a timely manner relieve Tenant of Tenant's
obligation to pay any amounts due Landlord based on Landlord's statement.
(4) If Tenant's Additional Rent as finally determined for any
calendar year exceeds the total payments made by Tenant on account thereof,
Tenant shall pay Landlord the deficiency within thirty (30) days of Tenant's
receipt of Landlord's statement. If the total payments made by Tenant on account
thereof exceed Tenant's Additional Rent as finally determined for such year,
Tenant's excess payment shall be credited toward the rent next due from Tenant
under this Lease. For any partial calendar year at the beginning or end of the
Term, Additional Rent shall be prorated on the basis of a 365-day year by
computing Tenant's Share of the increases in Operating Costs and Taxes for the
entire year and then prorating such amount for the number of days during such
year included in the Term. Notwithstanding the termination of this Lease,
Landlord shall pay to Tenant or Tenant shall pay to Landlord, as the case may
be, within thirty (30) days after Tenant's receipt of Landlord's final statement
for the calendar year in which this Lease terminates, the difference between
Tenant's Additional Rent for that year, as finally determined by Landlord, and
the total amount previously paid by Tenant on account thereof.
If for any reason Base Taxes or Taxes for any year during the Term are
reduced, refunded or otherwise changed, Tenant's Additional Rent shall be
credited against the next installment of Rent accordingly. If Taxes are
temporarily reduced as a result of space in the Building being leased to a
tenant that is entitled to an exemption from property taxes or other taxes, then
for purposes of determining Additional Rent for each year in which Taxes are
reduced by any such exemption, Taxes for such year shall be calculated on the
basis of the amount the Taxes for the year would have been in the absence of the
exemption. The obligations of Landlord to refund any overpayment of Additional
Rent and of Tenant to pay any Additional Rent not previously paid shall survive
the expiration of the Term. Notwithstanding anything to the contrary in this
Lease, if there is at any time a decrease in Taxes below the amount of the Taxes
for the Base Year, then for purposes of calculating Additional Rent for the year
in which such decrease occurs and all subsequent periods, Base Taxes shall be
reduced to equal the Taxes for the year in which the decrease occurs.
(c) TENANT'S AUDIT RIGHTS. Tenant, at its expense, shall have the right
upon fifteen (15) days prior written notice to Landlord ( "Tenant's Audit
Notice") to be given, if at all, only within one hundred twenty (120) days after
the date Tenant receives the statement of Additional Rent for any calendar year
to audit Landlord's books and records relating to such statement for such
immediately preceding year, subject to the following terms and conditions: (a)
No audit shall be conducted at any time that there has been any uncured Event of
Default by Tenant; (b) any audit shall be conducted only by a professional firm
employed by Tenant on an hourly or fixed fee basis, and not on a contingency fee
basis; and (c) Tenant shall not audit Landlord's books and records more than one
(1) time for any calendar year. Tenant acknowledges that Tenant's right to
inspect Landlord's books and records with respect to Additional Rent for the
preceding calendar year is for the exclusive purpose of determining whether
Landlord has complied with the terms of the Lease with respect to Additional
Rent. Tenant shall have ninety (90) days after Tenant's Audit Notice to complete
Tenant's inspection of Landlord's books and records concerning Additional Rent
at Landlord's accounting office. During its inspection Tenant agrees to request,
in writing, all pertinent documents relating to the inspection. If in Landlord's
possession, Landlord will provide such documents to Tenant within ten (10) days
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from Landlord's receipt of the request and Tenant shall not remove such records
from Landlord's accounting office, but Tenant shall have the right to make
copies of the relevant documents at Tenant's expense. Tenant shall deliver to
Landlord a copy of the results of such audit within fifteen (15) days of its
receipt by Tenant. The nature and content of any audit are strictly
confidential. Tenant shall not disclose, and Tenant shall prevent Tenant's
accountant, employees and agents from disclosing, the information obtained from
the audit to any other person or entity, including, without limitation, any
other tenant in the Building, or any agent, employee, officer, shareholder,
partner, accountant or attorney of such tenant in the Building. A breach of this
confidentiality agreement shall constitute an Event of Default under this Lease.
No assignee shall conduct an audit for any period during which such assignee was
not in possession of the Premises.
3.3 PAYMENT OF RENT. All amounts payable or reimbursable by Tenant under
this Lease, including late charges and interest, shall constitute rent and shall
be payable and recoverable as rent in the manner provided in this Lease. All
sums payable to Landlord on demand under the terms of this Lease shall be
payable within ten (10) days after notice from Landlord of the amounts due. All
rent shall be paid without offset, recoupment or deduction in lawful money of
the United States of America to Landlord at Landlord's Address for Payment of
Rent as set forth in the Basic Lease Information, or to such other person or at
such other place as Landlord may from time to time designate.
4. SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with
Landlord the amount specified in the Basic Lease Information as the Security
Deposit, if any (the "SECURITY DEPOSIT"), as security for the performance of
Tenant's obligations under this Lease. The Security Deposit may be in the form
of cash or in the form of a letter of credit. If Tenant deposits a letter of
credit for the $20,000.00 security deposit, such letter of credit shall be
subject to all of the terms and conditions of Section 36 below. Landlord may
(but shall have no obligation to) use the Security Deposit or any portion
thereof to cure any Event of Default under this Lease or to compensate Landlord
for any damage Landlord incurs as a result of Tenant's failure to perform any of
Tenant's obligations hereunder. In such event Tenant shall pay to Landlord on
demand an amount sufficient to replenish the Security Deposit. If Tenant is not
in default at the expiration or termination of this Lease, Landlord shall return
to Tenant the Security Deposit or the balance thereof then held by Landlord and
not applied as provided above. Landlord may commingle the Security Deposit with
Landlord's general and other funds. Landlord shall not be required to pay
interest on the Security Deposit to Tenant.
5. USE AND COMPLIANCE WITH LAWS.
5.1 USE. The Premises shall be used and occupied for general business
office purposes and for no other use or purpose. Tenant shall comply with all
present and future Laws relating to Tenant's use or occupancy of the Premises
(and make any repairs, alterations or improvements as required to comply with
all such Laws), and shall observe the "Building Rules" (as defined in Section 27
- - Rules and Regulations); provided, however, that the foregoing shall not be
interpreted to require Tenant to perform structural or capital work unless due
to Tenant's specific use of the Premises. Tenant shall not do, bring, keep or
sell anything in or about the Premises that is prohibited by, or that will cause
a cancellation of or an increase in the existing premium for, any
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insurance policy covering the Property or any part thereof. Tenant shall not
permit the Premises to be occupied or used in any manner that will constitute
waste or a nuisance, or disturb the quiet enjoyment of or otherwise annoy other
tenants in the Building. Without limiting the foregoing, the Premises shall not
be used for educational activities, practice of medicine or any of the healing
arts, providing social services, for any governmental use (including embassy or
consulate use), or for personnel agency, customer service office, studios for
radio, television or other media, travel agency or reservation center operations
or uses. Tenant shall not, without the prior consent of Landlord, (i) bring into
the Building or the Premises anything that may cause substantial noise, odor or
vibration, overload the floors in the Premises or the Building or any of the
heating, ventilating and air-conditioning ("HVAC"), mechanical, elevator,
plumbing, electrical, fire protection, life safety, security or other systems in
the Building ("BUILDING SYSTEMS"), or jeopardize the structural integrity of the
Building or any part thereof; (ii) connect to the utility systems of the
Building any apparatus, machinery or other equipment other than typical office
equipment; or (iii) connect to any electrical circuit in the Premises any
equipment or other load with aggregate electrical power requirements in excess
of 80% of the rated capacity of the circuit.
5.2 HAZARDOUS MATERIALS.
(a) DEFINITIONS.
(1) "HAZARDOUS MATERIALS" shall mean any substance: (A) that
now or in the future is regulated or governed by, requires investigation or
remediation under, or is defined as a hazardous waste, hazardous substance,
pollutant or contaminant under any governmental statute, code, ordinance,
regulation, rule or order, and any amendment thereto, including the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
ss.9601 ET SEQ., and the Resource Conservation and Recovery Act, 42 U.S.C.
ss.6901 ET SEQ., or (B) that is toxic, explosive, corrosive, flammable,
radioactive, carcinogenic, dangerous or otherwise hazardous, including gasoline,
diesel fuel, petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos,
radon and urea formaldehyde foam insulation.
(2) "ENVIRONMENTAL REQUIREMENTS" shall mean all present and
future Laws, orders, permits, licenses, approvals, authorizations and other
requirements of any kind applicable to Hazardous Materials.
(3) "HANDLED BY TENANT" and "HANDLING BY TENANT" shall mean and
refer to any installation, handling, generation, storage, use, disposal,
discharge, release, abatement, removal, transportation, or any other activity of
any type by Tenant or its agents, employees, contractors, licensees, assignees,
sublessees, transferees or representatives (collectively, "REPRESENTATIVES") or
its guests, customers, invitees, or visitors (collectively, "VISITORS"), at or
about the Premises in connection with or involving Hazardous Materials.
(4) "ENVIRONMENTAL LOSSES" shall mean all costs and expenses of
any kind, damages, including foreseeable and unforeseeable consequential
damages, fines and penalties incurred in connection with any violation of and
compliance with Environmental Requirements and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on
marketability or use of any portion of the Premises or Property.
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(b) TENANT'S COVENANTS. No Hazardous Materials shall be Handled
by Tenant at or about the Premises or Property without Landlord's prior written
consent, which consent may be granted, denied, or conditioned upon compliance
with Landlord's requirements, all in Landlord's absolute discretion.
Notwithstanding the foregoing, normal quantities and use of those Hazardous
Materials customarily used in the conduct of general office activities, such as
copier fluids and cleaning supplies ("PERMITTED HAZARDOUS MATERIALS"), may be
used and stored at the Premises without Landlord's prior written consent,
provided that Tenant's activities at or about the Premises and Property and the
Handling by Tenant of all Hazardous Materials shall comply at all times with all
Environmental Requirements. At the expiration or termination of the Lease,
Tenant shall promptly remove from the Premises and Property all Hazardous
Materials Handled by Tenant at the Premises or the Property. Tenant shall keep
Landlord fully and promptly informed of all Handling by Tenant of Hazardous
Materials other than Permitted Hazardous Materials. Tenant shall be responsible
and liable for the compliance with all of the provisions of this Section by all
of Tenant's Representatives and Visitors, and all of Tenant's obligations under
this Section (including its indemnification obligations under paragraph (e)
below) shall survive the expiration or termination of this Lease.
(c) COMPLIANCE. Tenant shall at Tenant's expense promptly take
all actions required by any governmental agency or entity in connection with or
as a result of the Handling by Tenant of Hazardous Materials at or about the
Premises or Property, including inspection and testing, performing all cleanup,
removal and remediation work required with respect to those Hazardous Materials,
complying with all closure requirements and post-closure monitoring, and filing
all required reports or plans. All of the foregoing work and all Handling by
Tenant of all Hazardous Materials shall be performed in a good, safe and
workmanlike manner by consultants qualified and licensed to undertake such work
and in a manner that will not interfere with any other tenant's quiet enjoyment
of the Property or Landlord's use, operation, leasing and sale of the Property.
Tenant shall deliver to Landlord prior to delivery to any governmental agency,
or promptly after receipt from any such agency, copies of all permits,
manifests, closure or remedial action plans, notices, and all other documents
relating to the Handling by Tenant of Hazardous Materials at or about the
Premises or Property. If any lien attaches to the Premises or the Property in
connection with or as a result of the Handling by Tenant of Hazardous Materials,
and Tenant does not cause the same to be released, by payment, bonding or
otherwise, within ten (10) days after the attachment thereof, Landlord shall
have the right but not the obligation to cause the same to be released and any
sums expended by Landlord (plus Landlord's administrative costs) in connection
therewith shall be payable by Tenant on demand.
(d) LANDLORD'S RIGHTS. Landlord shall have the right, but not
the obligation, to enter the Premises at any reasonable time upon advance notice
to Tenant and accompanied by a representative of Tenant, unless no
representative of Tenant meets Landlord's representative at the scheduled time
(provided, in the event of an emergency Landlord shall have the right to enter
the Premises at any time without notice to Tenant, and without being accompanied
by a representative of Tenant) (i) to confirm Tenant's compliance with the
provisions of this Section 5.2, and (ii) to perform Tenant's obligations under
this Section if Tenant has failed to do so after reasonable notice to Tenant.
Landlord shall also have the right to engage qualified Hazardous Materials
consultants to inspect the Premises and review the Handling by Tenant of
Hazardous Materials, including
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review of all permits, reports, plans, and other documents regarding same.
Tenant shall pay to Landlord on demand the costs of Landlord's consultants' fees
and all costs incurred by Landlord in performing Tenant's obligations under this
Section. Landlord shall use reasonable efforts to minimize any interference with
Tenant's business caused by Landlord's entry into the Premises, but Landlord
shall not be responsible for any interference caused thereby.
(e) TENANT'S INDEMNIFICATION. Tenant agrees to indemnify,
defend and hold harmless Landlord and its partners or members and its or their
partners, members, directors, officers, shareholders, employees and agents from
all Environmental Losses and all other claims, actions, losses, damages,
liabilities, costs and expenses of every kind, including reasonable attorneys',
experts' and consultants' fees and costs, incurred at any time and arising from
or in connection with the Handling by Tenant of Hazardous Materials at or about
the Property or Tenant's failure to comply in full with all Environmental
Requirements with respect to the Premises.
(f) LANDLORD'S RESPONSIBILITIES. Landlord shall not use any of
the Land or Building for any activities involving the use, generation, handling,
release, threatened release, treatment, storage, discharge, disposal or
transportation of any Hazardous Materials, except in such quantity or
concentration that is customarily used, stored or disposed in the ordinary
course of the business so long as such activity duly complies with applicable
Laws and good business practice. If Landlord violates the foregoing covenant
resulting in an Environmental Claim (as hereinafter defined) with respect to the
Premises, then Landlord agrees to (a) notify Tenant immediately of any such
Environmental Claim and (b) clean up any contamination in full compliance with
all applicable Laws. "Environmental Claim" means any claim, demand, action,
cause of action, suit, fine, penalty, expense, liability, criminal liability,
judgment, or governmental investigation relating to remediation or compliance
with requirements of Laws covering Hazardous Materials. The term "Environmental
Claim" also includes any costs incurred in responding to efforts to require
remediation and any claim based upon any asserted or actual breach or violation
of any requirements of any Laws covering Hazardous Materials.
6. ALTERATIONS.
6.1 Tenant shall not make any alterations, improvements or changes to the
Premises (including installation of any security system or telephone or data
communication wiring) ("ALTERATIONS"), without Landlord's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.
Notwithstanding any other provision contained herein, Tenant shall not be
required to obtain Landlord's prior consent for minor, non-structural
Alterations that (a) do not affect any of the Building Systems, (b) are not
visible from the exterior of the Premises, and (c) cost less than Twenty-Five
Thousand Dollars ($25,000), so long as Tenant gives Landlord notice of the
proposed Alterations at least ten (10) days prior to commencing the Alterations
and complies with all of the following provisions (except that Tenant shall not
be required to obtain Landlord's approval of any plans or specifications
therefor). Any such Alterations (whether or not requiring Landlord's prior
approval) shall be completed by Tenant at Tenant's sole cost and expense: (i)
with due diligence, in a good and workmanlike manner, using new materials; (ii)
in compliance with plans and specifications reasonably approved by Landlord;
(iii) in compliance with the construction rules and regulations reasonably
promulgated
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by Landlord from time to time; (iv) in accordance with all applicable Laws
(including all work, whether structural or non-structural, inside or outside the
Premises, required to comply fully with all applicable Laws and necessitated by
Tenant's work); and (v) subject to all conditions which Landlord may in
Landlord's discretion reasonably impose. Such conditions may include
requirements for Tenant to: (i) provide payment or performance bonds or
additional insurance (from Tenant or Tenant's contractors, subcontractors or
design professionals) for Alterations costing more than Fifty Thousand and
00/100 Dollars ($50,000.00), except that a payment or performance bond shall not
be required of Landlord's affiliated contractor, Commercial Interior
Contractors; (ii) use contractors or subcontractors approved by Landlord in
Landlord's reasonable discretion; and (iii) remove prior to or upon expiration
or termination of the Term any Alterations (or portions thereof), which in
Landlord's judgment are not typical office space improvements of a type and
quality commonly installed in the Building and in comparable buildings in the
vicinity, as may be designated by Landlord at the time that Landlord's consent
to such Alteration was given (or, if later, within ten days after Landlord's
receipt of Tenant's notice of the proposed Alteration). If any work outside the
Premises, or any work on or adjustment to any of the Building Systems, is
required in connection with or as a result of Tenant's work, such work shall be
performed at Tenant's expense by contractors designated by Landlord. Landlord's
right to review and approve (or withhold approval of) Tenant's plans, drawings,
specifications, contractor(s) and other aspects of construction work proposed by
Tenant is intended solely to protect Landlord, the Property and Landlord's
interests. No approval or consent by Landlord shall be deemed or construed to be
a representation or warranty by Landlord as to the adequacy, sufficiency,
fitness or suitability thereof or compliance thereof with applicable Laws or
other requirements. Except as otherwise provided in Landlord's consent, all
Alterations shall upon installation become part of the realty and be the
property of Landlord. If Tenant elects to install supplemental air conditioning
equipment, Landlord shall cooperate with Tenant to try to provide appropriate
space in which to locate the equipment, in the plenum above the finished ceiling
in the Premises or in an appropriate mechanical equipment room in the Building
(or on the roof of the Building or at such other location in or near the
Building as may be agreed by Landlord and Tenant), provided that (i) appropriate
space is available for such use by Tenant, (ii) the proposed installation and
equipment won't interfere with any of the Building Systems or interfere with
rights of others in the Building and is otherwise acceptable to and approved by
Landlord as provided above, and (iii) any such installation and use thereof
shall be at Tenant's sole cost and expense.
6.2 Before making any Alterations, Tenant shall submit to Landlord for
Landlord's prior reasonable approval reasonably detailed final plans and
specifications prepared by a licensed architect or engineer, a copy of the
construction contract, including the name of the contractor and all
subcontractors proposed by Tenant to make the Alterations and a copy of the
contractor's license. Tenant shall reimburse Landlord upon demand for any
expenses incurred by Landlord in connection with any Alterations made by Tenant,
including reasonable fees (without additional mark-up by Landlord) charged by
Landlord's contractors or consultants to review plans and specifications
prepared by Tenant and to update the existing as-built plans and specifications
of the Building to reflect the Alterations. Tenant shall obtain all applicable
permits, authorizations and governmental approvals and deliver copies of the
same to Landlord before commencement of any Alterations.
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6.3 Tenant shall keep the Premises and the Property free and clear of all
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. If any such lien attaches to the Premises or the Property,
and Tenant does not cause the same to be released by payment, bonding or
otherwise within ten (10) days after the attachment thereof, Landlord shall have
the right but not the obligation to cause the same to be released, and any sums
expended by Landlord (plus Landlord's administrative costs) in connection
therewith shall be payable by Tenant on demand with interest thereon from the
date of expenditure by Landlord at the Interest Rate (as defined in Section 16.2
- - Interest). Tenant shall give Landlord at least ten (10) days' notice prior to
the commencement of any Alterations and cooperate with Landlord in posting and
maintaining notices of non-responsibility in connection therewith.
6.4 Subject to the provisions of Section 5 - Use and Compliance with Laws
and the foregoing provisions of this Section, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures ("TRADE FIXTURES") in the Premises, provided that the Trade Fixtures do
not become an integral part of the Premises or the Building. Tenant shall
promptly repair any damage to the Premises or the Building caused by any
installation or removal of such Trade Fixtures.
7. MAINTENANCE AND REPAIRS.
7.1 By taking possession of the Premises Tenant agrees that the Premises
are then in a good and tenantable condition. During the Term, Tenant at Tenant's
expense but under the direction of Landlord (except that minor cosmetic repairs
and maintenance shall not require direction from Landlord), shall repair and
maintain the Premises, including the interior walls, floor coverings, ceiling
(ceiling tiles and grid), Tenant Improvements, Alterations, fire extinguishers,
outlets and fixtures, and any appliances (including dishwashers, hot water
heaters and garbage disposers) in the Premises, in a first class condition, and
keep the Premises in a clean, safe and orderly condition.
7.2 Landlord shall maintain or cause to be maintained in a first class
condition and repair, the structural portions of the Building, the roof,
foundations, floors and exterior walls and windows of the Building, the Building
Systems, and the public and common areas of the Property, such as elevators,
stairs, corridors and restrooms. Landlord shall be under no obligation to
inspect the Premises. Tenant shall promptly report in writing to Landlord any
defective condition known to Tenant which Landlord is required to repair. As a
material part of the consideration for this Lease, Tenant hereby waives any
benefits of any applicable existing or future Law, including the provisions of
California Civil Code Sections 1932(1), 1941 and 1942, that allows a tenant to
make repairs at its landlord's expense.
7.3 Landlord hereby reserves the right, at any time and from time to time,
without liability to Tenant, and without constituting an eviction, constructive
or otherwise, or entitling Tenant to any abatement of rent or to terminate this
Lease or otherwise releasing Tenant from any of Tenant's obligations under this
Lease:
(a) To make alterations, additions, repairs, improvements to or
in or to decrease the size of area of, all or any part of the Building, the
fixtures and equipment therein, and the
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Building Systems (except that Landlord shall not have any right under this
provision materially to reduce the size of the Premises, or permanently,
materially and adversely to affect Tenant's access to and use of the Premises,
except only as may be required to comply with Laws or as a result of any
casualty or Condemnation);
(b) To change the Building's name or street address; provided,
however, that so long as Tenant continues to occupy at least 75% of the Premises
free from sublease, assignment or other Transfer, Landlord shall not change the
name of the Building to the name of a business competitor of Tenant specified on
the list of competitors identified by Tenant in a written notice to Landlord,
which notice may be updated by Tenant not more frequently than once every six
months and shall at no time include more than ten competitors (and if the name
of more than one operating unit, division or subsidiary of any particular
business entity is a competitor Tenant wishes to list, Tenant shall specifically
identify the operating unit, division or subsidiary and each such operating
unit, division or subsidiary shall be counted separately as one of the maximum
of ten competitors to be included on Tenant's list at any one time);
(c) To install and maintain any and all signs on the exterior
and interior of the Building; provided, however, that so long as Tenant
continues to occupy at least 75% of the Premises free from sublease, assignment
or other Transfer, Landlord shall not install on the exterior of the Building
identification signage of a business competitor of Tenant specified on any
current list of competitors delivered by Tenant to Landlord as described in
Section 7.3(b) above (but including the name of a competitor on the proposed
sign monument referred to in Section 41 shall not be prohibited by this
provision);
(d) To reduce, increase, enclose or otherwise change at any
time and from time to time the size, number, location, lay-out and nature of the
common areas (including the Parking Facility) and other tenancies and premises
in the Property and to create additional rentable areas through use or enclosure
of common areas (except that Landlord shall not have any right under this
provision materially to reduce the size of the Premises, or permanently,
materially and adversely to affect Tenant's access to and use of the Premises,
except only as may be required to comply with Laws or as a result of any
casualty or Condemnation); and
(e) If any governmental authority promulgates or revises any
Law or imposes mandatory or voluntary controls or guidelines on Landlord or the
Property relating to the use or conservation of energy or utilities or the
reduction of automobile or other emissions or reduction or management of traffic
or parking on the Property (collectively "CONTROLS"), to comply with such
Controls, whether mandatory or voluntary, or make any alterations to the
Property related thereto.
In connection with any work performed by Landlord pursuant to paragraphs
(a) or (d) of this Section 7.3, Landlord shall use reasonable efforts to
minimize interference with the conduct of Tenant's business in the Premises to
the extent reasonably practicable under the circumstances. Notwithstanding the
foregoing, however, if such work prevents Tenant from reasonably using a
material portion of the Premises, and Tenant in fact ceases to use such portion
of the Premises, for an uninterrupted period in excess of five (5) Business
Days, Tenant shall be entitled to an abatement of Base Rent and Additional Rent
with respect to the portion of the Premises that Tenant is so prevented from
using and in fact not using, with the abatement commencing on the sixth (6th)
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Business Day of the period and continuing until Tenant is no longer so prevented
from using such portion of the Premises (or any earlier date on which Tenant
actually uses such portion of the Premises for any purpose). Notwithstanding
Tenant's entitlement to rent abatement under the preceding provisions, Tenant
shall continue to pay Tenant's then current rent until such time as Landlord and
Tenant agree on the amount of the rent abatement. If Landlord and Tenant are
unable to agree on the amount of such abatement within ten (10) Business Days of
the date they commence negotiations regarding the abatement, then either party
may submit the matter to binding arbitration pursuant to Sections 1280 ET SEQ.
of the California Code of Civil Procedure.
8. TENANT'S TAXES. "TENANT'S TAXES" shall mean (a) all taxes, assessments,
license fees and other governmental charges or impositions levied or assessed
against or with respect to Tenant's personal property or Trade Fixtures in the
Premises, whether any such imposition is levied directly against Tenant or
levied against Landlord or the Property, (b) all rental, excise, sales or
transaction privilege taxes arising out of this Lease (excluding, however, state
and federal personal or corporate income taxes measured by the income of
Landlord from all sources) imposed by any taxing authority upon Landlord or upon
Landlord's receipt of any rent payable by Tenant pursuant to the terms of this
Lease ("RENTAL TAX"), and (c) any increase in Taxes attributable to inclusion of
a value placed on Tenant's personal property, Trade Fixtures or Alterations.
Tenant shall pay any Rental Tax to Landlord in addition to and at the same time
as Base Rent is payable under this Lease, and shall pay all other Tenant's Taxes
before delinquency (and, at Landlord's request, shall furnish Landlord
satisfactory evidence thereof). If Landlord pays Tenant's Taxes or any portion
thereof, Tenant shall reimburse Landlord upon demand for the amount of such
payment, together with interest at the Interest Rate from the date of Landlord's
payment to the date of Tenant's reimbursement.
9. UTILITIES AND SERVICES.
9.1 DESCRIPTION OF SERVICES. Landlord shall furnish to the Premises
reasonable amounts of electricity, water, and janitorial service. Landlord shall
also provide the Building with normal fluorescent tube replacement, window
washing, elevator service, and common area toilet room supplies. Landlord shall
furnish reasonable amounts of heat, ventilation and air-conditioning during the
Business Hours specified in the Basic Lease Information ("BUSINESS HOURS") on
weekdays except public holidays ("BUSINESS DAYS"). Any additional utilities or
services that Landlord may agree to provide (including lamp or tube replacement
for other than Building Standard lighting fixtures) shall be at Tenant's sole
expense.
9.2 PAYMENT FOR ADDITIONAL UTILITIES AND SERVICES.
(a) Upon request by Tenant in accordance with the procedures
established by Landlord from time to time for furnishing HVAC service at times
other than Business Hours on Business Days, Landlord shall furnish such service
to Tenant and Tenant shall pay for such services on an hourly basis at the then
prevailing rate established for the Building by Landlord.
(b) If the temperature otherwise maintained in any portion of
the Premises by the HVAC systems of the Building is affected as a result of (i)
any lights, machines or equipment used by Tenant in the Premises beyond what is
normally used in comparable office space by a
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typical and reasonable computer software company at the date of this Lease, or
(ii) the occupancy of the Premises by more than one person per 150 square feet
of rentable area, then Landlord shall have the right to install any machinery or
equipment reasonably necessary to restore the temperature, including
modifications to the standard air-conditioning equipment. The cost of any such
equipment and modifications, including the cost of installation and any
additional cost of operation and maintenance of the same, shall be paid by
Tenant to Landlord upon demand.
(c) If Tenant's usage of electricity, water or any other
utility service exceeds the use of such utility Landlord determines to be
typical, normal and customary for the Building, Landlord may determine the
amount of such excess use by any reasonable means (including the installation at
Landlord's request but at Tenant's expense of a separate meter or other
measuring device) and charge Tenant for the cost of such excess usage. In
addition, Landlord may impose a reasonable charge for the use of any additional
or unusual janitorial services required by Tenant because of any unusual Tenant
Improvements or Alterations, the carelessness of Tenant or the nature of
Tenant's business (including hours of operation).
9.3 INTERRUPTION OF SERVICES. In the event of an interruption in, or
failure or inability to provide any of the services or utilities described in
Section 9.1 - "Description of Services" (a "SERVICE Failure"), such Service
Failure shall not, regardless of its duration, constitute an eviction of Tenant,
constructive or otherwise, or impose upon Landlord any liability whatsoever,
including, but not limited to, liability for consequential damages or loss of
business by Tenant or, except as provided herein, entitle Tenant to an abatement
of rent or to terminate this Lease.
(a) If any Service Failure not caused by Tenant or its
Representatives prevents Tenant from reasonably using a material portion of the
Premises and Tenant in fact ceases to use such portion of the Premises, Tenant
shall be entitled to an abatement of Base Rent and Additional Rent with respect
to the portion of the Premises that Tenant is prevented from using by reason of
such Service Failure in the following circumstances: (i) if Landlord fails to
commence reasonable efforts to remedy the Service Failure within ten (10)
Business Days following the occurrence of the Service Failure, and such failure
has persisted and continuously prevented Tenant from using a material portion of
the Premises during that period, the abatement of rent shall commence on the
eleventh Business Day following the Service Failure and continue until Tenant is
no longer so prevented from using such portion of the Premises; and (ii) if the
Service Failure in all events is not remedied within thirty (30) days following
the occurrence of the Service Failure and Tenant in fact does not use such
portion of the Premises for an uninterrupted period of thirty (30) days or more
by reason of such Service Failure, the abatement of rent shall commence no later
than the thirty-first day following the occurrence of the Service Failure and
continue until Tenant is no longer so prevented from using such portion of the
Premises.
(b) If a Service Failure is caused by Tenant or its
Representatives, Landlord shall nonetheless remedy the Service Failure, at the
expense of Tenant (to the extent that Landlord does not receive insurance
proceeds indemnifying Landlord against such expense), pursuant to Landlord's
maintenance and repair obligations under Section 7 - "Maintenance and Repair" or
Section 12.1 - "Landlord's Duty to Repair," as the case may be, but Tenant shall
not be entitled to an abatement of rent or to terminate this Lease as a result
of any such Service Failure.
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(c) Notwithstanding Tenant's entitlement to rent abatement
under the preceding provisions, Tenant shall continue to pay Tenant's then
current rent until such time as Landlord and Tenant agree on the amount of the
rent abatement. If Landlord and Tenant are unable to agree on the amount of such
abatement within ten (10) Business Days of the date they commence negotiations
regarding the abatement, then either party may submit the matter to binding
arbitration pursuant to Sections 1280 ET SEQ. of the California Code of Civil
Procedure.
(d) In addition to the foregoing provisions, if there is a
Service Failure not caused by Tenant or its Representatives and such Service
Failure prevents Tenant from conducting its business in the Premises in the
manner in which Tenant intends to conduct such business, and (i) Landlord fails
to commence reasonable efforts to remedy the Service Failure within ninety (90)
days following the occurrence of the Service Failure, or (ii) the Service
Failure in all events is not remedied within one (1) year following its
occurrence and Tenant in fact does not conduct any business in the Premises for
an uninterrupted period of one (1) year or more, Tenant shall have the right to
terminate this Lease by written notice delivered to Landlord within ten (10)
Business Days following the event described in clauses (i) or (ii) above giving
rise to the right to terminate.
(e) Where the cause of a Service Failure is within the control
of a public utility or other public or quasi-public entity outside Landlord's
control, notification to such utility or entity of the Service Failure and
request to remedy the failure shall constitute "reasonable efforts" by Landlord
to remedy the Service Failure.
(f) Tenant hereby waives the provisions of California Civil
Code Section 1932(1) or any other applicable existing or future law, ordinance
or governmental regulation permitting the termination of this Lease due to such
interruption, failure or inability.
10. EXCULPATION AND INDEMNIFICATION.
10.1 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall indemnify,
protect, defend and hold Tenant harmless from and against any claims, actions,
liabilities, damages, costs or expenses, including reasonable attorneys' fees
and costs incurred in defending against the same ("CLAIMS") asserted by any
third party against Tenant for loss, injury or damage, to the extent such loss,
injury or damage is caused by the willful misconduct or negligent acts or
omissions of Landlord or its authorized representatives.
10.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall indemnify,
protect, defend and hold Landlord harmless from and against Claims arising from
(a) the acts or omissions of Tenant or Tenant's Representatives or Visitors in
or about the Property, or (b) any construction or other work undertaken by
Tenant on the Premises (including any design defects), excluding any work
performed by Landlord or Landlord's contractors or employees, or (c) any loss,
injury or damage, howsoever and by whomsoever caused, to any person or property,
occurring in or about the Premises during the Term, excepting only Claims
described in this clause (c) to the extent they are caused by the willful
misconduct or negligent acts or omissions of Landlord or its authorized
representatives.
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10.3 DAMAGE TO TENANT AND TENANT'S PROPERTY. Landlord shall not be liable
to Tenant for any loss, injury or other damage to Tenant or to Tenant's property
in or about the Premises or the Property from any cause (including defects in
the Property or in any equipment in the Property; fire, explosion or other
casualty; bursting, rupture, leakage or overflow of any plumbing or other pipes
or lines, sprinklers, tanks, drains, drinking fountains or washstands in, above,
or about the Premises or the Property; or acts of other tenants in the
Property). Tenant hereby waives all claims against Landlord for any such loss,
injury or damage and the cost and expense of defending against claims relating
thereto, including any loss, injury or damage caused by Landlord's negligence
(active or passive) or willful misconduct. The foregoing provisions of this
Section 10.3 shall not affect Landlord's indemnification of Tenant as provided
in Section 10.1. Notwithstanding any other provision of this Lease to the
contrary, in no event shall Landlord or Tenant be liable to the other party for
any punitive or consequential damages or damages for loss of business by Tenant
or Landlord except for any liability which Tenant might have for holding over in
the Premises beyond the expiration of the Term in accordance with the provisions
of Section 19.2 of this Lease.
10.4 SURVIVAL. The obligations of the parties under this Section 10 shall
survive the expiration or termination of this Lease.
11. INSURANCE.
11.1 TENANT'S INSURANCE.
(a) LIABILITY INSURANCE. Tenant shall maintain in full force
throughout the Term, commercial general liability insurance providing coverage
on an occurrence form basis with limits of not less than Two Million Dollars
($2,000,000.00) each occurrence for bodily injury and property damage combined,
Two Million Dollars ($2,000,000.00) annual general aggregate, and Two Million
Dollars ($2,000,000.00) products and completed operations annual aggregate.
Tenant's liability insurance policy or policies shall: (i) include premises and
operations liability coverage, products and completed operations liability
coverage, broad form property damage coverage including completed operations,
blanket contractual liability coverage including, to the maximum extent
possible, coverage for the indemnification obligations of Tenant under this
Lease, and personal and advertising injury coverage; (ii) provide that the
insurance company has the duty to defend all insureds under the policy; (iii)
provide that defense costs are paid in addition to and do not deplete any of the
policy limits; (iv) cover liabilities arising out of or incurred in connection
with Tenant's use or occupancy of the Premises or the Property; and (v) extend
coverage to cover liability for the actions of Tenant's Representatives and
Visitors. Each policy of liability insurance required by this Section shall: (i)
contain a cross liability endorsement or separation of insureds clause; (ii)
provide that any waiver of subrogation rights or release prior to a loss does
not void coverage; (iii) provide that it is primary to and not contributing
with, any policy of insurance carried by Landlord covering the same loss; (iv)
provide that any failure to comply with the reporting provisions shall not
affect coverage provided to Landlord, its partners, property managers and
Mortgagees; and (v) name Landlord, its partners, the Property Manager identified
in the Basic Lease Information (the "PROPERTY MANAGER"), and such other parties
in interest as Landlord may from time to time reasonably designate to Tenant in
writing, as additional insureds. Such additional insureds shall be provided at
least the same extent of coverage as is provided to Tenant under such policies.
All endorsements effecting such
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additional insured status shall be at least as broad as additional insured
endorsement form number CG 20 11 11 85 promulgated by the Insurance Services
Office.
(b) PROPERTY INSURANCE. Tenant shall at all times maintain in
effect with respect to any Alterations and Tenant's Trade Fixtures and personal
property, commercial property insurance providing coverage, on an "all risk" or
"special form" basis, in an amount equal to at least 90% of the full replacement
cost of the covered property. Tenant may carry such insurance under a blanket
policy, provided that such policy provides coverage equivalent to a separate
policy. During the Term, the proceeds from any such policies of insurance shall
be used for the repair or replacement of the Alterations, Trade Fixtures and
personal property so insured. Landlord shall be provided coverage under such
insurance to the extent of its insurable interest and, if requested by Landlord,
both Landlord and Tenant shall sign all documents reasonably necessary or proper
in connection with the settlement of any claim or loss under such insurance.
Landlord will have no obligation to carry insurance on any Alterations or on
Tenant's Trade Fixtures or personal property.
(c) REQUIREMENTS FOR ALL POLICIES. Each policy of insurance
required under this Section 11.1 shall: (i) be in a form, and written by an
insurer, reasonably acceptable to Landlord, (ii) be maintained at Tenant's sole
cost and expense, and (iii) require at least thirty (30) days' written notice to
Landlord prior to any cancellation, nonrenewal or modification of insurance
coverage. Insurance companies issuing such policies shall have rating
classifications of "A" or better and financial size category ratings of "VII" or
better according to the latest edition of the A.M. Best Key Rating Guide. All
insurance companies issuing such policies shall be admitted carriers licensed to
do business in the state where the Property is located. Any deductible amount
under such insurance shall not exceed $5,000. Tenant shall provide to Landlord,
upon request, evidence that the insurance required to be carried by Tenant
pursuant to this Section, including any endorsement effecting the additional
insured status, is in full force and effect and that premiums therefor have been
paid.
(d) UPDATING COVERAGE. Tenant shall increase the amounts of
insurance as required by any Mortgagee, and, not more frequently than once every
three (3) years, as recommended by Landlord's insurance broker, if, in the
opinion of either of them, the amount of insurance then required under this
Lease is not adequate. Any limits set forth in this Lease on the amount or type
of coverage required by Tenant's insurance shall not limit the liability of
Tenant under this Lease.
(e) CERTIFICATES OF INSURANCE. Prior to occupancy of the
Premises by Tenant, and not less than thirty (30) days prior to expiration of
any policy thereafter, Tenant shall furnish to Landlord a certificate of
insurance reflecting that the insurance required by this Section is in force,
accompanied by an endorsement showing the required additional insureds
satisfactory to Landlord in substance and form. Notwithstanding the requirements
of this paragraph, Tenant shall at Landlord's request provide to Landlord a
certified copy of each insurance policy required to be in force at any time
pursuant to the requirements of this Lease or its Exhibits.
11.2 LANDLORD'S INSURANCE. During the Term, to the extent such coverages
are available at a commercially reasonable cost, Landlord shall maintain in
effect insurance on the Building with responsible insurers, on an "all risk" or
"special form" basis, insuring the Building and the Tenant
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Improvements in an amount equal to at least 90% of the replacement cost thereof,
excluding land, foundations, footings and underground installations. Landlord
may, but shall not be obligated to, carry insurance against additional perils
and/or in greater amounts. As of the date of this Lease Landlord carries
Workers' Compensation insurance on any employees of Landlord; an employee
dishonesty policy covering, among other things, the theft of trade secrets; and
boiler and machinery coverage; provided, however, Landlord reserves the right to
add to, delete, and change the limits of such coverage. Landlord shall maintain
in full force throughout the Term, commercial general liability insurance
providing coverage with limits of not less than Two Million Dollars
($2,000,000.00) each occurrence for bodily injury and property damage combined
covering the Property (the cost of the premiums for which shall be included in
Operating Costs).
11.3 MUTUAL WAIVER OF RIGHT OF RECOVERY & WAIVER OF SUBROGATION. Landlord
and Tenant each hereby waive any right of recovery against each other and the
partners, managers, members, shareholders, officers, directors and authorized
representatives of each other for any loss or damage that is covered by any
policy of property insurance maintained by either party (or required by this
Lease to be maintained) with respect to the Premises or the Property or any
operation therein, regardless of cause, including negligence (active or passive)
of the party benefiting from the waiver. If any such policy of insurance
relating to this Lease or to the Premises or the Property does not permit the
foregoing waiver or if the coverage under any such policy would be invalidated
as a result of such waiver, the party maintaining such policy shall obtain from
the insurer under such policy a waiver of all right of recovery by way of
subrogation against either party in connection with any claim, loss or damage
covered by such policy.
12. DAMAGE OR DESTRUCTION.
12.1 LANDLORD'S DUTY TO REPAIR.
(a) If all or a substantial part of the Premises are rendered
untenantable or inaccessible by damage to all or any part of the Property from
fire or other casualty then, within thirty (30) days following the date of any
such damage, Landlord shall notify Tenant of Landlord's good faith best estimate
of the time required to repair such damage in the manner described herein.
Unless either party is entitled to and elects to terminate this Lease pursuant
to Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate, Landlord shall, at its expense, promptly use reasonable efforts to
repair and restore the Premises and/or the Property, as the case may be, to
substantially their former condition to the extent permitted by then applicable
Laws, using materials and workmanship equal to or better than those originally
incorporated into the Building and the Premises; provided, however, that in no
event shall Landlord have any obligation for repair or restoration: (i) beyond
the extent of the sum of (x) the insurance proceeds received by Landlord for
such repair or restoration plus (y) $50,000, or (ii) for any of Tenant's
personal property, Trade Fixtures or Alterations.
(b) If Landlord is required or elects to repair damage to the
Premises and/or the Property, this Lease shall continue in effect, but Tenant's
Base Rent and Additional Rent shall be abated with regard to any portion of the
Premises that Tenant is prevented from using by reason of such damage or its
repair from the date of the casualty until substantial completion of Landlord's
repair of the affected portion of the Premises as required under this Lease. In
no event shall
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Landlord be liable to Tenant by reason of any injury to or interference with
Tenant's business or property arising from fire or other casualty or by reason
of any repairs to any part of the Property necessitated by such casualty.
12.2 LANDLORD'S RIGHT TO TERMINATE. Landlord may elect to terminate this
Lease following damage by fire or other casualty under the following
circumstances:
(a) If, in the reasonable judgment of Landlord, the Premises
and the Property cannot be substantially repaired and restored under applicable
Laws within one (1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate
proceeds are not, for any reason (except for Landlord's failure to maintain the
insurance coverage required to be maintained by Landlord under this Lease), made
available to Landlord from Landlord's insurance policies (and/or from Landlord's
funds made available for such purpose, at Landlord's sole option) to make the
required repairs, and the anticipated cost of repair and restoration will exceed
the sum of (x) the insurance proceeds received by Landlord for such repair or
restoration plus (y) $50,000;
(c) If the Building is damaged or destroyed to the extent that,
in the reasonable judgment of Landlord, the cost to repair and restore the
Building would exceed thirty three percent (33%) of the full replacement cost of
the Building, whether or not the Premises are at all damaged or destroyed; or
(d) If the fire or other casualty occurs during the last year
of the Term.
If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall give Tenant notice within one
hundred and twenty (120) days after the date of the casualty, specifying whether
Landlord elects to terminate this Lease as provided above; provided, however,
that Landlord shall not elect to terminate this Lease unless Landlord also
exercises whatever rights Landlord has to terminate the leases of all other
tenants in the Building similarly affected by the damage or destruction.
12.3 TENANT'S RIGHT TO TERMINATE. If all or a substantial part of the
Premises are rendered untenantable or inaccessible by damage to all or any part
of the Property from fire or other casualty, and Landlord does not elect to
terminate as provided above, then Tenant may elect to terminate this Lease as
follows:
(a) If Landlord's estimate of the time required to complete
Landlord's repair obligations under this Lease is greater than one (1) year, in
which event Tenant may elect to terminate this Lease by giving Landlord notice
of such election to terminate within thirty (30) days after Landlord's notice to
Tenant pursuant to Section 12.2 - Landlord's Right to Terminate.
(b) Where neither party had the right to terminate this Lease
pursuant to Subsections 12.2(a) and 12.3(a), but Landlord does not substantially
complete its repair work within eighteen (18) months from the date of the
casualty, in which event Tenant may elect
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to terminate this Lease by giving Landlord notice of such election to terminate
within ten (10) days after such eighteen (18) month period.
12.4 WAIVER. Landlord and Tenant each hereby waive the provisions of
California Civil Code Sections 1932(2), 1933(4) and any other applicable
existing or future Law permitting the termination of a lease agreement in the
event of damage or destruction under any circumstances other than as provided in
Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate.
13. CONDEMNATION.
13.1 DEFINITIONS.
(a) "AWARD" shall mean all compensation, sums, or anything of
value awarded, paid or received on a total or partial Condemnation.
(b) "CONDEMNATION" shall mean (i) a permanent taking (or a
temporary taking for a period extending beyond the end of the Term) pursuant to
the exercise of the power of condemnation or eminent domain by any public or
quasi-public authority, private corporation or individual having such power
("CONDEMNOR"), whether by legal proceedings or otherwise, or (ii) a voluntary
sale or transfer by Landlord to any such authority, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(c) "DATE OF CONDEMNATION" shall mean the earlier of the date
that title to the property taken is vested in the Condemnor or the date the
Condemnor has the right to possession of the property being condemned.
13.2 EFFECT ON LEASE.
(a) If the Premises are totally taken by Condemnation, this
Lease shall terminate as of the Date of Condemnation. If a portion but not all
of the Premises is taken by Condemnation, this Lease shall remain in effect;
provided, however, that if the portion of the Premises remaining after the
Condemnation will be unsuitable for Tenant's continued use, then upon notice to
Landlord within thirty (30) days after Landlord notifies Tenant of the
Condemnation, Tenant may terminate this Lease effective as of the Date of
Condemnation.
(b) If twenty-five percent (25%) or more of the Land or of the
Parking Facility or of the floor area in the Building is taken by Condemnation,
or if as a result of any Condemnation the Building is no longer reasonably
suitable for use as an office building, whether or not any portion of the
Premises is taken, Landlord may elect to terminate this Lease, effective as of
the Date of Condemnation, by notice to Tenant within thirty (30) days after the
Date of Condemnation.
(c) If all or a portion of the Premises is temporarily taken by
a Condemnor for a period not extending beyond the end of the Term, this Lease
shall remain in full force and effect.
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13.3 RESTORATION. If this Lease is not terminated as provided in Section
13.2 - Effect on Lease, Landlord, at its expense, shall diligently proceed to
repair and restore the Premises to substantially its former condition (to the
extent permitted by then applicable Laws) and/or repair and restore the Building
to an architecturally complete office building; provided, however, that
Landlord's obligations to so repair and restore shall be limited to the amount
of any Award received by Landlord and not required to be paid to any Mortgagee
(as defined in Section 20.2 below). In no event shall Landlord have any
obligation to repair or replace any improvements in the Premises beyond the
amount of any Award received by Landlord for such repair or to repair or replace
any of Tenant's personal property, Trade Fixtures, or Alterations.
13.4 ABATEMENT AND REDUCTION OF RENT. If any portion of the Premises is
taken in a Condemnation or is rendered permanently untenantable by repairs
necessitated by the Condemnation, and this Lease is not terminated, the Base
Rent and Additional Rent payable under this Lease shall be proportionally
reduced as of the Date of Condemnation based upon the percentage of Rentable
Area so taken or rendered permanently untenantable. In addition, if this Lease
remains in effect following a Condemnation and Landlord proceeds to repair and
restore the Premises, the Base Rent and Additional Rent payable under this Lease
shall be abated during the period of such repair or restoration to the extent
such repairs prevent Tenant's use of the Premises.
13.5 AWARDS. Any Award made shall be paid to Landlord, and Tenant hereby
assigns to Landlord, and waives all interest in or claim to, any such Award,
including any claim for the value of the unexpired Term; provided, however, that
Tenant shall be entitled to receive, or to prosecute a separate claim for, an
Award for a temporary taking of the Premises or a portion thereof by a Condemnor
where this Lease is not terminated (to the extent such Award relates to the
unexpired Term), or an Award or portion thereof separately designated for
relocation expenses or the interruption of or damage to Tenant's business or as
compensation for Tenant's personal property, Trade Fixtures or Alterations.
13.6 WAIVER. Landlord and Tenant each hereby waive the provisions of
California Code of Civil Procedure Section 1265.130 and any other applicable
existing or future Law allowing either party to petition for a termination of
this Lease upon a partial taking of the Premises and/or the Property.
14. ASSIGNMENT AND SUBLETTING.
14.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not assign this Lease or
any interest therein, or sublet or license or permit the use or occupancy of the
Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant's interest under this
Lease (each and all a "TRANSFER"), without the prior written consent of
Landlord, which consent (subject to the other provisions of this Section 14)
shall not be unreasonably withheld, conditioned or delayed. Notwithstanding any
provision in this Lease to the contrary, Tenant shall not mortgage, pledge,
hypothecate or otherwise encumber this Lease or all or any part of Tenant's
interest under this Lease.
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14.2 REASONABLE CONSENT.
(a) Prior to any proposed Transfer, Tenant shall submit in
writing to Landlord (i) the name and legal composition of the proposed assignee,
subtenant, user or other transferee (each a "PROPOSED TRANSFEREE"); (ii) the
nature of the business proposed to be carried on in the Premises; (iii) a
current balance sheet, income statements for the last two years and such other
reasonable financial and other information concerning the Proposed Transferee as
Landlord may request; and (iv) a copy of the proposed assignment, sublease or
other agreement governing the proposed Transfer. Within ten (10) Business Days
after Landlord receives all such information it shall notify Tenant whether it
approves or disapproves such Transfer or if it elects to proceed under Section
14.7 - Landlord's Right to Space.
(b) Tenant acknowledges and agrees that, among other
circumstances for which Landlord could reasonably withhold consent to a proposed
Transfer, it shall be reasonable for Landlord to withhold consent where (i) the
Proposed Transferee does not intend itself to occupy the entire portion of the
Premises assigned or sublet, (ii) Landlord reasonably disapproves of the
Proposed Transferee's business operating ability or history, reputation or
creditworthiness or the character of the business to be conducted by the
Proposed Transferee at the Premises, (iii) the Proposed Transferee is a
governmental agency or unit or an existing tenant in the Project, (iv) the
proposed Transfer would violate any "exclusive" rights of any tenants in the
Project, (v) Landlord or Landlord's agent has exchanged proposals with the
Proposed Transferee or the Proposed Transferee's agent concerning leasing of
space in the Project by the Proposed Transferee, at any time within the
preceding six (6) months, or (vi) Landlord otherwise determines that the
proposed Transfer would have the effect of decreasing the value of the Building
or increasing the expenses associated with operating, maintaining and repairing
the Property. In no event may Tenant advertise all or any portion of the
Premises for assignment or sublease at a rental less than that being sought by
Landlord for a direct lease (non sublease) of comparable space in the Project.
14.3 EXCESS CONSIDERATION. If Landlord consents to the Transfer, Tenant
shall pay to Landlord as additional rent, within ten (10) days after receipt by
Tenant, fifty percent (50%) of any consideration (less transaction costs and the
unamortized portion of Tenant's Investment, as provided below) paid by any
transferee (the "TRANSFEREE") for the Transfer, including, in the case of a
sublease, the excess of the rent and other consideration payable by the
subtenant over the amount of Base Rent and Additional Rent payable hereunder
applicable to the subleased space. The unamortized portion of "Tenant's
Investment" shall be equivalent to a $0.13 per rentable square foot per month
increase in Base Rent with respect to the space subject to the Transfer, over
the term of the Sublease or, with respect to an Assignment, the balance of the
Term. If consideration for the Transfer is paid in more than one installment,
the transaction costs shall be allocated between or among the installments on a
pro rata basis (against each installment in the same proportion as the
installment bears to the total consideration).
14.4 NO RELEASE OF TENANT. No consent by Landlord to any Transfer shall
relieve Tenant of any obligation to be performed by Tenant under this Lease,
whether occurring before or after such consent, assignment, subletting or other
Transfer. Each Transferee shall be jointly and severally liable with Tenant (and
Tenant shall be jointly and severally liable with each Transferee) for the
payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease)
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and for the performance of all other terms and provisions of this Lease. The
consent by Landlord to any Transfer shall not relieve Tenant or any such
Transferee from the obligation to obtain Landlord's express prior written
consent to any subsequent Transfer by Tenant or any Transferee. The acceptance
of rent by Landlord from any other person (whether or not such person is an
occupant of the Premises) shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any Transfer.
14.5 EXPENSES AND ATTORNEYS' FEES. Tenant shall pay to Landlord on demand
all costs and expenses (including reasonable attorneys' fees not to exceed One
Thousand Five Hundred and 00/100 Dollars [$1,500.00] per transaction) incurred
by Landlord in connection with reviewing or consenting to any proposed Transfer
(including any request for consent to, or any waiver of Landlord's rights in
connection with, any security interest in any of Tenant's property at the
Premises).
14.6 EFFECTIVENESS OF TRANSFER. Prior to the date on which any permitted
Transfer (whether or not requiring Landlord's consent) becomes effective, Tenant
shall deliver to Landlord a counterpart of the fully executed Transfer document
and Landlord's standard form of Consent to Assignment or Consent to Sublease
executed by Tenant and the Transferee in which each of Tenant and the Transferee
confirms its obligations pursuant to this Lease. Failure or refusal of a
Transferee to execute any such instrument shall not release or discharge the
Transferee from liability as provided herein. The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual cancellation by Landlord
and Tenant, shall not work a merger, and any such surrender or cancellation
shall, at the option of Landlord, either terminate all or any existing subleases
or operate as an assignment to Landlord of any or all of such subleases.
14.7 LANDLORD'S RIGHT TO SPACE.
(a) Notwithstanding any of the above provisions of this Section
to the contrary, if Tenant notifies Landlord that it desires to enter into a
Transfer (other than a Transfer to an "Affiliate" pursuant to Section 14.9
below), Landlord, in lieu of consenting to such Transfer, may elect (x) in the
case of an assignment or a sublease of the entire Premises, to terminate this
Lease, or (y) in the case of a sublease of less than the entire Premises, to
terminate this Lease as it relates to the space proposed to be subleased by
Tenant. In such event, this Lease will terminate (or the space proposed to be
subleased will be removed from the Premises subject to this Lease and the Base
Rent and Tenant's Share under this Lease shall be proportionately reduced) on
the date the Transfer was proposed to be effective, and Landlord may lease such
space to any party, including the prospective Transferee identified by Tenant.
(b) Notwithstanding any of the above provisions of Section 14.7
(a) to the contrary, so long as Security Dynamics Technologies, Inc. shall
continue to occupy a portion of the Premises (it being intended that all rights
pursuant to this Section 14.7(b) are and shall be personal to the original
Tenant under this Lease and shall not be transferable or exercisable for the
benefit of any Transferee), and provided Tenant is not in default under this
Lease at the time of the proposal to sublease, Landlord shall have the right to
terminate this Lease (only as to the space proposed to be subleased) pursuant to
the provisions of Section 14.7 (a) only if the space proposed to be subleased by
Tenant shall consist of one entire floor of the Premises, or more.
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14.8 ASSIGNMENT OF SUBLEASE RENTS. Tenant hereby absolutely and
irrevocably assigns to Landlord any and all rights to receive rent and other
consideration from any sublease and agrees that Landlord, as assignee or as
attorney-in-fact for Tenant for purposes hereof, or a receiver for Tenant
appointed on Landlord's application may (but shall not be obligated to) collect
such rents and other consideration and apply the same toward Tenant's
obligations to Landlord under this Lease; provided, however, that Landlord
grants to Tenant at all times prior to occurrence of any breach or default by
Tenant a revocable license to collect such rents (which license shall
automatically and without notice be and be deemed to have been revoked and
terminated immediately upon any Event of Default).
14.9 TRANSFER TO AFFILIATE. Notwithstanding the foregoing provisions of
this Section 14 to the contrary, Tenant may assign this Lease or sublet the
Premises or any portion thereof, upon fourteen (14) days prior written notice to
Landlord, without Landlord's consent, to any corporation or other entity which
controls, is controlled by, or is under common control with Tenant, or to any
corporation or other entity resulting from a merger or consolidation with
Tenant, or to any person or entity which acquires substantially all the assets
of Tenant as a going concern (collectively, an "Affiliate"), provided that the
Affiliate assumes in writing all of Tenant's obligations under this Lease, and
provided such transaction is not a subterfuge.
15. DEFAULT AND REMEDIES.
15.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" by Tenant:
(a) Tenant fails to make any payment of rent when due, or any
amount required to replenish the security deposit as provided in Section 4
above, if payment in full is not received by Landlord within five (5) days after
written notice that it is due.
(b) [Intentionally deleted].
(c) Tenant fails timely to deliver any subordination document,
estoppel certificate or financial statement requested by Landlord within the
applicable time period specified in Sections 20 and 21 below.
(d) Tenant violates the restrictions on Transfer set forth in
Section 14 - Assignment and Subletting.
(e) Tenant ceases doing business as a going concern; makes an
assignment for the benefit of creditors; is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of a petition)
seeking relief under any under any state or federal bankruptcy or other statute,
law or regulation affecting creditors' rights; all or substantially all of
Tenant's assets are subject to judicial seizure or attachment and are not
released within 30 days, or Tenant consents to or acquiesces in the appointment
of a trustee, receiver or liquidator for Tenant or for all or any substantial
part of Tenant's assets.
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(f) Tenant fails, within ninety (90) days after the
commencement of any proceedings against Tenant seeking relief under any state or
federal bankruptcy or other statute, law or regulation affecting creditors'
rights, to have such proceedings dismissed, or Tenant fails, within ninety (90)
days after an appointment, without Tenant's consent or acquiescence, of any
trustee, receiver or liquidator for Tenant or for all or any substantial part of
Tenant's assets, to have such appointment vacated.
(g) Tenant fails to perform or comply with any provision of
this Lease other than those described in (a) through (f) above, and does not
fully cure such failure within fifteen (15) days after notice to Tenant or, if
such failure cannot be cured within such fifteen (15)-day period, Tenant fails
within such fifteen (15)-day period to commence, and thereafter diligently
proceed with, all actions necessary to cure such failure as soon as reasonably
possible but in all events within ninety (90) days of such notice; provided,
however, that if Landlord in Landlord's reasonable judgment determines that such
failure cannot or will not be cured by Tenant within such ninety (90) days, then
such failure shall constitute an Event of Default immediately upon such notice
to Tenant.
(h) Tenant shall be in default, beyond any applicable grace or
cure period, under the terms of any lease by and between Tenant (or any
subsidiary, parent or affiliate) and Landlord (or any other entity having
William Wilson & Associates, or any entity controlled, directly or indirectly,
by it, as a partner, majority shareholder or manager).
15.2 REMEDIES. Upon the occurrence of an Event of Default, Landlord shall
have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
(a) Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including re-entry into the Premises, efforts to relet the Premises,
reletting of the Premises for Tenant's account, storage of Tenant's personal
property and Trade Fixtures, acceptance of keys to the Premises from Tenant or
exercise of any other rights and remedies under this Section, shall constitute
an acceptance of Tenant's surrender of the Premises or constitute a termination
of this Lease or of Tenant's right to possession of the Premises. Upon such
termination in writing of Tenant's right to possession of the Premises, as
herein provided, this Lease shall terminate and Landlord shall be entitled to
recover damages from Tenant as provided in California Civil Code Section 1951.2
and any other applicable existing or future Law providing for recovery of
damages for such breach, including the worth at the time of award of the amount
by which the rent which would be payable by Tenant hereunder for the remainder
of the Term after the date of the award of damages, including Additional Rent as
reasonably estimated by Landlord, exceeds the amount of such rental loss as
Tenant proves could have been reasonably avoided, discounted at the discount
rate published by the Federal Reserve Bank of San Francisco for member banks at
the time of the award plus one percent (1%).
(b) Landlord shall have the remedy described in California
Civil Code Section 1951.4 (Landlord may continue this Lease in effect after
Tenant's breach and abandonment and
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recover rent as it becomes due, if Tenant has the right to sublet or assign,
subject only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's expense.
If Landlord pays any sum or incurs any expense in curing the Event of Default,
Tenant shall reimburse Landlord upon demand for the amount of such payment or
expense with interest at the Interest Rate from the date the sum is paid or the
expense is incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all Tenant's property from the
Premises, and such property may be stored by Landlord in a public warehouse or
elsewhere at the sole cost and for the account of Tenant. If Landlord does not
elect to store any or all of Tenant's property left in the Premises, Landlord
may consider such property to be abandoned by Tenant, and Landlord may thereupon
dispose of such property in any manner deemed appropriate by Landlord. Any
proceeds realized by Landlord on the disposal of any such property shall be
applied first to offset all expenses of storage and sale, then credited against
Tenant's outstanding obligations to Landlord under this Lease, and any balance
remaining after satisfaction of all obligations of Tenant under this Lease shall
be delivered to Tenant.
16. LATE CHARGE AND INTEREST.
16.1 LATE CHARGE. If any payment of rent is not received by Landlord
within five (5) days after written notice from Landlord to Tenant that the
payment is past due, Tenant shall pay to Landlord on demand as a late charge an
additional amount equal to four percent (4%) of the overdue payment; provided,
however, if Landlord has given Tenant written notice two (2) or more times in
any consecutive twelve (12) month period that a payment of rent is past due,
then Tenant shall pay to Landlord on demand commencing with the third (3rd) past
due payment in any twelve (12) month period, and continuing with each past due
payment thereafter in such twelve (12) month period, as a late charge an
additional amount equal to four percent (4%) of the overdue payment without any
requirement of additional notice that such payment is past due. A late charge
shall not be imposed more than once on any particular installment not paid when
due, but imposition of a late charge on any payment not made when due does not
eliminate or supersede late charges imposed on other (prior) payments not made
when due or preclude imposition of a late charge on other installments or
payments not made when due.
16.2 INTEREST. In addition to the late charges referred to above, which
are intended to defray Landlord's costs resulting from late payments, any
payment from Tenant to Landlord not paid when due shall at Landlord's option
bear interest from the date due until paid to Landlord by Tenant at a floating
rate equal to the per annum prime rate published in the Wall Street Journal (or
the then substantial equivalent, as reasonably determined by Landlord), plus two
percent (2%) per annum, or the maximum lawful rate that Landlord may charge to
Tenant under applicable laws, whichever is less (the "INTEREST RATE").
Acceptance of any late charge and/or interest shall not constitute a waiver of
Tenant's default with respect to the overdue sum or prevent Landlord from
exercising any of its other rights and remedies under this Lease.
17. WAIVER. No provisions of this Lease shall be deemed waived by either
Landlord or Tenant unless such waiver is in a writing signed by the other party
hereto. The waiver by either
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Landlord or Tenant of any breach of any provision of this Lease shall not be
deemed a waiver of such provision or of any subsequent breach of the same or any
other provision of this Lease. No delay or omission in the exercise of any right
or remedy of either Landlord or Tenant upon any default by the other party
hereto shall impair such right or remedy or be construed as a waiver. Landlord's
acceptance of any payments of rent due under this Lease shall not be deemed a
waiver of any default by Tenant under this Lease (including Tenant's recurrent
failure to timely pay rent) other than Tenant's nonpayment of the accepted sums,
and no endorsement or statement on any check or payment or in any letter or
document accompanying any check or payment shall be deemed an accord and
satisfaction. The consent to or approval of any act by a party hereto requiring
the other party's consent or approval shall not be deemed to waive or render
unnecessary the consent to or approval of any subsequent act by the party hereto
seeking consent or approval.
18. ENTRY, INSPECTION AND CLOSURE. Upon reasonable oral or written notice to
Tenant (and without notice in emergencies), Landlord and its authorized
representatives may enter the Premises at all reasonable times and accompanied
by a representative of Tenant, unless no representative of Tenant meets
Landlord's representative at the scheduled time (provided, in the event of an
emergency Landlord shall have the right to enter the Premises at any time
without notice to Tenant, and without being accompanied by a representative of
Tenant), to: (a) determine whether the Premises are in good condition, (b)
determine whether Tenant is complying with its obligations under this Lease, (c)
perform any maintenance or repair of the Premises or the Building that Landlord
has the right or obligation to perform, (d) install or repair improvements for
other tenants where access to the Premises is required for such installation or
repair, (e) serve, post or keep posted any notices required or allowed under the
provisions of this Lease, (f) show the Premises to prospective brokers, agents,
buyers, transferees, Mortgagees or tenants, or (g) do any other act or thing
necessary for the safety or preservation of the Premises or the Building. When
reasonably necessary Landlord may temporarily close entrances, doors, corridors,
elevators or other facilities in the Building without liability to Tenant by
reason of such closure. Landlord shall conduct its activities under this Section
in a manner that will minimize inconvenience to Tenant without incurring
additional expense to Landlord. In no event shall Tenant be entitled to an
abatement of rent on account of any entry by Landlord, and Landlord shall not be
liable in any manner for any inconvenience, loss of business or other damage to
Tenant or other persons arising out of Landlord's entry on the Premises in
accordance with this Section. No action by Landlord pursuant to this paragraph
shall constitute an eviction of Tenant, constructive or otherwise, entitle
Tenant to an abatement of rent or to terminate this Lease or otherwise release
Tenant from any of Tenant's obligations under this Lease.
19. SURRENDER AND HOLDING OVER.
19.1 SURRENDER. Upon the expiration or termination of this Lease, Tenant
shall surrender the Premises and all Tenant Improvements and Alterations to
Landlord broom-clean and in their original condition, except for reasonable wear
and tear, damage from casualty or condemnation and any changes resulting from
approved Alterations; provided, however, that prior to the expiration or
termination of this Lease Tenant shall remove all telephone and other cabling
installed in the Building by Tenant and remove from the Premises all Tenant's
personal property and any Trade Fixtures and all Alterations to the extent such
Alterations may be required to be removed pursuant to the provisions Section 6.1
of this Lease, and repair any damage caused by such removal. If such
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removal is not completed before the expiration or termination of the Term,
Landlord shall have the right (but no obligation) to remove the same, and Tenant
shall pay Landlord on demand for all costs of removal and storage thereof and
for the rental value of the Premises for the period from the end of the Term
through the end of the time reasonably required for such removal. Landlord shall
also have the right to retain or dispose of all or any portion of such property
if Tenant does not pay all such costs and retrieve the property within ten (10)
days after notice from Landlord (in which event title to all such property
described in Landlord's notice shall be transferred to and vest in Landlord).
Tenant waives all Claims against Landlord for any damage or loss to Tenant
resulting from Landlord's removal, storage, retention, or disposition of any
such property. Upon expiration or termination of this Lease or of Tenant's
possession, whichever is earliest, Tenant shall surrender all keys to the
Premises or any other part of the Building and shall deliver to Landlord all
keys for or make known to Landlord the combination of locks on all safes,
cabinets and vaults that may be located in the Premises. Tenant's obligations
under this Section shall survive the expiration or termination of this Lease.
19.2 HOLDING OVER. If Tenant (directly or through any Transferee or other
successor-in-interest of Tenant) remains in possession of the Premises after the
expiration or termination of this Lease, Tenant's continued possession shall be
on the basis of a tenancy at the sufferance of Landlord. In such event, Tenant
shall continue to comply with or perform all the terms and obligations of Tenant
under this Lease, except that the monthly Base Rent during Tenant's holding over
shall be twice the Base Rent payable in the last full month prior to the
termination hereof. Acceptance by Landlord of rent after such termination shall
not constitute a renewal of this Lease; and nothing contained in this provision
shall be deemed to waive Landlord's right of re-entry or any other right
hereunder or at law. Tenant shall indemnify, defend and hold Landlord harmless
from and against all Claims arising or resulting directly or indirectly from
Tenant's failure to timely surrender the Premises, including (i) any rent
payable by or any loss, cost, or damages claimed by any prospective tenant of
the Premises, and (ii) Landlord's damages as a result of such prospective tenant
rescinding or refusing to enter into the prospective lease of the Premises by
reason of such failure to timely surrender the Premises.
20. ENCUMBRANCES.
20.1 SUBORDINATION. This Lease is expressly made subject and subordinate
to any mortgage, deed of trust, ground lease, underlying lease or like
encumbrance affecting any part of the Property or any interest of Landlord
therein which is now existing or hereafter executed or recorded ("ENCUMBRANCE");
provided, however, that such subordination shall only be effective, as to future
Encumbrances, if the holder of the Encumbrance agrees that this Lease shall
survive the termination of the Encumbrance by lapse of time, foreclosure or
otherwise so long as Tenant is not in default under this Lease. Provided the
conditions of the preceding sentence are satisfied, Tenant shall execute and
deliver to Landlord, within ten (10) days after written request therefor by
Landlord, any additional documents evidencing the subordination of this Lease
with respect to any such Encumbrance and the nondisturbance agreement of the
holder of any such Encumbrance, and so long as such holder is an "Institutional
Lender", then in a form used by such Institutional Lender for tenants of
comparable financial capability as Tenant, and occupying similar sized space as
Tenant. For the purposes of this Section an "Institutional Lender" is a bank,
insurance company, savings and loan, pension fund, or similar financial
institution regularly making commercial real
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estate loans secured by income producing property. If the interest of Landlord
in the Property is transferred pursuant to or in lieu of proceedings for
enforcement of any Encumbrance, Tenant shall immediately and automatically
attorn to the new owner, and this Lease shall continue in full force and effect
as a direct lease between the transferee and Tenant on the terms and conditions
set forth in this Lease. Landlord agrees to use reasonable good faith efforts to
obtain, at Tenant's cost and expense, within 30 days after execution of this
Lease, a Subordination, Attornment and Non-Disturbance Agreement (the "SNDA")
from the holder of any Encumbrance existing at the date of this Lease pursuant
to the provisions contained above. If Landlord does not do so, then Tenant shall
have the right to terminate this Lease, by and upon written notice delivered to
Landlord within ten days after the 30th day following execution of this Lease.
20.2 MORTGAGEE PROTECTION. Tenant agrees to give any holder of any
Encumbrance covering any part of the Property ("MORTGAGEE"), by registered mail,
a copy of any notice of default served upon Landlord, provided that prior to
such notice Tenant has been notified in writing (by way of notice of assignment
of rents and leases, or otherwise) of the address of such Mortgagee. If Landlord
shall have failed to cure such default within thirty (30) days from the
effective date of such notice of default, then the Mortgagee shall have an
additional thirty (30) days within which to cure such default or if such default
cannot be cured within that time, then such additional time as may be necessary
to cure such default (including the time necessary to foreclose or otherwise
terminate its Encumbrance, if necessary to effect such cure), and this Lease
shall not be terminated so long as such remedies are being diligently pursued.
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 ESTOPPEL CERTIFICATES. Within twenty (20) days after written request
therefor, Tenant shall execute and deliver to Landlord, in a form provided by or
satisfactory to Landlord, a certificate stating that this Lease is in full force
and effect, describing any amendments or modifications hereto, acknowledging
that this Lease is subordinate or prior, as the case may be, to any Encumbrance
and stating any other information Landlord may reasonably request, including the
Term, the monthly Base Rent, the date to which rent has been paid, the amount of
any security deposit or prepaid rent, whether either party hereto is in default
under the terms of the Lease, and whether Landlord has completed its
construction obligations hereunder (if any). Tenant irrevocably constitutes,
appoints and authorizes Landlord as Tenant's special attorney-in-fact for such
purpose to complete, execute and deliver such certificate if Tenant fails timely
to execute and deliver such certificate as provided above. Any person or entity
purchasing, acquiring an interest in or extending financing with respect to the
Property shall be entitled to rely upon any such certificate. If Tenant fails to
deliver such certificate within ten (10) days after Landlord's second written
request therefor, Tenant shall be liable to Landlord for any damages incurred by
Landlord including any profits or other benefits from any financing of the
Property or any interest therein which are lost or made unavailable as a result,
directly or indirectly, of Tenant's failure or refusal to timely execute or
deliver such estoppel certificate.
21.2 FINANCIAL STATEMENTS. Within ten (10) days after written request
therefor, but not more than once a year, Tenant shall deliver to Landlord a copy
of the financial statements (including at least a year end balance sheet and a
statement of profit and loss) of Tenant (and of each guarantor of Tenant's
obligations under this Lease) for each of the three most recently
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completed years, prepared in accordance with generally accepted accounting
principles (and, if such is Tenant's normal practice, audited by an independent
certified public accountant), all then available subsequent interim statements,
and such other financial information as may reasonably be requested by Landlord
or required by any Mortgagee.
22. NOTICES. Any notice, demand, request, consent or approval that either party
desires or is required to give to the other party under this Lease shall be in
writing and shall be served personally, delivered by messenger or courier
service, or sent by U.S. certified mail, return receipt requested, postage
prepaid, addressed to the other party at the party's address for notices set
forth in the Basic Lease Information. Notices shall be deemed to have been given
and be effective on the earlier of (a) receipt (or refusal of delivery or
receipt); or (b) one (1) day after acceptance by the independent service for
delivery, if sent by independent messenger or courier service, or three (3) days
after mailing if sent by mail in accordance with this Section. Either party may
change its address for notices hereunder, effective fifteen (15) days after
notice to the other party complying with this Section. If Tenant sublets the
Premises, notices from Landlord shall be effective on the subtenant when given
to Tenant pursuant to this Section.
23. ATTORNEYS' FEES. In the event of any litigation or arbitration regarding any
rights and obligations under this Lease, the prevailing party shall be entitled
to recover reasonable attorneys' fees and court costs in addition to any other
relief which may be granted. The "prevailing party" will be determined by the
court before whom the action was brought based upon the court's assessment of
which party's major arguments or positions taken in the suit or proceeding could
fairly be said to have prevailed over the other party's major arguments or
positions taken on major disputed issues in the court's decision.
24. QUIET POSSESSION. Subject to Tenant's full and timely performance of all of
Tenant's obligations under this Lease and subject to the terms of this Lease,
including Section 20 - Encumbrances, Tenant shall have the quiet possession of
the Premises throughout the Term as against any persons or entities lawfully
claiming by, through or under Landlord.
25. SECURITY MEASURES. Landlord may, but shall be under no obligation to,
implement security measures for the Property, such as the registration or search
of all persons entering or leaving the Building, requiring identification for
access to the Building, evacuation of the Building for cause, suspected cause,
or for drill purposes, the issuance of magnetic pass cards or keys for Building
or elevator access and other actions that Landlord deems necessary or
appropriate to prevent any threat of property loss or damage, bodily injury or
business interruption; provided, however, that such measures shall be
implemented in a way as not to inconvenience tenants of the Building
unreasonably. If Landlord uses an access card system, Landlord may require
Tenant to pay Landlord a deposit for each after-hours Building access card
issued to Tenant. Tenant shall be responsible for any loss, theft or breakage of
any such cards, which must be returned by Tenant to Landlord upon expiration or
earlier termination of the Lease. Landlord may retain the deposit for any card
not so returned. Landlord shall at all times have the right to change, alter or
reduce any such security services or measures. Tenant shall cooperate and comply
with, and cause Tenant's Representatives and Visitors to cooperate and comply
with, such security measures. Landlord, its agents and employees shall have no
liability to Tenant or its Representatives or Visitors for the implementation or
exercise of, or the failure to implement or exercise, any such
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security measures or for any resulting disturbance of Tenant's use or enjoyment
of the Premises. Tenant shall have the right, at Tenant's sole cost and expense,
and subject to Landlord's prior written approval in accordance with the
provisions of Section 6.1 of this Lease, to install security measures or devices
at the Premises.
26. FORCE MAJEURE. If either Landlord or Tenant is delayed, interrupted or
prevented from performing any of its obligations under this Lease (other than,
with respect to Tenant the payment of Base Rent, Additional Rent or any other
charge payable by Tenant to Landlord under this Lease), and such delay,
interruption or prevention is due to fire, act of God, governmental act or
failure to act, labor dispute, unavailability of materials or any cause outside
the reasonable control of Landlord or Tenant, then the time for performance of
the affected obligations of Landlord or Tenant, as the case may be, shall be
extended for a period equivalent to the period of such delay, interruption or
prevention. The inability to pay money shall in no event constitute force
majeure.
27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply with the
rules and regulations attached to and made a part of this Lease as EXHIBIT C to
the extent those rules and regulations are not in conflict with the terms of
this Lease, as well as any reasonable rules and regulations hereafter adopted by
Landlord for all tenants of the Building, upon notice to Tenant thereof
(collectively, the "BUILDING RULES"). Landlord shall not be responsible to
Tenant or to any other person for any violation of, or failure to observe, the
Building Rules by any other tenant or other person.
28. LANDLORD'S LIABILITY. The term "Landlord," as used in this Lease, shall mean
only the owner or owners of the Building at the time in question. In the event
of any conveyance of title to the Building, then from and after the date of such
conveyance, the transferor Landlord shall be relieved of all liability with
respect to Landlord's obligations to be performed under this Lease after the
date of such conveyance. Notwithstanding any other term or provision of this
Lease, the liability of Landlord for its obligations under this Lease is limited
solely to Landlord's interest in the Building as the same may from time to time
be encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against Landlord's partners
or members or its or their respective partners, shareholders, members,
directors, officers or managers on account of any of Landlord's obligations or
actions under this Lease.
29. CONSENTS AND APPROVALS.
29.1 DETERMINATION IN GOOD FAITH. Wherever the consent, approval, judgment
or determination of Landlord is required or permitted under this Lease, Landlord
may exercise its good faith business judgment in granting or withholding such
consent or approval or in making such judgment or determination, unless the
specific provision contained in this Lease providing for such consent, approval,
judgment or determination specifies that Landlord's consent or approval is not
to be unreasonably withheld, or that such judgment or determination is to be
reasonable, or otherwise specifies the standards under which Landlord may
withhold its consent. If it is determined that Landlord failed to give its
consent where it was required to do so under this Lease, Tenant shall be
entitled to injunctive relief but shall not to be entitled to monetary damages
or to terminate this Lease for such failure.
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29.2 NO LIABILITY IMPOSED ON LANDLORD. The review and/or approval by
Landlord of any item or matter to be reviewed or approved by Landlord under the
terms of this Lease or any Exhibits or Addenda hereto shall not impose upon
Landlord any liability for the accuracy or sufficiency of any such item or
matter or the quality or suitability of such item for its intended use. Any such
review or approval is for the sole purpose of protecting Landlord's interest in
the Property, and no third parties, including Tenant or the Representatives and
Visitors of Tenant or any person or entity claiming by, through or under Tenant,
shall have any rights as a consequence thereof.
30. BROKERS. Landlord shall pay the fee or commission of the broker or brokers
identified in the Basic Lease Information (the "BROKER") in accordance with
Landlord's separate written agreement with the Broker, if any. Tenant warrants
and represents to Landlord that in the negotiating or making of this Lease
neither Tenant nor anyone acting on Tenant's behalf has dealt with any broker or
finder who might be entitled to a fee or commission for this Lease other than
the Broker. Tenant shall indemnify and hold Landlord harmless from any claim or
claims, including costs, expenses and attorney's fees incurred by Landlord
asserted by any other broker or finder for a fee or commission based upon any
dealings with or statements made by Tenant or Tenant's Representatives.
31. [INTENTIONALLY DELETED] .
32. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Addenda
attached hereto, and the documents referred to herein, if any, constitute the
entire agreement between Landlord and Tenant with respect to the leasing of
space by Tenant in the Building, and supersede all prior or contemporaneous
agreements, understandings, proposals and other representations by or between
Landlord and Tenant, whether written or oral, all of which are merged herein.
Neither Landlord nor Landlord's agents have made any representations or
warranties with respect to the Premises, the Building, the Project or this Lease
except as expressly set forth herein, and no rights, easements or licenses shall
be acquired by Tenant by implication or otherwise unless expressly set forth
herein. The submission of this Lease for examination does not constitute an
option for the Premises and this Lease shall become effective as a binding
agreement only upon execution and delivery thereof by Landlord to Tenant.
33. MISCELLANEOUS. This Lease may not be amended or modified except by a writing
signed by Landlord and Tenant. Subject to Section 14 - Assignment and Subletting
and Section 28 - Landlord's Liability, this Lease shall be binding on and shall
inure to the benefit of the parties and their respective successors, assigns and
legal representatives. The determination that any provisions hereof may be void,
invalid, illegal or unenforceable shall not impair any other provisions hereof
and all such other provisions of this Lease shall remain in full force and
effect. The unenforceability, invalidity or illegality of any provision of this
Lease under particular circumstances shall not render unenforceable, invalid or
illegal other provisions of this Lease, or the same provisions under other
circumstances. This Lease shall be construed and interpreted in accordance with
the laws (excluding conflict of laws principles) of the State in which the
Building is located. The provisions of this Lease shall be construed in
accordance with the fair meaning of the language used and shall not be strictly
construed against either party, even if such party drafted the provision in
question. When required by the context of this Lease, the singular includes the
-36-
<PAGE> 40
plural. Wherever the term "including" is used in this Lease, it shall be
interpreted as meaning "including, but not limited to" the matter or matters
thereafter enumerated. The captions contained in this Lease are for purposes of
convenience only and are not to be used to interpret or construe this Lease. If
more than one person or entity is identified as Tenant hereunder, the
obligations of each and all of them under this Lease shall be joint and several.
Time is of the essence with respect to this Lease, except as to the conditions
relating to the delivery of possession of the Premises to Tenant. Neither
Landlord nor Tenant shall record this Lease.
34. AUTHORITY. If Tenant is a corporation, partnership, limited liability
company or other form of business entity, each of the persons executing this
Lease on behalf of Tenant warrants and represents that Tenant is a duly
organized and validly existing entity, that Tenant has full right and authority
to enter into this Lease and that the persons signing on behalf of Tenant are
authorized to do so and have the power to bind Tenant to this Lease. Tenant
shall provide Landlord upon request with evidence reasonably satisfactory to
Landlord confirming the foregoing representations.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of
the date first above written.
TENANT: LANDLORD:
SECURITY DYNAMICS TECHNOLOGIES, PENINSULA OFFICE PARK ASSOCIATES, L.P.
INC., a Delaware corporation a California limited partnership
By: Peninsula Office Park Investors, LLC
By: _____________________________ a California limited liability company
Sole General Partner
Name: _______________________
Title: ______________________
By: Opportunity Capital Partners III,
LLC a California limited liability
By: /s/ A. W. Coviello, Jr. company Manager
_____________________________
Name: A. W. Coviello, Jr.
_______________________
Title: C.O.O.
______________________ By: /s/ William Wilson III
____________________________
William Wilson III, Manager
By: /s/ Stephen J. Pilch
____________________________
Stephen J. Pilch, Manager
-37-
<PAGE> 41
EXHIBIT A
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF DECEMBER 19, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
THE PREMISES
[FLOOR PLAN SHOWING LOCATION
AND CONFIGURATION OF PREMISES
TO BE INSERTED.]
INITIALS:
Landlord ______
Tenant ______
Exhibit A, Page 1
<PAGE> 42
EXHIBIT B
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF DECEMBER 19, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
CONSTRUCTION RIDER
LANDLORD'S WORK IN COMMON AREAS. Landlord shall upgrade the restrooms on
the third floor of the Building to comply with current criteria for the
Americans with Disabilities Act ("Landlord's Work"), at such time during 1998 as
Landlord may elect and as may be needed to comply with Landlord's agreement with
the City of San Mateo regarding such work. Landlord shall use reasonable efforts
to coordinate Landlord's Work with the design and construction of the Tenant
Improvements to be constructed and installed in the Premises as provided in this
Construction Rider, and to cause Landlord's Work to be substantially completed
at or prior to the time the Tenant Improvements are substantially completed.
Tenant acknowledges and agrees that Landlord's failure or inability to cause
Landlord's Work to be substantially completed at or prior to the time of
substantial completion of the Tenant Improvements shall not delay commencement
of the Term of the Lease or any of Tenant's obligations to pay Rent as provided
in the Lease, and shall not entitle Tenant to terminate the Lease. Tenant shall
cooperate with Landlord to help coordinate Landlord's Work with the design and
construction of the Tenant Improvements to permit Landlord's Work and the Tenant
Improvements to be scheduled and performed in an efficient and economical
manner.
1. LEASE STRICTLY "AS IS". Tenant has thoroughly examined and inspected
the Premises and has elected to lease the Premises from Landlord pursuant to the
terms, conditions and provisions of the Lease on a strictly "AS IS" basis,
without any tenant improvement allowance from Landlord. Landlord shall have no
obligation to perform any renovations, tenant improvements or other work to
prepare the Premises for use or occupancy by Tenant.
2. TENANT IMPROVEMENTS. Tenant shall construct and install in the Premises
the improvements and fixtures provided for in this Construction Rider ("Tenant
Improvements"). Tenant shall enter into a construction contract with Commercial
Interior Contractors ("CIC"), an affiliate of Landlord, to construct the Tenant
Improvements. The construction contract between Tenant and CIC shall provide
that CIC shall commence construction of the Tenant Improvements when Landlord
tenders possession of the Premises to Tenant (after the Existing Tenant has
vacated the Premises), or as soon thereafter as may be reasonably practicable.
Tenant shall be responsible to pay for the entire cost of Tenant Improvements in
accordance with the provisions of Paragraph 2.3 of this Construction Rider.
Exhibit B, Page 1
<PAGE> 43
2.1. PLANS. Tenant will contract with a professional space
planner ("Space Planner") selected by Tenant, subject to Landlord's reasonable
approval, to provide interior space planning, programming, construction
documentation and construction administration services. Tenant will consider
using the space planning and architectural services of Gensler and Associates,
who have been retained by Landlord as the architect for the Building ("Building
Architect"). Tenant shall cause the Space Planner to prepare a conceptual space
plan ("Space Plan") for the Premises. Tenant shall devote such consultation time
with Landlord and the Space Planner, and shall furnish the Space Planner such
information, as may be necessary to finalize the Space Plan, including but not
limited to:
(a) Any requirements of Tenant for Above-Standard Tenant
Improvements.
(b) Special loading and floor requirements, such as the
location of cabinets, safes, file systems or special
equipment.
(c) Openings in the walls or floors.
(d) Special electrical, HVAC, plumbing work or UPS systems.
(e) Location and dimensions of telephone equipment rooms,
and telephone, data and electrical outlets.
(f) Location and type of partitions, including doors and
hardware.
(g) Special cabinet work or other millwork or
millwork-related items.
(h) Variations from standard ceiling heights.
(i) Color selection for painted areas.
(j) Selection of floor coverings and any special wall or
interior window coverings; provided, however, that
Building Standard window coverings shall be used on all
exterior windows.
Tenant shall deliver Tenant's Space Plan to Landlord within
forty five (45) days after the date on which Landlord delivers a fully executed
copy of this Lease to Tenant. Within five (5) Business Days after receipt of
Tenant's Space Plan, Landlord shall either (i) approve Tenant's Space Plan,
which approval shall not be unreasonably withheld, or (ii) notify Tenant in
writing of specific requests for changes and corrections as may be necessary to
ensure compatibility with the Building and to receive approval from Landlord. If
Landlord has requested changes or corrections, Tenant shall revise the proposed
Space Plan accordingly and
Exhibit B, Page 2
<PAGE> 44
deliver Tenant's revised Space Plan to Landlord within five (5) Business Days
after receipt of Landlord's request. Within three (3) Business Days after
receipt of Tenant's revised Space Plan, Landlord shall either approve the
revised Space Plan or specify needed changes or corrections as described above
(and the process shall continue as needed to obtain Landlord's approval).
Within forty-five (45) days after Landlord's approval of the
final Space Plan, Tenant shall cause Space Planner to prepare and deliver to
Landlord detailed plans and specifications ("Working Drawings and
Specifications") in form and substance sufficient to satisfy all applicable
requirements for issuance of all requisite governmental approvals and permits
and sufficient to permit the construction of the Tenant Improvements by CIC.
Within ten (10) Business Days after receipt of the Working Drawings and
Specifications, Landlord shall either (i) approve the Working Drawings and
Specifications, or (ii) notify Tenant in writing of the changes or corrections
needed to ensure compatibility with the Building and to receive approval from
Landlord. If Landlord has requested changes or corrections, Tenant shall revise
the Working Drawings and Specifications accordingly and deliver Tenant's revised
to Landlord within five (5) Business Days after receipt of Landlord's request.
Within three (3) Business Days after receipt of Tenant's revised Working
Drawings and Specifications, Landlord shall either approve the revised Working
Drawings and Specifications or specify needed changes or corrections as
described above (and the process shall continue as needed to obtain Landlord's
approval). The revised Working Drawings and Specifications, as approved by
Tenant and Landlord, are hereinafter referred to as the "Final Working Drawings
and Specifications".
Landlord and Tenant expect and assume that the Tenant
Improvements will be fairly common and typical and of such type and scope that
they can reasonably be expected to be completed within a construction period of
less than twelve (12) weeks.
Once the Final Working Drawings and Specifications have been
approved by Landlord, Tenant shall make no changes or modifications thereto
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, but may be withheld in Landlord's sole discretion if the
proposed Change would require any changes to the Building's shell or core or if
it would result in improvements of lower quality than the improvements currently
existing in the Building. Any change Tenant requests be made to the Final
Working Drawings and Specifications and approved by Landlord is hereby defined
as "Change Order," and collectively called "Change Orders."
All Change Orders shall be signed by Landlord, Tenant, and CIC.
Additional interior decorating services and advice on the
furnishing and decoration of the Premises, such as the selection of fixtures,
furnishings, design of mill work or other Above-Standard Tenant Improvements
required by Tenant, shall be provided by Tenant at its expense, but shall be
subject to the reasonable approval of Landlord.
Exhibit B, Page 3
<PAGE> 45
2.2. CONSTRUCTION.
(a) Upon approval by Landlord of the Final Working
Drawings and Specifications, Tenant shall enter into a construction contract
with CIC in the form attached as Schedule 3 to the Construction Rider (Exhibit
B) of the 2955 Campus Drive Lease, providing for CIC to construct the Tenant
Improvements under a guaranteed maximum price contract at competitive prices,
with a fee not to exceed four percent (4%) of the cost of the work and a charge
for general conditions not to exceed six percent (6%) of the cost of the work.
Prior to CIC starting construction of Tenant Improvements Tenant shall supply to
Landlord, at Tenant's cost, a builder's risk insurance policy for the full
replacement cost of the Tenant Improvements, in which policy Landlord is named
as beneficiary of such policy. Subcontracts will be competitively bid by CIC.
Tenant shall have the right to review and approve subcontractors' written bids
and contractor fees prior to the execution of a construction agreement with CIC.
Tenant may add names to the subcontractor bid list prior to such subcontracts
being put to bid, subject to Landlord's reasonable right to review and approve
subcontractors based on their qualifications, including quality of work,
creditworthiness, and experience. Tenant shall proceed diligently to cause the
Tenant Improvements to be completed as promptly as may be reasonably
practicable.
(b) Any alterations or improvements to the Premises
desired by Tenant other than the Tenant Improvements shall be made after the
commencement of the term of the Lease and shall be subject to the provisions of
Section 6 - "Alterations" of the Lease.
(c) If Tenant has not Substantially Completed the
Tenant Improvements on or before the Scheduled Commencement Date specified in
Section 2 - Term; Possession of the Lease, then the Lease shall remain in full
force and effect unless and until it is terminated under the express provisions
of the next succeeding Paragraph.
Notwithstanding the foregoing, if the Commencement
Date has not occurred or been deemed to have occurred on or before March 1,
1999, either party, by written notice to the other party given within ten (10)
days after March 1, 1999, may terminate this Lease without any liability to the
other party.
(d) LANDLORD AND TENANT MEETINGS. Throughout the
period of design, development and construction of the Tenant Improvements
Landlord shall use reasonable good faith efforts to meet weekly (whether in
person or by telephone), at mutually acceptable times, with Tenant and its
authorized representatives to discuss the scheduling and progress of the Tenant
Improvements.
2.3. COST OF TENANT IMPROVEMENTS. Prior to entering into a
construction contract with CIC Tenant shall provide Landlord with a copy of the
Final Cost Estimate based upon the Final Working Drawings and Specifications
approved by Landlord. As a material condition of Landlord entering into this
Lease, Tenant shall contribute at least $10.00 per rentable square foot in the
Premises ("Tenant's Construction Contribution") toward the cost of the
construction and installation of the Tenant Improvements, and shall also pay all
other or
Exhibit B, Page 4
<PAGE> 46
additional costs of the design, construction and installation of the Tenant
Improvements. Out of Tenant's Construction Contribution no more than $2.50 per
rentable square foot in the Premises (the "Planning Contribution") may be used
for professional services, such as space planning or preparation of working
drawings and specifications, except to the extent Tenant's Construction
Contribution exceeds $10.00 per rentable square foot in the Premises. Such
Planning Contribution shall be paid by Tenant directly to the professionals
performing such work. At the same time as Tenant pays the Planning Contribution
to the professionals providing such services Tenant shall send Landlord a copy
of the invoices from such professionals and a copy of Tenant's payment.
2.4. CHANGES. If Tenant requests any change, addition or
alteration in or to any Final Working Drawings and Specifications ("CHANGES"),
Tenant shall cause the Space Planner to prepare and submit to Landlord
additional Plans implementing such Change. Within five (5) Business Days after
receipt of the proposed Change, Landlord shall either (i) approve the Change or
(ii) notify Tenant in writing of specific requests for modifications as may be
necessary to ensure compatibility with the Building and to receive approval from
Landlord. No Changes shall be made without Landlord's approval.
3. DELIVERY OF PREMISES. After the Existing Tenant has vacated the
Premises, Landlord shall deliver possession of the Premises to Tenant. If (a)
CIC has not Substantially completed the Tenant Improvements and (b) Landlord has
not tendered possession of the Premises to Tenant on or before the Scheduled
Commencement Date specified in Section 2 -"Term; Possession" of the Lease,
neither Landlord nor its representatives shall be liable to Tenant for any
damage resulting from the delay in delivering possession to Tenant and the Lease
shall remain in full force and effect unless and until it is terminated under
the express provisions of Paragraph 2.2 of this Exhibit B.
4. ACCESS TO PREMISES. Tenant agrees that Landlord shall not be liable in
any way for any injury, loss or damage which may occur to any of Tenant's
property placed upon or installed in the Premises prior to the Commencement
Date, the same being at Tenant's sole risk, and Tenant shall be liable for all
injury, loss or damage to persons or property arising as a result of such entry
of the Premises by Tenant or its Representatives, except that Landlord shall be
liable for injury, loss or damage to such Tenant's property to the extent caused
by Landlord's gross negligence or willful misconduct.
5. OWNERSHIP OF TENANT IMPROVEMENTS. All Tenant Improvements, whether
installed by Landlord or Tenant, shall become a part of the Premises, shall be
the property of Landlord and, subject to the provisions of the Lease, shall be
surrendered by Tenant with the Premises, without any compensation to Tenant, at
the expiration or termination of the Lease in accordance with the provisions of
the Lease. Notwithstanding any other provisions of this Lease to the contrary,
Landlord agrees that Tenant shall have the right, on or before the expiration or
termination of the Term, to remove from the Premises all, or a portion of, the
following: (a) carpet tiles, (b) movable walls, (c) supplemental air
conditioning units installed by Tenant and which are not part of the Building
Systems, (d) raised flooring, (e) Tenant's trade fixtures, (f) reception desk,
(g) audio visual equipment (including screens, monitors and projectors), (h)
Exhibit B, Page 5
<PAGE> 47
security equipment, (i) demountable millwork which can be removed without damage
to the walls, (j) and furniture. Tenant shall be responsible for repairing any
damage to the walls (including the sheetrock) and to the Base Building Work
arising out of such removal.
6. MISCELLANEOUS.
6.1 NO FEES TO LANDLORD. Except for any fees payable by Tenant
to CIC, Landlord shall receive no other fee for supervision, profit, overhead or
general conditions in connection with the design and construction of Tenant
Improvements, nor shall Tenant be required to pay Landlord, Landlord's architect
or Landlord's engineer for review of Tenant's plans.
6.2 NO MISCELLANEOUS CHARGES. Neither Tenant nor the Contractor
(or any subcontractor) shall be charged for parking (to the extent parking is
available) or for the use of electricity, water, HVAC, security elevators,
and/or hoists during construction of Tenant Improvements or during Tenant's
move-in.
6.3 DELIVERY OF DOCUMENTS TO LANDLORD. Tenant shall: (1)
promptly deliver to Landlord copies of all "Plans and Specifications," "Change
Orders, " "Contract Documents," "Applications" for progress payments and for the
final payment, and the recorded "Notice of Completion" (all as defined under the
Construction Contract); (2) deliver copies of all necessary building permits and
governmental approvals prior to commencement of any work; and (3) upon request
by Landlord from time to time deliver to Landlord evidence of insurance, copies
of shop drawings, warranties, cut sheets, balancing reports, final inspection
sign off, as built drawings and other documents to be delivered to the "Owner"
by CIC pursuant to the provisions of the Construction Contract.
INITIALS:
Landlord ______
Tenant ______
Exhibit B, Page 6
<PAGE> 48
EXHIBIT C
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF DECEMBER 19, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
BUILDING RULES
The following Building Rules are additional provisions of the foregoing
Lease to which they are attached. The capitalized terms used herein have the
same meanings as these terms are given in the Lease.
1. USE OF COMMON AREAS. Tenant will not obstruct the sidewalks, halls,
passages, exits, entrances, elevators or stairways of the Building ("COMMON
AREAS"), and Tenant will not use the Common Areas for any purpose other than
ingress and egress to and from the Premises. The Common Areas, except for the
sidewalks, are not open to the general public and Landlord reserves the right to
control and prevent access to the Common Areas of any person whose presence, in
Landlord's opinion, would be prejudicial to the safety, reputation and interests
of the Building and its tenants.
2. NO ACCESS TO ROOF. Tenant has no right of access to the roof of the
Building and will not install, repair or replace any antenna, aerial, aerial
wires, fan, air-conditioner or other device on the roof of the Building, without
the prior written consent of Landlord. Any such device installed without such
written consent is subject to removal at Tenant's expense without notice at any
time. In any event Tenant will be liable for any damages or repairs incurred or
required as a result of its installation, use, repair, maintenance or removal of
such devices on the roof and agrees to indemnify and hold harmless Landlord from
any liability, loss, damage, cost or expense, including reasonable attorneys'
fees, arising from any activities of Tenant or of Tenant's Representatives on
the roof of the Building.
3. SIGNAGE. No sign, placard, picture, name, advertisement or notice
visible from the exterior of the Premises will be inscribed, painted, affixed or
otherwise displayed by Tenant on or in any part of the Building without the
prior written consent of Landlord. Landlord reserves the right to adopt and
furnish Tenant with general guidelines relating to signs in or on the Building.
All approved signage will be inscribed, painted or affixed at Tenant's expense
by a person approved by Landlord, which approval will not be unreasonably
withheld.
4. PROHIBITED USES. The Premises will not be used for manufacturing, for
the storage of merchandise held for sale to the general public, for lodging or
for the sale of goods to the general public. Tenant will not permit any food
preparation on the Premises except that Tenant
Exhibit C, Page 1
<PAGE> 49
may use Underwriters' Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages so long as such use is in accordance with all
applicable federal, state and city laws, codes, ordinances, rules and
regulations.
5. JANITORIAL SERVICES. Tenant will not employ any person for the purpose
of cleaning the Premises or permit any person to enter the Building for such
purpose other than Landlord's janitorial service, except with Landlord's prior
written consent. Tenant will not necessitate, and will be liable for the cost
of, any undue amount of janitorial labor by reason of Tenant's carelessness in
or indifference to the preservation of good order and cleanliness in the
Premises. Janitorial service will not be furnished to areas in the Premises on
nights when such areas are occupied after 9:30 p.m., unless such service is
extended by written agreement to a later hour in specifically designated areas
of the Premises.
6. KEYS AND LOCKS. Landlord will furnish Tenant, free of charge, two keys
to each door or lock in the Premises. Landlord may make a reasonable charge for
any additional or replacement keys. Tenant will not duplicate any keys, alter
any locks or install any new or additional lock or bolt on any door of its
Premises or on any other part of the Building without the prior written consent
of Landlord and, in any event, Tenant will provide Landlord with a key for any
such lock. On the termination of the Lease, Tenant will deliver to Landlord all
keys to any locks or doors in the Building which have been obtained by Tenant.
7. FREIGHT. Upon not less than twenty-four hours prior notice to Landlord,
which notice may be oral, an elevator will be made available for Tenant's use
for transportation of freight, subject to such scheduling as Landlord in its
discretion deems appropriate. Tenant shall not transport freight in loads
exceeding the weight limitations of such elevator. Landlord reserves the right
to prescribe the weight, size and position of all equipment, materials,
furniture or other property brought into the Building, and no property will be
received in the Building or carried up or down the freight elevator or stairs
except during such hours and along such routes and by such persons as may be
designated by Landlord. Landlord reserves the right to require that heavy
objects will stand on wood strips of such length and thickness as is necessary
to properly distribute the weight. Landlord will not be responsible for loss of
or damage to any such property from any cause, and Tenant will be liable for all
damage or injuries caused by moving or maintaining such property.
8. NUISANCES AND DANGEROUS SUBSTANCES. Tenant will not conduct itself or
permit Tenant's Representatives or Visitors to conduct themselves, in the
Premises or anywhere on or in the Property in a manner which is offensive or
unduly annoying to any other Tenant or Landlord's property managers. Tenant will
not install or operate any phonograph, radio receiver, musical instrument, or
television or other similar device in any part of the Common Areas and shall not
operate any such device installed in the Premises in such manner as to disturb
or annoy other tenants of the Building. Tenant will not use or keep in the
Premises or the Property any kerosene, gasoline or other combustible fluid or
material other than limited quantities thereof reasonably necessary for the
maintenance of office equipment, or, without Landlord's prior written approval,
use any method of heating or air conditioning other than that supplied by
Landlord. Tenant will not use or keep any foul or noxious gas or substance in
the Premises or
Exhibit C, Page 2
<PAGE> 50
permit or suffer the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by reason of noise,
odors or vibrations, or interfere in any way with other tenants or those having
business therein. Tenant will not bring or keep any animals in or about the
Premises or the Property.
9. BUILDING NAME AND ADDRESS. Without Landlord's prior written consent,
Tenant will not use the name of the Building in connection with or in promoting
or advertising Tenant's business except as Tenant's address.
10. BUILDING DIRECTORY. A directory for the Building will be provided for
the display of the name and location of tenants. Landlord reserves the right to
approve any additional names Tenant desires to place in the directory and, if so
approved, Landlord may assess a reasonable charge for adding such additional
names.
11. WINDOW COVERINGS. No curtains, draperies, blinds, shutters, shades,
awnings, screens or other coverings, window ventilators, hangings, decorations
or similar equipment shall be attached to, hung or placed in, or used in or with
any window of the Building without the prior written consent of Landlord, and
Landlord shall have the right to control all lighting within the Premises that
may be visible from the exterior of the Building.
12. FLOOR COVERINGS. Tenant will not lay or otherwise affix linoleum,
tile, carpet or any other floor covering to the floor of the Premises in any
manner except as approved in writing by Landlord. Tenant will be liable for the
cost of repair of any damage resulting from the violation of this rule or the
removal of any floor covering by Tenant or its contractors, employees or
invitees.
13. WIRING AND CABLING INSTALLATIONS. Landlord will direct Tenant's
electricians and other vendors as to where and how data, telephone, and
electrical wires and cables are to be installed. No boring or cutting for wires
or cables will be allowed without the prior written consent of Landlord. The
location of burglar alarms, smoke detectors, telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the written
approval of Landlord.
14. OFFICE CLOSING PROCEDURES. Tenant will see that the doors of the
Premises are closed and locked and that all water faucets, water apparatus and
utilities are shut off before Tenant or its employees leave the Premises, so as
to prevent waste or damage. Tenant will be liable for all damage or injuries
sustained by other tenants or occupants of the Building or Landlord resulting
from Tenant's carelessness in this regard or violation of this rule. Tenant will
keep the doors to the Building corridors closed at all times except for ingress
and egress.
15. PLUMBING FACILITIES. The toilet rooms, toilets, urinals, wash bowls
and other apparatus shall not be used for any purpose other than that for which
they were constructed and no foreign substance of any kind whatsoever shall be
disposed of therein. Tenant will be liable for any breakage, stoppage or damage
resulting from the violation of this rule by Tenant, its employees or invitees.
Exhibit C, Page 3
<PAGE> 51
16. USE OF HAND TRUCKS. Tenant will not use or permit to be used in the
Premises or in the Common Areas any hand trucks, carts or dollies except those
equipped with rubber tires and side guards or such other equipment as Landlord
may approve.
17. REFUSE. Tenant shall store all Tenant's trash and garbage within the
Premises or in other facilities designated By Landlord for such purpose. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in the city in which the Building is located without being in
violation of any law or ordinance governing such disposal. All trash and garbage
removal shall be made in accordance with directions issued from time to time by
Landlord, only through such Common Areas provided for such purposes and at such
times as Landlord may designate. Tenant shall comply with the requirements of
any recycling program adopted by Landlord for the Building.
18. SOLICITING. Canvassing, peddling, soliciting and distribution of
handbills or any other written materials in the Building are prohibited, and
Tenant will cooperate to prevent the same.
19. PARKING. Tenant will use, and cause Tenant's Representatives and
Visitors to use, any parking spaces to which Tenant is entitled under the Lease
in a manner consistent with Landlord's directional signs and markings in the
Parking Facility. Specifically, but without limitation, Tenant will not park, or
permit Tenant's Representatives or Visitors to park, in a manner that impedes
access to and from the Building or the Parking Facility or that violates space
reservations for handicapped drivers registered as such with the California
Department of Motor Vehicles. Landlord may use such reasonable means as may be
necessary to enforce the directional signs and markings in the Parking Facility,
including but not limited to towing services, and Landlord will not be liable
for any damage to vehicles towed as a result of non-compliance with such parking
regulations.
20. FIRE, SECURITY AND SAFETY REGULATIONS. Tenant will comply with all
safety, security, fire protection and evacuation measures and procedures
established by Landlord or any governmental agency.
21. RESPONSIBILITY FOR THEFT. Tenant assumes any and all responsibility
for protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.
22. SALES AND AUCTIONS. Tenant will not conduct or permit to be conducted
any sale by auction in, upon or from the Premises or elsewhere in the Property,
whether said auction be voluntary, involuntary, pursuant to any assignment for
the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.
23. WAIVER OF RULES. Landlord may waive any one or more of these Building
Rules for the benefit of any particular tenant or tenants, but no such waiver by
Landlord will be
Exhibit C, Page 4
<PAGE> 52
construed as a waiver of such Building Rules in favor of any other tenant or
tenants nor prevent Landlord from thereafter enforcing these Building Rules
against any or all of the tenants of the Building.
24. EFFECT ON LEASE. These Building Rules are in addition to, and shall
not be construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Violation of these Building
Rules constitutes a failure to fully perform the provisions of the Lease, as
referred to in Section 15.1 - "Events of Default".
25. NON-DISCRIMINATORY ENFORCEMENT. Subject to the provisions of the Lease
(and the provisions of other leases with respect to other tenants), Landlord
shall use reasonable efforts to enforce these Building Rules in a
non-discriminatory manner, but in no event shall Landlord have any liability for
any failure or refusal to do so (and Tenant's sole and exclusive remedy for any
such failure or refusal shall be injunctive relief preventing Landlord from
enforcing any of the Building Rules against Tenant in a manner that
discriminates against Tenant).
26. ADDITIONAL AND AMENDED RULES. Landlord reserves the right to rescind
or amend these Building Rules and/or adopt any other and reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building and for the preservation of good order
therein.
INITIALS:
Landlord ______
Tenant ______
Exhibit C, Page 5
<PAGE> 53
EXHIBIT D
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF DECEMBER 19, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
ADDITIONAL PROVISIONS RIDER
35. COST OF LIVING ADJUSTMENTS.
(a) The monthly Base Rent shall be adjusted effective on the first
anniversary of the Commencement Date and every year (on the anniversary of the
Commencement Date) thereafter (each an "ADJUSTMENT DATE"), to reflect increases
in the cost of living. The adjustment shall be calculated by multiplying the
average monthly Base Rent for the year immediately preceding the Adjustment Date
(the "PRIOR PERIOD") by the percentage increase in the Consumer Price Index,
measured from (i) the last calendar month for which the Consumer Price Index was
published at least one hundred twenty (120) days immediately before the
commencement of the Prior Period to (ii) the same calendar month immediately
prior to the end of the Prior Period; provided, however, that on each Adjustment
Date the monthly Base Rent shall be increased by a minimum of three percent (3%)
per annum, from the Commencement Date or the prior Adjustment Date, as
applicable, and by a maximum of six percent (6%) per annum, from the
Commencement Date or the prior Adjustment Date, as applicable. The monthly Base
Rent for each twelve (12) month period after the first Adjustment Date shall be
the monthly Base Rent for the Prior Period plus the increase calculated in
accordance with the preceding sentence. In no event shall the monthly Base Rent
following any such adjustment be less than the monthly Base Rent in effect
immediately prior to such adjustment.
(b) The term "CONSUMER PRICE INDEX" means the United States Department of
Labor's Bureau of Labor Statistics' Consumer Price Index, All Urban Consumers,
All Items, San Francisco-Oakland-San Jose, California (1982-84=100), or the
successor of such index.
(c) If the Consumer Price Index is not published by the Bureau of Labor
Statistics or another governmental agency for any month for which an adjustment
in the Consumer Price Index is to be measured, then the foregoing calculations
shall be made using the most closely comparable statistics on the purchasing
power of the consumer dollar as published by a responsible financial authority
selected by Landlord.
(d) If the adjustment provided for in this Section has not been made by
any Adjustment Date, Tenant shall continue to pay monthly Base Rent at the rate
applicable to the
Exhibit D, Page 1
<PAGE> 54
Prior Period. Within fifteen (15) days after Tenant receives Landlord's written
notice of the adjusted Base Rent for the then-current Adjustment Date, Tenant
shall pay to Landlord the shortfall between the old Base Rent, as paid by Tenant
to date for the then-current Lease period, and the new Base Rent payable from
the beginning of the then-current Lease period through the date of Landlord's
notice. Thereafter during such Lease period, Tenant shall pay monthly Base Rent
at the new rate set forth in Landlord's notice.
36. LETTER OF CREDIT.
(a) Tenant shall have the right to use a letter of credit as a Security
Deposit pursuant to the provisions of this Section 36. If Tenant elects to
supply to Landlord a letter of credit as the Security Deposit, Tenant shall
deliver to Landlord a clean, unconditional, irrevocable, transferable letter of
credit (the "Letter of Credit") in form, and issued by a financial institution
("Issuer") satisfactory to Landlord. The Letter of Credit shall be in the amount
of $20,000.00, name Landlord as the beneficiary thereunder, and provide that
draws thereunder will be honored upon receipt by Issuer of a written statement
signed by Landlord stating that Landlord is entitled to draw down on the Letter
of Credit. Landlord shall be entitled to draw the entire amount under the Letter
of Credit if either (i) Tenant commits an Event of Default under this Lease,
(ii) Tenant does not deliver to Landlord a replacement letter of credit from
Issuer or another financial institution satisfactory to Landlord in the amount
and form of the initial Letter of Credit no later than one month before the
expiration date of the then existing Letter of Credit, or (iii) upon a proposed
sale or lease of the Building Tenant does not deliver to any the new landlord a
replacement Letter of Credit pursuant to the provisions of (c) below. Any amount
drawn under the Letter of Credit shall be held by Landlord as a security
deposit, subject to the terms of Section 4 of the Lease.
(b) Tenant shall not assign or encumber or attempt to assign or encumber
the Letter of Credit and neither Landlord nor its successors or assigns shall be
bound by any such assignment or encumbrance or attempted assignment or
encumbrance.
(c) If Landlord shall be holding the Letter of Credit as security, then,
in the event of a proposed sale or lease of the Building by Landlord, Tenant
will, upon ten (10) Business Days' notice, at its sole cost and expense, cause
the issuing bank to consent to the assignment or to issue a substitute letter of
credit on identical terms except for the stated beneficiary, from the same
issuing bank or another bank acceptable to Landlord in Landlord's sole
discretion, naming the new landlord as the beneficiary thereof upon delivery by
Landlord of the then outstanding Letter of Credit.
37. PARKING.
(a) TENANT'S PARKING RIGHTS. Landlord shall provide Tenant, on an
unassigned and non-exclusive basis, for use by Tenant and Tenant's
Representatives and Visitors, at the users' sole risk, 3.3 parking spaces in the
Parking Facility for each one thousand (1,000) rentable square feet of the
Premises. The parking spaces to be made available to Tenant hereunder may
contain a reasonable mix of spaces for compact cars and up to ten percent (10%)
of the unassigned spaces may also be designated by Landlord as Building
visitors' parking. Landlord shall also provide
Exhibit D, Page 2
<PAGE> 55
Tenant with one (1) reserved parking space, at a location reasonably near the
Building to be designated by Landlord.
(b) AVAILABILITY OF PARKING SPACES. Landlord shall take reasonable actions
to ensure the availability of the parking spaces leased by Tenant, but Landlord
does not guarantee the availability of those spaces at all times against the
actions of other tenants of the Building and users of the Parking Facility.
Access to the Parking Facility may, at Landlord's option, be regulated by card,
pass, bumper sticker, decal or other appropriate identification issued by
Landlord. Landlord retains the right to revoke the parking privileges of any
user of the Parking Facility who violates the rules and regulations governing
use of the Parking Facility (and Tenant shall be responsible for causing any
employee of Tenant or other person using parking spaces allocated to Tenant to
comply with all parking rules and regulations).
(c) ASSIGNMENT AND SUBLETTING. Notwithstanding any other provision of the
Lease to the contrary, Tenant shall not assign its rights to the parking spaces
or any interest therein, or sublease or otherwise allow the use of all or any
part of the parking spaces to or by any other person other than permitted
subtenants or assignees, except with Landlord's prior written consent, which may
be granted or withheld by Landlord in its sole discretion. In the event of any
separate assignment or sublease of parking space rights that is approved by
Landlord, Landlord shall be entitled to receive, as additional Rent hereunder,
one hundred percent (100%) of any profit received by Tenant in connection with
such assignment or sublease.
(d) CONDEMNATION, DAMAGE OR DESTRUCTION. In the event the Parking Facility
is the subject of a Condemnation, or is damaged or destroyed, and this Lease is
not terminated, and if in such event the available number of parking spaces in
the Parking Facility is permanently reduced, then Tenant's rights to use parking
spaces hereunder may, at the election of Landlord, thereafter be reduced in
proportion to the reduction of the total number of parking spaces in the Parking
Facility, and the Monthly Parking Rental payable hereunder shall be reduced
proportionately. In such event, Landlord reserves the right to reduce the number
of parking spaces to which Tenant is entitled or to relocate some or all of the
parking spaces to which Tenant is entitled to other areas in the Parking
Facility.
38. EXTENSION OPTION.
Provided that Security Dynamics Technologies, Inc. occupies all of the
Premises free from any assignment, sublease or other Transfer, except to
Affiliates, at the time of exercise (it being intended that all rights pursuant
to this provision are and shall be personal to the original Tenant under this
Lease and shall not be transferable or exercisable for the benefit of any
Transferee), and provided Tenant is not in default under either this Lease or
the Lease Agreement dated as of the Lease Date between Tenant and Peninsula
Office Park Associates, L.P., a California limited partnership ("POPA"), as
Landlord, pursuant to which Tenant is leasing from POPA approximately 31,397
square feet on the fourth floor of the Building being built at 2955 Campus
Drive, San Mateo, California, or any lease between Landlord and Tenant
substituted in place thereof (in either event, the "2955 Campus Drive Lease") at
the time of exercise or at any time thereafter until the beginning of any such
extension of the Term, Tenant shall have the
Exhibit D, Page 3
<PAGE> 56
option (the "EXTENSION OPTION") to extend the Term for one (1) additional
consecutive period of five (5) years (the "EXTENSION PERIOD"), by giving written
notice to Landlord of the exercise of any such Extension Option at least twelve
(12) months, but not more than fifteen (15) months, prior to the expiration of
the initial Term. The exercise of any Extension Option by Tenant shall be
irrevocable and shall cover the entire Premises leased by Tenant pursuant to
this Lease. Upon such exercise, the term of the Lease shall automatically be
extended for the applicable Extension Period without the execution of any
further instrument by the parties; provided that Landlord and Tenant shall, if
requested by either party, execute and acknowledge an instrument confirming the
exercise of the Extension Option. Any Extension Option shall terminate if not
exercised precisely in the manner provided herein. Any extension of the Term
shall be upon all the terms and conditions set forth in this Lease and all
Exhibits thereto, except that: (i) Tenant shall have no further option to extend
the Term of the Lease, other than as specifically set forth herein; (ii)
Landlord shall not be obligated to contribute funds toward the cost of any
remodeling, renovation, alteration or improvement work in the Premises; and
(iii) Base Rent for any such Extension Period shall be the then Fair Market Base
Rental (as defined below) for the Premises for the space and term involved,
which shall be determined as set forth below.
(a) "FAIR MARKET BASE RENTAL" shall mean the "fair market" Base
Rent at the time or times in question for the applicable space, based on the
prevailing rentals then being charged to tenants in the Building and tenants in
other office buildings in the general vicinity of the Building of comparable
size, location, quality and age as the Building for leases with terms equal to
the Extension Period, taking into account the creditworthiness and financial
strength of the tenant, the financial guaranties provided by the tenant (if
any), the value of market concessions (including the value of construction,
renovation, moving and other allowances or rent credits), the desirability,
location in the building, size and quality of the space, tenant finish allowance
and/or tenant improvements, included services, operating expenses and tax and
expense stops or other escalation clauses, and brokerage commissions, for the
space in the Building for which Fair Market Base Rental is being determined and
for comparable space in the buildings which are being used for comparison. Fair
Market Base Rental shall also reflect the then prevailing rental structure for
comparable office buildings in the general vicinity of the Property, so that if,
for example, at the time Fair Market Base Rental is being determined the
prevailing rental structure for comparable space and for comparable lease terms
includes periodic rental adjustments or escalations, Fair Market Base Rental
shall reflect such rental structure.
(b) Landlord and Tenant shall endeavor to agree upon the Fair
Market Base Rental. If they are unable to so agree within thirty (30) days after
receipt by Landlord of Tenant's notice of exercise of the Extension Option,
Landlord and Tenant shall mutually select a licensed real estate broker who has
at least five (5) years experience in leasing office space and is active in the
leasing of office space in the general vicinity of the Property. Landlord shall
submit Landlord's determination of Fair Market Base Rental and Tenant shall
submit Tenant's determination of Fair Market Base Rental to such broker, at such
time or times and in such manner as Landlord and Tenant shall agree (or as
directed by the broker if Landlord and Tenant do not promptly agree). The broker
shall select either Landlord's or Tenant's determination as the Fair Market Base
Rental, and such determination shall be binding on Landlord and Tenant. If
Tenant's determination is selected as the Fair Market Base Rental, then Landlord
shall bear all of
Exhibit D, Page 4
<PAGE> 57
the broker's cost and fees. If Landlord's determination is selected as the Fair
Market Base Rental, then Tenant shall bear all of the broker's cost and fees.
(c) In the event the Fair Market Base Rental for any Extension
Period has not been determined at such time as Tenant is obligated to pay Base
Rent for such Extension Period, Tenant shall pay as Base Rent pending such
determination, the Base Rent in effect for such space immediately prior to the
Extension Period; provided, that upon the determination of the applicable Fair
Market Base Rental, any shortage of Base Rent paid, together with interest at
the rate specified in the Lease, shall be paid to Landlord by Tenant.
(d) In no event shall the Base Rent during any Extension Period
be less than the Base Rent in effect immediately prior to such Extension Period.
(e) The term of this Lease, whether consisting of the Initial
Term alone or the Initial Term as extended by any Extension Period (if any
Extension Option is exercised), is referred to in this Lease as the "Term."
39. RIGHT OF FIRST OFFER.
(a) Provided (x) at least fifteen (15) full calendar months remain in the
Term of this Lease, (y) Security Dynamics Technologies, Inc. has not assigned
this Lease or sublet all of the Premises, except to Affiliates (it being
intended that all rights pursuant to this provision are and shall be personal to
the original Tenant under this Lease and shall not be transferable or
exercisable for the benefit of any Transferee), and (z) Tenant is not in default
beyond any applicable notice and cure period under either this Lease or the 2955
Campus Drive Lease at the time of the exercise of any such right or at any time
thereafter until delivery of possession of the space to Tenant, and subject to
any and all rights of other tenants in the Project with respect to such space
(including renewal and extension rights and rights of first offer, first
negotiation, first refusal or other expansion rights) existing as of the date of
this Lease, Tenant shall have a one-time right of first offer (the "Right of
First Offer") to lease certain space in the Building, as follows:
(i) In the Building, Suite 220 (second floor) containing
approximately 7,250 rentable square feet.
(ii) In the Building, Suite 245 (second floor) containing
approximately 7,164 rentable square feet.
(iii) In the Building, Suite 175 (first floor) containing
approximately 8,708 rentable square feet.
(iv) In the Building, Suite 165 (first floor) containing
approximately 3,700 rentable square feet.
Exhibit D, Page 5
<PAGE> 58
(b) Such Right of First Offer may only be exercised with respect to (A)
space which has been previously leased and as to which each then existing
tenant, subtenant or other occupant of the space has elected not to extend or
renew its lease or otherwise to re-lease such space and (B) all of the space
being offered by Landlord. If any space qualifying for such Right of First Offer
becomes available, Landlord shall offer to lease such space to Tenant at the
same rent and on the same terms that Landlord intends to offer to other
prospective tenants. Tenant shall have ten (10) Business Days following receipt
of Landlord's offer with respect to any such space within which to notify
Landlord in writing of its intention to lease such space, and such notice, if
given by Tenant, shall constitute an acceptance of Landlord's terms for the
lease of such space. If Tenant exercises such Right of First Offer, the space to
be leased by Tenant shall be leased on the same terms and conditions as are
contained in this Lease (subject to an extension of the Term pursuant to the
provisions of Subsection (d) below of this Section 39), except for the economic
and other terms specifically set forth in Landlord's notice, and the parties
shall execute an amendment to this Lease to include such space in the Premises
and otherwise to provide for the leasing of such space on such terms. If more
than sixty (60) months remain on the Term of this Lease at the commencement date
of any space leased pursuant to this Right of First Offer, then the expiration
date for such space leased pursuant to this Right of First Offer shall be the
expiration of the Term (so that the expiration date of the space leased pursuant
to the Right of First Offer is coterminous with the expiration date of the then
existing Premises). If Tenant fails so to exercise Tenant's Right of First Offer
within such ten (10) Business Day period, Landlord may thereafter lease the
space described in the Right of First Offer to other prospective tenants.
(c) If Tenant does not lease the space described in the Right of First
Offer when the such space described in the Right of First Offer is first offered
to Tenant by Landlord, then this Right of First Offer shall terminate with
respect to the space then offered to Tenant in the applicable Right of First
Offer and Tenant shall have no further rights to lease the space described in
such Right of First Offer; provided, however, the Right of First Offer shall
remain in effect for the remaining space not described in either (i) the Right
of First Offer, or (ii) any previous Right of First Offer.
(d) If as of the commencement date of any space leased by Tenant pursuant
to any Right of First Offer there remains less than sixty (60) full calendar
months in the Term of this Lease, then the Term of this Lease for the entire
Premises shall be extended by that period of time (the "First Offer Extension
Period") to result in a remaining Term of sixty (60) full calendar months (plus
any first partial month) following the commencement date (the "First Offer Space
Commencement Date") of the space leased pursuant to the applicable Right of
First Offer. In such event the Term of the Lease shall be automatically extended
for the First Offer Extension Period without the execution of any further
instrument by the parties; provided that Landlord and Tenant shall, if requested
by the other party, execute and acknowledge an instrument confirming the First
Offer Extension Period. If Tenant leases space pursuant to the Right of First
Offer as space becomes available and is offered to Tenant at different dates in
accordance with the Right of First Offer contained herein, then the provisions
of this Subsection (d) shall apply to each space leased by Tenant pursuant to
the applicable Right of First Offer. For the purposes of this Subsection 39 (d)
the term "Original Premises" shall mean those Premises leased in accordance with
the provisions of this Lease prior to any expansion of the Premises pursuant to
any Right of
Exhibit D, Page 6
<PAGE> 59
First Offer. If the Term of this Lease is extended pursuant to the provisions of
this Subsection 39 (d), then during the First Offer Extension Period (whether
one or more) Base Rent for the Original Premises shall be at Fair Market Base
Rental (as defined in Section 38 of this Lease) without any contribution by
Landlord of funds to remodel, renovate, alter or improve the Premises; provided,
however, in no event shall the Base Rent for the Original Premises during the
First Offer Extension Period be less than the Base Rent in effect for the
Original Premises immediately prior to the First Offer Extension Period. The
Fair Market Base Rental shall determined pursuant to the provisions of Section
39 of this Lease at least six (6) months prior to the beginning of the
applicable First Offer Extension Period.
40. FITNESS FACILITY. So long as Tenant is not in default under this Lease and
Tenant executes Landlord's standard waiver and indemnification form, attached
hereto as EXHIBIT E, for the Project's fitness center (the "Fitness Facility"),
then Tenant's employees shall be entitled to use the Fitness Facility. The use
of the Fitness Facility shall be subject to the reasonable rules and regulations
(including rules regarding hours of use) established from time to time by
Landlord for the Fitness Facility. There shall be no separate charge to Tenant
or Tenant's authorized users for the use of the Fitness Facility.
41. SIGN ON MONUMENT. Subject to Landlord obtaining a permit from the applicable
governmental authority to construct a monument for signs, and so long as
Security Dynamics Technologies, Inc. has not assigned this Lease or sublet any
of the Premises (it being intended that all rights pursuant to this provision
are and shall be personal to the original Tenant under this Lease and shall not
be transferable or exercisable for the benefit of any Transferee), Security
Dynamics Technologies, Inc. shall have the right to install and maintain in a
first class condition a sign in the proposed sign monument located adjacent to
the Building, for no additional rent, subject to governmental approval of a
separate signage application and subject to review and approval by Landlord, in
Landlord's sole discretion, of the size, design, materials, color, illumination,
and all other aspects of any proposed sign. All costs and expenses of processing
governmental applications, permits, construction, installation and maintenance
of Tenant's sign shall be borne by Tenant.
42. ROOFTOP EQUIPMENT.
(a) SATELLITE DISH. Subject to all other provisions of the Lease, Tenant
shall have the non-exclusive right to install on the roof of the Building and
use during the Term of the Lease in conjunction with the conduct of Tenant's
usual business in the Premises one satellite dish antenna, not more than 36" in
diameter, so long as any such installation is designed, made, operated,
maintained, repaired, replaced as necessary, and removed by Tenant at Tenant's
sole cost and expense and at no cost or expense to Landlord, is not visible from
the ground, does not interfere with communications by others, does not adversely
affect the structural integrity of the roof, cause any leaks or adversely affect
any roof warranty, and complies at all times with all applicable laws and
governmental regulations and the provisions set forth below.
(b) REQUEST BY TENANT & APPROVAL BY LANDLORD. Tenant has not yet
determined what kind of antenna installation Tenant may wish to make, or even
determined whether Tenant will
Exhibit D, Page 7
<PAGE> 60
wish to install an antenna at the Building, but wishes to provide a mechanism
for doing so in the future, as set forth in this Section 42. At least thirty
(30) days prior to making any such installation, Tenant shall submit detailed
plans and specifications, describing all aspects of Tenant's proposed
installation, including detailed specifications and plans concerning the
antenna, all associated equipment, the means of attaching the antenna and
associated equipment to the Building, the connections between the antenna and
the equipment and the Premises, power requirements, cable specifications,
equipment and equipment cabinet dimensions and weights, and such other
particulars and details as Landlord may reasonably request in order to have
sufficient information to understand the installation proposed by Tenant
(collectively, the "Plans"), for review and approval by Landlord and Landlord's
consultants. All aspects of the Plans (including the location of any antenna and
any associated equipment) shall be subject to Landlord's prior written approval.
(c) GRANT OF LICENSE. Subject to Tenant's request and Landlord's approval
of Tenant's plans and specifications and written agreement between Landlord and
Tenant concerning the location of any antenna and any associated equipment,
Landlord hereby grants to Tenant, during the Term of the Lease, for no
additional rent or other charge (other than reimbursement of any out-of-pocket
expenditures incurred in good faith by Landlord in connection therewith and
payment of other costs as provided below), the nonexclusive right to use not
more than 100 square feet of space on the roof of the Building at the location
designated or approved by Landlord (the "LICENSED AREA") for the purpose of
installing, operating, using, maintaining and repairing an electronic satellite
antenna for data communications and associated cabling and equipment as defined
and described in the Plans approved by Landlord (the "EQUIPMENT") and including
the right to use certain core areas of the Building as designated by Landlord
and necessary to connect the Equipment to the Premises. Landlord may designate
the location or locations of all the Equipment in its sole discretion. If Tenant
elects to install the Equipment as provided above, the Licensed Area shall be
included within the term Premises for all purposes under the Lease. Landlord
retains the right to grant similar or additional rights and access to others.
(d) USE; COMPLIANCE WITH LAWS. The Licensed Area may be used by Tenant
only for the installation, operation, use, maintenance, repair, replacement and
removal of the Equipment, all at Tenant's sole risk and expense and in full
compliance with all applicable Laws, which Equipment shall be used only in the
conduct of Tenant's business in the Premises. Tenant's right to use the Licensed
Area is personal to Tenant and may not be separately assigned or sublet, except
in connection with an assignment of the Lease or sublease of the entire Premises
consented to by Landlord.
(e) INTERFERENCE. Tenant's use of the Licensed Area and Equipment shall
not interfere in any manner with Landlord's or any tenant's, occupant's or
licensee's use or activities in the Property and shall not damage or interfere
with any facilities or equipment of any type installed by Landlord or any other
person or entity, including without limitation, the Building Systems and any
satellite dishes, antenna, computer or other devices or systems installed at the
Property at any time prior to Landlord's approval of Tenant's Plans and
Equipment. Landlord shall be entitled to withhold approval until Landlord has
been completely satisfied (as determined by Landlord in Landlord's sole and
absolute discretion) that installation and use of Tenant's Equipment will not
Exhibit D, Page 8
<PAGE> 61
cause any such interference. Tenant agrees, warrants and represents that should
any such interference occur, it shall take whatever steps are required to
correct such interference within two (2) business days after receiving written
notice thereof from Landlord, and that should there occur any material
interference with the ability of Landlord or any tenants, occupants or licensees
of the Property to communicate in any manner (whether by radio, television,
electrical, telephone, computer, microwave or otherwise) that Tenant shall take
whatever steps are required to stop such interference (including stopping the
use of the Equipment) within twenty-four (24) hours after receiving written
notice thereof from Landlord. Tenant's failure to promptly correct any such
interference, as set forth herein, shall constitute an Event of Default and
shall entitle Landlord to correct the cause of the interference, including
turning off the utilities to the Licensed Area, and to charge Tenant with all
costs so incurred. Tenant agrees that Landlord shall not be responsible for
preventing or correcting any interference that may be caused to Tenant's
Equipment or its use and that Tenant shall be fully responsible for coordinating
and cooperating with other tenants, occupants or licensees who have
communications devices at the Property in order to minimize or prevent any
interference by or with Tenant's Equipment and its use (except as Landlord may
otherwise expressly agree to the contrary at the time Landlord approves Tenant's
Plans; for example, based on a particular proposed location for Tenant's
antenna, Landlord may agree not to locate anything that would interfere with
Tenant's antenna between Tenant's antenna and the edge of the roof).
(f) INSTALLATION AND MAINTENANCE OF EQUIPMENT. Tenant agrees that the
Licensed Area will be delivered to it in its AS IS and WHERE IS condition and
that Landlord shall have no obligation to modify or install any improvements in
the Licensed Area. Prior to installing any of the Equipment or constructing any
improvements in the Licensed Area, Tenant shall establish to Landlord's
satisfaction that the requirements of Article 11 (Insurance) of the Lease have
been satisfied. Landlord shall have the right to require reasonable
modifications and impose reasonable conditions on Tenant's Plans; provided,
however, that Landlord shall have the absolute right, in its sole discretion, to
require any changes or impose any conditions on the Plans (including without
limitation the right to require which contractors must be used) to the extent
the Plans affect the structural integrity of the Building (including requiring
use of a nonpenetrating roof mount) or any of the Building Systems, or to
prevent interference with any other communications devices at the Property (or
which Landlord has agreed to install or permit to be installed at the Property)
at the time of Landlord's approval, or to minimize the effect of the Equipment
on the appearance of the Building (including installing screens and other
esthetic improvements). Tenant shall be required, at its own cost, to construct
or install any improvements to the Property required by applicable Laws as a
result of Tenant's Equipment or improvements or the use or operation thereof.
The installation of Tenant's Equipment and construction of all related or
required improvements shall be completed by Tenant, at its sole cost, and in
full compliance with the Plans approved by Landlord and any conditions imposed
by Landlord thereon and the requirements of Article 6 (Alterations) of the
Lease. Tenant shall pay all of Landlord's costs incurred in the review and
supervision of Tenant's efforts. Tenant shall at all times, and at its sole
cost, maintain the Equipment and the Licensed Area in a good, orderly, sanitary
and safe condition and repair and restore any loss or damage Tenant or any of
Tenant's Representatives may cause to the Licensed Area or roof of the Building.
Tenant shall have access to the Licensed Area and other portions of the Property
at all reasonable times and as necessary for Tenant's installation, operation,
use, maintenance, repair, replacement and removal
Exhibit D, Page 9
<PAGE> 62
of the Equipment and other improvements installed by Tenant; provided, however,
that all of such access and activities shall be coordinated with Landlord, after
reasonable prior written notice, and shall be performed in a manner to minimize
any disturbance or interference of Landlord and all tenants and other occupants
of the Property, and to the maximum extent possible, shall be performed during
regular business hours for the Property.
(g) TITLE TO EQUIPMENT AND REMOVAL. Tenant shall at all times remain the
owner of all the Equipment, which shall not be deemed fixtures, notwithstanding
their method of installation or attachment to the Building, and shall pay all
Tenant's Taxes with respect to all the Equipment and related improvements
constructed or installed by Tenant. On or before the Expiration Date or earlier
termination date of the Lease, Tenant shall remove all of the Equipment and all
improvements installed or constructed by Tenant, shall restore the Licensed Area
and Property to the condition they were in upon installation of Tenant's
Equipment, reasonable wear and tear excepted, and shall return the Licensed Area
in broom-clean condition; provided, however, that (i) Landlord shall have the
option to require Tenant to leave at the Property any or all of the improvements
installed or constructed by Tenant, excluding the Equipment; (ii) Landlord shall
have the right, in its sole discretion, to approve Tenant's contractor and all
of Tenant's plans for the removal of the Equipment and improvements and
restoration of the Property; and (iii) if any of the improvements installed or
constructed by Tenant at the Property penetrated the room membrane or otherwise
in any affected the watertight integrity of the Building's roof, then upon
removal of such improvements, Tenant shall provide Landlord with a written
warranty, in a form and from a contractor reasonably acceptable to Landlord,
warranting the watertight integrity of the roof for a period of five years after
removal of such improvements. If Tenant does not remove all of its Equipment and
improvements, as required hereunder, Landlord may, at its sole option, either
retain such items as its own, without any further actions, notice or
compensation to Tenant, or remove and dispose of such items in any manner it
chooses, restore the Property as required hereunder and charge Tenant for all
costs incurred in that effort.
(h) UTILITIES. Tenant shall have the right to draw electricity from the
existing electrical service available at the Building; provided, however, that
Landlord shall have the right to stop such service and availability at any time
that Landlord determines, in its reasonable discretion, that providing
electrical service to Tenant is no longer practicable, interferes with the
provision of electrical service to any other tenants or occupants of the
Property or otherwise overloads or endangers the Building Systems. Tenant shall
pay for all costs of electrical service and other utilities provided to the
Licensed Area, which cost shall be determined and billed by Landlord as
equitably and accurately as may be reasonably practicable under the
circumstances (including applicable Laws and tariffs); provided, however, that
Tenant shall have the right, at its expense, to install and use check meters and
similar devices to measure its use of electricity or other utilities for the
Equipment.
(i) RELOCATION. Landlord shall have the right at any time, upon sixty (60)
days' prior written notice to Tenant, to relocate all or any portion of the
Licensed Area and the Equipment, at Landlord's sole cost and at no cost or
expense to Tenant, provided that the relocation does not interfere with Tenant's
operations or use of the Equipment, except for the period of time required for
such relocation.
Exhibit D, Page 10
<PAGE> 63
(j) INDEMNIFICATION AND WAIVER. In addition to the indemnification of
Landlord set forth in the Lease, Tenant shall indemnify, protect, defend and
hold harmless Landlord from any Claims arising out of or resulting from, in
whole or in part, any loss, injury or damage occurring or caused to any person
or property in or about the Licensed Area or the roof of the Building during the
Term; provided, however, that the foregoing indemnification by Tenant shall not
apply to the extent any such Claims are proven by final judgment to have been
caused by acts or omissions of Landlord that constitute gross negligence or
willful misconduct. This indemnification shall apply and be enforced to the
fullest extent permitted by Law and shall survive termination or expiration of
the Term. Landlord shall not be liable to Tenant, and Tenant hereby waives all
claims it may have against Landlord, for any loss, injury or damage to any
person or property in or about the Licensed Area or the roof of the Building,
including interruption of services and loss of use of the Equipment, from any
cause, without limitation as to type or description and specifically including
acts or omissions constituting the active or sole negligence of Landlord, but
excluding from all of the foregoing the acts or omissions of Landlord that are
proven by final judgment to constitute gross negligence or willful misconduct.
Notwithstanding any other provision of the Lease, in no event shall Landlord be
liable to Tenant for any punitive or consequential damages or damages for loss
of business by Tenant. It is the intent of the foregoing provisions that Tenant
shall look to its own insurance for payment or reimbursement for any such loss,
damage, injury or liability.
INITIALS:
Landlord ______
Tenant ______
Exhibit D, Page 11
<PAGE> 64
EXHIBIT E
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF DECEMBER 19, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
TENANT'S WAIVER AND INDEMNIFICATION FOR
USE OF THE PROJECT FITNESS FACILITY
Security Dynamics Technologies, Inc. ("Tenant") hereby agrees that the use of
the fitness center in the building known as 2855 Campus Drive, San Mateo,
California (the "Fitness Facility") by Tenant, and by those persons authorized
by Tenant to use the Fitness Facility within the guidelines established for the
Fitness Facility from time to time for the number and type of such authorized
users (collectively "Tenant's Users"), will be entirely at the risk of Tenant
and Tenant's Users. Tenant further agrees that it shall be responsible, and
waives all claims against PENINSULA OFFICE PARK ASSOCIATES, L.P. ("Landlord"),
and all claims against any owner or operator of the Fitness Facility, for all
costs, damages or liabilities of whatever nature arising out of the use of the
Fitness Facility by Tenant's Users, and agrees to indemnify, defend and hold
harmless Landlord from all claims, lawsuits, damages, expenses or costs,
including reasonable attorneys' fees, arising from or related to the use of the
Fitness Facility by Tenant's Users; provided, however, that the foregoing waiver
and indemnification shall not apply to any injuries or damages caused by the
negligence or willful misconduct of Landlord or its agents or employees. Tenant
agrees that the use of the Fitness Facility shall be in accordance with the
rules and regulations established from time to time by landlord of the Fitness
Facility.
SECURITY DYNAMICS TECHNOLOGIES, INC.
By: ___________________________________
Name: ______________________________
Title:______________________________
Date: ______________________________
INITIALS:
Landlord ______
Tenant ______
Exhibit E, Page 1
<PAGE> 65
EXHIBIT F
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF DECEMBER 19, 1997
BETWEEN
PENINSULA OFFICE PARK ASSOCIATES, L.P., AS LANDLORD,
AND
SECURITY DYNAMICS TECHNOLOGIES, INC., AS TENANT ("LEASE")
JANITORIAL SPECIFICATIONS
Janitorial services provided by Landlord shall include a level of service not
less than the following:
1. NIGHTLY SERVICES (five times per week, except holidays)
a. Vacuum all carpets.
b. Dust mop all VCT floors. Damp mop to remove spills and water stains
as required.
c. Damp mop all tile and hardwood floors.
d. Dust all desks and office furniture.
e. Empty all waste paper baskets and other trash containers; replace
liners as appropriate.
f. Remove all trash from floors to designated trash areas.
g. Clean and polish drinking fountains.
h. Wipe down counter tops in kitchen area, clean sinks.
INITIALS:
Landlord ______
Tenant ______
Exhibit F, Page 1
<PAGE> 1
EXHIBIT 11
SECURITY DYNAMICS TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON AND COMMON EQUIVALENT SHARE
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Basic earnings per share(1):
Net income per common share............................... $ .07 $ .13
======= =======
Weighted average number of shares outstanding............. 40,665 38,480
======= =======
Diluted earning per share(1):
Net income per common share............................... $ .07 $ .12
======= =======
Shares:
Weighted average number of shares outstanding............. 40,665 38,480
Effect of dilutive options................................ 1,486 1,603
------- -------
Adjusted weighted-average number of shares outstanding.... 42,151 40,083
======= =======
</TABLE>
- ---------------
(1) Results for all periods prior to March 26, 1998 and July 15, 1997 have been
restated for the acquisitions of Intrusion Detection Inc., and DynaSoft AB,
respectively, which acquisitions have been accounted for as poolings of
interests.
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 55,880
<SECURITIES> 109,263
<RECEIVABLES> 26,097
<ALLOWANCES> 882
<INVENTORY> 4,914
<CURRENT-ASSETS> 203,474
<PP&E> 28,090
<DEPRECIATION> 8,795
<TOTAL-ASSETS> 233,579
<CURRENT-LIABILITIES> 25,384
<BONDS> 0
0
0
<COMMON> 409
<OTHER-SE> 204,935
<TOTAL-LIABILITY-AND-EQUITY> 233,579
<SALES> 40,246
<TOTAL-REVENUES> 40,246
<CGS> 8,616
<TOTAL-COSTS> 34,138
<OTHER-EXPENSES> 2,600<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,918
<INCOME-TAX> 3,202
<INCOME-CONTINUING> 2,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,964
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
<FN>
<F1>Other expenses refers to expenses incurred in conjunction
with the acquisition and integration of Infusion Detection Inc.
</FN>
</TABLE>
