FORM 10-K/A
(Amendment No. 1)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended July 31, 1996.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to ______.
Commission file number 1-13580
ALLIED DIGITAL TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
Delaware 38-3191597
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
15 Gilpin Avenue, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 234-0200
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange
Title of each class on which registered
------------------- -------------------
Common Stock American Stock Exchange
Class A Redeemable Common Stock Purchase Warrants American Stock Exchange
Class B Redeemable Common Stock Purchase Warrants American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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|_|
<PAGE>
ALLIED DIGITAL TECHNOLOGIES CORP.
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
--- ----------------------
(2)(a) Amended and Restated Reorganization Agreement, dated as of
October 31, 1994, among Allied Digital Technologies Corp., Allied Film
Laboratory, Inc., EOS Acquisition Corp., Aurora Acquisition Corp., HMG
Digital Technologies Corp., HRM Holdings Corp., and Hauppauge Record
Manufacturing Ltd. (herein incorporated by reference to Exhibit
(2)/(10)(a) filed as part of registrant's Registration Statement on
Form S-4, File No. 33-86530).
(2)(b) Amended and Restated Agreement and Plan of Merger, dated as of
October 31, 1994, among Allied Digital Technologies Corp., Allied Film
Laboratory, Inc., and Aurora Acquisition Corp. (herein incorporated by
reference to Annex B (pages B-1 through B-10) to the Proxy Statement
and Prospectus that formed a part of registrant's Registration
Statement on Form S-4, File No. 33-86530).
(2)(c) Amended and Restated Agreement of Merger, dated as of October
31, 1994, among Allied Digital Technologies Corp., EOS Acquisition
Corp., and HMG Digital Technologies Corp. (herein incorporated by
reference to Annex C (pages C-1 through C-9) to the Proxy Statement
and Prospectus that formed a part of registrant's Registration
Statement on Form S-4, File No. 33-86530).
(3)(i) Certificate of Incorporation of Allied Digital Technologies
Corp. and all amendments thereto (herein incorporated by reference to
Exhibit (3)(a)/(4)(a) filed as part of registrant's Registration
Statement on Form S-4, File No. 33-86530).
(3)(ii)(a) Amended and Restated By-laws of Allied Digital Technologies
Corp. (herein incorporated by reference to Exhibit (3)(b)/(4)(b) filed
as part of registrant's Registration Statement on Form S-4, File No.
33-86530).
(3)(ii)(b) First Amendment to Allied Digital Technologies Corp.
Amended and Restated Bylaws (herein incorporated by reference to
Exhibit 3 to registrant's Form 10-Q for the quarterly period ended
January 31, 1995).
(4)(a) Specimen certificate for Allied Digital Technologies Corp.
Common Stock (herein incorporated by reference to Exhibit (4)(f) filed
as part of registrant's Registration Statement on Form S-4, File No.
33-86530).
(4)(b) Form of specimen note for HMG 12% Series A Note (herein
incorporated by reference to Exhibit (4)(g)/(10)(b) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(4)(c) Amendment No. 1 to the HMG 12% Series A Note (herein
incorporated by reference to Exhibit 4(i)(b) to HMG Digital
Technologies Corp. Annual Report on Form 10-K for the year ended July
31, 1995, Commission File No. 0-20014).
(4)(d) Form of specimen note for HMG 11% Series B Subordinated Note
(herein incorporated by reference to Exhibit (4)(h)/(10)(c) filed as
part of registrant's Registration Statement on Form S-4, File No.
33-86530). (4)(e) Warrant Agreement, dated as of July 29, 1992,
between HMG Digital Technologies Corp. and RAS Securities Corp.
(herein incorporated by reference to Exhibit 4.4 of HMG Digital
Technologies Corp.'s Registration Statement on Form S-1, File No.
33-44942).
(4)(f) Warrant Agreement, dated as of July 29, 1992, between HMG
Digital Technologies Corp. and American Stock Transfer & Trust Company
(herein incorporated by reference to Exhibit 4.5 of HMG Digital
Technologies Corp.'s Registration Statement on Form S-1, File No.
33-44942).
(4)(g) Form of Supplemental Warrant Agreement among Allied Digital
Technologies Corp., HMG Digital Technologies Corp. and RAS Securities
Corp. (herein incorporated by reference to Exhibit (4)(m) filed as
part of registrant's Registration Statement on Form S-4, File No.
33-86530).
(i)
<PAGE>
Exhibit
No. Description of Exhibit
--- ----------------------
(4)(h) Form of Supplemental Warrant Agreement among Allied Digital
Technologies Corp., HMG Digital Technologies Corp. and American Stock
Transfer & Trust Company (herein incorporated by reference to Exhibit
(4)(n) filed as part of registrant's Registration Statement on Form
S-4, File No. 33-86530).
(4)(i) Form of Class C Warrant Agreement between Allied Digital
Technologies Corp. and American Stock Transfer & Trust Company (herein
incorporated by reference to Exhibit (4)(o)(i) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(ii) Form of Class C Warrant Certificate (herein
incorporated by reference to Exhibit (4)(o)(ii) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(10)(a) Agreements with American National Bank and Trust Company of
Chicago ("ANB"):
(i) Amended and Restated Loan and Security Agreement, dated
as of October 30, 1996, between Hauppauge Record Manufacturing Ltd.
and ANB.
(ii) Amended and Restated Revolving Loan Note, dated October
30, 1996, made by Hauppauge Record Manufacturing Ltd. to the order of
ANB in the principal amount of $22,000,000.
(iii) Amended and Restated Term Note, dated October 30,
1996, made by Hauppauge Record Manufacturing Ltd. and payable to
Lender in the aggregate principal amount of $25,410,168.93.
(iv) Additional Term Note, dated October 30, 1996, made by
Hauppauge Record Manufacturing Ltd. and payable to ANB in the
aggregate principal amount of $1,500,000.
(v) Amended and Restated Guaranty Agreement, dated as of
October 30, 1996, made by HRM Holdings Corp. in favor of ANB.
(vi) Amended and Restated Guaranty Agreement dated October
30, 1996, made by Hauppauge Record Manufacturing Ltd. in favor of ANB.
(vii) Amended and Restated Subordination Agreement, dated as
of October 30, 1996, between HRM Holdings Corp. and ANB.
(viii) Fee Letter, dated October 30, 1996, between Hauppauge
Record Manufacturing Ltd. and ANB.
(ix) Collateral Patent, Trademark, Copyright and License
Agreement, dated October 30, 1996, made by Hauppauge Record
Manufacturing Ltd. in favor of ANB.
(x) Security Agreement, dated as of October 30, 1996, made
by Allied Digital Technologies Corp., HMG Digital Technologies Corp.
and HRM Holdings Corp. in favor of ANB.
(xi) Amended and Restated Guaranty Agreement, dated as of
October 30, 1996, made by Allied Digital Technologies Corp. in favor
of ANB.
(10)(b)(i) Amended and Restated Promissory Note, dated October 30,
1996, made by Hauppauge Record Manufacturing Ltd. in favor of William
H. Smith, Trustee, in the principal amount of $4,000,000.
(ii)
<PAGE>
Exhibit
No. Description of Exhibit
--- ----------------------
(10)(b)(ii) Amended and Restated Promissory Note dated October 30,
1996, made by Hauppauge Record Manufacturing Ltd. in favor of William
H. Smith, in the principal amount of $2,000,000.
(10)(c) Global Indemnification Agreement dated June 17, 1994, among
Allied Film Laboratory, Inc. and Greenfield Land Company and William
H. Smith, individually, d/b/a William H. Smith Realty and William H.
Smith, as Trustee, under the William H. Smith Trust Agreement dated
November 13, 1978 (herein incorporated by reference to Exhibit (99)(j)
filed as part of registrant's Registration Statement on Form S-4, File
No. 33-86530).
(10)(d) Non-Negotiable Promissory Note, dated December 29, 1992, made
by Allied Film Laboratory, Inc. to VTC, Inc. (herein incorporated by
reference to Exhibit (99)(o) filed as part of registrant's
Registration Statement on Form S-4, File No. 33-86530).
(10)(e) Asset Purchase Agreement, dated December 29, 1992, between
Allied Film Laboratory, Inc. and VTC, Inc. (herein incorporated by
reference to Exhibit (99)(p) filed as part of registrant's
Registration Statement on Form S-4, File No. 33-86530).
(10)(f)* (i) VHS Cassette License Agreement for Duplicators (USA),
dated July 1, 1991, between Victor Company of Japan, Limited and
Allied Digital Technologies Corp. (and executed by the parties on
November 9, 1995 and October 11, 1995, respectively).
*(ii) Addendum, dated January 1, 1995, between Allied Digital
Technologies Corp. and Victor Company of Japan, Limited.
*(iii) License Extension Addendum, dated July 1, 1996,
between Allied Digital Technologies Corp. and Victor Company of Japan,
Limited.
(10)(g) Licensed Duplicator Agreement for the United States and
Canada, dated June 1, 1993, between Macrovision Corporation and Allied
Film & Video (herein incorporated by reference to Exhibit (99)(jj)
filed as part of registrant's Registration Statement on Form S-4, File
No. 33-86530).
(10)(h)* CD Disc License Agreement, dated January 1, 1996, between
Hauppauge Record Manufacturing Ltd. and U.S. Phillips Corporation.
(10)(i)* Patent License Agreement for Disc Products, dated June 1,
1995, between Hauppauge Record Manufacturing Ltd. and Discovision
Associates.
(10)(j) (i) Lease Agreement, dated August 9, 1983, between Dallas
Communications Complex and Allied Film Laboratory, Inc. (for
warehouse, office and manufacturing facilities located in Irving,
Texas) (herein incorporated by reference to Exhibit (99)(u)(i) filed
as part of registrant's Registration Statement on Form S-4, File No.
33-86530).
(i)(a) Supplemental Lease Agreement, dated December 8,
1989, between Dallas Communications Complex and Allied Film
Laboratory, Inc. (amending Lease Agreement, dated August 9, 1983,
between Dallas Communications Complex and Allied Film Laboratory,
Inc.) (herein incorporated by reference to Exhibit (99)(u)(i)(a) filed
as part of registrant's Registration Statement on Form S-4, File No.
33-86530).
(ii) Lease Agreement, dated September 7, 1989, between
Dallas Communications Complex and Allied Film Laboratory, Inc. (for
manufacturing and office facilities located in Irving, Texas) (herein
incorporated by reference to Exhibit (99)(u)(ii) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(iii) Lease Agreement, dated March 8, 1993, between Dallas
Communications Complex and Allied Film Laboratory, Inc. (for warehouse
facilities located in Irving, Texas) (herein incorporated by reference
to Exhibit (99)(u)(iii) filed as part of registrant's Registration
Statement on Form S-4, File No. 33-86530).
(iii)
<PAGE>
Exhibit
No. Description of Exhibit
--- ----------------------
(10)(k) (i) Lease Agreement, dated December 1, 1986, between
Greenfield Land Company and Allied Film Laboratory, Inc. (for
warehouse, office, manufacturing facilities located in Detroit,
Michigan) (herein incorporated by reference to Exhibit (99)(v)(i)
filed as part of registrant's Registration Statement on Form S-4, File
No. 33-86530).
(i)(a) Amendment, dated July 1, 1994, to Lease Agreement
dated December 1, 1986, between Greenfield Land Company and Allied
Film Laboratory, Inc. (for warehouse, office, manufacturing facilities
located in Detroit, Michigan) (herein incorporated by reference to
Exhibit (99)(v)(i)(a) filed as part of registrant's Registration
Statement on Form S-4, File No. 33-86530).
(ii) Lease Agreement, dated January 2, 1987, between
Greenfield Land Company and Allied Film Laboratory, Inc. (for parking
area facilities located in Detroit, Michigan) (herein incorporated by
reference to Exhibit (99)(v)(ii) filed as part of registrant's
Registration Statement on Form S-4, File No. 33-86530).
(iii) Lease Agreement, dated January 2, 1987, between
American National Bank and Trust Company of Chicago, as Trustee, under
Trust Agreement dated February 13, 1986, for the benefit of Greenfield
Land Company and Allied Film Laboratory, Inc. (for manufacturing,
office and warehouse facilities located in Chicago, Illinois) (herein
incorporated by reference to Exhibit (99)(v)(iii) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(iv) Lease Agreement, dated November 1, 1986, between
American National Bank and Trust Company of Chicago, as Trustee, under
Trust Agreement dated February 13, 1986, for the benefit of Greenfield
Land Company and Allied Film Laboratory, Inc. (for manufacturing,
office and warehouse facilities located in Chicago, Illinois) (herein
incorporated by reference to Exhibit (99)(v)(iv) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(v) Lease Agreement, dated November 1, 1986, between
American National Bank and Trust Company of Chicago, as Trustee, under
Trust Agreement dated February 13, 1986, for the benefit of Greenfield
Land Company and Allied Film Laboratory, Inc. (for manufacturing,
office and warehouse facilities located in Chicago, Illinois) (herein
incorporated by reference to Exhibit (99)(v)(v) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(vi) Lease Agreement, dated November 1, 1986, between
American National Bank and Trust Company of Chicago, as Trustee, under
Trust Agreement dated February 13, 1986, for the benefit of Greenfield
Land Company and Allied Film Laboratory, Inc. (for manufacturing,
office and warehouse facilities located in Chicago, Illinois) (herein
incorporated by reference to Exhibit (99)(v)(vi) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(vii) Lease Agreement, dated March 1, 1989, between
Greenfield Land Company and Allied Film Laboratory, Inc. (for
manufacturing, office and warehouse facilities located in Orlando,
Florida) (herein incorporated by reference to Exhibit (99)(v)(vii)
filed as part of registrant's Registration Statement on Form S-4, File
No. 33-86530).
(viii) Lease Agreement, dated January 1, 1995, between
Greenfield Land Company and Allied Film Laboratory, Inc. (for
manufacturing, office and warehouse facilities located in Clinton,
Tennessee).
(10)(1) Form of Lease Agreement, dated March 1, 1993, between
Zellerbach Family Fund and Allied Film Laboratory, Inc. (for office
and warehouse facilities located in San Francisco, California) (herein
incorporated by reference to Exhibit (99)(w) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(10)(m) (i) Sublease Agreement, dated June 1, 1984, between William H.
Smith Living Trust Agreement dated November 13, 1978, William H.
Smith, Trustee, and Allied Film Laboratory, Inc. (for manufacturing,
office and warehouse facilities located in San Francisco, California)
(herein incorporated by reference to Exhibit (99)(x)(i) filed as part
of registrant's Registration Statement on Form S-4, File No.
33-86530).
(iv)
<PAGE>
Exhibit
No. Description of Exhibit
--- ----------------------
(ii) Sublease Agreement, dated June 1, 1984, between William
H. Smith, Trustee, William H. Smith Living Trust dated November 13,
1978, and Leo Diner, Inc. (Leo Diner, Inc. merged with Allied Film
Laboratory, Inc. January 1, 1992) (for manufacturing, office and
warehouse facilities located in San Francisco, California) (herein
incorporated by reference to Exhibit (99)(x)(ii) filed as part of
registrant's Registration Statement on Form S-4, File No. 33-86530).
(10)(n) Lease Agreement, dated November 29, 1994, between The
Prudential Insurance Company of America and Allied Film Laboratory,
Inc.
(10)(o) (i) Lease Agreement, dated April 10, 1989 (assigned to Allied
Film Laboratory, Inc. 1/12/93), between Elk Grove Village Industrial
Park Ltd. and VCA Teletronics, Inc. (for warehouse facilities located
in Elk Grove Village, Illinois) (herein incorporated by reference to
Exhibit (99)(aa)(i) filed as part of registrant's Registration
Statement on Form S-4, File No. 33-86530).
(ii) Assignment and Assumption of Lease Agreement, dated
January 12, 1993, between VCA/Teletronics, Inc. and Allied Film
Laboratory, Inc. (for warehouse facilities located in Elk Grove
Village, Illinois) (herein incorporated by reference to Exhibit
(99)(aa)(ii) filed as part of registrant's Registration Statement on
Form S-4, File No. 33-86530).
(10)(p) Lease Agreement, dated July 1, 1994, between Security Trust
Company, N.A. and Allied Film Laboratory, Inc. (for manufacturing and
office facilities located in Landover, Maryland) (herein incorporated
by reference to Exhibit (99)(bb) filed as part of registrant's
Registration Statement on Form S-4, File No. 33-86530).
(10)(q) Form of Lease Agreement, dated June 18, 1993, between
HomeCrest Corporation and Allied Film Laboratory, Inc. (for warehouse
facilities located in Clinton, Tennessee) (herein incorporated by
reference to Exhibit (99)(dd) filed as part of registrant's
Registration Statement on Form S-4, File No. 33-86530).
(10)(r) (i) Agreement of Lease, dated December 15, 1994, between HMG
Digital Technologies Corp. and Keelson Associates (herein incorporated
by reference to an Exhibit filed as part of HMG Digital Technologies
Corp. Quarterly Report on Form 10-Q for the period ended April 30,
1995, Commission File No. 0-20014).
(ii) Indenture of Lease, dated February 1, 1987, between Lee
Halpern and Larry Halpern and HMG (herein incorporated by reference to
an Exhibit filed as part of Registration Statement of HMG Digital
Technologies Corp. on Form S-4, File No. 33-66486).
(10)(s)* Lease Agreement, dated September 16, 1996, between Allied
Digital Technologies Corp. and Shivom Enterprises LLC (for office
facilities in Hauppauge, New York).
(10)(t) Allied Film Laboratory, Inc. Employees' Profit Sharing Plan.
National Bank of Detroit -- Trustee under the Allied Film Laboratory,
Inc. Amended Profit Sharing Retirement Trust Agreement between Allied
Film Laboratory, Inc. and National Bank of Detroit, dated February 24,
1994. (herein incorporated by reference to Exhibit (99)(ff) filed as
part of registrant's Registration Statement on Form S-4, File No.
33-86530).
(10)(u) Allied Film Laboratory, Inc. Five Year Bonus Program for
Fiscal Year 1992 through Fiscal Year 1996 (includes management,
supervisory and stock bonus plans) (herein incorporated by reference
to Exhibit (99)(gg) filed as part of registrant's Registration
Statement on Form S-4, File No. 33-86530).
(10)(v) Amended and Restated 1994 Long-Term Stock Incentive Plan of
Allied Digital Technologies Corp. (herein incorporated by reference to
Exhibit (4)(i) filed as part of registrant's Registration Statement on
Form S-4, File No. 33-86530).
(10)(w) Indemnification Agreements between Allied Digital Technologies
Corp. and each of William H. Smith, James A. Merkle, Werner Jean,
Jerry Stone, Eugene Gargaro, Jr., George N. Fishman, Seymour Leslie,
H. Sean Mathis, Donald L. Olesen, Charles
(v)
<PAGE>
Exhibit
No. Description of Exhibit
--- ----------------------
Kavanagh and Judith A. Szidik (herein incorporated by reference to
Exhibit 10(y) to registrant's Transition Report on Form 10-K for the
period from January 1, 1994 to July 31, 1994).
(10)(x) Allied Digital Stockholders Agreement, dated January 11, 1995,
among Allied Digital Technologies Corp.; William H. Smith; William H.
Smith Trust, William H. Smith as Trustee under agreement dated
November 13, 1978, as amended; Patricia M. Smith; Patricia M. Smith
Trust, Patricia M. Smith as Trustee under agreement dated November 13,
1978, as amended; George N. Fishman; Donald L. Olesen; The Donald L.
Olesen Annuity Trust, Donald L. Olesen, co-trustee; Leslie/Linton
Entertainment, Inc.; and Venture Partners (herein incorporated by
reference to Exhibit 3 filed as a part of a Schedule 13D filed
February 7, 1995, by William H. Smith; William H. Smith Trust, William
H. Smith as Trustee under agreement dated November 13, 1978, as
amended; Patricia M. Smith; Patricia M. Smith Trust, Patricia M. Smith
as Trustee under agreement dated November 13, 1978, as amended; George
N. Fishman; Donald L. Olesen; The Donald L. Olesen Annuity Trust,
Donald L. Olesen, co-trustee; Leslie/Linton Entertainment, Inc.; and
Venture Partners.)
(10)(y) Form of Employment Agreements between Hauppauge Record
Manufacturing, Ltd. and each of: (i) George Fishman, (ii) Charles
Kavanagh, (iii) Donald Olesen, (iv) Brian Wilson and (v) Philip
Gouldstone (herein incorporated by reference to Exhibit (99)(hh) filed
as part of registrant's Registration Statement on Form S-4, File No.
33-86530).
(10)(z) Smith Family Shareholders Agreement, dated January 11, 1995,
among Allied Digital Technologies Corp.; William H. Smith; William H.
Smith Trust, William H. Smith as Trustee under agreement dated
November 13, 1978, as amended; Patricia M. Smith; Patricia M. Smith
Trust, Patricia M. Smith as Trustee under agreement dated November 13,
1978, as amended; Kendall Allen Smith; Scott Douglas Smith; and Wendy
Allison Kubitskey (herein incorporated by reference to Exhibit 2 filed
as a part of a Schedule 13D filed January 20, 1995, by William H.
Smith; William H. Smith Trust, William H. Smith as Trustee under
agreement dated November 13, 1978, as amended; Patricia M. Smith;
Patricia M. Smith Trust, Patricia M. Smith as Trustee under agreement
dated November 13, 1978, as amended; Kendall Allen Smith; Scott
Douglas Smith; and Wendy Allision Kubitskey).
(10)(aa) (i) Consulting Agreement, dated June 16, 1994, between HMG
Digital Technologies Corp. and Seymour W. Zises (herein incorporated
be reference to Exhibit 10.22(i) of HMG Digital Technologies Corp.
Annual Report on Form 10-K for the fiscal year ended July 31, 1994,
Commission File No. 0-20014).
(ii) Consulting Agreement, dated June 16, 1994, between HMG
Digital Technologies Corp. and H. Sean Mathis (herein incorporated be
reference to Exhibit 10.22(ii) of HMG Digital Technologies Corp.
Annual Report on Form 10-K for the fiscal year ended July 31, 1994,
Commission File No. 0-20014).
(iii) Consulting Agreement, dated June 16, 1994, between HMG
Digital Technologies Corp. and Mark L. Freidman (herein incorporated
be reference to Exhibit 10.22(iii) of HMG Digital Technologies Corp.
Annual Report on Form 10-K for the fiscal year ended July 31, 1994,
Commission File No. 0-20014).
10(bb) (i) Agreement between HTM Ltd. (a predecessor in interest to
HMG) and Local 810, Steel, Metals, Alloys and Hardware Fabricators and
Warehousemen, affiliated with the International Brotherhood of
Teamsters, dated as of January 22, 1994 (herein incorporated by
reference to Exhibit 10.15(i) of HMG Digital Technologies Corp. Annual
Report on Form 10-K for the fiscal year ended July 31, 1994,
Commission File No. 0-20014).
(ii) Agreement between HVM Ltd. (a predecessor in interest
to HMG) and Local 810, Steel, Metals, Alloys and Hardware Fabricators
and Warehousemen, affiliated with the International Brotherhood of
Teamsters, dated as of January 22, 1994 (herein incorporated by
reference to Exhibit 10.15(ii) of HMG Digital Technologies Corp.
Annual Report on Form 10-K for the fiscal year ended July 31, 1994,
Commission File No. 0-20014).
(iii) Agreement between HCDM Ltd. (a predecessor in interest
to HMG) and Local 810, Steel, Metals, Alloys and Hardware Fabricators
and Warehousemen, affiliated with the International Brotherhood of
Teamsters, dated as of January 22, 1994
(vi)
<PAGE>
Exhibit
No. Description of Exhibit
--- ----------------------
(herein incorporated by reference to Exhibit 10.15(iii) of HMG Digital
Technologies Corp. Annual Report on Form 10-K for the fiscal year
ended July 31, 1994, Commission File No. 0-20014).
(10)(cc) Form of Indemnification Agreements, dated July 1, 1992,
between HMG Digital Technologies Corp. and each of Seymour Zises,
Wilmer J. Thomas, Jr., Thomas E. Constance, Alan I. Annex and Mark L.
Freidman (herein incorporated by reference to Exhibit 10.7 of HMG
Digital Technologies Corp. Registration Statement on Form S-1, File
No. 33-44942).
(10)(dd) Form of Indemnification Agreement, dated September 20, 1993,
between HMG Digital Technologies Corp. and each of Michael Delany,
Brian Wilson, Philip Gouldstone, Joel Ziegler and Frederick R.
Cummings, Jr. (herein incorporated by reference to Exhibit 10.6 of HMG
Digital Technologies Corp. Annual Report on Form 10-K for the fiscal
year ended July 25, 1993, Commission File No. 0-20014).
(10)(ee) (i) Subordinated Promissory Note dated October 30, 1996, made
by HMG Digital Technologies Corp. in favor of George N. Fishman in the
principal amount of $200,000.
(ii) Subordinated Promissory Note dated October 30, 1996,
made by HMG Digital Technologies Corp. in favor of Donald L. Olesen in
the principal amount of $200,000.
(iii) Subordinated Promissory Note dated October 30, 1996,
made by HMG Digital Technologies Corp. in favor of William H. Smith,
Trustee, in the principal amount of $1,600,000.
(10)(ff) Agreement between Anchor Bay Entertainment and Allied Digital
Technologies Corp. for Videotape Duplication and Order Fulfillment,
dated une 16, 1995.
(11) Statement re Computation of Per Share Earnings
No statement is required to be filed because the
computations can be clearly determined from the materials contained in
the Report.
(21) Subsidiaries of registrant
(23)(a) Consent of Arthur Anderson LLP
(23)(b) Consent of Grant Thornton LLP (Item 14(a) of this Report on Form
10-K).
- -----------
* Filed in paper format under cover of Form SE on November 14, 1996, pursuant
to a Temporary Hardship Exemption in accordance with Rule 201 of Regulation S-T.
(vii)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: November 14, 1996 ALLIED DIGITAL TECHNOLOGIES CORP.
By: /s/ George N. Fishman
------------------------------
George N. Fishman
Co-Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 1996 By: /s/ Charles P. Kavanagh
------------------------------
Charles P. Kavanagh
Secretary
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below as of November 14, 1996, by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Date: November 14, 1996 /s/ William H. Smith
------------------------------
William H. Smith, Co-Chairman
& Director
Date: November 14, 1996 /s/ George N. Fishman
------------------------------
George N. Fishman, Co-Chairman, Chief
Executive Officer & Director
Date: November 14, 1996 /s/ Donald L. Olesen
------------------------------
Donald L. Olesen, Director
Date: November 14, 1996 /s/ Eugene L. Gargaro, Jr.
------------------------------
Eugene L. Gargaro, Jr., Director
Date: November 14, 1996 /s/ Werner H. Jean
------------------------------
Werner H. Jean, Director
Date: November 14, 1996 /s/ Seymour Leslie
------------------------------
Seymour Leslie, Director
Date: November 14, 1996 /s/ H. Sean Mathis
------------------------------
H. Sean Mathis, Director
Date: November 14, 1996 /s/ John A. Morgan
------------------------------
John A. Morgan, Director
Date: November 14, 1996 /s/ Jerry E. Stone
------------------------------
Jerry E. Stone, Director
II-8
Exhibit (10)(f)(i)
VHS CASSETTE LICENSE AGREEMENT
FOR DUPLICATORS (U.S.A.)
BETWEEN
VICTOR COMPANY OF JAPAN, LIMITED
AND
ALLIED DIGITAL TECHNOLOGIES CORPORATION
<PAGE>
VHS CASSETTE LICENSE AGREEMENT
FOR DUPLICATORS (U.S.A.)
This Agreement made and entered into as of the 1st day of July 1991 by and
between, VICTOR COMPANY OF JAPAN, LIMITED, a corporation duly organized and
existing under the laws of Japan having its principal office at 12, 3-Chome,
Moriya-cho, Kanagawa-ku, Yokohama 221, Japan (hereinafter referred to as
"Licensor") and ALLIED DIGITAL TECHNOLOGIES CORPORATION a corporation duly
organized and existing under the laws of Delaware having its registered office
at 7375 Woodward Avenue, Detroit, MI 48202 U.S.A. (hereinafter referred to as
"Licensee").
WITNESSETH:
WHEREAS, Licensor has developed a VHS video cassette having 12.65 mm (1/2 inch)
width magnetic tape for VHS video cassette recorders and/or reproducers for the
recording and/or reproducing of television signals primarily for home use, and
is promoting the manufacture and sale of such video cassette throughout the
world.
WHEREAS, Licensor intends to ensure that such video cassettes will be
readily available to any customer at any place in the world.
WHEREAS, Licensor is prepared to make available the technical information
relating to such video cassettes to
<PAGE>
any qualified party in the world desiring to manufacture and sell such video
cassettes in conformity with the VHS Standards and other quality requirements
established by Licensor, and to grant a license and right therefor.
WHEREAS, Licensee is desirous of obtaining a license from Licensor to load video
tape into VHS cassette housings for its duplicating purpose and to sell, use or
otherwise dispose of such finished VHS video cassettes, and
WHEREAS, Licensee acknowledges the need to maintain sufficiently high quality of
its loaded sample VHS video cassettes through the technical evaluation conducted
by Licensor or Licensor's designated laboratory.
NOW, THEREFORE, Licensor and Licensee hereby agree as follows:
ARTICLE 1. Definitions
For the purpose of this Agreement, the following terms shall have the respective
meanings set forth below:
(1) "Technical Information" shall mean the VHS Standards and other information
set forth in Exhibit A hereof.
(2) "Licensed Product" or "Licensed Products" shall mean a VHS video cassette
or VHS video cassettes having packed
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<PAGE>
therein magnetic tape of 12.65mm (1/2 inch) width conforming to the VHS
Standards.
(3) "Trademark" shall mean the VHS Logo Trademark owned and used by Licensor
as shown in Exhibit B hereof.
(4) "Manufacturing Premises" shall mean Licensee's factory or factories for
manufacture of Licensed Products at
370 J.D. Yarnell Industrial Parkway 15 Gilpin Avenue
Clinton, Tennessee 37716 Hauppauge, NY 11788
or such other premises as Licensee may identify to Licensor and obtain
from Licensor a written consent from time to time.
ARTICLE 2. Grant of License
(1) Subject to the terms and condition hereinafter set forth and the due
performance by Licensee of each of its obligations and covenants contained
herein. Licensor hereby grants to Licensee a non-exclusive,
non-transferable and indivisible license and right, without the right to
sublicense to (i) manufacture Licensed Products in its Manufacturing
Premises (and to make use of the Technical Information in such
manufacturing) by loading video tape into VHS cassette housings for
duplicating purposes, and (ii) use or sell Licensed Products throughout
the world.
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<PAGE>
(2) No license shall be granted under the preceding Paragraph to sell (i)
component parts or constituent elements of Licensed Products including
blank video tape or cassette housing or (ii) unfinished products.
(3) No license shall be granted under the paragraph (1) above regarding the
manufacturing processes for magnetic tapes and magnetic materials.
(4) None of the provisions hereof shall be construed to restrict in any way
the manufacture and/or sale by Licensee of video cassettes of any kind and
type other than Licensed Products.
ARTICLE 3. Compatibility
Licensee fully recognizes the imperative need for maintaining
compatibility between Licensed Products and VHS video recorders and/or
reproducers conforming to VHS Standards to widely promote this VHS video
system, and undertakes to only sell, use of otherwise dispose of Licensed
Products which maintain such compatibility.
ARTICLE 4. Supply of Technical Information
(1) Licensor shall provide Licensee with Technical Information within forty
(40) days from the date on which Licensor acknowledges the receipt of
payment of
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<PAGE>
Evaluation Fee by Licensee according to Article 5 (1) ii. hereof.
(2) Licensor shall be under no obligation to supply Licensee with any
technical information other than as set forth in the preceding paragraph,
except that Licensor shall provide Licensee with any change or amendment
to the VHS Video Cassette System Standards for Licensed Product from time
to time and with any other information which may be necessary to enable
Licensee to comply with the provisions of Article 3 hereof.
ARTICLE 5. Consideration
(1) In consideration of the grant of license and rights under this Agreement,
Licensee shall pay to Licensor:
i. An Initial Fee of Twenty Five Hundred Dollars ($2,500) on signing of
this Agreement. Such amount shall not be refunded for any reason
whatsoever. Payment is to be paid by electronic bank transfer at the
same time the signed Agreements are sent to Japan by air courier.
ii. An Evaluation Fee of One Million (1,000,000) Japanese Yen with in
thirty days (30) after this
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<PAGE>
Agreement becomes effective. Such amount shall not be refundable for
any reason whatsoever.
iii. A royalty based upon either of the following royalty structures, to
be selected by Licensee for each quarter during the term of this
Agreement, with such selection to e reported to Licensor along with
the royalty statements for such quarter as provided by Article 5(3)
hereof:
(a)-1) until March 31, 1993, Five Japanese Yen (5 YEN) for each
Licensed Product sold or otherwise transferred by
Licensee, and
(a)-2) on or after April 1, 1993, Four Japanese Yen (4 YEN) for
each Licensed Product sold or otherwise transferred by
Licensee, provided however, that if Licensee can
demonstrate to Licensor's reasonable satisfaction that
certain of the Licensed Products sold or otherwise
transferred by Licensee have a recording time of thirty
(30) minutes or shorter ("Short Cassettes"), a royalty
rate of Three Japanese Yen (3 YEN) shall apply for each
such Short Cassette, or
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<PAGE>
(b) Eighty Seven Thousand Five Hundred Dollars (US $ 87,500)
plus Two Point Thirty Three Cents (2.33) for each
Licensed Product in excess of 3.75 million pieces sold
or otherwise transferred by Licensee during such
quarter.
The royalty rate for Licensed Products wold or otherwise transferred by Licensee
in the form of blank video cassettes for duplication by other duplications shall
be determined in the same manner as described in Article 5(1) iii. (a)-1) or
(a)-2) above, but the quantity of such blank video cassettes shall not be
included in determining the quarterly volume of Licensed Products for purposes
of Article 5(1) iii. (b).
Licensee shall not be obligated to pay in any quarter a royalty rate per
duplicated cassette which is higher than that paid by any other duplicator which
has duplicated, sold or otherwise transferred in such quarter a volume of video
cassettes comparable to that of Licensee.
ELECTRONIC BANK TRANSFER TO:
Bank Name: The Sakura Bank, Honcho Branch
Bank Address: 4-10, Nihonbashi-Honcho 3-chome,
Chuo-ku, Tokyo 103, Japan
Account No.: 1024755 (for deposit of Victor
Company of Japan, Limited).
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<PAGE>
AGREEMENTS & CORRESPONDENCE TO:
Mr. Y. Honda, Manager, Licensing
INTELLECTUAL PROPERTY DEPARTMENT
VICTOR COMPANY OF JAPAN, LIMITED
12, 3-Chome, Moriya-cho, Kanagawa-ku
Yokohama 221, Japan
(2) In the event that any income tax on payments by Licensee to Licensor
hereunder shall be required to be withheld from such payments, Licensee
may deduct the amount of such tax from such payments. In such case,
Licensee shall apply to the competent authority of Licensee's country on
behalf of Licensor an appropriate form of claim under the double taxation
conventions, if any, for the avoidance of double taxation between the two
nations and Licensee shall furnish Licensor with a certified tax receipt
immediately upon payment of such tax by Licensee.
(3) Licensee shall prepare and deliver to Licensor royalty statements duly
certified by the responsible officer or auditor of Licensee for each
calendar quarter ending in March, Jun, September, and December of each
year within sixty (60) days of each such period setting forth the quantity
of Licensed Products made, sold or otherwise disposed of by Licensee in
each such calendar quarter and the royalties due and payable with respect
to such
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<PAGE>
calendar quarter, as well as any other particulars to be requested by
Licensor.
(4) In the case of failure by Licensee to make any of the payments mentioned
in the preceding paragraph within the specified period, the royalties
remaining unpaid shall bear the interest of a rate of ten (10%) percent
per annum for any period until the payment is made in full.
(5) Licensee shall remit and pay to Licensor the total amount of royalties
given in paragraph (1) and/or the royalty statement of paragraph (4)
simultaneously with the delivery to Licensor of the royalty statement, and
such royalties paid to Licensor shall not be refundable for any reason
whatsoever.
(6) Licensee shall keep full, clear and accurate records and books showing the
manufacture, sale and other dispositions of Licensed products by Licensee
and shall keep such records and books during the effective period of this
Agreement and for two (2) years after the termination thereof.
(7) Independent public accountant(s) appointed by Licensor may examine, during
Licensee's normal business hours, Licensee's records and books set forth
in the preceding
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<PAGE>
paragraph to the extent necessary to verify the accuracy of royalty
statements delivered by Licensee to Licensor. Should this examination
result in a correction of more than five (5) percent of the royalty due,
Licensee shall bear the cost of the examination.
Article 6. Maintenance of Standards and Quality
(1) In order to insure the compatibility described in Article 3, Licensee
undertakes that Licensed Products manufactured hereunder by Licensee shall
comply with VHS Standards and all the other quality requirements imposed
by Licensor. For this purpose, Licensee shall provide any and all
necessary measuring equipment and facilities including those specified in
Exhibit C hereof or the equivalent as approved by Licensor. Within
forty-five (45) days after Licensee has received Technical Information,
and thereafter at any time during the effective period of this Agreement
upon Licensor's request, Licensee shall submit and deliver to Licensor the
samples of Licensed Products together with its own measured data for
Licensor's technical inspection. Licensee's procurement of magnetic tapes
or component partes from any other licensee shall not be deemed to exempt
Licensee from implementing the above Licensee's obligation as to sample
submission.
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<PAGE>
(2) Each time any significant change is made by Licensee in the process of
manufacture of Licensed Products or magnetic tapes packaged therein or the
component parts thereof, Licensee shall inform Licensor of such change
three (3) months or more prior to the commencement of sale thereof. Upon
Licensor's request, Licensee shall submit and deliver the samples of
Licensed Product incorporating such change for Licensor's technical
inspection and approval.
(3) If and when Licensee shall have received from Licensor a notice advising
Licensee that any sample of Licensed Products stipulated in Article 6(1)
or Licensed Products placed on the market by Licensee do not conform to
VHS Standards and/or any other quality requirements, then Licensee shall
take any and all steps necessary to remove the specified defects within
sixty (60) days from receipt of such notice so as to secure the conformity
to VHS Standards and/or other quality requirements imposed by Licensor.
(4) Even if Licensee does not manufacture magnetic tapes or component parts
for Licensed Products but procures them for Licensee's manufacture of
Licensed Products from any other licensee, Licensee shall confirm, as its
own responsibility, that such magnetic tapes or component
-11-
<PAGE>
parties are in conformity with VHS Standards and all other quality
requirements imposed by Licensor.
(5) During the term of this Agreement, Licensor's personnel may enter into any
premises which Licensee may from time to time use for the manufacture of
Licensed Products at reasonable time only for the purpose of inspecting
Licensed Products, production facilities and measuring equipment thereof.
(6) Upon Licensee's request and subject to Licensor's reasonable convenience,
Licensor agrees to have a technical meeting with Licensee's engineer(s) to
provide Licensee with technical counsel for the interpretation of
Technical Information and the performance measurement of Licensed Products
at Licensee's cost and expenses.
Article 7. Confidentiality
(1) Licensor shall use all reasonable efforts to keep in confidence all
Technical Information supplied by Licensor to Licensee under this
Agreement as well as the contents of this Agreement, and shall not reveal
or disclose the same to any third party, for five (5) years from the date
of mailing of Technical Information by Licensor (notwithstanding the
earlier termination or
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<PAGE>
expiration hereof), except to the extent that such information:
(i) is unavoidably disclosed by the sale of
Licensed Products manufactured by Licensee.
(ii) is or becomes legitimately a matter of public
knowledge.
(iii) is established to be in public domain other than a result of
Licensee's default of its obligations under this Agreement. Licensee shall
not use any Technical Information for any purpose other than for the
manufacture of Licensed Products under this Agreement.
(2) Licensee may cause any third party to manufacture any component or parts
of Licensed Products (including dies therefor) for Licensee using
Technical Information supplied by Licensor hereunder but only on the
condition that Licensee causes such party to assume the obligations
provided for in the preceding paragraph.
Article 8. Trademark and Identification
(1) Subject to (i) the due performance by Licensee of all of its obligations
and covenants contained herein, and
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<PAGE>
(ii) Licensor's approval on quality of sample cassettes to be submitted by
Licensee to Licensor in accordance with Licensor's instruction, Licensor
hereby grants to Licensee, without any additional payment, a non-exclusive
license to use the Trademark on Licensee's Licensed Products during the
period of this Agreement.
(2) Licensee shall use the Trademark prominently on the body of all Licensed
Products manufactured and sold by Licensee and shall use its best efforts
to ensure that its customers use the Trademark on any associated printed
materials such as packaging and advertising literature. All use of the
Trademark shall be in accordance with the instruction entitled "VHS Video
Cassette System Standard; VHS Mark Usage" to be provided by Licensor to
Licensee, except in those countries where Trademark may not be used.
(3) Licensee acknowledges that Licensor has acquired or will acquire all
right, title and interest in and to the Trademark and agrees not to use
such Trademark in any manner which may endanger Licensor's title to the
Trademark or the validity of the Trademark. Should Licensor have found or
in any way foreseen any trend on the market which may dilute or otherwise
jeopardize the Trademark, then Licensee shall make any reasonable
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<PAGE>
change in the manner of its use of the Trademark as Licensor may request
from time to time.
(4) License shall submit to Licensor samples of all of its proposed cassette
case artwork bearing the Trademark for the purpose of Licensor's
inspecting Licensee's usage of the Trademark to conform to the "VHS Video
Cassette System Standard; VHS Mark Usage" and shall use its best efforts
to ensure that such submission of samples occurs before releasing Licensed
Products bearing such artwork to the public.
(5) To indicate the origin of such Licensed Products Licensee shall use
Licensee's own trademark or the trademark of its customers in addition to
the Trademark on all the Licensed Products manufactured and sold by
Licensee to prevent possible confusion with Licensed Products manufactured
and sold by Licensor.
Article 9. Earlier Termination of this Agreement
(1) If Licensee shall have defaulted in the performance of
any of the obligations assumed hereunder, Licensor shall give a written
notice to Licensee specifying the default, and if Licensee shall not have
rectified such default within sixty (60) days after the receipt of
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<PAGE>
such notice, Licensor may terminate this Agreement immediately by giving a
written notice to such effect.
(2) Should Licensee have discontinued the manufacture and sale of Licensed
Products at any time after five (5) years from the date first above
written, Licensee may terminate this Agreement by giving a written notice
to such effect to Licensor, with such termination to take effect as of the
date of a Licensor's acknowledgement of said notice.
(3) If this Agreement is terminated under either of the preceding paragraphs
of this Article 9, all the rights and licenses granted under this
Agreement shall cease to exist forthwith and Licensee shall return to
Licensor all the Technical Information including all copies thereof within
thirty (30) days from the date of termination.
Article 10. Term of Agreement
Subject to the approval by the competent Japanese Governmental
authorities, if necessary, this Agreement shall become effective on the
date first above written and, unless terminated earlier in accordance with
the preceding Article 9, shall continue to be effective for five (5) years
thereafter. Within thirty (30) days
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<PAGE>
from the date of expiration, Licensee shall return to Licensor all of the
Technical Information including all copies thereof.
Article 11. Report and Payment upon Termination
(1) Upon the expiration of the term of this Agreement or the termination under
the provisions of Article 9, Licensee shall prepare and submit to Licensor
a royalty statement in accordance with Article 5 covering the quarterly
period in which this Agreement has terminated.
(2) Any stock of Licensed Products in Licensee's possession or control as of
the date of termination and any unfinished products which exist at the
time of termination and may be completed in to finished products after the
date of termination, shall be considered sold by Licensee on the
termination date, and shall be subject to the provisions of the preceding
paragraph of this Article 11.
Article 12. Disclaimer of Representation and Warranty
(1) No warranty or representation is made by Licensor either as to the
sufficiency of the Technical Information supplied hereunder for the
manufacture,
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<PAGE>
use, sale or other dispositions of Licensed Products by Licensee or as to
the sufficiency of the quality of Licensed Products to be manufactured,
used, sole or otherwise disposed of by Licensee under this Agreement.
(2) No warranty is made by Licensor to Licensee to the effect that Licensed
Products manufactured or sold under this Agreement (i) will be free from
claims of infringement of any patent, utility model, design right,
trademark right or any other right of any third party, (ii) will cause and
direct or indirect benefits to licensee or (iii) will not cause any loss
to Licensee.
(3) Licensee shall at all time keep Licensor fully and effectively indemnified
against all actions, proceedings, claims, demands, costs, charges,
damages, expenses and liabilities whatsoever by reason of or on account of
any inaccurate or defamatory or blasphemous statement or matter contained
on or implied in or any infringement of any copyright or any other
intellectual property right caused by any material duplicated onto or
otherwise recorded on any of the Licensed Products.
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<PAGE>
Article 13. Assignment
Neither this Agreement nor any licenses or rights hereunder granted, in
whole or in part, shall be assignable or otherwise transferable without
the prior written consent of Licensor. Any attempted assignment or
transfer of this Agreement or any of the rights or licenses granted
thereunder without such prior written consent of Licensor shall be null
and void.
Article 14. Notices
All notices, requests, statements or payments which may be or are required
to be given under this Agreement, shall be deemed to be sufficiently given
ten (10) days after posting airmail by prepaid registered mail addressed
to the addressee at its office first above specified or at such changed
address as the addressee shall have specified by written notice. Any mail
addressed to Licensor shall be directed to "Intellectual Property
Department".
Article 15. Force Majeure
Neither party may be liable for failure to perform its obligations under
this Agreement during the period when such failure is due to Acts of God,
fire, flood, war,
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<PAGE>
strikes and other similar causes beyond the control of the parties.
Article 16. Applicable Law and Jurisdiction
This Agreement shall be governed by and interpreted under the laws of
State of New York.
Article 17. Related Patents
(1) Subject to the terms and conditions of this Agreement and full and due
performance by Licensee of all of its obligations and covenants herein
contained, Licensor agrees that, for so long as Licensee makes payments to
Licensor pursuant to Article 5 hereof, Licensor shall not assert against
Licensee any patent, utility model and design patent right relating to
Licensed Products which are owned or will be acquired by Licensor during
the period of this Agreement.
(2) Should there be any patent, utility model or design patent right owned by
Licensee relating to Licensed Products, Licensee agrees to grant licenses
to Licensor under such reasonable terms as will be agreed upon separately.
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<PAGE>
Article 18. Past Royalty Settlement
Licensee acknowledges its obligations to provide to Licensor a statement
certified by a responsible officer of Licensee setting out the quantity of
VHS video cassettes made, sold or otherwise disposed of by Licensee prior
to the commencement of this Agreement using the Trademark or other
intellectual property rights belonging to Licensor. So long as Licensee is
not in default of its obligations under this Agreement, the $2,500 Initial
Fee set forth in Article 5 shall operate as satisfaction for Licensee's
past royalty obligations.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be signed in
duplicate copies, with each party to keep one copy.
On: November 9, 1995 Licensor
At: Yokohama, Japan VICTOR COMPANY OF JAPAN, LIMITED
By /s/ Takeo Shattui
------------------------------
Takeo Shutui, President
On: October 11, 1995 Licensee
At: Detroit, Michigan ALLIED DIGITAL TECHNOLOGIES
CORPORATION
By /s/ James A. Merkle
------------------------------
James A. Merkle
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Exhibit (10)(f)(ii)
ADDENDUM
THIS ADDENDUM is entered as of January 11, 1995, by and between
VICTOR COMPANY OF JAPAN, LIMITED, a corporation duly organized and existing
under the laws of Japan, having its principal office at 12, 3-Chome, Moriyacho,
Kanagawa-ku, Yokohama 221, Japan (hereinafter referred to as "Licensor"), and
ALLIED DIGITAL TECHNOLOGIES CORP., a corporation duly organized and existing
under the laws of the State of Delaware U.S.A., having an office and place of
business at 7375 Woodward Avenue, Detroit, Michigan 48202- 3121, U.S.A.
(hereinafter referred to as "Licensee").
W I T N E S S E T H:
WHEREAS, on January 11, 1995, Licensee was formed as a result of a
merger between Allied Film Laboratory, Inc. ("Allied"), a corporation organized
and existing under the laws of the State of Michigan, U.S.A., having its
principal office at 7375 Woodward Avenue, Detroit, Michigan 48202, U.S.A., and
HMG Digital Technologies Corp. d/b/a Hauppauge Manufacturing Group ("HMG"), a
corporation duly organized and existing under the laws of the State of New York,
U.S.A., having its principal office at 15 Gilpin Avenue, Hauppauge, New York
11788, U.S.A.; and
<PAGE>
WHEREAS, Allied was a party to that certain VHS Cassette License
Agreement For Duplicators dated as of July 1, 1991 (as amended, supplemented or
otherwise modified, the "Allied License Agreement") between Allied and Licensor;
and
WHEREAS, Hauppauge Record Manufacturing, Ltd. ("HRM"), a wholly
owned subsidiary of HMG, was a party, as the successor by merger with Hauppauge
Video Manufacturing, Ltd., to that certain VHS License Agreement For Duplicators
dated as of April 12, 1989 (as amended, supplemented or other modified, the "HNG
License Agreement") between HRM and Licensor; and
WHEREAS, Licensee assumed the business assets and liabilities of
Allied and HMG, including the Allied License Agreement and the HNG License
Agreement; and
WHEREAS, Licensor and Licensee are parties to a VHS Cassette License
Agreement For Duplicators dated as of July 1, 1991 (the "Duplicator Agreement"),
pursuant to which Licensee is granted, subject to its full compliance with all
of the terms and conditions of the Duplicator Agreement, a worldwide license to
use certain intellectual property rights and proprietary information owned by
Licensor; and
WHEREAS, Licensor and Licensee wish to amend certain terms and
conditions of the Duplicator Agreement as set forth herein and to otherwise
reaffirm such Duplicator Agreement in its entirety.
2
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements and
covenants of the parties, it is agreed as follows:
1. Notwithstanding the provisions of Article 5(1)iii. of the
Duplicator Agreement to the contrary, in any calendar year in which Licensee
shall sell or otherwise transfer in excess of 50 million Licensed Products,
Licensee may elect to pay to Licensor a flat royalty payment of $1,000,001 for
such calendar year. Such flat royalty payment is to be paid to Licensor in four
equal quarterly payments to be made by wire transfer as provided in Article 5 of
the Duplicator Agreement. If Licensee shall sell or otherwise transfer less than
50 million Licensed Products in a calendar year or, if Licensee shall not
exercise the election herein granted, then Licensee shall pay royalty payments
to Licensor in accordance with the provisions of Article 5(1)iii. of the
Duplicator Agreement, as herein amended.
2. Paragraph (1)iii.(b) of Article 5 shall be re-numbered to become
paragraph (1)iii.(b-1) and shall be further amended by adding the words "until
March 31, 1993," before the word "Eighty" in the first line thereof.
3. Article 5 of the Duplicator Agreement shall be amended to include
the following as paragraph (1)iii.(b-2):
3
<PAGE>
(b-2) On or after April 1, 1993, Eighty Seven Thousand Five Hundred
Dollars (U.S. $87,500) plus Two Point Thirty Three Cents (2.33
cents) for each Licensed Product in excess of 3.75 million pieces
sold or otherwise transferred by Licensee during such quarter,
provided, however, that if Licensee can demonstrate to Licensor's
reasonable satisfaction that certain of the Licensed Products sold
or otherwise transferred by Licensee during such quarter have a
recording time of thirty (30) minutes or shorter ("Short
Cassettes"), then the royalty rate of 1.75 cents for each such Short
Cassette in excess of 3.75 million pieces shall apply. the number of
Short Cassettes in excess of 3.75 million pieces shall be prorated
based on the number of Short Cassettes in the total umber of
Licensed Products sold or otherwise transferred by Licensee during
such quarter. For example, if Licensee sells or otherwise transfers
a total number of 4,000,000 pieces of Licensed Products including
1,000,000 pieces of Short Cassettes, then the total royalty shall be
calculated as follows:
$87,500 + (4,000,000 - 3,750,000) x 2.33 cents x 0.75 + (4,000,000 -
3,750,000) x 1.75 cents x *0.25 =
4
<PAGE>
$92,962.50. *The proportion of Short Cassettes is
25% of the total number of Licensed Products
(1,000,000 pieces/4,000,000 pieces).
4. With respect to Licensor's enforcement of the trademark,
technical information and patent rights referred to in the Duplicator Agreement
("Intellectual Property Rights"), Licensor warrants and represents as follows:
a. Article 5(1) of the Duplicator
Agreement, as amended by this Addendum,
accurately reflects the current royalty
rates which Licensor charges to U.S.
duplicators of video cassettes pursuant
to JVC's standard VHS Cassette License
Agreements;
b. Except as may be set forth in the letter
from Licensor to Allied dated July 11,
1994, a copy of which is annexed hereto
and made a part hereof, all of the U.S.
duplicators who have entered into VHS
Cassette License Agreements ("Licensed
Duplicators") have fulfilled their
royalty obligations to Licensor as of
the date of such letter, which
obligations are as set forth in Article
5(1) of the Duplicator Agreement;
5
<PAGE>
c. With respect to any Licensed Duplicators
identified in the annexed letter dated
July 11, 1994, Licensor has notified
such Licensed Duplicators of the
delinquent status of their royalty
obligations; and Licensor warrants and
represents that it will take all steps
reasonably necessary, in the sole
exercise of its reasonable discretion,
to insure that such delinquent Licensed
Duplicators comply with their royalty
obligations;
d. Licensor will use its best efforts to
encourage U.S. duplicators and loaders
who are using Licensor's Intellectual
Property Rights to enter into VHS
Cassette License Agreements;
e. Licensor agrees that it will continue to
enforce its Intellectual Property Rights
to the same extent that it is presently
enforcing such rights; and,
f. On or before July 1, 1995 and on each
July 1 thereafter, Licensor will submit
to Licensee a certification to the
effect that each of the warranties and
6
<PAGE>
representations set forth in paragraphs 4(a)-4(e) of
this Addendum are current as of that date, except for
any exclusions from such warranties and representations,
which exclusions will be fully identified.
5. Within sixty (60) days after execution of the Duplicator
Agreement by Licensee, Licensee shall deliver to Licensor all royalty statements
which reflect the total volume of Licensed Products sold or otherwise
transferred by HMG, and the royalty due thereon, which royalty statements were
not previously delivered to Licensor by HMG. Simultaneously, Licensee shall also
deliver to Licensor all royalty statements which reflect the total volume of
Licensed Products sold or otherwise transferred by Allied, and the royalty due
thereon, which royalty statements were to previously delivered to Licensor by
Allied.
6. Licensee shall pay to Licensor the combined total of all
outstanding royalty payments owed by both Allied and HMG (collectively, the
"Outstanding Royalty Payment") in four equal payments, the first of which shall
be paid at the same time that Licensee delivers to Licensor the royalty
statements required in paragraph 5 hereof. Thereafter, each remaining payment of
the Outstanding Royalty Payment shall be paid to Licensor within sixty (60)
7
<PAGE>
days after the preceding payment. All four payments are to be paid by
wire-transfer in accordance with the provisions of Article 5 of the Duplicator
Agreement.
7. To the extent either Allied or HMG sold or otherwise transferred
any Licensed Products during the first calendar quarter of 1995, such Licensed
Products shall be reported by Licensee to Licensor as part of the volume of
Licensed Products sold or otherwise transferred by Licensee shall pay all
royalties due thereon.
8. Except as otherwise provided in this Addendum, the terms and
conditions of the Duplicator Agreement shall remain in full force and effect.
8
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals on
the day and year first above written.
LICENSOR:
VICTOR COMPANY OF JAPAN, LIMITED
On: September 27, 1995 By: /s/ Takeo Shuzui
----------------------------
Takeo Shuzui, President
At: Yokohama, Japan
ATTEST:
/s/ Yoshitaka Honda
- ---------------------------
Yoshitaka Honda, Manager
Intellectual Property Dept.
LICENSEE:
ALLIED DIGITAL TECHNOLOGIES CORP.
On: August 23, 1995 By: /s/ James A. Merkle
----------------------------
James A. Merkle
President/CEO
At: Detroit, Michigan
ATTEST:
/s/ Betty M. Gunther
- ---------------------------
Betty M. Gunther
9
Exhibit 10(f)(iii)
LICENSE EXTENSION ADDENDUM
THIS LICENSE EXTENSION ADDENDUM (the "Addendum") is dated as July 1,
1996, and is between VICTOR COMPANY OF JAPAN, LIMITED, a corporation duly
organized and existing under the laws of Japan, having its principal office at
12, 3-Chome, Moriya-cho, Kanagawa-ku, Yokohama 221, Japan (hereinafter referred
to as "Licensor"), and Allied Digital technologies Corp., a corporation
organized and existing under the laws of the State of Delaware, U.S.A., having
its principal office at 15 Gilpin Avenue, Hauppauge, New york 11788, U.S.A.
(hereinafter referred to as "Licensee").
W I T N E S S E T H:
WHEREAS, Licensor and Licensee are parties to a VHS CASSETTE LICENSE
AGREEMENT FOR DUPLICATORS (U.S.A.) dated as of July 1, 1991 and an ADDENDUM
dated as of January 11, 1995 (the foregoing agreements are collectively referred
to herein as the "License Agreement"); and,
WHEREAS, Licensor and Licensee wish to renew and extend the terms
and conditions of the License Agreement as amended herein,
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements and
covenants of the parties, it is agreed as follows:
1. Paragraph 2 of Article 1 of the License Agreement shall be
amended to provide as follows:
"Licensed Product" or "Licensed Products" shall mean a VHS
videocassette or VHS videocassettes having packed therein magnetic
tape of 12.65 mm (1/2 inch) width conforming to the VHS Standards,
which include(s) a construction coming within the scope of JVC's
patent rights, bear the Trademark (as herein defined), or are
manufactured in accordance with JVC's Technical Information.
2. Article 10 of the License Agreement shall be deleted in its
entirety and the following shall be inserted in lieu thereof:
Subject to the approval of the competent Japanese Governmental
authorities, if necessary, this Agreement shall, unless terminated
earlier in accordance with the provisions of Article 9 hereof,
continue to be effective for five (5) years following July 1, 1996.
Within thirty (30) days following the date of expiration, Licensee
shall return to
-2-
<PAGE>
Licensor all of the Technical Information, including all copies
thereof.
3. Effective July 1, 1996, Article 5(1)iii of the License Agreement
shall be deleted in its entirety and the following shall be inserted in lieu
thereof:
iii. A royalty based upon the following royalty structures, to
be selected by Licensee, for each calendar quarter during the term
of this Agreement, with such selection to be reported to Licensor
along with the royalty statement for such quarter as provided in
Article 5(3) hereof:
(a) July 1, 1996 through December 31, 1996;
(a-1) For each calendar quarter between July 1, 1996 and December
31, 1996, inclusive, three Japanese Yen (3 Yen) for each
Licensed Product sold or otherwise transferred by Licensee
during such quarter, provided, however, that if Licensee can
demonstrate to Licensor's reasonable satisfaction that certain
the Licensed products sold or otherwise transferred by
Licensee during such quarter have a recording time of 30
-3-
<PAGE>
minutes or shorter ("Short Cassettes"), a royalty rate of two
and one quarter Japanese Yen (2.25 Yen) shall apply for each
such Short Cassette; or
(a-2) For each calendar quarter between July 1, 1996 and December
31, 1996, inclusive, seventy-two thousand five hundred dollars
(U.S. $72,500) plus 2 cents for each Licensed Product in
excess of 3.75 million pieces sole or otherwise transferred by
Licensee during such quarter, provided, however, that if
Licensee can demonstrate to Licensor's reasonable satisfaction
that certain of the Licensed Products sold or otherwise
transferred by Licensee during such quarter are Short
Cassettes, then the royalty rate of 1.5 cents for each such
Short Cassette in excess of 3.75 million pieces shall apply.
The number of Short Cassettes in excess of 3.75 million pieces
shall be prorated based on the number of
-4-
<PAGE>
Short Cassettes in the total number of Licensed Products sold
or otherwise transferred by Licensee during such quarter. The
royalties due for the period between July 1, 1996 and December
31, 1996, inclusive, as provided in this paragraph (a-2) shall
not exceed $400,000.
(b) January 1, 1997 through April 30, 1997;
(b-1) For each calendar quarter or portion thereof between January
1, 1997 and April 30, 1997, inclusive, two Japanese yen (2
Yen) for each Licensed product sold or otherwise transferred
by Licensee during such quarter or portion thereof, provided,
however, that if Licensee can demonstrate to Licensor's
reasonable satisfaction that certain of the Licensed products
sold or otherwise transferred by Licensee during such quarter
are Short Cassettes, a royalty rate of one and one half
Japanese Yen (1.5 Yen)
-5-
<PAGE>
shall apply for each such Short Cassette; or,
(b-2) For each calendar quarter or portion thereof between January
1, 1997 and April 30, 1997, inclusive, fifty thousand dollars
(U.S. $50,000) (prorated for the portion of the calendar
quarter between April 1 1997 and April 30, 1997) plus 1.5
cents for each Licensed Product in excess of 3.75 million
pieces sold or otherwise transferred by Licensee during such
quarter or portion thereof, provided, however, that if
Licensee can demonstrate to Licensor's reasonable satisfaction
that certain of the Licensed Products sold or otherwise
transferred by Licensee during such quarter are Short
Cassettes, then the royalty rate of 1 cents for each such
Short Cassette in excess of 3.75 million pieces shall be
prorated based on the number of
-6-
<PAGE>
Short Cassettes in the total number of Licensed products sold
or otherwise transferred by Licensee during such quarter. The
royalties due for the period between January 1, 1997 and April
30, 1997, inclusive, as provided in this paragraph (b-2) shall
not exceed $200,000.
(c) May 1, 1997 through June 30, 2001;
(c-1) For each calendar quarter or portion thereof between May 1,
1997 and June 30, 2001, inclusive, one Japanese Yen (1 Yen)
for each Licensed Product sold or otherwise transferred by
Licensee during such quarter or portion thereof provided,
however, that if Licensee can demonstrate to Licensor's
reasonable satisfaction that certain of the Licensed Products
sold or otherwise transferred by Licensee during such quarter
are Short Cassettes, a royalty rate of three quarters of one
Japanese Yen (0.75 Yen) shall apply for each such Short
Cassette; or,
-7-
<PAGE>
(c-2) For each calendar quarter or portion thereof between May 1,
1997 and June 30, 2001, inclusive, twenty-five thousand
dollars (U.S. $25,000) (prorated for the portion of the
calendar quarter between May 1, 1997 and June 30, 1997) plus
0.75 cents for each Licensed Product in excess of 3.75 million
pieces sold or otherwise transferred by Licensee during such
quarter or portion thereof, provided, however, that if
Licensee can demonstrate to Licensor's reasonable satisfaction
that certain of the Licensed Products sold or otherwise
transferred by Licensee during such quarter are Short
Cassettes, then the royalty rate of 0.5 cents for each such
Short Cassette in excess of 3.75 million pieces shall apply.
The number of Short Cassettes in excess of 3.75 millon pieces
shall be prorated based on the number of Short Cassettes in
the total number
-8-
<PAGE>
of Licensed Products sold or otherwise transferred by Licensee
during such quarter. The royalties due for the period between
May 1, 1997 and December 31, 1997, inclusive, as provided in
this paragraph (c-2) shall not exceed $200,000. The royalties
due for the period between January 1, 1998 and June 30, 2001,
inclusive, as provided in this paragraph (c-2) shall not
exceed $300,000 per annum.
The royalty rate for Licensed Products sold or otherwise transferred
by Licensee in the form of blank video cassettes for duplication by other
duplicators shall be determined in the same manner as described in Article
5(1)iii. (a-1), (b-1), and (c-1) above, but the quantity of such blank
videocasettes shall not be included in determining the quarterly volume of
Licensed Products for purposes of Article 5(1)iii (a-2), (b-2) or (c-2).
All royalty payments shall be paid by electronic
bank transfer to:
Bank Name: The Sakura Bank, Honcho Branch
Bank Address: 4-10 Nihonbashi-Honcho 3-chome,
Chuo-Ku, Tokyo 103, Japan
Account No.: 1024755 (for deposit of Victor Company of
Japan, Limited)
-9-
<PAGE>
All correspondence shall be delivered to:
INTELLECTUAL PROPERTY DEPARTMENT
VICTOR COMPANY OF JAPAN, LIMITED
12, 3-Chome, Moriya-cho,
Kanagawa-ku, Yokohama 221
Japan
4. Article 5 of the License Agreement shall be amended by adding the
following new paragraph to the end
thereof:
(8) At its option, Licensee may pay any or
all of the royalties due hereunder to Licensor in
U.S. currency based upon the yen/dollar rate of
exchange in effect at the close of business in New
York on the date on which such royalty is paid.
5. Except as otherwise amended by this Addendum, the terms and
conditions of the License Agreement are hereby renewed and shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have set their hands and seals on
the day and year first above-written.
LICENSOR:
VICTOR COMPANY OF JAPAN, LIMITED
On: October 4, 1996 By: /s/ Takeo Shuzui
----------------------------
Takeo Shuzui, President
At: Yokohama, Japan
ATTEST:
/s/ Yokio Kuboto
- -------------------------
-10-
<PAGE>
LICENSEE:
ALLIED DIGITAL TECHNOLOGIES
CORP.
On: September 18, 1996 By: /s/ Charles Kavanagh
----------------------------
Charles P. Kavanagh, VP
At: Hauppauge, New York
ATTEST:
/s/ Jane Gorten
- -------------------------
-11-
C 0 M P R E H E N S I V E - C D D I S C
L I C E N S E A G R E E M E N T
AGREEMENT, having an effective date of January 1, 1996 by and between U.S.
Philips Corporation having its principal office at 580 White Plains Road,
Tarrytown, New York 10591 (hereinafter referred to as "USPC") and Hauppauge
Record Manufacturing having its principal office at 15 Gilpin Avenue, Hauppauge,
New York 11788 (hereinafter referred to as "Licensee").
WHEREAS, the Philips' Group of Companies (hereinafter referred to as
"Philips") has for many years been engaged in research and development of
systems, in which signals encoded in digital form and stored on a disc are read
and reproduced by means of devices using an optical read out beam, and has
obtained valuable know-how and experience thereby;
WHEREAS, one of the achievements of such research and development efforts
was a new and revolutionary high-fidelity sound storage and reproduction system,
which was further developed and defined in a cooperation with Sony Corporation
of Japan and has been jointly presented under the name "Compact Disc Digital
Audio System" (CD-A);
1
<PAGE>
WHEREAS, on the basis of this "Compact Disc Digital Audio System" three
further systems have been defined in a cooperation with Sony Corporation of
Japan and have been jointly presented under the names "Compact Disc Data System"
(CD-ROM);"CDV System (CDV) and "Compact Disc Interactive System" (CD-i);
WHEREAS, a multi-session CD system has been defined by Philips and Sony and
jointly presented under the name "Enhanced Music Compact Disc System", which
system is capable of storing sound and data respectively in two sessions on an
optical disc;
WHEREAS, Licensee desires the right to manufacture and sell discs utilizing
any or all of the above CD-A, CD-ROM, CDV, CD-i and Enhanced Music CD Systems
(jointly hereinafter referred to as "CD Systems", and wishes such discs to be
interchangeable with the discs manufactured and sold by the Philips' Group of
Companies and others utilizing such CD-Systems;
WHEREAS, USPC owns and/or controls the right to license patent rights
pertinent to the CD-Systems and owns additional patent rights pertinent to
optical disc manufacturing in general;
2
<PAGE>
WHEREAS, USPC has been authorized by Sony to license patents owned by Sony
and indicated on the Exhibits hereto under the terms and conditions specified
herein, while Sony retains the right to also license such patents;
WHEREAS, Licensee understands that USPC is willing to license any one or
more patents owned by it for optical disc manufacturing, whether within or
outside(1) of the Standard Specifications defining the CD Systems on reasonable
terms and conditions; and
WHEREAS, in furtherance of Licensee's efforts to manufacture and sell discs
which are interchangeable within the respective CD-Systems, Licensee has
requested USPC for a license under patent rights pertinent to the CD-Systems,
which USPC has the free right to license, and, in addition, has requested USPC
to disclose and make available certain basic information on the CD-Systems;
NOW, THEREFORE, in mutual consideration of the premises and the faithful
performance of the mutual covenants
- ----------
(1) or further information please contact Michael E. Marion, U.S. Philips
Corporation, 580 White Plains Road, Tarrytown, NY 10591
3
<PAGE>
hereinafter set forth, the parties hereto have agreed as follows:
Article I - DEFINITIONS
As used in this Agreement the following terms shall have the following
meanings, unless the context clearly requires otherwise:
1.01 Disc - any non-recordable, reflective, disc-shaped information carrier
comprising any kind of information such as, but not limited to,
audio/video/text/data related information, which information is
irreversibly stored in a layer during and as an integral part of the
manufacturing process of the disc, in a form which is optically readable by
playback devices.
1.02 CD-Audio Disc - any Disc comprising audio information encoded in digital
form, which is optically readable by a CD-Audio-Player (as hereinafter
defined) and conforms to the CD-Audio Standard Specifications (as
hereinafter defined).
1.03 CD-ROM Disc - any Disc comprising information encoded in digital form,
which is optically readable by a CD-ROM Player (as hereinafter defined) and
conforms to either the
4
<PAGE>
CD-ROM Standard Specifications (as hereinafter defined) or the CD-ROM(XA)
Standard Specifications (as hereinafter defined).
1.04 CD-i Disc - any Disc comprising any kind of information such as, but not
limited to audio, video, text and data related information, encoded in
digital form, which is optically readable by a CD-i Player (as hereinafter
defined) and conforms to the CD-i Standard Specifications (as hereinafter
defined).
1.05 CDV-Disc - any Disc comprising television picture information consisting of
analog video information with digital audio information, and with or
without additional information to be used for control, retrieval,
educational and/or instructional purposes in relation to the visual display
of said television picture information, which is optically readable by a
CDV-Player (as hereinafter defined) and conforms to the CDV-Standard
Specifications (as hereinafter defined).
1.06 Enhanced Music CD Disc - any disc comprising any kind of information such
as, but not limited to, audio, video, text and data related information
encoded in digital form
5
<PAGE>
and which conforms to the Enhanced Music CD-Standard Specifications (as
hereinafter defined).
1.07 CD-Audio Standard Specifications - the specifications for the
CD-Audio-Disc/Player parameters as made available, modified or added to
from time to time in accordance with the provisions of Article III hereof.
1.08 CD-ROM Standard Specifications - the specifications for the CD-ROM
Disc/Player parameters as made available, modified or added to from time to
time in accordance with the provisions of Article III hereof.
1.09 CD-ROM(XA) Standard Specifications - the specifications for the CD-
ROM(XA)Disc/Player parameters as made available, modified or added to from
time to time in accordance with the provisions of Article III hereof.
1.10 CD-i Standard Specifications - the specifications for the CD-i Disc/Player
parameters (as hereinafter defined) as made available, modified or added to
from time to time in accordance with the provision of Article III hereof.
1.11 CDV-Standard Specifications - the NTSC and/or PAL specifications for the
CDV-Disc/Player parameters as made available, modified or added to from
time to time in
6
<PAGE>
accordance with the provisions of Article III hereof.
1.12 Enhanced Music CD-Standard Specifications - the specifications for the
Enhanced Music CD-Disc/Player parameters as made available, modified or
added to from time to time in accordance with the provisions of Article III
hereof.
1.13 Player - any playback device for optically reading information stored on a
Disc and converting such information into electrical signals for
reproduction purposes.
1.14 CD-Audio Player - a Player which is designed and manufactured solely for
the reproduction of information stored on a CD-Audio Disc and conversion of
such information, which is bit-encoded according to the CD-Audio Standard
Specifications, into electrical signals by means prescribed in the CD-Audio
Standard Specifications, which electrical signals are directly capable and
intended to be used for sound reproduction through amplifiers and
loudspeakers.
1.15 CD-ROM Player - a Player which is designed and manufactured solely for the
reproduction of information
7
<PAGE>
stored on a CD-ROM Disc and conversion of such information, which is
bit-encoded according to the CD-ROM Standard Specifications, into
electrical signals by means prescribed in the CD-ROM-Standard
Specifications, which electrical signals are directly capable and intended
to be used for reproduction of computer-related-data through data handling
and/or data processing apparatus.
1.16 CD-i Player - a Player which is designed and manufactured solely for the
reproduction of any kind of information stored on a CD-i Disc and as
defined in the CD-i Standard Specifications, and conversion of such
information, which is bit-encoded according to said CD-i Standard
Specifications, into electrical signals by means as prescribed in the CD-i
Standard Specifications, which electrical signals are directly capable and
intended to be used for reproduction of such information.
1.17 CDV-Player - a Player which is designed and manufactured solely for the
reproduction of information stored on a CDV-Disc and conversion of such
information, which is encoded according to the CDV-Standard Specifications,
into electrical signals by means as prescribed in the CDV-
8
<PAGE>
Standard Specifications, which electrical signals are directly capable and
intended to be used for visual reproduction through standard television
receivers and/or standard television monitors.
1.18 Enhanced Music CD-Player - a Player which is designed and manufactured
solely for the reproduction of information stored on an Enhanced Music CD
Disc and conversion of such information, which is bit-encoded according to
the Enhanced Music CD Standard Specifications, into electrical signals by
means as prescribed in the Enhanced Music CD Standard Specifications, which
electrical signals are directly capable and intended to be used for the
reproduction of audio, video, text and data related information through
data handling and/or data processing apparatus.
1.19 Combi-Player - a Player which is any combination of a CD-Audio Player, a
CD-ROM Player, a CD-i Player, a CDV-Player and an Enhanced Music CD Player.
1.20 Licensed Product - any CD-Audio Disc, CD-ROM Disc, CD-i Disc, CDV-Disc or
Enhanced Music CD Disc.
1.21 Licensed Patents - shall mean the patent rights listed in
9
<PAGE>
accordance with one of the following license options to be selected by the
Licensee:
(circle type of Licensed Product and Exhibit list of patents on each option
chosen, whether A or B, for each type of Disc)
I. Option A: Licensee, at its option, chooses from one or more of the U.S.
Patents listed on Exhibit I (CD-Audio Disc), Exhibit III (CD-ROM Disc),
Exhibit V (CD-i Disc), Exhibit VII (CDV Disc), and/or Exhibit IX (Enhanced
Music CD), and defined herein as Licensed Patents;
OR
II. Option B: Licensee chooses, at its option, all of the U.S. Patents
listed on Exhibit II (CD-Audio Disc), Exhibit IV (CD-ROM Disc), Exhibit VI
(CD-i Disc), Exhibit VIII (CDV Disc), and/or Exhibit X (Enhanced Music CD
Disc), and defined herein as Licensed Patents.
By __________________________ Date ______________
1.22 Associated Company - any corporation or other legal entity, in which a
party hereto, Philips Electronics North America Corporation, Philips
Electronics, N.V. (PENV) of the Netherlands or Sony Corporation of Japan,
now or
10
<PAGE>
hereafter controls, directly or indirectly, more than fifty percent (50%)
of the shares entitled to vote for the election of directors or persons
performing similar functions, but any such company or other legal entity
shall be deemed an Associated Company only for as long as such control
exists.
1.23 Territory - United States of America, its territories and possessions
Article II - LICENSES
Subject to the terms and conditions of this Agreement:
2.01 USPC hereby grants to Licensee and its Associated Companies a
non-exclusive, non-transferable license under Licensed Patents to make, use
and sell or otherwise dispose of Licensed Products in the Territory, but
not to have Licensed Products made for it by third parties except as
provided in Article IV.
2.02 USPC and Sony further agree for a period of ten (10) years from the date of
this Agreement, to grant Licensee and its Associated Companies a
non-exclusive, non-transferable license on reasonable, non-discriminatory
terms comparable to those set forth herein, to make, use, sell or otherwise
11
<PAGE>
dispose of Licensed Products in the Territory, under any patent rights not
yet licensed hereunder which are essential to the manufacturing, use or
sale of Licensed Products, as to which, and to the extent to which, USPC or
Sony, have, or may hereafter acquire, the free right to grant licenses to
Licensee and its Associated Companies and which patent rights were first
filed in any country of the world after December 31, 1982. It is expressly
understood that in respect of the patent rights to be licensed pursuant to
this paragraph 2.02 of Article II, paragraph 5.02 of Article V will not be
applicable and that royalties payable may have to be paid over and above
the royalties due on the basis of the use of Licensed Patents pursuant to
paragraph 2.01 of this Article II.
2.03 Finally, USPC and Sony agree for a period of ten (10) years from the date
of this Agreement to grant Licensee and its Associated Companies upon their
request and on reasonable, non-discriminating royalty rates and conditions
to be agreed upon from case to case, a non exclusive, non-transferable
license to make, use, sell or otherwise dispose of CD-Audio Players, CD-ROM
Players, CD-
12
<PAGE>
i Players, CDV-Players and Combi-Players in the Territory, under any or all
present and future patent rights essential to the manufacture, use or sale
of such Players, as to which, and to the extent to which, USPC or Sony may
now have, or may hereafter acquire, the free right to grant licenses to
Licensee and its Associated Companies for the manufacture, use and sale of
such Players. It is expressly understood that paragraphs 5.01 and 5.02 of
Article V shall not in any way be applicable to licenses pursuant to this
paragraph 2.03 of Article II.
2.04 In consideration of the undertakings set forth in paragraphs 2.01, 2.02 and
2.03 and similar undertakings by third party licensees of USPC or PENV, for
a period of ten (10) years from the effective date of this Agreement,
Licensee, agrees to grant to USPC, Philips Electronics North America
Corporation, PENV, Sony Corporation of Japan and their respective
Associated Companies, and to other third parties who have similarly
entered, or will enter, into a license agreement with USPC, PENV or an
Associated Company thereof concerning Licensed Products and who have
elected to accept or will accept a similar undertaking as
13
<PAGE>
contained in this paragraph 2.04, on reasonable, nondiscriminating
conditions comparable to those set forth herein, non-exclusive,
non-transferable licenses to manufacture, use, sell or otherwise dispose of
Licensed Products under any or all present and future patent rights which
are essential to the manufacturing, use or sale of Licensed Product, as to
which, and to the extent to which, Licensee or its Associated Companies may
now have or may hereafter acquire the right to grant licenses.
2.05 In consideration of the undertakings set forth in paragraphs 2.01, 2.02 and
2.03 and similar undertakings by third party licensees of USPC or PENV, for
a period of ten (10) years from the effective date of this Agreement,
Licensee agrees to grant to USPC, Philips Electronics North America
Corporation, PENV, Sony Corporation of Japan and their respective
Associated Companies, and to other third parties who have entered or will
enter into a license agreement with USPC, PENV or an Associated Company
thereof concerning Players and who have accepted or will accept a similar
undertaking as contained in this paragraph 2.05, on reasonable,
non-discriminating
14
<PAGE>
conditions to be agreed upon from case to case, nonexclusive,
non-transferable licenses to manufacture, use, sell or otherwise dispose of
CD-Audio, CD-ROM, CD-i, CDV, Enhanced Music CD and/or Combi-Players under
any or all present and future patent rights which are essential to the
manufacture, use or sale of such Player, as to which, and to the extent to
which, Licensee or its Associated Companies may now have or may hereafter
acquire the right to grant licenses.
2.06 To the extent a dispute exists between USPC, Licensee and/or Sony regarding
whether any patent is "essential" or whether any license offered by
Licensee, USPC, or Sony pursuant to this Article II is under "reasonable...
conditions" as those words are used in this Article II then USPC, Sony
and/or licensee shall submit such dispute to binding arbitration under the
1992 Patent Arbitration Rules of the American Arbitration Association
("AAA"). Such arbitration shall be held before a panel of three arbitrators
and shall take place in New York, New York. Licensee, USPC and/or Sony each
shall choose one arbitrator who shall be unaffiliated with the parties and
15
<PAGE>
who shall have been a member of the bar of the United States Court of
Appeals for the Federal Circuit for at least the preceding five years. The
two arbitrators chosen by USPC, Licensee and/or Sony shall then choose a
third arbitrator who shall also have been a member of the bar of the
Federal Circuit for at least the preceding five years and who shall serve
as chairperson of the panel. If the arbitrators chosen by USPC, Licensee
and/or Sony are unable to agree on a chairperson of the panel within sixty
days of their designation by USPC, Licensee and/or Sony then such third
arbitrator shall be chosen in accord with the rules of the AAA. All other
disputes regarding or relating to this License Agreement other than those
specified in this paragraph shall not be subject to arbitration.
IT IS EXPRESSLY UNDERSTOOD THAT
(I) THE LICENSES AND LICENSE UNDERTAKINGS WITH REGARD TO THE MANUFACTURE OF
LICENSED PRODUCTS DO NOT REFER TO RECORDING MACHINES, OR APPARATUS OR
METHODS FOR THE MULTIPLICATION OF DISCS, OR APPARATUS OR METHODS FOR THE
MANUFACTURE OF MATERIALS; NOR DO THE LICENSE UNDERTAKINGS WITH REGARD TO
16
<PAGE>
THE MANUFACTURE OF PLAYERS EXTEND TO THE MANUFACTURE OF COMPONENTS OF
PLAYERS SUCH AS, BUT NOT LIMITED TO SEMICONDUCTOR DEVICES, INTEGRATED
CIRCUITS, LASERS, MOTORS AND LENSES, EXCEPT FOR PATENT RIGHTS PERTAINING TO
CIRCUITRY AND/OR SYSTEM ASPECTS SPECIFIC TO THE CD-SYSTEMS (AND SIMILAR
TYPE OPTICAL READ-OUT SYSTEMS), AND
(II) THE RIGHTS AND LICENSES GRANTED PURSUANT TO THIS AGREEMENT DO NOT EXTEND TO
ANY COMBINATION OF ONE OR MORE LICENSED PRODUCTS WITH ANY OTHER ITEMS,
PRODUCTS, SYSTEMS, STRUCTURES, APPARATUS OR SOFTWARE.
Article III - STANDARD SPECIFICATIONS,
TECHNICAL INFORMATION AND SUPPORT
3.01 Upon execution of this Agreement and receipt of the payment provided in
paragraph 5.01 of Article V, USPC shall make available to Licensee for use
by Licensee and its Associated Companies a copy of then current version of
the respective Standard Specifications, together with such information as
is in USPC's reasonable opinion is required for the interpretation of such
then current Standard Specifications.
3.02 If USPC in its reasonable opinion determines
17
<PAGE>
that an addition or modification to any of the Standard Specifications
should be made, Licensee shall be so notified in writing and be furnished
with information to assist Licensee in the interpretation of such addition
and/or modification.
3.03 Insofar as USPC has a free and legal right to do so, USPC further agrees to
make available to Licensee upon Licensee's request and for use by Licensee
and its Associated Companies in accordance with the terms of this
Agreement, such other information, data and material as are, in USPC's
reasonable opinion, strictly required to manufacture Licensed Products,
which are interchangeable with Licensed Products made and/or sold by
Philips.
Article IV - HAVE MADE
The licenses and rights granted to Licensee and its Associated Companies
pursuant to Article II and the right to use the information pursuant to Article
III, include the right for Licensee and its Associated Companies to have third
parties manufacture for Licensee's or its Associated Companies' use and account
with due regard to what has been provided hereinbefore, such Licensed Products
as Licensee and/or its Associated
18
<PAGE>
Companies require in and for their sale of Licensed Products, provided that such
third parties agree to use the information obtained by Licensee pursuant to
Article III only for the manufacture of Licensed Products ordered by Licensee
and its Associated Companies and also agree to observe the secrecy obligations
accepted by Licensee hereunder. As and when the information supplied by USPC to
Licensee pursuant to Article III is supplied by Licensee or an Associated
Company of Licensee to a third party supplier to have such third party supplier
manufacture Licensed Products for Licensee and/or its Associated Companies,
Licensee will notify USPC of the name of such third party supplier and of the
fact that such third party supplier has agreed in writing to the restrictions on
the use of the USPC supplied information to be observed by it.
Article V - ROYALTIES, REPORTS AND PAYMENTS
5.01 Upon execution of this Agreement, Licensee will make a non-refundable
payment of twenty five thousand ($25,000) US dollars to USPC. Said payment
of twenty five thousand dollars shall not be credited against royalties
payable hereunder pursuant to paragraph 5.02 of this Article V.
5.02 (A) In the case where Licensee has chosen Option A to
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define Licensed Patents - In consideration of the patent licenses granted
hereunder by USPC to Licensee, Licensee agrees to pay to USPC royalties as
follows:
(a) seven point five U.S. cents ($0.075) for each CDV Disc with an
outer diameter greater than 130mm;
(b) two U.S. cents ($0.02) for each CD-Audio Disc with an outer
diameter smaller than 90mm; and
(c) four point five US cents ($0.045) for:
-each CD-i Disc;
-each Enhanced Music CD Disc;
-each CDV Disc with an outer diameter equal to, or smaller than
130 mm; and
-each CD-Audio Disc with an outer diameter equal to, or greater
than, 90mm;
which is made, used, sold or otherwise disposed of by Licensee or an Associated
Company of Licensee, and in which a Licensed Patent is utilized.
5.02(B) In the case where Licensee has chosen Option B to define Licensed
Patents - In consideration of the patent licenses granted hereunder by USPC
to Licensee, Licensee agrees
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to pay to USPC royalties as follows:
(a) eight U.S. cents ($0.08) for each CDV Disc with an outer diameter
greater than 130mm;
(b) two point two U.S. cents ($0.022) for each CD-Audio Disc with an
outer diameter smaller than 90mm; and
(c) four point eight US cents ($0.048) for:
-each CD-ROM Disc;
-each CD-i Disc;
-each Enhanced Music CD Disc;
-each CDV Disc with an outer diameter equal to, or smaller than,
130mm; and
-each CD-Audio Disc with an outer diameter equal to, or greater
than, 90mm;
which is made, used, sold or otherwise disposed of by Licensee or an Associated
Company of Licensee, and in which a Licensed Patent is utilized.
5.03 A Licensed Product shall be considered sold when invoiced, or if not
invoiced, when delivered to a party other than the manufacturer.
5.04 Within thirty (30) days after the 31st March, the 30th June, the 30th
September and the 31st December of each
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year during the period this Agreement shall be in force and effect,
Licensee shall submit to USPC, even if there are no sales, a statement in
writing, duly certified by an officer of the Licensee, setting forth with
respect to the preceding quarterly period:
(i) The quantities of Licensed Products sold by Licensee and its
Associated Companies, specifying the quantities for each of the
following individual type of Licensed Products:
(a) CD-Audio Discs with an outer diameter smaller than 90 mm;
(b) CD-Audio Discs with an outer diameter greater than 90 mm;
(c) CDV Discs with an outer diameter greater than 130 mm;
(d) CDV Discs with an outer diameter smaller than 130 mm;
(e) CD-ROM Discs;
(f) CD-i Discs;
(g) Enhanced Music CD Discs; and
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(ii) the royalty payable to USPC as calculated under the terms of this
Agreement.
Licensee shall pay to USPC the royalty due hereunder in U.S. dollars
concurrently with submission of the above mentioned statement.
5.05 Royalties shall be due and payable on all Licensed Products manufactured
prior to, but remaining in stock with Licensee and its Associated Companies
at the date of expiration or termination of this Agreement. Certified
reports on the number of Licensed Products in stock at the time of
expiration or termination of this Agreement shall be submitted to USPC
within thirty (30) days after such expiration or termination. For the
purpose of royalty computation it shall be assumed that all Licensed
Products in stock will be sold, leased or otherwise disposed of in the same
countries and in proportionally the same quantities as in the last full six
(6) months period reported on during the term of this Agreement. Payment of
royalties due shall be effected concurrently with the submission of said
certified report.
5.06 All payments which are not made on the dates specified
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herein, shall accrue interest at the rate of two percent (2%) per month or
the maximum permitted by applicable law, whichever is less.
5.07 All costs, such as stamp duties, taxes and other similar levies originating
from or in connection with the conclusion of this Agreement shall be borne
by Licensee. However, in the event that the government of a country imposes
any income taxes on payments hereunder by Licensee to USPC and requires
Licensee to withhold such tax from such payments, Licensee may deduct such
tax from such payments. In such event, Licensee shall promptly furnish USPC
with tax receipts issued by appropriate tax authorities so as to enable
USPC to support a claim for credit against income taxes which may be
payable by USPC and/or its Associated Companies in the Netherlands.
5.08 In order that the royalties and reports provided for in this Article V may
be verified, Licensee agrees to ensure that full, complete and accurate
books and records shall be kept covering all sales or other disposal of
Licensed Products by Licensee and/or its Associated Companies, for a period
of three (3) years following such sales or other
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dispositions. It is agreed that the books and records of Licensee and/or
its Associated Companies may be audited from time to time, but not more
than once in each calendar year, by an independent certified public
accountant appointed by USPC and reasonably acceptable to Licensee, to the
extent necessary to verify the accuracy of the aforementioned statements
and payments. Such inspection shall be completed at USPC's own expense
provided that if any discrepancy or error exceeding three percent (3%) of
the money actually due is found in connection with the computation, the
cost of such inspection shall be borne by Licensee.
5.09 Notwithstanding the provisions of paragraph 5.08 of this Article V,
Licensee shall furnish whatever additional information as USPC may
reasonably request from time to time to enable USPC to ascertain which
products sold, leased or put into use by Licensee and/or its Associated
Companies are subject to the payment of royalties to USPC hereunder, the
patent rights which have been utilized in connection with such products,
and the amount of royalties payable.
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Article VI - MOST FAVORABLE CONDITIONS
If under otherwise substantially the same conditions as contained in this
Agreement, licenses under the patent rights referred to and licensed pursuant to
Article II should be granted for Licensed Products to any third party at a
royalty rate more favorable than the rate payable by Licensee under this
Agreement, Licensee shall be entitled to have the royalty rate applicable to it
modified to such extent that the same shall be as favorable as that available to
such third party, provided always that such obligation shall not apply in
respect of cross-license agreements and other agreements, in which the
consideration for such licenses shall not be wholly expressed in payment of
royalties and shall also not apply to licenses or other arrangements made
pursuant to a court decision or a settlement of a dispute between USPC and a
Licensee or between USPC and a third party. Without limiting the foregoing, this
Article VI shall not apply to terms entered into in settlement of a filed court
action regardless of the nature of such action or settlement terms.
Article VII - DISCLAIMER
USPC warrants that it shall furnish the information to be
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suppled by it to the best of its ability, but it makes no representation or
warranty as to the value of the information transmitted or the ability of
Licensee to make use thereof to secure interchangability. USPC makes no warranty
whatsoever that the use of information supplied by USPC does not infringe or may
not cause infringement of patent rights owned or controlled by third parties, or
of patent rights owned or controlled by USPC or an Associated Company of USPC
not licensed pursuant to Article II.
In further certainty the parties of this agreement recognize that third
parties owned patent rights in the field of Licensed Products and Licensee
excepts that USPC makes no warranty whatsoever that any manufacture, use, sale,
lease or other disposition of Licensed Product will be free from infringement of
any patent other than Licensed Patents.
Article VIII - SECRECY
Licensee agrees that, subject to what has been provided for in Article IV
of this Agreement, Licensee and its Associated Companies shall not disclose to
any third party information relative to the manufacture and sale of Licensed
Products acquired from USPC or USPC's Associated Companies.
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This obligation, which shall run for the period of this Agreement and for a
period of three (3) years thereafter, shall not apply to the extent information
so acquired:
(a) was known to Licensee or its Associated Companies prior to the date said
information was acquired from USPC or its Associated Companies, as shown by
records of Licensee or any Associated Company of Licensee or otherwise
demonstrated to Philips' satisfaction;
(b) is or has become available to the public in general through no fault of
Licensee or its Associated Companies;
(c) was or is received from a third party who was free and had a legal right to
disclose the same.
In protecting information acquired from USPC or their Associated Companies
pertaining to Licensed Products, Licensee has agreed that Licensee and its
Associated Companies will take all necessary measures and precautions,
including, but not limited to, measures requiring their present and future
employees to give suitable undertakings of secrecy both for the period of their
employment and thereafter, and that in general such information will be treated
in the same manner and with the same degree of care as Licensee applies and has
applied to
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its own information of a sensitive or confidential nature.
Article IX - PATENT MARKINGS AND LOGO
9.01 If requested by USPC, Licensee shall place appropriate patent markings on
an exposed surface of the Licensed Products made, used, sold and/or
otherwise disposed of hereunder. The content, form, location and language
used in such markings shall be in accordance with the laws and practices of
the country, where such markings are used.
9.02 In addition, Licensed Products may be provided with respective logos in
accordance with the instructions laid down in the CD Logo Guide which is
available from USPC on request (hereinafter referred to as "the Logo"). In
advertisements and sales literature with respect to Licensed Products sold
by Licensee and/or its Associated Companies the Logo may similarly be used
and applied.
9.03 USPC grants Licensee and its Associated Companies a royalty free,
non-exclusive, non-transferable, indivisible right to use the Logo on and
with respect to Licensed Products manufactured by or for Licensee and/or
its Associated Companies in accordance with the instructions laid down in
Exhibit AA.
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9.04 Licensee understands and agrees that USPC makes no warranty whatsoever that
any use of the Logo will be free from infringement of intellectual property
rights owned by third parties.
Article X - ASSIGNMENT
This Agreement shall inure to the benefit of and be binding upon each of
the parties hereto and their respective assigns. It may not be assigned in whole
or in part by Licensee without the prior consent in writing of USPC except to
the surviving corporation of a merger, consolidation or other transfer of all or
substantially all the assets of Licensee and except that Licensee may assign
this Agreement to one of its Associated Companies provided that Licensee remains
liable hereunder and the transferee has the capability to perform all
obligations to be performed hereunder.
Article XI - TERM AND TERMINATION
11.01 This Agreement shall be effective from the date first written above, if
and unless otherwise terminated shall remain in force for a period of ten
(10) years from the effective date of this Agreement. Notwithstanding the
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foregoing, this Agreement shall expire on the expiration date of the last
to expire of the Licensed Patents licensed and referred to in Article II.
11.02 Either party may terminate this Agreement at any time on thirty (30) days
notice to the other party in the event that the latter shall fail to
perform any obligation under this Agreement and such default is not
remedied within thirty (30) days after receipt of a notice specifying the
nature of the default. Such right of termination shall not be exclusive of
any other remedies or means of redress to which the non-defaulting party
may be lawfully entitled, it being intended that all such remedies shall
be cumulative. Any such termination shall not affect any payments, the
rights to which may have fallen due under this Agreement prior to such
termination. Notwithstanding anything to the contrary herein, USPC shall
have the right, at its sole option and discretion, to terminate this
Agreement without advance notice (but with written notice) in the event
that Licensee shall fail to abide by the obligations as set forth in
Article V hereof for three (3) consecutive quarters.
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11.03 The obligations set forth in paragraphs 2.02, 2.03, 2.04, 2.05, 5.05,
12.05 and Article VIII shall survive termination of this Agreement.
Notwithstanding the foregoing, in the event termination is due to the
breach of the Agreement by Licensee, paragraphs 2.02 and 2.03 shall not
survive termination.
11.04 If Licensee should be dissolved or file a voluntary petition in bankruptcy
or seek any court or governmental protection from creditors or make any
assignment for creditors, or should an order be entered pursuant to any
law relating to bankruptcy or insolvency appointing a receiver or trustee
for Licensee, and if any such receivership is not terminated within sixty
(60) days, then, in any of the events specified in this paragraph 11.04,
USPC may give written notice to Licensee terminating this Agreement and
this Agreement shall be terminated in accordance with the notice.
Article XII - MISCELLANEOUS
12.01 This Agreement sets forth the entire agreement and understanding between
the parties as to the subject matter hereof and merges all prior
discussions between them and
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<PAGE>
neither of the parties shall be bound by any conditions, definitions,
warranties, waivers, releases or representations (either expressed or
implied) with respect to the subject matter of this Agreement, other than
expressly provided for herein, or as duly set forth on or subsequent to
the date hereof in writing signed by a duly authorized representative of
the party to be bound thereby.
12.02 Nothing contained in this Agreement shall be construed:
(a) as imposing on either party any obligation to institute any suit or
action for infringement of any of the patent rights licensed
hereunder or to defend any suit or action brought by a third party
which challenges or concerns the validity of any of such patent
rights, it being expressly understood that Licensee shall have no
right to institute any such suit or action for infringement of any
of the patent rights licensed by USPC hereunder, nor the right to
defend any such suit or action which challenges or concerns the
validity of any such USPC patent right;
(b) as imposing any obligation to file any patent
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<PAGE>
application or to secure any patent or to maintain any patent in
force;
(c) as conferring any license or right to copy or to simulate the
appearance and/or design of any product of USPC or its Associated
Companies;
(d) as conferring any license under the patent rights licensed pursuant
to Article II hereof to manufacture, use, sell, lease or otherwise
dispose of any product or device other than a Licensed Product.
12.03 If at any time a party shall elect not to assert its rights under any
provision of this Agreement, such action or lack of action in that respect
shall not be construed as a waiver of its rights under said provision or
of any other provision of this Agreement.
12.04 Any notice or request required or permitted to be given under or in
connection with this Agreement or the subject matter hereof shall be in
writing and shall be deemed to have been sufficiently given when, if given
to Licensee,
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it is addressed to:
Hauppauge record Manufacturing
15 Gilpin Avenue
Hauppauge, New York 11788
and in respect to USPC, to:
Intellectual Property Department
U.S. Philips Corporation
580 White Plains Road,
Tarrytown, New York 10591
and sent in each case by telecopy and Registered Mail, postage prepaid.
The date of mailing shall be deemed to be the date on which such notice of
request has been given. Either party may give written notice of change of
address and, after notice of such change has been received, any notice or
request required to be given shall thereafter be given to such party at
such changed address in the manner as provided above.
12.05 This Agreement and all disputes, claims or controversies arising out of,
or in any way relating to, this Agreement ("Dispute") shall be governed by
and construed, and any claim or controversy arising with respect thereto
shall be determined, in accordance with the laws and in the competent
courts of the State of New York. The parties
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hereto consent to the personal jurisdiction of the competent courts of the
State of New York for the purpose of prosecuting or resolving any such
Dispute.
IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
signed on the date first above written.
U.S. PHILIPS CORPORATION HAUPPAUGE RECORD MANUFACTURING
By /s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
--------------------------- --------------------------------
Title Vice President Title VP
------------------------ -----------------------------
Date 4/1/96 Date 2/29/29
------------------------ -----------------------------
36
[Letterhead of DVA Discovision Associates]
June 21, 1995
Mr. Jim Merkel Via Facsimile (313) 871-5907
President & Chief Executive Officer LETTER CONFIRMATION
ALLIED DIGITAL TECHNOLOGIES & ENCLOSURES VIA DHL
7375 Woodward Avenue
Detroit, Michigan 48202
Dear Mr. Merkel:
We are enclosing herewith, for your records, one original fully executed copy of
the "Non-Exclusive Patent License Agreement for Disc Products" date coded
051695, between Allied Digital Technologies Corp. and Discovision Associates.
Additionally enclosed are two individual product Royalty Reporting Forms for the
convenience of your Accounting Department. There is a separate form for each
product licensed under the above-referenced agreement. In accordance with
Section 6.5 of the Agreement, the quarterly accounting periods shall end on the
last day of each March, June, September and December during the term of this
Agreement. A written royalty report and payment for all running royalties for
that period is due within sixty (60) days after the end of each such quarterly
accounting period. The royalty report should include the information specified
in Section 6.3 of the Agreement. If you have any questions please do not
hesitate to contact us.
We would like to welcome Allied Digital Technologies to our steadily expanding
group of licensees. We look forward to a good relationship with you and your
company.
Please confirm receipt of these documents by signing and returning the enclosed
second copy of this letter to DVA.
Best regards,
DISCOVISION
/s/ Ronald J. Clark
Ronald J. Clark
Senior Vice President
RJC:jm
Enclosures: One fully executed License Agreement date coded 051695
Two Royalty Reporting Forms
Documents safely received:
By:____________________________ Date: ________________________________
2355 Main Street Suite 200 Irvine, CA 92714 o P.O. Box 19616, Irvine, CA 92713
o (714) 660-5000 o Facsimile (714) 660-1801
<PAGE>
NON-EXCLUSIVE PATENT LICENSE AGREEMENT
FOR
DISC PRODUCTS
This AGREEMENT is made effective this 1st day of June, 1995, by and
between DISCOVISION ASSOCIATES, a joint venture subject to the State of
California partnership law, having a place of business at 2355 Main Street,
Suite 200, Irvine California 92714, United States of America, (hereinafter
referred to was DVA) and ALLIED DIGITAL TECHNOLOGIES CORP., a United States
corporation, having a place of business at 7375 Woodward Avenue, Detroit,
Michigan 48202 (hereinafter referred to as LICENSEE), who agree as follows:
Section 1.0. Recitals
1.1 DVA has the right to grant licenses under certain DVA-owned United States
patents relating to the design, manufacture, and sale of optical disc
products such as compact discs, CD-ROM discs and video discs.
1.2 DVA is prepared to grant non-exclusive licenses under such patents on
reasonable terms and conditions to financially sound and commercially
responsible applicants.
1.3 LICENSEE has produced and/or sold and intends to continue producing and/or
selling products which may embody patented inventions covered by such DVA
patents or which may be made using apparatus or methods which may embody
such patented inventions.
1.4 DVA is offering LICENSEE, as an option herein, a license under individual
ones of its patents, the availability of such license under any one or
more of DVA's patents being in no way conditioned on the need for LICENSEE
to take a license under any other of DVA's patents.
1.5 LICENSEE has determined that its business interests will be best served by
taking a license under the terms and conditions of this Agreement. In so
doing, LICENSEE understands that if less than all DVA patents are
licensed, then licenses under additional DVA patents may be required
before LICENSEE can make or sell optical disc products free and clear of
all claims of patent infringement by DVA. Information regarding
infringement of additional DVA patents may be obtained by using the
factory inspection provisions of Section 10.0 herein.
<PAGE>
Section 2.0. Definitions
2.1 "Information Storage Medium(s)" shall mean any record carrier primarily
designed to store and/or record any type of information.
2.2 "Disc(s)" shall mean any pre-recorded, non-recordable and non-erasable
Information Storage Medium in the shape of a disc and having information
recorded thereon on one or both sides thereof, which information is
recoverable using optical detection means.
2.3 "Digital Disc(s)" shall mean a Disc having pre-recorded thereon digitally
encoded information. Digital Discs shall include, but are not limited to,
Discs commonly known as "Compact Disc Digital Audio Discs' or 'CD Digital
Audio Discs,' 'Compact Disc Single Discs' or 'CD Single Discs,' and 'Multi
Media Discs.'
2.4 "Compact Disc Digital Audio Disc(s)" or "CD Digital Audio Disc(s)" shall
mean a Digital Disc having pre-recorded thereon audio entertainment
information. A CD Digital Audio Disc is defined herein according to the
definition in a specification entitled "Compact Disc Digital Audio System
Description" published by N.V. Philips Consumer Electronics B.V. and Sony
Corporation and commonly referred to as the "Red Book". CD Digital Audio
Discs shall include, but are not limited to, Digital Discs commonly known
as compact discs (CD's) and pre recorded, non-recordable audio mini discs.
2.5 "Compact Disc Single Disc(s)" or "CD Single Disc(s)" shall mean a CD
Digital Audio Disc, either three inches (3") or five inches (5") in
diameter, having prerecorded thereon 20 minutes or less of audio
entertainment information.
2.6 "Multi Media Disc(s)" shall mean any Digital Disc having recorded thereon
computer, database, audio, video, text, graphics and/or player control
information. Multi Media Discs shall include, but are not limited to,
Digital Discs commonly known as CD-ROM Discs, CD-i Discs, CD-G Discs and
CD Digital Video Discs.
2.7 "Compact Disc Read Only Memory Disc(s)" or "CD-ROM Disc(s)" shall mean a
Digital Disc having pre-recorded thereon text files, data files, image
files, computer program files, and the like, primarily intended for
computer-related, database-related and/or multimedia-related usage. A
CD-ROM Disc is defined herein according to the definition in a
specification entitled 'Compact Disc Read Only Memory (CD-ROM) System
Description" published by N.V. Philips Consumer Electronics B.V. and Sony
Corporation and commonly referred to as
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the "Yellow Book". CD-ROM Discs include CD-ROM/XA discs and pre recorded
data mini discs.
2.8 "Compact Disc-Interactive Disc(s)' or 'CD-1 Disc(s)" shall mean a Digital
Disc having pre-recorded thereon audio, video and program control data for
interactive use with a human user by means of computer apparatus. A CD-1
Disc is defined herein according to the definition in a specification
entitled "Compact Disc Interactive Media Full Functional Specification"
published by N.V. Philips Consumer Electronics B.V. and Sony Corporation
and commonly referred to as the "Green Book".
2.9 "Compact Disc-Graphics Disc(s)" or "CD-G Disc(s)" shall mean a Digital
Disc having pre-recorded thereon graphics information comprised of
discrete still pictures or graphic images having no user perceivable
motion.
2.10 "Compact Disc Digital Video Disc(s)' or 'CD Digital Video Disc(s)' shall
mean a Digital Disc having pre-recorded thereon information intended to
produce visual images having user perceivable motion.
2.11 "Video Disc(s)' shall mean a Disc having pre-recorded thereon any
information intended to produce visual images having user perceivable
motion, which information is not digitally encoded. Video Discs shall
include, but are not limited to, Discs commonly known as laser discs
(LD's) and compact disc-video (CD-V) discs.
2.12 "Manufacturing Apparatus" shall mean apparatus for use in the fabrication
of Discs, including apparatus used in performing quality assurance
procedures and/or testing of Discs.
2.13 "Manufacturing Processes)" shall mean any method or process, including
related apparatus, used in the fabrication of Discs, including process
steps directed to quality assurance procedures and/or testing of Discs.
2.14 "DVA Patent(s)" shall mean all United States patents owned by DVA as of
the effective date of this Agreement, including utility models and design
patents, and any United States patents, including utility models and
design patents, issuing from pending United States patent applications
owned by DVA as of the effective date of this Agreement, directed to Discs
and/or any Manufacturing Apparatus and/or any Manufacturing Process, under
which patents and patent applications (as well as divisionals,
continuations, continuation-in-part applications, reissues, reexaminations
and extensions thereof) DVA has, as of the effective date of this
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<PAGE>
Agreement, the right to grant licenses to LICENSEE of the scope granted
herein, provided however that such grant, or the exercise of rights under
such grant, will not result in the payment of royalties or other
consideration by DVA to third parties (except for payments to Affiliates
of DVA and payments to third parties for inventions made by said third
parties while employed by DVA or any of its Affiliates). United States
patents relating to Discs and/or their manufacture which have issued and
are licensable by DVA are set forth in Appendix A. DVA shall provide
LICENSEE on at least an annual basis an updated version of Appendix A
which includes any new patent to be added to Appendix A and which
indicates the expiration of a previously listed patent by the addition of
the letter "E" following the patent number.
2.15 "Licensed Patent(s)" shall mean those DVA-owned United States patents
listed in Appendix B of this Agreement, these being the DVA Patent(s)
under which LICENSEE has agreed to take a license. Any DVA Patent(s)
listed in Appendix A may be added to Appendix B and thereby becomes a
Licensed Patent by written agreement of the parties.
2.16 "Transfer(s)" (Transferred) as used herein shall mean (i) sell and/or
sold, (ii) deliver(ed) to others (including for export) other than by
sale, regardless of the basis of compensation, if any, (for example, by
consignment, by gift or by transshipment through an intermediate country
or territory such as Switzerland, Hong Kong, et cetera) and/or (iii) sell
(sold) in combination with other products.
2.17 "Type Number" shall mean any combination of numbers, letters, and/or words
used to identify a particular type or model of Disc.
2.18 "Affiliate(s)" shall mean any corporation, company, or other business
entity controlled by a party to this Agreement. For this purpose, control
means direct or indirect beneficial ownership of greater than fifty
percent (50%) of the voting securities or greater than fifty percent (50%)
interest in the income of such corporation, company, or other business
entity.
2.19 "Arm's Length Trade" shall mean a sale, lease or other commercial
transaction between unaffiliated parties having an adverse economic
interest. After completion of an Arm's Length Trade, a party thereto will
derive no further economic benefit from subsequent transactions by another
party thereto with respect to the goods involved in such Arm's Length
Trade.
2.20 "Manufacturer's Net Selling Price" shall mean the invoice price after
discounts actually allowed for a Disc sold in Arm's Length Trade by
LICENSEE or its
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<PAGE>
Affiliate, such price not to include: (1) packaging costs incurred by
LICENSEE for such Disc; (2) insurance fees and packing and transportation
charges incurred by LICENSEE and invoiced separately to a third party; (3)
duties and sales taxes actually incurred and paid by LICENSEE in
connection with delivery of such Disc; (4) the cost of any copyright
license fee paid by LICENSEE in respect of information stored on the Disc;
and (5) mastering charges incurred by LICENSEE and necessary for the
manufacture of the Disc, which mastering charges are invoiced separately
to a third party. In respect of a Disc used or leased by LICENSEE or its
Affiliate or sold or Transferred in other than Arm's Length Trade by
LICENSEE or its Affiliate, the Manufacturer's Net Selling Price shall be
deemed to be equal to the average Manufacturer's Net Selling Price as
defined above for the same or equivalent Disc sold in Arm's Length Trade
during the then current accounting period. In the event there are no sales
in Arm's Length Trade during an accounting period, DVA and LICENSEE shall
attempt to agree upon an amount to be regarded as the Manufacturer's Net
Selling Price for such accounting period. If DVA and LICENSEE do not so
agree, then Manufacturer's Net Selling Price shall mean the actual selling
price to an ultimate consumer. If a Disc is not separately sold and is
included with other apparatus, then the Manufacturer's Net Selling Price
of such Disc shall be the Manufacturer's Net Selling Price of the
equivalent Disc which is separately sold, or, if no such equivalent Disc
exists, shall be the price as aforesaid of such other apparatus multiplied
by the ratio of the Manufacturing Cost of such Disc to the Manufacturing
Cost of such other apparatus.
2.21 "Manufacturing Cost" shall mean total cost of direct materials, direct and
indirect factory labor and factory overhead determined in accordance with
sound accounting principles.
2.22 "Patented Portion" shall mean that portion of a product which embodies or
uses any invention protected by an unexpired Licensed Patent, or which is
manufactured by the use of any Manufacturing Process and/or Manufacturing
Apparatus which uses any invention protected by an unexpired Licensed
Patent.
Section 3.0. Non-Exclusive License Grant
3.1 DVA grants to LICENSEE a non-exclusive, royalty bearing license under the
Licensed Patent(s):
3.1.1 to make, have made, use, rent, lease, sell and/or Transfer Discs in
the United States of America; and
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<PAGE>
3.1.2 to make, have made, use or have used Manufacturing Apparatus and to
use or have used Manufacturing Processes in the United States of
America to manufacture Discs for LICENSEE.
It is understood by LICENSEE that licenses under additional DVA Patent(s)
not listed in Appendix B may be required before LICENSEE can make, use,
rent, lease, sell and/or Transfer Discs free and clear of all claims of
patent infringement by DVA. LICENSEE may obtain from DVA a determination
as to the applicability of any DVA Patent(s) to LICENSEE'S products by use
of the factory inspection provisions of Section 10.0 of this Agreement. In
any event, DVA reserves the right to bring a patent infringement action
against LICENSEE with respect to any DVA Patent(s) not listed in Appendix
B.
3.2 No license is granted by DVA to LICENSEE in this Section 3.0, either
expressly or by implication, estoppel, or otherwise:
3.2.1 other than under the Licensed Patent(s) listed in Appendix B;
3.2.2 with respect to any products other than Discs;
3.2.3 with respect to any product which does not include a Patented
Portion;
3.2.4 to rent, lease, sell and/or Transfer any Manufacturing Apparatus; or
3.2.5 to rent, lease, sell and/or Transfer any Manufacturing Process or
process step thereof.
3.3 The license granted herein shall include a sublicense to LICENSEE's
Affiliates, identified in Appendix C, which are LICENSEE's Affiliates as
of the effective date of this Agreement. LICENSEE shall pay and account to
DVA for royalties hereunder with respect to the exercise by any Affiliate
of LICENSEE of the sublicense granted to it hereunder. Sublicenses will be
granted to additional Affiliates of LICENSEE during the term of this
Agreement upon receipt by DVA of written notices from LICENSEE setting
forth the names and addresses of such additional Affiliates to be covered
by this Agreement, provided each such notice is given before any sales of
Discs by the Affiliate named therein. Each Affiliate sublicensed under
this Agreement shall be bound by the terms and conditions of this
Agreement as if it were named herein in the place of LICENSEE. LICENSEE
represents to DVA that it has the power to bind each such Affiliate to the
terms and conditions of this Agreement and agrees to take whatever action
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is necessary to legally bind such Affiliates. The sublicense granted to an
Affiliate shall terminate on the date such Affiliate ceases to be an
Affiliate.
3.4 Except as set forth in Section 3.3, LICENSEE is expressly not granted the
right to sublicense third parties under this Agreement.
Section 4.0 Release
4.1 Upon payment of the consideration set forth in Section 5.8, DVA
irrevocably releases LICENSEE and its Affiliates, identified in Appendix
C, which are LICENSEE's Affiliates as of the effective date of this
Agreement, from any and all claims of infringement of the Licensed
Patent(s), which claims have been made or which might be made at any time,
with respect to any Discs used, rented, leased, sold, or otherwise
Transferred by or for LICENSEE or its sublicensed Affiliates before the
effective date of this Agreement, to the extent such Discs would have been
licensed hereunder had they been manufactured, used, rented, leased, sold,
or otherwise Transferred after the effective date of this Agreement. This
release shall not apply to any Disc on which a royalty accrues after the
effective date of this Agreement.
4.2 LICENSEE expressly represents that its Affiliates identified in Appendix C
includes all of LICENSEE's Affiliates as of the effective date of this
Agreement.
Section 5.0 Royalties and other Payments
5.1 LICENSEE shall pay, as hereinafter provided, earned royalties to DVA with
respect to both of the following for:
5.1.1 each Disc for which LICENSEE is licensed hereunder in the country of
manufacture; and
5.1.2 each Disc for which LICENSEE is licensed hereunder in the country of
use, rental, lease, sale or Transfer.
5.2 For each Disc manufactured in the United States of America, no more than
one royalty shall be due for such Disc, regardless of the number of
countries in which the use, distribution and sale of such Disc occurs.
5.3 LICENSEE shall pay to DVA a royalty as set forth below in Section 5.4 or
as set forth below in Section 5.5. LICENSEE's election between the royalty
of Section 5.4 and the royalty of Section 5.5 shall be made in writing to
DVA for each type of Digital Disc or Video Disc on or before submission of
the royalty report for the first accounting period for which royalty is to
be paid for such type
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of disc. This election, once made, cannot be changed except as provided
herein.
If Section 5.4 is selected, and LICENSEE subsequently wishes to change its
royalty election, LICENSEE may change the royalty election by notifying
DVA in writing, on or before submission of the royalty report for the next
accounting period for which such royalties are to be paid, of LICENSEE'S
election to pay royalties pursuant to Section 5.5 herein, and of the
Licensed Patent(s) to be included in Appendix B. Appendix B shall
thereupon be amended to list the Licensed Patent(s) in accordance with
LICENSEE'S written notification. LICENSEE shall be liable for royalty
payments pursuant to Section 5.4 up to the date of DVA's receipt of
written notice of LICENSEE'S change of royalty election.
If LICENSEE is considering an election to pay royalties pursuant to
Section 5.5, LICENSEE may request a factory inspection in accordance with
Section 10.0. If Section 5.5 is selected, DVA reserves the right to bring
a patent infringement action against LICENSEE with respect to any DVA
Patent(s) not listed in Appendix B.
The royalty election may be changed from Section 5.5 to Section 5.4 by
written agreement of the parties.
5.4 LICENSEE shall pay, as a first option hereinafter provided, royalties to
DVA with respect to the following Disc products:
5.4.1 For each Video Disc which is manufactured, used, rented, leased,
sold and/or Transferred by or for LICENSEE and/or its Affiliates in
the United States of America, LICENSEE shall pay to DVA a royalty
for:
5.4.1.1 Video Discs having a diameter up to and including six (6)
inches: four cents (U.S. $0.04) per side containing
information; and
5.4.1.2 Video Discs having a diameter greater than six (6) inches:
twelve cents (U.S. $0.12) per side containing information.
5.4.1.3 With respect to each of the preceding Sections 5.4.1.1
and 5.4.1.2, LICENSEE shall have the option of paying a
royalty of three percent (3.0%) of the Net Selling Price for
Video Discs manufactured, used, rented, leased, sold and/or
Transferred in the United States of America.
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5.4.2 For each Digital Disc which is manufactured, used, rented, leased,
sold and/or Transferred by or for LICENSEE and/or its Affiliates in
the United States of America, LICENSEE shall pay to DVA a royalty
for:
5.4.2.1 Digital Discs, except CD-Singles: three cents (U.S. $0.03)
per side containing information; and
5.4.2.2 CD-Singles (CD-3 or CD-5): two cents (U.S. $0.02) per side
containing information.
5.4.2.3 With respect to each of the preceding Sections 5.4.2.1 and
5.4.2.2, LICENSEE shall have the option of paying a royalty
of three percent (3.0%) of the Net Selling Price for
Digital Discs manufactured, used, rented, leased, sold
and/or Transferred in the United States of America.
5.5 For each Digital Disc and/or Video Disc which includes a Patented Portion
and which is manufactured, used, rented, leased, sold, and/or Transferred
by or for LICENSEE and/or its Affiliates in the United States of America,
LICENSEE, as a second option, shall pay to DVA a royalty equal to the sum
total of the individual patent royalty rates of Licensed Patent(s) as a
percentage of the Manufacturer's Net Selling Price of such Digital Disc or
Video Disc, such individual rates being set forth in Appendix B.
5.6 Lists of companies currently having a valid patent license agreement for
Discs with DVA are set forth in Appendix D-1 and D-2. These lists will be
updated annually. If LICENSEE purchases Discs from any of the licensees
listed in Appendix D-2, then LICENSEE shall pay a royalty of two United
States cents (U.S. $0.02) per disc side containing information for each
Digital Disc purchased from said licensee.
5.7 No royalties shall be paid by LICENSEE for:
5.7.1 Discs manufactured for LICENSEE by any other DVA licensee, so long
as the other DVA licensee has fully paid and reported royalties to
DVA on such Discs and has identified LICENSEE as the purchaser of
such Discs in their royalty reports to DVA. If the other DVA
licensee has paid a partial royalty to DVA, then LICENSEE shall
receive a credit for that partial royalty.
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5.7.2 Discs manufactured by LICENSEE for any other DVA licensee, so long
as the other DVA licensee has fully paid and reported royalties to
DVA on such Discs, and LICENSEE has identified such other DVA
licensee as the purchaser, and both LICENSEE and such other DVA
licensee have both identified the other in their respective royalty
reports due DVA reporting such transaction. If the other DVA
licensee has paid a partial royalty to DVA, then LICENSEE shall
receive a credit for that partial royalty.
5.8 LICENSEE agrees to pay DVA within sixty (60) days of the execution of this
Agreement, the sum of ten thousand United States Dollars (U.S.
$10000.00)as additional consideration granted LICENSEE in Section 4.0.
This sum is not refundable and is not creditable toward royalties set
forth in this Section 5.0.
Section 6.0 Accruals, Records and Reports
6.1 Royalties shall accrue when any Disc with respect to which royalty
payments are required by Section 5.0 of this Agreement is sold (as
evidenced by bill or invoice), first rented, first leased, first put into
use or Transferred, whether or not payment is received by LICENSEE. On
sales or Transfers between LICENSEE and its Affiliate for resale or for
further Transfer, the royalty shall accrue at the time of sale or Transfer
to the Affiliate.
6.2 LICENSEE shall pay royalties and other sums of money due hereunder in
United States dollars. All royalties for an accounting period computed on
invoiced amounts in currencies other than United States dollars shall be
converted directly into United States dollars without intermediate
conversions to another currency at the currency exchange rate quoted by
either the United States edition of the Wall Street Journal or the head
office of Citibank N.A. of New York, New York at the close of banking on
the last business day of such accounting period.
6.3 LICENSEE's royalty reports shall include the following information:
6.3.1 identification by Type Number, brand name and/or label name, Disc
type (for example, CD Digital Audio, CD-ROM, etc.), Manufacturer's
Net Selling Price and quantity of each Disc type upon which royalty
has accrued pursuant to Section 6.1;
6.3.2 identification by city and either state or province of the locations
at which the Discs identified pursuant to Section 6.3.1 were
manufactured and identification of the countries of first sale;
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6.3.3 identification of the royalty basis used for each Disc type pursuant
to the provisions of Section 5.0, the amount of royalties due for
each Disc type, all information required to show how such amount has
been calculated and the aggregate amount of all royalties due; and
6.3.4 identification by Type Number, brand name and/or label name, Disc
type (for example, CD Digital Audio, CD-ROM, etc.), and quantity of
each Disc type manufactured by or for LICENSEE during the applicable
accounting period which is exempt from royalty in accordance with
Section 5.7, including the name and address of the other DVA
licensee who manufactured or received the Discs.
In the event that either of Sections 6.3.1 and 6.3.4 do not apply,
LICENSEE shall so state as to each such section. In the event no royalties
are due, LICENSEE's report shall so state.
6.4 LICENSEE's royalty report shall be certified by an officer of LICENSEE or
by a designee of such officer to be correct to the best of LICENSEE's
knowledge and information.
6.5 An accounting period shall end on the last day of each March, June,
September and December during the term of this Agreement. The first
accounting period under this Agreement shall be for a period commencing as
of the effective date of this Agreement. Within sixty (60) days after the
end of each such period, LICENSEE shall furnish to DVA a written royalty
report containing the information specified in Section 6.3 hereof and
shall pay to DVA all unpaid royalties accrued hereunder in favor of DVA to
the end of each such period.
6.6 LICENSEE shall keep separate records in sufficient detail to permit the
determination of royalties payable hereunder. At the request of DVA,
LICENSEE will permit an independent auditor and/or technical consultant
selected by DVA, or any other person or persons acceptable to both DVA and
LICENSEE, to examine during ordinary business hours once in each calendar
year such records and other documents as may be necessary to verify or
determine royalties paid or payable under this Agreement. Such auditor,
technical consultant or other person(s) shall be instructed to report to
DVA only the amount of royalties due and payable. If no request for
examination of such records for any particular accounting period has been
made by DVA within three (3) years after the end of said period, the right
to examine such records for said period, and the obligation to keep such
records for said period, shall terminate.
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6.7 The fees and expenses of DVA's representatives performing any examination
of records under Section 6.6 above shall be borne by DVA. However, if an
error in royalties of more than three percent (3%) of the total royalties
due is discovered for any year examined, then the reasonable fees and
expenses of these representatives, with respect to such examination, shall
be borne by LICENSEE.
Section 7.0 Interest on Overdue Royalties and Other Payments
7.1 LICENSEE shall be liable for interest at a rate, per annum, of three
percent (3.0%) over the published prime rate, from time to time, on any
overdue royalty or other payment set forth in Section 5.0 herein,
commencing on the date such royalty or other payment becomes due. If such
interest rate exceeds the maximum legal rate in the jurisdiction where a
claim therefore is being asserted, the interest rate shall be reduced to
such maximum legal rate.
Section 8.0 Most Favored LICENSEE
8.1 If DVA shall hereafter grant a license which grants the same rights
concerning Discs as granted hereunder to LICENSEE for a Licensed Patent(s)
for a particular country at a more favorable royalty rate than that set
forth herein, then DVA shall notify LICENSEE thereof and LICENSEE shall be
entitled to receive the same more favorable royalty rate for such Licensed
Patent for such particular country, subject to the same terms and
conditions under which the more favorable royalty rate has been granted,
provided that this Agreement shall be modified accordingly by written
amendment, which amendment shall be effective only for the period the more
favorable royalty rate is in effect under such license. The foregoing
provisions of this Section 8.1 shall not apply if-
8.1.1 DVA receives a grant of patent rights, a license, or immunity or
other than only a monetary consideration for such license;
8.1.2 the more favorable royalty rate applies only to products for which
there is a claim of past infringement and is given in consideration
of settlement of such claim;
8.1.3 the more favorable royalty rate forms part of a settlement of an
outstanding controversy other than past infringement; or
8.1.4 LICENSEE elects to continue paying the royalty set forth in this
Agreement.
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Section 9.0 Assignments
9.1 LICENSEE shall not assign any of its rights or privileges hereunder
without the prior written consent of DVA, except to a successor in
ownership of all or substantially all the assets of LICENSEE, which
successor expressly assumes in writing the performance of all the terms
and conditions of this Agreement to be performed by LICENSEE as if it were
named herein in the place of LICENSEE. After any such assignment, LICENSEE
shall no longer be licensed hereunder.
Section 10.0 Factory Inspection
10.1 At LICENSEE's request, DVA will perform a factory inspection at LICENSEE's
Disc manufacturing facility, or the Disc manufacturing facility of the
manufacturer who supplies Discs to LICENSEE, and thereafter provide
LICENSEE with claim charts indicating which DVA Patent(s) listed in
Appendix A apply to LICENSEE's products. If LICENSEE is not the
manufacturer, it is LICENSEE's responsibility to obtain the authorization
of the manufacturer for DVA to perform the desired factory inspection.
LICENSEE shall pay to DVA an inspection fee of Fifty Thousand United
States Dollars (U.S. $50,000) for each Disc manufacturing facility to be
inspected, said fee to be paid prior to each inspection.
10.2 If LICENSEE notifies DVA that LICENSEE wishes to have the factory
inspection set forth in Section 10. 1, then LICENSEE agrees to allow, or
to obtain authorization to allow, the representatives of DVA to inspect
the Disc manufacturing facility as follows:
10.2.1 DVA's representatives shall be allowed to inspect those parts of
the Disc manufacturing facility which are directly related to the
possible infringement of DVA Patent(s). The inspection shall be
made during reasonable business hours as soon as practically
possible after payment of the inspection fee by LICENSEE. DVA and
LICENSEE shall determine by mutual agreement the time, duration and
other detailed manner and schedule of such inspection.
10.2.2 The employees at such production facilities will be directed, to
the best of LICENSEE'S ability, to answer all questions asked by
the DVA representatives and will allow the full and complete
inspection, copying, videotaping and photographing of all
documentation, machines, methods, and materials used in, at, or
with a part of the Disc manufacturing facility which LICENSEE has
the right to disclose to others, as long as such questions and/or
such part of the facility is directly related to the possible
infringement. Any notes made by the
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DVA representatives and any documents, photographs, and videotapes
shall be stamped "CONFIDENTIAL".
10.2.3 Any inspection of a Disc manufacturing facility shall be on a
confidential basis, and information learned as a result thereof
shall be used for no purpose other than the technical discussions
set forth herein. DVA shall safeguard the confidential information
learned with standards at least as high as those that it uses to
safeguard its own confidential information.
10.2.4 DVA shall not divulge any and all information obtained or learned
as a result of such inspection to any other person or entity other
than LICENSEE, including but not limited to other DVA licensees.
This obligation shall not apply to information which is or becomes
publicly available through no fault of DVA or is rightfully
obtained without a bind of secrecy.
10.2.5 DVA shall use its best efforts to provide, within sixty (60) days
from the inspection of the Disc manufacturing facility, a report in
writing to LICENSEE. The report shall include those DVA Patent(s)
which DVA believes are infringed by such facility and shall be in
the form of claim charts providing the basis and reasons for the
possible infringement of the DVA Patent(s) in question.
DVA shall use its best efforts to include in the report all DVA
Patent(s) which DVA believes are infringed by such facility. It is
understood and agreed by LICENSEE that the exclusion of one or more
DVA Patents neither estops DVA from asserting a claim of
infringement against LICENSEE under such DVA Patent(s), nor affects
the rights of DVA in any way with respect to such DVA Patent(s).
It is understood and agreed by LICENSEE that this report and these
claim charts are for settlement purposes only and cannot and Will
not be used for any other purpose. LICENSEE agrees to keep this
report and these claim charts confidential and not to disclose them
to any other party.
10.3 LICENSEE can elect this inspection option once per calendar year. Any
@Inspection of a Disc manufacturing facility after the first inspection of
such Disc manufacturing facility shall be performed for a fee to be
determined and agreed upon between DVA and LICENSEE.
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Section 11.0 License to DVA
11.1 LICENSEE grants to DVA and its Affiliates an irrevocable, non-exclusive,
royalty-free license under LICENSEE's United States patents and patent
applications to make, have made, use, lease, sell or otherwise Transfer
Discs, and to make, have made, use or have used Manufacturing Apparatus in
the manufacture of Discs and to practice or have practiced Manufacturing
Processes in the manufacture of discs. Said license to DVA and its
Affiliates shall be effective as of the date LICENSEE first pays royalties
in accordance with Section 5.0 hereof Said license shall be with respect
to all of LICENSEE's United States patents and patent applications,
including utility models, design patents, divisionals, reissues,
extensions, continuations, and reexaminations, under which patents and
patent applications LICENSEE now has or hereafter, during the term of this
Agreement, obtains the right to grant licenses to DVA of the scope granted
herein.
11.2 The license as set forth in Section 11.1 shall not apply with respect to
any patent of LICENSEE, if such grant would result in the payment of
royalties by LICENSEE to third parties, except for payments to Affiliates
of LICENSEE and payments to third parties for inventions made by said
third parties while employed by LICENSEE or any of its Affiliates.
Section 12.0 Term of AGREEMENT: Termination
12.1 Subject to Section 12.5 below, the term of this Agreement shall be from
the effective date hereof until the expiration of the last to expire of
the Licensed Patent(s), unless previously terminated as hereinafter
provided.
12.2 LICENSEE may terminate the license granted herein, but only in its
entirety, at any time by giving notice in writing to DVA. Such termination
shall be effective on the date such notice is received by DVA.
12.3 DVA shall have the right to terminate this Agreement in the event:
12.3.1 LICENSEE fails to make any payment when due under this Agreement
and such payment is not made within sixty (60) days of written
notice from DVA; or
12.3.2 LICENSEE defaults under any term of this Agreement, other than a
default involving the payment of money, which default is not cured
within thirty (30) days of written notice from DVA; or
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12.3.3 LICENSEE becomes insolvent or admits in writing its inability to
pay its debts as they mature or makes an assignment for the benefit
of creditors; or
12.3.4 LICENSEE files a petition under any foreign or U.S. bankruptcy law.
The rights and remedies set forth in this section are not exclusive
and are in addition to any other rights and remedies available to
DVA under this Agreement or at law or equity.
12.4 In the event this Agreement or the license granted hereunder shall be
terminated pursuant to this Section 12.0 or assigned pursuant to Section
9.0, the corresponding sublicenses granted to Affiliates of LICENSEE
pursuant to Section 3.3 shall likewise terminate, but no notices need be
given by DVA to such Affiliates.
12.5 Any expiration or termination of this Agreement pursuant to this Section
12.0, or any termination of a sublicense pursuant to Section 3.3, shall
not relieve LICENSEE of any obligation or liability accrued hereunder
prior to such termination (including, without limitation, the obligations
set forth in Sections 5.0, 6.0 and 7.0), or rescind or give rise to any
right to rescind anything done by LICENSEE or any payments made or other
consideration given to DVA hereunder prior to the time such termination
becomes effective, and such termination shall not affect in any manner any
rights of DVA arising under this Agreement prior to such termination.
Section 13.0 - Payments, Notices and Other Communications
13.1 Any notice or other communication pursuant to this Agreement shall be made
by registered airmail (except that registered or certified mail may be
used where delivery is in the same country as mailing) and shall be
effective upon receipt by the addressee. Such notice or communication
shall be mailed to:
13.1.1 In the case of DVA:
Dennis Fischel
President
DISCOVISION ASSOCIATES
Post Office Box 19616
Irvine, California 92713
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13.1.2 In the case of LICENSEE:
ALLIED DIGITAL TECHNOLOGIES CORP.
7375 Woodward Avenue
Detroit, Michigan 48202
Attn: James A. Merkle, President & Chief Executive Officer
with a copy to:
MILLER, CANFIELD, PADDOCK & STONE
150 West Jefferson
Suite 2500
Detroit, Michigan 48226
Attn: Gilbert E. Gove
13.2 LICENSEE's royalty reports, as described in Section 6.0 of this
Agreement, shall be mailed via air mail to:
DISCOVISION ASSOCIATES
ATTN: Controller
Post Office Box 19616
Irvine, California 92713
Fax No.: (714) 660-1801
A summary of the report, which states the total royalty to be paid,
shall be sent by facsimile to DVA on, or before, the mailing of the
complete report.
13.3 All payments set forth in Section 5.0 of this Agreement shall be
paid via bank wire transfer to:
Federal Reserve Bank of San Francisco
For Credit to Sumitomo Bank of California
San Francisco - Head Office
ABA: 131002042
For Further Credit to:
The Sumitomo Bank, Ltd., Los Angeles Branch
for Account of Discovision Associates
ABA: 132003396
Account Number: 046-133013-70
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or by check payable to DVA and mailed via air mail directly to:
DISCOVISION ASSOCIATES
ATTN: Controller
Post Office Box 19616
Irvine, California 92713
Section 14.0 Applicable Law
14.1 This Agreement shall be construed, and the legal relations between the
parties hereto shall be determined, in accordance with the laws of the
State of New York and, as applicable, the laws of the United States of
America.
Section 15.0 Miscellaneous
15.1 Nothing contained in this Agreement shall be construed as:
15.1.1 requiring the filing of any patent application, the securing of any
patents or the maintenance of any patents; or
15.1.2 a warranty or representation by DVA as to the validity or scope of
any Licensed Patent; or
15.1.3 a warranty or representation that the manufacture, use, rental,
lease, sale or other Transfer of any Disc is free from infringement
of any patents or other rights of third parties; or
15.1.4 an obligation on the part of DVA to furnish any manufacturing or
technical information, or any information concerning other
licensees, except as to the obligation under ss.8.0; or
15.1.5 an obligation upon DVA to make any determination as to the
applicability of its patents to any of LICENSEE's products, except
as otherwise provided in Section 10.0; or
15.1.6 a license with respect to any act which would otherwise constitute
inducement of infringement or contributory infringement under
United States patent law or its equivalent under any law foreign to
the United States; or
15.1.7 conferring any right to use, in advertising, publicity, or
otherwise, any name, trade name, trademark, service mark, symbol or
any other identification or any contraction, abbreviation or
simulation thereof; or
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15.1.8 conferring any rights by implication, estoppel or otherwise, to or
under copyrights with respect to any computer software under any
present system of statutory protection or one hereinafter enacted
in any country or countries, wherein the copying of such computer
software is a requisite of infringement under such system; or
15.1.9 an obligation to bring or prosecute actions or suits against third
parties for infringement of any patent.
15.2 LICENSEE shall have the complete responsibility and shall use its best
efforts to obtain all necessary approvals and validations of this
Agreement, including all necessary approvals and validations for any
products made, used or sold hereunder.
15.3 LICENSEE will sell and deliver to DVA, F.O.B. LICENSEE's shipping point,
any Disc ordered from LICENSEE by DVA and which is available for sale by
LICENSEE (which shall exclude any Disc manufactured by LICENSEE for a
third party.) LICENSEE will also sell and deliver to DVA a copy of each
manual (including, but not limited to, service, use and other technical
manuals) relevant to a Disc manufactured by or for LICENSEE, provided
that, upon request by LICENSEE, DVA first delivers to LICENSEE a letter
agreeing to hold such manual in confidence and to use it only for reverse
engineering purposes. Any such sales will be at the same prices charged to
LICENSEE's most favored customer.
15.4 The waiver by either party of a breach or default of any provisions of
this Agreement by the other party shall not be construed as a waiver of
any succeeding breach of the same or any other provision, nor shall any
delay or omission on the part of either party to exercise or avail itself
of any right, power or privilege that it has or may have hereunder operate
as a waiver of any right, power or privilege of such party.
15.5 It is the intention of both parties to make this Agreement binding only to
the extent that it may be lawfully done under existing applicable law as
identified in Section 14.0. If any sentence, paragraph, clause or
combination of the same is in violation of any applicable law, that
portion which is in violation shall be severed from this Agreement and the
remainder of this Agreement shall remain binding upon the parties hereto,
except that no license is granted, expressly or by implication, unless
royalties are paid pursuant to Section 5.0.
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15.6 Each party represents and warrants that it has the full right and power to
enter into this Agreement and that there are no outstanding agreements,
assignments, or encumbrances to which the representing party is bound
which may restrict, or prohibit entry into, or performance under, this
Agreement. DVA further represents and warrants that it has the full power
to grant the license and release set forth in Sections 3.0 and 4.0.
Neither party makes any other representations or warranties, express or
implied, other than the representations set forth in Sections 3.3 and 4.2
regarding Affiliates.
15.7 The headings of the several sections are inserted for convenience of
reference only and are not intended to affect the meaning or
interpretation of this Agreement.
15.8 This Agreement may be executed in any number of copies, but all of such
counterparts together shall constitute one and the same Agreement.
15.9 The parties hereto acknowledge that this instrument sets forth the entire
agreement and understanding of the parties hereto and shall supersede all
previous communications, representations and understandings, either oral
or written, between the parties relating to the subject matter hereof,
except prior written agreements signed by both parties, and shall not be
subject to any changes or modifications except by the signing of a written
instrument by or on behalf of both parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
signed as of the dates written below, to be effective as of the date first above
written.
DISCOVISION ASSOCIATES
/s/ Dennis Fischel
-----------------------------------
By: Dennis Fischel
Witness: Title: President
/s/ [ILLEGIBLE] Date: June 20, 1995
- ------------------------------ ------------------------------------
ALLIED DIGITAL TECHNOLOGIES
CORPORATION
/s/ James A. Merkle
-----------------------------------
By: James A. Merkle
Witness: Title: President/C.E.O.
/s/ [ILLEGIBLE] Date: June 9, 1995
- ------------------------------ ------------------------------------
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<TABLE>
<CAPTION>
APPENDIX A
====================================================================================================================================
INDIVIDUAL
PATENT
PATENT ROYALTY
COUNTRY NUMBER RATE TITLE
====================================================================================================================================
<S> <C> <C> <C>
UNITED STATES US 3,430,966E 2.00% TRANSPARENT RECORDING DISC
US 3,518,442E 2.00% VIDEO PLAYBACK ASSEMBLY WHEREIN THE RECORD DISC HAS OPTICAL
RECORDING ON BOTH SIDES
US 3,658,954E 2.00% DUPLICATING PROCESS FOR VIDEO DISC RECORDS
US 3,687,664E 2.00% DUPLICATING PROCESS FOR VIDEO DISC RECORDS
US 3,794,410E 2.00% ARTICULATED MIRROR
US 3,829,622E 2.00% VIDEO DISC PLAYER WITH VARIABLY BIASED PNEUMATIC HEAD
US 3,894,180E 2.00% HEAD HEIGHT CONTROL SYSTEM
US 3,908,076E 2.00% EXTENDED PLAY VIDEODISC RECORDING SYSTEM
US 3,908,080E 2.00% METHOD OF MAKING AN EXTENDED PLAY VIDEO DISC RECORD
US 3,914,541E 2.00% VIDEO DISC PLAYER
US 3,915,576E 0.80% METHOD AND APPARATUS FOR CENTERING A CIRCULAR DISC
US 3,924,062E 2.00% DISC RECORD WITH SKIPPED STANDARD VIDEO INCREMENTS & CONTINUOUS AUDIO
INCREMENTS & METHOD APPARATUS FOR REPRODUCTION
US 3,947,888E 1.65% HYDRODYNAMIC BEARING HEAD PROVIDING CONSTANT SPACING
US 3,954,469E 1.65% METHOD OF CREATING A REPLICATING MATRIX
US 3,997,715 1.65% FOCUSING SYSTEM FOR VIDEODISC PLAYER
US 4,006,294E 1.65% TRANSDUCER HEAD ASSEMBLY WITH FLUID BEARING AND HEAD HEIGHT CONTROL SYSTEM
US 4,124,672 2.00% REPLICATION UTILIZING A CASTING PROCESS
US 4,130,620 2.00% METHOD FOR MAKING VIDEO DISCS AND VIDEO DISCS MOLDS
US 4,141,731 1.65% METHOD OF CREATING A REPLICATING MATRIX
US 4,152,586 1.65% OPTICAL TRANSDUCER AND FOCUSING SYSTEM
US 4,161,752 2.00% HIGH DENSITY VIDEO DISC HAVING TWO PIT DEPTHS
US 4,161,753 2.00% VIDEO RECORDING DISC WITH INTERLACING DATA FOR FRAMES ON THE SAME TRACK
US 4,185,955 1.65% APPARATUS FOR REPLACING CENTRALLY APERTURED VIDEO DISC RECORDS
US 4,190,860 1.65% DIGITAL METHOD AND APPARATUS FOR ROTATING AN INFORMATION STORAGE DISC
US 4,204,199 2.00% METHOD AND MEANS FOR ENCODING AND DECODING DIGITAL DATA
US 4,210,931 2.00% VIDEO PLAYER AND/OR RECORDER WITH HARDAMARD TRANSFORM
US 4,211,617 2.00% PROCESS FOR PRODUCING A STAMPER FOR VIDEODISC PURPOSES
US 4,222,072 2.00% VIDEO PLAYER/RECORDER WITH NON-LINEAR MARK LENGTH MODULATION
US 4,225,873 2.00% RECORDING AND PLAYBACK SYSTEM
====================================================================================================================================
Page 1 of 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
====================================================================================================================================
INDIVIDUAL
PATENT
PATENT ROYALTY
COUNTRY NUMBER RATE TITLE
====================================================================================================================================
<S> <C> <C> <C>
UNITED STATES US 4,228,326 2.00% SYSTEM FOR RECORDING INFORMATION ON A ROTATING STORAGE DISC
(cont.) IN SUBSTANTIALLY UNIFORM RECORDING DENSITY
US 4,232,388 1.00% METHOD AND MEANS FOR ENCODING AND DECODING DIGITAL DATA
US 4,241,698 1.65% VACUUM EVAPORATING SYSTEM FOR THE DEPOSITION OF A THIN
EVAPORATED LAYER HAVING A HIGH DEGREE OF UNIFORMITY
US 4,252,327 2.00% VIDEO DISC PLAYER
US 4,256,374 0.75% WRITE AND READ OBJECTIVE LENS FOR HIGH DENSITY STORAGE
US 4,260,360 1.65% METHOD AND MEANS FOR REPLICATING CENTRALLY APERTURED VIDEO DISC RECORDS
US 4,264,911 2.00% OPTICAL RECORDING DISC AND RELATED METHOD OF MANUFACTURE
US 4,274,119 2.00% RECORDING DISC COVER AND PLAYER APPARATUS FOR REMOVING COVER
US 4,286,848 0.75% REPRODUCING OBJECTIVE LENS FOR VIDEODISCS
US 4,307,381 2.00% METHOD AND MEANS FOR ENCODING AND DECODING DIGITAL DATA
US 4,310,919 2.00% OPTICAL VIDEO DISC STRUCTURE
US 4,313,190 1.20% METHOD FOR MAKING A COMPOSITE VIDEO DISC
US 4,313,191 2.00% RECORDING MEDIUM HAVING A PILOT SIGNAL WITH AN ALIGNED PHASE ANGLE IN ADJACENT TRACKS
US 4,337,538 2.00% DRIVE ASSEMBLY FOR A VIDEO RECORDER-PLAYBACK MACHINE
US 4,339,814 2.00% SPINDLE ASSEMBLY FOR A VIDEO RECORDER-PLAYBACK MACHINE
US 4,340,353 1.65% HOT SPRUE VALUE ASSEMBLY FOR AN INJECTION MOLDING MACHINE
US 4,340,955 2.00% VIDEO DISC PLAYER
US 4,341,469 0.80% LASER SHADOWGRAPH
US 4,345,261 2.00% DIELECTRIC RECORDING MEDIUM
US 4,347,599 0.80% SPINDLE CLAMP ASSEMBLY FOR A VIDEO RECORDER-PLAYER MACHINE
US 4,347,619 2.00% DIGITAL FORMATTING SYSTEM
US 4,353,767 2.00% METHOD OF MANUFACTURING AN OPTICAL READING DISC
US 4,357,533 2.00% FOCUS DETECTOR FOR AN OPTICAL DISC PLAYBACK SYSTEM
US 4,358,774 2.00% APPARATUS AND METHOD FOR CONTROLLING FOCUS IN A RECORDING MEDIUM
US 4,358,802 1.65% FLUID CUSHION TURNTABLE FOR VIDEO DISC PLAYER
US 4,367,545 2.00% VIDEO DISC PLAYER
US 4,368,957 0.75% WIDE APERTURE OBJECTIVE LENS
US 4,372,741 1.65% HOT SPRUE VALUE ASSEMBLY FOR AN INJECTION MOLDING MACHINE
====================================================================================================================================
Page 2 of 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
====================================================================================================================================
INDIVIDUAL
PATENT
PATENT ROYALTY
COUNTRY NUMBER RATE TITLE
====================================================================================================================================
<S> <C> <C> <C>
US 4,504,939 2.00% STORAGE MEDIUM TRACK PITCH DETECTOR
US 4,510,536 2.00% SIGNAL CONDITIONING METHOD AND APPARATUS FOR FM CODE SIGNAL
US 4,519,004 2.00% EXTENDED PLAY VIDEODISC
US 4,524,444 2.00% ANALYZING THE SIGNAL TRANSFER CHARACTERISTICS OF A SIGNAL PROCESSING UNIT
US 4,535,548 1.65% METHOD AND MEANS FOR DRYING COATINGS ON HEAT SENSITIVE MATERIALS
US 4,566,090 2.00% STORAGE MEDIUM TRACK PITCH DETECTOR
US 4,583,210 2.00% METHOD AND APPARATUS FOR STORING AND RETRIEVING INFORMATION
US 4,598,324 2.00% AUDIO EVALUATION UNDER CONTROL OF VIDEO PICTURE FRAME NUMBER
US 4,611,318 2.00% METHOD AND APPARATUS FOR MONITORING THE STORAGE OF INFORMATION ON A STORAGE MEDIUM
US 4,615,753 2.00% VIDEO RECORD DISC AND PROCESS FOR MAKING SAME
US 4,623,837 2.00% AUDIO/VIDEO QUALITY MONITORING SYSTEM
US 4,648,084 2.00% STORAGE MEDIUM TRACK PITCH DETECTOR
US 4,706,133 2.00% METHOD AND APPARATUS FOR RECOVERING INFORMATION FROM A VIDEO DISC
US 4,759,007 2.00% STORAGE MEDIUM TRACK PITCH DETECTOR
US 4,764,915 2.00% METHOD AND APPARATUS FOR RECORDING A MULTIPLEXED SIGNAL ON A RECORD MEDIUM
US 4,796,098 2.00% BANDED AND INTERLEAVED VIDEO DISC FORMAT
US 4,797,752 2.00% BANDED AND INTERLEAVED VIDEO DISC FORMAT
US 4,819,223 2.00% VIDEO RECORD DISC
US 4,893,297 2.00% VIDEO RECORD DISC AND PROCESS FOR MAKING SAME
US 4,980,878 2.00% METHOD AND APPARATUS FOR SCANNING A RECORDING MEDIUM FOR DEFECTS
US 5,001,568 2.00% SIGNAL EVALUATION BY ACCUMULATION AT ONE RATE AND RELEASING AND TESTING AT A SLOWER RATE
US 5,003,526 2.00% SYSTEM FOR RECORDING DIGITAL INFORMATION IN A PULSE-LENGTH MODULATION FORMAT
US 5,018,020 2.00% RECORD DISC FOR STORING SEPARATE VIDEO AND AUDIO INFORMATION
US 5,084,852 2.00% SYSTEM FOR RECORDING DIGITAL INFORMATION IN A PULSE-LENGTH MODULATION FORMAT
US 5,126,990 2.00% A METHOD OF EVALUATING A STORAGE MEDIUM BY RECIRCULATING A TEST SAMPLE OF A SIGNAL
US 5,220,434 2.00% VIDEO RECORDING MEDIUM FOR STOP-MOTION PLAYBACK
US 5,253,244 2.00% SYSTEM FOR RECORDING DIGITAL INFORMATION IN A PULSE-LENGTH MODULATION FORMAT
US RE32,431 2.00% METHOD AND APPARATUS FOR RECOVERING INFORMATION FROM A ROTATABLE STORAGE DISC
====================================================================================================================================
NOTE: An "E" directly following the patent Number indicates that patent has expired.
Page 4 of 4
</TABLE>
<PAGE>
Appendix B
UNITED STATES PATENTS LICENSED TO LICENSEE UNDER THIS AGREEMENT:
INDIVIDUAL
PATENT
PATENT NUMBER ROYALTY RATE
- ------------- ------------
APPENDIX B PATENTS SHALL BE ALL OF THE PATENTS LISTED IN APPENDIX A
APPENDIX B
Page 1 of 1
<PAGE>
APPENDIX C
LICENSEE'S Affiliates as of the effective date of this Agreement are:
Company: Hauppauge Record Manufacturing, Ltd.
Address: 15 Gilpin Avenue
Hauppauge, New York 11788
Company: HRM Holdings Corp.
Address: 15 Gilpin Avenue
Hauppauge, New York 11788
Company: Allied Film Laboratory, Inc.
Address: 7375 Woodward Avenue
Detroit, Michigan 48202
Company: _______________________________________
Address: _______________________________________
_______________________________________
_______________________________________
APPENDIX C
Page 1 of I
<PAGE>
APPENDIX D-1
LICENSED DISC MANUFACTURERS WHO ARE PAYING U.S. RATES:
Americ Disc Inc. Nimbus Manufacturing Inc.
Atlantic Recording Corporation Optical Disc Corporation
Better Quality Cassettes, Inc. Philips (N.V.)
Cinram Ltd. Pilz (U.S.)
Denon Corporation (USA) Pioneer
Digital Audio Disc Corporation (U.S.) Producers Color/Technidisc
Discovery Systems/Metatec Sanyo Laser Products
Disctronics Limited (U.S.) Sonopress Inc. (U.S.)
EMI Manufacturing (USA) Sony Music Entertainment
JVC America Time Warner Inc. (U.S.)
KAO Corporation U.S. Optical Disc
Kuraray Co., Ltd. Warner Bros. Records Inc.
Mitsubishi Plastics Industries Ltd. Warner Communications Inc.
National Tape & Disc Inc. WEA Manufacturing Inc.
APPENDTX D-1
Page I of 1
<PAGE>
APPENDIX D-2
LICENSED DISC MANUFACTURERS NOT PAYING U.S. RATES:
Bertelsmann AG Pilz GmbH & Company
Compact Disc KG
Bertelsmann de Mexico P & 0 Compact Disc
Damont Audio Limited Ritek Incorporation
Disctronics Limited Sanyo Electric Co., Ltd.
Hitachi Ltd. Sonopress Pan Asia Ltd.
Matsushita Electric Industrial Co., Ltd. Sony Corporation
Mayking Records Ltd. Sony DADC Austria AG
Memory-Tech Corporation Thom EMI plc
Mitsubishi Electric Corporation Toshiba Corporation
Moulage Plastique de L'ouest (MPO) Toshiba-EMI Limited
Nimbus Manufacturing (UK) Ltd. Victor Company of Japan
Nippon Columbia Co., Ltd.
APPENDIX D-2
Page 1 of I
<PAGE>
<TABLE>
<CAPTION>
ROYALTY REPORT PAGE __ OF __
DIGITAL DISCS
UNITED STATES
===========================================================================================================
COMPANY: ALLIED DIGITAL TECHNOLOGIES CORP. PERIOD:_______ TO________
EXCHANGE RATE: ____________/US$
===========================================================================================================
PER CONTRACT
ROYALTY PER
BRAND COUNTRY COUNTRY INFORMATION SIDE
OR OF OF OF ROYALTY ROYALTY
PRODUCT TRADEMARK MANUFACTURE DESTINATION NET SELLING PRICE QUANTITY RATE DUE
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
===========================================================================================================
TOTAL NET TOTAL
SELLING PRICE:____________ TAX %:____ ROYALTIES DUE:__________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYALTY REPORT PAGE __ OF __
DIGITAL DISCS
UNITED STATES
===========================================================================================================
COMPANY: ALLIED DIGITAL TECHNOLOGIES CORP. PERIOD:_______ TO________
EXCHANGE RATE: ____________/US$
===========================================================================================================
PER CONTRACT
ROYALTY PER
BRAND COUNTRY COUNTRY INFORMATION SIDE
OR OF OF OF ROYALTY ROYALTY
PRODUCT TRADEMARK MANUFACTURE DESTINATION NET SELLING PRICE QUANTITY RATE DUE
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
===========================================================================================================
TOTAL NET TOTAL
SELLING PRICE:____________ TAX %:____ ROYALTIES DUE:__________________
</TABLE>
LEASE
THIS LEASE, made and entered into as of the 1st day of January 1995, by
and between Greenfield Land Company (hereinafter called the "Lessor") and
Allied Film Laboratory, INC. (hereinafter called the "Lessee").
1. Premises. Lessor, in consideration of the payments, covenants and
conditions herein expressed, does hereby lease and demise unto Lessee those
certain premises and all buildings, structures, and improvements thereon
(hereinafter called the "Premises") located in the City of Clinton County of
Anderson ,State of Tennessee and more particularly described as follows:
Tract 1:
--------
Situated in the First Civil District of Anderson County Tennessee, on the
Southwest shore of Melton Hill Lake and the Eagle Bend industrial park
area, approximately 1- 3/4 miles Southeast of the State Highway 61 bridge
across the lake, and being a portion of TVA Tract No. XMHR-28 and being
more fully described as follows:
BEGINNING at US-TVA Monument 16-94 (Coordinates: N. 625,371; E. 2559,460)
between a road and a railroad at a corner of TVA Property and in the
Eastern line of Yarnell Industrial parkway; thence with Yarnell.1
Industrial parkways, North 15 degrees 48 minutes East, 470 feet to a metal
marker; thence North 15 degrees 52 minutes East, 452 feet to a metal
marker; thence North 16 degrees 29 minutes East, 20.5 feet to a point;
thence leaving Yarnell Industrial Parkway, South 74 degrees 16 minutes
East, 586 feet to a point; thence South 85 degrees 4 minutes 50 seconds
East, 539.26 feet to a point, a corner to TVA Tract XMHR-42 a portion of
which is described herein as Tract 2; thence with the line of Tract 2
South 37 degrees 18 minutes West, 929.13 feet to a metal marker in the
line of Tennessee. Valley Authority; thence with TVA Property North 86
degrees 00 minutes West, 700 feet to a metal marker; thence South 83
degrees 24 minutes West, 98 feel to the point of BEGINNING.
Containing 18.24 acres, more or less.
BEING the same property conveyed to Sprague Electric Company by deed from
the Industrial Development Board of Anderson County, Tennessee, dated
April 25, 1985, filed April 13, 1986 in Warranty Book L, Volume 16, Page
729, in the Anderson County Register's Office.
<PAGE>
TRACT 2:
--------
SITUATED in the First Civil District of Anderson County on the Southwest
shore of Melton Hill Lake and the Eagle Bend Industrial park area and
being a portion of Tract No. XMHR42 and being more fully described as
follows:
TO FIND THE POINT OF BEGINNING commence at US-TVA Monument 16-94
(Coordinates; N. 625,373: E. 2559,460) between a road and a railroad and
in the boundary of the United States of America's (TVA) land; thence
leaving said road and crossing the railroad tracks, North 83 degrees 24
minutes East, 98 feet to a metal marker; thence South 86 degrees 00
minutes East, 700 feet to a metal marker marking the point of BEGINNING;
herein; thence from said point of BEGINNING and leaving the property of
TVA, North 37 degrees 18 minutes East, 929.13 feet to a point; thence
South 85 degrees 4 minutes 50 seconds East, 484.58 feet to a point; thence
South 46 degrees 1 minute West, 1034.79 feet to a metal marker in the line
of TVA Property; thence North 86 degrees West 302 feet to the point of
BEGINNING.
CONTAINING 7.03 acres more or less.
BEING a portion of the property conveyed to Sprague Electric Company by
deed from the United States of America, dated September 13, 1979 and
recorded in Deed Book W, Volume 14, Page 983, in the Anderson Register's
Office.
Plus the 50,000 square foot building located adjacent to the existing
building.
Plus the 45,000 square foot addition adjacent to the existing building
completed in 1994.
2
<PAGE>
2. Term The term of the Lease shall commence on January 1. 1995 1 and
unless sooner terminated under the provisions hereof, shall run for Fifteen (15)
Years ending on December 31, 2009 (hereinafter called the "Term").
3. Rental. Lessee in consideration and respect of this Lease, hereby
leases and hires said Premises for said Term and covenants and agrees to pay to
the Lessor as rental for said Premises the sum of Six hundred twenty-four
thousand ($624,000) dollars per annum in lawful money of the United States of
America, payments to be made in monthly installments of Fifty-two Thousand
($52,000) payable in advance on or before the 1st day of every month.
The Lessor will guarantee said rental amount
(_________________________)for the period of January 1, 1995 through December
31, 1995 thereafter reserve the right to increase rental amount by any portion
or total thereof based on multiplying the rental amount (_____________ ) by the
fractional change as computed by the numerator of which is the Consumer Price
Index all urban consumers (C.P.I.U.) for (City) (all items 1967=100) published
by the Bureau of Labor Statistics for the month of December using that current
year of computation (current years, ie: 1994, 1995, 1996, etc.) and the
denominator of which is such Consumer Price Index for Detroit for the month of
December 1994. The Lessor will be required to notify the Lessee in writing
thirty (30) days in advance of any rental increase and any change in rental
amount will be cause for an amendum to the lease.
4. Advance Deposit. Upon execution of this Lease, Lessee, in addition to
the monthly installments required by Paragraph 3, shall pay to Lessor an amount
equal to One Months Rent as security for the performance of the covenants of
Lessee under this Lease.
3
<PAGE>
5. Use and Occupancy. Lessee will not use said Premises in such a way as
to violate any law or regulation of the federal, state or local government. If
any order is made or notice served by any officer of government requiring
compliance with any such law or regulation, and such order or notice is not
obeyed or contested by timely and appropriate proceedings, a default under the
provisions of this paragraph will be deemed conclusively to have occurred.
Default under the provisions of this paragraph will give Lessor the right
forthwith to terminate this Lease and repossess said Premises. Lessee will pay
all license fees, inspection charges and any other expenses which may be imposed
upon Lessor or the Premises because of the occupancy or use of the premises by
Lessee.
6. Repairs and Alterations. With respect to repairs, alternations and the
like, it is agreed:
(a) Lessee during the terms of this Lease shall maintain (by means of
both repair and replacement) the Premises including both
interior and exterior and every part thereof in as good repair, and at
expiration or earlier termination of said Term yield and deliver up the same in
as good condition, as when taken, reasonable or ordinary wear and tear excepted.
Lessee shall have the right to make only such substantial alterations and
changes in and to the Premises and only in such a manner as (i) Lessor shall in
writing approve or (ii) as are required by any lawful authority as a condition
to the use of the Premises for the purposes herein authorized. All
above-mentioned repairs, alterations, replacements, changes and other acts by
Lessee shall be at its own expense, shall not adversely affect the value or
structural strength of the Premises, shall be made in a workmanlike manner, and
shall comply with all applicable laws. rules and regulations of the City of
Clinton, County of Anderson, State of Tenessee, and the Board of Fire Insurance
Underwriters.
(b) Prior to the commencement by Lessee of any work in, upon or about the
Premises that might result in the creation of mechanics' or materialmen's liens
thereon, Lessee shall either deliver to the Lessor waivers sufficient to
preclude the creation of such liens in connection with such work, or make other
arrangements satisfactory to the Lessor for payment of the cost of such work.
Lessee covenants that all bills for labor and materials supplied upon Lessee's
order to the Premises shall be fully paid when due, and that in any event any
mechanics' or materialmen's lien or liens are filed in respect-thereof , Lessee
shall within ten(10) days thereafter, at its own cost and expense cause the same
to be discharged by filing the bond or bonds for that purpose required by laws.
4
<PAGE>
(c) All movable furniture and trade fixtures placed or installed in or
about the Premises by Lessee shall be and remain the property of Lessee and may
be removed by it any time, free from any claim of Lessor, except that Lessee
shall promptly remedy any damages to the Premises caused by such removal. All
other alternations, additions or improvements made by either party upon the
Premises shall be the property of Lessor and shall remain upon and be
surrendered with the Premises upon the termination of this Lease, without
molestation or injury, except as Lessor shall otherwise in writing agree.
(d) Lessee shall at all times keep the Premises in a clean, orderly and
sanitary condition, free from rubbish, refuse, dirt, ice and snow, and Lessee
shall do no act nor permit any condition to exist which may damage said Premises
or be a menace or nuisance, or which constitutes a violation of any law or
ordinance or the order of any court.
(e) If Lessee shall fail or refuse to commence promptly any o@ the repairs
or other obligations required by this paragraph 5 and to complete the same with
reasonable dispatch, Lessor shall have the right to terminate this Lease, or, at
their option, Lessor may enter upon said Premises and themselves do or contract
for the necessary work (this clause shall in nowise relieve the Lessee from its
obligation to keep said Premises at all times in good condition and repair) .
Lessee will reimburse Lessor for the cost of such work as soon as it is
invoiced, and Lessor will have the same remedies for non-payment of such invoice
as for nonpayment of rent.
7. Taxes All real estate and personal property taxes and assessments and
all special taxes and assessments or other governmental charges which may be
levied or assessed upon or in respect of the Premises or any property found in
or about the Premises during the Term of this Lease shall be promptly paid and
discharged by Lessee as, and on the day, the same first becomes due. Receipts
for payment of all such taxes, assessments or governmental charges shall be
furnished Lessor within thirty (30) days after the date upon which they were due
and payable, or Lessee may elect to pay any such taxes assessments or
governmental charges in one or more installments if permissible under the
applicable statute, charter or ordinance, in which event receipts of payment of
all such taxes, assessments or governmental charges shall be furnished Lessor
within thirty (30) days of the date upon which each and every installment
becomes due, provided, however, that all such taxes, assessments or governmental
charges shall be deemed to have become due for purposes of the first sentence of
this paragraph 7 as if all such taxes, assessments or other govern-
5
<PAGE>
mental charges were required to be paid in full when they first became due. It
is expressly understood that no such taxes, assessments or governmental charges
shall be pro-rated, but that all of the same having a due date during the term
of this Lease shall be paid and discharge by the Lessee.
8. Insurance. With respect to insurance it is agreed:
(a) Lessee shall at its expense carry in full force and effect at all
times during the Term of this Lease, fire, windstorm and extended coverage
insurance, in insurance companies and on policies satisfactory to Lessor,
covering the Premises in a sum equal to not less than eighty percent (80%) of
the insurable value of the buildings, structures and improvements thereon
(whether now or hereafter existing). The named insured in such insurance shall
be the Lessor. All such policies shall be, upon Lessor's demand, delivered to
and retained by it and at any time and from time to time upon Lessor's demand,
Lessee shall deliver documentary proof of the timely payment of premiums
thereon.
(b) Lessee shall use its best efforts to include in its policies of
personal property insurance which insure property located within or about the
Premises, clauses by which the insurers either (i) waive all rights of
subrogation to any claims against Lessor, its officers, agents or employees or
(ii) agree that the insured's rights under such policies shall not be affected
adversely if Lessee waives its rights of recovery against Lessor, its officers,
agents and employees, for any loss covered by such policies. Provided that, and
only if, Lessee's rights under any policy of personal property insurance which
insures property located within or about the Premises are not affected adversely
by such a waiver, Lessee hereby waives its rights of recovery against Lessor,
its officers, agents and employees, for any loss covered by such policy,
notwithstanding that such loss may result from the negligence of Lessor, its
officers, agents or employees.
(c) Lessor shall use its best efforts to include in the policies of
fire, windstorm and extended coverage insurance which insure the Premises, in
which Lessor is the named insured, clauses by which the insurers either (i)
waive all rights of subrogation to any claims against Lessee, its officers,
agents or employees, or (ii) agree that the insured's rights under such policies
shall not be affected adversely if Lessor waives its rights of recovery against
Lessee, its officers, agents and employees, for any loss covered by such
policies. Provided that, and only is, Lessor's rights under any policy of fire,
windstorm and extended coverage insurance which insures the Premises are not
affected adversely by such a waiver, Lessor hereby waives its rights of recovery
against Lessee, its officers, agents and employees, for any loss covered by such
policy, notwithstanding that such loss may result from the negligence of Lessee,
its officers, agents or employees.
9. Damage or Destruction of Premises If the Premises shall be destroyed in
whole or in part by fire or other casualty during the Term of this Lease, Lessor
will repair and restore the same to a good-tenantable condition with reasonable
dispatch.
6
<PAGE>
10. Eminent Domain. If the whole of said Premises is taken for a public
purpose under the power of eminent domain said term and the obligation of Lessee
to pay rent will cease as of the day that possession is required pursuant to
such taking or voluntary conveyance. If only a part of said Premises is so taken
or if any part of the property described in paragraph 1 is taken for public
purposes under the power of eminent domain, and if the loss of any such
substantially impairs the use to which the Premises was being put. Either Lessee
or Lessor shall have the right to terminate this Lease in its entirety by
written notice to the other party delivered within sixty (60) days after such
taking and specifying a termination date not earlier than the delivery date of
such notice and not later that ninety (90) days after such taking. If this Lease
shall not be so terminated, Lessee shall continue in possession of the remaining
Premises upon the same terms and conditions here in provided, except chat the
rental herein provided for shall be reduced in proportion to the value of any
part of the Premises taken. All damages awarded for such taking shall belong to
and be the property of the Lessor, whether such damage shall be awarded as
compensation for diminution in value to the leasehold or to the fee of the
Premises, except that Lessee shall be entitled to an amount equal to the
reasonable cost of removing its removable fixtures.
11. Peaceful Possession. Lessor represents and covenants that Lessee, upon
paying the aforesaid rentals and performing the covenants and agreements under
this Lease by it to be performed, shall and may have at all times during the
term hereof peaceful and quiet enjoyment and possession of the Premises without
any manner of hindrance from Lessor or any person or persons lawfully claiming
through Lessor.
7
<PAGE>
12. Condition of Premises. Lessee acknowledges that it has examined the
Premises prior to the making of this Lease, and knows the condition thereof, and
that no representations as to the condition or state of repairs have been made
by or on behalf of Lessor which are not herein expressed, and Lessee hereby
accepts the Premises in their present condition.
13. Non-Liability of Lessor. Not withstanding any other provisions of this
Lease, Lessor shall not in any manner or to any extent be liable or responsible
to Lessee or any other person - -
(a) For any loss or damages (or injury to person or property) caused
by stoppage, failure, malfunction or other defect of or in utilities or any
other aspect or facility of the Premises, such as (but not limited to) leakage,
overflow or backing up of or from plumbing, heating, air-conditioning, gas
lines, water mains, sewers or other drainage facilities;
(b) For loss or damage or injury to person or property resulting from
accidents, explosions, leaks or other causes attributable to Lessee's use
thereof or arising in or bout the Premises and Lessee shall be solely
responsible therefore.
14. Assignment, ETC. Lessee shall not in whole or in part assign,
transfer, mortgage, pledge, hypothecate or encumber this Lease or any interest
herein or hereunder nor sublet all or any part of the Premises, without first
obtaining Lessor's written consent thereto, which consent shall not be
unreasonably withheld. Unless otherwise expressly agreed by lessor in writing,
no assignment, subletting or other aforesaid transaction shall operate to
relieve or dis charge either the Lessee or any or all second parties from the
obligations imposed under this Lease. Lessee shall be fully responsible to
Lessor and Lessor shall be only responsible to Lessee, during the Term of this
Lease as if Lessee were the sole and only occupant of the Premises.
8
<PAGE>
15. Inspection. Lessor or its authorized agents shall have the right to
enter upon the Premises at all reasonable times for the purpose of inspecting
same. If any repairs (or other obligations under Paragraph 6 hereof) shall be
necessary for which Lessee is responsible, Lessor may demand that Lessee make
the same, and if Lessee refuses or neglects forthwith to commence such repairs
(or other obligations) and complete the same with reasonable dispatch, Lessor
may make or cause such repairs to be made (or other obligations to be performed)
and shall not be responsible to Lessee for any loss or damage that may accrue
including but not limited to Lessee's business by reason thereof.
16. Termination. This Lease may be terminated at any time, and the
Premises thereupon repossessed, upon written notice specifying the date of
termination, only in the following events:
(a) Lessor may terminate it upon not less than seven (7) days,
written notice to Lessee for the nonpayment of any rental or other amount owing
hereunder; provided, however, that this Lease shall not for such reason
terminate if, prior to the date of termination specified in the aforesaid
notice, Lessee shall have paid such overdue rental or other amount in full.
(b) Lessor may terminate it upon not less than ten (10) days, written
notice to the Lessee (specifying the defaults giving rise to such notice) if the
Lessee shall fail or refuse to perform any of its covenants or agreements under
this Lease; provided, however, that this Lease shall not for such reason
terminate if, prior to the date of termination specified in the aforesaid
notice, the Lessee shall have cured all its defaults which are so specified.
(c) If the estate hereby created shall be taken in execution or by
other process of law, or if Lessee shall be adjudicated bankrupt, or if a
petition for reorganization not filed by Lessee shall be approved, or if Lessee
shall file any petition in bankruptcy court or elsewhere stating that it is
insolvent or unable to pay or meet its debts as they mature, or if Lessee shall
become insolvent, or if any receiver be appointed for the business or property
of Lessee, or if any assignment shall be made of Lessee's property for the
benefit of creditors, then and in such event this Lease may be cancelled
forthwith at the option of Lessor.
9
<PAGE>
17. Notice to Quit. In any instance where Lessor would be entitled to give
notice of termination, as aforesaid, Lessor shall be entitled in lieu thereof to
give a formal notice to quit. The giving of a formal notice to quit prior to
taking proceedings for repossession of the Premises shall not be deemed a
termination of this Lease but shall instead be deemed as a notice and demand for
possession, unless said notice expressly provides for forfeiture of this Lease.
18. Re-entry and Expenses, Etc. Upon termination of this Lease pursuant to
paragraphs 2, 6, 9, 16, 17 or 18 hereof or otherwise, or upon termination of
Lessee's right to possession of the Premises, or if the Premises shall be
deserted or vacated, Lessee shall yield up the Premises peacefully, and it shall
be lawful for Lessor, its agents, attorneys, successors and assigns to re-enter
and repossess the Premises and Lessee and each and every occupant thereof to
remove and put out. In the event that Lessor shall obtain possession of the
Premises by re-entry, summary proceedings or otherwise, Lessee shall be liable
to Lessor for all expenses of obtaining such possession, including bull not
limited to court costs and actual attorney fees, and also all expenses,
commissions and attorney fees which may be paid in connection with reletting
same or attempting so to do, together with all other damages resulting from
Lessee's default.
19. Holding Over. In the event of Lessee holding over after termination of
this Lease, a tenancy from month to month shall thereafter exist in the absence
of a written agreement to the contrary.
10
<PAGE>
20. Right to Show Premises. Lessee agrees that, during the three (3)
months next preceding the expiration of the Term of this Lease, it will at all
reasonable hours permit Lessor or its duly authorized agent to show the Premises
to any person who might desire to lease or purchase the same.
21. Survival of Obligations. Notwithstanding termination of this Lease,
the Lessee shall be required to carry out any provisions hereof which require
performance by it subsequent to termination; nor shall such termination affect
any liability or obligation which shall have accrued prior to such termination
(including, but not limited to, any accrued rental and any liability for loss or
damage on account of default).
22. Reimbursement. Lessee shall forthwith reimburse Lessor for any
damages, fines or penalties suffered by Lessor because of lessee's noncompliance
with this Lease. Furthermore, if Lessee shall default in the payment of any
amount due under this Lease, or the performance of any other obligation or
provision of or under this Lease, the Lessor may at its option make such payment
or perform such obligation or provision and shall thereupon have a right of
immediate reimbursement (with interest at seven (7%) percent per annum) and at
its option may treat the amount so owing (including interest) as equivalent to
rent, in which case if not paid in full on or before the next rental payment
date specified in paragraph 3, Lessor may treat it as rent in default.
23. Cumulative Remedies. All rights, remedies and benefits of Lessor under
this Lease shall be cumulative and shall not be exclusive of any other rights,
remedies and benefits conferred by law or by this Lease.
11
<PAGE>
24. Waiver. No waiver of any provision of this Lease, or of the breach
thereof, shall be construed as a continuing waiver or shall constitute a waiver
of any other provision or breach.
25. Modifications, Etc., to be in writing. No present or future
agreements, waivers, consents or approvals pertaining to the Premises or the
subject matter of this Lease shall be binding upon Lessor unless in writing and
signed by Lessor and any modification or amendment of this Lease must be in
writing and signed by both Lessor and Lessee. No party hereto has made any oral
or written representations, guarantees or warranties except as herein set forth;
nor are there any agreements collateral hereto, unless they are in writing and
expressly refer to this Lease.
26. Relationship of Parties. Nothing contained in this Lease shall be
deemed or construed by the parties hereto, nor by any third party, as creating
the relationship of principal and agent or of partnership or of joint venture
between the Lessor and any of the parties hereto, it being understood and agreed
that neither any provision contained in this Lease, nor any acts of the parties
hereto, shall be deemed to create any relationship between the Lessor and any of
the second parties hereto other than the relationship of Lessor and Lessee.
27. Interpretation. The paragraph headings herein are included solely for
convenience and shall in no event affect, or be used in connection with, the
interpretation of this Lease. Each separately numbered paragraph of this Lease
shall be treated as severable, to the end that, if any one or more paragraphs
shall be adjudged or declared illegal, invalid or unenforceable, this Lease
shall be interpreted, and shall remain in full force and effect, as though such
paragraph
12
<PAGE>
or paragraphs had never been contained in this Lease. Whenever reasonably
necessary in the interpretation of this Lease, pronouns of any gender shall be
deemed synonymous, as shall singular and plural pronouns.
28. Successors and Assigns. This Lease shall bind and inure to the benefit
of Lessor, its personal representatives, heirs, devisees, successors and
assigns, and as to Lessee it shall bind its personal representatives, heirs,
devisee, successors and assigns, but it shall inure to their benefit only as
Lessor acquiesces in their continued possession of said Premises.
29. Notices. Any notice, demand or other writing to be given pursuant to
this Lease shall be deemed to have been given and received, and to be effective
all purposes, when sent by registered mail, postage prepaid, and return receipt
requested, to the following addresses, respectively (or such other address as
the recipient shall have previously designated by written notice):
Lessor: Greenfield Land Company
7375 Woodward Avenue
Detroit, MI 48202
Attn: Managing Partner
Lessee: Allied Film Laboratory, Inc.
Eagle Bend Industrial Park
370 J. D. Yarnell Industrial Parkway
Clinton, Tennessee 37716
30. Interest. Any rental or other amount owing to Lessor pursuant to this
Lease shall bear interest at the rate of seven (7%) per cent per annum from the
due date to the date of payment.
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<PAGE>
31. Payments and Receipts. Rentals and other amounts owing by either party
pursuant to this Lease shall be paid in current Detroit funds at the same
address specified for notices, unless a different address has been designated in
writing. Each party shall be entitled to receive from the other party upon
request a written receipt for any rentals or other such amounts which may be
paid.
32. Option to Renew. Lessee shall have the option to renew this Lease, on
the same terms and conditions as herein contained, for a period of one
additional year. If Lessee so renews for one additional year, Lessee shall have
the further option to renew this Lease, on the same terms and conditions as
herein contained, for another one-year period. Such options must be exercised in
writing prior to ninety (90) days before the expiration of this Lease or of any
renewal period under this Lease, and notice must be sent to the Lessor pursuant
to paragraph 29 above.
IN WITNESS THEREOF, the parties hereto have caused this Lease to be
executed by their duly authorized officers on the day and year first above
written.
Signed, sealed and delivered Greenfield Land Company
in the presence of:
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ----------------------------- -----------------------------------
Managing Partner
Allied Film Laboratory, Inc.
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ----------------------------- -----------------------------------
Its President
By
- ----------------------------- -----------------------------------
14
<PAGE>
State of Michigan )
County of ) ss
On this 1st day of January, 1995 before me, a notary public in and for
said County, personally appeared William H. Smith to me personally known, who
being by me duly sworn did for himself say that he is the Managing Partner of
Greenfield Land a named in and which executed the foregoing Lease as Lessor, and
that said Lease was signed and sealed on behalf of said by authority of its
agreement and the said acknowledged said Lease to be the free act and deed of
said _____________________________________.
/s/ Catherine J. Warner
------------------------------------
CATHERINE J WARNER
Notary Public, Macomb County, MI
My Commission Expires May 2, 1998
Acting in Wayne County, MI
15
TABLE OF CONTENTS
FOR
SUPPLEMENTAL LEASE PROVISIONS
Description Page
- --------------------------------------------------------------------------------
Article 1 Term and Possession ............................................ 1
Article 2 Rent ........................................................... 2
Article 3 Security Deposit ............................................... 3
Article 4 Occupancy and Use .............................................. 4
Article 5 Utilities and Services ......................................... 5
Article 6 Maintenance, Repairs, Alterations and improvements ............. 6
Article 7 Insurance, Fire and Casualty ................................... 7
Article 8 Condemnation ................................................... 9
Article 9 Liens .......................................................... 10
Article 10 Taxes on Tenant's Property ..................................... 10
Article 11 Subletting and Assigning ....................................... 10
Article 12 Transfers by Landlord, Subordination and
Tenant's Estoppel Certificate .................................. 11
Article 13 Default ........................................................ 11
Article 14 Notices ........................................................ 15
Article 15 Miscellaneous Provisions ....................................... 15
LIST OF EXHIBITS AND RIDERS
TO SUPPLEMENTAL LEASE PROVISIONS
Exhibit A Floor Plan
Exhibit B Land Legal Description
Exhibit C Work Letter
Exhibit D Acceptance of Premises Memorandum
Addendum X Check, if applicable
--
Rider 1 Water Expenses
Rider 2 Renewal Option
Rider 3 ---------------
Rider 4 ---------------
Rider 5 ---------------
Rider H-1 Hazardous Materials
Rider H-2 X Check, if attached
--
or
__ Check, if not attached and
Tenant has waived hazardous materials
inspection right.
i
<PAGE>
MULTI-TENANT INDUSTRIAL
LEASE AGREEMENT WITH EXPENSE STOPS
This Lease Agreement (hereinafter called "this Lease") is made this 29 day
November, 1994 between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation (hereinafter called "Landlord"), and Video Services, Inc. a
___________ (hereinafter called "Tenant"). This Lease consists of this
paragraph, The Basic Lease Provisions, Supplemental Lease Provisions and each
exhibit, rider, schedule and addendum attached to the Basic Lease Provisions and
Supplemental Lease Provisions.
BASIC LEASE PROVISIONS
1. Building:
a. Name: Clover Park.
b. Address: 2000 Governors Circle, 3915-3925 Dacoma, & 4120-4141
Directors Row, Houston, Texas 77092.
c. Property Number: GA00998.
d. Agreed Rentable Area: 132,929 square feet.
2. Premises:
a. Suite#: B at 4140 Directors Row, Houston, Texas 77092.
b. Agreed Rentable Area: 3600 square feet.
3. Basic Rent (see Article 2, Supplemental Lease Provisions):
Basic Basic
Rental Annual Monthly
Period Rent Rent
------ ---- ----
Months 1 - 12 $ 21,060 $1,755.00
Months 13 - 24 $ 22,140 $1,845.00
$ 0.0 $ 0.0
$ 0.0 $ 0.0
$ 0.0 $ 0.0
4. Expense Stops and Pro Rata Share Percentage:
a. Operating Expense Stop: .74 per square foot annually.
b. Real Estate Taxes Expense Stop: $0.57.
c. Tenant's Pro Rata Share Percentage: 2.71% (the Agreed Rentable
Area of the Premises divided by the Agreed Rentable Area of the
Building, expressed in a percentage).
5. Term: Two (2) years and zero (0) months (see Article 1, Supplemental Lease
Provisions).
6. Commencement Date: January 1, 1995 (see Article 1, Supplemental Lease
Provisions).
7. Expiration Date: December 31, 1996 (see Article 1, Supplemental Lease
Provisions).
8. Security Deposit: $ None (see Article 3, Supplemental Lease Provisions).
9. Tenant's Broker: Tenant's Broker is represented by ____________
10. Permitted Use: General office a distribution, provided Tenant complies
with all applicable zoning laws, rules and regulations (see Article 4,
Supplemental Lease Provisions).
11. All payments shall be sent to Landlord in care of Premisys Real Estate
Services ("Property Manager") at 2900 North Loop West, Suite 110, Houston,
Texas 77092 or such other place as Landlord may designate from time to
time. All payments shall be in the form of check until otherwise
designated by Landlord.
12. Addresses for notices due under this Lease (see Article 14, Supplemental
Lease Provisions):
Landlord: Tenant:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
PRIOR TO COMMENCEMENT DATE:
c/o Premisys Real Estate Services, Inc Allied Film & Video services Inc
2900 North Loop West, Suite 110 6305 N. O'Conner Rd. Suite 111
Houston, Texas 77092 Irving Texas 75039-3510
Attn: Steve Carter Attn:
Fax:713-683-0324 Fax: (214) 869-2117
With a copy to: ON AND AFTER COMMENCEMENT DATE:
THE Prudential Insurance Company of America The Premises.
1100 Milam, Suite 3900 Fax:
Houston, Texas 77002-5407
Attn.: Vice President, Prudential Realty Croup
AND IF NOTICE OF DEFAULT, COPY TO
Law Department, Prudential Realty Group
1201 Elm Street, Suite 4900
Dallas, Texas 75270
Fax:(214) 745-1958
Landlord and Tenant are initialing these Basic Lease Provisions in the
appropriate space provided below as an acknowledgment that they are a part of
this Lease.
<PAGE>
SUPPLEMENTAL LEASE PROVISIONS
ARTICLE 1
TERM AND POSSESSION
SECTION 1.1 LEASE OF PREMISES, COMMENCEMENT AND EXPIRATION.
1.101 Lease of Premises. In consideration of the mutual covenants herein,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord,
subject to all the terms and conditions of this Lease, the portion of the
Building (as described in Item I of the Basic Lease Provisions) described
as the Premises in Item 2 of the Basic Lease Provisions and that is more
particularly described by the crosshatched area on Exhibit A attached
hereto (hereinafter called the "Premises"). The Building, the land (the
"Land") on which the Building is situated (which Land is more particularly
described on Exhibit B attached hereto), the parking garage, if any,
located on the Land and serving the Building (the "Garage") and all other
improvements located on and appurtenances to the Building, the Garage and
the Land are referred to collectively herein as the "Property".
1.102 The agreed rentable area of the Premises is hereby stipulated to be the
"Agreed Rentable Area" of the Premises set forth in Item 2b of the Basic
Lease Provisions, irrespective of whether the same should be more or less
as a result of minor variations resulting from construction of Tenant's
Improvements (as defined in the Work Letter (herein so called) attached
hereto as Exhibit C). The agreed rentable area of the Building is hereby
stipulated to be the "Agreed Rentable Area" of the Building set forth in
Item 1c of the Basic Lease Provisions, irrespective of whether the same
should be more or less as a result of minor variations resulting from
actual construction or repair of the Building.
1.103 Initial Term and Commencement. The initial term of this Lease shall be the
period of time specified in Item 5 of the Basic Lease Provisions. The
initial term shall commence on the Commencement Date (herein so called)
set forth in Item 6 of the Basic Lease Provisions (as Date may be adjusted
pursuant to Section 3 of the Work Letter) and, unless sooner terminated
pursuant to the terms of this Lease, the initial term of this Lease shall
expire, without notice to Tenant, on the Expiration Date (herein so
called) set forth in Item 7 of the Basic Lease Provisions (as such
Expiration Date may be adjusted pursuant to Section 3 of the Work Letter).
SECTION 1.2 INSPECTION AND DELIVERY OF PREMISES, CONSTRUCTION OF LEASE SPACE
IMPROVEMENTS AND POSSESSION
1.201 tenant hereby accepts delivery of the Premises. Tenant acknowledges that
Tenant has inspected the Premises and the Common Areas (as hereinafter
defined) and, except for latent defects discovered and reported to
Landlord by Tenant within 180 days from the Commencement Date, hereby (i)
accepts the Common Areas in "as is" condition for all purposes and (ii)
subject to Landlord's completion of its obligations under the Work Letter,
Tenant hereby accepts the Premises (including the suitability of the
Premises for the Permitted Use) for all purposes.
1.202 Completion. Landlord will perform or cause to be performed the work and/or
construction of Tenant's Improvements (as defined in the Work Letter) in
accordance with the terms of the Work Letter and will use reasonable
efforts to Substantially Complete (as defined in the Work Letter) Tenant's
Improvements by the Commencement Date. If Tenant's Improvements are not
Substantially Complete by the Commencement Date set forth in Item 6 of the
Basic Lease Provisions for any reason whatsoever, Tenant's sole remedy
shall be an adjustment of the Commencement Date and the Expiration Date to
the extent permitted under Section 3 of the Work Letter.
1.203 Acceptance of Premises Memorandum. Upon Substantial Completion (as defined
in the Work Letter) of Tenant's improvements, Landlord and Tenant shall
execute the Acceptance of Premises Memorandum, (herein so called) attached
hereto as Exhibit D. If Tenant occupies the Premises without executing an
Acceptance of Premises Memorandum, Tenant shall be deemed to have accepted
the Premises for all purposes and Substantial Completion shall be deemed
to have occurred on the earlier to occur of (i) actual occupancy or (ii)
the Commencement Date set forth in item 6 of the Basic Lease Improvement.
SECTION 1.3 REDELIVERY OF THE PREMISES. Upon the expiration or earlier
termination of this Lease or upon the exercise by Landlord of its right to
re-enter the Premises without terminating this Lease, Tenant shall immediately
deliver to Landlord the Premises free of offensive odors and in a safe, clean,
neat, sanitary and operational condition, together with all keys and parking and
access cards. Tenant shall, by the Expiration Date or, if this Lease is earlier
terminated, within seven (7) days after the termination, at the sole expense of
Tenant: (i) remove from the Premises (unless Landlord is asserting its lien
rights therein), any equipment, machinery, trade fixtures and personally
installed or placed in the Premises by or on behalf of Tenant and (ii) if
requested by Landlord, (a) remove from the Premises all or any part of the
improvements made to the Premises by or on behalf of Tenant and (b) restore the
Premises to the condition existing prior to the installation of such
improvements. All removals and work described shall be accomplished in a good
and workmanlike manner and shall be conducted in a fashion so as not to damage
the Premises or the Building or the plumbing, electrical lines or other
utilities serving the Building. Tenant shall, at its expense, promptly repair
any damage caused by any such removal or work. If Tenant fails to deliver the
Premises in the condition aforesaid, then Landlord may restore the Premises to
such a condition at Tenant's expense. All property required to be removed
pursuant to this Section not removed within the time period required hereunder
shall thereupon be conclusively presumed to have been abandoned by Tenant, and
Landlord may, at its option, take over possession of such property and either
(a) declare the same to be the property of Landlord by written notice to Tenant
at the address provided herein or (b) at the sole cost and expense of Tenant,
remove and store and/or dispose of the same or any part thereof in any manner
that Landlord shall choose without incurring liability to Tenant or any other
person.
1
<PAGE>
SECTION 1.4 HOLDING OVER. in the event Tenant, or any party under Tenant
claiming rights to this Lease, retains possession of the Premises after the
expiration or earlier termination of this Lease, such possession shall
constitute and be construed as a tenancy at will only, subject, however, to all
of the terms, provisions, covenants and agreements on the part of Tenant
hereunder; such parties shall be subject to immediate eviction and removal, and
Tenant or any such party shall pay Landlord as rent for the period of such
holdover an amount equal to one and one-half (1-1/2) times the Basic Annual Rent
and Additional Rent (as hereinafter defined) in effect immediately preceding
expiration or termination, as applicable, prorated on a daily basis. Tenant
shall also pay any and all damages sustained by Landlord as a result of such
holdover. The rent during such holdover period shall be payable to Landlord from
time to time on demand; provided, however, if no demand is made during a
particular month, holdover rent accruing during such month shall be paid in
accordance with the provisions of Article 2. Tenant will vacate the Premises and
deliver same to Landlord immediately upon Tenant's receipt of notice from
Landlord to so vacate. No holding over by Tenant, whether with or without
consent of Landlord, shall operate to extend the term of this Lease; no
payments of money by Tenant to Landlord after the expiration or earlier
termination of this Lease shall reinstate, continue or extend the term of this
Lease; and no extension of this Lease after the expiration or earlier
termination thereof shall be valid unless and until the same shall be reduced to
writing and signed by both Landlord and Tenant.
ARTICLE 2
RENT
SECTION 2.1 BASIC RENT. Tenant shall pay as annual rent for the Premises the
applicable Basic Annual Rent shown in Item 3 of the Basic Lease Provisions. The
Basic Annual Rent shall be payable in monthly installments equal to the
applicable Basic Monthly Rent shown in Item 3 of the Basic Lease Provisions in
advance, without demand, offset or deduction, which monthly installments shall
commence on the Commencement Date and shall continue on the first (1st) day of
each calendar month thereafter. If the Commencement Date occurs on a day other
than the first day of a calendar month or the Expiration Date occurs on a day
other than the last day of a calendar month, the Basic Monthly Rent for such
partial month shall be prorated.
SECTION 2.2 ADDITIONAL RENT.
2.201 Definitions. For purposes of this Lease, the following definitions shall
apply:
(a) "Additional Rent", for a particular calendar year, shall equal the
product of Tenant's Pro Rata Share Percentage (as set forth in Item 4c of
the Basic Lease Provisions), multiplied by the sum of (i) the amount by
which all Operating Expenses (as hereinafter defined) for the applicable
calendar year exceed Tenant's Operating Expense Stop (as set forth in Item
4a of the Basic Lease Provisions) plus (ii) the amount by which the Real
Estate Taxes (as hereinafter defined) for the applicable calendar year
exceed Tenant's Real Estate Taxes Expense Stop (as set forth in Item 4b of
the Basic Lease Provisions) plus (iii) Additional Pass Through Costs (as
hereinafter defined) for the applicable calendar year.
(b) "Operating Expenses" shall mean (without duplication of any costs and
expenses for which Tenant is responsible under Section 5.1 or 5.2 or
subsection 6.201 below) (i) all of the costs and expenses Landlord incurs,
pays or becomes obligated to pay in connection with operating, managing,
maintaining, repairing and insuring the Property (including, without
limitation, the Common Areas) for a particular calendar year or portion
thereof as determined by Landlord in accordance with generally accepted
accounting practices, (ii) costs of maintenance, repair and care of rail
spur areas, if any, shared with other tenants of the Building and (iii)
the charges assessed against the Property pursuant to any contractual
covenants or recorded declaration of covenants or the covenants,
conditions and restrictions of any other similar instrument affecting the
Property. Operating Expenses shall not include Real Estate Taxes or
Additional Pass Through Costs.
(c) "Real Estate Taxes" shall mean (i) all real estate taxes and other
taxes or assessments which are levied with respect to the Property or any
portion thereof for each calendar year, (ii) any tax, surcharge or
assessment which shall be levied as a supplement to or in lieu of real
estate taxes, (iii) the costs and expenses of a consultant, if any, or of
contesting the validity or amount of such real estate or other taxes and
(iv) any rental, excise, sales, transaction, privilege or other tax or
levy, however denominated, imposed upon or measured by the rental reserved
hereunder or on Landlord's business of leasing the Premises, excepting
only Landlord's net income taxes (collectively, "Real Estate Taxes").
(d) "Additional Pass Through Costs" shall mean the following costs and
expenses incurred by Landlord from and after January 1 of the calendar
year in which this Lease is executed: (i) subject to the limitations of
clause (ii) following, the cost of any improvement made to the Property by
Landlord that is required under any governmental law or regulation which
was not promulgated, or which was promulgated but was not applicable to
the Building, at the time the Building was constructed, amortized over
such period as Landlord shall reasonably determine, together with an
amount equal to interest at the rate of twelve percent (12%) per annum
(the "Amortization Rate") on the unamortized balance thereof-, (ii) the
cost of any improvement made to the Common Areas of the Property that is
required under interpretations or regulations issued after the
Commencement Date under, or amendments made after the Commencement Date
to, the provisions of Tax. Rev. Civ. Stat. Ann. art. 9102 and the
provisions of the Americans With Disabilities Act of 1990, 42 U.S.C.
ss.ss.12101-12213 (collectively, the "Disability Acts"), amortized over
such period as Landlord shall reasonably determine, together with an
amount equal to interest at the Amortization Rate on the unamortized
balance thereof, (iii) the cost of any labor-saving or energy-saving
device or other equipment installed in the Building (provided Landlord
reasonably anticipates that the installation thereof will reduce Operating
Expenses), amortized over such period as is
2
<PAGE>
reasonably determined by Landlord together with an amount equal to
interest at the Amortization Rate on the unamortized balance thereof, and
(iv) all other capital costs and expenses which would generally be
regarded as ownership, operating, maintenance and management costs and
expenses which would normally be amortized over a period not to exceed
five (5) years.
(e) "Tenant's Operating Expense Stop" shall be the total Operating
Expenses for the applicable calendar year set forth in Item 4a of the
Basic Lease Provisions or if no year is so stated, the total dollar amount
stated in Item 4a of the Basic Lease Provisions.
(f) "Tenant's Real Estate Taxes Expense Stop" shall be the total of all
Real Estate Taxes for the applicable calendar year set forth in Item 4b of
the Basic Lease Provisions or if no year is so stated, the total dollar
amount stated in Item 4b of the Basic Lease Provisions.
2.202 Payment Obligation. In addition to the Basic Rent specified in this Lease,
Tenant shall pay to Landlord the Additional Rent, in each calendar year or
partial calendar year during the term of this Lease, payable in monthly
installments as hereinafter provided. On or prior to the Commencement Date
and at least thirty (30) days prior to each calendar year thereafter (or
as soon thereafter as is reasonably possible), Landlord shall give Tenant
written notice of Tenant's estimated Additional Rent for the applicable
calendar year and the amount of the monthly installment due for each month
during such year. Tenant shall pay to Landlord on the Commencement Date
and on the first day of each month thereafter the amount of the applicable
monthly installment, without demand, offset or deduction, provided,
however, if the applicable installment covers a partial month, then such
installment shall be prorated on a daily basis. Within ninety (90) days
after the end of (i) each calendar year and (ii) the Expiration Date or as
soon thereafter as is reasonably possible, Landlord shall prepare and
deliver to Tenant a statement showing Tenant's actual Additional Rent for
the applicable calendar year, provided that with respect to the calendar
year in which the Expiration Date occurs, (x) that calendar year shall be
deemed to have commenced on January 1 of that year and ended on the
Expiration Date (the "Final Calendar Year") and (y) Landlord shall have
the right to estimate the actual Operating Expenses allocable to the Final
Calendar Year but which are not determinable within such ninety day
period. If Tenant's total monthly payments of Additional Rent for the
applicable year are less than Tenant's actual Additional Rent, then Tenant
shall pay to Landlord the amount of such underpayment. If Tenant's total
monthly payments of Additional Rent for the applicable year are more than
Tenant's actual Additional Rent, then Landlord shall credit against the
next Additional Rent payment or payments due from Tenant the amount of
such overpayment, provided, however, with respect to the Final Calendar
Year, Landlord shall pay to Tenant the amount of such excess payments,
less any amounts then owed to Landlord. Unless Tenant takes written
exception to any item within thirty (30) days after the furnishing of an
annual statement, such statement shall be considered as final and accepted
by Tenant. Any amount due Landlord as shown on any such statement shall be
paid by Tenant within thirty (30) days after it is furnished to Tenant.
2.203 Billing Disputes. If there exists any dispute as to (i) the amount of
Additional Rent, (ii) whether a particular expense is properly included in
Additional Rent or (iii) Landlord's calculation of Additional Rent (each
an "Additional Rent Dispute"), the events, errors, acts or omissions
giving rise to such Additional Rent Dispute shall not constitute a breach
or default by Landlord under this Lease and even if a judgment resolving
the Additional Rent Dispute is entered against Landlord, this Lease shall
remain in full force and effect and Landlord shall not be liable for any
consequential damages resulting from the event, error, act or omission
giving rise to such Additional Rent Dispute. Notwithstanding the existence
of an Additional Rent Dispute, Tenant shall pay timely the amount of
Additional Rent which is in dispute and will continue to make all
subsequent payments of Additional Rent as and when required under this
Lease, provided that the payment of such disputed amount and other amounts
shall be without prejudice to Tenant's position. If an Additional Rent is
resolved in favor of Tenant, Landlord shall forthwith pay to Tenant the
amount of Tenant's overpayment of Additional Rent, together with interest
from the time of such overpayment at the annual rate of ten percent (10%).
SECTION 2.3 RENT DEFINED AND NO OFFSETS. Basic Annual Rent, Additional Rent and
all other sums (whether or not expressly designated as rent) required to be paid
to Landlord by Tenant under this Lease (including, without limitation, any sums
payable to Landlord under any addendum, exhibit, rider or schedule attached
hereto) shall constitute rent and are sometimes collectively referred to as
"Rent". Each payment of Rent shall be paid by Tenant when due, without prior
demand therefor and without deduction or setoff.
SECTION 2.4 LATE CHARGES. If any installment of Basic Annual Rent or Additional
Rent or any other payment of Rent under this Lease shall not be paid when due, a
"Late Charge" of ten cents ($.10) per dollar so overdue may be charged by
Landlord to defray Landlord's administrative expense incident to the handling of
such overdue payments. Each Late Charge shall be payable on demand.
ARTICLE 3
SECURITY DEPOSIT
Tenant will pay Landlord on the date this Lease is executed by Tenant the
Security Deposit set forth in Item 8 of the Basic Lease Provisions as security
for the performance of the terms hereof by Tenant. Tenant shall not be entitled
to interest thereon and Landlord may commingle such Security Deposit with any
other funds of Landlord. The Security Deposit shall not be considered an advance
payment of rental or a measure of Landlord's damages in case of default by
Tenant. If Tenant defaults with respect to any provision of this Lease, Landlord
may, but shall not be required to, from time to time, without prejudice to any
other remedy, use, apply or retain all or any part of this Security Deposit for
the payment of any Rent or any other sum in default or for the payment of any
other amount which Landlord may spend or become obligated to spend by reason of
Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default, including, without
limitation, costs and attorneys' fees incurred by Landlord to recover possession
of the Premises. If Tenant shall fully and faithfully perform every provision of
this Lease to be performed by it, the Security Deposit shall be returned to
Tenant within sixty (60) days after the
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Expiration Date. Tenant agrees that it will not assign or encumber or attempt to
assign or encumber the monies deposited herein as the Security Deposit and that
Landlord and its Successors and assigns shall not be bound by any such actual or
attempted assignmenT or encumbrance. Regardless of any assignment of this Lease
by Tenant; Landlord may return the Security Deposit to the original Tenant, in
the absence of evidence satisfactory to Landlord of an assignment of the right
to receive the Security Deposit or any part of the balance thereof
ARTICLE 4
OCCUPANCY AND USE
SECTION 4.1 USE OF PREMISES.
4.101 General. The Premises shall, subject to (lie remaining provisions of this
Section, be used solely for the Permitted Use (herein so called) specified
in Item 10 of the Basic Lease Provisions. Prior to commencement of any
work pursuant to the Work Letter (or if no work is to be performed
pursuant to a Work Letter, then prior to Tenant's occupancy of the
Premises), Tenant shall satisfy itself and Landlord that the Permitted Use
will comply with all applicable zoning ordinances, rules and regulations.
Without in any way limiting the foregoing, Tenant shall not use any pan of
the Premises for sleeping quarters, or for the manufacture of hazardous or
toxic chemical or materials, and will not use, occupy or permit the use or
occupancy of the Premises for any purpose (and the Permitted Use shall not
include any use) which is forbidden by or in violation of any zoning
ordinance, jaw, rule or regulation or any other law, ordinance or
governmental or municipal regulation, order, or certificate of occupancy,
or which may be dangerous to life, limb or property; or permit the
maintenance of any public or private nuisance; or do or permit any other
thing which may disturb die quiet enjoyment of any other tenant of the
Property; or keep any substance or carry on or permit any operation which
might emit offensive odors or conditions from the Premises; or commit or
suffer or permit any waste in or upon the Premises; or sell, purchase, or
give away, or permit the sale, purchase or gift of food in any form by or
to any of Tenant's agents or employees or other parties in the Premises
except through vending machines in employee lunch or rest areas within the
Premises for use by Tenant's employees only; or use any apparatus which
might make undue noise or set up vibrations in the Building; or permit
anything to be done which would increase the fire and extended coverage
insurance rate on the Building or contents, and if there is any increase
in such rate by reason of acts of Tenant, then Tenant agrees to pay such
increase upon demand therefor by Landlord. Payment by Tenant of any such
rate increase shall not be a waiver of Tenant's duty to comply herewith.
Outside storage, including without limitation, storage in non-operative or
stationary trucks, trailers and other vehicles, and all vehicle
maintenance or repair upon or adjacent to the Premises is prohibited
without Landlord's prior written consent. Tenant shall keep the Premises
neat and clean at all times. Tenant shall comply with, and promptly
correct any violation of; a governmental law, rule or regulation relating
to the Premises. Tenant shall comply with any direction of any
governmental authority having jurisdiction which imposes any duty upon
Tenant or Landlord with respect to the Premises, or with respect to the
occupancy or use thereof
4.102 Hazardous and Toxic Materials.
(a) For purposes of this Lease, hazardous or toxic materials shall mean
asbestos containing materials "ACM") and all other materials, substances,
wastes and chemicals classified as hazardous or toxic substances,
materials, wastes or chemicals under then-current applicable governmental
Jaws, rules or regulations or that are subject to any right-to-know laws
or requirements.
(b) Tenant shall not knowingly incorporate into, or use or otherwise place
or dispose of any hazardous or toxic materials, at or on the Premises or
the Property except for use and storage of cleaning and office supplies
used in the ordinary course of Tenants business and then only if (i) such
materials are in small quantities, properly labeled and contained, (ii)
such materials are handled and disposed of in accordance with the highest
accepted industry standards for safety, storage, use and disposal, (iii)
notice of and a copy of the current material safety data sheet is provided
to Landlord for each such hazardous or toxic material and (iv) such
materials are used, transported, stored, handled and disposed of in
accordance with all applicable governmental laws, rules and regulation;.
Landlord shall have the right to periodically inspect, take samples for
testing and otherwise investigate the Premises for the presence of
hazardous or toxic materials. Landlord shall not knowingly dispose of any
hazardous or toxic materials on the Property and shall otherwise deal with
all hazardous or toxic materials at the Premises, Building or Land in a
manner that will not materially and adversely affect Tenant's access, use
or occupancy of the Premises. if Landlord or Tenant ever has knowledge of
the presence of hazardous or toxic materials on the Property that affect
the Premises, the party having knowledge shall no~ the other party thereof
in writing promptly after obtaining such knowledge.
(c) Prior to commencement of any tenant finish work to be performed by
Landlord, Tenant shall have the right to make such studies and
investigations and conduct such tests and surveys of the Premises from an
environmental standpoint as permitted under Rider H-2 attached hereto. if
Tenant requests that Landlord commence construction of Tenant's
Improvements prior to exercising such fight, Tenant shall be deemed to
have waived the termination right set forth in Rider H-2.
(d) if Tenant or its employees, agents or contractors shall ever violate
the provisions of paragraph 01) of this subsection 4.102 or otherwise
contaminate the Premises or the Property, with hazardous or toxic
materials, then Tenant shall clean-up, remove and dispose of the material
causing the violation, in compliance with all applicable governmental
standards, laws, rules and regulations and then prevalent Industry
practice and standards and shall repair any damage to the Premises or
Building within such period of time as may be reasonable under (lie
circumstances after written notice by Landlord. Tenant shall notify
Landlord of its method, time and procedure for any clean-up or removal and
Landlord shall have the right to require reasonable changes in such
method, time or procedure or to require the same to be done after normal
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business hours. Tenant's obligations under this subsection 4.102(d) shall
survive the termination of this Lease. Tenant represents to Landlord that,
except as has been disclosed to Landlord, Tenant has never been cited for or
convicted of any hazardous or toxic materials violations under applicable laws,
rules or regulations.
4.103 Disability Acts. Landlord, at Landlord's expense, shall be obligated to
see that all Common Areas comply %with tile Disability Act requirements that are
in effect on the Commencement Date. From and after the Commencement Date, Tenant
shall be obligated to see that the Premises comply with all existing
requirements of and regulations issued under the Disability Acts for each of the
following: (i) alterations or improvements to any portion of the Premises
performed after the Commencement Date; (ii) obligations or complaints arising
under or out of Title I of the Americans With Disabilities Act or Tenant's
employer-employee obligations; (iii) obligations or complaints arising under or
out of the conduct or operations of Tenant's business, including any obligations
or requirements for barrier removal to customers or invitees as a commercial
facility or as a public accommodation (as defined in the Disability Acts); and
(iv) any change in the nature of Tenant's business, or its employees, or
financial net worth, or Tenant's business operations that triggers an obligation
under the Disability Acts.
SECTION 4.2 RULES AND REGULATIONS. Tenant will comply with such rules and
regulations (the "Rules and Regulations") generally applying to tenants in the
Building as may be adopted from time to time by Landlord for the management,
safety, care and cleanliness of, and the preservation of good order and
protection of property in, the Premises and the Building and at the Property.
All such Rules and Regulations are hereby made a part hereof. The Rules and
Regulations in effect on the date hereof are on file with the Property Manager.
All changes and amendments to the Rules and Regulations sent by Landlord to
Tenant in writing and conforming to the foregoing standards shall be carried out
and observed by Tenant. Landlord hereby reserves all rights necessary to
implement and enforce the Rules and Regulations and each and every provision of
this Lease.
SECTION 4.3 ACCESS. Without being deemed guilty of an eviction of Tenant and
without abatement of Rent, Landlord and its authorized agents shall have the
right to enter the Premises, upon reasonable notice, to inspect the Premises, to
show the Premises to prospective lenders, purchasers or tenants and to fulfill
Landlord's obligations or exercise its rights (including without limitation
Landlord's Reserved Right [as hereinafter defined]) under this Lease. Tenant
hereby waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises and any other loss occasioned thereby. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key with which to unlock
the doors to and within the Premises, excluding Tenant's vaults and safes.
Landlord shall have the right to use any and all means which Landlord may deem
proper to enter the Premises in an emergency without liability therefor.
SECTION 4.4 QUIET POSSESSION. Provided Tenant timely pays Rent and observes and
performs all of the covenants, conditions and provisions on Tenant's part to be
observed and performed hereunder, Tenant shall have the quiet possession of the
Premises for the entire term hereof, subject to all of the provisions of this
Lease and all laws and restrictive covenants to which the Property is subject.
ARTICLE 5
UTILITIES AND SERVICES
SECTION 5.1 UTILITIES. Except for Landlord's obligation under the last two
sentences of this Section 5. 1, Tenant shall be responsible for providing all
utilities to the Premises. Without limiting the foregoing, Tenant shall heat
the Premises as necessary to prevent any freeze damage to the Premises or any
portion thereof. Tenant shall directly pay, under separate meters (installed,
maintained and read, at Tenant's sole cost and expense), for all water, gas,
light, power, telephone, sewer, sprinkler charges and other utilities and other
services used on or from the Premises, together with any maintenance charges for
utilities. Tenant's use of electric current shall at no time exceed the capacity
of the feeders or lines to the Building or the risers or varying installation of
the Building or the Premises. IN NO EVENT SHALL LANDLORD BE LIABLE FOR ANY
INTERRUPTION OR FAILURE OF, AND TENANT SHALL NOT BE ENTITLED TO ANY ABATEMENT OR
REDUCTION OF RENT BY REASON OF, ANY INTERRUPTION OR FAILURE OF UTILITIES OR
SERVICES TO THE PREMISES, NOR SHALL ANY SUCH INTERRUPTION OR FAILURE IN ANY SUCH
UTILITY OR SERVICE BE CONSTRUED AS AN EVICTION (CONSTRUCTIVE OR ACTUAL) OF
TENANT OR AS A BREACH OF THE IMPLIED WARRANTY OF SUITABILITY, OR RELIEVE TENANT
FROM THE OBLIGATION TO PERFORM ANY COVENANT OR AGREEMENT HEREIN CONTAINED, AND
IN NO EVENT SHALL LANDLORD BE LIABLE FOR DAMAGE TO PERSONS OR PROPERTY
(INCLUDING, WITHOUT LIMITATION, BUSINESS INTERRUPTION) OR BE IN DEFAULT
HEREUNDER, AS A RESULT OF ANY SUCH INTERRUPTION OR FAILURE. However, if any such
interruption is caused by a break or other damage to any of utility lines
located on the Property and outside of the Building that are under the control
of Landlord, Landlord will perform or cause to be performed the necessary
repairs promptly in order to restore the affected service to the Premises. In
addition, if any such interruption is caused by a break or other damage to any
utility line located on the Property and controlled by a governmental, private
or public utility, Landlord will cooperate with such utility so that the
interrupted service is restored to the Premises as soon as is reasonably
possible.
SECTION 5.2 SERVICES. Landlord shall be under no obligation to provide any
services to the Building or Premises, except that Landlord shall provide routine
maintenance and cleaning in the Common Areas and utility service lines and
hook-ups to the Building. Tenant shall provide all necessary services to the
Premises, which shall include, but not be limited to, janitorial and trash
removal.
SECTION 5.3 LANDLORD'S RIGHT TO PROVIDE UTILITIES AND SERVICES. Any utility or
service which Tenant is required to perform or provide under Section 5.1 or 5.2
above may, upon written notice from Landlord to Tenant, be provided or performed
by Landlord for Tenant's benefit, in which event Tenant shall reimburse Landlord
for all expenses and costs incurred by Landlord in providing and/or performing
same. In the event Tenant fails, in the reasonable judgment of Landlord, to
provide and perform the utilities and services required under Sections 5.1 and
5.2 above, Landlord shall have the right to provide
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and/or perform same, at Tenant's sole cost and expense. Tenant shall pay to
Landlord on demand any such cost or expense incurred by Landlord, together with
interest thereon at the rate specified in Section 15. 10 below from the date of
demand until paid.
ARTICLE 6
MAINTENANCE, REPAIRS, ALTERATIONS AND IMPROVEMENTS
SECTION 6.1 LANDLORD'S OBLIGATION TO MAINTAIN AND REPAIR. Landlord shall
(subject to Section 7.1, Section 7.4 and Article 8 below and Landlord's rights
under Section 2.2 above, and except for ordinary wear and tear) maintain load
bearing walls, structural components and the roof of the Building. Except for
load bearing walls of the Building located within the Premises, Landlord shall
not be required to maintain or repair any portion of the Premises.
SECTION 6.2 TENANT'S OBLIGATION TO MAINTAIN AND REPAIR.
6.201 Tenant's obligation. Subject to Sections 6.1. 7.1 and 7.4 and Article 8 of
this Lease, Tenant shall, at Tenant's sole cost and expense, repair and,
as appropriate, replace any damage or injury done to the Property caused
by Tenant, Tenant's agents, employees, licensees, invitees or visitors and
shall otherwise keep and maintain in good condition, appearance and repair
(including replacements), the Premises, which obligation shall include,
but not be limited to, the maintenance, repair and, as appropriate,
replacement of (a) all security, fire (including firesprinkler), heating
and air conditioning systems and fixtures within the Premises, (b) all
plumbing, sewage, mechanical and electrical systems and fixtures within
the Premises, (c) all fixtures, walls, ceilings, floors, doors, overhead
and dock loading doors, windows, plate glass, skylights, lamps, fans and
all other appliances and equipment of every kind and nature located in,
upon or about the Premises and (d) the rail spur(s), if any, exclusively
serving the Premises. TENANT SHALL INDEMNIFY AND HOLD LANDLORD HARMLESS
FROM, AND REIMBURSE LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL COSTS,
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES), CLAIMS AND CAUSES OF
ACTION ARISING FROM OR INCURRED BY AND/OR ASSERTED IN CONNECTION WITH ANY
SUCH MAINTENANCE, REPAIRS, REPLACEMENTS, DAMAGE OR INJURY. All repairs and
replacements performed by or on behalf of Tenant shall be performed in a
good and workmanlike manner and in accordance with the standards
applicable to alterations or improvements performed by Tenant. Tenant
shall continue to pay Rent, without abatement, during any period that
repairs or replacements are performed or required to be performed by
Tenant under this Section 6.2.
6.202 Rights of Landlord. Landlord shall have the same rights with respect to
repairs performed by Tenant as Landlord has with respect to improvements
and alterations performed by Tenant under subsection 6.303 below. In the
event Tenant fails, in the reasonable judgment of Landlord, to maintain
the Premises in good order, condition and repair, or otherwise satisfy its
repair and replacement obligations under subsection 6.201 above, Landlord
shall have the right to perform such maintenance, repairs and replacements
at Tenant's expense. Tenant shall pay to Landlord on demand any such cost
or expense incurred by Landlord, together with interest thereon at the
rate specified in Section 15.10 below from the date of demand until paid.
SECTION 6.3 IMPROVEMENTS AND ALTERATIONS.
6.301 Landlord's Construction Obligation. Landlord's sole construction
obligation under this Lease is as set forth in the Work Letter.
6.302 Alteration of Building. LANDLORD HEREBY RESERVES THE RIGHT AND AT ALL
TIMES SHALL HAVE THE RIGHT TO REPAIR, CHANGE, REDECORATE, ALTER, IMPROVE,
MODIFY, RENOVATE, ENCLOSE OR MAKE ADDITIONS TO ANY PART OF THE PROPERTY
(INCLUDING, WITHOUT LIMITATION, STRUCTURAL, ELEMENTS AND LOAD BEARING
ELEMENTS WITHIN THE PREMISES) AND TO ENCLOSE AND/OR CHANGE THE ARRANGEMENT
AND/OR LOCATION OF DRIVEWAYS OR PARKING AREAS OR LANDSCAPING OR OTHER
COMMON AREAS OF THE PROPERTY, ALL WITHOUT BEING HELD GUILTY OF AN ACTUAL
OR CONSTRUCTIVE EVICTION OF TENANT OR BREACH OF THE IMPLIED WARRANTY OF
SUITABILITY AND WITHOUT AN ABATEMENT OF RENT (THE "RESERVED RIGHT").
WITHOUT IN ANY WAY LIMITING THE GENERALITY OF THE FOREGOING, LANDLORD'S
RESERVED RIGHT SHALL INCLUDE, BUT NOT BE LIMITED TO THE RIGHT TO DO ANY OF
THE FOLLOWING: (i) erect and construct scaffolding, pipe, conduit and
other structures on and within and outside of the Premises where
reasonably required by the nature of the changes, alterations,
improvements, modifications, renovations and/or additions being performed,
(ii) perform within and outside of the Premises all work and other
activities associated with such changes, alterations, improvements,
modifications, renovations and/or additions being performed, (iii) repair,
change, renovate, remodel, alter, improve, modify or make additions to the
arrangement, appearance, location and/or size of entrances or passageways,
doors and doorways, corridors, elevators, elevator lobbies, stairs,
toilets or other Common Areas, (iv) temporarily close any Common Areas
and/or temporarily suspend Building services and facilities in connection
with any repairs, changes, alterations, modifications, renovations or
additions to any part of the Building, (v) repair, change, alter or
improve plumbing, pipes and conduits located in the Building, including
without limitations those located within the Premises or the Common Areas
and (vi) repair, change, modify, alter, improve, renovate or make
additions to the Building central heating, ventilation, air conditioning,
electrical, mechanical or plumbing systems. When exercising the Reserved
Right, Landlord will interfere with Tenant's use and occupancy of the
Premises as little as is reasonably practicable.
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6.303 Alterations, Additions, Improvements and Installations by Tenant. Tenant
shall not, without the prior written consent of Landlord, make any
changes, modifications, alterations, additions or improvements (other than
Tenant's Improvements under the Work Letter) to, or install any equipment
or machinery (other than office equipment and unattached personal
property) on, the Premises (all such changes, modifications, alterations,
additions, improvements (other than Tenant's Improvements under the Work
Letter) and installations approved by Landlord are herein collectively
referred to as "Installations") if any such Installations would (i) affect
any structural or load bearing portions of the Building, (ii) result in a
material increase of electrical usage above the normal type and amount of
electrical current to be provided by Landlord, (iii) result in an increase
in Tenant's usage of heating or air conditioning, (iv) impact mechanical,
electrical or plumbing systems in the Premises or the Building, (v)
adversely affect delivery of services to other tenants of the Building or
(vi) violate any provision in Article 4 above or Rider H-1 or Rider H-2
attached hereto. As to Installations not covered by the preceding
sentence, Tenant will not perform same without the prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed.
All Installations shall be at Tenant's sole cost and expense. Without in
any way limiting Landlord's consent rights, Landlord shall not be required
to give its consent until (a) Landlord approves the contractor or person
making such Installations and approves such contractor's insurance
coverage to be provided in connection with the work, (b) Landlord approves
final and complete plans and specifications for the work and (c) the
appropriate governmental agency, if any, has approved the plans and
specifications for such work. All work performed by Tenant or its
contractor relating to the installations shall conform to applicable
governmental laws, rules and regulations, including, without limitation,
the Disability Acts. Upon completion of the Installations, Tenant shall
deliver to Landlord "as built" plans. If Landlord performs such
Installations, Tenant shall pay Landlord, as additional Rent, the cost
thereof plus ten percent (10%) as reimbursement for Landlord's overhead.
Each payment shall be made to Landlord within ten (10) days after receipt
of an invoice from Landlord. All Installations that constitute
improvements constructed within the Premises shall be surrendered with the
Premises at the expiration or earlier termination of this Lease, unless
Landlord requests that same be removed pursuant to Section 1.3 above.
TENANT SHALL INDEMNIFY AND HOLD LANDLORD HARMLESS FROM, AND REIMBURSE
LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL COSTS, EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES), DEMANDS, CLAIMS, CAUSES OF ACTION AND LIENS
ARISING FROM OR IN CONNECTION WITH ANY INSTALLATIONS PERFORMED BY OR ON
BEHALF OF TENANT. All Installations performed by or on behalf of Tenant
will be performed diligently and in a first-class workmanlike manner and
in compliance with all applicable laws, ordinances, regulations and rules
of any public authority having jurisdiction over the Building and/or
Tenant's and Landlord's insurance carriers. Landlord will have the right,
but not the obligation, to inspect periodically the work on the Premises
and may require changes in the method or quality of the work.
6.304 Approvals. Any approval by Landlord (or Landlord's architect and/or
engineers) of any of Tenant's contractors or Tenant's drawings, plans or
specifications which are prepared in connection with any construction of
improvements (including without limitation, Tenant's Improvements) in the
Premises shall not in any way be construed as or constitute a
representation or warranty of Landlord as to the abilities of the
contractor or the adequacy or sufficiency of such drawings, plans or
specifications or the improvements to which they relate, for any use,
purpose or condition.
ARTICLE 7
INSURANCE, FIRE AND CASUALTY
SECTION 7.1 TOTAL OR PARTIAL DESTRUCTION OF THE BUILDING OR THE PREMISES. In the
event that the Building should be totally destroyed by fire or other casualty or
in the event the Building (or any portion thereof) should be so damaged that
rebuilding or repairs cannot be completed, in Landlord's reasonable opinion,
within one hundred eighty (180) days after commencement of repairs to the
Building, Landlord may, at its option, terminate this Lease, in which event
Basic Annual Rent and Additional Rent shall be abated during the unexpired
portion of this Lease effective with the date of such damage. Landlord shall
exercise the termination right pursuant to the preceding sentence, if at all, by
delivering written notice of termination to Tenant within ten (10) days after
determining that the repairs cannot be completed within such one hundred eighty
(180) day period. In the event that the Premises should be so damaged by fire or
other casualty that rebuilding or repairs cannot be completed, in Landlord's
reasonable opinion, within one hundred eighty (180) days after the commencement
of repairs to the Premises, Tenant may, at its option terminate this Lease, in
which event Basic Annual Rent and Additional Rent shall be abated during the
unexpired portion of this Lease, effective the date of termination. Tenant shall
exercise the termination right pursuant to the preceding sentence, if at all, by
delivering written notice of termination to Landlord within ten (10) days after
being advised by Landlord that the repairs cannot be completed within such one
hundred eighty (180) day period. In the event the Building or the Premises
should be damaged by fire or other casualty and, in Landlord's reasonable
opinion, the rebuilding or repairs can be completed within one hundred eighty
(180) days after the commencement of repairs to the Building or Premises, as
applicable, or if the damage should be more serious but neither Landlord nor
Tenant elect to terminate this Lease pursuant to this Section, in either such
event Landlord shall, within sixty (60) days after the date of such damage,
commence (and thereafter pursue with reasonable diligence) repairing the
Building and the Premises (including Tenant's Improvements), but only to the
extent of insurance proceeds actually received by Landlord for such repairs, to
substantially the same condition which existed immediately prior to the
happening of the casualty. In no event shall Landlord be required to rebuild,
repair or replace any part of the furniture, equipment, fixtures, inventory,
supplies or any other personalty or any other improvements (except Tenant's
Improvements to the extent set forth in the preceding sentence), which may have
been placed by Tenant within the Building or at the Premises. Landlord shall
allow Tenant a fair diminution of Basic Annual Rent and Additional Rent during
the time the Premises are unfit for occupancy; provided, that if such casualty
was caused by Tenant, its agents, employees, licensees or invitees, Basic Annual
Rent and Additional Rent shall be abated only to the extent Landlord is
compensated for such Basic Annual Rent and Additional Rent by loss of rents
insurance, if any. Notwithstanding Landlord's restoration obligation, in the
event any mortgagee under a deed of trust, security agreement or mortgage on the
Building should require that the insurance proceeds be used to retire or reduce
the mortgage debt or if the insurance company issuing Landlord's fire and
casualty insurance policy fails or refuses to pay Landlord the proceeds under
such policy, Landlord shall have no obligation to rebuild and this Lease shall
terminate upon notice by Landlord to Tenant. Any insurance which may be carried
by Landlord or Tenant against loss or damage to the Building or to the Premises
shall be for the sole benefit of the party carrying such insurance and under its
sole control.
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SECTION 7.2 TENANT'S INSURANCE.
7.201 Types of Coverage. Tenant covenants and agrees that from and after the
date of delivery of the Premises from Landlord to Tenant, Tenant will
carry and maintain, at its sole cost and expense, the insurance set forth
in paragraphs (a), (b) and (c) of this subsection.
(a) Commercial General Liability Insurance. Commercial General Liability
Insurance covering the Premises and Tenant's use thereof against claims
for personal or bodily injury or death or property damage occurring upon,
in or about the Premises (including contractual indemnity and liability
coverage), such insurance to insure both Tenant and, as additional named
insureds, Landlord and the Property Manager, and to afford protection to
the limit of not less than $1,000,000.00, combined single limit, in
respect to injury or death to any number of persons and all property
damage arising out of any one (1) occurrence, with a deductible acceptable
to Landlord. If the Agreed Rentable Area of the Premises is more than
30,000 square feet, then, in addition to and not in lieu of the above
stated coverage, Tenant shall carry umbrella or so called excess coverage
in an amount not less than $ 1,000,000.00 over Tenant's base coverage
amount. This insurance coverage shall extend to any liability of Tenant
arising out of the indemnities provided for in this Lease.
(b) Fire and Extended Coverage Insurance. Property insurance on an
all-risk extended coverage basis (including coverage against fire, wind,
tornado, vandalism, malicious mischief, water damage and sprinkler
leakage) covering all fixtures, equipment and personalty located in the
Premises and endorsed to provide one hundred percent (100%) replacement
cost coverage. Such policy will be written in the names of Tenant,
Landlord and any other parties reasonably designated by Landlord from
time to time, as their respective interests may appear. The property
insurance may, with the consent of the Landlord, provide for a reasonable
deductible.
(c) Workers Compensation and Employer's Liability Insurance. Worker's
compensation insurance insuring against and satisfying Tenant's
obligations and liabilities under the worker's compensation laws of the
State of Texas, together with employer's liability insurance in an amount
not less $1,000,000.00.
7.202 Other Requirements of Insurance. All such insurance will be issued and
underwritten by companies reasonably acceptable to Landlord and will
contain endorsements that (a) such insurance may not lapse with respect to
Landlord or Property Manager or be canceled or amended with respect to
Landlord or Property Manager without the insurance company giving Landlord
and Property Manager at least thirty (30) days prior written notice of
such cancellation or amendment, (b) Tenant will be solely responsible for
payment of premiums, (c) in the event of payment of any loss covered by
such policy, Landlord or Landlord's designees will be paid first by the
insurance company for Landlord's loss and (d) Tenant's insurance is
primary in the event of overlapping coverage which may be carried by
Landlord.
7.203 Proof of Insurance. Tenant shall deliver to Landlord duplicate originals
of all policies of insurance required by this Section 7.2 or duly executed
originals of the certificates of such insurance evidencing in-force
coverage, within ten (10) days prior to the commencement of construction
of Tenant's Improvements. Further, Tenant shall deliver to Landlord
renewals thereof at least thirty (30) days prior to the expiration of the
respective policy terms.
SECTION 7.3 LANDLORD'S INSURANCE.
7.301 Types of Coverage. Landlord covenants and agrees that from and after the
date of delivery of the Premises from Landlord to Tenant, Landlord will
carry and maintain, at its sole cost and expense, the insurance set forth
in paragraphs (a) and (b) of this subsection.
(a) Commercial General Liability Insurance. Commercial General Liability
Insurance covering the Building and all Common Areas, but excluding the
Premises, insuring against claims for personal or bodily injury or death
or property damage occurring upon, in or about the Building or Common
Areas to afford protection to the limit of not less than $2,000,000.00
combined single limit in respect to injury or death to any number of
persons and property damage arising out of any one (1) occurrence. This
insurance coverage shall extend to any liability of Landlord arising out
of the indemnities provided for in this Lease.
(b) Fire and Extended Coverage Insurance. Landlord shall at all times
during the term hereof maintain in effect a policy or policies of all risk
extended coverage insurance covering the Building (excluding property
required to be insured by Tenant) endorsed to provide full replacement
cost coverage and providing protection against perils included within the
standard Texas form of fire and extended coverage insurance policy,
together with insurance against sprinkler damage, vandalism, malicious
mischief and such other risks as Landlord may from time to time determine
and with any such deductibles as Landlord may from time to time determine.
7.302 Self Insurance. Any insurance provided for in subsection 7.301 above may
be effected by self-insurance or by a policy or policies of blanket
insurance covering additional items or locations or assureds, provided
that the requirements of this Section 7.3 are otherwise satisfied. Tenant
shall have no rights in any policy or policies maintained by Landlord.
SECTION 7.4 WAIVER OF SUBROGATION. LANDLORD AND TENANT EACH HEREBY WAIVES ANY
RIGHTS IT MAY HAVE AGAINST THE OTHER (INCLUDING, BUT NOT LIMITED TO, A DIRECT
ACTION FOR DAMAGES) ON ACCOUNT OF ANY LOSS OR DAMAGE OCCASIONED TO LANDLORD OR
TENANT, AS THE CASE MAY BE (EVEN IF SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT,
NEGLIGENCE OR OTHER TORTIOUS CONDUCT, ACTS OR OMISSIONS OF THE RELEASED PARTY OR
THE RELEASED PARTY'S
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DIRECTORS, EMPLOYEES, AGENTS OR INVITEES), TO THEIR RESPECTIVE PROPERTY, THE
PREMISES, ITS CONTENTS OR TO ANY OTHER PORTION OF THE BUILDING OR THE PROPERTY
ARISING FROM ANY RISK (WITHOUT REGARD TO THE AMOUNT OF COVERAGE OR THE AMOUNT OF
DEDUCTIBLE) COVERED BY THE ALL RISK FULL REPLACEMENT COST PROPERTY INSURANCE
REQUIRED TO BE CARRIED BY TENANT AND LANDLORD, RESPECTIVELY, UNDER SUBSECTIONS
7.201(b) AND 7.301(b) ABOVE. The foregoing waiver shall be effective even if
either or both parties fail to carry the insurance required by sections 7.20l(b)
and 7.301(b) above. If a party waiving rights under this Section is carrying an
all risk full replacement cost insurance policy in the promulgated form used in
the State of Texas and an amendment to such promulgated form is passed, such
amendment shall be deemed not a part of such promulgated form until it applies
to the policy being carried by the waiving party. Without in any way limiting
the foregoing waivers and to the extent permitted by applicable law, the parties
hereto each, on behalf of their respective insurance companies insuring the
property of either Landlord or Tenant against any such loss, waive any right of
subrogation that Landlord or Tenant or their respective insurers may have
against the other party or their respective officers, directors, employees,
agents or invitees and all rights of their respective insurance companies based
upon an assignment from its insured. Each party to this Lease agrees
immediately to give to each such insurance company written notification of the
terms of the mutual waivers contained in this Section and to have said
insurance policies property endorsed, if necessary, to prevent the invalidation
of said insurance coverage by reason of said waivers. The foregoing waiver shall
be effective whether or not the parties maintain the required insurance.
SECTION 7.5 INDEMNITY.
7.501 Tenant's Indemnity. SUBJECT TO THE LIMITATION AND EXCLUSIONS SET FORTH
BELOW IN THIS SUBSECTION, TENANT WILL INDEMNIFY AND HOLD HARMLESS
LANDLORD, PROPERTY MANAGER, THEIR RESPECTIVE OFFICERS, DIRECTORS, AND
EMPLOYEES AND ANY OTHER PARTIES FOR WHOM LANDLORD AND/OR PROPERTY MANAGER
ARE RESPONSIBLE (EACH A "LANDLORD INDEMNIFIED PARTY") FROM, AND SHALL
REIMBURSE EACH LANDLORD INDEMNIFIED PARTY FOR AND WITH RESPECT TO, ANY
AND ALL COSTS, EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS FEES), CLAIMS, DEMANDS, ACTIONS, PROCEEDINGS, JUDGMENTS,
HEARINGS, DAMAGES, LOSSES AND LIABILITIES BROUGHT OR ASSERTED BY OR
PAYABLE TO ANY THIRD PARTY ON ACCOUNT OF PERSONAL INJURY, DEATH, PROPERTY
DAMAGE OR ANY OTHER FORM OF INJURY OR DAMAGE (EACH A "CLAIM" AND
COLLECTIVELY THE "CLAIMS") ARISING OUT OF OR RELATING TO (A) AN INCIDENT
OR EVENT WHICH OCCURRED WITHIN OR ON THE PREMISES, (B) THE USE OR
OCCUPANCY OF THE PREMISES OR (C) ANY BREACH OF THIS LEASE BY TENANT AND
WHICH RESULTED IN A CLAIM, EVEN IF THE CLAIM IS THE RESULT OF OR CAUSED BY
THE NEGLIGENT ACTS OR OMISSIONS OF ANY LANDLORD INDEMNIFIED PARTY. The
indemnification and reimbursement obligations of Tenant under this
subsection (i) shall be limited to the greater of the amount of Commercial
General Liability Insurance required to be carried by such party under
this Lease or $5,000,000 and (ii) shall not apply to a Claim (a) waived by
Landlord under Section 7.4 above or any other provision of this Lease, (b)
related to hazardous or toxic materials and caused by an act or omission
that does not constitute a breach by Tenant of the provisions of
subsection 4.102 above or Rider H-1 or Rider H-2 attached hereto, (c)
arising out of the gross negligence or intentional misconduct of the
Landlord Indemnified Party or (d) resulting from host liquor liability. If
a third party files a lawsuit or brings any other legal action asserting a
Claim against a Landlord Indemnified Party and that is covered by Tenant's
indemnity, then Tenant, upon notice from the Landlord Indemnified Party,
shall resist and defend such Claim through counsel reasonably satisfactory
to the Landlord Indemnified Party. Tenant's obligations under this
subsection shall survive the termination of this Lease.
7.502 Landlord's Indemnity. SUBJECT TO THE LIMITATION AND EXCLUSIONS SET FORTH
BELOW IN THIS SUBSECTION, LANDLORD WILL INDEMNIFY AND HOLD HARMLESS
TENANT AND ITS OFFICERS, DIRECTORS, AND EMPLOYEES AND ANY OTHER PARTIES
FOR WHOM TENANT IS RESPONSIBLE (EACH A "TENANT INDEMNIFIED PARTY") FROM,
AND SHALL REIMBURSE EACH TENANT INDEMNIFIED PARTY FOR AND WITH RESPECT TO,
ANY AND ALL CLAIMS (AS DEFINED IN SUBSECTION 7.501 PRECEDING) ARISING OUT
OF OR RELATING TO (A) AN INCIDENT OR EVENT WHICH OCCURRED WITHIN OR ON THE
COMMON AREAS, (B) THE USE OR OCCUPANCY OF THE COMMON AREAS OR (C) ANY
BREACH OF THIS LEASE BY LANDLORD AND WHICH RESULTED IN A CLAIM, EVEN IF
THE CLAIM IS THE RESULT OF OR CAUSED BY THE NEGLIGENT ACTS OR
OMISSIONS OF ANY TENANT INDEMNIFIED PARTY. The indemnification and
reimbursement obligations of Landlord under this subsection (i) shall be
limited to the greater of the amount of Commercial General Liability
Insurance required to be carried by such party under this Lease or
$5,000,000 and (ii) shall not apply to a Claim (a) waived by Tenant under
Section 7.4 above or any other provision of this Lease, (b) related to
hazardous or toxic materials and caused by an act or omission that does
not constitute a breach by Landlord of the provisions of subsection 4.102
above or Rider H-1 or Rider H-2 attached hereto, (c) arising out of the
gross negligence or intentional misconduct of the Tenant Indemnified Party
or (d) resulting from host liquor liability. If a third party files a
lawsuit or brings any other legal action asserting a Claim against a
Tenant Indemnified Party and that is covered by Landlord's indemnity, then
Landlord, upon notice from the Tenant Indemnified Party, shall resist and
defend such Claim through counsel reasonably satisfactory to the Tenant
Indemnified Party. Landlord's obligations under this subsection shall
survive the termination of this Lease.
ARTICLE 8
CONDEMNATION
SECTION 8.1 CONDEMNATION RESULTING IN CONTINUED USE NOT FEASIBLE. If the
Property or any portion thereof that, in Landlord's reasonable opinion, is
necessary to the continued efficient and/or economically feasible use of the
Property shall be taken or condemned in whole or in part for public purposes, or
sold to a condemning authority in lieu of taking, then the term of this Lease
shall, at the option of Landlord, forthwith cease and terminate.
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SECTION 8.2 TOTAL CONDEMNATION OF PREMISES. In the event that all or
substantially all of the Premises is taken or condemned or sold in lieu thereof
or Tenant will be unable to use a substantial portion of the Premises for a
period of one hundred eighty (180) consecutive days by reason of a temporary
taking, either Landlord or Tenant may terminate this Lease by delivering written
notice thereof to the other within ten (10) business days after the taking,
condemnation or sale in lieu thereof.
SECTION 8.3 CONDEMNATION WITHOUT TERMINATION. If upon a taking or condemnation
or sale in lieu of the taking of all or less than all of the Property which
gives either Landlord or Tenant the right to terminate this Lease pursuant to
Section 8.1 or 8.2 above and neither Landlord nor Tenant elect to exercise such
termination right, then this Lease shall continue in full force and effect,
provided that, if the taking, condemnation or sale includes any portion of the
Premises, the Basic Annual Rent and Additional Rent shall be redetermined on the
basis of the remaining square feet of Agreed Rentable Area of the Premises.
Landlord, at Landlord's sole option and expense, shall restore and reconstruct
the Building to substantially its former condition to the extent that the same
may be reasonably feasible, but such %work shall not be required to exceed the
scope of the work done by Landlord in originally constructing the Building, nor
shall Landlord in any event be required to spend for such work an amount in
excess of the amount received by Landlord as compensation or damages (over and
above amounts going to the mortgagee of the property taken) for the part of the
Building or the Premises so taken.
SECTION 8.4 CONDEMNATION PROCEEDS. Landlord shall receive the entire award
(which shall include sales proceeds) payable as a result of a condemnation,
taking or sale in lieu thereof. Tenant hereby expressly assigns to Landlord any
and all right, title and interest of Tenant now or hereafter arising in and to
any such award. Tenant shall, however, have the right to recover from such
authority through a separate award which does not reduce Landlord's award, any
compensation as may be awarded to Tenant on account of moving and relocation
expenses and depreciation to and removal of Tenant's physical property.
ARTICLE 9
LIENS
Tenant shall keep the Premises and the Property free from all liens arising out
of any work performed, materials furnished or obligations incurred by or for
Tenant AND TENANT SHALL INDEMNIFY AND HOLD HARMLESS LANDLORD FROM AND AGAINST,
AND REIMBURSE LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL CLAIMS, CAUSES OF
ACTION, DAMAGES, EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES), ARISING FROM
OR IN CONNECTION WITH ANY SUCH LIENS. In the event that Tenant shall not, within
ten (10) days following notification to Tenant of the imposition of any such
lien, cause the same to be released of record by payment or the posting of a
bond in amount, form and substance acceptable to Landlord, Landlord shall have,
in addition to all other remedies provided herein and by law, the right but not
the obligation, to cause the same to be released by such means as it shall deem
proper, including payment of or defense against the claim giving rise to such
lien. All amounts paid or incurred by Landlord in connection therewith shall be
paid by Tenant to Landlord on demand and shall bear interest from the date of
demand until paid at the rate set forth in Section 15.10 below. Nothing in this
Lease shall be deemed or construed in any way as constituting the consent or
request of Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any specific improvement,
alteration or repair of or to the Building or the Premises or any part thereof,
nor as giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any mechanic's or other liens against the interest of
Landlord in the Property or the Premises.
ARTICLE 10
TAXES ON TENANT'S PROPERTY
Tenant shall be liable for and shall pay, prior to their becoming delinquent,
any and all taxes and assessments levied against, and any increases in Real
Estate Taxes as a result of, any personal property or trade or other fixtures
placed by Tenant in or about the Premises and any improvements (other than
Tenant's Improvements) constructed in the Premises by or on behalf of Tenant. In
the event Landlord pays any such additional taxes or increases, Tenant will,
within ten (10) days after demand, reimburse Landlord for the amount thereof.
ARTICLE 11
SUBLETTING AND ASSIGNING
SECTION 11. SUBLEASE AND ASSIGNMENT. Tenant shall not assign this Lease, or
allow it to be assigned, in whole or in part, by operation of law or otherwise
(it being agreed that for purposes of this Lease, assignment shall include,
without limitation, the transfer of a majority interest of stock, partnership or
other forms of ownership interests, merger or dissolution) or mortgage or pledge
the same, or sublet the Premises or any part thereof or permit the Premises to
be occupied by any firm, person, partnership or corporation or any combination
thereof, other than Tenant, without the prior written consent of Landlord. In no
event shall any assignment or sublease ever release Tenant from any obligation
or liability hereunder.
SECTION 11.2 TENANT'S CONTINUING OBLIGATIONS. Without limiting Landlord's
consent rights and as a condition to obtaining Landlord's consent, (i) each
assignee must assume all obligations under this Lease and (ii) each sublessee
must confirm that its sublease is subject and subordinate to this Lease. In
addition, each assignee and sublessee shall agree to cause the Premises to
comply at all times with all requirements of the Disability Acts (as amended),
including, but not limited to, obligations arising out of or associated with
such assignee's or subtenant's use of or activities or business operations
conducted within the Premises. No assignee or sublessee of the Premises or any
portion thereof may assign or sublet the Premises or any portion thereof.
Consent by Landlord to one or more assignments or sublettings shall not operate
as a waiver of Landlord's rights as to any subsequent assignments and/or
sublettings. All reasonable legal fees and expenses incurred by Landlord in
connection with any
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assignment or sublease proposed by Tenant, will be the responsibility of Tenant
and will be paid by Tenant within five (5) days of receipt of an invoice from
Landlord. In addition, Tenant will pay to Landlord an administrative overhead
fee of $500.00 in consideration for Landlord's review of any assignment or
sublease proposed by requested assignment or sublease.
SECTION 11.3 LANDLORD'S RIGHTS RELATING TO ASSIGNEE OR SUBTENANT. To the extent
the rentals or income derived from any sublease or assignment exceed the rentals
due hereunder, such excess rentals (the "Excess Sublease Rentals") shall be the
property of and paid over to Landlord in consideration for Landlord's consent to
the applicable assignment or sublease. Landlord may at its option collect
directly from such assignee or sublessee all rents becoming due to Tenant under
such assignment or sublease Tenant hereby authorizes and directs any such
assignee or sublessee to make such payments of rent direct to Landlord upon
receipt of notice from Landlord and Tenant agrees that any such payments made by
an assignee or sublessee to Landlord shall, to the extent of the payments so
made, be a full and complete release and discharge of rent owed to Tenant by
such assignee or sublessee. No direct collection by Landlord from any such
assignee or sublessee shall be construed to constitute a novation or a release
of Tenant or any guarantor of Tenant from the further performance of its
obligations hereunder. Receipt by Landlord of rent from any assignee, sublessee
or occupant of the Premises or any part thereof shall not be deemed a waiver of
the above covenant in this Lease against assignment and subletting or a release
of Tenant under this Lease. In the event that, following an assignment or
subletting, this Lease or Tenant's right to possession of the Premises is
terminated for any reason, including without limitation in connection with
default by or bankruptcy of Tenant (which, for the purposes of this Section
11.3. shall include all persons or entities claiming by or through Tenant),
Landlord may, at its sole option, consider this Lease to be thereafter a direct
lease to the assignee or subtenant of Tenant upon the terms and conditions
contained in this Lease, in which event all rentals payable under such lease
after the termination of this Lease or Tenant's right to possession of the
Premises shall be deemed the property of Landlord.
ARTICLE 12
TRANSFERS BY LANDLORD, SUBORDINATION AND
TENANT'S ESTOPPEL CERTIFICATE
SECTION 12.1 SALE OF THE PROPERTY. in the event of any transfer of title to the
Building, the transferor shall automatically be relieved and freed of all
obligations of Landlord under this Lease accruing after such transfer, provided
that if a Security Deposit has been made by Tenant, Landlord shall not be
released from liability with respect thereto unless Landlord transfers the
Security Deposit to the transferee.
SECTION 12.2 SUBORDINATION, ATTORNMENT AND NOTICE. This Lease is subject and
subordinate to (i) any lease wherein Landlord is the tenant and to the liens of
any and all mortgages and deeds of trust, regardless of whether such lease,
mortgage or deed of trust now exists or may hereafter be created with regard to
all or any part of the Property, (ii) any and all advances (including interest
thereon) to be made under any such lease, mortgage or deed of trust and (iii)
all modifications, consolidations, renewals, replacements and extensions of any
such lease, mortgage or deed of trust; provided that the foregoing subordination
in respect of any mortgage or deed of trust placed on the Property after the
date hereof shall not become effective until and unless the holder of such
mortgage or deed of trust delivers to Tenant a non-disturbance agreement (which
may include Tenant's agreement to attorn as set forth below) permitting Tenant,
if Tenant is not then in default under, or in breach of any provision of, this
Lease, to remain in occupancy of the Premises in the event of a foreclosure of
any such mortgage or deed of trust. Tenant also agrees that any lessor,
mortgagee or trustee may elect (which election shall be revocable) to have this
Lease superior to any lease or lien of its mortgage or deed of trust and, in the
event of such election and upon notification by such lessor, mortgagee or
trustee to Tenant to that effect, this Lease shall be deemed superior to the
said lease, mortgage or deed of trust, whether this Lease is dated prior to or
subsequent to the date of said lease, mortgage or deed of trust. Tenant shall,
in the event of the sale or assignment of Landlord's interest in the Premises
(except in a sale-leaseback financing transaction), or in the event of the
termination of any lease in a sale-leaseback financing transaction wherein
Landlord is the lessee, attorn to and recognize. such purchaser, assignee or
mortgagee as Landlord under this Lease. Tenant shall, in the event of any
proceedings brought for the foreclosure of, or in the event of the exercise of
the power of sale under, any mortgage or deed of trust covering the Premises,
attorn to and recognize purchaser at such sale, assignee or mortgagee, as the
case may be, as Landlord under this Lease. The above subordination and
attornment clauses shall be self-operative and no further instruments of
subordination or attornment need be required by any mortgagee, trustee, lessor,
purchaser or assignee. In confirmation thereof, Tenant agrees that, upon the
request of Landlord, or any such lessor, mortgagee, trustee, purchaser or
assignee, Tenant shall execute and deliver whatever instruments may be required
for such purposes and to carry out the intent of this Section 12.2.
SECTION 12.3 TENANT'S ESTOPPEL CERTIFICATE. Tenant shall, upon the request of
Landlord or any mortgagee of Landlord, without additional consideration, deliver
an estoppel certificate, consisting of reasonable statements required by
Landlord, any mortgagee or purchaser of any interest in the Property, which
statements may include but shall not be limited to the following: this Lease is
in full force and effect, with rental paid through _______________; this Lease
has not been modified or amended; Landlord is not in default and Landlord has
fully performed all of Landlord's obligations hereunder; and such other
statements as may reasonably be required by the requesting party. If Tenant is
unable to make any of the statements contained in the estoppel certificate
because the same is untrue, Tenant shall with specificity state the reason why
such statement is untrue. Tenant shall, if requested by Landlord or any such
mortgagee, deliver to Landlord a fully executed instrument in form reasonably
satisfactory to Landlord evidencing the agreement of Tenant to the mortgage or
other hypothecation by Landlord of the interest of Landlord hereunder.
ARTICLE 13
DEFAULT
SECTION 13.1 DEFAULTS BY TENANT. The occurrence of any of the events described
in subsections 13.101 through 13.108 shall constitute a default by Tenant under
this Lease.
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13.101 Failure to Pay Rent. Any failure by Tenant to pay Rent or to make any
other payment required to be made by Tenant hereunder when due, no notice
being required for default in payment of Rent.
13.102 Failure to Perform. Except for a failure covered by subsection 13.101
above or 13.103 below, any failure by Tenant to observe and perform any
provision of this Lease to be observed or performed by Tenant where such
failure continues for thirty (30) days after written notice to Tenant,
provided that if such failure cannot be cured within said thirty (30) day
period, Tenant shall not be in default hereunder so long as Tenant
commences curative action within such thirty (30) day period, diligently
and continuously pursues the curative action and fully and completely
cures the failure within sixty (60) days after such written notice to
Tenant.
13.103 Continual Failure to Perform. The third failure by Tenant in any twelve
(12) month period to perform and observe a particular provision of this
Lease to be observed or performed by Tenant (other than the failure to
pay Rent, which in all instances will be covered by subsection 13.101
above), no notice being required for any such third failure.
13.104 Bankruptcy, Insolvency, Etc. Tenant or any guarantor of Tenant's
obligations hereunder (hereinafter called "Guarantor", whether one (1) or
more), (i) cannot meet its obligations as they become due, (ii) becomes
or is declared insolvent according to any law, (iii) makes a transfer in
fraud of creditors according to any applicable law, (iv) assigns or
conveys all or a substantial portion of its property for the benefit or
creditors or (v) Tenant or Guarantor files a petition for relief under
the Federal Bankruptcy Code or any other present or future federal or
state insolvency, bankruptcy or similar law (collectively, "applicable
bankruptcy law"); a receiver or trustee is appointed for Tenant or
Guarantor or its property; the interest of Tenant or Guarantor under this
Lease is levied on under execution or under other legal process; any
involuntary petition is filed against Tenant or Guarantor under
applicable bankruptcy law; or any action is taken to reorganize or modify
Tenant's or Guarantor's capital structure if either Tenant or Guarantor
be a corporation or other entity (provided that no such levy, execution,
legal process or petition filed against Tenant or Guarantor shall
constitute a breach of this Lease if Tenant or Guarantor shall vigorously
contest the same by appropriate proceedings and shall remove or vacate
the same within ninety (90) days from the date of its creation, service
or filing).
13.105 Abandonment. The abandonment of the Premises by Tenant.
13.106 Vacation. The vacating of the Premises by Tenant, which shall be
conclusively presumed if Tenant is absent from the Premises for ten (10)
consecutive days or more or if Tenant shall fail to move into or take
possession of the Premises within ten (10) days after the date on which
Rent is to commence under the terms of this Lease.
13.107 Loss of Right to do Business. If Tenant is a corporation or limited
partnership, Tenant fails to maintain its right to do business in the
State of Texas or fails to pay any applicable annual franchise taxes as
and when same become finally due and payable.
13.108 Dissolution or Liquidation. If Tenant is a corporation or partnership,
Tenant dissolves or liquidates or otherwise fails to maintain its
corporate or partnership structure, as applicable.
Except as expressly provided in subsection 13.102, Landlord shall not be
obligated to give notices of default set forth in this Section 13.1 and Tenant
shall have no right to cure any such defaults.
SECTION 13.2 REMEDIES OF LANDLORD.
13.201 Termination of the Lease. Upon the occurrence of a default by Tenant
hereunder, Landlord may, without judicial process, terminate this Lease
by giving written notice thereof to Tenant (whereupon all obligations and
liabilities of Landlord hereunder shall terminate) and, without further
notice and without liability, repossess the Premises. Landlord shall be
entitled to recover all loss and damage Landlord may suffer by reason of
such termination, whether through inability to relet the Premises on
satisfactory terms or otherwise, including without limitation, the
following (without duplication of any element of damages):
(a) accrued Rent to the date of termination and Late Charges, plus
interest thereon at the rate established under Section 15.10 below from
the date due through the date paid or date of any judgment or award by
any court of competent jurisdiction, the unamortized cost of Tenant's
Improvements, brokers' fees and commissions, attorneys' fees, moving
allowances and any other costs incurred by Landlord in connection with
making or executing this Lease, the cost of recovering the Premises and
the costs of reletting the Premises (including, without limitation,
advertising costs, brokerage fees, leasing commissions, reasonable
attorneys' fees and refurbishing costs and other costs in readying the
Premises for a new tenant);
(b) the present value of the Rent (discounted at a rate of interest equal
to eight percent [8%] per annum [the "Discount Rate"]) that would have
accrued under this Lease for the balance of the Lease term but for such
termination, reduced by the reasonable fair market rental value of the
Premises for such balance of the Lease term (determined from the present
value of the actual base rents, discounted at the Discount Rate, received
and to be received from Landlord's reletting of the Premises or, if the
Premises are not relet, the base rents, discounted at the Discount Rate,
that would be received from a comparable lease and comparable tenant for
a comparable term and taking into account among other things, the
condition of the Premises, market conditions and the period of time the
Premises may reasonably remain vacant before Landlord is able to release
the same to a suitable replacement tenant, it being agreed that Landlord
shall have no obligation to relet or attempt to relet the Premises);
12
<PAGE>
(c) plus any other costs or amounts necessary to compensate Landlord
for its damages.
13.202 Repossession and Re-Entry. Upon the occurrence of a default by Tenant
hereunder, Landlord may, without judicial process, immediately terminate
Tenant's right of possession of the Premises (whereupon all obligations
and liability of Landlord hereunder shall terminate), but not terminate
this Lease, and, without notice, demand or liability, enter upon the
Premises or any part thereof, take absolute possession of the same, expel
or remove Tenant and any other person or entity who may be occupying the
Premises and change the locks. If Landlord terminates Tenant's possession
of the Premises under this subsection 13.202, (i) Landlord shall have no
obligation whatsoever to tender to Tenant a key for new locks installed
in the Premises, (ii) Tenant shall have no further right to possession of
the Premises and (iii) Landlord shall have no obligation whatsoever to
relet or attempt to relet the Premises. Landlord may, however, at its
sole option relet the Premises or any part thereof for such terms and
such rents as Landlord may in its sole discretion elect. If Landlord
elects to relet the Premises, rent received by Landlord from such
reletting shall be applied first, to the payment of any indebtedness
other than Rent due hereunder from Tenant to Landlord (in such order as
Landlord shall designate), second, to the payment of any cost of such
reletting, including, without limitation, refurbishing costs, reasonable
attorneys' fees, advertising costs, brokerage fees and leasing
commissions and third, to the payment of Rent due and unpaid hereunder
(in such order as Landlord shall designate), and Tenant shall satisfy and
pay to Landlord any deficiency upon demand therefor from time to time.
Landlord shall not be responsible or liable for any failure to relet the
Premises or any part thereof or for any failure to collect any rent due
upon any such reletting. No such re-entry or taking of possession of the
Premises by Landlord shall be construed as an election on Landlord's part
to terminate this Lease unless a written notice of such termination is
given to Tenant pursuant to subsection 13.201 above. If Landlord relets
the Premises, either before or after the termination of this Lease, all
such rentals received from such lease shall be and remain the exclusive
property of Landlord and Tenant shall not be, at any time, entitled to
recover any such rental. Landlord may at any time after a reletting elect
to terminate this Lease.
13.203 Cure of Default. Upon the occurrence of a default hereunder by Tenant,
Landlord may, without judicial process and without having any liability
therefor, enter upon the Premises and do whatever Tenant is obligated
to do under the terms of this Lease and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in effecting
compliance with Tenant's obligations under this Lease, and Tenant further
agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action, WHETHER CAUSED BY THE NEGLIGENCE OF LANDLORD OR
OTHERWISE.
13.204 Continuing Obligations. No repossession of or re-entering upon the
Premises or any part thereof pursuant to subsection 13.202 or 13.203
above or otherwise and no resetting of the Premises or any part thereof
pursuant to subsection 13.202 above shall relieve Tenant or any Guarantor
of its liabilities and obligations hereunder, all of which shall survive
such repossession or reentering. In the event of any such repossession of
or re-entering upon the Premises or any part thereof by reason of the
occurrence of a default, Tenant will continue to pay to Landlord Rent
required to be paid by Tenant.
13.205 Cumulative Remedies. No right or remedy herein conferred upon or
reserved to Landlord is intended to be exclusive of any other right or
remedy set forth herein or otherwise available to Landlord at law or in
equity and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. In addition to the other
remedies provided in this Lease and without limiting the preceding
sentence, Landlord shall be entitled, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or
attempted or threatened violation, of any of the covenants, agreements,
conditions or provisions of this Lease, or to a decree compelling
performance of any of the covenants, agreements, conditions or provisions
of this Lease, or to any other remedy allowed to Landlord at law or in
equity.
SECTION 13.3 DEFAULTS BY LANDLORD. Landlord shall be in default under this Lease
if Landlord fails to perform any of its obligations hereunder and said failure
continues for a period of thirty (30) days after Tenant delivers written notice
thereof to Landlord (to each of the addresses required by this Section) and each
mortgagee who has a lien against any portion of the Property and whose name and
address has been provided to Tenant, provided that if such failure cannot
reasonably be cured within said thirty (30) day period, Landlord shall not be in
default hereunder if the curative action is commenced within said thirty (30)
day period and is thereafter diligently pursued until cured. In no event shall
(i) Tenant claim a constructive or actual eviction or that the Premises have
become unsuitable hereunder or (ii) a constructive or actual eviction or breach
of the implied warranty of suitability be deemed to have occurred under this
Lease, prior to the expiration of the notice and cure periods provided under
this Section 13.3. Any notice of a failure to perform by Landlord shall be sent
to Landlord at the addresses and to the attention of the parties set forth in
the Basic Lease Provisions. Any notice of a failure to perform by Landlord not
sent to Landlord at all addresses and/or to the attention of all parties
required under this Section and to each mortgagee who is entitled to notice or
not sent in compliance with Article 14 below shall be of no force or effect.
SECTION 13.4 LANDLORD'S LIABILITY.
13.401 Tenant's Rights in Respect of Landlord Default. Tenant is granted no
contractual right of termination by this Lease, except to the extent and
only to the extent set forth in Sections 7.1 and 8.2 above and Rider H-2
attached hereto. If Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the right, title
and interest of Landlord in the Property as the same may then be
encumbered and Landlord shall not be liable for any deficiency. If
Landlord is found to be in default hereunder by reason of its failure to
give a consent that it is required to give hereunder, Tenant's sole
remedy will be an action for specific performance or injunction. The
foregoing sentence shall in no event be construed as mandatorily
requiring Landlord to give consents under this Lease. In no event shall
Landlord be liable to Tenant for consequential or special damages by
reason of a failure to perform (or a default) by Landlord hereunder or
otherwise. In no event shall Tenant have the right to levy execution
against any property of Landlord other than its interest in the Property
as hereinbefore expressly provided.
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13.402 Certain Limitations on Landlord's Liability. UNLESS COVERED BY SUBSECTION
7.502 ABOVE OR CAUSED BY LANDLORD'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AND WITHOUT LIMITING THE PROVISIONS OF SECTION 7.4, LANDLORD
SHALL NOT BE LIABLE TO TENANT FOR ANY CLAIMS, ACTIONS, DEMANDS, COSTS,
EXPENSES, DAMAGE OR LIABILITY OF ANY KIND (i) arising out of the use,
occupancy or enjoyment of the Premises by Tenant or any person therein
or holding under Tenant or by or through the acts or omissions of any
of their respective employees, officers, agents, invitees or contractors,
(ii) caused by or arising out of fire, explosion, falling sheetrock, gas,
electricity, water, rain, snow or dampness, or leaks in any part of the
Premises, (iii) caused by or arising out of damage to the roof, pipes,
appliances or plumbing works or any damage to or malfunction of heating,
ventilation or air conditioning equipment, (iv) caused by tenants or any
persons either in the Premises or elsewhere in the Building (other than
Common Areas) or by occupants of property adjacent to the Building or
Common Areas or by the public or by the construction of any private,
public or quasi-public work or (v) caused by any act, neglect or
negligence of Tenant. In no event shall Landlord be liable to Tenant for
any loss of or damage to property of Tenant or of others located in the
Premises, the Building or any other part of the Property by reason of
theft or burglary,
SECTION 13.5 WAIVER OF TEXAS DECEPTIVE TRADE PRACTICES ACT. IT IS THE INTENT OF
LANDLORD AND TENANT TO WAIVE ALL OF THE PROVISIONS (OTHER THAN SECTION 17.555)
OF THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SUBCHAPTER E
OF CHAPTER 17 OF THE TEXAS BUSINESS AND COMMERCE CODE (THE "DTPA") AS SUCH
PROVISIONS ARE OR MAY BE APPLICABLE TO THIS LEASE AND THE TRANSACTION EVIDENCED
HEREBY. Accordingly, Landlord and Tenant hereby represent and agree as follows:
(a) Tenant represents to Landlord that Tenant is not in a significantly
disparate bargaining position with respect to this Lease and the
transaction evidenced hereby.
(b) Tenant represents to Landlord that Tenant is represented by legal
counsel in connection with this Lease.
(c) Tenant represents to Landlord that this Lease does not involve a
purchase or lease of a family residence occupied or to be occupied as
Tenant's residence and that, with respect to this Lease, Tenant is a
business consumer as that term is used in the DTPA (i.e. Tenant is an
individual, partnership or corporation who seeks or acquires by purchase
or lease, any goods or services for commercial or business use).
(d) Landlord and Tenant agree that the total consideration paid or to be
paid by Tenant over the term of this Lease exceeds $500,000.00, failing
which this part (d) shall be deemed deleted.
(e) Tenant represents to Landlord that Tenant has assets of $5 million or
more according to the most recent financial statement of Tenant prepared
in accordance with generally accepted accounting principles, failing
which Landlord and Tenant shall have their respective legal counsel sign
this Lease in the space provided on the signature page hereof. Tenant
further represents that it has knowledge and experience in financial and
business matters that enable it to evaluate the merits and risks of this
transaction.
(f) LANDLORD AND TENANT HEREBY AGREE, FOR THEMSELVES, THEIR AGENTS,
PROPERTY MANAGERS, BROKERS AND CONTRACTORS AND THEIR RESPECTIVE HEIRS,
PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS, THAT ALL OF THE
PROVISIONS OF THE DTPA (EXCEPT FOR SECTION 17.555 THEREOF) WHICH ARE OR
MAY BE APPLICABLE TO THIS LEASE AND THE TRANSACTION EVIDENCED HEREBY ARE
HEREBY WAIVED, INCLUDING SPECIFICALLY, WITHOUT LIMITATION, ALL RIGHTS
AND REMEDIES RESULTING FROM OR ARISING OUT OF ANY AND ALL ACTS OR
PRACTICES OF THE OTHER PARTY OR THEIR AGENTS, PROPERTY MANAGERS OR
BROKERS OR THEIR RESPECTIVE HEIRS, PERSONAL REPRESENTATIVES OR ASSIGNS
IN CONNECTION WITH THIS LEASE AND/OR THE TRANSACTION EVIDENCED HEREBY,
REGARDLESS OF WHETHER SUCH ACTS OR PRACTICES OCCURRED BEFORE OR AFTER THE
EXECUTION OF THIS LEASE. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE
EXECUTION AND ANY TERMINATION OF THIS LEASE. IF PART (d) ABOVE IS DEEMED
DELETED, THIS SECTION 13.5 SHALL NOT BE APPLICABLE AND SHALL BE WITHOUT
FORCE OR EFFECT.
Landlord agrees to delete Section 13.68 Landlord's Lien, but reserves any
statutory lien for rent in Landlord's favor as well as all remedies provided by
law and all rights and remedies under the Uniform Commercial Code.
14
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ARTICLE 14
NOTICES
Any notice or communication required or permitted in this Lease shall be given
in writing, sent by (a) personal delivery, with proof of delivery, (b) expedited
delivery service, with proof of delivery, (c) United States mail, postage
prepaid, registered or certified mail, return receipt requested or (d) prepaid
telegram (provided that such telegram is confirmed by expedited delivery service
or by mail in the manner previously described), addressed as provided in Item 12
of the Basic Lease Provisions and Section 13.3 above or to such other address or
to the attention of such other person as shall be designated from time to time
in writing by the applicable party and sent in accordance herewith. Notice also
may be given by telex or fax, provided each such transmission is confirmed (and
such confirmation is supported by documented evidence) as received and further
provided a telex or fax number, as the case may be, is set forth in Item 12 of
the Basic Lease Provisions. Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or in the case of telegram or telex
or fax, upon receipt.
ARTICLE 15
MISCELLANEOUS PROVISIONS
SECTION 15.1 BUILDING NAME AND ADDRESS. Tenant shall not, without the written
consent of Landlord, use the name of the Building for any purpose other than as
the address of the business to be conducted by Tenant in the Premises and in no
event shall Tenant acquire any rights in or to such names. Landlord shall have
the right at any time to change the name, number or designation by which the
Building is known.
SECTION 15.2 SIGNAGE. Tenant shall not erect, inscribe, paint, affix or display
any sign or other insignia upon any part of the Premises. Without in any way
limiting the foregoing, any signs erected by Tenant shall conform to all laws,
ordinances, statutes, rules, regulations or other governmental or
quasi-governmental or restrictive covenant requirements. Once erected, Tenant
shall keep and maintain such signs in good repair and remove the same and
restore the Premises at the end of the Term to their original condition.
SECTION 15.3 NO WAIVER. No waiver by Landlord or by Tenant of any provision of
this Lease shall be deemed to be a waiver by either party of any other provision
of this Lease. No waiver by Landlord of any breach by Tenant shall be deemed a
waiver of any subsequent breach by Tenant of the same or any other provision. No
waiver by Tenant of any breach by Landlord shall be deemed a waiver of any
subsequent breach by Landlord of the same or any other provision. The failure of
Landlord or Tenant to insist at any time upon the strict performance of any
covenant or agreement or to exercise any option, right, power or remedy
contained in this Lease shall not be construed as a waiver or a relinquishment
thereof for the future. Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to render
unnecessary the obtaining of Landlord's consent to or approval of any subsequent
act of Tenant. Tenant's consent to or approval of any act by Landlord requiring
Tenant's consent or approval shall not be deemed to render unnecessary the
obtaining of Tenant's consent to or approval of any subsequent act of Landlord.
No act or thing done by Landlord or Landlord's agents during the term of this
Lease shall be deemed an acceptance of a surrender of the Premises, unless done
in writing signed by Landlord. The delivery of the keys to any employee or agent
of Landlord shall not operate as a termination of this Lease or a surrender of
the Premises. The acceptance of any Rent by Landlord following a breach of this
Lease by Tenant shall not constitute a waiver by Landlord of such breach or any
other breach. The payment of Rent by Tenant following a breach of this Lease by
Landlord shall not constitute a waiver by Tenant of any such breach or any
other breach. No waiver by Landlord or Tenant of any provision of this Lease
shall be deemed to have been made unless such waiver is expressly stated in
writing signed by the waiving party. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly installment of Rent due under this Lease
shall be deemed to be other than on account of the earliest Rent due hereunder.
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment as Rent be deemed an accord and satisfaction and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance of such rent or pursue any other remedy which may be
available to Landlord.
SECTION 15.4 APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Texas.
SECTION 15.5 COMMON AREAS. "Common Areas" will mean all areas, spaces,
facilities, and equipment (whether or not located within the Building) made
available by Landlord for the common and joint use of Landlord, Tenant and
others designated by Landlord using or occupying space in the Building or at the
Property, as applicable, including but not limited to, (i) walkways, sidewalks
and driveways necessary for access to the Building, (ii) non-exclusive parking
lots or structures, if any, (iii) public corridors, public rest rooms,
elevators, public drinking fountains, if any, and (iv) Building stairs, ramps,
loading docks and loading areas to the extent same (x) are not expressly made a
part of the Premises, and (y) are made available for use of all tenants in the
Building. Tenant is hereby granted a nonexclusive right to use the Common Areas
during the term of this Lease for their intended purposes, in common with others
designated by Landlord, subject to the terms and conditions of this Lease,
including, without limitation, the Rules and Regulations. The Common Areas will
be at all times under the exclusive control, management and operation of the
Landlord.
SECTION 15.6 SUCCESSORS AND ASSIGNS. Subject to Article 11 hereof, all of the
covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
15
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SECTION 15.7 BROKERS. Tenant warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease,
excepting only the broker named in Item 9 of the Basic Lease Provisions and that
it knows of no other real estate brokers or agents who are or might be entitled
to a commission in connection with this Lease. Tenant agrees to indemnify and
hold harmless Landlord from and against any liability or claim, whether
meritorious or not, arising in respect to brokers and/or agents not so named.
Landlord has agreed to pay the fees of the broker (but only the broker) named in
Item 9 of the Basic Lease Provisions to the extent that Landlord has agreed to
do so pursuant to a written agreement with such broker.
SECTION 15.8 SEVERABILITY. If any provision of this Lease or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the application of such provisions to other persons or circumstances and
the remainder of this Lease shall not be affected thereby and shall be enforced
to the greatest extent permitted by law.
SECTION 15.9 EXAMINATION OF LEASE. Submission by Landlord of this instrument to
Tenant for examination or signature does not constitute a reservation of or
option for lease. This Lease will be effective as a lease or otherwise only upon
execution by and delivery to both Landlord and Tenant.
SECTION 15.10 INTEREST ON TENANT'S OBLIGATIONS. Any amount due from Tenant to
Landlord which is not paid within thirty (30) days after the date due shall bear
interest at the lower of (i) eighteen percent (18%) per annum or (ii) the
highest rate from time to time allowed by applicable law, from the date such
payment is due until paid, but the payment of such interest shall not excuse or
cure the default.
SECTION 15.11 TIME. Time is of the essence in this Lease and in each and all of
the provisions hereof. Whenever a period of days is specified in this Lease,
such period shall refer to calendar days unless otherwise expressly stated in
this Lease.
SECTION 15.12 DEFINED TERMS AND MARGINAL HEADINGS. The words "Landlord" and
"Tenant" as used herein shall include the plural as well as singular. If more
than one person is named as Tenant, the obligations of such persons are joint
and several. The headings and titles to the articles, sections and subsections
of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.
SECTION 15.13 AUTHORITY OF TENANT. Tenant and each person signing this Lease on
behalf of Tenant represents to Landlord as follows: Tenant, if a corporation, is
duly incorporated and legally existing under the laws of the state of its
incorporation and is duly qualified to do business in the State of Texas.
Tenant, if a partnership or joint venture, is duly organized under the Texas
Uniform Partnership Act. Tenant, if a limited partnership, is duly organized
under the applicable limited partnership act of the State of Texas or, if
organized under the laws of a state other than Texas, is qualified under said
Texas limited partnership act. Tenant has all requisite power and all
governmental certificates of authority, licenses, permits, qualifications and
other documentation to lease the Premises and to carry on its business as now
conducted and as contemplated to be conducted. Each person signing on behalf of
Tenant is authorized to do so. The foregoing representations in this Section
15.13 shall also apply to any corporation, partnership, joint venture or limited
partnership which is a general partner or joint venturer of Tenant.
SECTION 15.14 FORCE MAJEURE. Whenever a period of time is herein prescribed for
action to be taken by Landlord or Tenant, the party taking the action shall not
be liable or responsible for, and there shall be excluded from the computation
for any such period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other causes of any kind whatsoever which are beyond the
reasonable control of such party; provided, however, in no event shall the
foregoing apply to the financial obligations of either Landlord or Tenant to the
other under this Lease, including Tenant's obligation to pay Basic Annual Rent,
Additional Rent or any other amount payable to Landlord hereunder.
SECTION 15.15 RECORDING. This Lease shall not be recorded. However, Landlord
shall have the right to record a short form or memorandum hereof, at Landlord's
expense, at any time during the term hereof and, if requested, Tenant agrees
(without charge to Landlord) to join in the execution thereof.
SECTION 15.16 NO REPRESENTATIONS. Landlord and Landlord's agents have made no
warranties, representations or promises (express or implied) with respect to the
Premises, the Building or any other part of the Property (including, without
limitation, the condition, use or suitability of the Premises, the Building or
the Property), except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the provisions of this Lease.
SECTION 15.17 PARKING. If the Property includes a Garage, there shall be an
Exhibit F attached hereto, which shall set forth the agreements between Landlord
and Tenant relating to parking. If there is no Garage included in the Property,
then the remaining provisions of this Section shall be applicable with respect
to parking. The parking areas shall be designated for automobile parking on a
non-exclusive basis for all Property tenants (including Tenant) and their
respective employees, customers, invitees and visitors. Parking and delivery
areas for all vehicles shall be in accordance with parking regulations
established from time to time by Landlord, with which Tenant agrees to conform.
Tenant shall only permit parking by its employees, customers and agents of
automobiles in appropriate designated parking areas.
SECTION 15.18 ATTORNEYS' FEES. In the event of any legal action or proceeding
brought by either party against the other arising out of this Lease, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred in such action (including, without limitation, all costs of
appeal) and such amount shall be included in any judgment rendered in such
proceeding.
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SECTION 15.19 NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of
light, air or view by any structure which may be erected on the Property or
lands adjacent to the Property shall in no way affect this Lease or impose any
liability on Landlord (even if Landlord is the adjacent landowner).
SECTION 15.20 RELOCATION. Upon 120 days advance written notice to Tenant (the
"Relocation Notice"), Landlord shall have the right to relocate Tenant to other
space in the Building (the "Substitute Premises") provided such other space is
equal in size to or larger in size than the Premises. Landlord shall pay all
reasonable out-of-pocket expenses of any such relocation, including the expenses
of moving and construction of improvements substantially similar to Tenant's
Improvements and other improvements installed with the written consent of
Landlord and prior to the date of the Relocation Notice, subject to the
condition that Landlord shall have the right to use all or any of Tenant's
Improvements and such other improvements in connection with the construction of
the improvements in the Substitute Premises. In the event of such relocation,
this Lease shall continue in full force and effect without any change in the
terms or other conditions, except that the Substitute Premises shall be the
Premises and an Exhibit A showing the Substitute Premises shall be substituted
for the Exhibit A attached hereto. If requested by Landlord, Tenant shall
execute an amendment to this Lease evidencing the foregoing.
SECTION 15.21 SURVIVAL OF INDEMNITIES. Each indemnity agreement and hold
harmless agreement contained herein shall survive the expiration or termination
of this Lease.
SECTION 15.22 ENTIRE AGREEMENT. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease and
no prior agreement, understanding or representation pertaining to any such
matter shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Lease,
as of the date first written in this Lease.
For purposes of Section 13.5(e) LANDLORD
only, Landlord's attorney and
Tenant's attorney have executed THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
this Lease: a New Jersey corporation
___________________________ BY: Premisys Real Estate Services
Attorney for Landlord its duly authorized agent
By: /s/ Gregory T. Jones
------------------------------------------
Name: Gregory T. Jones
----------------------------------------
Title: Vice President
---------------------------------------
TENANT
ALLIED FILM & VIDEO SERVICES, INC.
___________________________ By: /s/ James A. Merkle
Attorney for Tenant ------------------------------------------
Name: James A. Merkle
----------------------------------------
Title: President
---------------------------------------
17
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[Graphic appears rendering floorplan]
EXHIBIT A
<PAGE>
EXHIBIT B
TRACT I
METES AND BOUNDS DESCRIPTION
1.7218 ACRES OUT OF
BLOCK 3, BROOKHOLLOW/HOUSTON, SECTION ONE
HOUSTON, HARRIS COUNTY, TEXAS
All that certain 1.7218 acres of land out of Block 3, Brookhollow/Houston,
Section One, Henry), Reinerman Survey, A-644 according to the plat thereof filed
at Volume 144, Page 79 of the Harris County Map Records and being all that
certain 1.7218 acres described as Tract I in a deed dated 08-24-1988 from PIC
Realty Corporation to The Prudential Insurance Company of America filed in the
Official Public Records of Harris County, Texas at Clerk File No. L-816121,
Film Code No. 125-76-0145 and being more particularly described by metes and
bounds as follows:
Commencing at a point located in the west right-of-way line of Governors Circle
East (60' wide) at its intersection with the south right-of-way line of Dacoma
Street (80' wide); Thence S 87 degrees 57' 50" W - 466.96' to a found 5/8" iron
rod marking the POINT OF BEGINNING of the herein described tract.
THENCE S 87 degrees 02' 10" E - 250.00', with the west line of that certain
116,740 square foot tract described in a deed dated 3-26-1976 from Rede Company
to CB Institutional Fund 11 filed in the Official Public Records of Real
Property of Harris County, Texas at Clerk File No. E-716232, Film Code No.
138-010134, to a set "P-K" nail in asphalt for corner;
THENCE S 87 degrees 57' 50" W - 300.00', with the north line of that certain
2.6919 acre tract described as Tract 11 in said deed dated 08-24-1988 from PIC
Realty Corporation to The Prudential Insurance Company of America filed in the
Official Public Records of Real Property of Harris County, Texas at Clerk File
No. L-816121, Film Code No. 125-76-0145, to a set 5/8" iron rod with cap for
corner;
THENCE N 02 degrees 02' 10" W - 250.00', with the east line of that certain
49,275.88 square foot tract described in a deed dated 11-22-1975 from Crow-St.
Louis to Houston-St. Louis Properties, Ltd. filed in the Official Public Records
of Real Property of Harris County, Texas at Clerk File No. E-608950, Film Code
No. ###-##-####, to a found 5/8" iron rod for corner;
THENCE N 87 degrees 57' 50" E - 300.00', with the south line of the
aforementioned Dacoma Street, to the POINT OF BEGINNING and containing 1.7218
acres (75,000 square feet) of land, more or less.
Compiled by:
PREJEAN & COMPANY, INC.
surveying/mapping
Job #101-93A
August 19, 1993 [SEAL OF ROBERT J. PREJEAN, LAND SURVEYOR]
B-1
<PAGE>
TRACT II
METES AND BOUNDS DESCRIPTION
2.6919 ACRES OUT OF
BLOCK 3, BROOKHOLLOW/HOUSTON, SECTION ONE
AND BLOCK 3, BROOKHOLLOW/HOUSTON, SECTION TWO
HOUSTON, HARRIS COUNTY, TEXAS
All that certain 2.6919 acres, being all that certain called 46,655 square feet
out of Block 3, Brookhollow/Houston, Section One, Henry Reinerman Survey, A-644,
Harris County, Texas filed at Volume 144, Page 79 of the Harris County Map
Records and all that certain called 70,597 square feet out of Block 3,
Brookhollow/Houston, Section Two,, Henry Reinerman Survey, A-644, Harris County,
Texas filed at Volume 149, Page 33 of the Harris County Map Records and
described as Tract 11 in that certain deed dated 08-24-1988 from PIC Realty
Corporation to The Prudential Insurance Company of America filed in the
Official Public Records of Real Property of Harris County, Texas at Clerk File
No. L-81612 1, Film Code No. 125-76-0145 and being more particularly described
by metes and bounds as follows:
Commencing at a point located in the west right-of-way line of Governors Circle
East (60' wide) at its intersection with the south right-of-way line of Dacoma
Street (80' wide); Thence S 02 degrees 02' 10" E 250.00', with the west
right-of-way line of said Governors Circle East, to a point; Thence S 87 degrees
57' 50" W - 300.00', to a found 5/8 iron rod marking the POINT OF BEGINNING of
the herein described tract;
THENCE S 02 degrees 02' 10" E - 53.16', with the west line of that certain
45,005 square feet of land described in a deed dated 12-04-1967 from Brookhollow
of Houston, Inc. to Junior Achievement of Houston, Inc. filed in the Official
Public Records of Real Property of Harris County, Texas filed at Clerk File No.
C626047, Film Code No. 086-26-0642, to a set railroad spike in asphalt marking
the Point of Curvature of a curve to the right having a central angle of 09' 44'
10" and a radius of 420.00';
THENCE, continuing with the west line of said 45,005 square foot tract, passing
at 46.91' the south line of said Brookhollow/Houston, Section One and the north
line of said Brookhollow/Houston, Section Two, for a total are distance of
71.37'; to a found 5/8" iron rod for corner;
THENCE S 27 degrees 32' 37" W - 216.58', with the west line that certain 31,920
square foot tract described in a deed dated 11-15-1990 from Keith George and
Cecil George to Collin Loewen and Wilson J. Rockefeller filed in the Official
Public Records of Real Property of Harris County, Texas at Clerk File No.
M-910799, Film Code No. 193-75-2489, to a found 5/8" iron rod marking a point on
a curve of a curve to the left having a central angle of 29 degrees 34' 48", a
radius of 480.00', the center of said curve being located on a radial line
bearing S 27 degrees 3 2' 3 S" W , from said point;
THENCE in a westerly direction with the north right-of-way line of Directors Row
(60'wide), a distance of 247.81', to a found 5/8" iron rod marking the Point of
Tangency;
THENCE S 87 degrees 57' 50" W - 117.05', continuing with said north right-of-way
line of Directors Row, to a found 518" iron rod for corner;
THENCE N 02 degrees 02' 10" W, with the east line of that certain 32,135 square
foot tract described in a deed dated 10-31-1968 from Brookhollow of Houston,
Inc. to Glass-McMullen, Inc. filed in the Official Public Records of Real
Property of Harris County, Texas at Clerk File No. C-817420, Film Code No.
099-340133, passing at 150.00' the north line of said Brookhollow/Houston,
Section Two and the south line of said Brookhollow/Houston, Section One, and
continuing for a total distance of 250.00', to a found 518" iron rod for corner;
THENCE N 87 degrees 57' 50" E - 466.96', with the north line of the
aforementioned Tract 11, to the POINT OF BEGINNING and containing 2.6919 acres
(117,252 square feet) of land, more or less.
Compiled by:
PREJEAN & COMPANY, INC.
surveying/mapping
Job #101-93B
August 19, 1993 [SEAL OF ROBERT J. PREJEAN, LAND SURVEYOR]
B-2
<PAGE>
TRACT III
METES AND BOUNDS DESCRIPTION
1.8392 ACRES OF LAND OUT OF
BLOCK 4, BROOKHOLLOW/HOUSTON, SECTION TWO
AND BLOCK 4, BROOKHOLLOW/HOUSTON, SECTION THREE
HOUSTON, HARRIS COUNTY, TEXAS
All that certain 1.8392 acres of land being all that certain 80,116 square feet
out of Brookhollow/Houston, Section Two, Henry Reinermann Survey, A-644, Harris
County, Texas filed at Volume 149, Page 33 of the Harris County Map Records, and
Block 4, Brookhollow/Houston, Section Three, Henry Reinerman Survey, A-644,
Harris County, Texas filed it Volume 158, Page 85 of the Harris County Map
Records, described as Tract III in a deed dated 08-24-1988 from PIC Realty
Corporation to The Prudential Insurance Company of America filed in the Official
Public Records of Real Property of Harris County, Texas at Clerk File No.
L-816121, Film Code No. 125-76-0145 and being more particularly described by
metes and bounds as follows:
Commencing at a point for reference being the most northerly northwest comer of
said Block 4, Brookhollow/Houston, Section Two, being located at the northerly
end of a 10' cutback in the southwest right-of-way line of Directors Row (60'
wide) at U. S. Highway 290 (Northwest Freeway) (width varies); Thence N 45
degrees 05' 07" E - 901.361, with the south line of said Directors Row, to a
found 5/8" iron rod marking the Point of Curvature of a curve to the right
having a central angle of 42 degrees 52' 43" and a radius of 420.00'; Thence
continuing with said south line of Directors Row for an arc distance of 314.32'.
to a found 5/8" iron rod marking the Point of Tangency; Thence N 87 degrees 57'
50" E - 8.43', continuing with said south right-of-way line of Directors Row. to
a found 5/8" iron rod marking the POINT OF BEGINNING of the herein described
tract;
THENCE N 87 degrees 57' 50" E - 196.13', with the south right-of-way, line of
said Directors Row, to a found 5/8" iron rod marking a the Point of Curvature of
a curve to the right having a central angle of 07 degrees 39' 5 1 and a radius
of 420.00';
THENCE continuing with the south right-of-way line of said Directors Row for an
arc distance of 56.18', to a found 5/8" iron rod for corner;
THENCE S 05 degrees 37' 46" W - 350.001, with the west line of that certain
1.1386 acre tract described in a deed dated 3-27-1987 from Interfirst Bank
Fannin to Saratoga Financial Corporation filed in the Official Public Records of
Real Property of Harris County, Texas at Clerk File No. L-042387, Film Code No.
07764-1109 and the west line of that certain 81,413 square foot tract described
in a deed dated 12-28-1990 from George M. Ragsdale to Nueland, Inc. filed in the
Official Public Records of Real Property of Harris County, Texas at Clerk File
No. M-964080, Film Code No. 197-63-2377, to a set 5/8" iron rod with cap for
corner;
THENCE N 88 degrees 11' 14" W - 9.35', to a set "P-K" nail in asphalt for an
angle point;
THENCE S 87 degrees 57' 50" W - 196.131, with the north line of that certain
3.0393 acres described as Tract IV in a deed dated 08-24-1988 from PIC Realty
Corporation to The Prudential Insurance Company of America filed in the Official
Public Records of Real Property of Harris County, Texas at Clerk File No. L81612
1, Film Code No. 125-76-0145, to a found 5/8" iron rod for corner;
THENCE N 02 degrees 02' 10" W - 350.00', with the east line of that certain
80,000 square foot tract described in a deed dated 12-12-1990 from State Farm
Life Insurance Company to Brookhollow Jack Limited Partnership filed in the
Official Public Records of Real Property of Harris County, Texas at Clerk File
No. M-938497, Film Code No. 195-71-1328, to the POINT OF BEGINNING and
containing 1.8392 acres (80,116 square feet) of land, more or less.
Compiled by:
PREJEAN & COMPANY, INC.
surveying/mapping
Job #101-93C.MB
August 19, 1993 [SEAL OF ROBERT J. PREJEAN, LAND SURVEYOR]
B-3
<PAGE>
TRACT IV
METES AND BOUNDS DESCRIPTION
3.0393 ACRES OUT OF
BLOCK 4, BROOKHOLLOW/HOUSTON, SECTION THREE
HENRY REINERMAN SURVEY, A-644
HOUSTON, HARRIS COUNTY, TEXAS
All that certain 3.0393 acres out of Block 4, Brookhollow/Houston, Section
Three, Henry Reinerman Survey A-644, Harris County, Texas filed at Volume 158,
Page 85 of the Harris County Map Records described as Tract IV in a deed dated
08-24-1988 from PIC Realty Corporation to The Prudential Insurance Company of
America filed in the Official Public Records of Real Property of Harris County,
Texas at Clerk File No. L-816121, Film Code No. 125-76-0145 and being more
particularly described by metes and bounds as follows:
Commencing at a point for reference, being the most easterly south comer of
said Brookhollow/Houston, Section Two; Thence N 53 degrees 19' 15" W - 60.00',
with the south line of said Section Two, to a point; Thence S 36 degrees 40'
45" W - 30.74', the westerly right-of-way line of Governors Circle East to a
point marking the Point of Curvature of a curve to the right having a central
angle of 09' 29'30" and a radius of 420.00'; Thence continuing with said
westerly right-of-way line of Governors Circle East for an arc distance of
69.58', to a found 518" iron rod marking the POINT OF BEGINNING of the herein
described tract and being a point on a curve having a central angle of 41' 47'
35", a radius of 420.00', the center of said curve being located on a radial
line bearing N 43 degrees 49'45" W from said point;
THENCE. continuing with the north right-of-way line of said Governors Circle
East for an arc distance of 306.36', to a found 5/8" iron rod for the Point of
Tangency;
THENCE S 87 degrees 57'50" W - 208.80', with the north right-of-way line of
Governors Circle West (60'wide), to a found 5/8" iron rod marking the Point of
Curvature of a curve to the right having a central angle of 29 degrees 11' 08"
and a radius of 420.00';
THENCE continuing with the north right-of-way line of said Governors Circle West
for an arc distance of 213.94', to a found 5/8" iron rod for corner;
THENCE N 45 degrees 05' 07" E - 318.44', with the east line of that certain
2,184 square foot of land described in a deed dated 08-27-1986 from GDH
Industrial Co. to Joe R. Davis, Inc. filed in the Official Public Records of
Real Property of Harris County, Texas at Clerk File No. K-752009, Film Code No.
059-731222, to a found 5/8" iron rod for corner;
THENCE N 87 degrees 57'50" E - 232.05', with the north line of said Tract IV, to
a set "P-K" nail in asphalt for an angle point,
THENCE S 88 degrees II' 14" E - 9.35', to a set 5/8" iron rod with cap for
corner;
THENCE S 84 degrees 22' 14" E - 19.451, with the southeast line of that certain
81,413 square foot tract described in a deed dated 12-28-1990 from George M.
Ragsdale to Nueland, Inc. filed in the Official Public Records of Real Property
of Harris County, Texas at Clerk File No. M-964080, Film Code No. 197-63-2377,
to a set 5/8" iron rod with cap for corner;
THENCE S 53 degrees 19' 15" E - 255.68', continuing with the southerly line of
said 81,413 square foot tract, to the POINT OF BEGINNING and containing 3.0393
acres (132,390 square feet) of land, more or less.
Compiled by:
PREJEAN & COMPANY, INC.
surveying/mapping
Job #101-93D.MB
August 19, 1993 [SEAL OF ROBERT J. PREJEAN, LAND SURVEYOR]
B-4
<PAGE>
EXHIBIT C
The Leased Premises shall be delivered to Tenant in "As-Is" condition on the
Commencement Date.
C-1
<PAGE>
EXHIBIT D
ACCEPTANCE OF PREMISES MEMORANDUM
This Acceptance of Premises Memorandum is being executed pursuant to that
certain Lease Agreement (the "Lease") dated the 29th day of November, 1994,
between The Prudential Insurance Company of America, a New Jersey corporation
("Landlord"), and Allied Film Video Services, Inc., a ("Tenant"), pursuant to
which Landlord leased to Tenant and Tenant leased from Landlord certain space in
the office building located at 4140-B Directors Row in Houston, Texas (the
"Building"). Landlord and Tenant hereby agree that:
1. Except for the Punch List Items (as shown on the attached Punch List),
Landlord has fully completed the construction work required under the
terms of the Lease and the Work Letter attached thereto.
2. The Premises are tenantable, Landlord has no further obligation for
construction (except with respect to Punch List Items) and Tenant
acknowledges that the Building, the Premises and Tenant's Improvements
are satisfactory in all respects. except for the Punch List Items and
are suitable for the Permitted Use.
3. The Commencement Date of the Lease is January 1, 1995. If the dare set
forth in Item 6 of the Basic Lease Provisions is different than the dare
set forth in the preceding sentence, then Item 6 of the Basic Lease
Provisions is hereby amended to be the Commencement Date set forth in the
preceding sentence.
4. The Expiration Date of the Lease is December 31, 1996. If the date set
forth in Item 7 of the Basic Lease Provisions is different than the date
set forth in the preceding sentence, then Item 7 of the Basic Lease
Provisions is hereby amended to be the Expiration Date set forth in the
preceding sentence.
5. Tenant acknowledges receipt of the current Rules and Regulations for the
Building.
6. Tenant represents to Landlord that Tenant has obtained a Certificate of
occupancy covering the Premises.
7. All capitalized terms not defined herein shall have the meaning assigned
to them in the Lease.
Agreed and Executed this 29th day of March, 1995.
LANDLORD
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
a New Jersey corporation
BY: PREMISYS REAL ESTATE SERVICES, INC.
its duly authorized agent
By: /s/ Steven J. Carter
--------------------------------------
Name: Steven J. Carter
------------------------------------
Title: Property Manager
-----------------------------------
TENANT
ALLIED FILM & VIDEO SERVICES, INC.
By: /s/ James A. Merkle
--------------------------------------
Name: James A. Merkle
------------------------------------
Title: President
-----------------------------------
D-1
<PAGE>
RIDER 1
WATER EXPENSES
TENANT'S SHARE BASED ON TENANT'S PRO RATA SHARE PERCENTAGE
This Rider is attached to and a part of that certain Lease Agreement dated as of
November 29, 1994, executed by and between THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Landlord"), and ALLIED FILM & VIDEO
SERVICES, INC., a _____________________ ("Tenant"). Any capitalized term used
but not defined herein shall have the meaning assigned to it in the provisions
designated in the Lease as the Supplemental Lease Provisions. Landlord and
Tenant mutually agree as follows:
Notwithstanding the provisions of Sections 2.2 and 5.1 of the Supplemental
Lease Provisions, Operating Expenses shall not include the cost charged by the
applicable utility or utilities which provide water and sewer service to the
Premises. In lieu thereof, Tenant shall directly pay to Landlord Tenant's share
(calculated as provided below) of Landlord's actual cost from the utility or
utilities which provide water and sewer to the Premises. Landlord may require
that the Premises be separately metered (at Tenant sole cost and expense) for
water usage, in which event Tenant shall make payments to Landlord based on
readings of the meter. If Landlord does not require that the Premises be
separately metered, then Tenant shall pay Landlord a pro rata share of the
entire water bill for the Building. Such pro rata share shall be equal to the
product of the amount of the entire water bill, multiplied by Tenant's Pro Rata
Share Percentage set forth in Item 4 of the Basic Lease Provisions.
<PAGE>
RIDER 2
RENEWAL OPTION
This Rider is attached to and a part of that certain Lease Agreement dated as of
November 29, 1994, executed by and between THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Landlord"), and ALLIED FILM & VIDEO
SERVICES, INC., a ____________________ ("Tenant"). Any capitalized term used but
not defined herein shall have the meaning assigned to it in the provisions
designated in the Lease as the Supplemental Lease Provisions. Landlord and
Tenant mutually agree as follows:
1. If, and only if, on the Expiration Date and the date Tenant notifies
Landlord of its intention to renew the term of this Lease (as provided
below), (i) Tenant is not in default under this Lease, (ii) Tenant then
occupies and the Premises then consist of at least all the original Premises
and (iii) this Lease is in full force and effect, then Tenant, but not any
assignee or subtenant of Tenant, shall have and may exercise an option to
renew this Lease for one (1) additional term of two (2) years (the "Renewal
Term") upon the same terms and conditions contained in this Lease with the
exceptions that (x) this Lease shall not be further available for renewal
and (y) the rental for the Renewal Term shall be the "Renewal Rental Rate",
but in no event will the Base Annual Rent be less than the Base Annual Rent
for the last twelve (12) calendar months of the initial term of the Lease.
The Renewal Rental Rate is hereby defined to mean the then prevailing rents
(including, without limitation, those similar to the Basic Annual Rent and
Additional Rent) payable by renewal tenants having a credit standing
substantially similar to that of Tenant, for properties of equivalent
quality, size, utility and location as the Premises, including any additions
thereto, located within the area described below and leased for a renewal
term approximately equal to the Renewal Term. The Renewal Rental Rate will
take into consideration the tenant inducements offered in the renewal
transactions considered by Landlord in determining the Renewal Rental Rare.
2. If Tenant desires to renew this Lease, Tenant must notify Landlord in
writing of its intention to renew an or before the date which is at least
nine (9) months but no more than twelve (12) months prior to the Expiration
Date. Landlord shall, within the next sixty (60) days, notify Tenant in
writing of Landlord's determination of the Renewal Rental Rate and Tenant
shall, within the next twenty (20) days following receipt of Landlord's
determination of the Renewal Rental Rate, notify Landlord in writing of
Tenant's acceptance or rejection of Landlord's determination of the Renewal
Rental Rate. If Tenant timely notifies Landlord of Tenant's acceptance of
Landlord's determination of the Renewal Rental Rate, this Lease shall be
extended as provided herein and Landlord and Tenant shall enter into an
amendment to this Lease to reflect the extension of the term and changes in
Rent in accordance with this Rider. If (x) Tenant timely notifies Landlord
in writing of Tenant's rejection of Landlord's determination of the Renewal
Rental Rate or (y) Tenant does not notify Landlord in writing of Tenant's
acceptance or rejection of Landlord's determination of the Renewal Rental
Rare within such twenty (20) day period, this Lease shall end on the
Expiration Date and Landlord shall have no further obligations or liability
hereunder.
3. The area with respect to which the Renewal Rental Rate will be determined is
near northwest Houston ____________________________________________________.
<PAGE>
RIDER H-1
(HAZARDOUS MATERIALS SURVEYS)
NO KNOWN HAZARDOUS MATERIALS
This Rider is attached to and a part of that certain Lease Agreement dated as of
November 29, 1994, executed by and between PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Landlord"), ALLIED FILM & VIDEO SERVICES,
INC., a _____________________ ("Tenant"). Any capitalized term used but not
defined herein shall have the meaning assigned to it in the provisions
designated in the Lease as the Supplemental Lease Provisions. Landlord and
Tenant mutually agree as follows:
Landlord has heretofore engaged one or more independent contractors to
perform limited surveys at the Property to determine if hazardous materials
exist on or at the Property (whether one or more, the "Survey"). The scope of
visual inspection, testing and sampling performed in connection with the Survey
is set forth in the written report (whether one or more, the "Written Report")
submitted to Landlord by independent contractor(s) performing the Survey.
However, the Tenant is advised that neither extensive testing nor sampling of
any portion of the Property was performed in connection with the Survey of the
Property. A copy of each Written Report is on file in the Property Manager's
office and Tenant shall have the right to inspect each such report. Except as
expressly stated in the next following sentence, Landlord makes no
representations or warranties whatsoever (express or implied) to Tenant
regarding (x) the Survey (including, without limitation, the contents, accuracy
and/or scope thereof) or the Written Report or (y) the presence or absence of
hazardous or toxic materials or wastes in, at, or under the Premises or the
Property. Landlord is not aware of (i) any written reports or surveys concerning
the Building other than the Written Report and the Survey on file with the
Property Manager and (ii) any fact that makes the Written Report or Survey
inaccurate in any material respect. Tenant (a) shall not rely on and has not
relied on the Survey or the Written Report, the same having been provided for
informational purposes only and (b) acknowledges that Tenant has taken such
actions as Tenant deems appropriate to fairly evaluate the Premises and has
otherwise satisfied itself that the Premises are acceptable and suitable from an
environmental perspective. Tenant shall furnish Landlord with a complete and
legible copy of any study, report, test, survey or investigation performed by or
on behalf of Tenant at any time involving the Premises and shall fully restore
all areas and improvements where samples were taken or work was performed and
repair all damage resulting from any of the same. TENANT SHALL INDEMNIFY AND
HOLD HARMLESS LANDLORD FROM, AND SHALL REIMBURSE LANDLORD FOR AND RESPECT TO,
ANY AND ALL CLAIMS, ACTIONS, LIABILITIES, DAMAGES, LOSSES, INJURIES OR DEATHS IN
CONNECTION WITH OR ARISING OUT OF OR FROM ANY INSPECTION, TESTING SAMPLING OR
SIMILAR OR DISSIMILAR ACTIVITY CONDUCTED BY TENANT, TENANT'S AGENTS OR
CONTRACTORS AT THE PREMISES OR THE BUILDING FOR HAZARDOUS OR TOXIC MATERIAL,
WHETHER UNDER THIS RIDER OR OTHERWISE UNDER OR IN CONNECTION WITH THIS LEASE.
<PAGE>
RIDER H-2
TENANT'S STUDY, TESTING AND INSPECTION RIGHTS
This Rider is attached to and a part of that certain Lease Agreement dated as of
November 29, 1994, executed by and between PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("Landlord"), ALLIED FILM & VIDEO SERVICES,
INC., a _____________________ ("Tenant"). Any capitalized term used but not
defined herein shall have the meaning assigned to it in the provisions
designated in the Lease as the Supplemental Lease Provisions. Landlord and
Tenant mutually agree as follows:
Prior to commencement of any tenant finish work to be performed by
Landlord, Tenant shall have the right to make such studies and investigations
and conduct such tests and surveys of the Premises from an environmental
standpoint as Tenant deems necessary or appropriate, subject to the condition
that all such studies and investigations shall be completed prior to the
commencement of any tenant finish work to be performed by Landlord. TENANT
SHALL INDEMNIFY AND HOLD HARMLESS LANDLORD FROM, AND REIMBURSE LANDLORD FOR AND
WITH RESPECT TO, AND ANY ALL LOSS, DAMAGES, AND CLAIMS RESULTING FROM OR
RELATING TO TENANT'S STUDIES, TESTS AND INVESTIGATIONS. If such study, test,
investigation or survey evidences hazardous or toxic materials which affect the
Premises, Tenant shall have the right to terminate this Lease provided such
right shall be exercised, if at all, prior to the commencement of any tenant
finish work to be performed by Landlord and, in any event, within five (5) days
after Tenant receives the evidence of hazardous or toxic materials. If Tenant
does not exercise such right prior to commencement of any such tenant finish
work and within such five (5) day period, Tenant's right to terminate this Lease
shall be null and void and of no further force or effect.
AGREEMENT OF LEASE
BY AND BETWEEN:
SHIVOM ENTERPRISES LLC
AND
ALLIED DIGITAL TECHNOLOGY CORP.
as "TENANT"
THIS LEASE, made as of the 16th day of September, 1996 between SHIVOM
ENTERPRISES LLC., a New York limited liability corporation having an address at
140 Fell Court, Hauppauge, New York 11788 (hereinafter referred to as
"Landlord") and ALLIED DIGITAL TECHNOLOGY CORP., a corporation organized under
the laws of the State of Delaware and maintaining an office for the transaction
of business at 15 Gilpin Avenue, Hauppauge, New York 11788 (hereinafter referred
to as "Tenant").
WITNESSETH
WHEREAS, Landlord is the owner of the office building (the "Building")
located at 140 Fell Court, Hauppauge, New York 11788, situate on the real
property (the "Property") described on Exhibit "A" annexed.
NOW THEREFORE, in consideration of the covenants hereinafter
contained, the Landlord agrees to lease the Premises hereinafter described to
the Tenant and the Tenant agrees to lease the Premises from the Landlord and
operate an office therein as part of the Building upon the terms and conditions
set out in this agreement.
SECTION 1
PREMISES: (A) Landlord hereby leases unto Tenant and Tenant hereby
hires from Landlord the following described premises (hereinafter sometimes
referred to as (the "Premises") or "Demised Premises"): Entire south side of the
third floor of the Building, comprising 7,000 rentable square feet together with
the use in common with others of the first and third floor corridors and third
floor restrooms; and parking facilities.
<PAGE>
SECTION 2
TERM AND COMMENCEMENT: The term of this lease (hereinafter referred to
as ("Term") shall be for a period of five (5) years one and one-half months from
September 15, 1996 to October 31, 2001.
SECTION 3
RENT: (A) Tenant shall pay to Landlord in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts in the manner and at the address specified
on the first page hereof, during the term, the annual rent as indicated on
Exhibit "B" annexed. Such rental shall be paid in equal monthly installments in
advance on the first day of each and every month beginning on the commencement
date as hereinbefore defined.
(B) Rent Concession: Provided that Tenant has furnished evidence
of insurance as set forth in Section 37 hereof, Tenant may take occupancy of the
premises on September 15, 1996, and shall not be liable for the payment of rent
for the period ending October 31, 1996.
(C) Late Charges: If Landlord does not receive the entire rent
for any month during the term of this lease prior to the tenth day of such
month, Tenant shall pay, as additional rent, a late charge of five (5%) per cent
of such monthly rent.
SECTION 4
TENANTS PROPORTIONATE SHARE: Tenant's proportionate share for taxes
shall be 15.8%.
SECTION 5
ADDITIONAL RENT: Tenant agrees to pay Landlord, throughout the term of
this lease (including any renewal or extension period) Tenant's "Proportionate
share" any increases in Taxes hereinafter defined over and above Landlord's
Taxes
2
<PAGE>
for the 1996-1997 lien year.
(A) Taxes: Taxes as defined herein shall mean all general and
special real estate taxes and special assessments and water and sewer charges,
which Landlord shall pay, subject to the following:
(i) The amount of real property taxes against Landlord's real property
to be included shall be the amount shown by the tax bills for the lien year in
respect of which the Taxes are being determined. There shall be deducted from
said Taxes the net amount of any refunds, after reasonable expenses, such
refunds to be applied against said Taxes for the same calendar year to which the
taxes apply.
(ii) The amount of special taxes or special assessments to be included
shall be limited to the amount of the installments of special taxes or special
assessments required to be paid during the lien year in respect to which these
special taxes or special assessments are to be determined; however, Landlord
shall elect the longest period of time allowed by the authority imposing the tax
or assessment in which to pay installments of special taxes or special
assessments and in no event shall such special taxes or special assessments be
prorated over a period of less than five years.
(iii) If due to a future change in the method of taxation any tax is
levied against Landlord in substitution for or in lieu of general real estate
taxes and special real estate taxes, then such taxes to such extent shall be
deemed to be a real estate tax for the purpose hereof.
(iv) State income tax (as presently constituted) or any local income
tax (to the extent that it is not in lieu of real estate taxes) payable by
Landlord shall not be included in Taxes, but shall be the sole responsibility of
the Landlord. If there is an additional assessment because of improvements made
by Tenant in the Premises that are not standard office improvements and said
additional improvements meaningfully
3
<PAGE>
affect the assessment at the time of the original assessment, the amount of the
assessment or taxes attributable to such improvements shall be paid by Tenant.
(v) There shall be excluded from Taxes all federal income taxes1
federal excess profits taxes, franchise, capital stock, and federal or state
inheritance or estate taxes.
(vi) There shall be excluded from taxes in connection with any major
change in the Building such as adding or deleting floors.
(B) Payment of Taxes
Not later than February 1 of each year Landlord shall deliver to
Tenant, a copy of the Tax bill for the current year together with a computation
of Tenant's proportionate share, and Tenant shall pay its proportionate share of
any increase not later than thirty (30) days from receipt of such computation
and the report operating expenses as provided in subsection (A) hereof.
SECTION 6
USE: Tenant agrees and covenants that it shall use the premises solely
as office space for the operation of general office services related to, the
corporate headquarters for tenant and its subsidiaries and related services and
for no other purpose without the prior written consent of Landlord. Tenant will
not permit any part thereof to be used in any manner which would in any way (i)
violate any of the provisions of any mortgage to which this lease is
subordinate, (ii) violate any laws or requirements of all governmental
authorities and the Fire Rating Organization and Board of Fire Underwriters, and
any similar bodies having jurisdiction thereof, (iii) make void or voidable any
fire or liability insurance policy then in force with respect to the Premises or
the Building of which they are a part, (iv) constitute a public or private
nuisance, (v) impair the appearance, character, or reputation of the Building,
(vi) cause Tenant to default in any of its other obligations under this lease,
(vii) violate any
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zoning or occupancy conditions imposed by any municipality or governmental
regulations to be applicable to the Premises or the Building.
SECTION 7
REPAIRS: (A) Landlord shall not be required to make any repairs to the
Premises, except as specifically set forth in this lease.
(B) During the entire term of this lease, Tenant shall at
Tenant1s expense keep and maintain the premises in good order, condition and
repair and maintain, repair and replace, when necessary, appurtenances,
alterations, additions, and improvements to same, including all windows and
doors, signs, floor covering, ceiling tile and light bulbs and make all
necessary non-structural repairs and replacements with respect to the premises.
The common areas shall not be maintained by the Tenant.
(C) Landlord shall make all repairs necessary to preserve and
maintain the exterior and structure of the Premises including the foundation,
down spouts, gutters, and roof of the entire Building and including all repairs
and maintenance of heating, ventilating and air conditioning (HVAC) systems,
plumbing fixtures and water and sewer pipes serving the Premises, except that
Tenant shall be solely responsible to the extent that any repair is required by
reason of the negligent act or omission of Tenant, its employees, invitees,
agents, contractors, concessionaires and/or subtenants.
(D) Tenant agrees to keep the Premises clean and free from dirt
and other refuse matter, and continuously keep and maintain every part and
portion of the Premises in good order and repair, reasonable wear excepted. It
is the understanding and intention of the parties hereto that all interior
repairs of a minor nature (for purposes of this paragraph, costing under $500.00
per item) shall be the responsibility of the Tenant.
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SECTION 8
COMPLIANCE WITH LAW: Tenant shall in the use and occupancy of the
premises conform to all laws, orders, and regulations of the Federal, State, and
Municipal governments, or any of their departments, and regulations of the New
York Board of Fire Underwriters, applicable to the premises.
SECTION 9
SUBORDINATION: It is a condition of this Agreement and the Tenant's
rights granted hereunder that this Agreement and the lease and all the rights of
the Tenant hereunder and under the lease are subordinate to any and all
mortgages, trust deeds, or other instruments of financing, refinancing, or
collateral financing, from time to time in existence against the office
building. Upon request, Tenant will subordinate this agreement and the lease and
all of its rights hereunder and under the lease in such form as the Landlord
requires to any and all mortgages, trust deeds, or other instruments of
financing, refinancing, or collateral financing, as aforesaid. and will if
requested, attorn to the holder thereof or to the registered owners of the
office building as the case may be. If within 10 business days after request by
Landlord to Tenant to execute the instruments or certificates to give effect to
the foregoing the Tenant has not executed the same, the Landlord may at its
option terminate this agreement and the lease without liability on account.
SECTION 10
CONDEMNATION:
(A) Total or Substantial Partial Condemnation: If the whole of
the Premises shall be taken for any public or any quasi-public use by any
statute or by right of eminent domain, or by private purchase in lieu thereof,
then this lease shall automatically terminate as of the date that title shall be
taken. If any part of the Premises shall be so taken as to render the remainder
thereof unusable for the purposes for which the Premises were leased, then
Landlord and
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Tenant shall each have the right to terminate this lease on thirty days notice
to the other given within ninety days after the date of such taking. In the
event that this lease shall terminate or be terminated, the rental(s) shall, if
and as necessary, be equitable adjusted.
(B) Partial Taking Where Lease Unaffected: If any part of the
Premises shall be so taken and this lease shall not terminate or be terminated
under the provisions of paragraph A hereof, then the rental shall be equitably
apportioned according to the space so taken and Landlord shall, at its own cost
and expense, restore the remaining portion of the Premises to the extent
necessary to render same reasonably suitable for the purposes for which the
Premises were leased and shall make all repairs to the Building in which the
Premises are located to the extent necessary to constitute the remaining portion
of the Building a complete architectural unit, provided that such work shall not
exceed the size of the original Building and the cost thereof shall not exceed
the proceeds of its condemnation award.
(C) Disposition of Proceeds: All compensation awarded or paid
upon such a total or partial taking of the Premises shall belong to and be the
property of the Landlord except that Tenant shall be entitled to retain any
amount awarded to it for moving expenses.
SECTION 11
SUMS EXPENDED BY LANDLORD TO BE ADDITIONAL RENT: In the event that the
Landlord shall pay any sum of money, or do any act which shall require the
expenditure of any sums by reason of the failure of the Tenant to perform any of
the covenants, terms or conditions herein contained, the Tenant covenants to
repay within 30 business days such sums to the Landlord upon demand, and in
default thereof the sums so paid by the Landlord, together with interest thereon
may be added as additional rent to the fixed rent becoming due upon the next
rent day, or any subsequent rent day and shall be payable as
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such. Nothing contained herein shall be construed to post-pone the right of the
Landlord immediately upon expending such sums, to collect such sums with
interest by action or otherwise.
SECTION 12
DEFICIENCY: In any case where Landlord has recovered possession of the
Premises by reason of Tenant1s default, Landlord may at Landlord's option occupy
the Premises or cause the Premises to be redecorated, altered, divided,
consolidated with other adjoining Premises, or otherwise changed or prepared for
reletting, and may relet the Premises or any part thereof as agent of Tenant or
otherwise, for a term or terms to expire prior to, at the same time, or
subsequent to, the original expiration date of the lease at Landlord's option,
and receive the rent therefor, applying the same first to the payment of such
expenses as Landlord may have incurred in connection with the recovery of
possession, redecorating, not to exceed the original tenant finish allowance
provided to Tenant, altering, dividing, consolidating with other adjoining
premises, otherwise changing or preparing for reletting, including brokerage and
reasonable attorney's fees, and then to the payment of damages in amount equal
to the rent hereunder and to the cost and expense of performance of the other
covenants of Tenant as herein provided; and Tenant agrees, whether or not
Landlord has relet, to pay the Landlord damages equal to the rent and other sums
herein agreed to be paid by Tenant, less the net proceeds of the reletting, if
any, as ascertained from time to time, and the same shall be payable by Tenant
on the several rent days above specified. In reletting the Premises as
aforesaid, Landlord may grant rent concessions, and Tenant shall not be credited
therewith. No such reletting shall constitute a surrender and acceptance or be
deemed evidence thereof. If Landlord elects, pursuant hereto, actually to occupy
and use the Premises or any part thereof, during any part of the balance of the
term as originally fixed or since extended, there shall be allowed against
Tenant's obligation
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for rent or damages as herein defined, during the period of Landlord's
occupancy, the reasonable value of such occupancy, not to exceed, in any event
the rent herein reserved, and such occupancy shall not be construed as a release
of Tenant's liability hereunder.
Tenant hereby waives all right of redemption to which Tenant or any
person claiming under Tenant might be entitled by any law now or hereafter in
force.
Landlord's remedies hereunder are in addition to any remedy allowed by
law.
SECTION 13
ENTIRE AGREEMENT: No oral statement or prior written matter shall
have any force or effect. No waiver of any provision of this agreement shall be
effective unless in writing, signed by the waiving party. Tenant agrees that it
is not relying on any representations or agreements other than those contained
in this lease. This agreement shall not be modified except by writing subscribed
by all parties, nor may this lease be cancelled by Tenant except with the
written consent of the Landlord, unless otherwise specifically provided herein.
SECTION 14
LANDLORD'S RIGHT TO CURE TENANT'S BREACH: If Tenant breaches any
covenant or condition of this lease, Landlord may, on reasonable notice to
Tenant (except that no notice need be given in case of emergency), cure such
breach at the expense of Tenant and the reasonable amount of all expenses,
including attorney's fees, incurred by Landlord in doing so (whether paid by
Landlord or not) shall be deemed additional rent payable on demand.
SECTION 15
MECHANIC'S LIEN: Tenant shall within thirty days after written notice
from Landlord discharge any mechanic's lien for materials or labor claimed to
have been furnished to the Premises on Tenant's behalf.
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SECTION 16
LANDLORD'S RIGHT TO INSPECT AND REPAIR: may, but shall not be
obligated to, enter the Premises at any reasonable time, on reasonable notice to
Tenant (except that no notice need be given in case of emergency) for the
purposes of inspection or the making of such repairs replacements, and additions
in, to, on and about the Premises or the Building, as Landlord deems necessary
or desirable. Tenant shall have no claim or cause of action against Landlord by
reason thereof.
SECTION 17
ESTOPPEL CERTIFICATES: Tenant shall, without charge, at any time and
from time, within ten days after requested by Landlord, certify by written
instrument, duly executed, acknowledged and delivered, to Landlord, or any other
person, firm or corporation specified by Landlord:
(A) that this lease is unmodified and in full force and effect,
or, if there have been any modifications, that the same is in full force and
effect as modified and stating the modifications;
(B) whether or not there are then existing any set-offs or
defenses against the enforcement of any of the agreements, terms, covenants or
conditions hereof and any modification hereof upon the part of Tenant to be
performed or complied with, and, if so, specifying the same;
(C) the dates, if any, to which the base rent and additional rent
and other charges hereunder have been paid in advance;
(D) the date of expiration of the current term;
(E) and the base rent then payable under this lease.
SECTION 18
SURRENDER OF PREMISES: On the last day or sooner termination of the
demised term, Tenant shall quit and surrender the Premises broom-clean, in good
condition and repair (reasonable wear and tear excepted) together with all
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alterations, additions and improvements which may have been made in, on or to
the Premises, except movable furniture or unattached movable trade fixtures put
in at the sole expense of Tenant; remove from the Premises all its property
together with any alterations, additions and improvements, the removal of which
is requested by Landlord, and any or all of such property not so removed shall,
at Landlord's option, become the exclusive property of Landlord or be disposed
of by the Landlord, at Tenant's cost and expense, without further notice to or
demand upon Tenant. If the Premises be not surrendered as and when aforesaid,
Tenant shall indemnify Landlord against loss or liability resulting from the
delay by Tenant in so surrendering the Premises including, without limitation,
any claims made by any succeeding occupant founded on such delay. Tenant's
obligations under this section shall survive the expiration or sooner
termination of the demised term.
SECTION 19
RULES AND REGULATIONS: Tenant and Tenant's agents, servants,
employees, invitees and licensees shall observe faithfully and comply strictly
with the Rules and Regulations attached hereto as Exhibit "D" and with any
modifications thereof and any additional rules and regulations which may from
time to time hereafter be adopted by Landlord for the Building of which the
Premises form a part. Notice of the adoption of any such modification or
additional rule or regulation shall be given to Tenant by Landlord. If Tenant
disputes the reasonableness off any such modification or additional rule or
regulation adopted by Landlord, the parties hereto agree to submit the question
of the reasonableness of such modification or additional rule or regulation for
decision to the Chairman of the Board of Directors of the Management Division of
The Real Estate Board of New York, Inc., or to such impartial person or persons
as he may designate1 whose determination shall be final and conclusive upon the
parties hereto.
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SECTION 20
CONSENTS: Whenever the terms of this Lease require the consent or
approval of Landlord, Landlord agrees that such consent or approval will not be
unreasonably withheld or delayed.
SECTION 21
COMMON AREAS: Premises demised to Tenant shall include the right to
use in common with other tenants of the Building, their invitees, customers and
employees, the stairways, elevators halls, third floor toilet and sanitary
facilities contained in the Building, as well as the sidewalks, delivery areas
and parking facilities, and appurtenances thereto. Tenant shall have access to
the Premises at all times. Tenant's employees shall have the right to use on
site parking areas at no cost to Tenant or employee.
SECTION 22
INDEMNIFICATION/HOLD HARMLESS: Landlord will not be liable for any
damage or injury caused solely by Tenant on the Premises. Notwithstanding
anything contained in this lease to the contrary, Tenant will indemnify and hold
Landlord harmless for any claims or damages caused solely by an act or omission
of Tenant, its agents or employees that occurs on the Premises, and Landlord
will indemnify and hold harmless Tenant for any claims for damages caused by an
act or omission of Landlord, its agents or employees. Notwithstanding the
foregoing, the respective liability of Landlord and Tenant shall be limited to
the limits of liability insurance covering such occurrence provided further that
Tenant maintains the liability insurance policy described in Section 37 hereof.
SECTION 23
FIRE AND OTHER CASUALTIES: In the event the Building or Premises shall
be destroyed or rendered untenantable, either in whole or in part, Landlord may,
at it's option, restore the Building and Premises to the condition existing just
prior to
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the casualty and Tenant's rent for that portion of the Premises rendered unfit
for occupancy shall abate until the Building and Premises have been fully
restored or this Lease has been terminated.
Within thirty (30) days of the date of the casualty, Landlord shall
give Tenant written notice indicating whether or not Landlord will restore the
Building and Premises. If Landlord elects to restore, the notice must indicate
how long the restoration is expected to take. If Premises are not restored
within one hundred and twenty (120) days from the date of such casualty to
substantially the same condition as before the casualty, Tenant shall have the
right to cancel this lease as of the date of the casualty.
(A) If Landlord does not give Tenant the required notice within
the thirty (30) day period or Landlord's notice does not include the required
information, Tenant may give Landlord a written notice indicating the default
and Landlord shall have ten (10) days from date of Tenant's notice to issue or
re-issue the notice. If at the end of the ten (10) day period Landlord has not
given Tenant said notice, this Lease shall expire and rent shall be abated from
the date of the casualty without further action on the part of either Landlord
or Tenant.
(B) If Landlord's notice indicates that Landlord does not intend
to restore the Building and Premises, this Lease shall terminate automatically
as of the date of the casualty without further action on the part of either the
Landlord or Tenant.
(C) If Landlord's notice indicates that Landlord intends to
restore and the restoration will not be substantially complete within one
hundred twenty (120) days from the date of casualty, Tenant shall have the
option to cancel this Lease by giving Landlord written notice within ten (10)
days of receipt of Landlord's notice.
In the event the Tenant should not cancel the Lease,
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Landlord will proceed to restore the Building and Premises in accordance with
Landlord's notice to Tenant and Tenant's rent for the space unfit for occupancy
shall remain abated until the Premises are again tenantable, however, if the
restoration is not complete within 110% of the time indicated in Landlord's
notice, Tenant shall have an additional option to cancel this Lease by giving
Landlord written notice within ten (10) days.
(D) If Landlord's notice shall indicate that Landlord will
restore in one hundred twenty (120) days or less from the date of casualty, the
Landlord will proceed with the restoration and Tenant's rent for the space unfit
for occupancy shall remain abated until Premises shall again be tenantable,
however, if the restoration is not complete within 110% of the time indicated in
Landlord's notice, Tenant shall have the option to cancel this Lease by giving
Landlord written notice within ten (10) days.
SECTION 24
DEFAULT REMEDIES: If Tenant defaults in the payment of rent or
additional rent or defaults in the performance of any of the covenants or
conditions hereof, Landlord may give to Tenant notice of such default and if
Tenant does not cure any rent or additional roommate default within five (5)
days, or other default within fifteen (15) days, after the giving of such notice
(or, if such other default is of such nature that it cannot be completely cured
within such fifteen (15) days, if Tenant does not commence such curing within
such curing within such fifteen (15) days and thereafter proceed with reasonable
diligence and in good faith to cure such default), then Landlord may terminate
this Lease on not less than three (3) days notice to Tenant, and on the date
specified in said notice the term of this Lease shall terminate, and Tenant
shall then quit and surrender the Premises to the Landlord, but Tenant shall
remain liable as herein provided. If this lease shall have been so terminated by
Landlord, Landlord may at any time thereafter resume possession of the Premises
by any lawful
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means and remove Tenant or other occupants and their effects.
TENANT'S REMEDIES: In the event of a breach of this lease by Landlord,
and Landlord's failure to cure such breach within thirty (30) days of Tenant's
written notice of breach to Landlord, or if claimed breach cannot be cured
within thirty (30) days, or if curative steps are not undertaken at the same
time and diligently pursued, Tenant will have the right of pursuing any other
remedies which Tenant may have at law or equity or under any state statute or
regulation. Should Tenant elect to cure Landlord's breach, Tenant may offset the
costs of cure incurred by Tenant against future sums due Landlord under this
lease and/or submit an invoice to Landlord specifying the amount due Tenant,
which amount Landlord will pay within ten (10) days of receipt of Tenant's
invoice. The election by Tenant of any remedy afforded Tenant will not be deemed
a waiver of any other remedies available to Tenant, Tenant's remedies being
cumulative.
SECTION 25
ASSIGNMENT AND SUBLETTING: Nothing will be construed as prohibiting
Tenant the right to assign this Lease or to sublet all or a portion of the
Premises to a company under common control or ownership with Tenant in which
case Tenant will give Landlord prompt written notification of the same. Any
other assignment or subletting may be made only with the consent of Landlord,
which shall not be unreasonably withheld or delayed.
SECTION 26
SIGNS: Tenant is granted permission to place a free-standing
identification sign not larger than two feet by two feet (2'x2') at the end of
the cul-de-sac adjoining the Building, provided that
(i) Tenant acquires, at Tenant's sole cost and expense, any
necessary municipal approvals; and
(ii) that Landlord approves the design of and materials used
in the construction of such sign, which
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approval should not be unreasonably withheld or delayed. Tenant is granted the
right to display all company names (not exceeding 5), the names of pertinent
departments and individuals in the Building directory. All such signs shall be
identical in letter size1 color and material to the signage directory upon the
commencement of this lease.
SECTION 27
NOTICES: All notices under this Lease shall be sent by registered or
certified mail, return receipt requested, or delivered in person.
(A) Notices to Landlord shall be sent to Landlord at the address
set forth on the first page of this Lease.
(B) Any notice which either party may or is required to give,
will be given by registered or certified mail, return receipt requested, postage
prepaid, to the address(es) shown below, or at such other places as may be
designated by the parties from time to time:
To Landlord: 140 Fell Court
Hauppauge, New York 11788
with copy to:
Anthony T. Conforti, Esq.
140 Fell Court
Hauppauge, New York 11788
To Tenant: 140 Fell Court
Hauppauge, New York 11788
with copy to:
Joel Ziegler, Esq.
Greshin, Ziegler & Pruzansky, Esqs.
199 East Main Street
Smithtown, New York 11787
SECTION 28
CARPET CARE: Tenant shall be required to equip all castered chairs
with two and one-half inch carpet casters to protect carpet and Landlord
acknowledges that doing so fulfills Tenant's obligation to protect the carpet.
SECTION 29
MUTUAL WAIVER OF SUBROGATION: Landlord and Tenant mutually agree to
endeavor to obtain from their respective
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insurers permission to waive subrogation. In the event an insurer refuses to
grant such permission1 the insured will arrange to add the other party (Landlord
or Tenant as the case may be) as an Additional Insured. If any additional
premium is incurred as a result of this addition, it will be reflected as an
adjustment to the rent.
SECTION 30
JANITORIAL & WASTE REMOVAL: The Landlord shall furnish to the Tenant
cleaning and janitorial service1 including removal of refuse and rubbish and
furnish washroom supplies as defined in the Janitorial Schedule attached hereto.
Landlord shall also coordinate refuse sorting to meet municipal
recycling regulations.
SECTION 31
INTERRUPTION OF SERVICES OR USE: Interruption or curtailment of any
service maintained in the Building, if caused by strikes, mechanical
difficulties, or any causes beyond Landlord's control whether similar or
dissimilar to those enumerated, shall not entitle Tenant to any claim against
Landlord or to any abatement in rent, nor shall the same constitute constructive
or partial eviction, unless Landlord fails to take such measures as may be
reasonable in the circumstances to restore the service without undue delay. If
the Premises are rendered untenantable in whole or in part, for a period of over
three (3) business days, by the making of repairs, replacements or additions,
other than those made with Tenant's consent or caused by misuse or neglect by
Tenant or Tenant's agents, servants, visitors or licensees, there shall be a
proportionate abatement of rent during the period of such untenantability.
SECTION 32
Services
A. Landlord shall provide:
(i) Necessary elevator facilities and elevator repairs, including
emergency elevator repairs, on
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Business Days from 8:00 a.m. to 7:00 p.m., on Saturdays from 9:00 a.m. to 1:00
p.m. and have at least one elevator subject to call at all other times; there
shall be no major loading or unloading in the Building between 9:00 a.m. and
6:00 p.m. on Business Days, except that Tenant shall schedule with the Building
manager Tenant's deliveries in the ordinary course of business at the Building
loading dock during such hours as may be reasonably designated by Landlord.
(ii) Light and heat for Building common areas.
(iii) Condensed water to the heat pump unities which provide heat
and air conditioning to the Premises and when the heat pump units alone cannot
provide in Landlord's reasonable judgment adequate heat for the Premises, or
when otherwise requested in advance by Tenant, supplemental hot water; such
supplemental hot water and condensed water to be available twenty-four (24)
hours per day, but at Tenant's cost (but not to exceed similar charges in
comparable office buildings) on non-Business Days other than Saturdays, on
Business Days from 7:01 p.m. to 7:59 a.m. and on Saturdays, for any periods
other than from 9:00 a.m. to 1:00 p.m., to provide heat or air conditioning to
the Premises.
(iv) Hot and cold water for ordinary lavatory and drinking
purposes, but if Tenant uses or consumes water for any other purposes or in
unusual quantities (of which fact Landlord shall be the reasonable judge),
Landlord may install a water meter at Tenant's expense which tenant shall
thereafter maintain at Tenant's expense in good working order and repair to
register such water consumption and Tenant shall pay for water consumed as shown
on such meter as Additional Rent within thirty (30) days following Landlord's
rendering the bill therefor. On Tenant's default in making such payment after
the expiration of applicable cure periods, Landlord may pay such charges and
collect the same from Tenant. A water meter shall be installed and maintained at
Tenant's expense if
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required by Applicable Law. If a water meter is so installed, Tenant shall pay
its proportionate share of the water charges and sewer rent (if applicable)
resulting from such increased water use and all other rents and charges which
are now or hereafter assessed1 imposed, or may become a lien on the Premises or
the Building.
(v) Cleaning service for the Premises on Business Days at
Landlord's expense in accordance with the provisions of Exhibit C annexed hereto
and made a part hereof. Tenant shall pay Landlord the cost of removal of any
Tenant's "extraordinary refuse and rubbish" from the Building; as used herein,
extraordinary refuse and rubbish shall mean refuse and rubbish that necessitates
more than one (1) elevator load per floor of the Premises per day of refuse and
rubbish in excess of refuse and rubbish usually associated with normal office
use.
(vi) Parking facilities, in use common with the other tenants at
the Premises, their employees, agents and invitees, except that Tenant shall be
guaranteed availability of forty spaces including five reserved spaces to be
located adjacent to the handicapped parking area on the south side of the
Building.
(vii) Snow removal and landscaping services including the mowing
of lawn during the growing season at intervals at least one time per week.
(viii) Landlord agrees to repair 1 broken glass pane.
B. Landlord reserves the right to stop services of the elevators, the
heating, plumbing, air-conditioning, or power system, or cleaning or other
services, if any, when necessary by reason of accident or for repairs,
alterations, replacements, or improvements necessary in the reasonable judgment
of Landlord for as long as may be reasonably required by reason thereof or by
reason of strikes, accidents, laws, orders or regulations or any other reason
beyond the control of Landlord, provided that Landlord shall exercise good faith
efforts to diligently complete the repairs and restore the service as soon as
practicable and to minimize disruption to
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Tenant's business.
SECTION 33
Electricity
(A) Tenant will obtain its electricity for the Premises as a direct
customer of the public utility through wiring, metering and equipment servicing
the Premises and either presently existing or hereafter installed by Tenant, as
hereinafter provided. If for any reason beyond Landlord's control, including
action by government or other authority asserting jurisdiction over the matter,
Tenant no longer can so obtain its electricity supplied directly from the public
utility, then, and in such event, Landlord will redistribute to Tenant the
electricity for the Premises area with charges to be determined pro-rata based
upon rentable area occupied by Tenant or at Landlord's option, on a "rent
inclusion", "submetering" or other basis.
(B) If and so long as electricity for all or part of the Premises is
to be obtained by Tenant directly from the public utility, Tenant shall obtain
from and pay to the public utility, for Tenant's entire separate supply of
electric current for the Premises and, or portion thereof receiving direct
service, by direct application to and arrangement with the public utility
company servicing the Building. Landlord will permit its electric feeders,
risers and wiring servicing the Premises to be used by Tenant to the extend
available and safely capable of being used for such purpose.
(C) Landlord shall not be liable to Tenant for any loss or damage or
expense which Tenant may sustain or incur if either the quantity or character of
electric service is changed or is no longer available or suitable for Tenant's
requirements.
SECTION 34
ACCEPTANCE OF POSSESSION AND PUNCH LIST ITEMS: Notwithstanding the
date specified in the Lease for the commencement of the term, the term and
Tenant's obligation to
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pay rent under the Lease shall not commence until Landlord shall have
substantially completed all work and installations to be performed by Landlord
for Tenant's occupancy and Tenant has accepted possession of the Premises.
If Landlord is unable to give possession of the Premises on the
Commencement Date of the term of this Lease because construction, or
improvements are not completed, rent shall abate for the period that possession
by Tenant is delayed. If such delay shall continue for more than 45 days, than
Tenant may, within 10 days after the expiration of said 45 day period, give
Landlord a notice of election to terminate this Lease. Unless possession of the
Premises shall sooner be made available to Tenant, this Lease shall terminate on
the 10th day after the giving of said notice and Landlord shall return to Tenant
the consideration paid. Landlord shall have no obligation to Tenant for failure
to give possession except as above provided.
Tenant's acceptance of possession of the premises may be subject to a
punch list of incomplete or incorrect improvement items. Landlord shall complete
or correct the punch list items within thirty (30) days of submission of the
punch list by Tenant. Landlord agrees that, although rent will accrue from the
date of acceptance and taking of possession of the Premises by Tenant subject to
the rent concession provided for herein, no rent payments shall be made until
all punch list items are corrected to Tenant's satisfaction.
SECTION 35
QUIET ENJOYMENT: Landlord covenants that if and so long as Tenant pays
the rent and additional rent and performs the covenants hereof, Tenant shall
peaceably and quietly have, hold and enjoy the Premises for the term or renewal
term herein mentioned, subject to the provisions of this Lease.
SECTION 36
TIME LIMIT FOR COMPLETE EXECUTION: Landlord shall have five (5) days
from the delivery of this Lease signed by
<PAGE>
Tenant in which to affix Landlord's signature to same and return a minimum of
one such fully executed document to Tenant. Failing to so perform shall entitle
Tenant to cancel this Lease by written notice to Landlord in which case this
Lease shall be deemed null and void, and neither party hereto shall have any
further obligation to the other for performance hereunder.
SECTION 37
INSURANCE: Tenant shall provide and at all times maintain
comprehensive liability insurance covering the Premises, written by an
underwriter satisfactory to Landlord, with minimum limits of liability,
regarding personal injury or death1 of $1,000,000.00 per occurrence, and
regarding property damage, of $100,000.00 per occurrence. Landlord shall be
named as an additional insured and shall be furnished with a certificate of
insurance. Landlord will be promptly notified of cancellation and/or reduction
in insurance coverage.
SECTION 38
EXPENSES OF PROCEEDINGS: In the event that Landlord shall have to
initiate any action or proceeding against the Tenant for the recovery of money
damages or possession of the Premises or other injunctive or declaratory relief
by reason of nonpayment of Rent or Additional Rent or by nonperformance by
Tenant of the terms and conditions of the lease then the Tenant shall pay, as
Additional Rent, all of Landlord's costs and expenses1 including reasonable
legal fees.
In the event that tenant shall have to initiate any action or
proceeding against the Landlord by reason of the Landlord's breach of any
obligation of Landlord under this Lease, and if Tenant is successful in such
action or proceeding, Landlord shall pay all of Tenant's costs and expenses,
including reasonable legal fees.
SECTION 39
BROKERAGE
Landlord and Tenant each represents and warrants to the other that it
has not dealt with any broker in connection
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with this lease other than Ashland Properties ("Broker") and Landlord shall pay
Broker any commission earned pursuant to a separate Agreement between Landlord
and Broker. Landlord and Tenant shall indemnify and defend each other against
any costs, claims and expenses, including reasonable attorney's fees, arising
out of the breach of their respective parts of any representation Agreement
contained in this section.
SECTION 40
BLIND PROVISION: Tenant is hereby granted permission to install, at
Tenant's own expense and arrangement, interior window treatments which are
vertical in design and nature and colored either in light beige and/or cream.
SECTION 41
SECURITY: The sum of EIGHTEEN THOUSAND AND 00/100 ($18,000.00) DOLLARS
shall be deposited by the Tenant herein with the Landlord as security for the
faithful performance of all the covenants and conditions of the lease by said
Tenant. If the Tenant faithfully performs all the covenants and conditions on
its part to be performed, then such sum, shall be returned to said Tenant.
The Landlord shall deposit the security into a five year certificate
of deposit and the interest thereon shall accrue in favor of Tenant and be
payable to Tenant at the expiration of the Lease if Tenant performs all of the
covenants and conditions on its part to be performed.
SECTION 42
MISCELLANEOUS
A. LIMITATION ON LANDLORDS'S PERSONAL LIABILITY: It is understood and
agreed that Tenant shall look solely to the estate and property of Landlord in
the property for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring payment of money by Landlord in
the event of any default or breach by Landlord with respect to any of the
terms, covenants and conditions of
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the Lease to be observed or performed by the Landlord, and any other obligation
of Landlord created by or under this Lease, and no other property or assets of
Landlord or of its members, partners, beneficiaries, co-tenants, shareholders,
or principals (as the case may be) shall be subject to levy, execution or other
enforcement procedures for the satisfaction of Tenant's remedies.
The term "Landlord," as used throughout this Lease, shall be limited
to mean and include only the owner or owners at the time in question of
Landlord's interest in this Lease. Further, in the event of any transfer by
Landlord of Landlord's interest in this Lease, Landlord herein named (and in
case of any subsequent transfers or conveyances, the then owner), including each
of its members, partners, beneficiaries, co-tenants, shareholders, or principals
(as the case may be), shall be automatically freed and relieved, from and after
the date of such transfer or conveyance of any liability to Tenant by virtue of
this agreement.
B. FORCE MAJEURE: The period of time during which either party is
prevented or delayed in any performance or the making of any improvements or
repairs or fulfilling any obligation under his Lease, other than the payment of
Rent and Additional Rent, due to unavoidable delays caused by fire, catastrophe,
strikes or labor trouble, civil commotion, Acts of God, the public enemy,
governmental prohibitions or regulations or inability to obtain materials by
reason thereof, or any other causes beyond such party's reasonable control,
shall be added to such party's time for performance, and such party shall have
no liability by reason of such delay.
C. CHANGES AND ADDITIONS: Landlord hereby reserves the right at any
time, and from time to time, to make alterations or additions to, and to build
additional stories on the Building in which the Premises are located and to
build new space adjoining the same. Landlord also reserves the right at any
time, and from time to time, to construct other buildings
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or improvements on Landlord's Property, to make alterations therein or additions
thereto, to build additional stories on any Building or Buildings within the
Landlord's Property, to build adjacent thereto, to construct decks or elevated
parking facilities, to install, maintain, use, repair and replace ducts, wires,
pipes and conduits passing through or under the Premises serving other parts
(now existing or hereafter added) of the Property, and to sell or lease any part
of Landlord's Property.
D. ATTORNMENT BY TENANT:
In the event any proceedings are brought for the foreclosure of,
or in the event of conveyance by deed in lieu of foreclosure of, or in the event
of the exercise of the power of sale under, any mortgage made by Landlord
covering the Premises, or in the event Landlord sells, conveys or otherwise
transfers its interest in the Property or any portion thereof containing the
Premises, Tenant shall attorn to and hereby covenants and agrees to execute an
instrument in writing reasonably satisfactory to the new owner whereby Tenant
attorns to such successor in interest and recognizes such successor as the
Landlord under this Lease.
E. SURVIVAL OF TENANT'S OBLIGATIONS: Any sums due Landlord from Tenant
that by the terms herein would be payable, or are incapable of calculation until
after the expiration or earlier termination of this Lease, shall survive and
remain a continuing obligation until paid.
F. EFFECT OF LANDLORD'S NOTICE TO TERMINATE: Any right on the part of
the Landlord to terminate this Lease shall, when exercised, require no further
act, to the end that at the expiration of the applicable time period, if any,
contained in the particular termination provision, this Lease and the term
hereunder shall end and expire as fully and completely as if such termination
date was that date herein definitely fixed for the end and expiration of this
Lease and the term hereof, and upon such date Tenant shall quit and
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surrender the Premises to Landlord.
G. EFFECT OF CAPTIONS: The captions or legends in this Lease are
inserted only for convenient reference or identification of the particular
paragraphs. They are in no way intended to describe, interpret, define or
limit the scope, extent or interest of this Lease, or any paragraph or provision
thereof.
H. EXECUTION IN COUNTERPARTS: This Lease may be executed in one or
more counterparts, any one or all of which shall constitute but one agreement.
I. EXECUTION OF LEASE BY LANDLORD: The submission of this document for
examination and negotiation does not constitute an offer to lease or a
reservation of, or option for, the Premises, and this document shall be
effective and binding only upon the execution and delivery thereof by both
Landlord and Tenant.
J. ENVIRONMENTAL COMPLIANCE: Tenant represents that it shall not
release, discharge or deposit any Hazardous Substance as defined by any
environmentally related statute enacted by the State of New York. Should Tenant
breach the obligation not to release, discharge or deposit a Hazardous Substance
on the Premises, Tenant will unconditionally indemnify and hold Landlord
harmless from and on account of any claim, judgment, cleanup order or related
expense (including, but riot limited to, reasonable attorneys fees and
disbursements incurred in connection with defending or representing Landlord in
defending any action, judgment or clean-up order incurred in connection with any
release, discharge of deposit of any Hazardous Substance.
Tenant's obligation to Landlord as set forth in this sub-section
shall not extend to any claims not made to and received by Tenant within one
year from Tenant's (including
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assignee's) vacating of the Premises.
LANDLORD:
SHIVOM ENTERPRISES LLC
BY: /s/ Chandra Bhansal
------------------------------------
CHANDRA BHANSAL,
Manager
TENANT:
ALLIED DIGITAL TECHNOLOGY CORP.
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title: CEO
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EXHIBIT "A"
The entire south side of the third floor of the Building located 140 Fell Court,
Hauppauge, New York Comprising 7,000 square rentable feet at the premises
described below:
ALL that certain plot, piece or parcel of land, situate, lying and
being in the Hamlet of Hauppauge, Town of Islip, County of Suffolk and
State of New York, being more particularly bounded and described as
follows:
BEGINNING at a point on the Westerly side of Fell Court, distant
425.00 feet, Southerly from the Southerly end of a curve connecting the
Westerly side of Fell Court, with the Southerly side of Rabro Drive
(extension);
RUNNING THENCE Southerly along the Westerly side of Fell Court, the
following three courses and distances:
1. South 2 degrees 35 minutes 3 seconds East, 177.55 feet;
2. 17.91 feet, on an arc of a right circular curve, the radius of
which is 20.00 feet;
3. 147.99 on the arc of a left circular curve the radius of which is
60 feet;
THENCE South 2 degrees 35 minutes 03 seconds East, 117.65 feet, to
land proposed to be dedicated to the Town of Islip;
THENCE South 88 degrees 07 minutes 22 seconds West, 290.02 feet, to
land now or formerly of Gloria Hocker;
THENCE along land now or formerly of Gloria Hocker, North 2 degrees 35
minutes 03 seconds West, 414.07 feet;
THENCE North 87 degrees 24 minutes 57 seconds East, a distance of 260
feet, to the Westerly side of Fell Court and the point or place of
BEGINNING.
<PAGE>
EXHIBIT B
RENT SCHEDULE ATTACHED TO AND MADE PART OF A LEASE MADE BY AND SHIVOM
ENTERPRISES LLC, LANDLORD and ALLIED DIGITAL TECHNOLOGY CORP. AS TENANT
BASE ANNUAL RENT
Annual Monthly
------ -------
November 1, 1996/
October 31, 1997 $101,500.00 $ 8,458.33
November 1, 1997/
October 31, 1998 $104,545.00 $ 8,712.08
November 1, 1998/
October 31, 1999 $107,681.35 $ 8,973.45
November 1, 1999/
October 31, 2000 $110,911.79 $ 9,242.65
November 1, 2000/
October 31, 2001 $114,239.14 $ 9,519.93
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