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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB
(Mark One)
/X/ Quarterly report under section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1999
OR
/ / Transition report under section 13 or 15 (d) of the Securities Exchange
Act of 1934 for the transition period from _______________ to
_______________
Commission file number 0-25159
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LION INC.
(Name of Small Business Issuer in its charter)
Minnesota 91-1524747
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2201 Lind Ave. SW, Suite 200, Renton, WA 98055
(Address of principal executive offices) (Zip code)
(206) 236 - 1995
(Issuer's telephone number)
Plenum Communications, Inc.
3003-80th Ave. SE, Mercer Island, WA 98040
(Former name and address if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ( X ) No ( )
As of October 6, 1999, approximately 27,400,497 shares of the Company's common
stock were outstanding.
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LION Inc. and Subsidiary
Form 10 - QSB
For the Quarter Ended September 30, 1999
<TABLE>
<CAPTION>
PAGE NUMBER
INDEX
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets at September 30, 1999 (unaudited) and
December 31, 1998 3
Consolidated Statements of Operations for the three and nine month periods
ended September 30, 1999 and 1998 (unaudited) 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds 12
Item 6 Exhibits and Reports on Form 8 - K 13
Signatures 14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LION Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30,
1999 December 31,
(Unaudited) 1998
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 185,791 $ 566,767
Accounts receivable, less allowance for doubtful accounts of $35,965
and $23,350 in 1999 and 1998, respectively 395,086 121,302
Prepaid expenses and other 271,179 12,705
---------------- ----------------
Total current assets 852,056 700,774
PROPERTY AND EQUIPMENT - net 893,851 212,179
OTHER ASSETS
Goodwill - net 529,015 -
Other assets 35,576 6,351
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$ 2,310,498 $ 919,304
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---------------- ----------------
LIABILITIES
CURRENT LIABILITIES
Line of credit $ 206,750 $ -
Accounts payable 291,532 45,016
Accrued liabilities 414,116 183,626
Deferred revenue 231,852 97,828
Related party payables - 26,188
Convertible debentures - 85,032
---------------- ----------------
Total current liabilities 1,144,250 437,690
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share; authorized
5,000,000 shares; none outstanding - -
Common stock - authorized, 50,000,000 shares of $.001 par value; 27,398,497
and 24,671,355 shares issued and outstanding in 1999 and 1998,
respectively 27,398 24,671
Additional contributed capital 7,625,316 5,879,970
Notes receivable from stockholders (217,813) (207,812)
Accumulated deficit (6,268,653) (5,215,215)
---------------- ----------------
1,166,248 481,614
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$ 2,310,498 $ 919,304
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---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these statements.
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LION Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
----------------------------------------- -----------------------------------------
1999 1998 1999 1998
------------------ ------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Revenues $ 1,174,228 $ 517,125 $ 2,837,725 $ 1,271,033
Expenses
Marketing and administrative 571,623 335,856 1,470,355 853,261
Salaries and payroll taxes 923,777 423,096 2,209,904 1,067,033
Depreciation and amortization 68,817 21,081 135,516 55,953
------------------ ------------------- ------------------- ------------------
1,564,217 780,033 3,815,775 1,976,247
------------------ ------------------- ------------------- ------------------
Operating loss (389,989) (262,908) (978,050) (705,214)
Other income (expense)
Interest expense (62,322) (120,054) (112,649) (201,875)
Interest income 6,564 2,190 24,307 3,585
Other income 12,954 - 12,954 -
------------------ ------------------- ------------------- ------------------
NET LOSS $ (432,793) $ (380,772) $ (1,053,438) $ (903,504)
------------------ ------------------- ------------------- ------------------
------------------ ------------------- ------------------- ------------------
Loss per common share $ (.02) $ (.02) $ (.04) $ (.04)
------------------ ------------------- ------------------- ------------------
------------------ ------------------- ------------------- ------------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
LION Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-----------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net loss $(1,053,438) $ (903,504)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 135,516 55,953
Interest earned on notes receivable (16,200) (1,336)
Interest expense on notes payable - 30,463
Interest expense on convertible debentures 96,356 158,133
Warrants issued for services received 47,000 -
Common stock issued for drawings - 400
Common stock and stock options issued for services received 52,238 9,411
Changes in assets and liabilities
Accounts receivable (195,147) (57,428)
Prepaid expenses and other (96,487) 20,169
Deferred revenue 73,230 45,989
Accounts payable 240,846 34,845
Accrued liabilities 135,420 40,616
---------------- ----------------
Net cash used in operating activities (580,666) (566,289)
Cash flows from investing activities
Deposit on leased facilities (35,577) -
Capitalized software development costs (260,582) -
Cash received from purchase of assets with common stock 26,866 -
Purchase of property and equipment (435,024) (83,814)
---------------- ----------------
Net cash used in investing activities (704,317) (83,814)
Cash flows from financing activities
Payments on notes payable - (8,562)
Payments on convertible debentures - (6,562)
Payments on related party payables (26,188) (114,361)
Proceeds from line of credit 206,750 -
Proceeds from issuance of common stock and exercise of stock options 50,950 173,625
Proceeds from exercise of warrants 672,495 672,290
---------------- ----------------
Net cash provided by financing activities 904,007 716,430
---------------- ----------------
Net (decrease) increase in cash and cash equivalents (380,976) 66,327
Cash and cash equivalents at beginning of period 566,767 104,604
---------------- ----------------
Cash and cash equivalents at end of period $ 185,791 $ 170,931
---------------- ----------------
---------------- ----------------
Supplemental non-cash investing and financing activities:
Exercise of stock options by notes receivable $ 10,000 $ 156,250
Related party debt converted to common stock $ - $ 447,577
Debentures converted to common stock $ 181,388 $ 306,494
Issuance of warrants on line of credit guarantee $ 134,000 $ -
Notes payable converted to common stock $ - $ 203,381
Accrued liability on capitalized software costs $ 49,000 $ -
Purchase of assets with common stock $ 600,001 $ -
</TABLE>
The accompanying notes are an integral part of these statements.
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LION Inc. and Subsidiary
Form 10 - QSB
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements and related notes
are presented as permitted by Form 10 - QSB, and do not contain
certain information included in the Company's audited consolidated
financial statements and notes for the fiscal year ended December
31, 1998. The information furnished reflects, in the opinion of
management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the results of the
interim periods presented. The results of operations for the
interim periods are not necessarily indicative of the results to be
expected for the entire fiscal year ending December 31, 1999. The
accompanying unaudited consolidated financial statements and
related notes should be read in conjunction with the audited
consolidated financial statements and the Form 10 - KSB of LION
Inc. (formerly Plenum Communications, Inc.) and its subsidiary,
Lioninc.com, collectively referred to as the Company, and notes
thereto, for its fiscal year ended December 31, 1998.
NOTE 2. LOSS PER SHARE
The Company accounts for loss per share under Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share," which established standards for
computing and presenting earnings per share (EPS). Loss per share is based on
the average number of shares outstanding during each period and income available
to common stockholders. The weighted average number of common shares outstanding
were 26,913,374 and 22,810,707 for the three months ended September 30, 1999 and
1998, respectively, and 25,956,231 and 21,463,755 for the nine months ended
September 30, 1999 and 1998, respectively. The computation for loss per common
share assuming dilution for the three and nine months ended September 30, 1999
and 1998 was anti-dilutive, and therefore, is not included.
NOTE 3. LINE OF CREDIT
The Company's operating subsidiary, Lioninc.com, obtained a $650,000 line of
credit on September 9, 1999. The underlying note bears interest at the Bank's
prime rate plus 1.75 percent (10 percent at September 30, 1999) and matures
on September 7, 2000. Any amounts advanced are personally guaranteed by the
CEO of LION Inc. and a prominent businessman and shareholder of the Company.
There are security agreements on Lioninc.com's assets and intellectual
property. The Company is required to use 60% of all equity raised through the
exercise of outstanding warrants to repay outstanding balances on the line of
credit.
The Company had an outstanding balance on the line of credit totaling $206,750
at September 30, 1999. See related comments in the Liquidity and Capital
Resources section of this report.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION.
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the Financial Statements and the
related Notes included elsewhere in this document.
Except for the historical information contained herein, the matters discussed in
this Form 10 - QSB include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934. All statements that look forward in time or include anything other than
statements of historical fact are forward-looking statements. Such statements
are based upon the beliefs of, and information currently available to, the
Company's management, and involve risks and uncertainties that may affect the
Company's actual results of operations. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to be correct. Those risks
and uncertainties, which are discussed in more detail in the Company's Form 10 -
KSB filed with the Securities and Exchange Commission, include but are not
limited to: (i) uncertainties of achieving profitability; (ii) market demand for
quality, accurate and timely information on a consistent basis; (iii) the
competitive market for Internet-based services in which the Company operates,
and uncertainties as to continued end-user acceptance of the Company's services
and products; (iv) dependence on the Internet and current software standards;
(v) dependence on mortgage brokers and the mortgage brokerage industry; (vi)
possible undercapitalization and the need for future financing; (vii) dependence
on hardware and other equipment and services used for system database security;
(viii) the impact of mergers and acquisitions; (ix) the impact of the Year 2000
related issues; and (x) risks associated with the introduction of new products
and services.
The Company disclaims any obligation to update any forward-looking statements
whether as a result of new information, future events or otherwise.
BACKGROUND
LION has been helping mortgage professionals grow and prosper their businesses
since October of 1990. In May of 1995, LION was one of the first American
businesses to extend its services nationally over the Internet. Drawing upon its
extensive technological expertise and its mortgage industry background, LION has
now emerged as one of the premier providers of cutting-edge Internet products
for the $1+ trillion mortgage industry.
LION-Pro Products
LION-Pro helps mortgage professionals (brokers and lenders) create profitable
business-to-business transactions over the Internet. Beginning in 1990, LION
began creating what is now one of the largest databases of home loan products on
the Internet. This database allows over 5,300 subscribing mortgage brokers and
450 lenders to easily transact business, electronically, each day. LION-Loan
SearchTM, a key feature of the LION-Pro product, allows mortgage broker members
to perform comprehensive searches on this extensive database to quickly find the
right product for their customer. The database represents over 17 million
pricing variants from over 17,000 loan programs in 38 defined regions around the
country. The database is updated every day. Another popular feature of the
LION-Pro service is LION-Loan LinkTM, which allows the subscribing mortgage
brokers to submit harder-to-place loan requests to "sub-prime lenders"
throughout the nation
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Other LION-Pro services highly valued by subscribing members include LION
News-Now(TM), which gives subscribers access to important industry news and lets
them easily track interest rate changes throughout the day, and LION
Documents-On-Demand(TM), which gives access to lender's daily rate sheets and
other documents via fax or a PDF download.
Web sites
In addition to the many services provided for LION-Pro subscribers, LION also
develops and hosts web sites for wholesale lenders (#1 in nation), mortgage
brokers (#2 in nation), mortgage associations (#1 in nation), and co-brands
electronic mortgage centers for real estate company web sites (2,050+).
In addition to the creation of web sites, LION provides Internet Traffic
Strategies to drive traffic to these sites and Ad Banner Sales.
LION's web sites include Lioninc.com, LionAu.com, LionChoice.com,
Mortgage-101.com, and AMO-mortgage.com. Investor information can be found at
lioncorp.net
LION-Choice Products
Whereas LION-Pro services help mortgage brokers and lenders use the Internet to
create business-to-business relationships, LION-Choice products help mortgage
brokers develop their Internet strategy to serve their borrowers. Through its
LION-Choice Internet services, LION helps borrowers determine if they can afford
to buy a home (mortgage101.com), what loan might best meet their needs
(amo-mortgage.com), and how to find a local or national mortgage broker to help
them in the mortgage process. LION-Choice offerings also include e-commerce
solutions with full featured, highly interactive and content rich web sites for
mortgage brokers.
LION is currently constructing a new consumer site, which will leverage the LION
database, wholesale lenders and local mortgage brokers into a powerful mortgage
site available to consumers. Consumers will have the best of both worlds: 1)
searching a comprehensive, nation-wide mortgage database, and 2) the choice of
performing the transaction on-line, in person with a local company, or a
combination of both.
LION-AU Products
There is an electronic revolution occurring in the mortgage industry. The older
paper-driven mortgage loan process is being rapidly replaced with fast,
efficient electronic processes. "Automated underwriting" (AU) is driving much of
this electronic revolution. AU makes electronic underwriting decisions in
seconds, as opposed to days, and vastly simplifies the mortgage loan process
LION is developing the Internet technology that allows mortgage brokers and
lenders to successfully create, receive and submit loan applications
"electronically" for quick AU approval. By creating these cutting-edge Internet
products and providing an Internet portal for AU providers, LION is enabling its
customers to compete in the new Internet environment.
Research and Development
LION recently created a new R&D department so that Internet products and
services can be developed and quickly deployed to meet its customers' needs.
These customers include borrowers who want to use the Internet to become more
informed about the home loan process and those who want to shop for home loans
over the Net; real estate companies who want to use the Internet to more
efficiently help their customers find and buy (finance) homes; brokers who use
the Internet to find great loans for their
<PAGE>
customers, and who want to make the home loan process fast and convenient for
their customers; lenders who want to have "electronic docking and launching
stations" custom built so they can do business electronically over the Internet
with brokers, borrowers, and AU providers; and GSEs, such as Fannie Mae, who are
leading many of the electronic Internet initiatives in the $1+ trillion mortgage
industry.
RESULTS OF OPERATIONS
REVENUES
Revenues increased to $2,837,725 from $1,271,033 for the nine months ended
September 30, 1999 and 1998, respectively. This represents an increase of
$1,566,692 or 123%. Total revenues of $2,837,725 for the nine months ended
September 30,1999 were comprised of mortgage broker fees of $2,128,548 or 75%,
lender fees of $487,358 or 17%, ad banner revenues of $128,621 or 5%, broadcast
fax fees of $76,253 or 3% and all other fees and discounts of $16,945 or less
than 1%. Three areas of the Company's business have continued to contribute to a
majority of this increase over the previous nine month period. First, the
on-going development of the Company's growing base of subscribing mortgage
brokers and participating lenders by region throughout the United States has
contributed to a majority of the growth in its core LION-Pro products,
representing $878,706 of the $1,566,692 increase. Second, with the acquisition
of the IMark assets and its mortgage industry Internet sites on May 17, 1999,
LION-Choice products contributed $418,866 of new revenues. Finally, the
Company's lender services area contributed $230,667 of new revenues.
Revenues increased to $1,174,228 from $517,125 for the three months ended
September 30, 1999 and 1998, respectively. This represents an increase of
$657,103 or 127%. Total revenues of $1,174,228 for the three months ended
September 30,1999 were comprised of mortgage broker fees of $905,945 or 77%,
lender fees of $189,305 or 16%, ad banner revenues of $49,763 or 4%, broadcast
fax fees of $22,296 or 2% and all other fees and discounts of $6,919 or 1%. The
reasons for the increase are similar to those discussed in the preceding
paragraph.
MARKETING AND ADMINISTRATIVE EXPENSES
Marketing and administrative expenses are comprised of marketing and advertising
costs, outside consulting services, telecommunications expenses and other
marketing and administrative related expenses. Marketing and administrative
expenses increased to $1,470,355 from $853,261 for the nine months ended
September 30, 1999 and 1998, respectively. This represents an increase of
617,094 or 72%. Marketing and administrative expenses as a percentage of
revenues improved to 52% from 67% for the nine months ended September 30, 1999
and 1998, respectively. These costs as a percent of revenue are expected to
decrease throughout the remainder of 1999 and into 2000. The increase in costs
was due primarily to (1) management consulting services for strategic planning,
accounting and legal expenses supporting increased external reporting
requirements with the SEC and investors, (2) investment in systems, processes
and occupancy costs in order to provide value added products and services in the
future and (3) advertising, direct mail and trade show expenses. The Company
will continue to invest its resources in new systems and processes to develop
and deliver its value added products and services.
Marketing and administrative expenses increased to $571,623 from $335,856 for
the three months ended September 30, 1999 and 1998, respectively. This
represents an increase of $235,767 or 70%. Marketing and administrative expenses
as a percent of revenues improved to 49% from 65% for the three months ended
September 30, 1999 and 1998, respectively. The comparison of percentages for the
three month periods is consistent with the nine month periods.
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SALARIES AND PAYROLL TAXES
Salaries and payroll tax expenses increased to $2,209,904 from $1,067,033 for
the nine months ended September 30, 1999 and 1998, respectively. This represents
an increase of $1,142,871 or 107%. Salaries and payroll tax expenses as a
percentage of revenue improved to 78% from 84% for the nine months ended
September 30, 1999 and 1998, respectively. The Company has grown to 104
associates at September 30, 1999 from a total of 50 associates at September 30,
1998. Most of the growth has been in the areas of sales, customer service,
finance, web site development and software engineering. The Company anticipates
that salaries and payroll expenses will grow in absolute dollars as it develops
its infrastructure to support systems and processes to deliver its value added
products and services.
Salaries and payroll tax expenses increased to $923,777 from $423,096 for the
three months ended September 30, 1999 and 1998, respectively. This represents an
increase of $500,681 or 118%. This trend has increased compared to the first six
months of 1999 compared to the same period in the prior year where the rate of
increase was 100%. Salaries and payroll tax expenses as a percentage of revenue
improved to 79% from 82% for the three months ended September 30, 1999 and 1998,
respectively.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased to $135,516 from $55,953 for
the nine months ended September 30, 1999 and 1998, respectively. This represents
an increase of $79,563 or 142%. Depreciation and amortization expenses were 5%
and 4% of revenues for the nine months ended September 30, 1999 and 1998,
respectively. The increase of $79,563 was due primarily to the purchase of
telecommunications equipment and computer hardware needed to expand and improve
the Company's telecommunications and computer systems infrastructure. The
Company expects these capital expenditure requirements to continue to grow in
the future in order to provide its value added products and services in both a
timely and efficient manner. In addition, goodwill from the May 17, 1999 IMark
acquisition of assets totaling $566,801, contributed approximately $37,800 of
amortization expense through September 1999.
Depreciation and amortization expenses increased to $68,817 from $21,081 for the
three months ended September 30, 1999 and 1998, respectively. This represents an
increase of $47,736 or 226%. Depreciation and amortization expenses were 6% and
4% of revenues for the three months ended September 30, 1999 and 1998,
respectively. Amortization expense related to goodwill from the IMark
acquisition represented approximately $28,300 of the increase.
INTEREST EXPENSE
Interest expense is comprised primarily of (1) interest on convertible
debentures and amortization of loan fees related to the Lioninc.com line of
credit for the three and nine month periods ended September 30, 1999 and (2)
interest on convertible debentures, related party debt and notes payable for the
three and nine month periods ended September 30, 1998. All applicable debt
accrued interest ranging from 10% to 12%. Interest expense of $112,649 for the
nine months ended September 30, 1999 is attributed to terms in the two
convertible debenture agreements that allows quadruple the number of shares to
be purchased at the date of conversion to common stock if the convertible
debentures are held to maturity. This quadrupling affect is recorded as interest
expense and was approximately $96,000 for the nine months ended September 30,
1999. The two debentures matured and were converted to stock of the Company in
July and August of 1999.
For the three months ended September 30, 1999, interest expense decreased to
$62,322 compared to $120,054 for the three months ended September 30, 1998
resulting primarily from the payoff of related party debt and notes payable.
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LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations and capital
expenditure requirements through private placements, exercise of stock warrants,
issuance of convertible debentures and borrowings from related parties and
others. At September 30, 1999, the Company had approximately $186,000 in cash
and cash equivalents.
During the nine month period ended September 30, 1999, the Company used net cash
of $580,666 in its operating activities, compared to the use of $566,289 for
operations in the nine month period ended September 30, 1998. The increase in
cash used in operations was primarily attributable to the increased expenses
discussed above in the "Results of Operations" section of this report.
During the nine month period ended September 30, 1999, the Company used net cash
of $704,317 for its investing activities as compared to $83,814 for the same
period in the prior year. The increase consisted primarily of $260,582 in
capitalized software development costs and $435,024 for the acquisition of
property and equipment for its Seattle, Spokane and Denver operations
The Company has obtained a $650,000 line of credit that matures September 7,
2000. The intent of the line of credit is to cover the time period in between
exercises of stock warrants coming due in the latter part of the fourth quarter
of 1999 and the first six months of 2000. At September 30, 1999, the Company has
drawn $206,750 against the line of credit. Beginning November 1, 1999, per debt
covenants on the underlying agreement, 60 percent of all proceeds from the
exercise of stock warrants must be applied to the outstanding balance on the
line of credit. The remaining 40 percent of the proceeds can be used in the
Company's operations.
During the fourth quarter of 1999 and the first half of 2000, the Company plans
to supplement its financing of operations and growth through the exercise of
these stock warrants. If the outstanding warrants fail to be exercised at
sufficient levels, the Company will require additional financing sources. In
addition, if the Company were to be unsuccessful in obtaining additional
financing and if the warrants do not exercise at sufficient levels, this could
have a material adverse effect on the Company's business, financial condition
and results of operations.
However, a high percentage of warrants have exercised through September 1999.
Warrants with expiration dates during the first nine months of 1999 totaled
approximately $464,000. Of this amount, approximately $409,500 or 88% were
exercised as compared to an exercise rate of 84% during all of 1998. During the
first nine months of 1999, approximately $263,000 of additional warrants
exercised that had expiration dates after September 30, 1999.
Warrants with expiration dates during the three months ended September 30, 1999
totaled approximately $130,000. Of this amount, approximately $107,850 or 83%
were exercised. During the three months ended September 30, 1999, approximately
$116,000 of additional warrants exercised that had expiration dates after
September 30, 1999.
At September 30, 1999, outstanding warrants with expiration dates during the
fourth quarter of 1999 total approximately $840,000 and warrants with expiration
dates from January 1 to July 10, 2000 total approximately $1,927,500.
YEAR 2000 COMPLIANCE
The Company completed a thorough and extensive review of all computer
information systems and
<PAGE>
related software applications and has found them to be year 2000 ("Y2K")
compliant. The monitoring for Y2K compliance is an on-going process for any new
systems development performed or contemplated by the Company. The Company has
purchased software for internal use from outside suppliers who have certified
that they are Y2K compliant. To date, the Company's cost to ascertain and to
maintain Y2K compliance has been minimal. No increased cost exposure is
anticipated at this time. However, significant uncertainty exists concerning the
potential costs and effects associated with Y2K compliance outside of the
Company's control. Since the Company is reliant on the Internet as the source to
provide its suite of products and services, the real concern is whether the
Internet itself will fail. This would have a material adverse affect on the
Company's business, results of operations and financial condition. The Company
has not yet developed a contingency plan to operate in the event that any
critical systems are not Y2K compliant, or if failure of vendor, supplier or
third party systems have a material effect on the Company.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the nine month period ended September 30, 1999, outstanding warrants were
exercised by 32 existing shareholders for 1,412,986 common shares. Total cash
consideration received was $672,495. The issuances of common stock to investors
upon exercise of warrants were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act as transactions
by an issuer not involving any public offering. The investors were accredited or
sophisticated purchasers. The recipients of securities represented their
intentions to acquire the securities for investment only, and not with a view to
sell, or for sale in connection with any resale or distribution. Appropriate
legends were affixed to the certificates issued in the transactions. The
recipients of securities in each such transaction had pre-existing relationships
with the Company. The offering was made without the use of any general
solicitation or advertising. All recipients had access to all material
information concerning the Company.
On September 9, 1999, the Company granted warrants to 2 participants as
guarantors on Lioninc.com's $650,000 line of credit. The warrants granted
totaled 280,000 common shares at an exercise price of $1.06 and an expiration
date of September 9, 2001. The granting of stock warrants did not require
registration under the Securities Act, or an exemption therefrom, since the
grants did not involve a "sale" as the term is used in Section 2(3) of the
Securities Act.
On May 21, 1999, the Company granted warrants for financial advisory services.
The warrants were granted to 4 participants for a total of 50,000 common shares
at an exercise price of $1.75 and an expiration date of May 21, 2002. The
granting of stock warrants did not require registration under the Securities
Act, or an exemption therefrom, since the grants did not involve a "sale" as the
term is used in Section 2(3) of the Securities Act.
During the nine month period ended September 30, 1999, stock options were
exercised by 13 employees for a total of 845,000 common shares. Cash
consideration was received from 9 of the employees in the total amount of
$50,950 for 805,000 shares at exercise prices ranging from $.01 to $.50 per
share. Promissory notes were received from 4 participants in the total amount of
$10,000 for 40,000 shares at an exercise price of $.25 per share. The promissory
notes accrue interest at 10% per annum and are due March 30, 2000. The issuances
of common stock to twelve of the employees upon exercise of the stock options
were deemed to be exempt from registration under the Securities Act in reliance
on Rule 701, and
<PAGE>
were issued pursuant to a written compensation benefit plan in consummation of
offers made prior to the Company becoming subject to the reporting requirements
of the Exchange Act. The remaining issuance was deemed exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as a
transaction by an issuer not involving any public offering. The investor was an
accredited purchaser and an executive officer of the Company.
Pursuant to the Company's 1998 Stock Option Plan, the Company granted stock
options to 58 employees at various dates from January 1 to September 30, 1999.
These stock options were comprised of 1,920,000 shares of common stock, expire 5
years from the date of grant, vest in quarterly increments over a 4 year period
and have exercise prices, based on the market price at the date of grant,
ranging from $.81 to $2.42. During the nine month period ended September 30,
1999, the Company also granted stock options to two contractors for services
received. These options were comprised of 60,000 shares of common stock, expire
over a range of one and one-half to 4 years from the date of grant, vest upon
the completion of the related services provided and have exercise prices ranging
from $.75 to $.92 per share. The granting of stock options did not require
registration under the Securities Act, or an exemption therefrom, since the
grants did not involve a "sale" as the term is used in Section 2(3) of the
Securities Act.
ITEM 4. SUBMISSION OF ITEMS TO A VOTE OF SECURITY HOLDERS
A special meeting of the Shareholders with a quorum present was held on August
20, 1999. The sole matter to be acted upon was a proposal to change the name of
the Company from Plenum Communications, Inc. to LION Inc. and to amend the
Articles of Incorporation. By a vote of 12,658,704 in favor of the proposal and
53 against, the proposal was approved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits to Part II:
Exhibit 10.5 - Premises Lease Agreement (Renton Property) dated as of
June 30, 1999 (lease term beginning September 13, 1999)
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
September 30, 1999.
<PAGE>
SIGNATURES
----------
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
LION INC.
---------
(Registrant)
Date: November 15, 1999 By: /s/ Allen Ringer
--- ----------------
Allen Ringer
President
<PAGE>
EXHIBIT INDEX
10.5 Premises Lease Agreement (Renton Property) dated as of June 30, 1999
(lease term beginning September 13, 1999)
27.1 Financial Data Schedule September 30, 1999
<PAGE>
EXHIBIT 10.5
RENTON PROPERTY
BASIC LEASE INFORMATION
OFFICE GROSS
June 30, 1999
LEASE DATE: (same as date in first paragraph of Lease)
TENANT: LION Inc., a Washington corporation
TENANT'S NOTICE ADDRESS: 2201 Lind Avenue SW, Suite 200
Renton, WA 98055
TENANT'S BILLING ADDRESS: 2201 Lind Avenue SW, Suite 200
Renton, WA 98055
TENANT CONTACT: Sam Ringer PHONE NUMBER: 206-236-1995
LANDLORD: Spieker Properties, L.P., a California
limited partnership
LANDLORDIS NOTICE ADDRESS: 33801 Ist Way South, Suite 209
Federal Way, WA 98003
LANDLORD'S REMITTANCE ADDRESS: Post Office Box 24827
Dept. 20341
Seattle, WA 98124-0827
Project Description: Three story office building known as
Southgate Office Plaza I
located in Renton, Washington
Building Description: Southgate Office Plaza I
2201 Lind Avenue SW
Renton, Wa 98055
Premises: Approximately 20,093 rentable square feet,
Suite # 200
Permitted Use: General Office
Occupancy Density: 7/1000 s. f.
Parking Density: 511000 s. f.
Parking and Parking Charge: 100 non-exclusive spaces at $0 per space /
per month
Scheduled Term Commencement Date: August 1, 1999
Scheduled Length of Term: 60 months
Scheduled Term Expiration Date: July 31, 2004
Rent:
<TABLE>
<S> <C>
Base Rent: $19.00/s.f. per year August 1, 1999 through July 30, 2000
$19.00/s.f per year August 1, 2000 through July 30, 2001
$20.00/s.f. per year August 1, 2001 through July 30, 2002
$20.00/s.f. per year August 1, 2002 through July 30, 2003
$21.00/s.f. per year August 1, 2003 through July 30, 2004
Base Year for Operating Expenses: 1999
</TABLE>
Security Deposit: $35,163
Tenant's Proportionate Share:
Of Building: 17.77%
Of Project: 17.77%
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
LANDLORD TENANT
Spieker Properties, L.P., LION, Inc.
a California limited partnership A Washington Corporaton
By: Spieker Properties, Inc.,
a Maryland corporation, By: ____________________________
its general partner Sam Ringer
Its: President
By: ___________________________
Richard P. Gervais
Its: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
Basic Lease Information...................................................1
Table of Contents.........................................................2
1. Premises..................................................................3
2. Possession and Lease Commencement.........................................3
3. Term......................................................................3
4. Use.......................................................................3
5. Rules and Regulations.....................................................4
6. Rent......................................................................4
7. Operating Expenses........................................................5
8. Insurance and Indemnification.............................................8
9. Waiver of Subrogation.....................................................9
10. Landlord's Repairs and Maintenance........................................9
11. Tenant's Repairs and Maintenance.........................................10
12. Alterations..............................................................10
13. Signs....................................................................10
14. Inspection/Posting Notices...............................................11
15. Services and Utilities...................................................11
16. Subordination............................................................12
17. Financial Statements.....................................................12
18. Estoppel Certificate.....................................................12
19. Security Deposit.........................................................12
20. Limitation of Tenant's Remedies..........................................12
21. Assignment and Subletting................................................13
22. Authority of Tenant......................................................14
23. Condemnation.............................................................14
24. Casualty Damage..........................................................14
25. Holding Over.............................................................15
26. Default..................................................................15
27. Liens....................................................................16
28. Substitution.............................................................16
29. Transfers by Landlord....................................................17
30. Right of Landlord to Perform Tenant's Covenants..........................17
31. Waiver...................................................................17
32. Notices..................................................................17
33. Attorney's Fees .........................................................17
34. Successors and Assigns ..................................................17
35. Force Majeure ...........................................................17
36. Surrender of Premises ...................................................17
37. Parking .................................................................18
38. Miscellaneous ...........................................................18
39. Additional Provisions ...................................................19
40. Jury Trial Waiver .......................................................21
Signatures ..............................................................21
Exhibits:
Exhibit A ...............................................Rules and Regulations
Exhibit A- I ................................................Legal Description
Exhibit B .....................................Site Plan, Property Description
Exhibit C ..............................Tenant Improvements and Specifications
Additional Exhibits as Required
</TABLE>
2
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LEASE
THIS LEASE is made as of the 25th day of June, 1999, by and between Spieker
Properties, L.P., a California limited partnership (hereinafter called
"Landlord"), and LION Inc., a Washington corporation (hereinafter called
"Tenant").
1. PREMISES
Landlord leases to Tenant and Tenant leases from Landlord, upon the
terms and conditions hereinafter set forth, those premises (the "Premises")
outlined in red on Exhibit B and described in the Basic Lease Information. The
Premises shall be all or part of a building (the "Building") and of a project
(the "Project"), which may consist of more than one building and additional
facilities, as described in the Basic Lease Information. The Building and
Project are situated at the real property described on Exhibit A-1 and are
outlined in blue and green respectively on Exhibit B. Landlord and Tenant
acknowledge that physical changes may occur from time to time in the Premises,
Building or Project, and that the number of buildings and additional facilities
which constitute the Project may change from time to time, which may result in
an adjustment in Tenant's Proportionate Share, as defined in the Basic Lease
Information, as provided in Paragraph 7.A.
2. POSSESSION AND LEASE COMMENCEMENT
A. Not used.
B. Construction of Improvements. If this Lease pertains to a Building to be
constructed or improvements to be constructed within a Building, the provisions
of this Paragraph 2.13. shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("Term Commencement Date") shall be the
earlier of the date on which: (1) Tenant takes possession of some or all of the
Premises; or (2) the improvements to be constructed or performed in the Premises
by Landlord (if any) shall have been substantially completed in accordance with
the plans and specifications, if any, described on Exhibit C and Tenant's taking
of possession of the Premises or any part thereof shall constitute Tenant's
confirmation of substantial completion for all purposes hereof, whether or not
substantial completion of the Building or Project shall have occurred. Landlord
agrees to use commercially reasonable efforts to deliver the Premises on the
scheduled Term Commencement Date. If for any reason Landlord cannot deliver
possession of the Premises to Tenant on the scheduled Term Commencement Date,
Landlord shall not be subject to any liability therefor, nor shall Landlord be
in default hereunder nor shall such failure affect the validity of this Lease,
and Tenant agrees to accept possession of the Premises at such time as such
improvements have been substantially completed, which date shall then be deemed
the Term Commencement Date. Tenant shall not be liable for any Rent for any
period prior to the Term Commencement Date (but without affecting any
obligations of Tenant under any improvement agreement appended to this Lease).
In the event of any dispute as to substantial completion of work performed or
required to be performed by Landlord, the certificate of Landlord's architect or
general contractor shall be conclusive. Substantial completion shall have
occurred notwithstanding Tenant's submission of a punchlist to Landlord, which
Tenant shall submit, if at all, within three (3) business days after the Term
Commencement Date or otherwise in accordance with any improvement agreement
appended to this Lease. Upon Landlord's request, Tenant shall promptly execute
and return to Landlord a "Start-Up Letter" in which Tenant shall agree, among
other things, to acceptance of the Premises and to the determination of the Term
Commencement Date, in accordance with the terms of this Lease, but Tenant's
failure or refusal to do so shall not negate Tenant's acceptance of the Premises
or affect determination ol th T Commencement Date.
3. TERM
The term of this Lease (the "Term") shall commence on the Term Commencement Date
and continue in full force and number of months specified as the Length of Term
in the Basic Lease Information or until this Lease is terminated as otherwise
provided herein. If the Term Commencement Date is a date other than the first
day of the calendar month, the Term shall be the number of months of the Length
of Term in addition to the remainder of the calendar month following the Term
Commencement Date.
4. USE
A. General. Tenant shall use the Premises for the permitted use specified
in the Basic Lease Information ("Permitted Use") and for no other use or
purpose. Tenant shall control Tenant's employees, agents, customers, visitors,
invitees, licensees, contractors, assignees and subtenants (collectively,
"Tenant's Parties") in such a manner that Tenant and Tenant's Parties
cumulatively do not exceed the occupant density (the "Occupancy Density") or the
parking density (the "Parking Density") specified in the Basic Lease
Information. Tenant shall pay the Parking Charge specified in the Basic Lease
Information as Additional Rent (as hereinafter defined) hereunder. So long as
Tenant is occupying the Premises, Tenant and Tenant's Parties shall have the
nonexclusive right to use, in common with other parties occupying the Building
or Project, the parking areas, driveways and other common areas of the Building
and Project, subject to the terms of this Lease and such rules and regulations
as Landlord may from time to time prescribe. Landlord reserves the right,
without notice or liability to Tenant, and without the same constituting an
actual or constructive eviction, to alter or modify the common areas from time
to time, including the location and configuration thereof, and the amenities and
facilities which Landlord may determine to provide from time to time.
B. Limitations. Tenant shall not permit any odors, smoke, dust, gas,
substances, noise or vibrations to emanate from the Premises or from any portion
of the common areas as a result of Tenant's or any Tenant's Party's use thereof,
nor take any action which would
3
<PAGE>
constitute a nuisance or would disturb, obstruct or endanger any other tenants
or occupants of the Building or Project or elsewhere, or interfere with their
use of their respective premises or common areas. Storage outside the Premises
of materials, vehicles or any other items is prohibited. Tenant shall not use or
allow the Premises to be used for any immoral, improper or unlawful purpose, nor
shall Tenant cause or maintain or permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer the commission of any waste in, on
or about the Premises. Tenant shall not allow any sale by auction upon the
Premises, or place any loads upon the floors, walls or ceilings which could
endanger the structure, or place any harmful substances in the drainage system
of the Building or Project. No waste, materials or refuse shall be dumped upon
or permitted to remain outside the Premises. Landlord shall not be responsible
to Tenant for the non-compliance by any other tenant or occupant of the Building
or Project with any of the above-referenced rules or any other terms or
provisions of such tenant's or occupant's lease or other contract.
C. Compliance with Regulations. By entering the Premises, Tenant accepts
the Premises in the condition existing as of the date of such entry. Tenant
shall at its sole cost and expense strictly comply with all existing or future
applicable municipal, state and federal and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances and
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, to Tenant's use of
the common areas, or to the use, storage, generation or disposal of Hazardous
Materials (hereinafter defined) (collectively "Regulations"). Tenant shall at
its sole cost and expense obtain any and all licenses or permits necessary for
Tenant's use of the Premises. Tenant shall at its sole cost and expense promptly
comply with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted. Tenant shall not do or permit anything to be
done in, on, under or about the Project or bring or keep anything which will in
any way increase the rate of any insurance upon the Premises, Building or
Project or upon any contents therein or cause a cancellation of said insurance
or otherwise affect said insurance in any manner. Tenant shall indemnify, defend
(by counsel reasonably acceptable to Landlord), protect and hold Landlord
harmless from and against any loss, cost, expense, damage, attorneys' fees or
liability arising out of the failure of Tenant to comply with any Regulation.
Tenant's obligations pursuant to the foregoing indemnity shall survive the
expiration or earlier termination of this Lease. Tenant shall have the sole
responsibility for complying, at Tenant's cost, with any and all provisions of
the Americans with Disabilities Act of 1990, as it has been and may later be
amended ("ADA"), (i) with respect to the Premises: and (ii) with respect to the
common areas of the Project where in the case of this clause (ii) such
compliance has been brought about by: (A) any Tenant Improvements or Alterations
to the Premises or to the common areas made by or on behalf of Tenant, whether
by Landlord or otherwise, and performed after the Term Commencement Date; (B)
requirements of Tenant's employees, or any changes to Tenant's use of the
Premises, or (C) any architectural barriers caused by Tenant's installation of
any equipment, fixtures, furniture, or other personal property in or about the
Premises (items (i) and (ii) collectively, "Tenant's ADA Responsibilities").
Tenant shall indemnify. defend and hold Landlord, its agents and employees
harmless from and against any and all claims, damages, or liabilities including,
without limitation, reasonable attorneys' fees and costs) arising directly or
indirectly from Tenant's failure to satisfy any of the Tenant's ADA
Responsibilities. Landlord shall indemnify, defend and hold Tenant, Its agents
and employees harmless from and against any and all claims, damages or
liabilities arising directly or indirectly from Landlord's failure to comply
with any obligations of a landlord under the ADA, other than such claims,
damages or liabilities arising from Tenant's failure to satisfy any of Tenant's
ADA Responsibilities, provided, however, that Landlord may treat costs of ADA
compliance with respect to the common areas of the Project to the extent
incurred after the Term Commencement Date as an Operating Expense to be
amortized over no fewer than sixty (60) months.
D. Hazardous Materials. As used in this Lease, "Hazardous Materials" shall
include, but not be limited to, hazardous, toxic and inactive materials and
those substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or other similar designations in any
Regulation. Tenant shall not cause, or allow any of Tenant's Parties to cause,
any hazardous Materials to be handled, used, generated, stored, released or
disposed of in, on, under or about the Premises, the Building or the Project or
surrounding land or environment in violation of any Regulations. Tenant must
obtain Landlord's written consent prior to the introduction of any Hazardous
Materials onto the Project. Notwithstanding the foregoing, Tenant may handle,
store, use and dispose of products containing small quantities of Hazardous
Materials for "general office purposes" (such as toner for copiers) to the
extent customary and necessary for the Permitted Use of the Premises; provided
that Tenant shall always handle, store, use, and dispose of any such Hazardous
Materials in a safe and lawful manner and never allow such Hazardous Materials
to contaminate the Premises, Building, or Project or surrounding land or
environment. Tenant shall immediately notify Landlord in writing of any
Hazardous Materials' contamination of any portion of the Project of which Tenant
becomes aware, whether or not caused by Tenant. Landlord shall have the right at
all reasonable times upon reasonable prior notice to Tenant to inspect the
Premises and to conduct tests and investigations to determine whether Tenant is
in compliance with the foregoing provisions, the costs of all such inspections,
tests and investigations to be borne by Tenant. Tenant shall indemnify, defend
(by counsel reasonably acceptable to Landlord), protect and hold Landlord
harmless from and against any and all claims, liabilities, losses, costs, loss
of rents, liens, damages, injuries or expenses (including attorneys' and
consultants' fees and court costs), demands, causes of action, or judgments
directly or indirectly arising out of or related to the use, generation,
storage, release, or disposal of Hazardous Materials by Tenant or any of
Tenant's Parties in, on, under or about the Premises, the Building or the
Project or surrounding land or environment, which indemnity shall include,
without limitation, damages for personal or bodily injury, property damage,
damage to the environment or natural resources occurring on or off the Premises,
losses attributable to diminution in value or adverse effects on marketability,
the cost of any investigation, monitoring, government oversight, repair,
removal, remediation, restoration, abatement, and disposal, and the preparation
of any closure or other required plans, whether such action is required or
necessary prior to or following the expiration or earlier termination of this
Lease. Neither the consent by Landlord to the use, generation, storage, release
or disposal of Hazardous Materials nor the strict compliance by Tenant with all
laws pertaining to Hazardous Materials shall excuse Tenant from Tenant's
obligation of indemnification pursuant to this Paragraph 4.D. Tenant's
obligations pursuant to the foregoing indemnity shall survive the expiration or
earlier termination of this Lease.
5. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as Exhibit A and any other rules and regulations and
any modifications or additions thereto which Landlord may from time to time
prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant's Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or Project with
any of such rules and regulations, any other tenant's or occupant's lease or any
Regulations.
6. RENT
A. Base Rent. Tenant shall pay to Landlord and Landlord shall receive,
without notice or demand throughout the Term, Base Rent as specified in the
Basic Lease Information except as otherwise noted in Paragraph 39A, payable in
monthly installments in advance on
4
<PAGE>
or before the first day of each calendar month, in lawful money of the United
States, without deduction or offset whatsoever, at the Remittance Address
specified in the Basic Lease Information or to such other place as Landlord may
from time to time designate in writing. Base Rent for the first full month of
the Terrn shall be paid by Tenant upon Tenant's execution of this Lease. If the
obligation for payment of Base Rent commences on a day other than the first day
of a month, then Base Rent shall be prorated and the prorated installment shall
be paid on the first day of the calendar month next succeeding the Term
Commencement Date. The Base Rent payable by Tenant hereunder is subject to
adjustment as provided elsewhere in this Lease, as applicable. As used herein,
the term "Base Rent" shall mean the Base Rent specified in the Basic Lease
Information as it may be so adjusted from time to time.
B. Additional Rent. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.C. and D., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("Additional Rent"). "Rent" shall mean
Base Rent and Additional Rent.
7. OPERATING EXPENSES
A. Operating Expenses. In addition to the Base Rent required to be paid
hereunder, beginning with the expiration of the Base Year specified in the Basic
Lease Information (the "Base Year"), Tenant shall pay as Additional Rent,
Tenant's Proportionate Share of the Building and/or Project (as applicable), as
defined in the Basic Lease Information, of increases in Operating Expenses
(defined below) over the Operating Expenses incurred by Landlord during the Base
Year (the "Base Year Operating Expenses"), in the manner set forth below. Tenant
shall pay the applicable Tenant's Proportionate Share of each such Operating
Expenses. Landlord and Tenant acknowledge that if the number of buildings which
constitute the Project increases or decreases, or if physical changes are made
to the Premises, Building or Project or the configuration of any thereof,
Landlord may at its discretion reasonably adjust Tenant's Proportionate Share of
the Building or Project to reflect the change. Landlord's determination of
Tenant's Proportionate Share of the Building and of the Project shall be
conclusive so long as it is reasonably and consistently applied. "Operating
Expenses" shall mean all expenses and costs of every kind and nature which
Landlord shall pay or become obligated to pay, because of or in connection with
the ownership, management, maintenance, repair, preservation, replacement and
operation of the Building or Project and its supporting facilities and such
additional facilities now and in subsequent years as may be determined by
Landlord to be necessary or desirable to the Building and/or Project (as
determined in a reasonable manner) other than those expenses and costs which are
specifically attributable to Tenant or which are expressly made the financial
responsibility of Landlord or specific tenants of the Building or Project
pursuant to this Lease. Operating Expenses shall include, but are not limited
to, the following:
(1) Taxes. All real property taxes and assessments, possessory interest
taxes, sales taxes, personal property taxes, business or license taxes or fees,
gross receipts taxes, service payments in lieu of such taxes or fees, annual or
periodic license or use fees, excises, transit charges, and other impositions,
general and special, ordinary and extraordinary, unforeseen as well as foreseen,
of any kind (including fees "in-lieu" of any such tax or assessment) which are
now or hereafter assessed, levied, charged, confirmed, or imposed by any public
authority upon the Building or Project, its operations or the Rent (or any
portion or component thereof), or any tax, assessment or fee imposed in
substitution, partially or totally, of any of the above. Operating Expenses
shall also include any taxes, assessments, reassessments, or other fees or
impositions with respect to the development, leasing, management, maintenance,
alteration, repair, use or occupancy of the Premises, Building or Project or any
portion thereof, including, without limitation, by or for Tenant, and all
increases therein or reassessments thereof whether the increases or
reassessments result from increased rate and/or valuation (whether upon a
transfer of the Building or Project or any portion thereof or any interest
therein or for any other reason). Operating Expenses shall not include
inheritance or estate taxes imposed upon or assessed against the interest of any
person in the Project, or taxes computed upon the basis of the net income of any
owners of any interest in the Project. If it shall not be lawful for Tenant to
reimburse Landlord for all or any part of such taxes, the monthly rental payable
to Landlord under this Lease shall be revised to net Landlord the same net
rental after imposition of any such taxes by Landlord as would have been payable
to Landlord prior to the payment of any such taxes.
(2) Insurance. All insurance premiums and costs, including, but not limited
to, any deductible amounts, premiums and other costs of insurance incurred by
Landlord, including for the insurance coverage set forth in Paragraph 8.A.
herein.
(3) Common Area Maintenance.
(a) Repairs, replacements, and general maintenance of and for the Building
and Project and public and common areas and facilities of and comprising the
Building and Project, including, but not limited to, the roof and roof membrane,
windows, elevators, restrooms, conference rooms, health club facilities,
lobbies, mezzanines, balconies, mechanical rooms, building exteriors, alarm
systems, pest extermination, landscaped areas, parking and service areas,
driveways, sidewalks, loading areas, fire sprinkler systems, sanitary and storm
sewer lines, utility services, heating/ventilation/air conditioning systems,
electrical, mechanical or other systems, telephone equipment and wiring
servicing, plumbing, lighting, and any other items or areas which affect the
operation or appearance of the Building or Project, which determination shall be
at Landlord's discretion, except for: those items expressly made the financial
responsibility of Landlord pursuant to Paragraph 10 hereof; those items to the
extent paid for by the proceeds of insurance; and those items attributable
solely or jointly to specific tenants of the Building or Project.
(b) Repairs, replacements, and general maintenance shall include the cost of
any capital improvements made to or capital assets acquired for the Project or
Building that in Landlord's discretion may reduce any other Operating Expenses,
including present or future repair work, are reasonably necessary for the health
and safety of the occupants of the Building or Project, or are required to
comply with any Regulation, such costs or allocable portions thereof to be
amortized over such reasonable period as Landlord shall determine, together with
interest on the unamortized balance at the publicly announced "prime rate"
charged by Wells Fargo Bank, N.A. (San Francisco) or its successor at the time
such improvements or capital assets are constructed or acquired, plus two (2)
percentage points, or in the absence of such prime rate, then at the U.S.
Treasury six-month market note (or bond, if so designated) rate as published by
any national financial publication selected by Landlord, plus four (4)
percentage points, but in no event more than the maximum rate permitted by law,
plus reasonable financing charges.
(c) Payment under or for any easement, license, permit, operating agreement,
declaration, restrictive covenant or instrument relating to the Building or
Project.
(d) All expenses and rental related to services and costs of supplies,
materials and equipment used in operating, managing and maintaining the
Premises, Building and Project, the equipment therein and the adjacent
sidewalks, driveways, parking and service areas, including, without limitation,
expenses related to service agreements regarding security, fire and other alarm
systems, janitorial services, window cleaning, elevator maintenance, Building
exterior maintenance, landscaping and expenses related to the administration,
management and operation of the Project, including without limitation salaries,
wages and benefits and management office rent.
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(e) The cost of supplying any services and utilities which benefit all or a
portion of the Premises, Building or Project, including without limitation
services and utilities provided pursuant to Paragraph 15 hereof.
(f)) Legal expenses and the cost of audits by certified public accountants;
provided, however, that legal expenses chargeable as Operating Expenses shall
not include the cost of negotiating leases, collecting rents, evicting tenants
nor shall it include costs incurred in legal proceedings with or against any
tenant or to enforce the provisions of any lease.
(g) A management and accounting cost recovery fee equal to five percent (5%)
of the sum of the Project's base rents and Operating Expenses to the extent not
included in such base rents (other than such management and accounting fee).
If the rentable area of the Building and/or Project is not fully occupied during
any fiscal year of the Term as determined by Landlord, an adjustment may be made
in Landlord's discretion in computing the Operating Expenses for such year so
that Tenant pays an equitable portion of all variable items (e.g., utilities,
janitorial services and other component expenses that are affected by variations
in occupancy levels) of Operating Expenses, as reasonably determined by
Landlord; provided, however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the total Operating Expenses
from all of the tenants in the Building or Project, as the case may be.
Operating Expenses shall not include the cost of providing tenant improvements
or other specific costs incurred for the account of, separately billed to and
paid by specific tenants of the Building or Project, the initial construction
cost of the Building, or debt service on any mortgage or deed of trust recorded
with respect to the Project other than pursuant to Paragraph 7.A.(3)(b) above.
Notwithstanding anything herein to the contrary, in any instance wherein
Landlord, in Landlord's sole discretion, deems Tenant to be responsible for any
amounts greater than Tenant's Proportionate Share, Landlord shall have the right
to allocate costs in any manner Landlord deems appropriate. In addition,
notwithstanding anything In the definition of Operating Expenses in this Lease
to the contrary, Operating Expenses shall not Include the following. except to
the extent specifically Provided:
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(i) Any around lease rental;
(ii) Costs of capital improvements, replace ents or equipment and jay
depreciation or amortization expenses thereon, except to the extent
Included In g2erating Expenses In Paragraph _7.A of this Lease;
(iii) Rentals for Items (except when needed In connection with normal repairs
and maintenance of permanent systems) which If Purchased, rather than
rented, would constitute a capital improvement which Is specifically
excluded in clause (ii) above (excluding, however, equipment not.affixed
to the Building or Project which is used In providing janitorial or
similar services);
(iv) Costs incurred by Landlord for the repair of damage to the Building or
Project, to the extent that Landlord Is reimbursed by insurance
proceeds:
(v) Costs, including permit, license and Inspection costs incurred with
respect to the Installation of tenant or other occupant improvements
made for tenants or other occupants in the Building or the Project or
incurred in renovating or otherwise Improving. decorating, painting or
redecorating vacant space for the Premises of other tenants or other
occupants of the Building or project;
(vi) Marketing costs. including leasing commissions, attorneys' fees In
connection with the negotiation and preparation or enforcement of
letters, deal memos. letters of intent, leases, subleases and/or
assignments, space planning costs, and other costs and expenses
incurred in connection with lease, sublease, and/or assignment
negotiations and transactions with present or prospective tenants or
other occupants of the Building or the Project;
(vii) Costs Incurred by Landlord due to the violation by Landlord of the terms
and conditions of any lease of space in the Building or the Project;
(viii) Except to the extent included In Operating Expenses In Paragraph 7-A(3)
above, interest, principal, points and fees on debt or amortization.
payments on any mortgage or deed.- of trust or any other debt instrument
encumbering the Building or Project or the land on which the Building or
Project is situated;
(ix) Except for making repairs or keeping permanent systems in operation
while repairs are being made, rentals and other related expenses
incurred in leasing air conditioning systems, elevators or other
equipment or considered to be of a capital nature, except equipment not
affixed to the Building or Project which is used in providing Janitorial
or similar services;
(x) Advertising and Promotional expenditures (except for retail Property
Promotions);
(xi) Costs incurred In connection with upgrading the Building or Project to
comply with disability, life, fire and safety codes In effect prior to
the issuance of the temporary certificate of occupancv for the Building,
(xii) Interest, fines or Penalties incurred as a result of Landlord's failure
to make Payments when due unless such failure is commercially reasonable
under the circumstances;
(xiii) Costs arising from Landlord's charitable or Political contributions;
(xiv) Costs for acquisition of sculpture, paintings or other objects of art in
common areas;
(xv) The depreciation of the Building and other real Property structures In
the Project;
(xvi) Landlord's general corporate overhead and general administrative
expenses not related to the operation of the building or the project,
except as specifically set forth in Paragraph 7.A of this Lease-,
(xvii) Any bad debt loss, rent loss or reserves for bad debts or rent loss, or
reserves for equipment or capital replacement.
The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.
B. Payment of Estimated Operating Expenses. "Estimated Operating Expenses"
for any particular year shall mean Landlord's estimate of the Operating Expenses
for such fiscal year made with respect to such fiscal year as hereinafter
provided. Landlord shall have the right from time to time to revise its fiscal
year and interim accounting periods so long as the periods as so revised are
reconciled with prior periods in a reasonable manner. During the last month of
each fiscal year during the Term, or as soon thereafter as practicable, Landlord
shall give Tenant written notice of the Estimated Operating Expenses for the
ensuing fiscal year. Tenant shall pay Tenant's Proportionate Share of the
difference between Estimated Operating Expenses and Base Year Operating Expenses
with installments of Base Rent for the fiscal year to which the Estimated
Operating Expenses applies in monthly installments on the first day of each
calendar month during such year, in advance. Such payment shall be construed to
be Additional Rent for all purposes hereunder. If at any time during the course
of the fiscal year, Landlord determines that Operating Expenses are projected to
vary from the then Estimated Operating Expenses by more than five percent (5%),
Landlord may, by written notice to Tenant, revise the Estimated Operating
Expenses for the balance of such fiscal year, and Tenant's monthly installments
for the remainder of such year shall be adjusted so that by the end of such
fiscal year Tenant has paid to Landlord Tenant's Proportionate Share of the
revised difference between Estimated Operating Expenses and Base Year Operating
Expenses for such year, such revised installment amounts to be Additional Rent
for all purposes hereunder.
C. Computation of Operating Expense Adjustment. "Operating Expense
Adjustment" shall mean the difference between Estimated Operating Expenses and
actual Operating Expenses for any fiscal year, over Base Year Operating
Expenses, determined as
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hereinafter provided. Within one hundred twenty (120) days after the end of each
fiscal year, or as soon thereafter as practicable, Landlord shall deliver to
Tenant a statement of actual Operating Expenses for the fiscal year just ended,
accompanied by a computation of Operating Expense Adjustment. If such statement
shows that Tenant's payment based upon Estimated Operating Expenses is less than
Tenant's Proportionate Share of actual increases in Operating Expenses over the
Base Year Operating Expenses, then Tenant shall pay to Landlord the difference
within twenty (20) days after receipt of such statement, such payment to
constitute Additional Rent for all purposes hereunder. If such statement shows
that Tenant's payments of Estimated Operating Expenses exceed Tenant's
Proportionate Share of actual increases in Operating Expenses over the Base Year
Operating Expenses, then (provided that Tenant is not in default under this
Lease) Landlord shall pay to Tenant the difference within twenty (20) days after
delivery of such statement to Tenant. If this Lease has been terminated or the
Term hereof has expired prior to the date of such statement, then the Operating
Expense Adjustment shall be paid by the appropriate party within twenty (20)
days after the date of delivery of the statement. Tenant's obligation to pay
increases in Operating Expenses over the Base Year Operating Expenses shall
commence on January I of the year succeeding the Base Year. Should this Lease
terminate at any time other than the last day of the fiscal year, Tenant's
Proportionate Share of the Operating Expense Adjustment shall be prorated based
on a month of 30 days and the number of calendar months during such fiscal year
that this Lease is in effect. Tenant shall in no event be entitled to any credit
if Operating Expenses in any year are less than Base Year Operating Expenses.
Notwithstanding anything to the contrary contained in Paragraph TA or 7.13,
Landlord's failure to provide any notices or statements within the time periods
specified in those paragraphs shall in no way excuse Tenant from its obligation
to pay Tenant's Proportionate Share of increases in Operating Expenses.
D. Gross Lease. This shall be a gross Lease; however, it is intended that
Base Rent shall be paid to Landlord absolutely net of all costs and expenses
other than Operating Expenses each year equal, to Tenant's Proportionate Share
of Base Year Operating Expenses, except as otherwise specifically provided to
the contrary in this Lease. The provisions for payment of increases in Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities, in
excess of the Base Year Operating Expenses, now and in subsequent years as may
be determined by Landlord to be necessary or desirable to the Building and/or
Project.
E. Tenant Audit. If Tenant shall dispute the amount set forth in any
statement provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall
have the right, not later than thirty (30) days following receipt of such
statement and upon the condition that Tenant shall first deposit with Landlord
the full amount in dispute, to cause Landlord's books and records with respect
to Operating Expenses for such fiscal year to be audited by certified public
accountants selected by Tenant and subject to Landlord's reasonable right of
approval. The Operating Expense Adjustment shall be appropriately adjusted on
the basis of such audit. If such audit discloses a liability for a refund in
excess of ten percent (10%) of Tenant's Proportionate Share of the Operating
Expenses previously reported, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of this Paragraph 7.E. within
thirty (30) days after receipt of Landlord's statements provided pursuant to
Paragraph 7.B. or 7.C., such statement shall be final and binding for all
purposes hereof.
8. INSURANCE AND INDEMNIFICATION
A. Landlord's Insurance. All insurance maintained by Landlord shall be
for the sole benefit of Landlord and under La I sole control.
(1) Property Insurance. Landlord agrees to maintain property insurance
insuring the Building against damage or destruction due to risk including fire,
vandalism, and malicious mischief in an amount not less than the replacement
cost thereof, in the form and with deductibles and endorsements as selected by
Landlord. At its election, Landlord may instead (but shall have no obligation
to) obtain "All Risk" coverage, and may also obtain earthquake, pollution,
and/or flood insurance in amounts selected by Landlord.
(2) Optional Insurance. Landlord, at Landlord's option, may also (but shall
have no obligation to) carry insurance against loss of rent, in an amount equal
to the amount of Base Rent and Additional Rent that Landlord could be required
to abate to all Building tenants in the event of condemnation or casualty damage
for a period of twelve (12) months. Landlord may also (but shall have no
obligation to) carry such other insurance as Landlord may deem prudent or
advisable, including, without limitation, liability insurance in such amounts
and on such terms as Landlord shall determine. Landlord shall not be obligated
to insure, and shall have no responsibility whatsoever for any damage to, any
furniture, machinery, goods, inventory or supplies, or other personal property
or fixtures which Tenant may keep or maintain in the Premises, or any leasehold
improvements, additions or alterations within the Premises.
B. Tenant's Insurance.
(1) Property Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times until
the end of the Term, insurance on all personal property and fixtures of Tenant
and all improvements, additions or alterations made by or for Tenant to the
Premises on an "All Risk" basis, insuring such property for the full replacement
value of such property.
(2) Liability Insurance. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times until
the end of the Term Commercial General Liability insurance covering bodily
injury and property damage liability occurring in or about the Premises or
arising out of the use and occupancy of the Premises and the Project, and any
part of either, and any areas adjacent thereto, and the business operated by
Tenant or by any other occupant of the Premises. Such insurance shall include
contractual liability insurance coverage insuring all of Tenant's indemnity
obligations under this Lease. Such coverage shall have a minimum combined single
limit of liability of at least Two Million Dollars ($2,000,000.00), and a
minimum general aggregate limit of Three Million Dollars ($3,000,000-00), with
an "Additional Insured - Managers or Lessors of Premises Endorsement." All such
policies shall be written to apply to all bodily injury (including death),
property damage or loss, personal and advertising injury and other covered loss,
however occasioned, occurring during the policy term, shall be endorsed to add
Landlord and any party holding an interest to which this Lease may be
subordinated as an additional insured, and shall provide that such coverage
shall be "primary" and non-contributing with any insurance maintained by
Landlord, which shall be excess insurance only. Such coverage shall also contain
endorsements including employees as additional insureds if not covered by
Tenant's Commercial General Liability Insurance. All such insurance shall
provide for the severability of interests of insureds; and shall be written on
an "occurrence" basis, which shall afford coverage for all claims based on acts,
omissions, injury and damage, which occurred or arose (or the onset of which
occurred or arose) in whole or in part during the policy period.
(3) Workers' Compensation and Employers' Liability Insurance. Tenant shall
carry Workers' Compensation insurance as required by any Regulation, throughout
the Term at Tenant's sole cost and expense. Tenant shall also carry Employers'
Liability Insurance in amounts not less than One Million Dollars ($1,000,000)
each accident for bodily injury by
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accident; One Million Dollars ($1,000,00o) policy limit for bodily injury by
disease; and One Million Dollars ($1,000,000) each employee for bodily injury by
disease, throughout the Term at Tenant's sole cost and expense.
(4) General Insurance Requirements. All coverages described in this
Paragraph 8.B. shall be endorsed to (i) provide Landlord with thirty (30) days'
notice of cancellation or change in terms; and (ii) waive all rights of
subrogation by the insurance carrier against Landlord. If at any time during the
Term the amount or coverage of insurance which Tenant is required to carry under
this Paragraph 8.13. is, in Landlord's reasonable judgment, materially less than
the amount or type of insurance coverage typically carried by owners or tenants
of properties located in the general area in which the Premises are located
which are similar to and operated for similar purposes as the Premises or if
Tenant's use of the Premises should change with or without Landlord's consent,
Landlord shall have the right to require Tenant to increase the amount or change
the types of insurance coverage required under this Paragraph 8.B. All insurance
policies required to be carried by Tenant under this Lease shall be written by
companies rated A X or better in "Best's Insurance Guide" and authorized to do
business in the State of Washington. In any event deductible amounts under all
insurance policies required to be carried by Tenant under this Lease shall not
exceed Five Thousand Dollars ($5,000.00) per occurrence. Tenant shall deliver to
Landlord on or before the Term Commencement Date, and thereafter at least thirty
(30) days before the expiration dates of the expired policies, certified copies
of Tenant's insurance policies, or a certificate evidencing the same issued by
the insurer thereunder; and, if Tenant shall fail to procure such insurance, or
to deliver such policies or certificates, Landlord may, at Landlord's option and
in addition to Landlord's other remedies in the event of a default by Tenant
hereunder, procure the same for the account of Tenant, and the cost thereof
shall be paid to Landlord as Additional Rent.
Indemnification. Tenant shall indemnify, defend by counsel reasonably acceptable
to Landlord, protect and hold Landlord harmless from and against any and all
claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or
expenses, including reasonable attorneys' and consultants' fees and court costs,
demands, causes of action, or judgments, directly or indirectly arising out of
or related to: (1) claims of injury to or death of persons or damage to property
occurring or resulting directly or indirectly from the use or occupancy of the
Premises, Building or Project by Tenant or Tenant's Parties, or from activities
or failures to act of Tenant or Tenant's Parties; (2) claims arising from work
or labor performed, or for materials or supplies furnished to or at the request
or for the account of Tenant in connection with performance of any work done for
the account of Tenant within the Premises or Project; (3) claims arising from
any breach or default on the part of Tenant in the performance of any covenant
contained in this Lease; and (4) claims arising from the negligence or
intentional acts or omissions of Tenant or Tenant's Parties. The foregoing
indemnity by Tenant shall not be applicable to claims to the extent arising from
the gross negligence or willful misconduct of Landlord. Landlord shall not be
liable to Tenant and Tenant hereby waives all claims against Landlord for any
injury or damage to any person or property in or about the Premises, Building or
Project by or from any cause whatsoever (other than Landlord's gross negligence
or willful misconduct) and, without limiting the generality of the foregoing,
whether caused by water leakage of any character from the roof, walls, basement
or other portion of the Premises, Building or Project, or caused by gas, fire,
oil or electricity in, on or about the Premises, Building or Project. landlord
shall indemnify, defend by counsel reasonably acceptable to Tenant, Protect and
hold Tenant.. harmless from and against any and all claims, liabilities. losses.
costs, damages. Injuries or expenses including reasonable attorneys' and
consultants' fees and court costs, demands, causes of action. or judgements
arise out of or relate to the gross negligence or willful misconduct of Landlord
or Landlord's agents, employees or Invitees. Notwithstanding the forgoing or
anything to the contrary contained In this Lease, Landlord shall In no event be
liable to Tenant and Tenant hereby waives all claim against Landlord for any
injury or damage to any person or property In or about the Premises, Building or
project, Including without limitation the common areas, whether caused by theft,
fire, rain or water leakage of any character from the roof, walls, plumbing,
sprinklers, pipes, basement or any other portion of the Premises, Building or
project, or cause by gas, fire, oil or electricity In, on or about the Premises,
Building or project, or from any other systems except In each case to the extent
caused by the gross negligence or willful misconduct of Landlord, or by acts of
God (including without limitation flood or earthquake), acts of a public enemy,
riot, strike, insurrection, war, court order. requisition or order of
governmental body or authority or from any other cause whatsoever, or for any
damage or inconvenience which may arise through repair, subject to and except as
expressly otherwise provided in Paragraph 9 or 10 of this Lease except to the
extent caused directly by the gross negligence or willful misconduct of
Landlord. In addition. Landlord shall In no event be liable for (i) injury to
Tenant's business or any loss of Income or Profit therefrom or from
consequential damages, or (ii) sums up to the amount of Insurance Proceeds
received by Tenant. The foregoing indemnity by Landlord shall not be applicable
to claims to the extent arising from the negligence or willful misconduct of
Tenant or Tenant's Parties. The foregoing indemnity by Landlord shall survive
the expiration or earlier termination of this Lease. The provisions of this
Paragraph shall survive the expiration or earlier termination of this Lease.
9. WAIVER OF SUBROGATION
To the extent permitted by law and without affecting the coverage
provided by insurance to be maintained hereunder or n rights or remedies,
Landlord and Tenant each waive any right to recover against the other for: (a)
damages for injury to o de t persons; (b) damages to property, including
personal property; (c) damages to the Premises or any part thereof; and (d)
claims arising by reason of the foregoing due to hazards covered by insurance
maintained or required to be maintained pursuant to this Lease to the extent of
proceeds recovered therefrom, or proceeds which would have been recoverable
therefrom in the case of the failure of any party to maintain any insurance
coverage required to be maintained by such party pursuant to this Lease. This
provision is intended to waive fully, any rights and/or claims arising by reason
of the foregoing, but only to the extent that any of the foregoing damages
and/or claims referred to above are covered or would be covered, and only to the
extent of such coverage, by insurance actually carried or required to be
maintained pursuant to this Lease by either Landlord or Tenant. This provision
is also intended to waive fully, and for the benefit of each party, any rights
and/or claims which might give rise to a right of subrogation on any insurance
carrier. Subject to all qualifications of this Paragraph 9, Landlord waives its
rights as specified in this Paragraph 9 with respect to any subtenant that it
has approved pursuant to Paragraph 21 but only in exchange for the written
waiver of such rights to be given by such subtenant to Landlord upon such
subtenant taking possession of the Premises or a portion thereof. Each party
shall cause each insurance policy obtained by it to provide that the insurance
company waives all right of recovery by way of subrogation against either party
in connection with any damage covered by any policy.
10. LANDLORD'S REPAIRS AND MAINTENANCE
Landlord shall at Landlord's expense maintain in good repair, reasonable
wear and tear excepted, the structural soundness of the roof, foundations, and
exterior walls of the Building. The term "exterior walls" as used herein shall
not include windows, glass or plate glass, doors, special store fronts or office
entries. Any damage caused by or repairs necessitated by any negligence or act
of Tenant or Tenant's Parties may be repaired by Landlord at Landlord's option
and Tenant's expense. Tenant shall immediately give Landlord written notice of
any defect or need of repairs in such components of the Building for which
Landlord is responsible, after which Landlord shall have a reasonable
opportunity and the right to enter the Premises at all reasonable times to
repair same. Landlord's liability with respect to any defects, repairs, or
maintenance for which Landlord is responsible under any of the provisions of
this Lease shall be limited to the cost of
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such repairs or maintenance, and there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of repairs, alterations or improvements in or
to any portion of the Premises, the Building or the Project or to fixtures,
appurtenances or equipment in the Building, except as provided in Paragraph 24.
By taking possession of the Premises, Tenant accepts them "as is," as being in
good order, condition and repair and the condition in which Landlord is
obligated to deliver them and suitable for the Permitted Use and Tenant's
intended operations in the Premises, whether or not any notice of acceptance is
given.
11. TENANT'S REPAIRS AND MAINTENANCE
Tenant shall at all times during the Term at Tenant's expense maintain
all parts of the Premises and such portions of the Building as are within the
exclusive control of Tenant in a first-class, good, clean and secure condition
and promptly make all necessary repairs and replacements, as determined by
Landlord, with materials and workmanship of the same character, kind and quality
as the original. Notwithstanding anything to the contrary contained herein,
Tenant shall, at its expense, promptly repair any damage to the Premises or the
Building or Project resulting from or caused by any negligence or act of Tenant
or Tenant's Parties. Nothing herein shall expressly or by implication render
Tenant Landlord's agent or contractor to effect any repairs or maintenance
required of Tenant under this Paragraph 11, as to all of which Tenant shall be
solely responsible.
12. ALTERATIONS
A. Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
("Alterations") without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to proposed Alterations
which: (a) comply with all applicable Regulations; (b) are, in Landlord's
opinion, compatible with the Building or the Project and its mechanical,
plumbing, electrical, heating/ventilation/air conditioning systems, and will not
cause the Building or Project or such systems to be required to be modified to
comply with any Regulations (including, without limitation, the Americans With
Disabilities Act); and (c) will not interfere with the use and occupancy of any
other portion of the Building or Project by any other tenant or its invitees.
Specifically, but without limiting the generality of the foregoing, Landlord
shall have the right of written consent for all plans and specifications for the
proposed Alterations, construction means and methods, all appropriate permits
and licenses, any contractor or subcontractor to be employed on the work of
Alterations, and the time for performance of such work, and may impose rules and
regulations for contractors and subcontractors performing such work. Tenant
shall also supply to Landlord any documents and information reasonably requested
by Landlord in connection with Landlord's consideration of a request for
approval hereunder. Tenant shall cause all Alterations to be a accomplished in a
first-class, good and workmanlike manner, and to comply with all applicable
Regulations and Paragraph 27 hereof Tenant shall at Tenant's sole expense,
perform any additional work required under applicable Regulations due to the
Alterations hereunder. No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of Tenant's obligations
under this Paragraph 12, nor constitute any warranty or representation that the
same complies with all applicable Regulations, for which Tenant shall at all
times be solely responsible. Tenant shall reimburse Landlord for all costs which
Landlord may incur in connection with granting approval to Tenant for any such
Alterations, including any costs or expenses which Landlord may incur in
electing to have outside architects and engineers review said plans and
specifications, and shall pay Landlord an administration fee of ten percent
(10%) of the cost of the Alterations as Additional Rent hereunder. All such
Alterations shall remain the property of Tenant until the expiration or earlier
termination of this Lease, at which time they shall be and become the property
of Landlord; provided, however, that Landlord may, at Landlord's option, require
that Tenant, at Tenant's expense, remove any or all Alterations made by Tenant
and restore the Premises by the expiration or earlier termination of this Lease,
to their condition existing prior to the construction of any such Alterations.
All such removals and restoration shall be accomplished in a first-class and
good and workmanlike manner so as not to cause any damage to the Premises or
Project whatsoever. If Tenant fails to remove such Alterations or Tenant's trade
fixtures or furniture or other personal property, Landlord may keep and use them
or remove any of them and cause them to be stored or sold in accordance with
applicable law, at Tenant's sole expense. In addition to and wholly apart from
Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses,
Tenant shall be responsible for and shall pay prior to delinquency any taxes or
governmental service fees, possessory interest taxes, fees or charges in lieu of
any such taxes, capital levies, or other charges imposed upon, levied with
respect to or assessed against its fixtures or personal property, on the value
of Alterations within the Premises, and on Tenant's interest pursuant to this
Lease, or any increase in any of the foregoing based on such Alterations. To the
extent that any such taxes are not separately assessed or billed to Tenant,
Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.
Notwithstanding the foregoing, at Landlord's option (but without obligation),
all or any portion of the Alterations shall be performed by Landlord for
Tenant's account and Tenant shall pay Landlord's estimate of the cost thereof
(including a reasonable charge for Landlord's overhead and profit) prior to
commencement of the work. In addition, at Landlord's election and
notwithstanding the foregoing, however, Tenant shall pay to Landlord the cost of
removing any such Alterations and restoring the Premises to their original
condition such cost to include a reasonable charge for Landlord's overhead and
profit as provided above, and such amount may be deducted from the Security
Deposit or any other sums or amounts held by Landlord under this Lease.
B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to pen-nit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.
C. Notwithstanding anything to the contrary contained In Paragraph 12.A. at
the time Landlord gives Its consent for any Alterations Tenant shall also be
notified whether or not Landlord will require that such Alterations be removed
non the expiration or earlier termination of this Lease. If Landlord falls to so
notify Tenant, It shall be assumed that Landlord will require their removal.
13. SIGNS
Tenant shall not place, install, affix, paint or maintain any signs, notices,
graphics or banners whatsoever or any window deco visible in or from public view
or corridors, the common areas or the exterior of the Premises or the Building,
in or on any exterior window or window fronting upon any common areas or service
area without Landlord's prior written approval which Landlord shall have the
right to withhold in its absolute and sole discretion; provided that Tenant's
name shall be included in any Building-standard door and directory signage, if
any, in accordance with Landlord's Building signage program. Any installation of
signs, notices, graphics or banners on or about the Premises or Project approved
by Landlord shall be subject to any Regulations and to any other requirements
imposed by Landlord. Tenant shall remove all such signs or graphics by the
expiration or any earlier termination of this Lease. Such installations and
removals shall be made in such manner as to avoid injury to or defacement of the
Premises, Building or Project and any other improvements contained therein, and
Tenant shall repair any injury or defacement including without limitation
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discoloration caused by such installation or removal. Tenant shall be entitled
to signage on the Building monument sign as it may be available. Such signage
will be designed and constructed at Tenant's sole cost and expense. All signs
shall be subject to Landlord's approval, which shall not be unreasonably
withheld or delayed and approval of any public authorities having jurisdiction.
All of Tenant's signs shall at all times remain Tenant and Tenant must remove
its signs at the expiration or earlier, termination of this Lease. Tenant shall
repair, any damage caused in the removal of its sign.
14. INSPECTION/POSTING NOTICES
After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises at reasonable times to inspect the same, to clean,
to perform such work as may be permitted or required hereunder, to make repairs,
improvements or alterations to the Premises, Building or Project or to other
tenant spaces therein, to deal with emergencies, to post such notices as may be
permitted or required by law to prevent the perfection of liens against
Landlord's interest in the Project or to exhibit the Premises to prospective
tenants, purchasers, encumbrancers or to others, or for any other purpose as
Landlord may deem necessary or desirable; provided, however, that Landlord shall
use reasonable efforts not to unreasonably interfere with Tenant's business
operations. Tenant shall not be entitled to any abatement of Rent by reason of
the exercise of any such right of entry. Tenant 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. Landlord shall at all times have and retain a key with which to unlock
all of the doors in, upon and about the Premises, excluding Tenant's vaults and
safes or special security areas (designated in advance), and Landlord shall have
the right to use any and all means which Landlord may deem necessary or proper
to open said doors in an emergency, in order to obtain entry to any portion of
the Premises, and any entry to the Premises or portions thereof obtained by
Landlord by any of said means, or otherwise, shall not be construed to be a
forcible or unlawful entry into, or a detainer of the Premises, or an eviction,
actual or constructive, of Tenant from the Premises or any portions thereof. At
any time within six (6) months prior to the expiration of the Term or following
any earlier termination of this Lease or agreement to terminate this Lease,
Landlord shall have the right to erect on the Premises, Building and/or Project
a suitable sign indicating that the Premises are available for lease.
15. SERVICES AND UTILITIES
A. Provided Tenant shall not be in default hereunder, and subject to the
provisions elsewhere herein contained and to the rules and regulations of the
Building, Landlord shall furnish to the Premises during ordinary business hours
of generally recognized business days, to be determined by Landlord (but
exclusive, in any event, of Saturdays, Sundays and legal holidays), water for
lavatory and drinking purposes and electricity, heat and air conditioning as
usually furnished or supplied for use of the Premises for reasonable and normal
office use as of the date Tenant takes possession of the Premises as determined
by Landlord (but not including above-standard or continuous cooling for
excessive heat-generating machines, excess lighting or equipment), janitorial
services during the times and in the manner that such services are, in
Landlord's judgment, customarily furnished in comparable office buildings in the
immediate market area, and 24 hour elevator service, which shall mean service
either by nonattended automatic elevators or elevators with attendants, or both,
at the option of Landlord. Tenant acknowledges that Tenant has inspected and
accepts the water, electricity, heat and air conditioning and other utilities
and services being supplied or furnished to the Premises as of ' the date Tenant
takes possession of the Premises, as being sufficient for use of the Premises
for reasonable and normal office use in their present condition, "as is," and
suitable for the Permitted Use, and for Tenant's intended operations in the
Premises. Landlord shall provide additional or after-hours electricity, heating
or air conditioning, at Tenant's request, Tenant shall pay to Landlord a
reasonable charge for such services as determined by Landlord. Tenant agrees to
keep and cause to be kept closed all window covering when necessary because of
the sun's position, and Tenant also agrees at all times to cooperate fully with
Landlord and to abide by all of the regulations and requirements which Landlord
may prescribe for the proper functioning and protection of electrical, heating,
ventilating and air conditioning systems. Wherever heat-generating machines,
excess lighting or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Tenant to Landlord upon
demand by Landlord. Tenant acknowledges and agrees that Tenant's use of the
Premises after ordinary business hours (defined as 8:00 a.m. to 6:00 p.m.,
Monday through Friday, and 8:00 a.m.- to 12 noon, Saturday) and outside of
generally recognized business days (generally recognized business days shall not
include Saturdays, except as noted herein, Sundays, and legal holidays) imposes
additional burden on the Project's HVAC. Accordingly, any such after-hours use
of will be made available and will be billed as an after-hours Rent assessment,
even If Tenant Is directly contracting utilities or services. After-hours use
may be metered by Landlord with a bypass timer located on the applicable floors
of the Building or through establishment of a recognized monthly after-hours
assessment based upon Landlord's estimate of Tenant's usage. Such costs will be
Payable by Tenant to Landlord within thirty (30) days after demand as Additional
Rent. The minimum amount of after-hours usage shall be two (2) hours, and the
cost thereof shall not exceed Twenty Dollars ($20) per hour per floor during the
Initial year of the Lease Term, subject to adjustment thereafter to reflect
increases In the cost of such utilities or services.
B. Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises, including without limitation, computers,
electronic data processing machines, copying machines, and other machines, using
excess lighting or using electric current, water, or any other resource in
excess of or which will in any way increase the amount of electricity, water, or
any other resource being furnished or supplied for the use of the Premises for
reasonable and normal office use, in each case as of the date Tenant takes
possession of the Premises as determined by Landlord, or which will require
additions or alterations to or interfere with the Building power distribution
systems; nor connect with electric current, except through existing electrical
outlets in the Premises or water pipes, any apparatus, equipment or device for
the purpose of using electrical current, water, or any other resource. If Tenant
shall require water or electric current or any other resource in excess of that
being furnished or supplied for the use of the Premises as of the date Tenant
takes possession of the Premises as determined by Landlord, Tenant shall first
procure the written consent of Landlord which Landlord may refuse, to the use
thereof, and Landlord may cause a special meter to be installed in the Premises
so as to measure the amount of water, electric current or other resource
consumed for any such other use. Tenant shall pay directly to Landlord as an
addition to and separate from payment of Operating Expenses the actual cost of
all such additional resources, energy, utility service and meters (and of
installation, maintenance and repair thereof and of any additional circuits or
other equipment necessary to furnish such additional resources, energy, utility
or service). Landlord may add to the separate or metered charge a recovery of
additional expense incurred in keeping account of the excess water, electric
current or other resource so consumed. Landlord shall not be liable for any
damages directly or indirectly resulting from nor shall the Rent or any monies
owed Landlord under this Lease herein reserved be abated by reason of. (a) the
installation, use or interruption of use of any equipment used in connection
with the furnishing of any such utilities or services, or any change in the
character or means of supplying or providing any such utilities or services or
any supplier thereof, (b) the failure to furnish or delay in furnishing any such
utilities or services when such failure or delay is caused by acts of God or the
elements, labor disturbances of any character, or any other accidents or other
conditions beyond the reasonable control of Landlord or because of any
interruption of service due to Tenant s use of water, electric current or other
resource in excess of that being supplied or furnished for the use of the
Premises as of the date Tenant takes possession of the Premises; (c) the
inadequacy, limitation, curtailment, rationing or restriction on use of water,
electricity, gas
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or any other form of energy or any other service or utility whatsoever serving
the Premises or Project, whether by Regulation or otherwise; or (d) the partial
or total unavailability of any such utilities or services to the Premises or the
Building, whether by Regulation or otherwise; nor shall any such occurrence
constitute an actual or constructive eviction of Tenant. Landlord shall further
have no obligation to protect or preserve any apparatus, equipment or device
installed by Tenant in the Premises, including without limitation by providing
additional or after-hours heating or air conditioning. Landlord shall be
entitled to cooperate voluntarily and in a reasonable manner with the efforts of
national, state or local governmental agencies or utility suppliers in reducing
energy or other resource consumption. The obligation to make services available
hereunder shall be subject to the limitations of any such voluntary, reasonable
program. In addition, Landlord reserves the right to change the supplier or
provider of any such utility or service from time to time. Tenant shall have no
right to contract with or otherwise obtain any electrical or other such service
for or with respect to the Premises or Tenant's operations therein from any
supplier or provider of any such service. Tenant shall cooperate with Landlord
and any supplier or provider of such services designated by Landlord from time
to time to facilitate the delivery of such services to Tenant at the Premises
and to the Building and Project, including without limitation allowing Landlord
and Landlord's suppliers or providers, and their respective agents and
contractors, reasonable access to the Premises for the purpose of installing,
maintaining, repairing, replacing or upgrading such service or any equipment or
machinery associated therewith.
C. Tenant shall pay, upon demand, for all utilities furnished to the
Premises, or if not separately billed to or metered to Tenant, Tenant's
Proportionate Share of all charges jointly serving the Project in accordance
with Paragraph 7. All sums payable under this Paragraph 15 shall constitute
Additional Rent hereunder.
16. SUBORDINATION
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are situated, or
both; and (b) any mortgage or deed of trust which may now exist or be placed
upon the Building, the Project and/or the land upon which the Premises or the
Project are situated, or said ground leases or underlying leases, or Landlord's
interest or estate in any of said items which is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within ten (10) days after request by Landlord, Tenant shall
execute and deliver any additional documents evidencing Tenant's attornment or
the subordination of this Lease with respect to any such ground leases or
underlying leases or any such mortgage or deed of trust, in the form requested
by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of
trust, subject to such nondisturbance requirement. If requested in writing by
Tenant, Landlord shall use commercially reasonable efforts to obtain a
subordination, nondisturbance and attornment agreement for the benefit of Tenant
reflecting the foregoing from any ground landlord, mortgagee or beneficiary, at
Tenant's expense, subject to such other terms and conditions as the ground
landlord, mortgagee or beneficiary may require.
17. FINANCIAL STATEMENTS
At the request of Landlord from time to time, Tenant shall provide to Landlord
Tenant's and any guarantor's current financial statements or other information
discussing financial worth of Tenant and any guarantor, which Landlord shall use
solely for purposes of this Lease and in connection with the ownership,
management, financing and disposition of the Project.
18. ESTOPPEL CERTIFICATE
Tenant agrees from time to time, within ten (10) days after request of Landlord,
to deliver to Landlord, or Landlord's designee, an estoppel certificate stating
that this Lease is in full force and effect, that this Lease has not been
modified (or stating all modifications, written or oral, to this Lease), the
date to which Rent has been paid, the unexpired portion of this Lease, that
there are no current defaults by Landlord or Tenant under this Lease (or
specifying any such defaults), that the leasehold estate granted by this Lease
is the sole interest of Tenant in the Premises and/or the land at which the
Premises are situated, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to 6xecutc and deliver such certificate within such ten (10) day period,
Landlord may execute and deliver such certificate on Tenant's behalf and that
such certificate shall be binding on Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
Project or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this Lease, and shall be an event of default
(without any cure period that might be provided under Paragraph 26.A(3) of this
Lease) if Tenant fails to fully comply or makes any material misstatement in any
such certificate.
19. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord upon execution of this Lease, a security
deposit as stated in the Basic Lease Information (the "Security Deposit"), which
sum shall be held and owned by Landlord, without obligation to pay interest, as
security for the performance of Tenant's covenants and obligations under this
Lease. The Security Deposit is not an advance rental deposit or a measure of
damages incurred by Landlord in case of Tenant's default. Upon the occurrence of
any event of default by Tenant beyond any applicable notice and cure period,
Landlord may from time to time, without prejudice to any other remedy provided
herein or by law, use such fund as a credit to the extent necessary to credit
against any arrears of Rent or other payments due to Landlord hereunder, and any
other damage, injury, expense or liability caused by such event of default, and
Tenant shall pay to Landlord, on demand, the amount so applied in order to
restore the Security Deposit to its original amount. Although the Security
Deposit shall be deemed the property of Landlord, any remaining balance of such
deposit shall be returned by Landlord to Tenant at such time after termination
of this Lease that all of Tenant's obligations under this Lease have been
fulfilled ' reduced by such amounts as may be required by Landlord to remedy
defaults on the part of Tenant in the payment of Rent or other obligations of
Tenant under this Lease, to repair damage to the Premises, Building or Project
caused by Tenant or any Tenant's Parties and to clean the Premises. Landlord may
use and commingle the Security Deposit with other funds of Landlord.
20. LIMITATION OF TENANT'S REMEDIES
The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord's
interest in the Project for the recovery of any amount from Landlord, and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual or other partners of Landlord or its or their partners, directors,
officers or shareholders. Any lien obtained to enforce any such judgment and any
levy of execution thereon shall be subject and subordinate to any
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lien, mortgage or deed of trust on the Project. Under no circumstances shall
Tenant have the right to offset against or recoup rent or other payments due and
to become due to Landlord hereunder except as expressly provided in Paragraph
23.B. below, which nt and other payments shall be absolutely due and payable
hereunder in accordance with the terms hereof.
21. ASSIGNMENT AND SUBLETTING
A. (1) General. This Lease has been negotiated to be and is granted as an
accommodation to Tenant. Accordingly, this Lease is personal to Tenant, and
Tenant's rights granted hereunder do not include the right to assign this Lease
or sublease the Premises, or to receive any excess, either in installments or
lump sum, over the Rent which is expressly reserved by Landlord as here in after
provided, except as otherwise expressly hereinafter provided. Tenant shall not
assign or pledge this Lease or sublet the Premises or any part thereof, whether
voluntarily or by operation of law, or permit the use or occupancy of the
Premises or any part thereof by anyone other than Tenant, or suffer or permit
any such assignment, pledge, subleasing or occupancy, without Landlord's prior
written consent except as provided herein. If Tenant desires to assign this
Lease or sublet any or all of the Premises, Tenant shall give Landlord written
notice (the "Transfer Notice") at least sixty (60) days prior to the anticipated
effective date of the proposed assignment or sublease, which shall contain all
of the information reasonably requested by Landlord to address Landlord's
decision criteria specified hereinafter. Landlord shall then have a period of
thirty (30) days following receipt of the Transfer Notice to notify Tenant in
writing that Landlord elects either: (i) to terminate this Lease in the event of
an assignment of the Leasee as to the space so affected as of the date so
requested by Tenant; or (ii) to consent to the proposed assignment or sublease,
subject, however, to Landlord's prior written consent of the proposed assignee
or subtenant and of any related documents or agreements associated with the
assignment or sublease. If Landlord should fail to notify Tenant in writing of
such election within said period, Landlord shall be deemed to have waived option
(i) above, but written consent by Landlord of the proposed assignee or subtenant
shall still be required. If Landlord does not exercise option (i) above,
Landlord's consent to a proposed assignment or sublease shall not be
unreasonably withheld. Consent to any assignment or subletting shall not
constitute consent to any subsequent transaction to which this Paragraph 21
applies.
(2) Conditions of Landlord's Consent. Without limiting the other
instances in which it may be reasonable for Landlord to withhold Landlord's
consent to an assignment or subletting, Landlord and Tenant acknowledge that it
shall be reasonable for Landlord to withhold Landlord's consent in the following
instances: if the proposed assignee does not agree to be bound by and assume the
obligations of Tenant under this Lease in form and substance satisfactory to
Landlord; the use of the Premises by such proposed assignee or subtenant would
not be a Permitted Use or would violate any exclusivity or other arrangement
which Landlord has with any other tenant or occupant or any Regulation or would
increase the Occupancy Density or Parking Density of the Building or Project, or
would otherwise result in an undesirable tenant mix for the Project as
determined by Landlord; the proposed assignee or subtenant is not of sound
financial condition as determined by Landlord in Landlord's sole discretion; the
proposed assignee or subtenant is a governmental agency; the proposed assignee
or subtenant does not have a good reputation as a tenant of property or a good
business reputation; the proposed assignee or subtenant is a person with whom
Landlord is negotiating to lease space in the Project or is a present tenant of
the Project; the assignment or subletting would entail any Alterations which
would lessen the value of the leasehold improvements in the Premises or use of
any Hazardous Materials or other noxious use or use which may disturb other
tenants of the Project; or Tenant is in default beyond any applicable notice and
cure period of any obligation of Tenant under this Lease, or Tenant has
defaulted under this Lease on three (3) or more occasions during any twelve (12)
months preceding the date that Tenant shall request consent. Failure by or
refusal of Landlord to consent to a proposed assignee or subtenant shall not
cause a termination of this Lease. Upon a termination under Paragraph
2l.A.(l)(i), Landlord may lease the Premises to any party, including parties
with whom Tenant has negotiated an assignment or sublease, without incurring any
liability to Tenant. At the option of Landlord, a surrender and termination of
this Lease shall operate as an assignment to Landlord of some or all subleases
or subtenancies. Landlord shall exercise this option by giving notice of that
assignment to such subtenants on or before the effective date of the surrender
an termination. In connection with each request for assignment or subletting,
Tenant shall pay to Landlord Landlord's standard fee for approving such
requests, as well as all reasonable costs incurred by Landlord or any mortgagee
or ground lessor in approving each such request and effecting any such transfer,
including, without limitation, reasonable attorneys' fees.
(3) Permitted Transfers. An "Affiliate" means any entity that (i)
controls. is controlled by, or Is under common control with Tenant, (ii) results
from the transfer of all or substantially all of Tenant's assets or stock, or
(iii) results from the merger or consolidation of Tenant with another entity.
"Control" means the direct or indirect ownership of more than fifty percent
(50%) of the voting securities of an entity or possession of the right to vote
more than fifty percent (50%) of the voting Interest In the ordinary direction
of the entity's affairs. Notwithstanding anything to the contrary contained In
this Lease, Landlord's consent Is not required for an assignment of this Lease
or sublease of all or a portion of the Premises t;an Affiliate so lone as the
following conditions are met: (a) at least ten (10) business days before any
such assignment or sublease, Landlord receives written notice of such assignment
or sublease (as well as any documents or Information reasonably requested by
Landlord regarding the Proposed Intended transfer and the transferech (b) Tenant
Is not then gild has not been in default under this Lease beyond any applicable
notice AND cure PERIOD ; (c) If the transfer Is an assignment or any other
transfer to an Affiliate other than a sublease, the intended assignee assumes In
writing all of Tenant's obligations under this Lease relating to the Premises In
form satisfactory to Landlord or, If the transfer Is a sublease, the Intended
sublessee accepts the sublease In form satisfactory to Landlord; (d) the
intended transferee has a tangible net worth, as evidenced by financial
statements delivered to Landlord and certified by an Independent certified
public accountant in accordance with generally accepted accounting principles
that are consistently applied, at least equal to the financial statement of
Tenant; (e) the Premises shall continue to be operated solely for the use
specified In the Basic Lease Information; and (f) Tenant shall pay to Landlord
Landlord's standard fee for approving assignments and subleases and all costs
reasonably incurred by Landlord or any mortgagee or ground lessor for such
assignment or subletting, Including, without limitation, reasonable attorneys'
fees. No transfer to an Affiliate In accordance with this subparagraph shall
relieve Tenant named herein of any obligation under this Lease or alter the
primary liability of Tenant named herein for the payment of Rent or for the
performance of any other obligation to be performed by Tenant, Including the
obligations contained in Paragraph 25 with respect to any Affiliate.
B. Bonus Rent. Any Rent or other consideration realized by Tenant under any
such sublease or assignment in excess of the Rent payable hereunder, after
amortization of a reasonable brokerage commission incurred by Tenant, shall be
divided and paid, forty percent (40%) to Tenant, sixty percent (60%) to
Landlord. In any subletting or Assignment undertaken by Tenant, Tenant shall
diligently seek to obtain the maximum rental amount available in the marketplace
for comparable space available for primary leasing.
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C. Corporation. If Tenant is a corporation, a transfer of corporate shares
by sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.
D. Unincorporated Entity. If Tenant is a partnership, joint venture,
unincorporated limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.
E. Liability. No assignment or subletting by Tenant, permitted or
otherwise, shall relieve Tenant of any obligation under this Lease or alter the
primary liability of the Tenant named herein for the payment of Rent or for the
performance of any other obligations to be performed by Tenant, including
obligations contained in Paragraph 25 with respect to any assignee or subtenant.
Landlord may collect rent or other amounts or any portion thereof from any
assignee, subtenant, or other occupant of the Premises, permitted or otherwise,
and apply the net rent collected to the Rent payable hereunder, but no such
collection shall be deemed to be a waiver of this Paragraph 21, or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of the obligations of Tenant under
this Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.
22. AUTHORITY
Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord's obligations hereunder and that
all persons signing this Lease on its behalf are authorized to do. Tenant and
the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.
23. CONDEMNATION
A. Condemnation Resulting In Termination. If the whole or any substantial
part of the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its option. In either of such events, the Rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking of said
Premises shall have occurred and any prepaid rent shall be refunded to Tenant.
B. Condemnation Not Resulting in Termination. If a portion of the Project
of which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained in this Paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Term; in the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use of or occupancy of the Premises
during the Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration of the Premises and the use and
occupancy of the Premises.
C. Award. Landlord shall be entitled to (and Tenant shall assign to
Landlord) any and all payment, income, rent, award or any interest therein
whatsoever which may be paid or made in connection with such taking or
conveyance and Tenant shall have no claim against Landlord or otherwise for any
sums paid by virtue of such proceedings, whether or not attributable to the
value of any unexpired portion of this Lease, except as expressly provided in
this Lease. Notwithstanding anything to the contrary in this Paragraph 23 of
this Lease, Tenant shall have the right to claim separately from the authority
such compensation as may be recoverable by Tenant in its own right for the
amortized value of leasehold improvements paid for solely by Tenant (except for
those Alterations approved by Landlord and which will become the property of
Landlord upon the expiration or termination of this Lease), for Tenant's
personal property and trade fixtures, and for moving and restoration costs
incurred by Tenant, so long as It does not prejudice or reduce Landlord's claim
against or award from the condemning authority.
I
24. CASUALTY DAMAGE
A. General. If the Premises or Building should be damaged or destroyed by
fire, tornado, or other casualty (collectively, "Casualty"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's estimation material restoration of the Premises can reasonably be
made one hundred eighty (180) days from the date of such notice and receipt of
required permits for such restoration. Landlord's determination shall be binding
on Tenant.
B. Within 180 Days. If the Premises or Building should be damaged by
Casualty to such extent that material restoration can in Landlord's estimation
be reasonably completed within one hundred eighty (180) days after the date of
such notice and receipt of required permits for such restoration, this Lease
shall not terminate. Provided that insurance proceeds are received by Landlord
to fully repair the damage, Landlord shall proceed to rebuild and repair the
Premises in the manner determined by Landlord, except that Landlord shall not be
required to rebuild, repair or replace any part of the Alterations which may
have been placed on or about the Premises by Tenant. If the Premises are
untenantable in whole or in part following such damage, the Rent payable
hereunder during the period in which they are untenantable shall be abated
proportionately, but only to the extent of rental abatement insurance proceeds
received by Landlord during the time and to the extent the Premises are unfit
for occupancy.
C. Greater than 180 Days. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, then Landlord shall have the option of either: (1) terminating this
Lease effective upon the date of the occurrence of such damage, in which event
the Rent shall be abated during the unexpired portion of this Lease; or (2)
electing to rebuild or repair the Premises diligently and in the manner
determined by Landlord. Landlord shall notify Tenant of its election within
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thirty (30) days after Landlord's receipt of notice of the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.
D. Tenant's Fault. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.
E. Insurance Proceeds. Notwithstanding anything herein to the contrary, if
the Premises or Building are damaged or destroyed and are not fully covered by
the insurance proceeds received by Landlord or if the holder of any indebtedness
secured by a mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.
F. Waiver. This Paragraph 24 shall be Tenant's sole and exclusive remedy in
the event of damage or destruction to the Premises or the Building, As a
material inducement to Landlord entering into this Lease, Tenant hereby waives
any rights it may have under any law, statute or ordinance now or hereafter in
effect or also with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs.
G. Tenant's Personal Property. In the event of any damage or destruction of
the Premises or the Building, under no circumstances shall Landlord be required
to repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.
25. HOLDING OVER
Unless Landlord expressly consents in writing to Tenant's holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord's written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
double the amount of daily rental as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defend, protect
and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems necessary at Tenant's
sole cost and expense, and any required by Landlord to complete such obligations
shall be considered a period of holding over and the terms of this Paragraph 25
may apply. The provisions of this Paragraph 25 shall survive any expiration or
earlier termination of this Lease.
26. DEFAULT
A. Events of Default. The occurrence of any of the following shall
constitute an event of default on the part of Tenant:
(1) Abandonment. Abandonment or vacation of the Premises for a continuous
period in excess of five (5) days.
(2) Nonpayment of Rent. Failure to vay any installment of Rent or any other
amount due and Payable hereunder when said payment Is due. such failure
continuing for three (3)-days after written notice of such failure, as to which
time Is of the essence. provided that Landlord shall not be required to provide
such notice more than once during the twelve (12) month period commencing with
the date of such notice, the second failure to pay any such amount within (five
(5) days after said payment is due during such 12-month period shall be an event
of default hereunder without notice. Such notice shall replace rather than
supplement any statutory notice required under Code of Civil Procedure Section
1161 or any similar or successor statute.
(3) Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in subparagraphs
(1) and (2) of this Paragraph 26.A., such failure continuing for fifteen (16
twenty (20) days after written notice of such failure, as to which time is of
the essence.
(4) General Assignment. A general assignment by Tenant for the benefit of
creditors.
(5) Bankruptcy. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors, which
involuntary petition remains undischarged for a period of thirty (30) days. If
under applicable law, the trustee in bankruptcy or Tenant has the right to
affirm this Lease and continue to perform the obligations of Tenant hereunder,
such trustee or Tenant shall, in such time period as may be permitted by the
bankruptcy court having jurisdiction, cure all defaults of Tenant hereunder
outstanding as of the date of the affirmance of this Lease and provide to
Landlord such adequate assurances as may be necessary to ensure Landlord of the
continued performance of Tenant's obligations under this Lease.
(6) Receivership. The employment of a receiver to take possession of
substantially all of Tenant's assets or Tenant's leasehold of the Premises, if
such appointment remains undismissed or undischarged for a period of fifteen (4)
twenty (20) days after the order therefor.
(7) Attachment. The attachment, execution or other judicial seizure of all or
substantially all of Tenant's assets or Tenant's leasehold of the Premises, if
such attachment or other seizure remains undismissed or undischarged for a
period of fifteen (15) days after the levy thereof.
(8) Insolvency. The admission by Tenant in writing of its inability to pay its
debts as they become due.
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B. Remedies Upon Default.
(1) Termination. In the event of the occurrence of any event of default,
Landlord shall have the right to give a written termination notice to Tenant,
and on the date specified in such notice, Tenant's right to possession shall
terminate, and this Lease shall terminate unless on or before such date all Rent
in arrears and all costs and expenses incurred by or on behalf of Landlord
hereunder shall have been paid by Tenant and all other events of default of this
Lease by Tenant at the time existing shall have been fully remedied to the
satisfaction of Landlord. At any time after such termination, Landlord may
recover possession of the Premises or any part thereof and expel and remove
therefrom Tenant and any other person occupying the same, including any
subtenant or subtenants notwithstanding Landlord's consent to any sublease, by
any lawful means, and again repossess and enjoy the Premises without prejudice
to any of the remedies that Landlord may have under this Lease, or at law or
equity by any reason of Tenant's default or of such termination. Landlord hereby
reserves the right, but shall not have the obligation, to recognize the
continued possession of any subtenant. The delivery or surrender to Landlord by
or on behalf of Tenant of keys, entry codes, or other means to bypass security
at the Premises shall not terminate this Lease.
(2) Continuation After Default. Even though an event of default may have
occurred, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession under Paragraph 26.B.(I) hereof, and
Landlord may enforce all of Landlord's rights and remedies under this Lease and
at law or in equity, including without limitation, the right to recover Rent as
it becomes due. Acts of maintenance, preservation or efforts to lease the
Premises or the appointment of a receiver under application of Landlord to
protect Landlord's interest under this Lease or other entry by Landlord upon the
Premises shall not constitute an election to terminate Tenant's right to
possession.
(3) Increased Security Deposit. If Tenant is in default under Paragraph
26.A.(2) hereof and such default remains uncured for ten (10) days after such
occurrence or such default occurs more than three times in any twelve (12) month
period, Landlord may require that Tenant increase the Security Deposit to the
amount of three times the current month's Rent at the time of the most recent
default.
C. Damages After Default. Should Landlord terminate this Lease pursuant to
the provisions of Paragraph 26.B.(I) hereof, Landlord shall have the rights and
remedies to which Landlord may be entitled under this Lease or under applicable
law or at equity. In addition, Landlord shall be entitled to recover from
Tenant: (1) the unpaid Rent and other amounts which had been earned at the time
of termination, (2) the amount by which the unpaid Rent and other amounts that
would have been earned after the date of termination until the time of award
exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (3) the amount by which the unpaid Rent and other amounts
for the balance of the Term after the time of award exceeds the amount of such
Rent loss that the Tenant proves could be reasonably avoided; and (4) any other
amount and court costs necessary to compensate Landlord for all detriment
proximately caused by Tenant's failure to perform Tenant's obligations under
this Lease or which, in the ordinary course of things, would be likely to result
therefrom. If this Lease provides for any periods during the Term during which
Tenant is not required to pay Base Rent or if Tenant otherwise receives a Rent
concession, then upon the occurrence of an event of default, Tenant shall owe to
Landlord the full amount of such Basic Rent or value of such Rent concession,
plus interest at the Applicable Interest Rate (defined below), calculated from
the date that such Base Rent or Rent concession would have been payable.
D. Late Charge. In addition to its other remedies, Landlord shall have the
right without notice or demand to add to the amount of any payment required to
be made by Tenant hereunder, and which is not paid and received by Landlord on
or before the first day of each calendar month, an amount equal to ten percent
(10%) of the delinquency for each month or portion thereof that the delinquency
remains outstanding to compensate Landlord for the loss of the use of the amount
not paid and the administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such delinquencies would be
extremely difficult and impracticable to compute and the amount stated herein
represents a reasonable estimate thereof. Any waiver by Landlord of any late
charges or failure to claim the same shall not constitute a waiver of other late
charges or any other remedies available to Landlord.
E. Interest. Interest shall accrue on all sums not paid when due hereunder
at the lesser of eighteen percent (18%) per annum or the maximum interest rate
allowed by law ("Applicable Interest Rate") from the due date until paid.
F. Remedies Cumulative. All rights, privileges and elections or remedies of
the parties are cumulative and not alternative, to the extent permitted by law
and except as otherwise provided herein.
27. LIENS
Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. If Tenant shall not, within twenty (20) days following the
imposition of any such lien, cause the same to be released of record by payment
or posting of a proper bond, 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 Landlord shall deem proper, including
payment of the claim giving rise to such lien. All sums paid by Landlord on
behalf of Tenant and all expenses incurred by Landlord in connection therefor
shall be payable to Landlord by Tenant on demand with interest at the Applicable
Interest Rate as Additional Rent. Landlord shall have the right at all times to
post and keep posted on the Premises any notices permitted or required by law,
or which Landlord shall deem proper, for the protection of Landlord, the
Premises, the Project and any other party having an interest therein, from
mechanics' and materialmen's liens and Tenant shall give Landlord not less than
ten (10) business days prior written notice of the commencement of any work in
the Premises or Project which could lawfully give rise to a claim for mechanics'
or materialmen's liens to permit Landlord to post and record a timely notice of
non-responsibility, as Landlord may elect to proceed or as the law may from time
to time provide, for which purpose, if Landlord shall so determine, Landlord may
enter the Premises. Tenant shall not remove any such notice posted by Landlord
without Landlord's consent, and in any event not before completion of the work
which could lawfully give rise to a claim for mechanics' or materialmen's liens.
28. SUBSTITUTION
A. At any time after execution of this Lease, Landlord may substitute for
the Premises other second floor or above premises in the Project or owned by
Landlord in the vicinity of the Project (the "New Premises") upon not less than
sixty (60) days prior written notice, in which event the New Premises shall be
deemed to be the Premises for all purposes hereunder and this Lease shall be
deemed modified accordingly to reflect the new location and shall remain in full
force and effect as so modified, provided that:
(1) The New Premises shall be similar in area and in function for Tenant's
purposes; and
(2) If Tenant is occupying the Premises at the time of such substitution,
Landlord shall pay the expense of physically moving Tenant, Tenant's
property and equipment to the New Premises and shall, at Landlord's
sole cost, improve the New Premises with improvements substantially
similar to those the Landlord has committed to provide or has provided
in the Premises.
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29. TRANSFERS BY LANDLORD
In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the successor-
in-interest of Landlord under this Lease with respect to the performance of the
covenants and duties of "Landlord" to be performed after the passing of title to
Landlord's successor-in-interest. This Lease shall not be affected by any such
sale and Tenant agrees to attom to the purchaser or assignee. Landlord's
successor(s)-in-interest shall not have liability to Tenant with respect to the
failure to perform any of the obligations of "Landlord," to the extent required
to be performed prior to the date such successor(s)-in-interest became the owner
of the Building.
30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. If Tenant shall fail to pay any sum of money,
other than Base Rent, required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph I I hereof, and such failure shall continue
for fifteen (15) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent.
31. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.
32. NOTICES
Each provision of this Lease or of any applicable governmental laws, ordinances,
regulations and other requirements with reference to sending, mailing, or
delivery of any notice or the making of any payment by Landlord or Tenant to the
other shall be deemed to be complied with when and if the following steps are
taken:
A. Rent. All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at Landlord's Remittance Address
set forth in the Basic Lease Information, or at such other address as Landlord
may specify from time to time by written notice delivered in accordance
herewith. Tenant's obligation to pay Rent and any other amounts to Landlord
under the terms of this Lease shall I not be deemed satisfied until such Rent
and other amounts have been actually received by Landlord.
B. Other. All notices, demands, consents and approvals which may or are
required to be given by either party to the other hereunder shall be in writing
and either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original sent by commercial overnight courier), and in each
case addressed to the party to be notified at the Notice Address for such party
as specified in the Basic Lease Information or to such other place as the party
to be notified may from time to time designate by at least fifteen (15) days
notice to the notifying party. Notices shall be deemed served upon receipt or
refusal to accept delivery. Tenant appoints as its agent to receive the service
of all default notices and notice of commencement of unlawful detainer
proceedings the person in charge of or apparently in charge of occupying the
Premises at the time, and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the Premises.
C. Required Notices. Tenant shall immediately notify Landlord in writing of
any notice of a violation or a potential or alleged violation of any Regulation
that relates to the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any governmental
or regulatory agency against Tenant or any other occupant of the Premises, or
any claim that is instituted or threatened by any third party that relates to
the Premises or the Project.
33. ATTORNEYS' FEES
If Landlord places the enforcement of this Lease, or any part thereof, or the
collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs,
whether incurred without trial, at trial, appeal or review. In any action which
Landlord or Tenant brings to enforce its respective rights hereunder, the
unsuccessful party shall pay all costs incurred by the prevailing party
including reasonable attorneys' fees, to be fixed by the court, and said costs
and attorneys' fees shall be a part of the judgment in said action.
34. SUCCESSORS AND ASSIGNS
This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided hereunder, Tenant's assigns.
35. FORCE MAJEURE
If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent,
however, is not excused by this Paragraph 35.
36. SURRENDER OF PREMISES
Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord in the same condition as existed on the date Tenant
originally took possession thereof, including, but not limited to, all interior
walls cleaned, all interior painted surfaces repainted in the original color,
all holes in walls repaired, all carpets shampooed and cleaned, and all floors
cleaned, waxed, and free of any
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Tenant-introduced marking or painting, all to the reasonable satisfaction of
Landlord. Tenant shall remove all of its debris from the Project. At or before
the time of surrender, Tenant shall comply with the terms of Paragraph 12.A.
hereof with respect to Alterations to the Premises and all other matters
addressed in such Paragraph. If the Premises are not so surrendered at the
expiration or sooner termination of this Lease, the provisions of Paragraph 25
hereof shall apply. All keys to the Premises or any part thereof shall be
surrendered to Landlord upon expiration or sooner termination of the Term.
Tenant shall give written notice to Landlord at least thirty (30) days prior to
vacating the Premises and shall meet with Landlord for a joint inspection of the
Premises at the time of vacating, but nothing contained herein shall be
construed as an extension of the Term or as a consent by Landlord to any holding
over by Tenant. In the event of Tenant's failure to give such notice or
participate in such joint inspection, Landlord's inspection at or after Tenant's
vacating the Premises shall conclusively be deemed correct for purposes of
determining Tenant's responsibility for repairs and restoration. Any delay
caused by Tenant's failure to carry out its obligations under this Paragraph 36
beyond the term hereof, shall constitute unlawful and illegal possession of
Premises under Paragraph 25 hereof.
37. PARKING
So long as Tenant is occupying the Premises, Tenant and Tenant's Parties
shall have the right free of rent or other charges to use up to the number of
parking spaces, if any, specified in the Basic Lease Information on an
unreserved, nonexclusive, first come, first served basis, for passenger-size
automobiles, in the parking areas in the Project designated from time to time by
Landlord for use in common by tenants of the Building.
Tenant shall at all times comply and shall cause all Tenant's Parties
and visitors to comply with all Regulations and any rules and regulations
established from time to time by Landlord relating to parking at the Project,
including any keycard, sticker or other identification or entrance system, and
hours of operation, as applicable.
Landlord shall have no liability for any damage to property or other
items located in the parking areas of the Project, nor for any personal injuries
or death arising out of the use of parking areas in the Project by Tenant or any
Tenant's Parties. Without limiting the foregoing, if Landlord arranges for the
parking areas to be operated by an independent contractor not affiliated with
Landlord, Tenant acknowledges that Landlord shall have no liability for claims
arising through acts or omissions of such independent contractor. In all events,
Tenant agrees to look first to its insurance carrier and to require that
Tenant's Parties look first to their respective insurance carriers for payment
of any losses sustained in connection with any use of the parking areas.
Landlord reserves the right to assign specific spaces, and to reserve
spaces for visitors, small cars, disabled persons or for other tenants or
guests, and Tenant shall not park and shall use reasonable efforts to not allow
Tenant's Parties to park in any such assigned or reserved spaces. Tenant may
validate visitor parking by such method as Landlord may approve, at the
validation rate from time to time generally applicable to visitor parking.
Landlord also reserves the right to alter, modify, relocate or close all or any
portion of the parking areas in order to make repairs or perform maintenance
service, or to restripe or renovate the parking areas, or if required by
casualty, condemnation, act of God, Regulations or for any other reason deemed
reasonable by Landlord.
38. MISCELLANEOUS
A. General. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.
B. Time. Time is of the essence regarding this Lease and all of its
provisions.
C. Choice of Law. This Lease shall in all respects be governed by the laws
of the State of Washington.
D. Entire Agreement. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease Information, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.
E. Modification. This Lease may not be modified except by a written
instrument signed by the parties hereto. Tenant accepts the area of the Premises
as specified in the Basic Lease Information as the approximate area of the
Premises for all purposes under this Lease, and acknowledges and agrees that no
other definition of the area (rentable, usable or otherwise) of the Premises
shall apply. Tenant shall in no event be entitled to a recalculation of the
square footage of the Premises, rentable, usable or otherwise, and no
recalculation, if made, irrespective of its purpose, shall reduce Tenant's
obligations under this Lease in any manner, including without limitation the
amount of Base Rent payable by Tenant or Tenant's Proportionate Share of the
Building and of the Project.
F. Severability. If, for any reason whatsoever, any of the provisions
hereof shall be unenforceable or ineffective, all of the other provisions shall
be and remain in full force and effect.
G. Recordation. Tenant shall not record this Lease or a short form
memorandum hereof.
H. Examination of Lease. Submission of this Lease to Tenant does not
constitute an option or offer to lease and this Lease is not effective otherwise
until execution and delivery by both Landlord and Tenant.
I. Accord and Satisfaction. No payment by Tenant of a lesser amount than
the total Rent due nor any endorsement on any check or letter accompanying any
check or payment of Rent shall be deemed an accord and satisfaction of full
payment of Rent, and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of such Rent or to pursue other
remedies. All offers by or on behalf of Tenant of accord and satisfaction are
hereby rejected in advance.
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J. Easements. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that no
such grant or dedication shall materially interfere with Tenant's Permitted Use
of the Premises. Upon Landlord's request, Tenant shall execute, acknowledge and
deliver to Landlord documents, instruments, maps and plats necessary to
effectuate Tenant's covenants hereunder.
K. Drafting and Determination Presumption. The parties acknowledge that
this Lease has been agreed to by both the parties, that both Landlord and Tenant
have consulted with attorneys with respect to the terms of this Lease and that
no presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required or allowed in this
Lease or requested of Landlord, Landlord's consent, determination or estimation
shall be given or made solely by Landlord in Landlord's good faith opinion,
whether or not objectively reasonable. If Landlord fails to respond to any
request for its consent within the time period, if any, specified in this Lease,
Landlord shall be deemed to have disapproved such request.
L. Exhibits. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.
M. No Light, Air or View Easement. Any diminution or shutting off of
light, air or view by any structure which may be erected on lands adjacent to or
in the vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.
N. No Third Party Benefit. This Lease is a contract between Landlord and
Tenant and nothing herein is intended to create any third party benefit.
0. Quiet Enjoyment. Upon payment by Tenant of the Rent, and upon the
observance and performance of all of the other covenants, terms and conditions
on Tenant's part to be observed and performed, Tenant shall peaceably and
quietly hold and enjoy the Premises for the term hereby demised without
hindrance or interruption by Landlord or any other person or persons lawfully or
equitably claiming by, through or under Landlord, subject, nevertheless, to all
of the other terms and conditions of this Lease. Landlord shall not be liable
for any hindrance, interruption, interference or disturbance by other tenants or
third persons, nor shall Tenant be released from any obligations under this
Lease because of such hindrance, interruption, interference or disturbance.
P. Counterparts. This Lease may be executed in any number of counterparts,
each of which shall be deemed an original.
Q. Multiple Parties. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.
R. Prorations. Any Rent or other amounts payable to Landlord by Tenant
hereunder for any fractional month shall be prorated based on a month of 30
days. As used herein, the term "fiscal year" shall mean the calendar year or
such other fiscal year as Landlord may deem appropriate.
39. ADDITIONAL PROVISIONS
A. Must-Take Space. Tenant shall be required to occupy and pay rent on,
subject to the base rent schedule contained herein, from Landlord
and Landlord shall be required to lease to Tenant those certain
premises located on the second floor of the Building (the
"Must-Take Space")as follows:
(i) 7,201 square feet of rentable area of the Premises (the 11 Must-Take
Space"), effective as of the first day of the eleventh (11 th) nionth
of the Lease (the "Must-Take Space Commencement Date") (Must-Take
SDace Is hatched in Red as Exhibit D).
(ii) Subject to conditions contained herein, Tenant shall not be required to
pay rent on the Must-Take Space prior to the Must-Take Space
Commencement Date, unless Tenant occupies the Must-Take Space prior to
the Commencement Date.
(iii) Tenant shall have the right to-occupy and Pay rent on the Must-Take
Space prior to the Must-Take Space Commencement Date upon five (5) days
written notice to Landlord. whereupon Landlord shall deliver possession
of the Must-Take Space to Tenant and Tenant shall accept such space
subject to the terms and conditions contained herein-
(iv) The Must-Take Space shall be leased to Tenant "as Is" and n Its then
existing condition and state of improvement and Landlord shall have no
obligation to make any additional, improvements, repairs or alterations
thereof.
(v) Landlord shall have no liability to Tenant for any advantage resulting
from any delay in delivering possession of the Must-Take Space to
Tenant.
B. Right of First Refusal. Provided Tenant Is not, and - has not been, In
default beyond any applicable notice and cure period of any terms and-conditions
of this Lease. and Tenant has occupied and begun paying rent on the Must-Take
Space, then Tenant shall have a right of first offer to lease available
contiguous space on the second floor of the Building as shown on Exhibit D. Upon
notification by Landlord in writing of the availability of space and the terms
and conditions on which Landlord is willing to lease such additional sy ce to
Tenant, Tenant shall have five (5) business days to notify Landlord in writing
of Tenant's desire to exercise Tenant's Habit of first offer on the terms and
conditions. In the event Tenant fails to give Landlord notice of Tenant's
election to lease such additional space within such time period. or If Tenant
elects to not lease the additional-space. then Tenant shall have no further
right, title or interest In such additional space other than as provided herein
under expansion options and this right of first offer shall terminate. If, on
the other hand. Tenant exercises its right of first offer in Tenant shall
immediately deliver to Landlord payment for the first month's rent for such
additional space (in the same manner as provided for in-this Lease), and the
lease for such additional space shall be consummated without delay in accordance
with the terms and conditions set forth In Landlord's notice Such additional
space shall be leased to Tenant on an "as Is" basis and Landlord shall have no
obligation to Improve such additional space or grant Tenant any Improvement
allowance thereon. Notwithstanding anything to the contrary herein contained.
Tenant's right to the expansion premises shall be conditioned upon the
following: (1) at the time Tenant agrees to accept the expansion premises and at
the time of the commencement of the term for the expansion premises, Tenant (or
affiliate, subject to the provision set forth in Paragraph 21 A.3.1).shall be in
possession of and occupying the primary premises for the conduct of Its business
therein and the same shall not be occupied by any assignee, subtenant or
licensee and provided further, that the option for additional space shall be
applicable hereunder only if the expansion premises will actually be occupied by
Tenant (or affiliate, subject to the provision set forth In Paragragh 21 A.3.)
and (ii) the agreement of acceptance shall constitute a representation by Tenant
to Landlord, effective as of the date of the agreement of acceptance and as of
the date of commencement of the lease for the expansion Premises, that Tenant
does not Intend to assign the lease for the expansion premises, In whole or In
part or sublet all or any portion of the Premises, the election to expand being
for the purpose of utilizing the expansion premises for Tenant's purposes in the
conduct of Tenant's business therein. Tenant's
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options to renew and .expansion Oritions shall continue In full force and effect
notwithstanding Tenant's failure to exercise its right of refusal.
C. Back-up Power Capabilities. Landlord shall provide backup power to the
building for Tenant's use. Tenant, at Tenant's sole cost and expense, shall be
responsible for connecting the backup power from Landlord's source to the
Premises. All work performed in conjunction with providing the connection to the
Premises shall be performed pursuant to Paragraph 12, Alterations, of this
Lease.
D. Additional HVAC - Data Room. Landlord shall provide and maintain a
separate HVAC unit in the Data Room (as shown on Exhibit E), and Tenant shall
pay to Landlord, the cost of the electricity for said unit which will be
recorded by Landlord on a monthly basis and billed to Tenant as additional Rent.
E. Option to Renew. Tenant shall, provided this Lease is in full force and
effect and Tenant is not and has not been in default beyond any applicable
notice and cure Period under any of the terms and conditions of this Lease, have
one (1) successive option(s) to renew this Lease for a term of three (3) years
each, for the Premises in "as is" condition and on the same terms and conditions
set forth in this Lease, except as modified by the terms, covenants and
conditions set forth below:
(1) If Tenant elects to exercise such option, then Tenant shall provide
Landlord with written notice no earlier than the date which is twelve (12)
months prior to the expiration of the then current term of this Lease, but no
later than 5:00 p.m. (Pacific Standard Time) on the date which is nine (9)
months prior to the expiration of the then current term of this Lease. If Tenant
fails to provide such notice, Tenant shall have no further or additional right
to extend or renew the term of this Lease.
(2) The Base Rent in effect at the expiration of the then current term
of this Lease shall be increased to reflect the current fair market rental for
comparable space in the Building or Project and in other similar buildings in
the same rental market as of the date the renewal term is to commence, taking
into account the specific provisions of this Lease which will remain constant,
and the Building amenities, location, identity, quality, age, condition, term of
lease, tenant improvements, services provided, and other pertinent items.
Notwithstanding anything contained herein to the contrary, the Base Year for
Operating Expenses as-specified In the Basic Lease Information herein shall be
adjusted to the year In which the Option to Renew Is exercised.
(3) Landlord shall advise Tenant of the new Base Rent for the Premises for
the applicable renewal term based on Landlord's determination of fair market
rental value, no later than fifteen (15) days after receipt of notice of
Tenant's exercise of its option to renew.
(4) Landlord and Tenant shall negotiate in good faith to agree on the fair
market rental value of the Premises and terms and conditions for each renewal
term. If Tenant and Landlord are unable to agree on a mutually acceptable rental
rate for any renewal term within thirty (30) days after notification by Landlord
to Tenant of Landlord's determination of the new Base Rent for the applicable
renewal term, but in any event no later than the date which is ninety (90) days
prior to the expiration of the then current term, then on or before such date
Landlord and Tenant shall each appoint a licensed real estate broker with at
least ten (10) year's experience in leasing office space in the area in which
the Building is located to act as arbitrators. The two (2) arbitrators so
appointed shall determine the fair market rental value for the Premises for the
applicable renewal term based on the above criteria and each shall submit his or
her determination of such fair market rental value to Landlord and Tenant in
writing, within sixty (60) days after their appointment.
If the two (2) arbitrators so appointed cannot agree on the fair market rental
value for the applicable renewal term within such 60-day period, the two (2)
arbitrators shall within five (5) days thereafter appoint a third arbitrator who
shall be a licensed real estate broker with at least ten (10) year's experience
in leasing office space in the area in which the Building is located. The third
arbitrator so appointed shall independently determine the fair market rental
value for the Premises for the renewal term within thirty (30) days after
appointment, by selecting from the proposals submitted by each of the first two
arbitrators the one that most closely approximates the third arbitrator's
determination of such fair market rental value. The third arbitrator shall have
no right to adopt a compromise or middle ground or any modification of either of
the proposals submitted by the first two arbitrators. The proposal chosen by the
third arbitrator as most closely approximating the third arbitrator's
determination of the fair market rental value shall constitute the decision and
award of the arbitrators and shall be final and binding on the parties.
Each party shall pay the fees and expenses of the arbitrator appointed by such
party and one-half (1/2) of the fees and expenses of the third arbitrator.
Notwithstanding the foregoing, in the event the Base Rent is found to be within
twelve percent (12%) of the original rate quoted by Landlord, then Tenant shall
bear the full cost of the arbitration process.
If either party fails to appoint an arbitrator, or if either of the first two
arbitrators fails to submit his or her proposal of fair market rental value to
the other party, in each case within the time periods set forth above, then the
decision of the other party's arbitrator shall be considered final and binding,
In the event the third arbitrator fails to present a fair market rental value
within such 30-day period, then by mutual consent of the Landlord and Tenant:
(a) the time period will be extended, or
(b) If either Landlord or Tenant do not wish to extend the time
period, a fourth arbitrator shall selected by the first two
arbitrators and a new thirty (30) day period shall begin
(5) Notwithstanding anything to the contrary contained in this Paragraph, in
no event shall the Base Rent for any renewal term be less than the Base Rent in
effect at the expiration of the previous term plus expense escalations over the
previous years. In addition, Landlord shall have no obligation to provide or pay
for any tenant improvements or brokerage commissions during any renewal term.
(6) Tenant's right to exercise any option(s) to renew under this Paragraph
shall be conditioned upon Tenant occupying the entire Premises and the same not
being occupied by any assignee, subtenant or licensee other than Tenant or its
Affiliate at the time of exercise of any option and commencement of the renewal
term. Tenant's exercise of the option to renew shall constitute a representation
by Tenant to Landlord that as of the date of exercise of the option and the
20
<PAGE>
commencement of the renewal term, Tenant does not intend to seek to assign this
Lease in whole or in part, or sublet all or any portion of the Premises.
(7) Any exercise by Tenant of any option to renew under this Paragraph shall
be irrevocable. If requested by Landlord, Tenant agrees to execute a lease
amendment reflecting the foregoing terms and conditions, prior to the
commencement of the renewal term. The option(s) to renew granted under this
Paragraph is/are not transferable; the parties hereto acknowledge and agree that
they intend that each option to renew this Lease under this Paragraph shall be
"personal" to the specific Tenant named in this Lease and that in no event will
any assignee or sublessee have any rights to exercise such option(s) to renew,
except for affiliates by WRY Of Dermitted transfers under Paragraph 21.A.3.
F. Fitness Center. Landlord shall provide a fitness center for use by all
tenants in the building, subject to rules and regulations associated with the
fitness center. Cost for the use of the fitness center shall not exceed twelve
and 501100 dollars ($12.50) per month for Tenant's employees.
40. JURY TRIAL WAIVER
EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE
COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 40. THE
PROVISIONS OF THIS PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.
LANDLORD
Spieker Properties, L.P.,
a California limited partnership
By: Spieker Properties, Inc.,
a Maryland corporation,
its general partner
By: _________________________
Richard P. Gervais
Its: Vice President r] Date:
TENANT
LION Inc
A Washington corporation
By: ___________________________
Sam Ringer
Its: President
Date: 7/2/99
21
<PAGE>
STATE OF WASHINGTON
) ss.
COUNTY OF KING
On this 2nd day of July, 1999 personally appeared before me _______________to me
known to be the _________________of the corporation which executed the within
and foregoing instrument, and acknowledged to be a free and voluntary act and
deed of said corporation, for the uses and purposes therein mentioned, and on
oath state thatwas authorized to execute said instrument and that the seal
affixed (if any) is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal the day and year first above written.
(notary signature)
(name - typed or printed)
NOTARY PUBLIC in and for the State of Washington
residing at (giving place of residence)
My commission expires:
STATE OF WASHINGTON
ss.
COUNTY OF KING
On this 10TH day of July, 1999 personally appeared before me Richard P. Gervais
to me known to be Vice President of the corporation which executed the within
and foregoing instrument, and acknowledged to be a free and voluntary act and
deed of said corporation, for the uses and purposes therein mentioned, and on
oath state that ' he was authorized to execute said instrument and that the seal
affixed (if any) is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal the day and year first above written.
(notary signature)
(name - typed or printed)
NOTARY PUBLIC in and for the State of Washington
residing at (giving place of residence)
My commission expires:
EXHIBIT A
Rules and Regulations
1. Driveways, sidewalks, halls, passages, exits, entrances, elevators,
escalators and stairways shall not be obstructed by tenants or used
by tenants for any purpose other than for ingress to and egress
from their respective premises. 'Me driveways, sidewalks, halls,
passages, exits, entrances, elevators and stairways are not for the
use of the general public and Landlord shall in all cases retain
the right to control and prevent access thereto by all persons
whose presence, in the judgment of Landlord, shall be prejudicial
to the safety, character, reputation and interests of the Building,
the Project and its tenants, provided that nothing herein contained
shall be construed to prevent such access to persons with whom any
tenant normally deals in the ordinary course of such tenant's
business unless such persons are engaged in illegal activities. No
tenant, and no employees or invitees of any tenant, shall go upon
the roof of any Building, except as authorized by Landlord. No
tenant, and no employees or invitees of any tenant shall move any
common area furniture without Landlord's consent.
2. No sign, placard, banner, picture, name, advertisement or notice,
visible from the exterior of the Premises or the Building or the
common areas of the Building shall be inscribed, painted, affixed,
installed or otherwise displayed by Tenant either on its Premises
or any part of the Building or Project without the prior written
consent of Landlord in Landlord's sole and absolute discretion.
Landlord shall have the right to remove any such sign, placard,
banner, picture, name, advertisement, or notice without notice to
and at the expense of Tenant, which were installed or displayed in
violation of this rule. If Landlord shall have given such consent
to Tenant at any time, whether before or after the execution of
Tenant's Lease, such consent shall in no way operate as a waiver or
release of any of the provisions hereof or of the Lease, and shall
be deemed to relate only to the particular sign, placard, banner,
picture, name, advertisement or notice so consented to by Landlord
and shall not be construed as dispensing with the necessity of
obtaining the specific written consent of Landlord with respect to
any other such sign, placard, banner, picture, name, advertisement
or notice.
All approved signs or lettering on doors and walls shall be
printed, painted, affixed or inscribed at the expense of Tenant by
a person or vendor approved by Landlord and shall be removed by
Tenant at the time of vacancy at Tenant's expense.
3. The directory of the Building or Project will be provided exclusively
for the display of the name and location of tenants only and
Landlord reserves the right to charge for the use thereof and to
exclude any other names therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, hangings or decorations shall be attached to,
hung or placed in, or used in connection with, any window or door
on the Premises without the prior written consent of Landlord. In
any event with the prior written consent of Landlord, all such
items shall be installed inboard of Landlord's standard window
covering and shall in no way be visible from the exterior of the
Building. All electrical ceiling fixtures hung in offices or spaces
along the perimeter of the Building must be fluorescent or of a
quality, type, design, and bulb color approved by Landlord. No
articles shall be placed or kept on the window sills so as to be
visible from the exterior of the Building. No articles shall be
placed against glass partitions or doors which Landlord considers
unsightly from outside Tenant's Premises.
5. Landlord reserves the right to exclude from the Building and the
Project, between the hours of 6 p.m. and 8 a.m. and at all hours on
Saturdays, Sundays and legal holidays, all persons who are not
tenants or their accompanied guests in the Building. Each tenant
shall be responsible for all persons for whom it allows to enter
the Building or the Project and shall be liable to Landlord for all
acts of such persons.
Landlord and its agents shall not be liable for damages for any
error concerning the admission to, or exclusion from, the Building
or the Project of any person.
During the continuance of any invasion, mob, riot, public
excitement or other circumstance rendering such action advisable in
Landlord's opinion, Landlord reserves the right (but shall not be
obligated) to prevent access to the Building and the Project during
the continuance of that event by any means it considers appropriate
for the safety of tenants and protection of the Building, property
in the Building and the Project.
6. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord. Except with the
written consent of Landlord, no person or persons other than those
approved by Landlord shall be permitted to enter the Building for
the purpose of cleaning the same. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or
indifference in the preservation of good order and cleanliness of
its Premises. Landlord shall in no way be responsible to Tenant for
any loss of property on the Premises, however occurring, or for any
damage done to Tenant's property by the janitor or any other
employee or any other person.
7. Tenant shall see that all doors of its Premises are closed and securely
locked and must observe strict care and caution that all water
faucets or water apparatus, coffee pots or other beat-generating
devices are entirely shut off before Tenant or its employees leave
the Premises, and that all utilities shall likewise be carefully
shut off, so as to prevent waste or damage. Tenant shall be
responsible for any damage or injuries sustained by other tenants
or occupants of the Building or Project or by Landlord for
noncompliance with this rule. On multiple-tenancy floors, all
tenants shall keep the door or doors to the Building corridors
closed at all times except for ingress and egress.
8. Tenant shall not use any method of heating or air-conditioning other
than that supplied by Landlord. As more specifically provided in
Tenant's lease of the Premises, Tenant shall not waste electricity,
water or air-conditioning and agrees to cooperate fully with
Landlord to assure the most effective operation of the Building's
heating and air-conditioning, and shall refrain from attempting to
adjust any controls other than room thermostats installed for
Tenant's use.
9. Landlord will furnish Tenant free of charge with two keys to each door
in the Premises. Landlord may make a reasonable charge for any
additional keys, and Tenant shall not make or have made additional
keys. Tenant shall not alter any lock or access device or install a
new or additional lock or access device or bolt on any door of its
Premises, without the prior written consent of Landlord. If
Landlord shall give its consent, Tenant shall in each case furnish
Landlord with a key for any such lock. Tenant, upon the termination
of its tenancy, shall deliver to Landlord the keys for all doors
which have been furnished to Tenant, and in the event of loss of
any keys so furnished, shall pay Landlord therefor.
10. The restrooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall
be thrown into them. The expense of any breakage, stoppage, or
damage resulting from violation of this rule shall be borne by the
tenant who, or whose employees or invitees, shall have caused the
breakage, stoppage, or damage.
Exhibit A - Page I
<PAGE>
11. Tenant shall not use or keep in or on the Premises, the Building or the
Project any kerosene, gasoline, or inflammable or combustible fluid
or material.
12. Tenant shall not use, keep or permit to be used or kept in its Premises
any foul or noxious gas or substance. Tenant shall not allow the
Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by
reason of noise, odors and/or vibrations or interfere in any way
with other tenants or those having business therein, nor shall any
animals or birds be brought or kept in or about the Premises, the
Building, or the Project.
13. No cooking shall be done or permitted by any tenant on the Premises,
except that use by the tenant of Underwriters' Laboratory (UL)
approved equipment, refrigerators and microwave ovens may be used
in the Premises for the preparation of coffee, tea, hot chocolate
and similar beverages, storing and heating food for tenants and
their employees shall be permitted. All uses must be in accordance
with all applicable federal, state and city laws, codes,
ordinances, rules and regulations and the Lease.
14. Except with the prior written consent of Landlord, Tenant shall not
sell, or permit the sale, at retail, of newspapers, magazines,
periodicals, theater tickets or any other goods or merchandise in
or on the Premises, nor shall Tenant carry on, or permit or allow
any employee or other person to carry on, the business of
stenography, typewriting or any similar business in or from the
Premises for the service or accommodation of occupants of any other
portion of the Building, nor shall the Premises be used for the
storage of merchandise or for manufacturing of any kind, or the
business of a public barber shop, beauty parlor, nor shall the
Premises be used for any illegal, improper, immoral or
objectionable purpose, or any business or activity other than that
specifically provided for in such Tenant's Lease. Tenant shall not
accept hairstyling, barbering, shoeshine, nail, massage or similar
services in the Premises or common areas except as authorized by
Landlord.
15. If Tenant requires telegraphic, telephonic, telecommunications, data
processing, burglar alarm or similar services, it shall first
obtain, and comply with, Landlord's instructions in their
installation. The cost of purchasing, installation and maintenance
of such services shall be bome solely by Tenant.
16. Landlord will direct electricians as to where and how telephone,
telegraph and electrical wires are to be introduced or installed.
No boring or cutting for wires will be allowed without the prior
written consent of Landlord. The location of burglar alarms,
telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the prior written approval of Landlord.
17. Tenant shall not install any radio or television antenna, satellite
dish, loudspeaker or any other device on the exterior walls or the
roof of the Building, without Landlord's consent. Tenant shall not
interfere with radio or television broadcasting or reception from
or in the Building, the Project or elsewhere.
18. Tenant shall not mark, or drive nails, screws or drill into the
partitions, woodwork or drywall or in any way deface the Premises
or any part thereof without Landlord's consent. Tenant may install
nails and screws in areas of the Premises that have been identified
for those purposes to Landlord by Tenant at the time those walls or
partitions were installed in the Premises. Tenant shall not lay
linoleum, tile, carpet or any other floor covering so that the same
shall be affixed to the floor of its Premises in any manner except
as approved in writing by Landlord. The expense of repairing any
damage resulting from a violation of this rule or the removal of
any floor covering shall be borne by the tenant by whom, or by
whose contractors, employees or invitees, the damage shall have
been caused.
19. No furniture, freight, equipment, materials, supplies, packages,
merchandise or other property will be received in the Building or
carried up or down the elevators except between such hours and in
such elevators as shall be designated by Landlord.
Tenant shall not place a load upon any floor of its Premises which
exceeds the load per square foot which such floor was designed to
carry or which is allowed by law. Landlord shall have the right to
prescribe the weight, size and position of all safes, furniture or
other heavy equipment brought into the Building. Safes or other
heavy objects shall, if considered necessary by Landlord, stand on
wood strips of such thickness as determined by Landlord to be
necessary to properly distribute the weight thereof. Landlord will
not be responsible for loss of or damage to any such safe,
equipment or property from any cause, and all damage done to the
Building by moving or maintaining any such safe, equipment or other
property shall be repaired at the expense of Tenant.
Business machines and mechanical equipment belonging to Tenant
which cause noise or vibration that may be transmitted to the
structure of the Building or to any space therein to such a degree
as to be objectionable to Landlord or to any tenants in the
Building shall be placed and maintained by Tenant, at Tenant's
expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.
20. Tenant shall not install, maintain or operate upon its Premises any
vending machine without the written consent of Landlord.
21. There shall not be used in any space, or in the public areas of the
Project either by Tenant or others, any hand trucks except those
equipped with rubber tires and side guards or such other material
handling equipment as Landlord may approve. Tenants using hand
trucks shall be required to use the freight elevator, or such
elevator as Landlord shall designate. No other vehicles of any kind
shall be brought by Tenant into or kept in or about its Premises.
22. Each tenant shall store all its trash and garbage within the interior
of the Premises. Tenant shall not place in the trash boxes or
receptacles any personal trash or any material that may not or
cannot be disposed of in the ordinary and customary manner of
removing and disposing of trash and garbage in the city, without
violation of any law or ordinance governing such disposal. All
trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes and at such
times as Landlord shall designate. If the Building has implemented
a building-wide recycling program for tenants, Tenant shall use
good faith efforts to participate in said program.
23. Canvassing, soliciting, distribution of handbills or any other written
material and peddling in the Building and the Project are
prohibited and each tenant shall cooperate to prevent the same. No
tenant shall make room-to-room solicitation of business from other
tenants in the Building or the Project, without the written consent
of Landlord.
24. Landlord shall have the right, exercisable without notice and without
liability to any tenant, to change the name and address of the
Building and the Project.
25. Landlord reserves the right to exclude or expel from the Project any
person who, in Landlord's judgment, is under the influence of
alcohol or drugs or who commits any act in violation of any of
these Rules and Regulations.
26. Without the prior written consent of Landlord, Tenant shall not use the
name of the Building or the Project or any photograph or other
likeness of the Building or the Project in connection with, or in
promoting or advertising, Tenant's business except that Tenant may
include the Building's or Project's name in Tenant's address.
27. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any
governmental agency.
Exhibit A - Page 2
<PAGE>
28. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors
locked and other means of entry to the Premises closed.
29. The requirements of Tenant will be attended to only upon appropriate
application at the office of the Building by an authorized
individual. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special
instructions from Landlord, and no employees of Landlord will admit
any person (tenant or otherwise) to any office without specific
instructions from Landlord.
30. Landlord reserves the right to designate the use of the parking spaces
on the Project. Tenant or Tenant's guests shall park between
designated parking lines only, and shall not occupy two parking
spaces with one car. Parking spaces shall be for passenger vehicles
only; no boats, trucks, trailers, recreational vehicles or other
types of vehicles may be parked in the parking areas (except that
trucks may be loaded and unloaded in designated loading areas).
Vehicles in violation of the above shall be subject to tow-away, at
vehicle owner's expense. Vehicles parked on the Project overnight
without prior written consent of the Landlord shall be deemed
abandoned and shall be subject to tow-away at vehicle owner's
expense. No tenant of the Building shall park in visitor or
reserved parking areas. Any tenant found parking in such designated
visitor or reserved parking areas or unauthorized areas shall be
subject to tow-away at vehicle owner's expense. 'Me parking areas
shall not be used to provide car wash, oil changes, detailing,
automotive repair or other services unless otherwise approved or
furnished by Landlord. Tenant will from time to time, upon the
request of Landlord, supply Landlord with a list of license plate
numbers of vehicles owned or operated by its employees or agents.
31. No smoking of any kind shall be permitted anywhere within the Building,
including, without limitation, the Premises and those areas
immediately adjacent to the entrances and exits to the Building, or
any other area as Landlord elects. Smoking in the Project is only
permitted in smoking areas identified by Landlord, which may be
relocated from time to time.
32. If the Building furnishes common area conferences rooms for tenant
usage, Landlord shall have the right to control each tenant's usage
of the conference rooms, including limiting tenant usage so that
the rooms are equally available to all tenants in the Building. Any
common area amenities or facilities shall be provided from time to
time at Landlord's discretion.
33. Tenant shall not swap or exchange building keys or cardkeys with other
employees or tenants in the Building or the Project.
34. Tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by Tenant's employees, agents, clients,
customers, invitees and guests.
35. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify, alter or amend, in whole or in
part, the terms, covenants, agreements and conditions of any lease
of any premises in the Project.
36. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenant or tenants, but no such waiver
by Landlord shall be construed as a waiver of such Rules and
Regulations in favor of any other tenant or tenants, nor prevent
Landlord from thereafter enforcing any such Rules and Regulations
against any or all tenants of the Building.
37. Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for
safety and security, for care and cleanliness of the Building and
the Project and for the preservation of good order therein. Tenant
agrees to abide by all such Rules and Regulations herein stated and
any additional rules and regulations which are adopted.
Exhibit A - Page 3
<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION
- -----------------
THAT PORTION OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 19,
TOWNSHIP 23 NORTH, RANGE 5 EAST, W.M., DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTH LINE OF THE SAID SOUTHWEST QUARTER OF THE
SOUTHWEST QUARTER WHICH IS NORTH 89-5 1'55" WEST 40.01 FEET FROM THE SOUTHWEST
CORNER THEREOF; THENCE CONTINUING NORTH 89'5 1'55" WEST ALONG SAID SOUTH LINE
547.00 FEET; THENCE CONTINUING NORTH 0'08'5" EAST 507.38 FEET TO A POINT ON A
NON-TANGENT CURVE FROM WHICH THE RADIAL CENTER BEARS NORTH 17035'32" EAST 140.00
FEET; THENCE NORTHWESTERLY, NORTHEASTERLY AND SOUTHEASTERLY ALONG THE ARC OF
SAID NON-TANGENT CURVE CONCASE TO THE SOUTHEAST, THROUGH A CENTRAL ANGLE OF
235-5 1'39", AN ARC DISTANCE OF 576.32 FEET; THENCE SOUTH 88'39'35" EAST ALONG A
NON-TANGENT LINE 385.14 FEET TO A POINT ON THE WEST LINE OF THE EAST 40.00 FEET
OF THE SAID SOUTHWEST QUARTER; THENCE SOUTH 1020'25" WEST ALONG SAID WEST LINE
673.16 FEET TO THE POINT OF THE BEGINNING.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
THE FORM 10-QSB FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 185,791
<SECURITIES> 0
<RECEIVABLES> 431,051
<ALLOWANCES> 35,965
<INVENTORY> 0
<CURRENT-ASSETS> 852,056
<PP&E> 1,364,439
<DEPRECIATION> 470,588
<TOTAL-ASSETS> 2,310,498
<CURRENT-LIABILITIES> 1,144,250
<BONDS> 0
0
0
<COMMON> 27,398
<OTHER-SE> 1,138,580
<TOTAL-LIABILITY-AND-EQUITY> 2,310,498
<SALES> 2,837,725
<TOTAL-REVENUES> 2,837,725
<CGS> 0
<TOTAL-COSTS> 3,815,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,649
<INCOME-PRETAX> (1,053,438)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,053,438)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,053,438)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
