<PAGE> 1
As filed with the Securities and Exchange Commission on February 5, 1999
Registration No. 333-_____
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HNC SOFTWARE INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 33-0248788
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
(Address of Principal Executive Offices)
(1) 1995 EQUITY INCENTIVE PLAN
(2) STOCK OPTIONS GRANTED BY APTEX SOFTWARE INC. UNDER ITS
1996 EQUITY INCENTIVE PLAN AND ASSUMED BY THE REGISTRANT
(Full Title of the Plan)
---------------
RAYMOND V. THOMAS
CHIEF FINANCIAL OFFICER
HNC SOFTWARE INC.
5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
(619) 546-8877
(Name, Address and Telephone Number of Agent for Service)
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Copies to:
KENNETH A. LINHARES, ESQ.
WILLIAM L. HUGHES, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
CALCULATION OF REGISTRATION FEE
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====================================================================================================================================
TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 700,000(1) $26.625(2) $18,637,500(2) $5,182(3)
Common Stock, $0.001 par value 400,532(4) $26.970(5) $10,802,348 $3,004(3)
====================================================================================================================================
</TABLE>
(1) Additional shares available for grant under Registrant's 1995 Equity
Incentive Plan as of November 20, 1998 and not yet subject to awarded
outstanding stock options, restricted stock purchase agreements or stock
bonus agreements.
(2) Estimated as of February 4, 1999 pursuant to Rule 457(c) solely for the
purpose of calculating the registration fee.
(3) Fee calculated pursuant to Section 6(b) of the Securities Act of 1933, as
amended.
(4) Shares subject to assumed Aptex Software Inc. 1996 Equity Incentive Plan as
of January 22, 1999.
(5) Weighted average per share exercise price for such outstanding options
calculated pursuant to Rule 457(h)(1).
<PAGE> 2
HNC SOFTWARE INC.
REGISTRATION STATEMENT ON FORM S-8
PART II: INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference:
(a) The Registrant's latest annual report filed pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or the latest prospectus filed pursuant to Rule 424(b) under the
Securities Act of 1933, as amended (the "Securities Act") that contains
audited financial statements for the Registrant's latest fiscal year for
which such statements have been filed.
(b) All other reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual
report or prospectus referred to in (a) above.
(c) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the
Commission under Section 12 of the Exchange Act on May 26, 1995,
including any amendment or report filed for the purpose of updating such
description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Registrant by Fenwick & West LLP, of Palo
Alto, California. Members of the firm of Fenwick & West LLP own an aggregate of
approximately 4,000 shares of Common Stock of the Registrant.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability: (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any transaction
from which the director derived an improper personal benefit.
In addition, as permitted by Section 145 of the Delaware General
Corporation Law, the Bylaws of the Registrant provide that: (i) the Registrant
is required to indemnify its directors and officers, as well
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<PAGE> 3
as directors and officers of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise when they are serving in such
capacities at the request of the Registrant, to the fullest extent permitted by
the Delaware General Corporation Law; (ii) the Registrant may, in its
discretion, indemnify other officers, employees and agents as set forth in the
Delaware General Corporation Law; (iii) upon receipt of an undertaking to repay
such advances if indemnification is determined to be unavailable, the Registrant
is required to advance expenses, as incurred, to its directors and officers to
the fullest extent permitted by the Delaware General Corporation Law in
connection with a proceeding (except that the Registrant is not required to
advance expenses to a person against whom it brings a claim for breach of the
duty of loyalty, failure to act in good faith, intentional misconduct, knowing
violation of law or deriving an improper personal benefit); (iv) the rights
conferred in the Bylaws are not exclusive and the Registrant is authorized to
enter into indemnification agreements with its directors, officers and employees
and agents; and (v) the Registrant may not retroactively amend the Bylaw
provisions in a way that adversely affects the indemnification provided
thereunder.
The Registrant's policy is to enter into indemnity agreements with each
of its directors and officers. The indemnity agreements provide that directors
and officers will be indemnified and held harmless against all expenses
(including attorneys' fees), judgments, fines, ERISA excise taxes or penalties
and settlement amounts paid or reasonably incurred by them in any action, suit
or proceeding, including any derivative action by or in the right of the
Registrant, on account of their services as a director or officer of the
Registrant or as directors or officers of any other corporation, partnership or
enterprise when they are serving in such capacities at the request of the
Registrant; except that no indemnity is provided in a derivative action in which
such director or officer is finally adjudged by a court to be liable to the
Company due to willful misconduct in the performance of his or her duty to the
Company, unless the court determines that such director or officer is entitled
to indemnification. The Registrant will not be obligated pursuant to the
agreements to indemnify or advance expenses to an indemnified party with respect
to proceedings or claims (i) initiated voluntarily by the indemnified party and
not by way of defense, except with respect to a proceeding authorized by the
Board of Directors and successful proceedings brought to enforce a right to
indemnification and/or advancement of expenses under the indemnity agreements;
(ii) for any amounts paid in settlement of a proceeding unless the Registrant
consents to such settlement; (iii) on account of any suit in which judgment is
rendered against the indemnified party for an accounting of profits made from
the purchase or sale by the indemnified party of securities of the Registrant
pursuant to the provisions of Section 16(b) of the Exchange Act and related laws
and regulations; (iv) on account of conduct by an indemnified party that is
finally adjudged to have been in bad faith or conduct that the indemnified party
did not reasonably believe to be in, or not opposed to, the best interests of
the Registrant; (v) on account of any criminal action or proceeding arising out
of conduct that the indemnified party had reasonable cause to believe was
unlawful; or (vi) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
The indemnity agreement requires a director or officer to reimburse the
Registrant for expenses advanced only if and to the extent it is ultimately
determined that the director or executive officer is not entitled, under
Delaware law, the Registrant's Certificate of Incorporation, the Registrant's
Bylaws, his or her indemnity agreement or otherwise to be indemnified for such
expenses. The indemnity agreement provides that it is not exclusive of any
rights a director or executive officer may have under the Certificate of
Incorporation, the Bylaws, other agreements, any majority-in-interest vote of
the stockholders or vote of disinterested directors, Delaware law, or otherwise.
The indemnification provision in the Bylaws, and the indemnity
agreements entered into between the Registrant and its directors and officers,
may be sufficiently broad to permit indemnification of the Registrant's
directors and officers for liabilities arising under the Securities Act.
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The indemnity agreements require the Registrant to maintain director and
officer liability insurance to the extent readily available. The Registrant
currently carries a director and officer insurance policy.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
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4.01 HNC Software Inc. 1995 Equity Incentive Plan, as amended
through November 20, 1998.(1)
4.02 Form of 1995 Equity Incentive Plan Stock Option Agreement
and Stock Option Exercise Agreement.(1)
4.03 Aptex Software Inc. 1996 Equity Incentive Plan.(2)
4.04 Form of Aptex Software Inc. 1996 Equity Incentive Plan Stock
Option Agreement and Stock Option Exercise Agreement.
4.05 Registrant's Restated Certificate of Incorporation filed
with the Secretary of State of Delaware on June 13, 1996.(3)
4.06 Registrant's Bylaws, as amended.(4)
4.07 Form of specimen certificate for Registrant's Common
Stock.(5)
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of Attorney (see pages 7 and 8).
99.01 Office Building Lease dated as of October 2, 1998, between
the Registrant and The Irvine Company.
99.02 Office Building Lease Amendment No. 1 dated as of November
30, 1998, between Retek Information Systems, Inc. and
Midwest Real Estate Holdings LLC.
99.03 Office Building Lease Amendment No. 2 dated as of December
18, 1998, between Retek Information Systems, Inc. and
Midwest Real Estate Holdings LLC.
</TABLE>
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(1) Incorporated by reference from Exhibit 10.02 to the Registrant's
Registration Statement Amendment No. 1 on Form S-4 (File No.
333-64527) filed on December 21, 1998.
(2) Aptex Software Inc. is a California corporation and a subsidiary
of the Registrant that was merged into the Registrant on January
22, 1999 pursuant to a Plan of Merger adopted by the Board of
Directors of the Registrant on December 21, 1998 under which
Registrant agreed to assume all outstanding stock options granted
under Aptex Software Inc.'s 1996 Equity Incentive Plan.
(3) Filed as Exhibit 3(i).04 with the Registrant's Report on Form
10-Q for the quarter ended June 30, 1996, as originally filed on
August 13, 1996.
(4) Filed as Exhibit 3(ii).05 with the Registrant's Report on Form
10-Q for the quarter ended June 30, 1996, as originally filed on
August 13, 1996.
(5) Incorporated by reference from Exhibit 4.01 to the Registrant's
Registration Statement on Form S-1 (File No. 33-91932) filed on
May 5, 1995, and as subsequently amended.
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ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low and high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 6 hereof, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
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<PAGE> 6
officer or controlling person in connection with the securities being registered
hereby, the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Robert L. North and Raymond V. Thomas,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-8, and to file the same with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on the 2nd day
of February, 1999.
HNC SOFTWARE INC.
By: /s/ RAYMOND V. THOMAS
-------------------------------------------
Raymond V. Thomas
Vice President, Finance and Administration,
Chief Financial Officer and Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
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SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ Robert L. North President, Chief Executive Officer February 2, 1999
- ----------------------------- and a Director
Robert L. North
PRINCIPAL FINANCIAL OFFICER:
/s/ Raymond V. Thomas Vice President, Finance and Administration February 2, 1999
- ----------------------------- Chief Financial Officer and Secretary
Raymond V. Thomas
PRINCIPAL ACCOUNTING OFFICER:
/s/ Kenneth J. Saunders Vice President, Corporate Controller February 2, 1999
- -----------------------------
Kenneth J. Saunders
</TABLE>
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<TABLE>
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ADDITIONAL DIRECTORS:
/s/ Edward K. Chandler Director February 2, 1999
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Edward K. Chandler
/s/ Oliver D. Curme Director February 2, 1999
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Oliver D. Curme
/s/ Thomas F. Farb Director February 2, 1999
- -----------------------------
Thomas F. Farb
Director February 2, 1999
- -----------------------------
Charles H. Gaylord, Jr.
/s/ Alex W. Hart Director February 2, 1999
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Alex W. Hart
</TABLE>
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<PAGE> 9
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
4.01 HNC Software Inc. 1995 Equity Incentive Plan, as amended through
November 20, 1998.(1)
4.02 Form of 1995 Equity Incentive Plan Stock Option Agreement and Stock
Option Exercise Agreement.(1)
4.03 Aptex Software Inc. 1996 Equity Incentive Plan.(2)
4.04 Form of Aptex Software Inc.1996 Equity Incentive Plan Stock Option
Agreement and Stock Option Exercise Agreement.
4.05 Registrant's Restated Certificate of Incorporation filed with the
Secretary of State of Delaware on June 13, 1996.(3)
4.06 Registrant's Bylaws, as amended.(4)
4.07 Form of specimen certificate for Registrant's Common Stock.(5)
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.03 Power of Attorney (see pages 7 and 8).
99.01 Office Building Lease dated as of October 2, 1998, between
Registrant and The Irvine Company.
99.02 Office Building Lease Amendment No. 1 dated as of November 30, 1998,
between Retek Information Systems, Inc, and Midwest Real Estate
Holdings LLC.
99.03 Office Building Lease Amendment No. 2 dated as of December 18, 1998,
between Retek Information Systems, Inc, and Midwest Real Estate
Holdings LLC.
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(1) Incorporated by reference from Exhibit 10.02 to the Company's
Registration Statement Amendment No. 1 on Form S-4 (File No.
333-64527) filed on December 21, 1998.
(2) Aptex Software Inc. is a California corporation and a subsidiary
of Registrant that was merged into the Registrant on January 22,
1999 pursuant to a Plan of Merger adopted by the Board of
Directors of the Registrant on December 21, 1998 under which
Registrant agreed to assume all outstanding stock options granted
under Aptex Software Inc.'s 1996 Equity Incentive Plan.
(3) Filed as Exhibit 3(i).04 with the Registrant's Report on Form
10-Q for the quarter ended June 30, 1996, as originally filed on
August 13, 1996.
(4) Filed as Exhibit 3(ii).05 (Bylaws) with the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1996, as originally
filed on August 13, 1996.
(5) Incorporated by reference from Exhibit 4.01 to the Registrant's
Registration Statement on Form S-1 (File No. 33-91932) filed on
May 5, 1995, and as subsequently amended.
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<PAGE> 1
EXHIBIT 4.03
APTEX SOFTWARE INC.
1996 EQUITY INCENTIVE PLAN
As Adopted September 5, 1996
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock. Capitalized
terms not defined in the text are defined in Section 23. This Plan is intended
to be a written compensatory benefit plan within the meaning of Rule 701
promulgated under the Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 17,
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be Two Million (2,000,000) Shares. Subject to
Sections 2.2 and 17, Shares that: (a) are subject to issuance upon exercise of
an Option but cease to be subject to such Option for any reason other than
exercise of such Option; (b) are subject to an Award granted hereunder but are
forfeited or are repurchased by the Company as set forth herein; or (c) are
subject to an Award that otherwise terminates without Shares being issued under
such Award; will again be available for grant and issuance in connection with
future Awards under this Plan. At all times the Company shall reserve and keep
available a sufficient number of Shares as shall be required to satisfy the
requirements of all outstanding Options granted under this Plan and all other
outstanding but unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of the
Company's outstanding Shares is changed by a stock dividend, recapitalization,
stock split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards, will be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share will not be issued but will either
be replaced by a cash payment equal to the Fair Market Value of such fraction of
a Share or will be rounded up to the nearest whole Share, as determined by the
Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5) may be granted only to
employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors and consultants of the Company or any
Parent or Subsidiary of the Company; provided such consultants render bona fide
services other than in connection with the offer and sale of securities in a
capital-raising transaction. A person may be granted more than one Award under
this Plan.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan,
<PAGE> 2
Aptex Software Inc.
1996 Equity Incentive Plan
and to the direction of the Board, the Committee will have full power to
implement and carry out this Plan. Without limitation, the Committee will have
the authority to:
(a) construe and interpret this Plan, any Award Agreement
and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile
any inconsistency in this Plan, any Award, any Award Agreement, any Exercise
Agreement or any Restricted Stock Purchase Agreement entered into pursuant to
this Plan;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable
for the administration of this Plan.
4.2 Committee Discretion. Subject to the provisions of Section
22, any determination made by the Committee with respect to any Award will be
made in its sole discretion at the time of grant of the Award or, unless in
contravention of any express term of this Plan or Award, at any later time, and
any such determination will be final and binding on the Company and on all
persons having an interest in any Award under this Plan.
5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and, subject to the provisions of
Section 22, all other terms and conditions of the Option, subject to the
following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee.
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<PAGE> 3
Aptex Software Inc.
1996 Equity Incentive Plan
The Stock Option Agreement and a copy of this Plan will be delivered to the
Participant within a reasonable time after the granting of the Option.
5.3 Exercise Period. Subject to the provisions of Section 22,
Options may be exercisable within the times or upon the events determined by the
Committee as set forth in the Stock Option Agreement governing such Option;
provided, however, that each Option granted under the Plan shall (subject to
earlier termination of the Option as provided in Section 22 or elsewhere herein)
become exercisable at the rate of at least 20% of the Shares covered by such
Option per year over the five (5) year period from the date the Option is
granted; provided, further, that no Option will be exercisable more than ten
(10) years from the date such Option is granted; and provided further that no
ISO granted to a person who directly or by attribution owns more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any Parent or Subsidiary of the Company ("TEN PERCENT
SHAREHOLDER") will be exercisable after the expiration of five (5) years from
the date the ISO is granted. The Committee also may provide for Options to
become exercisable at one time or from time to time, periodically or otherwise,
in such number of Shares or percentage of Shares as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any
Option granted to a Ten Percent Shareholder will not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 7.
5.5 Method of Exercise. Options may be exercised only by delivery
to the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares being purchased pursuant to the provisions of
Section 22 and the other restrictions, if any, imposed on the Shares purchased
under such Exercise Agreement, and such representations and agreements regarding
Participant's investment intent and access to information and other matters, if
any, as may be required or desirable by the Company to comply with applicable
securities laws, together with payment in full of the Exercise Price for the
number of Shares being purchased and any taxes payable by Participant in
connection with such purchase.
5.6 Termination. Subject to earlier termination pursuant to
Subsection 17.1 and notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:
(a) If Participant is Terminated for any reason other than
Participant's death, or Disability, then the Participant may exercise such
Participant's Options (but only to the extent that such Options would have been
exercisable upon the Termination Date) no later than three (3) months after the
Termination Date (or such shorter time period of not less than 30 days after the
Termination Date, or such longer time period not exceeding five (5) years after
the Termination Date, as may be determined by the Committee, with any exercise
beyond three (3) months after the Termination Date deemed to be an NQSO), but in
any event, no later than the expiration date of the Options.
(b) If Participant is Terminated because of Participant's
death or Disability (or if Participant dies within three (3) months after a
Termination other than because of Participant's death or Disability), then
Participant's Options may be exercised only to the extent that such Options
would have been exercisable by Participant on the Termination Date, and must be
exercised by Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months
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after the Termination Date (or such shorter time period (but not less than 6
months after the Termination Date) as may be specified in the Stock Option
Agreement or such longer time period not exceeding five (5) years after the
Termination Date, as may be determined by the Committee), with any such exercise
beyond (a) three (3) months after the Termination Date when the Termination is
for any reason other than the Participant's death or disability as defined in
Section 22(e)(3) of the Code, or (b) twelve (12) months after the Termination
Date when the Termination is for Participant's death or disability as defined in
Section 22(e)(3) of the Code, deemed to be the exercise of an NQSO), but in any
event no later than the expiration date of the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that first become exercisable in that calendar year will be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of this Plan to provide for a different limit
on the Fair Market Value of Shares permitted to be subject to ISOs, then such
different limit will be automatically incorporated herein and will apply to any
Options granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of affected Participants by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 for Options granted on
the date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO of such
Participant under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the Purchase Price, the restrictions to which the Shares
will be subject (which shall in all cases include the General Repurchase Option
set forth in Section 22), and all other terms and conditions of the Restricted
Stock Award, subject to the following:
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6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company (in the proper form of
payment approved by the Committee) within such thirty (30) day period, then the
offer of such Restricted Stock will terminate, unless otherwise determined by
the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to
a Restricted Stock Award will be determined by the Committee and will be at
least 85% of the Fair Market Value of the Shares on the date the Restricted
Stock Award is granted or at the time the purchase is consummated, except in the
case of a sale to a Ten Percent Shareholder, in which case the Purchase Price
must be 100% of the Fair Market Value on the date the Restricted Stock Award is
granted or at the time the purchase is consummated. Payment of the Purchase
Price may be made in accordance with Section 7 of this Plan.
6.3 Restrictions. Restricted Stock Awards may be subject to the
restrictions set forth in Section 11 of this Plan and shall be subject to the
General Repurchase Option provided for in Section 22.
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment. Payment for Shares purchased pursuant to this Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company that either: (1)
have been owned by Participant for more than six (6) months and have been paid
for within the meaning of SEC Rule 144 (and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by Participant in the public
market;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and 1274 of the
Code; provided, however, that Participants who are not employees or directors of
the Company will not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other than the Shares;
(d) by waiver of compensation that the Company does not
dispute to be due or accrued to the Participant for services rendered to the
Company;
(e) with respect only to purchases upon exercise of an
Option, and provided that a public market for the Company's stock then exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a
member of the National Association of
Securities Dealers (an "NASD DEALER") whereby
the Participant
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irrevocably elects to exercise the Option and
to sell a portion of the Shares so purchased
to pay for the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from the
Participant and a NASD Dealer whereby the
Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in
the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise
Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
8. WITHHOLDING TAXES.
8.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
8.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined (the "TAX DATE"). All elections by a Participant to
have Shares withheld for this purpose will be made in writing in a form
acceptable to the Committee in accordance with the requirements established by
the Committee for such elections.
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; and all new, additional
or different securities the Participant may become entitled to receive with
respect to such Shares by virtue of a stock dividend or distribution, stock
split or any other change in the corporate or capital structure of the Company
will be subject to the same restrictions (including but not limited to the
General Repurchase Option provided for under Section 22) as the Shares with
respect to which such securities were issued; provided, that the Participant
will have no right to retain such stock dividends or stock distributions with
respect to Unvested Shares that
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are repurchased at the Participant's original Purchase Price pursuant to Section
11 or any Shares that are repurchased pursuant to the General Repurchase Option
pursuant to Section 22.
9.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Options outstanding, or as otherwise required or permitted under
Section 260.140.46 of Title 10 of the California Code of Regulations.
Notwithstanding the foregoing, the Company shall not be required to provide such
financial statements to Participants who are key employees whose duties in
connection with the Company assure them access to equivalent information.
10. TRANSFERABILITY. Options granted to a Participant under this Plan
and a Participant's right to purchase Shares under a Restricted Stock Award, and
any interest therein, will not be transferable or assignable by a Participant,
and may not be made subject to execution, attachment or similar process,
otherwise than by will or by the laws of descent and distribution. During the
lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award, may be made only by the
Participant.
11. RESTRICTIONS ON SHARES. At the discretion of the Committee, in
addition to the General Repurchase Option provided for in Section 22, the
Company may also reserve to itself and/or its assignee(s) in the Award Agreement
(a) a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
and/or (b) a right to repurchase a portion of or all Shares held by a
Participant following such Participant's Termination at any time within ninety
(90) days after Participant's Termination Date, for cash and/or cancellation of
purchase money indebtedness for the Shares, at: (A) with respect to Vested
Shares, the higher of: (l) Participant's Purchase Price or Exercise Price, as
the case may be, or (2) the Fair Market Value of such Shares on Participant's
Termination Date; provided, that such right of repurchase (i) must be exercised
as to all such Vested Shares unless a Participant consents to the Company's
repurchase of only a portion of such Vested Shares and (ii) terminates when the
Company's securities become publicly traded; or (B) with respect to Unvested
Shares, at the Participant's Purchase Price or Exercise Price, as the case may
be, provided, that the right to repurchase Unvested Shares at the Purchase Price
or the Exercise Price, as the case may be, lapses (and Unvested Shares thus
become Vested Shares) at the rate of at least twenty percent (20%) per year over
five (5) years from the date the Shares were purchased (in the case of
Restricted Stock) or from the date of grant of the Option (in the case of Shares
obtained pursuant to exercise of an Option). If such right to repurchase
Unvested Shares is assigned, the assignee must (unless the assignee is a 100%
owned subsidiary of the Company or is the parent of the Company owning 100% of
the Company) pay the Company, upon assignment of the right to repurchase, cash
equal to the excess of the Fair Market Value of the Shares over the original
Purchase Price or Exercise Price, as the case may be.
12. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. The Company and any agent designated to hold Shares,
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1996 Equity Incentive Plan
stock powers or other instruments in escrow as provided above shall not be a
fiduciary and shall have no fiduciary duties to any Participant. Any Participant
who is permitted to execute a promissory note as partial or full consideration
for the purchase of Shares under this Plan will be required to pledge and
deposit with the Company all or part of the Shares so purchased as collateral to
secure the payment of Participant's obligation to the Company under the
promissory note; provided, however, that the Committee may require or accept
other or additional forms of collateral to secure the payment of such obligation
and, in any event, the Company will have full recourse against the Participant
under the promissory note notwithstanding any pledge of the Participant's Shares
or other collateral. In connection with any pledge of the Shares, Participant
will be required to execute and deliver a written pledge agreement in such form
as the Committee will from time to time approve. The Shares purchased with the
promissory note may be released from the pledge on a pro rata basis as the
promissory note is paid, if the Committee so permits.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee in its sole discretion
may, at any time or from time to time, authorize the Company, with the consent
of the respective Participants, to issue new Awards in exchange for the
surrender and cancellation of any or all outstanding Awards. The Committee in
its sole discretion may at any time buy from a Participant an Award previously
granted with payment in cash, Shares (including Restricted Stock) or other
consideration, based on such terms and conditions as the Committee and the
Participant may agree on.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code. An
Award will not be effective unless such Award is in compliance with all
applicable federal and state securities laws, rules and regulations of any
governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are
in effect on the date of grant of the Award and also on the date of exercise or
other issuance. Notwithstanding any other provision in this Plan, the Company
will have no obligation to issue or deliver certificates for Shares under this
Plan prior to: (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and/or (b) completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.
17. CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other
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than any shareholder which merges with the Company in such merger or which owns
or controls another corporation that merges with the Company in such merger)
cease to own their shares or other equity interests in the Company, or (d) the
sale of substantially all of the assets of the Company, any or all outstanding
Awards may be assumed, converted or replaced by the successor corporation (if
any), which assumption, conversion or replacement will be binding on all
Participants. In the alternative, the successor corporation may substitute
equivalent Awards or provide substantially similar consideration to Participants
as was provided to shareholders of the Company (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions and other provisions no less favorable to the Participant than
those which applied to such outstanding Shares immediately prior to such
transaction described in this Section 17.1. In the event such successor
corporation (if any) refuses to assume or substitute Options, as provided above,
pursuant to a transaction described in this Section 17.1, then notwithstanding
any other provision in this Plan to the contrary, such Options will expire on
such transaction at such time and on such conditions as the Board will
determine.
17.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation or sale of assets.
17.3 Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code and the provisions of Section 22 shall apply to such
assumed Award). In the event the Company elects to grant a new Option rather
than assuming an existing option, such new Option may be granted with a
similarly adjusted Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Awards pursuant to this Plan; provided, however, that: (a) no Option
may be exercised prior to shareholder approval of this Plan; and (b) the
issuance of any Shares purchased pursuant to any Award prior to shareholder
approval of this Plan must be rescinded if shareholder approval of this Plan is
not obtained within twelve (12) months before or after the Effective Date.
19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval. This Plan and all agreements
thereunder shall be governed by and construed in accordance with the internal
laws of the State of California.
20. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of
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Award Agreement or instrument to be executed pursuant to this Plan; provided,
however, that the Board will not, without the approval of the shareholders of
the Company, amend this Plan in any manner that requires such shareholder
approval pursuant to the Code or the regulations promulgated thereunder as such
provisions apply to ISO plans; and provided further, that the provisions of
Section 22 of this Plan may not be amended, altered or repealed without the
prior written consent of HNC.
21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
22. GENERAL REPURCHASE OPTION. In consideration of agreements made by
the Company with HNC, each Award granted under this Plan shall be granted
pursuant to an Award Agreement that shall provide that, at any time during the
Repurchase Period (as that term is defined below) HNC shall, subject to the
terms and conditions of this Section 22, have the sole and exclusive right (the
"GENERAL REPURCHASE OPTION"), at its sole option:
(i) to repurchase all (but not less than all) of the outstanding
Shares issued under such Award or Award Agreement (whether or not such Shares
are subject to other repurchase rights or options, rights of first refusal or
other rights, restrictions or options in favor of the Company or others) at the
Share Repurchase Price (as that term is defined below) in accordance with the
terms and conditions of this Section; and
(ii) to cause and compel each Participant who then holds an
Option granted under this Plan (but not less than all such Participants) to
forever and irrevocably entirely surrender and release such Option and all
rights of such Participant under such Option so that such Option and all rights
of Participant under such Option (including without limitation such
Participant's right and option to purchase Shares under such Option) shall be
fully terminated and cancelled in consideration of HNC's payment to such
Participant of the Option Repurchase Price (as that term is defined below).
22.1 Certain Definitions. As used herein:
(a) the term "REPURCHASE PERIOD" means that time period
beginning on July 1, 1998 and ending on the earlier to occur of: (i) ninety (90)
days before the consummation of a Business Combination (as defined below); or
(ii) ninety (90) days before the first sale of the Company's Common Stock to the
general public pursuant to a registration statement filed with and declared
effective by the SEC under the 1933 Act (other than a registration statement
solely covering an employee benefit plan or corporate business combination or
reorganization); or (iii) July 1, 2006.
(b) The term "BUSINESS COMBINATION" shall mean: (i) a
consolidation or merger of the Company with or into any other corporation or
corporations that results in the holders of the Company's outstanding capital
stock immediately prior to such consolidation or merger owning, immediately
after such consolidation or merger, Stock (as defined below) representing less
than fifty percent (50%) of the voting power of all of the then outstanding
capital stock of (A) the surviving corporation of such consolidation or merger
or (B) of the parent (or ultimate parent) corporation of such surviving
corporation, (ii) a sale of all or substantially all the assets of the Company;
or (iii) any transaction or series of related transactions in which shareholders
of the Company sell or otherwise transfer to a single party (or group of related
parties) (other than to HNC or the Company) outstanding capital stock of the
Company that represents more than fifty percent (50%) of the voting power of all
of
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the Company's then outstanding capital stock. As used in this subsection
22.1(b), the term "STOCK" means either stock of the Company that was outstanding
immediately prior to a consolidation or merger referred to in clause (i) of the
preceding sentence, or stock of another corporation that is issued to the
shareholders of the Company in such consolidation or merger in respect of their
ownership of capital stock in the Company.
(c) The term "REPRESENTATIVE" means the person who, on the
date the Exercise Notice (as defined below) is given, owns the highest number of
Award Shares then held by any other person; provided, however, that if such
person declines to act as the Representative, then the Representative shall be
the Chief Executive Officer of the Company. For purposes of this subsection
22.1(c): (i) "AWARD SHARES" means, at the time in question, all then outstanding
Shares issued under this Plan plus the number of Shares subject to then
outstanding Options granted under this Plan (including Shares as to which any
such Option may not then be immediately exercisable); and (ii) a person will be
deemed to own all then outstanding Shares issued under this Plan that are then
owned of record by such person plus all then outstanding Shares subject to then
outstanding Options granted under this Plan and owned by such person (including
Shares as to which any such Option may not then be immediately exercisable).
(d) The term "Qualified Appraiser" means an investment
banking firm of national or regional reputation (or a senior employee or partner
of such an investment banking firm) that is experienced in representing and
valuing software companies, or an expert in business valuations who has at least
five (5) years of reasonably substantial experience in valuing software
companies, either of which: (i) does not have a family relationship, or a
then-currently active significant business relationship with the party who
selected such Selected Appraiser (as defined in Section 22.5) or (in the case of
the Representative's Appraiser, as defined in Section 22.5) with any security
holder of the Company (other than HNC), or (in the case of the HNC Appraiser, as
defined in Section 22.5) with any Affiliate of HNC; or (ii) is not then, or does
not then represent or render significant services to, a competitor of HNC (in
the case of the Representative's Appraiser) or a direct competitor of the
Company (in the case of the HNC Appraiser).
(e) "GOOD CAUSE SHOWN" shall exist only if the Selected
Appraiser objected to is demonstrably not a Qualified Appraiser.
22.2 EXERCISE OF GENERAL REPURCHASE OPTION. At any time during
the Repurchase Period, HNC may elect to (i) repurchase all (but not less than
all) of the Shares outstanding under the Plan (whether or not such Shares are
subject to repurchase rights or options, rights of first refusal or other
rights, restrictions or options in favor of the Company or others) and (ii) to
cause and compel each Participant who holds an Option to forever and irrevocably
surrender and release such Option and all such Participant's rights thereunder
so that such Option and all rights of such Participant under such Option
(including without limitation such Participant's right and option to purchase
Shares under such Option) shall be fully terminated and cancelled, by giving to
the Representative written notice of HNC's exercise of the General Repurchase
Option (the "EXERCISE NOTICE"). HNC will then have the right and option (i) to
repurchase from each holder of Shares issued under this Plan (or such holder's
personal representative, as the case may be) all (but not less than all) of the
Shares held by such holder (whether such Shares are issued at, on or after the
date of the Exercise Notice) at the Share Repurchase Price (as defined below)
applicable to such holder, and (ii) to cause and compel each Participant who
holds an Option to forever and irrevocably surrender and release such Option and
all such Participant's rights thereunder so that such Option and all rights of
such Participant under such Option (including without limitation such
Participant's right and option to purchase Shares under such Option) shall be
fully terminated and cancelled in consideration of the payment to such
Participant of the Option Repurchase
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Aptex Software Inc.
1996 Equity Incentive Plan
Price (as defined below) applicable to such Participant, on the terms and
conditions set forth in this Section.
22.3 Share Repurchase Price. The "SHARE REPURCHASE PRICE" at
which the General Repurchase Option may be exercised with respect to particular
Shares shall be the higher of:
(a) 125% of the Appraised Fair Market Value (as defined in
Section 22.5 below) per share of the Shares; or
(b) 150% of the original purchase price per Share that was
originally paid to the Company for such Shares (as adjusted to reflect any stock
dividend, stock split, reverse stock split or similar recapitalization of the
Common Stock of the Company occurring after the issuance of such Share).
22.4 Option Repurchase Price. The "OPTION REPURCHASE PRICE" at
which the General Repurchase Option may be exercised to cancel and cause the
surrender and release of an outstanding Option, shall be the difference between:
(a) the product of the Option Measure Price (as defined below) multiplied by the
total number of Shares then subject to such Option (including Shares as to which
such Option may not then be immediately exercisable), and (b) the product of the
then-effective Exercise Price per Share of such Option multiplied by the total
number of Shares then subject to such Option (including Shares as to which such
Option may not then be immediately exercisable). As used herein, the "OPTION
MEASURE PRICE" means the higher of: (i) 125% of the Appraised Fair Market Value
(as defined in Section 22.5 below) per share of the Shares; or (ii) 150% of the
then-effective Exercise Price per Share of such Option.
22.5 Determination of Appraised Fair Market Value. In the event
that the General Repurchase Option is exercised, then the Appraised Fair Market
Value (as defined below) shall be determined as follows:
(a) Selection of Appraisers. Within twenty (20) days after
the Exercise Notice is given (A) HNC and the Representative shall each select
one Qualified Appraiser to determine the Appraised Fair Market Value per share
of the Shares as of the date of the Exercise Notice (the "SELECTED APPRAISER")
and (B) HNC and the Representative shall each give the other written notice
("APPRAISER NOTICE") of the identity of their respective Selected Appraiser.
HNC's Selected Appraiser is sometimes hereinafter called the "HNC APPRAISER" and
the Representative's Selected Appraiser is sometimes hereinafter called the
"REPRESENTATIVE'S APPRAISER". The party identified by HNC or the Representative,
respectively, as its Selected Appraiser in its Appraiser Notice shall be its
Selected Appraiser for purposes of determining the Appraised Fair Market Value
unless HNC or the Representative, as applicable, gives the other written notice
of its good faith objection to the other's Selected Appraiser (an "OBJECTION
NOTICE") for Good Cause Shown (as defined in Section 22.1) within seven (7) days
after the Appraiser Notice identifying such Selected Appraiser is given. An
Objection Notice must set forth in reasonable detail the asserted Good Cause
Shown for objection to a party's Selected Appraiser. The Representative may not
object to HNC's Selected Appraiser for the purposes of delaying exercise of the
General Repurchase Option. If a party's Selected Appraiser is timely objected to
in good faith in an Objection Notice for Good Cause Shown, then such party
shall, within twenty (20) days after receiving such Objection Notice, select a
new Qualified Appraiser as its Selected Appraiser and shall give the other party
written notice of the identity of such new Selected Appraiser. Such new Selected
Appraiser shall then be such party's Selected Appraiser and may not be objected
to by the other party.
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Aptex Software Inc.
1996 Equity Incentive Plan
(b) Appraisal Procedure. The Company shall provide the HNC
Appraiser and the Representative's Appraiser with full access during normal
business hours to the Company's facilities, products, personnel, books, records
and financial statements for purposes of assisting the Selected Appraisers in
determining the Appraised Fair Market Value per share of the Company's Common
Stock. The HNC Appraiser and the Representative's Appraiser shall each in good
faith attempt to appraise and determine the fair market value per share of the
Company's Common Stock as of the date of the Exercise Notice (expressed as a
precise dollar amount and not as a range of values), taking into account the
absence of a public trading market for such stock and assuming (even though such
is not in fact the case) that the licenses and rights granted to the Company by
HNC under that certain Technology License Agreement between HNC and the Company
dated as of September 5, 1996 (as such may be amended) are transferable by the
Company (the "APPRAISED VALUE PER SHARE"). Within thirty (30) days after both
the HNC Appraiser and the Representative's Appraiser have been determined, the
HNC Appraiser and the Representative's Appraiser shall each deliver to HNC and
the Representative a written report ("APPRAISAL REPORT") setting forth such
Selected Appraiser's appraisal and determination of the Appraised Value Per
Share. As used herein, the term "APPRAISED FAIR MARKET VALUE" means the average
of the HNC Appraiser's appraisal of the Appraised Value Per Share and the
Representative's Appraiser's appraisal of the Appraised Value Per Share as set
forth in their respective Appraisal Reports; provided, however, that
notwithstanding the foregoing, if there is only one Selected Appraiser because
HNC or the Representative fail to select their Selected Appraiser or to select a
new Selected Appraiser in response to an Objection Notice, then Appraised Fair
Market Value shall instead mean the appraisal of the Appraised Value Per Share
as set forth in the Appraisal Report of such sole Selected Appraiser. HNC shall
pay the fees and expenses charged by the HNC Appraiser and the Representative's
Appraiser; provided that the amount of such fees and expenses for the
Representative's Appraiser borne by HNC shall not exceed the sum of $250,000,
and any fees or expenses charged by Representative's Appraiser in excess of such
sum shall be borne by each holder of Shares or Options issued or granted under
the Plan that are being repurchased or released pursuant to HNC's exercise of
the General Repurchase Option, pro rata according to the amount of cash that
each such holder is entitled to receive from HNC by virtue of HNC's exercise of
the General Repurchase Option.
22.6 Payment of General Repurchase Price. The Share Repurchase
Price to be paid to each holder of Shares upon the purchase of such Shares
pursuant to HNC's exercise of the General Repurchase Option, and the Option
Repurchase Price to be paid to each holder of an Option upon the cancellation
and release of such Option pursuant to HNC's exercise of the General Repurchase
Option, will be paid by HNC in cash, by check or wire transfer. The Share
Repurchase Price and the Option Repurchase Price will be paid by HNC without
interest within twenty (20) days after the final determination of the Appraised
Fair Market Value in accordance with subsection 22.5 above. Such payment may be
delivered to the Company's principal offices.
22.7 General Repurchase Option Prevails. In case of any
inconsistency or conflict between the Company's attempted exercise of any
repurchase option, right of first refusal or other right and HNC's attempted
exercise of the General Repurchase Option granted under this Section, the
General Repurchase Option shall supersede, govern and prevail and the Company's
repurchase option, right of first refusal or other right may not be exercised to
the extent they are inconsistent or in conflict with HNC's rights or ability to
exercise the General Repurchase Option. The exercise by the Company (but not its
assignees) of a repurchase option or right of first refusal that results in the
Company's repurchase of Shares or the cancellation of an Option at a time when
the General Repurchase Option is not being exercised will not be deemed
inconsistent or in conflict with the General Repurchase Option.
22.8 Term. The General Repurchase Option shall remain in full
force and effect until the expiration of the Repurchase Period. The termination
of a Participant's employment with the Company for any reason shall not
terminate the General Repurchase Option and shall have no effect
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<PAGE> 14
Aptex Software Inc.
1996 Equity Incentive Plan
whatsoever on the General Repurchase Option, which shall remain in full force
and effect in accordance with its terms with respect to any of the Shares and
Options held by such Participant.
22.9 Restrictions on Company Actions. Until the General
Repurchase Option has terminated in accordance with its terms:
(a) The Company will cause each Award Agreement and each
Award granted under this Plan to contain provisions in form and substance
reasonably satisfactory to HNC that are binding on and acknowledged by the
Participant receiving such Award, to the effect that the General Repurchase
Option shall be applicable to the Shares and/or Options subject to such Award
Agreement, on the terms and conditions set forth herein and the Company will not
amend, modify or release any Participant from, any such provisions or from the
General Repurchase Option or any aspect thereof without HNC's prior written
consent, which may be withheld by HNC in its sole discretion;
(b) The Company will not grant to any third party any
securities, options or other rights that might conflict or be inconsistent with,
or in any way have priority over, the terms and conditions of this Section and
HNC's rights hereunder;
(c) The Company will not amend the provisions of this
Section or any other provisions of this Plan that would affect this Section
without HNC's prior written consent, which may be withheld by HNC in its sole
discretion; or
(d) Upon delivery of the Exercise Notice by HNC to
exercise the General Repurchase Option, the Company will cease to grant any
further Awards under this Plan.
22.10 Assignment. HNC may assign its rights under this Section 22
to the Company and HNC's rights under this Section 22 shall inure to the benefit
of HNC's successors, whether by merger, consolidation, operation of law or
otherwise. Any such assignment of or succession to HNC's rights under this
Section 22 shall be binding on all Participants.
23. CERTAIN DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:
"AWARD" means any award under this Plan, including any Option or
Restricted Stock.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board.
"COMPANY" means Aptex Software Inc., a corporation organized under
the laws of the State of California, or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee in good faith.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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Aptex Software Inc.
1996 Equity Incentive Plan
"EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on
the last trading day prior to the date of determination as
reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on
the last trading day prior to the date of determination on
the principal national securities exchange on which the
Common Stock is listed or admitted to trading as reported
in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to
trading on a national securities exchange, the average of
the closing bid and asked prices on the last trading day
prior to the date of determination as reported in The Wall
Street Journal; or
(d) if none of the foregoing is applicable, by the Committee in
good faith.
"HNC" means HNC Software Inc., a Delaware corporation, and its
successors and assigns.
"OPTION" means an award of an option to purchase Shares pursuant to
Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under this Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this Plan.
"PLAN" means this Aptex Software Inc. 1996 Equity Incentive Plan,
as amended from time to time.
"PURCHASE PRICE" means the price at which a Participant may
purchase Restricted Stock.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17, and any
successor security.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
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<PAGE> 16
Aptex Software Inc.
1996 Equity Incentive Plan
"TERMINATION" or "TERMINATED" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, director or consultant to the Company or a
Parent or Subsidiary of the Company, except in the case of sick leave, military
leave, or any other leave of absence approved by the Committee, provided that
such leave is for a period of not more than ninety (90) days, or reinstatement
upon the expiration of such leave is guaranteed by contract or statute. The
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the Award
Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
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<PAGE> 1
EXHIBIT 4.04
NO. ______
APTEX SOFTWARE INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "AGREEMENT") is made and
entered into as of the date of grant set forth below (the "DATE OF GRANT") by
and between Aptex Software Inc., a California corporation (the "COMPANY"), and
the participant named below ("PARTICIPANT"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1996 Equity
Incentive Plan (the "PLAN").
<TABLE>
<S> <C>
PARTICIPANT:
----------------------------------
SOCIAL SECURITY NUMBER:
----------------------------------
ADDRESS:
----------------------------------
----------------------------------
TOTAL OPTION SHARES:
----------------------------------
EXERCISE PRICE PER SHARE:
----------------------------------
DATE OF GRANT:
----------------------------------
FIRST VESTING DATE:
----------------------------------
EXPIRATION DATE:
----------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
</TABLE>
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above (the "SHARES") at the Exercise Price Per Share set
forth above (the "EXERCISE PRICE"), subject to all of the terms and conditions
of this Agreement and the Plan. If designated as an Incentive Stock Option
above, this Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. Provided Participant
continues to provide services to the Company or any Subsidiary or Parent of the
Company and subject to earlier termination of this Option as provided in Section
8 below or Section 22 of the Plan, this Option will become vested and
exercisable as to portions of the Shares as follows: (a) this Option shall not
vest nor be exercisable with respect to any of the Shares until ___________,
____ (the "FIRST VESTING DATE"); (b) on the First Vesting Date, this Option will
become vested and exercisable as to 25% of the Shares; and (c) thereafter,
<PAGE> 2
at the end of each full succeeding month, this Option will become vested and
exercisable as to an additional 2.0833% of the Shares until this Option is
vested and exercisable as to 100% of the Shares. If application of the vesting
percentage causes a fractional share, such share shall be rounded up to the
nearest whole share.
2.2 VESTING OF OPTION. Shares that are vested pursuant to
the schedule set forth in Section 2.1 are "VESTED SHARES". Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES".
Only Vested Shares may be exercised.
2.3 EXPIRATION. This Option shall expire on the Expiration
Date set forth above and must be exercised, if at all, on or before the
Expiration Date.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH OR DISABILITY.
If Participant is Terminated for any reason, except death or Disability, this
Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If
Participant is Terminated because of death or Disability of Participant (or
Participant dies within three (3) months after Termination other than because of
Participant's death or Disability), this Option, to the extent that it is
exercisable by Participant on the Termination Date, may be exercised by
Participant (or Participant's legal representative or authorized assignee) no
later than twelve (12) months after the Termination Date, but in any event no
later than the Expiration Date. Any exercise beyond three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Section 22(e)(3) of the
Code is deemed to be the exercise of an NQSO.
3.3 NO OBLIGATION TO EMPLOY. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent, Subsidiary or Affiliate of
the Company, or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this
Option, Participant (or in the case of exercise after Participant's death or
incapacity, Participant's executor, administrator, heir or legatee, as the case
may be) must deliver to the Company an executed stock option exercise agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Company from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, inter alia, Participant's election to exercise this Option, the
number of Shares being purchased, the restrictions imposed on the Shares being
purchased pursuant to the provisions of Section 22 of the Plan and the other
restrictions, if any, imposed on the Shares purchased under such Exercise
Agreement and such representations and agreements regarding Participant's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises this Option, then such person must submit documentation reasonably
acceptable to the Company that such person has the right to exercise this
Option.
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<PAGE> 3
4.2 LIMITATIONS ON EXERCISE. This Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise. This
Option may not be exercised as to fewer than one hundred (100) Shares unless it
is exercised as to all Shares as to which this Option is then exercisable.
4.3 PAYMENT. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock that
either: (1) have been owned by Participant for more than six
(6) months and have been paid for within the meaning of SEC
Rule 144 (and, if such shares were purchased from the
Company by use of a promissory note, such note has been
fully paid with respect to such shares); or (2) were
obtained by Participant in the open public market; and (3)
are clear of all liens, claims, encumbrances or security
interests;
(c) by waiver of compensation that the Company does not dispute
to be due or accrued to Participant for services rendered to
the Company;
(d) provided that a public market for the Company's stock
exists, (1) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby Participant irrevocably elects to exercise
this Option and to sell a portion of the Shares so purchased
to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward
the Exercise Price directly to the Company, or (2) through a
"margin" commitment from -- Participant and an NASD Dealer
whereby Participant irrevocably elects to exercise this
Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company; or
(e) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the Shares
upon exercise of this Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of this Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise Agreement
and payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
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<PAGE> 4
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If this
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (a) the date two
(2) years after the Date of Grant, and (b) the date one (1) year after transfer
of such Shares to Participant upon exercise of this Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS RESTRICTIONS ON SHARES. The
Plan and this Agreement are intended to comply with Section 25102(o) of the
California Corporations Code. Any provision of this Agreement which is
inconsistent with Section 25102(o) shall, without further act or amendment by
the Company or the Board, be reformed to comply with the requirements of Section
25102(o). The exercise of this Option and the issuance and transfer of Shares
shall be subject to compliance by the Company and Participant with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the Securities and Exchange Commission, any state securities
commission or any stock exchange to effect such compliance. Participant also
understands that this Agreement imposes: (a) contractual restrictions on
Participant's ability to transfer, pledge or encumber the Shares received on
exercise of this Option and (b) contractual options that may require Participant
to (i) surrender and release this Option and all rights of Participant under
this Option and (ii) sell the Shares back to the Company, HNC or others on terms
and conditions set forth in this Agreement and the Plan.
7. NONTRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime of Participant only by Participant. The
terms of this Option shall be binding upon the executors, administrators,
successors and assigns of Participant.
8. GENERAL REPURCHASE OPTION. Participant agrees with the Company
and with HNC that, as provided in the Plan, at any time during the Repurchase
Period (as that term is defined in Section 22 of the Plan) HNC shall have the
right, at its sole option, (a) to repurchase all (but not less than all) of the
Shares issued under this Option at the Share Repurchase Price (as that term is
defined in Section 22 of the Plan); and (b) to cause and compel Participant to
forever and irrevocably entirely surrender and release this Option and all
rights of Participant under this Option so that this Option and all rights of
Participant under this Option (including without limitation Participant's right
and option to purchase Shares under this Option) shall be fully terminated and
cancelled in consideration of HNC's payment to Participant of the Option
Repurchase Price (as that term is defined in Section 22 of the Plan), all in
accordance with the provisions of this Section 8 and the provisions of the Plan,
specifically including the provisions of Section 22 of the Plan entitled
"General Repurchase Option" (the "GENERAL REPURCHASE OPTION").
8.1 ACKNOWLEDGMENT AND AGREEMENT. PARTICIPANT HEREBY FURTHER
ACKNOWLEDGES AND AGREES THAT:
(a) PARTICIPANT HAS READ AND UNDERSTANDS THE PLAN (INCLUDING
WITHOUT LIMITATION THE PROVISIONS OF SECTION 22 OF THE PLAN
REGARDING THE GENERAL REPURCHASE OPTION, THE DEFINITION OF
THE "REPURCHASE PERIOD" AND THE PROVISIONS OF THE PLAN
REGARDING THE DETERMINATION OF (I) THE "SHARE REPURCHASE
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<PAGE> 5
PRICE" AT WHICH THE SHARES ISSUED UNDER THIS OPTION MAY BE
PURCHASED PURSUANT TO THE GENERAL REPURCHASE OPTION AND (II)
THE "OPTION REPURCHASE PRICE" AT WHICH THE GENERAL
REPURCHASE OPTION MAY BE EXERCISED TO CANCEL AND CAUSE THE
SURRENDER AND RELEASE OF THIS OPTION);
(B) A COPY OF THE PLAN IS ATTACHED AS EXHIBIT 4 TO THE EXERCISE
AGREEMENT, WHICH IS ATTACHED HERETO AS EXHIBIT A TO THIS
AGREEMENT, AND THE PROVISIONS OF THE PLAN (INCLUDING WITHOUT
LIMITATION THE PROVISIONS OF SECTION 22 OF THE PLAN
REGARDING THE GENERAL REPURCHASE OPTION) ARE INCORPORATED BY
REFERENCE IN THIS AGREEMENT AND FORM PART OF THE PROVISIONS
OF THIS AGREEMENT; AND
(C) PARTICIPANT, THIS OPTION AND THE SHARES ISSUED UNDER THIS
OPTION ARE BOUND BY THE GENERAL REPURCHASE OPTION AND THE
PROVISIONS OF THE PLAN (INCLUDING WITHOUT LIMITATION THE
PROVISIONS OF SECTION 22 OF THE PLAN REGARDING THE GENERAL
REPURCHASE OPTION).
8.2 GENERAL REPURCHASE OPTION PREVAILS. In case of any
inconsistency or conflict between the Company's attempted exercise of the Right
of First Refusal under Section 9 hereof, and HNC's attempted exercise of the
General Repurchase Option granted under this Section 8 and under Section 22 of
the Plan, the General Repurchase Option shall supersede, govern and prevail and
the Right of First Refusal may not be exercised to the extent it is inconsistent
or in conflict with HNC's rights or ability to exercise the General Repurchase
Option. The exercise by the Company (but not its assignees) of the Right of
First Refusal that results in the Company's repurchase and reacquisition of
Shares at a time when the General Repurchase Option is not being exercised will
not be deemed inconsistent or in conflict with the General Repurchase Option.
8.3 TERM. The termination of Participant's relationship with
the Company for any reason shall not terminate the General Repurchase Option and
shall have no effect whatsoever on the General Repurchase Option, which shall
remain in full force and effect in accordance with its terms with respect to any
of the Shares.
8.4 CONSTRUCTION. The parties acknowledge and agree that the
provisions of this Section 8 have been included in this Agreement in order to
carry out the provisions of Section 22 of the Plan regarding HNC's General
Repurchase Option (the "PLAN REPURCHASE OPTION PROVISIONS"). Accordingly, in
case of any conflict or inconsistency between the provisions of this Section 8
and the Plan Repurchase Option Provisions, the provisions of this Section 8
shall be construed and interpreted in a manner consistent with the terms,
conditions, construction and interpretation of the Plan Repurchase Option
Provisions.
9. RIGHT OF FIRST REFUSAL. Shares that are subject to the General
Repurchase Option ("OPTION SHARES") may not be transferred by Participant
without HNC's prior written consent unless the transferee who acquires such
Option Shares first agrees, in a writing that is reasonably satisfactory to HNC
and that is signed by HNC and such transferee, that the General Repurchase
Option and the restrictions and provisions of this Section 9 shall continue to
apply to and bind all such Option Shares in the hands of such transferee and its
transferees, successors and assigns. As used herein, the term "TRANSFERABLE
SHARES" means Shares that either (i) are not Option Shares or (ii) are Option
Shares as to
-5-
<PAGE> 6
which HNC has given Participant HNC's prior written consent to transfer in
accordance with the foregoing provisions of this Section. Subject to the
foregoing provisions of this Section and the terms and conditions of this
Agreement and the Plan, before any Transferable Shares held by Participant or
any transferee of such Shares (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including without limitation a
transfer by gift or operation of law), the Company and/or its assignee(s) shall
have a right of first refusal to purchase the Transferable Shares to be sold or
transferred (the "OFFERED SHARES") on the terms and conditions set forth in this
Section (the "RIGHT OF FIRST REFUSAL").
9.1 NOTICE OF PROPOSED TRANSFER. The Holder of the Offered
Shares will deliver to the Company a written notice (the "NOTICE") stating: (i)
the Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed purchaser or other transferee of any
Offered Shares ("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be
transferred to each Proposed Transferee; (iv) the bona fide cash price or other
consideration for which the Holder proposes to transfer the Offered Shares (the
"OFFERED PRICE"); and (v) that the Holder will offer to sell the Offered Shares
to the Company and/or its assignee(s) at the Offered Price as provided in this
Section.
9.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all
(but not less than all) of the Offered Shares proposed to be transferred to any
one or more of the Proposed Transferees named in the Notice, at the purchase
price determined in accordance with subsection 9.3 below.
9.3 PURCHASE PRICE. The purchase price for the Offered
Shares purchased under this Section will be the Offered Price. If the Offered
Price includes consideration other than cash, then the value of the non-cash
consideration as determined in good faith by the Company's Board of Directors
will conclusively be deemed to be the cash equivalent value of such non-cash
consideration.
9.4 PAYMENT. Payment of the purchase price for Offered
Shares will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case of a
purchase of Offered Shares by such assignee) or by any combination thereof. The
purchase price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 120 days after the date of the
Notice, and provided further, that: (i) any such sale or other transfer is
effected in compliance with all applicable securities laws; and (ii) the
Proposed Transferee agrees in writing that the provisions of this Section will
continue to apply to the Offered Shares in the hands of such Proposed
Transferee. If the Offered Shares described in the Notice are not transferred to
the Proposed Transferee within such 120 day period, then a new Notice must be
given to the Company, and the Company will again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
9.6 EXEMPT TRANSFERS. Notwithstanding anything to the
contrary in this Section, the following transfers of Shares will be exempt from
the Right of First Refusal: (i) the transfer of any or all of the Shares during
Participant's lifetime by gift or on Participant's death by will or
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<PAGE> 7
intestacy to Participant's "immediate family" (as defined below) or to a trust
for the benefit of Participant or Participant's immediate family, provided that
each transferee or other recipient agrees in a writing satisfactory to the
Company and HNC that the General Repurchase Option set forth in Section 8 (if
such General Repurchase Option has not expired by its terms) and the provisions
of this Section will continue to apply to the transferred Shares in the hands of
such transferee or other recipient; (ii) any transfer of Shares made pursuant to
a statutory merger or statutory consolidation of the Company with or into
another corporation or corporations (except that the Right of First Refusal will
continue to apply thereafter to such Shares, in which case the surviving
corporation of such merger or consolidation shall succeed to the rights or the
Company under this Section unless the agreement of merger or consolidation
expressly otherwise provides); or (iii) any transfer of Shares pursuant to the
winding up and dissolution of the Company. As used herein, the term "IMMEDIATE
FAMILY" will mean Participant's spouse, lineal descendant or antecedent, father,
mother, brother or sister, adopted child or grandchild, or the spouse of any
child, adopted child, grandchild or adopted grandchild of Participant.
9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of
First Refusal will terminate as to all Shares on the effective date of the first
sale of Common Stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the SEC under the
1933 Act (other than a registration statement relating solely to the issuance of
Common Stock pursuant to a business combination or an employee incentive or
benefit plan).
9.8 ENCUMBRANCES ON TRANSFERABLE SHARES. Participant may
grant a lien or security interest in, or pledge, hypothecate or encumber
Transferable Shares only with the prior written consent of the Company and (if
the General Repurchase Option has not terminated) HNC, and only if each party to
whom such lien or security interest is granted, or to whom such pledge,
hypothecation or other encumbrance is made, agrees in a writing satisfactory to
the Company and (so long as the General Repurchase Option has not terminated)
HNC that (i) such lien, security interest, pledge, hypothecation or encumbrance
will not apply to such Transferable Shares after they are acquired by the
Company and/or its assignees pursuant to the Right of First Refusal set forth in
this Section or by HNC pursuant to the General Repurchase Option set forth in
Section 8; and (ii) the provisions of this Section and Section 8 will continue
to apply to such Transferable Shares in the hands of such party and any
transferee of such party. Participant may not grant a lien or security interest
in, or pledge, hypothecate or encumber, any Shares that are not Transferable
Shares.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the
Effective Date of the Plan of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
10.1 EXERCISE OF ISO. If this Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of this Option, although the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price will be treated as
a tax preference item for federal income tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
10.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If this Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of this Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. The Company will be required to withhold from
Participant's compensation or collect
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<PAGE> 8
from Participant and pay to the applicable taxing authorities an amount equal to
a percentage of this compensation income at the time of exercise.
10.3 DISPOSITION OF SHARES. If the Shares are held for more
than twelve (12) months after the date of issuance of the Shares pursuant to the
exercise of this Option and, in the case of an ISO, are disposed of more than
two years after the Date of Grant, any gain realized on disposition of the
Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within the
applicable one year or two year period, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price. The Company may be required to withhold
from Participant's compensation or collect from Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any
of the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.
12. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
13. ENTIRE AGREEMENT. The Plan is incorporated herein by reference.
This Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by facsimile, rapifax or telecopier.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement, including its rights to repurchase Shares under the
Right of First Refusal. Such rights may be assigned, without limitation, to HNC.
This Agreement will be binding upon and inure to the benefit of the successors
and assigns of the Company and (to the extent applicable) HNC. Subject to the
restrictions on transfer herein set forth, this Agreement will be binding upon
Participant and Participant's heirs, executors, administrators, successors and
assigns. HNC's rights under the General Repurchase Option may be assigned to any
corporation with whom HNC is merged or consolidated with or into in any
consolidation, merger or similar business combination or to whom HNC sells or
transfers all or substantially all its assets.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as such laws
are applied to agreements between California residents entered into and to be
performed entirely within California. If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such provision
will be
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<PAGE> 9
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
17. AMENDMENT; WAIVER. This Agreement may be amended and modified
only by a writing executed by the Company and Participant; provided, however,
that no provision of this Agreement affecting (or potentially affecting) the
General Repurchase Option or any other rights (or potential rights) of HNC
hereunder in any manner may be amended or modified in any respect without the
prior written consent of HNC, which may be withheld in HNC's sole discretion. No
rights of the Company, Participant or HNC may be waived except by a writing
executed by the party against whom such waiver is asserted.
18. HNC THIRD PARTY BENEFICIARY STATUS. The parties acknowledge and
agree that the provisions of this Agreement are being made for the benefit of
HNC and that HNC is an intended third party beneficiary of this Agreement,
entitled to enforce all the terms and conditions of this Agreement (including
but not limited to the provisions of Section 8, Section 9, Section 15, Section
17, this Section 18 and any other provisions related thereto) against the
Company and Participant and their respective successors and assigns, to the same
extent that HNC could if HNC were a party and signatory to this Agreement.
19. ACCEPTANCE. Participant hereby acknowledges receipt of a copy
of the Plan and this Agreement. Participant has read and understands the terms
and provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of this Option or disposition of
the Shares issued under this Option and that Participant should consult a tax
adviser prior to such exercise or disposition.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Participant has
executed this Agreement in duplicate as of the date set forth below.
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<PAGE> 10
<TABLE>
<S> <C>
COMPANY PARTICIPANT
Aptex Software Inc.
By:
------------------------------- -----------------------------------------
(Signature)
- ---------------------------------- -----------------------------------------
(Please print name) (Please print name)
- ----------------------------------
(Please print title)
- ----------------------------------
(Date)
</TABLE>
[SIGNATURE PAGE TO 1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT]
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<PAGE> 11
EXHIBIT A
NO. ______
APTEX SOFTWARE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of ______________,
_____ (the "EFFECTIVE DATE") by and between Aptex Software, Inc., a California
corporation (the "COMPANY"), and the purchaser named below (the "PURCHASER").
Capitalized terms not defined herein shall have the meaning ascribed to them in
the Company's 1996 Equity Incentive Plan (the "PLAN").
<TABLE>
<S> <C>
PURCHASER: ----------------------------------
SOCIAL SECURITY NUMBER: ----------------------------------
ADDRESS: ----------------------------------
TOTAL NUMBER OF SHARES: ----------------------------------
EXERCISE PRICE PER SHARE: ----------------------------------
TOTAL EXERCISE PRICE: ----------------------------------
OPTION NO. ___ DATE OF GRANT: ----------------------------------
TYPE OF OPTION: [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
</TABLE>
1. EXERCISE OF OPTION.
1.1 EXERCISE. Pursuant to exercise of that certain option
("OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Agreement, Purchaser hereby purchases from the Company, and
the Company hereby sells to Purchaser, the total number of shares set forth
above ("SHARES") of the Company's Common Stock at the Exercise Price Per Share
set forth above ("EXERCISE PRICE"). As used in this Agreement, the term "SHARES"
refers to the Shares purchased under this Exercise Agreement and includes all
securities received (a) in replacement of the Shares, (b) as a result of stock
dividends or stock splits with respect to the Shares, and (c) all securities
received in replacement of the Shares in a merger, recapitalization,
reorganization or similar corporate transaction.
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<PAGE> 12
1.2 TITLE TO SHARES. The exact spelling of the name(s) under
which Purchaser will take title to the Shares is:.
----------------------------------------------------------------------
----------------------------------------------------------------------
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Alone or with spouse as trustee(s) of the following trust (including date):
----------------------------------------------------------------------
----------------------------------------------------------------------
[ ] Other; please specify:
----------------------------------------------------
----------------------------------------------------------------------
1.3 PAYMENT. Purchaser hereby delivers payment of the
Exercise Price in the manner permitted in the Stock Option Agreement as follows
(check and complete as appropriate):
[ ] in cash in the amount of $____________, receipt of which is
acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to Purchaser
in the amount of $__________;
[ ] by delivery of _________ fully-paid, nonassessable and
vested shares of the Common Stock of the Company owned by
Purchaser for at least six (6) months prior to the date
hereof which have been paid for within the meaning of SEC
Rule 144, (if purchased by use of a promissory note, such
note has been fully paid with respect to such vested
shares), or obtained by Purchaser in the open public market,
and owned free and clear of all liens, claims, encumbrances
or security interests, valued at the current Fair Market
Value of $___________ per share;
[ ] by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_________.
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers to
the Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock
Power and Assignment Separate from Stock Certificate in the form of Exhibit 1
attached hereto (the "STOCK POWERS"), both executed by Purchaser (and
Purchaser's spouse, if married), (iii) if Purchaser is married, a Consent of
Spouse in the form of Exhibit 2 attached hereto (the "SPOUSE CONSENT") executed
by Purchaser's spouse, and (iv) the Exercise Price.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the
Exercise Price and all the documents to be executed and delivered by Purchaser
to the Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser, to be placed in
escrow as provided in Section 11 until expiration or termination of the
Company's Right of First Refusal and HNC's General Repurchase Option described
in Sections 9 and 8, respectively.
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<PAGE> 13
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Purchaser has received a
copy of the Plan and the Stock Option Agreement, has read and understands the
terms of the Plan, the Stock Option Agreement and this Exercise Agreement, and
agrees to be bound by their terms and conditions. Purchaser acknowledges that
there may be adverse tax consequences upon exercise of the Option or disposition
of the Shares, and that Purchaser should consult a tax adviser prior to such
exercise or disposition.
3.2 PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the
"SECURITIES ACT"). Purchaser has no present intention of selling or otherwise
disposing of all or any portion of the Shares and no one other than Purchaser
has any beneficial ownership of any of the Shares.
3.3 ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
3.4 UNDERSTANDING OF RISKS. Purchaser is fully aware of: (i)
the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (e.g., that Purchaser may not be
able to sell or dispose of the Shares or use them as collateral for loans); (iv)
the qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Shares. Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
3.5 NO GENERAL SOLICITATION. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
4.1 COMPLIANCE WITH FEDERAL SECURITIES LAWS. Purchaser
understands and acknowledges that the Shares have not been registered with the
Securities and Exchange Commission ("SEC") under the Securities Act and that,
notwithstanding any other provision of the Stock Option Agreement to the
contrary, the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws. Purchaser agrees to cooperate with the Company to ensure
compliance with such laws. The Shares are being issued under the Securities Act
pursuant to the exemption provided by SEC Rule 701.
4.2 COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE PLAN,
THE STOCK OPTION AGREEMENT, AND THIS AGREEMENT ARE INTENDED TO COMPLY WITH
SECTION 25102(O) OF THE CALIFORNIA CORPORATIONS CODE. ANY PROVISION OF THIS
AGREEMENT WHICH IS INCONSISTENT WITH SECTION 25102(O) SHALL, WITHOUT
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<PAGE> 14
FURTHER ACT OR AMENDMENT BY THE COMPANY OR THE BOARD, BE REFORMED TO COMPLY WITH
THE REQUIREMENTS OF SECTION 25102(O). THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA
COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT
TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 NO TRANSFER UNLESS REGISTERED OR EXEMPT. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.
Purchaser also understands that, in addition to the above securities law
restrictions, this Agreement imposes: (i) contractual restrictions on
Purchaser's ability to transfer, pledge or encumber the Shares, and (ii)
contractual options that may require Purchaser to sell the Shares back to the
Company, HNC or others on the terms and conditions set forth in this Agreement
and in the Plan.
5.2 SEC RULE 144. In addition, Purchaser has been advised
that SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held for a
minimum of two years, and in certain cases three years, after they have been
purchased and paid for (within the meaning of Rule 144). Purchaser understands
that Rule 144 may indefinitely restrict transfer of the Shares if and for so
long as Purchaser remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.
5.3 SEC RULE 701. Under the currently effective provisions
of Rule 701 promulgated by the SEC under the 1933 Act, the Shares will become
freely tradable by Purchaser (if Purchaser not then an affiliate of the
Company), subject to limited conditions regarding the method of sale, ninety
(90) days after the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the SEC, subject to the lengthier market standoff agreement contained in this
Agreement or in any other agreement entered into by Purchaser. Under such Rule
701, if Purchaser is an affiliate of the Company, then Purchaser must comply
with the provisions (other than the holding period requirements) of Rule 144 in
reselling Shares.
6. RESTRICTIONS ON TRANSFERS.
6.1 DISPOSITION OF SHARES. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares (other than as permitted by
this Agreement) unless and until:
(a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of
the terms and conditions of the proposed disposition;
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<PAGE> 15
(b) Purchaser shall have complied with all requirements of
this Exercise Agreement applicable to the disposition
of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to
counsel for the Company, that (i) the proposed
disposition does not require registration of the
Shares under the Securities Act or (ii) all
appropriate action necessary for compliance with the
registration requirements of the Securities Act or of
any exemption from registration available under the
Securities Act (including Rule 144) has been taken;
and
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the
Company, that the proposed disposition will not result
in the contravention of any transfer restrictions
applicable to the Shares pursuant to the provisions of
the Commissioner Rules identified in Section 4.2.
6.2 RESTRICTION ON TRANSFER. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Shares which are subject to the Company's Right
of First Refusal or HNC's General Repurchase Option, except as permitted by this
Agreement.
6.3 TRANSFEREE OBLIGATIONS. Each person (other than the
Company) to whom the Shares are transferred by means of one of the permitted
transfers specified in this Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred shares are subject to: (i) both Company's Right of First Refusal and
HNC's General Repurchase Option granted hereunder and (ii) the market stand-off
provisions of Section 7, to the same extent such shares would be so subject if
retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with
any registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Shares without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) after the effective date of
such registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.
8. GENERAL REPURCHASE OPTION. Purchaser agrees with the Company and
with HNC that, as provided in the Plan (and in addition to the Right of First
Refusal), at any time during the Repurchase Period, HNC shall have the right, at
its sole option, to repurchase all (but not less than all) of the Shares at the
Share Repurchase Price in accordance with the provisions of this Section 8 and
the provisions of the Plan, specifically including the provisions of Section 22
of the Plan entitled "General Repurchase Option" (the "GENERAL REPURCHASE
OPTION").
8.1 ACKNOWLEDGMENT AND AGREEMENT. PURCHASER HEREBY FURTHER
ACKNOWLEDGES AND AGREES THAT:
(a) PURCHASER HAS READ AND UNDERSTANDS THE PLAN (INCLUDING
WITHOUT LIMITATION THE PROVISIONS OF SECTION 22 OF THE
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<PAGE> 16
PLAN REGARDING THE GENERAL REPURCHASE OPTION, THE
DEFINITION OF THE "REPURCHASE PERIOD" AND THE PROVISIONS
OF THE PLAN REGARDING THE DETERMINATION OF THE "SHARE
REPURCHASE PRICE" AT WHICH THE SHARES MAY BE PURCHASED
PURSUANT TO THE GENERAL REPURCHASE OPTION);
(b) A COPY OF THE PLAN IS ATTACHED AS EXHIBIT 1 TO THIS
AGREEMENT AND THE PROVISIONS OF THE PLAN (INCLUDING
WITHOUT LIMITATION THE PROVISIONS OF SECTION 22 OF THE
PLAN REGARDING THE GENERAL REPURCHASE OPTION) ARE
INCORPORATED BY REFERENCE IN THIS AGREEMENT AND FORM PART
OF THE PROVISIONS OF THIS AGREEMENT; AND
(c) PURCHASER AND THE SHARES ARE BOUND BY THE GENERAL
REPURCHASE OPTION AND THE PROVISIONS OF THE PLAN
(INCLUDING WITHOUT LIMITATION THE PROVISIONS OF SECTION 22
OF THE PLAN REGARDING THE GENERAL REPURCHASE OPTION).
8.2 GENERAL REPURCHASE OPTION PREVAILS. In case of any
inconsistency or conflict between the Company's attempted exercise of the Right
of First Refusal under Section 9 hereof, and HNC's attempted exercise of the
General Repurchase Option granted under this Section 8 and under Section 22 of
the Plan, the General Repurchase Option shall supersede, govern and prevail and
the Right of First Refusal may not be exercised to the extent it is inconsistent
or in conflict with HNC's rights or ability to exercise the General Repurchase
Option. The exercise by the Company (but not its assignees) of a right of first
refusal that results in the Company's repurchase and reacquisition of Shares at
a time when the General Repurchase Option is not being exercised will not be
deemed inconsistent or in conflict with the General Repurchase Option.
8.3 TERM. The termination of Purchaser's employment with the
Company for any reason shall not terminate the General Repurchase Option and
shall have no effect whatsoever on the General Repurchase Option, which shall
remain in full force and effect in accordance with its terms with respect to any
of the Shares.
8.4 CONSTRUCTION. The parties acknowledge and agree that the
provisions of this Section 6 have been included in this Agreement in order to
carry out the provisions of Section 22 of the Plan regarding HNC's General
Repurchase Option (the "PLAN REPURCHASE OPTION PROVISIONS"). Accordingly, in
case of any conflict or inconsistency between the provisions of this Section 8
and the Plan Repurchase Option Provisions, the provisions of this Section 8
shall be construed and interpreted in a manner consistent with the terms,
conditions, construction and interpretation of the Plan Repurchase Option
Provisions.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Shares that are subject to the
General Repurchase Option ("OPTION SHARES") may not be transferred by Purchaser
without HNC's prior written consent unless the transferee who acquires such
Option Shares first agrees, in a writing that is reasonably satisfactory to HNC
and that is signed by HNC and such transferee, that the General Repurchase
Option and the restrictions and provisions of this sentence shall continue to
apply to and bind all such Option Shares in the hands of such transferee and its
transferees, successors and assigns. As used herein, the term "TRANSFERABLE
SHARES" means Shares that either (i) are not Option Shares, or (ii) are Option
Shares as to which HNC has given Purchaser HNC's prior written consent to
transfer in accordance with the foregoing provisions of this Section. Subject to
the foregoing provisions of this Section and the terms
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<PAGE> 17
and conditions of this Agreement and the Plan, before any Transferable Shares
held by Purchaser or any transferee of such Shares (either being sometimes
referred to herein as the "HOLDER") may be sold or otherwise transferred
(including without limitation a transfer by gift or operation of law), the
Company and/or its assignee(s) shall have a right of first refusal to purchase
the Transferable Shares to be sold or transferred (the "OFFERED SHARES") on the
terms and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
9.1 NOTICE OF PROPOSED TRANSFER. The Holder of the Offered
Shares will deliver to the Company a written notice (the "NOTICE") stating: (i)
the Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed purchaser or other transferee of any
Offered Shares ("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be
transferred to each Proposed Transferee; (iv) the bona fide cash price or other
consideration for which the Holder proposes to transfer the Offered Shares (the
"OFFERED PRICE"); and (v) that the Holder will offer to sell the Offered Shares
to the Company and/or its assignee(s) at the Offered Price as provided in this
Section.
9.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all
(but not less than all) of the Offered Shares proposed to be transferred to any
one or more of the Proposed Transferees named in the Notice, at the purchase
price determined in accordance with subsection (c) below.
9.3 PURCHASE PRICE. The purchase price for the Offered
Shares purchased under this Section will be the Offered Price. If the Offered
Price includes consideration other than cash, then the value of the non-cash
consideration as determined in good faith by the Company's Board of Directors
will conclusively be deemed to be the cash equivalent value of such non-cash
consideration.
9.4 PAYMENT. Payment of the purchase price for Offered
Shares will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case of a
purchase of Offered Shares by such assignee) or by any combination thereof. The
purchase price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 120 days after the date of the
Notice, and provided further, that: (i) any such sale or other transfer is
effected in compliance with all applicable securities laws; and (ii) the
Proposed Transferee agrees in writing that the provisions of this Section will
continue to apply to the Offered Shares in the hands of such Proposed
Transferee. If the Offered Shares described in the Notice are not transferred to
the Proposed Transferee within such 120 day period, then a new Notice must be
given to the Company, and the Company will again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
9.6 EXEMPT TRANSFERS. Notwithstanding anything to the
contrary in this Section, the following transfers of Shares will be exempt from
the Right of First Refusal: (i) the transfer of any or all of the Shares during
Purchaser's lifetime by gift or on Purchaser's death by will or intestacy to
Purchaser's "immediate family" (as defined below) or to a trust for the benefit
of Purchaser or Purchaser's immediate family, provided that each transferee or
other recipient agrees in a writing satisfactory to the Company and HNC that the
General Repurchase Option set forth in Section 8 (if such
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<PAGE> 18
General Repurchase Option has not expired by its terms) and the provisions of
this Section will continue to apply to the transferred Shares in the hands of
such transferee or other recipient; (ii) any transfer of Shares made pursuant to
a statutory merger or statutory consolidation of the Company with or into
another corporation or corporations (except that the Right of First Refusal will
continue to apply thereafter to such Shares, in which case the surviving
corporation of such merger or consolidation shall succeed to the rights or the
Company under this Section unless the agreement of merger or consolidation
expressly otherwise provides); or (iii) any transfer of Shares pursuant to the
winding up and dissolution of the Company. As used herein, the term "IMMEDIATE
FAMILY" will mean Purchaser's spouse, lineal descendant or antecedent, father,
mother, brother or sister, adopted child or grandchild, or the spouse of any
child, adopted child, grandchild or adopted grandchild of Purchaser.
9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of
First Refusal will terminate as to all Shares on the effective date of the first
sale of Common Stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the SEC under the
1933 Act (other than a registration statement relating solely to the issuance of
Common Stock pursuant to a business combination or an employee incentive or
benefit plan).
9.8 ENCUMBRANCES ON TRANSFERABLE SHARES. Purchaser may grant
a lien or security interest in, or pledge, hypothecate or encumber Transferable
Shares only with the prior written consent of the Company and (if the General
Repurchase Option has not terminated) HNC, and only if each party to whom such
lien or security interest is granted, or to whom such pledge, hypothecation or
other encumbrance is made, agrees in a writing satisfactory to the Company and
(so long as the General Repurchase Option has not terminated) HNC that (i) such
lien, security interest, pledge, hypothecation or encumbrance will not apply to
such Transferable Shares after they are acquired by the Company and/or its
assignees pursuant to the Right of First Refusal set forth in this Section or by
HNC pursuant to the General Repurchase Option set forth in Section 8; and (ii)
the provisions of this Section 9 will continue to apply to such Transferable
Shares in the hands of such party and any transferee of such party. Purchaser
may not grant a lien or security interest in, or pledge, hypothecate or
encumber, any Shares that are not Transferable Shares.
10. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of
this Agreement and the Plan, Purchaser will have all of the rights of a
shareholder of the Company with respect to the Shares from and after the date
that Purchaser delivers payment of the Exercise Price to the Company until such
time as Purchaser disposes of the Shares or the Company and/or its assignee(s)
or HNC exercise(s) the General Repurchase Option or the Right of First Refusal
with respect to such Shares. Upon an exercise of the General Repurchase Option
or the Right of First Refusal, Purchaser will have no further rights as a holder
of the Shares so purchased upon such exercise, except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement and the Plan, and Purchaser will promptly surrender the stock
certificate(s) evidencing the Shares so purchased to the Company or HNC, as
applicable, for transfer or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of
this Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if
married (with the date and number of Shares left blank), to the Secretary of the
Company or other designee of the Company ("ESCROW HOLDER"), who is hereby
appointed to hold such certificate(s) and Stock Powers in escrow and to take all
such actions and to effectuate all such transfers and/or releases of such Shares
as are in accordance with the terms of this Agreement. Purchaser and the Company
agree that Escrow Holder will not be liable to any party to this Exercise
Agreement (or to any other party) for any actions or omissions unless Escrow
Holder is grossly negligent or intentionally fraudulent in carrying
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<PAGE> 19
out the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may
rely upon any letter, notice or other document executed by any signature
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Agreement.
The Shares will be released from escrow only upon termination of both the
General Repurchase Option and the Right of First Refusal provided that Shares
shall be released from escrow to HNC (or its successors or assigns) upon
exercise of the General Repurchase Option.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
12.1 LEGENDS. Purchaser understands and agrees that the
Company will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or federal securities laws, the Company's Articles of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party (including without
limitations HNC):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE AND TRANSFER, A REPURCHASE OPTION
HELD BY HNC SOFTWARE INC. ("HNC") AND A RIGHT OF FIRST REFUSAL
OPTION HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A
STOCK OPTION EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL
HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE AND TRANSFER
RESTRICTIONS, REPURCHASE OPTION AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
12.2 STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, to
ensure compliance with the restrictions imposed by this Agreement, the Company
may issue appropriate "stop-transfer"
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<PAGE> 20
instructions to its transfer agent, if any, and if the Company transfers its own
securities, it may make appropriate notations to the same effect in its own
records.
12.3 REFUSAL TO TRANSFER. The Company will not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Shares, or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such Shares have been so
transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY
SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR
DISPOSITION OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED
WITH ANY TAX ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE
OR DISPOSITION OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF THE SHARES ARE SUBJECT TO REPURCHASE BY
THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH PURCHASER'S
TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b) ELECTION WITH THE
INTERNAL REVENUE SERVICE.
Set forth below is a brief summary as of the date of this Exercise Agreement of
some of the federal and California tax consequences of exercise of the Option
and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT A TAX
ADVISER BEFORE EXECUTING THIS OPTION OR DISPOSING OF THE SHARES.
13.1 EXERCISE OF INCENTIVE STOCK OPTION. If the Option
qualifies as an incentive stock option, there will be no regular federal income
tax liability or California income tax liability upon the exercise of the
Option, although the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price will be treated as a tax preference
item for federal income tax purposes and may subject Purchaser to the
alternative minimum tax in the year of exercise.
13.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option
does not qualify as an incentive stock option, there may be a regular federal
income tax liability and a California income tax liability upon the exercise of
the Option. Purchaser will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. The
Company will be required to withhold from Purchaser's compensation or collect
from Purchaser and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
13.3 DISPOSITION OF SHARES. If the Shares are held for more
than twelve (12) months after the date of acquisition of the Shares pursuant to
the exercise of the Option and, in the case of an ISO, are disposed of more than
two years after the Date of Grant, any gain realized on disposition of the
Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within the
applicable one year or two year period, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price. The Company may be required to withhold
from Purchaser's compensation or collect from Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
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<PAGE> 21
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer
of the Shares will be subject to and conditioned upon compliance by the Company
and Purchaser with all applicable state and federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the time
of such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement, including its rights to repurchase Shares under the
Right of First Refusal. Such rights may be assigned, without limitation, to HNC.
This Agreement will be binding upon and inure to the benefit of the successors
and assigns of the Company and (to the extent applicable), HNC. Subject to the
restrictions on transfer herein set forth, this Agreement will be binding upon
Purchaser and Purchaser's heirs, executors, administrators, successors and
assigns. HNC's rights under the General Repurchase Option may be assigned to any
corporation with whom HNC is merged or consolidated with or into in any
consolidation, merger or similar business combination or to whom HNC sells or
transfers all or substantially all its assets.
16. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within California. If any provision of this
Agreement is determined by a court of law to be illegal or unenforceable, then
such provision will be enforced to the maximum extent possible and the other
provisions will remain fully effective and enforceable.
17. AMENDMENT; WAIVER. This Agreement may be amended and modified
only by a writing executed by the Company and Purchaser; provided, however, that
no provision of this Agreement affecting (or potentially affecting) the General
Repurchase Option or any other rights (or potential rights) of HNC hereunder in
any manner may be amended or modified in any respect without the prior written
consent of HNC, which may be withheld in HNC's sole discretion. No rights of the
Company, Purchaser or HNC may be waived except by a writing executed by the
party against whom such waiver is asserted.
18. HNC THIRD PARTY BENEFICIARY STATUS. The parties acknowledge
and agree that the provisions of this Agreement are being made for the benefit
of HNC and that HNC is an intended third party beneficiary of this Agreement,
entitled to enforce all the terms and conditions of this Agreement (including
but not limited to the provisions of Section 8, Section 9, Section 17, this
Section 18 and any other provisions related thereto) against the Company and
Purchaser and their respective successors and assigns, to the same extent that
HNC could if HNC were a party and signatory to this Agreement.
19. NOTICES. Any notice required to be given or delivered to the
Company shall be in writing and addressed to the Corporate Secretary of the
Company at its principal corporate offices. Any notice required to be given or
delivered to Purchaser shall be in writing and addressed to Purchaser at the
address indicated above or to such other address as Purchaser may designate in
writing from time to time to the Company. All notices shall be deemed
effectively given upon personal delivery, three (3) days after deposit in the
United States mail by certified or registered mail (return receipt requested),
one (1) business day after its deposit with any return receipt express courier
(prepaid), or one (1) business day after transmission by rapifax or telecopier.
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<PAGE> 22
20. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
21. HEADINGS. The captions and headings of this Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
22. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all its Exhibits, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Agreement, and supersede all prior understandings and agreements, whether
oral or written, between the parties hereto with respect to the specific subject
matter hereof.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 23
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Purchaser has
executed this Agreement in duplicate as of the Effective Date.
COMPANY PURCHASER
Aptex Software Inc.
By:
------------------------------- -----------------------------------------
(Signature)
- ---------------------------------- -----------------------------------------
(Please print Name) (Please print name)
- ---------------------------------- -----------------------------------------
(Please print title) (Please print title)
[SIGNATURE PAGE TO APTEX SOFTWARE INC.
STOCK OPTION EXERCISE AGREEMENT]
-23-
<PAGE> 24
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check or Other Evidence of Payment
<PAGE> 25
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
<PAGE> 26
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option
Exercise Agreement No. ___ dated as of _______________, ____ (the "Agreement"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, _______ shares of the Common Stock of Aptex
Software Inc., a California corporation (the "Company"), standing in the
undersigned's name on the books of the Company represented by Certificate No(s).
______ delivered herewith, and does hereby irrevocably constitute and appoint
the Secretary of the Company as the undersigned's attorney-in-fact, with full
power of substitution, to transfer said stock on the books of the Company. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS
THERETO AND THE COMPANY'S 1996 EQUITY INCENTIVE PLAN.
Dated: _______________, ______
<TABLE>
<S> <C>
PURCHASER
-----------------------------------------
(Signature)
-----------------------------------------
(Please Print Name)
-----------------------------------------
(Spouse's Signature, if married)
-----------------------------------------
(Please Print Spouse's Name)
</TABLE>
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company and/or
its assignee(s) to acquire the shares upon exercise of its "Right of First
Refusal" set forth in the Agreement or to enable HNC Software Inc. to acquire
the shares upon exercise of its "General Repurchase Option" set forth in the
Agreement, without requiring additional signatures on the part of the Purchaser
or Purchaser's Spouse.
<PAGE> 27
EXHIBIT 2
SPOUSE CONSENT
<PAGE> 28
SPOUSE CONSENT
I, the undersigned, ________________, am the spouse of
___________________ ("PURCHASER"). I have read, understood, and hereby approve
the Stock Option Exercise Agreement between Purchaser and the Company (the
"AGREEMENT").
In consideration of the Company granting my spouse, the
Purchaser, the right to purchase the Shares under the Agreement, I hereby agree
with the Company and its successors and assigns, and with HNC Software Inc., and
its successors and assigns, to be irrevocably bound by all the terms and
conditions of the Agreement (including, but not limited to the General
Repurchase Option, the Right of First Refusal and the market standoff agreements
contained therein) and further agree that any community property interest or
other interest I may have in or to the Shares will be irrevocably bound by the
Agreement.
I hereby appoint Purchaser as my attorney-in-fact, to act in my
name, place and stead with respect to any amendment of the Agreement or any
actions in connection therewith.
<TABLE>
<S> <C>
Date:
----------------------------- -----------------------------------------
Signature of Purchaser's Spouse
Address:
---------------------------------
---------------------------------
</TABLE>
<PAGE> 29
EXHIBIT 3
COPY OF PURCHASER'S CHECK OR OTHER EVIDENCE OF PAYMENT
<PAGE> 1
EXHIBIT 5.01
February 5, 1999
HNC Software Inc.
5930 Carnerstone Court West
San Diego, CA 92121-3728
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-8
(the "Registration Statement") filed by you with the Securities and Exchange
Commission (the "Commission") on or about February 5, 1999 in connection with
the registration under the Securities Act of 1933, as amended, of:
(i) an aggregate of 700,000 additional shares of the Common Stock,
$0.001 par value (the "Common Stock") of HNC Software Inc, a
Delaware corporation (the "Company"), subject to issuance by the
Company under its 1995 Equity Incentive Plan, as amended through
November 20, 1998 (the "HNC Plan"); and
(ii) 400,532 shares of the Company's Common Stock which are issuable
upon the exercise of options originally granted by Aptex Software
Inc., a formerly existing California corporation and subsidiary
of the Company ("Aptex"), under the Aptex 1996 Equity Incentive
Plan adopted effective September 5, 1996 (the "Aptex Plan") that
have been assumed by the Company and converted into options to
purchase shares of the Company's Common Stock (the "Assumed
Options") pursuant to the Plan of Merger adopted by the Boards of
Directors of both Aptex and the Company as of December 21, 1998
(the "Merger Plan").
In rendering this opinion, we have examined the following:
(1) your registration statement on Form S-1 (File Number 33-91932)
filed with and declared effective by the Commission on June 20,
1995, together with the Exhibits filed as a part thereof;
(2) your registration statement on Form 8-A filed with the Commission
on May 26, 1995, together with the order of effectiveness issued
by the Commission therefor on June 20, 1995;
(3) the Registration Statement, together with the Exhibits filed as a
part thereof;
(4) the Prospectuses prepared in connection with the Registration
Statement;
<PAGE> 2
February 5, 1999
Page 2
(5) the Nasdaq National Market Listing of Additional Shares
Notifications prepared in connection with the Registration
Statement;
(6) the HNC Plan and related award grant and exercise agreement
forms;
(7) the Aptex Plan and related award grant and exercise agreement
forms;
(8) the Merger Plan;
(9) the Restated Certificate of Incorporation of the Company filed
with the Delaware Secretary of State on June 13, 1996 and the
Bylaws of the Company, both as filed by the Company with its
Report on Form 10-Q for the quarter ended June 30, 1996;
(10) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors of the Company that are
contained in your minute books that are in our possession;
(11) A certificate from your transfer agent Boston Equiserve dated of
even date herewith, verifying the number of your issued and
outstanding shares of capital stock as of the date hereof and a
list of outstanding options to purchase shares of the Company's
capital stock that was prepared by you and dated February 5, 1999
verifying the number of such issued and outstanding securities;
and
(12) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and
other representations.
We have also have confirmed your eligibility to use Form S-8 by
telephone call to the offices of the Commission.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and the completeness of all documents
submitted to us as originals, the conformity to originals and completeness of
all documents submitted to us as copies, the legal capacity of all natural
persons executing the same, the lack of any undisclosed termination,
modification, waiver or amendment to any document reviewed by us and the due
authorization, execution and delivery of all documents where due authorization,
execution and delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely
upon our examination of the documents referred to above and have assumed the
current accuracy and completeness of the information obtained from public
officials and records referred to above. We have made no independent
investigation or other attempt to verify the accuracy of any of such information
or to determine the existence or non-existence of any other factual matters;
however, we are not aware of any facts that would cause us to believe that the
opinion expressed herein is not accurate.
We are admitted to practice law in the State of California, and we
express no opinion herein with respect to the application or effect of the laws
of any jurisdiction other than the
<PAGE> 3
February 5, 1999
Page 3
existing laws of the United States of America and the State of California and
(without reference to any case law or secondary sources) the existing Delaware
General Corporation Law.
In connection with our opinion expressed below, we have assumed that, at
or prior to the time of the delivery of any shares of Stock, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, that the registration will apply to such shares of Stock and will not
have been modified or rescinded or been made subject to any Commission stop
order and that there will not have occurred any change in law affecting the
validity or enforceability of such shares of Stock.
Our opinion in paragraph (i) below is given on the assumption that the
700,000 shares of Common Stock of the Company referred to in such paragraph may
not be issued and sold by the Company in accordance with the HNC Plan unless and
until such shares, at the time in question, are (a) explicitly reserved and
available for issuance under the HNC Plan or (b) become issuable under the HNC
Plan in the future by virtue of the terms of Section 2.1 of the HNC Plan, which
provide that certain shares issuable upon exercise of stock options granted
under the Prior Plan (as the term is defined in the HNC Plan) that expire or
become unexercisable without having been exercised are available for grant and
issuance under the HNC Plan.
Based upon the foregoing, it is our opinion that:
(i) the 700,000 additional shares of Common Stock that may be issued
and sold by you upon the exercise of stock options, the purchase
of restricted stock or awards of stock bonuses awarded or to be
awarded under the HNC Plan, when issued and sold in accordance
with the HNC Plan and the stock option, restricted stock purchase
agreement or stock bonus agreements to be entered into
thereunder, and in the manner referred to in the relevant
Prospectus associated with the HNC Plan and the Registration
Statement, will be validly issued, fully paid and nonassessable;
and
(ii) The 400,532 shares of Common Stock that may be issued and sold by
the Company pursuant to exercise of the Assumed Options, when
issued and sold in the manner referred to in the Prospectus
associated with the Assumed Options and the Registration
Statement and in accordance with the Aptex Plan pursuant to which
the Assumed Options were granted, will be validly issued, fully
paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
<PAGE> 4
February 5, 1999
Page 4
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof. This
opinion is intended solely for your use as an exhibit to the Registration
Statement for the purpose of the above sale of the Stock and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 29, 1998, except as to Note 11
which is as of February 13, 1998, appearing on page 36 of HNC Software Inc.'s
Annual Report on Form 10-K/A-1 for the year ended December 31, 1997. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 62 of such Annual Report on Form
10-K/A-1.
PRICEWATERHOUSECOOPERS LLP
San Diego, California
February 5, 1999
<PAGE> 1
EXHIBIT 99.01
INDUSTRIAL LEASE
(SINGLE TENANT; NET)
THIS LEASE is made as of the 2nd day of October, 1998, by and between
THE IRVINE COMPANY, a Delaware corporation, hereafter called "Landlord," and HNC
SOFTWARE INC., a Delaware corporation, hereinafter called "Tenant."
ARTICLE I. BASIC LEASE PROVISIONS
Each reference in this Lease to the "Basic Lease Provisions" shall mean
and refer to the following collective terms, the application of which shall be
governed by the provisions in the remaining Articles of this Lease.
1. Premises: The Premises are more particularly described in Section 2.1.
Address of Building: 110 Theory, Irvine, CA 92612
2. Project Description (if applicable): University Research Park
3. Use of Premises: General office, administration, sales, training and
development of computer software and computer related projects but in no
event shall tenant engage in retail sales of services or products from
the Premises.
4. Estimated Commencement Date: January 22, 1999
5. Lease Term: Eighty-four (84) months, plus such additional days as may be
required to cause this Lease to terminate on the final day of the
calendar month.
6. Basic Rent: Ninety-One Thousand Nine Hundred Forty-Seven Dollars
($91,947.00) per month, based on $1.45 per rentable square foot.
Basic Rent is subject to adjustment as follows:
Commencing twelve (12) months following the Commencement Date, the Basic
Rent shall be Ninety-Five Thousand One Hundred Eighteen Dollars
($95,118.00) per month, based on $1.50 per rentable square foot.
Commencing twenty-four (24) months following the Commencement Date, the
Basic Rent shall be Ninety-Eight Thousand Two Hundred Eighty-Nine
Dollars ($98,289.00) per month, based on $1.55 per rentable square foot.
Commencing thirty-six (36) months following the Commencement Date, the
Basic Rent shall be One Hundred Two Thousand Ninety-Three Dollars
($102,093.00) per month, based on $1.61 per rentable square foot.
Commencing forty-eight (48) months following the Commencement Date, the
Basic Rent shall be One Hundred Five Thousand Two Hundred Sixty-Four
Dollars ($105,264.00) per month, based on $1.66 per rentable square
foot.
Commencing sixty (60) months following the Commencement Date, the Basic
Rent shall be One Hundred Nine Thousand Sixty-Nine Dollars ($109,069.00)
per month, based on $1.72 per rentable square foot.
Commencing seventy-two (72) months following the Commencement Date, the
Basic Rent shall be One Hundred Twelve Thousand Eight Hundred
Seventy-Three Dollars ($112,873.00) per month, based on $1.78 per
rentable square feet.
7. Guarantor(s): N/A
8. Floor Area of Premises: approximately 63,412 rentable square feet
9. Security Deposit: $124,160.00
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10. Broker(s): CB Richard Ellis
11. Additional Insureds: Insignia\ESG of California, Inc.
12. Address for Payments and Notices:
<TABLE>
<CAPTION>
LANDLORD TENANT
<S> <C> <C>
INSIGNIA\ESG OF CALIFORNIA, INC. HNC SOFTWARE INC.
One Technology Drive, Suite F-207 110 Theory
Irvine, CA 92618 Irvine, CA 92612
with a copy of notices to: with a copy of notices to:
IRVINE INDUSTRIAL COMPANY HNC Software Inc.
P.O. Box 6370 5930 Cornerstone Court West
Newport Beach, CA 92658-6370 San Diego, CA 92121
Attn: Vice President, Industrial Attn: Chief Financial Officer
Operations
</TABLE>
13. Tenant's Liability Insurance Requirement: $2,000,000.00
14. Vehicle Parking Spaces: Two Hundred Thirty-Four (234)
15. Plan Approval Date: August 31, 1998
16. Tenant understands and acknowledges that a material consideration for
Landlord's entering into this Lease is the nature of Tenant's business
and the mutual benefits to be derived as a result of Tenant's business
operating in a project located proximate to the University of California
at Irvine (the "University"). Accordingly, in the event of any proposed
assignment or sublease, in addition to all the provisions of Section
9.1(b) of this Lease, Landlord may reasonably withhold its consent to
any such proposed assignment or sublease if Landlord determines in its
sole and absolute discretion that the proposed use of the Premises by
such assignee, sublessee or transferee will not derive mutual benefits
by operating in a project located proximate to the University.
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<PAGE> 3
ARTICLE II. PREMISES
SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant
leases from Landlord the premises shown in Exhibit A (the "Premises"), including
the building identified in Item 1 of the Basic Lease Provisions (which together
with the underlying real property, is called the "Building"), and containing
approximately the floor area set forth in Item 8 of the Basic Lease Provisions.
The Premises is a portion of the project shown in Exhibit Y (the "Project").
SECTION 2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that neither
Landlord nor any representative of Landlord has made any representation or
warranty with respect to the Premises or the Building or the suitability or
fitness of either for any purpose, including without limitation any
representations or warranties regarding zoning or other land use matters, and
that neither Landlord nor any representative of Landlord has made any
representations or warranties regarding (i) what other tenants or uses may be
permitted or intended in the Building and the Project, or (ii) any exclusivity
of use by Tenant with respect to its permitted use of the Premises as set forth
in Item 3 of the Basic Lease Provisions. Tenant further acknowledges that
neither Landlord nor any representative of Landlord has agreed to undertake any
alterations or additions or construct any improvements to the Premises except as
expressly provided in this Lease. The taking of possession or use of the
Premises by Tenant for any purpose other than construction shall conclusively
establish that the Premises and the Building were in satisfactory condition and
in conformity with the provisions of this Lease in all respects, except for
those matters which Tenant shall have brought to Landlord's attention on a
written punch list. The list shall be limited to any items required to be
accomplished by Landlord under the Work Letter attached as Exhibit X, and shall
be delivered to Landlord within thirty (30) days after the term ("Term") of this
Lease commences as provided in Article III below. If no items are required of
Landlord under the Work Letter, by taking possession of the Premises Tenant
accepts the improvements in their existing condition, and waives any right or
claim against Landlord arising out of the condition of the Premises. Nothing
contained in this Section shall affect the commencement of the Term or the
obligation of Tenant to pay rent. Landlord shall diligently complete all punch
list items of which it is notified as provided above as soon as reasonably
possible.
SECTION 2.3. BUILDING NAME AND ADDRESS. Tenant shall not utilize any
name selected by Landlord from time to time for the Building and/or the Project
as any part of Tenant's corporate or trade name. Landlord shall have the right
to change the name, address, number or designation of the Building or Project
without liability to Tenant.
SECTION 2.4. LANDLORD'S RESPONSIBILITIES.
(a) Landlord warrants to Tenant that all Building systems
including but not limited to mechanical, electrical, plumbing, heating,
ventilating and air conditioning and life-fire safety shall be new and in good
working order as of the Commencement Date and shall be free from defects in
workmanship or materials for a period of twelve (12) months from the
Commencement Date. Landlord shall promptly rectify any non-compliance at its
sole cost and expense and not as a Project Cost after receipt of written notice
from Tenant within such time setting forth the nature and extent of any such
non-compliance.
(b) In connection with the completion of the Tenant Improvements
pursuant to the Work Letter, Landlord shall obtain customary warranties and
guaranties from the contractor(s) performing such work and/or the manufacturers
of equipment installed but shall be under no obligation to incur additional
expense in order to obtain or extend such warranties. If after expiration of the
initial twelve (12) months of the Lease Term, Tenant is required to make repairs
to any component of the Premises or any of its systems for which Landlord may
have obtained a warranty, Landlord shall, upon request by Tenant, use its good
faith efforts to pursue its rights under any such warranties for the benefit of
Tenant. Landlord shall be under no obligation to incur any expense in connection
with asserting rights under such warranties or guaranties against either the
contractor or the manufacturer, but shall use reasonable good faith efforts to
enforce such warranties and guaranties for Tenant's benefit.
SECTION 2.5. RIGHT OF FIRST REFUSAL. Provided Tenant is not then in
default of any material covenant of this Lease (including, without limitation,
the obligation to pay Basic Rent and/or Operating Expenses) after the expiration
of the applicable cure period, and provided further that Landlord has not
previously entered into a lease for such space prior to the execution of this
Lease, Landlord hereby grants Tenant the one time right ("First Right") to lease
space in Landlord's adjacent building at 100 Theory, Irvine California which is
depicted on Exhibit A-1 hereto ("First Right Space") in accordance with and
subject to the provisions of this Section 2.5. At any time after the date of
this Lease, but prior to leasing the First Right Space, or any portion thereof,
to any third party, if Landlord has reached a tentative agreement (which may be
a nonbinding, tentative agreement) to lease any of the First Right Space to a
third party, Landlord shall give Tenant written notice describing the space (the
"Designated First Right Space") and the basic economic terms including but not
limited to the Basic Rent, term, operating expense base, if any, and tenant
improvement allowance (collectively, the "Economic Terms"), tentatively agreed
upon for such lease, provided that the Economic Terms shall exclude brokerage
commissions and other Landlord payments that do not directly inure to the
tenant's benefit. It is understood that should Landlord intend to lease other
space in addition to the First Right Space as part of a single transaction, then
Landlord's notice shall so provide and all such space shall collectively be
subject to the following provisions. Within five (5) business days after receipt
of Landlord's notice, Tenant must give Landlord written notice pursuant to which
Tenant shall elect to (i) lease all, but not less than all, of the Designated
First Right upon such Economic Terms and the same non-Economic Terms as set
forth in this Lease; (ii) refuse to lease the Designated Space, specifying that
such refusal is not based upon the Economic Terms, but upon Tenant's lack of
need for the Designated Space, in which event Tenant's First Right as to the
Designated First Right Space shall be terminated and of no further force and
effect and Landlord may lease the
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<PAGE> 4
Designated First Right Space upon any terms it deems appropriate; or (iii)
refuse to lease the Designated Space, specifying that such refusal is based upon
said Economic Terms, in which event Tenant shall also specify revised Economic
Terms upon which Tenant shall be willing to lease the Designated First Right
Space. In the event that Tenant does not so respond in writing to Landlord's
notice within said period, Tenant shall be deemed to have elected clause (ii)
above. In the event Tenant gives Landlord notice pursuant to clause (iii) above,
Landlord may elect to either (x) lease the Designated First Right Space to
Tenant upon such revised Economic Terms and the same other non-Economic Terms as
set forth in this Lease, or (y) lease the Designated First Right Space to any
third party upon Economic Terms which are not materially more favorable to such
party than those Economic Terms proposed by Tenant. Should Landlord so elect to
lease the Designated First Right Space to Tenant, then Landlord shall promptly
prepare and deliver to Tenant an amendment to this Lease consistent with the
foregoing, and Tenant shall execute and return same to Landlord within ten (10)
business days. Tenant's failure to timely return the amendment shall entitle
Landlord to specifically enforce Tenant's commitment to lease the Designated
First Right Space, to lease such space to a third party, and/or to pursue any
other available legal remedy.
Tenant's rights under this Section 2.5 shall belong solely to HNC
Software Inc., a Delaware corporation, and may not be assigned or transferred.
Any attempted assignment or transfer of such rights shall be void and of no
force or effect.
ARTICLE III. TERM
SECTION 3.1. GENERAL. The Term shall be for the period shown in Item 5
of the Basic Lease Provisions. Subject to the provisions of Section 3.2 below,
the Term shall commence ("Commencement Date") on the earlier of (a) the date
upon which all relevant governmental authorities have approved the Tenant
Improvements in accordance with applicable building codes, as evidenced by
written approval thereof in accordance with the building permits issued for the
Tenant Improvements or issuance of a temporary or final certificate of occupancy
for the Premises, or (b) the date Tenant commences use of the Premises for any
purpose other than construction of Tenant Improvements by Tenant under the Work
Letter. Within ten (10) days after possession of the Premises is tendered to
Tenant, the parties shall memorialize on a form provided by Landlord the actual
Commencement Date and the expiration date ("Expiration Date") of this Lease.
Tenant's failure to execute that form shall not affect the validity of
Landlord's determination of those dates.
SECTION 3.2. DELAY IN POSSESSION. If Landlord cannot deliver possession
of the Premises to Tenant on or before the Estimated Commencement Date, this
Lease shall not be void or voidable nor shall Landlord be liable to Tenant for
any resulting loss or damage. However, Tenant shall not be liable for any rent
and the Commencement Date shall not occur until Landlord delivers possession of
the Premises and the Premises are in fact available for Tenant's occupancy with
any Tenant Improvements that have been approved as per Section 3.1(a) above,
except that if Landlord's failure to so deliver possession on the Estimated
Commencement Date is attributable to any action or inaction by Tenant (including
without limitation any Tenant Delay described in the Work Letter, if any,
attached to this Lease), then the Commencement Date shall not be advanced to the
date on which possession of the Premises is tendered to Tenant, and Landlord
shall be entitled to full performance by Tenant (including the payment of rent)
from the date Landlord would have been able to deliver the Premises to Tenant
but for Tenant's delay(s). Notwithstanding anything to the contrary contained in
this Section 3.2, however, if for any reason other than "Tenant Delays" (as
defined in the Work Letter) or other matters beyond Landlord's reasonable
control, the Commencement Date has not occurred by the date that is one hundred
eighty (180) days following the Estimated Commencement Date, then Tenant may, by
written notice to Landlord given at any time thereafter but prior to the actual
occurrence of the Commencement Date, elect to terminate this Lease.
Notwithstanding the foregoing, if at any time during the construction period,
Landlord reasonably believes that the Commencement Date will not occur on or
before to hundred ten (210) days following the Estimated Commencement Date,
Landlord shall notify Tenant in writing of such fact and of a new outside date
on or before which the Commencement Date will occur, and Tenant must elect
within ten (10) days of receipt of such notice to either terminate this Lease or
waive its right to terminate this Lease provided the Commencement Date occurs on
or prior to the new outside date established by Landlord in such notice to
Tenant. Tenant's failure to elect to terminate this Lease within such ten (10)
day period shall be deemed Tenant's waiver of its right to terminate this Lease
as provided in this paragraph as to the previous outside date, but not as to the
new outside date established by said notice.
SECTION 3.3. RIGHT TO EXTEND THIS LEASE. Provided that both at the time
of exercise of the extension right granted herein and at the time of the
commencement of such extension: (i) Tenant is not in material default under any
provision of this Lease after the applicable cure period and (ii) Tenant is
occupying not less than seventy-five percent (75%) of the rentable area of the
Premises, Tenant may extend the Term of this Lease as to the entire Premises for
one (1) period of sixty (60) months subject to Landlord's determination that
Tenant's continued use of the Premises during the extended term would to provide
further benefit to the University (the "University Community Contingency").
Tenant shall exercise its right to extend the Term by and only by delivering to
Landlord, not less than nine (9) months or more than twelve (12) months prior to
the expiration date of the Term, Tenant's irrevocable written notice of its
commitment to extend (the "Commitment Notice"). Within thirty (30) days after
receipt of Tenant's Commitment Notice, Landlord shall provide written notice to
Tenant if, in Landlord's sole determination, Tenant's presence in the Project
would satisfy the University Community Contingency and, if so, the Commitment
Notice shall be accepted. If Tenant does not satisfy the University Community
Contingency, Landlord's written notice shall advise Tenant that the Commitment
Notice has been rejected and the Lease shall
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terminate upon expiration of the Term. The Basic Rent payable under the Lease
during any extension of the Term shall be at the fair market rental, including
subsequent adjustments, for comparable industrial space being leased by Landlord
in the Project. In the event that the parties are not able to agree on the fair
market rental within one hundred twenty (120) days prior to the expiration date
of the Term, then either party may elect, by written notice to the other party,
to cause said rental, including subsequent adjustments, to be determined by
appraisal as follows.
Within ten (10) days following receipt of such appraisal
election, the parties shall attempt to agree on an appraiser to determine the
fair market rental. If the parties are unable to agree in that time, then each
party shall designate an appraiser within ten (10) days thereafter. Should
either party fail to so designate an appraiser within that time, then the
appraiser designated by the other party shall determine the fair rental value.
Should each of the parties timely designate an appraiser, then the two
appraisers so designated shall appoint a third appraiser who shall, acting
alone, determine the fair rental value of the Premises. Any appraiser designated
hereunder shall have an M.A.I. certification with not less than five (5) years
experience in the valuation of commercial industrial buildings in Orange County,
California.
Within thirty (30) days following the selection of the appraiser,
such appraiser shall determine the fair market rental value, including
subsequent adjustments of the Premises. In determining such value, the appraiser
shall first consider rental comparables for the Project, provided that if
adequate comparables do not exist then the appraiser may consider transactions
involving similarly improved space in the Irvine Spectrum area with appropriate
adjustments for differences in location and quality of project. In no event
shall the appraiser attribute factors for market tenant improvement allowances
or brokerage commissions to reduce said fair market rental. The fees of the
appraiser(s) shall be shared equally by both parties.
Within twenty (20) days after the determination of the fair
market rental, Landlord shall prepare a reasonably appropriate amendment to this
Lease for the extension period and Tenant shall execute and return same to
Landlord within ten (10) days. Should the fair market rental not be established
by the commencement of the extension period, then Tenant shall continue paying
rent at the rate in effect during the last month of the initial Term, and a lump
sum adjustment shall be made promptly upon the determination of such new rental.
If Tenant fails to timely comply with any of the provisions of
this paragraph, Tenant's right to extend the Term shall be extinguished and the
Lease shall automatically terminate as of the expiration date of the Term,
without any extension and without any liability to Landlord. Any attempt to
assign or transfer any right or interest created by this paragraph shall be void
from its inception. Tenant shall have no other right to extend the Term beyond
the single sixty (60) month extension created by this paragraph. Unless agreed
to in a writing signed by Landlord and Tenant, any extension of the Term,
whether created by an amendment to this Lease or by a holdover of the Premises
by Tenant, or otherwise, shall be deemed a part of, and not in addition to, any
duly exercised extension period permitted by this paragraph.
ARTICLE IV. RENT AND OPERATING EXPENSES
SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant
shall pay to Landlord without deduction or offset, Basic Rent for the Premises
in the total amount shown (including subsequent adjustments, if any) in Item 6
of the Basic Lease Provisions. Any rental adjustment shown in Item 6 shall be
deemed to occur on the specified monthly anniversary of the Commencement Date,
whether or not that date occurs at the end of a calendar month. The rent shall
be due and payable in advance commencing on the Commencement Date (as prorated
for any partial month) and continuing thereafter on the first day of each
successive calendar month of the Term. No demand, notice or invoice shall be
required for the payment of Basic Rent. An installment of rent in the amount of
one (1) full month's Basic Rent at the initial rate specified in Item 6 of the
Basic Lease Provisions shall be delivered to Landlord concurrently with Tenant's
execution of this Lease and shall be applied against the Basic Rent first due
hereunder.
SECTION 4.2. OPERATING EXPENSES.
(a) Tenant shall pay to Landlord, as additional rent, "Building
Costs" and "Property Taxes," as those terms are defined below, incurred by
Landlord in the operation of the Building and Project. For convenience of
reference, Property Taxes and Building Costs shall be referred to collectively
as "Operating Expenses".
(b) Commencing prior to the start of the first full "Expense
Recovery Period" (as defined below) of the Lease, and prior to the start of each
full or partial Expense Recovery Period thereafter, Landlord shall give Tenant a
written estimate of the amount of Operating Expenses for the Expense Recovery
Period. Tenant shall pay the estimated amounts to Landlord in equal monthly
installments, in advance, with Basic Rent. If Landlord has not furnished its
written estimate for any Expense Recovery Period by the time set forth above,
Tenant shall continue to pay cost reimbursements at the rates established for
the prior Expense Recovery Period, if any; provided that when the new estimate
is delivered to Tenant, Tenant shall, at the next monthly payment date which is
at least ten (10) days after written notice is delivered to Tenant, pay any
accrued cost reimbursements based upon the new estimate. For purposes hereof,
"Expense Recovery Period" shall mean every twelve month period during the Term
(or portion thereof for the first and last lease years) commencing July 1 and
ending June 30.
(c) Within one hundred twenty (120) days after the end of each
Expense Recovery Period, Landlord shall furnish to Tenant a statement showing in
reasonable detail the actual or prorated Operating Expenses incurred by Landlord
during the period, and the parties shall within thirty (30) days thereafter make
any payment or
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allowance necessary to adjust Tenant's estimated payments, if any, to Tenant's
actual owed amounts as shown by the annual statement. Any delay or failure by
Landlord in delivering any statement hereunder shall not constitute a waiver of
Landlord's right to require Tenant to pay Operating Expenses pursuant hereto.
Any amount due Tenant shall be credited against installments next coming due
under this Section 4.2, and any deficiency shall be paid by Tenant together with
the next installment. If Tenant has not made estimated payments during the
Expense Recovery Period, any amount owing by Tenant pursuant to subsection (a)
above shall be paid to Landlord in accordance with Article XVI. Should Tenant
fail to object in writing to Landlord's determination of actual Operating
Expenses within sixty (60) days following delivery of Landlord's expense
statement, Landlord's determination of actual Operating Expenses for the
applicable Expense Recovery Period shall be conclusive and binding on the
parties and any future claims to the contrary shall be barred.
(d) Even though the Lease has terminated and the Tenant has
vacated the Premises, when the final determination is made of Operating Expenses
for the Expense Recovery Period in which the Lease terminates, Tenant shall upon
notice pay the entire increase due over the estimated expenses paid. Conversely,
any overpayment made in the event expenses decrease shall be rebated by Landlord
to Tenant.
(e) If, at any time during any Expense Recovery Period, any one
or more of the Operating Expenses are increased to a rate(s) or amount(s) in
excess of the rate(s) or amount(s) used in calculating the estimated expenses
for the year, then the estimate of Operating Expenses shall be increased for the
month in which such rate(s) or amount(s) becomes effective and for all
succeeding months by an amount equal to the increase. Landlord shall give Tenant
written notice of the amount or estimated amount of the increase at least ten
(10) days prior to the month in which the increase will become effective, and
the month for which the payments are due. Tenant shall pay the increase to
Landlord as a part of Tenant's monthly payments of estimated expenses as
provided in paragraph (b) above, commencing with the month in which effective.
(f) The term "Building Costs" shall include all expenses of
operation and maintenance of the Building and of the Building's proportionate
share of the Project, if applicable (determined as the rentable square footage
of the Building divided by the rentable square footage of all space in the
Project), to the extent such expenses are not billed to and paid directly by
Tenant, and shall include the following costs by way of illustration but not
limitation: water and sewer charges; insurance premiums or reasonable premium
equivalents should Landlord elect to selfinsure any risk that Landlord is
authorized to insure hereunder; license, permit, and inspection fees; heat;
light; power; air conditioning; supplies; materials; equipment; tools; the cost
of any environmental, insurance, tax or other consultant utilized by Landlord in
connection with the Building and/or Project; establishment of reasonable
reserves for replacements and/or repair of Common Area improvements (if
applicable), equipment and supplies; costs incurred in connection with
compliance of any laws or changes in laws applicable to the Building or the
Project; the cost of any capital investments (other than tenant improvements for
specific tenants) to the extent of the amortized amount thereof over the useful
life of such capital investments calculated at a market cost of funds, all as
reasonably determined by Landlord, for each such year of useful life during the
Term; costs associated with the procurement and maintenance of an intrabuilding
network cable service agreement for any intrabuilding network cable
telecommunications lines within the Project, and any other installation,
maintenance, repair and replacement costs associated with such lines; labor;
reasonably allocated wages and salaries, fringe benefits, and payroll taxes for
administrative and other personnel directly applicable to the Building and/or
Project, including both Landlord's personnel and outside personnel; any expense
incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2; and a commercially
reasonable overhead/management fee for the professional operation of the
Building and Project which is consistent with that charged for similar projects
in the Irvine Spectrum area. Notwithstanding anything to the contrary contained
herein, the amount of any particular component of Building Cost to be charged to
Tenant shall be determined by multiplying the actual fee charged (which from
time to time may be with respect to the entire Project, a portion of the Project
only, the Building only, or the Project together with other properties owned by
Landlord and/or its affiliates) by a fraction, the numerator of which is the
floor area of the Premises (as set forth in Item No. 8 of the Basic Lease
Provisions) and the denominator of which is the total square footage of space
charged with such fee actually leased to tenants (including Tenant). It is
understood that Building Costs shall include competitive charges for direct
services provided by any subsidiary or division of Landlord.
Notwithstanding the provisions of this Section 4.2 to the contrary, Operating
Expenses shall not include any cost or expense identified as the responsibility
of Landlord and not an Operating Expense or a Building Cost by the express terms
of this Lease, and shall not include any of the following:
(1) Leasing commissions, attorneys' fees, costs,
disbursements and other expenses incurred by Landlord or its agents in
connection with negotiations for leases with tenants, other occupants or
prospective tenants or other occupants of the Project, and similar costs
incurred in connection with disputes with and/or enforcement of any lease with
tenants, other occupants, or prospective tenants or other occupants of the
Project;
(2) "Tenant allowances", "tenant concessions", work letter
payments, and other costs or expenses (including permit, license and inspection
fees) incurred in completing, fixturing, furnishing, renovating or otherwise
improving, decorating or redecorating space for tenants or other occupants of
the Project, or vacant, leasable space in the Project, including space
planning/interior design fees for same;
(3) Depreciation and other "non-cash" expense items;
(4) Costs or expenses (including fines, penalties and
legal fees) incurred due to the violation by Landlord of any terms and
conditions (other than by Tenant) of this Lease or of the leases of other
tenants in the Project, that would not have incurred but for such violation by
Landlord;
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(5) Payments of principal, finance charges or interest on
debt or amortization on any deed of trust or other debt encumbering the Project,
and rental payments (or increases in same) under any ground or underlying lease
or leases encumbering the Project (except to the extent the same may be made to
pay or reimburse, or may be measured by Property Taxes);
(6) Costs for which Landlord is compensated through or
reimbursed by other tenants or former tenants of the Project, by Tenant or which
are paid by Tenant directly to a third person.
(g) The term "Property Taxes" as used herein shall include the
following: (i) all real estate taxes or personal property taxes, as such
property taxes may be reassessed from time to time; and (ii) other taxes,
charges and assessments which are levied with respect to this Lease or to the
Building and/or the Project, and any improvements, fixtures and equipment and
other property of Landlord located in the Building and/or the Project, except
that general net income and franchise taxes imposed against Landlord shall be
excluded; and (iii) all assessments and fees for public improvements, services,
and facilities and impacts thereon, including without limitation arising out of
any Community Facilities Districts, "Mello Roos" districts, similar assessment
districts, and any traffic impact mitigation assessments or fees; (iv) any tax,
surcharge or assessment which shall be levied in addition to or in lieu of real
estate or personal property taxes, other than taxes covered by Article VIII; and
(v) costs and expenses incurred in contesting the amount or validity of any
Property Tax by appropriate proceedings.
SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant's delivery of
this Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9
of the Basic Lease Provisions, to be held by Landlord as security for the full
and faithful performance of Tenant's obligations under this Lease (the "Security
Deposit"). Subject to the last sentence of this Section, the Security Deposit
shall be understood and agreed to be the property of Landlord upon Landlord's
receipt thereof, and may be utilized by Landlord in its discretion towards the
payment of all prepaid expenses by Landlord for which Tenant would be required
to reimburse Landlord under this Lease, including without limitation brokerage
commissions and Tenant Improvement costs. Upon any default by Tenant beyond the
applicable cure period, including specifically Tenant's failure to pay rent or
to abide by its obligations under Sections 7.1 and 15.3 below, whether or not
Landlord is informed of or has knowledge of the default, the Security Deposit
shall be deemed to be automatically and immediately applied, without waiver of
any rights Landlord may have under this Lease or at law or in equity as a result
of the default, as a setoff for full or partial compensation for that default.
If any portion of the Security Deposit is applied after a default by Tenant,
Tenant shall within five (5) days after written demand by Landlord deposit cash
with Landlord in an amount sufficient to restore the Security Deposit to its
original amount. Landlord shall not be required to keep this Security Deposit
separate from its general funds, and Tenant shall not be entitled to interest on
the Security Deposit. If Tenant fully performs its obligations under this Lease,
the Security Deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest in this Lease)
after the expiration of the Term, provided that Landlord may retain the Security
Deposit to the extent and until such time as all amounts due from Tenant in
accordance with this Lease have been determined and paid in full.
ARTICLE V. USES
SECTION 5.1. USE. Tenant shall use the Premises only for the purposes
stated in Item 3 of the Basic Lease Provisions, all in accordance with
applicable laws and restrictions and pursuant to approvals to be obtained by
Tenant from all relevant and required governmental agencies and authorities. The
parties agree that any contrary use shall be deemed to cause material and
irreparable harm to Landlord and shall entitle Landlord to injunctive relief in
addition to any other available remedy. Tenant, at its expense, shall procure,
maintain and make available for Landlord's inspection upon reasonable prior
notice throughout the Term, all governmental approvals, licenses and permits
required for the proper and lawful conduct of Tenant's permitted use of the
Premises. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way interfere with the rights of other occupants of
the Building or the Project, or use or allow the Premises to be used for any
unlawful purpose, nor shall Tenant permit any nuisance or commit any waste in
the Premises or the Project. Tenant shall not do or permit to be done anything
which will invalidate or increase the cost of any insurance policy(ies) covering
the Building, the Project and/or their contents, and shall comply with all
applicable insurance underwriters rules and the requirements of the Pacific Fire
Rating Bureau or any other organization performing a similar function. Tenant
shall comply at its expense with all present and future laws, ordinances,
restrictions, regulations, orders, rules and requirements of all governmental
authorities that pertain to Tenant or its use of the Premises, including without
limitation all federal and state occupational health and safety requirements,
whether or not Tenant's compliance will necessitate expenditures or interfere
with its use and enjoyment of the Premises. Tenant shall comply at its expense
with all present and future covenants, conditions, easements or restrictions now
or hereafter affecting or encumbering the Building and/or Project, and any
amendments or modifications thereto, including without limitation the payment by
Tenant of any periodic or special dues or assessments charged against the
Premises or Tenant which may be allocated to the Premises or Tenant in
accordance with the provisions thereof. Tenant shall promptly upon demand
reimburse Landlord for any additional insurance premium charged by reason of
Tenant's failure to comply with the provisions of this Section, and shall
indemnify Landlord from any liability and/or expense resulting from Tenant's
noncompliance.
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SECTION 5.2 SIGNS. Provided Tenant continues to occupy the entire
Premises, Tenant shall have the exclusive right to install one (1) exterior sign
on the Building, subject to Landlord's prior approval that such exterior signage
is in compliance with the Signage Criteria (defined below). Except as provided
in the foregoing, or as otherwise approved in writing by Landlord, in its sole
discretion, Tenant shall have no right to maintain identification signs in any
location in, on or about the Premises, the Building or the Project and shall not
place or erect any signs, displays or other advertising materials that are
visible from the exterior of the Building. The size, design, graphics, material,
style, color and other physical aspects of any permitted sign shall be subject
to any covenants, conditions or restrictions encumbering the Premises,
Landlord's signage program for the Project, as in effect from time to time and
approved by the City of Irvine ("Signage Criteria"), and any applicable
municipal or other governmental permits and approvals. Tenant acknowledges
having received and reviewed a copy of the current Signage Criteria for the
Project. Tenant shall be responsible for the cost of any permitted sign,
including the fabrication, installation, maintenance and removal thereof. If
Tenant fails to maintain its sign, or if Tenant fails to remove same upon
termination of this Lease and repair any damage caused by such removal, Landlord
may do so at Tenant's expense.
SECTION 5.3 HAZARDOUS MATERIALS.
(a) For purposes of this Lease, the term "Hazardous Materials"
includes (i) any "hazardous materials" as defined in Section 25501(n) of the
California Health and Safety Code, (ii) any other substance or matter which
results in liability to any person or entity from exposure to such substance or
matter under any statutory or common law theory, and (iii) any substance or
matter which is in excess of permitted levels set forth in any federal,
California or local law or regulation pertaining to any hazardous or toxic
substance, material or waste.
(b) Tenant shall not cause or permit any Hazardous Materials to
be brought upon, stored, used, generated, released or disposed of on, under,
from or about the Premises (including without limitation the soil and
groundwater thereunder) without the prior written consent of Landlord.
Notwithstanding the foregoing, Tenant shall have the right, without obtaining
prior written consent of Landlord, to utilize within the Premises standard
office products that may contain Hazardous Materials (such as photocopy toner,
"White Out", and the like), provided however, that (i) Tenant shall maintain
such products in their original retail packaging, shall follow all instructions
on such packaging with respect to the storage, use and disposal of such
products, and shall otherwise comply with all applicable laws with respect to
such products, and (ii) all of the other terms and provisions of this Section
5.3 shall apply with respect to Tenant's storage, use and disposal of all such
products. Landlord may, in its sole discretion, place such conditions as
Landlord deems appropriate with respect to any such Hazardous Materials, and may
further require that Tenant demonstrate that any such Hazardous Materials are
necessary or useful to Tenant's business and will be generated, stored, used and
disposed of in a manner that complies with all applicable laws and regulations
pertaining thereto and with good business practices. Tenant understands that
Landlord may utilize an environmental consultant to assist in determining
conditions of approval in connection with the storage, generation, release,
disposal or use of Hazardous Materials by Tenant on or about the Premises,
and/or to conduct periodic inspections of the storage, generation, use, release
and/or disposal of such Hazardous Materials by Tenant on and from the Premises,
and Tenant agrees that any costs incurred by Landlord in connection therewith
shall be reimbursed by Tenant to Landlord as additional rent hereunder upon
demand.
(c) Prior to the execution of this Lease, Tenant shall complete,
execute and deliver to Landlord an Environmental Questionnaire and Disclosure
Statement (the "Environmental Questionnaire") in the form of Exhibit B attached
hereto. The completed Environmental Questionnaire shall be deemed incorporated
into this Lease for all purposes, and Landlord shall be entitled to rely fully
on the information contained therein. On each anniversary of the Commencement
Date until the expiration or sooner termination of this Lease, Tenant shall
disclose to Landlord in writing the names and amounts of all Hazardous Materials
which were stored, generated, used, released and/or disposed of on, under or
about the Premises for the twelve-month period prior thereto, and which Tenant
desires to store, generate, use, release and/or dispose of on, under or about
the Premises for the succeeding twelve-month period. In addition, to the extent
Tenant is permitted to utilize Hazardous Materials upon the Premises, Tenant
shall promptly provide Landlord with complete and legible copies of all the
following environmental documents relating thereto: reports filed pursuant to
any self-reporting requirements; permit applications, permits, monitoring
reports, workplace exposure and community exposure warnings or notices and all
other reports, disclosures, plans or documents (even those which may be
characterized as confidential) relating to water discharges, air pollution,
waste generation or disposal, and underground storage tanks for Hazardous
Materials; orders, reports, notices, listings and correspondence (even those
which may be considered confidential) of or concerning the release,
investigation of, compliance, cleanup, remedial and corrective actions, and
abatement of Hazardous Materials; and all complaints, pleadings and other legal
documents filed by or against Tenant related to Tenant's use, handling, storage,
release and/or disposal of Hazardous Materials.
(d) Landlord and its agents shall have the right, but not the
obligation, to inspect, sample and/or monitor the Premises and/or the soil or
groundwater thereunder at any time to determine whether Tenant is complying with
the terms of this Section 5.3, and in connection therewith Tenant shall provide
Landlord with full access to all relevant facilities, records and personnel. If
Tenant is not in compliance with any of the provisions of this Section 5.3, or
in the event of a release of any Hazardous Material on, under or about the
Premises caused or permitted by Tenant, its agents, employees, contractors,
licensees or invitees, Landlord and its agents shall have the right, but not the
obligation, without limitation upon any of Landlord's other rights and remedies
under this Lease, to immediately enter upon the Premises without notice and to
discharge Tenant's obligations under this Section 5.3 at Tenant's expense,
including without limitation the taking of emergency or long-term remedial
action. Landlord and its agents shall endeavor to minimize interference with
Tenant's business in connection therewith, but shall not be liable for any such
interference. In addition, Landlord, at Tenant's expense, shall have the right,
but not the obligation, to join and participate in any legal proceedings or
actions initiated in connection with any claims arising
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out of the storage, generation, use, release and/or disposal by Tenant or its
agents, employees, contractors, licensees or invitees of Hazardous Materials on,
under, from or about the Premises.
(e) If the presence of any Hazardous Materials on, under, from or
about the Premises or the Project caused or permitted by Tenant or its agents,
employees, contractors, licensees or invitees results in (i) injury to any
person, (ii) injury to or any contamination of the Premises or the Project, or
(iii) injury to or contamination of any real or personal property wherever
situated, Tenant, at its expense, shall promptly take all actions necessary to
return the Premises and the Project and any other affected real or personal
property owned by Landlord to the condition existing prior to the introduction
of such Hazardous Materials and to remedy or repair any such injury or
contamination, including without limitation, any cleanup, remediation, removal,
disposal, neutralization or other treatment of any such Hazardous Materials.
Notwithstanding the foregoing, Tenant shall not, without Landlord's prior
written consent, take any remedial action in response to the presence of any
Hazardous Materials on, under or about the Premises or the Project or any other
affected real or personal property owned by Landlord or enter into any similar
agreement, consent, decree or other compromise with any governmental agency with
respect to any Hazardous Materials claims; provided however, Landlord's prior
written consent shall not be necessary in the event that the presence of
Hazardous Materials on, under or about the Premises or the Project or any other
affected real or personal property owned by Landlord (i) imposes an immediate
threat to the health, safety or welfare of any individual or (ii) is of such a
nature that an immediate remedial response is necessary and it is not possible
to obtain Landlord's consent before taking such action. To the fullest extent
permitted by law, Tenant shall indemnify, hold harmless, protect and defend
(with attorneys acceptable to Landlord) Landlord and any successors to all or
any portion of Landlord's interest in the Premises and the Project and any other
real or personal property owned by Landlord from and against any and all
liabilities, losses, damages, diminution in value, judgments, fines, demands,
claims, recoveries, deficiencies, costs and expenses (including without
limitation attorneys' fees, court costs and other professional expenses),
whether foreseeable or unforeseeable, arising directly or indirectly out of the
use, generation, storage, treatment, release, on- or off-site disposal or
transportation of Hazardous Materials on, into, from, under or about the
Premises, the Building and the Project and any other real or personal property
owned by Landlord caused or permitted by Tenant, its agents, employees,
contractors, licensees or invitees, specifically including without limitation
the cost of any required or necessary repair, restoration, cleanup or
detoxification of the Premises, the Building and the Project and any other real
or personal property owned by Landlord, and the preparation of any closure or
other required plans, whether or not such action is required or necessary during
the Term or after the expiration of this Lease. If Landlord at any time
discovers that Tenant or its agents, employees, contractors, licensees or
invitees may have caused or permitted the release of a Hazardous Material on,
under, from or about the Premises or the Project or any other real or personal
property owned by Landlord, Tenant shall, at Landlord's request, immediately
prepare and submit to Landlord a comprehensive plan, subject to Landlord's
approval, specifying the actions to be taken by Tenant to return the Premises or
the Project or any other real or personal property owned by Landlord to the
condition existing prior to the introduction of such Hazardous Materials. Upon
Landlord's approval of such cleanup plan, Tenant shall, at its expense, and
without limitation of any rights and remedies of Landlord under this Lease or at
law or in equity, immediately implement such plan and proceed to cleanup such
Hazardous Materials in accordance with all applicable laws and as required by
such plan and this Lease. The provisions of this subsection (e) shall expressly
survive the expiration or sooner termination of this Lease.
(f) Landlord hereby discloses to Tenant, and Tenant hereby
acknowledges, certain facts relating to Hazardous Materials at the Project known
by Landlord to exist as of the date of this Lease, as more particularly
described in EXHIBIT C attached hereto. Tenant shall have no liability or
responsibility with respect to the Hazardous Materials facts described in
EXHIBIT C, nor with respect to any Hazardous Materials which were not caused or
permitted by Tenant, its agents, employees, contractors, licensees or invitees.
Landlord shall take responsibility, at its sole cost and expense, for any
governmentally-ordered clean-up, remediation, removal, disposal, neutralization
or other treatment of Hazardous Materials conditions described in this
subparagraph. The foregoing obligation on the part of Landlord shall include the
reasonable costs (including, without limitation, reasonable attorney's fees) of
defending Tenant (with attorneys reasonably acceptable to Tenant) from and
against any legal action or proceeding instituted by any governmental agency in
connection with such clean-up, remediation, removal, disposal, neutralization or
other treatment of such conditions, provided that Tenant promptly tenders such
defense to Landlord. Tenant agrees to notify its agents, employees, contractors,
licensees, and invitees of any exposure or potential exposure to Hazardous
Materials at the Premises that Landlord brings to Tenant's attention.
ARTICLE VI. COMMON AREAS; SERVICES
SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and
shall pay promptly, directly to the appropriate supplier, all charges for water,
gas, electricity, sewer, heat, light, power, telephone, refuse pickup,
janitorial service, interior landscape maintenance and all other utilities,
materials and services furnished directly to Tenant or the Premises or used by
Tenant in, on or about the Premises during the Term, together with any taxes
thereon. Landlord shall not be liable for damages or otherwise for any failure
or interruption of any utility or other service furnished to the Premises, and
no such failure or interruption shall be deemed an eviction or entitle Tenant to
terminate this Lease or withhold or abate any rent due hereunder. Landlord shall
at all reasonable times have free access to all electrical and mechanical
installations of Landlord. Notwithstanding the foregoing, if as a result of the
actions of Landlord, its agents, contractors or employees or the inactions of
Landlord if Landlord is
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required to act under this Lease, for more than three (3) consecutive business
days following written notice to Landlord there is no HVAC service or
electricity service to all or a portion of the Premises, or such an interruption
of other essential utilities and building services, such as fire protection or
water, so that all or a portion of the Premises cannot be used by Tenant, then
Tenant's obligation to pay Basic Rent and Operating Expenses (or an equitable
portion of such Basic Rent and Operating Expenses to the extent that less than
all of the Premises are affected) shall thereafter be abated until the Premises
are again useable by Tenant; provided, however, that if Landlord is diligently
pursuing the repair of such utilities or services and Landlord provides
substitute services reasonably suitable for Tenant's purposes, as for example,
bringing in portable air-conditioning equipment, then there shall not be an
abatement of Basic Rent or Operating Expenses. Any disputes concerning the
foregoing shall be resolved by JAMS arbitration pursuant to Section 22.8 of this
Lease. The foregoing provisions shall not apply in case of damage to, or
destruction of, the Premises, which shall be governed by the provisions of
Article XI of the Lease. Landlord shall at all reasonable times have free access
to all electrical and mechanical installations of Landlord.
SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the Term,
Landlord shall operate all Common Areas within the Project. The term "Common
Areas" shall mean all areas which are not held for exclusive use by persons
entitled to occupy space, and all other appurtenant areas and improvements
provided by Landlord for the common use of Landlord and tenants and their
respective employees and invitees, including without limitation parking areas
and structures, driveways, sidewalks, landscaped and planted areas, hallways and
interior stairwells not located within the premises of any tenant, common
electrical rooms and roof access entries, common entrances and lobbies,
elevators, and restrooms not located within the premises of any tenant.
SECTION 6.3. USE OF COMMON AREAS. The occupancy by Tenant of the
Premises shall include the use of the Common Areas in common with Landlord and
with all others for whose convenience and use the Common Areas may be provided
by Landlord, subject, however, to compliance with all rules and regulations as
are prescribed from time to time by Landlord. Landlord shall operate and
maintain the Common Areas in the manner Landlord may determine to be
appropriate. All costs incurred by Landlord for the maintenance and operation of
the Common Areas shall be included in Building Costs unless any particular cost
incurred can be charged to a specific tenant of the Project. Landlord shall at
all times during the Term have exclusive control of the Common Areas, and may
restrain any use or occupancy, except as authorized by Landlord's rules and
regulations. Tenant shall keep the Common Areas clear of any obstruction or
unauthorized use related to Tenant's operations. Landlord may temporarily close
any portion of the Common Areas for repairs, remodeling and/or alterations, to
prevent a public dedication or the accrual of prescriptive rights, or for any
other reason deemed sufficient by Landlord, without liability to Landlord.
SECTION 6.4. PARKING. Tenant shall be entitled to the number of vehicle
parking spaces set forth in Item 14 of the Basic Lease Provisions, which spaces
shall be unreserved and unassigned, on those portions of the Common Areas
designated by Landlord for parking. Tenant shall not use more parking spaces
than such number. All parking spaces shall be used only for parking by vehicles
no larger than full size passenger automobiles or pickup trucks. Tenant shall
not permit or allow any vehicles that belong to or are controlled by Tenant or
Tenant's employees, suppliers, shippers, customers or invitees to be loaded,
unloaded or parked in areas other than those designated by Landlord for such
activities. If Tenant permits or allows any of the prohibited activities
described above, then Landlord shall have the right, without notice, in addition
to such other rights and remedies that Landlord may have, to remove or tow away
the vehicle involved and charge the costs to Tenant. Parking within the Common
Areas shall be limited to striped parking stalls, and no parking shall be
permitted in any driveways, access ways or in any area which would prohibit or
impede the free flow of traffic within the Common Areas. There shall be no
overnight parking of any vehicles of any kind unless otherwise authorized by
Landlord, and vehicles which have been abandoned or parked in violation of the
terms hereof may be towed away at the owner's expense. Nothing contained in this
Lease shall be deemed to create liability upon Landlord for any damage to motor
vehicles of visitors or employees, for any loss of property from within those
motor vehicles, or for any injury to Tenant, its visitors or employees, unless
ultimately determined to be caused by the sole active negligence or willful
misconduct of Landlord, its agents, servants and employees. Landlord shall have
the right to establish, and from time to time amend, and to enforce against all
users all reasonable rules and regulations (including the designation of areas
for employee parking) that Landlord may deem necessary and advisable for the
proper and efficient operation and maintenance of parking within the Common
Areas. Landlord shall have the right to construct, maintain and operate lighting
facilities within the parking areas; to change the area, level, location and
arrangement of the parking areas and improvements therein; to restrict parking
by tenants, their officers, agents and employees to employee parking areas; to
enforce parking charges (by operation of meters or otherwise after the initial
Term) after the initial Term; and to do and perform such other acts in and to
the parking areas and improvements therein as, in the use of good business
judgment, Landlord shall determine to be advisable. Any person using the parking
area shall observe all directional signs and arrows and any posted speed limits.
In no event shall Tenant interfere with the use and enjoyment of the parking
area by other tenants of the Project or their employees or invitees. Parking
areas shall be used only for parking vehicles. Washing, waxing, cleaning or
servicing of vehicles, or the storage of vehicles for 24-hour periods, is
prohibited unless otherwise authorized by Landlord. Tenant shall be liable for
any damage to the parking areas caused by Tenant or Tenant's employees,
suppliers, shippers, customers or invitees, including without limitation damage
from excess oil leakage. Tenant shall have no right to install any fixtures,
equipment or personal property in the parking areas.
SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. Landlord reserves the
right to make alterations or additions to the Project, or to the attendant
fixtures, equipment and Common Areas. Landlord may at any time relocate or
remove any of the various buildings (other than the Building), parking areas,
and other Common
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Areas, and may add buildings and areas to the Project from time to time. No
change shall entitle Tenant to any abatement of rent or other claim against
Landlord, provided that the change does not deprive Tenant of reasonable access
to or use of the Premises or the parking areas.
ARTICLE VII. MAINTAINING THE PREMISES
SECTION 7.1. TENANT'S MAINTENANCE AND REPAIR. Tenant at its sole expense
shall comply with all applicable laws and governmental regulations governing the
Premises and make all repairs necessary to keep the Premises in the condition as
existed on the Commencement Date (or on any later date that the improvements may
have been installed), excepting ordinary wear and tear, including without
limitation the electrical and mechanical systems, any air conditioning,
ventilating or heating equipment which serves the Premises, all walls, glass,
windows, doors, door closures, hardware, fixtures, electrical, plumbing, fire
extinguisher equipment and other equipment. Any damage or deterioration of the
Premises shall not be deemed ordinary wear and tear if the same could have been
prevented by good maintenance practices by Tenant. As part of its maintenance
obligations hereunder, Tenant shall, at Landlord's request, provide Landlord
with copies of all maintenance schedules, reports and notices prepared by, for
or on behalf of Tenant. Tenant shall obtain preventive maintenance contracts
from a licensed heating and air conditioning contractor to provide for regular
inspection and maintenance of the heating, ventilating and air conditioning
systems servicing the Premises, all subject to Landlord's approval. All repairs
shall be at least equal in quality to the original work, shall be made only by a
licensed contractor approved in writing in advance by Landlord and shall be made
only at the time or times approved by Landlord. Any contractor utilized by
Tenant shall be subject to Landlord's standard requirements for contractors, as
modified from time to time. Landlord shall have the right at all times to
inspect Tenant's maintenance of all equipment (including without limitation air
conditioning, ventilating and heating equipment), and may impose reasonable
restrictions and requirements with respect to repairs, as provided in Section
7.3, and the provisions of Section 7.4 shall apply to all repairs.
Alternatively, Landlord may elect to make any repair of the electrical and
mechanical systems and any air conditioning, ventilating or heating equipment
serving the Premises and include the reasonable cost thereof as part of
"Building Costs", and if the Tenant fails to properly maintain and/or repair the
Premises as herein provided following Landlord's written notice and the
expiration of the applicable cure period, then Landlord may elect to make any
other reasonable repair or maintenance required hereunder on behalf of Tenant
and at Tenant's expense, and Tenant shall promptly reimburse Landlord for all
costs incurred upon submission of an invoice.
SECTION 7.2. LANDLORD'S MAINTENANCE AND REPAIR. Subject to Section 7.1
and Article XI, Landlord shall provide service, maintenance and repair with
respect to the roof, foundations, and footings of the Building, all landscaping,
walkways, parking areas, Common Areas, exterior lighting, and the exterior
surfaces of the exterior walls of the Building, except that Tenant at its
expense shall make all repairs which Landlord deems reasonably necessary as a
result of the act or negligence of Tenant, its agents, employees, invitees,
subtenants or contractors. Landlord shall have the right to employ or designate
any reputable person or firm, including any employee or agent of Landlord or any
of Landlord's affiliates or divisions, to perform any service, repair or
maintenance function. Landlord need not make any other improvements or repairs
except as specifically required under this Lease, and nothing contained in this
Section shall limit Landlord's right to reimbursement from Tenant for
maintenance, repair costs and replacement costs as provided elsewhere in this
Lease. Tenant understands that it shall not make repairs at Landlord's expense
or by rental offset. Tenant further understands that Landlord shall not be
required to make any repairs to the roof, foundations or footings unless and
until Tenant has notified Landlord in writing of the need for such repair and
Landlord shall have a reasonable period of time thereafter to commence and
complete said repair, if warranted. All costs of any maintenance and repairs on
the part of Landlord provided hereunder shall be considered part of Building
Costs.
SECTION 7.3. ALTERATIONS. Tenant shall make no alterations, additions or
improvements to the Premises without the prior written consent of Landlord,
which consent may be given or withheld in Landlord's sole discretion.
Notwithstanding the foregoing, Landlord shall not unreasonably withhold its
consent to any alterations, additions or improvements to the Premises which cost
less than One Dollar ($1.00) per square foot of the improved portions of the
Premises (excluding warehouse square footage) and do not (i) affect the exterior
of the Building or outside areas (or be visible from adjoining sites), or (ii)
affect or penetrate any of the structural portions of the Building, including
but not limited to the roof, or (iii) require any change to the basic floor plan
of the Premises, any change to any structural or mechanical systems of the
Premises, or any governmental permit as a prerequisite to the construction
thereof, or (iv) interfere in any manner with the proper functioning of or
Landlord's access to any mechanical, electrical, plumbing or HVAC systems,
facilities or equipment located in or serving the Building, or (v) diminish the
value of the Premises. Landlord may impose, as a condition to its consent, any
requirements that Landlord in its discretion may deem reasonable or desirable,
including but not limited to a requirement that all work be covered by a lien
and completion bond satisfactory to Landlord and requirements as to the manner,
time, and contractor for performance of the work. Tenant shall obtain all
required permits for the work and shall perform the work in compliance with all
applicable laws, regulations and ordinances, all covenants, conditions and
restrictions affecting the Project, and the Rules and Regulations (hereafter
defined). Tenant understands and agrees that Landlord shall be entitled to a
supervision fee in the amount of five percent (5%) of the cost of any work which
requires a governmental permit. If any governmental entity requires, as a
condition to any proposed alterations, additions or improvements to the Premises
by Tenant, that improvements be made to the Common Areas, and if Landlord
consents to such improvements to the Common Areas, then Tenant shall, at
Tenant's sole expense, make such required improvements to the Common Areas in
such manner, utilizing such materials, and with such contractors (including, if
required by Landlord, Landlord's contractors) as Landlord may require in its
sole discretion. Under no circumstances shall Tenant make any improvement which
incorporates any Hazardous Materials, including without limitation
asbestos-containing construction materials into the Premises. Any request for
Landlord's consent shall be made in writing and shall contain architectural
plans describing the work in detail
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reasonably satisfactory to Landlord. Unless Landlord otherwise agrees in
writing, all alterations, additions or improvements affixed to the Premises
(excluding moveable trade fixtures and furniture) shall become the property of
Landlord and shall be surrendered with the Premises at the end of the Term,
except that Landlord may, by notice to Tenant, require Tenant to remove by the
Expiration Date, or sooner termination date of this Lease, all or any
alterations, decorations, fixtures, additions, improvements and the like
installed either by Tenant or by Landlord at Tenant's request and to repair any
damage to the Premises arising from that removal. Except as otherwise provided
in this Lease or in any Exhibit to this Lease, should Landlord make any
alteration or improvement to the Premises for Tenant, Landlord shall be entitled
to prompt reimbursement from Tenant for all costs incurred. Notwithstanding the
foregoing, Landlord shall have the right to require Tenant to remove (i) any
Non-Standard Improvements included in the initial Tenant Improvements to the
Premises but only if Landlord notifies Tenant that such removal will be required
at the time of Landlord's approval of the Preliminary Plan, and (ii) any
subsequent alterations, additions or improvements unless Landlord's written
consent was obtained and unless at the time of providing its consent Landlord
notified Tenant in writing that Tenant would not have to remove such items upon
the expiration of the Lease Term.
SECTION 7.4. MECHANIC'S LIENS. Tenant shall keep the Premises free from
any liens arising out of any work performed, materials furnished, or obligations
incurred by or for Tenant. Upon request by Landlord, Tenant shall promptly cause
any such lien to be released by posting a bond in accordance with California
Civil Code Section 3143 or any successor statute. In the event that Tenant shall
not, within thirty (30) days following the imposition of any lien, cause the
lien to be released of record by payment or posting of a proper bond, Landlord
shall have, in addition to all other available remedies, the right to cause the
lien to be released by any means it deems proper, including payment of or
defense against the claim giving rise to the lien. All expenses so incurred by
Landlord, including Landlord's attorneys' fees, and any consequential or other
damages incurred by Landlord arising out of such lien, shall be reimbursed by
Tenant promptly following Landlord's demand, together with interest from the
date of payment by Landlord at the maximum rate permitted by law until paid.
Tenant shall give Landlord no less than twenty (20) days' prior notice in
writing before commencing construction of any kind on the Premises so that
Landlord may post and maintain notices of nonresponsibility on the Premises.
SECTION 7.5. ENTRY AND INSPECTION. Landlord shall at all reasonable
times, upon reasonable prior notice (except in emergencies, when no notice shall
be required) have the right to enter the Premises to inspect them, to supply
services in accordance with this Lease, to protect the interests of Landlord in
the Premises, and to submit the Premises to prospective or actual purchasers or
encumbrance holders (or, during the last one hundred and eighty (180) days of
the Term or when an uncured Tenant default exists, to prospective tenants), all
without being deemed to have caused an eviction of Tenant and without abatement
of rent except as provided elsewhere in this Lease. Landlord shall have the
right, if desired, to retain a key which unlocks all of the doors in the
Premises, excluding Tenant's vaults and safes, other areas reasonably approved
by Landlord which contain confidential information, and Landlord shall have the
right to use any and all means which Landlord may deem proper to open the doors
in an emergency in order to obtain entry to the Premises, and any entry to the
Premises obtained by Landlord shall not under any circumstances be deemed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or any
eviction of Tenant from the Premises.
ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY
Tenant shall be liable for and shall pay, at least ten (10) days before
delinquency, all taxes and assessments levied against all personal property of
Tenant located in the Premises, against all improvements to the Premises made by
Landlord or Tenant which are above Landlord's Project standard in quality and/or
quantity for comparable space within the Project ("Above Standard
Improvements"), and against any alterations, additions or like improvements made
to the Premises by or on behalf of Tenant. When possible Tenant shall cause its
personal property, Above Standard Improvements and alterations to be assessed
and billed separately from the real property of which the Premises form a part.
If any taxes on Tenant's personal property, Above Standard Improvements and/or
alterations are levied against Landlord or Landlord's property and if Landlord
pays the same, or if the assessed value of Landlord's property is increased by
the inclusion of a value placed upon the personal property, Above Standard
Improvements and/or alterations of Tenant and if Landlord pays the taxes based
upon the increased assessment, Tenant shall pay to Landlord the taxes so levied
against Landlord or the proportion of the taxes resulting from the increase in
the assessment. In calculating what portion of any tax bill which is assessed
against Landlord separately, or Landlord and Tenant jointly, is attributable to
Tenant's Above Standard Improvements, alterations and personal property,
Landlord's reasonable determination shall be conclusive.
ARTICLE IX. ASSIGNMENT AND SUBLETTING
SECTION 9.1. RIGHTS OF PARTIES.
(a) Notwithstanding any provision of this Lease to the contrary,
Tenant will not, either voluntarily or by operation of law, assign, sublet,
encumber, or otherwise transfer all or any part of Tenant's interest in this
lease, or permit the Premises to be occupied by anyone other than Tenant,
without Landlord's prior written consent, which consent shall not unreasonably
be withheld in accordance with the provisions of Section 9.1.(b). No assignment
(whether voluntary, involuntary or by operation of law) and no subletting shall
be valid or effective without Landlord's prior written consent and, at
Landlord's election, any such assignment or subletting or attempted assignment
or subletting shall constitute a material default of this Lease. Landlord shall
not be deemed to have given its consent to any assignment or subletting by any
other course of action, including its acceptance of any name for listing in the
Building directory. To the extent not prohibited by provisions of the Bankruptcy
Code, 11 U.S.C.
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Section 101 et seq. (the "Bankruptcy Code"), including Section 365(f)(1), Tenant
on behalf of itself and its creditors, administrators and assigns waives the
applicability of Section 365(e) of the Bankruptcy Code unless the proposed
assignee of the Trustee for the estate of the bankrupt meets Landlord's standard
for consent as set forth in Section 9.1(b) of this Lease. If this Lease is
assigned to any person or entity pursuant to the provisions of the Bankruptcy
Code, any and all monies or other considerations to be delivered in connection
with the assignment shall be delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or of
the estate of Tenant within the meaning of the Bankruptcy Code. Any person or
entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed to have assumed all of the obligations arising
under this Lease on and after the date of the assignment, and shall upon demand
execute and deliver to Landlord an instrument confirming that assumption.
(b) If Tenant desires to transfer an interest in this Lease, it
shall first notify Landlord of its desire and shall submit in writing to
Landlord: (i) the name and address of the proposed transferee; (ii) the nature
of any proposed subtenant's or assignee's business to be carried on in the
Premises; (iii) the terms and provisions of any proposed sublease or assignment,
including a copy of the proposed assignment or sublease form; (iv) evidence of
insurance of the proposed assignee or subtenant complying with the requirements
of Exhibit D hereto; (v) a completed Environmental Questionnaire from the
proposed assignee or subtenant; and (vi) any other information requested by
Landlord and reasonably related to the transfer. Except as provided in
Subsection (e) of this Section, Landlord shall not unreasonably withhold its
consent, provided: (1) the use of the Premises will be consistent with the
provisions of this Lease and with Landlord's commitment to other tenants of the
Project; (2) the proposed assignee or subtenant has not been required by any
prior landlord, lender or governmental authority to take remedial action in
connection with Hazardous Materials contaminating a property arising out of the
proposed assignee's or subtenant's actions or use of the property in question
and is not subject to any enforcement order issued by any governmental authority
in connection with the use, disposal or storage of a Hazardous Material; (3) at
Landlord's election, insurance requirements shall be brought into conformity
with Landlord's then current leasing practice; (4) any proposed subtenant or
assignee demonstrates that it is financially responsible by submission to
Landlord of all reasonable information as Landlord may request concerning the
proposed subtenant or assignee, including, but not limited to, a balance sheet
of the proposed subtenant or assignee as of a date within ninety (90) days of
the request for Landlord's consent and statements of income or profit and loss
of the proposed subtenant or assignee for the two-year period preceding the
request for Landlord's consent, and/or a certification signed by the proposed
subtenant or assignee that it has not been evicted or been in arrears in rent at
any other leased premises for the 3year period preceding the request for
Landlord's consent; (5) any proposed subtenant or assignee demonstrates to
Landlord's reasonable satisfaction a record of successful experience in
business; (6) the proposed assignee or subtenant is not an existing tenant of
the Project or a prospect with whom Landlord is negotiating in writing to become
a tenant at the Project; and (7) the proposed transfer will not impose
additional burdens or adverse tax effects on Landlord. If Tenant has any
exterior sign rights under this Lease, such rights are personal to Tenant and
may not be assigned or transferred to any assignee of this Lease or subtenant of
the Premises without Landlord's prior written consent, which may be withheld in
Landlord's sole and absolute discretion.
If Landlord consents to the proposed transfer, Tenant may
within ninety (90) days after the date of the consent effect the transfer upon
the terms described in the information furnished to Landlord; provided that any
material change in the terms shall be subject to Landlord's consent as set forth
in this Section. Landlord shall approve or disapprove any requested transfer
within thirty (30) days following receipt of Tenant's written request, the
information set forth above, and the fee set forth below.
(c) Notwithstanding the provisions of Subsection (b) above, in
lieu of consenting to a proposed assignment or subletting of more than
twenty-five percent (25%) of the rentable area of the Premises in the aggregate,
taking into consideration prior subleases for the remainder of the Term,
Landlord may elect to (i) sublease the Premises (or the portion proposed to be
subleased), or take an assignment of Tenant's interest in this Lease, upon the
same terms as offered to the proposed subtenant or assignee (excluding terms
relating to the purchase of personal property, the use of Tenant's name or the
continuation of Tenant's business), or (ii) terminate this Lease as to the
portion of the Premises proposed to be subleased or assigned with a
proportionate abatement in the rent payable under this Lease, effective on the
date that the proposed sublease or assignment would have become effective.
Landlord may thereafter, at its option, assign or relet any space so recaptured
to any third party, including without limitation the proposed transferee of
Tenant.
(d) Tenant agrees that fifty percent (50%) of any amounts paid by
the assignee or subtenant, however described, in excess of (i) the Basic Rent
payable by Tenant hereunder, or in the case of a sublease of a portion of the
Premises, in excess of the Basic Rent reasonably allocable to such portion, plus
(ii) Tenant's direct out-of-pocket costs which Tenant certifies to Landlord have
been paid to provide occupancy related services to such assignee or subtenant of
a nature commonly provided by landlords of similar space, shall be the property
of Landlord and such amounts shall be payable directly to Landlord by the
assignee or subtenant or, at Landlord's option, by Tenant. At Landlord's
request, a written agreement shall be entered into by and among Tenant, Landlord
and the proposed assignee or subtenant confirming the requirements of this
subsection.
(e) Tenant shall pay to Landlord a fee of Five Hundred Dollars
($500.00) if and when any transfer hereunder is requested by Tenant. Such fee is
hereby acknowledged as a reasonable amount to reimburse Landlord for its costs
of review and evaluation of a proposed assignee/sublessee, and Landlord shall
not be obligated to commence such review and evaluation unless and until such
fee is paid.
SECTION 9.2. EFFECT OF TRANSFER. No subletting or assignment, even with
the consent of Landlord, shall relieve Tenant of its obligation to pay rent and
to perform all its other obligations under this Lease. Moreover, Tenant shall
indemnify and hold Landlord harmless, as provided in Section 10.3, for any act
or omission by an assignee or subtenant. Each assignee, other than Landlord,
shall be deemed to assume all obligations of Tenant
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under this Lease and shall be liable jointly and severally with Tenant for the
payment of all rent, and for the due performance of all of Tenant's obligations,
under this Lease. No transfer shall be binding on Landlord unless any document
memorializing the transfer is delivered to Landlord and both the
assignee/subtenant and Tenant deliver to Landlord an executed consent to
transfer instrument prepared by Landlord and consistent with the requirements of
this Article. The acceptance by Landlord of any payment due under this Lease
from any other person shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any transfer. Consent by Landlord
to one or more transfers shall not operate as a waiver or estoppel to the future
enforcement by Landlord of its rights under this Lease.
SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions
shall apply to any subletting by Tenant of all or any part of the Premises and
shall be deemed included in each sublease:
(a) Each and every provision contained in this Lease (other than
with respect to the payment of rent or completion of tenant improvements
hereunder) is incorporated by reference into and made a part of such sublease,
with "Landlord" hereunder meaning the sublandlord therein and "Tenant" hereunder
meaning the subtenant therein.
(b) Tenant hereby irrevocably assigns to Landlord all of Tenant's
interest in all rentals and income arising from any sublease of the Premises,
and Landlord may collect such rent and income and apply same toward Tenant's
obligations under this Lease; provided, however, that until a default occurs in
the performance of Tenant's obligations under this Lease, Tenant shall have the
right to receive and collect the sublease rentals. Landlord shall not, by reason
of this assignment or the collection of sublease rentals, be deemed liable to
the subtenant for the performance of any of Tenant's obligations under the
sublease. Tenant hereby irrevocably authorizes and directs any subtenant, upon
receipt of a written notice from Landlord stating that an uncured default exists
in the performance of Tenant's obligations under this Lease, to pay to Landlord
all sums then and thereafter due under the sublease. Tenant agrees that the
subtenant may rely on that notice without any duty of further inquiry and
notwithstanding any notice or claim by Tenant to the contrary. Tenant shall have
no right or claim against the subtenant or Landlord for any rentals so paid to
Landlord.
(c) In the event of the termination of this Lease, Landlord may,
at its sole option, take over Tenant's entire interest in any sublease and, upon
notice from Landlord, the subtenant shall attorn to Landlord. In no event,
however, shall Landlord be liable for any previous act or omission by Tenant
under the sublease or for the return of any advance rental payments or deposits
under the sublease that have not been actually delivered to Landlord, nor shall
Landlord be bound by any sublease modification executed without Landlord's
consent or for any advance rental payment by the subtenant in excess of one
month's rent. The general provisions of this Lease, including without limitation
those pertaining to insurance and indemnification, shall be deemed incorporated
by reference into the sublease despite the termination of this Lease.
SECTION 9.4. CERTAIN TRANSFERS. The sale of all or substantially all of
Tenant's assets (other than bulk sales in the ordinary course of business) or,
if Tenant is a corporation, an unincorporated association, or a partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association, or partnership in the aggregate of twenty-five percent
(25%) (except for publicly traded shares of stock constituting a transfer of
twenty-five percent (25%) or more in the aggregate, so long as no change in the
controlling interest of Tenant occurs as a result thereof) shall be deemed an
assignment within the meaning and provisions of this Article. Notwithstanding
the foregoing, Landlord's consent shall not be required for the assignment of
this Lease as a result of a merger by Tenant with or into another entity, or to
any parent, wholly-owned subsidiary or other entity controlled by, controlling
or under common control with Tenant (collectively a "Tenant Affiliate") so long
as (i) the net worth of the successor entity after such merger is at least equal
to the greater of the net worth of Tenant as of the execution of this Lease by
Landlord or the net worth of Tenant immediately prior to the date of such
merger, evidence of which, satisfactory to Landlord, shall be presented to
Landlord prior to such merger, (ii) Tenant shall provide to Landlord, prior to
such merger, written notice of such merger and such assignment documentation and
other information as Landlord may request in connection therewith, and (iii) all
of the other terms and requirements of this Article shall apply with respect to
such assignment. Control for the purposes of defining a Tenant Affiliate means a
direct or indirect ownership of more than fifty percent (50%) of the voting
securities of such entity or possession of the right to vote or otherwise cause
the direction of the management and policy of such entity.
ARTICLE X. INSURANCE AND INDEMNITY
SECTION 10.1. TENANT'S INSURANCE. Tenant, at its sole cost and expense,
shall provide and maintain in effect the insurance described in Exhibit D.
Evidence of that insurance must be delivered to Landlord prior to the
Commencement Date.
SECTION 10.2. LANDLORD'S INSURANCE. Landlord shall provide the following
types of insurance, with or without deductible and in amounts and coverages as
may be reasonably determined by Landlord in its discretion provided such
amounts, coverages and deductibles are reasonable and comparable to those
maintained on comparable properties in the area: "all risk" property insurance,
subject to standard exclusions, covering the Building or Project, and such other
risks as Landlord or its mortgagees may from time to time deem appropriate,
including leasehold improvements made by Landlord, and commercial general
liability coverage. Landlord shall not be required to carry insurance of any
kind on Tenant's property, including leasehold improvements, trade fixtures,
furnishings, equipment, plate glass, signs and all other items of personal
property, and shall not be obligated to repair or replace that property should
damage occur. All proceeds of insurance maintained by Landlord upon the Building
and Project shall be the property of Landlord, whether or not Landlord is
obligated to or elects to make any repairs.
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At Landlord's option, Landlord may self-insure all or any portion of the risks
for which Landlord elects to provide insurance hereunder.
SECTION 10.3. JOINT INDEMNITY.
(a) To the fullest extent permitted by law, Tenant shall defend,
indemnify, protect, save and hold harmless Landlord, its agents, and any and all
affiliates of Landlord, including, without limitation, any corporations or other
entities controlling, controlled by or under common control with Landlord, from
and against any and all claims, liabilities, costs or expenses arising either
before or after the Commencement Date from Tenant's use or occupancy of the
Premises, or from the conduct of its business, or from any activity, work, or
thing done, permitted or suffered by Tenant or its agents, employees, invitees
or licensees in or about the Premises, or from any negligence or willful
misconduct of Tenant or its agents, employees, visitors, patrons, guests,
invitees or licensees. In cases of alleged negligence asserted by third parties
against Landlord which arise out of, are occasioned by, or in any way
attributable to Tenant's, its agents, employees, contractors, licensees or
invitees use and occupancy of the Premises, or from the conduct of its business
or from any activity, work or thing done, permitted or suffered by Tenant or its
agents, employees, invitees or licensees on Tenant's part to be performed under
this Lease, or from any negligence or willful misconduct of Tenant, its agents,
employees, licensees or invitees, Tenant shall accept any tender of defense for
Landlord and shall, notwithstanding any allegation of negligence or willful
misconduct on the part of the Landlord, defend Landlord and protect and hold
Landlord harmless and pay all costs, expenses and attorneys' fees incurred in
connection with such litigation, provided that Tenant shall not be liable for
any such injury or damage, and Landlord shall reimburse Tenant for the
reasonable attorney's fees and costs for the attorney representing both parties,
all to the extent and in the proportion that such injury or damage is ultimately
determined by a court of competent jurisdiction (or in connection with any
negotiated settlement agreed to by Landlord) to be attributable to the
negligence or willful misconduct of Landlord. Upon Landlord's request, Tenant
shall at Tenant's sole cost and expense, retain a separate attorney reasonably
selected by Landlord to represent Landlord in any such suit if Landlord
reasonably determines that the representation of both Tenant and Landlord by the
same attorney would cause a conflict of interest; provided, however, that to the
extent and in the proportion that the injury or damage which is the subject of
the suit is ultimately determined by a court of competent jurisdiction (or in
connection with any negotiated settlement agreed to by Landlord) to be
attributable to the negligence or willful misconduct of Landlord, Landlord shall
reimburse Tenant for the reasonable legal fees and costs of the separate
attorney retained by Tenant. The provisions of this Subsection 10.3(a) shall
expressly survive the expiration or sooner termination of this Lease.
(b) To the fullest extent permitted by law, but subject to the
express limitations on liability contained in this Lease (including, without
limitation, the provisions of Sections 10.4, 10.5 and 14.8 of this Lease),
Landlord shall defend, indemnify, protect, save and hold harmless Tenant, its
agents and any and all affiliates of Tenant, including, without limitation, any
corporations, or other entities controlling, controlled by or under common
control with Tenant, from and against any and all claims, liabilities, costs or
expenses arising either before or after the Commencement Date from any
negligence or willful misconduct in the operation, maintenance or repair of the
Common Areas, the Project and/or the Building by Landlord or its employees or
authorized agents. In cases of alleged negligence asserted by third parties
against Tenant which arise out of, are occasioned by, or in any way attributable
to the maintenance or repair of the Common Areas, the Project or the Building by
Landlord or its authorized agents or employees, Landlord shall accept any tender
of defense for Tenant and shall, notwithstanding any allegation of negligence or
willful misconduct on the part of Tenant, defend Tenant and protect and hold
Tenant harmless and pay all cost, expense and attorneys' fees incurred in
connection with such litigation, provided that Landlord shall not be liable for
any such injury or damage, and Tenant shall reimburse Landlord for the
reasonable attorney's fees and costs for the attorney representing both parties,
all to the extent and in the proportion that such injury or damage is ultimately
determined by a court of competent jurisdiction (or in connection with any
negotiated settlement agreed to by Tenant) to be attributable to the negligence
or willful misconduct of Tenant. Upon Tenant's request, Landlord shall at
Landlord's sole cost and expense, retain a separate attorney reasonably selected
by Tenant to represent Tenant in any such suit if Tenant reasonably determines
that the representation of both Tenant and Landlord by the same attorney would
cause conflict of interest; provided, however, that to the extent and the
proportion that the injury or damage which is the subject of the suit is
ultimately determined by a court of competent jurisdiction (or in connection
with any negotiated settlement agreed to by Tenant) to be attributable to the
negligence or willful misconduct or Tenant, Tenant shall reimburse Landlord for
the reasonable legal fees and costs of the separate attorney retained by
Landlord. The provisions of this Subsection 10.3(b) shall expressly survive the
expiration or sooner termination of this Lease.
SECTION 10.4. LANDLORD'S NONLIABILITY. Subject to the express indemnity
obligations of Section 10.3(b), Landlord shall not be liable to Tenant, its
employees, agents and invitees, and Tenant hereby waives all claims against
Landlord for loss of or damage to any property, or any injury to any person, or
loss or interruption of business or income, or any other loss, cost, damage,
injury or liability whatsoever (including without limitation any consequential
damages and lost profit or opportunity costs) resulting from fire, explosion,
falling plaster, steam, gas, electricity, water or rain which may leak or flow
from or into any part of the Building or from the breakage, leakage, obstruction
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, electrical works or other fixtures in the Building, whether the
damage or injury results from conditions arising in the Premises or in other
portions of the Project. Notwithstanding any provision of this Lease to the
contrary, and regardless of the negligence or willful misconduct of Landlord,
its employees or authorized agents, Landlord shall in no event be liable to
Tenant, its employees, agents or invitees and Tenant hereby waives all claims
against Landlord, for (i) loss or interruption of Tenant's business or income (
including without limitation any consequential damages and lost profit or
opportunity costs); and (ii) any loss, cost, damage, injury or liability
resulting from Acts of God (except with respect to restoration obligations
pursuant to Article XI below), acts of civil disobedience or insurrection, acts
or omissions (criminal or otherwise) of any third parties (other than Landlord's
employees or authorized agents ), including without limitation, any other
tenants within the Project or their agents, employees, contractors, guests or
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invitees. It is understood that any such condition may require the temporary
evacuation or closure of all or a portion of the Building. Except as provided in
Sections 11.1 and 12.1 below, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business (including without limitation consequential damages and lost profit or
opportunity costs) arising from the making of any repairs, alterations or
improvements to any portion of the Building, including repairs to the Premises,
nor shall any related activity by Landlord constitute an actual or constructive
eviction; provided, however, that in making repairs, alterations or
improvements, Landlord shall interfere as little as reasonably practicable with
the conduct of Tenant's business in the Premises. Neither Landlord nor its
agents shall be liable for interference with light or other similar intangible
interests. Tenant shall immediately notify Landlord in case of fire or accident
in the Premises, the Building or the Project and of defects in any improvements
or equipment.
SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waives all rights of recovery against the other and the other's agents on
account of loss and damage occasioned to the property of such waiving party to
the extent only that such loss or damage is required to be insured against under
any "all risk" property insurance policies required by this Article X; provided
however, that (i) the foregoing waiver shall not apply to the extent of Tenant's
obligations to pay deductibles under any such policies and this Lease, and (ii)
if any loss is due to the act, omission or negligence or willful misconduct of
Tenant or its agents, employees, contractors, guests or invitees, Tenant's
liability insurance shall be primary and shall cover all losses and damages
prior to any other insurance hereunder. By this waiver it is the intent of the
parties that neither Landlord nor Tenant shall be liable to any insurance
company (by way of subrogation or otherwise) insuring the other party for any
loss or damage insured against under any "all-risk" property insurance policies
required by this Article, even though such loss or damage might be occasioned by
the negligence of such party, its agents, employees, contractors, guests or
invitees. The provisions of this Section shall not limit the indemnification
provisions elsewhere contained in this Lease.
ARTICLE XI. DAMAGE OR DESTRUCTION
SECTION 11.1. RESTORATION.
(a) If the Building is damaged, Landlord shall repair that damage
as soon as reasonably possible, at its expense, unless: (i) Landlord reasonably
determines that the cost of repair is not covered by Landlord's fire and
extended coverage insurance plus such additional amounts Tenant elects, at its
option, to contribute, excluding however the deductible (for which Tenant shall
be responsible for Tenant's proportionate share); (ii) Landlord reasonably
determines that the Premises cannot, with reasonable diligence, be fully
repaired by Landlord (or cannot be safely repaired because of the presence of
hazardous factors, including without limitation Hazardous Materials, earthquake
faults, and other similar dangers) within two hundred seventy (270) days after
the date of the damage; (iii) an event of default by Tenant has occurred and is
continuing at the time of such damage; or (iv) the damage occurs during the
final twelve (12) months of the Term. Should Landlord elect not to repair the
damage for one of the preceding reasons, Landlord shall so notify Tenant in
writing within sixty (60) days after the damage occurs and this Lease shall
terminate as of the date of that notice.
(b) Unless Landlord elects to terminate this Lease in accordance
with subsection (a) above, this Lease shall continue in effect for the remainder
of the Term; provided that so long as Tenant is not in default under this Lease,
if the damage is so extensive that Landlord reasonably determines that the
Premises cannot, with reasonable diligence, be repaired by Landlord (or cannot
be safely repaired because of the presence of hazardous factors, earthquake
faults, and other similar dangers) so as to allow Tenant's substantial use and
enjoyment of the Premises within two hundred seventy (270) days after the date
of damage, then Tenant may elect to terminate this Lease by written notice to
Landlord within the sixty (60) day period stated in subsection (a).
(c) Commencing on the date of any damage to the Building, and
ending on the sooner of the date the damage is repaired or the date this Lease
is terminated, the rental to be paid under this Lease shall be abated in the
same proportion that the floor area of the Building that is rendered unusable by
the damage from time to time bears to the total floor area of the Building, but
only to the extent that any business interruption insurance proceeds are
received by Landlord therefor from Tenant's insurance described in Exhibit D.
(d) Notwithstanding the provisions of subsections (a), (b) and
(c) of this Section, and subject to the provisions of Section 10.5 above, the
cost of any repairs shall be borne by Tenant, and Tenant shall not be entitled
to rental abatement or termination rights, if the damage is due to the fault or
neglect of Tenant or its employees, subtenants, invitees or representatives. In
addition, the provisions of this Section shall not be deemed to require Landlord
to repair any improvements or fixtures that Tenant is obligated to repair or
insure pursuant to any other provision of this Lease.
(e) Tenant shall fully cooperate with Landlord in removing
Tenant's personal property and any debris from the Premises to facilitate all
inspections of the Premises and the making of any repairs. Notwithstanding
anything to the contrary contained in this Lease, if Landlord in good faith
believes there is a risk of injury to persons or damage to property from entry
into the Building or Premises following any damage or destruction thereto,
Landlord may restrict entry into the Building or the Premises by Tenant, its
employees, agents and contractors in a non-discriminatory manner, without being
deemed to have violated Tenant's rights of quiet enjoyment to, or made an
unlawful detainer of, or evicted Tenant from, the Premises. Upon request,
Landlord shall consult with Tenant to determine if there are safe methods of
entry into the Building or the Premises solely in order to allow Tenant to
retrieve files, data in computers, and necessary inventory, subject however to
all indemnities and waivers of liability from Tenant to Landlord contained in
this Lease and any additional indemnities and waivers of liability which
Landlord may require.
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SECTION 11.2. LEASE GOVERNS. Tenant agrees that the provisions of this
Lease, including without limitation Section 11.1, shall govern any damage or
destruction and shall accordingly supersede any contrary statute or rule of law.
ARTICLE XII. EMINENT DOMAIN
SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of
the Premises is taken by any lawful authority by exercise of the right of
eminent domain, or sold to prevent a taking, either Tenant or Landlord may
terminate this Lease effective as of the date possession is required to be
surrendered to the authority. In the event title to a portion of the Premises is
taken or sold in lieu of taking, and if Landlord elects to restore the Premises
in such a way as to alter the Premises materially, either party may terminate
this Lease, by written notice to the other party, effective on the date of
vesting of title. In the event neither party has elected to terminate this Lease
as provided above, then Landlord shall promptly, after receipt of a sufficient
condemnation award, proceed to restore the Premises to substantially their
condition prior to the taking, and a proportionate allowance shall be made to
Tenant for the rent corresponding to the time during which, and to the part of
the Premises of which, Tenant is deprived on account of the taking and
restoration. In the event of a taking, Landlord shall be entitled to the entire
amount of the condemnation award without deduction for any estate or interest of
Tenant; provided that nothing in this Section shall be deemed to give Landlord
any interest in, or prevent Tenant from seeking any award against the taking
authority for, the taking of personal property and fixtures belonging to Tenant
or for relocation or business interruption expenses recoverable from the taking
authority.
SECTION 12.2. TEMPORARY TAKING. No temporary taking of the Premises
shall terminate this Lease or give Tenant any right to abatement of rent, and
any award specifically attributable to a temporary taking of the Premises shall
belong entirely to Tenant. A temporary taking shall be deemed to be a taking of
the use or occupancy of the Premises for a period of not to exceed one hundred
eighty (180) days.
SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a
taking of the parking area such that Landlord can no longer provide sufficient
parking to comply with this Lease, Landlord may substitute reasonably equivalent
parking in a location reasonably close to the Building; provided that if
Landlord fails to make that substitution within one hundred eighty (180) days
following the taking and if the taking materially impairs Tenant's use and
enjoyment of the Premises, Tenant may, at its option, terminate this Lease by
written notice to Landlord. If this Lease is not so terminated by Tenant, there
shall be no abatement of rent and this Lease shall continue in effect.
ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS
SECTION 13.1. SUBORDINATION. At the option of Landlord, this Lease shall
be either superior or subordinate to all ground or underlying leases, mortgages
and deeds of trust, if any, which may hereafter affect the Premises, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, that so long as Tenant is not in default under this Lease beyond any
applicable cure period, this Lease shall not be terminated or Tenant's quiet
enjoyment of the Premises disturbed in the event of termination of any such
ground or underlying lease, or the foreclosure of any such mortgage or deed of
trust, to which Tenant has subordinated this Lease pursuant to this Section. In
the event of a termination or foreclosure, Tenant shall become a tenant of and
attorn to the successor-in-interest to Landlord upon the same terms and
conditions as are contained in this Lease, and shall execute any instrument
reasonably required by Landlord's successor for that purpose. Tenant shall also,
upon written request of Landlord, execute and deliver all instruments as may be
required from time to time to subordinate the rights of Tenant under this Lease
to any ground or underlying lease or to the lien of any mortgage or deed of
trust (provided that such instruments include the nondisturbance and attornment
provisions set forth above), or, if requested by Landlord, to subordinate, in
whole or in part, any ground or underlying lease or the lien of any mortgage or
deed of trust to this Lease. Landlord represents and warrants to Tenant that as
of the date of this Lease there is no mortgage or deed of trust encumbering the
Premises.
SECTION 13.2. ESTOPPEL CERTIFICATE.
(a) Tenant shall, at any time upon not less than ten (10) days
prior written notice from Landlord, execute, acknowledge and deliver to
Landlord, in any form that Landlord may reasonably require, a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of the modification and certifying
that this Lease, as modified, is in full force and effect) and the dates to
which the rental, additional rent and other charges have been paid in advance,
if any, and (ii) acknowledging that, to Tenant's knowledge, there are no uncured
defaults on the part of Landlord, or specifying each default if any are claimed,
and (iii) setting forth all further information that Landlord may reasonably
require. Tenant's statement may be relied upon by any prospective purchaser or
encumbrancer of the Premises.
(b) Notwithstanding any other rights and remedies of Landlord,
Tenant's failure to deliver any estoppel statement within the provided time
shall be conclusive upon Tenant that (i) this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) there are no
uncured defaults in Landlord's performance, and (iii) not more than one month's
rental has been paid in advance.
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SECTION 13.3 FINANCIALS.
(a) Tenant shall deliver to Landlord, prior to the execution of
this Lease and thereafter at any time upon Landlord's request but not more than
once in a calendar year, Tenant's current financial statements, audited or
certified true, accurate and complete by the chief financial officer of Tenant,
including a balance sheet and profit and loss statement for the most recent
prior year (collectively, the "Statements"), which Statements shall accurately
and completely reflect the financial condition of Tenant. Landlord agrees that
it will keep the Statements confidential, except that Landlord shall have the
right to deliver the same to any proposed purchaser or encumbrancer of the
Premises.
(b) Tenant acknowledges that Landlord is relying on the
Statements in its determination to enter into this Lease, and Tenant represents
to Landlord, which representation shall be deemed made on the date of this Lease
and again on the Commencement Date, that no material change in the financial
condition of Tenant, as reflected in the Statements, has occurred since the date
Tenant delivered the Statements to Landlord. The Statements are represented and
warranted by Tenant to be correct and to accurately and fully reflect Tenant's
true financial condition as of the date of submission by any Statements to
Landlord.
ARTICLE XIV. DEFAULTS AND REMEDIES
SECTION 14.1. TENANT'S DEFAULTS. In addition to any other event of
default set forth in this Lease, the occurrence of any one or more of the
following events shall constitute a default by Tenant:
(a) The failure by Tenant to make any payment of rent or
additional rent required to be made by Tenant, as and when due, where the
failure continues for a period of five (5) days after written notice from
Landlord to Tenant; provided, however, that any such notice shall be in lieu of,
and not in addition to, any notice required under California Code of Civil
Procedure Section 1161 and 1161(a) as amended. For purposes of these default and
remedies provisions, the term "additional rent" shall be deemed to include all
amounts of any type whatsoever other than Basic Rent to be paid by Tenant
pursuant to the terms of this Lease.
(b) Assignment, sublease, encumbrance or other transfer of the
Lease by Tenant, either voluntarily or by operation of law, whether by judgment,
execution, transfer by intestacy or testacy, or other means, without the prior
written consent of Landlord.
(c) The discovery by Landlord that any financial statement
provided by Tenant, or by any affiliate, successor or guarantor of Tenant, was
materially false.
(d) The failure of Tenant to timely and fully provide any
subordination agreement, estoppel certificate or financial statements in
accordance with the requirements of Article XIII.
(e) The failure or inability by Tenant to observe or perform any
of the provisions of this Lease to be observed or performed by Tenant, other
than as specified in any other subsection of this Section, where the failure
continues for a period of thirty (30) days after written notice from Landlord to
Tenant or such shorter period as is specified in any other provision of this
Lease; provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161 and 1161(a) as amended. However, if the nature of the failure is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences the cure within
thirty (30) days, and thereafter diligently pursues the cure to completion.
(f) (i) The making by Tenant of any general assignment for the
benefit of creditors; (ii) the filing by or against Tenant of a petition to have
Tenant adjudged a Chapter 7 debtor under the Bankruptcy Code or to have debts
discharged or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
the same is dismissed within thirty (30) days); (iii) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, if possession is
not restored to Tenant within thirty (30) days; (iv) the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where the seizure is not
discharged within thirty (30) days; or (v) Tenant's convening of a meeting of
its creditors for the purpose of effecting a moratorium upon or composition of
its debts. Landlord shall not be deemed to have knowledge of any event described
in this subsection unless notification in writing is received by Landlord, nor
shall there be any presumption attributable to Landlord of Tenant's insolvency.
In the event that any provision of this subsection is contrary to applicable
law, the provision shall be of no force or effect.
SECTION 14.2. LANDLORD'S REMEDIES.
(a) In the event of any default by Tenant, then in addition to
any other remedies available to Landlord, Landlord may exercise the following
remedies:
(i) Landlord may terminate Tenant's right to possession of
the Premises by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. Such
termination shall not affect any accrued obligations of Tenant under this Lease.
Upon
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termination, Landlord shall have the right to reenter the Premises and remove
all persons and property. Landlord shall also be entitled to recover from
Tenant:
(1) The worth at the time of award of the unpaid
rent and additional rent which had been earned at the time of termination;
(2) The worth at the time of award of the amount by
which the unpaid rent and additional rent which would have been earned after
termination until the time of award exceeds the amount of such loss that Tenant
proves could have been reasonably avoided;
(3) The worth at the time of award of the amount by
which the unpaid rent and additional rent for the balance of the Term after the
time of award exceeds the amount of such loss that Tenant proves could be
reasonably avoided;
(4) Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of things would
be likely to result from Tenant's default, including, but not limited to, the
cost of recovering possession of the Premises, refurbishment of the Premises,
marketing costs, commissions and other expenses of reletting, including
necessary repair, the unamortized portion of any tenant improvements and
brokerage commissions funded by Landlord in connection with this Lease,
reasonable attorneys' fees, and any other reasonable costs; and
(5) At Landlord's election, all other amounts in
addition to or in lieu of the foregoing as may be permitted by law. The term
"rent" as used in this Lease shall be deemed to mean the Basic Rent and all
other sums required to be paid by Tenant to Landlord pursuant to the terms of
this Lease. Any sum, other than Basic Rent, shall be computed on the basis of
the average monthly amount accruing during the twenty-four (24) month period
immediately prior to default, except that if it becomes necessary to compute
such rental before the twenty-four (24) month period has occurred, then the
computation shall be on the basis of the average monthly amount during the
shorter period. As used in subparagraphs (1) and (2) above, the "worth at the
time of award" shall be computed by allowing interest at the rate of ten percent
(10%) per annum. As used in subparagraph (3) above, the "worth at the time of
award" shall be computed by discounting the amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).
(ii) Landlord may elect not to terminate Tenant's right to
possession of the Premises, in which event Landlord may continue to enforce all
of its rights and remedies under this Lease, including the right to collect all
rent as it becomes due. Efforts by the Landlord to maintain, preserve or relet
the Premises, or the appointment of a receiver to protect the Landlord's
interests under this Lease, shall not constitute a termination of the Tenant's
right to possession of the Premises. In the event that Landlord elects to avail
itself of the remedy provided by this subsection (ii), Landlord shall not
unreasonably withhold its consent to an assignment or subletting of the Premises
subject to the reasonable standards for Landlord's consent as are contained in
this Lease.
(b) Landlord shall be under no obligation to observe or perform
any covenant of this Lease on its part to be observed or performed which accrues
after the date of any default by Tenant unless and until the default is cured by
Tenant, it being understood and agreed that the performance by Landlord of its
obligations under this Lease are expressly conditioned upon Tenant's full and
timely performance of its obligations under this Lease. The various rights and
remedies reserved to Landlord in this Lease or otherwise shall be cumulative
and, except as otherwise provided by California law, Landlord may pursue any or
all of its rights and remedies at the same time.
(c) No delay or omission of Landlord to exercise any right or
remedy shall be construed as a waiver of the right or remedy or of any default
by Tenant. The acceptance by Landlord of rent shall not be a (i) waiver of any
preceding breach or default by Tenant of any provision of this Lease, other than
the failure of Tenant to pay the particular rent accepted, regardless of
Landlord's knowledge of the preceding breach or default at the time of
acceptance of rent, or (ii) a waiver of Landlord's right to exercise any remedy
available to Landlord by virtue of the breach or default. The acceptance of any
payment from a debtor in possession, a trustee, a receiver or any other person
acting on behalf of Tenant or Tenant's estate shall not waive or cure a default
under Section 14.1. No payment by Tenant or receipt by Landlord of a lesser
amount than the rent required by this Lease shall be deemed to be other than a
partial payment on account of the earliest due stipulated rent, nor shall any
endorsement or statement on any check or letter be deemed an accord and
satisfaction and Landlord shall accept the check or payment without prejudice to
Landlord's right to recover the balance of the rent or pursue any other remedy
available to it. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept a surrender shall be valid unless in writing and signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease, and
the delivery of the keys to any employee shall not operate as a termination of
the Lease or a surrender of the Premises.
SECTION 14.3. LATE PAYMENTS.
(a) Any rent due under this Lease that is not received by
Landlord within five (5) business days of the date when due shall bear interest
at the greater of twelve percent (12%) per year or the maximum rate permitted by
law from the date due until fully paid. The payment of interest shall not cure
any default by Tenant under this Lease. In addition, Tenant acknowledges that
the late payment by Tenant to Landlord of rent will cause
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Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult and impracticable to ascertain. Those costs
may include, but are not limited to, administrative, processing and accounting
charges, and late charges which may be imposed on Landlord by the terms of any
ground lease, mortgage or trust deed covering the Premises. Accordingly, if any
rent due from Tenant shall not be received by Landlord or Landlord's designee
within five (5) business days after the date due, then Tenant shall pay to
Landlord, in addition to the interest provided above, a late charge in a sum
equal to five percent (5%) of the amount overdue for each delinquent payment;
provided, however, that such late charge shall be waived by Landlord for the
initial late payment only during each calendar year of the Term. Acceptance of a
late charge only by Landlord shall not constitute a waiver of Tenant's default
with respect to the overdue amount, nor shall it prevent Landlord from
exercising any of its other rights and remedies.
(b) Following each second consecutive installment of rent that is
not paid within five (5) business days following notice of nonpayment from
Landlord, Landlord shall have the option to require that Tenant increase the
amount, if any, of the Security Deposit by one hundred percent (100%). Should
Tenant deliver to Landlord, at any time during the Term, two (2) or more
insufficient checks, the Landlord may require that all monies then and
thereafter due from Tenant be paid to Landlord by cashier's check.
SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements
to be performed by Tenant under this Lease shall be performed at Tenant's sole
cost and expense and without any abatement of rent or right of set-off. If
Tenant fails to pay any sum of money, other than rent, or fails to perform any
other act on its part to be performed under this Lease, and the failure
continues beyond any applicable grace period set forth in Section 14.1, then in
addition to any other available remedies, Landlord may, at its election make the
payment or perform the other act on Tenant's part. Landlord's election to make
the payment or perform the act on Tenant's part shall not give rise to any
responsibility of Landlord to continue making the same or similar payments or
performing the same or similar acts. Tenant shall, promptly upon demand by
Landlord, reimburse Landlord for all sums paid by Landlord and all necessary
incidental costs, together with interest at the maximum rate permitted by law
from the date of the payment by Landlord. Landlord shall have the same rights
and remedies if Tenant fails to pay those amounts as Landlord would have in the
event of a default by Tenant in the payment of rent.
SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in
default in the performance of any obligation under this Lease unless and until
it has failed to perform the obligation within thirty (30) days after written
notice by Tenant to Landlord specifying in reasonable detail the nature and
extent of the failure; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed to be in default if it commences
performance within the thirty (30) day period and thereafter diligently pursues
the cure to completion.
SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by
Landlord in connection with any event of default by Tenant under this Lease or
holding over of possession by Tenant after the expiration or earlier termination
of this Lease, including without limitation all costs, expenses and actual
accountants, appraisers, attorneys and other professional fees, and any
collection agency or other collection charges, shall be due and payable by
Tenant to Landlord on demand, and shall bear interest at the rate of ten percent
(10%) per annum. Should either Landlord or Tenant bring any action in connection
with this Lease, the prevailing party shall be entitled to recover as a part of
the action its reasonable attorneys' fees, and all other costs. The prevailing
party for the purpose of this paragraph shall be determined by the trier of the
facts.
SECTION 14.7. WAIVER OF JURY TRIAL. LANDLORD AND TENANT EACH
ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE
WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY
EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST
THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR
SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM OF INJURY OR DAMAGE.
SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord do
not constitute the personal obligations of the individual partners, trustees,
directors, officers or shareholders of Landlord or its constituent partners.
Should Tenant recover a money judgment against Landlord, such judgment shall be
satisfied only out of the proceeds of sale received upon execution of such
judgment and levied thereon against the right, title and interest of Landlord in
the Project and out of the rent or other income from such property receivable by
Landlord or out of consideration received by Landlord from the sale or other
disposition of all or any part of Landlord's right, title or interest in the
Project, and no action for any deficiency may be sought or obtained by Tenant.
SECTION 14.9. LIMITATION OF ACTIONS AGAINST LANDLORD. Any claim, demand
or right of any kind by Tenant which is based upon or arises in connection with
this Lease shall be barred unless Tenant commences an action thereon within
twelve (12) months after the date that the act, omission, event or default upon
which the claim, demand or right arises, has occurred.
ARTICLE XV. END OF TERM
SECTION 15.1. HOLDING OVER. This Lease shall terminate without further
notice upon the expiration of the Term, and any holding over by Tenant after the
expiration shall not constitute a renewal or
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extension of this Lease, or give Tenant any rights under this Lease, except when
in writing signed by both parties. If Tenant holds over for any period after the
expiration (or earlier termination) of the Term without the prior written
consent of Landlord, such possession shall constitute a tenancy at sufferance
only; such holding over with the prior written consent of Landlord shall
constitute a month-to-month tenancy commencing on the first (1st) day following
the termination of this Lease. In either of such events, possession shall be
subject to all of the terms of this Lease, except that the monthly Basic Rent
shall be one hundred fifty percent (150%) of the Basic Rent for the month
immediately preceding the date of termination for the first two (2) months of
any such holdover and thereafter 175% of the Basic Rent for the month
immediately preceding the date of termination. If Tenant fails to surrender the
Premises upon the expiration of this Lease despite demand to do so by Landlord,
Tenant shall indemnify and hold Landlord harmless from all loss or liability,
including without limitation, any claims made by any succeeding tenant relating
to such failure to surrender. Acceptance by Landlord of rent after the
termination shall not constitute a consent to a holdover or result in a renewal
of this Lease. The foregoing provisions of this Section are in addition to and
do not affect Landlord's right of reentry or any other rights of Landlord under
this Lease or at law.
SECTION 15.2. MERGER ON TERMINATION. The voluntary or other surrender of
this Lease by Tenant, or a mutual termination of this Lease, shall terminate any
or all existing subleases unless Landlord, at its option, elects in writing to
treat the surrender or termination as an assignment to it of any or all
subleases affecting the Premises.
SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Upon the
Expiration Date or upon any earlier termination of this Lease, Tenant shall quit
and surrender possession of the Premises to Landlord in as good order, condition
and repair as when received or as hereafter may be improved by Landlord or
Tenant, reasonable wear and tear, repairs which are Landlord's obligation and
except as specifically set forth in Articles XI or XII hereof, damage from
casualty or condemnation excepted, and shall, without expense to Landlord,
remove or cause to be removed from the Premises all personal property and
debris, except for any items that Landlord may by written authorization allow to
remain. Tenant shall repair all damage to the Premises resulting from the
removal, which repair shall include the patching and filling of holes and repair
of structural damage, provided that Landlord may instead elect to repair any
structural damage at Tenant's expense. If Tenant shall fail to comply with the
provisions of this Section, Landlord may effect the removal and/or make any
repairs, and the cost to Landlord shall be additional rent payable by Tenant
upon demand. If Tenant fails to remove Tenant's personal property from the
Premises upon the expiration of the Term, Landlord may remove, store, dispose of
and/or retain such personal property, at Landlord's option, in accordance with
then applicable laws, all at the expense of Tenant. If requested by Landlord,
Tenant shall execute, acknowledge and deliver to Landlord an instrument in
writing releasing and quitclaiming to Landlord all right, title and interest of
Tenant in the Premises.
ARTICLE XVI. PAYMENTS AND NOTICES
All sums payable by Tenant to Landlord shall be paid, without deduction
or offset, in lawful money of the United States to Landlord at its address set
forth in Item 12 of the Basic Lease Provisions, or at any other place as
Landlord may designate in writing. Unless this Lease expressly provides
otherwise, as for example in the payment of rent pursuant to Section 4.1, all
payments shall be due and payable within five (5) days after demand. All
payments requiring proration shall be prorated on the basis of a thirty (30) day
month and a three hundred sixty (360) day year. Any notice, election, demand,
consent, approval or other communication to be given or other document to be
delivered by either party to the other may be delivered in person or by courier
or overnight delivery service to the other party, or may be deposited in the
United States mail, duly registered or certified, postage prepaid, return
receipt requested, and addressed to the other party at the address set forth in
Item 12 of the Basic Lease Provisions, or if to Tenant, at that address or, from
and after the Commencement Date, at the Premises (whether or not Tenant has
departed from, abandoned or vacated the Premises), or may be delivered by
telegram, telex or telecopy, provided that receipt thereof is telephonically
confirmed. Either party may, by written notice to the other, served in the
manner provided in this Article, designate a different address. If any notice or
other document is sent by mail, it shall be deemed served or delivered
forty-eight (48) hours after mailing. If more than one person or entity is named
as Tenant under this Lease, service of any notice upon any one of them shall be
deemed as service upon all of them.
ARTICLE XVII. RULES AND REGULATIONS
Tenant agrees to observe faithfully and comply strictly with the Rules
and Regulations, attached as Exhibit E, and any reasonable and nondiscriminatory
amendments, modifications and/or additions as may be adopted and published by
written notice to tenants by Landlord for the safety, care, security, good
order, or cleanliness of the Premises, and Project and Common Areas (if
applicable). Landlord shall not be liable to Tenant for any violation of the
Rules and Regulations or the breach of any covenant or condition in any lease by
any other tenant or such tenant's agents, employees, contractors, quests or
invitees. One or more waivers by Landlord of any breach of the Rules and
Regulations by Tenant or by any other tenant(s) shall not be a waiver of any
subsequent breach of that rule or any other. Tenant's failure to keep and
observe the Rules and Regulations shall constitute a default under this Lease.
In the case of any conflict between the Rules and Regulations and this Lease,
this Lease shall be controlling.
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ARTICLE XVIII. BROKER'S COMMISSION
The parties recognize as the broker(s) who negotiated this Lease the
firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease
Provisions, and agree that Landlord shall be responsible for the payment of
brokerage commissions to those broker(s) unless otherwise provided in this
Lease. Tenant warrants that it has had no dealings with any other real estate
broker or agent in connection with the negotiation of this Lease, and Tenant
agrees to indemnify and hold Landlord harmless from any cost, expense or
liability (including reasonable attorneys' fees) for any compensation,
commissions or charges claimed by any other real estate broker or agent employed
or claiming to represent or to have been employed by Tenant in connection with
the negotiation of this Lease. The foregoing agreement shall survive the
termination of this Lease. If Tenant fails to take possession of the Premises or
if this Lease otherwise terminates prior to the Expiration Date as the result of
failure of performance by Tenant, Landlord shall be entitled to recover from
Tenant the unamortized portion of any brokerage commission funded by Landlord in
addition to any other damages to which Landlord may be entitled.
ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST
In the event of any transfer of Landlord's interest in the Premises, the
transferor shall be automatically relieved of all obligations on the part of
Landlord accruing under this Lease from and after the date of the transfer,
provided that any funds held by the transferor in which Tenant has an interest
shall be turned over, subject to that interest, to the transferee and Tenant is
notified of the transfer as required by law. No holder of a mortgage and/or deed
of trust to which this Lease is or may be subordinate, and no landlord under a
socalled saleleaseback, shall be responsible in connection with the Security
Deposit, unless the mortgagee or holder of the deed of trust or the landlord
actually receives the Security Deposit. It is intended that the covenants and
obligations contained in this Lease on the part of Landlord shall, subject to
the foregoing, be binding on Landlord, its successors and assigns, only during
and in respect to their respective successive periods of ownership.
ARTICLE XX. INTERPRETATION
SECTION 20.1. GENDER AND NUMBER. Whenever the context of this Lease
requires, the words "Landlord" and "Tenant" shall include the plural as well as
the singular, and words used in neuter, masculine or feminine genders shall
include the others.
SECTION 20.2. HEADINGS. The captions and headings of the articles and
sections of this Lease are for convenience only, are not a part of this Lease
and shall have no effect upon its construction or interpretation.
SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person or
entity is named as Tenant, the obligations imposed upon each shall be joint and
several and the act of or notice from, or notice or refund to, or the signature
of, any one or more of them shall be binding on all of them with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
termination or modification of this Lease.
SECTION 20.4. SUCCESSORS. Subject to Articles IX and XIX, all rights and
liabilities given to or imposed upon Landlord and Tenant shall extend to and
bind their respective heirs, executors, administrators, successors and assigns.
Nothing contained in this Section is intended, or shall be construed, to grant
to any person other than Landlord and Tenant and their successors and assigns
any rights or remedies under this Lease.
SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to
the performance of every provision of this Lease.
SECTION 20.6. CONTROLLING LAW. This Lease shall be governed by and
interpreted in accordance with the laws of the State of California.
SECTION 20.7. SEVERABILITY. If any term or provision of this Lease, the
deletion of which would not adversely affect the receipt of any material benefit
by either party or the deletion of which is consented to by the party adversely
affected, shall be held invalid or unenforceable to any extent, the remainder of
this Lease shall not be affected and each term and provision of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by
Landlord or Tenant of any breach of any term, covenant or condition contained in
this Lease shall not be a waiver of any subsequent breach of the same or any
other term, covenant or condition. Consent to any act by one of the parties
shall not be deemed to render unnecessary the obtaining of that party's consent
to any subsequent act. No breach by Tenant of this Lease shall be deemed to have
been waived by Landlord unless the waiver is in a writing signed by Landlord.
The rights and remedies of Landlord under this Lease shall be cumulative and in
addition to any and all other rights and remedies which Landlord may have.
22
<PAGE> 23
SECTION 20.9. INABILITY TO PERFORM. In the event that either party shall
be delayed or hindered in or prevented from the performance of any work or in
performing any act required under this Lease by reason of any cause beyond the
reasonable control of that party, then the performance of the work or the doing
of the act shall be excused for the period of the delay and the time for
performance shall be extended for a period equivalent to the period of the
delay. The provisions of this Section shall not operate to excuse Tenant from
the prompt payment of rent or from the timely performance of any other
obligation under this Lease within Tenant's reasonable control.
SECTION 20.10.ENTIRE AGREEMENT. This Lease and its exhibits and other
attachments cover in full each and every agreement of every kind between the
parties concerning the Premises, the Building, and the Project, and all
preliminary negotiations, oral agreements, understandings and/or practices,
except those contained in this Lease, are superseded and of no further effect.
The parties waive any rights to rely on any representations or promises made by
the other which are not contained in this Lease. No verbal agreement or implied
covenant shall be held to modify the provisions of this Lease, any statute, law,
or custom to the contrary notwithstanding.
SECTION 20.11.QUIET ENJOYMENT. Upon the observance and performance of
all the covenants, terms and conditions on Tenant's part to be observed and
performed, and subject to the other provisions of this Lease, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Term without hindrance
or interruption by Landlord or any other person claiming by or through Landlord.
SECTION 20.12.SURVIVAL. All covenants of Landlord or Tenant which
reasonably would be intended to survive the expiration or sooner termination of
this Lease, including without limitation any warranty or indemnity hereunder,
shall so survive and continue to be binding upon and inure to the benefit of the
respective parties and their successors and assigns.
ARTICLE XXI. EXECUTION AND RECORDING
SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.
SECTION 21.2. CORPORATE AND PARTNERSHIP AUTHORITY. If Tenant is a
corporation or partnership, each individual executing this Lease on behalf of
the corporation or partnership represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of the corporation or
partnership, and that this Lease is binding upon the corporation or partnership
in accordance with its terms. Tenant shall, at Landlord's request, deliver a
certified copy of its board of directors' resolution or partnership agreement or
certificate authorizing or evidencing the execution of this Lease.
SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER. The submission of
this Lease to Tenant shall be for examination purposes only, and shall not
constitute an offer to or option for Tenant to lease the Premises. Execution of
this Lease by Tenant and its return to Landlord shall not be binding upon
Landlord, notwithstanding any time interval, until Landlord has in fact executed
and delivered this Lease to Tenant, it being intended that this Lease shall only
become effective upon execution by Landlord and delivery of a fully executed
counterpart to Tenant.
SECTION 21.4. RECORDING. Tenant shall not record this Lease without the
prior written consent of Landlord. Tenant, upon the request of Landlord, shall
execute and acknowledge a "short form" memorandum of this Lease for recording
purposes.
SECTION 21.5. AMENDMENTS. No amendment or termination of this Lease
shall be effective unless in writing signed by authorized signatories of Tenant
and Landlord, or by their respective successors in interest. No actions,
policies, oral or informal arrangements, business dealings or other course of
conduct by or between the parties shall be deemed to modify this Lease in any
respect.
SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar
reproduction of this Lease shall be deemed an original for all purposes.
SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda
attached to this Lease are hereby incorporated into and made a part of this
Lease.
ARTICLE XXII. MISCELLANEOUS
SECTION 22.1. NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and
agrees that the terms of this Lease are confidential and constitute proprietary
information of Landlord. Disclosure of the terms could adversely affect the
ability of Landlord to negotiate other leases and impair Landlord's relationship
with other tenants. Accordingly, Tenant agrees that it, and its partners,
officers, directors, employees and attorneys, shall not intentionally and
voluntarily disclose the terms or and conditions of this Lease to any other
tenant or apparent prospective tenant of the Project, either directly or
indirectly, without the prior written consent of Landlord, provided, however,
that Tenant may disclose the terms as required by a regulatory agency or to
prospective subtenants or assignees under this Lease.
23
<PAGE> 24
SECTION 22.2. GUARANTY. [Intentionally deleted].
SECTION 22.3. CHANGES REQUESTED BY LENDER. If, in connection with
obtaining financing for the Project, the lender shall request reasonable
modifications in this Lease as a condition to the financing, Tenant will not
unreasonably withhold or delay its consent, provided that the modifications do
not materially increase the obligations of Tenant or materially and adversely
affect the leasehold interest created by this Lease.
SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the part
of Landlord which would otherwise entitle Tenant to be relieved of its
obligations hereunder or to terminate this Lease shall result in such a release
or termination unless (a) Tenant has given notice by registered or certified
mail to any beneficiary of a deed of trust or mortgage covering the Premises
whose address has been furnished to Tenant and (b) such beneficiary is afforded
a reasonable opportunity to cure the default by Landlord (which in no event
shall be less than sixty (60) days), including, if necessary to effect the cure,
time to obtain possession of the Premises by power of sale or judicial
foreclosure provided that such foreclosure remedy is diligently pursued. Tenant
agrees that each beneficiary of a deed of trust or mortgage covering the
Premises is an express third party beneficiary hereof, Tenant shall have no
right or claim for the collection of any deposit from such beneficiary or from
any purchaser at a foreclosure sale unless such beneficiary or purchaser shall
have actually received and not refunded the deposit, and Tenant shall comply
with any written directions by any beneficiary to pay rent due hereunder
directly to such beneficiary without determining whether an event of default
exists under such beneficiary's deed of trust.
SECTION 22.5. COVENANTS AND CONDITIONS. All of the provisions of this
Lease shall be construed to be conditions as well as covenants as though the
words specifically expressing or imparting covenants and conditions were used in
each separate provision.
SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that
Landlord shall have no obligation whatsoever to provide guard service or other
security measures for the benefit of the Premises or the Project. Tenant assumes
all responsibility for the protection of Tenant, its agents, invitees and
property from acts of third parties. Nothing herein contained shall prevent
Landlord, at its sole option, from providing security protection for the Project
or any part thereof, in which event the cost thereof shall be included within
the definition of Building Costs.
SECTION 22.7. SATELLITE DISH. Provided Tenant shall continue to occupy
the entire Building, upon the execution by Tenant of Landlord's standard License
Agreement attached as EXHIBIT F hereto, Tenant shall have the right to install,
maintain and operate on the roof of the Building, during the Term of this Lease,
one (1) satellite dish (not to exceed six (6) feet in diameter) in accordance
with and subject to the terms of said License Agreement. Tenant shall not be
obligated to pay any license fee for such satellite dish during the initial
Lease Term. Thereafter, said license fee shall be the amount as reasonably
determined by Landlord from time to time.
SECTION 22.8. JAMS ARBITRATION.
(a) All claims or disputes between Landlord and Tenant arising
out of, or relating to the Lease which either party is expressly authorized by a
provision hereof to submit to arbitration, shall be decided by the
JAMS/ENDISPUTE, or its successor, in Orange, California ("JAMS"), unless the
parties mutually agree otherwise. Within ten (10) business days following
submission to JAMS, JAMS shall designate three arbitrators and each party may,
within five (5) business days thereafter, veto one of the three persons so
designated. If two different designated arbitrators have been vetoed, the third
arbitrator shall hear and decide the matter. Any arbitration pursuant to this
Section 22.8 shall be decided within thirty (30) days of submission of JAMS. The
decision of the arbitrator shall be final and binding on the parties. All costs
associated with arbitration shall be awarded to the prevailing party as
determined by the arbitrator.
(b) Notice of the demand for arbitration by either party to the
Lease shall be filed in writing with the other party to the Lease and with JAMS
and shall be made within a reasonable time after the dispute has arisen. The
award rendered by the arbitrators shall be final, and judgment may be entered
upon it in accordance with applicable law in any court having jurisdiction
thereof. Except by written consent of the person or entity sought to be joined,
no arbitration arising out of or relating to the Lease shall include, by
consolidation, joinder or in any other manner, any person or entity not a party
to the Lease under which such arbitration is filed if (1) such person or entity
is substantially involved in a common question of fact or law, (2) the presence
of such person or entity is required if complete relief is to be accorded in the
arbitration, or (3) the interest or responsibility of such person or entity in
the matter is not insubstantial.
(c) The agreement herein among the parties to the Lease and any
other written agreement to arbitrate referred to herein shall be specifically
enforceable under prevailing law.
LANDLORD: TENANT:
THE IRVINE COMPANY HNC SOFTWARE INC.,
A DELAWARE CORPORATION
24
<PAGE> 25
By: /s/ CLARENCE W. BARKER By: /s/ RAYMOND V. THOMAS
----------------------------------------- -------------------------
Clarence W. Barker, Name: Raymond V. Thomas
President, Irvine Industrial Company, Title: Vice President,
Finance and a division of Administration and Chief
The Irvine Company Financial Officer
By: /s/ JOHN C. TSU By:
----------------------------------------- -------------------------
John C. Tsu, Name:
Assistant Secretary Title:
<PAGE> 26
INDEX TO INDUSTRIAL LEASE
(Single Tenant; Net)
ARTICLE I. BASIC LEASE PROVISIONS
ARTICLE II. PREMISES
Section 2.1 Leased Premises
Section 2.2 Acceptance of Premises
Section 2.3 Building Name and Address
Section 2.4 Right of First Offer
ARTICLE III. TERM
Section 3.1 General
Section 3.2 Delay in Possession
Section 3.3 Right to Extend this Lease
ARTICLE IV. RENT AND OPERATING EXPENSES
Section 4.1 Basic Rent
Section 4.2 Operating Expenses
Section 4.3 Security Deposit
ARTICLE V. USES
Section 5.1 Use
Section 5.2 Signs
Section 5.3 Hazardous Materials
ARTICLE VI. COMMON AREAS; SERVICES
Section 6.1 Utilities and Services
Section 6.2 Operation and Maintenance of Common Areas
Section 6.3 Use of Common Areas
Section 6.4 Parking
Section 6.5 Changes and Additions by Landlord
ARTICLE VII. MAINTAINING THE PREMISES
Section 7.1 Tenant's Maintenance and Repair
Section 7.2 Landlord's Maintenance and Repair
Section 7.3 Alterations
Section 7.4 Mechanic's Liens
Section 7.5 Entry and Inspection
ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY
ARTICLE IX. ASSIGNMENT AND SUBLETTING
Section 9.1 Rights of Parties
Section 9.2 Effect of Transfer
Section 9.3 Sublease Requirements
Section 9.4 Certain Transfers
ARTICLE X. INSURANCE AND INDEMNITY
Section 10.1 Tenant's Insurance
Section 10.2 Landlord's Insurance
Section 10.3 Tenant's Indemnity
Section 10.4 Landlord's Nonliability
Section 10.5 Waiver of Subrogation
ARTICLE XI. DAMAGE OR DESTRUCTION
Section 11.1 Restoration
Section 11.2 Lease Governs
ARTICLE XII. EMINENT DOMAIN
Section 12.1 Total or Partial Taking
Section 12.2 Temporary Taking
Section 12.3 Taking of Parking Area
ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIAL
Section 13.1 Subordination
Section 13.2 Estoppel Certificate
Section 13.3 Financials
(i)
ARTICLE XIV. DEFAULTS AND REMEDIES
<PAGE> 27
Section 14.1 Tenant's Defaults
Section 14.2 Landlord's Remedies
Section 14.3 Late Payments
Section 14.4 Right of Landlord to Perform
Section 14.5 Default by Landlord
Section 14.6 Expenses and Legal Fees
Section 14.7 Waiver of Jury Trial
Section 14.8 Satisfaction of Judgment
Section 14.9 Limitation of Actions Against Landlord
ARTICLE XV. END OF TERM
Section 15.1 Holding Over
Section 15.2 Merger on Termination
Section 15.3 Surrender of Premises; Removal of Property
ARTICLE XVI. PAYMENTS AND NOTICES
ARTICLE XVII. RULES AND REGULATIONS
ARTICLE XVIII. BROKER'S COMMISSION
ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST
ARTICLE XX. INTERPRETATION
Section 20.1 Gender and Number
Section 20.2 Headings
Section 20.3 Joint and Several Liability
Section 20.4 Successors
Section 20.5 Time of Essence
Section 20.6 Controlling Law
Section 20.7 Severability
Section 20.8 Waiver and Cumulative Remedies
Section 20.9 Inability to Perform
Section 20.10 Entire Agreement
Section 20.11 Quiet Enjoyment
Section 20.12 Survival
ARTICLE XXI. EXECUTION AND RECORDING
Section 21.1 Counterparts
Section 21.2 Corporate and Partnership Authority
Section 21.3 Execution of Lease; No Option or Offer
Section 21.4 Recording
Section 21.5 Amendments
Section 21.6 Executed Copy
Section 21.7 Attachments
ARTICLE XXII. MISCELLANEOUS
Section 22.1 Nondisclosure of Lease Terms
Section 22.2 Guaranty
Section 22.3 Changes Requested by Lender
Section 22.4 Mortgagee Protection
Section 22.5 Covenants and Conditions
Section 22.6 Security Measures
SECTION 22.7 SATELLITE DISH
SECTION 22.8 JAMS ARBITRATION
EXHIBITS
Exhibit A Description of the Premises
Exhibit A-1 Description of First Right Space
Exhibit B Environmental Questionnaire
Exhibit C Landlord's Disclosures
Exhibit D Insurance Requirements
Exhibit E Rules and Regulations
Exhibit F License Agreement
Exhibit X Work Letter
Exhibit Y Project Site Plan
(ii)
<PAGE> 28
INDUSTRIAL LEASE
(SINGLE TENANT; NET)
BETWEEN
THE IRVINE COMPANY
AND
HNC SOFTWARE INC.
<PAGE> 1
EXHIBIT 99.02
SUPPLEMENT AND AMENDMENT NO. 1
THIS SUPPLEMENT AND AMENDMENT NO. 1 ("AMENDMENT") is made and entered
into as of the 30th day of November, 1998, by and between MIDWEST REAL ESTATE
HOLDINGS LLC ("LANDLORD") and RETEK INFORMATION SYSTEMS, INC. (the "TENANT").
RECITALS:
WHEREAS, Tenant and Landlord's predecessor in interest, Midwest Real
Estate Holdings, Inc., entered into a lease agreement ("LEASE AGREEMENT") dated
May 30, 1997, pertaining to certain premises consisting of the entire 11th floor
("PREMISES"), containing approximately 42,266 square feet of rentable area in
the East and West Towers of the building located at 800 Marquette Avenue and 801
Nicollet Mall, Minneapolis, Minnesota 55402 ("BUILDING"); and
WHEREAS, Tenant desires to lease additional space within the Building,
which Landlord is willing to do, subject to the terms hereafter set forth.
NOW THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Lease Agreement is hereby supplemented, amended and
modified as follows:
1. Defined Terms. All defined terms or phrases as utilized herein (and
identified by the use of initial capitalized letters) shall have the meanings
ascribed to them in the Lease Agreement, unless otherwise defined herein.
2. 3W Space. As of the "3W Effective Date" (as defined below), the
Premises shall be expanded to add thereto that certain space consisting of
approximately 8191 square feet of rentable area located on the 3rd floor of the
West Tower of the Building, known as Suite 350, as more fully set forth on
Exhibit A attached hereto (the "3W SPACE"). Thus, the Premises as of the 3W
Effective Date shall be increased from 42,266 square feet to 50,457 rentable
square feet of area.
3. 12W Space. As of the "12W Effective Date" (as defined below), the
Premises shall be further expanded to add thereto that certain space consisting
of approximately 9467 square feet of rentable area located on the 12th floor of
the West Tower of the Building, known as Suite 1201, as more fully set forth on
Exhibit A-1 attached hereto (the "12W SPACE"). Thus, the Premises as of the 12W
Effective Date shall be increased from 50,457 square feet to 59,924 rentable
square feet of area.
4. 4W Space. As of the "4W Effective Date" (as defined below), the
Premises shall be expanded to add thereto that certain space consisting of
approximately 7,244 square feet of rentable area located on the 4th floor of the
West Tower of the Building, known as Suite 420 and Suite 460, as more fully set
forth on Exhibit A-2 attached hereto (the "4W SPACE"). Thus, the Premises as of
the 4W Effective Date shall be increased from 59,924 square feet to 67,168
rentable square feet of area.
<PAGE> 2
5. 17W Space. If and only if Tenant notifies Landlord in writing prior
to 12:01 P.M. Central Standard Time on December 31, 1998, time being of the
essence, that it is electing to exercise its rights under this Paragraph (the
"17W OPTION NOTICE"), then as of the "17W Effective Date" (as defined below),
the Premises shall be further expanded to add thereto that certain space
consisting of approximately 12,321 square feet of rentable area located on the
17th floor of the West Tower of the Building, known as Suite 1700, as more fully
set forth on Exhibit A-3 attached hereto (the "17W SPACE"). Thus, the Premises
as of the 17W Effective Date shall be increased from 67,168 square feet to
79,489 rentable square feet of area. The 3W Space, 4W Space, 12W Space and (if
Tenant gives the 17W Option Notice) 17W Space shall collectively be referred to
herein as the "ADDED SPACE". If Tenant does not timely give the 17W Option
Notice, the 17W Space shall not become part of the Added Space, however Tenant
shall continue to have the rights to Suite 1700 as set forth in Article 32 of
the Lease. Whether Tenant does or does not timely give the 17W Option Notice,
Tenant shall continue to have the rights to the 18th floor of the Building as
set forth in Article 32 of the Lease.
6. Improvements. Tenant agrees to provide plans of the Leasehold
Improvements ("IMPROVEMENTS") it desires for the Added Space. Said plans shall
be subject to Landlord's approval, which approval shall not be unreasonably
withheld or delayed, provided said plans:
a. provide for the Building's standard grade of materials, or upgrades
thereof;
b. provide that the electrical wiring, HVAC and other Building systems
to be installed or affected by said plans shall be approved, at no
cost to Tenant, by Landlord's contractors, and/or electrical, HVAC or
other systems' subcontractors and/or consultants as being of a
quality comparable to the systems installed elsewhere in the
Building, including the Premises; and
c. provide only for permanent improvements to the Premises, as opposed
to personal property, equipment, trade fixtures and furnishings of
Tenant or of the business to be conducted by Tenant within the
Premises.
In the event of any reasonable objections to said plans by Landlord, Landlord
shall so notify Tenant promptly, so as to resolve such objections in an
expeditious and timely manner. When all such objections have been satisfied,
Landlord shall approve said plans. Upon approval, said plans shall become the
"APPROVED PLANS." Tenant shall have plans submitted to Landlord so as to obtain
Approved Plans pursuant to the following schedule: i) Approved Plans for the 3W
Space by December 1, 1998; ii) Approved Plans for the 12W Space by December 1,
1998; iii) Approved Plans for the 4W Space by January 1, 1999; and iv) Approved
Plans for the 17W Space by April 1, 1999.
7. Tenant Improvement Allowance. Landlord shall construct, in a good and
workmanlike manner, the Improvements as set forth in the Approved Plans. The
cost of said Improvements shall be borne by Tenant; however Landlord shall
provide Tenant the "3W ALLOWANCE" (as defined in Paragraph 34B of the Lease
Agreement to be equal to $15.00 per
-2-
<PAGE> 3
rentable square foot of 3W Space reduced by $0.1785 per rentable square foot of
3W Space for each full calendar month the 3W Effective date occurs after August
1, 1997); plus a "12W ALLOWANCE" which shall be calculated the same as the 3W
Allowance except the 12W Space rentable square feet shall be utilized in lieu of
the 3W Space and the 12W Effective Date shall be utilized in lieu of the 3W
Effective Date; plus a "4W ALLOWANCE" which shall be calculated the same as the
3W Allowance except the 4W Space rentable square feet shall be utilized in lieu
of the 3W Space and the 4W Effective Date shall be utilized in lieu of the 3W
Effective Date; plus an "ARTICLE 32 IMPROVEMENT ALLOWANCE" (as defined to equal
$10.00 per rentable square foot of area contained in the 17W Space).
Collectively the 3W Allowance, 12W Allowance, 4W Allowance and the Article 32
Improvement Allowance shall be referred to as the "TENANT IMPROVEMENT
ALLOWANCE". All costs in excess of the Tenant Improvement Allowance shall be
paid by Tenant to Landlord as additional rent under the Lease Agreement, within
ten (10) days of the date of the later of substantial completion of the
pertinent Added Space, or submission by Landlord to Tenant of a statement of the
actual construction costs of such Improvements, showing the excess of said costs
over the corresponding Tenant Improvement Allowance. The cost of the
Improvements shall include those items set forth in the Lease Agreement at
Paragraph 4A3 (items a. - j.). In addition to the Tenant Improvements and the
Tenant Improvement Allowance, Landlord shall provide all demising walls on
multi-tenant floors of the Added Space run from the floor to the ceiling deck,
and shall further provide Tenant with the following at Landlord's expense with
respect to the 17W Space:
a. asbestos abatement, if necessary;
b. new 2x4 light fixtures (stacked on the floor);
c. new 2x2 ceiling tiles (stacked on the floor);
d. new 2x2 ceiling grid (installed);
e. installation of life safety and life support systems as are
required by building code for shell space;
f. building-standard mini-blinds (installed and clean);
g. drinking fountain at core;
h. electrical and telephone closets;
i. building fire stairwells for exiting;
j. mechanical equipment room with air handling unit and primary duct
system currently in place above ceiling;
k. shell space shall include only sheet rocked perimeter walls and
interior columns, elevator lobby and core;
l. fire protection alarm and communication system installed
according to building code for shell space;
m. smooth and level concrete floor in accordance with industry
standards; n. 208/110 volt and 480/277 volt power panels (fused
to current building code) connected to building power and
providing 8 watts per rentable square foot demand for power on
the floor;
o. for multi-tenant floors only, finished floor lobby and common
areas in accordance with building-standard finishes;
p. one (1) 2x4 light fixture per 100 usable square feet;
-3-
<PAGE> 4
q. for multi-tenant floors only, finished inside surface of corridor
walls, taped, sanded and ready for paint; and
r. plans and/or drawings for areas of the Building other than the
Premises which may be required in order for the Tenant
Improvements to be constructed and Tenant being able to lawfully
occupy the Premises.
The parties acknowledge that the items set forth in the foregoing paragraphs
"f", "n" and "r" shall be provided with respect to the 3W, 4W and 12W Spaces,
with the balance of the foregoing items having been provided, are already in
place or are otherwise not applicable with respect to said 3W, 4W and 12W
Spaces.
8. Use of Improvement Allowances. Notwithstanding the provisions of the
foregoing paragraph, Tenant may apply the Tenant Improvement Allowance to any
costs incurred in constructing the Tenant Improvements, whether in the 3W Space,
4W Space, 12W Space or 17W Space. Tenant may utilize the 3W Allowance and/or 4W
Allowance and/or 12W Allowance and/or the Article 32 Improvement Allowance in
any order until the total of such Improvement Allowances have been depleted.
9. Excess Cost Amortization Option. If the total Tenant Improvements
exceed the total Tenant Improvement Allowance, then Tenant may elect to pay such
amount (but not any portion of such an amount which exceeds $5.00 times the
rentable square feet in the Added Space) by increasing the monthly Minimum Rent
otherwise payable, by an amount equal to the installments of a hypothetical loan
equal to such excess costs together with interest at 10% per annum which is
amortized over the number of months remaining from the 17W Effective Date until
August 31, 2004, which is the end of the Term (the "EXCESS COST AMORTIZATION
OPTION").
10. Construction. Landlord agrees to use due diligence in constructing
the Improvements for the 3W Space pursuant to the Approved Plans so as to
substantially complete the same on or about February 1, 1999 (the "3W TARGET
EFFECTIVE DATE"). Landlord agrees to use due diligence in constructing the
Improvements for the 4W Space pursuant to the Approved Plans so as to
substantially complete the same on or about March 1, 1999 (the "4W TARGET
EFFECTIVE DATE"). Landlord agrees to use due diligence in constructing the
Improvements for the 12W Space pursuant to the Approved Plans so as to
substantially complete the same on or about February 1, 1999 (the "12W TARGET
EFFECTIVE DATE"). Landlord agrees to use due diligence in constructing the
Improvements for the 17W Space pursuant to the Approved Plans so as to
substantially complete the same on or about December 1, 1999 (the "17W TARGET
EFFECTIVE Date"). The respective Target Effective Dates shall be extended by any
delays by Tenant in finalizing the Approved Plans, any hold-over of any existing
occupants ("EXISTING TENANTS"), strikes, material shortages, or any other cause
beyond or within Landlord's control. The "3W EFFECTIVE DATE", "4W EFFECTIVE
DATE", "12W EFFECTIVE DATE" and the "17W EFFECTIVE DATE" will be the date, with
respect to each respective Added Space which is the earlier of: i) the date
which is ten (10) days after the date Landlord delivers possession of the Added
Space to Tenant with the Improvements substantially complete, or ii) ten (10)
days after the date Landlord provides Tenant with notice that Tenant can have
access for "Early Installation" (as defined below) within said Added Space (but
in no event prior to substantial completion), or iii) Tenant's
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<PAGE> 5
commencement of its business activities from within the respective Added Space..
For purposes of this Amendment, "substantially completed" or "substantial
completion" shall mean:
(i) Landlord has sufficiently completed all the work required to be
performed by Landlord under this Amendment (except for minor "punchlist"
items which Landlord shall diligently pursue and thereafter complete
without unreasonably interfering with Tenant's use of the Premises) such
that Tenant can lawfully conduct its normal business operations from the
Added Space in question;
(ii) Tenant has been delivered complete and uninterrupted access to the
Added Space in question (and other required portions of the Building);
and
(iii) All of the systems, equipment, machinery and fixtures used in
connection with, and necessary for, the operation of the Building and
required service to the Added Space in question shall be in operating
order.
Landlord shall act as construction manager for purposes of coordinating
construction of the Tenant Improvements, there being no "general contractor."
Upon completion of the Approved Plans, Landlord shall obtain bids for
construction of the Tenant Improvements from at least three (3) reputable
contractors for each "Major Contract" other than for architectural, mechanical
and electrical (a "MAJOR CONTRACT" shall be deemed any contract in excess of
$5,000.00). For each such Major Contract, Tenant shall have the right to suggest
contractors from whom Landlord shall solicit bids. All Major Contract bids shall
be disclosed and reviewed with Tenant. Prior to commencing construction of the
Tenant Improvements, Landlord shall obtain Tenant's approval of (i) Landlord's
Preliminary Tenant Improvement Budget Estimate (the "BUDGET") for the Tenant
Improvements and (ii) the final costs of said Tenant Improvements (the "FINAL
COSTS"), both of which shall be of sufficient detail so as to show the costs set
forth in paragraph 7 above of this Amendment, which approval shall be deemed
automatically given in the event Tenant has not responded in writing to Landlord
within five (5) business days of Landlord's request for approval. Landlord shall
cause construction of the Tenant Improvements to the Premises in due course, in
a prompt manner, subject to delays caused by Tenant or otherwise beyond
Landlord's reasonable control. Tenant acknowledges that the restrooms on the
third, fourth and twelfth floors of the West Tower have been upgraded to
standards substantially similar to those on the 11th floor of the West Tower.
Landlord agrees that the restrooms on the 17th floor of the West Tower will be
likewise upgraded to substantially the same condition as the 11th floor
restrooms prior to the 17W Effective Date. Landlord shall be responsible for
ensuring that the restrooms on any floor of the West Tower on which Added Space
is located complies with Title III of the Americans with Disabilities Act of
1990 ("ADA"). Tenant acknowledges that the provisions of Articles 4 and 5 of the
Lease shall not be applicable to the Added Space, unless specifically
incorporated by this Amendment.
11. Move In. During the Early Installation period, Tenant shall, for its
own purposes, install its telephone lines and computer systems, including any
and all associated wiring and/or cabling, at Tenant's sole cost and expense.
Tenant's taking possession of each respective Added Space shall be deemed
exclusive acceptance of said Added Space and an acknowledgment by
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<PAGE> 6
Tenant that said Added Space is in the condition required by this Amendment,
except for: i) punch list items for which Tenant gives Landlord written notice
within thirty (30) days of Tenant's taking possession of the respective Added
Space, ii) latent defects in materials or workmanship of which Tenant has given
Landlord written notice within one (1) year of the Effective Dates for the
respective Added Spaces and iii) latent structural defects; it being agreed by
Landlord, however, that in the event a latent defect is covered by a warranty in
favor of Landlord extending beyond (1) year, Landlord shall use its best efforts
to enforce such warranty for and on behalf of Tenant. Notwithstanding anything
contained herein to the contrary, Tenant, its agents and contractors shall be
permitted to enter the respective Added Spaces ten (10) days prior to Landlord's
estimated Effective Date or estimated date of substantial completion for such
Added Space so that Tenant may install its freestanding work stations, fixtures,
furniture, equipment and telecommunications and computer cabling systems in the
Added Space so entered ("EARLY INSTALLATION"); provided that such Early
Installation shall not in any way interfere or delay Landlord in substantially
completing the Tenant Improvements for such Added Space. In the event Tenant
takes occupancy of a respective Added Space prior to its respective Effective
Date for such Early Installation or otherwise, its occupancy thereof shall in
all respects be governed by the Lease Agreement, except the rentals shall not
commence until the Effective Date.
12. Fourth Floor Lease. The parties acknowledge that Tenant is currently
leasing Suite 460 of the Building ("SUITE 460") on a month to month basis
pursuant to a lease with Landlord dated August 17, 1998 ("FOURTH FLOOR LEASE").
The parties acknowledge that Suite 460 is part of the 4W Space. As of the 4W
Effective Date, the Fourth Floor Lease shall terminate the same as if its Term
had expired, with any accrued but unsatisfied obligations arising thereunder
surviving such termination.
13. Fitness Facilities. Tenant desires to make certain improvements
within the 3W Space or the 4W Space so as to be able to utilize said
improvements as an exercise facility for its employees (the "EXERCISE
IMPROVEMENTS"), to which Landlord shall consent subject to Landlord's approval
of the plans as provided below. Exercise Improvements shall not be deemed to
include any equipment, fitness trade fixtures or other personal property of
Tenant placed in or installed within the 3W or 4W Space. Tenant agrees to
provide plans of the Exercise Improvements it desires to make to either the 3W
or 4W Space. Said plans shall be subject to Landlord's reasonable approval,
which approval Landlord may withhold or condition for any good cause related to
the operation, management or ownership of the Building. Said plans shall
specifically:
a. provide that the electrical wiring, HVAC and other Building
systems to be installed or affected by said plans shall be
approved, at no cost to Tenant, by Landlord's contractors, and/or
electrical, HVAC or other systems' subcontractors and/or
consultants as being of a quality comparable to the systems
installed elsewhere in the Building, including the Premises; and
b. provide adequate sound insulation to prevent noise being
generated from the Exercise Improvements from emanating to other
premises within the Building, which sound insulation may include
sound insulation installed above the ceiling
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<PAGE> 7
within the premises located on the floor below the Exercise
Improvements, which insulation Landlord may require Tenant to
have installed at any time during the Term of the Lease if such
premises beneath the Exercise Improvements becomes leased to a
third party.
In the event of any objections to said plans by Landlord (including but not
limited to the size of said facilities), Landlord shall so notify Tenant
promptly, so as to resolve such objections in an expeditious and timely manner.
When all such objections have been satisfied, Landlord shall approve said plans.
Upon approval, said plans shall become the "APPROVED PLANS." Tenant, at its sole
cost and expense, shall construct and equip the Exercise Improvements pursuant
to the Approved Plans, in a good and workmanlike manner, utilizing new materials
and shall indemnify and hold Landlord harmless from all claims, liens, costs and
expenses (including reasonable attorneys fees incurred by Landlord) arising from
such construction and equipping of the Exercise Improvements. Prior to the
expiration of the Term, Tenant, at its sole cost and expense shall (unless
Landlord notifies Tenant in writing to the contrary) remove the Exercise
Improvements and restore such portion of the Premises where the Exercise
Improvements were located to the condition it was in prior to the installation
of the Exercise Improvements.
14. Locker Room Facilities. Tenant desires to make certain other
improvements within its Premises (including the Added Space) so as to be able to
utilize said improvements as locker rooms and showers for its employees (the
"LOCKER/SHOWER FACILITIES"), to which Landlord shall consent subject to
Landlord's approval of the plans as provided below. The Locker/Shower Facilities
shall not be deemed to include any equipment, locker room trade fixtures or
other personal property of Tenant placed in or installed within the Premises.
Tenant agrees to provide plans of the Locker/Shower Facilities it desires to
make specifically showing the location within the Premises. Said plans shall be
subject to Landlord's reasonable approval, which approval Landlord may withhold
or condition for any good cause related to the operation, management or
ownership of the Building. Said plans shall specifically:
a. provide that the electrical wiring, HVAC, plumbing and other
Building systems to be installed or affected by said plans shall
be approved, at no cost to Tenant, by Landlord's contractors,
and/or electrical, HVAC, plumbing or other systems'
subcontractors and/or consultants as being of a quality
comparable to the systems installed elsewhere in the Building,
including the Premises; and
b. provide adequate sound insulation to prevent noise being
generated from the Locker/Shower Facilities from emanating to
other premises within the Building, which sound insulation may
include sound insulation installed above the ceiling within the
premises located on the floor below the Locker/Shower Facilities,
which insulation Landlord may require Tenant to have installed at
any time during the Term of the Lease if such premises beneath
the Locker/Shower Facilities becomes leased to a third party.
In the event of any objections to said plans by Landlord (including but not
limited to the size of said facilities), Landlord shall so notify Tenant
promptly, so as to resolve such objections in an
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<PAGE> 8
expeditious and timely manner. When all such objections have been satisfied,
Landlord shall approve said plans. Upon approval, said plans shall become the
"APPROVED PLANS." Tenant, at its sole cost and expense, shall construct and
equip the Locker/Shower Facilities pursuant to the Approved Plans, in a good and
workmanlike manner, utilizing new materials and shall indemnify and hold
Landlord harmless from all claims, liens, costs and expenses (including
reasonable attorneys fees incurred by Landlord) arising from such construction
and equipping of the Locker/Shower Facilities. Prior to the expiration of the
Term, Tenant, at its sole cost and expense shall (unless Landlord notifies
Tenant in writing to the contrary) remove the Locker/Shower Facilities and
restore such portion of the Premises where the Locker/Shower Facilities were
located to the condition it was in prior to the installation of the
Locker/Shower Facilities.
15. Term. The Added Space shall be deemed to be a part of the Premises
as of the respective Effective Dates. The Term of the Lease Agreement shall
expire as set forth in the Lease Agreement on August 31, 2004.
16. Minimum Rental. Subject to the provisions of the last sentence of
paragraph 11 above, commencing on the 3W Effective Date, the annual Minimum Rent
for the Premises under the Lease Agreement shall be increased in an amount equal
to the number of square feet contained in the 3W Space times $12.00 (decreased
by $.0833 per rentable square foot of 3W Space for each full calendar month the
3W Effective Date occurs prior to August 1, 2000). Subject to the provisions of
the last sentence of paragraph 11 above, commencing on the 12W Effective Date,
the annual Minimum Rent for the Premises under the Lease Agreement shall be
further increased in an amount equal to the number of square feet contained in
the 12W Space times $12.00 (decreased by $.0833 per rentable square foot of 12W
Space for each full calendar month the 12W Effective Date occurs prior to August
1, 2000). Subject to the provisions of the last sentence of paragraph 11 above,
commencing on the 4W Effective Date, the annual Minimum Rent for the Premises
under the Lease Agreement shall be further increased in an amount equal to the
number of square feet contained in the 4W Space times $12.00 (decreased by
$.0833 per rentable square foot of 4W Space for each full calendar month the 4W
Effective Date occurs prior to August 1, 2000). Subject to the provisions of the
last sentence of paragraph 11 above, commencing on the 17W Effective Date, the
annual Minimum Rent for the Premises under the Lease Agreement shall be again
increased in an amount equal to the number of square feet contained in the 17W
Space times $12.00. On or about each of the 3W, 12W, 4W and 17W Effective Dates
the parties shall execute memoranda setting forth the entire monthly Minimum
Rental due under the Lease Agreement as amended by this Paragraph and taking
into account any Excess Cost Amortization Option, if exercised by Tenant.
17. Additional Rental. The parties acknowledge and agree that the
addition of the Added Space to the Premises as of the respective Effective Dates
shall automatically result in Tenant paying its pro rata share of Real Estate
Taxes and Operating Expenses as Additional Rental pursuant to Article 6 based
upon the entire Premises (including the respective Added Spaces as and when so
added to the Premises as set forth herein).
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<PAGE> 9
18. Termination of Article 36. The parties acknowledge and agree that
Article 36 of the Lease Agreement entitled "Option to Terminate Early" shall be
and hereby is terminated and shall be deemed null and void and of no further
force and effect.
19. Brokerage. Each of the parties represent and warrant that, except as
set forth below, there are no claims for brokerage commissions or finder's fees
in connection with this Amendment (collectively the "LEASING COMMISSIONS"), and
agrees to indemnify the other against, and hold it harmless from all liabilities
arising from any such claim, including without limitation, the costs of
attorney's fees in connection therewith. Notwithstanding the foregoing, Landlord
agrees to pay any Leasing Commissions payable to Landlord's broker, United
Properties Brokerage Company in the amount of $3.00 per square foot of area
contained in the Added Space. Landlord further agrees to pay to Tenant's broker,
CB Richard Ellis: (i) Leasing Commissions in the amount of $1.50 times the
number of rentable square feet contained within the Added Space; and (ii) a
project management fee (the "PM FEE") in the amount of $.50 times the number of
rentable square feet contained within the Added Space, which Leasing Commissions
and PM Fee shall be payable one half upon execution of this Amendment and the
remaining one half payable at the rate of $1.00 per rentable square foot times
the rentable square feet contained within the 3W Space on the 3W Effective Date;
$1.00 times the rentable square feet contained within the 12W Space on the 12W
Effective Date; $1.00 times the rentable square feet within the 4W Space on the
4W Effective Date; and $1.00 times the rentable square feet contained within the
17W Space on the 17W Effective Date. The foregoing provisions relating to
Leasing Commissions shall be payable in lieu of and not in addition to any
Leasing Commissions and/or PM Fees which would have otherwise been payable under
Article 29 of the Lease Agreement. Notwithstanding the foregoing, no Leasing
Commissions or PM Fees shall be payable with respect to the 17W Space until and
unless the 17W Option Notice is given by Tenant.
20. 9E Space. Landlord will provide the "Landlord's Notice" with respect
to the 9E Space when the entire 9E Space becomes "Available for Leasing" (as
defined in Article 33). If at such time as the 9E Space becomes Available for
Leasing and Tenant exercises its expansion option as set forth in Article 33 of
the Lease Agreement with respect thereto, then notwithstanding any provision of
Article 33, the parties agree as follows: i) the Minimum Rental rate for the 9E
Space shall be $12.00 per rentable square foot contained within the 9E Space for
the period through August 31, 2004: ii) the Term of the Lease Agreement shall be
extended from August 31, 2004 until August 31, 2006 (the "EXTENDED TERM"); iii)
the rental rate during the Extended Term (September 2004 through August 2006)
for the entire Premises (including the 9E Space and the Added Space) shall be at
an annual Minimum Rental rate of $13.00 per rentable square foot contained
within said Premises; iv) any tenant improvements to the 9E Space shall be
pursuant to Article 33 of the Lease Agreement (including the amount of the 9E
Improvement Allowance), as well as in a manner consistent with Paragraphs 6, 7
and 10 of this Amendment; v) in connection with Tenant's "9E Notice" (as defined
in paragraph 33B of the Lease Agreement), Tenant may delete from the Premises
either the 3W Space or the 12W Space (the "DELETION OPTION"), which Deletion
Option shall become effective at such date as Tenant sets forth in the Tenant's
9E Notice, but in no event sooner than six (6) months from the date of Tenant's
9E Notice and must be on the last day of the month (the "DELETION EFFECTIVE
DATE"). If
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<PAGE> 10
Tenant elects the Deletion Option, the conditions precedent for the
effectiveness thereof shall be: i) Tenant's not being in default under the Lease
Agreement and this Amendment beyond all applicable grace or cure periods as of
the exercise of the Deletion Option or at any time thereafter; and ii) the
payment by Tenant to Landlord, at the time the Tenant's 9E Notice is given, of a
termination fee, which shall be equal to the unamortized costs of the "Leasing
Commissions" and "Tenant Improvement Allowances" with respect to the space being
deleted. Said unamortized portion of such costs shall be equal to the unpaid
principal balance, as of the Deletion Effective Date, of a hypothetical loan,
and assuming the loan was in the original principal amount of said Leasing
Commissions and Tenant Improvement Allowances relating to the space being
deleted, at an interest rate of ten percent (10%) and was over an original term
equal to the period from the 3W or 12W Effective Date (as the case may be) and
continuing through the end of the original Term of the Lease Agreement. Any
inconsistencies between this Paragraph and Article 33 of the Lease Agreement
shall be resolved in favor of the provisions of this Paragraph.
21. Parking. Landlord shall make available to Tenant, up to 12
unreserved parking spaces in the below ground level of the Parking Ramp,
provided Tenant, within 30 days of the date hereof, executes Landlord's standard
license agreement with respect to the number of such parking spaces it desires
to so utilize, abides by the rules for the use thereof and pays Landlord's
market rates for the use of the same.
22. Bicycle Storage. Tenant agrees not to allow its employees or
officers to store, park or otherwise allow within the Premises or elsewhere in
the Building bicycles, except for storage space separately licensed to Tenant
(on Landlord's standard storage license form) in the lower level and/or dock
area of the Building as designated by Landlord, and which shall be accessed only
through the lower level Parking Ramp/dock area of the Building.
23. Cleaning Specifications. The parties agree that Exhibit C to this
Amendment shall be substituted in lieu of Exhibit C attached to the Lease, which
is entitled "Night Cleaning Specifications".
24. Internal Stairwell. Tenant may desire to install an internal
stairwell between the 11th floor Premises and the 12W Space (the "INTERNAL
STAIRWELL"), to which Landlord shall consent subject to Landlord's approval of
the plans as provided below. Tenant agrees to provide plans of the Internal
Stairwell, specifically showing the location within the Premises. Said plans
shall be subject to Landlord's reasonable approval, which approval Landlord may
withhold or condition for any good cause related to the operation, management or
ownership of the Building. Said plans shall specifically:
a. provide that the electrical wiring, HVAC and other Building
systems to be installed or affected by said plans shall be
approved, at no cost to Tenant, by Landlord's contractors, and/or
electrical, HVAC, plumbing or other systems' subcontractors
and/or consultants as being of a quality comparable to the
systems installed elsewhere in the Building, including the
Premises.
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<PAGE> 11
In the event of any objections to said plans by Landlord (including but not
limited to any structural concerns), Landlord shall so notify Tenant promptly,
so as to resolve such objections in an expeditious and timely manner. When all
such objections have been satisfied, Landlord shall approve said plans. Upon
approval, said plans shall become the "APPROVED PLANS." Tenant, at its sole cost
and expense, shall construct the Internal Stairwell pursuant to the Approved
Plans, in a good and workmanlike manner, utilizing new materials and shall
indemnify and hold Landlord harmless from all claims, liens, costs and expenses
(including reasonable attorneys fees incurred by Landlord) arising from such
construction of the Internal Stairwell. Prior to the expiration of the Term,
Tenant, at its sole cost and expense shall (unless Landlord notifies Tenant in
writing to the contrary) remove the Internal Stairwell and restore such portion
of the Premises where the Internal Stairwell was located to the condition it was
in prior to the installation of the Internal Stairwell.
25. Submission. The submission of an unexecuted copy of this document
for review by Tenant shall not constitute an offer by Landlord. The execution of
this document by Tenant and the submission to Landlord shall constitute an offer
to Landlord which may be accepted only by Landlord executing and delivering a
fully executed counterpart hereof to Tenant. This Amendment may be executed in
counterparts, each evidencing, however, the single agreement between the
parties.
26. Ratification. Except as is explicitly inconsistent, modified,
supplemented or amended by the express terms hereof, the Lease Agreement is
hereby ratified and confirmed.
LANDLORD:
MIDWEST REAL ESTATE HOLDINGS LLC
By: /s/ BOYD B. STOFER
-----------------------------
Boyd B. Stofer, President
By: /s/ FRANK J. DUTKE
-----------------------------------------
Frank J. Dutke, Senior Vice President
TENANT:
RETEK INFORMATION SYSTEMS, INC.
By: /s/ GREGORY A. EFFERTZ
-----------------------------------------
Gregory A. Effertz, Executive Director,
Finance and Administration
CONSENT BY GUARANTOR
The undersigned hereby consents to the above Supplement and Amendment
No. 1. The undersigned hereby ratifies and confirms its continued obligations
and liabilities under the Lease Guaranty dated June 2, 1997 with respect to the
Lease, and hereby agrees that said obligations and liabilities shall be extended
and amended to include the Lease as amended as set forth in this Supplement and
Amendment No. 1 in the same manner as if the undersigned were re-executing the
Guaranty with specific reference to the Lease as amended by this Amendment No.
1.
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<PAGE> 12
GUARANTOR: HNC SOFTWARE INC.
By: /s/ RAYMOND V. THOMAS
Raymond V. Thomas, Vice President,
Finance and Administration and
Chief Financial Officer
Its:________________________________________
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<PAGE> 1
EXHIBIT 99.03
SUPPLEMENT AND AMENDMENT NO. 2
THIS SUPPLEMENT AND AMENDMENT NO. 2 ("AMENDMENT") is made and entered
into as of the 18th day of December, 1998, by and between MIDWEST REAL ESTATE
HOLDINGS LLC ("LANDLORD") and RETEK INFORMATION SYSTEMS, INC. (the "TENANT").
WHEREAS, Tenant and Landlord's predecessor in interest, Midwest Real
Estate Holdings, Inc., entered into a lease agreement dated May 30, 1997
("LEASE"), as amended November 30th, 1998 (the "FIRST AMENDMENT") (collectively
the "LEASE AGREEMENT") pertaining to certain premises ("PREMISES"), in the East
and West Towers of the building located at 800 Marquette Avenue and 801 Nicollet
Mall, Minneapolis, Minnesota 55402 ("BUILDING"); and
WHEREAS, Tenant desires to lease additional space within the Building by
modifying and amending the First Amendment, which Landlord is willing to do,
subject to the terms hereafter set forth.
NOW THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the First Amendment is hereby supplemented, amended and
modified as follows:
1. Defined Terms. All defined terms or phrases as utilized herein (and
identified by the use of initial capitalized letters) shall have the meanings
ascribed to them in the First Amendment, or if not so defined therein, then in
the Lease, unless otherwise defined herein.
2. 12W Space. Paragraphs 3 through 5 of the First Amendment are hereby
revised by restating them in there entirety as follows (with language removed
therefrom shown by "strikeout" and new language shown by "double underlining"):
"3. 12W Space. As of the "12W Effective Date" (as defined below),
the Premises shall be further expanded to add thereto that
certain space consisting of approximately 12,270 square feet of
rentable area located on the 12th floor of the West Tower of the
Building, consisting of the entire 12th floor of the West Tower,
as more fully set forth on Exhibit A-1 attached hereto (the "12W
SPACE"). Thus, the Premises as of the 12W Effective Date shall be
increased from 50,457 square feet to 62,727 rentable square feet
of area.
"4. 4W Space. As of the "4W Effective Date" (as defined below),
the Premises shall be expanded to add thereto that certain space
consisting of approximately 7,244 square feet of rentable area
located on the 4th floor of the West Tower of the Building, known
as Suite 420 and Suite 460, as more fully set forth on Exhibit
A-2 attached hereto (the "4W SPACE"). Thus, the Premises as of
the 4W Effective Date shall be increased from 62,727 square feet
to 69,971 rentable square feet of area.
<PAGE> 2
"5. 17W Space. If and only if Tenant notifies Landlord in writing
prior to 12:01 P.M. Central Standard Time on December 31, 1998,
time being of the essence, that it is electing to exercise its
rights under this Paragraph (the "17W OPTION NOTICE"), then as of
the "17W Effective Date" (as defined below), the Premises shall
be further expanded to add thereto that certain space consisting
of approximately 12,321 square feet of rentable area located on
the 17th floor of the West Tower of the Building, known as Suite
1700, as more fully set forth on Exhibit A-3 attached hereto (the
"17W SPACE"). Thus, the Premises as of the 17W Effective Date
shall be increased from 69,971 square feet to 82,292 rentable
square feet of area. The 3W Space, 4W Space, 12W Space and (if
Tenant gives the 17W Option Notice) 17W Space shall collectively
be referred to herein as the "ADDED SPACE". If Tenant does not
timely give the 17W Option Notice, the 17W Space shall not become
part of the Added Space, however Tenant shall continue to have
the rights to Suite 1700 as set forth in Article 32 of the Lease.
Whether Tenant does or does not timely give the 17W Option
Notice, Tenant shall continue to have the rights to the 18th
floor of the Building as set forth in Article 32 of the Lease."
In addition Exhibit A-1 attached to this Amendment shall be substituted in lieu
of Exhibit A-1 attached to the First Amendment.
3. 12W Allowance. Notwithstanding anything contained in the First
Amendment to the contrary, in connection with this Amendment, Tenant agrees that
the 12W Allowance as set forth in Paragraph 7 of the First Amendment shall be
reduced by $30,000.00.
4. Minimum and Additional Rental. Tenant acknowledges that the Minimum
and Additional Rental calculations set forth in Paragraphs 16 and 17 of the
First Amendment shall incorporate and utilize the square feet of the 12W space
as increased by Paragraph 2 of this Amendment.
5. Brokerage. Landlord acknowledges that the Leasing Commissions and PM
Fee calculations set forth in Paragraph 19 of the First Amendment shall
incorporate and utilize the square feet of the 12W space as increased by
Paragraph 2 of this Amendment. Each of the parties represent and warrant that,
except as set forth above, there are no claims for brokerage commissions or
finder's fees in connection with this Amendment (collectively the "LEASING
COMMISSIONS"), and agrees to indemnify the other against, and hold it harmless
from all liabilities arising from any such claim, including without limitation,
the costs of attorney's fees in connection therewith.
6. Submission. The submission of an unexecuted copy of this document for
review by Tenant shall not constitute an offer by Landlord. The execution of
this document by Tenant and the submission to Landlord shall constitute an offer
to Landlord which may be accepted only by Landlord executing and delivering a
fully executed counterpart hereof to Tenant. This Amendment may be executed in
counterparts, each evidencing, however, the single agreement between the
parties.
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<PAGE> 3
7. Ratification. Except as is explicitly inconsistent, modified,
supplemented or amended by the express terms hereof, the Lease and First
Amendment are hereby ratified and confirmed.
<TABLE>
<S> <C>
LANDLORD:
MIDWEST REAL ESTATE HOLDINGS LLC
By: /s/ RICHARD E. STUDENT
--------------------------------------
Richard E. Student, Vice President
By: /s/ FRANK J. DUTKE
--------------------------------------
Frank J. Dutke, Executive Vice
President
TENANT:
RETEK INFORMATION SYSTEMS, INC.
By: /s/ GREGORY A. EFFERTZ
--------------------------------------
Gregory A. Effertz, Executive Director,
Finance and Administration
</TABLE>
CONSENT BY GUARANTOR
The undersigned hereby consents to the above Supplement and Amendment
No. 2. The undersigned hereby ratifies and confirms its continued obligations
and liabilities under the Lease Guaranty dated June 2, 1997 with respect to the
Lease Agreement, and hereby agrees that said obligations and liabilities shall
be extended and amended to include the Lease Agreement as amended as set forth
in this Supplement and Amendment No. 2 in the same manner as if the undersigned
were re-executing the Guaranty with specific reference to the Lease Agreement as
amended by this Amendment No. 2.
<TABLE>
<S> <C>
GUARANTOR: HNC SOFTWARE INC.
By: /s/ RAYMOND V. THOMAS
--------------------------------------
Raymond V. Thomas, Vice President,
Finance and Administration and
Chief Financial Officer
Its:
-------------------------------------
</TABLE>
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